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spk00: Good morning. My name is Cree, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Boise Cascades second quarter 2021 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during that time, simply press star then the number one on your telephone keypad. Questions will be taken in the order they are received. If you would like to withdraw your question, press the pound key. Before we begin, I remind you that this call may contain forward-looking statements about the company's future business prospects and anticipated financial performance. These statements are not guarantees of future performance, and the company undertakes no duty to update them. Although these statements reflect management expectations today, they are subject to a number of business risks and uncertainties. Actual results may differ materially from those expressed or implied in this call. For a discussion of the factors that may cause actual results to differ from results anticipated, please refer to Boise Cascades' recent filings with the SEC. It is now my pleasure to introduce your introduce you to Kelly Hibbs, Senior Vice President, CFO, and Treasurer, Boise Cascade. Mr. Hibbs, you may begin your conference.
spk02: Thank you, Cree. Good morning, everyone. I would like to welcome you to Boise Cascade second quarter 2021 earnings call and business update. Joining me on today's call are Nate Jorgensen, our CEO, Mike Brown, head of our wood products operations, and Jeff Strom, head of our building materials distribution operations. Turning to slide two, I would point out the information regarding our forward-looking statements. The appendix includes reconciliations from our GAAP net income to EBITDA and adjusted EBITDA and segment income to segment EBITDA. I will now turn the call over to Nate.
spk01: Thanks, Kelly. Good morning, everyone. Thank you for joining us for our earnings call today. I'm on slide number three. Our second quarter sales at $2.4 billion were up 97% from second quarter of 2020. Our net income was $302.6 million. or $7.62 per share, compared to net income of $33.6 million, or $0.85 per share, in the year-ago quarter. In second quarter 2021, total U.S. housing starts increased 43% compared to the same period last year. Single-family housing starts, the primary driver of our sales volumes, increased 42%. During the period, our associates in both businesses performed with focus and dedication to capitalize on the strength in residential construction and delivered exceptional operating and financial results. Our wood products manufacturing business reported segment income of $213.8 million in the second quarter compared to $17.1 million in the year-ago quarter. Wood products benefited from historic plywood pricing levels and improved sales realization, EWP sales realizations and volumes compared to last year's second quarter. Wood products also continued efforts to increase manufacturing production rates to align with strong end product demand, particularly for our EWP business. Our building materials distribution business reported segment income of $206.3 million on sales of $2.2 billion for the second quarter, compared to $43.2 million of segment income on sales of $1.1 billion in the comparative prior year quarter. BMD's results were favorably impacted by higher commodity wood products pricing, driven by continued strength in new home construction activity. Commodity lumber prices fell sharply in the back half of the quarter, and Kelly will speak to the inventory valuation adjustment we recorded momentarily. As it relates to the general line and EWP product categories, supply constraints remain and demand was strong with the exception of a notable pause in demand in the back half of the quarter for products that sell through the home center channel. Kelly will walk through the financial results in more detail, and then I'll come back and provide our outlook before we take your questions.
spk02: Kelly? Thank you, Nate. I'm on slide four. Wood product sales in the second quarter, including sales to our distribution segment, were $594.6 million. compared to $281.5 million in second quarter 2020. As Nate mentioned, Wood Products reported segment income of $213.8 million in the second quarter compared to $17.1 million in the prior year quarter. Reported EBITDA for the business was $227.9 million, up from EBITDA of $31 million reported in the year-ago quarter. The increase in segment income was due primarily to higher plywood, EWP, and lumber sales prices, as well as higher EWP sales volumes. These improvements were offset partially by higher wood fiber costs. BMD sales in the quarter were $2.2 billion, up 92% from second quarter 2020. Sales prices and sales volumes increased 83% and 9% respectively. The business reported segment income of $206.3 million or EBITDA of $212.3 million in the second quarter. This compares to segment income of $43.2 million and EBITDA of $48.8 million in the prior year quarter. The increase in segment income was driven by a gross margin increase of $187.9 million, resulting primarily from improved sales volumes and gross margins on substantially all product lines, particularly commodity products, compared with second quarter 2020. This margin improvement was offset partially by increased selling and distribution expenses of $25.9 million. Included in BMV's Q2 results is a $12 million lower of cost or market adjustment to inventory, resulting from the sharp decline in commodity lumber prices in the back half of the quarter. The amounts for unallocated corporate costs and other items impacting our reported adjusted EBITDA can be found in the tables of our earnings release. The net of those items was negative 10.3 million in second quarter 2021 compared with negative 8.5 million in second quarter 2020. The increase was due primarily to 3.4 million of estimated losses caused by a fire at our BMD Phoenix location. Corporate absorbed these losses in the second quarter as part of our self-insured risk retention program. These losses were offset partially by lower incentive compensation due to award forfeitures after the departure of an officer. Turning to slide five, our second quarter sales volumes for IJOYS and LVL were up 53% and 22% respectively compared