West Fraser Timber Co Ltd (WFG) 2007 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the West Fraser Timber first quarter results conference call. During this conference call, we will be making certain statements about potential future developments. These forward-looking statements are to provide reasonable guidance to investors, but the accuracy of these statements depends on a number of assumptions and is subject various risks and uncertainties. These statements are not guaranteed by the Company and actual outcomes will depend on a number of factors that could affect the ability of the Company to execute its business plans, including those matters described under "Risk Factors" in our annual MD&A, which can be accessed on our website or through SEDAR. Accordingly, listeners should exercise caution in relying upon forward-looking statements.

I would now like to turn the meeting over to Mr. Hank Ketcham, Chairman, President, and Chief Executive Officer. Please go ahead, Mr. Ketcham.

Thank you. Good morning and welcome to West Fraser's first quarter 2007 conference call. West Fraser had a first-quarter loss of C$5 million, or C$0.12 per share, versus C$296 million, or C$6.87, per share in the fourth quarter of 2006. Fourth-quarter earnings, excluding a softer lumber duty refund, would have been C$7 million, or C$0.17 per share. Martti Solin, our CFO, will review the earnings in more detail later in the call.

On a divisional basis, our Lumber division suffered an operating loss of C$40 million in the quarter, versus a loss of C$3 million in the quarter of '06, ignoring the duty refund. EBITDA was negative C$13 million, versus C$1 million last quarter on the same basis. I want to point out that our loss during the quarter included an C$18 million, or C$0.28 per share, write-down of log inventories.

Lumber prices have declined significantly since the first quarter of '06, reflecting a sharp decline in housing starts. The benchmark price for SPF was $253 per thousand in the quarter, versus $245 per thousand last quarter and $343 for the first quarter of '06. The benchmark price for number two Western 2 x 4 southern yellow pine was C$263 in Q1 '07, versus C$267 in Q4 '06 and C$409 in Q1 of '06.

We had good production during the quarter at our lumber and plywood mills. Lumber shipments were 38 million feet lower than production, primarily due to the CN rail strike. Our inventories are manageable, although somewhat higher than we would like. Lumber recovery and grade recovery were marginally better than in the fourth quarter, although lower than the first part of '06. This reflects the decline in quality of the beetle-killed pine. The Quesnel sawmill continues along its startup curve. It should be at full production by year-end.

On March 31, we closed the acquisition of 13 sawmills in the U.S. South. We have a full management team in place and are working hard to extract the synergies of C$23 million that we have previously announced. Under our current market conditions, we will incur losses at this division.

During the quarter, our Panel business, which includes plywood, MDF, and LDL, operated well. EBITDA was C$15 million in the quarter, versus C$5 million last quarter. This reflects better operating cost and prices for our plywood operations. The benchmark price for plywood was C$379 per thousand, compared to C$307 per thousand in the fourth quarter of '06.

Our Pulp and Paper division reported EBITDA of C$35 in the quarter, compared to C$42 million last quarter. The Company's Pulp and Paper results include improved pulp selling prices. The increased price for pulp was offset by higher fiber costs at most mills, higher transportation costs as a result of the CN strike, and lower production and shipments from our Hinton and Kitimat mills.

As part of our previously-announced restructuring at Hinton pulp, the older of the two pulp machines in the mill's wood room ceased operation. A C$20 million upgrade of the remaining pulp machine is expected to be completed by the end of the second quarter of 2007, resulting in improved operations and lower production costs.

At the Kitimat mill, production problems related to the startup of the new turbo generator, along with several other operational issues, resulted in a production shortfall of about 15,000 tonnes in the first quarter of 2007 when compared to the same time period in 2006. This translated into higher conversion costs and an operating loss at this division. By the end of the first quarter, the turbo generator was running at approximately 75% of target.

The current price for NBSK is C$810 per tonne. Market conditions for other pulp grades, including BCTMP, were weaker in the first quarter of 2007. The first quarter of '07 benchmark price for linerboard remained consistent with the previous quarter. Price levels for craft paper increased by 10 to 15% over the last year and we expect the craft paper markets to remain strong for the remainder of the year. Newsprint prices and demand continued to decline in the first quarter of '07.

In the second quarter, we will take our Hinton pulp, Cariboo pulp, and Kitimat liner mills down for their annual maintenance shutdowns. This will reduce production by approximately 50,000 metric tonnes in the quarter.

