Q1 2024 UFP Industries Inc Earnings Call

April 30, 2024

Operator: Good day, and welcome to the Q1 2024 UFP Industries Inc. Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode.

Good day and welcome to the Q1 2024, you F. P Industries, Inc earnings Conference call and webcast. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.

One one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question Press Star. One again. Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker, Mr. <expletive> Coffee Vice President of Investor Relations. Please go ahead Sir.

Operator: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Dick Gauthier, Vice President of Investor Relations. Please go ahead, sir.

Yeah.

Dick Gauthier: Welcome to the first quarter 2024 conference call for UFP Industries. Hosting the call today are CEO Matt Missad and CFO Mike Cole. Matt and Mike will offer prepared remarks, and then the call will be open for questions. This conference call is available simultaneously in its entirety to all interested investors and news media through our webcast at ufpi.com. A replay will also be available on that website.

Mr. Coffee: Welcome to the first quarter 2024 conference call for UFP industries hosting the call today are CEO, Matt <unk> and CFO, Mike Cole, Matt and Mike will offer prepared remarks, and then the call will be opened for questions. This conference call is available simultaneously in its entirety to all interested investors and news media through our webcast at USPI Dot Com a replay.

Mr. Coffee: We'll also be available at that website.

Dick Gauthier: Before I turn the call over to Matt Missad, let me remind you that today's press release and 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 the company's expectations and projections. These risks and uncertainties include, but are not limited to, those factors identified in the press release and in the filings with the Securities and Exchange Commission. I will now turn the call over to Matt Missad. Thank you, Dick.

Michael Richard Cole: Before I turn the call over to Matt and aside let me remind you that today's press release and presentation include forward looking statements as defined in the private Securities Litigation Reform Act of $19 95. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations and projections. These risks and uncertainties include but are not live.

Mr. Coffee: Added to those factors identified in the press release and in our filings with the Securities and Exchange Commission I will now turn the call over to Matt <unk>.

Matthew Jon Missad: And good morning, everyone. Thank you for joining our first quarter 2024 investor call. The first quarter was generally in line with expectations, and I'm proud of our team for dealing well with the uncertainty and still delivering strong results. That said, it remains difficult to have clear insight into the balance of the year. Conflicting economic indicators and forecasts by various economists have blurred the ability to make confident forecasts.

Matt: Thank you <expletive> and good morning, everyone. Thank you for joining our first quarter 2024 investor call.

Matt: The first quarter was generally in line with expectations and I am proud of our team for dealing well with the uncertainty and still delivering strong results.

Matt: That said it remains difficult to have clear insight into the balance of the year.

Matt: Conflicting economic indicators and forecast by various economists have blurred the ability to make competent forecast.

Matthew Jon Missad: So rather than wait for Johnny Nash to bring some clarity, the UFP team will continue to execute our plan, and we will rely on our experience and our balanced business model to continue to improve. While Mike will review the financial details, the overall picture includes net sales for the quarter of $1.64 billion and net earnings per share of $1.96. Net sales were down due to lower demand and a lower level of the lumber market, while EPS was above expectations aided by a non-recurring tax benefit for the quarter.

Matt: So rather than wait for Johnny Nash to bring some clarity the UFP team will continue to execute our plan and we will rely on our experience and our balanced business model to continue to improve.

Matt: While Mike will review the financial details. The overall picture includes net sales for the quarter of $1 64 billion and net earnings per share of $1 96.

Matt: Net sales were down due to lower demand and a lower level of lumber market, while EPS was above expectations aided by a nonrecurring tax benefit for the quarter.

Matthew Jon Missad: Due to the slower demand, we are executing plans to improve operating costs and to consolidate excess capacity in the short term, while still investing with optimism and strength in future growth and efficiency to implement our long-term vision. We will discuss some of those improvements in a few moments. But first, let's take a look at the segment.

Matt: Due to the slower demand, we are executing plans to improve operating costs and to consolidate excess capacity in the short term, while still investing with optimism and strength and future growth and efficiency to implement our long term vision.

Matt: We will discuss some of those improvements in a few moments.

Matt: First let's take a look at the segments.

Matthew Jon Missad: Retail Solutions. As a value-added manufacturer, seller, and self-distributor, our products provide solutions for the DIY consumer as well as the professional contract. Overall, retail saw lower sales but better bottom-line results. Our ProWood and SunBelt units saw unit declines in the quarter from strong unit volumes a year ago, and we expect the balance of the year to be in line with adjusted forecasts from both Big Box and Large Independence.

Matt: Retail solutions.

Matt: Got it out value added manufacturer seller in south distributor our products provide solutions for the DIY consumer as well as the professional contractor.

Matt: Overall retail saw lower sales, but better bottom line results.

Matt: Our provost and Sunbelt unit saw unit declines in the quarter from strong unit volumes, a year ago, and we expect the balance of the year to be in line with adjusted forecast from both big box and large independents.

Matthew Jon Missad: The Decorators product line continues to grow with modest unit increases this quarter. Once again, Decorators will be investing heavily in marketing to drive brand awareness and promote the industry-leading and patented SureStone technology, which we believe is the best composite substrate. In addition to marketing, we have increased our new product development spend, which will enable us to use planned capacity increases to drive additional products using the SureStone technology. The UFP Edge Siding Pattern and Trim Products added additional third-party distribution in the quarter, which we expect will drive more growth later in the year.

Matt: The decorators product line continues to grow with modest unit increases this quarter. Once again decorators will be investing heavily in marketing to drive brand awareness and promote the industry, leading and patented <unk> technology, which we believe is the best composite substrate.

Matt: And in addition to marketing we have increased our new product development spend which will enable us to use planned capacity increases to drive additional products using the <unk> technology.

Matt: The UFP edge siding pattern and trim products added an additional third party distribution in the quarter, which we will which we expect will drive more growth later in the year.

Matthew Jon Missad: The revised forecast for repair and remodel for the balance of 2024 indicates a year-over-year unit demand reduction in the mid-single-digit range. The various indices also predict a rebound in 2025 and 2026. Business in the construction segment was strong, led by increases in both the site-built and the factory-built business units. With mortgage rates steadily around the 7% to 7.35% range, growth expectations for site built housing have been tempered somewhat, particularly in the multifamily sector. While starts in 2024 are projected to be slightly up to slightly down from the 1.413 million actual housing starts in 2023, February starts were well above that target, while March starts were below the annual target.

Matt: The revised forecast for repair and remodel for the balance of 2024 indicates a year over year unit demand reduction in the mid single digit range.

Matt: The various indices also predict a rebound in 2025 and 2026.

Matt: Business in the construction segment was strong led by increases in both the site built and the factory build business units.

Matt: With mortgage rates steadily around the 7% to 735% range growth expectations and site built have been tempered somewhat particularly in the multifamily sector.

Matt: While starts in 2024 are projected to be slightly up to slightly down from the $1 for $1 3 million actual housing starts in 2023.

Matt: February starts we're well above that target while March starts were below the annual target.

Matthew Jon Missad: Some of the swings are attributable to different weather conditions in the markets year over year, but it does make predictions difficult. Factory built vehicles showed strong signs of improvement as unit sales increased and the team captured market share in the RV and cargo space. We have recognized the need to grow this area faster and drive more sales of both OEM products and aftermarket products. As part of our succession planning and to more quickly generate revenue from new products under the Recreate brand, Jonathan West, a highly talented and respected 30-year teammate and the current Executive Vice President of Factory Built, will transition to an important new role as Head of National Sales and Innovation for Factory Built beginning in the third quarter of 2024. Chad Easton, a 25-year veteran with outstanding relationships throughout the markets we serve, will assume the Executive Vice President role of this business unit by September 30.

Matt: Some of the swings are attributable to different weather conditions in the markets year over year, but it does make predictions difficult.

Matt: Factory built showed strong signs of improvement as unit sales increase and the team captured market share in the RV and cargo space.

Matt: We have recognized the need to grow this area of faster and drive more sales of both OEM products and after market products.

Matt: As part of our succession planning and to more quickly generate revenue from new products under the recreate brand Jonathan West a highly talented and respected 30 year teammate and the current executive Vice President of factory built will transition to the important new role as head of National sales and innovation for factory built beginning in the third.

Matt: <unk> 2024.

Matt: Chad East and a 25 year veteran with outstanding relationships throughout the markets. We serve will assume the executive Vice President role of this business unit by September 30th.

Matthew Jon Missad: These changes underscore our commitment to be the best partner for our customers and to continue to drive more value-add in our products and services. However, in the packaging segment, demand expectations have been muted. The expectations for the year have been tempered by higher-for-longer interest rates, and the Purchasing Manager's Index dropped below 50 in March, which would suggest continued softness and consumer demand for many of the runways. However, I am pleased with the team's ability to adjust to market conditions and remain on offense to provide better results.

Matt: These changes underscore our commitment to be the best partner for our customers and to continue to drive more value add in our products and services.

Matt: In the packaging segment demand expectations have been muted.

Matt: The expectations for the year had been tempered by higher for longer interest rates and the purchasing managers index dropped below 50 in March which would suggest continued softness in consumer demand for many of the runways.

Matt: However, I am pleased with the team's ability to adjust to the market conditions and remain on offense to provide better results.

Matt: They have consistently evaluated capacity internal cost and ability to create manufacturing efficiencies.

Matt: Recent investments in automated equipment and operating changes coupled with demand forecasts have enabled facilities to produce more in the same footprint.

Matthew Jon Missad: They have consistently evaluated capacity, internal costs, and ability to create manufacturing efficiency. Recent investments in automated equipment and operating changes, coupled with demand forecasts, have enabled facilities to produce more in the same footprint. As a result, we plan to consolidate seven facilities by the end of Q3, with expected annual cost savings in 2025 estimated at $8 million. In addition, we are analyzing an additional four facilities and other product areas for possible consolidation or alternative paths to market by year end. Balancing transportation costs and service to customers are key considerations in the financial analysis for these locations.

Matt: As a result, we plan to consolidate seven facilities by the end of Q3 with expected annual cost savings in 2025 estimated at $8 million.

Matt: In addition, we are analyzing an additional four facilities and other product areas for possible consolidation or alternative paths to market by year end.

Matt: Balancing transportation costs and service to the customers are key considerations in the financial analysis for these locations.

Matt: With a clear path on the cost side. It is important to note that our sales teams are aggressively seeking new accounts, while also protecting market share and increasing value added opportunities for our customers.

Matt: While there may be short term economic challenges the long term outlook for UFP packaging remains very strong.

Matt: We will continue to invest in automation innovation and acquisition to advance our goal of becoming a global packaging solutions provider.

Matthew Jon Missad: With a clear path on the cost side, it is important to note that our sales teams are aggressively seeking new accounts while also protecting market share and increasing value-added opportunities for our customers. While there may be short-term economic challenges, the long-term outlook for UFP packaging remains very strong. We will continue to invest in automation, innovation, and acquisition to advance our goal of becoming a global packaging solutions provider. Some items of interest in our focus areas and departments are new products. New product sales for the first quarter were $124 million.

Matt: Some items of interest in our focus areas and departments are new products new.

Matt: New product sales for the first quarter were $124 million.

Matt: We enhanced the definition of new products to drive more value added products and services and set a target of $510 million for 2024.

Matt: It takes into account the expected lower level of the lumber market for lumber related products.

Matt: Through the first quarter, we are on track to meet the annual target.

Matt: And the purchasing area with more capacity online and still more on the way no significant moves are expected in the level of the lumber market.

Matt: We expect that the mills will manage the supply side by taking production offline at less efficient mills to match market demand rather than to erode further erode their margins.

Matthew Jon Missad: We enhanced the definition of new products to drive more value-added products and services and set a target of $510 million for 2024, taking into account the expected lower level of the lumber market for lumber related products. Through the first quarter, we are on track to meet the annual target. In the purchasing area, with more capacity online and still more on the way, no significant moves are expected in the level of the lumber market.

Matt: On the transportation side transportation costs have become more competitive, albeit at a higher level.

Matt: <unk> is lower for the transportation industry, while costs, including fuel and insurance have increased.

Matt: So in spite of lower demand finding qualified drivers still continues to be challenging.

Matt: On the human capital side, we continue to see quality applicants to help us grow and to strengthen our team.

Matt: While the headline U three unemployment data seems low the more accurate <unk> unemployment rate for March was seven 4% up from 7% at the end of December.

Matthew Jon Missad: We expect that the mills will manage the supply side by taking production offline at less efficient mills to match market demand rather than to further erode their margins. On the transportation side, transportation costs have become more competitive, albeit at a higher level. Demand is lower for the transportation industry, while costs, including fuel and insurance, have increased. So, in spite of lower demand, finding qualified drivers still continues to be a challenge. On the human capital side, we continue to seek quality applicants to help us grow and to strengthen our team.

Matt: An estimated 303 full and part time jobs were added in March with more than half of those and nonprofit and government.

Matt: 39000 were added in construction due in part to milder weather this year.

Matt: <unk> and manufacturing remained unchanged.

