1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
Commission File Number 0-22684
UNIVERSAL FOREST PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-1465835
--------------------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2801 East Beltline NE, Grand Rapids, Michigan 49505
--------------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (616) 364-6161
NONE
--------------------------------------------------------------
(Former name or former address, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date:
Class Outstanding as of August 1, 1996
-------------------------- --------------------------------
Common stock, no par value 17,039,020
Page 1 of 16
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INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets at June 29, 1996
and December 30, 1995. 3
Consolidated Condensed Statements of Earnings for the Three and
Six Months Ended June 29, 1996 and July 1, 1995. 4
Consolidated Condensed Statements of Cash Flows for the Six
Months Ended June 29, 1996 and July 1, 1995. 5
Notes to Consolidated Condensed Financial Statements. 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8-13
Forward-Looking Statements and Risk Factors. 14
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings - NONE.
Item 2. Changes in Securities - NONE.
Item 3. Defaults Upon Senior Securities - NONE.
Item 4. Submission of Matters to a Vote of Security Holders. 15
Item 5. Other Information - NONE.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit Index 17
(b) No reports were filed on Form 8-K during the
six months ended June 29, 1996.
2
3
UNIVERSAL FOREST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
June 29, December 30,
1996 1995
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................................... $ 126,644 $ 21,471,821
Accounts receivable............................................................ 61,548,339 24,569,330
Inventories:
Raw materials................................................................ 26,533,010 22,409,785
Finished goods............................................................... 51,505,254 43,501,348
Prepaid income taxes........................................................... 810,666
Other current assets........................................................... 3,415,408 3,566,812
------------ ------------
TOTAL CURRENT ASSETS.................................................... 143,128,655 116,329,762
OTHER ASSETS..................................................................... 5,320,264 4,041,369
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost......................................... 95,947,671 91,766,778
Accumulated depreciation and amortization...................................... (40,213,848) (36,481,076)
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, NET...................................... 55,733,823 55,285,702
------------ ------------
$204,182,742 $175,656,833
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................................... $32,146,610 $14,138,012
Accrued liabilities:
Compensation and benefits.................................................... 13,641,622 14,572,566
Income taxes................................................................. 2,398,563
Other........................................................................ 3,780,849 4,131,833
Current portion of long-term debt
and capital lease obligations ................................................ 3,913,000 3,928,433
------------ ------------
TOTAL CURRENT LIABILITIES............................................... 55,880,644 36,770,844
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, less current portion.............................................. 50,564,275 52,455,513
OTHER LIABILITIES................................................................ 4,142,631 2,991,622
SHAREHOLDERS' EQUITY:
Preferred stock, no par value; shares authorized
1,000,000; issued and outstanding, none
Common stock, no par value; shares authorized
25,000,000; issued and outstanding, 17,038,200
and 17,041,496............................................................... 17,038,200 17,041,496
Additional paid-in capital..................................................... 28,779,292 28,615,581
Retained earnings.............................................................. 49,106,320 39,525,149
Foreign currency translation adjustment........................................ (656,093) (997,549)
------------ ------------
94,267,719 84,184,677
Officers' stock notes receivable............................................... (672,527) (745,823)
------------ ------------
93,595,192 83,438,854
------------ ------------
$204,182,742 $175,656,833
============ ============
See notes to consolidated condensed financial statements.