The Softwood Lumber Agreement still remains an issue for the Canadian industry, as there are a number of uncertainties related to the agreement, including the so-called surge mechanism. Under the SLA, the surge trigger volumes in the first quarter were not exceeded for B.C. and Alberta. However, the calculation of U.S. consumption, a key metric used in the surge trigger calculation, is being challenged by the US. It will take several months to resolve this issue if it is referred to arbitration. We believe Canada's interpretation and application is consistent with the agreement and the Canadian position will prevail.

We welcome the introduction of the Canadian government to end the strike at CN rail. The strike impacted shipments and costs during the first quarter. We hope that with both the strike and winter operations behind us, rail service will return to more acceptable levels.

On balance, we are generally satisfied with the performance of our wood products business. We continue to modernize and upgrade our facilities to improve efficiency and try to offset some of the effect of mountain pine beetle. Our most significant challenges at this point are to successively integrate our new southern sawmills, improve the performance of our Kitimat mill, complete the restructuring of our Hinton pulp mill, and reduce costs throughout our craft, pulp, and liner board divisions.

I will now turn things over to Martti.

Thanks, Hank. As we normally do, I will comment on a couple of the items we think warrant some further explanation or comments. My first comment deals with the U.S. sawmill acquisition. The transaction closed at the end of March without any hiccups. You may recall that the agreed purchase price of C$325 million cash included a target working capital of C$65 million.

As reported earlier, we also agreed to cancel the two pulp shells contracts entered into as a part of the rail board acquisition. The accounting rules require us to establish a value for those contracts, which we have now done with approximately C$10 million valuation, which increased the total consideration for those assets by that amount. No value was originally established for these contracts, so that the whole amount is a gain.

Our transaction expenses are currently estimated at around C$6 million. Therefore, before the final adjustments, the total cost of the U.S. acquisition in U.S. dollars will be about $337 million, or approximately $390 million. They say is no goodwill associated with this transaction.

We have not had a chance to establish new amortization rates for these assets, however as a guidance, which we will update, we suggest that you use a C$37 million annual amortization for the new newly-acquired mills and our existing U.S. mills.

My next topic is SG&A. It turns out that we overestimated the performance-related compensation in the last year by C$8 million pretax, which is now being reversed. To clarify, the reversal has not been allocated to the operating segments. In the segmented result table, you will find it under the corporate EBITDA line and, of course, it shows up in the P&L in the SG&A caption.

I would like to give my non-accountant comments on the log inventory write-down Hank mentioned in his comments. Under GAAP, companies have the choice of recording raw material inventories, such as logs, either using the method of overall cost and replacement cost, which is commonly used by many companies, or the method which Frazer uses, which is the overall cost and net realizable value. We have always used this latter method, which we believe to be more conservative. Thanks to our low cost operation, it has not been often when we have to have -- when we have had to write-down our logs to reflect depressed lumber markets.

The fact that we have an extra quarter of logs in the inventory at the end of March affected the Q1 results in this case by C$18 million. While this is a large [thing], we don't believe we should change our well-tested accounting for log inventories. I just want -- I took this extra time to dwell on this point, because we have a different accounting practices in the industry in this area.

I also would like to comment on our reported operating earnings for the current period, as we already discussed, were a negative about C$25 million, which include a gain of C$8 million on account of the over-accrual of compensation items and the log inventory write-down of C$18 million, which we just discussed. So on the normalized basis, our operating results would be about C$11 million, which includes our share option expense of about C$2 million. As you can see from our presentation, the share option expense is now included in SG&A line and not separated, as we have done in the past.

The pulp contract cancellation gain of C$10 million is included in the other income, which also includes various other minor gains and losses. So, that is all I have this time. Operator, we are now available for any questions. Questions, if any. Thank you.

(OPERATOR INSTRUCTIONS). John Duncanson, Jennings Capital.

Good morning. Just had one question, Martti, and it may be too early for you with all your acquisitions in the US, I was just wondering what we should be using, sort of, for CapEx for '07?

I think we said, John, in the last conference call that it was roughly C$200 million for 2007 in total. And we are looking at the timing of the various CapEx, so that is likely to be a different figure going forward, but that is what we told in February.

And so your depreciation is running at --

About C$280 million kind of a run rate annualized, when you are all-in.

And that includes the 37 you mentioned for the new mills in the south?

Yes, and, obviously, for this, that is the annualized run rate, John. So the new mills will be only three quarters for the year.

