Interfor Corp

TSX:IFP

Earnings Call Transcript 2018-Q3

[Operator]

Good morning, my name is Carol, and I will be your operator today. At this time, I would like to welcome everyone to the Interfor Third Quarter Analyst Call. [Operator Instructions] At this time, I would like to turn the call over to Duncan Davies, President and CEO.

[Duncan K. Davies, President, CEO & Non]

Thanks very much, Carol. Good morning, everyone. Thanks for joining us. We're here today to discuss Interfor's third quarter results and our outlook for the balance of the year. Joining me as usual is Bart Bender, our Senior Vice President of Sales and Marketing, who will comment on the current state of the lumber market, both North American and offshore in a couple of minutes. Marty Juravsky, our CFO, who normally joins us on these calls, is not available this morning. We're going to keep our remarks brief as we often -- as we always try to do. And we'll turn the meeting over to you for questions as soon as we can.The dominating feature of the third quarter this year was the drop in lumber prices that began in late May and early June and continued unabated through the third quarter and into the fourth quarter of the year. Pricing volatility is a fact of life in the lumber business. If you look at product prices over the last 10 years, it will show that prices often move $70 to $80 a thousand board feet from high to low over the course of a year. And the third quarter is often the weakest as distributors reposition inventories moving into the fall and winter. The situation this year, however, has been unprecedented. Other than a brief pause in late March, prices rose steadily through the first 5 months of the year, exacerbated by logistics issues, which trapped supply in Western Canada during the winter months and slow truck shipments in other regions.After opening the year in the $430 range, the Western Spruce Composite gained $145 in 23 weeks, peaking at record levels in the last week of May. And over the same period, the Southern Pine Composite gained more than $150 a thousand board feet. As is often the case, studs were even more volatile, gaining more than $200 from the first week of January through the last week of May. Since then, as [indiscernible]. From its peak, the SPF Composite dropped almost $280 to a low of $296 in the space of 21 weeks. And Hem-Fir studs lost more than $300 a thousand. Southern Yellow Pine prices fared a little better but still dropped $180 a thousand between the end of May and the end of October. In our view, the current state of the lumber market makes little sense. Overall demand and supply is in a reasonable balance and the outlook for consumption overall remains positive in spite of some softening in the new home construction market. In our view, the drop we've experienced in the last few months is more of an overreaction to an overreaction that occurred earlier this year with a combination of incremental supply coming available in the short term at the same time that intermediaries in the supply chain have chosen to destock in order to rid themselves of higher-priced inventory.The good news is the market is dynamic. And prices for the Western commodities appear to have bottomed. Random Lengths is reporting this week that the Spruce Composite is up $15 from the trough. Southern Yellow Pine has continued to ease down somewhat and today sits at $378 a thousand board feet. But we believe the bottom is near for pine as well. Looking at prices for the main benchmarks in the third quarter relative to the immediately preceding quarter. The Spruce Composite was off $98 or 18%. Hem-Fir studs were off $94 or 17%. And the Yellow Pine Composite was off $63 or 12%. The drop in pricing had a material impact on our results in the third quarter. Net earnings were $28.1 million and EBITDA, after accounting for the effects of share-based compensation, was $69.4 million on sales of $571 million. This compares with net earnings and EBITDA of $63.8 million and $123.8 million, respectively, on sales of $620 million in the second quarter. The drop in lumber prices accounted for approximately 70% of the drop in EBITDA during the third quarter. Other factors impacting our results included a drop in shipment volumes, which accounted for 5% of the decline; higher log costs in the B.C. Interior, which accounted for 18%; and higher operating cost in the U.S. South, which was attributable to a higher maintenance spending and downtime associated with a couple of adverse weather events accounted for 15%. The increase in log cost in the B.C. Interior was due in part to higher stumpage charges; in part to higher hauling cost and other costs of production; and part of it was due to higher inventory valuation adjustments triggered by the drop in lumber prices. As prices reverse and start to increase, that inventory valuation adjustment should reverse. A total of $15.9 million in export duties were expensed in the third quarter compared to $14.8 million in the second quarter. Production in the third quarter came in at 674 million board feet, down 14 million board feet or 2% quarter-over-quarter, driven primarily by the maintenance and weather-related downtime in the South and by a reduction in operating hours in the Northwest as we adjusted production volumes in line with market weakness. On a regional basis, capacity utilization rates were 47% on the Coast, 99% in the Interior, 86% in the Northwest and 89% in the South for a total of 87% compared with 89% in the second quarter. In the third quarter, Interfor generated $69.7 million in cash from operations before changes in working capital, bringing the total over the last 12 months to just over $350 million or more than $5 per share. Capital spending in the quarter reflects the ramp-up from our strategic capital projects and was $38.5 million in the quarter. We also repurchased 597,000 shares in the quarter at a cost of $12 million. During the third quarter, net debt was reduced by $30.6 million, coming in at $3.4 million or 0.4% of invested capital. We closed the quarter with more than $550 million of available liquidity. Turning for a minute to our strategic capital activity. I'm able to report that good progress is being made on our Phase 1 and Phase 2 projects. With the Meldrim and Monticello projects on track for completion in early 2019 and the Thomaston, Eatonton and Georgetown projects on track for completion in stages over the period from 2019 to 2021. We've also come to the conclusion that the greenfield project we've been looking at should be postponed indefinitely. This decision will allow us to focus on completing our Phase 1 and Phase 2 strategic projects and to pursue other capital investment and allocation alternatives that we believe offer better return opportunities at this point in time.At this point, what I'd like to do is I'm going to ask Bart if he can provide an update on what he's seeing in the lumber market on a go-forward basis. And then he'll come back to me and then we'll open it up to you, folks, for questions. So Bart, please?