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UNIVERSAL FOREST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended Six Months Ended
--------------------------- --------------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
------------- ------------ ------------ ------------
NET SALES ..................... $275,727,249 $235,436,944 $435,308,166 $410,424,751
COST OF GOODS SOLD ............ 244,844,785 212,062,613 387,441,737 368,064,437
------------ ------------ ------------ ------------
GROSS PROFIT .................. 30,882,464 23,374,331 47,866,429 42,360,314
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ...... 16,350,916 13,498,165 28,136,479 25,419,524
------------ ------------ ------------ ------------
EARNINGS FROM OPERATIONS ...... 14,531,548 9,876,166 19,729,950 16,940,790
OTHER INCOME (EXPENSE):
Interest income .............. 119,504 94,238 289,679 154,303
Interest expense ............. (1,017,646) (1,246,069) (2,045,691) (2,620,562)
Other, net ................... 142,976 178,695 201,262 409,479
------------ ------------ ------------ ------------
TOTAL OTHER
INCOME (EXPENSE) ......... (755,166) (973,136) (1,554,750) (2,056,780)
------------ ------------ ------------ ------------
EARNINGS BEFORE INCOME TAXES .. 13,776,382 8,903,030 18,175,200 14,884,010
INCOME TAXES .................. 5,579,000 3,602,000 7,361,000 6,066,000
------------ ------------ ------------ ------------
NET EARNINGS .................. $ 8,197,382 $ 5,301,030 $ 10,814,200 $ 8,818,010
============ ============ ============ ============
EARNINGS PER SHARE ............ $ .46 $ .30 $ .61 $ .50
WEIGHTED AVERAGE SHARES
OUTSTANDING .................. 17,658,000 17,565,000 17,663,000 17,563,000
See notes to consolidated condensed financial statements.
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5
UNIVERSAL FOREST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
-----------------------------
June 29, July 1,
1996 1995
-------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings ......................................... $ 10,814,200 $ 8,818,010
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization ...................... 4,109,978 3,276,559
Stock Gift Program expense ......................... 1,764
Loss (gain) on disposal of property, plant
and equipment ..................................... 613 (156,809)
Change in:
Accounts receivable ............................... (36,637,552) (17,080,621)
Inventories ....................................... (12,127,131) 11,008,292
Other.............................................. (80,756) (5,851)
Accounts payable .................................. 18,008,597 7,817,382
Accrued liabilities ............................... 1,927,298 2,164,000
------------ -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES ............................ (13,982,989) 15,840,962
CASH FLOWS FROM INVESTING ACTIVITIES:
Collection of notes receivable ....................... 177,571 256,174
Purchases of property, plant and equipment ........... (4,549,359) (9,205,396)
Proceeds from sale of property, plant and equipment .. 49,770 489,487
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES ........... (4,322,018) (8,459,735)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of notes payable ...................... (1,600,000)
Proceeds from issuance of common stock ............... 258,652
Cash dividends paid to shareholders .................. (511,146) (426,012)
Repayment of long-term debt .......................... (1,965,794) (2,174,028)
Repurchase of common stock ........................... (821,882)
-------------- -----------
NET CASH USED IN FINANCING ACTIVITIES ........... (3,040,170) (4,200,040)
-------------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS .................................... (21,345,177) 3,181,187
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD ........................................... 21,471,821 103,355
-------------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............. $ 126,644 $ 3,284,542
============ ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ........................................... $ 3,035,330 $ 2,663,000
Income taxes ....................................... 4,151,771 4,711,000
NONCASH INVESTING ACTIVITIES:
Equipment acquired through long-term debt ............ $ 59,000
See notes to consolidated condensed financial statements.
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UNIVERSAL FOREST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 29, 1996
A. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated condensed financial
statements (the "Financial Statements") of Universal Forest Products, Inc.
and its wholly-owned subsidiaries (together, the "Company"), have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, the Financial Statements do not include
all of the information and footnotes normally included in the annual
consolidated financial statements prepared in accordance with generally
accepted accounting principles. All significant intercompany accounts and
transactions have been eliminated in consolidation.
In the opinion of management, the Financial Statements contain all material
adjustments necessary to present fairly the consolidated financial position,
results of operations and cash flows of the Company for the interim periods
presented. All such adjustments are of a normal recurring nature. These
Financial Statements should be read in conjunction with the financial
statements and footnotes thereto included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 30, 1995.
Certain reclassifications have been made in the Consolidated Condensed
Statements of Earnings for the 1995 periods presented to conform to the
classifications used in 1996.
