A very good day to you, ladies and gentlemen. Welcome to the Q2 2014 Universal Forest Products, Inc. Earnings Conference Call. My name is Gary, and I will be your event coordinator today. Throughout the presentation, your lines will be on listen-only. (Operator Instructions) The call will be recorded today, July 17, for audio replay purposes. I would now like to turn the call over to Lynn Afendoulis, Director of Corporate Communications. Over to you.

Good morning. Welcome to the Universal Forest Products Second Quarter 2014 Conference Call. Hosting the call today are CEO, Matt Missad; and CFO, Mike Cole. Matt and Mike will offer prepared remarks then we will 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 available at that website through August 17, 2014. Before I turn the call over to Matt Missad, let me remind you that yesterday's press release and today's 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, ladies and gentlemen. Welcome to our second quarter 2014 earnings conference call. We appreciate you joining us this morning and for your interest in our company. I am grateful for the start of Michigan's six weeks of summer, but I'm even more grateful for the second quarter performance of our team. With quarterly earnings per share of $1.08, we beat last year by 37%. Our year-to-date earnings of $1.44 per share also beat last year's by 37%. These improvements show that the efforts of our team to boost profitability are working. The second quarter also our best sales performance since 2006, as we recovered from the slight sale shortfall of the first quarter. Of course, we are never satisfied with our results and we recognize that improvement is like Jell-O. There's always room for more. I believe we are on the right track as we will discuss by walking through our four key business metrics, sales, margin, inventory and accounts receivable. In the second quarter, sales dollars were up 5%, while units were up 6%. Sales activity was good and our facilities are experiencing reasonable capacity utilization for this time of the year. The lumber market was relatively flat during the quarter and the results that we posted are indicative of a flat market. By market, our sales results were as follows. Retail was up 10.9% at $349.1 million, construction was down 4% at $231.6 million. A decline in the market price of OSB was the biggest driver for the decline in sales in this market. We also reduced sales of framing in our quest to seek better margins in that area. The industrial market was up 5% to $203.5 million. While this increase is good, we should be able to do better in our…

Thanks, Matt. Starting with our income statement for the quarter, our overall sales increased 5% due to a 6% increase in units offset by 1% decline in our prices. By market, we were very pleased to see our sales to the retail market rebound to an 11% increase in unit sales in Q2 after the impact of difficult weather in Q1. Within this market, sales to our big-box customers increased 13%, while sales to our other retail customers increased 8%. Our sales to the industrial market increased 5% comprised of a 6% increase in units offset by 1% decline in prices. Units sales growth this quarter was primarily driven by orders from existing customers which contributed $8.5 million to our sales growth this quarter. While new customers added about $1.5 million to sales. Overall sales for the construction market decreased 4%, primarily due to sales to our customers that produce factory-built manufactured housing and [residential] housing. Sales to manufactured housing customers decreased 9%, due to an 8% decline in selling prices combined with a 1% decrease in units shipped. By comparison HUD-code home production increased about 4% during the quarter. Our unit sales growth trailed the market, primarily due to a vertical integration strategy recently employed by one of our customers. Our sales prices declined primarily due to a year-over-year decline in OSB prices of about 37%. Sales to residential construction customers decreased by 8% this quarter, comprised of an 11% decrease in units offset by a 3% increase in prices. By comparison, national housing starts for the quarter increased about 9% year-over-year. Our unit sales change trailed the market is a result of being more selective in the business that we take, particularly in our framing operation. As a result of these decisions and certain operational improvements, the profitability…

Thank you very much, Mike. We would now like to open it up for any questions you may have.

Thank you. Ladies and gentlemen, your Q&A session will now begin. (Operator Instructions) We have our first question from the line of Jay McCanless of Sterne Agee. Over to you, Jay.

Good morning, everyone.

Good morning, Jay.

A couple of questions for you. The first one on the SG&A growth, so that's headcount, that's bonuses. Is there any of that that's maybe one-time and what should we expect for the back half of the year in terms of SG&A levels.

There aren't any significant one-time increases or decreases, Jay. About $3.5 million or so of the $5.9 million increase is bonuses and profitability. To the extent we continue to profitability gains like we have seen in the first year. You should see the same sort of trend in the back half of the year. The balance of the increases is tied to headcount. Most of that's in the sales and design area, so the way we look at that, we are making an investment for future sales growth there, and I would expect that trend to certainly continue for the balance of the year.

Okay. Then in terms of the major manufactured housing customer, can you quantify in revenue terms what the loss of that customer means and what opportunities do you have to backfill that business with other people in the MH space?

In terms of the revenue portion, Jay, I think it was about $8 million in Q1, maybe $6 million actually in Q1 and it was about $8 million in Q2.

Yes. I think with respect to the manufactured housing customer base, we still have a tremendous market share with remaining manufactured housing producers, so while there may be some opportunity to improve and there is some opportunity to gain more business. I wouldn't anticipate that they will be able to pick up that much volume with the remaining participants in the MH business.

Okay. Then on the retail segment, did you give the actual unit growth there?

Yes. The Retail segment, the unit sales growth was about 11%.

11%. Okay. Then just an observation, it seems like the commentary in the release and what you said today, about especially the big boxes seems more positive on a roller basis versus what you guys have been seeing before? What's going on there? Are you seeing better opportunities to sell into the stores and what's happening with the lumber yards as well, the smaller lumber yards as well?

There was a couple of things on there, Jay. What we are seeing is that both, improved repair and remodel demand which we see helping to drive the big-box retail market. We are also seeing increased penetration into the independent retail market and the introduction of a lot of our products and creating new opportunities for us to add value is really helping expand our capabilities with those customer, so to summarize I would say that overall their market is improving and also we are increasing penetration.

