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Louisiana-Pacific Corp  (NYSE:LPX)
Q3 2018 Earnings Conference Call
Nov. 06, 2018, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2018 Louisiana-Pacific Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a remainder, this conference maybe recorded.

I would now like to turn the conference over to Mike Kinney. You may begin.

Michael Kinney -- Interim Chief Financial Officer

Thank you, Nicole, and good morning, everybody. Thank you for joining us on our conference call today to discuss LP's financial results for the third quarter of 2018. I'm Mike Kinney, LP's Interim Chief Financial Officer and I am joined today by Brad Southern, LP's Chief Executive Officer. As we've done in the past, we've opened up this call to the public and are doing a webcast. The webcast can be accessed at www.lpcorp.com.

Additionally, to help with the discussion, we have provided a presentation with supplemental information that should be reviewed in conjunction with the earnings release. I will be referencing these slides in my comments this morning. Also, we have filed our 10-Q and 8-K this morning with some supplemental information.

I do want to remind all participants on the call about the forward-looking statements comment on slide two of the presentation. Please also be aware the discussion of our use of non-GAAP financial information included on slide three of the presentation. The appendix attached to the presentation has some of the necessary reconciliation that have been supplemented by the Form 8-K filing we made this morning. Rather than reading these two statements, I incorporate them with this reference.

Now, let me turn the call over to Brad.

Brad Southern -- Chief Executive Officer

Thanks, Mike, and thank you all for joining us this morning. I'll begin today's call with an overview of our results for the quarter, followed by highlights from each of the segments, a review of the current market environment and the outlook for the remainder of the year, including our capital allocation priorities. Mike will then take you through the financial results in more detail, followed by the question-and-answer session.

We delivered solid results in the third quarter, highlighted by the continued progress of our strategic transformation into a leading building solutions company, a company serving markets where we can create and sustain competitive advantage through a distinctive customer value proposition is strong and growing brand and a focus on innovative high-performance products with the ultimate goal of delivering Top Tier total shareholder returns.

We introduced this strategic shift in the first quarter of this year and we have been actively working over the last three quarters to transition LP's focus to higher value add and higher margin siding and specialty products. We believe that this transformation, the decoupling of our performance from the commodity cycle that dominates OSB will lead to more consistent and sustainable results, greater growth opportunities, a stronger margin profile and increased shareholder value. Against the backdrop of the current commodity market, OSB pricing and transportation headwinds, our results this quarter provide validation of the merits of this strategy and give us confidence that our transformation is positioning LP for long-term stability and profitable growth across the cycle. It's important to note this strategic transformation is not just a matter of shifting production capacity and selling more siding, rather it's a broad-based change in how we are approaching all aspects of our business, such as focusing on building a performance-based culture and executing our innovation roadmap. While we have more work to do, we are beginning to deliver on these promises.

Let met provide a few quick examples starting with our effort to build a performance-based organization and culture. We recently completed an in-depth review of our corporate organizational structure. Our transformation to a high-performance culture is dependent upon having an organizational structure that clearly defines accountability, fosters ownership, aligns with our strategy and enables us to deliver the results we expect. For this reason, we have shifted from a matrix management structure in which our corporate functional teams were accountable for certain aspects of each business to a line management structure which embeds functional support in each business segment reporting directly to business leadership. Through this structure, Siding OSB and EWP will have complete accountability for all facets of their business P&L and strategic execution. Our South America operations have been run under a line management structure since inception. This new line management structure will strengthen LP's competitiveness and improve our efficiency by better positioning each business to resource growth opportunities, by aligning our business function with the market and by reducing overall corporate infrastructure cost.

As an additional element of our corporate review, we also took a close look at our geographical footprint across the U.S. and decided to consolidate some of our administrative office locations. The end result is that we will be closing our offices in Hayden Lake, Idaho, Portland, Oregon and Vancouver, Washington in 2019. The business functions in these offices will be combined into the Nashville operations.

Let me now turn to review of our business segments starting with Siding. We are pleased to report continued strong momentum in Siding as we delivered record net sales, EBITDA, strand volume and strand order intake. Pricing remains strong compared to prior year for strand and fiber smart side. During the quarter, we achieved 16% revenue growth for strand and continue to be on track to deliver our anticipated 12% to 14% full-year revenue growth. This growth significantly outperformed housing growth and validates our diversified market penetration strategy. Inventories in the channel for smart side products are at normal levels.

We continue to proceed on time and on budget with the Dawson Creek British Columbia conversion project. We expect to take the OSB mill offline in November and we are targeting restarting the siding mill in the middle of the first quarter of 2019. We expect the impact from this offline period to be approximately $5 million during the fourth quarter and an additional potential $5 million during the first quarter. As a comparison, this is consistent with our experience from our Swan Valley mill conversion project in 2015 during which we experienced an impact of $10 million over Q3 and Q4 of that year.

Turning now to our OSB results. During the quarter, we achieved strong price realization relative to random links, despite volume and pricing headwinds. Wet weather across many Southern markets slowed job site activity during the latter half of Q3 and as a result, inventories ended higher than in previous quarters. Our continued focus on shifting our sales mix, especially OSB, delivered strong results in the quarter with value-added sales volumes improving by 8% compared to the prior year quarter. This compares to commodity sales down 4% versus the prior-year quarter. As a reminder, diversifying our sales mix to include more specialty OSB is a key focus area because these products generate stronger, more stable margins through the cycle.

We've been taking action to improve the operational efficiency of our OSB mills in an effort to drive competitiveness and profitability by increasing plant run time, efficiency and quality. We refer to this internally as overall equipment effectiveness for OEE. I am very pleased to report that as a result of this work, in Q3, we delivered a 5% increase in OEE on a year-over-year basis. To provide some context, 5% increase across our system is equivalent to adding one half of the capacity of the new mill on an annual basis. This initiative is now under way in our siding plants as well. Additionally, within the quarter, we locked in on a schedule on upcoming press rebuild at our Carthage, Texas mill. The plant will go down in the first quarter for approximately 35 days.