[J. Barton Bender, Senior Vice President of Sales & Marketing]

Okay. Thanks, Duncan. I'll comment on the current state of the lumber market. I think Duncan coined it well when he said that what we're experiencing is an overreaction to the overreaction that took place in the first half of 2018. Since the end of Q3, lumber prices have continued to decline, likely will finish the quarter with a quarter-over-quarter drop. Inventories in the marketplace also continued to decline as distribution and end users adjust to these lower prices. It is quite likely that North America will finish 2018 at even lower end market inventories than we did in 2017. It's important to remember that low end market inventories set the stage for the peak prices that we saw in the first half of 2018. There have been a number of curtailments, including our own, that have been announced recently. And I'm also sure that there are other curtailments that don't get announced, all in an effort to balance supply to the demand that we are currently seeing from our customers, who are in the process of reducing their inventories. We pay a lot of attention to inventories in the marketplace. And our feeling is that they had been reduced significantly over the past few months. With the drop in pricing, our competitiveness overseas has increased. Our sales certainly reflect this. And we are hearing this as the case for others as well. I think it's worth pointing out, too, that the opposite can be said for lumber imports. I don't believe that any significant inventories are increasing at manufacturing sites. Certainly, at Interfor year-to-date, we're shipping our production. There seems to be an expectation that substantial North American production will present itself in 2019. It's our view that labor constraints, cost and equipment lead times will result in delays. This production will come to the market slower than what is expected. From the demand side, even though we are seeing some slowdown in new home construction, we expect continued growth in North American lumber demand. Repair and remodel fundamentals support growth. There seems -- there continues to be pent-up demand for housing. The work that's getting done by the softwood lumber board is growing the demand for lumber, all of which is supported by a strong U.S. economy, high employment rates and wage growth. As Duncan said, pricing volatility is a fact of life in the lumber business. And we fully expect this to continue as we complete a good year. We continue to be optimistic about 2019. Back over to you, Duncan.

[Duncan K. Davies, President, CEO & Non]

Great, Bart, and thanks. I think at this point, it would be more useful for our guests if we turned it over for questions. So Carol, if we can, if you could open up the lines, please?

[Operator]

[Operator Instructions] Our first question this morning comes from Ketan Mamtora from BMO Capital.

[Ketan Mamtora, Analyst]

First question, can you talk about the key factors behind the deferral on the greenfield mill?

[Duncan K. Davies, President, CEO & Non]

Sure. And as you know, we've been very interested in finding an opportunity for a greenfield investment. And I've put a lot of time and effort into it over the last year or so. But at the same time, we had very strict criteria for -- that needed to be met to trigger a positive decision to move forward with the project. And over the last number of months, it became -- it become readily apparent to us that equipment lead times, contractor services, steel prices and a number of other cost factors were increasing to the point where we weren't comfortable that we could generate the kind of returns that we felt were necessary to go forward with a project of that magnitude. And that was the primary factor. And so as that became apparent to us, we made the decision and recommended to our board, and they agreed with us, that we should table or defer that project for an indefinite period of time. It's not like we'll never do it. But for the next couple of years, we think it makes more sense to focus on delivering the high-return projects at our existing facilities and eliminating the distraction associated with doing another project with marginal returns at the same time. We also think that the currently overheated market for equipment and services and the like will tend to moderate somewhat as things progress, which will create a better potential for attractive, longer-term returns that meet our criteria going forward, Ketan. For now we're tabling the project. We'll revisit it over the course of the next couple of years. But if we were to go ahead with it, and there's no guarantee we will, if we were to go ahead with it, it would be a few years out.

