Good day, ladies and gentlemen, and welcome to the Q1 2012 Universal Forest Products, Inc. Earnings Conference Call. My name is Shanee, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today, Mrs. Lynn Afendoulis, Director of Corporate Communications. Please proceed, ma'am.

Thank you. Welcome to the Universal Forest Products First Quarter 2012 Conference Call. Hosting the call today are CEO, Matt Missad; and CFO Mike Cole. Matt and Mike will offer prepared remarks, then we'll open up the call for questions. This call is available simultaneously and in its entirety to all interested investors and news media through a webcast on our website at www.ufpi.com. A replay will also be available at www.ufpi.com through May 18, 2012. Before I turn the call over to Matt Missad, let me remind you that today's press release and the presentations made by our executives include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, those factors identified in the press release and in our filings with the Securities and Exchange Commission. At this time, I would like to turn the call over to Matt Missad.

Thank you, Lynn. Good morning, everyone, and thank you very much for joining us on the call today. Hey, how about that weather? I know it seems cliché, but it's really appropriate for the first quarter of 2012. It was a beautiful first quarter here in Michigan and in nearly all of our facilities across North America. In fact, the U.S. saw the warmest March on record since 1985. That helped us grow net sales by 18% over a weather-challenged 2011. Fortunately, the story of the quarter wasn't just about the weather. It was also about the hard work and determination of our people. Our people drove impressive profitability growth through a combination of sales and production advances and by leveraging our G&A cost to accommodate more volume with less expense. And it wasn't easy. Yes, demand improved during the quarter and weather helped out a great deal, but we still faced strong competitive pressure in our markets and uncertainty about the economy. We also had to overcome the volume lost due to our decisions not to accept certain unprofitable business. These decisions, coupled with a more predictable lumber market, enabled us to improve gross profit by 1 percentage point over 2011. Even with this improvement, our margins are very low. We saw improvements with our inventories thanks to strong demand that helped us increase our turns. Inventories, as a percent of current month sales, were just over 128% compared to over 153% at this time last year. So we're sitting very good with our inventory position. Our accounts receivable are also in very good shape, although we are keeping a watchful eye on certain customers and certain markets. Moving forward, we continue to focus on overall profitability. We are more selective about the business we take, making sure it meets our profitability objectives. From time to time and in certain markets, that may mean losing sales that don't meet our goals, and we will work hard to offset these losses by growing sales to existing customers and adding new customers. Our goal is to fill our facilities with business that makes good sense for Universal. And in fact, we have added about $59 million in sales to new customers together with increased sales to existing customers versus the first quarter of 2011. We're also finding ways to further improve our cost so that we can continue to provide the best delivered value for our customers. We understand the consumers' desire and need to get the best value for their limited discretionary dollars. And as we've discussed before, we're going to grow with new products and in new markets. We've dedicated substantial new resources to these areas and already are seeing the fruits of our efforts. We're adding new SKUs that are helping our top and bottom lines. And we're opening doors to potential partnerships in other countries that will allow us to grow our global presence and our global opportunity. Right now, we're pursuing acquisition targets aggressively and expect to see positive results of our hard work in this area. We're also focused very much on developing the skills and talents of our people. As I said yesterday at our Annual Shareholder Meeting, we recognize the importance of continually upgrading the strength of our team and of providing training and development opportunities so our people can grow within the company. We have a tremendous culture of long-term employment, and we hope that continues. We also know that this is an ever-changing world, and we have to stay ahead of our competition. And the competition is moving very fast. Looking ahead at some of the macroeconomic issues, we see some evidence of economic improvement. We're not quite sure if it's election-year media or natural growth in demand, but we are poised to capitalize on it in either event. We also recognize some headwinds, such as persistent high unemployment and underemployment in the U.S., issues in European countries that could affect markets worldwide, high fuel prices and some other challenges. So while we're grateful for a better quarter and confident about the weeks and months ahead of us, we're not yet certain about the long-term sustainability of the economy, the demand or even the weather. We do know that our operations are very focused. They are not making excuses about things they can't control. Instead, they're focused on the things that they can control, and they're doing a great job. Now I'd like to turn it over to Mike Cole for a review of the financial highlights.

