Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 Universal Forest Products Earnings Conference Call. My name is Chanel, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, to Ms. Lynn Afendoulis. Please proceed.

Good morning, and again welcome to the Universal Forest Products Inc. Fourth Quarter 2012 Conference Call. Hosting the call today are CEO, Matt Missad; and CFO, Mike Cole. Matt and Michael also prepared remarks, and then we'll open up the call for questions. This conference call is available simultaneously 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 that website through March 15, 2013. 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 difference -- or 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, ladies and gentlemen. We appreciate the time you're taking this morning to listen to our fourth quarter 2012 earnings call. I'd like to start by walking through our 4 key business metrics: sales, margin, inventory and accounts receivable. Overall, our fourth quarter results were mixed. Sales dollars were up 11.2% versus 2011, but unit sales were down slightly by 2%. By market, retail building materials was down both in dollars and units, but we believe we will have increased market share in 2013 based on the results of the fall quoting process. Our industrial sales, although down in the fourth quarter, were up 18.5% for the year. We believe our fourth quarter industrial sales were impacted by a sudden decline in national defense spending of 22% in the fourth quarter, which, although it did not have a significant direct impact on us, it did create a ripple effect on several of the adjacent industries we serve. Continued uncertainty with the federal budget may impact demand, but we continue to add business, including a modest $5 million in the fourth quarter. Manufactured housing sales were up 20.9% to $81.3 million for the quarter. Higher selling prices for lumber and trusses and an increase in distribution sales helped offset a reduction in FEMA orders received by our customers in the last half of 2012 as compared to 2011. Listening to our manufactured housing customers, there appears to be a little more optimism for growth both in multi-section homes and in single-section homes. They also expect an uptick in modular homes in the wake of Hurricane Sandy. We continue to improve our value proposition to our customers, some of whom are looking to better leverage and integrate their materials management processes. In the commercial construction and concrete forming area, sales increased slightly in the fourth quarter to $22 million. We continue to add customers and projects in this market. Residential construction sales were up substantially to $74.6 million versus $46.5 million in 2011, again higher prices and an increase in starts helped fuel the growth. While we reported gross profit improvement of more than $25 million for all of 2012, the fourth quarter was disappointing. Our fourth quarter gross profit was down by $3.4 million, and we recognized significant areas for improvement. As our site built business overall continues to improve, we expect to be able to take advantage of increased operating leverage as housing starts and completions ramp up. We also believe increased operating leverage will help our profit results as we continue to utilize increasing levels of our capacity in other markets as well. As you noticed, inventory at year end is up dramatically, primarily because of a lumber market averaging over 35% higher than 2011 at year end. We expect inventory to remain at a higher value, due primarily to a higher lumber market throughout the first half of 2013. And as you would expect, accounts receivable was also higher than 2011 year end numbers, again due primarily to the higher lumber market. We have improved our percent current of accounts receivable, and we are seeing an increase in requests from customers for higher credit limits to cover both more unit sales as well as the higher prices. And I'd like to touch now briefly on our strategic growth initiatives, including new product development and sales, growth and value-added manufacturing and engineered wood products and expansion in international markets. First, we're particularly encouraged by our new product development effort. In 2012, we invested over $7 million in research and development and product development initiatives. We are investing heavily in our future to ensure a steady stream of new products and try to get closer to the front end of the product life cycle. In fact, during 2012, we achieved over $53 million in new product sales for products introduced in 2011 and 2012. We looked for accelerated growth with our new products, and we are also going to continue to strengthen our product brands and product management and will be making modest investments to promote the value advantage of our products and to help pull sales through our customers' locations. We also continue to look at different opportunities in our non-wood product lines as the markets for those products continue to evolve. On the international front, our International business development initiatives have identified several good potential business partners. In keeping with our conservative approach, we are looking for a good fit that complements our overall business objectives and our return on investment philosophy. We will continue to diligently pursue these potential partnerships. I'd also like to briefly highlight some other macroeconomic factors, which may affect our business in 2013 and beyond. With the lumber market hovering in the upper 300 to 400,000 -- $400 per thousand board foot range, we feel very confident that, given a reasonable economy, we will eclipse our sales numbers for the year versus 2012. However, we remain focused on growing our unit sales as well and expect to be able to achieve unit sales growth in 2013. We remain cautiously optimistic with the general economy thus far in 2013, but we recognize that uncertainty surrounding the federal debt needs to be resolved. This resolution will definitely impact our business, but we are uncertain as to the extent of that impact. Surprisingly, we have seen some difficulty in hiring entry-level employees in certain markets. With the government's view 6 measure of unemployment hovering at 14.4%, it seems counterintuitive, but many potential applicants have stated they're unwilling to forgo the taxpayer-provided benefits to enter the workforce. In spite of some of these headwinds, our management team and our great employees are confident that we will outperform the economy in the long term. We have set some challenging goals for the future based on a return to housing unit completions in the range of 1.5 million units per year. If this completion target is met, we believe it will bring a more healthy economy overall, and we have set a target of $3.0 billion in sales and a return to operating margins at more normalized historical levels by the end of 2017. Now I'd like to turn it over to Mike Cole to address some of the financial results. Mike?

