Floyd F. Sherman - Chief Executive Officer, President and Director M. Chad Crow - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Member of Proxy Committee

Trey Grooms - Stephens Inc., Research Division Rob Hansen - Deutsche Bank AG, Research Division Seth B. Yeager - Jefferies LLC, Fixed Income Research John A. Baugh - Stifel, Nicolaus & Company, Incorporated, Research Division Paul T. Betz - BB&T Capital Markets, Research Division Justin Bergner - G. Research, Inc. Matthew Dodson Sean Wondrack

Good morning, and welcome to the Builders FirstSource Second Quarter 2014 Earnings Release Conference Call. Your host for today's call is Mr. Floyd Sherman, Chief Executive Officer. [Operator Instructions] Any reproduction of this call in whole or in part is not permitted without prior written authorization of Builders FirstSource, and as a reminder, this conference is being recorded today, July 25, 2014. The company issued a press release after the market closed yesterday. If you don't have a copy, you can find it on our website at bldr.com. Before we begin, I would like to remind you that during the course of this conference call, management may make statements concerning the company's future prospects, financial results, business strategies and industry trends. Such statements are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties, which could cause actual results to differ materially from expectations. Please refer to our most recent Form 10-K filed with the Securities and Exchange Commission and other reports filed with the SEC for more information on those risks. The company undertakes no obligation to publicly update or revise any forward-looking statements. We have provided reconciliations of non-GAAP financial measures to their GAAP equivalents in our earnings press release and detailed explanations of non-GAAP financial measures in our Form 8-K filed yesterday, both of which are available on our website. At this time, I will turn the call to Mr. Floyd Sherman. Floyd F. Sherman: Thank you, and good morning. Welcome to our Second Quarter 2014 Earnings Call. Joining me from our management team is Chad Crow, Senior Vice President and Chief Financial Officer; and Marcie Hyder, Vice President and Controller. I'll start with an overview of the second quarter and then I'll turn the call over to Chad, who will discuss our financial results in more detail. After my closing comments regarding our outlook, we'll take your questions. We achieved our highest quarterly sales since 2006 as we ended the second quarter of 2014 with sales of $426.5 million. We were able to achieve this high level of sales even though lumber and lumber sheet goods sales were reduced by 15.4% due to commodity deflation this quarter. We estimate that the -- this negatively impacted our total sales for the current quarter by approximately 5.8% or approximately $22.9 million. In addition, the U.S. Census Bureau reported actual single-family housing starts in the South Region, which encompasses all of our markets, increased just 6/10 of 1% compared to the second quarter of 2013. Our results are a prime example of how our market share gains of recent years and the tremendous efforts of our employees continues to have a positive impact on our business. From a sales-per-start perspective, we ended the quarter with $4,755 of sales per South Region single-family start, up from $4,464 in the second quarter of 2013 and $4,390 on a sequential quarter basis. Another highlight of the quarter was our acquisition of Slone Lumber. This acquisition affords us the opportunity to expand our presence in the Houston market, which is currently the #1 homebuilding market in the country. Evaluating attractive acquisition opportunities such as Slone will continue to be a key strategy of the company. I'll now turn the call over to Chad, who will review our financial results in more detail. M. Chad Crow: Thank you, Floyd. Good morning, everyone. For the current quarter, we reported sales of $426.5 million compared to $398.1 million for the second quarter of 2013, an increase of $28.4 million or 7.1%. We estimate sales increased 12.9% due to increased sales volume, but was offset 5.8% due to decreased market prices for commodity lumber products. Looking at our sales by product category, prefabricated components were $91 million, up 16.4% from $78.2 million in the second quarter of 2013. Windows & doors were $90.8 million, up 16.8% from $77.8 million last year. Lumber & lumber sheet goods were $143.9 million, down 3.6%. Our millwork category was $40.1 million, up approximately 14%, and other building products & Services