Wayne M. Rancourt - Chief Financial Officer, Senior Vice President and Treasurer Thomas E. Carlile - Chief Executive Officer and Director Thomas Kevin Corrick - Executive Vice President of Wood Products Nick A. Stokes - Executive Vice President of Building Materials Distribution

Alex Ovshey - Goldman Sachs Group Inc., Research Division George L. Staphos - BofA Merrill Lynch, Research Division Mark Wilde Chip A. Dillon - Vertical Research Partners, LLC William Hoffmann - RBC Capital Markets, LLC, Research Division Adam Rudiger - Wells Fargo Securities, LLC, Research Division Steven Chercover - D.A. Davidson & Co., Research Division

Good morning. My name is Kevin, and I'll be your conference facilitator today. At this time, I'd like to welcome everyone to the Boise Cascade Second Quarter 2014 Conference Call. [Operator Instructions] Before we begin, I'll remind you that this call may contain forward-looking statements about the company's future business prospects and anticipated financial performance. These statements are not guarantees of future performance and the company undertakes no duty to update them. Although these statements reflect management's expectations today, they are subject to a number of business risks and uncertainties. Actual results may differ materially from those expressed or implied in this call. For a discussion of the factors that may cause actual results to differ from the results anticipated, please refer to Boise Cascade's recent filings with the SEC. It is now my pleasure to introduce Wayne Rancourt, Senior Vice President, CFO and Treasurer, Boise Cascade. Mr. Rancourt, you may begin your conference. Wayne M. Rancourt: Thank you, Kevin. Good morning, everyone. I'd like to welcome you to Boise Cascade's second quarter 2014 earnings call and business update. Joining me on today's call are Tom Carlile, our CEO; Tom Corrick, Head of our Wood Products Operations; and Nick Stokes, Head of our Building Materials Distribution Operations. Turning to Slide 2, I'd point out the information regarding our forward-looking statements. The appendix of this presentation includes reconciliations from our GAAP net income to EBITDA. And with that, I will turn the call over to Tom Carlile. Thomas E. Carlile: Thanks, Wayne. Good morning. Thank you for joining us on our earnings call today. Before we start, I would like to begin by acknowledging Tom Corrick as the leader of our Wood Products business. He has developed and led the EWP business for many years, and he has played a key role in our recent successful IPO process. Most of you had a chance to meet Tom. The company and the board are very pleased to have an internal leader with Tom's experience and knowledge to take over the leadership of Wood Products. Moving to Slide 3. Both of our businesses performed well in the second quarter as demand picked up after a challenging start to the year. We reported $961 million of sales in the second quarter, up 13% compared to the second quarter of 2013. Our net income was $26.4 million or $0.67 per share. Wood Products and Building Materials Distribution both generated strong top line growth, particularly on engineered wood products sales. Wood Products -- plywood sales and earnings benefited from our acquisition last September of the 2 plywood operations in the Carolinas. Wayne will provide more additional details in his comments. The tone of the business is good as we start the third quarter. The pace of recovery in housing is a little slower than many of us expected earlier in the year, but we believe the industry is still on track for over 1 million starts this year and the consensus estimate for 2015 shows further improvement to approximately 1.2 million starts. Over the next few years, our expectation is for a long -- for a return to long-term trend levels of 1.4 and 1.5 million U.S. housing starts. With that overview, I will ask Wayne to cover the detailed financial results. Wayne M. Rancourt: Thank you, Tom. Turning to Slide 4. Wood Products second quarter sales, including sales to our Building Materials Distribution segment were $351 million, up 25% compared to last year's second quarter. The sales growth was driven primarily by plywood and EWP volume increases, as well as higher EWP prices. The decline in plywood prices was largely offset by improved lumber particleboard and byproduct sales. I would note that intercompany sales from Wood Products to our distribution business grew by almost $39 million in the quarter. Wood Products' second quarter EBITDA was $41.3 million, up 40% from the year ago quarter. Overall, the increase in EBITDA was due primarily to higher plywood sales volumes and higher EWP and lumber sales prices, as well as lower costs for purchased OSB we used in the manufacture of I-joist. The improvement in EBITDA included $4.8 million related to the acquired plywood operations. The positive factors contributing to EBITDA growth for the quarter were offset partially by lower plywood sales prices and higher log costs. Building Materials Distribution sales increased 11% to $758.4 million for the second quarter. Compared with the same quarter in the prior year, the overall increase in sales was driven primarily by improvements in sales volumes of 15%, offset partially by a decrease in sales prices of 3%. BMD reported EBITDA of $21.8 million. The earnings results were significantly