x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Michigan
|
38-1465835
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification Number)
|
|
2801 East Beltline NE, Grand Rapids, Michigan
|
49525
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Large Accelerated Filer x
|
Accelerated Filer o
|
Non-Accelerated Filer o
|
Smaller reporting company o
|
Class
|
Outstanding as of March 26, 2011
|
|||
Common stock, no par value
|
19,524,953
|
Page No.
|
|||
PART I.
|
FINANCIAL INFORMATION.
|
||
Item 1.
|
Financial Statements.
|
||
3
|
|||
4
|
|||
5
|
|||
6
|
|||
7 - 14
|
|||
Item 2.
|
15 -25
|
||
Item 3.
|
26
|
||
Item 4.
|
26
|
||
PART II.
|
OTHER INFORMATION.
|
||
Item 1.
|
Legal Proceedings - NONE.
|
||
Item 1A.
|
Risk Factors - NONE.
|
||
Item 2.
|
27
|
||
Item 3.
|
Defaults Upon Senior Securities - NONE.
|
||
Item 4.
|
(Removed and Reserved).
|
||
Item 5.
|
27
|
||
Item 6.
|
28
|
(in thousands, except share data)
|
||||||||||||
March 26,
|
December 25,
|
March 27,
|
||||||||||
2011
|
2010
|
2010
|
||||||||||
ASSETS
|
||||||||||||
CURRENT ASSETS:
|
||||||||||||
Cash and cash equivalents
|
$ | - | $ | 43,363 | $ | - | ||||||
Accounts receivable, net
|
182,841 | 126,780 | 187,625 | |||||||||
Inventories:
|
||||||||||||
Raw materials
|
146,435 | 113,049 | 112,004 | |||||||||
Finished goods
|
97,204 | 77,341 | 95,782 | |||||||||
243,639 | 190,390 | 207,786 | ||||||||||
Assets held for sale
|
7,528 | 2,446 | - | |||||||||
Refundable income taxes
|
3,379 | - | - | |||||||||
Other current assets
|
18,655 | 19,020 | 21,718 | |||||||||
TOTAL CURRENT ASSETS
|
456,042 | 381,999 | 417,129 | |||||||||
OTHER ASSETS
|
11,698 | 11,455 | 4,311 | |||||||||
GOODWILL
|
154,702 | 154,702 | 154,392 | |||||||||
INDEFINITE-LIVED INTANGIBLE ASSETS
|
2,340 | 2,340 | 2,340 | |||||||||
OTHER INTANGIBLE ASSETS, net
|
14,492 | 15,933 | 15,194 | |||||||||
PROPERTY, PLANT AND EQUIPMENT:
|
||||||||||||
Property, plant and equipment
|
516,588 | 517,793 | 514,687 | |||||||||
Accumulated depreciation and amortization
|
(299,786 | ) | (295,642 | ) | (287,418 | ) | ||||||
PROPERTY, PLANT AND EQUIPMENT, NET
|
216,802 | 222,151 | 227,269 | |||||||||
TOTAL ASSETS
|
$ | 856,076 | $ | 788,580 | $ | 820,635 | ||||||
LIABILITIES AND EQUITY
|
||||||||||||
CURRENT LIABILITIES:
|
||||||||||||
Accounts payable
|
$ | 66,612 | $ | 59,481 | $ | 82,571 | ||||||
Accrued liabilities:
|
||||||||||||
Compensation and benefits
|
34,821 | 43,909 | 38,153 | |||||||||
Income taxes
|
- | 657 | 919 | |||||||||
Other
|
14,606 | 15,135 | 23,654 | |||||||||
Current portion of long-term debt and capital lease obligations
|
74,647 | 712 | 683 | |||||||||
TOTAL CURRENT LIABILITIES
|
190,686 | 119,894 | 145,980 | |||||||||
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion
|
52,474 | 54,579 | 68,881 | |||||||||
DEFERRED INCOME TAXES
|
20,506 | 20,631 | 21,640 | |||||||||
OTHER LIABILITIES
|
12,512 | 12,300 | 12,276 | |||||||||
TOTAL LIABILITIES
|
276,178 | 207,404 | 248,777 | |||||||||
EQUITY:
|
||||||||||||
Controlling interest shareholders' equity:
|
||||||||||||
Preferred stock, no par value; shares authorized 1,000,000;issued and outstanding, none
|
||||||||||||
Common stock, no par value; shares authorized 40,000,000;issued and outstanding 19,524,953, 19,333,122 and 19,361,407