were $60.7 million, up approximately 5%. From a sales mix perspective, lumber and lumber sheet goods were 33.8% of total sales, down from 37.5% of total sales in the same quarter last year. As Floyd pointed out earlier, this was largely due to commodity lumber price deflation. Prefabricated components made up 21.3% of total sales this quarter, which is the highest mix of this category since the downturn began. All other product categories were fairly consistent between periods from a mix standpoint. Our gross margin percentage was 22.0% in the current quarter, up 130 basis points from 20.7% in the same quarter last year. On a sequential quarter basis, our second quarter gross margin was up 30 basis points. Improved customer pricing drove our overall margin increase. [Audio Gap] 13. The 60 basis-point increase was primarily due to the impact of commodity lumber price deflation on our sales. Based on our growth in sales volume, absent the negative impact of price deflation, our growth and operating expense was in line with our expectations. For the current quarter, our salaries and benefit expense, excluding stock compensation expense, was $48.3 million or 11.3% of sales compared to $44 million or 11% of sales last year. Delivery expense increased $1.7 million and other G&A expense increased $1.2 million, primarily a result of increased sales volumes. Interest expense was $6.5 million, a decrease of $54.6 million when compared to the second quarter of 2013. This decrease relates primarily to our second quarter 2013 refinancing, which included $4.2 million of interest expense on our then-outstanding term loan, the write-off of $6.8 million of unamortized debt discount and $2.1 million of debt issuance costs and the $39.5 million prepayment premium related to the early termination of our term loan. We recorded $200,000 of income tax expense in the second quarter of 2014 compared to $400,000 in the same quarter last year. We recorded a reduction in the after-tax noncash valuation allowance of $4.1 million in the second quarter of 2014 compared to an increase of $17 million in the second quarter of 2013. Both were related to our net-deferred tax assets. Absent the valuation allowance, our effective tax rate would have been 39.5% and 34.6% in 2014 and 2013, respectively. At the end of the current quarter, our gross federal income tax NOL available for carryforward was approximately $258 million. Income from continuing operations improved to $10.6 million or $0.09 per diluted share compared to a loss of $48.3 million or a $0.50 loss per diluted share in the second quarter of 2013. On an adjusted basis, our income from continuing operations was $5.4 million or $0.05 per diluted share compared to $500,000 or $0.01 per diluted share for the second quarter of 2013. Net income for the second quarter of 2014 was $10.6 million or $0.09 per diluted share compared to a net loss of $48.2 million or $0.50 per diluted share for the second quarter of 2013. Our adjusted EBITDA was $20.4 million or 4.8% of sales for the current quarter compared to $16.7 million or 4.2% of sales in the second quarter of 2013. We ended the current quarter with total liquidity of $194 million, consisting of $34.5 million of cash and $159.4 million in borrowing availability under our revolving credit facility. We had no borrowings during the quarter under our revolver. From a working capital perspective, our working capital as a percent of sales improved to 9.3% of sales, down from 10.2% of sales in the second quarter of 2013. Operating cash flow was negative $13.1 million for the second quarter of '14 compared to negative $60.7 million for the same period last year. The difference was primarily related to our second quarter 2013 refinancing. Also during the current quarter, we used approximately $8.7 million of cash on hand to acquire Slone Lumber company, a building materials supplier based in Houston, Texas. Capital expenditures were $6.8 million for the current quarter compared to $3.6 million for the second quarter of '13. I'll now turn the call back over to Floyd for his closing comments. Floyd F. Sherman: Thank you, Chad. Though the growth in housing starts along with the commodity pricing this year has not been what most people expected, we still have been able to drive improved year-over-year results due to our market share gains and operating efficiencies. We will continue leveraging those strengths and also look for ways to expand our footprint and market share through acquisitions as we did with our recent acquisition in Houston, Texas market. I'll now turn the call over to the operator for the Q&A.

