Louisiana-Pacific Corp (LPX) 2010 Q4 法說會逐字稿

(Operator Instructions) Welcome to the Q4 2000 and Louisiana-Pacific Corporation earnings call. (Operator Instructions)I would now like to turn the presentation over to the host, Mr. Curt Stevens, Executive Vice President of Administration and CFO. Please proceed.

Thank you and thank all of you who are joining us on the conference call to discuss our results on the Q4 and full year of 2010. With me today at are Rick Frost LP's CEO as well as Mike Kinney, our primary Investor Relations contact. I will begin the discussion with a review of the financial results for the Q4 and full year 2010. I'll follow this with some comments on the performance of each of our individual segments, and then talk about some selected balance sheet items.

After I finish my comments, Rick will take over to discuss the general market environment in which LP has been operating on, his perspective on our operating results for 2010, and some thoughts on the outlook of 2011. And as the moderator said we will then open up for a Q&A session. As we have done in the past, we are doing a webcast of this call today. This can be accessed at www.LPCorp.com

Additionally to help with the discussion, we have provided a presentation that will supplement our information that will be reviewed in conjunction with this and I will be referencing those slides in those comments. Additionally, we did file an 8-K that had supplemental information in that, including our press release and a reconciliation of adjusted EBITDA. For your information we will be filing our annual form 10-K, early in March.

Before we get started with the comments I would like to remind the participants about the forward-looking statements, that is included on slide two of the presentation and also the non- GAAP financial information language included on slide three of the presentation. As I said, we have provided reconciliation in the presentation and in the 8-K filing that we made this morning. I will not reread these statements but I will incorporate them with this reference.

Moving to slide four of the presentation, this is a discussion of the Q4 2010 results, compared to the same quarter last year as well as Q3 2010.

We are reporting today a net loss for the Q4 of $7 million or $0.05 per diluted share. Net sales from continuing operations were $316 million in the quarter. For the same period last year we reported a net loss of almost $50 million or $0.37 per diluted share on sales from continuing operations of $277 million. Adjusted EBITDA from continuing operations was positive, albeit it was a very low number, but it was positive in the quarter, and that compared to a loss of $20 million in Q4 of 2009.

As a side note this is the first positive EBITDA quarter that we have enjoyed since 2005, or Q4, since 2005.

We did have a loss of $6.8 million in discontinued operations that was almost entirely related to an increases in warranty reserves for two former product lines, vinyl siding and decking. You'll also note on the side that there was quite a bit of movement in the tax rate between the quarters. The effective tax benefit rate in quarter four was 80% on net income, where the effective tax benefit rate in Q4 2009 was 27%. This was primarily the result of the true up that occurs every Q4, both in 2010 and 2009, caused by applying the estimated effective annual tax benefit rate to full year results.I will get to it in a minute but looking at the full year the tax benefit rate was 41% in 2010 and 35% in 2009.

On slide five of the presentation is a brief reconciliation of special charges. I think the good news this quarter, the special items were all positive. We did recognize a gain on the sale of a portion of our auction rate security portfolio, a $19 million gain. And I will note and talk about later that although we sold the securities, we did retain all of our legal rights to pursue the issuers of these instruments with the goal of full recovery of the investment and appropriate damages. Other items included a slight loss and impairment of long life assets and a reduction in the warranty and settlement reserves of $2.5 million. The impact of looking at our results without these items shows and adjusted loss for operations of $0.12 per share.

Slide six is a discussion of the full year results for 2010. We are reporting a net loss of $39 million on net sales of $1.4 billion. For the same period last year, we reported a net loss of $121 million on sales of $1.1 billion.Of note here is our sales increased by 30%, while the base housing market increased by about 7% so clearly a good performance based on housing.

The adjusted EBITDA of continuing operations a positive $82 million, compared to a loss of $44 million in 2009. For the year, the loss from discontinued operations was $10.4 million, almost all of that related to the warranty reserves mentioned above. As they said earlier, the tax rate was 41% for 2010 versus 35% in the prior year.