Okay. That's great. Thank you.

Patrick Yung, Raymond James.

Good morning. I was wondering if you could provide any thoughts on this stumpage change that is coming up, in terms of your expectations and, you know, how it will impact your costs going forward?

I am going to let, Patrick, I'm going to let Wayne Clogg, who is our VP of Woodlands, answer that.

Good morning, Patrick. I can't give you a definitive answer to that, but I can tell you that the Ministry of Forests has compiled the 2006 timber sales and data and is working on a new regression equation. But it is a little bit early, at least for us, to speculate on where that might go, so you might get a little more information out of revenue branch if you talk to some of those folks.

All right. Thanks for that. And turning over to the recently-acquired IP sawmills, what are you seeing in terms of log cost and yellow pine realizations?

Well, I think the key is, as I mentioned in the first quarter, yellow pine realizations, with respect to the Canadian SPF and, of course, the margin between the -- the traditional margin between southern yellow pine and SPF is very, very small. The margin today is very, very small versus the traditional margin that southern yellow pine usually enjoys it, so that is squeezing profitability down there significantly. And then the declining -- in a declining pricing market that we have seen so far, we are not seeing a heck of a lot of movement in wood costs.

All right. That's all I had. Thanks for that.

Thank you. Richard Kelertas, Dundee Securities.

Hi, good morning, everyone. Could you, Marty, just break down for us what impact, if you could, the CN rail strike had on your after-tax operating profits? So for the quarter, what was it, if you could, on a per-share basis?

Good morning, Rich. I mean that is the type of thing we can't give. It gets to the area that to difficult for us to make it public.

Okay. And in terms of the log inventory write-down, that C$18 million is an after-tax number.

That is a pretax number.

Pretax. Okay. Should we use about, what, 37%?

Use 35, 34% tax rate. 34% will be more accurate.

34, you said?

Yes.

Okay. Great. And if you could just talk very, very briefly right now in terms of when you think that you will get the U.S. acquisition to these standards that you have your other sawmills in North America? That means getting it into West Fraser Timber operating standards, so will it take another quarter, two quarters, three quarters to get where you think you want it to be, where they match up in terms of performance levels? And that is just assuming that they are operating full, and I know they won't be, but in terms of where you will be happy with them.

Well, you know, the 13 mills, Richard, it is difficult to predict how long it is going to take, so I am not going to do that. Although if you have some way to get it there in a quarter, we would like to come and spend some time with you.

We'd like to shut down six of them and then we will get the rest, obviously.

Exactly. No, it is -- two things have happened so far. We have got an entire team in place, a lot of -- most of the people at IP that were with that group stayed with us. We have got a great guy that was heading the wood products. He stayed with us. He has brought his whole team up here for our annual meeting this year. We are integrating them from a cultural point of view.

We have got some of our key people who have chosen to move down to the U.S. South and work in the operation, so I think we have got a strong integrated team. So I would say the one thing that we are really pleased about is we hit the ground running with a strong, committed team who want to be very, very successful. That is number one.

Number two, there is a range of assets that we bought, ranging from quite modern and efficient, to assets that haven't had a lot of money spent on them. So it is going to be -- in some cases, it is just going to be a matter of doing some things differently operationally, and in other cases, it could be a matter of spending, capital. We haven't got that really figured out yet, so I think it is a little bit too early for us to give you a good impression of that.

Okay, great. And final question, I think for the last, what, 20 quarters we have been talking about Kitimat and getting it to where you want it to be. Can you just describe what the problems are there now and what phase-in you are talking about?

Well, if it has only been 20 quarters, Richard, I guess I wish it had only been 20 quarters. We have had -- that Kitimat operation has had an improving performance for the past three years to the point -- I mean, basically, after the significant strike we had three years ago, we had a new team in place and I think up until November, it was running at design capacity and it was driving its costs down, it was doing a good job.

We have had a problem when we installed the turbo generator, which is a good project and it is supposed to significantly reduce our energy costs. But it has not started up well and it has basically caused a bunch of operating issues in the mill. So we have sunk back since November to a poor performance in that facility and we have got -- all we can do is plug ahead and solve one problem at a time and hopefully we will get back to the performance we were at half a year ago.

And what is your target for getting it back up to speed?

Well, like yesterday, I mean, I can't answer that. I mean, it is a struggle, but I can't really give you anything more than that. We have got all the horses we have on it right now.