better than last year's second quarter when BMD's EBITDA was $5.5 million. A year ago, the second quarter's gross margin bore the brunt of sharply declining commodity prices. Gross margins in this year's second quarter were 220 basis points better on a comparative basis, the bulk of which is attributable to the stable price environment for commodities. As Tom mentioned, total company net income was $26.4 million for the quarter or $0.67 per share. Our effective tax rate for the quarter was about 35%, which includes a favorable impact of tax credits recorded in the second quarter 2014 related to 2013 research and development costs. We expect our normalized tax rate going forward to still be around 38%. Turning to Slide 5. Our second quarter plywood sales volumes in Wood Products were up 21% with the impact of the recent acquisition. We are continuing to sell a portion of the production from the new facilities as high-strength veneer, which doesn't show up in the plywood sales data. We will share EBITDA for the acquired facilities again next quarter, but for competitive reasons, we do not intend to break out product level sales data for the individual mills. Our average -- our $301 average net sales price for plywood was down 8% from the second quarter of 2013 but was up 2% sequentially from first quarter '14. With strengthening the demand for plywood and more veneer flowing into engineered wood production, we are continuing to see strong operating rates in our veneer and plywood operations. Turning into Slide 6. Our second quarter sales volume for LVL and I-joist were up 28% and 29%, respectively, compared with the year ago quarter. Obviously, that was a much higher increase than what we saw in the housing starts statistics. We believe there might have been some pent-up demand left over from first quarter when many customers in the supply chain had difficulty in positioning spring inventories or starting construction due to weather. In addition, we announced the June 1 price increase on EWP, which may have spurred some additional activity in the second quarter. As others announce their results, we'll have a better idea of how much if any of the volume increases may be attributable to market share gains. Our LVL and I-joist sales price realizations improved 4% and 8%, respectively, from the year ago quarter and were up 2% and 5%, respectively, from first quarter 2014. We believe we will be able to further increase prices and operating margins on engineered wood products as our capacity utilization rates move higher with increased housing starts. Moving to Slide 7. BMD's second quarter sales were $758 million, up 11% compared with the year ago quarter. BMD's sales of EWP increased 36%, General Line product sales increased 9% and commodity sales increased 6%. As I mentioned earlier, gross margins improved by 220 basis points compared with last year's second quarter and drove the strong EBITDA performance of $21.8 million. On Slide 8, we have set out the key elements of our working capital. Company net working capital decreased $12.7 million during the second quarter. Accounts receivable grew with a higher sales activity, while inventory levels came down modestly in both businesses. As a reminder, the statistical information filed as Exhibit 99.2 to our 8-K has the receivables inventory and accounts payable data broken down by segment for those that are interested in more detail. I'm now on Slide 9. We generated $43.9 million of cash in the second quarter and ended the quarter with total available liquidity at $471.9 million. In July, we contributed approximately $11 million to our pension plans, which funded the vast majority of our remaining obligations for 2014. Even with a pension contribution, I would expect the company to generate a meaningful amount of free cash flow from operations again in the third quarter. Tom, I will pass back to you to wrap up. Thomas E. Carlile: Thanks. As I mentioned earlier, the consensus estimate for 2014 total U.S. housing starts now stands at 1,040,000, which would be up about 12% from the 925,000 starts experienced in 2013. We believe demographics in the U.S. support a return to residential construction of 1.4 to 1.5 million total starts per year in the years ahead. We will continue to manage our business to be supportive of our customers and captured opportunities the market presents. I'm optimistic about the outlook for the remainder of the year and 2015. We expect to see additional production and earnings from the acquired mills as we target maintenance and capital spending to bring the mills up to our standards and continue to implement the operations improvement process used in our other facilities. EWP sales volumes are on an upward trend as housing recovers, and I expect further revenue and earnings growth in our distribution business. In addition to the leverage we get from our existing businesses, we continue to seek out favorable opportunities to grow the company and create additional shareholder value. We are returning to an earnings level that provides more flexibility in considering mechanism for returning capital to shareholders if value-adding acquisitions are not developing. Thank you, again, for joining us on our call this morning and your support as investors. We would welcome any questions at this time. Kevin, would you please open the phone lines?