B. EARNINGS PER COMMON SHARE
Earnings per common share have been computed based on the weighted average
number of common and common equivalent shares outstanding during the periods
presented, giving effect to options granted in 1989 and 1993, utilizing the
"treasury stock" method. Primary and fully-diluted earnings per common
share were not materially different during the periods presented. Weighted
average shares outstanding are as follows:
Three Months Ended Six Months Ended
---------------------- ----------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Issued and outstanding ............... 17,020,000 17,040,000 17,021,000 17,040,000
Effect of stock options .............. 638,000 525,000 642,000 523,000
---------- ---------- ---------- ----------
Weighted average shares outstanding .. 17,658,000 17,565,000 17,663,000 17,563,000
========== ========== ========== ==========
C. NON-COMPETE
In February 1996, the Company entered into a consulting and non-compete
agreement with one of its former officers. Included in the agreement are
conditions that the former officer provide certain
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UNIVERSAL FOREST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 29, 1996 - CONTINUED
consulting services and agree not to compete with the Company for a period
of eleven years. In consideration for these services and agreement not to
compete, the Company agreed to make payments to the officer as follows:
1996 ..................... $ 325,000
1997 ..................... 450,000
1998 ..................... 350,000
1999 ..................... 100,000
----------
$1,225,000
==========
The Company recorded the present value of this obligation to "Other Assets"
and "Other Liabilities," based on an imputed interest rate of 8% per annum.
Amortization of the asset is computed on a straight-line basis over the
eleven year non-compete period. In March 1996, the $325,000 obligation
listed above was paid.
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8
UNIVERSAL FOREST PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL IMPACT OF FLUCTUATIONS IN LUMBER PRICES AND SEASONALITY
The Company experiences significant fluctuations in the cost of lumber products
from primary producers. The table below highlights such fluctuations for the
six months ended June 29, 1996 and July 1, 1995. A variety of factors over
which the Company has no control, including environmental regulations, weather
conditions, and natural disasters, impact the cost of lumber products. The
Company anticipates that these fluctuations will continue in the future.
The following table presents the Random Lengths framing lumber composite price.
The composite price is a weighted average of nine key framing lumber prices
chosen from major producing areas and species. The composite price is designed
as a broad measure of price movement in the commodity lumber market ("Lumber
Market"). The effects of the Lumber Market on the Company's results of
operations are discussed below under the captions "Net Sales" and "Cost of
Goods Sold and Gross Profit." Depending on the extent of the fluctuation, the
type of product and other factors, it could take up to a month for a
fluctuation in the Lumber Market to be reflected in the Company's selling
prices.
Random Lengths
Average $/MBF
----------------
1996 1995
------- -------
January ............. $ 329 $ 379
February ............ 347 383
March ............... 353 358
April ............... 374 335
May ................. 420 313
June ................ 409 292
The Company's business is seasonal in nature and results of operations vary
from quarter to quarter. The demand for many of the Company's products is
highest during the period of April to August. Accordingly, the Company's sales
tend to be greater during its second and third quarters. To support this sales
peak, the Company builds its inventory of finished goods throughout the winter
and spring. Therefore, quantities of raw materials and finished goods
inventories tend to be at their highest, relative to sales, during the
Company's first and fourth quarters. Although the Company maintains unique
supply programs with vendors which have greatly reduced its inventory levels
compared to historical averages, this seasonal requirement still exists. As a
result, the Company has some exposure related to sharp declines in the Lumber
Market during its primary selling season. Beginning in 1995, the Company took
the following steps to decrease its exposure:
- - Negotiated unique supply programs with vendors. These programs have
substantially reduced the Company's inventory quantities, and include those
materials which are most susceptible to adverse changes in the Lumber Market.
- - Instituted inventory management initiatives to accelerate the throughput
of material in its plants and reduce the average supply of inventory.
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UNIVERSAL FOREST PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
- - Set a goal of improving its sales mix by selling more value-added
products in relationship to total sales. Value-added products are less
susceptible to the adverse effects a decline in the Lumber Market can have on
the Company's profitability. See further discussion under the caption "Net
Sales."
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the components of the
Company's Consolidated Condensed Statements of Earnings as a percentage of net
sales.
Three Months Ended Six Months Ended
-------------------- ------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
--------- --------- -------- --------
Net sales ..................................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold ............................ 88.8 90.1 89.0 89.7
--------- --------- -------- --------
Gross profit .................................. 11.2 9.9 11.0 10.3
Selling, general and administrative expenses .. 5.9 5.7 6.5 6.2
--------- --------- -------- --------
Earnings from operations ...................... 5.3 4.2 4.5 4.1
Other expense, net ............................ 0.3 0.4 0.3 0.5
--------- --------- -------- --------
Earnings before income taxes .................. 5.0 3.8 4.2 3.6
Income taxes .................................. 2.0 1.5 1.7 1.5
--------- --------- -------- --------
Net earnings .................................. 3.0% 2.3% 2.5% 2.1%
========= ========= ======== ========
NET SALES
Net sales in the second quarter of 1996 increased $40 million, or 17%,
primarily due to the overall Lumber Market (see Random Lengths table) which
increased 28% compared to the same period of 1995, combined with an increase in
unit sales to the do-it-yourself (DIY) and manufactured housing (MH) markets.