So it actually didn't impact your operating profit out of Kitimat for the quarter.

Significantly.

All right. Thanks very much.

Richard Skidmore, Goldman Sachs.

Good morning. I would like to follow up just on the long-term pulp supply agreement. When you first purchased Weldwood, I believe there was a provision in the initial purchase agreement that had to do with the price of NBSK being above a certain level and if it did, then there was perhaps a payment to IP upwards of about C$50 million. Can you just update us where you are in that provision, because I think the number was C$710 for NBSK? Can you just update where that is? Have you paid IP some additional money for that or will you be paying them a certain amount in the future?

Good morning, Rick. You are absolutely right. There is a provision in our original IP deal when we bought Weldwood, a contingent payment provision which was tied to a NBSK price. That comes to an end end of June '07, so we are now in the last quarter of it. The price was expressed in Canadian dollars, the trigger -- well, there is a trigger. In U.S. and Canadian, it was the higher of those two and we are not, based on all we see, we will not be hitting the trigger and no payments will be required as we see it today. This is now the last quarter of it.

And that provision is different than this long-term supply agreement that you just canceled?

That's correct. We had the long-term contract was a 10-year, 170,000-tonne contract with IP, dealing with the mills IP used to own and then they sold those underlying consuming mills and, therefore, the agreement was, say, canceled.

And then just following up on the comment that Hank made in the prepared remarks with regards to the U.S. mills that were acquired, generating a loss currently. Can you elaborate on that and sort of the magnitude? Is it slightly EBITDA negative? Is it operating income negative? Just help us understand where that operation is now and how to think about that over the next quarter.

It's EBITDA negative. And, you know, I think there are some metrics there that are causing it to fall below our expectations at this point. And the primary one is the mill nets down there are below, as I said, the traditional -- significantly below the traditional spreads. So, you know, it's a tough slug down there.

And then just to follow up, now with the U.S. mills, the acquisition completed, how should we think about the currency impact for West Fraser with the Canadian dollar? Can you just maybe update, Martti, what the sensitivity is or have you done that work yet?

Well, the sensitivity doesn't really change. But I know you guys haven't had a chance to look at the notes in the details. We changed the accounting for the U.S. business and now when we have a more significant business down there, it is called self-sustaining a business. And therefore, we use the current rates to translate both the assets and liabilities, and therefore it doesn't impact in any significant way our -- the effect doesn't impact our bottom line. So our sensitivity continues to be a C$17 million for C$0.01 change in U.S., or thereabouts.

Okay. That's great. Thank you.

Mark Bishop, RBC Capital Markets.

Thanks. A couple of questions. First, on your chip prices, just wondering, Martti, if you could give us a flavor for how your chip pricing may have changed from the end of the quarter until now. And also, just if you could give us a sense of what percent of your overall chips were from whole log chipping?

I don't have that (inaudible) -- the change of a chip price,[okay]?

Mark, it is Gerry Miller. The residual chip price at the end of the quarter compared to the end of the fourth quarter is up a little less than 10%. And the volume of our whole log chips across the board is very small. It is less than a couple of -- a couple of a percent, probably, across the board.

Okay. And then since the end of first quarter to now, have you also seen an additional ratcheting up of chip prices?

I think it is up, I would say, another couple percent.

Okay. And level of whole log chipping is still pretty much the same?

Yes, we are not whole log chipping a lot.

Okay. Hank, I think you mentioned that lumber recovery was up from the fourth quarter; obviously down from the first quarter of '06. Are we going to see a fluctuation or should we read into this that we are kind of now at a bit of a steady state at a lower level?

You know, it's hard to say. I would say in British Columbia, my guess now -- I think it is actually too early to really make a lot of forward comments on the effect of the beetles on the lumber log quality, because there are other things that affect it too.

But we have seen in British Columbia, versus Alberta and our U.S. sales operations, we have seen a decline across-the-board in lumber recovery and grade percent. So I attribute that to beetles, but again, like I say, it has really only been in the last six months that we have really seen it -- six or nine months. So it is probably a little too early to be definitive on that.

Okay. On your lumber inventories, obviously as a result of the CN strike, you mentioned that the inventories were higher. How long do you expect it to take to get your lumber inventories back into your normalized range?

You know, again, it depends on two things. It depends on if people want to buy it and, secondly, if the railroad supplies the cars. And with the strike over, we are getting better car supplies, so that doesn't seem to be an issue. So the real question is is the market there to absorb it.