Commodity pricing continues to be a source of pressure within our OSB business with prices falling throughout October. In response, we took and will continue to take the appropriate actions to adjust our commodity production to match demand.

Turning to EWP. We continue to make progress against our ongoing EWP initiatives during the quarter. Our average sales price improved quarter-over-quarter and we continue to see strong demand in LSL with sales in the third quarter beating the prior-year period by 30%. LSL growth is a key driver in the turnaround story for this business. We continue to experience softer demand for I-Joist and for LVL as well as higher cost of sales, which have outpaced average price increases for these products. Overall inventory levels in the channel for EWP are aligned with demand.

Our Wilmington, North Carolina LVL facility sustained significant damage from Hurricane Florence and we expect the facility to be down through mid-December. Thankfully, all of our employees are safe, however many did sustain significant property damage. For LP in the interim, we have been servicing customers through finished goods inventory at Wilmington supplemented by inventory from our (inaudible) plan in Golden, British Columbia and from a third party LVL supply agreement. Mike will provide some more color on the financial impact in his section.

Finally, in LP, South America, I'm pleased to report a record financial quarter in Brazil, the highest since the start of our operations in the region. The team in Brazil has done a tremendous job in a difficult market environment. In Chile, we started up the Panguipulli second line, our third press line in the country on time and on budget. We did experience slower demand in Chile during the softening market as well as pricing pressure from importers. We are closely monitoring this and expect to see recovery during the fourth quarter.

Before I hand off the call to Mike, I want to take a few moments to discuss our outlook for the remainder of the year and our capital allocation priorities. We see continued strength, reflective of a robust economy, with the combination of low unemployment and steady income growth. Builder sentiment remains positive and consumers and small businesses remain optimistic about current and future economic conditions. While home prices remain affordable relative to historical levels, interest rates and housing supply availability are affecting affordability. Looking ahead, we continue to anticipate a solid outlook for housing due to favorable demographic trends related to the millennial generation. Balancing this are constraints including rising interest rates and construction labor scarcity.

Consistent with our commitment to strategically deploy capital where we believe we can drive the greatest value for our shareholders, during the quarter we deployed $60 million to repurchase 2.1 million shares, almost completing the balance of the existing $100 million authorization approved in 2014. We also began repurchasing shares under the new authorization of $150 million, which we announced last quarter. To date, we've repurchased 4.4 million shares or approximately $119 million worth, leaving $131 million to be deployed. In addition, in August we paid another $0.13 dividend, our third payment since reinstating the dividend in February and last Friday we announced that we will be paying the next dividend later this month.

In conclusion, we are well positioned for the long-term as we approach the end of the year. We are pleased with the progress of our transformation into a leading building solutions provider and we believe that our results reflect the long-term value of this strategy. Looking ahead, we will continue to leverage our strong balance sheet to deploy capital to highest return opportunities while continuing to invest in our Specialty Products businesses.

With that let me turn the call over to Mike.

Michael Kinney -- Interim Chief Financial Officer

Thanks, Brad. I will begin my discussion with a review of the financial results for our third quarter 2018. This will be followed by some comments on the performance of the individual segments and selected balance sheet items.

Moving to slide four of the presentation for a discussion of the third quarter 2018 consolidated results. We reported net sales of $737 million for the third quarter of 2018%, a 30% increase from the third quarter of 2017. Net income was $124 million or $0.86 per diluted share compared to net income of $110 million or $0.75 per diluted share in the third quarter of 2017. Adjusted EBITDA from continuing operations was $193 million in the quarter compared to $194 million in the third quarter of 2017.

Turning to our results for the first nine months of 2018. Net sales were $2.2 billion, an 11% increase year-over-year. Net income was $378 million or $2.59 per diluted share, up from $259 million or $1.77 per diluted share in the first nine months of 2017. Adjusted EBITDA from continuing operations was $595 million compared to $475 million in the same period of 2017.

Moving on to slide five, and a review of our segment results. Starting with Siding. This segment includes our Smart Side, fiber and strand, CanExel siding products as well as OSB produced on one line of our Hayward, Wisconsin operation and our Dawson Creek operation. The Siding segment reported sales of $241 million, a 6% increase from the third quarter of 2017. Operating income was $60 million and adjusted EBITDA was $68 million, representing an increase of $7 million from the third quarter for 2017.

For the quarter, SmartSide strand average sales prices were up 5% due to changes in the product mix and a price increase implemented in the first quarter of 2018 with sales volumes higher by 10%. In SmartSide fiber, smit (ph) sales prices were up 11% while volumes were down 5%. As a remainder, we raised prices on our SmartSide fiber products which slowed demand and as we continue to seek opportunitie to position our fiber offerings to maximize returns. We produced about 100 million feet of OSB in this segment during the quarter of 2018, which is consistent with the third quarter of 2017, as we continue to prepare for the conversion of our Dawson OSB mill into a siding mill later this year.

We estimated adjusted EBITDA from continuing operations associated with OSB and sold in the Siding segment for the third quarter was $4.5 million compared to $8.5 million in the third quarter of 2017. For the third quarter of 2018 as compared to 2017, CanExel prices were down 5% and flat in Canadian dollars as a majority of these sales are made in Canada. Volume was down 42% in the quarter primarily due to customers rebalancing their inventories. As a reminder, based upon the last three years of siding sales, CanExel represents about 6% of our total sales.

For the first nine months of 2018, Siding segment sales were $729 million, an increase of 9% year-over-year. Siding operating income was $168 million compared to $143 million in the first nine months for 2017. Adjusted EBITDA was $193 million compared to $167 million in the same period of 2017.

Turning to slide six. OSB reported net sales for the third quarter of 2018 of $349 million, about flat with the third quarter of 2017. Operating income was $115 million compared to income of $127 million in the third quarter of 2017. Adjusted EBITDA from continuing operations was $131 million compared to $142 million in 2017. For the quarter, sales volumes in commodity OSB were 4% lower, while sales volumes in our value-add products were 8% higher. The volume increase in the value-add product was across all major value-add product line.

