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[00:00:03] Ladies and gentlemen, thank you for standing by and welcome to the Q3 2020 UFP Industries earnings conference call. At this time, all participants on 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 meet the Press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker, Mr. Dick Gauthier, vice president of Business Outreach. Please go ahead, sir.
[00:00:46] Welcome to the industry's third quarter 2020 conference call, hosting the call today, our CEO, Matt Missad and CFO Mike Cole. Matt and Mike will offer prepared remarks and then answer questions. This conference call is available simultaneously and in its entirety to all interested investors and news media through our webcast at www.youtube.com. A replay will also be available at that website through November. Twenty second twenty Missed. Before we turn the call over to Matt Masad, let me remind you that yesterday's press release and today's presentation include forward looking statements as defined in the Private Securities Litigation Reform Act of nineteen ninety five. 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.
[00:01:50] Thank you, Dick, and good morning, everyone. When we decided to reorganize our company to unleash the full power of USP, we believed it would help us create greater success. We had no idea of the challenges we would face this year, and our team members responded with an amazing performance that Arrowsmith's could sing about. I can't tell you how proud I am of the effort of the industry, the team and the third quarter. The team blew past our expectations and posted a record quarter from both earnings and profits for to. One of the many lessons I will take from twenty 20 is that Up Industries has the business diversification processes and experienced team members to face serious challenges and continue to serve our customers while delivering strong results for our stakeholders. So far this year we faced a pandemic shutdown orders that disrupted economic activity, a record increase in lumber price supply constraints, wildfires, hurricanes and rail shortages. The only things missing are pestilence and a contested election. But we still have another two months to go and anything can happen despite the uncontrollable. Our teams work diligently at things they could control by responding quickly to shifting customer demands, managing inventory wisely and delivering record results. They set the bar of what is achievable even higher. I want to thank each and every one of our over thirteen thousand team members for their fantastic efforts.
[00:03:25] While Mike Cole, will cover the numbers in detail, I wanted to hit on a couple of standouts. The first is net sales of one point four nine billion. The second is a unit sales increase of eight percent overall. The third is a gross profit increase of twenty nine percent and the fourth is net earnings up forty nine percent. In addition, our new product sales for the third quarter were one hundred and fifty three point seven million and our three hundred ninety eight point one million year to date. Enough of the numbers, though, and a little background in the third quarter story is as follows. Up you up retail solutions again in the quarter. Unit sales to retail customers grew thirty four percent organically over this period, led by the company dimension's home decor where unit sales were up. Fifty seven percent decorator's was up 50 percent, Prahlad was up 30 percent. And Outdoor Essentials, which is our fence line and garden products, were up twenty eight percent. E-commerce sales were up one hundred and seven percent in the quarter and total one hundred and thirty nine dollars million year to date. Of course, retail was helped by the rising lumber market throughout the third quarter and will be impacted as a lumber market declines, although the lower seasonal volumes will blunt some of that impact. You have construction overall demand was strong, but margins were impacted on fixed price products as lumber prices rose faster than contract prices.
[00:05:05] Generally, the reverse will be true in a declining lumber market site built and factory build, housing demand stayed strong, while parts of commercial construction, particularly in hospitality, office and retail, slowed. In response to Lockdown's Yousefi, Industrial continued to rebound with the reopening of many geographies but faced similar margin pressures as the construction segment on fixed priced items. Heavy demand for appliances and other durable goods has outpaced our customers ability to supply, so we expect continued improvement. In this end, market OEM furniture customers have seen strong. Mortar fires as well, and we saw increased demand for our Total Foundation Solutions product line, the aforementioned lumber market climbed much of the quarter and reached record levels near the end of the quarter. Supply caught up with demand and the market has trended downwards analyse on most items. We expect that trend to continue. The current challenges still exist for our company. The first is to analyze and improve struggling locations. We are in the midst of twenty twenty one budget and planning season and have instructed our operations that aren't meeting their Pibor in our ally targets that they must have a realistic plan to do so or they will be consolidated. But we expect the vast majority of our operations to meet their targets and recover from covid in lumber market challenges.