Net sales in the first six months of 1996 increased $25 million, or 6%,
compared to the same period of 1995.
The Company's ratio of value-added product sales to total sales was over 32.0%
in the second quarter of 1996 and 1995. Comparing the first six months of 1996
with the same period of 1995, this ratio increased to 33.3% from 32.5%.
Value-added products consist primarily of items sold to the DIY market under
the Company's Fence Fundamentals(TM), Lattice Basics(TM), Deck Necessities(R),
Outdoor Essentials(R), Storage Solutions(TM), and YardLine(TM) trade names,
trusses sold to the MH market, and products sold to the industrial market. A
long-term goal of the Company is to achieve a ratio of value-added product
sales to total sales of 50%.
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UNIVERSAL FOREST PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
The following table presents, for the periods indicated, the Company's net
sales (in thousands) and percentage of total net sales by market
classification.
Three Months Ended Six Months Ended
---------------------------------- ----------------------------------
June 29, July 1, June 29, July 1,
Market Classification 1996 % 1995 % 1996 % 1995 %
- ----------------------- -------- ------ -------- ------ -------- ------ -------- ------
Do-It-Yourself ........ $163,617 59.3% $138,424 58.8% $234,631 53.9% $216,294 52.7%
Manufactured Housing .. 81,619 29.6 70,679 30.0 148,005 34.0 143,649 35.0
Wholesale Lumber ...... 17,313 6.3 14,724 6.3 29,601 6.8 27,498 6.7
Industrial ............ 13,178 4.8 11,610 4.9 23,071 5.3 22,984 5.6
-------- ------ -------- ------ -------- ------ -------- ------
$275,727 100.0% $235,437 100.0% $435,308 100.0% $410,425 100.0%
======== ====== ======== ====== ======== ====== ======== ======
Do-It-Yourself (DIY):
Net sales to the DIY market increased approximately $25 million, or 18%, in the
second quarter of 1996 compared to the same period of 1995, primarily due to an
increase in the Lumber Market which substantially increased the overall selling
prices of the Company's commodity-based products. In addition, overall unit
sales to this market were up in the second quarter due to harsh winter weather
which delayed consumer demand for the Company's products until late spring.
Net sales in the first six months of 1996 increased approximately $18 million,
or 8%, compared to the same period of 1995.
The Company's ratio of value-added product sales to total sales to this market
was 33.0% in the second quarter of 1996 and 1995. In the first six months of
1996 this ratio increased to 34.4% from 33.9% in the same period of 1995. The
improvement for the first six months was driven by an increase in sales of
fencing products, the Company's highest margin product supplied to the DIY
market, which were up approximately 19% for the year to date.
Manufactured Housing (MH):
Net sales to the MH market increased approximately $11 million, or 15%, in the
second quarter of 1996 compared to 1995 due primarily to an increase in unit
sales to this market. The effect of the higher Lumber Market on selling prices
in the second quarter was substantially offset by increased competition in
certain geographic areas, forcing selling prices down. Net sales in the first
six months of 1996 increased approximately $4 million, or 3%, compared to the
same period of 1995. In its May 1996 report, the Manufactured Housing
Institute reported an 11% increase in year-to-date industry shipments of
manufactured homes.
The Company's ratio of value-added product sales to total sales to this market
was 28.0% in the second quarter and first six months of 1996 and 1995.
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UNIVERSAL FOREST PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
Wholesale:
Net sales to the wholesale lumber market increased approximately $2.5 million,
or 17%, in the second quarter of 1996 compared to the same period of 1995 due
to the effect of the higher Lumber Market. Net sales in the first six months
of 1996 increased approximately $2.1 million, or 8%, compared to the same
period of 1995. The Company does not expect unit sales to this market to
increase in the foreseeable future as a result of its goal to increase its
ratio of value-added product sales to total sales.