[Ketan Mamtora, Analyst]

Got it, that's helpful. And then Duncan, you highlighted some other capital opportunities that you'll see versus the greenfield at this point. Outside of the projects that are going on right now, would you be able to sort of comment or give any color on what those could be?

[Duncan K. Davies, President, CEO & Non]

Well, we have what we call Phase 3 of our strategic capital initiative, Ketan. And those -- they're projects that are in the South and in other regions as well. We haven't got to the point yet where we've announced any of those. But they would be consistent with the capital spend rate that we talked about publicly over the course of the last couple of calls, where we talked about spending something in the range of CAD 500 million on discretionary activities over the course of the next 4 or 5 years. These would fit into that. They would be much smaller projects than the ones that we've got on the drawing board currently. And they would likely be -- likely, we would have projects that we would do beginning next year and probably stretching out through the next 2 to 3 years after that.

[Ketan Mamtora, Analyst]

Got it. And that's helpful. And then in your view, is this sharp drop in lumber prices triggering any changes around assets that are for sale or impact on valuation?

[Duncan K. Davies, President, CEO & Non]

Well, nothing that I've seen at this point in time, other than for the publicly traded companies. We haven't been -- we've looked at a few things, Ketan. We haven't -- they haven't met our criteria for reasons other than price. So we haven't got -- we haven't gone much further on that. I would -- I think it will really boil down to what people expect prices will look like in a more normalized basis rather than in the peaks and troughs of a highly volatile market that we have currently.

[Ketan Mamtora, Analyst]

Got it. And then just last question for me, would you look at any acquisitions outside of lumber?

[Duncan K. Davies, President, CEO & Non]

Well, we're a lumber company. And our primary focus is the lumber business. We operate in 4 regions in North America. We will look at some things that we think are synergistic with our business that might include something outside of the pure lumber focus. But it'd have to be a compelling reason to want to do it and both from the financial standpoint and from a strategic standpoint before we would do that.

[Operator]

Our next question comes from Hamir Patel from CIBC Capital Markets.

[Hamir Patel]

Duncan, on the greenfield, are you able to share with us where the final cost estimate ended up when you decided not to go ahead?

[Duncan K. Davies, President, CEO & Non]

I'd prefer not, other than to say it was quite a bit higher than the initial guidance that we had provided, Hamir, and to the point that we were comfortable that it met our criteria for risk-adjusted returns, which we've indicated are in the 20% range. So we couldn't see our way clear to achieve that, given our view of the lumber market and the log markets going forward. And so it's just -- we were actually all quite comfortable just to say that the down tools at this point in time and focus on the other projects, which have, by definition, much higher returns because they tend to be smaller. And they're building off of an existing asset base as opposed to the risks associated with a brand-new project in a brand-new region or a brand-new area for us.

[Hamir Patel]

Sure enough, Duncan. But I mean, based on that analysis, do you have a feel as to maybe how much of the capacity that's been announced maybe actually gets built?

[Duncan K. Davies, President, CEO & Non]

I haven't gone through the list. But I wouldn't be surprised to see other announcements similar to ours that people have either canceled projects or deferring them for a period of time. But it has been our contention, and as you know, we've talked about this, that the number of projects that have been announced, we indicated some time ago that we would be surprised if all of those projects were built and all of that capacity that the people have been assuming is going to come on to the market here over the course of the next little while is going to get built or will get built as anywhere near as quickly as people have been thinking it might get built.

[Hamir Patel]

Right. Okay. That's helpful. And just turning to B.C., do you have a sense as to where log decks for the industry are? And given the weaker prices, do you think there's maybe a risk that the industry might not invest enough in the log decks heading to winter?

