Louisiana-Pacific Corporation

Good day and thank you for standing by. Welcome to the third quarter Louisiana Pacific Corporation earnings conference call. At this time, we ask all participants are in listening only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Aaron Howald, Vice President, Investor Relations and Business Development. Please go ahead.

Thank you, Operator. Good morning, everyone, and thank you for joining us to discuss LP's results for the third quarter of 2022, as well as our updated outlook for the fourth quarter and full year. As the operator said, my name is Aaron Howald, and I am LP's Vice President of Investor Relations and Business Development. I'm joined this morning by Brad Southern, LP's Chief Executive Officer, and Alan Hockey, LP's Chief Financial Officer. During this morning's conference call and webcast, we will refer to an accompanying presentation that is available on LP's IR webpage, which is investor.lpcorp.com. Our 8-K filing is also available there, along with our earnings press release and various other materials. Statements regarding non-GAAP financial metrics and forward-looking statements are available on slides two and three of the earnings presentation. And the appendix also contains reconciliations that are further supplemented by this morning's AK filing. Rather than reading those statements, I incorporate them here and by reference. And with that, I will turn the call over to Brad.

Thanks, Aaron. Good morning, everyone, and thank you for joining us to discuss LP's results for the third quarter and our full-year outlook. As you all know, the third quarter saw a significant slowdown in single-family housing starts, which no doubt contributed to the normalization of OSB prices. This is a challenge for commodity OSB results, but also provides an opportunity to demonstrate the value of LP's transformation against the backdrop of a slowdown in new residential construction. LP's strategic focus on the repair and remodel market segment and higher value-added specialty products drove continued growth. In fact, the siting segment generated more revenue than the OSB segment in Q3. And within OSB, the majority of the revenue came from the more specialized structural solutions portfolio. Our disciplined capital allocation strategy continues to prioritize and support investment in the capacity necessary to enable future growth. Pages 5 and 6 of the presentation show some high-level results for the quarter. LP earned $200 million in EBITDA in the quarter and received about another $200 million in net proceeds from the EWP sale. In Q3, we invested $86 million in capital projects to drive future growth and returned $341 million to shareholders, the bulk of which was spent to repurchase 5.6 million shares. LP ended the quarter with a very strong balance sheet, including $482 million in cash and over $1 billion in available liquidity. Page 7 shows more detail on siting solutions growth. Recall, only about 40% of siting volume goes into the single-family new construction, with a growing majority dedicated to R&R, SHEDS, and other DIY applications. Through Q3, single-family starts fell by about 5% on a trailing 12-month basis. In contrast, siting solutions volume grew by 6%, and price increased by 13% over the past 12 months. Comparing only the third quarter, single-family starts were down 18% compared to last year, but siting sales grew by 27%, with SmartSide and Expert Finish both setting new records for volume and price in the quarter. In both siting and structural solutions, product innovation continues to drive growth. In siting, new products made up 11% of volume and generated 15% of siting's revenue in the quarter. Expert finish and builder series are the fastest growing product categories within siting, where expert finish volume grew by 48%. Structural solutions volume grew by 10% compared to prior year quarter. The newest addition to the structural solutions portfolio, NovaCore Insulated Sheathing, officially launched last week. NovaCore Launch is a priceless product not connected to random links. LP is committed to making the investments necessary to continue this growth and innovation. Slide 8 shows an update on our strategic capacity planning. Holton remains ahead of schedule and should finish the year running near full rated capacity. Segola, Michigan, which is the next siding press capacity addition after Holton, will cease OSB production this week to start the final phases of the conversion process. This will remove roughly 420 million square feet of OSB capacity and, once fully up and running, add about 320 million feet of siding capacity annually, bringing total siding capacity to about 2.3 billion square feet. Segola is expected to produce SmartSide in Q1 of next year and should ramp up at about the same rate that Holton has, progressing from panel and soffit, then ultimately to lap and trim, with roughly linear ramp up from start to full production run rate over three to four quarters. For expert finish, the expansion of LP's finishing facility in Green Bay is nearly complete. The latest project in Bath, New York will add expert finish capacity in the strategically important northeastern market. This project remains on schedule with production expected to begin in Q2 of 2023. And today we can announce two more capacity additions in the siting business. Pending final approvals from state and local regulators and other stakeholders, we will build on the success of the Holton conversion project by expanding that mill. This project will add a new forming line in press with Holton joining Hayward as our second two-line siding facility. New siding production there should begin in mid to late 2024 and will more than double Holton's capacity, improving the utilization of shared green-in and finishing processes. Holton's second line will bring total siding press capacity to roughly 2.6 billion square feet. To accelerate expert finish growth, We plan to add a new facility in Washington State to better serve the growing pre-finished siting markets in the Pacific Northwest. Compared to the 2021 capacity baseline for expert finish, expansion over our existing pre-finished facilities plus new capacity at the New York and Washington sites puts LP on a path to more than double pre-finishing capacity by the end of 2023. And we are on pace to double expert finish capacity again by 2025. These projects will add scale, efficiency, and geographic range while simultaneously driving down cost. We believe that the long-term fundamentals for housing and R&R remain very favorable despite near-term turbulence, and we are investing to meet that demand. Given our current visibility into order files, inventory levels, and the capacity expansions that I just outlined, we anticipate remaining on managed order file for prime products at least until CIGOLA provides meaningful volume in Q2 of next year, and potentially throughout 2023 for expert finish. In order to ensure that we can generate value over the long term, we remain focused on enhancing our sustainable business model. This includes long-term access to responsibly managed fiber resources, efficient production processes that minimize waste and emissions, carbon negative products that sequester more CO2 than is emitted in their manufacturing distribution, and building a team that is welcoming and inclusive for all who have the talent and desire to contribute to LP's growth. We plan to publish our second sustainability report tomorrow, so stay tuned for more detail about our sustainability performance and strategy. As we look towards Q4 and next year, inflationary pressures continue to provide headwinds. Alan will provide more detail on this in a moment, but so far LP's growth continues to more than offset the cost impact of raw material and wage inflation. Mortgage rates of 7% or more will worsen affordability, especially for first-time homebuyers, and this is likely a contributing factor for softening housing starts. But as we head into a potentially weaker housing market, I remain optimistic about two factors. First, I remain bullish about the long-term fundamentals for housing and repair and remodeling. And second, I am more convinced than ever that LP's strategy of growing siding and structural solutions and managing our capital and capacity with discipline is the right approach in any market. And with that, I will turn the call over to Alan for a more detailed review of the quarter before we take your questions.