with second quarter 2020. Demand for EWP continues to be strong in 2021 fueled by increased housing starts and a higher proportion of single family starts. Pricing in second quarter for IJOYS and LVL were both up 3% compared with first quarter 2021 As previously announced, price increases continue to take effect and certain temporary price protection arrangements expire. We expect EWP prices to continue to increase sequentially during 2021, reflecting pricing actions taken in late 2020 and thus far in 2021. I'm now on slide six. Our second quarter plywood sales volume in wood products was 338 million feet compared to 314 million feet in second quarter 2020. Our veneer and plywood mills operated well during the quarter, allowing us to benefit from unusually strong plywood pricing. The 878 per thousand average plywood net sales price in second quarter was well above historical averages, up 206% from second quarter 2020. July price realizations were modestly above our Q2 average because of the length of our order files. However, plywood pricing has since transitioned meaningfully lower as demand has softened, and we plan to take rolling curtailments as and where necessary to assist in balancing supply and demand at our plywood facilities. Moving to slide 7, BMD second quarter sales were $2.2 billion, up 92% from second quarter 2020. By product area, BMD's commodity sales increased 167%, general line product sales increased 26%, and EWP increased 52%. Gross margin dollars generated improved by $187.9 million in second quarter compared with the same quarter last year. The gross margin percentage for BMD was 15.6%, including the previously mentioned inventory valuation adjustments. up 220 basis points from the 13.4% reported in second quarter 2020. The impact of continued escalating commodity prices in April and May is evident in our sales mix and gross margin percentage expansion. BMD's EBITDA margin was 9.8% for the quarter, up from the 4.3% reported in the year-ago quarter. due to our gross margin expansion and improved leveraging of selling and distribution costs. The trajectory of commodity products pricing will have a meaningful influence on BMD's financial results as we move through the balance of the year. Given continued sharp declines in commodity lumber and panel prices, we expect BMD's third quarter 2021 results to be well below the comparable year-ago quarter. I'm now on slide eight. This slide shows lumber pricing was very volatile during second quarter 2021, with rapidly rising prices in April and most of May, followed by sharp price declines during the remainder of the quarter, largely due to declining repair and remodel and do-it-yourself activity, causing hesitancy in the marketplace because of expectations for potential price erosion. With COVID-19 vaccines and easing pandemic restrictions, Indications are that people are spending less time at home on home improvement projects, resulting in reduced demand from our home center customers. Turning to slide nine, although lagging the lumber price declines, the Random Links Composite Panel Index reflects short price declines beginning early in the third quarter. Current composite panel and lumber prices have both declined by approximately 50% from levels at the end of second quarter 2021. We expect commodity product pricing will continue to be volatile as we move through the rest of the year. Pricing movements from current levels will likely be determined by the strength of in-market consumption and industry operating rates. On slide 10, we have set out the key elements of our working capital. Net working capital, excluding cash, income tax items, accrued interest, and dividends payable increased $58.4 million during the second quarter. The increase in accounts receivable was driven by strong sales in June 2021. Inventories increased in both segments, particularly BMD, due to the current demand environment and elevated commodity prices. Seasonally higher purchasing activity and extended terms offered by major vendors led to the increase in accounts payable. In addition, an increase in accrued rebates contributed to the increase in accrued liabilities. The statistical information filed as Exhibit 99.2 to our 8K has the receivables, inventory, and accounts payable data broken down by segment for those interested in the detail. I'm now on slide 11. We finished second quarter with $654 million of cash. Our total available liquidity at June 30th was approximately $999 million, which reflects our cash and availability under our committed bank lines. We had $444 million of outstanding debt at June 30, 2021. We expect capital expenditures in 2021 to total approximately $90 to $100 million. Included in our capital spending range is the completion of a log utilization center project at our fluorine plywood and veneer plant, a new door assembly operation in Houston, Texas, and expansion of our distribution capabilities in the Nashville, Tennessee markets. Our capital expenditure range could increase or decrease as a result of a number of factors, including acquisitions, efforts to accelerate organic growth, exercise of lease purchase options, our financial results, future economic conditions, availability of engineering and construction resources, and timing and availability of equipment purchases. Consistent with last quarter, our effective tax rate is expected to be between 25 and 27% in 2021. with ongoing federal legislation activity, possibly increasing tax rates in 2022 and beyond. In light of our higher than targeted cash balance, we recently paid a supplemental dividend of $2 per share to our shareholders. After payment of the supplemental dividend, we remain well positioned with sufficient cash in reserve to support internal growth initiatives and anticipated working capital uses, as well as opportunistic acquisitions. We will take a prudent approach to capital allocation when evaluating organic and M&A opportunities. As we have demonstrated in the past, if our cash exceeds opportunities ahead of us, we will utilize mechanisms to return cash to our shareholders. Our overarching objective remains to successfully grow our business while generating appropriate returns on shareholder capital. I will now turn it back over to Nate to discuss our business outlook.