|
$ | 19,525 | $ | 19,333 | $ | 19,361 | ||||||
Additional paid-in capital
|
140,083 | 138,573 | 134,109 | |||||||||
Retained earnings
|
410,438 | 414,108 | 409,605 | |||||||||
Accumulated other comprehensive earnings
|
4,704 | 4,165 | 4,061 | |||||||||
Employee stock notes receivable
|
(1,493 | ) | (1,670 | ) | (1,771 | ) | ||||||
573,257 | 574,509 | 565,365 | ||||||||||
Noncontrolling interest
|
6,641 | 6,667 | 6,493 | |||||||||
TOTAL EQUITY
|
579,898 | 581,176 | 571,858 | |||||||||
TOTAL LIABILITIES AND EQUITY
|
$ | 856,076 | $ | 788,580 | $ | 820,635 |
(in thousands, except per share data)
|
||||||||
Three Months Ended
|
||||||||
March 26,
|
March 27,
|
|||||||
2011
|
2010
|
|||||||
NET SALES
|
$ | 387,233 | $ | 392,958 | ||||
COST OF GOODS SOLD
|
345,819 | 341,324 | ||||||
GROSS PROFIT
|
41,414 | 51,634 | ||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
|
46,488 | 48,489 | ||||||
NET LOSS ON DISPOSITION OF ASSETS AND OTHER IMPAIRMENT AND EXIT CHARGES
|
7 | 172 | ||||||
EARNINGS (LOSS) FROM OPERATIONS
|
(5,081 | ) | 2,973 | |||||
INTEREST EXPENSE
|
883 | 886 | ||||||
INTEREST INCOME
|
(248 | ) | (120 | ) | ||||
635 | 766 | |||||||
EARNINGS (LOSS) BEFORE INCOME TAXES
|
(5,716 | ) | 2,207 | |||||
INCOME TAXES (BENEFIT)
|
(2,287 | ) | 487 | |||||
NET EARNINGS (LOSS)
|
(3,429 | ) | 1,720 | |||||
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST
|
(241 | ) | (733 | ) | ||||
NET EARNINGS (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST
|
$ | (3,670 | ) | $ | 987 | |||
EARNINGS (LOSS) PER SHARE - BASIC
|
$ | (0.19 | ) | $ | 0.05 | |||
EARNINGS (LOSS) PER SHARE - DILUTED
|
$ | (0.19 | ) | $ | 0.05 | |||
WEIGHTED AVERAGE SHARES OUTSTANDING FOR BASIC EARNINGS (LOSS)
|
19,306 | 19,258 | ||||||
WEIGHTED AVERAGE SHARES OUTSTANDING FOR DILUTED EARNINGS (LOSS)
|
19,306 | 19,517 |
(in thousands, except share and per share data)
|
||||||||||||||||||||||||||||
Controlling Interest Shareholders' Equity
|
||||||||||||||||||||||||||||
Common Stock
|
Additional Paid-In Capital
|
Retained Earnings
|
Accumulated Other Comprehensive Earnings
|
Employees Stock Notes Receivable
|
Noncontrolling Interest
|
Total
|
||||||||||||||||||||||
Balance at December 26, 2009
|
$ | 19,285 | $ | 132,765 | $ | 409,278 | $ | 3,633 | $ | (1,743 | ) | $ | 5,728 | $ | 568,946 | |||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net earnings
|
987 | 733 | ||||||||||||||||||||||||||
Foreign currency translation adjustment
|
428 | 122 | ||||||||||||||||||||||||||
Total comprehensive earnings
|
2,270 | |||||||||||||||||||||||||||
Distributions to noncontrolling interest
|
(90 | ) | (90 | ) | ||||||||||||||||||||||||
Issuance of 14,945 shares under employee stock plans
|
15 | 264 | 279 | |||||||||||||||||||||||||
Issuance of 76,045 shares under stock grant programs
|
76 | 37 | 113 | |||||||||||||||||||||||||
Issuance of 5,830 shares under deferred compensation plans
|
5 | (5 | ) | - | ||||||||||||||||||||||||
Repurchase of 20,000 shares
|
(20 | ) | (660 | ) | (680 | ) | ||||||||||||||||||||||
Tax benefits from non-qualified stock options exercised
|
79 | 79 | ||||||||||||||||||||||||||
Expense associated with share-based compensation arrangements
|