[Operator Instructions] Our first question comes from Alex Ovshey from Goldman Sachs. Alex Ovshey - Goldman Sachs Group Inc., Research Division: A couple of questions, Wayne. I wanted to start on the cap allocation front. Can you talk about the appetite for buyback? And I know Tom just sort of finished his prepared remarks with a comment there. But in terms of the timeframe, would it be reasonable to assume that we may see something on the buyback front in the back half of this year? Thomas E. Carlile: Alex, our focus first continues to be to grow the company and create value. We'll continue to talk with our board on sequence of other things, buybacks, dividends and we're not prepared to say anything more than that at this point in time, but other than we continue to talk about it every board meeting. Alex Ovshey - Goldman Sachs Group Inc., Research Division: Okay. That's fair. And then on the plywood side, just looking at your realization, it seems like it lagged pretty materially with the implied number. It should've been based on just looking at the indices by random lens in the west and the south. Can you talk to that? And is there just a lag, and as we think about the third quarter, we should see a pretty meaningful improvement in your plywood price realization, obviously, holding things equal where we are today relative to what average price reported for the second quarter was? Thomas E. Carlile: Alex, I'll start and then ask Tom Corrick to add in. I can't speak to the lag to the indices. Mix does play a part into it, so it's not something that I have in front of me. We are -- as we ended the quarter and got into the third quarter, we saw some improvement in plywood prices. The demand-supply balances is quite good in plywood. And then last week, the unfortunate [indiscernible] fire of one of our West Coast competitors has put more pressure on pricing. Tom Corrick, anything else you want to add?

Yes. This is a pretty broad generic statement, Alex but I would just add that if you look at the mix of products we sell, we would tend to lag going up random than we tend to lag random going down as well.

The next question comes from George Staphos, Bank of America. George L. Staphos - BofA Merrill Lynch, Research Division: A couple of questions, and I know it might be difficult at this juncture, but do you have any initial estimate as to how much demand for EWP might've been pulled into 2Q from what otherwise it would've been in the third quarter if not for the pricing action?

It's Tom Corrick. We're obviously still assessing that. And I think partially, we're going to have to wait to see what our competitors report when they report going forward. I can tell you that sales, orders actually are down in the third quarter but still above year-to-date levels, so we're certainly seeing some slowdown in order volume, which will lead me to believe that some portion of it was related to buying in front of price increase. George L. Staphos - BofA Merrill Lynch, Research Division: And I'm sorry, you said -- go ahead, I'm sorry. Thomas E. Carlile: I was just going to add that our volumes were up quite a bit in the second quarter. If you look at the APA data for production, I think the industry for I-joists and LVL was up 20% to 22% on production. So as Tom said, when we see Weyerhaeuser out on the first and LP, I think, reports August 5, we'll get a better sense on their sales numbers. But the production numbers for the industry in total were up well above what housing starts were. George L. Staphos - BofA Merrill Lynch, Research Division: Sure. It's a fair point. Tom, I'm sorry, I missed your commentary. You said your volumes early in the third quarter are up year-on-year, or you're up year-to-date over the first, whatever, 7 months? Thomas E. Carlile: Yes, basically, year-to-date. George L. Staphos - BofA Merrill Lynch, Research Division: Okay. Could you at least provide what you're running early in July or in 3Q in terms of bookings or billings or however you want to measure it? Thomas E. Carlile: No, George, I don't think we can provide you that specific guidance. There has been some back off, but it's not a material back-off. That's the best way that we can answer that. Wayne M. Rancourt: Yes, the way that I would describe it, the July activity by itself does not explain what happened in the second quarter. There has not been enough of a falloff in July that indicated there was a lot of pull forward. George L. Staphos - BofA Merrill Lynch, Research Division: All right. One last one, and I'll it over. Can you give us just a sense for year-to-date where operating rates are across your businesses and in particular, where you stand with veneer? Thomas E. Carlile: I would -- operating rates are probably in the mid- to high-60s right now on EWP. Our dryers are fundamentally running full at this point. In terms of veneer supply, we're not constrained by veneer supply right now.