Matt: Compensation and benefits continue to climb as rising minimum wage rates drive all other wage rates higher and fuel inflationary pressure as costs for goods and services rise.

Matt: As counter to these increases our incentive compensation plans automatically adjust to reflect pre bonus operating profit.

Matt: When profits are down incentives are reduced which in turn encourages our team of high achievers to drive improvements faster.

Matt: On the capital allocation side, our capital plan centered on three areas.

Matthew Jon Missad: While the headline U3 unemployment data seems low, the more accurate U6 unemployment rate for March was 7.4%, up from 7% at the end of December. An estimated 303,000 full and part-time jobs were added in March, with more than half of those in non-profits and government.

Matt: Growth.

Matt: Investment in new products technology, and our future.

Matt: And providing strong returns to our shareholders.

Matt: Whether via M&A or organic growth, we will aggressively pursue our runways.

Matt: Acquisitions have been more challenging however, the target pipelines have begun to expand.

Matt: And we maintain our philosophy that if we are unable to acquire reasonably priced acquisition targets, we will grow organically.

Matthew Jon Missad: 39,000 were added in construction due, in part, to milder weather this year; jobs in manufacturing remained unchanged. Compensation and benefits continue to climb as rising minimum wage rates drive all other wage rates higher and fuel inflationary pressure as costs for goods and services rise. As a counter to these increases, our incentive compensation plans automatically adjust to reflect pre-bonus operating profits. When profits are down, incentives are reduced, which in turn encourages our team of high achievers to drive improvements faster.

Matt: We have increased capital spending on organic growth, including Greenfield growth over the last few years.

Matt: We expect to authorize a $100 million in 2024 for these projects.

Matt: We expect another $100 million to be spent on new product capacity increases technology investments research and development and innovation.

Matt: And to ensure strong returns for our shareholders. The board declared a dividend of <unk> 33 per share payable on June 17, 2024 to shareholders of record as of June three 2024.

Matt: And in our share repurchase plan as of last week, we have repurchased 671291 shares of stock and still have $97 million remaining on our repurchase repurchase authorization to $97 million.

Matt: Even though we are pursuing growth strategies for the future. We are confident that our shares are a very good long term investment.

Matthew Jon Missad: On the capital allocation side, our capital plan centered on three areas, growth, investment in new products, technology, and our future, and providing strong returns to our shareholders. Whether via M&A or organic growth, we will aggressively pursue our runway. Acquisitions have been more challenging, but the target pipelines have begun to expand, and we maintain our philosophy that if we are unable to acquire reasonably priced acquisition targets, we will grow organically. We have increased capital spending on organic growth, including greenfield growth, over the last few years. We expect to authorize $100 million in 2024 for these projects.

Matt: And other macro outlook items, we would summarize the future outlook to be a tale of two different consumer types. Those that are doing well in the current economy are making the bulk of the retail purchases. These.

Matt: These purchases can sustain the current levels of demand and have kept our businesses all floating.

Matt: We could improve demand if we could provide lower cost to those whose limited resources have been decimated due to high energy costs and inflationary impacts basic necessities, such as housing transportation and food.

Matt: I would endorse reducing inflation and providing relief by allowing the market to work reducing costs, such as energy education and unnecessary regulations.

Speaker Change: I won't hold my breath waiting for the adoption of my suggestions. So we will continue to drive our business execute our strategies and create value for our shareholders.

Speaker Change: Now I'd like to turn it over to Mike Cole to review the financial information.

Matthew Jon Missad: We expect another $100 million to be spent on new product capacity increases, technology investments, research and development, and innovation. And to ensure strong returns for our shareholders, the board declared a dividend of 33 cents per share payable on June 17, 2024, to shareholders of record as of June 3, 2024. And in our share repurchase plan, as of last week, we have repurchased 671,291 shares of stock and still have 97 million remaining on a repurchase authorization. It's $97 million.

Michael Richard Cole: Thank you Matt.

Michael Richard Cole: Our consolidated results. This quarter include a 10% drop in sales to $1 64 billion largely driven by a 9% reduction in selling prices while unit sales declined by just 1%.

Michael Richard Cole: The decline in selling prices resulted from a drop in lumber and more competitive pricing in certain business units.

Michael Richard Cole: Our overall unit sales held up well this quarter in spite of a more challenging demand environment due to the strength of our balanced business model.

Michael Richard Cole: While adjusted EBITDA dropped tenant 10, 5% to $181 million. We're pleased to report our adjusted EBITDA margin remained well above historical levels and improved sequentially from Q4 to 11%.

Michael Richard Cole: I was also pleased to see our cash cycle improved to 62 days. This year from 71 days last year, which reduced our investment in net working capital and contributed to a $20 million improvement in our cash used in operations in the quarter that has seasonal working capital demands.

Matthew Jon Missad: Even though we are pursuing growth strategies for the future, we are confident that our shares are a very good long-term investment. In other macro Outlook items, we would summarize the future Outlook as a tale of two different consumer types. Those that are doing well in the current economy are making the bulk of retail purchases.

Michael Richard Cole: Our trailing 12 month return on invested capital also remains at historically high levels at nearly 20% about two times, our weighted average cost to capital.

Matthew Jon Missad: These purchasers can sustain the current levels of demand and have kept our businesses afloat. We could improve demand if we could provide lower costs to those whose limited resources have been decimated due to high energy costs and inflationary impacts on basic necessities such as housing, transportation, and food. I would endorse reducing inflation and providing relief by allowing the markets to work, reducing costs such as energy, education, and unnecessary regulation.

Michael Richard Cole: We've significantly increased our dividends and share repurchases this year.

Michael Richard Cole: Our balance sheet remains strong with a net cash surplus of $703 million this year compared to $145 million last year.

Speaker Change: Moving on to our segments.

Speaker Change: In our retail segment dropped 17% to $629 million, consisting of a 6% decline in selling prices, a 3% decline due to transfers of certain product sales to other segments and an 8% decline in unit sales.

Matthew Jon Missad: I won't hold my breath waiting for the adoption of my suggestions, so we will continue to drive our business, execute our strategies, and create value for our shareholders. Now I'd like to turn it over to Mike Cole to review the financials. Thank you, Matt.

Michael Richard Cole: Unit decline was comprised of a 9% drop in volume with big box customers and a 7% decline in volume with independent retailers due to soft demand and more conservative inventory positioning.

Michael Richard Cole: Our consolidated results this quarter included a 10% drop in sales to $1.64 billion, largely driven by a 9% reduction in selling prices, while unit sales declined by just 1%. The decline in selling prices resulted from a drop in lumber and more competitive pricing in certain businesses. Our overall unit sales held up well this quarter in spite of a more challenging demand environment due to the strength of our balanced business model. While adjusted EBITDA dropped 10.5% to $181 million, we're pleased to report our adjusted EBITDA margin remained well above historical levels and improved sequentially from Q4 to 11%.

Michael Richard Cole: By business unit, we experienced a 9% unit decline in <unk> that was partially offset by a 4% unit gain in our sales and decorators decking and railing products, which continues to experience solid demand.

Michael Richard Cole: In spite of lower overall demand in sales volumes in the retail segment. We are pleased to report a $6 million increase in our gross profits for the quarter driven by a variety of factors, including better inventory management, SKU rationalization and operating improvements in each of our business units.

Michael Richard Cole: Operating profits also improved by $6 million as SG&A expenses were flat.

Michael Richard Cole: Moving on to packaging sales in this segment dropped 13% to $424 million, consisting of an 11% decline in selling prices.

Michael Richard Cole: I was also pleased to see our cash cycle improve to 62 days this year from 71 days last year, which reduced our investment in net working capital and contributed to a $20 million improvement in our cash used in operations in a quarter that had seasonal working capital. Our trailing 12-month return on invested capital also remains at historically high levels at nearly 20 percent, about two times our weighted average cost.

Michael Richard Cole: And a 6% decrease in units, partially offset by a 4% increase as a result of the transfer from retail.

Michael Richard Cole: As we mentioned over the last couple of quarters customer demand continues to be soft and thats contributed to more competitive pricing.

Michael Richard Cole: As a result of these factors gross profit dropped by $35 million year over year for the quarter, but were encouraged by the sequential improvement in sales and gross profit since Q4.

Michael Richard Cole: We've significantly increased our dividends and share repurchases this year, and our balance sheet remains strong with a net cash surplus of $703 million this year compared to $145 million last year. Moving on to our segment, sales in our retail segment dropped 17% to $629 million, consisting of a 6% decline in selling prices, a 3% decline due to transfers of certain product sales to other segments, and an 8% decline in unit sales.

Michael Richard Cole: The year over year decline in gross profits was offset by an $11 million decrease in SG&A, resulting from a drop in incentive compensation expenses.

Michael Richard Cole: Consequently, operating profits in the packaging segment declined by 24 million to $31 million.

Michael Richard Cole: Turning to construction sales in this segment were flat at $518 million of the 10% decline in selling prices was offset by an 8% gain in units and a 2% increase as a result of the transfer from retail.

Michael Richard Cole: The unit decline was comprised of a 9% drop in volume with big box customers and a 7% decline in volume with independent retailers due to soft demand and more conservative inventory positions. By business unit, we experienced a 9% unit decline in ProWood that was partially offset by a 4% unit gain in our sales of Deck Raiders decking and railing products, which continue to experience solid demand. In spite of lower overall demand and sales volumes in the retail segment,

Michael Richard Cole: The improvement in volume was due to our site built unit, which increased 18% and our factory built unit, which increased 16% comparatively.

Michael Richard Cole: Comparatively national year over year housing starts from December to February increased 7% and year to date factory built home shipments increased 17%.

Michael Richard Cole: These volume increases were offset by declines in our commercial and concrete forming business units.

Michael Richard Cole: The decline in selling prices was primarily experienced in a slight build in concrete forming business units, which along with the unit declines I mentioned resulted in a $7 million reduction in our overall gross profit for the quarter.

Michael Richard Cole: We're pleased to report a $6 million increase in gross profits for the quarter, driven by a variety of factors including better inventory management, skew rationalization, and operating improvements in each of our business units. Operating profits also improved by $6 million as SG&A expenses were flat.

Michael Richard Cole: When combined with a $2 million increase in SG&A or operating profits declined by $9 million to $45 million for the quarter.

Michael Richard Cole: As we manage through this cycle. Each segment continues to focus on executing our strategies to grow our portfolio of value added products. Our year to date ratio of value added sales to total sales improved slightly to 69% this year.

Michael Richard Cole: Moving on to packaging, sales in this segment dropped 13% to $424 million, consisting of an 11% decline in selling prices and a 6% decrease in units, partially offset by a 4% increase as a result of the transfer from retail. As we mentioned over the last couple of quarters, customer demand continues to be soft, and that's contributed to more competitive prices. As a result of these factors, gross profits dropped by $35 million year-over-year for the quarter, but we're encouraged by the sequential improvement in sales and gross profits since Q4.

Michael Richard Cole: And our ratio of new product sales to total sales also improved slightly to seven 6% this year.

Michael Richard Cole: We're also mindful of our cost structure in this environment as we ensure the company is appropriately sized relative to demand, while still providing the resources needed to execute our long term strategies.

Michael Richard Cole: Our SG&A expenses came in on plan for the quarter and were $3 million lower than last year, primarily driven by lower bonus and sales incentives offset by higher base wages and benefit costs.

Michael Richard Cole: The year-over-year decline in gross profits was offset by an $11 million decrease in SG&A, resulting from a drop in incentive compensation. Consequently, operating profits in the packaging segment declined by $24 million to $31 million. Turning to construction,

Michael Richard Cole: The $20 million improvement over last year was due to lower volumes in lumber prices and an improvement in our cash cycle, all of which reduced our investment in net working capital.

Michael Richard Cole: Sales in this segment were flat at $518 million as a 10% decline in selling prices was offset by an 8% gain in units and a 2% increase as a result of the transfer from retail. The improvement in volume was due to our site-built unit, which increased 18%, and our factory-built unit, which increased 16%. Comparatively, national year-over-year housing starts from December to February increased 7%, and year-to-date factory-built home shipments increased 17%.

Michael Richard Cole: Our cash cycle. This year decreased to 62 days from 71 days last year due to a two day improvement in our receivable cycle as our receivables remain a healthy 95% current and a seven day improvement in their days supply of inventory due to our construction segment.

Michael Richard Cole: Our investing activities included $49 million and capital expenditures, our target for the year is $250 million to $300 million and we've already approved $100 million of projects with another $200 million of requests in our pipeline for evaluation as we continue to invest to support our long term growth strategy.

Michael Richard Cole: As a reminder, our expansionary capital investments are primarily focused on three key areas expanding our capacity to manufacture new and value added products.

Michael Richard Cole: These volume increases were offset by declines in our commercial and concrete forming business. The decline in selling prices was primarily experienced in our site built and concrete forming business units, which, along with the unit declines I mentioned, resulted in a seven million dollar reduction in our overall gross profits for the quarter. When combined with a $2 million increase in SG&A, our operating profits declined by $9 million to $45 million for the quarter.