spk01: Thanks, Kelly. I'm on slide number 12. The demand environment for new residential construction continues to be favorable, supported by low mortgage rates, continuation of work-from-home practices by many, and demographics in the U.S. We expect strengthened residential construction activity to continue into 2021 and into next year. The blue-chip consensus for U.S. housing starts is $1.6 million for 2021. Although we believe that current U.S. demographics support the higher level of forecasted housing starts, and many national homebuilders are reporting strong near-term backlogs, Labor shortages and supply-induced constraints on residential construction activity may continue to extend build times and limit activity. In addition, while the age of the U.S. housing stock and limited home inventory availability will continue to provide a favorable backdrop for repair and remodel spending, we expect the recent decline in home improvement demand to continue near-term as travel restrictions are rescinded and pent-up demand for leisure spending occurs. Demand for EWP remains strong and pricing efforts on EWP are showing solid traction and will help mitigate impacts from lower plywood pricing. As always, we will continue to focus on innovation to reduce our costs, as well as establishing products and services to address market opportunities and the commercial use of mass timber. In the distribution arena, BMD has done a terrific job of executing and responding to market opportunities at the local and national level. Declines in commodity product pricing will pressure near-term financial results, but I'm confident in the BMD team and their ability to effectively manage the impacts of a rapidly changing commodity price environment without sacrificing customer service. Our balance sheet also affords us the ability to continue to pursue growth opportunities with BMD. As we wrap up our formal comments, I want to express my appreciation for the focus of our associates have maintained on safety as we completed one of our safest quarters on record. I also want to especially recognize our associates at our BMD branch, Phoenix branch, An early June fire in adjacent property spread through to our location, and I am inspired by the efforts to minimize disruption and stay dedicated to our customers and suppliers. Our proven values of integrity, safety, respect, and pursuit of excellence have served us incredibly well as we've navigated through the pandemic and will continue to be our foundation moving forward. We will continue to make sure we use our operating and financial strength to the benefit of our customers, suppliers, communities, and shareholders. Thank you for joining us today and your continued support and interest. We would welcome any questions at this time. Cree, would you please open up the phone lines?
spk02: Cree, are you there?
spk00: Yes, can you hear me? My mute button was on. Okay, your first question. Yes, okay, and I was opening the line of Mark Walde with BMO Capital Markets.
spk02: Good morning, Mark.
spk07: First question, can you just kind of talk more about your EWP, what you're seeing order file-wise, kind of the progress of the price increases rolling through? And if you're seeing any kind of substitution effects kind of going through as the price increases roll through.
spk02: Yeah, hey, Jesse, this is Kelly. So, yeah, so in terms of EWP volumes and EWP pricing, order files continue to be strong. Demand outlook consistent with single family starts continues to be strong. And then the pricing actions that we've seen from through the end of 2020 and into 2021, we continue to expect to see sequential price increases in EWP. We're expecting, if I direct you to Q3 versus Q2, the guidance we'd give is high single digits for EWP price increases moving forward, Q3 to Q2. And then in terms of substitution, back out of EWP. We really, really haven't seen or experienced that, Jesse. If you think about the constraints on labor out at the home builder level, EWP is just a much higher value proposition in terms of reducing the labor required to install the floors. And so we just haven't seen anything there.