Industrial:
Net sales to the industrial market increased approximately $1.5 million, or
14%, in the second quarter of 1996 compared to the same period of 1995, while
year-to-date sales to this market have remained flat comparing 1996 with 1995.
The Company plans to grow its sales to this market in the future through
strategic acquisitions.
COST OF GOODS SOLD AND GROSS PROFIT
Gross profit as a percentage of net sales increased to 11.2% in the second
quarter of 1996 compared to 9.9% in the same period of 1995. This increase is
primarily due to trends in the Lumber Market which increased overall selling
prices and enhanced the Company's ability to cover fixed manufacturing costs,
and the Company's efforts to improve production efficiency. In addition,
increased competition in the MH market slightly impacted the Company's margins,
offsetting some of the positive effects of the Lumber Market trend. Gross
profit as a percentage of net sales increased to 11.0% for the first six months
of 1996 compared to 10.3% for the same period of 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses have increased $2.9 million and
$2.7 million, or 21% and 11%, respectively, comparing the second quarter and
first six months of 1996 and 1995, respectively. Such increases are primarily
due to increases in accrued incentive compensation expenses related to
profitability and certain variable expenses related to sales.
OTHER EXPENSE, NET
Other expense, net is primarily comprised of interest expense. Net interest
costs (interest expense less interest income) decreased by over $250,000 and
$710,000, or 22% and 29%, respectively, comparing the second quarter and first
six months of 1996 and 1995, respectively. These decreases are due to the
Company's continued improvement in working capital management (see "Liquidity
and Capital Resources"). These practices helped the Company avoid borrowing on
its lines of credit and maintain a significant cash position for the majority
of the period despite seasonal constraints.
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UNIVERSAL FOREST PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
INCOME TAXES
The Company's effective tax rate in the second quarter and first six months of
1996 and 1995 ranges from 40.50% to 40.75%. Effective tax rates differ from
statutory federal income tax rates primarily due to provisions for state and
local income taxes and are not expected to increase significantly in the
foreseeable future.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used in operating activities for the first six months of 1996 was
$14 million compared with $16 million provided by operations in the same period
of 1995. The $30 million decrease is due primarily to the timing of cash
receipts from customers, and the trend in the Lumber Market increasing the cost
of lumber, and consequently, the Company's investment in inventory at the end
of the quarter. Trade receivables tend to be at their highest levels during
the month of June due to the Company's peak selling season. The Company
expects to generate significant cash flows from operations in the third quarter
of 1996 as existing receivables and inventory are collected and sold.
The Company continues to improve its working capital management practices,
evidenced by a 25% decrease in its cash cycle (days sales outstanding plus days
supply of inventory less days payables outstanding) comparing the first six
months of 1996 with the same period of 1995. This improvement, along with the
Company's strong cash position at the beginning of the year, allowed it to
avoid borrowing on its lines of credit during the period, leaving $116 million
available on its revolving credit facilities at June 29, 1996.
Capital expenditures totaled almost $4.5 million in the first six months of
1996 as the Company remains on pace to spend approximately $10 to $12 million
for the year to upgrade its machinery and equipment and information systems.
In addition, the Company is currently investigating strategic acquisitions.
The Company's current plan involves pursuing acquisitions in the following
markets:
- - Manufacturers of commercial and residential trusses.
- - Manufacturers of industrial packaging products.
- - Truss manufacturers which supply the MH market.
- - Low cost treating operations which supply the DIY market.
The Company may finance any potential future acquisition using its cash
reserves or credit facilities, through an issuance of common stock or a
combination of the above.
Cash flows from financing activities in the first six months of 1996 consisted
of repayments on long-term debt, repurchases of common stock, proceeds from the
issuance of common stock and dividends paid to shareholders at a rate of $.03
per common share. In January 1996, the Company repurchased 100,000 shares of
its common stock for an amount totaling approximately $822,000. Management is
authorized to repurchase an additional 900,000 common shares under its current
stock repurchase program. While the Company has no current obligation to buy
back additional shares, it will continue to evaluate market
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UNIVERSAL FOREST PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
conditions and alternative uses of its cash to determine when it will make
repurchases. In February and April 1996, one former officer and seven current
officers of the Company exercised options to purchase 95,000 shares of common
stock for an amount totaling approximately $247,000.
