UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR FISCAL YEAR ENDED DECEMBER 29, 2001. OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from ____________ to _________________. Commission File No.: 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 No.) 2801 E. BELTLINE, N.E., GRAND RAPIDS, MICHIGAN 49525 (Address of principal executive offices) (Zip Code) (616) 364-6161 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each Class Name of each exchange on which registered NONE ----------------------------------------- Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, NO PAR VALUE (Title of Class) Indicate by checkmark 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 by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of March 1, 2002, 17,792,961 shares of the registrant's common stock, no par value, were outstanding. The aggregate market value of the common stock held by non-affiliates of the registrant (i.e. excluding shares held by executive officers, directors, and control persons as defined in Rule 405, 17 CFR 230.405) on that date was $311,392,018 computed at the closing price of $23.14 on that date. Documents incorporated by reference: (1) Certain portions of the Company's Annual Report to Shareholders for the fiscal year ended December 29, 2001 are incorporated by reference into Part I and II of this Report. (2) Certain portions of the Company's Proxy Statement for its 2002 Annual Meeting of Shareholders are incorporated by reference into Part III of this Report. Exhibit Index located on page E-1. Page 1 of 15
ANNUAL REPORT ON FORM 10-K DECEMBER 29, 2001 TABLE OF CONTENTS PAGE ---- PART I Item 1. Business. 3 Item 2. Properties. 7 Item 3. Legal Proceedings. 7 Item 4. Submission of Matters to a Vote of Security Holders. 8 Additional Item: Executive Officers of the Registrant. 8 PART II Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters. 10 Item 6. Selected Financial Data. 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 10 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 11 Item 8. Financial Statements and Supplemental Data. 11 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 12 PART III Item 10. Directors and Executive Officers of the Registrant. 12 Item 11. Executive Compensation. 12 Item 12. Security Ownership of Certain Beneficial Owners and Management. 12 Item 13. Certain Relationships and Related Transactions. 12 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 13 2
PART I ITEM 1. BUSINESS. (a) GENERAL DEVELOPMENT OF THE BUSINESS. Universal Forest Products, Inc. was organized as a Michigan corporation in 1955. We engineer, manufacture, treat and distribute lumber and other building products to the DIY/retail, site-built construction, manufactured housing, industrial and wholesale lumber markets. We currently operate 90 facilities throughout the United States, Canada and Mexico. Information relating to current developments in our business is incorporated by reference from our Annual Report to Shareholders for the fiscal year ended December 29, 2001 ("2001 Annual Report") under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations." Selected portions of the 2001 Annual Report are filed as Exhibit 13 with this Form 10-K Report. (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131") defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Under the definition of a segment, our Eastern and Western Divisions may be considered an operating segment of our business. Under SFAS 131, segments may be aggregated if the segments have similar economic characteristics and if the nature of the products, distribution methods, customers and regulatory environments are similar. We have aggregated our divisions into one reporting segment, consistent with SFAS 131. Accordingly, separate industry segment information is not presented. (c) NARRATIVE DESCRIPTION OF BUSINESS. We presently engineer, manufacture, treat and distribute lumber and other building products to the DIY/retail, site-built construction, manufactured housing and industrial markets. Each of these markets is discussed in the paragraphs which follow. We also sell lumber products to the wholesale lumber market but are not emphasizing this business in our growth objectives. DIY/RETAIL MARKET. The customers comprising this market are primarily national home center retailers, retail-oriented regional lumberyards and contractor-oriented lumberyards. Customers in this market are serviced by our regional sales staff and are assisted by personnel from our headquarters. Generally, terms of sale are established for annual periods, and orders are placed with our regional facilities in accordance with established terms. One customer, The Home Depot, accounted for approximately 33%, 32% and 26% of our total net sales for fiscal 2001, 2000 and 1999, respectively. 3
From time to time we enter into certain sales contracts with The Home Depot. The contracts are limited to the establishment of general sales terms and conditions, such as delivery, invoicing, warranties and other standard, commercial matters. Sales are made by the release of purchase orders to us for particular quantities of certain products. We also enter into marketing agreements and rebate agreements with The Home Depot. The marketing agreements provide a certain percentage of our sales revenue or a minimum dollar amount will be committed to generate sales for us and The Home Depot. While we are entitled to make certain recommendations under the marketing agreements, The Home Depot reserves the right to spend these funds as it deems appropriate. The rebate agreements provide for certain percentage rebates to be given to The Home Depot based upon sales levels. The level and amount for the rebates vary with the level of our sales to The Home Depot. We currently supply customers in this market from over 50 of our locations. These regional facilities are able to supply customers with mixed truckloads of products which can be delivered to customers with rapid turnaround from receipt of an order. Freight costs are a factor in the ability to competitively service this market, especially with treated wood products because of their heavier weight. The close proximity of our regional facilities to the various outlets of these customers is a significant advantage when negotiating annual sales programs. The products offered to customers in this market include dimensional lumber (both preserved and unpreserved) and various "value-added products," some of which are sold under our trademarks. Value-added products may be preserved or unpreserved, and include the following: - - The Deck Necessities(R) group of products consists of decking, balusters, spindles, decorative posts, handrails, stair risers, stringers and treads. - - The Fence Fundamentals(TM) group of products includes various styles of fences, as well as gates, posts and other components. - - The Outdoor Essentials(R) group of products consists of various home and garden and landscaping items. - - Lattice is sold under the Lattice Basics(TM) trademark for use as skirting on decks, trellises and various outdoor home improvement projects. - - The Storage Solutions(TM) product line consists primarily of storage building frames and trusses. We also sell engineered wood products to this market, which include roof trusses, wall panels and engineered floor systems (see "Site-Built Construction Market" below). We are not aware of any competitor that currently manufactures, treats and distributes a full line of both value-added and commodity products on a national basis. We face competition on individual products from several different producers, but the majority of these competitors tend to be regional in their efforts and/or do not offer a full line of outdoor lumber products. We believe the breadth of our product offering, geographic dispersion, close proximity of our plants to core customers, purchasing expertise and service capabilities provide significant competitive advantages in this market. As the customers in this market continue to consolidate, we believe we are well-positioned to capture additional market share. 4
