Good morning. My name is Sydney, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Boise Cascade's Third Quarter 2020 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer period. Before we begin, I 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 results anticipated, please refer to Boise Cascade's recent filings with the SEC. It is now my pleasure to introduce you to Wayne Rancourt, Executive Vice President, CFO, and Treasurer, Boise Cascade. Mr. Rancourt, you may begin your conference.

Thank you, Chris. Good morning, everyone. I'd like to welcome you to Boise Cascade's Third Quarter 2020 Earnings Call and Business update. Joining me on today's call are Nate Jorgensen, our CEO; Mike Brown, Head of our Wood Products Operations; and Nick Stokes, Head of our Building Materials Distribution Operations. Turning to slide 2, I would point out the information regarding our forward-looking statements. The appendix of the presentation includes reconciliations from our GAAP net income to EBITDA and adjusted EBITDA and segment income to segment EBITDA. I will now turn the call over to Nate.

Thanks, Wayne. Good morning, everyone. Thank you for joining us on our earnings call today. I'm on slide number 3. Our third quarter sales of $1.6 billion were up 25% from the third quarter of 2019. Our net income was $103.2 million or $2.61 per share compared to the net income of $27.2 million, or $0.69 per share in the year-ago quarter. Total U.S. housing starts increased 11% compared to the same period last year. Single-family housing starts, the primary driver of our sales volume, increased 17%. Given the extraordinary market conditions caused by an ongoing imbalance between industry supply and end-product demand for wood-based commodities, both businesses delivered outstanding operating and financial results during the period. Our Wood Products manufacturing business reported segment income of $66 million in the third quarter compared to $15.6 million in the year-ago quarter. Wood products continue to focus on establishing pre-COVID-19 manufacturing production levels as product demand exceeded supply during the third quarter. Our Building Materials distribution business reported segment income of $107.9 million on sales of $1.4 billion for the third quarter compared to $38.7 million of segment income on sales of $1.1 billion in the comparative prior year quarter. BMD sales and income were robust, and our long-term strategy and commitment to consistently carry a broad base of in-stock products, supported by high service levels, and a solid financial position continue to deliver value to our vendor and customer partners in the supply chain, as well as our shareholders. Wayne will walk through the financial results in more detail, and then I'll come back to provide our outlook before we take your questions. Wayne?

Thank you, Nate. I'm on slide 4. Wood Products sales in the third quarter, including sales to our distribution segment were $363.7 million compared to $325.1 million in the third quarter of 2019. As Nate mentioned, Wood Products reported segment income of $66 million in the third quarter, compared to $15.6 million in the prior year quarter. Reported EBITDA for the business was $80 million, up from EBITDA of $30.8 million reported in the year-ago quarter. The increase in segment income was due primarily to higher plywood sales prices offset partially by higher wood fiber costs, as well as lower net sales prices of EWP. In addition, selling and distribution expenses and general and administrative expenses increased by $2.0 million and $1.7 million, respectively. BMD sales in the quarter were $1.4 billion, up 25% from the third quarter of 2019. Sales prices increased by 25% with relatively flat sales volumes. The business reported segment income of $107.9 million or EBITDA of $113.6 million in the third quarter. This compares to segment income of $38.7 million and EBITDA of $43.9 million in the prior year quarter. The increase in segment income was driven by a gross margin increase of $86.7 million resulting primarily from improved gross margins on commodity products compared with the third quarter of 2019. This margin improvement was offset, partially, by increased selling and distribution expenses and general and administrative expenses of $14.3 million and $2.5 million respectively. The amounts for unallocated corporate costs and other items impacting our reported adjusted EBITDA can be found in the tables of our earnings release. The net of those items was negative $15 million in the third quarter of 2020 compared with $10.7 million in the third quarter of 2019. The increase was due primarily to higher incentive compensation costs, and approximately $3.2 million of business interruption losses at Wood Products facilities that were absorbed at corporate in the third quarter, as part of our self-insured risk retention program.

Thanks Wayne. I'm on slide number 12. Weather continues to present a heightened level of economic uncertainty given the pandemic, low mortgage rates, and the continuation of work-from-home practices by many in the economy. This has created a favorable demand environment for new residential construction which we expect to continue into next year. Furthermore, with homeowners spending more time at home, repair and remodel spending may continue to strengthen as homeowners invest in existing homes. The blue-chip consensus for U.S. housing starts was last published at an expectation of $1.32 million for 2020, although we believe that the current U.S. demographics support a higher level of housing starts and many national homebuilders are reporting strong near-term backlogs. The impacts of COVID-19 on residential construction are uncertain. A reacceleration of COVID-19 cases could prompt state or local officials to reinstitute restrictions that could limit or constrain building activity. Aside from higher OSB input costs into I-joists, we continue to see favorable cost improvements and efficiencies in our manufacturing operations. Wood Products continues to make an effort to restore production rates to pre-COVID-19 levels in response to strong end product demand, particularly for our EWP business. As previously announced, we will continue to evaluate plywood market conditions, log supply availability, operating costs, environmental permits, and other factors influencing our urgent plywood operations as we approach 2021.