Thanks, Matt, and I'll start by reviewing our income statement. Our sales for the quarter increased 18% due to an increase in unit sales, driven in large part by much more favorable weather in 2012 and an increase in demand. In addition, average lumber prices were comparable year-over-year and had little impact on our sales comparisons. Sales to the -- by market, sales to the retail market increased 12% due to an increase in unit sales. Within this market, sales to our big-box customers increased 4%, while our sales to other retailers increased 25%. As you might recall, one of our objectives is to increase our share of business with independent retailers. And as you can see from the numbers, we're having some success. Our sales to the manufactured housing market increased 34% due to an increase in unit sales, primarily due to industry production of HUD-Code homes, which increased almost 43% year-over-year. In addition, approximately 1/3 of our sales to this market are from modular homes, and the most recent data from modular housing sources indicates that those shipments are up 8% year-over-year. When you blend this industry data together and compare it to our sales increase, you can see that we maintained our market share. Our sales to the residential construction market increased 9% due to an increase in unit sales as plants we closed since April of last year caused our unit sales to decline by 2%. By comparison, housing starts experienced a year-over-year increase of 26% through February. Our decline in market share was anticipated and is due to our focus on profitability. This segment is still challenged with excess capacity, so we continue to be selective in the business that we take in order to improve our performance in this segment. Finally, our sales to the industrial market increased 21% as we added almost 200 new customers this quarter, and demand from existing customers improved substantially. Moving down the income statement, our first quarter gross profit, as a percentage of sales, increased by 100 basis points primarily due to higher sales volume, combined with the operating leverage we have in the business. Also good weather this year, compared with inclement weather last year, favorably impacted our production efficiencies and gross margins in 2012. These improvements more than offset the effect of continued pricing pressure in each of our markets. Selling, general and administrative expenses decreased by $700,000 or 1.5%, in spite of a $2.8 million increase in incentive compensation tied to profitability. The increase in incentive compensation more than offset -- was more than offset by a decline in base compensation and related expenses tied to a decline in headcount, as well as smaller decreases in amortization and bad debt expense. Overall, we're very proud of how our people managed these costs in a period of higher growth and believe it is something we can continue to do in the future. As a result of the sales margin and cost improvements we discussed, our earnings per share increased to $0.21 per share, which is our best first quarter since 2006. Moving on to our cash flow statement. Our cash flow used in operations was $45 million this year compared to $109 million last year. Our operating cash flow in 2012 is comprised of net earnings of $4 million and $8 million in the non-cash expenses, offset by a $57 million increase in working capital since December. Working capital increased since year end due to the normal seasonality of our business. However, our inventories have decreased year-over-year, and today, are much better positioned relative to demand. In 2012, demand has been strong, and our inventory turnover has increased substantially over '11 when demand was much, much weaker than we expected, which resulted in higher inventory levels than we wanted at the end of March '11. Investing activities include capital expenditures of almost $8 million, which includes about $5 million of expansionary capital expenditures that will drive future sales. And finally, our seasonal working capital requirements were funded through our cash reserves and $34 million in borrowings under our revolving credit facility, which has a total remaining availability of almost $200 million. With respect to our balance sheet, our total debt is $86 million compared to $127 million a year ago. We currently anticipate strong cash flows for the balance of the year. In absence of acquisitions, expect our debt to decrease as we move beyond our seasonal working capital requirements of Q1 and Q2. That's all I have on the financials. Matt?

Thank you, Mike. Now we'll open up the lines for questions.

[Operator Instructions] Your first question comes from the line of Trey Grooms with Stephens Inc. B.G. Dickey: Yes, this is actually B.G. Dickey sitting in for Trey this morning. I know that you guys mentioned weather in your prepared remarks. And frankly, that's been kind of the pushback that we're hearing from many of our investors, is that the strength may not be entirely weather-driven, but maybe it's the majority. Can you talk about that and maybe give us some color on the level of visibility you guys have going forward with respect to demand? In other words, are you seeing kind of similar strengths today that you saw in the quarter? And kind of what are your expectations for the spring and summer?