660 | 660 | ||||||||||||||||||||||||||
Accrued expense under deferred compensation plans
|
327 | 327 | ||||||||||||||||||||||||||
Notes receivable adjustment
|
(18 | ) | (37 | ) | (55 | ) | ||||||||||||||||||||||
Payments received on employee stock notes receivable
|
9 | 9 | ||||||||||||||||||||||||||
Balance at March 27, 2010
|
$ | 19,361 | $ | 134,109 | $ | 409,605 | $ | 4,061 | $ | (1,771 | ) | $ | 6,493 | $ | 571,858 | |||||||||||||
Balance at December 25, 2010
|
$ | 19,333 | $ | 138,573 | $ | 414,108 | $ | 4,165 | $ | (1,670 | ) | $ | 6,667 | $ | 581,176 | |||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net earnings (loss)
|
(3,670 | ) | 241 | |||||||||||||||||||||||||
Foreign currency translation adjustment
|
539 | 188 | ||||||||||||||||||||||||||
Total comprehensive loss
|
(2,702 | ) | ||||||||||||||||||||||||||
Purchase of additional noncontrolling interest
|
(100 | ) | (100 | ) | ||||||||||||||||||||||||
Capital contribution from noncontrolling interest
|
40 | 40 | ||||||||||||||||||||||||||
Distributions to noncontrolling interest
|
(395 | ) | (395 | ) | ||||||||||||||||||||||||
Issuance of 24,738 shares under employee stock plans
|
25 | 431 | 456 | |||||||||||||||||||||||||
Issuance of 164,201 shares under stock grant programs
|
164 | (24 | ) | 140 | ||||||||||||||||||||||||
Issuance of 3,213 shares under deferred compensation plans
|
3 | (3 | ) | - | ||||||||||||||||||||||||
Tax benefits from non-qualified stock options exercised
|
152 | 152 | ||||||||||||||||||||||||||
Expense associated with share-based compensation arrangements
|
735 | 735 | ||||||||||||||||||||||||||
Accrued expense under deferred compensation plans
|
231 | 231 | ||||||||||||||||||||||||||
Notes receivable adjustment
|
(12 | ) | 12 | - | ||||||||||||||||||||||||
Payments received on employee stock notes receivable
|
165 | 165 | ||||||||||||||||||||||||||
Balance at March 26, 2011
|
$ | 19,525 | $ | 140,083 | $ | 410,438 | $ | 4,704 | $ | (1,493 | ) | $ | 6,641 | $ | 579,898 |
(in thousands)
|
||||||||
Three Months Ended
|
||||||||
March 26,
|
March 27,
|
|||||||
2011
|
2010
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net earnings (loss) attributable to controlling interest
|
$ | (3,670 | ) | $ | 987 | |||
Adjustments to reconcile net earnings (loss) attributable to controlling interest to net cash from operating activities:
|
||||||||
Depreciation
|
6,902 | 7,630 | ||||||
Amortization of intangibles
|
1,441 | 1,825 | ||||||
Expense associated with share-based compensation arrangements
|
875 | 773 | ||||||
Excess tax benefits from share-based compensation arrangements
|
(121 | ) | (63 | ) | ||||
Deferred income tax credit
|
(69 | ) | (96 | ) | ||||
Net earnings attributable to noncontrolling interest
|
241 | 733 | ||||||
Net gain on sale or impairment of property, plant and equipment
|
(142 | ) | (40 | ) | ||||
Changes in:
|
||||||||
Accounts receivable
|
(55,869 | ) | (80,239 | ) | ||||
Inventories
|
(53,007 | ) | (45,022 | ) | ||||
Accounts payable
|
7,035 | 32,788 | ||||||
Accrued liabilities and other
|
(13,054 | ) | 3,081 | |||||
NET CASH FROM OPERATING ACTIVITIES
|
(109,438 | ) | (77,643 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchase of property, plant and equipment
|