spk07: Great. And then have you seen any kind of loosening around Veneer? I know it was kind of a constraint the last couple quarters.
spk03: Good morning, Jesse. It's Mike. Unfortunately, the answer is no. I think that's still one of the major bottlenecks as it relates to making EWP for all the principal manufacturers. So I think as you're already aware, we're fairly much self-sufficient in veneer supply, which is one of the reasons we've been able to increase our production quite significantly over the last 12 months. But open market veneer supply, at least in the last little while hasn't changed at all from where it was during the prior quarter.
spk07: Great. And then last one from me. Can you just add some color around BMD, kind of what you guys are doing to mitigate the margin compression that you're going to see in Q3 over Q2? Thanks.
spk02: Yeah. So, yes, we did speak to the $12 million inventory valuation adjustment we had, and that's principally lumber. which really tipped over kind of, you know, late May and into June. In terms of what we're doing to mitigate, you know, we're in the market every day buying and selling, but I would tell you we are, you know, we're certainly taking a forward view and looking at what's ahead of us to try to not get long. But as Nate mentioned, you know, we're not going to sacrifice customer service in the meantime. So it's kind of that balancing act, if you will, to make sure we're servicing our customers' needs but also not getting too long. And so, you know, as moving forward, it's something we're obviously spending a lot of time on. And, you know, we have some exposure still with lumber and panels, given what commodity prices have done since end of second quarter.
spk01: Hey, Jesse, it's Nate. Maybe just one other thing to add to Kelly's comments is that, you know, when you think about a market that's in correction, like commodities, you know, kind of the risk-reward people will tend to go short and they'll become that much more dependent upon distribution in terms of in-market services. So instead of buying, you know, trucks or rail cars, it's maybe units and trucks. And so that still supports our distribution business incredibly well in terms of kind of moving through the process. So we expect, you know, velocity to be good in part based on, you know, customers managing their risk and, again, probably wanting to stay, you know, short at least for the time being.
spk07: Great. Thanks. I'll turn it over. Thanks, Jason.
spk00: Your next question is from Susan McCallery with Goldman Sachs. Good morning, everyone.
spk06: This is Charles. Hey, good morning. This is Charles. We're on InforSuit today. Thanks for taking my question. I guess first I would like to go back to the outlook on demand. We've heard from some industry participants of early signs of stabilization in DIY lumber demand. I was wondering if you can share your perspective on the outlook for framing lumber at this point and How do you expect the environment to play out in the second half, considering at the same time the strength that we see in the new residential construction?
spk01: This is Nate. I'll start. And I think, you know, overall in terms of the, you know, the framing side of things, if you think about, you know, kind of the trends with single family to start with, single family remains strong. And I think builder confidence has remained elevated. And when you look at single family starts as compared to, for example, multifamily and the consumption of frame materials is significantly higher. So I think we feel good about the single-family builder and what is in front of them here through the balance of the year. And so that demand environment looks steady and stable. Repair and remodel, I think, as we described earlier, a bit of a correction as we finish the quarter. It feels like there's some momentum regaining on the repair and remodel. And, again, I think that's largely based upon, again, the – the do-it-yourselfer, perhaps spending their time and resources elsewhere, we still believe the professional remodeler remains active, you know, through the cycle. So as we look at, you know, the overall, you know, demand environment for framing material and some of the products and services that we have, we feel good about, you know, the third quarter and the balance of the year in large part just given the, I think, the strength and momentum that exists with a single-family builder.
spk02: And maybe one more point I'd add to that, Charles, is on the supply side. In Western Canada, there has been multiple producers that have had some disruptions of late due to wildfires in Western Canada. So there is some supply constraints that are recent events. And to Nate's point, the takeaways on new res and the pro contractors is still pretty strong.
spk06: Got it. That's a very helpful color. Thanks for that. My follow-up is I was wondering if you could share additional details on the inflationary pressures, predominantly, I guess, in transportation costs, but also, I guess, on the log fiber side, given the overall demand. How should we expect these to impact your business going forward, and what measures can you implement to offset these impacts?
spk03: So, Charles, this is Mike. I'll address the fiber side first. So yes, you're right, there has been some significant pressure on log costs, but it's more geographically based. So if you look at our southeastern operations, there really hasn't been much change in log costs, not in the recent past, really not over really quite an extended period of time. There are some isolated circumstances where, you know, might be a storm or some disruption which leads to a short-term spike, but they tend to settle back to the price levels that we've seen historically. In the Pacific Northwest, we certainly have seen a significant increase in log costs, specifically as it relates to some of our operations, partly as a general market movement up year over year, and also in some cases the way in which log contracts are put together tend to be linked to product pricing. And in some cases, they use trailing pricing as a methodology to set the future pricing for either a month or a quarter. So I think in the Pacific Northwest, log prices are probably going to be at the levels that they're currently at for at least a little while longer. And then they'll really depend on what happens in the market as really the lumber side of the business tends to drive more of the log costs. Transportation side, I mean, I'll let Jeff speak to that. It may be a little bit in a moment as well. Yes, we're certainly seeing increases in our transportation costs. I think they were worse maybe three months ago than they are today. As some of the comments Nate made just a moment ago with a change in the focus in the economy where people are going on vacation and what have you, that's resulting in less demand, which means there's less stress in the transportation network, specifically I'm talking around trucking. We have quite good availability of trucks today compared to three months ago, but the pricing is still relatively elevated. I would say on the rail side, the availability of the rail has been really very good. There's been a little bit of price pressure, but really because that's done on a contracted basis for the most part, as well as general tariffs. You sort of know what they are because they're published. So I know, Jeff, you have a significant transportation component.
spk08: Charles and Jeff, the one component that I would add that Mike didn't speak to is the ocean freight, and that is still incredibly difficult and challenging, and not only is it incredibly difficult and challenging, it is incredibly expensive. But as Mike spoke on the rail and on the truck, it's eased up.
spk06: I appreciate the color there. And if I can squeeze one last in, I was wondering if you can provide an update on your ongoing investment projects on distribution in Nashville and also the door assembly operation in Houston. And at the same time, if you can comment on your appetite to add capacities given the strength that we see in the demand these days.
spk08: Certainly. This is Jeff again. I'll start in Houston with that door shop. We're really excited about that opportunity. It's about 30 days delayed, but that door shop should be up and running by the very end of this quarter. In Nashville, that has been a long project, and again, it's kind of the same timeframe. We're nearing an end on that. We have a few little things to do, and we should have our certificate of occupancy in about the next 45 days, and then we'll be able to start rolling there. So we're really excited about both opportunities. As far as expanding, I know we've said many times we absolutely – like the door business, and it's something we like to look, and we're looking for areas to expand that in. It's a business that we fit well in. It's a business that we know we can add value to our customers with. And then as far as locations, we're constantly looking across our footprint and other areas where we could serve our customers better or decrease our cost of service if we had a facility there. And then in addition to that, there's a lot of energy right now about our existing footprint that we have. Can we expand that? Can we add products and services to better serve our customers with?
spk02: Thank you. You're welcome. Thank you.
spk00: Your next question comes from Ruben Garner with The Benchmark.
spk05: Thank you. Good morning, everybody. Good morning, Ruben. So I was a little surprised by the strength in the BMD margins in the quarter just given lumber started to roll over. I know the panels held in through the end of the quarter. Was there anything else or were the margins just in the first couple of months before that happened so strong that you guys were able to absorb the pressure in the back half? And I guess as a part of that question, I think, you know, low double-digit gross margin and something like 2.5% EBITDA margins, the lowest we've seen in an environment like, well, we haven't seen an environment like we're seeing right now, but in a plummeting lumber price environment, that's as low as it's been. Is that a good kind of floor for what to expect for the third quarter or any other color you could give for BMD to appreciate it?
spk02: Yeah, no, you described it pretty well, Ruben, I guess, to start with your second quarter and the margins we saw. I mean, you're right. We certainly saw some outsized margins, if you will, on commodities in the first couple months, given the strength in commodity pricing. And then we had some weakness in June, specifically to lumber. But I would also remind you that General Line and EWP, the strength of that business is good, and we continue to You know, we like the margin profile on those product lines. So, yeah, so you described it pretty well, Ruben, in terms of how I would have framed it up. Now, in terms of going forward into Q3, you know, we've signaled that, you know, we do not expect to hit third quarter 2020 levels when we report third quarter of 2021, just given the strong downdraft in commodity products pricing. And so, yeah, you referenced back to some history around 2.5% to 3% EBITDA margins when we kind of get to a more, you know, that has historically been what I would say is more of a, you know, 3% to 3.5% has kind of been a more normalized rate for us. So, you know, it's all going to depend upon commodity prices from here and how that influences BMV's results as we get into third quarter. And, you know, is there more pressure be had and more margin squeeze on the commodity side or do we find some levelization point which maybe we're finding in lumber today we'll see where panels go so it's really hard to predict where we might end up third quarter 2021 until we get more visibility through the quarter on commodity products pricing can i follow up kelly and ask it this way is there any um i don't know if you even have this
spk05: data in front of you, but could you tell us maybe what the gross margin look like for the first month of the third quarter? I mean, I assume that's as bad as it can get in terms of, you know, falling prices.
spk02: Yeah, we have not closed the books on July yet, Ruben. But yeah, I would tell you the July gross margins were certainly constrained given commodity products pricing.
spk05: Got it. And then longer term, that 3% to 3.5% normal EBITDA margin, is that still the right way to think about it? And would a higher – if folks assume that lumber and panel prices may be a bit higher than they were earlier in the cycle, would that change what the margin profile of the business looks like at the EBITDA line? In other words, if lumber – say normalizes around $500 instead of, you know, 300 to 400, would that lead to more leverage on the SG&A line and a higher EBITDA sort of normal margin level?
spk02: Yeah, so I guess I'd answer that a couple of different ways, Ruben. In terms of the gross margin percentage, if we kind of get to a normalized level or a more stable level in composite lumber and panel pricing, and we get to a more normal mix in terms of commodity, general line, and EWP, I would still direct you towards 12 to 12.5% in terms of what our normal, sort of a normal gross margin percentage profile would be. But yes, you're right. If lumber is at 500 compared to 300, yes, we would get some operating expense leverage in that environment.
spk05: Got it. And I'm going to sneak one more in. Given the... Commodity environment any help on how to think about working capital I guess declining in the back half of the year and you know just cash flow more broadly Yeah, so maybe I'll speak predominantly to the distribution business so
spk02: As it's coming to distribution businesses, specifically I'll speak to receivables. As business tails off, as it has here as we've started the third quarter, we certainly get some working capital back as receivables come off. And then, you know, inventory would come off some as well, you know, due to commodity product prices, as well as us just trying to be thoughtful to mitigate exposure that we have. And then, you know, as we get into the back half of the year, you'll typically see the normal seasonal growth tail down a little bit just to manage inventories relative to the seasonal demand that we'll have as we get later into the year.
spk01: Hey, Ruben, it's Nate. Maybe just one other thing to add is I think Kelly described it well. I think on the general line in the EWP, as we think about B&B specifically, those are areas we'd like to add inventory and continue to grow that as we move forward and prepare for 2022. I think in terms of the refinement, as Kelly described, largely commodity-based, but in terms of our desire to make sure we have got the right inventory footprint on both General Line and EWP, really important part of our service proposition to customers as we finish this year and prepare for next year.
spk05: Perfect. Congrats on the strong results, guys, and good luck as we move to the back half of the year.
spk02: Thanks, Ruben.
spk00: As a reminder, to ask a question, please press star, then the number one on your telephone keypad. Again, that's star, then the number one on your telephone keypad. Your next question is from George Steffos with Bank of America.
spk04: Hi, everyone. Good morning. How are you? Congratulations on the quarter. I thought it was a typo when I saw the press release yesterday, but anyway. Thanks, George. All good. I guess the first thing, to the extent that you could comment, guys, can you talk a little bit about the rolling curtailments, any way to quantify the operating extent that you currently have in wood products, and then try and establish maybe some guardrails on wood and recognizing it's very difficult and there are no guarantees on any of this. We wouldn't hold you to it. Should we look at slide nine as instructive in terms of where your plywood pricing would be. So, you know, I don't know, you know, $500, $600 as we sit here today, lower than the average in 2Q or anything, you know, you gave us some guidance on BMD, anything that you could share with us if prices stayed where they are right now, where wood might be for 3Q. So that to start.
spk03: Yeah, George, I'll have a stab at the first one. It's Mike. So the containment... Yeah, how you doing, man? Thanks for the comment about the typo. The way we look at the curtailment is sort of like this. Usually, we would schedule them as an outage of a week at a time. We really haven't got down to the nitty-gritty of which mills might need to be taken out when and where yet. But if you think of it like this, if we take one of our plywood mills down for a week, It generally means in round numbers, depending on the mill, about 5 million feet of plywood less than we would produce. That's sort of like a very rough average because some are higher and some are less, right? So if you see an announcement, because we will probably specify them if we have to do this, then you can start using that as a sort of general guidance. I'm sure you, I know you know this, George. Some of our mills are much larger than that and some are smaller, but that's sort of a real general Go ahead. That's great, Mike. Okay.
spk02: Yeah, sure. And then the forward question on plywood pricing. Thanks, Mike. So, I mean, we alluded to in the script, George, that July pricing was actually slightly ahead of Q2 averages. That was because of the length of our order files. And so, yeah, then the question becomes, okay, what do you think about August and September? So, you know, you've seen the random prices, and certainly they have come off a lot from where we were at the end of the second quarter. And so I guess directionally what we would typically steer you towards is kind of 50-50 between the southern composite and the western composite and kind of bump that up against how our realizations have compared to those markets. those metrics historically would kind of probably get you in the right zip code of how it would come out. But, yeah, it's really hard to predict right now because we're kind of right on the – we're in the middle of the storm right now.
spk04: Understood, Kelly. And I do now remember that you said that about July. Sorry, I had missed that earlier. With the BMD guidance, and thank you for providing that, What are your assumptions, key assumptions, in terms of pricing across the commodities? So should we assume that, again, lumber is holding at these levels going forward? What's built in there? Obviously, EWP, you're assuming, goes up. But anything else that you could give us to help us adjust as needed, perhaps, as the quarter goes on?
spk01: Yeah, George, it's Nate. Let me help. I'll try to – I think if you maybe start with both General Line and EWP, I think both volumes and pricing will be strong. So I think that sets kind of the framework for those obviously two very important products. I think on commodities, when you look at lumber, I think the view is we're perhaps have found or near kind of the bottom, and we're not at this point maybe assuming anything dramatic from here. but I think that it's stabilized on the lumber side. On OSB and plywood, probably a tale of two different stories there. I think OSB has so much more tied to single-family construction, so maybe that'll feel and look maybe a little bit different as compared to lumber and perhaps plywood. But as Kelly described, we're kind of right in the middle of that change, and it's really kind of hard to provide any additional context on that. As I mentioned earlier, George, we still feel good about the takeaway in terms of, you know, what's happening. And, again, as customers manage their risk on commodities, you know, they're looking to BMD as a relevant solution to that end. So, you know, volume continues to flow. It's just a matter of, you know, kind of getting through this correction. Again, I think we're in the middle of the panels. I think we're largely through it and perhaps on the other side of it relative to lumber.
spk04: Last one, and I'll turn it over. To the extent that you obviously have a pretty good window into this, where do you think inventories are in the trade right now on commodity products? Are we below average, above average? Are you getting any sense that people are coming in now with a sense that perhaps pricing has stabilized and, you know, from a precautionary standpoint, you know, it might be a good time to rebuild and sell? Similarly, you know, are you seeing a little bit more activity and pull-through at the DIY channel from some of the big box retailers? Thanks, guys, and good luck in the quarter.
spk08: George, this is Jeff. I'll just start that with this. I'm going to break it into two. On the general line and EWP side, the inventories across the channel, they're very lean, and that's a universal thing everywhere. On the commodity side, what we've heard from all the locations is it really is a mixed bag. You have some accounts that are still heavy with inventory that need to move some off, and then you have some that are very lean and poised to buy. The fundamentals that you hear from everybody, though, is that the demand is going to be incredible coming once we find a trading level. And then on the do-it-yourself perspective, You know, as Nate mentioned, there's two different types over there. You have the do-it-yourself person, the homeowner. You have the repair and remodel person. And the different variety of products that we sell into those markets is very vast. So for us, that business is still strong. But the do-it-yourself person, we're hearing of more takeaway on the commodity side. But on the general line, EWP product is still very strong.
spk03: Thank you, Jeff. Certainly.
spk00: And at this time, there are no questions.
spk02: Okay, thank you. We appreciate your interest, and we'll look forward to talking to you next quarter.
spk00: This concludes today's conference. You may now disconnect.
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