Good day, ladies and gentlemen and welcome to the First Quarter 2017 Universal Forest Products, Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference Ms. Lynn Afendoulis, Director of Corporate Communications. Ma'am you may begin.

Welcome to the Universal Forest Products Incorporated first quarter 2017 conference call. Hosting the call today are CEO, Matt Missad; and CFO, Mike Cole. Matt and Mike will offer prepared remarks and then we'll open up the call for questions. This conference call is available simultaneously and in its entirety to all interested investors and news media through a webcast at www.ufpi.com. A replay will also be made available at that website through May 19, 2017. Before I turn the call over to Matt Missad, let me remind you that yesterday's press release and today's presentation 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, and good morning everyone. I appreciate you taking the time to join us on this morning's call. The first quarter of 2017 was a bit like a Spring training baseball game, we got to victory and we're just getting warmed up for the season. We're very pleased to report record net sales and record first quarter profits in spite of a few challenges. We say it often, yet the experience and dedication of our employees helps us overcome these challenges to deliver solid results. I would like to thank them again for their tremendous effort in the first quarter. As we go through our key business drivers, let's start with sales. Sales for the quarter were a record $856.8 million, up 23.5% from $693.9 million a year ago. By market, retail was up 14.9%, industrial was up 37.5%, and construction was up 21.2% versus 2016. Moving to profitability, overall gross margin declined 80 basis points to 14.3% versus 15.1% a year ago. The biggest factors impacting gross margin were the impact of the higher lumber market which is up 21% versus 2016 as well as the absence of a comparable buy-in opportunity like we experienced a year ago. We expect to be able to improve the margin once the lumber market settles out. In addition to the margin challenge, we were able to absorb the normal start-up operating losses from our seven new Greenfield locations. We expect these operations to all turn to profitability within the next 12 months. Weather related closures in March also took a toll in the Northeast and the North Atlantic. Yet in spite of these obstacles, net earnings increased to $21 million versus $19.2 million a year ago, and earnings per share were $1.03 versus $0.95. EBITDA year-to-date was $46.9 million versus…

Thanks, Matt. Before reviewing the financials, I should briefly address the impact of the lumber market this quarter. Overall year-over-year lumber prices were up 21% and Southern Yellow Pine prices, which represent our highest volume of purchases, were up 16%. As we've mentioned before, we attempt the pass changes in commodity lumber cost on in our selling prices, so that we earn a targeted profit per unit. In periods of high lumber prices like this, gross profit and SG&A cost as a percentage of sales will look comparatively low, and we found that a better way to evaluate our profitability is to compare our change in unit shift with our changes in costs and profits. Also, our investment in working capital is comparatively higher due to the lumber market. So a better way to assess our working capital management is to evaluate those investments relative to sales and cost of goods sold. Moving on to the financials, I'll start with the highlights from our income statement. Our overall sales for the quarter increased 23%, resulting from a 17% increase in unit sales and a 6% increase in selling prices due to the lumber market. Our 17% unit sales increase comprised 12% growth from recently completed acquisitions and 5% organic growth. Breaking down by market, sales to the retail market increased 15% resulting from a unit increase of 9% and an increase in selling prices of 6%. Our unit growth this quarter was primarily driven by our acquisition of Robbins Manufacturing, which contributed 7% to our unit growth. Within this market, our sales to big box customers grew 19% with a small contribution from acquired operations, while our sales to other independent retailers grew 9% with a significant lift from acquisitions. Our sales to the industrial market increased 37%, driven by…

Thank you, Mike. Now I'd like to open it up for any question you may have.

[Operator Instructions]. And our first question comes from the line of Steve Chercover of D.A. Davidson. Your line is now open.

So first of all, could you elaborate a bit on the seven Greenfield operations that you started. What exactly are they doing and where they are located?

They're located all over the country. There are expansionary opportunities and they are in each of the different markets, not material in any -- by any stretch, but it's one of those things that we either grow via Greenfield or we grow via acquisition. We choose to do both, and so we don't pay any goodwill for the Greenfield operations, but we expect to encounter normal start-up losses. So they are in line with our expectations. They are just a drag on earnings.

And are they producing the gamut of products that can be dedicated to residential, industrial, et cetera?

Yes, they serve -- not all of them serve every market, but they serve either multiple markets or one or two markets.

Okay. And then I want to talk a little bit about idX. I think that's considering to the elevated SG&A right now, and may be you could tell us just how much and what the proper run rate SG&A should be?

Yes, I think overall, I'll let Mike talk about future kind of run rate of SG&A, but you're correct in your assessment, the SG&A increase is due in part to acquisitions and they are the largest the SG&A pieces of the acquired companies, so that does have an impact. It's important to keep in mind that idX in the overall scheme of things is still less than 10% of our company as kind of the size of one of our regions. So we don't get too excited about the impact one way or another, but Mike may be you want to touch on the future run rate for SG&A?

Yes, so I guess you had asked what the amount of the increase of SG&A was associated with acquisitions, the total is $13 million, and you're right the lion's share of that is idX. With regard to run rate, I think last quarter, we called out our core SG&A of being right around $77 million and said that going forward into this year that was a small inflationary-type increase, would be in line with expectations for the year and that's pretty much where we landed in Q1. So the core SG&A number was about $79 million, $2.5 million increase or about 3% in Q4. So that looks like a pretty reasonable number going forward within a small range.

Got it. Thanks and then finally you said you remain committed to having the supply to provide your customers with top service et cetera and the supply of affordable lumbers being jeopardized presumably by the U.S. imposing tariffs or duties or quotas of some sort. I mean we're already pricing it in advance of the event, but are you in favor of limiting the Canadian access to the U.S. market or would you rather if the Canadians are silly enough to sell lumber below fair market value wouldn't you just be happy to take it?

Yes, I think for us we think the position that the overall level of the lumber market is really not a big issue to us as long as it's not rapidly rising or falling, and as we look at the situation with Canada, we were not necessarily in favor of a duty. We just want to make sure that affordable housing and all of those things continue, so we want to make sure that the overall level of the lumber market remains reasonable. And then as you pointed out, yes, if someone's willing to sell material cheaper, we are more than happy to purchase it.

Yes, okay, I lied. One more question. Labor is getting fairly tight in certain jurisdictions, certainly in Oregon. Are you finding that your ability to produce components in a factory environment is beneficial and is that something you're trying to really leverage selling factory manufactured components to residential builders?

Yes, absolutely Steve, I think that that's one of the key selling points of being able to produce it in the factory that's less labor onsite, less waste onsite and helps speed up the construction process, so we certainly try to promote that view point and definitely believe that helps us.

Great, okay. Best wishes for the second half.

Thank you.

Thanks, Steve.

Thank you. And I'm showing no further questions at this time. I would now like to turn the call back over to Mr. Matt Missad for closing remarks.

Once again I'd like to thank you for taking the time to join us on today's call. I'm confident that each of the UFP employees is motivated to grow ROI which is Return On Investment both because they like to win and they're rewarded for their achievement of this goal that also helps them and U.S. shareholders. We will keep running hard to make sure we finish well just like our very own Matt McSween who qualified with the Elite runners and finished the Boston Marathon this week in the top 400 men in spite of bump [ph] Achilles tendon. We couldn't ask for a better example of the can do spirit at UFP. Thank you again for your support and interest in the company and have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.