[Duncan K. Davies, President, CEO & Non]

Well, it's not an issue of desire, Hamir. I think it's an issue of the impacts of both declining allowable cuts and exacerbated by the impacts of the fires that we saw both in 2017 and again this year. And while the fires this year didn't disrupt production to the same extent that they did in 2017, certainly significant amounts of standing timber inventory was burned and which will impact supply in the near term as we move over the course of the year. So I think -- I'm not aware of any -- let me put it this way. I am aware of log decks being tight in some areas and in some cases, including ours. And we're very aware of what we think is irrational behavior as the industry looks to capture supply to maintain operations. And that creates a dynamic which drives log prices up that we just don't think makes a bunch of sense. And so I wouldn't be at all surprised to see less production coming out of the B.C. Interior over the course of the next 6 to 12 months simply as a result of availability of timber supply and log cost that don't make sense, given the lumber market environment that we're likely going to be dealing with over the course of next year, so...

[Hamir Patel]

So based on that, Duncan, would that suggest that the 20% curtailments in Interior that you've taken, that those might persist into 2019?

[Duncan K. Davies, President, CEO & Non]

Well, for us, it became a question of timing. And our sense was it would be better off to be disciplined in the current market environment and position ourselves to be able to operate in a normal course in the early part of next year would be a better operation as opposed to continuing a curtailment during that period of time. But I think others, who have chosen to run more actively in the current market environment, may find themselves with less timber supply available to support their operations going forward.

[Operator]

Our next question comes from Sean Steuart from TD Securities.

[Sean Steuart, Research Analyst]

A few questions. On the cost side, the $11.5 million inventory revaluation, was that fully baked into cost of sales this quarter?

[Duncan K. Davies, President, CEO & Non]

Yes.

[Sean Steuart, Research Analyst]

Okay. And some of the other cost items this quarter, I think we have a pretty good sense of the fiber cost inflation in B.C. The maintenance downtime you took though and, I guess, preventative downtime ahead of the hurricane, can you guys quantify that impact beyond just lost production?

[Duncan K. Davies, President, CEO & Non]

I think I tried to do that with my comments about what the cost of that was. It accounted, I think -- I don't have the number right exactly in front of me right now, Sean. But I think it was 18 -- 15% to 20% of our -- the difference in EBITDA in the quarter was attributable to the downtime in the South. And it was a combination of a bunch of things. It was -- we took Georgetown down in South Carolina in anticipation of Hurricane Florence. And I think we were out for -- I think it was 5 to 7 days, I can't remember exactly. And we did the same thing in the fourth quarter with the hurricane that rolled through the Florida Panhandle and into Southern Georgia. But that's not a third quarter item. The other spending is the maintenance spending, even though you had taken on without anticipating it's going to generate any significant returns for you. The mills will operate better as a result of that. And it's all part and parcel of our program of bringing the operating standards and practices up to something that we're more comfortable with in the South, similar to what we've got in the West and the Northwest. And some of it was project-related. So at Monticello, for example, where we're in the process of rebuilding the mill, there's times when you take different machine centers down or you'll take the whole mill down for a tie-in of new equipment. So that's -- that was the impact that, that had on both production and on profitability. Part of it was related to the capital projects that we think are positioning ourselves going forward.

[Sean Steuart, Research Analyst]

Got it. Second question I had, the marketable securities you guys acquired this quarter, is that just treasury management, investment in fixed income, that sort of stuff?

[Duncan K. Davies, President, CEO & Non]

Yes, strictly. We've got this significant cash balance. And so we're moving some of that cash into marketable securities that generate higher returns for us. It's just a cash management thing.

[Operator]

Our next question comes from Paul Quinn from RBC Capital Markets.

[Paul C. Quinn, Analyst]

I guess, this is a question to Bart. But Bart, you talked about inventories in the pipeline being at very low levels. Just wondering how you're gauging this.

[J. Barton Bender, Senior Vice President of Sales & Marketing]

Well, I mean, obviously there's the information that you get from sources such as FEA and whatnot, who track those things closely. But I would say the majority of that is just through discussions with our customers. We stay tight with our customers in general. And that's the question that gets asked all the time. And I would say right now, more than any time I have seen in the recent past, you hear comments like I'm no -- I'm not carrying 60 days of inventory, I'm now carrying 45. Or in some cases, 45, I'm taking them down to 30. And so I think there is a commonality in the marketplace, where people would like to work through their inventories as they approach year-end. There's obviously an incentive to do that. And the way the market is and with availability and lead times, I think it can afford them that opportunity. And our position is that you take inventories down 2 weeks, well, that -- if everybody does that, that can be a significant volume that goes out of the marketplace. And I don't think that volume is being accumulated elsewhere. So that's gone.