Thanks, Matt. Before I review the financials, I want to point out that the higher level of the lumber market had a significant impact on our key numbers for this quarter. Lumber prices were up 33% on average, which impacted not only our sales levels but our working capital cash flow in ratios like margins. Please keep this in mind as you consider our numbers for the quarter. Starting with our income statement, our overall sales were impacted by a 13% increase in selling prices due to the lumber market, offset by a 2% decrease in unit sales. Excluding the positive effect of acquisitions, unit sales decreased 3%. By market, our sales to the retail market decreased 4% due to a 14% decrease in unit sales, offset by a 10% increase in prices. Within this market, sales to our big-box customers decreased 14%, which was offset by a 10% increase in sales to all other retail customers. Earlier this year, we mentioned that we lost some lower margin business with one of our big-box customers and that one of our objectives has been to replace that business with sales to other retailers. As you can see from the numbers, we've had some success accomplishing that objective. Looking forward, we're pleased to report we increased market share with both big-box and independent retailers, resulting from the proposal process recently completed for next year's business. Our sales to the manufactured housing market increased 21%, due to an increase in prices. Our unit sales were flat in spite of an 11% decrease in the production of HUD-code homes. This is due to share gains resulting from our distribution business, acquiring a competitor earlier this year and sales to certain customers that gained market share. Our sales to the residential construction market increased 60%, due to a 43% increase in unit sales and a 17% increase in prices. By comparison, housing starts increased 36%. Our unit growth outpaced the national average, primarily due to market share gains in 2 regions. This segment is still challenged with that excess capacity so pricing and margins are difficult. Our recent improvements and market conditions have us cautiously optimistic. Collectively, our plans that served this market have been profitable for 7 straight quarters and reported a year-over-year increase in operating profit of $1.6 million this quarter. Finally, our sales to the industrial market increased 8%, comprised of an 11% increase in pricing offset by a 3% decrease in unit sales. Excluding the positive impact of acquiring Nepa Pallet in the fourth quarter, unit sales were up 6%. This is the first time we've seen a decline in unit sales in our industrial markets since the worst of the recession. We think this was due to a temporary decline in orders of existing customers, and we're pleased with our new customer growth, which generated $5 million of additional sales this quarter. We continue to believe we are well-positioned to continue to grow our share of this market and anticipate customer demand will rebound in future quarters. Moving down the income statement, our fourth quarter gross profit as a percentage of sales decreased by 180 basis points. Approximately 125 points of this decline was simply due to the higher level of year-over-year lumber prices. As you might recall, we generally price our products to earn a fixed profit per unit, with commodity costs being a pass through. In some periods of higher lumber prices, our gross profit percentage declines. The remaining decline was primarily due to higher labor and overhead cost relative to volume, resulting from lower-than-expected unit sales. SG&A expenses decreased by $700,000 or almost 2%. This decrease was primarily due to a decline in salaries and wages. Unfortunately, the decline in unit sales resulted in an operating loss of $1.1 million this quarter. Looking forward to 2013, we're optimistic about our ability to grow unit sales to several of our markets, assuming current trends and demand remain favorable. Moving on to our cash flow statement. Our cash flow from operations was down $6 million this year, compared to up $12 million last year. Our operating cash flow in 2012 is comprised of net earnings of $26 million and $39 million in noncash expenses, offset by $7 million in net gains and a sale of property and a $64 million increase in working capital since last December. Our investment working capital has increased primarily due to higher lumber prices, which was 33% higher this year. Investing activities include capital expenditures of almost $30 million, including $12 million related to expanding capacity for new products and industrial business. In addition, we sold idle property for approximately $18 million and invested approximately $17 million in business acquisitions this year. Finally, our operating activities, investing activities and repayment of the $40 million note payable were primarily funded through the issuance of 2 notes payable totaling $75 million in December. The notes are unsecured, have an average maturity of 11 years and have an average interest rate of less than 4%. With respect to our balance sheet, our total net debt increased to $81 million, compared to $41 million a year ago, again, due to the higher -- again due to the impact of higher lumber prices on working capital. That's all I have on the financials, Matt.