[00:06:39] We have to react fairly and quickly to fix those that don't. Labor is another challenge. We are currently seeking over three hundred employees primarily in our production facilities. We appreciate the extra effort and overtime given by our loyal employees, but are also seeking to provide them with some relief and give them more time to spend with their families. The third challenge is economic and social uncertainty. Concerns about the safety and security of our team members, whether due to covid, the response to covid or violence and rioting have created an unacceptable level of fear and tension. The financial hardships brought on by Lockdown's exacerbate those concerns. We are hopeful for reasonable approaches to restoring constitutional rights to the citizens, which include both the rights of peaceful protest and the rights for safety and protection from those wishing to cause harm to persons or property. Regardless of the political outcome, we are pursuing our goals with the belief that we still can chart our own destiny. We have strong prospects and several goals to share with you. First goal is growing our sales and profitability. We continue to improve automation, capital projects as well as the equipment to support new products and further business development. In the Retail Solutions segment. Our acquisition of FRSC is a great example of a scalable new product as we drive increased fire retardant sales.
[00:08:09] As discussed earlier this year, our patented vault and voyaged mineral composite decking products sold under the decorator's brand are performing very well and we will be adding more capacity in twenty. Twenty one decorator's will also be launching its new price point wood plastic composite board under the trailhead brand and will absorb most of the new capacity coming online in the fourth quarter of twenty twenty for this product. The decorator's sales and marketing team will have several new distributors for twenty twenty one, including five internal USP distribution facilities to make us more responsive to customer needs in each market, additional certified professional installers are expected to also drive more volume. We will be adding capacity to our finishing operation for siting pattern and trim, as well as our own USP edge branded products. And as I mentioned, the core lines are adding ten new hardwood kits for do it yourselfers and crafters in factory built. We look for continued new product growth. In twenty twenty one. We have designed and engineered two new products which are in the final testing stages. Customers and factory built have strong our reporter files through year end and we are optimistic for a solid twenty twenty one as well. Concrete forming products will continue to grow as we focus on design engineered and manufactured solutions. Together with our equipment program for project use in the industrial segment, we are looking to expand our packaging capabilities in wood, steel, plastics and other materials, utilizing our design, engineering and manufacturing capabilities to provide the most value to our customers.
[00:09:58] We plan to scale our recent acquisitions nationally, as well as adding other acquisitions to achieve our growth targets. We will also expand our ability to market protective packaging products to our customers through distribution partners. Another area of focus is capital allocation. In addition to cash dividends and opportunistic share repurchases, we expect to have around one hundred million in capital expenditures in twenty twenty one and we'll continue to pursue acquisition targets while keeping a strong balance sheet. More new products. These are the lifeblood of our growth and profitability improvement goals. Each of our business segments is increasing their investment in new products and services, whether organically or via. Position, we also believe that consolidation in our end markets and with our competitors will continue. We will look to consolidate product manufacturing within USPI industries where strategically appropriate. We also expect external markets to consolidate in areas such as wood packaging, wood preservation, protective packaging and construction components. We intend to participate in these consolidations to improve our customer growth and enhance our ability to be the preferred solutions provider to our customers and prospects. The recent BFX probles and stock BMC merger is an example of second level consolidation between two companies who themselves recently consolidated.
[00:11:32] We believe the lumber market will decline until it reaches the new demand supply balance. A rational approach is that twenty twenty one should reflect the second year of normal growth when using 2019 as a base year, which removes the anomaly of the twenty 20 spike. Finally, our e commerce growth has been impressive, and while our previous investments have provided great rewards so far in twenty twenty, we expect an increase in our investment in technology to meet the growing demand and we'll have more distribution through our internal locations to increase speed to customer on the acquisition trail. We continue to maintain a strong pipeline of acquisition targets while maintaining a disciplined approach to the capital allocation model. Each business unit has identified targets to fit its growth runways. The selected transactions will be based on the best long term return on investment and strategic fit. We also will continue to refine our management structure. Our new management structure, implemented January 1st of Twenty Twenty, has helped us serve our end markets better and enables us to tighten our focus to scale new products and to execute initiatives with greater speed. We continue to discover and exploit opportunities to improve the new structure to unlock even more value. Now I'd like to turn it over to Michael so he can highlight the incredible numbers for the quarter and take a victory lap. Mike.