SITE-BUILT CONSTRUCTION MARKET. We entered the site-built construction market through strategic business acquisitions beginning in 1997. The customers comprising this market are primarily large-volume, multi-tract builders and smaller volume custom builders. Customers are serviced by our sales, engineering and design personnel in each region. Generally, terms of sale and pricing are determined based on quotes for each order. We currently supply customers in this market from 41 facilities located in 19 different states and Canada. These facilities manufacture various engineered wood products used to frame residential or commercial projects, including roof and floor trusses, wall panels, Open Joist 2000 and I-joists. Freight costs are a factor in the ability to competitively service this market due to the space requirements of these products on each truckload. Competitors in this market include lumberyards who also manufacture components, as well as regional manufacturers of components. Our objective is to continue to increase our manufacturing capacity for this market while developing a national presence. We believe our primary competitive advantages relate to the engineering and design capabilities of our regional staff, customer relationships, product quality and timeliness of delivery. MANUFACTURED HOUSING MARKET. The customers comprising the manufactured housing market are producers of mobile, modular and prefabricated homes and recreational vehicles. Products sold to customers in this market consist primarily of roof trusses, lumber cut and shaped to the customer's specification, plywood, particle board and dimensional lumber, all intended for use in the construction of manufactured housing. Sales are made by personnel located at each regional facility based on customer orders. Our engineering and support staff act as a sales resource to assist customers with truss designs, obtaining various building code approvals for the designs and aiding in the development of new products and manufacturing processes. While no competitor operates in as widely-dispersed geographic areas as we do, we face competition from suppliers in many geographic regions. Our principal competitive advantages include our product knowledge, the capacity to supply all of the customer's lumber requirements, the ability to deliver engineering support services, the close proximity of our regional facilities to core customers and our ability to provide national sales programs to certain customers. INDUSTRIAL MARKET. We define our industrial market as industrial manufacturers and agricultural customers who use pallets, crates and wooden boxes for packaging, shipping and material handling purposes. Many of the products sold to this market may be produced from the by-product of other manufactured products, thereby allowing us to increase our raw material yields while expanding our business. Competition is fragmented and includes virtually every supplier of lumber convenient to the customer. We service this market with our regional sales personnel supported by a centralized national sales and marketing department. SUPPLIERS. We are one of the largest domestic buyers of solid sawn lumber from primary producers (lumber mills). We use primarily southern yellow pine in our pressure-treating operations and site-built component plants in the Southeastern United States, which we obtain from mills located throughout the states comprising the Sunbelt. Other species we use include "spruce-pine-fir" from 5
Ontario, Quebec, British Columbia and Alberta, Canada; hemlock, Douglas fir and cedar from the Pacific Northwest; inland species of Ponderosa pine; and Radiata pine. There are numerous primary producers for all varieties we use, and we are not dependent on any particular source of supply. Our financial resources, in combination with our strong sales network and ability to remanufacture lumber, enable us to purchase a large percentage of a primary producer's output (as opposed to only those dimensions or grades in immediate need), thereby lowering our average cost of raw materials. We believe this represents a significant competitive advantage. INTELLECTUAL PROPERTY. We own a patent relating to automated equipment for the manufacture of lattice, a tie-down strap patent related to truss components, and a patent on machinery used in the recycling of drywall. In addition, we own four registered trade names or trademarks: PRO-WOOD(R) relating to preservative-treated wood products; Deck Necessities(R) relating to deck component products; Outdoor Essentials(R) related to lawn and garden items such as planter boxes, fencing products and lattice products; and the pine tree logo. As we develop proprietary brands, we may pursue registration or other formal protection. In addition, we claim common law trademark rights to several other trade names or trademarks. While we believe our patent and trademark rights are valuable, the loss of a patent or any trademark would not be likely to have a material adverse impact on our competitive position. SEASONAL INFLUENCES. Our manufactured housing and site-built construction markets are affected by seasonal influences in the northern states during the winter months when installation and construction is more difficult. The activities in the DIY/retail market have substantial seasonal impacts. The demand for many of our DIY/retail products is highest during the period of April to August. Accordingly, our sales to the DIY/retail market tend to be greater during the second and third quarters. We build our inventory of finished goods throughout the winter and spring to support this sales peak. Restraints on production capacity make this a necessary practice which potentially exposes us to adverse effects of changes in economic and industry trends. Since 1995, inventory management initiatives, supply programs with vendors and programs with customers have been used to reduce our exposure to adverse changes in the commodity lumber market and decrease demands on cash resources. BACKLOG. Due to the nature of our DIY/retail, manufactured housing and industrial businesses, backlog information is not meaningful. The maximum time between receipt of a firm order and shipment does not usually exceed a few days. Therefore, we would not normally have a backlog of unfilled orders in a material amount. The relationships with our major customers are such that we are either the exclusive supplier of certain products and/or certain geographic areas, or the designated source for a specified portion of the customer's requirements. In such cases, either we are able to forecast the customer's requirements or the customer may provide an estimate of its future needs. In neither case, however, will we receive firm orders until just prior to the anticipated delivery dates for the products in question. On March 1, 2002 and 2001, backlog orders associated with the site-built construction business approximated $27.7 million and $31.8 million, respectively, representing approximately six and 6
seven weeks of production, respectively. We believe the relatively short time period associated with our backlog, in certain regions, provides a significant competitive advantage. RESEARCH AND DEVELOPMENT. Our research and development efforts generally fall into four categories: engineering and testing of new truss designs; design and development of wood treatment systems and manufacturing processes; design and development of machinery and tooling of various wood shaping devices; and development of new products. Although important to our competitive strengths and growth, the dollar amount of research and development expenditures has not typically been material to us. WOOD PRESERVATION TREATMENT. Information required for environmental disclosures is incorporated by reference from Footnote N of the Consolidated Financial Statements presented under Item 8 herein. EMPLOYEES. At March 1, 2002, we had approximately 6,600 employees. One of our subsidiaries, which operates a location acquired in June 2000, has certain production employees who are represented by a labor union. We believe relations with our employees are good. (d) FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS. The dominant portion of our operations and sales occur in the United States. Separate financial information about foreign and domestic operations and export sales is incorporated by reference from Footnote P of the Consolidated Financial Statements presented under Item 8 herein. ITEM 2. PROPERTIES. Our headquarters building is located on a ten acre site adjacent to a main thoroughfare in suburban Grand Rapids, Michigan. The headquarters building consists of several one and two story structures of wood construction. We currently have 90 facilities located throughout the United States, Canada and Mexico. These facilities are generally of steel frame and aluminum construction and situated on fenced sites ranging in size from 7 acres to 48 acres. Depending upon function and location, these facilities typically utilize office space, manufacturing space, treating space and covered storage. We own all of our properties, free from any significant mortgage or other encumbrance, except for 12 regional facilities which are leased. We believe all of these operating facilities are adequate in capacity and condition to service existing customer locations. ITEM 3. LEGAL PROCEEDINGS. During the second quarter of 2001, we received a request for indemnification from a major customer in two separate lawsuits which seek class action status. One case, titled Jerry Jacobs et. al. v. Osmose, Inc. et. al., is pending in the U.S. District Court for the Southern District of Florida. A 7