[Operator Instructions] And we'll take our first question from Trey Grooms from Stephens. Trey Grooms - Stephens Inc., Research Division: First question is can you talk a little bit about lumber prices currently, or I guess more for the third quarter of this year versus where you were last year, how we need to think about the margin impact for lumber? I know you guys are tough -- facing a tough compare in the third quarter. If you could just give us a little bit of color on how to think about that as we look into the third quarter. Floyd F. Sherman: Yes, I think, Trey, the -- right now, I think we're going to see a very similar quarter in the third quarter as compared to what we had in the second quarter. The -- right now, we're seeing a little bit of improvement on -- in the lumber market, but this is really being offset by even further weakness in the panel market. But all in all, I think it's going to be a very similar effect to what we had and what we saw in the second quarter. Chad, do you have any... M. Chad Crow: Yes. Right now, I don't see anything that makes me think Q3 will look a whole lot different than the quarter we just finished. From a year-over-year basis, Trey, you're right, we do have some tough comps. Our margin in Q3 last year was 23%. I think that's going to be tough to match. This time last year, we had commodity lumber prices that were moving in our favor a little bit that gave us a little bump on gross margin. So I think Floyd is right, Q3 right now is likely going to look a lot like Q2. Trey Grooms - Stephens Inc., Research Division: And from a top line perspective, given kind of what's going on with pricing in lumber, I mean, you guys put up a really good quarter, in my opinion, from a volume standpoint given what's going on in your end markets. But from a top line standpoint, would we expect to see a negative impact or a positive impact given the lumber? Or kind of how should we be thinking about the top line impact as well, I guess, is the question? M. Chad Crow: Well, on a sequential quarter basis, I think it will be fairly consistent. From a year-over-year basis, I still think our volume is going to be up and so I think our sales for Q3 are certainly going to be better than Q3 last year. Trey Grooms - Stephens Inc., Research Division: Okay. And so volume has been up 12% this last quarter. Can you talk about kind of how that -- how volumes trended through the quarter and into July? M. Chad Crow: It was remarkably consistent. Our sales per day during Q2 grew through most of the quarter, but it seems to kind of be -- the rate of acceleration seems to be slowing a little bit, and I think we've probably kind of settled into the rate of sales we're going to see in the third quarter. That's why I think, at the end of the day, Q3 is going to look a lot like Q2. Floyd F. Sherman: Yes, I think, Trey, one of the -- we certainly -- one of the things that's going -- that continues to affect our overall sales is our willingness to walk from business that just doesn't meet our pricing criteria or margin criteria. That was a significant amount of business that we walked from in the second quarter and have already been making those decisions again in the third quarter. We are seeing some extremely predatory pricing that's taking place. I think it certainly has a lot to do with the level of housing and people's concern for the lack of growth in housing and there -- people have added capacity this year. The -- certainly, there was a heightened optimism as to where this year was going, and I think some people are starting to panic. We're not. We are continuing to search out, look for new customers, look for opportunities where we can get fair -- at least fair pricing under these circumstances and yet continue to grow our business. And I think when you look at the growth that Chad spoke about in our product categories such as our prefab components, the millwork categories, windows & doors, we had good double-digit growth in those markets -- those product areas, and we're going to continue to drive that type of business. And I think our people are really focusing in those areas because we have a better chance to deliver not only sales, but keep our margins up. And so I think that overall, I think we will exceed last year's third quarter in sales. The -- we may not quite hit it in margins, but I think we'll have a -- I think we'll deliver a good performance in the third quarter in spite of the headwinds that we're facing.