Pricing for OSB was lower by 4% in commodity and 3% higher in value add. Generally, pricing for our value-added products trailed the commodity decrease based upon how prices are set. The decrease in OSB pricing resulted in decreased operating results of $4 million. In addition to the reduced sales price, we saw increases in raw material cost, primarily resin.

For the first nine months of 2018, OSB segment sales were $1 billion, an increase of 11% year-over-year. Operating income was $370 million compared to $291 million in the first nine months of 2018. Adjusted EBITDA was $414 million compared to $336 million in the same period of 2017. The increase in OSB prices accounted for $117 million of this increase offset by increases in raw material cost and manufacturing cost due to downtime related to logistics associated with our Western Canadian operations and maintenance capital improvements.

Now turning to EWP. Please turn to slide seven of the presentation which shows the result from our Engineered Wood Products segment. The segment includes I-Joist, Laminated Strand Lumber, Laminated Veneer Lumber, OSB produced at our Houlton, Maine facility, plywood, plus other related products. This segment also includes the sale of I-Joist and LVL products produced by the Resolute Joint Venture or under a contract manufacturing agreement with Murphy Plywood. For the third quarter, EWP sales were $105 million, up from $98 million in the third quarter of 2017.

Operating income was $9 million compared to $7 million in the third quarter of 2017. Adjusted EBITDA from continued operations was $12 million compared to $11 million in the third quarter of 2017. LSL volumes were up 30% while LVL volumes were down 10%. I-Joist volumes were up 4% compared to the same quarter last year.

Pricing was up 13% in LSL, 9% in LVL and 5% in I-Joist. For the first nine months of 2018, EWP reported sales of $315 million, an increase of 15% year-over-year. EWP operating income was $20 million compared to the $13 million in the prior-year period. Adjusted EBITDA was $33 million as compared to $24 million in the same period of 2017.

As Brad noted, during the third quarter, our Wilmington, North Carolina LVL operations suffered damage in Hurricanes Florence and has been temporarily shut down. The initial cost of $0.5 million associated with the repairs and clean up are included in our other operating charges and credits for the third quarter of 2018. We anticipate additional costs of $10 million to $15 million, including capital will be incurred in the fourth quarter of 2018. It is expected that we will receive reimbursement from our insurance carriers for cost in excess of our $5 million deductible.

Moving on to slide eight of the presentation. For the quarter, our South America segment reported sales of $35 million, about $4 million lower than the third quarter of 2017. Operating income was $7 million and adjusted EBITDA was $9 million. Pricing was up 7% in OSB and 2% in Siding. Volume were lower in both OSB and Siding due to the slowing housing market in Chile and general economic weakness across all of South America. For the first nine months of 2018, our South America operations reported sales of $122 million, an increase of 6% year-over-year. Segment operating income was $25 million compared to $16 million in the first nine months of 2017. Adjusted EBITDA was $32 million as compared to $23 million in the same period of 2017.

Turning to our costs for the quarter. Total SG&A cost were $51 million compared to $49 million in the same quarter in 2017. For the first nine months, our total SG&A costs were $152 million, up from $145 million in 2017. These increases are primarily related to the increased investment in our sales and marketing areas. In terms of our unallocated costs, these were slightly lower at $28 million for the quarter and $83 million for the first nine months. As Brad noted, given our realignment to realignment to a line management organization, we do anticipate the unallocated to continue to decrease as these costs are redeployed into the businesses. Net interest income was higher by $2 million in the third quarter of 2018 as compared to the third quarter of 2017, driven by the higher cash balances and improved interest rates.

Please refer to slide nine of the presentation. As of September 30, 2018, we had cash and cash equivalents of $986 million. Capital expenditures for the first six months of 2018 were $150 million. Inventory is up from December 31, with the $16 million of this related to in-transit and our adoption of the new revenue recognition standard. We are projecting capital expenditures for the full year at $200 million to $225 million of which $115 million is for growth and $100 million associated with maintenance projects.

Thank you, Nicole. And if we can now go to the queue?

Questions and Answers:

Operator

(Operator Instructions) Our first question comes from George Staphos of Bank of America Merrill Lynch. Your line is now open.

Unidentified Participant -- -- Analyst

Hey morning. This is actually (inaudible) on the line for George. Just want to quickly follow up with regards to the management structure change there. Can you talk a little bit about what led to that decision and also provide a little bit more color on what you see the benefits are of this line management style versus the matrix structure?

Brad Southern -- Chief Executive Officer

Sure, John. Thanks. So, we, as part of our strategy, we're aligning our corporation around a series of strategic agenda items to drive incremental shareholder value, predominantly these initiatives reside within our business lines, obviously because it related to either product growth or more efficient operations as I referenced in my prepared comments. At LP, we have a history of having a more matrix functional organization, I think it's a legacy when we add several more businesses in our portfolio than we do today. So, as we went through over the past year and really looked at our cost structure and the way accountability was being assigned, we felt like it was -- to better align our functional organization with the businesses, we wanted to move away from the matrix structure and embed all the functional support those around those businesses directly into the business. And we feel like that will better align all of our organization around executing on our strategic agenda and also provide some efficiency as well. So that was really the initiative and the thought catalyst that went into initiating the study, we did this cross functionally with representatives from the business and functional leadership engaged and coming up with our new structure, and we're in the process of rolling it out today and we'll have it pretty much fully in place by the end of the year.

Unidentified Participant -- -- Analyst

Okay. Thanks for that. And then just moving to the OSB business, I was wondering if you could talk about market conditions as they stand now, how inventories are in the channel, and also where your order files stand?

Brad Southern -- Chief Executive Officer

Okay. So, I think everybody pretty much understands what happened in 3Q. Just as a reminder, the capacity additions that have come online over the past 12 months were definitely -- there is volume in the market there, starts were softer Q3 and coming into October, weather certainly hasn't helped, especially the rains in Texas and the associated rains with the two hurricanes that landed in the Southeast. I do believe in preparation for some of the hurricane issues, there were some pre-buy, an inventory build within the channel that we've been working through, and then on the supply side, fortunately, we as an industry, we did have all the logistics issues that plagued us in the first and second quarter kind of ease up on us. So, product could really move around North America, and so we saw pricing pressure. As we look into October, we were encouraged by the Random Lengths reports last week where we saw a little bit of a bounce. So -- but I do think buyers have been looking for a floor. So, they've been cautious about taking positions as pricing especially as rapidly as price was falling, but we have seen that firm up a little bit and we currently have our order files out two to three weeks. So, we feel good about our current position. As far as inventory in the channel, I do think we've worked through some of the inventory -- some higher than normal inventory levels in September and October associated with the pre-builds that were -- positions that were taken prior to the hurricanes, but feel pretty good about where those inventories are now.