(6,309 | ) | (4,622 | ) | ||||
Acquisitions, net of cash received
|
- | (634 | ) | |||||
Proceeds from sale of property, plant and equipment
|
177 | 189 | ||||||
Collections of notes receivable
|
243 | 15 | ||||||
Other, net
|
25 | 13 | ||||||
NET CASH FROM INVESTING ACTIVITIES
|
(5,864 | ) | (5,039 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Net borrowings under revolving credit facilities
|
71,817 | 15,686 | ||||||
Proceeds from issuance of common stock
|
456 | 279 | ||||||
Purchase of additional noncontrolling interest
|
(100 | ) | - | |||||
Distributions to noncontrolling interest
|
(395 | ) | (90 | ) | ||||
Capital contribution from noncontrolling interest
|
40 | - | ||||||
Repurchase of common stock
|
- | (680 | ) | |||||
Excess tax benefits from share-based compensation arrangements
|
121 | 63 | ||||||
Other, net
|
- | 14 | ||||||
NET CASH FROM FINANCING ACTIVITIES
|
71,939 | 15,272 | ||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
(43,363 | ) | (67,410 | ) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
43,363 | 67,410 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
$ | - | $ | - | ||||
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
|
||||||||
Cash paid during the period for:
|
||||||||
Interest
|
$ | 250 | $ | 4,905 | ||||
Income taxes
|
1,690 | 12,346 | ||||||
NON-CASH FINANCING ACTIVITIES:
|
||||||||
Common stock issued under deferred compensation plans
|
$ | 109 | $ | 203 |
A.
|
BASIS OF PRESENTATION
|
B.
|
FAIR VALUE
|
March 26, 2011
|
March 27, 2010
|
|||||||||||||||||
(in thousands)
|
Quoted Prices in Active Markets
(Level 1)
|
Prices with Other Observable Inputs
(Level 2)
|
Total
|
Quoted Prices in Active Markets
(Level 1)
|
Prices with Other Observable Inputs
(Level 2)
|
Total
|
||||||||||||
Recurring:
|
||||||||||||||||||
Money market funds
|
$ | 84 | $ | 84 | ||||||||||||||
Mutual funds:
|
$ | 1,010 | $ | 1,010 | ||||||||||||||
Domestic stock funds
|
528 | 528 | ||||||||||||||||
International stock funds
|
518 | 518 | ||||||||||||||||
Target funds
|
144 | 144 | ||||||||||||||||
Bond funds
|
104 | 104 | ||||||||||||||||
Total mutual funds
|
1,294 | 1,294 | 1,010 | 1,010 | ||||||||||||||
$ | 1,378 | $ | 1,378 | $ | 1,010 | $ | 1,010 |
C.
|
REVENUE RECOGNITION
|
March 26,
2011
|
December 25,
2010
|
March 27,
2010
|
||||||||||
Cost and Earnings in Excess of Billings
|
$ | 4,927 | $ | 3,604 | $ | 9,355 | ||||||
Billings in Excess of Cost and Earnings
|
1,820 | 2,126 | 8,297 |
D.
|
EARNINGS (LOSS) PER SHARE
|
Three Months Ended March 26, 2011
|
Three Months Ended March 27, 2010
|
|||||||||||||||||||||||
Income
|
Shares
|
Per Share
|
Income
|
Shares
|
Per Share
|
|||||||||||||||||||
(Numerator)
|
(Denominator)
|
Amount
|
(Numerator)
|
(Denominator)
|
Amount
|
|||||||||||||||||||
Net (Loss) Earnings Attributable to Controlling Interest
|
$ | (3,670 | ) | $ | 987 | |||||||||||||||||||
EPS – Basic
Income available to common stockholders
|
(3,670 | ) | 19,306 | $ | (0.19 | ) | 987 | 19,258 | $ | 0.05 | ||||||||||||||
Effect of dilutive securities
Options
|
- | 259 | ||||||||||||||||||||||
EPS - Diluted
Income available to common stockholders and assumed options exercised
|
$ | (3,670 | ) | 19,306 | $ | (0.19 | ) | $ | 987 | 19,517 | $ | 0.05 |
E.