Slide seven of the presentation is a reconciliation of special items for the full year, other than the items that I talked about for the Q4, the other big one was the write-down of our US Green Fiber investment that we took in Q3, and just as a reminder that investment writedown was not deductible so the related tax provision does look a little bit unusual.

Let me shift to the segments. On slide eight is our OSB segment. We had an operating loss of $13 million in the quarter compared to a loss of $17 million in the Q4 last year. And in the quarter, we did have a 6% increase in volume and average sales price is about $4 million higher. Increase in the sales price accounted for $4 million improvement in earnings and in adjusted EBITDA.Offsetting the increase in pricing was the strengthening of the Canadian dollar which increased our costs more than revenue due to sales in the US. We also absorbed increases in raw material costs, primarily electricity and resin.

Adjusted EBITDA for continuing operations of the OSB segment was $5 million better than the same quarter last year and $8 million lower than Q3, both price and volume were down. For the full year, OSB had operating income of $26 million compared to a loss of $65 million in the same period last year. Adjusted EBITDA for the comparable periods was $64 million in 2010 and a loss of $29 million in 2009. Pricing accounted for $102 million on LP produced product and another $11 million on product produced through our joint venture. One note I will make, on the purchases we make from our joint venture, we record 100% of sales but we only receive 50% of the profits on those sales.

Slide nine of the presentation is our siding business. This segments includes our SmartSide CanExel siding products, plus commodity OSB produced in our Hayward mill. For the Q4 siding had operating income of $12 million which was an increase over the $5 million recorded in the same quarter last year. Adjusted EBITDA from continuing operations of the siding segment was $16 million compared to $9 million in the Q4 of 2009. For the quarter sales were up 18% with unit volumes higher by 16% and SmartSide and 6% in CanExel. For the quarter SmartSide average sales prices were flat between periods, while the CanExel price showed an increase of 14%. This was largely due to CanExel primarily being sold in Canada and with a strengthening Canadian dollar it increased the US equivalent sales price. For the full year siding had operating income of $51 million compared to $29 million in the same period last year. Adjusted EBITDA for the comparable periods was $70 million versus $48 million. Higher OSB prices accounted for $9 million of the change and volume was responsible for the rest of the improvement.

Slide 10 is our engineered wood business, this includes our I-Joist, Laminated Strand Lumber, and our Laminated Veneer Lumber.It also includes the sale of I-Joist and LVL products produced with our joint venture with Abitibi or under a sales agreement with Murphy Plywood.For Q4, EWP recorded a loss of $6 million compared to a loss of $9 million same quarter last year.

Adjusted EBITDA in the EWP segment was a negative $2 million in the Q4, versus a loss of $6 million in the same quarter last year. Our volumes of I-Joist were down 18% while the volumes of LVL LSL were down 2% compared to 2009 same quarter. Pricing was up 8% in I-Joist and 17% in the combination of LVL and LSL due to price increases, we implemented an EWP partially offset higher raw materials cost costs, principally in OSB, veneer and lumber. For the year, EWP had an operating loss of $21 million compared to a loss of $33 million during the same period last year, so a 30% improvement. Adjusted EBITDA for the comparable periods with a loss of $8 million compared to a loss of $20 million, so a better than 50% improvement.

While there is no slide for other building products, let me just make a few comments. We showed income of a $1.5 million in the Q4 of 2010 compared to a loss of about the same amount in 2009. For the quarter sales were about $38 million, up 21% from the $31 million recorded in Q4 of last year, primarily driven by our South American operations. For the full year other building products had operating income of $6.1 million compared to income of about $1 million in the same period last year. Adjusted EBITDA for the comparable periods was $17.2 million in 2010 versus $11.5 million in 2009.

Couple other things, we did have a foreign exchange gain in the quarter compared to -- a foreign exchange gain of about $1.2 million compared to $3.1 million in the same quarter last year. For the full-year foreign exchange was at $2.2 million gain compared to $13.4 million in 2009. That largely comes from the cash that we have in our Canadian operations held in Canadian dollars and a conversion of that, and then in 2009 we did have a US denominated loan in our Chilean operation that created part of that gain as Chilean currency strengthened against the US dollar.