Moving on, we'll take our next question from Rob Hansen with Deutsche Bank. Rob Hansen - Deutsche Bank AG, Research Division: I wanted to ask about acquisitions since you've got the Slone acquisition here. What does this take your market share in Houston to and what are you -- and then kind of broader, speaking a little more broadly, what is the most important aspect of a target that you look for? Is it market share? Is it product overlap? Customer overlap? How do you kind of think about acquisitions overall? M. Chad Crow: Well, I would say, first of all, regarding the Houston market, this will be our first distribution facility in that market. We have a window facility there and we provide windows directly to builders. But this will be our first distribution facility there, so we'll just be scratching the surface on our market share in Houston with the Slone acquisition. But the more broad question on what do we look for in an acquisition, I think you hit a lot of those items. We look for their product mix, how much of their product is what we call a value-add product. We look at their customer base. We look, is it a market we want to gain a foothold in that we're not presently in, or maybe it's a market we're already in, we want to increase our share in. So there's quite a few things we'll look at, and I think, as Floyd was mentioning a moment ago, the pause in housing, if you will, or the deceleration of the growth that we're seeing, I think is going to be a great opportunity for us to continue to look at good acquisition opportunities. I think there's folks out there that are still struggling with liquidity and I think this slowdown this year may cause some of them to rethink whether they want to continue or possibly sell their business to folks like us with a better liquidity position, someone they can partner with to help them grow their business. So we're excited about the opportunities that may lay ahead on the acquisition side. Rob Hansen - Deutsche Bank AG, Research Division: What's the kind of ideal size you'd take? Or I guess, looked at another way, like what's the largest kind of size you'd take on? And I guess I'm thinking in terms of a revenue perspective. M. Chad Crow: I think -- I'm open to anything. I wouldn't be opposed to someone with $400 million or $500 million in revenue. Floyd F. Sherman: But I think most of what we're going to be seeing, especially when we're looking for tuck-in acquisitions, acquisitions that really strengthen our presence in a market, especially in markets that we feel have a good long-term potential, those acquisitions are going to be somewhere in the $10 million to $40 million range, $10 million to $50 million. But put several of those together and it can have a very meaningful impact on our business.

Moving on, we'll take our next question from Seth Yeager with Jefferies Investment Bank. Seth B. Yeager - Jefferies LLC, Fixed Income Research: When we look at your non-lumber business, did you guys go along with the price increases that were out there for your builder windows? And can you maybe just talk about trends in gross margins for the product segments? Are you seeing some of the traction in windows & doors pricing sticking out there? Floyd F. Sherman: Yes, we -- definitely on some of the product areas that you mentioned where we saw some price increases and their -- they varied quite widely. The -- but yes, we obviously implemented those price increases. And whether we always got our full margin mark up on those price increases, I would like to be able to say yes to that. That wasn't always the case, but we definitely look to avoid eating the cost. The -- unfortunately, our builder customers would very much like us to eat the cost and keep them from seeing the cost increases, but we've been able to get pass through. Seth B. Yeager - Jefferies LLC, Fixed Income Research: Okay. That's good to know. And you've been having -- you've had a nice pickup in the prefab top line year-to-date. I know that historically, that was a pretty high margin business for you. Are you starting to see some expansion in margins there now that activity is picking up or -- and maybe as a follow-up, are you starting to see some competition come up from guys that may have left the market during the downturn, specific to that business? Floyd F. Sherman: Yes, but definitely, we are seeing margin pick up. The -- we've done a lot to improve the efficiencies within our plant. Our people's level of performance is definitely part of the reason we're seeing improvements in margins in the component area. I would say we're about halfway back to where we were at the height, so we've made good progress in margin improvement in the component products. The demand is certainly increasing for components due to the real labor shortage issues that exist out there in the construction industry. The -- this is really playing into the -- well into the strategy that we've had of developing our component business. We have seen some -- a limited amount of entrants come, of people who had exited, have come back in a small way, but don't really see -- hasn't really had a meaningful effect to-date on our business. The -- where the pricing is very competitive, we'll back away from, but there's been some really good opportunities for us to get attractive business, and I look for that part of our business to continue expanding and improving its margin over the rest of the year. Seth B. Yeager - Jefferies LLC, Fixed Income Research: And just last quick housekeeping. The -- I apologize if you -- if I missed it somewhere. The acquisition you made, did you break out any sort of revenue or EBITDA impact there? And I didn't see it broken out, but did you guys incur any additional costs that weren't broken out in the P&L related to that? M. Chad Crow: No. We disclosed the purchase price, and any additional cost related to that acquisition would have been insignificant.