|
ASSETS HELD FOR SALE AND NET LOSS ON DISPOSITION OF ASSETS AND OTHER IMPAIRMENTS AND EXIT CHARGES
|
Three Months Ended March 26, 2011
|
Three Months Ended March 27, 2010
|
|||||||||||||||||||||||
Eastern and Western Divisions
|
Atlantic Division
|
All Other
|
Eastern and Western Divisions
|
Atlantic Division
|
All Other
|
|||||||||||||||||||
Severances
|
$ | 108 | $ | 16 | $ | 25 | $ | 119 | $ | 85 | $ | 8 | ||||||||||||
Property, plant and equipment
|
(99 | ) | (12 | ) | (31 | ) | (21 | ) | (9 | ) | (10 | ) |
Description
|
Net Book Value
|
|||
Assets held for sale as of December 25, 2010
|
$ | 2,446 | ||
Additions
|
5,082 | |||
Assets held for sale as of March 26, 2011
|
$ | 7,528 |
F.
|
COMMITMENTS, CONTINGENCIES, AND GUARANTEES
|
G.
|
BUSINESS COMBINATIONS
|
Company Name
|
Acquisition Date
|
Purchase Price
|
Intangible Assets
|
Net Tangible Assets
|
Operating Segment
|
Business Description
|
Shepherd Distribution Co.
(“Shepherd”)
|
April 29, 2010
|
$5.9 (asset purchase)
|
$2.2
|
$3.7
|
Distribution Division
|
Distributes shingle underlayment, bottom board, house wrap, siding, poly film and other products to manufactured housing and RV customers. Headquartered in Elkhart, Indiana, it has distribution capabilities throughout the United States.
|
Service Supply Distribution, Inc.
(“Service Supply”)
|
March 8, 2010
|
$0.6 (asset purchase)
|
$0.0
|
$0.6
|
Distribution Division
|
Distributes certain plumbing, electrical, adhesives, flooring, paint and other products to manufactured housing and RV customers. Headquartered in Cordele, Georgia, it has distribution capabilities throughout the United States.
|
H.
|
SEGMENT REPORTING
|
Three Months Ended March 26, 2011
|
||||||||||||||||||||
Eastern and Western Divisions
|
Atlantic Division
|
Corporate
|
All Other
|
Total
|
||||||||||||||||
Net sales to outside customers
|
$ | 270,283 | $ | 86,108 | $ | - | $ | 30,842 | $ | 387,233 | ||||||||||
Intersegment net sales
|
16,841 | 9,610 | - | 8,537 | 34,988 | |||||||||||||||
Segment operating loss
|
(91 | ) | (3,485 | ) | (13 | ) | (1,492 | ) | (5,081 | ) |
Three Months Ended March 27, 2010
|
||||||||||||||||||||
Eastern and Western Divisions
|
Atlantic Division
|
Corporate
|
All Other
|
Total
|
||||||||||||||||
Net sales to outside customers
|
$ | 276,431 | $ | 89,972 | $ | - | $ | 26,555 | $ | 392,958 | ||||||||||
Intersegment net sales
|
20,160 | 7,628 | - | 14,201 | 41,989 | |||||||||||||||
Segment operating profit (loss)
|
6,131 | (1,430 | ) | (3,798 | ) | 2,070 | 2,973 |
I.
|
INCOME TAXES
|
J.
|
SUBSEQUENT EVENTS
|
·
|
Our overall unit sales decreased 1% compared to the first quarter of 2010 due to a decline in sales to our site-built, DIY/retail and manufactured housing markets, offset by a significant increase in unit sales to our industrial market. We believe we gained additional share of the industrial and manufactured housing markets we serve. Share gains in our industrial market were achieved by adding many new customers and increased demand of existing customers, while share gains in manufactured housing were achieved by acquiring distribution operations. We believe we have maintained our share of the DIY/retail market. Finally, we recently closed several plants that supply the site-built housing market in order to achieve profitability and cash flow goals. Consequently, we believe that these actions may temporarily cause us to lose some market share.
|
·
|
The Lumber Market was up 0.7% in the quarter compared to the same period of 2010. Therefore, lumber prices had a minor impact on the change in our sales comparing the first quarter of 2011 and 2010.
|
·
|
National housing starts decreased approximately 10% in the period from December through February of 2011 (our sales trail housing starts by about a month), compared to the same period of 2010, likely due to the expiration of certain government tax credits in 2010.