Our next question comes from Mark Wilde with Bank of Montréal.

Just, I guess, I'm at EWP for one more shot. You didn't do anything that would have increased your kind of geographic distribution range during the first half of the year, did you? Wayne M. Rancourt: Mark, we did not. We do think our integrated model through distribution did help us. Strong growth in supervision was fueled by EWP as well.

Okay. And just to kind of follow up, a couple of questions on that. It's interesting, Tom, you guys always talk about the importance of distribution in EWP, but you've got a big competitor that went from unaligned with any distributor to aligned, and they seem to have lost share. Any thoughts on that? Thomas E. Carlile: No. I can focus on what we do, and we think there's value to that. And maybe we're seeing that in the current environment.

Yes, okay. The other question I have on EWP is just with the Carolina plywood and veneer operations. Any thoughts on the potential over the next couple of years of integrating forward to the EWP on the East Coast? You've talked about this in the past. Thomas E. Carlile: Mark, there's nothing to announce at this point in time. As we said when we bought those mills, we feel that's an opportunity down the road. If the demand is there, that it could be a great place to fully integrate into the EWP business. Wayne M. Rancourt: But a fair amount of our investments over the next 12 to 18 months, I would anticipate, will be in that region and it will be focused on the similar works that we've done in Louisiana on upgrading dryers and veneer throughput. And you're right, it's really to increase veneer self-sufficient in giving us the flexibility over time to think about EWP in that region.

Okay. The last question I had is, can you just update us on kind of log cost in the 3 different regions for you, and kind of where you see that going for the balance of the year? Wayne M. Rancourt: If I could think about the change compared to a year ago? The south, on a total wood cost basis hasn't moved out much at all, low-single digits. And then the west, after an elevated start in the first quarter, that has really backed off and on a year-to-date basis, wood cost in the West are probably only up about 3%.

Okay. And any view kind of going forward through the balance of the year? Thomas E. Carlile: Yes. The wood costs are going to be higher in the west than they are in the south. We don't -- it's something that we watch very meaningful, but we don't expect it to be something that we can't manage going forward in '14 and into '15. Wayne M. Rancourt: But when you look at stumpage and we look at growth to drain in and around the Carolina mills and in Louisiana, we feel pretty good about availability of the fiber. If there's constraints, and we haven't bumped into a lot of this yet, but it's probably on getting loggers and getting the cut and haul piece.

I guess it's similar to what we got with the truckers going on right now? Thomas E. Carlile: Absolutely.

Our next question comes from Chip Dillon with Vertical Research. Chip A. Dillon - Vertical Research Partners, LLC: I apologize, I missed some of the beginning of the call. But certainly, the margins in distribution were very stellar, I would say. And was some of that either inventory related, or differently, did you maybe discontinued some items that weren't as profitable in the past? Thomas E. Carlile: I'll start and have Nick fill in. One, we have not changed our business model. One area where we had strong growth was, again, EWP, as I just spoke earlier. Nick, fill in that. Nick A. Stokes: Yes, Tom. There's 2 things really, Chip, and the language talks about the primary driver. It was just the absence of the negative commodity environment that we had in the second quarter of 2013. That was an aberration. And what you see in the second quarter of '14 is a more normalized margin environment, a healthy mix, to Tom's point, about EWP in some of the seasonal products that kicked in as winter finished. Chip A. Dillon - Vertical Research Partners, LLC: That's very helpful. And then -- and again, you might have addressed this. But in a very general sense, I know in the past, you guys have talked about the consolidation potential that your company has, in particular, you do have a very strong record in distribution, and from what we can see in the public realm, that's unique. But would you comment also on also branching into potential opportunities if they were to present themselves in either OSB or Engineered Wood Products? Thomas E. Carlile: Yes. We've been pretty consistent on our point of view on that is -- our first focus is on veneer based and structural panel businesses that support EWP. We have said on the OSB side that, that is something -- we used to own a business in OSB, own a mill, we'd build the mill, we don't have any today. It's integrated with -- I mean, there's value within our EWP business. So it's not something we take off of the table, but we're focusing on other things first, veneer-based, and in distribution, we continue to look for things that fill out geographies where we're underserved or in adjacent product lines that serve our customers.