[00:13:04] Thanks, Matt. This quarter provided another example of how UFP's balanced business model and diversified product portfolio are great advantages in challenging times. Our results this quarter are highlighted by a 51 percent increase in operating profits and a one hundred and ten basis point improvement in operating margins to seven point two percent, a 230 basis point improvement in our trailing 12 month return on invested capital to seventeen and a half percent operating cash flow of one hundred eighty five million and total liquidity of seven hundred and seven million at the end of September. Three hundred and fifteen million dollar increase since the end of the first quarter when the pandemic hit, and in spite of average lumber prices for the quarter that have more than doubled. Moving on to highlights from the income statement, our overall net sales increased twenty eight percent compared to last year and consisted of an eight percent increase in our unit sold and a 20 percent increase in gasoline prices as a result of the impact of lumber market on our variable price products similar to last quarter. Our unit sales results vary greatly by segment. Sales to the retail segment increased seventy six percent, consisting of a thirty four percent organic unit increase and a forty two percent increase in prices. Unit growth was driven by our decorator's provided outdoor essentials and dimension's business units as a result of strong consumer demand for repair and remodel projects and outdoor living trends.
[00:14:29] New product sales for the retail segment were also strong, growing by over fifty nine percent. Given the time of the year, demand trends in this segment continue to be strong. Sales to the industrial segment increased by four percent due to a six percent increase in selling prices and a three percent contribution from recent acquisitions, offset by a five percent decrease in organic unit sales. As our customers businesses recovered from government imposed shutdowns and a temporary drop in demand, this decline was a substantial improvement from the twenty seven percent decrease we experienced last quarter. These results are encouraging considering the strong travel continues to have on our ability to gain share by adding new customers and additional locations of existing customers. Finally, our sales for the construction segment were flat compared to last year, with a nine percent increase in selling prices offset by a nine percent decline in units, a sequential improvement from last quarter when our unit sales declined. Sixteen percent. Our overall unit decline this quarter was comprised of a two percent drop in concrete, forming an eight percent decrease in saipov and a forty three percent decline in commercial. These decreases were offset by a seven percent increase in factory built housing.
[00:15:46] Looking forward, we're encouraged by our order files and the current demand trends and our two largest business units cycle in manufactured housing and anticipate commercial will continue to remain challenging. Moving down the income statement, our third quarter gross profits increased by almost fifty four million dollars, or nearly twenty nine percent. This increase was primarily due to a sixty two million dollar improvement in retail, offset by a ten million dollar decline in construction improvements in the profitability of our retail retail segment. We're primarily due to the impact of strong organic growth, which allowed us to leverage fixed costs and the sequential rise in oil prices, which favorably impacted our gross profit per unit of products sold on a variable price like pro with pressure treated lumber. The decline in construction profitability was primarily due to higher commodity lumber costs, which adversely impacted our profit per unit of products. We sell on a fixed price for a period of time and the decline in sales volume of our commercial business unit, which is a more significant fixed cost structure. As lumber prices continue to fall from peak levels at the end of September, this should favorably impact our site, both business unit, and represent a headwind for products sold on a variable price. Continuing to move down the income statement as SHANTÉ expenses increased by almost 19 million to one hundred and thirty five million for the quarter, due to a twenty million dollar increase in our accrued bonus expense to forty two million.
[00:17:20] As a reminder, our bonus plan is based on a combination of pre bonus operating profit and return on investment, which are both considerably higher this year. Moving on to our cash flow statement, we've generated one hundred and eighty five million of operating cash flow for the year to date. Cash flow declined by thirteen million compared to the same period last year due to an increase in our net working capital since year end. In a typical year, our net working capital declines during the third quarter and is a source of cash flow in twenty nineteen. This amount of three million dollars this year due to volume growth and record high lumber prices. Networking capital increased sixty dollars million this year and as one. Oil prices continue to normalize downward and volumes decline seasonally, we anticipate net working capital being a source of cash flow in Q4 for our cash cycle, which measures how efficiently we're managing our working capital improved to forty three days compared to fifty two days last year. This improvement was due to a reduction in our days supply of inventory driven by strong demand in our retail segment and shortages of supply.