Good morning, George. I think the fundamental backbone of our strategy has been and will continue to be making sure that we have product available for our customers on a daily basis. And there are ongoing reasons in terms of customer service and those kinds of necessities. Quite frankly, it represents an opportunity in environments like this one. It does have some risk. But if you think about everyone's expectation in terms of declining prices, there is opportunity if you have commodity products on the ground that you can get to your customers tomorrow. So fundamentally, we start with the premise that we want to have product available and to ensure it flows out and flows in every day. Hopefully, the inflow doesn't exceed the outflow, and obviously, we manage that with pricing. Certainly, in the broader context given what we've had in terms of the magnitude of pricing volatility, as we came into the tail end of the third quarter, we recognized that given extended order files and relatively high prices, there was probably a little more risk out there than in normal times. So we adjusted the inflow accordingly.

Yes, George, this is Mike. I would reiterate what Nick said. Obviously, there were some interruptions with the fires in the West and the storms in the Southeast, primarily in Louisiana. But taking it all into account after those issues passed, we've had a bit more challenge in locating trucks on a timely basis, but not dramatically so. That has not been our biggest challenge recently. Pricing has been relatively constant, so it's not a major issue at the moment.

Great. Thank you, and good morning, everyone.

Yes, Kurt. Good morning to you. The divergence we've seen between plywood and OSB is interesting. I look at it like this: the run-up in plywood prices was expected to be in parallel with OSB. However, recent times have shown more domestic plywood production, particularly in certain geographies, increasing supply. This has caused plywood prices to take a hit. On the other hand, OSB production has faced constraints, leading to higher prices. This resulted in the divergence we've seen.

Wayne, I think the data we have available relative to what we had in the second half of 2018 is considerably better. The way Nick’s team managed the risk of a rollover since the end of August has been impressive. I think he has visibility into pricing and demand that will serve us well for the upcoming months.

Yes, Mark, good morning. I would echo Wayne's comments. We don’t expect a 16% margin experience in the fourth quarter. That is well outside our historical range. But with inventories being relatively lean throughout the supply chain, if demand holds up, the flow-through will be quite good.

I believe we will be able to manage the fluctuations in commodity pricing effectively. The key element at this point is to maintain solid relationships and have a good visibility on market pricing to make timely adjustments.

As we wrap up our formal comments, I want to express my sincere appreciation for the focus our associates and managers have maintained on safety and taking care of one another and the communities in which we operate. Their performance through the pandemic has been inspiring. We will continue to be guided by our values of safety, integrity, respect, and pursuit of excellence.

Hi, everyone. Good morning. Thanks for taking my question and congratulations on the progress in the quarter. My question relates to the drop in some of the commodity prices, particularly lumber. What do you do differently in terms of managing the working capital risk going into the fourth quarter as well as the first quarter?

Of course, we are actively managing our costs and maintaining a balance to deliver strong results amidst the challenges we face. Yes, transportation costs have been challenging in the past quarter, but we’ve dealt with this effectively thus far.

From a distribution standpoint, we do have our own fleet, but only about half of what we deliver is on our own trucks. The rest relies on dedicated and contract carriers.

Thank you. Good morning, everybody. Given that we're currently running at about 90% capacity, can we expect that your year-over-year growth rates might accelerate with what we've been seeing in the market?

Yes, Ruben. It usually takes about a quarter for the adjustments to filter through, but I'm optimistic about the upcoming quarters since demand remains strong and we’re working as hard as we can to increase our production where possible.

I think it's safe to say that we are planning for a strong demand environment going forward and our strategy enables us to adjust effectively to changes in the market, allowing us to stay competitive.

Hey, good morning. On the EWP side, taking a look at Slide 5, I've noticed the LVL prices have been declining. What has been the key drivers behind this trend?

Yes, Paul. The drop in LVL pricing is a reflection of the oversupply combined with a lower number of housing starts. We want to ensure our customers have access to available product, and we’re ready to act based on market demands.

The Brazilian imports have increased due to several factors including favorable currency in addition to price levels which are benefiting both the customers and the suppliers.

Thank you for joining us today for your continued support and interest in Boise Cascade. We welcome any questions at this time.

Our first question comes from George Staphos with Bank of America. Your line is open.