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…

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%,…

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.