Moving on, we'll take our next question from John Baugh from Stifel. John A. Baugh - Stifel, Nicolaus & Company, Incorporated, Research Division: I was wondering on Slone, could you just tell us sort of the composition of their business? What are they good at? What can you improve? And yes, if there is a rough annual run rate of revenue for them. M. Chad Crow: They're primarily a lumber distributor and they have a nice millwork facility. Their mix of millwork is pretty heavily weighted towards millwork, and so we're excited about the opportunity to get a foothold in the Houston market. Floyd F. Sherman: Yes, John, one of the things this acquisition really does for us is it gives us an entrance into the market with a business that already has an established reputation, a good reputation for service and especially millwork sales. The Houston market, as you know, is -- and as we've said, is the largest single market in the country. If you look at the housing starts for last year in Houston, there was as many housing starts in Houston as I believe there was in the entire state of California. So it is a huge market. This really opens the door for us to get in with an established name, good quality people and where we can really build upon some of the relationships that we have through our window program, as well as that relations that we have with some of the major national builders from our DFW market, Austin market, San Antonio market and be able to now capitalize on that in the Houston market. So we are looking to aggressively build our business in that market. M. Chad Crow: And just to answer your other question, their revenue last year was about $17 million. John A. Baugh - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And Floyd, I apologize for my ignorance here, but you say enter the Houston market. You've had some revenue though, had you not, in the Houston market before? I guess you're talking more about getting a physical presence there with these guys? Floyd F. Sherman: The Houston market through -- we have a window manufacturing plant in Houston, and that is obviously -- we intend to leverage off of that. But we also intend to leverage off of the relations that we have with many of the national builders, as I've said, in the other Texas markets where we're selling a full range of building material products, whether it be lumber and lumber sheet goods, obviously, millwork, et cetera. And so we think that the combination of our relations that we have within the state with the national builders, along with our -- the leverage that we can gain with customers with windows, plus what they have, will really help us develop a very, very attractive business position in Houston.

Moving on, we'll take our next question from Paul Betz with BB&T Capital Markets. Paul T. Betz - BB&T Capital Markets, Research Division: For clarification, did you say lumber commodity inflation was down 15.4% year-over-year and it impacted sales by about $22 million? M. Chad Crow: The price deflation impacted our lumber and lumber sheet goods category by a negative 15.4%, and that in turn, it impacted our total sales by about 5.8%. Paul T. Betz - BB&T Capital Markets, Research Division: Okay. And then do you have a CapEx projection for this year? M. Chad Crow: Probably $18 million to $20 million. Paul T. Betz - BB&T Capital Markets, Research Division: So that's kind of gone up, I guess, from previous estimates? So even though it has slowed down, you guys are still going to spend some more? M. Chad Crow: Yes. It's gone up since the beginning of the year, primarily due to the relocating of a couple of facilities and some CapEx related to that. Paul T. Betz - BB&T Capital Markets, Research Division: Okay. And then you mentioned SG&A, part of the reasons of the increase kind of broke up, but I guess with -- as you increase sales, you're going to have increased delivery expenses, so this $76.4 million in the quarter is probably not a base level that should -- your SG&A should kind of increase as sales goes on. Is that true? M. Chad Crow: Yes. The most variable part of our SG&A would be the delivery side. Obviously, we need more pullers, more drivers as our sales volume goes up. And then the salesmen commission, they're paid a percentage of gross profits, so that goes up as well.