second case, Albert Miller et. al. vs. Home Depot, USA Inc., et. al. is pending in the U.S. District Court for the Western District of Louisiana. During the fourth quarter of 2001, we were named as a defendant, along with chemical manufacturers and retailers, in a case titled Ardoin v. Stine Lumber, et. al. which was filed in Louisiana State Court. In these cases, the putative plaintiffs allege that CCA treated lumber is defective and also allege that the marketing of the product is either deceptive or not sufficiently informative as to the risks of the product. The plaintiffs seek removal of CCA treated lumber, together with financial remuneration. We believe the claims are baseless and without merit. To the extent we are required to defend these actions, we intend to do so vigorously. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ADDITIONAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT. The following table lists the names, ages and positions of all of our executive officers as of March 1, 2002. Executive officers are elected annually by the Board of Directors at the first meeting of the Board following the annual meeting of shareholders. Name Age Position - ------------------------------------------------------------------------------------------------------------------- Peter F. Secchia 64 Chairman of the Board, Universal Forest Products, Inc. William G. Currie 54 Vice Chair. of the Board and Chief Exec. Officer, Universal Forest Products, Inc. Michael B. Glenn 50 President and Chief Operating Officer, Universal Forest Products, Inc. C. Scott Greene 46 President, Universal Forest Products Eastern Division, Inc. Robert K. Hill 54 President, Universal Forest Products Western Division, Inc. Gary A. Wright 54 Exec. Vice President Site-Built, Universal Forest Products Eastern Division, Inc., and President, Universal Forest Products Shoffner LLC. Jeff A. Higgs 47 Exec. Vice President Site-Built, Universal Forest Products Western Div., Inc. Donald L. James 42 Vice President Site-Built, Universal Forest Products Eastern Division, Inc. Robert D. Coleman 47 Exec. Vice President Manufacturing, Universal Forest Products, Inc. Philip E. Rogers 51 Exec. Vice Pres. National Sales and Marketing, Universal Forest Products, Inc. Matthew J. Missad 41 Executive Vice President and Secretary, Universal Forest Products, Inc. 8
Michael R. Cole 35 Chief Financial Officer and Treasurer, Universal Forest Products, Inc. - ---------------------------------------------------------------------------------------------------------------- Peter F. Secchia, Chairman of the Board, began his service with us in 1962 and has been a director since 1967. William G. Currie joined us in 1971. From 1983 to 1990, Mr. Currie was President of Universal Forest Products, Inc., and he was the President and Chief Executive Officer of The Universal Companies, Inc. from 1989 until the merger to form Universal Forest Products, Inc. in 1993. On January 1, 2000, Mr. Currie also became Vice Chairman of the Board. Michael B. Glenn has been employed by us since 1974. In June of 1989, Mr. Glenn was elected Senior Vice President of our Southwest Operations, and on December 1, 1997, became President of Universal Forest Products Western Division, Inc. Effective January 1, 2000, Mr. Glenn was promoted to President and Chief Operating Officer. C. Scott Greene joined us in February of 1991. In November of 1996 he became General Manager of Operations for our Florida Region, and in January of 1999 became Vice President of Marketing for Universal Forest Products, Inc. During early 2000, Mr. Greene became President of Universal Forest Products Eastern Division, Inc. Robert K. Hill has been with us since 1986. In March of 1993, Mr. Hill was elected Senior Vice President of our Far West Operations. On December 1, 1997, Mr. Hill became the Executive Vice President of Operations of Universal Forest Products Western Division, Inc., and on January 1, 2000, became President of that Division. Gary A. Wright, has been affiliated with us since March 30, 1998 at which time we acquired Shoffner Industries, Inc., with whom he had been employed since 1978. Mr. Wright remained President of Shoffner Industries, L.L.C., now known as Universal Forest Products Shoffner LLC, and in 2000 he also became Executive Vice President of Site-Built for Universal Forest Products Eastern Division, Inc. Jeff A. Higgs, has been an employee since April 20, 1998, at which time we acquired the assets of Advanced Component Systems, Inc. Mr. Higgs served as a Vice President of Operations for Universal Forest Products Western Division, Inc. since 1998, and in 2000 became Executive Vice President of Site-Built for Universal Forest Products Western Division, Inc. Donald L. James joined us in March of 1998, and in June of that year became Director of National Sales, Site-Built Construction. Mr. James became the General Manager of Site-Built Operations for Universal Forest Products Shoffner LLC on January 1, 2001, and became Vice President Site- Built, Universal Forest Products Eastern Division, Inc. on January 1, 2002. Robert D. Coleman, has been an employee since 1979. Mr. Coleman was promoted to Senior Vice President of our Midwest Operations in September 1993. On December 1, 1997, Mr. Coleman became the Executive Vice President of Manufacturing of the Universal Forest Products Eastern Division, Inc. On January 1, 1999, Mr. Coleman was named the Executive Vice President of Manufacturing. 9
Philip E. Rogers, an employee since 1989, served as Vice President of Operations for the Universal Forest Products Southwest Company until November of 1997. At that time, Mr. Rogers became the Vice President of Sales, National Accounts Retail. Effective January 1, 1999, Mr. Rogers was promoted to Executive Vice President of National Sales and Marketing. Matthew J. Missad has been employed since 1985. Mr. Missad has served as General Counsel and Secretary since December 1, 1987, and Vice President Corporate Compliance since August 1989. In February 1996, Mr. Missad was promoted to Executive Vice President. Michael R. Cole, CPA, CMA, joined us in November of 1993. In January of 1997, Mr. Cole was promoted to Director of Finance, and on January 1, 2000 was made Vice President of Finance. On July 19, 2000, Mr. Cole became Chief Financial Officer. PART II The following information items in this Part II, which are contained in the 2001 Annual Report, are specifically incorporated by reference into this Form 10-K Report. These portions of the 2001 Annual Report, that are specifically incorporated by reference, are filed as Exhibit 13 with this Form 10-K Report. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. The information required by this Item is incorporated by reference from the 2001 Annual Report under the caption "Price Range of Common Stock and Dividends." ITEM 6. SELECTED FINANCIAL DATA. The information required by this Item is incorporated by reference from the 2001 Annual Report under the caption "Selected Financial Data." ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required by this Item is incorporated by reference from the 2001 Annual Report under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations." 10
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. We are exposed to market risks related to fluctuations in interest rates on our variable rate debt, which consists of revolving credit facilities and industrial development revenue bonds. We do not currently use interest rate swaps, futures contracts or options on futures, or other types of derivative financial instruments to mitigate this risk. For fixed rate debt, changes in interest rates generally affect the fair market value, but not earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not influence fair market value, but do affect future earnings and cash flows. We do not have an obligation to prepay fixed rate debt prior to maturity, and as a result, interest rate risk and changes in fair market value should not have a significant impact on such debt until we would be required to refinance it. On December 29, 2001, the estimated fair value of our long-term debt, including the current portion, was $175.8 million, which was $1.1 million greater than the carrying value. The estimated fair value is based on rates anticipated to be available to us for debt with similar terms and maturities. The estimated fair value of notes payable included in current liabilities and the revolving credit facility approximated the carrying values. Expected cash flows over the next five years related to debt instruments are as follows: 2002 2003 2004 2005 2006 Thereafter Total ---- ---- ---- ---- ---- ---------- ----- ($US equivalents, in thousands) Long-term Debt: Fixed Rate ($US)............... $5,714 $5,714 $5,714 $21,500 $78,500 $117,142 Average interest rate........ 7.15% 7.15% 7.15% 6.69% 6.98% Variable Rate ($US)............ $2,726 $27,293 $202 $202 $195 $15,051 $45,669 Average interest rate(1)..... 2.48% Variable Rate ($CDN)........... $11,974 $11,974 Interest rate(2)............. 2.93% (1) Average of rates at December 29, 2001 (2) Rate at December 29, 2001 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this Item is incorporated by reference from the 2001 Annual Report under the following captions: "Report of Independent Public Accountants" "Independent Auditors' Report" "Consolidated Balance Sheets" "Consolidated Statements of Earnings" "Consolidated Statements of Shareholders' Equity" "Consolidated Statements of Cash Flows" "Notes to Consolidated Financial Statements" 11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. On June 14, 2001, the Company's Board of Directors approved of a change in its independent accountant from Deloitte & Touche LLP ("Deloitte") to Arthur Andersen LLP ("Andersen") based upon the recommendation of the Audit Committee. Deloitte's report on the Company's financial statements for the past two fiscal years did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles. During 1999, 2000, and a portion of 2001, preceding the Board's decision to change independent accountants, there were no disagreements with Deloitte on any matter of accounting principles or practices, financial statement disclosure, auditing scope or procedure, which disagreement(s), if not resolved, would have caused Deloitte to refer to the matter of the disagreement(s) in connection with its reports. During that same period of time, there were no reportable events as described in item 304(a)(1)(b) of the Securities and Exchange Commission's Regulation S-K. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information relating to executive officers is included in this report in the last Section of Part I under the caption "Additional Item: Executive Officers of the Registrant." Information relating to directors and compliance with Section 16(a) of the Securities and Exchange Act of 1934 is incorporated by reference from our definitive Proxy Statement dated March 18, 2002, for the 2002 Annual Meeting of Shareholders, as filed with the Commission ("2002 Proxy Statement"), under the captions "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance." ITEM 11. EXECUTIVE COMPENSATION. Information relating to executive compensation is incorporated by reference from the 2002 Proxy Statement under the caption "Executive Compensation." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information relating to security ownership of certain beneficial owners and management is incorporated by reference from the 2002 Proxy Statement under the captions "Ownership of Common Stock" and "Securities Ownership of Management." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information relating to certain relationships and related transactions is incorporated by reference from the 2002 Proxy Statement under the caption "Election of Directors." 12
PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) 1. Financial Statements. The following Report of Independent Public Accountants, Independent Auditors' Report and Consolidated Financial Statements are incorporated by reference, under Item 8 of this report, from the 2001 Annual Report: Report of Independent Public Accountants Independent Auditors' Report Consolidated Balance Sheets as of December 29, 2001 and December 30, 2000 Consolidated Statements of Earnings for the Years Ended December 29, 2001, December 30, 2000 and December 25, 1999 Consolidated Statements of Shareholders' Equity for the Years Ended December 29, 2001, December 30, 2000 and December 25, 1999 Consolidated Statements of Cash Flows for the Years Ended December 29, 2001, December 30, 2000 and December 25, 1999 Notes to Consolidated Financial Statements 2. Financial Statement Schedules. All schedules required by this Form 10-K Report have been omitted because they were inapplicable, included in the Consolidated Financial Statements or Notes to Consolidated Financial Statements, or otherwise not required under instructions contained in Regulation S-X. 3. Exhibits. Reference is made to the Exhibit Index which is found on pages E-1 through E-3 of this Form 10-K Report. (b) None. 13
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: March 27, 2002 UNIVERSAL FOREST PRODUCTS, INC. By: /s/ Peter F. Secchia ---------------------------------------------- PETER F. SECCHIA, CHAIRMAN OF THE BOARD and /s/ William G. Currie ---------------------------------------------- WILLIAM G. CURRIE, VICE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER and /s/ Michael R. Cole ---------------------------------------------- MICHAEL R. COLE, CHIEF FINANCIAL OFFICER AND TREASURER (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) 14
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 27th day of March, 2002, by the following persons on behalf of us and in the capacities indicated. Each Director whose signature appears below hereby appoints Matthew J. Missad and Michael R. Cole, and each of them individually, as his attorney-in-fact to sign in his name and on his behalf as a Director, and to file with the Commission any and all amendments to this report on Form 10-K to the same extent and with the same effect as if done personally. /s/ Peter F. Secchia /s/ John W. Garside - --------------------------------------- ------------------------------------- PETER F. SECCHIA, DIRECTOR JOHN W. GARSIDE, DIRECTOR /s/ William G. Currie /s/ Philip M. Novell - --------------------------------------- ------------------------------------- WILLIAM G. CURRIE, DIRECTOR PHILIP M. NOVELL, DIRECTOR /s/ John C. Canepa /s/ Louis A. Smith - --------------------------------------- ------------------------------------- JOHN C. CANEPA, DIRECTOR LOUIS A. SMITH, DIRECTOR /s/ Carroll M. Shoffner - --------------------------------------- CARROLL M. SHOFFNER, DIRECTOR 15
EXHIBIT NO. DESCRIPTION - ----------- ----------- 3(a) Registrant's Articles of Incorporation were filed as Exhibit 3(a) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference. 3(b) Registrant's Bylaws were filed as Exhibit 3(b) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference. 4(a) Specimen form of Stock Certificate for Common Stock was filed as Exhibit 4(a) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference. 4(b)(3) Series A, Senior Unsecured Note Agreement dated May 5, 1994, was filed as Exhibit 4(b)(3) to a Form 10-Q Quarterly Report for the quarter period ended March 26, 1994, and the same is incorporated herein by reference. 4(b)(4) First Amendment to Note Agreement dated November 13, 1998, relating to Series A, Senior Unsecured Note Agreement dated May 5, 1994, was filed as Exhibit 4(b)(4) to a Form 10-K Annual Report for the fiscal year ended December 26, 1998. 10(a)(2) Redemption Agreement with Peter F. Secchia, dated January 2, 2002. 10(b) Form of Indemnity Agreement entered into between the Registrant and each of its directors was filed as Exhibit 10(b) to a Registration Statement on Form S-1 (No. 33- 69474) and the same is incorporated herein by reference. 10(c)(2) Lease guarantee, dated March 10, 1978, given by Registrant on behalf of Universal Restaurants, Inc. to Jackson Properties was filed as Exhibit 10(c)(2) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference. 10(c)(5) Lease guarantee, dated April 26, 1978, by Registrant on behalf of Universal Restaurants, Inc. to Dorr D. and Nettie R. Granger was filed as Exhibit 10(c)(5) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference. 10(d)(1) Lease between Registrant and its Employee Profit Sharing and Retirement Trust Fund as lessor regarding Registrant's Shakopee, Minnesota facility was filed as Exhibit 10(d)(1) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference. 10(d)(2) Lease between Registrant and McIntosh Lumber Co. as lessor regarding Registrant's Huntington Beach, California facility was filed as Exhibit 10(d)(2) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference. *10(e)(1) Form of Executive Stock Option Agreement was filed as Exhibit 10(e)(1) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference. E-1