Michael Richard Cole: Geographic expansion in core higher margin businesses.

Michael Richard Cole: And achieving efficiencies through automation.

Michael Richard Cole: Finally, our financing activities included returning capital to shareholders through almost $20 million of dividends and $37 million of share repurchases.

Michael Richard Cole: Turning to our capital structure and resources, we continue to have a strong balance sheet with $703 million in surplus cash and in excess of debt compared to $145 million last year.

Michael Richard Cole: As we manage through this cycle, each segment continues to focus on executing our strategies to grow our portfolio with value-added products. Our year-to-date ratio of value-added sales to total sales improved slightly to 69% this year, and our ratio of new product sales to total sales also improved slightly to 7.6%. We're also mindful of our cost structure in this environment as we ensure the company is appropriately sized relative to demand, while still providing the resources needed to execute our long-term strategy. SG&A expenses came in unplanned for the quarter and were $3 million lower than last year, primarily driven by lower bonus and sales incentives offset by higher base wages and benefit costs.

Michael Richard Cole: And our total liquidity was $2 2 billion, which consists of cash of nearly $1 billion and more than $1 2 billion in availability under long term lending agreements.

Michael Richard Cole: With respect to capital allocation, we plan to continue to pursue a balanced and return driven approach between dividends share buybacks capital investments and M&A.

Michael Richard Cole: As we've discussed in the past our highest priority for capital allocation is to drive organic and inorganic growth that results in higher margins and returns.

Michael Richard Cole: Our strategy also includes continuing to grow our dividends in line with our free cash flow growth and repurchase our stock to offset dilution from share based compensation plans.

Michael Richard Cole: We will continue to Opportunistically buy back more stock when it's trading at a discounted value.

Michael Richard Cole: Most recently, our board approved a quarterly dividend of <unk> 33, a share to be paid in June representing a 32% increase from the rate paid a year ago.

Michael Richard Cole: Moving on to our cash flow statement, our cash flow used in operations was $17 million compared to $37 million last year. As a reminder, in Q1 and Q2, we experienced a seasonal increase in networking capital, which was converted into cash flow in Q3 and Q4. The $20 million improvement over last year was due to lower volumes and lumber prices and an improvement in our cast cycle, all of which reduced our investment in net working capital.

Michael Richard Cole: Through the end of last week, we repurchased 671000 shares.

Michael Richard Cole: Stock at an average price of $114 43.

Michael Richard Cole: Offsetting the issuance of 450000 shares under our compensation plans.

Michael Richard Cole: We currently have remaining authorization to repurchase $97 million worth of stock through the end of July 2024.

Michael Richard Cole: As we mentioned last quarter as a result of the growth and margin improvement opportunities. We see we plan to meaningfully increase our total capital expenditures to <unk>.

Michael Richard Cole: Our cash cycle this year decreased to 62 days from 71 days last year due to a two-day improvement in our receivable cycle, as our receivables remain a healthy 95% current, and a seven-day improvement in our day's supply of inventory due to our construction. Our investing activities included $49 million in capital expenditures.

Michael Richard Cole: Estimated range of $250 million to $300 million in 2024 compared to approximately $180 million in 2023.

Michael Richard Cole: Expansionary capital investments are expected to comprise of $150 million to $200 million of this total.

Michael Richard Cole: We plan to continue to invest at this elevated level to capitalize on the automation and higher margin growth opportunities, we see in each of our segments.

Michael Richard Cole: Our target for the year is $250 million to $300 million, and we've already approved $100 million in projects with another $200 million of requests in our pipeline for evaluation as we continue to invest to support our long-term growth strategy. As a reminder, our expansionary capital investments are primarily focused on three key areas, expanding our capacity to manufacture new and value-added products. Geographic Expansion and CORE Higher Margin Businesses and Achieving Efficiencies Through Automation

Michael Richard Cole: Finally, we continue to pursue a pipeline of M&A opportunities that are a strong strategic fit while providing higher margin return and growth potential.

Michael Richard Cole: Recently, we've seen more activity in our pipeline, which is encouraging as a reminder, our first priority is to grow through M&A, but if the opportunities are present for evaluations arent appropriate, we'll pivot to greenfield growth.

Michael Richard Cole: I'll finish up with comments about our outlook for the rest of the year.

Michael Richard Cole: We believe the soft demand and more competitive pricing. We are currently experiencing will continue for most of the year, but we're cautiously optimistic we'll see year over year improvements beginning in the back half of the year due to more favorable comparisons.

Michael Richard Cole: Finally, our financing activities included returning capital to shareholders through almost $20 million of dividends and $37 million of share repayments. Turning to our capital structure and resources, we continue to have a strong balance sheet with $703 million in surplus cash and in excess of debt compared to $145 million last year. And our total liquidity was $2.2 billion, which consists of cash of nearly $1 billion and more than $1.2 billion in availability under long-term lending.

Michael Richard Cole: Our outlook is heavily dependent on the health of the economy, including the trajectory of interest rates.

Michael Richard Cole: By segment, we continue to plan for total housing starts that are essentially flat with last year with a significant increase in single family starts offset by a decrease in multifamily.

Michael Richard Cole: Now planning for mid single digit declines in demand in retail and packaging softer than we originally anticipated, but prudent we think based on current market conditions.

Michael Richard Cole: So while we manage through mixed conditions in the short term, we remain confident in our long term growth and margin potential and continue to invest in properly to properly position the company to capitalize on those opportunities.

Michael Richard Cole: With respect to capital allocation, we plan to continue to pursue a balanced and return-driven approach between dividends, share buybacks, capital investments, and M&A. As we've discussed in the past, our highest priority for capital allocation is to drive organic and inorganic growth that results in higher margins in return. Our strategy also includes continuing to grow our dividends in line with our free cash flow growth and repurchase our stock to offset dilution from share-based compensation. We will continue to opportunistically buy back more stock when it's trading at a discounted value.

Speaker Change: So all I have in financials Matt.

Matt: Thank you Mike now I'd like to open it up for any questions that you may have.

Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question Press Star one again.

Speaker Change: One moment, while we compile the Q&A roster.

Speaker Change: And our first question will come from the line of Keith <unk> with BMO capital markets. Your line is open.

Keith: Thank you good morning, Mike and Dave.

Michael Richard Cole: Most recently, our board approved a quarterly dividend of $0.33 a share to be paid in June, representing a 32% increase from the rate paid a year ago. Through the end of last week, we repurchased 671,000 shares of stock at an average price of $114.43, offsetting the issuance of 450,000 shares under our compensation. We currently have remaining authorization to repurchase $97 million worth of stock through the end of July 2024 As we mentioned last quarter, as a result of the growth and margin improvement opportunities we see, we plan to meaningfully increase our total capital expenditures to an estimated range of $250 to $300 million in 2024, compared to approximately $180 million in 2023. Expansionary capital investments are expected to comprise $150 to $200 million of this total.

Keith: Good morning Peyton.

Keith: Hi.

Keith: The first question, perhaps starting with.

Keith: Decorators I saw that you talked about volumes up 4%, yet sales were up 10%.

Keith: Balanced price is it can you just give a little more color on that.

Keith: Yes, it's both.

Keith: <unk>.

Speaker Change: Sure Stone product continues to.

Speaker Change: Our strong growth rates and it's getting to the point, where it's almost as large as the WPC product, we sell and obviously that comes at a higher price and that's caused the higher.

Speaker Change: Sales increase than the unit increase.

Speaker Change: Got it and how big is the complete piece both WPC plus your story. So thank you <unk>.

Speaker Change: In total at this point 2023.

Speaker Change: I'm, sorry can you repeat them and that in total.

Speaker Change: Okay.

Speaker Change: It's about $150 million with the WPC being maybe $10 million higher than the.

Speaker Change: Mineral based composite.

Speaker Change: So a little over $300 million, both put together is that fair.

Speaker Change: No, it's a $150 million both put together.

Michael Richard Cole: We plan to continue to invest at this elevated level to capitalize on the automation and higher margin growth opportunities we see in each of our segments. Finally, we continue to pursue a pipeline of M&A opportunities that are a strong strategic fit while providing higher margin return and growth potential. Recently, we've seen more activity in our pipeline, which is encouraged. As a reminder, our first priority is to go through M&A, but if the opportunities aren't present or valuations aren't appropriate, we'll pivot to greenfield growth.

Speaker Change: Oh I see got it Okay 150 to 160 I don't have it in front of me, but that's about the number yes. Okay.

Speaker Change: Okay, perfect just setting by the way that railing is on top of that along with the other products we sell through decorators.

Speaker Change: Understood. Thanks for that matter of vacation and then switching to packaging.

Speaker Change: I know Mike in your outlook comments, you talked about sort of competitive price pressure Im curious just specifically on the packaging side.

Speaker Change: What are you seeing right now in terms of not just pricing pressure both on the structural packaging side on the pilot side.

Speaker Change: Yes.

Speaker Change: The market is still soft we I think we mentioned a couple of months ago. When we released we were hopeful that the first half of the year, we would reach a bottom.

Michael Richard Cole: I'll finish up with comments about our outlook for the rest of the year. We believe the soft demand and more competitive pricing we're currently experiencing will continue for most of the year, but we're cautiously optimistic we'll see year-over-year improvements beginning in the back half of the year due to more favorable comparisons. Our outlook is heavily dependent on the health of the economy, including the trajectory of interest.

Speaker Change: I think more anecdotally, we think thats the case it feels like.

Speaker Change: It doesn't feel like things are getting any worse from a from a pricing and a volume standpoint, and so now we'll be waiting for for things to turn.

Speaker Change: Understood that's helpful I'll jump back in the queue. Good luck.

Speaker Change: Thanks Becky.

Speaker Change: Thank you one moment for our next question.

Michael Richard Cole: By segment, we continue to plan for total housing starts that are essentially flat with last year, with a significant increase in single-family starts offset by a decrease in multiple-family starts. We're now planning for mid-single-digit declines in demand in retail and packaging. Softer than we originally anticipated, but prudent, we think, based on the current market. So while we manage through mixed conditions in the short term, we remain confident in our long-term growth and margin potential and continue to invest to properly position the company to capitalize on those opportunities. That's all I have on the financials, Matt. Thank you, Mike.

Speaker Change: And that will come from the line of Stephen <unk> with Sidoti Your line is open.

Stephen: Alright, good morning can you hear me.

Stephen: Yes, good morning.

Stephen: Alright.

Stephen: Any thoughts on the pricing trend.

Stephen: And the construction industry it might offer to your project.

Stephen: Prices were seeing to segment to decline before returning Mike I'm sorry.

Speaker Change: Okay.

Michael Richard Cole: Yes, I think if we kind of consider the overall construction market and we look at kind of the pricing metrics I think what youre seeing now is what I would call a more normalized view today.

Michael Richard Cole: I think in terms of pricing, we don't expect a lot of change relative to where we are in the current state came down versus a year ago, given the market conditions lumber market was tended to be higher a year ago. So there was some built in <unk>.

Matthew Jon Missad: Now I'd like to open it up to any questions that you may have. Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, press star 1-1 again.

Michael Richard Cole: Job that were pre purchased.

Michael Richard Cole: Now with the market being much more level it probably has a bias.

Operator: One moment while we compile the Q&A roster, and our first question will come from the line of Ketan Mamtora with BMO Capital Markets. Your line is open. Thank you. Good morning, Matt, Mike, and Dick.

Michael Richard Cole: My opinion anyway, it's leveled off at the current pricing levels. It will be a situation where demand is going to drive the differences.

Speaker Change: Alright, thank you.

Michael Richard Cole: Focusing on Pennsylvania.

Speaker Change: Outline your strategy for managing SG&A expenses expenses relative concern over the next year or so.

Ketan Mamtora: Well, first question, perhaps, you know, starting with decorators, I saw that you talked about volumes up 4%, yet sales were up 10%. So is the balance price, is it mixed? Can you just give a little more color on that? Yes, it's both.

Speaker Change: Specialty in the context of incremental investment how would your reports.

Michael Richard Cole: This environment.

Speaker Change: Sure and I think one of the things that I think we're very very good at and I give tons of credit to all of our leaders who are running our operations. They focus on SG&A costs every day and we have as I mentioned, some built in safeguards with respect to incentive compensation, which tends to be.

Matthew Jon Missad: I think the SureStone product continues to... have strong growth rates, and it's getting to the point where it's almost as large as the WPC product we sell. And obviously, that comes at a higher price, and that's caused a higher sales increase than the unit increase. Got it. And how big is the complete piece, both the WPC plus Shearstorms, the decorators, the decking in total at this point, or 2023? I'm sorry, can you repeat that? Bye! Bye!

Michael Richard Cole: A large variable cost item for us so that's automatically managed so if.

Michael Richard Cole: Stability is lower incentive compensation is lower and as I indicated none of us likes to lose so we want to make sure. We're winning so we're highly motivated to keep driving more efficiencies to manage those SG&A costs downward trends.

Michael Richard Cole: Trends are in a downward direction and to also keep a cap on them as we are growing.