Okay. Then just last question I had, was there any lingering impact from the weather this quarter? Some of the builders that we talked to say that winter extended all the way into May in certain parts of the U.S. Was that your experience or what, if any, impact do you think there was from the weather in 2Q.

I think in the second quarter, there may be some limited impact from the weather, but I wouldn't certainly put any blame on that. One of the things that we did see is there was a pickup from some of the lost business in the first quarter, but we see a labor shortage and a shortage in the construction professional side of the business. They weren't able to do much in the first quarter, but that doesn't mean there is more of them in the second quarter, so what really happens now is it's a labor-crunch issue and a professionals-crunch issue. Their time is pretty full, so that might be a bigger holdback than whether.

Okay. Great. Thanks, guys.

Thank you.

Thanks, Jay.

Thank you. We have our next question from the line of Steve Chercover, over to you.

Good morning, Matt. Hi, Mike.

Good morning, Steve.

Good morning, Steve.

You probably haven't seen these, because they’ve just come out, but the building statistics were just released, permits in June 963,000, starts were 893 down, 9% from May and up both, just from 838,000 last year. Do those numbers if you can process them surprise you and would they change any of your expectations for the second half of the year. I guess, especially the permit authorizations?

Yes. I think, we tended to be a little more conservative in our forecast. I think, what that might change as you will see on the supply side it may have some impact on the market both, the lumber market. As we talked about the OSB market I think they added capacity in 2013 based on the fact that they were expecting about 1.2 million housing starts this year. Obviously did expect that doesn't materialize. That's going to continue to depress pricing on those types of products and I also think it will have an impact on the lumber market, but we didn't base our performance results on a high number of starts, so it is disappointing from the economy standpoint, but I don't think it's going to have a big negative effect, but it will hurt the lumber market.

Got you. Okay. Then I want to ask you about your $3 billion sales aspirations for 2017. Given that you are on a pace for about $2.6 billion, maybe it's $2.5 billion given seasonality this year and the new products you have in the pipeline and acquisitions. Isn't that really quite conservative?

I hope it is.

I mean. Yes. 2017. That's three years from now, so just seemed - you are expecting maybe lower pricing. I was a typo. I would have thought that would be in my model $3 billion in sales would be 2015, not 2017.

Well, as you know, we don't give guidance and so I will certainly say that we hope it is a conservative number and rest assured that we aren't going to stop once we hit that goal to continue to grow, so.

Well, I hope not. As a follow-on to that, knowing that you don't give guidance, given some of the changes in your segments and the business mix, can you just remind us what the historical operating margins you are shooting for would be?

Sure. If you are looking at EBITDA, that would be between 5% to 6%.

5% to 6%. Got it. Then one last question also margin related, what type of margins do you need not to fire your customers, because you walked away from business.

That is a very slippery slope to try to address on this call, but had the return targets that you are well aware of. We have a cost of capital and we have to make sure that our pricing will allow us to earn a return that is equal to our cost of capital.

So suffice to say, as always you don't do business for practice.

Correct. We don't do business for practice. We had plenty of practice in our career, so we don't need to do anymore.

All right, thanks. I will get back in the queue.

Thanks, Steve.

Thank you.

Thank you. We have a question from David Fondrie with Heartland Funds. Over to you, David.

Yes. Good morning David Fondrie with Heartland Funds.

Good morning, Dave.

You mentioned that you, I am not sure I am paraphrasing this correctly, but I think that you are unhappy with your growth in industrial. Could you provide a color around that and then what do you need to do in order to accelerate the industrial growth and were there any new customers on the industrial side?

Yes I guess I wouldn't classify it as unhappy, David. I think we did have solid growth, but we think we could do better and I think as we move further on the design curve to do more a high design, high-engineered products and a better mix, that's really what will focused on and we continue to try to grow market share. Again, general economy indicates how much growth there is actually within our customer base and how much we have to get through market share gains.

Were there any -

Amounting to about $1.5 million in sales, so sales per customer is low, but it takes time to develop that. I guess the one thing that I would say is that that's probably a much lower number than we have seen in the last several quarters, so that's something we are very focused on and put a lot of capital and a lot of people on it so we expect to grow that at a higher rate.

Okay. Can you describe a little bit about how you go to market there? I mean, do you have a dedicated sales force that is calling on effectively cold calling on potential customers or just how do you try to develop that customer base?

Yes. We have a number of different methods to grow that business, but we do have a large dedicated sales force as well as design and engineering professionals and we are out either through existing customers who are growing and also through the new customers we use that sales force pretty aggressively.

Terrific. The last question if I may, could you talk about a little bit about the linearity in the quarter? Was it more backend weighted, might be a reflection of the weather or perhaps at the front end it was a pretty strong because of the very weak first quarter.

I think we were fairly consistent throughout the quarter, and I think the stability in the lumber market certainly creates what we would deem to be at more of a normalized lumber market for us, so the results were skewed heavily either way. I think they were just pretty consistent throughout.

Great. Thank you very much.

Thank you.

Thank you, David.

Thank you. There are no further questions, so I would now like to turn the call back over to Matt Missad for any closing comments. Thank you.

Once again, we would like to thank you for listening this morning and for your interest in our company. Please rest assured that we will keep driving sales and profit growth with the ultimate goal of increasing the value of our company for our shareholders. Have a great day and happy birthday, Tina.

Thank you very much ladies and gentlemen. That now concludes your conference call for today. You may now disconnect. Thank you very much.