On selling and general administrative costs, they were at $31.7 million in the Q4 compared to $32.4 so slightly down compared to the same period in 2009. For the full year we were slightly higher at $119 million, although the portion that represents general corporate SG&A was lower by about $3 million.

Refer slide 11 in the presentation on the balance sheet, key balance sheet statistics. Cash, cash equivalents, investments, and restricted cash was $436 million at the end of the year, just slightly down from where we began the year and this was after paying off $60 million in debt. Working capital was about $580 million, net cash position of over $210 million. We did keep our capital expenditures to the level that Rick had been talking about, $15 million, and our book value for ending share was $9.23.

Before I turn the call over to Rick, let me summarize our year-over-year results at a very high level. We had operating improvement of $125 million between the years. Higher sales prices accounted for about $130 million of that improvement with OSB being the bulk of it. Our LSL operational improvement at our Holden mill added $5 million, and additional volume contributed about $22 million, but offsetting that as we did have high raw materials cost of about $25 million that reduced our results. And we had the Canadian currency went against us for about $15 million. With that, I will turn it over to Rick.

Thank you, Curt, I too appreciate your hour this morning and your interest. Curt explains everything so well it doesn't leave me much to say so I will be the color commentator today. It is clear and cold here in Nashville and after significant snow and ice storm that went through here yesterday right at rush hour, the whole town was gridlocked last night and it took me three hours and 40 minutes to drive 19 miles. I know that's nothing like you experience in the Northeast and Midwest but it is significant for us. Along with an economic recession in housing, we also find ourselves in middleTennessee in somewhat of a professional football recession as theTitans are now without a starting quarterback and just announced a brand-new head coach this year, this week.

So in my prepared remarks this morning I'm going to give you some observations on Q4, look back at the whole year and then try to provide you with what it feels like entering into 2011. Let's start with Q4 of 2010. All of our businesses did perform better than in Q4 of 2009. This includes OSB siding, engineered wood, molding and Brazil and Chile. And with this, we were able to eke out adjusted the EBITDA which was positive a couple thousand dollars versus negative of $20 million in Q4 of 2009. Our loss from operations did drop to $18 million from $51 million in the same quarter a year ago.

In OSB, when operated at 63% of our currently available capacity, and 50% of our total capacity which includes a couple of indefinitely shut mills. Right now we have three mills that are running full and the rest are on some type of flex schedule. Volume and price in OSB both declined from Q3, but we are better than Q4 of 2009 as shown in our presentation. In our SmartSide siding line, we had our best Q4 ever in the history of that product line in terms of both volume and profit and that does exclude the OSB component which is produced our Hayward siding mill and volume and pricing both contributed in the favorable comparisons. Engineered wood continues to struggle as it is our product line that is most heavily dependent and correlated upon to new residential starts. However we reduced our losses from Q4 2009 with price improvement throughout the year and help from additional international sales volume. Although we do not report Chile and Brazil separately, we ended the year with both mills in Chile running full, and our Brazil mill running at about 50% and both countries were cash contributors. Overall for Q4, our sense was that we didn't leave a lot on the table and we got about out all we could have out of it under these market conditions.

When I look back at the full year of 2010 I would characterize it about the same. We didn't leave much on the table for a year when we were anticipating 700,000 starts and we've got just a little bit over 600,000 starts, and I don't think that we mis-played too many cards. 2010 was a year if you remember where the first-half business activity was better than the second, and in hindsight now, we realize that was created by the tax incentive for home buyers that simply pulled demand forward in the year. As a result, the demand from our customers and the pricing spike which exceeded our expectations in March and April time frame, which did help us significantly from a cash preservation perspective.

In Chile, OSB it is growing in acceptance as a new residential construction product. Going into the year we had estimated that the conversion to the frame stick built housing have gotten to the 26% to 28% level. The unfortunate earthquake that took place in Chile last year seems to have accelerated our demand there and it has sped up the full running of our second mill in Chile, Lautaro. The frame built structures held up much better during the earthquake than the masonry construction which is the norm and we believe that will make frame built construction practices the standard rather than the exception going forward. The Chilean government has stated its plan to subsidize construction of 100,000 homes in 2011. Our increased international sales in engineered wood products predominately to Australia did provide additional volume for us to help dilute some fixed costs in that business, but increased new residential construction in the US and higher lumber pricing are still a key to a turn to in profitability in engineered wood.