|
·
|
Shipments of HUD code manufactured homes were down 14% in January and February of 2011, compared to the same period of 2010. Shipments of manufactured homes were also positively impacted by certain tax credits in 2010 that have now expired.
|
·
|
Our gross profit percentage decreased to 10.7% from 13.1% comparing the first quarter of 2011 with the same period of 2010. In addition, our gross profit dollars decreased by 20% comparing the first quarter of 2011 with the same period of 2010, which compares unfavorably to our 1% decrease in unit sales. The decline in our gross margin and profitability this quarter was due to several factors. Most notably, gross margins on sales to the DIY/retail market declined 330 basis points for the quarter resulting from an increase in material costs as a percentage of sales to this market. This was primarily due to the Lumber Market, which was increasing during the first quarter of 2010, and as a result, improved margins on products whose prices were indexed to the current Lumber Market. Also, competitive pricing pressure adversely impacted 2011 margins. In addition, a decline in sales to our DIY/retail, site-built, and manufactured housing markets adversely impacted our margins due to fixed manufacturing costs. Major winter storms in January and February impacted transportation and production in many parts of the country which caused us to lose approximately 219 production days to weather nation-wide during the quarter. As a result, unfavorable cost variances increased by $3.4 million this year due to lost sales volume and lost production days due to inclement weather.
|
·
|
Our cash flow used in operating activities increased to $109 million in the first quarter of 2011 compared to $78 million last year, reflecting much higher inventory levels in 2011. We currently anticipate achieving strong cash flows from operations for the balance of the year as we move beyond our seasonal peak for working capital requirements.
|
Random Lengths Composite
|
||||||||
Average $/MBF
|
||||||||
2011
|
2010
|
|||||||
January
|
$ | 301 | $ | 264 | ||||
February
|
296 | 312 | ||||||
March
|
294 | 310 | ||||||
First quarter average
|
$ | 297 | $ | 295 | ||||
First quarter percentage change from 2010
|
0.7 | % |
Random Lengths SYP
|
||||||||
Average $/MBF
|
||||||||
2011
|
2010
|
|||||||
January
|
$ | 282 | $ | 269 | ||||
February
|
289 | 331 | ||||||
March
|
290 | 337 | ||||||
First quarter average
|
$ | 287 | $ | 312 | ||||
First quarter percentage change from 2010
|
(8.0 | %) |
|
UNIVERSAL FOREST PRODUCTS, INC.
|
Ÿ
|
Products with fixed selling prices. These products include value-added products such as decking and fencing sold to DIY/retail customers, as well as trusses, wall panels and other components sold to the site-built construction market, and most industrial packaging products. Prices for these products are generally fixed at the time of the sales quotation for a specified period of time or are based upon a specific quantity. In order to maintain margins and reduce any exposure to adverse trends in the price of component lumber products, we attempt to lock in costs for these sales commitments with our suppliers. Also, the time period and quantity limitations generally allow us to re-price our products for changes in lumber costs from our suppliers.
|
Ÿ
|
Products with selling prices indexed to the reported Lumber Market with a fixed dollar "adder" to cover conversion costs and profits. These products primarily include treated lumber, remanufactured lumber, and trusses sold to the manufactured housing industry. For these products, we estimate the customers' needs and carry anticipated levels of inventory. Because lumber costs are incurred in advance of final sale prices, subsequent increases or decreases in the market price of lumber impact our gross margins. For these products, our margins are exposed to changes in the trend of lumber prices. As a result of the decline in the housing market and our sales to site-built customers, a greater percentage of our sales fall into this general pricing category. Consequently, we believe our profitability may be impacted to a greater extent to changes in the trend of lumber prices.
|
Ÿ
|
Products with significant inventory levels with low turnover rates, whose selling prices are indexed to the Lumber Market. In other words, the longer the period of time these products remain in inventory, the greater the exposure to changes in the price of lumber. This would include treated lumber, which comprises approximately 17% of our total sales. This exposure is less significant with remanufactured lumber, trusses sold to the manufactured housing market, and other similar products, due to the higher rate of inventory turnover. We attempt to mitigate the risk associated with treated lumber through vendor consignment inventory programs. (Please refer to the “Risk Factors” section of our annual report on form 10-K, filed with the United States Securities and Exchange Commission.)