Unidentified Participant -- -- Analyst

Okay. Thank you. And then just in Siding (inaudible) volumes were down a little bit from last quarter. What were the big drivers of that? And then also if you could just kind of tag in on that, that last question just on or rather commentary on OSB pricing, has that had any impact on prices within Siding and how your customers are viewing current pricing levels?

Michael Kinney -- Interim Chief Financial Officer

Hi, John, this is Mike. We think that we probably left a little bit out there in Q3, maybe 20 million feet in terms of shipments that we couldn't get out that we had the orders, we still had some lingering availability of cars, getting the cars and getting the trucks to get the product out. No real impact on the price part because it's not a commodity and we're not trading from a price standpoint, but when you still look at the full year and a nine months, rolling 12 months type thing, we're in that 13% growth, which is within the 12% to 14% revenue guidance that we've given and 8% of that was volume and 5% of that price. So, I think that while we didn't get out in Q3, we'll get that out in Q4.

Unidentified Participant -- -- Analyst

Okay. And what was that just transportation logistics impact of that?

Michael Kinney -- Interim Chief Financial Officer

Yes, I mean we were having a hard time getting caught, at the end of a quarter at the end of any time period it's just, if you get the cars grade and it's sometimes they flop into the next week and when you're -- and that's really what happened at the end of the quarter.

Brad Southern -- Chief Executive Officer

We did have, as I reported in my prepared comments, we had record order intake for SmartSide Strand in the quarter. So we definitely have the orders to ship more than we did with respect -- (inaudible) a little bit of issue of button things up at the end of the quarter.

Unidentified Participant -- -- Analyst

Okay, thank you. That's all I have now.

Operator

Thank you. Our next question comes from the line of Mark Connelly of Stephens. Your line is now open.

Mark Connelly -- Stephens Inc. -- Analyst

Can you hear --?

Brad Southern -- Chief Executive Officer

Mark, you there?

Mark Connelly -- Stephens Inc. -- Analyst

Sorry, can you hear me?

Brad Southern -- Chief Executive Officer

Yes, we can hear you.

Mark Connelly -- Stephens Inc. -- Analyst

Okay, sorry about that, my line cut out. Can you talk about market penetration for your Siding business little bit? Clearly an improving market, you can grow sales, but when housing slows down, how much will your strategy shift to capture greater market share? Where are the markets you think you are under penetrated versus potential and are those different markets in terms of repair and remodel versus new home construction? Thanks.

Brad Southern -- Chief Executive Officer

So, we are very focused on further penetration in the repair and remodel market, we have relatively low market share there, especially compared to our position in single-family. That's a major initiative to us, we continue to execute on that. That's some of the sales and marketing additional SG&A that Mike spoke to or focused on adding resources to our effort there, and so that we see a lot of possibility there, I mean, it was encouraging this quarter to get the kind of growth we got as housing began to slow. So, I think we're seeing some fruits of that. But without question, repair and remodel is the biggest opportunity and our highest focus area other than just executing on the single-family side. I will also mention that there's a smaller opportunity is the architect -- what we call specified markets, so that would be more commercial type applications for SmartSide, we are very under penetrated there as well and see that as an opportunity. We geared up in that area of sales and marketing, when we introduced our FlameBlock product at OSB, and so we have learned how to be successful in that channel through the success of our FlameBlock offering and are using those resources to also sell and promote siding there. So those are the two kind of -- well, repair and remodel is a very large area, but the specified market is also an area of focus for us and an area who we believe we're under penetrated.

Mark Connelly -- Stephens Inc. -- Analyst

Great, that's very helpful. So, you just kind of going back to OSB prices a little bit, they've come down recently, but for a little while they looked too high to be sustainable, do those very high OSB prices worry you to some extent in terms of the potential for creating a more sustainable, profitable OSB market, how do you think about your customers and just sort of the incentive for competitors of that capacity? Thanks so much.

Brad Southern -- Chief Executive Officer

Well, you said that (inaudible) there very long, is one thing I have experienced, so I don't think it has -- those kind of prices have in anyway affected the overall competitive position of OSB in the marketplace, especially relative to plywood what's kind of tends to move in relationship to OSB, so I don't think it hurt us competitively over the last couple spikes, though, I mean I understand the nature of the question, OSB remains over a cycle or even over a year, very competitive way of sheathing a home. So, I think if it stayed up there, forever people (inaudible) start looking for alternatives, but I don't think there has been any significant substitution of OSB in the marketplace over this last couple of peaks and pricing.

Mark Connelly -- Stephens Inc. -- Analyst

Really appreciate it. Thanks so much.

Brad Southern -- Chief Executive Officer

Welcome.

Operator

Thank you. Our next question comes from the line of Ketan Mamtora of BMO Capital Markets. Your line is now open.

Ketan Mamtora -- BMO Capital Markets -- Analyst

Good morning, Brad and Mike.

Brad Southern -- Chief Executive Officer

Good morning, Ketan.

Ketan Mamtora -- BMO Capital Markets -- Analyst

Just coming back to that earlier question, is it possible for you to kind of quantify sort of your exposure in terms of your volumes right now, how much goes to kind of new resi versus repair and remodeling? And I also know you have the outdoor building solutions kind of exposure as well. So, is there any way to kind of quantify that?