Michael Richard Cole: We are making several investments on the SG&A side.

Michael Richard Cole: And innovation and new products, and marketing, which we talked about because we believe that's going to drive much more value in the future.

Matthew Jon Missad: It's about $150 million, with the WPC being maybe $10 million higher than the mineral-based composite. I see. So a little over $300 million both put together. Is that fair?

Michael Richard Cole: But in terms of looking at facility consolidations, which we discussed.

Michael Richard Cole: Looking at hiring personnel counts all of those things we take a very close look at that all the time and our goal is to not have event driven items, but rather manage that consistently on a day to day basis, and I think our teams do a terrific job of that.

Ketan Mamtora: No, it's $150 million both put together. Oh, I see. Got it. Okay, 150 to 160. I don't have it in front of me, but that's about the number.

Speaker Change: Alright. Thank you so much for taking my questions.

Matthew Jon Missad: Yep. Okay. Perfect. Just checking, by the way, that railing is now on top of that, along with the other products we sell. Understand? Thanks for that clarification.

Speaker Change: Thank you.

Speaker Change: Thank you one moment our next question.

Speaker Change: And that will come from the line of Reuben Garner with benchmark. Your line is open.

Reuben Garner: Thank you and good morning, everybody.

Reuben Garner: Sure.

Reuben Garner: So I guess first a clarification on the construction pricing where your comments about.

Michael Richard Cole: And then switching to packaging. I know, Mike, in your Outlook comments, you talked about some sort of competitive price pressure. I'm curious, specifically on the packaging side, what are you seeing right now in terms of, you know, just that pricing pressure, both on the structural packaging side and on the pallet side? Yeah, the market is still soft. We think we mentioned a couple of months ago when we released that we were hopeful that in the first half of the year, we'd reach a bottom. And I think, more anecdotally, we think that's the case.

Reuben Garner: I think you said something about locked in pricing was that multifamily side of your business that would have changed dramatically on a year over year basis, yes.

Reuben Garner: Yes, I think so Reuben I think as you know multifamily projects have a longer lead time, and so we're required to actually get inventory.

Reuben Garner: Sooner on those types of projects so.

Reuben Garner: Market, where it's high and then declining obviously that creates opportunity for expansion of margin.

Reuben Garner: Got it.

Ketan Mamtora: It feels like, doesn't feel like things are getting any worse from a pricing and a volume standpoint. And so now we'll be waiting for things to turn. Understandable. That's helpful. I'll jump back in the queue.

Reuben Garner: And then on the retail side pretty meaningful change in your outlook and a couple of months and I think you referenced more conservative inventory positioning from your customers I don't know if that was specific to big box or the independent retailers.

Ketan Mamtora: Good luck. [inaudible] Thank you. One moment for our next question, and that will come from the line of Stephan Guillaume with Sidoti. Hi, good morning, can you hear me?

Reuben Garner: In the press release, but just any color there more color there on what youre seeing or hearing is this an ongoing destocking or were you expecting.

Reuben Garner: Some sort of.

Stephan Guillaume: Yes, good morning. All right. Any thoughts on the pricing trend affecting the construction industry, like how far do you project prices within the segment to decline before reaching a state of stability? Yeah, I think if we kind of consider the overall construction market, we look at kind of the pricing metrics. I think what you're seeing now is what I'd call a more normalized view today.

Reuben Garner: Rebound earlier in the year that doesn't look like it's going to come to fruition at this point.

Speaker Change: Yes, that's a great question.

Reuben Garner: I would point to is the I'll call it reasonable optimism that the second half of the year was going to be significantly better because we were expecting interest rates to.

Reuben Garner: <unk> come down a little bit from the fed.

Reuben Garner: That doesn't appear to be happening. So that's the largest single issue I think we're just basically reflecting the difference.

Matthew Jon Missad: I think in terms of pricing, we don't expect a lot of change relative to where we are in the current state. It came down versus a year ago, given the market conditions. The lumber market tended to be higher a year ago, so there were some built-in jobs that were pre-purchased. Now, with the market being much more level, it probably has...

Reuben Garner: And we're looking at what we're seeing we're talking to our customers they are indicating.

Reuben Garner: A change from what even we had a couple of months ago because of the interest rate expectations.

Speaker Change: So we haven't lost any confidence in the business.

Matthew Jon Missad: In my opinion, anyway, it's leveled off at the current price. It'll be a situation where demand is going to drive the difference. All right, thank you. Focusing on SG&A, could you outline your strategy for managing SG&A expenses relative to sales over the next year or so, especially in the context of incremental investment? How would you approach this in a challenging environment?

Reuben Garner: We still believe that our share is strong and we have opportunities to gain share.

Reuben Garner: And we will certainly be doing our best to do that but we think overall demand without the interest rate drop is going to be kind of in line with where we are today as opposed to improving in the second half.

Speaker Change: And just one.

Speaker Change: Last quick follow up there.

Speaker Change: Your first quarter kind of mix between <unk> and <unk>.

Matthew Jon Missad: Sure, and one of the things that I think we're very, very good at, and I give tons of credit to all of our leaders who are running our operations, they focus on SG&A costs every day. And we have, as I mentioned, some built-in safeguards with respect to incentive compensation, which tends to be a large variable cost item for us. So that's automatically managed, so if profitability is lower, incentive compensation is lower.

Reuben Garner: Composites or.

Reuben Garner: Decorators would look something like that as the year progresses, where we may still see growth in the decorators side, almost offset by unit declines in the treated lumber.

Speaker Change: Yes, we would expect that I think it's also important ruben to note that.

Speaker Change: I am certainly not talking on a sequential basis I'm talking more relative to year over year, because second and third quarter, we still expect will be more.

Matthew Jon Missad: And as I indicated, none of us likes to lose, so we want to make sure we're winning, so we're highly motivated to keep driving more efficiencies to manage those SG&A costs downward when trends are in a downward direction and to also keep a cap on them as we're growing. We are making several investments on the SG&A side, in innovation and new products and marketing, which we talked about, because we believe that's going to drive much more value in the future.

Reuben Garner: In line kind of with seasonality typical seasonality.

Reuben Garner: But we do expect that decorators has opportunities to continue to grow and take share.

Speaker Change: Got it. Thank you guys I'll pass it on good luck. Thank you. Thanks David.

Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one one.

Speaker Change: And our next question that will come from the line of Kurt Yinger with D. A Davidson your line is open.

Kurt Willem Yinger: Great. Thanks, and good morning, everyone.

Kurt Willem Yinger: Good morning, Kurt.

Kurt Willem Yinger: I just wanted to go back to site built and hopefully put a bow on it but you talked about pricing and the idea that from a competitive standpoint, it seems like things have.

Matthew Jon Missad: But in terms of looking at facility consolidations, which we discussed, looking at hiring personnel counts, all those things, we take a very close look at that all the time, and our goal is to not have event-driven items but rather manage that consistently on a day-to-day basis, and I think our teams do a terrific job of that. All right, thank you so much for taking my question.

Kurt Willem Yinger: Kind of stabilize there is there.

Kurt Willem Yinger: Tail impacts from the multifamily dynamics.

Kurt: They continue to weigh on margins, even though pricing is generally stable at this point or do you think you've worked through those challenges as a whole.

Stephan Guillaume: Thank you. Thank you. One moment for our next question, and that will come from the line of Reuben Garner with Benchmark. Your line is open. Thank you. Good morning, everybody.

Speaker Change: That's a good question Kurt I'm not sure I have a great answer for you I guess, what I would look to is the consolidation in the industry over the last few years on the site built side.

Kurt: I think probably is a dynamic that needs to be considered as you think about what what's going out in the marketplace.

Reuben Garner: So, I guess, first, a clarification, Matt, on the construction pricing. Were your comments about, kind of, I think you said something about locked-in pricing. Was that the multifamily side of your business that would have changed dramatically on a year-over-year basis? Yeah, I think so, Reuben.

Speaker Change: We have expected that multifamily at some point in time would take a brief pause or.

Speaker Change: It appears that maybe thats, where we are as they wait for rates to improve.

Matthew Jon Missad: I think, as you know, multifamily projects have a longer lead time, and so we're required to actually get inventory sooner on those types of projects. So in a market where demand is high and then declining, obviously, that creates opportunity for Expansion of March. And then on the retail side, a pretty meaningful change in your outlook in a couple of months. And I think you referenced more conservative inventory positioning from your customers.

Speaker Change: So I think.

Speaker Change: My my outlook right now is that if demand stays relatively in this range that the pricing should stay relatively in this range.

Speaker Change: Got it okay.

Speaker Change: Thanks for that and then on the retail side.

Speaker Change: Is kind of striking to me looking at the gross margin.

Speaker Change: Very strong for that business.

Speaker Change: Which is surprising considering volumes seem to still be a little bit soft and not a whole heck of a lot going on in lumber. So maybe give us a little bit more color around what you saw there.

Matthew Jon Missad: I don't know if that was specific to big box or independent retailers in the press release, but just any color there, more color there on what you're seeing or hearing. Is this an ongoing destocking? Or were you expecting some sort of rebound earlier in the year that doesn't look like it's going to come to fruition at this point? Yeah, that's a great question.

Speaker Change: And whether there was anything from a mix perspective worth calling out with the transfer of certain sales to other segments.

Speaker Change: Yes, that's a good observation, Kurt and I think there might be a little bit of a head fake in there.

Speaker Change: No this well, but if we look at our if we look at how we price products there with a fixed adder.

Matthew Jon Missad: And I would point to the, I'll call it reasonable optimism, that the second half of the year was going to be significantly better because we were expecting interest rates to come down a little bit from the Fed. And that doesn't appear to be happening. So that's the largest single issue. I think we're just basically reflecting the difference.

Speaker Change: When the lumber market goes down obviously the percentage goes up.

Speaker Change: Even though the fixed at or is the same.

Speaker Change: I think youre seeing that as a big contributor.

Speaker Change: To this.

Speaker Change: This swing that you're observing there.

Speaker Change: Primarily driven more by the lower lumber market than by anything else.

Speaker Change: The team's been working really hard on operating improvements. So I know the retail team has added.

Matthew Jon Missad: And we're looking at what we're seeing. We're talking to our customers. They're indicating a change from what even we had a couple months ago because of the interest rate expectation. So we haven't lost any confidence in the business. We still believe that our share is strong, and we have opportunities to gain share. And we will certainly be doing our best to do that.

Speaker Change: Inventory managers inventories are much more.

Speaker Change: Much better positioned now than they've done in the past for using our.

Speaker Change: Better managed inventory programs more now than we have in the past.

Speaker Change: Last year, we were still integrating.

Speaker Change: Sunbelt team into our ERP systems, and operating practices, the edge team and kind.

Matthew Jon Missad: But we think overall demand without the interest rate drop is going to be kind of in line with where we are today, as opposed to improving in the second. And just one last quick follow-up there. Your first quarter kind of mixed between ProWood and Composites or decorators; would it look something like that as the year progresses where we may still see growth in the decorator side, and it's offset by unit declines in the treated lumber business? Yeah, we would expect that.

Speaker Change: Stubbed its toe out of the gate. So theres a lot there was a lot of opportunities for operating improvements and the team's just done it.

Speaker Change: Fantastic job on and getting after those.

Speaker Change: Gotcha.

Speaker Change: About a year ago, you guys acquired Cedar.

Speaker Change: Cedar Poly any.

Speaker Change: Noteworthy kind of updates in terms of integration.

Speaker Change: Savings.

Speaker Change: The combination of that and decorators has provided thus far.

Matthew Jon Missad: I think it's also important, Reuben, to note that I'm certainly not talking on a sequential basis; I'm talking more relative to year over year because the second and third quarters, we still expect them to be more in line kind of with seasonality, typical seasonality. But we do expect that Decorators has opportunities to continue to grow and take share. Got it. Thank you, guys. I'll pass it on.

Speaker Change: Yes, so if you look at Cedar probably we've essentially become.

Speaker Change: They are not exclusive necessarily we're pretty close to their exclusive customer for our wood plastic composite operations were exploring other opportunities to open that up for other materials, which could be used.

Speaker Change: With our sure stone technology.

Speaker Change: But.

Speaker Change: That's served us very well and in line with what we expected in terms of cost savings.

Speaker Change: And we are continuing to explore additional opportunities, including being able to utilize more recycled material in our finished products.

Reuben Garner: Good luck. Thank you. Thank you. As a reminder, if you would like to ask a question, please press star 1 1.

Speaker Change: Our commitment to quality once.

Operator: And our next question, that will come from the line of Kurt Yinger with DA Davidson. Great, thanks and good morning, everyone. Good morning, everybody.

Speaker Change: Requires us to make sure that quality comes first and if we can add more recycled content without hurting quality at all we will continue to do that.

Kurt Willem Yinger: I just wanted to go back to site built and hopefully put a bow on it. But you talked about pricing and the idea that, from a competitive standpoint, it seems like things have kind of stabilized there. Is there, you know, a tail impact from the multifamily dynamic that may continue to weigh on margins, even though pricing is generally stable at this point? Or do you think you've worked through those challenges as a whole?