ENVIRONMENTAL CONSIDERATIONS AND REGULATIONS
The Company is self-insured for environmental impairment liability, and accrues
for the estimated cost of remedial actions when situations requiring such
action arise. The Company owns and operates sixteen facilities throughout the
United States that chemically treat lumber products. In connection with the
ownership and operation of these and other real properties, and the disposal or
treatment of hazardous or toxic substances, the Company may, under various
federal, state, and local environmental laws, ordinances, and regulations, be
potentially liable for removal and remediation costs, as well as other
potential costs, damages, and expenses. Remediation and/or site assessment
activities are currently being conducted at the Company's Granger Indiana;
Union City, Georgia; Stockertown, Pennsylvania; Elizabeth City, North Carolina;
and North East, Maryland treatment facilities.
The Company has accrued, in current liabilities, amounts totaling $2.6 million
and $2.8 million at June 29, 1996 and December 30, 1995, respectively,
representing the estimated costs to complete remediation efforts currently in
process. The Company believes that the potential future costs of known
remediation efforts will not have a material adverse effect on its future
financial position, results of operations or liquidity.
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14
UNIVERSAL FOREST PRODUCTS, INC. AND SUBSIDIARIES
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
From time to time the Company may make certain statements which are considered
forward-looking. Statements regarding future performance are contingent on a
variety of risk factors which may impact the Company's ability to meet its
projections. In addition to the other risks contained herein, the risk factors
described below may negatively impact future financial results, and should be
considered when evaluating forward-looking statements made by the Company.
Competition:
The Company is subject to competitive selling and pricing pressures in its
major markets. While the company is generally aware of its existing
competitors' capabilities, it is subject to entry in its markets by new
competitors, which could negatively impact financial results.
Market Growth:
The Company's projections may be based on certain growth assumptions for the
overall markets which it serves. If the Company's markets do not maintain
anticipated growth projections, or if the Company fails to maintain its market
share, financial results could be impaired.
Government Regulations:
The Company is subject to a substantial amount of existing government
regulations which create a burden on the Company. Should the Company become
subject to additional laws and regulations enacted in the future, it could have
an adverse affect on the Company's financial results.
Lumber Market Volatility:
As previously stated, the Company experiences significant fluctuations in the
cost of lumber products from primary producers. While the Company attempts to
minimize its risk from severe price fluctuations, substantial, rapid changes in
lumber prices can affect the Company's financial results.
14
15
UNIVERSAL FOREST PRODUCTS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The following matter was voted upon at the Company's Annual Meeting of
Shareholders on April 24, 1996.
Election of the following Directors for three year terms expiring in 1999:
For Withheld
---------- ----------
Louis A. Smith 12,283,901 10,500
John C. Canepa 11,285,693 1,008,708
Other Directors whose terms of office continued after the meeting are as
follows:
Peter F. Secchia
William G. Currie
Philip M. Novell
Richard M. DeVos
John W. Garside
15
16
UNIVERSAL FOREST PRODUCTS, INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIVERSAL FOREST PRODUCTS, INC.
Date: August 12, 1996 By: /s/ William G. Currie
------------------------ -----------------------------------------
William G. Currie
Its: President and Chief Executive Officer
Date: August 12, 1996 By: /s/ Elizabeth A. Bowman
------------------------ -----------------------------------------
Elizabeth A. Bowman
Its: Executive Vice President of Finance and
Administration and Treasurer (Principal
Financial Officer)
16
17
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
27 Financial Data Schedule
17
5
6-MOS
DEC-28-1996
DEC-31-1995
JUN-29-1996
126,644
0
62,593,730
1,045,391
78,038,264
143,128,655
95,947,671
40,213,848
204,182,742
55,880,644
50,564,275
0
0
17,038,200
76,556,992
204,182,742
435,308,166
435,308,166
387,441,737
387,441,737
26,585,010
1,060,528
2,045,691
18,175,200
7,361,000
10,814,200
0
0
0
10,814,200
.61
.61