Okay. Obviously, no anticipation of a slowdown in production though?

Not currently.

And I just wanted to end, Hank, on your favorite topic, on the rails. Obviously, the strike is over, you are getting better service. I understand that we could see about a 5% increase in your freight cost with the rails. Is that in the range of what you anticipate, or how does your picture for rail costs look going forward into '07?

It's Bill Legrow here, Mark, if there is a 5% increase coming, I am certainly not aware of it. We don't expect to see anything of that nature happened.

Okay. Do you have contracts that cover you right through the year? Do have protection?

Yes.

Okay. Great. That's all I have. Thanks.

Pierre Lacroix, Desjardins Securities.

Thank you, good morning. Just one question regarding to if we can get some perspective on how you manage your lumber mill system versus cash generation, and what percentage of product shipments, basically, was curtailed in the first quarter due to market conditions? And, also, any particular lumber mill that is struggling more than another? Some perspective on that, that would be great.

I can't give you too much perspective on that, Pierre. I can only say this, you know, that I think every company is looking at each one of their assets. This is a very, very severe pricing downturn and we have a range of mills that -- we don't have the same cost structure, of course, in every mill, so we have to look at them all. But I think I will tell you, we do feel quite comfortable that we have a strong group of assets, modern, and I don't think that we have any bad that were, well -- our asset base is, we think, a very strong, solid, modern asset base.

Okay and basically, if you look at the first quarter of 2007 versus the first quarter of 2006, production was down 13%. Mostly related to the sales of Decker Lakes and all these mills?

It would be largely related to that and a bit of, I think as we mentioned in the fourth quarter, probably a little of a LRF decline, as well, in the third and fourth quarter. Oh, and the startup of our Quesnel sawmill. We shut down our older Quesnel sawmill and had to start up, so that affected production as well.

Okay. Thank you very much for that. Thanks.

Sean Steuart, TD Newcrest.

Thank you. Just a few questions, guys. Hank or Martti, I guess first question, the Q2 downtime you are planning across the pulp and paper, the annual shuts. Is the 50,000 tonnes in line with what you would have taken in 2006 in that quarter? I am just trying to get a sense of, using the historical ramp-up in unit costs as a pretty good guide.

Yes, it is roughly the same.

Okay. And the second question is the turbo generators start-up being a bit slower at Kitimat. Can you quantify that on a unit costs basis, how much that would have affected Q1 costs versus Q4?

No, I can't quantify it. Some of that cost is in Q4, as well, because we started it up in Q4. But suffice it to say, it is not a pretty start-up and it has been a real disappointment for us. And like I say, somebody asked a question on Kitimat earlier. I think it was Richard. You know, this -- I don't like getting on the phone and apologizing for Kitimat every quarter. We did feel, in fact, we had that mill going in the right direction for the last two or three years and I hate to be apologetic. We are -- we believe strongly we can get it back to that successful trajectory and that is what we are committed to doing, but I can't tell you anything more than that.

Okay. And then just finally, Hank, following on Mark's question, I guess, can you give us any sense of the magnitude of the improvement, the sequential improvement in LRF this quarter, if it was material at all versus Q4, or was it just --

It was small.

Okay. Okay, that's all for me. Thank you.

Paul Quinn, Salman Partners.

Thanks. A couple of easy questions. Just one, getting back to the U.S. sawmills and just how we are going to model this going forward. Do you have any sense of how much you will be running the facilities? I mean, there is a lot of capacity down there and I bet you don't want to bleed all your cash, so can you give us a rough idea?

No, I can't give you a rough idea. Like I say, we took them over March 31. We are going to take some time to really analyze it. I can't tell you whether we are going to make a decision on something next week or ever, so we are just too early in the game to really be able to talk about that.

Okay, I guess I will come back next quarter on that one. Newsprint, it seems like you are building inventory. Are you having difficulty selling all production?

Not really.

Okay. Mountain pine beetle, how is it affecting Alberta operations?

Currently, it is not affecting the Alberta operations significantly, although we are modifying our harvesting patterns to make sure that we are working with the provincial government in terms of, you know, hitting the areas which are most prone to mountain pine beetle. I think in Alberta, the issue is going to be in early summer, we are going to get some results on work they have done to find out how hard Alberta has been hit. And that will give us some sense as to how to continue to modify our logging plans.

What is your expectation for the future in Alberta with the mountain pine beetle? Is it going to be a problem like B.C. or do you see them actually getting their hands around the problem?