Speaker Change: Gotcha, Okay, and then just last one here.

Speaker Change: Bind us.

Speaker Change: Any notable.

Speaker Change: Organic growth plans or sorry organic capital plans in the <unk> business this year and I guess as we look at the $100 million.

Speaker Change: Kind of growth related capex, how much of that is related to decorators capacity specifically this year.

Speaker Change: Yeah.

Speaker Change: Yes, I'll answer the first question first and Mike can probably give you the specific numbers.

Matthew Jon Missad: That's a good question, Kurt. I'm not sure I have a great answer for you. I guess what I would look at is the consolidation in the industry over the last few years on the site build side, I think, probably is a dynamic that needs to be considered as you think about what's going on in the marketplace. We've expected that multifamily at some point in time would take a brief pause, and it appears that maybe that's where we are as they wait for rates to improve.

Speaker Change: If we're allowed to give you the specific numbers, but what I would tell you is we have a significant amount built in for the site built group to expand both geographically and to improve.

Speaker Change: Certain locations, including relocating existing locations to larger more efficient facilities.

Michael Richard Cole: So that's baked into those numbers as well as adding decorators capacity, which we've talked about on prior calls and talked about a couple of months ago as well, we're excited about growing that capacity.

Matthew Jon Missad: So I think. My outlook right now is that if demand stays relatively in this range, then prices should stay relatively in this range. Got it, okay. And then on the retail side, it was kind of striking to me, looking at the gross margin, very strong for that business, which is surprising considering volumes seem to still be a little bit soft and not a whole heck of a lot going on in lumber. So maybe give us a little bit more color around what you saw there and whether there was anything from a mixed perspective worth calling out with the transfer of certain sales to other segments. Yeah, that's a good observation, Kurt. And I think there might be a little bit of a head fake in there.

Michael Richard Cole: Both in Selma and into location in the northeast so.

Michael Richard Cole: Those are all on the board for this year.

Michael Richard Cole: And we had I think we announced the project we approved to expand capacity for system last summer and Thats going to be completed here shortly and I think that that capacity probably adds another $100 million of sales potential.

Speaker Change: That business unit and then northeast site as is new for Us now.

Speaker Change: Got it so that'll be a capital I appreciate the color guys and last projects will result in some sales increases going forward.

Speaker Change: Okay got it. Thank you guys for the detail appreciate it.

Matthew Jon Missad: You know this well, but if we look at our, how we price products there with a fixed adder, when the lumber market goes down, obviously, the percentage goes up, even though the fixed adder is the same. So I think you're seeing that as a big contributor, this swing that you're observing there, primarily driven more by the lower lumber market than by anything else. And the team's been working really hard on operational improvements.

Speaker Change: Sure.

Speaker Change: Thank you I'm showing no further questions in the queue at this time I would like to turn the call back over to Mr. Matt massage for any closing remarks.

Matt: Well. Thank you again for spending the time with US today and 2024, we're not going to sit back and wait for the economy to improve.

Matt: Instead, we are going to get in the Olympic Spirit and do what we were trying to do.

Matt: Work hard take care of our customers take care of our teammates and win in the marketplace.

Matthew Jon Missad: So I know the retail team has added inventory managers, and inventories are much better positioned now than they've been in the past for using our Vendor Managed Inventory Programs more now than we have in the past. Last year, we were still integrating the Sunbelt team into our ERP systems and operating practices. The Edge team kind of stubbed its toe out of the gate, so there were a lot of opportunities for operating improvements, and the team did a great job. Fantastic job on getting that.

Matt: I'm confident our team will continue to drive success and as Tom Petty suggested.

Matt: Whatever it takes to make it better in 2024 have a great day.

Speaker Change: This concludes today's program. Thank you all for participating you may now disconnect.

Matthew Jon Missad: Gotcha. And, you know, about a year ago, you guys acquired Peter Pauly, any... noteworthy kind of updates in terms of integration and savings that the combination of that and decorators has provided thus far? Yeah, so if you look at Cedar Poly, we've essentially become, they're not necessarily their exclusive customer, but they're pretty close to being their exclusive customer for our wood plastic composite operation. We're exploring other opportunities to open that up for other materials which could be used with our SureStone technology.

Speaker Change: [music].

Matthew Jon Missad: But that's served us very well and in line with what we expected in terms of cost savings. And we are continuing to explore additional opportunities, including being able to utilize more recycled material in our finished products. Our commitment to quality requires us to make sure that quality comes first, and if we can add more recycled content without hurting quality at all, we'll continue to do that. Gotcha. Okay. And then just last one.

Matthew Jon Missad: Can you remind us of any notable organic growth plans or, sorry, organic capital plans in the site built business this year? And I guess as we look at the hundred million dollars of growth-related CapEx, how much of that is related to decorators' capacity specifically this year? Yeah, I'll answer the first question first.

Matthew Jon Missad: And Mike can probably give you the specific numbers, if we're allowed to give you the specific numbers. But what I would tell you is we have significant amounts built in for the site built group to expand both geographically and to improve certain locations, including relocating existing locations to larger, more efficient facilities. So that's baked into those numbers as well as adding decorator capacity, which we've talked about on prior calls and talked about a couple months ago as well. We're excited about growing that capacity both in Selma and in a location in the Northeast. They are all on the board for this.

Matthew Jon Missad: And we had a, I think we announced a project we approved to expand capacity for Sherstone last summer, and that's going to be completed here shortly. And I think that that capacity probably adds another hundred million in sales potential to that business unit. And then, and then the Northeast site is new for us. Got it. So that'll be a secret back soon.

Matthew Jon Missad: We'll appreciate it another guys. The last project will result in some sales increases going forward. Got it.

Kurt Willem Yinger: Thank you guys for the detail. I appreciate it. Thank you. Thank you. I'm showing no further questions in the queue at this time. I would like to turn the call back over to Mr. Matt Missad for any closing remarks.

Matthew Jon Missad: Well, thank you again for spending the time with us today. In 2024, we're not going to sit back and wait for the economy to improve. Instead, we are going to get in the Olympic spirit and do what we were trained to do, work hard, take care of our customers, take care of our teammates, and win in the marketplace. I am confident our team will continue to achieve success and, as Tom Petty suggested, do whatever it takes to make it better in 2024. Have a great day!

Operator: This concludes today's program. Thank you all for participating. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good day and welcome to the Q1 2024 UFP Industries, Inc. Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode.

Speaker Change: [music].

Matthew Jon Missad: So rather than wait for Johnny Nash to bring some clarity, the UFP team will continue to execute our plan, and we will rely on our experience and our balanced business model to continue to improve. While Mike will review the financial details, the overall picture includes net sales for the quarter of $1.64 billion and net earnings per share of $1.96. Net sales were down due to lower demand and a lower level of the lumber market, while EPS was above expectations, aided by a non-recurring tax benefit for the quarter.

Matthew Jon Missad: Retail Solutions. As a value-added manufacturer, seller, and self-distributor, our products provide solutions for the DIY consumer as well as the professional contractor. Overall, retail saw lower sales but better bottom-line results. Our ProWood and SunBelt units saw unit declines in the quarter from strong unit volumes a year ago, and we expect the balance of the year to be in line with adjusted forecasts from both Big Box and Large Independence.

Matthew Jon Missad: The Decorators product line continues to grow with modest unit increases this quarter. Once again, Decorators will be investing heavily in marketing to drive brand awareness and promote the industry-leading and patented SureStone technology, which we believe is the best composite substrate. In addition to marketing, we have increased our new product development spend, which will enable us to use planned capacity increases to drive additional products using the SureStone technology. The USP Edge Siding Pattern and Trim Products added additional third-party distribution in the quarter, which we expect will drive more growth later in the year.

Speaker Change: Good day and welcome to the Q1 2024, you F. P Industries, Inc earnings Conference call and webcast. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.

Speaker Change: You will then ear an automated message advising your hand is raised to withdraw your question Press Star. One again. Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker, Mr. <expletive> Coffee Vice President of Investor Relations. Please go ahead Sir.

Matthew Jon Missad: Growth expectations in site built housing have been tempered somewhat, particularly in the multifamily sector. While starts in 2024 are projected to be slightly up to slightly down from the 1.413 million actual housing starts in 2023, February starts were well above that target, while March starts were below the annual target. Some of the swings are attributable to different weather conditions in the markets year over year, but it does make predictions difficult. Factory built vehicles showed strong signs of improvement as unit sales increased and the team captured market share in the RV and cargo space.

Michael Richard Cole: Com a replay will also be available at that website before I turn the call over to Matt in a side, let me remind you that today's press release and presentation include forward looking statements as defined in the private Securities Litigation Reform Act of $19 95. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the companys expectations.

Michael Richard Cole: 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 I will now turn the call over to Matt <unk>.

Matthew Jon Missad: We have recognized the need to grow this area faster and drive more sales of both OEM products and aftermarket products. As part of our succession planning and to more quickly generate revenue from new products under the Recreate brand, Jonathan West, a highly talented and respected 30-year teammate and the current Executive Vice President of Factory Built, will transition to the important new role of Head of National Sales and Innovation for Factory Built, beginning in the third quarter of 2024. Chad Easton, a 25-year veteran with outstanding relationships throughout the markets we serve, will assume the Executive Vice President role of this business unit by September 30.

Matt: Thank you <expletive> and good morning, everyone. Thank you for joining our first quarter 2024 investor call.

Matt: First quarter was generally in line with expectations and I am proud of our team for dealing well with the uncertainty and still delivering strong results.

Matt: It remains difficult to have clear insight into the balance of the year.

Matt: The conflicting economic indicators and forecast by various economists have blurred the ability to make competent forecast.

Matt: While Mike will review the financial details. The overall picture includes net sales for the quarter of $1 64 billion and net earnings per share of $1 96.

Matthew Jon Missad: These changes underscore our commitment to be the best partner for our customers and to continue to drive more value-add in our products and services. However, in the packaging segment, demand expectations have been muted. The expectations for the year have been tempered by higher-for-longer interest rates, and the Purchasing Manager's Index dropped below 50 in March, which would suggest continued softness and end consumer demand for many of the runways. However, I am pleased with the team's ability to adjust to market conditions and remain on offense to provide better results.

Matt: Net sales were down due to lower demand and a lower level of lumber market, while EPS was above expectations aided by a nonrecurring tax benefit for the quarter.

Matt: We will discuss some of those improvements in a few moments.

Matt: First let's take a look at the segments.

Matt: Retail solutions.

Matt: I've added out value added manufacturer seller in south distributor our products provide solutions for the DIY consumer as well as the professional contractor.

Matt: Overall retail saw lower sales, but better bottom line results.

Matt: Our progress in Sunbelt unit saw unit declines in the quarter from strong unit volumes, a year ago, and we expect the balance of the year to be in line with adjusted forecast from both big box and large independents.

Matt: The UFP edge siding pattern and trim products added an additional third party distribution in the quarter, which we will which we expect will drive more growth later in the year.

Matt: The revised forecast for repair and remodel for the balance of 2024 indicates a year over year unit demand reduction in the mid single digit range.

Matt: The various indices also predict a rebound in 2025 and 2026.

Matt: Business in the construction segment was strong led by increases in both the site built in the factory build business unit.

Matt: With mortgage rates steadily around the 7% to 735% range growth expectations and site built have been tempered somewhat particularly in the multifamily sector.

Matt: While starts in 2024 are projected to be slightly up to slightly down from the 141 3 million actual housing starts in 2023 February starts we're well above that target while March starts were below the annual target.

Matthew Jon Missad: We enhanced the definition of new products to drive more value-added products and services and set a target of $510 million for 2024, the expected lower level of the lumber market for lumber-related products. Through the first quarter, we are on track to meet the annual target. In the purchasing area, with more capacity online and still more on the way, no significant moves are expected in the level of the lumber market. We expect that the mills will manage the supply side by taking production offline at less efficient mills to match market demand rather than to further erode their margins. On the transportation side, transportation costs have become more competitive, albeit at a higher level. Demand is lower for the transportation industry, while costs, including fuel and insurance, have increased.

Matt: Some of the swings are attributable to different weather conditions in the markets year over year, but it does make predictions difficult.

Matt: Factory built showed strong signs of improvement as unit sales increase and the team captured market share in the RV and cargo space.

Matt: We have recognized the need to grow this area of faster and drive more sales with both OEM products and after market products.

Matt: As part of our succession planning and to more quickly generate revenue from new products under the recreate brand Jonathan West a highly talented and respected 30 year teammate and the current executive Vice President of factory Bill will transition to the important new role as head of National sales and innovation for factory built beginning in the third.

Matt: <unk> 2024.

Matt: Chad East and a 25 year veteran with outstanding relationships throughout the markets. We serve will assume the executive Vice President role of this business unit by September 30th.

