Pencils are made by first cutting incense-cedar log into lumber called ‘Pencil stock.’ It is the dried in a particular way, and sent to a slat factory. They then cut the pencil stock into pencil blocks just a bit longer than the normal length of a pencil. The pencil blocks are then cut into pencil slats using specially designed circular saws. The pencil slats are then treated with wax and stain in order to have a uniform color. A groover machine is then used to cuts grooves into the slats in order to accept the lead. Lead is then placed into the groove, and then a second grooved slat is attached to the other groove in order to make a sort of sandwich. The sandwich is then made squared, and individual pencils are cut from the sandwich. Finally, each pencil is painted and then an eraser and ferrule are added to the pencil. Tada!