Michael Kinney -- Interim Chief Financial Officer

So, Ketan, with the kind of new res in the Siding is 35% to 40%. So, if you compare that to OSB, which would be in that 75% to 80% and engineered wood, which significantly would be 90% to 95% new res, so kind of that 35% to 40%. And then, I know the outdoor the building solutions, the sheds is kind of 25%, so a quarter of the overall from a segment standpoint. And I think if you look at -- I think everybody thinks that it's -- the majority of it is in the new res. And I think at what it does, that provides the diversification across the whole portfolio, whether it's the repair remodel, whether it's the sheds, and then, also in the new res as well. So, it's not just all new residential.

Ketan Mamtora -- BMO Capital Markets -- Analyst

So, what would be the remaining one-third of the piece, Mike, new resi is less about 40% and sheds is 25%. What would be the biggest piece of that remaining one-third?

Michael Kinney -- Interim Chief Financial Officer

Retail environment.

Ketan Mamtora -- BMO Capital Markets -- Analyst

I see, got you. Okay. And that's (multiple speakers).

Michael Kinney -- Interim Chief Financial Officer

There are some specified markets, but not much.

Ketan Mamtora -- BMO Capital Markets -- Analyst

Got it. And then, any update on kind of when you plan to launch the smooth SmartSide product? I recall last quarter, you all have talked about tentatively planning for Feb 2019?

Brad Southern -- Chief Executive Officer

Yes, let me give you an update on that. So, we have almost complete with all the -- I'll call it in-house testing, weatherability testing and durability testing. We are in the process of installing the siding on some test homes, which is really a means of making sure from an installed standpoint that the product functions as we want to. We are planning now to show the product at IBS in February and expect to be taking order shortly thereafter. So, I would say late Q1 we'll be taking orders for smooth SmartSide strand.

Ketan Mamtora -- BMO Capital Markets -- Analyst

Got it. That's very helpful.

Brad Southern -- Chief Executive Officer

Yes, great question, Ketan. And I just want to -- I'm very proud of the progress we've made there. As you know, that's been a focus for us for several years with a really intense focus over the last couple and we're really looking forward to showing at the Builder Show in February.

Ketan Mamtora -- BMO Capital Markets -- Analyst

Got it. That's helpful. And then, just one other question and this is sort of big picture. If you sort of step back, you talked about Q3 housing wasn't great, and I know there were other things going on this quarter, we had the hurricanes, the wet weather, what is the step back? What are you hearing from your customers in terms of just general housing demand outside of these weather-related issues that we've seen? Obviously, the one piece is affordability. We've also talked about labor and load constraint. So, what are you hearing from your customers as you look out to 2019?

Brad Southern -- Chief Executive Officer

Ketan, I spent a lot of time with customers, builder customers in this past quarter. And I have actually been encouraged by the conversations. I guess I was expecting a little more pessimism kind of based on where the share prices were for our sector. But I was encouraged they are, as a general statement, looking at modest growth for next year. So, I would say, instead of the higher closer to 10% -- which some do range there, but more at the middle 4% to 6% growth for next year, so they see opportunity to continue to grow their business in the next year. And despite some ups and downs that happened quarter to quarter among a month, there was general generally a conservative positive mood across the customers we interacted with in Q3.

Ketan Mamtora -- BMO Capital Markets -- Analyst

Got it. That's helpful. And just one last clean-up question. Mike, when I look at the presentation and I look at the Siding slide, in that, the OSB price decline quarter-over-quarter is 24%. But when I look at the OSB segment and in that the commodity price decline is only about 14%. What would drive such a large difference between price declines in those two segments within sort of just OSB?

Michael Kinney -- Interim Chief Financial Officer

Yes, Ketan, it's a completely different mix. We have -- if you look at the mix that's coming out of Hayward and coming out of Dawson, that's going to be a different mix, both from a product mix and from a regional mix. So, Dawson Creek is going to be all Western Canadian production and anything coming out of Hayward is going to be North Central.

Ketan Mamtora -- BMO Capital Markets -- Analyst

Gotcha. That's very helpful. I'll turn it over. Good luck into 2019.

Michael Kinney -- Interim Chief Financial Officer

Okay. Thanks, Ketan.

Operator

Thank you. Our next question comes from Chip Dillon of Vertical Research. Your line is now open.

Chip Dillon -- Vertical Research Partners -- Analyst

Yes. And good morning, Brad and Mike.

Brad Southern -- Chief Executive Officer

Good morning, Chip.

Michael Kinney -- Interim Chief Financial Officer

Good morning, Chip.

Chip Dillon -- Vertical Research Partners -- Analyst

It looks like that you guys took -- unless I miss something, three months ago that you -- you're edging down the CapEx guidance for the year. And I didn't know if you could just A) affirm that and B) give us kind of an early look, even if it's just directional in terms of what you see CapEx doing in 2019?

Michael Kinney -- Interim Chief Financial Officer

Yes, Chip, we -- probably didn't -- early -- I mean, even though it's down from what we said, it really is -- we are essentially implementing all the same projects we were planning on implementing. It's really about timing of when the cash is going to come through in 2018 versus going into 2019. So, we've been saying in $200 million to $250 million. And if it's going to be a little bit lower, if we're in that $20 million, $25 million lower in 2018, that's just going to go into 2019. So now, when you look at 2019, our first look at 2019 is about the same as 2018. So, no significant difference, $200 million to $225 million.

Chip Dillon -- Vertical Research Partners -- Analyst

Okay, that's helpful. It's actually very interesting to hear you all describe some of the inner workings of the company and it makes all the sense to me that if you have people doing a lot of different things than -- when things go wrong, they don't have to take responsibility when things go well, they can -- they will all try. It seems like there is a bit of that change in LPX. And as you go through this process and we look at those three locations that you're taking now, that you're going to be closing, can you give us an idea in terms of kind of A) the headcount? And will some of that show up on the corporate line or will it all be -- whatever the savings are, B) in the segment lines?