Matthew Jon Missad: So, in spite of lower demand, finding qualified drivers still continues to be a challenge. On the human capital side, we continue to seek quality applicants to help us grow and to strengthen our team. While the headline U3 unemployment data seems low, the more accurate U6 unemployment rate for March was 7.4%, up from 7% at the end of December. An estimated 303,000 full and part-time jobs were added in March, with more than half of those in non-profits and government. 39,000 were added to construction due, in part, to milder weather this year; jobs in manufacturing remained unchanged.

Matt: These changes underscore our commitment to be the best partner for our customers and to continue to drive more value add in our products and services.

Matt: In the packaging segment demand expectations have been muted.

Matt: However, I am pleased with the team's ability to adjust to the market conditions and remain on offense to provide better results.

Matt: They have consistently evaluated capacity internal cost and ability to create manufacturing efficiencies.

Matthew Jon Missad: Compensation and benefits continue to climb as rising minimum wage rates drive all other wage rates higher and fuel inflationary pressure as costs for goods and services rise. As a counter to these increases, our incentive compensation plans automatically adjust to reflect pre-bonus operating profits. When profits are down, incentives are reduced, which in turn encourages our team of high achievers to drive improvements faster. On the capital allocation side, our capital plan is centered on three areas: growth, investment in new products, technology, and our future, and providing strong returns to our shareholders.

Matt: Recent investments in automated equipment and operating changes coupled with demand forecasts have enabled facility to produce more in the same footprint.

Matt: As a result, we plan to consolidate seven facilities by the end of Q3 with expected annual cost savings in 2025 estimated at $8 million.

Matt: In addition, we are analyzing an additional four facilities and other product areas for possible consolidation or alternative paths to market by year end.

Matt: Balancing transportation costs and service to the customers are key considerations in the financial analysis for these locations.

Matthew Jon Missad: Whether via M&A or organic growth, we will aggressively pursue our runways. Acquisitions have been more challenging; however, the target pipelines have begun to expand, and we maintain our philosophy that if we are unable to acquire reasonably priced acquisition targets, we will grow organically. We have increased capital spending on organic growth, including greenfield growth, over the last few years. We expect to authorize $100 million in 2024 for these projects.

Matt: While there may be short term economic challenges the long term outlook for UFP packaging remains very strong.

Matt: We will continue to invest in automation innovation and acquisition to advance our goal of becoming a global packaging solutions provider.

Matt: Some items of interest in our focus areas and departments are new products.

Matt: New product sales for the first quarter were $124 million.

Matt: We enhanced the definition of new products to drive more value added products and services and set a target of $510 million for 2024.

Matthew Jon Missad: We expect another $100 million to be spent on new product capacity increases, technology investments, research and development, and innovation. And to ensure strong returns for our shareholders, the board declared a dividend of $0.33 per share payable on June 17, 2024, to shareholders of record as of June 3, 2024. And in our share repurchase plan, as of last week, we have repurchased 671,291 shares of stock and still have 97 million remaining on a repurchase authorization. It's $97 million.

Matt: It takes into account the expected lower level of the lumber market for lumber.

Matt: <unk> products.

Matt: Through the first quarter, we are on track to meet the annual target.

Matt: And the purchasing area with more capacity online and still more on the way no significant moves are expected in the level of the lumber market.

Matt: We expect that the mills will manage the supply side by taking production offline at less efficient mills to match market demand rather than to erode further erode their margins.

Matt: On the transportation side transportation costs have become more competitive, albeit at a higher level.

Matt: Demand is lower for the transportation industry, while costs, including fuel and insurance have increased.

Matt: So in spite of lower demand finding qualified drivers still continues to be challenging.

Matt: On the human capital side, we continue to see quality applicants to help us grow and to strengthen our team.

Matt: While the headline U three unemployment data seems low the more accurate usage unemployment rate for March was seven 4% up from 7% at the end of December and.

Matt: An estimated 303000 full and part time jobs were added in March with more than half of those and nonprofit and government.

Matt: <unk> 9000 were added in construction due in part to milder weather this year.

Matt: Jobs in manufacturing remained unchanged.

Matt: Compensation and benefits continue to climb as rising minimum wage rates drive all other wage rates higher and fuel inflationary pressure as costs for goods and services rise.

Matt: As counter to these increases our incentive compensation plans automatically adjust to reflect pre bonus operating profit.

Matt: When profits are down incentives are reduced which in turn encourages our team of high achievers to drive improvements faster.

Matt: On the capital allocation side, our capital plan centered on three areas.

Matt: Growth.

Matt: Investment in new products technology, and our future.

Matt: And providing strong returns to our shareholders.

Matt: Whether via M&A or organic growth, we will aggressively pursue our runways.

Matt: Acquisitions have been more challenging however, the target pipelines have begun to expand.

Matt: And we maintain our philosophy that we are if we are unable to acquire reasonably priced acquisition targets, we will grow organically.

Matt: We have increased capital spending on organic growth, including Greenfield growth over the last few years.

Matt: We expect the authorized $100 million in 2024 for these projects.

Matt: We expect another $100 million to be spent on new product capacity increases technology investments research and development and innovation.

Matt: And to ensure strong returns for our shareholders. The board declared a dividend of <unk> 33 per share payable on June 17, 2024 to shareholders of record as of June three 2024.

Michael Richard Cole: I was also pleased to see our cash cycle improve to 62 days this year from 71 days last year, which reduced our investment in net working capital and contributed to a $20 million improvement in our cash used in operations in a quarter that had a seasonal working capital deficit. Our trailing 12-month return on investment capital also remains at historically high levels at nearly 20 percent, about two times our weighted average cost.

Matt: And in our share repurchase plan as of last week, we have repurchased 671291 shares of stock and still have $97 million remaining on our repurchase of repurchase authorization to $97 million.

Matt: Even though we are pursuing growth strategies for the future. We are confident that our shares are a very good long term investment.

Matt: These purchases can sustain the current levels of demand and have kept our businesses all floating.

Matt: We could improve demand if we could provide lower cost to those who has limited resources have been decimated due to high energy costs and inflationary impacts on basic necessities, such as housing transportation and food.

Matt: I would endorse reducing inflation and providing relief by allowing the markets to work reducing costs, such as energy education and unnecessary regulations.

Speaker Change: I won't hold my breath waiting for the adoption of my suggestions. So we will continue to drive our business execute our strategies and create value for our shareholders.

Speaker Change: Now I'd like to turn it over to Mike Cole to review the financial information.

Michael Richard Cole: Thank you Matt.

Michael Richard Cole: Our consolidated results. This quarter include a 10% drop in sales to $1 64 billion largely driven by a 9% reduction in selling prices while unit sales declined by just 1%.

Michael Richard Cole: The decline in selling prices resulted from a drop in lumber and more competitive pricing in certain business units.

Michael Richard Cole: Our overall unit sales held up well this quarter in spite of a more challenging demand environment due to the strength of our balanced business model.

Michael Richard Cole: While adjusted EBITDA dropped tenant 10, 5% to 181 million. We're pleased to report our adjusted EBITDA margin remained well above historical levels and improved sequentially from Q4 to 11%.

Matt: Our trailing 12 month return on invested capital also remains at historically high levels and nearly 20% about two times, our weighted average cost to capital.

Matt: We've significantly increased our dividends and share repurchases this year and our balance sheet remains strong with a net cash surplus of $703 million this year compared to $145 million last year.

Matt: Moving on to our segments sale.

Matt: Sales in our retail segment dropped 17% to $629 million, consisting of a 6% decline in selling prices, a 3% decline due to transfers of certain product sales to other segments and an 8% decline in unit sales.

Michael Richard Cole: The year-over-year decline in gross profits was offset by an $11 million decrease in SG&A, resulting from a drop in incentive compensation expenses. Consequently, operating profits in the packaging segment declined by $24 million to $31 million. Turning to construction,

Matt: The unit decline was comprised of a 9% drop in volume with big box customers and a 7% decline in volume with independent retailers due to soft demand and more conservative inventory positioning.

Matt: By business unit, we experienced a 9% unit decline in <unk> that was partially offset by a 4% unit gains in our sales and decorators decking and railing products, which continues to experience solid demand.

Matt: In spite of lower overall demand in sales volumes in the retail segment. We're pleased to report a $6 million increase in our gross profit for the quarter driven by a variety of factors, including better inventory management, SKU rationalization and operating improvements in each of our business units.

Matt: Operating profits also improved by $6 million as SG&A expenses were flat.

Matt: Moving on to packaging sales in this segment dropped 13% to $424 million, consisting of an 11% decline in selling prices.

Michael Richard Cole: These volume increases were offset by declines in our commercial and concrete forming businesses. The decline in selling prices was primarily experienced in our site built and concrete forming business units, which, along with the unit declines I mentioned, resulted in a seven million dollar reduction in our overall gross profits for the quarter. When combined with a $2 million increase in SG&A, our operating profits declined by $9 million to $45 million for the quarter.

Matt: And a 6% decrease in units, partially offset by a 4% increase as a result of the transfer from retail.

Matt: As we mentioned over the last couple of quarters customer demand continues to be soft and that's contributed to more competitive pricing.

Matt: As a result of these factors gross profit dropped by $35 million year over year for the quarter, but we are encouraged by the sequential improvement in sales and gross profit since Q4.

Matt: The year over year decline in gross profits was offset by an $11 million decrease in SG&A, resulting from a drop in incentive compensation expenses.

Matt: Consequently, operating profits in the packaging segment declined by 24 million to $31 million.

Matt: Turning to construction sales in this segment were flat at $518 million of the 10% decline in selling prices was offset by an 8% gain in units and a 2% increase as a result of the transfer from retail.

Matt: The improvement in volume was due to our site built unit, which increased 18% in our factory built unit, which increased 16%.

Matt: Comparatively national year over year housing starts from December to February increased 7% and year to date factory built home shipments increased 17%. These.

Matt: These volume increases were offset by declines in our commercial and concrete forming business units.

Matt: The decline in selling prices was primarily experienced in a slight build in concrete forming business units, which along with the unit declines I mentioned resulted in a $7 million reduction in our overall gross profits for the quarter.

Matt: When combined with a $2 million increase in SG&A or operating profits declined by 9 million to $45 million for the quarter.

Matt: As we manage through this cycle. Each segment continues to focus on executing our strategies to grow our portfolio with value added products our year to date ratio of value added sales to total sales improved slightly to 69% this year.

Matt: And our ratio of new product sales to total sales also improved slightly to seven 6% this year.

Matt: We're also mindful of our cost structure in this environment as we ensure the company is appropriately sized relative to demand, while still providing the resources needed to execute our long term strategies.

Matt: Our SG&A expenses came in on plan for the quarter and were $3 million lower than last year, primarily driven by lower bonus and sales incentives offset by higher base wages and benefit costs.

Matt: Moving on to our cash flow statement, our cash flow used in operations was $17 million compared to $37 million last year. As a reminder, in Q1 and Q2, we experienced a seasonal increase in net working capital, which is converted into cash flow in Q3 and Q4.

Michael Richard Cole: Our target for the year is $250 to $300 million, and we've already approved $100 million in projects with another $200 million of requests in our pipeline for evaluation as we continue to invest to support our long-term growth strategy. As a reminder, our expansionary capital investments are primarily focused on three key areas: expanding our capacity to manufacture new and value-added products; geographic expansion and CORE Higher Margin Businesses, and Achieving Efficiencies Through Automation.

Matt: The $20 million improvement over last year was due to lower volumes in lumber prices and an improvement in our cash cycle, all of which reduced our investment in net working capital or.

Matt: Our cash cycle. This year decreased to 62 days from 71 days last year due to a two day improvement in our receivables cycle as our receivables remain a healthy 95% current and a seven day improvement in our days supply of inventory due to our construction segment.

Matt: Our investing activities included $49 million and capital expenditures, our target for the year is $250 million to $300 million and we've already approved a $100 million of projects with another $200 million of requests in our pipeline for evaluation as we continue to invest to support our long term growth strategy.

Matt: As a reminder, our expansionary capital investments are primarily focused on three key areas expanding our capacity to manufacture new and value added products.

Matt: Geographic expansion in core higher margin businesses.

Matt: And achieving efficiencies through automation.

Matt: Finally, our financing activities included returning capital to shareholders through almost $20 million of dividends and $37 million of share repurchases.

Matt: Turning to our capital structure and resources, we continue to have a strong balance sheet with $703 million in surplus cash and in excess of debt compared to $145 million last year.

Michael Richard Cole: With respect to capital allocation, we plan to continue to pursue a balanced and return-driven approach between dividends, share buybacks, capital investments, and M&A. As we've discussed in the past, our highest priority for capital allocation is to drive organic and inorganic growth that results in higher margins and returns. Our strategy also includes continuing to grow our dividends in line with our free cash flow growth and repurchase our stock to offset dilution from share-based compensation, and we will continue to opportunistically buy back more stock when it's trading at a discounted value. Most recently, our board approved a quarterly dividend of $0.33 a share to be paid in June, representing a 32% increase from the rate paid a year ago.

Matt: And our total liquidity was $2 2 billion, which consists of cash of nearly $1 billion and more than $1 2 billion in availability under long term lending agreements.