EXHIBIT NO. DESCRIPTION - ----------- ----------- *10(e)(2) Form of Officers' Stock Option Agreement was filed as Exhibit 10(e)(2) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference. *10(f) Salaried Employee Bonus Plan was filed as Exhibit 10(f) to a Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by reference. 10(g)(5) Promissory Note with NBD Bank, N.A., dated January 20, 1994, was filed as Exhibit 10(g)(5) to a Form 10-K Annual Report for the year ended December 25, 1993, and the same is incorporated herein by reference. 10(g)(6) Promissory Note with Old Kent Bank and Trust Company, dated January 24, 1994, was filed as Exhibit 10(g)(6) to a Form 10-K Annual Report for the year ended December 25, 1993, and the same is incorporated herein by reference. 10(g)(7) Promissory Note with Michigan National Bank, dated January 27, 1994, was filed as Exhibit 10(g)(7) to a Form 10-K Annual Report for the year ended December 25, 1993, and the same is incorporated herein by reference. 10(g)(8) Promissory Note with Comerica Bank, dated February 14, 1994, was filed as Exhibit 10(g)(8) to a Form 10-K Annual Report for the year ended December 25, 1993, and the same is incorporated herein by reference. 10(h)(1) Land Contract Agreement dated May 26, 1994, was filed as Exhibit 10(h)(1) to a Form 10-Q Quarterly Report for the quarter period ended June 25, 1994, and the same is incorporated herein by reference. 10(i)(1) Revolving Credit Agreement dated November 13, 1998 was filed as Exhibit 10(i)(1) to a Form 10-K Annual Report for the year ended December 26, 1998, and the same is incorporated herein by reference. 10(j)(1) Series 1998-A, Senior Note Agreement dated December 21, 1998 was filed as Exhibit 10(j)(1) to a Form 10-K Annual Report for the year ended December 26, 1998, and the same is incorporated herein by reference. 13 Selected portions of the Company's Annual Report to Shareholders for the fiscal year ended December 29, 2001. 21 List of Registrant's subsidiaries. 23(a) Consent of Arthur Andersen LLP. 23(b) Consent of Deloitte & Touche LLP. 99 Letter to the Commission pursuant to Temporary Note 3T. - ----------------- E-2
EXHIBIT 10(a)(2) STOCK REDEMPTION AGREEMENT This Stock Redemption Agreement is entered into by and among Universal Forest Products, Inc., a Michigan corporation, with headquarters at 2801 East Beltline, N.E., Grand Rapids, Michigan 49525 (the "Corporation"); Peter F. Secchia, individually ("PFS"); Peter F. Secchia Trust u/a/d August 27, 1990, as amended (the "PFS Trust"); the Secchia Family Limited Partnership ("SFLP"); SIBSCO, L.L.C., a Michigan limited liability company ("SIBSCO"); and the Secchia Family Foundation (the "Foundation"). RECITALS A. The PFS Trust; SFLP; SIBSCO; the Foundation; the Mark W. Secchia Trust u/a/d December 23, 1991, as amended (the "MWS Trust"); the Stephanie R. Secchia Trust u/a/d December 23, 1991, as amended (the "SRS Trust"); the Charles N. Secchia Trust u/a/d December 23, 1991, as amended (the "CNS Trust"); the Sandra V. Secchia Trust u/a/d December 23, 1991, as amended (the "SVS Trust"); The Piffuskids Christmas Trust for Grandma u/a/d December 23, 1987 ("Grandma's Trust"); the Fifth Third Securities Corporation, IRA Custodian for the benefit of Peter F. Secchia (the "PFS-IRA"); Mark W. Secchia, individually; Stephanie R. Secchia; individually; Charles N. Secchia, individually; and Sandra Secchia Aslanian, individually (collectively, the "Shareholders") each own shares of the common stock, no par value, of the Corporation ("Common Stock"). B. The Shareholders desire to have some of their shares of Common Stock redeemed by the Corporation on the terms and conditions hereinafter set forth. C. The Corporation desires to redeem from one or more of the Shareholders 2,000,000 shares of Common Stock owned by the Shareholders on the terms and conditions hereinafter set forth. In consideration of the above recitals and of the mutual covenants and agreements herein contained, the parties mutually agree as follows: 1. REDEMPTION. Subject to the terms and conditions of this Agreement, on January 2, 2002 (the "Redemption Date"), one or more of the Shareholders, collectively, shall sell and transfer to the Corporation, and the Corporation shall redeem from one or more of the Shareholders, 2,000,000 shares of Common Stock owned by the Shareholders. The number of shares to be sold by each Shareholder on the Redemption Date shall be determined by the Shareholders and provided to the Corporation in a writing signed by all of the Shareholders on or prior to January 2, 2002, in the form attached as Exhibit A. 2. CALCULATION AND PAYMENT OF REDEMPTION PRICE. On the Redemption Date, the Corporation shall pay to each Shareholder, in immediately available funds, the "Per Share Price" multiplied by the number of shares redeemed by the Corporation from that Shareholder on the Redemption Date. The "Per Share Price" shall mean Eighteen Dollars ($18.00) per Share. The aggregate amount payable to each Shareholder is referred to as the "Applicable Redemption Price." 1
3. TRANSFER OF OWNERSHIP OF SHARES. On or before the Redemption Date, each Shareholder selling shares hereunder shall deliver to the Corporation, at its address set forth in paragraph 12 hereof, the original stock certificate(s) representing the redeemed shares, duly endorsed in blank by that Shareholder, or accompanied by blank stock powers, in the manner required by the Corporation's transfer agent. Each Shareholder shall deliver such other documents and instruments reasonably required by the Corporation or its transfer agent to transfer the redeemed shares to the Corporation. If any certificates evidencing shares of Common Stock are lost, stolen or destroyed, the Shareholder entitled to payment with respect to such Common Stock shall make and deliver an affidavit of lost certificate in form and substance acceptable to the Corporation and its transfer agent, and deliver such affidavit in lieu of the original stock certificate required above. In such event, the Corporation may, in its discretion and as a condition precedent to payment of the Applicable Redemption Price with respect thereto, require the Shareholder to indemnify the Corporation against any claim that may be made against it with respect to the lost, stolen or destroyed certificates(s) and to pay any required indemnity bond, as may be required by the transfer agent. 4. ADJUSTMENTS. If, between the date of this Agreement and the Redemption Date, the outstanding shares of Common Stock changes into a different number of shares or a different class of shares by reason of any stock split, split-up, reclassification, recapitalization, merger, consolidation, combination, exchange of shares, stock dividend or dividend payable in other securities, or any similar event has occurred, and the record date for such change is within that time period, the number of shares to be redeemed from each Shareholder pursuant to this Agreement and the Applicable Redemption Price shall be appropriately adjusted to provide to the holders thereof the same economic effect as contemplated by this Agreement prior to such event. 5. REPRESENTATIONS OF THE SHAREHOLDERS AT CLOSING. By executing and delivering the form attached hereto as Exhibit A, each Shareholder severally represents and warrants with respect to himself, herself or itself as follows, and covenants that the same shall be true as of the Redemption Date with respect to the shares of Common Stock to be redeemed on the Redemption Date: (a) the Shareholder is the legal and beneficial owner of all of the shares of Common Stock to be sold and transferred by the Shareholder hereunder, free and clear of any and all liens, encumbrances and other charges; (b) the Shareholder has good and marketable title to the shares of Common Stock to be sold and transferred by the Shareholder hereunder, and has full right to sell and transfer such shares to the Corporation; (c) the Shareholder is not a party to any agreement, written or oral, creating rights in respect of any of the shares of Common Stock to be sold and delivered by the Shareholder hereunder; 2
(d) there are no existing warrants, options, stock purchase agreements, or restrictions of any nature relating to the shares of Common Stock to be sold and delivered by the Shareholder hereunder, and the Shareholder's performance hereunder will not conflict with or violate any agreement to which the Shareholder is a party or by which the Shareholder is bound; and (e) this Agreement is a binding obligation of the Shareholder, enforceable against the Shareholder in accordance with its terms. 6. REPRESENTATIONS OF THE CORPORATION. The Corporation represents, warrants and covenants that: (a) its execution and delivery of this Agreement has been duly authorized by requisite corporate action; (b) the execution and delivery of this Agreement and performance of its obligations hereunder do not violate section 345 of the Michigan Business Corporation Act; (c) it has obtained all consents, authorizations and waivers required to be obtained by it in order to execute and deliver this Agreement and perform its obligations hereunder, and it will timely make all filings and registrations that are required by law or contract to be made in connection herewith; (d) this Agreement is a binding obligation of the Corporation, enforceable against it in accordance with its terms. 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made hereunder shall survive the delivery of the shares redeemed hereunder. 8. CONDITIONS PRECEDENT TO CORPORATION'S OBLIGATIONS. It shall be a condition precedent to the Corporation's obligations hereunder with respect to any Shareholder that: (a) the representations and warranties made by such Shareholder herein shall be true and correct on the Redemption Date as if made on and as of that date, and the tender of shares by such Shareholder on the Redemption Date shall be deemed an affirmation thereof; and (b) on the Redemption Date, the Corporation shall not be in default, nor shall its performance of the transactions contemplated hereby cause a default, under any of the Corporation's loan documents or credit facilities. 3
9. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS. It shall be a condition precedent to each Shareholder's obligation hereunder that: (a) the representations and warranties made by the Corporation herein shall be true and correct on the Redemption Date as if made on and as of that date, and the tender of the Applicable Redemption Price by the Corporation on the Redemption Date shall be deemed an affirmation thereof. 10. CONTINUING RIGHTS OF SHAREHOLDERS. Nothing in this Agreement shall affect any Shareholder's rights with respect to shares of Common Stock not yet redeemed hereunder, or any other shares of Common Stock owned, now or in the future, by such Shareholder, and each Shareholder shall continue to possess and have the right to exercise all rights of ownership with respect to such shares until redeemed pursuant hereto. 11. FURTHER ASSURANCES. Each party shall take whatever further action may become necessary or appropriate to carry out the intent and accomplish the purposes of this Agreement. 12. NOTICES. All demands and notices given hereunder will be sent by personal delivery or overnight express with a nationally recognized courier, addressed to the respective parties at the addresses set forth below, or to such other address for a party as that party may hereafter designate in writing to the other parties in the same manner: If to the Corporation: Universal Forest Products, Inc. Attention: Matthew J. Missad 2801 East Beltline, NE Grand Rapids, Michigan 49505 If to any Shareholder: c/o Peter F. Secchia 2833 Bonnell, SE Grand Rapids, Michigan 49506 With a copy to: Stephen J. Mulder Mika, Meyers, Beckett & Jones, PLC 200 Ottawa Avenue, Suite 700 Grand Rapids, Michigan 49503 13. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their legal representatives, successors, and assigns. This Agreement may not be assigned by any of the Shareholders or the Corporation. 14. REDEMPTION DATE. If the Redemption Date is not a Business Day, then the Redemption Date shall be the first Business Day following the scheduled Redemption Date. "Business Day" means any day on which banks are not required or authorized to close in the City of Grand Rapids, Michigan. 4
15. ENTIRE AGREEMENT. This Agreement may be amended only by a writing signed by each party affected thereby, expressly referring to this Agreement and stating that it is intended to amend this Agreement. 16. NON-WAIVER. No delay or failure by any party to exercise any right under this Agreement, and no partial or single exercise of that right, will constitute a waiver of that or any other right, unless otherwise expressly provided herein. 17. HEADINGS. Headings in this Agreement are for convenience only and will not be used to interpret or construe is provisions. 18. GOVERNING LAW. This Agreement will be construed in accordance with and governed by the laws of the State of Michigan. 19. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which together will be one and the same instrument. 20. JOINT AND SEVERAL OBLIGATIONS. The mutual obligations of the Corporation and each Shareholder are included in one agreement for convenience only, and such obligations relating to one Shareholder shall not be affected by any change, circumstance or determination regarding such obligations relating to another Shareholder. The obligations of each Shareholder hereunder are not joint obligations, but are several obligations only. 21. THIRD PARTY BENEFICIARIES. The parties hereto intend that the Shareholders who are not named parties to this agreement shall be third-party beneficiaries of this agreement, and shall have the right to enforce this agreement as if named parties hereto, subject to performance of the obligations imposed on Shareholders hereunder. 5
IN WITNESS WHEREOF, the parties have signed this Agreement this 3rd day of December, 2001. UNIVERSAL FOREST PRODUCTS, INC. By /s/ Michael B. Glenn ------------------------------------------------ Michael B. Glenn, its President /s/ Peter F. Secchia -------------------------------------------------- Peter F. Secchia, individually PETER F. SECCHIA TRUST, U/A/D AUGUST 27, 1990, AS AMENDED By /s/ Peter F. Secchia ----------------------------------------------- Peter F. Secchia, its Trustee SECCHIA FAMILY LIMITED PARTNERSHIP By /s/ Peter F. Secchia ----------------------------------------------- Peter F. Secchia, Trustee of the Peter F. Secchia Trust, u/a/d August 27, 1990, as amended, its Managing Partner SIBSCO, L.L.C. By /s/ Peter F. Secchia ----------------------------------------------- Peter F. Secchia, its Managing Member SECCHIA FAMILY FOUNDATION By /s/ Peter F. Secchia ----------------------------------------------- Peter F. Secchia, its President 6
EXHIBIT A TO STOCK REDEMPTION AGREEMENT Universal Forest Products, Inc. 2801 East Beltline, NE Grand Rapids, Michigan 49505 Attention: Matthew J. Missad Re: Exercise Notice Pursuant to the terms of that certain Stock Redemption Agreement, dated December 3rd, 2001, between Universal Forest Products, Inc. and the undersigned Shareholders (the "Agreement"), the number of shares to be redeemed from each Shareholder is as follows: PFS shares ------------------ PFS Trust 800,000 shares ------------------ SFLP 560,410 shares ------------------ SIBSCO 100,000 shares ------------------ Foundation 400,000 shares ------------------ MWS Trust 40,000 shares ------------------ SRS Trust 20,000 shares ------------------ CNS Trust 40,000 shares ------------------ SVS Trust 28,000 shares ------------------ Grandma's Trust shares ------------------ PFS-IRA 11,590 shares ------------------ Mark W. Secchia shares ------------------ Stephanie R. Secchia shares ------------------ Charles N. Secchia shares ------------------ Sandra Secchia Aslanian shares ------------------ TOTAL 2,000,000 shares Each capitalized term used herein and not otherwise defined shall have the meaning ascribed to it in the Agreement. This Notice may be executed in two or more counterparts, each of which will be deemed an original but all of which together will be one and the same instrument. (Signatures on following two pages) 7
Dated as of: January 2, 2002 /s/ Peter F. Secchia --------------------------------------------- Peter F. Secchia, individually PETER F. SECCHIA TRUST, U/A/D AUGUST 27, 1990, AS AMENDED By /s/ Peter F. Secchia ------------------------------------------ Peter F. Secchia, its Trustee SECCHIA FAMILY LIMITED PARTNERSHIP By /s/ Peter F. Secchia ------------------------------------------ Peter F. Secchia, Trustee of the Peter F. Secchia Trust, u/a/d August 27, 1990, as amended, its Managing Partner SIBSCO, L.L.C. By /s/ Peter F. Secchia ------------------------------------------ Peter F. Secchia, its Managing Member SECCHIA FAMILY FOUNDATION By /s/ Peter F. Secchia ------------------------------------------ Peter F. Secchia, its President /s/ Mark A. Schut --------------------------------------------- Mark A. Schut, Trustee of the Mark W. Secchia Trust u/a/d December 23, 1991, as amended, and the Stephanie R. Secchia Trust u/a/d December 23, 1991, as amended, and the Charles N. Secchia Trust u/a/d December 23, 1991, as amended, and the Sandra V. Secchia Trust u/a/d December 23, 1991, as amended 8
THE PIFFUSKIDS CHRISTMAS TRUST FOR GRANDMA u/a/d December 23, 1987 By ------------------------------------------ Valerie Gail Secchia, Trustee PFS - IRA By /s/ L. L. Cannon ------------------------------------------- Its -------------------------------- /s/ Mark W. Secchia --------------------------------------------- Mark W. Secchia, individually /s/ Stephanie R. Secchia --------------------------------------------- Stephanie R. Secchia, individually /s/ Charles N. Secchia --------------------------------------------- Charles N. Secchia, individually /s/ Sandra Secchia Aslanian --------------------------------------------- Sandra Secchia Aslanian, individually 9
EXHIBIT 13 Financial Information Table of Contents
Selected Financial Data (In thousands, except per share and statistics data.)