[Paul C. Quinn, Analyst]

Okay. And then just with the customers themselves, I mean, one of their concerns in the U.S. housing market is affordability. I'm just wondering as you talk to your U.S. homebuilding customers, what's the sense that you've got of their ability to shift their construction to more affordable homes? And how likely is that to occur and you see evidence of that happening?

[J. Barton Bender, Senior Vice President of Sales & Marketing]

Duncan, do you want me to take that?

[Duncan K. Davies, President, CEO & Non]

Yes.

[J. Barton Bender, Senior Vice President of Sales & Marketing]

Okay. It's an interesting question. I think that -- I think for that end-use sector, which is, what, I guess, in total, 30% of the lumber consumption in North America, they're working through those realities as well. And it's very interesting. We get some different comments, where the new home entrant is actually still a very active segment of the marketplace and that really a lot of the impact on affordability is being impacted through the move-up, so people that own homes and want different homes. And so I think as that industry works its way through, there's a combination of things that are going to take place. First, they're going to redesign their homes to address the affordability issue. But the other piece that, I think, is a meaningful move in the marketplace is this whole concept of off-site construction. And the idea that assembling wall panels or roof trusses or any of those types of things is a mechanism that they can use to bring more affordability into their construction cost. So I really think that, that sector is really dynamic right now and shifting to make sure that they're responsive to the needs in the marketplace. And so our conversations, more times than not, the response to us is that they see the current situation as more of a pause than a real change in demand for homes.

[Paul C. Quinn, Analyst]

Okay. And then just lastly, just on the question of -- or I guess, the avenue of off-site construction, what do you see those efficiency gains -- or what do you hear in those efficiency gains, i.e., to build a same type of house inside? I suspect they'll use less lumber. Is that a 5% less? Is that a 10% less? Do you have any idea what that is?

[J. Barton Bender, Senior Vice President of Sales & Marketing]

Well, Paul, I think the big driver is not the usage of lumber. I mean, I -- you hear about some ideas that they can reduce but really not essentially that much. I think the real driver there is labor and the constraints of labor. And so the efficiencies that you gain not only within a factory environment. Cost and quality, coupled with the efficiencies that you gain in assembling the structures on site, just require quite a different amount of labor. And so that's why our view is that off-site construction is real because it addresses two factors, cost and labor availability.

[Duncan K. Davies, President, CEO & Non]

And Paul, I think it's got the potential for a positive impact on total demand for lumber. Because there continues to be a significant pent-up demand for housing. Labor availability is one of the big factors which has constrained new home construction. So if builders can find other ways to construct homes and to match those homes with where the market demand is, I think it's got the potential to increase overall home construction starts and to increase the volume of lumber consumed. So we're pretty optimistic about that and have been working actively with our -- with homebuilders on exactly that kind of discussion.

[Operator]

[Operator Instructions] Our next question comes from Chris Damas from BCMI Research.

[Chris Damas]

I wondered if you could comment on what's going on in the Southeast. We had 2 major hurricanes. And it seems like a long time ago, really it was September or mid-September, it was Florence, more of a flooding event. And then we had a direct hit to Florida and South Georgia. How did that affect your mills? What do you see in terms of the fiber basket and the construction -- the homebuilding business down there?

[Duncan K. Davies, President, CEO & Non]

Yes, so in terms of our mills, there was no damage at all to any of our mills as a result of the hurricanes. But both in the Carolinas and then subsequent in the Southern Georgia, we took a precautionary approach by taking our mills down in advance. We're very focused on making sure that our workforce is safe and they're able to do what they need to do to look after themselves and their families and their homes. And so we took those facilities down. And I can't remember exactly the numbers, but I think Georgetown was down 5 to 7 days during that period of time. And then we lost about a week of production in our Georgia facilities as a result of the preparations for Hurricane Michael. The bigger issue, it doesn't affect us so much. But in the -- in Southern Georgia, there was some significant damage that occurred on the timberlands in a couple of areas that has -- will have longer-term implications for that marketplace. None so much on us, just because of where we're located, but for other operations, I think it's -- they're having to take account of the amount of damage that has taken place down in that area from a timber supply standpoint. In terms of the housing market itself, you go through periods of time where the weather is wet or there's hurricanes or whatever it is that slows down the rate of construction. And by slowing down the rate of construction, by definition, it slows down the rate of lumber consumption. Texas, in particular, has been quite wet this year. And that's had an impact as well. But I think where -- we continue to believe that the South is going to be the major market in North America as it has been for many years now from a lumber consumption standpoint and from a home construction standpoint. And you never like to look at a national disaster like that and think of what that impact is on construction. But natural disasters tend to have a positive impact on the amount of construction that is required to rebuild homes. So it tends to impact the overall demand piece positively longer term after some short-term dislocations.