The progress in our siding business continues to create excitement inside and outside the organization and create results, as the value proposition for this product line becomes more obvious to the building and the repair and remodeling community. Net sales overall for LP improved as Curt said year over year by 30%, a far larger increase than experienced in new residential starts. Where LP overall, adjusted EBITDA was improved from negative $44 million to a positive $82 million, that in the face of overcoming about $24 million in a year-to-year comparison of 2009 to 2010 increase in raw materials and the $12 million negative currency impact.

Using most of the means that we had available to us last year, we were able to preserve our cash and cash equivalents, beginning with the year at $394 million and ending with $389 million, in spite of our inability yet to divest shut assets that we have held for sale. Also in the year we did retire $60 million worth of debt and we added $10 million to our pension fund.

I would be remiss if I didn't brag on this organization a bit for what they did in safety in 2010. It was the best year in the history of LP and we ended up with a total incident rate of 0.44, which we believe will also be again industry-leading when the numbers for the industry become available. Only 16 people in LP including our international operations had a reportable safety incident in 2010.

We continued to make good use of Lean Six Sigma technology in 2010 with a 6.3 to 1 return level, doubling our target of 3.1, over the cost that we put into this program. These improvements permeate now most of the facets of our organization and they do help us offset inflation and raw material increases. In 2009, we instituted a full-court press to ingrain improved quality of product and service, much the way that we have in safety. We have two initiatives underway in this company in 2010, one is called LP By Me, Made Here, Made Right which is internally focused and, we have another initiative which is externally focused called LP By Me, customer focused and service driven. We think both of these initiatives will help further differentiate us in the future.

Claims on products manufactured in the last 12 to 18 months have dropped significantly as a result of this, and we are also developing a measurement system to assess customer satisfaction with our corporation.

For the full year 2010, our sales and marketing folks ended up with a little over 1900 wins. I have defined a win for you in the past as a product placement with a new customer or an additional product placement within existing customer.

LP spent about $14 million in capital in 2010 and we began the year with a little over 4000 employees and we ended up the year with about 100 less people.

As I look going into 2011, we built our operating plan this year on a foundation of 700,000 new starts. That is all-in, including single-family, multifamily and manufactured housing. That appears to be pretty much triangulated into the middle of the low estimates of between 600 and 650 and the high estimates between 750 and 800.

As I noted earlier in 2010, activity bounced in the first half of the year and fell off in the second. This year we expect activity to be slower in the first half of the year and somewhat better in the second, but the fact is that we don't know. So we are concentrating on being agile and flexible enough to adapt to however the market unfolds this year. We are not yet getting any indications from our customers that they expect a big spring build or a surge in activity. My assessment of our customers is, they are still very lean of product. They are taking a wait and see approach before tying up their cash and inventory. Some of this, obviously, is weather-related as January weather was not conducive across the country for anybody to get too excited about building, and that was also been demonstrated through the significant OSB pricing drop over the last couple of weeks as reported by Random Lengths . In siding, we are starting off the year with quite a healthy order file and engineered wood lags last year by a little bit.

At this time I expect our capital expenditures in 2011 to pay about $50 million for operations and another $20 million to $22 million to complete the Masisa transaction for 100 percent ownership of the OSB mill in Brazil. I will add that if the market does not unfold in an encouraging fashion, we have the ability to moderate the CapEx to our operations. My early concern for this year, for 2011 is increasing raw material cost escalation, particularly anything related to energy or energy derivatives. At this point we are expecting our raw material costs to increase about the magnitude that they did last year in 2011 and I think that oil price is the big unknown variable.

Overall, the key issues standing in the way of recovery in housing to a more normal level are pretty much the same. We have to work through the large inventory of homes that are in the foreclosure process or will enter that process. We have to see home prices start to turn upward and reduce the number of homeowners that are upside down in their mortgages. Unemployment needs to be trending in a positive downward direction and we have at least a couple of data points on that lately. And all of this must boost consumer confidence. Until then, we are still I think in an endeavor of preserving cash while retaining the ability to capitalize on the upswings since the market going forward. With that said, I will turn it back over to Curt for the question and answer

Thank you Rick. Mary, can we go to the Q&A queue?