|
Ÿ
|
Products with fixed selling prices sold under long-term supply arrangements, particularly those involving multi-family construction projects. We attempt to mitigate this risk through our purchasing practices by locking in costs.
|
Period 1
|
Period 2
|
|||||||
Lumber cost
|
$ | 300 | $ | 400 | ||||
Conversion cost
|
50 | 50 | ||||||
= Product cost
|
350 | 450 | ||||||
Adder
|
50 | 50 | ||||||
= Sell price
|
$ | 400 | $ | 500 | ||||
Gross margin
|
12.5 | % | 10.0 | % |
For the Three Months Ended
|
||||||||
March 26,
2011
|
March 27,
2010
|
|||||||
Net sales
|
100.0 | % | 100.0 | % | ||||
Cost of goods sold
|
89.3 | 86.9 | ||||||
Gross profit
|
10.7 | 13.1 | ||||||
Selling, general, and administrative expenses
|
12.0 | 12.3 | ||||||
Net loss on disposition of assets and other impairment and exit charges
|
0.0 | 0.0 | ||||||
Earnings (loss) from operations
|
(1.3 | ) | 0.8 | |||||
Interest, net
|
0.2 | 0.2 | ||||||
Earnings (loss) before income taxes
|
(1.5 | ) | 0.6 | |||||
Income taxes (benefit)
|
(0.6 | ) | 0.1 | |||||
Net earnings (loss)
|
(0.9 | ) | 0.4 | |||||
Less net earnings attributable to noncontrolling interest
|
(0.1 | ) | (0.2 | ) | ||||
Net earnings (loss) attributable to controlling interest
|
(1.0 | %) | 0.3 | % |
|
Note: Actual percentages are calculated and may not sum to total due to rounding.
|
Ÿ
|
Diversifying our end market sales mix by increasing sales of specialty wood packaging to industrial users, increasing our penetration of the concrete forms market, increasing our sales of engineered wood components for custom home, multi-family and light commercial construction, and expanding our product lines in each of the markets we serve.
|
Ÿ
|
Expanding geographically in our core businesses.
|
Ÿ
|
Increasing sales of "value-added" products and framing services. Value-added product sales primarily consist of fencing, decking, lattice, and other specialty products sold to the DIY/retail market, specialty wood packaging, engineered wood components, and "wood alternative" products. Engineered wood components include roof trusses, wall panels, and floor systems. Wood alternative products consist primarily of composite wood and plastics. Although we consider the treatment of dimensional lumber with certain chemical preservatives a value-added process, treated lumber is not presently included in the value-added sales totals.
|
Ÿ
|
Developing new products and expanding our product offering for existing customers.
|
Ÿ
|
Maximizing unit sales growth while achieving return on investment goals.
|
For the Three Months Ended
|
||||||||||||
Market Classification
|
March 26,
2011
|
March 27,
2010
|
%
Change
|
|||||||||
DIY/Retail
|
$ | 150,004 | $ | 164,407 | (8.8 | ) | ||||||
Site-Built Construction
|
53,991 | 60,889 | (11.3 | ) | ||||||||
Industrial
|
143,901 | 125,988 | 14.2 | |||||||||
Manufactured Housing
|
46,325 | 48,362 | (4.2 | ) | ||||||||
Total Gross Sales
|
394,221 | 399,646 | (1.4 | ) | ||||||||
Sales Allowances
|
(6,988 | ) | (6,688 | ) | ||||||||
Total Net Sales
|
$ | 387,233 | $ | 392,958 | (1.5 | ) |
Three Months Ended
|
||||||||
March 26,
2011
|
March 27,
2010
|
|||||||
Value-Added
|
57.7 | % | 58.0 | % | ||||
Commodity-Based
|
42.3 | % | 42.0 | % |
·
|
Current and projected earnings, cash flow and return on investment
|
·
|
Current and projected market demand
|
·
|
Market share
|
·
|
Competitive factors
|
·
|
Future growth opportunities
|
·
|
Personnel and management
|
Three Months Ended
|
||||||||
March 26,
2011
|
March 27,
2010
|
|||||||
Cash from operating activities
|
$ | (109,438 | ) | $ | (77,643 | ) | ||
Cash from investing activities
|
(5,864 | ) | (5,039 | ) | ||||
Cash from financing activities
|
71,939 | 15,272 | ||||||
Net change in cash and cash equivalents
|
(43,363 | ) | (67,410 | ) | ||||
Cash and cash equivalents, beginning of period
|
43,363 | 67,410 | ||||||
Cash and cash equivalents, end of period
|
$ | - | $ | - |
(a)
|
Evaluation of Disclosure Controls and Procedures. With the participation of management, our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15e and 15d – 15e) as of the quarter ended March 26, 2011 (the “Evaluation Date”), have concluded that, as of such date, our disclosure controls and procedures were effective.