Michael Kinney -- Interim Chief Financial Officer

Yeah. Chip, no, thanks. So, those three operations are -- those locations had about 85 people, I think maybe 90 between the three of them, they had our accounts payable, accounts receivables and some of the accounting functions, and then, as well as our IT operations, as well as our tax department. So mostly, they were functional in terms of supporting the functions. So, we are in the -- we had three separate leases, that we will be getting out of those leases and moving them into into Nashville. In 2019, they -- we will actually incur probably more cost in terms of severance and the move cost and the (inaudible) transition people from one location to another location, you're going to end up having an overlap of that. So in the end, our cost will be down, we have not specifically kind of stated that externally yet. I think we'll probably not to think about how much we say publicly on that. But we're looking forward to having those people here in Nashville, and how (inaudible) having a nucleus of people in Nashville versus a few people here and a few people there in the different locations. So, we're -- if you think about it, it's similar to moving from the matrix to line management in terms of having those people closest to where everything is going on in Nashville versus out in the middle. I've traveled to Portland and Hayden Lake quite a bit and I think the benefits of having those people here will be realized. It will be very important.

Brad Southern -- Chief Executive Officer

Chip, just let me add, if you don't mind. One of the learnings we had during the downturn is, when you have everybody in one location, you do find ways to -- for efficiency gains and productivity gains by sharing work or somebody leaves the company and instead of hiring new, maybe parse out that individual's work and a couple of years later you find out that it actually worked doing that. So I see this as -- while we definitely have some cost savings baked in to our expectations, while consolidating all those activities here, we will find efficiency and productivity improvements, but just by having it all consolidated in one place. So, there was a bit of -- yet to be discovered cost number on that, but it will be real and we'll continue to share with you all as we get more clarity around it.

Chip Dillon -- Vertical Research Partners -- Analyst

Yes, OK.

Michael Kinney -- Interim Chief Financial Officer

Chip, one other point I would say is we couldn't have even done this in the past and we'd -- when we were not on our enterprise system and -- from an -- being on SAP made us realize that is the way we should be centralized. So we couldn't have even done it before we went on to SAP.

Chip Dillon -- Vertical Research Partners -- Analyst

Understood. Thank you.

Operator

Our next question comes the line of Sean Steuart of TD Securities. Your line is now open.

Sean Steuart -- TD Securities -- Analyst

Thanks, good morning. Couple of questions. On the move to the line management system, excluding potential cost savings from closing down some of those offices and relocating people, how should we think about your quarterly corporate expense following going forward? And I guess I'm just trying to get a sense of it (inaudible) run rate of $25 million a quarter now, does that trend to between $5 million and $10 million and the rest gets reallocated to the segments? How should we think about that?

Brad Southern -- Chief Executive Officer

No, Sean, I wouldn't think about it that way. It might be probably too early to say how much is going to go down, but I think it will trend down but trending and unless we significantly change the -- an allocation aspect of it, it's going to be -- it's not to the $5 million range, it's going to be slightly down yes, but I wouldn't say that it's going to be in the $5 million range unless we significantly change an allocation methodology, which at this point in time, we have not -- we don't plan on doing in the near term.

Sean Steuart -- TD Securities -- Analyst

Okay. Mike, follow-up. You guys had a big pension payment this quarter, can you give us the catalyst for that and rationale and should we expect any further lump-sum payments going forward on that front?

Michael Kinney -- Interim Chief Financial Officer

No, I think that was it at this point. When we looked at the change in the (Techinical Difficulty) bringing it up closer to being fully funded, that reduced those. And so, when we looked at it from an IRR standpoint, that was the best thing to do and then essentially pre-funded that and also eliminated those fees. So, we don't have any more of that plan at this point in time.

Sean Steuart -- TD Securities -- Analyst

Okay. That's all I had. Thanks.

Operator

Thank you. Our next question comes from the line of Steven Chercover of Davidson. Your line is now open.

Steven Chercover -- D.A. Davidson & Co -- Analyst

Thanks. Good morning, everyone.

Brad Southern -- Chief Executive Officer

Good morning, Steve.

Steven Chercover -- D.A. Davidson & Co -- Analyst

First one, real simple, what's the financial impact of the Carthage press rebuild?

Michael Kinney -- Interim Chief Financial Officer

I think CapEx is $14 million, a little over $14 million, it's between $14 million and $15 million, I believe. It's typically those pressure rebuilds are in that range.

Steven Chercover -- D.A. Davidson & Co -- Analyst

And it's 35 days down?

Michael Kinney -- Interim Chief Financial Officer

That -- plus or minus, yes, I mean that's what we're "budgeting" and we're always trying to do it shorter, but that's the plan at this point in time.

Steven Chercover -- D.A. Davidson & Co -- Analyst

Okay. And then secondly, it sounds fair to say that your operational stance has evolved substantially. And I'm just wondering, is it simple as just producing your order file? Are there other financial and strategic elements when you contemplate your ordering -- your order stance?

Brad Southern -- Chief Executive Officer

We are producing to our order file. Our view is we want to service our customers, we do not want to build inventory within our own system and we do not own a (inaudible) inventory within the channel. So, we try to match our production to our customers' demand. And we focus on that everyday.

Steven Chercover -- D.A. Davidson & Co -- Analyst

And the last one from me, if I did my math right, the first repo we did about 2.1 million shares at $26 or so. And the second one 4.4 million at $27, so it sends a strong signal about your assessment of intrinsic value. But the shares can also overshoot. So, I'm just wondering if you'll be a bit more opportunistic on the second half of the second repo?

Michael Kinney -- Interim Chief Financial Officer

Well, if it was a good deal at $27, it's probably a better deal at $23, right?

Steven Chercover -- D.A. Davidson & Co -- Analyst

That kind of makes sense. All right. Thank you.

Operator

Thank you. Our next question comes from the line of John Tumazos of John Tumazos Very Independent Research. Your line is now open.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Thank you very much for taking my question. I'm looking at last Friday's Random Lengths price, $185, Western Canada, $203 Southeastern U.S. And what price level do you think would cause material production cuts? Are these prices of Random Lengths probably just correct, are there competitors that have annual contracts with minimums or floors above that level? Are $30 to $50 of the cost fixed or semi-fixed? So that if we read a statement that has an EBITDA cost of $180, if you're right or you still continue to have $30 to $50 of cost, but at what level does supply contract?