[00:18:29] Our receivables remain at over ninety five percent current. We continue to have a balanced approach to capital allocation. Our investing and financing activities consisted of capital expenditures totaling sixty seven million, including expansionary and efficiency capex of twenty six million. Thirty five million used to purchase design and architectural millwork in March and to lumber in July. In addition, early in fiscal October we announced the acquisition of fire retardant chemical technologies and invested approximately six million, one hundred and fifty dollars million issuance of long term debt as we evaluate acquisitions and other growth opportunities. Twenty three dollars in dividends and twenty nine dollars million of share repurchases we completed in Q1. With respect to our balance sheet, at the end of September we had approximately thirty two million in net cash, compared to ninety nine million in net debt last year, and our total liquidity increased to seven hundred and seven million at the end of September, consisting of three point forty six million in cash and three hundred and sixty one million of availability under our long term credit facility, providing us with ample resources to not only operate a business but take advantage of wise investment opportunities during this challenging time that's only having a financial SMAP.
[00:19:55] Thank you, Mike. Now, I'd like to turn it over for questions.
[00:20:00] Thank you, ladies and gentlemen, as a reminder to ask a question, you will need to press star one on your telephone to withdraw your question. Press the pound key, please stand by while we compile the Q&A roster. My first question will come from Ketan Mamtora with BMO Capital Markets. Please go ahead.
[00:20:19] Good morning, Matt. Mike. Congrats on a very strong third quarter. First question, just starting off on the retail side. You know, we've seen really strong demand over the last five to six months. I'm just curious, as we get into the fall and winter and typically demand slow seasonally, I'm just curious to see what you are hearing and seeing from your customers. Obviously, it's been a very different year this time. So I'm just trying to get a sense of, you know, obviously seeing the normal pattern of seasonal slowing in demand.
[00:20:59] Yeah, I think given what we're seeing as demand still is remaining strong, which we do expect there to be seasonality, more weather driven than anything else. And our customers are very optimistic and bullish on 2021 as well. So they're seeing a lot of solid growth. And obviously we're going to be there to provide the products they need.
[00:21:24] Got it. So, I mean, some of the strength you say, you know, you would say that has guided into October. Is that fair?
[00:21:31] Yes.
[00:21:33] Got it. And then switching to lumber, so, you know, we started to see pricing falling quite sharply, maybe just give us an update in terms of, you know, how it impacts, you know, some of this time of the year. Mike alluded to it in terms of, you know, some contracted out on fixed prices. So just maybe give us an update on, you know, on the balance, kind of how does it how does it impact you during this time of year?
[00:22:07] Yeah. So, again, we talk a lot about the So, variable pricing model and the fixed pricing model and the different businesses and different products that are priced differently. And it's all about the balance of that product mix. And as we look at it, you know, typically second and third quarter tend to be heavier at a variable price product and less So, so in the fourth and first quarters. And we expect that to be consistent again this year. So while on the retail side, which tends to be more variable price for the I'll call it the mentioned lumber products, that that will be a headwind for us in the Q4. But on the other So, side, on the fixed priced items, it'll actually be a tailwind for So, all the fixed price items, which tend to be more in the construction and in the industrial segments.
[00:23:04] Got it and then just turned into a mini mart, has your view changed at all in terms of growth, opportunity, let's say an industrial, which is clearly a focus area, you know, in the last few years, versus finding more opportunity on the outdoor living product side, you know, given what has happened this year?
[00:23:27] Yeah, I think Ketan, that's a great observation. There's So, some things that we've looked at and I think a big part of the driver. I give credit to the business unit leaders who have come up with growth runways. And while we're still committed to growing our industrial business, growing our construction business and, you know, may have looked like we weren't as interested in growing some of the retail businesses, but we still see really strong runways. And each one of the business unit leaders has identified targets, whether those are for new products, whether those are for expansion and growth, or whether those are to provide us with more opportunities to get closer to customers and sell them our entire product line. We see a lot of opportunities there. And obviously, if you a couple of years ago, everybody was talking about people moving into cities and the suburbs were dying. Now it appears that the reverse is true. So we're going to keep our balance model and we're going to we're going to have targets in each of our segments and each of our business units. And, you know, we just are very optimistic about the opportunities that are there.
[00:24:39] Got it. That's very helpful. I'll jump back in the queue. Good luck for the rest of this year and into 2021.
[00:24:45] Thank you Ketan.
[00:24:47] Thank you. Our next question will come from Reuben Garner with the Benchmark Company. Please go ahead.
[00:24:54] Thank you. Good morning, everybody.
[00:24:55] Good morning, Ruben.