[OPERATOR INSTRUCTIONS]Your first question comes from the line of Steve Chercover from DA Davidson.

Good morning. I just thought it would tell Rick that it is sunny and warm in Portland and the commute is very easy. First of all, could you discuss the product acceptance of the Wholeton OSL, and I think there are a couple of oriented lumber projects in Canada that are based on European technology, is that a threat for you?

Let me take those one at a time. We did get significant growth year-over-year from 2010-2009, but the base obviously was low. We expect to get again more market penetration in 2011 and paste the plan on doing that. But we are nowhere near close to filling up that mill. But it's just really tough in the marketplace to get your customer to design this product into their building plans, etc., in this kind of a market. With lumber pricing having been so low over the last couple of years, that acts as a bit of a deterrent for the substitution that we are trying to create. That said, we are still confident that this is a very good product and in a more robust market, people will see the value proposition of the product. In terms of competitors, they there are two bills that I know of in Canada that claimed to have the ability to produce duce similar technology product. Neither one of them are doing much with that, I think one of them will need quite a bit of capitol to complete. So in the short-term, we are not feeling pressure on that. In the longer term we will have to see how it plays out. There have only been two people in that product line, or two companies in the product line up until now, and entry has not been very easy, so it's hard for me at this point in time to judge the competitive threat. Certainly if it comes, it will come when the market is much more robust.

Thank you. I have a quick one for Curt and one more for you. Curt, what is that the face value of those auction rate securities that you sold?

The face value was $35 million and we got cash at $22 million, and we recognize the $19 million gain. What that but that leaves us with Steve is, we have $15.4 million on the books of 61.5 million face. So that is what is left on the books, but as I said, we are retaining all of our legal rights and what I'm actively pursuing with Mark Tobin and Marc Fuchs is full recovery of our investment.

Seems reasonable. And what are the facilities that are held for sale please?

Well there are various facilities. -- Michelle has been for sale for a while. We did shut down our R&D lab, and we shut down the hanger, and then we have the two OSB mills that we permanently curtailed, the facility, and there are some minor other properties but those are the big ones.

Great, thank you very much.

The next question next question comes from the line of Mark Wilde, Deutsche Bank.

Good morning. I have a few questions. Rick, you brought up the input cost that look like they will be an issue this year as well. Can you walk us through the particular issues, I would think it would be freight and resin before anything else, but walk us through what their real pressure points will be for you and what your current view is of how much they may move this year?

Actually, Mark, I'm not ducking this one that Curt has a handy dandy chart right in front of him.

I'll take that.

Wood we see pockets of pressure on pricing but not much, so wood is not going to be a big one. We are seeing anything related to wood and our plastic molding business, we use polystyrene and in MBI PF we are expecting some increases there. Wax is this pretty tightly controlled and there is not much -- there are not many alternatives to that so when you get a price increase there you don't have much of a change. There are for 2011, there are two raw materials related to our siding business that we were -- we feel like we were under the market and we got some market adjustments to those -- so we will see some increases there. Don't see a whole lot in the energy side. Electricity seems to go up to 2.5 to 4 million a year and we will probably see that. Natural gas will not be a problem. So those are the principal ones that I would say.

Curt, what is kind of the total petro chemical or resin spend at last year's volume's? What did you spend, $20 million or $30 million?

It was probably, between PF -- it is probably $125 million.

Okay.

So that would be PF, MDI and wax. So pretty significant.

And the two things you mentioned for siding, the paper and zinc borate, how big of a spend of that?

Paper is about $25 million spend, and zinc borate is about $10 million or $15 million.

Okay, and that is off of last year? Right?

Right.

Second question, down in Brazil, you mentioned you were only running at 50%, and I would imagine that the way Brazil is booming, if you were going to be running at full bore, you would be doing it right now. Could you walk us through that?