Yes. I think that's a terrific question, and it's one that we've all been trying to look in the crystal ball and figure out ourselves. What we think for the first quarter is, could be anywhere between 50% and 75% weather related, but we also see some strength in demand. And I think the other positive thing for us is our guys and gals are out there selling and developing new customers. So I think we're picking up market share as well. So the weather itself, we can't control, and we're not going to try to. But I think we're going to still see some positive results based on the efforts our teams are making. B.G. Dickey: Okay. And then on kind of the big-ticket items like decks, are you guys seeing any increased appetite from customers for these products?

Again, I think it's more market specific. And as we look at it versus last year in the first quarter, yes, the demand is much greater. But how much of that is sustainable, how much of it is pull-forward, it's really tough for us to tell at this point. B.G. Dickey: Okay. And with respect to the big-box customers, are these guys more willing to kind of build inventory going forward? What's kind of their perception as we head into their busy season here?

Well, I think they're also seeing some significant improvement in their volumes as well. So they want to make sure that they can meet their consumers' demands and the consumers' needs. So they are maintaining good inventory positions and they still would like to try to keep it as just in time as possible.

Your next question comes from the line of Steve Chercover from D.A. Davidson.

So Mike, you really stressed that the housing segment, the reason it was relatively lackluster compared to some of your other segments was due to the closures that you made. Do you now think you have the proper geographic footprint?

Yes, we -- first off, if you look at our same -- you said lackluster. If you look at our same plant sales, they're up 11% for the quarter. All the plants that we have that are open now are profitable. And one of the things we're most proud of over the last -- almost a year, is they've been profitable for 3 straight quarters. And so, yes, we're very happy with the performance and the footprint that we have inside those [ph] segments thus far. And there's still a lot of excess capacity, so we still have to be careful about the business that we take as we don't want to take a step backwards.

And Matt said that you're aggressively pursuing acquisitions, can you give us any color along which business lines they might be or geographically?

Yes, I think we start walking down a little bit of a slippery slope there, Steve. But I think what we're trying to do is we're looking in the markets where we can possibly help the excess capacity situation and consolidate. We're also looking at areas where we can grow geographically, where we may not have a strong presence. And of course, it's -- our international strategy is also -- we've talked about that quite a bit. We want to work at finding partners in other countries as well.

And internationally, I mean, that's in the close proximity to North America. Are you looking to literally go into South America, Europe?

Yes, I think it will be beyond North America. We're already in North America today, and we'd like to continue to expand and grow there. But there's also some opportunities in other markets, where we currently sell a little bit, or we source quite a bit of product. So we're looking at expanding in those areas as well.

Okay. And then finally, since it was your best start since 2006, and back then, you used to give guidance. Are you ready to resume that practice?

Not quite yet. I think we're still trying to sort through the economy and a few other issues. So I don't think -- I know I'm not smart enough to give guidance yet. So we'll have to keep getting a better picture until we're ready to start that again.

Okay. And so maybe one more, if I could. Are you concerned at all that if the good weather in Q1 was substantially responsible, not entirely, for the great performance, did you borrow anything from subsequent quarters? Or have business trends remained as they were into April?

Yes, that's certainly a concern. That's something that I don't think we can tell at this point, but we're really confident that the business is pretty solid for right now. The latter half of the year is going to be much more difficult for us to gauge at this point.

And as you know, Steve, we maintain weekly profit and loss statements. And we can tell you from what we know so far, going into April, things continue to be strong into April.

Your next question comes from the line of Robert Kelly with Sidoti.

Just a question on the strength you're seeing in April. The year-ago quarter was impacted pretty significantly by weather as well and some other issues. And the way the release is written, you talk about optimism over being able to sustain the growth you saw in 1Q. Should we be thinking mid-teen or high-teen volume growth again for 2Q?

That sounds an awful lot like guidance to me. As much as I'd like to help you, I don't think we can empathically tell you what it's going to look like at this point.