The next question comes from Bill Hoffman with RBC Capital. William Hoffmann - RBC Capital Markets, LLC, Research Division: Just a couple of more questions on the plywood mills down in the south. I just wanted to get a sense, since you're generating some pretty strong free cash flows, is there any increase in capital spend down there to bring those up to the cost position where you're targeting? Thomas E. Carlile: Bill, yes, we are investing some capital down there. We will be putting a new dryer in Chester. It was something that was in our plans when we bought the mill. It's very consistent with what we've done in our other mills, and it's cost savings, but it also helps us generate additional veneer to help support both our plywood and our engineered wood business. We are spending some extra money on maintenance, extra capital on fixing some things that's consistent with our mills but nothing major has surfaced at this point in time.

Bill, this is Tom Corrick. I would add that on that dryer in the Carolina's, that's a replacement of an existing dryer, not an additional dryer. William Hoffmann - RBC Capital Markets, LLC, Research Division: Okay. And how would you say your operating down there, just from either an operating standpoint or in a cost position compared to the other -- the rest of the facilities? Thomas E. Carlile: What I would say is that it's meeting our expectations, but there's lots of opportunity for improvement, which I think we knew as we went in. Wayne M. Rancourt: I would describe the second quarter was a lot closer to where we think the trend line is. I mean, obviously, at $4.8 million, we had said that we thought trend line EBITDA, kind of free capital and free upgrade with somewhere around $20 million. Obviously, the $4.8 million that we got in the second quarter is a lot closer to that run rate than what we saw in the first quarter, so we're a lot happier that the performance is coming in line. And on the other dryer projects we've done, those have typically been 3, 3.5 year kind of pay back. So we would think that the dryer project at Chester is probably in a similar realm. William Hoffmann - RBC Capital Markets, LLC, Research Division: Okay. And then just last question. Just in the M&A scheme of things right now, what are you seeing, opportunity wise? And are you seeing valuations come down at all? Thomas E. Carlile: I can -- I'll speak to valuations. We view valuations still a challenge, and we're pretty disciplined, and we're not going to buy something that we don't think provides shareholder value, and that's a challenge in the marketplace.

Our next question comes from Adam Rudiger with Wells Fargo Securities. Adam Rudiger - Wells Fargo Securities, LLC, Research Division: It seems like there's a lot of confusing signs right now, whether it be the census data on starts and new home sales or company-specific data on kind of repair and remodeling trends. I was wondering if you could -- if it's possible, when you look at some of the sales you're seeing out of BMD, what that might explain. What's going on in the marketplace, whether it be -- talk about specific products or you're seeing strength in R&R, and new construction, things like that? Nick A. Stokes: Adam, this is Nick. You articulated the challenge. There's a lot of mixed signals in terms of housing by itself. That ranges from places like Phoenix, were permits are actually down year-over-year and their building fewer homes than they did the prior year. I'm sure everybody saw our report last week or so about the constraint on lot availability across the south, reportedly due to too much rain. There's places in the some of the bigger metro markets where the trades in terms of the framers and the HVAC and the plumbers are putting a constraint on the pace of new home development and build. There's just a lot of the regional difference in terms of new houses. Certainly, the repair and remodel across the country, as well as houses in the northeast to the midwest where, as you recall, we had such a severe winter both in duration and magnitude. But spring kind of came to life. That's about as much color as I can give you, and none of which is science, it's more field and in conversations with customers.