Matt: With respect to capital allocation, we plan to continue to pursue a balanced returns driven approach between dividends share buybacks capital investments and M&A.

Matt: As we've discussed in the past our highest priority for capital allocation is to drive organic and inorganic growth that results in higher margins and returns.

Matt: Our strategy also includes continuing to grow our dividends in line with our free cash flow growth and repurchase our stock to offset dilution from share based compensation plans.

Matt: We will continue to Opportunistically buy back more stock when it's trading at a discounted value.

Matt: Most recently, our board approved a quarterly dividend of <unk> 33, a share to be paid in June representing a 32% increase from the rate paid a year ago.

Michael Richard Cole: Through the end of last week, we repurchased 671,000 shares of stock at an average price of $114.43, offsetting the issuance of 450,000 shares under our compensation. We currently have remaining authorization to repurchase $97 million worth of stock through the end of July 2024. As we mentioned last quarter, as a result of the growth and margin improvement opportunities we see, we plan to meaningfully increase our total capital expenditures to an estimated range of $250 to $300 million in 2024, compared to approximately $180 million in 2023. Expansionary capital investments are expected to comprise $150 to $200 million of this total.

Matt: Through the end of last week, we repurchased 671000 shares.

Matt: Stock at an average price of $114 43.

Matt: Offsetting the issuance of 450000 shares under our compensation plans.

Matt: We currently have remaining authorization to repurchase $97 million worth of stock through the end of July 2024.

Matt: As we mentioned last quarter as a result of the growth and margin improvement opportunities. We see we plan to meaningfully increase our total capital expenditures to an estimated range of $250 million to $300 million in 2024 compared to approximately $180 million in 2023.

Matt: Expansionary capital investments are expected to comprise of $150 million to $200 million of this total.

Michael Richard Cole: We plan to continue to invest at this elevated level to capitalize on the automation and higher margin growth opportunities we see in each of our sectors. Finally, we continue to pursue a pipeline of M&A opportunities that are a strong strategic fit while providing higher margins, return, and growth potential. Recently, we've seen more activity in our pipeline, which is encouraging. As a reminder, our first priority is to go through M&A, but if the opportunities aren't present or valuations aren't appropriate, we'll pivot to greenfield growth.

Matt: We plan to continue to invest at this elevated level to capitalize on the automation and higher margin growth opportunities, we see in each of our segments.

Matt: Finally, we continue to pursue a pipeline of M&A opportunities that are a strong strategic fit while providing higher margin return and growth potential.

Matt: Recently, we've seen more activity in our pipeline, which is encouraging as a reminder, our first priority is to grow through M&A, but if the opportunities aren't present, where valuations are appropriate we will pivot to greenfield growth.

Matt: I'll finish up with comments about our outlook for the rest of the year.

Matt: We believe the soft demand and more competitive pricing. We are currently experiencing will continue for most of the year, but we're cautiously optimistic we'll see year over year improvements beginning in the back half of the year due to more favorable comparisons.

Matt: Our outlook is heavily dependent on the health of the economy, including the trajectory of interest rates.

Michael Richard Cole: By segment, we continue to plan for total housing starts that are essentially flat with last year, with a significant increase in single-family starts offset by a decrease in multiple-family starts. We're now planning for mid-single-digit declines in demand in retail and packaging. However, softer than we originally anticipated, but prudent, we think, based on the current market. So, while we manage through mixed conditions in the short term, we remain confident in our long-term growth and margin potential and continue to invest to properly position the company to capitalize on those opportunities.

Matt: By segment, we continue to plan for total housing starts that are essentially flat with last year with a significant increase in single family starts offset by a decrease in multifamily.

Matt: We're now planning for mid single digit declines in demand in retail and packaging softer than we originally anticipated, but prudent we think based on current market conditions.

Matt: So while we manage through mixed conditions in the short term, we remain confident in our long term growth and margin potential and continue to invest in properly to properly position the company to capitalize on those opportunities.

Michael Richard Cole: That's all I have on the financials, Matt. Thank you, Mike. Now I'd like to open it up for any questions that you may have. Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, press star 1-1 again.

Matt: So all I have in financials Matt.

Matt: Thank you Mike now I'd like to open it up for any questions that you may have.

Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question Press Star one again.

Michael Richard Cole: One moment while we compile the Q&A roster, and our first question will come from the line of Ketan Mamtora with BMO Capital Markets. Your line is open. Thank you. Good morning, Matt, Mike, and Dick.

Speaker Change: One moment, while we compile the Q&A roster.

Matt: And our first question will come from the line of Kian <unk> with BMO capital markets. Your line is open.

Kian: Thank you good morning, Mike and Dave.

Kian: Good morning Peyton.

Kian: Okay.

Kian: The first question, perhaps starting with.

Kian: Decorators I saw that you talked about volumes up 4%, yet sales were up 10%.

Kian: Balanced price is it can you just give a little more color on that.

Kian: Yes, it's both.

Matthew Jon Missad: I think the SureStone product continues to... have strong growth rates, and it's getting to the point where it's almost as large as the WPC product we sell. And obviously, that comes at a higher price, and that's caused a higher sales increase than the unit increase. And how big is the complete piece, both the WPC plus Shearstones, the decorators, the decking in total at this point or in 2023? I'm sorry, can you repeat that?

Kian: <unk>.

Speaker Change: Sure Stone product continues to.

Kian: Have a strong growth rates and it's getting to the point, where it's almost as large as the WPC product. We saw an average obviously that comes at a higher price and that's caused the higher.

Kian: Sales increase than the unit increase.

Speaker Change: Got it.

Kian: How big is the complete piece, both WPC plus your storm so backward the deck.

Kian: In total at this point 2023.

Speaker Change: I'm, sorry can you repeat them and that in total.

Ketan Mamtora: It's about $150 million, with the WPC being maybe $10 million higher than the mineral-based composition. I see. So a little over $300 million both put together. Is that fair?

Speaker Change: Okay.

Kian: It's about $150 million with the WPC being maybe $10 million higher than the.

Kian: Mineral based composite.

Kian: So a little over $300 million, both put together is that fair.

Matthew Jon Missad: No, it's $150 million both put together. Oh, I see. Got it. Okay, 150 to 160. I don't have it in front of me, but that's about the number.

Speaker Change: No, it's a $150 million both put together.

Speaker Change: Oh I see got it Okay 150 to 160 I don't have it in front of me, but that's about the number yes. Okay.

Ketan Mamtora: Yep. Okay. Perfect. Just checking, by the way, that railing is now on top of that, along with the other products we sell. Understand? Thanks for that clarification.

Kian: Okay, perfect just setting by the way that railing is on top of that along with the other products we sell through decorators.

Speaker Change: Understood. Thanks for that clarification, and then switching to packaging.

Matthew Jon Missad: And then switching to packaging. I know, Mike, in your Outlook comments, you talked about some sort of competitive price pressure. I'm curious, specifically on the packaging side, what are you seeing right now in terms of not just that pricing pressure, both on the structural packaging side and on the pallet side? Yeah, the market is still soft. We think we mentioned a couple of months ago when we released that we were hopeful that in the first half of the year, we'd reach a bottom. And I think, more anecdotally, we think that's the case.

Speaker Change: I know Mike in your outlook comments, you talked about sort of competitive price pressure Im curious just specifically on the packaging side.

Speaker Change: What are you seeing right now in terms of not just pricing pressure both on the structural packaging side on the on the pilot side.

Speaker Change: Yes.

Speaker Change: The market is still soft we think we mentioned a couple of months ago. When we released we were hopeful that the first half of the year, we would reach a bottom.

Speaker Change: I think more anecdotally, we think thats the case it feels like.

Michael Richard Cole: It feels like, doesn't feel like things are getting any worse from a pricing and a volume standpoint. And so now we'll be waiting for things to turn. Understandable. That's helpful. I'll jump back in the queue.

Speaker Change: Doesn't feel like things are getting any worse from a from a pricing and a volume standpoint, and so now we'll be waiting for for things to turn.

Speaker Change: Understood that's helpful I'll jump back in the queue. Good luck.

Ketan Mamtora: Good luck. [inaudible] Thank you. One moment for our next question, and that will come from the line of Stephan Guillaume with Sidoti. All right, good morning. Can you hear me?

Speaker Change: Thanks Becky.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And that will come from the line of Stephen <unk> with Sidoti Your line is open.

Stephan Guillaume: yet that morning. All right. Any thoughts on the pricing trend affecting the construction industry, like how far do you project prices within the segment to decline before reaching a state of stability? Yeah, I think if we kind of consider the overall construction market, we look at kind of the pricing metrics. I think what you're seeing now is what I'd call a more normalized view today. I think, in terms of pricing, we don't expect a lot of change relative to where we are in the current state.

Stephen: Alright, good morning can you hear me.

Stephen: Yes, good morning.

Stephen: Alright.

Stephen: Any thoughts on the pricing trend.

Stephen: The construction industry it might offer to your project.

Stephen: Prices were seeing to segment to decline before returning mic.

Stephen: It looks to me.

Speaker Change: Yes, I think if we kind of consider the overall construction market and we look at kind of the pricing metrics I think what youre seeing now is what I would call a more normalized view today.

Speaker Change: I think in terms of pricing, we don't expect a lot of change relative to where we are in the current state came down versus a year ago, given the market conditions lumber market was tended to be higher a year ago. So there was some built in <unk>.

Stephan Guillaume: It came down versus a year ago given the market conditions. The lumber market tended to be higher a year ago, so there were some built-in jobs that were pre-purchased. Now with the market being much more level, it probably has, in my opinion anyway, leveled off at the current price.

Speaker Change: Job that were pre purchased.

Speaker Change: Now with the market being much more level it probably has a bias.

Speaker Change: My opinion anyway, it's leveled off at the current pricing levels. It will be a situation where demand is going to drive the differences.

Matthew Jon Missad: It'll be a situation where demand is going to drive the difference. Alright, thank you. Focusing on SG&A, could you outline your strategy for managing SG&A expenses relative to sales over the next year or so, especially in the context of incremental investment? How would you approach this in a challenging environment?

Speaker Change: Alright, thank you.

Speaker Change: Focusing on SG&A could you.

Speaker Change: Outline your strategy for managing SG&A expenses expenses relative to sales over the next year or so.

Speaker Change: Especially in the context of incremental investment how would your reports.

Speaker Change: So congrats on that.

Speaker Change: A large variable cost item for us. So that's automatically managed so if profitability is lower incentive compensation is lower and as I indicated none of us likes to lose so we want to make sure. We're winning so we're highly motivated to keep driving more efficiencies to manage those SG&A.

Speaker Change: Cost downward when trends are in a downward direction.

Speaker Change: And to also keep a cap on them as we are growing.

Speaker Change: We are making several investments on the SG&A side.

Speaker Change: And innovation and new products, and marketing, which we talked about because we believe that's going to drive much more value in the future.

Matthew Jon Missad: But in terms of looking at facility consolidations, which we discussed, looking at hiring staff counts, all those things, we take a very close look at that all the time. And our goal is to not have event-driven items but rather manage that consistently on a day-to-day basis. And I think our teams do a terrific job of that.

Speaker Change: But in terms of looking at facility consolidations, which we discussed.

Speaker Change: Looking at hiring personnel counts all of those things we take a very close look at that all the time and our goal is to not have event driven items, but rather manage that consistently on a day to day basis, and I think our teams do a terrific job of that.

Stephan Guillaume: Alright, thank you so much for taking my question. Thank you. Thank you. One moment for our next question, and that will come from the line of Reuben Garner with Benchmark. Your line is open. Thank you. Good morning, everybody.

Speaker Change: Alright. Thank you so much for taking my questions.

Speaker Change: Thank you.

Speaker Change: Thank you one moment our next question.

Speaker Change: And that will come from the line of Reuben Garner with benchmark. Your line is open.

Reuben Garner: Thank you good morning, everybody.

Reuben Garner: So, I guess, first, clarification, Matt, on the construction pricing. Were your comments about kind of, I think you said something about locked-in pricing. Was that the multifamily side of your business that would have changed dramatically on a year-over-year basis? Yeah, I think so, Reuben.

Reuben Garner: Sure.

Reuben Garner: So I guess first a clarification, Matt on the construction pricing where your comments about.

Reuben Garner: I think you said something about locked in pricing was that multifamily side of your business that that would have changed dramatically on a year over year basis, yes.

Matthew Jon Missad: I think, as you know, multifamily projects have a longer lead time, and so we're required to actually get inventory sooner on those types of projects. So in a market where demand is high and then declining, obviously, that creates opportunity for Expansion of Mars. And then on the retail side, a pretty meaningful change in your outlook in a couple of months. And I think you referenced more conservative inventory positioning from your customers. I don't know if that was specific to big box or independent retailers in the press release, but just any color there, more color there on what you're seeing or hearing.

Matt: Yes, I think so Reuben I think as you know multifamily projects have a longer lead time, and so we're required to actually get inventory.

Matt: Sooner on those types of projects so.

Matt: In a market, where it's high and then declining obviously that creates opportunity for expansion of margin.