Next, we'll take our question from Justin Bergner from Gabelli & Company. Justin Bergner - G. Research, Inc.: You mentioned labor tightness as a continuing driver of demand for you guys. Can you talk about -- has that labor tightness increased over the last year as unemployment has declined? And does that sort of bode well for sort of margins once some of this extra capacity is absorbed that was put online? Floyd F. Sherman: Yes. The -- from our perspective, we -- labor is probably a little bit tighter now than it was last year. We are not seeing the entrants into the construction fields for a lot of the general labor that maybe some of the other industries have seen. I'm not really sure. I'm not a true believer of the labor stats that come out of Washington, so I'm not completely in agreement that our employment situation has really improved that much. But aside and apart from that, the -- no, labor is, if anything, a little bit tighter right now than it was a year ago. We are certainly encountering a lot of temporary holdups, missed schedules and so forth because there just aren't the -- whether it be framers, whether it be the concrete people, whether it be the masonry people and other construction trades just not available to keep up with the level of housing that we're seeing, even though it's on a -- about on par with where we were a year ago. The -- our industry, it's hot out there. It's dirty. It's dusty and it seems that a lot of people don't want to come get off their couch because they can sit at home and get entitlements that allow them to have the equivalent of about a $17-an-hour job and pay no taxes and have free health care. So why the hell do they want to work out there in the mud, in the rain and everything else? But I'm sorry, I got to get on my soapbox sometimes. Justin Bergner - G. Research, Inc.: Okay. I enjoyed that color, but I mean, it's good for Builders FirstSource to the extent it drives further prefabrication demand. Floyd F. Sherman: Yes. We definitely see builders, who in the past have not been willing to consider the use of components, definitely turning to them now because it cuts down on the labor requirements to build a house. Justin Bergner - G. Research, Inc.: Okay. My second question relates to what I perceive to be acceleration, sort of the volume metric trend per housing start in the second quarter versus the first quarter. Is that sort of an accurate assessment from your vantage point? If so, despite your being selective in your business that you're taking on, what's driving that improvement? M. Chad Crow: Well, as I've said earlier, I think we still have a lot of competitors out there, especially the smaller ones who are struggling from a liquidity standpoint and that they don't have the liquidity to grow their business. And so that's enabling us to move in and take share. We did quote sales-per-start on a South Region basis. For whatever reason, the June numbers in the South Region lagged a little bit behind the rest of the country, so that obviously played into the sales-per-start calculation. But our sales are also driven by units under construction. So you really need to look at a combination of what's going on throughout the construction chain, from starts to units under construction, to the units being completed. But the short answer is yes, I do feel like we're still gaining market share. Floyd F. Sherman: But I think a lot of it also comes from -- we have got -- we have been increasing the size of our sales force. I think we have a very, very good quality sales representation out in the field, and in this type of environment that definitely is an added plus to gaining new business. We opened close to 600 new accounts last quarter, so we're continuing to increase the number of people we do business with. So I think all of those things, combined with what Chad said and these other points, is the reason that we're continuing to gain market share. And yes, if you look at the housing starts on the U.S. basis, where in the South it was virtually flat with last year, on the U.S. start basis we're only up, I think, something like 1.2%. So essentially housing is kind of flattened out, and so we're not getting any real help out of a growing housing market right now. M. Chad Crow: And I think as we discussed earlier, our strength in prefab has also allowed us to increase market share as builders are turning to those products. And if you can get in the door on the prefab side, it opens the opportunity to start selling the rest of your products as well.

And moving on, we'll take our next question from Matthew Dodson from JWest, LLC.

Guys, congratulations on a great quarter in a tough environment. Floyd F. Sherman: Thank you, Matthew. I really appreciate you saying that because it was one hell of a tough quarter and I think our people really delivered a heck of a good result for the challenges that we were facing.

Can you help me understand a little bit about your sales trends that you talked about earlier in the call? I think you guys said that it accelerated through the quarter, and then it moderated. Was that an acceleration month-over-month or was that year-over-year? I believe in April, you were up 8% to 10%, and you finished only at, what, 7.1%? M. Chad Crow: It was both. On a sales-per-day basis, we saw our sales increasing during the first part of the quarter and then, as we said earlier, it kind of started to flatten out. And that's kind of what we're seeing right now.

And so it's kind of up in the 6% to 7% range in June? Is that fair? M. Chad Crow: Right. Floyd F. Sherman: Right.

June and July, excuse me, perfect. And then I assume with the labor shortage, your prefab is going to grow faster than your overall business, as with your millwork? What kind of delta is there in your margins between your overall margins and then your prefab and millwork? M. Chad Crow: In a normal environment, you can see prefab being 600 to 800 basis points higher than our overall gross margin. Right now, it's not quite that big a spread. As Floyd mentioned, we've not regained all of our margin loss back from where we were pre-downturn. But right now, it's probably 200 to 400 basis points. Floyd F. Sherman: Yes, and the millwork and components, the prefab, are very similar.

Moving on, we'll take our next question from Philip Volpicelli from Deutsche Bank.

Sean Wondrack here on the call for Phil. Just going back to Rob's question on acquisitions, is there a leverage ceiling at which point you would not undertake an acquisition? M. Chad Crow: I think as time goes on, we'll look at it on what our feeling is on housing over the next couple of years combined with what our overall liquidity is. There's obviously a minimum amount of liquidity we're going to want to keep in the company, so we're not going to go crazy.