Adam, this is Tom Corrick. I would also add that if you look at, seasonally, adjusted housing data, it masks what happens month-to-month. And if you look at the second quarter versus the first quarters, starts were up over 30% and it still adjusts -- looks kind of like the same seasonal number, but that's -- from an operations perspective, that's a true increase in demand. Adam Rudiger - Wells Fargo Securities, LLC, Research Division: Okay. Second question was, can you quantify the EWP price increase in June, and what the success of that so far has been?

In general, there's a lot of range to it, but in general, I would say it's 5% plus. The acceptance has been very good. I think it's been well implemented across the marketplace. It really takes several months for that price increase to fully show up in the marketplace, and then the results.

[Operator Instructions] Our next question comes from Steve Chercover with D.A. Davidson. Steven Chercover - D.A. Davidson & Co., Research Division: Two quick questions. First of all, with respect to the unfortunate incident in Springfield, did you have any veneer trading relationship with Swanson? And I was also wondering if it might impact log costs a little bit?

We have a very small relationship with that mill. I don't think it's got a materially impact on veneer supply. I don't think we have any sense, whatsoever, what will happen on the log side. Thomas E. Carlile: Steve, the other thing, our distribution facility was a customer and they're experiencing the same thing as others in the marketplace of doing a little bit of scrambling to backfill for the product they had assumed coming from that mill. Steven Chercover - D.A. Davidson & Co., Research Division: Yes. No, it was a total loss. It's very unfortunate. Okay, and then I have one question on distribution. I think you recently bought a DC in Kansas City. And can you tell us what the opportunity there is? And then I was looking at your map, and I see that there's nothing in the Dakotas. I realize it would be a small base, but it's growing fast with the oil. Is there an opportunity there? Nick A. Stokes: Yes, Steve. As it relates to Kansas City, the tailwind of June, we announced that we had acquired a facility in the market. It's in Lee's Summit. That trade area and marketplace is currently being served by other -- other of our distribution centers, primarily Tulsa. We've been doing business in that area for at least a decade. The volumes have grown. We've got an existing customer base. The volumes have grown where it makes sense to put inventory and logistics service on the ground in the market. I think that gives us some capacity for additional products, better services to the customers and just a broader healthier mix, and we'll save them logistics cost, trying to service it from away. So we're very excited about that opportunity. As it relates to the Dakotas, the growth of that market, obviously driven by some of the oil stuff, has been sporadic but generally strong. We service that market today from both our Minneapolis facility, as well as our Billings, Montana facility. And we're doing reasonably significant volumes over there and feel like we're getting our share.

Our next question comes from George Staphos from Bank of America. George L. Staphos - BofA Merrill Lynch, Research Division: Guys, just some follow-ups. So looking at last year's 2Q in BMD and recognizing organizing that there's a fairly significant inventory charge based on the way that commodities were progressing at that point in time. If we take a rough swag and say, okay, you would've been more or less in line with the prior year quarter, take that as my starting point and the look at the EBIT that you've generated this quarter, your incremental margin would have been, I think, over 10% for BMD. Should we still assume more of like a 5% incremental margin in BMD on a going forward basis? I guess, this is question one. Secondly, you mentioned that you're out with a mid-single-digit price increase in EWP. Are you in a position to comment whether others have also been implementing pricing increases in EWP? And one last follow-on. Wayne M. Rancourt: Yes, I think, on distribution, I would continue to guide people that probably 4% to 4.5% EBITDA margins on incremental sales as we get leverage on occupancy on payroll -- and on payroll. And on the EWP price increase, there were a number of others in the industry that had similar pricing please announcements. And to Tom Corrick's point, it depends on the builder, it depends on the distributor but there are some organizations that have price protections for certain periods of time. So we would expect those price increases to show up in the third and fourth quarter as that rolls in, and that gets to this pull forward nature. We do generally put volume constraints, so that we try to limit those price increases are -- we try to limit the amount of volume that people can pull forward to a reasonable number, and we'll see how that plays out in July and August. But as we mentioned earlier, we haven't seen a big impact on the volumes yet in July, but we'll see how that plays out in the balance of the third quarter. But others did have price increases that were similar. George L. Staphos - BofA Merrill Lynch, Research Division: Okay. And 2 others, and I'll wrap it up from my side. Number one, realizing that you still want to grow the company, you're specific in terms of the years that your most focused on, veneer-based, acquisitions that could grow your business, overall. Within capital return, would you tend to put dividends above share buyback at this juncture? I mean, that's always been our take on your commentary. So that's question number one. Question number two, given the spread that you are beginning to see between plywood and OSB, which is at a relatively high level, do you begin to worry, or we had a level where we need to start considering whether there's some -- substitution by OSB into some traditional plywood markets, recognizing, obviously, the trend for years has been OSB has been taking share from plywood? Thomas E. Carlile: Thanks, George. As far as prioritizing dividend versus share back, I think it depends on our view. We will not implement a dividend until we're sure that it's a sustainable dividend over the long term. And we'll continue making flexibility and it's a discussion that we have with our board every board meeting. As far as substitution, Tom Corrick, do you want to speak to that?