Michael Kinney -- Interim Chief Financial Officer

Well, John, you know, I think what, if you look back and look -- go back into October and look at what happened over the most of October, I think what you'll find is that when it hits above where it is right now, it kind of slow down, I mean, so I think that what happens is that they -- the buyers end up waiting for a bottom or whatever they think the bottom is. And then the order files are longer now, when you look at Random Lengths, they're out two to three weeks. So, plus or minus, I would say that that's -- you're in that range right now, depending on the region. And you've had some regions are down 5 some regions are plus 10 plus 3. When you look at last week and if you look at the commentary from Random Lengths, it showed a lift to coming toward the end of the week from a demand standpoint. So, some of the things Brad was talking about in terms of the weather in October, it's seems to be -- it's starting to dry out a little bit and we'll see how that plays out over the next few months.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Is the situation partly expectational where most people expect prices to begin rising in December and into the spring, so if we're at these prices on March 1st through April 1st, for sure we get production cuts?

Michael Kinney -- Interim Chief Financial Officer

I don't know about any of that but I would say it's probably expectational from a buyer's standpoint and a seller standpoint and what enters into all their mind at any given point in time it. I mean I would say that's probably the definition of a commodity, right?

Brad Southern -- Chief Executive Officer

John, I'll just add, from our experience in the OSB business, there's a lot of emotion on the selling floor and on the buying floor when prices moving either up or down and that emotion is people do not want to take a stocking position if next week they believe the price is going to be lower and they do want to take up stocking position if they believe next week, the price is going to be higher and that is just much feel as science, especially during these times of movement. So, I think we see these swings, especially as we approach peak or trough that are as much emotion driven as they are any kind of mathematical formula that you could run. I mean, even if you look at from a standpoint of demand and capacity, we're still very balanced as an industry and prices have moved the way they moved this year. So, it's very hard to predict and all we can do is make sure our customers, we're matching our customer's demands for capacity and into our production and that's what we focus on every day.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Thank you.

Michael Kinney -- Interim Chief Financial Officer

Thanks, John.

Operator

Thank you. Our next question comes Mark Weintraub of (inaudible) Global. Your line is now open.

Mark Weintraub -- -- Analyst

Thank you. First just on Siding, you laid out your initiatives, repair remodel. You also talked about the smooth appearance product. If housing were to be relatively flat and obviously we're hoping there's still give be some upside, but if it were to be relatively flat, do you still think you can achieve the lion's share of that 12% to 14% revenue growth on the back of the initiatives you're launching?

Brad Southern -- Chief Executive Officer

Mark, I do. I would say, this is an initial reaction, I would stick to that as long as housing didn't decline. I think if we saw a decline in predictive starts, we would want to evaluate that before I would make a statement about it. But given the diversification in our product offering across segments, and the market share that we continue to garner even in single family, I would -- it would -- we're pretty robust about our guidance we've been giving on volumes or actually on revenue, yes.

Mark Weintraub -- -- Analyst

Thank you. And then as you point out, if the stock is attractive at $27, it's even more attractive at $23.5 and you've also got almost $1 billion of cash on the balance sheet. In the past you've talked about wanting to have -- I think on the order of $300 million and then having some money for CapEx projects so that you're now much further along in that process. Maybe if you could kind of just update us on what you'd like the balance sheet to look at when we have a situation where -- maybe your stock is a fair bit undervalued relative to your views of intrinsic value.

Brad Southern -- Chief Executive Officer

Well, so let me go through our capital allocation priorities and see if that answers your question. We, as Mike mentioned, we're going to do another press rebuild in OSB next year. We have begun the formalizing the study around the next siding mill, and just as a reminder to that, there's -- we've kind of done the easy ones there from a conversion standpoint and that you're taking -- running OSB mills and converting the siding. We now have a siding Cook Minnesota, we have a non-operating mill in Quebec. So the next siding mill is going to be -- potentially be substantially more capital associated with funding that growth. We want to make sure we have adequate financing for that as well as the next one on the pace that we're on now, and I mean it's encouraging from a siding standpoint to be beginning the planning on the next mill before the mill we're working on and start it up on siding. And so those are our biggest priorities, the organic growth, let's call that, we would like to continue to evaluate adjacency M&A opportunities, similar to what we've done with Barrier, and then similar to what we've done with Entekra. While those have been modest, we continue to be active in that area, and obviously we're going to (inaudible) but there is certainly could be a use of capital in the future. And then, Mark, we reinstated the dividend, we have -- we're buying back shares, and we do understand that our shareholders deserve a return on their investment with LP and depending on where we are with the share pricing, we will -- we can flex some of that share buyback initiative that we have and we plan to do that. So that's where we're focused, you're right, we do speak to the $300 million cushion that we want to have in cash. And as long as it's higher than that, we will be actively pursuing opportunities to create shareholder value with the remaining capital for our shareholders.

Mark Weintraub -- -- Analyst

Okay, thank you. And that's -- you obviously got a list of attractive potential opportunities competing for capital, and I guess as you put it all together and you have a share repurchase, which I think you mentioned, it's about $130 million left to potentially be deployed, if the share price opportunity remains very attractive from your perspective. How quickly do you think it's realistic that you would deploy that and/or would there potentially be appetite to do more?

Michael Kinney -- Interim Chief Financial Officer

Well, I think Mark, so we had the $100 million, which we obviously initiated quite a while ago and then between the last two quarters, we did $39 million and $60 million. So yet to little bit more than $50 million a quarter and then it always still have $131 million left on the $150 million authorization. So, I think that we will continue to look at that and obviously the opportunity to accelerate that is better at $23 than at $27 or $28.

Mark Weintraub -- -- Analyst

Okay. Thank you very much.

Brad Southern -- Chief Executive Officer

Mark, let me say, I think our Board is actively involved in these discussions around the questions you're asking, and we -- my feel is share repurchase will be a viable part of our strategy going forward, given the strength of our balance sheet. So, we'll work through this current authorization, and I'm confident that if it makes sense, our Board will be supportive of the next one and then we'll execute around that depending on where we are in the cycle.

Mark Weintraub -- -- Analyst

Thanks very much.