[00:24:59] First, I just want to express my condolences to the to the FBI team for your loss yesterday, very fitting that you posted such a an amazing quarter. But just wanted to say that before we get started, it's hard not to start with the retail strength. Maybe. Can you just talk about you guys relative to the industry and where an things stand or stand in the quarter and where they stand kind of as we move into next year from an a supply standpoint. Did you miss out on potentially some volume again in the third quarter? I know you mentioned having trouble keeping up earlier in the year, or were you guys in a better position? Maybe did you gain some business in the decorator's segment and the treated lumber space from competitors not being able to keep up? Just talk about kind of you guys versus the industry in the third quarter?
[00:25:56] Yeah, that's a great that's a great point. One of the things that we saw probably early in the third quarter where there was still supply shortages and there was I will call the missed opportunities just simply because we didn't have the product. Having said that, relative to a lot of the smaller competitors, we were able to get product that they may not have been able to get. So that enabled us to take more share. And hopefully that that trend will continue going forward as we continue to see retail retain its strength and we'll also have to be looking to time, the time to get back into the market. As you know, for the treating business, we have to make sure that we have ample inventory. We don't want to run our customers out of products. So everybody will be paying attention to that this fall and early this winter to make sure that we have ample supply for next year.
[00:26:56] And on the decorator's side, up 50 percent, I mean, did you did you not we heard in the quarter that some of your larger peers may have had some supply availability issues. I mean, were you guys able to take advantage of that or is this just kind of an underlying strength that you're that you're seeing because you guys are building out your distribution network and growing new products? Or is it a combination of both?
[00:27:20] I think it's a combination room, and I think we were able to take advantage of some situations. But I also think it's So, a growing strength in the product line. And as So, people get more familiar with it, they love the product. And so I would say it's some So, some of it's due to competitors maybe not being able to supply and some of it's just due to the quality of our products. I would tell you that as we mentioned earlier this year, we were a little bit behind where we thought we would be earlier in the year, year over year comp issues. But we've clearly made up and we as we said before, we thought we would be to our target by the end of the year. And we still feel very comfortable with that.
[00:28:10] And Matt, that's the first time I think I've heard you guys mentioned the new price point and absorbing your new capacity with that and adding new capacity involved in Bolton voyage. Can you just talk about what you know? There's a couple of items. Trailhead that a lower price point, a higher price point, and then the bolt voyage capacity. How much are you planning to add in 2021?
[00:28:34] Yes. So the trailhead is a lower price point, kind of an entry level work product that is intended to fall in line with some of the competitive products out there. It's that we're excited about where it's going to position us. And so that's So, going to utilize some of the capacity that we are adding this year for wood plastic composite. And in 2021, because of the strong demand for the Volt voyage products, we want to add another 20 percent or so of capacity for those product lines as well. So very bullish on the future of those product lines. And it's exciting times right now.
[00:29:22] And I hate to harp on this, but just curious, the trailhead, the lower price point, I mean, is the goal there to just kind of I mean, is that a is that an equally profitable business for you guys? Or is the goal just to continue to drive interest in the decorator's suite of products and maybe sell them to some of your other products? I mean, talk to me about kind of how that how you're thinking about that?
[00:29:47] Yeah. So, again, from our standpoint, we have always tried to have a good, better, best kind of mentality. We're going to add a couple of different levels of good for us. Our pressure treated lumber is a is a very good product line and that's a price point product line, kind of the next level up between that and the entry level or what we would call our better product line, our midpoint wood plastic composite product. There is a gap in pricing there so we can fill that gap with the trailhead product and still continue to grow that business. And then we have our premium product, which is the vault voyage, the mineral composite line. So it's really just an extension of that product line and trying to make sure that we're competitive in the marketplace as well.
[00:30:42] Got it, and then sneak one more in, if that's all right, the construction business, I was a little bit surprised to see the volume declines in sight. Bill, is that just a function of the weakness in the starkest environment back in March and April? Is that a geographical thing where there are issues with some of your facilities related to covid, or is that just kind of what the market looks like right now in a lot of the dating scene, in the housing space, maybe will come, you know, evolve into business for you as we move into later this year in 2021?