What you've seen, thus far, I mean, is that the trend?

I think the optimism that we reflected in the press release is very accurate. And I guess at this point, I hate not being able to answer your question directly, but I think that's really what we're focused on, as we think our guys are doing a great job, and we expect them to continue to do a great job.

Okay, great. Just as far as the DIY retail channel, you might have said it, I missed it. Your growth with your largest DIY customer, was that on par with what the overall category did during 1Q?

The overall category, being...

The plus 12%.

No, it was not.

So the independents are growing at a -- can you just help us parse out what your main customer in the independent growth looks like?

Main customer was flat to slightly down and overall. And as I mentioned earlier, independents were up 25%.

Okay, so that's the balance, great. Is there any -- is the trend for SG&A expense, is that a number that you can hold flat in 2012, based on the moves you made toward the latter part of '11?

Yes, that's a good question. If you -- it's been my feeling that if you look at the most recent quarters and you pull out the incentive compensation, which I had disclosed to you in my comments, that those costs -- the costs that we're very focused on -- and most of them are labor related. Those are costs that we're very focused on keeping flat. So absent acquisitions, absent major events where you're doing something to affect those costs, they should run forward at the same kind of run rate with the variable being incentive compensation.

Understood. In the past, you've noted you wouldn't need to really touch SG&A. You wouldn't really need to increase that line item until you saw a 5%, 10% increase in the market. Does that same equation hold in what you're seeing in 2012, thus far?

Yes, in fact we -- if you think about it, we kind of smoked that goal. I mean, we have reduced our cost by $3.5 million if you threw out incentives and we increased our sales by 18%.

So did the -- is the market rebounding to the point where you need to add SG&A? Or did the moves you made in latter 2011 kind of move that goal out to '13 or beyond?

Yes. I think, overall, if we continue to grow our sales, we will certainly need to add certain positions. But we think we're going to be able to keep SG&A down in the levels that it's at today or slightly above. But we have a really short leash on that. So I think our guys are managing that well.

Okay, great. And then, just the inventory build for 1Q, it seems a little bit, I mean, lighter compared to what you've done in past years. Is that just a function of being more efficient with your working capital or the lumber prices are fairly steady year-on-year?

I think -- yes, there's a couple of things there. I'm not sure that it's necessarily being more efficient with our working capital. I think what we saw this year was a much better takeaway. We had a slightly different strategy on the purchasing side. And again, I think our team is managing their inventories very, very well. I think a lot of the improved demand helped us improve our turns. So...

Our product mix is probably also a factor, too. We have less treated lumber sales, the kind of low-margin treated lumber which usually is more a part of that inventory build in Q1.

Okay, got you. And then you talked about the strategy change. What was entailed in that? And how did it compare to a year ago?

With respect to inventory?

With respect to, I guess -- I thought you were referring to maybe how you were pricing.

Oh, the purchasing part of it? Yes, I think it's just how we looked at building our inventory, how we look at trying to align our inventories with our customers' needs. We used a slightly different philosophy, and I think it's been more effective so far.

Okay, great. And then I know you don't have an answer, but I'll try anyway. Housing starts in 2012, I know it's a shrinking part of your business, but just housing or housing related, obviously, going to be up, I think, versus what we saw, a very depressed 2011. Consensus estimates like 740,000 starts, is that something that you're organizing your business around?

We are not looking that aggressively from a growth standpoint. We are looking at a much different mix than historically in multi-family units versus single-family units. And we believe that trend will continue throughout this year. But if the numbers hit the consensus you're talking about, that will be very, very good for us. But we're not planning on it being anywhere near that high.

I would now like to turn the call over to Mr. Matt Missad for closing remarks.

Once again, I'd like to thank you very much for taking your time this morning and for your interest in UFP. We remain hard at work executing the strategy that we hope will allow us to improve our performance, both in the short term and in the long term. Our goal is to be the best, and we are fighting very hard to achieve it. And finally, I'd like to give a shout-out to my buddy Hank, and let him know that I'm waiting for his call. Thank you all again and have a great day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.