Management's Discussion and Analysis of Financial Condition and Results of Operations Risk Factors Included in this report are certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements are based on the beliefs and assumptions of management, together with information available to us when the statements were made. Future results could differ materially from those included in such forward-looking statements as a result of, among other things, the factors set forth below and certain economic and business factors which may be beyond our control. Investors are cautioned that all forward-looking statements involve risks and uncertainty. WE ARE SUBJECT TO FLUCTUATIONS IN THE PRICE OF LUMBER. We experience significant fluctuations in the cost of commodity lumber products from primary producers (the "Lumber Market"). A variety of factors over which we have no control, including government regulations, environmental regulations, weather conditions, economic conditions and natural disasters, impact the cost of lumber products and our selling prices. While we attempt to minimize our risk from severe price fluctuations, substantial, prolonged trends in lumber prices can negatively affect our sales volume, our gross margins and our profitability. We anticipate that these fluctuations will continue in the future. OUR GROWTH MAY BE LIMITED BY THE MARKETS WE SERVE. Our sales growth is dependent, in part, upon the growth of the markets we serve. If our markets do not achieve anticipated growth, or if we fail to maintain our market share, financial results could be impaired. The manufactured housing industry is currently hampered by market conditions, including an oversupply of product and tightened credit policies which have impacted our ability to achieve short-term performance objectives. Significant lenders who previously provided financing to consumers of these products and industry participants have either restricted credit or exited the market. A continued shortage of financing to this industry could adversely affect our operating results. Our ability to achieve growth in sales and margins to the site-built construction market is somewhat dependent on housing starts. If housing starts decline significantly, our financial results could be negatively impacted. We are witnessing consolidation by our customers. These consolidations will result in a larger portion of our sales being made to some customers and may limit the customer base we are able to serve. OUR GROWTH MAY BE LIMITED BY OUR ABILITY TO MAKE SUCCESSFUL ACQUISITIONS. A key component of our growth strategy is to complete business combinations. Business combinations involve inherent risks, including assimilation and successfully managing growth. While we conduct extensive due diligence and have taken steps to ensure successful assimilation, factors beyond our control could influence the results of these acquisitions. Also, the repurchase of approximately $36 million of our stock from our largest shareholder may reduce the number and scope of our acquisitions in 2002. WE MAY BE ADVERSELY AFFECTED BY THE IMPACT OF ENVIRONMENTAL AND SAFETY REGULATIONS. We are subject to the requirements of federal, state and local environmental and occupational health and safety laws and regulations. There can be no assurance that we are at all times in complete compliance with all of these requirements. We have made and will continue to make capital and other expenditures to comply with environmental regulations. If additional laws and regulations are enacted in the future, which restrict our ability to manufacture and market our products, including our treated lumber products, it could adversely affect our sales and profits. If existing laws are interpreted differently, it could also increase the financial costs to us. See additional discussion below under the caption "Environmental Considerations and Regulations." SEASONALITY AND WEATHER CONDITIONS COULD ADVERSELY AFFECT US. Some aspects of our business are seasonal in nature and results of operations vary from quarter to quarter. Our treated lumber and outdoor specialty products, such as fencing, decking and lattice, experience the greatest seasonal effects. Sales of treated lumber, primarily consisting of Southern Yellow Pine ("SYP"), also experience the greatest Lumber Market risk (see Historical Lumber Prices). Treated lumber sales are generally at their highest levels between April and August. 7
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) This sales peak, combined with capacity constraints in the wood treatment process, requires us to build our inventory of treated lumber throughout the winter and spring. This also has an impact on our receivables balances, which tend to be significantly higher at the end of the second and third quarters. Because sales prices of treated lumber products may be indexed to the Lumber Market at the time they are shipped, our profits can be negatively affected by prolonged declines in the Lumber Market during our primary selling season. To mitigate this risk, programs are maintained with certain vendors and customers that are intended to decrease our exposure. These programs include those materials which are most susceptible to adverse changes in the Lumber Market. Vendor programs also allow us to carry a lower investment in inventories. The majority of our products are used or installed in outdoor construction activities; therefore, short-term sales volume, our gross margins, and our profits can be negatively affected by adverse weather conditions. In addition, adverse weather conditions can negatively impact our productivity and costs per unit. WE MAY BE ADVERSELY AFFECTED IF OUR CUSTOMERS AND VENDORS ARE NOT WILLING TO MODIFY OUR EXISTING DISTRIBUTION STRATEGIES. While we have invested heavily in technology and established electronic business-to-business efficiencies with certain customers and vendors, the willingness of customers and vendors to modify existing distribution strategies poses a potential risk. We believe the nature of our products, together with our value-added services, ensures that we have a secure position in the supply chain. When analyzing this report to assess our future performance, please recognize the potential impact of the various factors set forth above. Historical Lumber Prices The following table presents the Random Lengths framing lumber composite price for the years ended December 29, 2001, December 30, 2000 and December 25, 1999.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) In addition, a SYP composite price, prepared and used by our managers, is presented below. Sales of products produced using this species comprise up to fifty percent of our sales volume.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) the greater the exposure to changes in the price of lumber. This exposure is less significant with remanufactured lumber, trusses sold to the manufactured housing market and other similar products, due to the higher level of inventory turnover. In addition to the impact of Lumber Market trends on gross margins, changes in the level of the market causes fluctuations in gross margins when comparing operating results from period to period. This is explained in the following example, which assumes the price of lumber has increased from period one to period two, with no changes in the trend within each period.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) The following table presents, for the periods indicated, our net sales (in thousands) and percentage of total net sales by market classification.