We are in the process of trying to break OS be into the home construction business, much like we were in Chile 10 years ago. Currently most of the OSB that we sell is for not for construction purposes. It's either use as packaging or temporary fencing, or used for any other thing that people can think of other than putting it on the side of a house. Our strategy there has been changed somewhat from the way that we thought, which was too either be able to take our Chilean model of conversion, but we found that extremely difficult because of the bureaucracy see that we have to fight our way through. So late last year, we changed the name of our strategy from conversion to adaptation. And what we are trying to do now is find places where OSB will fit into their current building practices until the acceptance of the product becomes greater. We are also attending their home below the show here next month, we did the same thing last year and we are starting to generate more interest for people that want to build frame built housing. But currently if you are looking at what we are selling, almost all of it is not going into construction. So that is a hard thing right now, but it's very exciting to us as we look at the home demand. And in a country like Brazil where it is 10 times bigger than Chile, we don't have to hit a home run.

Will that move a lot of volume?

Yes, we just have to get a bunt play. So we did grow that business significantly from where it was last year when we took over the first 75% of it, and we are encouraged that we will be able to ratchet that volume up again this year. We have been running that mill only one thermal oil system, and we think that sometime in the next three or four or five months we will be able to start the second line up in that mill has the capability to be able to do about 360 million and will probably sell 190 million to 192 million down there, if you take the run rate in December, that's what we will do this year before we take the second line. It will take us a little while to fill it out. But as you recognize them. So as we have an underlying need for homes right now, somewhere in the deficit of about 6 million to 7 million and the government has come out and say they are going to try to provide 4 million homes in the next two years which we do not think is possible. But the stars are lining up for as they are, it just takes a little bit of time.

Well I will tell you, that Chilean number I remember being at only about 15% penetration a few years ago, so clearly you made headway there.

Yes, actually our strategy there has changed as well because we call that a conversion strategy, and with the earthquake, it's our belief now that what we have is a protection strategy. We think that the earthquake completed the conversion process for us now and now we just need to maintain our position.

Okay, last question I have. If you take a couple of steps back, what is puzzling to me is, why we haven't seen more consolidation taking place in the market, given the extent and duration of this downturn in the housing market. Any thoughts they are?

Well, it is over simplistic if you heard me say it, and everyone laughs at me when I do, but there are no sissies left in his business and nobody wants to give up their shop and let someone else on them, is my opinion. I just think everyone likes the business for one reason or another and they want to stay in it.

Would you anticipate any further changes in the industry structure as we look out over the next 12 months?

I don't anticipate them, maybe someone else looks at it differently but I don't.

That is helpful. Thanks guys.

Mark, before you leave, I think where you will see the consolidation is where you will continually see the channel because the channel guys have had difficulty -- we've had 7000 lumberyards close.

Yes, I know that with both the wholesalers and the lumberyards there has been a lot of turmoil and a lot of rationalization that has taken place, and maybe some more head.

So I think you will see more there than on the producer side.

Good luck guys.

Thanks.

Thank you. Your next question comes from the line of Peter Ruschmeier from Barclays Capital.

Thank you and good morning. Rick, I'm sorry to hear about the Titans quarterback, but if it makes you feel better, the Steelers didn't have a quarterback either at times during the Super Bowl. [laughter] I wanted to ask a question. Curt, you mentioned -- if I understand the math right, I think you got $0.63 on the dollar on the face value for the AR securities?

A little more than $0.65 Pete.

A little more than $0.65. Now is that a good precedent do you think or are there any reasons why you would do better or worse on the remaining $61.5 million of face value.

Yes, they are all different securities. These were the credit linked notes. And if you look at what the ratings were -- the latest ratings on those notes and you look at spreads, the 65% is what we think is the best you could do given where that paper is rated. The remaining ARS that we have are primarily Bank trust preferred, and they have not recovered to the same level but the credit incomes have.

Okay.

So the market value, what we record is, we record what our best indication of market value is, so that $50.4 versus the $61.5, that's the best information we have today on the value of securities.

Understood. Rick, I'm curious, I don't think you are selling much if any OSB today to China, but I'm curious as to whether you are or not where you are getting inquiries or not, and how do you think of that as a potential opportunity down the road of?