|
(b)
|
Changes in Internal Controls. During the quarter ended March 26, 2011, there were no changes in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
|
Fiscal Month
|
(a)
|
(b)
|
(c)
|
(d)
|
||||||
December 26, 2010 – January 29, 2011(1)
|
2,988,229 | |||||||||
January 30 – February 26, 2011
|
2,988,229 | |||||||||
February 27 – March 26, 2011
|
2,988,229 |
|
(a)
|
Total number of shares purchased.
|
|
(b)
|
Average price paid per share.
|
|
(c)
|
Total number of shares purchased as part of publicly announced plans or programs.
|
|
(d)
|
Maximum number of shares that may yet be purchased under the plans or programs.
|
(1)
|
On November 14, 2001, the Board of Directors approved a share repurchase program (which succeeded a previous program) allowing us to repurchase up to 2.5 million shares of our common stock. On October 14, 2010, our Board authorized an additional 2 million shares to be repurchased under our share repurchase program. The total number of shares that may be repurchased under the program is almost 3 million shares.
|
31
|
Certifications.
|
|
(a)
|
Certificate of the Chief Executive Officer of Universal Forest Products, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
|
|
(b)
|
Certificate of the Chief Financial Officer of Universal Forest Products, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
|
32
|
Certifications.
|
|
(a)
|
Certificate of the Chief Executive Officer of Universal Forest Products, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
|
|
(b)
|
Certificate of the Chief Financial Officer of Universal Forest Products, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
|
UNIVERSAL FOREST PRODUCTS, INC.
|
||||
Date: |
April 19, 2011
|
By:
|
/s/ Michael B. Glenn
|
|
|
Michael B. Glenn,
|
|||
Chief Executive Officer and Principal Executive Officer
|
||||
Date: |
April 19, 2011
|
By:
|
/s/ Michael R. Cole
|
|
|
Michael R. Cole,
|
|||
Chief Financial Officer,
|
||||
Principal Financial Officer and
|
||||
Principal Accounting Officer
|
Exhibit No.
|
Description
|
31
|
Certifications.
|
|
Certificate of the Chief Executive Officer of Universal Forest Products, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
|
|
Certificate of the Chief Financial Officer of Universal Forest Products, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
|
32
|
Certifications.
|
|
Certificate of the Chief Executive Officer of Universal Forest Products, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
|
|
Certificate of the Chief Financial Officer of Universal Forest Products, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
|
1.
|
I have reviewed this report on Form 10-Q of Universal Forest Products, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
April 19, 2011
|
/s/ Michael B. Glenn
|
|
Michael B. Glenn,
|
|||
Chief Executive Officer and Principal Executive Officer
|
1.
|
I have reviewed this report on Form 10-Q of Universal Forest Products, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
April 19, 2011
|
/s/ Michael R. Cole
|
|
Michael R. Cole,
|
|||
Chief Financial Officer,
|
|||
Principal Financial Officer and
|
|||
Principal Accounting Officer
|
UNIVERSAL FOREST PRODUCTS, INC.
|
||||
Date: |
April 19, 2011
|
By:
|
/s/ Michael B. Glenn
|
|
Michael B. Glenn,
|
||||
Chief Executive Officer and Principal Executive Officer
|
UNIVERSAL FOREST PRODUCTS, INC.
|
||||
Date: |
April 19, 2011
|
By:
|
/s/ Michael R. Cole
|
|
Michael R. Cole,
|
||||
Chief Financial Officer,
|
||||
Principal Financial Officer and
|
||||
Principal Accounting Officer
|