Paul, it's Wayne. I think we are encouraged by how aggressive the Alberta government is being in the early stages and they have been working with B.C., I think, taking from the experience in B.C. to try and jump on it early. That being said, as you know, there is a lot of pine in Alberta and it is going very much have to do with the weather patterns that we are going to see in the years coming.

I have seen some very recent survey information in the Grand Prairie area, which is where the heavy infestation from B.C. came out, and there is some encouraging survey information on both early and late winter mortality from some cold snaps there. So it is too early, as Hank said, to really be definitive, but there is some reason for some optimism there, Paul.

Okay. Just, lastly, just on -- are you guys surprised at the amount of, I guess, overcapacity on the lumber side, currently, in both Canada and the U.S. and do you see additional capacity coming off-line as people realize prices aren't going to bounce back anytime soon?

Well I don't -- given the strength of the housing market over the last few years, you know, to us, it is a typical cycle. I mean, we have seen it in the mid-70s, the early 80s, and the early 90s. And by the way, I mean, we are -- in real dollar terms, you know, lumber prices today, actually today are lower than they were in 82, which is the worst recession I remember. So same old thing, I mean, we build capacity to accommodate over 2 million housing starts and they have dropped to whatever they are now, 1.4, 1.5.

It is a very painful process to get your production in balance with consumption and that is happening. It is certainly occurring. Every time you get into this it seems to take a lot longer than you would like, but I just feel that we, from our point of view, sitting where we sit, we think that we could be into this for a while and we have just got to buckle down and drive our costs down. That is what we are doing every day.

All right. Thanks guys.

Operator?

-- -- Eldredge. Your line is now open. You may ask a question.

I'm sorry. Good morning. Thank you. The release discloses that you were able to extend the existing revolving credit facility as well as enter into two new credit facilities. Any financial covenants, or other covenants associated with that activity, or status quo?

Nothing new. They are like in a bank revolver, so there are certain covenants. But nothing new that affects us.

Thank you. That was it. Thank you.

Mark Bishop, RBC Capital Markets.

Thanks. I just wanted to follow up on the Panel segment, which obviously hasn't gotten a lot of focus here. Could you just elaborate a little bit on the strength of the MDF markets, which we found surprising in the quarter. Are you still seeing that continuing through at least through mid-year?

Well, we are seeing it continue at least through the few weeks. Don't predict these things very well, but, no, it is very strong and --

What are the drivers of that, Hank, just given, obviously, the end markets should have been weaker by now, I would have expected?

Yes, well, I am told that there is a significant reduction in production, primarily based on access to fiber, on the one hand and I guess that is the primary issue. Asia is very strong, so there seems to be a bit of a, at least in North America and possibly worldwide, a shortage of supply primarily due to fiber.

You are not exporting (inaudible) part of your MDF now are you?

We are exporting some, yes.

To Korea, or where does it go?

Asia. Strengthening prices, significantly strengthening prices.

Taiwan -- Taiwan and Korea, Mark.

Okay. Thanks, Zoltan. And just on the plywood side, I suspect the targeted plywood by potential tariffs would not come into your softwood plywood, but you have any concern that there might be a little bit of a rebound effect that ultimately backs up into the Canadian plywood markets? This is referring to potential U.S. tariffs on imported plywood.

Hi, Mark, it's Chris McIver. We don't expect that there will be any pushback. It is targeting its hardwood plywood as far as we can tell, and we don't see anything against softwood plywood.

Okay. So you don't -- great. Okay. Just checking. Thank you.

(OPERATOR INSTRUCTIONS). James [Keller], [Thermapolis] Partners.

Given the low lumber price environment that we are in now and the increased inventories that you guys have, have you decided to accelerate any of your CapEx plans or take any extra downtime in this lumber environment?

No, we haven't decided to do either of those two things. One thing that happens in a tough environment like this is we are certainly reevaluating every single one of our capital projects. And in terms -- I already answered the question, I think, on the potential downtime. We are -- that is something I don't think we are prepared to talk about, but I will say that, again, that, you know, we do believe we have a very strong set of assets here.

Thank you. There are no further questions registered at this time. I would like to turn the meeting back over to Mr. Ketcham.

Well, good. I think that is it and thank you very much for joining us and I guess we will talk to you in another quarter. Thank you.

The conference has now ended. Please disconnect your lines at this time. Thank you for your participation and have a great day.