Here is my current thinking on China. Near as we can determine, we think about 75 million feet of OSB went to China last year from North America. Of that, 5 million of that was ours. Our obstacle in doing business over there has been that it is an unattractive market for us in terms of pricing. That is not the case though for Brazil. We probably have the opportunity with a specialty OSB product out of Brazil to go to maybe about 40 million feet over there, but that product is not being used for construction purposes. So our obstacle so far, and we keep looking at it and I keep pounding Jeff, our OSB guy, about why we are not sending more to China, but we are just taking bad business and we have not found opportunities where it was additive to our P&L for doing that. Overtime if there are additional uses, or if we can invent more specialty products which will go over there, we will certainly chase it when it seems to make sense. But that is my assessment of where we are in China right now. Most of the noise in China appears to be around lumber which I am sure that you are up on.

Okay. How do you think about whether you need to grow your footprint in the Chile or not, I think you are sold you're a sold-out and visibility with strong demand, so is that something you need to put new capacity on the ground? Do you serve that market through North America? How do you think about that?

Obviously in the short term if we get sold-out and not wanting to create a void, they can service them out here but we are wrestling in the next five year timeframe say around where our next mill should be down there in terms of Chile. Then obviously the one that could potentially surprise us and come at us faster is, where would hour new mill in Brazil be? Because if we get word on the ball in Brazil, with 360 million feet, that's a little yellow spot in the snow compared to what it could be.

Okay, that is helpful.

That is one of the reasons why we are hanging on to some of the older equipment that we have here, because, that is what we did in the Chile. We took old shutdown shut down vintage one OSB mills and took them down there and in a smaller environment like that you can fill them up quickly. The economics are better.

Okay. Lastly, can you remind us what it takes to start a sum of your and definitely idle mills? Some of them are presumably low cost, like Clark County and others that have been shut down for a while. With the current forecast for housing it doesn't appear you need to start these up anytime soon, but what has to happen once you make that decision, and how quickly can you do that? How do you think about that?

Here is our latest thinking, and I will use Clark County as an example. First of all, we are not planning on running it this year because we don't think there will be a need for it. I think it will take us 10 months from the time that we make the decision to do it to be making a help supply of boards. And as we have said in many of our conferences the last couple of years, then there is a significant cash outlay that is required there to go ahead and hire the people and get them trained up and bring your inventories of raw materials up to speed, and so we have estimated somewhere around a $7 million cash outlay and about 10 months to do it, soup to nuts.

Thank you very much.

Thank you. Your next question comes from the line of Joe Stivaletti, Goldman Sachs.

Hi. Good morning. Two things. One, I was just wondering if you could talk about your views on OSB pricing against your 700,000 starts forecast for 2011, and maybe talk about some of the recent volatility and pricing. That's my first question.

I don't really know how to comment on that. Pricing is driven by how much supply there is and how much demand there is and we cannot tell you two weeks from now what pricing is going to be. And I have been doing this a long time and I still cannot tell you what pricing will be two weeks from now.

Just as an example of Joe, we had several weeks where pricing with down pretty hard and midweek was up into regions this week.

At this level, you have some people running their current capacity and it appears to be pretty full out. I told you what ours was and we are running a small amount. So it really is very difficult for us to give you any guidance on pricing that is simply a relationship of supply and demand at any given time.

The other question I had was, whether there is any thought on potential opportunities to expand any parts of your business, particularly away from the OSB part of your company. I just wondered if that was something that was even on your radar screen if you look at those opportunities in your area - in wood - or what have you?

In our foreseeable plan, the two areas that we are trying to pour gas on is our siding business and our South America business. That is where we, within the context of the markets that we are operating in now and the limited resources that we have, those are the two areas that we are actually calling growth areas for ourselves.

Remember, Joe, we have a lot of capacity in front of everyone of our customers, so priority one is to use the capacity we already put in place. We had an aggressive capital plan as we entered into the downturn. We just talked about Clark County, It's brand new mill should be low-cost and we are not running at all and we talked about LSL being underutilized and in siding we are still running 200 million feet per year in Hayward of OSB that we would like to convert to siding.