Yes. I think that as we look at the substitution issue, relative to residential construction, I think that substitution is going to continue. And I think that, at least partially, the price increases reflect tightness in supply, and that will probably drive some substitution as well, simply due to availability issues. But the bulk of what we sell in plywood really doesn't go under residential construction anymore. There are features and benefits to the plywood panel, relative to OSBs, that I think makes us feel pretty comfortable about the relative relationship between the 2 structural panel businesses. George L. Staphos - BofA Merrill Lynch, Research Division: Tom, what do you think the remaining amount that plywood and OSB compete against at each other in residential is if you had to put in a BSF stamp metric? Wayne M. Rancourt: Yes, I mean, the numbers we see from industry sources would say that somewhere between 20% to 25% of plywood ends up in new residential construction, and a lot of that are in places where there are strong regional preferences, like the Northeast or where you have code issues, like Florida. In some ways, the price separation you're seeing, I think, is reflective of the supply demand balance, and the plywood being probably in the mid-to high 90s at the moment. I'm sticking with the Swanson buyer. And with OSB, I think you just have a case where more supply came on in response to what people anticipated for housing starts, and the housing starts didn't show up. So I think you got it -- a more difficult supply-demand balance in OSB. But the 2 are trading independently because largely, OSB, won the war on new residential construction and most of the substitution has taken place, and I think the pricing dynamics we're seeing confirmed that those have really become more independent markets this time has gone on.

Our next question comes from Mark Wilde of Bank of Montréal.

A couple of questions on distribution and then one on transportation. Just in that distribution business, the margins that you put up this quarter were margins that we didn't think you would see until we have much higher housing start numbers. Is there anything else that kind of helped that margin this quarter? Wayne M. Rancourt: Yes, I mean, I think you've got a couple of things going. And as Nick said, we did get a nice rebound on commodity margin, and this math is not perfect. But if you took OSB at $225, the margin percentage is going to generally be higher than if OSB was selling at $300 or $350. Because the amount of dollars we can generate on a gross margin basis is going to be tied to the value of the service we provide. On a percentage basis, I would expect there's a low commodity price environment or gross margins are going to be a little higher. And then as Nick mentioned in second or third quarter, you're going to see a seasonal pickup in demand in engineered wood. You're going to see products like composite decking, are going to have higher demand and that's a product line the typically carries a higher gross margin than we see on poor commodities and some of the general line items. So if you look at the 11.3% that we posted on gross margins, as we've been having conversations with people and if you go back and look at our numbers over the last 5 years, we'd kind of said that if we get to normalized housing environment, we think that gross margin numbers is probably 10.5% to 11%. So again, we think we'll see leverage an operating cost, but when we think through our model, we're thinking 10.5% to 11% gross margin line and somewhere in the 7.5% to 8% on operating expenses to get to that 3% bogey on the EBITDA margin. Now hopefully, we'll do better than that in midcycle, and we're working everyday to do that. But that's kind of what I would give you for guidance.