Thank you, Mike. We now like to welcome any questions that you may have.

[Operator Instructions] Our first question comes from the line of Robert Kelly of Sidoti.

Just had a question on the fall quoting period. You said you had some success with the big box as far as winning some new share. Was that priced based on like 3Q lumber prices? How did you go to market with respect to price for those businesses that you won?

Yes. Again, as Mike mentioned, what we try to do is take out the commodity price of the material and it's basically based on a fixed add or over the commodity lumber cost. So it shouldn't be impacted by the current market price.

Okay, that's encouraging. And then as far as the wins, was it regaining lost share with respect to the big box business? Or was it new opportunities that -- where you haven't been participating before?

I think there's a combination, Bob, of business with all parts of the DIY sector for us. So it's spread out among the existing big box business as well as other independent retail outlets.

Okay. As far as -- 2 things that you said in the release I wanted to talk about. One was improving operating margins. You've done a lot on the SG&A front. Is there any more room to cut there? And if not, how do you shape up the margins for '13? And then as far as the longer-term goal, you talked about average historical normal margins. Exactly what are we talking about when you say that?

Well, I think we are trying to focus on the operating margin more so than the gross profit margin. So operating margins historically kind of in normalized times are in the 4% to 5% range. So that's what we're looking at from an operating margin historical perspective. In terms of how we get there with respect to gross profit improvement, one of our challenges is to try to improve that. We can do that through operating leverage in our facilities, and that's probably the biggest driver available to us today.

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

So, on occasion, when lumber prices are really low, you try and lay in inventories early in the year. Clearly, that's -- won't be the case this year, but are your inventories okay?

Okay is probably a very good way to say it.

And is it your sense that lumber is lean throughout the entire supply chain?

I think without going into specific individual products, Steve, I would say that the mills are doing a very good job of managing the availability of supply. And we don't see a lot of excess supply anywhere right now. So they may bring more capacity online layer in the first quarter, early second quarter, but we don't expect a significant impact on a pricing standpoint, at least, through the first quarter -- first half of 2013.

Well, now it seems like some analysts or pundits are talking about a lumber super cycle due in part to the beetle kill in British Columbia. I mean, do you believe in that super cycle notion? And would that be just a long-term negative because you'd be dealing with lower margins?

No. I think, again, if we look and focus on growth profit dollars per unit, that's a good metric for us. And as long as we can improve gross profit dollars per unit, we'll deal with whatever the market price of lumber is. I think the super cycle, first of all, I'm not sure I understand what the super cycle means, but a lot of beetle-kill timber has been harvested and a lot of takeaway has happened overseas, which has helped buttress the market pricing. And at least the mills that we've talked to are trying to balance their sales and make sure they don't forgo all potential opportunities overseas and focus 100% on the U.S. market. So they're trying to balance their business model as well. And I think they've done a good job of it.

Yes. I'm not necessarily a believer in the super cycle, but I think the folks who are saying that there's a new normal in lumber, and it's going to be much higher than in the previous decade are basically pointing to the beetle kill pointing to the advent of China as a big new market and saying, going forward, we're not going to see the low lumber prices we enjoyed before. One last question and I'll get back in the queue. Your new products, are they kind of non-wood by and large?

No. They're actually -- it's a combination of a bunch of different things. And one of the things we've realized is we need to keep improving our product line every year and coming up with new ideas and new manufacturing techniques, which has enabled us to develop some pretty innovative products. So a lot of them are wood based. There are some that are not wood based, but I would say by and large, we're still focused with wood or wood alternative type items for our new products.

And there are no further questions in the queue. I'd now like to turn the call back over to management for closing remarks.

Once again, thank you for your interest in our company. We look forward to reaching our goals and rewarding our shareholders investment in our company. I'd like to wish you all best -- the very best for Valentine's Day, and make sure you don't forget your flowers and candy when you go home. Have a great day.

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.