Okay, but not a particularly high level of interest in maybe going after property that could be available on the wood product side of things like.

Well, if you did that, it would make a decision on where you would shut down. Would you shut down what you just bought or what you already own? And those are tough decisions to make.

And in reality, even if we were thinking about that, we couldn't tell you.

I was just trying to gauge your level of interest in that part of the industry. So the growth opportunities, you are focused on South American siding and it would characterize as all basically organic types of growth opportunities.

Yes. And that is where any additional resources that we have right now, that is where they would go. This is not a resource rich environment as you know, they are in a cash preservation game.

Right. Okay, thank you.

The next question comes from the line of Chip Dillon, Credit Suisse.

Good morning.

Chip, before you get started, I want you to go for 38 in a row. [laughter]

Well it's all in your hands. I think you will get there. Listen, on the timber sales that you have done in the past, and I know that you update us every quarter in terms of the corresponding assets and liabilities there, how do the remainder of those were roll off, since it's been a number of years, is this something that will stay constant for a few years and a drop-off or will it continue to edge down?

We do have that information out there, Chip, and I will do it from memory. I think there is about $113 million that is due in 2013 on the sale in the NorthWest and then we have a bullet payment on the Southern Timberlands in 2018, and that's all one. Then there is a minor $20 million or so in 2012.

So the big one is 2018, and I guess the amount of tax you ultimately pay on that will be a function on how much money you might be making plus or minus whatever your NOL situation is?

That is correct. For instance, in 2010, we did receive a $120 million payment, of which $4 million was to us and then $116 paid out the liability side, and we think we will defer all that tax -- will consume the operating losses to offset the tax so there will not be a tax payment this year.

I think you have mentioned this before, but the two plants that are shut down is Chambord and Clark County, right?

Right.

And I think you had a prior question about how long it would take to ramp those up, but if you think about it, I imagine that Chambord could, again we are assuming the market conditions were there, could come up faster that the work forces would be pretty available. So could you tell us how long the day you decided to start that to the day you're getting wood out of the door, and how about the same for Clark County, which I imagine since you've never had a workforce there would take longer?

Clark we think is about 10 months and I would take about two months off of that if it was Chambord.

Okay. Great.

Your next question comes from the line of Paul Quinn, RBC Capital Markets.

Good morning guys, it's nice and sunny here in Vancouver. Just a question on siding, you guys have done a great job in that segment, had a lot of growth, I get 80% operating rate there, so I wanted to question that, and how do you look at the growth in that business, and do you look at taking some of the OSB product out of Hayward to further grow that and how do you look at converting another mill?

We have some inefficiency built in right now because we are not operating all of the mills fully shifted. So as we get more volume this year, we solve that problem simply by running full shifted on the three little mills. Then the next chunk of volume is the 200 million feet of capability that we have at Hayward where kick OSB out the door and we would have 200 million more feet to grow there, and of course that leads you into supposing that one of our strategic discussions around here is where and when should the next siding mill be, but that depends upon how fast this growth comes at us. But we have this volume of capability ahead of us from where we are right today before we have to answer that last question.

Paul, the other thing I would add there is we have already made the capital investment of the 200 million to Hayward, so there's no additional capital. It's already in place.

That's helpful. And on CapEx, I heard $50 million, and I would say they break that down to $15 million on maintenance and the rest on discretionary?

Well most of it is maintenance or maintenance related. Some of it has a return on it, and some of it is just stuff we have to do. The $50 -- but like I said, I think if I have to, as I continually look at how the year unfolds, I could pull that back or in essence meter it out at a rate where, if I feel like I don't want to go that , I'll just have to tell some people to make do. And then the other $20 million to $22 million to complete the most recent

All right, thank you.

Thank you, I would like to end the call to Curt Stevens for closing remarks.

Thank you very much for attending the call and thank you for your thoughtful questions. As always, Mike and Becky will be available for calls following this and as I mentioned before, we will have our form 10 K by no later than the first of March. Thank you very much, Mary, if you get the replay information, that would be great. We will talk to you next quarter.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect.