Louisiana-Pacific Corporation

Thank you for standing by, and welcome to Louisiana Pacific's third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. We will ask you to limit yourself to one question and one follow-up. To ask a question during the session, you will need to press star 1 on your touchtone telephone. Please be advised that today's conference is being recorded. Should you require any further assistance, please press star zero. I would now like to hand the conference over to your host, Investor Relations, Aaron Howald.

Thank you, Operator, and good morning, everyone. Thank you for joining us today to discuss LP's results for the third quarter of 2021, as well as our outlook for the fourth quarter. My name is Aaron Howald, and I am LP's Director of Investor Relations. I'm joined this morning by Brad Southern, LP's Chief Executive Officer, and Alan Hockey, LP's Chief Financial Officer. In addition to this morning's conference call, we are hosting a simultaneous webcast, and we have uploaded a presentation to which we will refer during this morning's discussion. We also filed our 8-K this morning with some additional information. Slides two and three of the accompanying presentation provide notices and detail regarding forward-looking statements and non-GAAP financial metrics. The appendix of the presentation also contains some necessary reconciliations that are further supplemented by this morning's 8K filing. Rather than reading these statements, I incorporate them herein by reference. Before I turn the call over to Brad and Alan, I'm happy to announce that we published an environmental product declaration for SmartSide last week. We have known for years that SmartSide performs very well and looks great. As the EPD demonstrates, it is also classified as carbon negative, making it exceptionally sustainable, especially when compared to alternative siding substrates. LP is also expected to publish its first ESG report later in November, including SASB disclosures. Sustainability is a core value at LP and we're excited to share our story. The SmartSide EPD is available on LP's website and our ESG report will be published soon. And with that, I will turn the call over to Brad.

Thanks, Aaron. Good morning and thank you for joining us to discuss LP's results for the third quarter of 2021. Despite a significant OSB price correction in the quarter, and ongoing inflation and supply chain challenges, LP delivered its second-best quarter ever. Siding sales grew at 19%, LP South America and EWP set all-time quarterly records, and the OSB business continued to generate impressive cash flows. Intecra, our California-based off-site advanced framing system business, was gross profit positive in the quarter and continues to gain customer acceptance and operational momentum. Demand for LP's products remain robust and our capacity expansion projects at Holton and Peace Valley are on schedule. We also strengthen our strategic relationships with key customers, including being named partner of the year in our category by the Home Depot. As you will see on slide five of the presentation, sales for siting solutions increased by 19%. Another record quarter made possible by strong demand and exceptional performance by the siting operations team. Siding efficiently produced and shipped over 430 million square feet, and more importantly, they did so safely, without a single recordable injury in the quarter. The fastest-growing components of the siding portfolio are innovative products like expert-finished pre-finished siding, smooth siding, and shakes. We shipped more than four times the volume of those products compared to Q3 of last year. These newer products contributed significantly to the segment's price growth in the quarter. OSB sales were up over $230 million from last year, but down sequentially as OSB prices corrected early in the quarter. Since reaching the recent low in August, Random Link's OSB prices have steadily increased, supported by consistently strong demand. The engineered wood product segment had another record quarter with twice their sales revenue and more than four times the EBITDA of the same quarter last year. South America also had a very strong quarter, with more stable OSB prices than seen in North America. Compared to Q3 of last year, sales in South America increased by almost 70%, and EBITDA more than tripled. As we have seen recently, LP South America is capable of significant cash flow generation, and we are reinvesting that cash in South America to grow capacity and improve OEE in order to stay ahead of steadily growing demand. The siding conversion project at Holton remains on schedule with production expected to begin in the first quarter of next year. The mill has discontinued production of laminated strand lumber and OSB production will cease this week to begin the last phases of the conversion process. Inflationary pressures have impacted the Holton project somewhat, particularly the price of steel, but the long-term nature of material and labor contracts for the project have blunted these inflationary pressures somewhat. I want to thank the team there for keeping the conversion process safe and on schedule. The Peace Valley restart has also gone exceptionally well. I am grateful to the local mill leadership as well as the OSB operations and support functions for a safe and efficient restart. The mill is ahead of its planned ramped up curve and produced just over 100 million square feet in Q3. With having starts consensus higher now than when we announced the restart, there's no question that the market needs the mill's output. Peace Valley will also contribute to our structural solution strategy as a significant producer of TechShield Radiant Barrier as we work to transform our portfolio away from commodity OSB to higher market structural solutions. The resulting financial performance for Q3 is summarized on page six of the presentation. LP's businesses generated a combined $1.2 billion in sales, $522 million in EBITDA, and $3.87 in earnings per share. We returned over $400 million to shareholders via dividends and share repurchases, all of it from free cash flow generated in the quarter. Our Board of Directors declared an $0.18 per share dividend, and as Alan will detail, authorized a further $500 million for share repurchases. Supply chain interruptions and inflationary pressures are presenting headwinds. While we have benefited from higher OSB prices, some of those gains are now being offset by higher prices and tight availability for residents and freight, where we have seen meaningful price increases. We are working to minimize these impacts by partnering with our suppliers, balancing costs and risks with agile inventory management, and seeking alternate sources of supply where possible. I am proud of and confident in our strategic sourcing and operations teams as they navigate these challenges. I want to talk about how we're responding to these inflationary pressures. When faced with raw material scarcity, we have consistently allocated limited resources to the most strategic applications. Because our OSB business has maintained the flexibility to use various resin types, we've been able to shift MDI resins to siding in order to maintain production, product quality, and growth. For freight, flatbed trucks are in tight supply. We have the ability to convert shipments from truck to rail, and we have our own small trucking fleet, both of which contributed to record-citing shipments in the quarter. We can't predict the duration of these supply chain challenges, but our teams will continue to work diligently to minimize their impacts. Before I turn the call over to Alan to review our financial performance in more detail, I want to announce two changes to LP's executive leadership team. First, Neil Sherman, who joined LP in 1994, and has served as executive vice president and general manager of LP's siding business since January of 2017, will transition to lead Intecra as its president. Neil has done a tremendous job of growing LP's siding business, and he is exactly the kind of leader Intecra needs to reach its potential as an innovative and disruptive building technology. Second, Jason Ringbloom, who joined LP in 2004 and has served as the executive vice president and general manager of LP's OSV and EWP businesses, since January 2017, will succeed now as EVP and general manager of the siting business. Jason has been instrumental in transforming LP's OSB business, increasing its operational agility and efficiency, while shifting the focus from commodity products to value-added structural solutions. Jason is rejoining the siting business where he previously held a leadership position within our sales team, so he's very familiar with the SmartSide customer base and value proposition. Neil and Jason's leadership of siting and OSB has been critically important to LP's ongoing strategic transformation. I am extremely grateful for their contributions, and I am confident they will continue to deliver outstanding results in their new roles. Both of them have built world-class teams that lead and execute their business strategies, and I know neither team will skip a beat during this transition. Both Jason and Neil will remain in their current roles for a brief transition period until we appoint a new EVP and general manager for OSB and EWP, a process that we hope to complete soon. With that, I will turn the call over to Alan for a more detailed discussion of LP's financial results for the third quarter, as well as an update on our capital allocation strategy and our outlook for Q4 and the full year.