Matt: Got it.

Matt: And then on the retail side pretty meaningful change in your outlook.

Matt: Couple of months and I think you referenced more conservative inventory positioning from your customers I don't know if that was specific to big box or the independent retailers.

Matt: In the press release, but just any color there more color there on what youre seeing or hearing is this an ongoing destocking or were you expecting.

Matthew Jon Missad: Is this an ongoing destocking, or were you expecting some sort of, you know, rebound earlier in the year that doesn't look like it's going to come to fruition at this point? Yeah, that's a great question.

Matt: Some sort of.

Matt: Rebound earlier in the year that doesn't look like it's going to come to fruition at this point.

Speaker Change: Yes, that's a great question.

Matt: I would point to is the I'll call it reasonable optimism that the second half of the year was going to be significantly better because we were expecting interest rates to.

Matt: <unk> come down a little bit from the fed.

Matt: That doesn't appear to be happening. So that's the largest single issue I think we're just basically reflecting the difference.

Matt: And we're looking at what we're seeing we're talking to our customers they are indicating.

Matt: A change from what even we had a couple of months ago because of the interest rate expectations.

Matthew Jon Missad: So we haven't lost any confidence in the business. We still believe that our share is strong, and we have opportunities to gain share. And we will certainly be doing our best to do that, but we think overall demand without the interest rate drop is going to be kind of in line with where we are today, as opposed to improving in the second half. And just one last quick follow-up there. Your first quarter will be a kind of mix between ProWood and Composites or decorators.

Speaker Change: So we haven't lost any confidence in the business.

Speaker Change: We still believe that our share is strong and we have opportunities to gain share.

Speaker Change: And we will certainly be doing our best to do that but we think overall demand without the interest rate drop is going to be kind of in line with where we are today as opposed to improving in the second half.

Speaker Change: And just one.

Speaker Change: Last quick follow up there.

Speaker Change: Your first quarter kind of mix between <unk> and <unk>.

Speaker Change: Composites or.

Matthew Jon Missad: Would it look something like that as the year progresses, where we may still see growth on the decorator's side, and it's offset by unit declines in treated lumber? Yeah, we would expect that. I think it's also important, Reuben, to note that I'm certainly not talking on a sequential basis. I'm talking more relative to year over year because the second and third quarter, we still expect, will be more in line kind of with seasonality, typical seasonality.

Speaker Change: Decorators would it look something like that as the year progresses, where we may still see growth in the decorators side, almost offset by unit declines in the treated lumber visible.

Speaker Change: Yes, we would expect that I think it's also important rubin to note that.

Speaker Change: I'm certainly not talking on a sequential basis I'm talking more relative to year over year, because second and third quarter, we still expect will be more.

Speaker Change: In line with seasonality typical seasonality.

Reuben Garner: But we do expect that Decorators will have opportunities to continue to grow and take share. Got it. Thank you, guys. I'll pass it on.

Speaker Change: But we do expect that decorators has opportunities to continue to grow and take share.

Speaker Change: Got it. Thank you guys I'll pass it on good luck. Thank you. Thanks Stephen.

Operator: Good luck. Thank you. Thank you. As a reminder, if you would like to ask a question, please press star 11. And our next question will come from the line of Kurt Yinger with DA Davidson. Great, thanks, and good morning, everyone. I just wanted to go back to site built and, hopefully, put a bow on it.

Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one one.

Speaker Change: And our next question that will come from the line of Kurt Yinger with D. A Davidson your line is open.

Kurt Willem Yinger: Great. Thanks, and good morning, everyone.

Kurt Willem Yinger: Good morning, Kurt.

Kurt Willem Yinger: I just wanted to go back to site built and hopefully put a bow on it but you talked about pricing and the idea that from a competitive standpoint, it seems like things have.

Kurt Willem Yinger: But you talked about pricing, and the idea that from a competitive standpoint, things seem like things have kind of stabilized there. Is there, you know, a tail impact from the multifamily dynamic that, you know, may continue to weigh on margins, even though pricing is generally stable at this point? Or do you think you've worked through those challenges as a whole?

Kurt Willem Yinger: Kind of stabilize there is there.

Kurt Willem Yinger: <unk> impact from the multifamily dynamics.

Kurt Willem Yinger: They continue to weigh on margins, even though pricing is generally stable at this point or do you think you've worked through those challenges as a whole.

Speaker Change: That's a good question Kurt I'm not sure I have a great answer for you I guess, what I would look to is the <unk>.

Kurt Willem Yinger: <unk> in the industry over the last few years on the site built side.

Kurt Willem Yinger: I think probably is a dynamic that needs to be considered as you think about what what's going out in the marketplace.

Kurt Willem Yinger: We have expected that multifamily at some point in time would take a brief pause or.

Kurt Willem Yinger: It appears that maybe thats, where we are as they wait for rates to improve.

Kurt Willem Yinger: So I think.

Kurt Willem Yinger: My my outlook right now is that if demand stays relatively in this range that the pricing should stay relatively in this range.

Speaker Change: Got it okay. Thanks.

Kurt Willem Yinger: And then on the retail side, it was kind of striking to me looking at the gross margin. Very strong for that business, which is surprising considering volumes seem to still be a little bit soft and not a whole heck of a lot going on in lumber. So maybe give us a little bit more color around what you saw there and whether there was anything from a mixed perspective worth calling out with the transfer of certain sales to other segments. Yeah, that's a good observation, Kurt. And I think there might be a little bit of a head fake in there.

Speaker Change: Thanks for that and then on the retail side.

Kurt Willem Yinger: Is kind of striking to me looking at the gross margin.

Kurt Willem Yinger: Very strong for that business.

Kurt Willem Yinger: Which is surprising considering volumes seem to still be a little bit soft and not a whole heck of a lot going on in lumber. So maybe give us a little bit more color around what you saw there.

Kurt Willem Yinger: Whether there is anything from a mix perspective worth calling out with the transfer of certain sales to other segments.

Speaker Change: Yes, that's a good observation, Kurt and I think there might be a little bit of a head fake in there.

Matthew Jon Missad: You know this well, but if we look at our, how we price products there with a fixed adder, when the lumber market goes down, obviously, the percentage goes up, even though the fixed data is the same. So I think you're seeing that as a big contributor to this swing that you're observing there, primarily driven more by the lower lumber market than by anything else. And the team's been working really hard on operational improvements.

Speaker Change: Know this well, but if we look at our if we look at how we price products there with it.

Speaker Change: Fixed adder.

Speaker Change: When the lumber market goes down obviously the out of the percentage goes up.

Speaker Change: Even though the fixed data is the same so I think youre seeing that as a big contributor.

Kurt Willem Yinger: To this.

Kurt Willem Yinger: This swing that you're observing there.

Kurt Willem Yinger: Primarily driven more by the lower lumber market than by anything else.

Kurt Willem Yinger: And the team has been working really hard on operating improvements. So I know the retail team has added.

Matthew Jon Missad: So I know the retail team has added inventory managers. Inventories are in a much better position now than they've been in the past. Vendor Managed Inventory Programs more now than we have in the past. Last year, we were still integrating the Sunbelt team into our ERP systems and operating practices. The Edge team kind of stubbed its toe out of the gate, so there were a lot of opportunities for operating improvements, and the team did a fantastic job. Great job on getting that.

Kurt Willem Yinger: Inventory managers inventories are much more.

Kurt Willem Yinger: Much better positioned now than they've done in the past we are using our <unk>.

Kurt Willem Yinger: Vendor managed inventory programs more now than we have in the past.

Kurt Willem Yinger: Last year, we were still integrating.

Kurt Willem Yinger: Sunbelt team into our ERP systems, and operating practices, the edge team and kind of stuff that's totally out of the gate. So there is a there was a lot of opportunities for operating improvements and the team's just done it.

Kurt Willem Yinger: Fantastic job on getting after those.

Matthew Jon Missad: Gotcha. And, you know, about a year ago, you guys acquired Peter Pauly, any... noteworthy kind of updates in terms of integration and savings that the combination of that and decorators has provided thus far? Yeah, so if you look at Cedar Poly, we've essentially become, they're not exclusive necessarily, but we're pretty close to their exclusive customer for our wood plastic composite operation. We're exploring other opportunities to open that up for other materials which could be used with our SureStone technology.

Kurt Willem Yinger: Gotcha.

Kurt Willem Yinger: About a year ago, you guys acquired.

Kurt Willem Yinger: Cedar Poly any yes.

Kurt Willem Yinger: Noteworthy kind of updates in terms of integration.

Kurt Willem Yinger: Savings that the combination of that and decorators has provided thus far.

Kurt Willem Yinger: Yes, so if you look at Cedar Poly.

Kurt Willem Yinger: Essentially become.

Kurt Willem Yinger: They are not exclusive necessarily we're pretty close to their exclusive customer for our wood plastic composite operations were exploring other opportunities to open that up for other materials, which could be used.

Kurt Willem Yinger: Our sure stone technology.

Kurt Willem Yinger: That's served us very well and in line with what we expected in terms of cost savings.

Kurt Willem Yinger: And we are continuing to explore additional opportunities, including being able to utilize more recycled material in our finished products.

Kurt Willem Yinger: Our commitment to quality once.

Kurt Willem Yinger: Requires us to make sure that quality comes first and if we can add more recycled content without hurting quality at all we will continue to do that.

Matthew Jon Missad: Gotcha. Okay. And then just last one, can you remind us of any notable organic growth plans or, sorry, organic capital plans in the site built business this year? And I guess as we look at the $100 million of growth-related CapEx, how much of that is related to decorators' capacity specifically this Yeah, I'll answer the first question first. And Mike can probably give you the specific numbers, if we're allowed to give you the specific numbers.

Speaker Change: Gotcha, Okay, and then just.

Speaker Change: Last one.

Speaker Change: Can you remind us any notable.

Speaker Change: Organic growth plans or sorry organic capital plans in the <unk> business this year and I guess as we look at the $100 million.

Speaker Change: Growth related capex, how much of that is related to decorators capacity specifically this year.

Speaker Change: Yes, I'll answer the first question first and Mike can probably give you the specific numbers.

Matthew Jon Missad: But what I would tell you is we have significant amounts built in for the site built group to expand both geographically and to improve certain locations, including relocating existing locations to larger, more efficient facilities. So that's baked into those numbers as well as adding decorators capacity, which we've talked about on prior calls and talked about a couple months ago as well. We're excited about growing that capacity both in Selma and at another location in the Northeast.

Speaker Change: We're allowed to give you the specific numbers, but what I would tell you is we have a significant amount built in for the <unk> group to expand both geographically and to improve.

Speaker Change: Certain locations, including relocating existing locations to larger more efficient facilities.

Michael Richard Cole: Both in Selma and into location in the northeast. So those are all on the board for this year.

Matthew Jon Missad: Those are all on the board for this, and we had a I think we announced a project we approved to expand capacity for sure stone last summer, and that's going to be completed here shortly. And I think that that capacity probably adds another 100 million in sales potential to that business unit. And then the northeast site is new for us.

Michael Richard Cole: And we had I think we announced a project we approved to expand capacity for system last summer and Thats going to be completed here shortly and I think that.

Michael Richard Cole: That capacity, probably adds another $100 million of sales potential.

Michael Richard Cole: That business unit and then northeast site as is new for Us now.

Kurt Willem Yinger: Got it. So that'll be a cat back soon. We'll appreciate another, guys. This is the last project. We're resulting in some sales increases going forward. Got it. Thank you guys for the detail.

Michael Richard Cole: Got it will that will be a capital I. Appreciate all the color guys and last project will result in some sales increases going forward.

Speaker Change: Okay got it. Thank you guys for the detail appreciate it thank.

Kurt Willem Yinger: I appreciate it. Thank you. Thank you. I'm showing no further questions in the queue at this time.

Speaker Change: Thank you.

Speaker Change: Thank you I'm showing no further questions in the queue at this time I would like to turn the call back over to Mr. Matt massage for any closing remarks.

Matthew Jon Missad: I would like to turn the call back over to Mr. Matt Missad for any closing remarks. Well, thank you again for spending the time with us today. In 2024, we're not going to sit back and wait for the economy to improve. Instead, we are going to get in the Olympic spirit and do what we were trained to do. Work hard, take care of our customers, take care of our teammates, and win in the marketplace. I am confident our team will continue to drive success and, as Tom Petty suggested, do whatever it takes to make it better in 2024.

Matt: Well. Thank you again for spending the time with US today and 2024, we're not going to sit back and wait for the economy to improve.

Matt: Instead, we are going to get in the Olympic Spirit and do what we were trying to do work.

Matt: Work hard take care of our customers take care of our teammates and win in the marketplace.

Speaker Change: I'm confident our team will continue to drive success and as Tom Petty suggested do whatever it takes to make it better in 2024 have a great day.

Have a great day. This concludes today's program. Thank you all for participating. You may now disconnect.

Speaker Change: This concludes today's program. Thank you all for participating you may now disconnect.

Q1 2024 UFP Industries Inc Earnings Call

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