[00:31:18] Yeah, there's it a number of different factors in there, Ruben. And you hit on most of them. One upstate New York, for example, had a longer lock down. They still we still have not, you know, fully optimized the facilities there. So that's a that is certainly part of that decline. There was still a little hangover on Starz, I'll call it in July and in some of the other markets. But I would tell you that in in the southeast and in Texas, our facilities are running full out. So they're just their geographic pockets where it just either demand hasn't come back or we haven't been able to operate, given the Stars covid situation, those areas.
[00:32:06] Great. Thank you, guys. Congrats on the quarter and good luck to you.
[00:32:11] Thank Reuben.
[00:32:13] Thank you. Our next question will come from Steve Chercover with D.A. Davidson. Please go ahead.
[00:32:19] Thanks a lot, Mike. Morning, Steve. So what we're spending a bit of time on. I just wanted to get a couple almost point answers, obviously decorator's. Rebounded from a tough comp, can you give us what the what the year to date growth is so far for decorator's?
[00:32:40] I don't I don't have that number specifically. Mike do you have that I can look that up.
[00:32:45] Steve, hold on a second. You have another follow up question.
[00:32:49] Well, and yeah, just in, you know, which is growing faster, do you think? I guess it's hard to tell from the pricing dynamics, but do you think Wood is recouping share from composites or composites to continue to gain share?
[00:33:05] So I think overall the market exploded this year. So I would say that there's there was tremendous growth in all product lines, relative share treated lumber versus composites. I think composites still are gaining share, although I don't know how significant it was this year. I think the rising tide lifts all the boats this year. So from my perspective, long term treated lumber is a very good Do-It-Yourself product to higher end wood, plastic composite or our mineral composite products tend to be more of an installer product. So I think a lot of people who were home, we're doing do it yourself products and projects. So that really drove a lot of the lumber stuff.
[00:33:59] Answer to your first question Steve, it's up 11 percent here today.
[00:34:07] Thanks, Mike. And this might seem like an oddball, tangential, but, you know, a lot of people are using these outdoor sheds as almost offices or play rooms for the kids, thanks to covid. So it's one thing that I don't think I've heard you guys specifically talk about, but if we were to buy a wood shed, it's kind of a kit. Is there a strong likelihood that you make that anyhow?
[00:34:35] So we supply the companies that make those products throughout the country and I don't know if you were referring specifically to the company called Tough Gedera, that was just an example. But yes. So there's we definitely supply the shed manufacturers. So our products are likely in those units.
[00:35:00] Yeah, I was just referring to them because it's the one that came to mind. But ever any consideration of you having a USVI branded qaid, whether it's a playhouse or a man cave or Shihad, whatever they call them these days?
[00:35:17] Yeah. Without going into too deep into history, we've been down that path before. I would never say never. But I think right now we're really comfortable with our relationship with our customers on that product.
[00:35:32] Makes sense, and I think you're doing just fine with the current stance. Okay, and then switching gears, the gross performance in Q3 was quite extraordinary given the spike in lumber. I guess it was a bit of a source of concern for us. Can you give us some insight on how you accomplished it? And are you concerned about a reversal of lumber? Really? Does Krater.
[00:35:57] Yeah, so all of the credit goes to our teams are purchasing team was outstanding and the operations were incredible in terms of how they managed the craziness of the lumber market. So, again, I think if we didn't have the experience that we have within our company, it could have been disastrous. But they were outstanding throughout. We recognize that part of part of the performance is due to the headwind excuse me, the tailwind from the market in the third quarter. And, you know, of course, we're going to face a headwind in the fourth quarter as the market drops. But again, I think we've gotten out in front of it and we've been able to blunt a lot of that, a lot of that headwind, I think. So, again, it's just experience management, kind of working with our managed inventory programs, working with our vendor partners. And as we've maintained and we're not really too concerned about the Shihab level of the lumber market on a general basis, it's just if it falls faster, rises fast in a period of time, it causes us some concern for 30 or 60 days. So we'll see some of that. But again, I think our team is managing it very well so far and we look to be able to weather that storm as well.
[00:37:26] Ok, and finally, Ruben kind of asked anticipated question I was going to ask in terms of site built construction, but maybe I'll ask you to put up to look at a crystal ball. You think there's any long term, you know, permanent impacts from covid, whether it's, you know, the demise of the of downtowns back into suburban living or permanent changes in shopping habits and how they might impact commercial construction.