Right. Is there a range of, like, minimum liquidity you can provide, whether that's $30 million to $50 million, just in order of magnitude? M. Chad Crow: Well, historically, we've kind of used $50 million as kind of our minimum. But again, we'd have to look at that in relation to our outlook on housing, as well.

Right. No, that makes sense. And is there a target leverage profile, I mean, that you'll seek out in the next few years? M. Chad Crow: No, I wouldn't say there's an absolute target. We're just going to evaluate our liquidity over the next couple of years in light of where we think housing is heading and what opportunities we have to grow the business from an acquisition standpoint or a greenfield standpoint.

Okay. All right. And then shifting focus, we've been hearing that non-res construction has been accelerating in Florida and in other pockets of the South. What do you think the reason for the slowdown in growth in the res side has been? And is there a big variance in single-family home demand from state to state? M. Chad Crow: What was the last part of your question?

Is there a big variance in single-family home demand from state to state? Obviously, Texas is very strong. Floyd F. Sherman: Yes, there's quite a large difference. We're seeing a lot of strength in Texas. Florida has definitely been coming back. It's kind of flattened out during some of the earlier months, but seems again to be rebounding. The Atlanta market, definitely coming back, but at the same time, we've seen a real falloff in the Baltimore, Washington market. South Carolina is weak yet as compared to North Carolina. So -- but Texas and Florida, still the states for us that have the most activity and the biggest increases going on.

Okay. And do you anticipate single-family starts to pick up in the second half of the year here? Floyd F. Sherman: We're -- the -- overall, we really anticipate -- our view is right now, it's going to be flat. Our projection for the year at best, I really don't see on an overall U.S. single-family actual start rate, maybe 650,000, but I think it's going to be pretty hard. We've got a -- that would mean almost an 8.5% increase in a start rate over what we've seen in the first half. And right now, I can't really say that I see anything that is going to really meaningfully improve the housing start rate. But I think it's going to be more of the same.

And is there anything in particular that you think is really holding back demand? Is it mortgages? Is it employment? Floyd F. Sherman: I think -- I definitely feel employment has a lot to do with it. I think the ability of the first-time homebuyer to be able to get the financing so that they can again start participating in home ownership, I think that's probably the weakest part of housing right now. I think that you've got a lot of the younger-age-group buyer who's getting out of school, who's carrying a lot of student debt and other forms of debt. I think it's -- right now, they're not in a position to get in the market or have the necessary qualifications for a mortgage and they're choosing to go into the rental market. And the -- but I think there's also -- some of the builders are also having lot shortages, and they have to wait for development to catch up of lots. So I think it's a combination of many factors from where we see.

Right. And do you think that's more specific to the South? Because, I mean, the rest of the country is still continuing to grow on the res side. That's why I'm just a little curious why the South is so much weaker. Floyd F. Sherman: Well, when you say the rest of the parts of the country are growing, if you say 1%, on an overall basis, that's not a heck of a lot of growth. I'm sure there are states where there are -- or within a state that there may be pockets where the growth is, but I don't think the South is a great deal different than -- the South Region is a great deal different than the other markets in the country. The -- when I look down over the numbers on -- with the other regions on single-family, Northeast for the time is down 4% for the year, is down 4.7%. Midwest is up, but that's primarily in those states where there's a lot of frac-ing, oil and gas work going on and the housing shortages. But then South was down 1/10 of 1 point, and West was up a little over 3% for the year. So on an overall basis, I don't see that there's a great deal of difference from region to region in the country.

Right. No, I mean, you also have a lot of the growth in the Gulf Coast region coming from the petrochem and a lot of the non-res that's going on there. But I appreciate your color.

And at this time, that will conclude our question-and-answer session. We'd like to turn the conference back over to our speakers for any additional or closing remarks. Floyd F. Sherman: Okay. We appreciate everyone joining the call today. If you have any follow-up questions, please feel free to give Chad Crow or Marcie Hyder a call here in Dallas. Thank you, again.

Thank you. That will conclude today's conference. We thank everyone for their participation.