Okay. All right. Wayne, one other on distribution. Just can you give us just some examples of sort of adjacent markets that you guys might be -- would consider in distribution? Wayne M. Rancourt: Yes, I'll give you a couple of examples, and I'd ask Nick to chime in here because he's probably closer to it. But if you look at our 32 branches now with the addition of Kansas City, the customer set and product set varied by marketplace, and that's part of what made us successful. It's a pretty entrepreneurial culture and it's what works in the local market. And in a number of markets, we've got a presence, for example, with the mobile home industry or with trust manufacturers, and maybe some industrial customers. But that would not be true across the system, and we've got certain products that've been successful in certain markets that we haven't necessarily pushed into all markets. And got a number of branches, for example, where we'll run door shops. And so I think we're continuing to be very thoughtful geographically about how we do that product line expansion and the customer expansion. But if you took the width of our product line across the system and if you took the width of our customer base across the system, there's a lot of headroom for organic growth, just by continuing to do what we do in servicing customers and just broadening the mix and broadening the customer set in each geography. Nick A. Stokes: Mark, I would add in just from a pure geographic standpoint, we are not ready to disclose the specific markets that we're looking at. I think from an instructive standpoint, you can look at a case study for Kansas City and kind of extrapolate where you think we might go and draw it up against our current footprint. I mean, we serve all parts of this country today and there's some markets, just geographically, that we're a bit underserved or kind of hard to look to see what kind of opportunities we have.

Okay. And one other question I had is for guys that rely on truck transport quite a bit and for all that we've been hearing from other companies about sort of challenges in the trucking business right now, you guys really haven't mentioned that much this morning. I wondered if you could just touch on that briefly on both sides of your business. Nick A. Stokes: Yes, Mark, this is Nick again. It is a very challenging problem from the distribution standpoint, both inbound and outbound. And you think about the inventory in the pipeline that doesn't flow as efficiently as we're used to, extends lead times, those kinds of things. You think about distribution from an outbound standpoint. As you are well aware BMD has their own fleet, and we haul about 60% of what we sell on our own equipment and hire the rest. And so the hire the rest is more challenging, but we believe that to the extent that we've got our own fleet, it gives us a little bit of an advantage over some of our competitors who are purely at the mercy of the outside carriers. But it's a problem. And there's all kinds of data on why it's a problem, but we certainly don't anticipate it getting any easier. Thomas E. Carlile: I would say on our side that on the manufacturing side, we're seeing exactly the same issues. There's a little bit of a characteristic of what I, for lack of a better term, would call moving pockets of distractions. So we'll end up with one mill, then we end up with real challenges getting inventory out, and over a 2- to 3-month period, we'll adjust to that problem, but have something else show up somewhere else. We're also frankly having challenges with the railroads. So it's pretty broad-based. I guess from afar I don't think our challenges are different than our competitors, however, but certainly it causes inventory issues in our mills and for our customers that everybody is having to adjust to shipments taking longer than they took a year ago or 3 years ago.

Yes, okay. So it sounds like the business may be very sensitive if we were to see a little unexpected incremental pickup in demand that the system may be challenged to handle that. Or let's say we had a bad hurricane season that, that could create some real disruptions as well. Is that fair to say? Thomas E. Carlile: Yes, absolutely. Wayne M. Rancourt: Yes. I would describe it as the rubber band is reasonably tight. And I think as you look at what's happened to plywood pricing, for example, in the West, in response to the Swanson fire, it gives you a good indication to how -- how well-balanced supply and demand were when things were running well and when transportation was working. And to your point, it doesn't take much of a hiccup because, at least a 2- or 3-, 4-week shock in the system. Now people will figure out how to add shifts and balance things back out. But you're absolutely right, Mark, near-term events can cause more shock in the system than it used to.

I'm not showing any further questions at this time. Let's turn the conference back over to our host for closing remarks. Thomas E. Carlile: Thank you. Thanks, everyone, for your interest in our company. And we look forward to visiting with you again at the end of the third quarter. Thanks.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.