Michael Kinney -- Interim Chief Financial Officer

Thanks, Mark.

Operator

Thank you. And our next question comes from line of Paul Quinn of RBC Capital Markets. Your line is now open.

Paul Quinn -- RBC Capital Markets -- Analyst

Yes, thanks very much. Good morning, Brad and Mike.

Brad Southern -- Chief Executive Officer

Paul.

Michael Kinney -- Interim Chief Financial Officer

Good morning, Paul.

Paul Quinn -- RBC Capital Markets -- Analyst

Hey, just a question on the siding, it's great to see you kept the revenue guidance at 12% to 14%, but I suspect when you put in that guidance, you weren't quite 100% sure that you'd have this smooth side product available. Just wondering what if you could sort of give us a rough idea of what kind of growth you see in the smooth siding, I mean is that a significant portion of the 12% to 14% going forward?

Brad Southern -- Chief Executive Officer

Yes. Paul, when we -- as we go into next year and launch that product, we'll probably -- we'll sharpen our pencil on that, but I want to tell you where I am standing right now on it is -- as we have these questions around how are you going to sustain the 12% to 14%, a key initiative for us, as the cycle for single family begins to slowdown in growth, we have to accelerate in repair and remodel. And as we've talked about in the past without having smooth, it has blocked us out of some geographic regions and that has been the hindrance overall to the repair and remodel across really all regions, because that is an option you really need to have in your portfolio. So, currently we see that product is being an enabler to sustain the 12% to 14% rather than an incremental to that. Now give us a year to have that product launch out in the market and we can come back and be more specific, if we see that changing on the upper side.

Paul Quinn -- RBC Capital Markets -- Analyst

Okay, that's helpful. And then just tweaking my supply demand model on the OSB side, we've got these four -- three restarts and one new mill coming in over the last 12 months. What are you hearing on that little Forex mill in Quebec, are you hearing anything on that? And do you expect any other additions in the marketplace over the next year going forward?

Michael Kinney -- Interim Chief Financial Officer

Well, from a Forex standpoint, Paul, we don't hear a thing -- to be honest with you, I'm not even sure when we ask our sales guys if they even know it's running. So if it is, it's barely running and if it isn't, we're not really anything. So, I don't -- we're not really sure on that one. And then on anything else, it's hard to say, but the only ones that have been -- being talked about from a mill standpoint is the Chambord mill that we traded with Norbord and I'm sure you heard what they said on their conference call the other -- last week, so. Other than that, I don't think there's any other mill specific other than just continued productivity enhancements, whether they're us or anybody else.

Paul Quinn -- RBC Capital Markets -- Analyst

Okay. So then on the withdraw side, we've got the Dawson Creek conversion which takes out for three months and we've got -- it sounds like a month plus at Carthage. Do you have any idea on maintenance downtime Q4, Q1 of '19?

Michael Kinney -- Interim Chief Financial Officer

No, we wouldn't we wouldn't say that even, I mean, obviously, we have our plans, but at this point in time, what we've talked about is, Dawson being down from November to kind of Q1 and then when you look at Carthage, 35 days, middle of Q1, maybe that goes into Q2, but kind of right in that range.

Paul Quinn -- RBC Capital Markets -- Analyst

Okay. And last thing I had, just that obviously volume pickup at 30% year-over-year is pretty impressive, especially given that the drop in lumber, which I guess is a substitute for that product. Just wondering that Houlton mill, what percentage of production is OSL versus OSB, do you have any kind of rough breakdown there?

Michael Kinney -- Interim Chief Financial Officer

Right, I'll take the volume part. There's very little OSB being produced there, I have to get back to you on the actual volume, but it's not a lot of -- majority of the increase for sure is LSL and then I don't know Brad, if you want to talk about the strategy and the value-add?

Brad Southern -- Chief Executive Officer

Paul, we've -- over the last several years, the LSL -- our LSL strategy has really been a dealer strategy, which is adding to the number of stocking dealers we have in that product, we have found that if you get good dealers, lumber dealers who have a good take of stocking position, the product does move. And so we've been incenting that and marketing and selling around that and our sales force and our dealer network supported by our distribution network has done a really good job of just increasing the exposure that product has to the market. And once it gets exposed and once it gets used, we've been really successful growing it. So it's been a -- in the big schema LP, it's kind of a small thing, but I'm really proud of the execution of that product growth strategy by our sales force and by our distributor and dealer network. (multiple speaker) the segment -- very impactful to the segment profitability.

Paul Quinn -- RBC Capital Markets -- Analyst

Best of luck, guys. Thanks very much.

Brad Southern -- Chief Executive Officer

Thank you, Paul.

Michael Kinney -- Interim Chief Financial Officer

Thanks, Paul.

Operator

Thank you. And I'm showing no further questions at this time. I would hand the call back over to Mike Kinney for any closing remarks.

Michael Kinney -- Interim Chief Financial Officer

Nicole, I think that's all is the time we have for questions. So if you could provide the replay number, that would be great. And as always, thank you for participating in our call and myself and Becky are here to answer any follow-up questions. Thank you and have a good day.

Operator

Thank you. Ladies and gentlemen, this conference will be available for replay on today, November 6, 2018, 2 P.M. Eastern Time. You may access the remote replay at any time by dialing 1800-585-8367 or 855-859-2056 with a conference ID of 5745448. For international participants, we ask that you please dial 404-537-3406 and the same conference ID is 5745448. That does conclude our conference for today. You may now disconnect. Everyone, have a great day.

Duration: 66 minutes

Call participants:

Michael Kinney -- Interim Chief Financial Officer

Brad Southern -- Chief Executive Officer

Unidentified Participant -- -- Analyst

Mark Connelly -- Stephens Inc. -- Analyst

Ketan Mamtora -- BMO Capital Markets -- Analyst

Chip Dillon -- Vertical Research Partners -- Analyst

Sean Steuart -- TD Securities -- Analyst

Steven Chercover -- D.A. Davidson & Co -- Analyst

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Mark Weintraub -- -- Analyst

Paul Quinn -- RBC Capital Markets -- Analyst

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