[00:37:58] I think there's site-built a lot of takeaways, and I hesitate to make too many real long term decisions based on the short term information, but I think you hit on a few things. I think, you know, the retail environment is definitely changing, was changing before covid. It's just accelerated. So I think we have to we have to look at the reality of that and short-term change our customer profile, customer mix on the commercial side, which we're already doing. But I think if you if you also look at the cities, kind of the urban areas, a lot of it might be related to covid. But quite honestly, I think a fair amount is related to the safety and security in those in those urban areas. And I think people who feel unsafe are going to move out. And so I do see that being a potential trend, particularly if we if we don't take the necessary steps to bring back safety and security. So and obviously we're prepared for it. Either way. We So, see a much greater interest more recently here and in the suburbs and moving out, which is creating more pressure on housing demand. And that's a that's a good thing overall for us.
[00:39:23] Yeah, I can tell you that downtown Portland is a shambles. Okay, well, thank you. And stay safe for the remainder of 2020.
[00:39:30] All right. Thank you, Steve.
[00:39:30] Thank you. Our next question will come from Julio Romero with Sidoti & Co. Please go ahead.
[00:39:39] Hey, good morning. Hope you're doing well.
[00:39:40] Morning.
[00:39:40] Well, so certainly a really strong quarter. How much of the growth within the quarter did the fixed price portion of your portfolio maybe see if it was on a standalone basis? I don't know if you can touch on that either, either on a percentage basis, unit basis or dollar basis, but kind of any of the above would be helpful.
[00:40:04] Yeah, I think I'd like Mike to try to take a stab at that.
[00:40:08] Yeah, that's a difficult question to answer. We don't we don't go about trying to measure it that way. I guess I would probably point you to more of the business units and segments that have more variable and fixed price. So retail has more variable price product. A lot of a lot of treated lumber goes through there. I mentioned earlier what the price increase was in in retail, and that's predominantly the price pressure treated when you get into the industrial and in the cycle excuse me, the construction segments, that that's going to be much more fixed price.
[00:40:50] Ok, got it. The cost controls continue to trend really well, I mean, to the tune excluding bonus was down on a daily basis, I think, in the quarter and year to date, maybe how much of that would be due to some temporary reductions within the year that could potentially swing back in twenty one.
[00:41:11] There's a fair amount of temporary reductions as this particular quarter, and I think travel and related costs were down about three million dollars versus last year. We call out travel earlier in Q2 as well. Health care costs have also trended much lower. So there are a handful of costs, you know, for the last two quarters that are definitely lower than twenty-one what we would have normally planned for.
[00:41:40] And I guess I would add there I'd add there who also some of the travel, some of the business meetings that we have historically done, we weren't able to do, but we have, using technology, been able to accomplish a lot of a lot of meetings and things that we didn't do in the past. So while some of those costs will come back, I think we've learned that we can we can do a lot more with less. And so we should be able to recoup a lot of those savings in the future to.
[00:42:13] Off the top of my head, who will I think we call out maybe 10 million of costs last quarter that we felt like we're not at a normalized level, the categories I mentioned, and then in this quarter, three to five million or so. So about 15 million so far for the year.
[00:42:31] Got it. Yeah, that makes sense, I guess just last one for me is on the M&A pipeline, I think touched on it earlier. But you mentioned in the prepared remarks about consolidation, you know, you just talk broadly about the industry and you did issue some senior notes earlier in the summer. So I guess, you know, is the inference maybe a step up in maybe the quantity of potential bolt ons that you're targeting for twenty one?
[00:43:01] You have very good instincts Julio.
[00:43:04] Thanks. Okay, that's all for me. Thanks very much, guys.
[00:43:10] Thank you. And speakers, I am showing no further questions in the queue at this time, but I like to turn the call back over to management for any further remarks.
[00:43:19] Well, thank you again. Yes, the third quarter was a remarkable quarter for U.S. industries. With Halloween in mind, the frightening part of this quarter, at least for our leadership, is that our team now sees what's possible for our future performance. Until recently, an eight percent ibbett as a percent of sales was thought to be far in our future if reachable at all. Yes, a crazy lumber market provided a tailwind, but still our teams proved it can be done and now have set the bar even higher for themselves. We're very excited about our future and are proud to be a small but dynamic part of the land of the free and the home of the brave. And we will continue to work to ensure that these freedoms and opportunities are preserved for all Americans. Thank you for listening and have a great day.
[00:44:08] Well, ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.