[Chris Damas]

How much Southern Yellow Pine are you exporting relative to domestic demand down there?

[Duncan K. Davies, President, CEO & Non]

We were exporting, I think, Bart, somewhere in the 5% to 7% range of our production. Is that about right, Bart?

[J. Barton Bender, Senior Vice President of Sales & Marketing]

Yes.

[Duncan K. Davies, President, CEO & Non]

And with the tariffs on -- being placed by the Chinese on U.S. product imports, that slowed down a little bit. But we would expect over time that common sense would prevail, at least we hope it will, and that we'll be able to move back into increasing our rate of shipment from the Southeast to the Asia-Pacific market in particular and also to the Indian market. One of the benefits of whether it's Interfor or the other big Western Canadian producers operating in the U.S. Southeast is we have established customer bases and distribution channels in most of the major markets of the world. And that's what we've been doing is moving product on a backhaul out of East Coast ports into the Asia-Pacific markets, which is quite cost-competitive and has been met with fairly enthusiastic response in the marketplace.

[Operator]

Our next question comes from Ketan Mamtora from BMO Capital.

[Ketan Mamtora, Analyst]

Just a couple of quick ones. Duncan, any sense of CapEx for 2019?

[Duncan K. Davies, President, CEO & Non]

I think a round number would be $200 million, Ketan. We're ramping up the phase -- so the Phase 1 projects will be completing in the first part of next year. And the Phase 2 projects will be starting to ramp up. And some of the Phase 3 projects, we believe, will be underway in 2019. And as I said earlier, we've got $550 million worth of liquidity today. So we're pretty comfortable with the rate of CapEx that we've got on the drawing board here, both next year and for the next few years.

[Ketan Mamtora, Analyst]

Got it, that's helpful. And then just one more on log cost inflation. So in B.C, do you expect the log cost to come down with the sharp correction in Western SPF? Is that also your best-case estimate for at least the first half of '19?

[Duncan K. Davies, President, CEO & Non]

Yes, I think just like you've got an overreaction in the lumber market to different demand-supply conditions, I think you've got some overreactions happening in the log markets as well, driven by a combination of declining allowable cuts, reductions in standing timber inventory because of wildfires and other factors. And just a drop in lumber prices, I think, will force log consumers to be more disciplined in their buying activity. If they're not going to do that, it's like putting a loaded gun to your temple and spinning the chamber and seeing how it works out. So I'm much more comfortable managing our business in a disciplined way. And I think generally what that will do is tend to put downward pressure on log prices going forward.

[Ketan Mamtora, Analyst]

Got it. That's very helpful. And then in the U.S. South, are you assuming any log cost inflation or a little flat?

[Duncan K. Davies, President, CEO & Non]

No. We think the demand-supply balances in the inventory levels in the U.S. South will mitigate any significant upward pressure in log costs next year and for some period of time going forward.

[Operator]

And we have no further questions in the queue at this time. I'll turn the call back over for closing remarks.

[Duncan K. Davies, President, CEO & Non]

Okay, thanks, Carol. Thanks, everybody. We very much appreciate your interest in the company. Unfortunately, Marty is dealing with a personal situation today, so he's not able to be with us. I expect he'll be available this afternoon and over the course of the next week. I know a number of you would like to talk to Marty and get his insight, so I would encourage you to do that as the day rolls on and into next week. In the meantime, our expectation is the pricing that we've seen through the first part of the fourth quarter will impact our results in the fourth quarter. But we continue to be very optimistic both about the lumber market and how we're positioned relative to that lumber market and with the benefits of all of our capital programs. So we look forward to reporting to you again early next year and updating you on the progress that we're making internally with our capital activities. In the meantime, feel free to call Marty or call myself if you want any more insights. On that, thanks very much. Have a good day. And thanks for your interest in our company. Bye now.

[Operator]

This does conclude today's conference. You may now disconnect.