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) DIY/Retail: We have developed strong relationships with national retail customers due to our ability to provide quality products and a high level of service at competitive prices. The most significant is our long standing relationship with The Home Depot, which comprised 32.8% of our total sales and 67.9% of our DIY/retail sales in 2001. Net sales to the DIY/retail market increased 12% in 2001 compared to 2000, primarily due to growth in sales to The Home Depot. Our sales to The Home Depot increased 14% due to unit sales increases across several regions in all product lines. Net sales to the DIY/retail market increased 2% in 2000 compared to 1999 was primarily due to a 17% increase in sales to The Home Depot despite a decrease in overall selling prices caused by a decline in the Lumber Market (see "Historical Lumber Prices"). In addition, this increase in unit sales was partially offset by a decrease in sales to two customers due to a decline in their financial positions. Site-Built Construction: Net sales to the site-built construction market increased 27% in 2001 compared to 2000 primarily due to several acquisitions we completed during 2001 (see "Business Combinations") combined with 11% growth out of our existing operations. Net sales to the site-built construction market increased 15% in 2000 compared to 1999 primarily due to the acquisitions of TED and Gang-Nail during the year 2000 (see "Business Combinations"). Manufactured Housing: Net sales to the manufactured housing market decreased 4% in 2001 compared to 2000 due to a decline in selling prices resulting from the Lumber Market. Our unit sales remained relatively flat despite a 23.3% decline in industry shipments. Since the fourth quarter of 1999, our customers have been struggling with an oversupply of finished homes at the retail level, tightened credit conditions and an increase in repossessions. The industry appears to have reached its low point for production in 2001. Net sales to the manufactured housing market decreased in 2000 compared to 1999 due to a decline in both unit sales and selling prices due to the deflated Lumber Market. Our unit sales decreased as customers struggled with market conditions. The Manufactured Housing Institute, in its December 2000 "Manufacturing Report" estimated that the number of finished homes shipped to retailers declined 25.7% from 1999 to 2000. Industrial: Net sales to the industrial market increased 5% in 2001 compared to 2000. This resulted from re-directing sales efforts and manufacturing capacity at certain plants due to the downturn in the manufactured housing market and the continued efforts of our industrial sales personnel. We anticipated stronger growth in 2001, but the slowing economy had a significant impact on many of our customers, particularly those in the technology sector. Net sales to the industrial market increased 25% in 2000 compared to 1999 due to increased market share in several regions. Additional sales personnel focused exclusively on industrial sales, combined with the effects of re-directing sales efforts and manufacturing capacity at certain plants as a result of the downturn in the manufactured housing market, caused this increase. COST OF GOODS SOLD AND GROSS PROFIT Gross profit as a percentage of net sales increased in 2001 compared to 2000. This increase was primarily due to an increase in our ratio of sales of higher margin, value-added products, particularly sales of engineered wood products to the site-built construction market, trusses to the manufactured housing market and fencing and 13
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) decking to the DIY/retail market. These positive effects were offset by margin pressure in the site built market as activity in several regions softened. Gross profit as a percentage of net sales increased in 2000 compared to 1999, primarily due to the following factors. - - An increase in the ratio of value-added product sales to total sales due to increased sales of engineered wood products to the site-built construction market, specialty packaging products to the industrial market and fencing products to the DIY/retail market. - - An increase in gross margins on certain products due to the low level of the Lumber Market throughout 2000 compared to 1999. The selling prices of many of our products are indexed to the Lumber Market along with a fixed dollar adder to cover conversion costs and profits. Therefore, in periods when the Lumber Market is low, the fixed adder will result in higher gross margins. See "Impact of the Lumber Market on Our Operating Results." - - The above increases were offset by lower margins on sales to the manufactured housing market due to the effect of price competition and manufacturing inefficiencies resulting from lower volumes. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses ("SG&A") as a percentage of sales increased to 9.5% in 2001 compared to 9.0% in 2000. This increase was primarily due to: - - An increase in compensation and related benefit costs from a higher headcount. - - An increase in consulting costs associated with certain projects. - - Losses on the sale or impairment of idle assets. SG&A as a percentage of sales increased to 9.0% in 2000 compared to 8.0% in 1999, primarily due to an increase in selling and administrative headcount to support the growth of the business and to pursue strategic initiatives. INTEREST, NET Net interest costs were lower in 2001 compared to 2000. Although we had higher average debt levels due to acquisitions in 2001, this was offset by a substantial decrease in short-term borrowing rates on variable rate debt. The average interest rate on our primary revolving credit facility was 4.7% and 7.1% for 2001 and 2000, respectively. Net interest costs increased in 2000 compared to 1999, primarily due to higher average debt balances associated with share repurchases and acquisitions. Short-term borrowing rates on variable rate debt were also higher in 2000 compared to 1999. The average interest rate on our primary revolving credit facility was 7.1% and 5.9% for 2000 and 1999, respectively. INCOME TAXES Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for state and local income taxes and permanent tax differences. Our effective tax rate declined to 36.1% in 2001 from 38.1% in 2000. This decline primarily resulted from a permanent tax difference associated with our 50% investment in D&R and receipt of a tax credit we did not anticipate. Our tax rate declined to 38.1% in 2000 from 38.7% in 1999 due to lower estimated state and local income taxes. 14
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Liquidity and Capital Resources Cash flows from operating activities increased in 2001 compared to 2000. This improvement was primarily due to: - - Increased earnings, depreciation and amortization. - - An increase in accrued liabilities due to increases in workers' compensation and medical reserves. - - An increase in accounts payable was offset by an increase in accounts receivable. These changes resulted primarily from the timing of disbursements and receipts at year end. Due to the seasonality of our business and the effects of the Lumber Market, we believe our cash cycle (days sales outstanding plus days supply of inventory less days payables outstanding) is a good indicator of our working capital management. Our cash cycle decreased to 44 days in 2001 from 45 days in 2000. This decrease was primarily due to a 4 day decrease in our days supply of inventory resulting from better inventory management. This improvement was offset by an increase in our days sales outstanding due to increased sales to the site-built construction market, which has a longer receivables cycle. Capital expenditures totaled $23 million in 2001. These expenditures consisted of several projects to improve efficiencies and expand manufacturing capacity at existing plants and $6 million in costs to acquire two new truss plants. On December 29, 2001, outstanding purchase commitments on capital projects totaled $1.7 million. We intend to satisfy these commitments utilizing our primary revolving credit facility. We spent approximately $50 million in 2001 related to acquisitions which are discussed earlier under the caption "Business Combinations." We funded the purchase price of these acquisitions using our primary revolving credit facility. In November 2001, we agreed to purchase approximately $36 million of common stock from our largest shareholder. This transaction, which was completed in January 2002, is expected to reduce the level of acquisitions this year. On December 29, 2001, we had $27 million outstanding on our $175 million primary revolving credit facility and $19 million Canadian ($12 million U.S.) outstanding on our $20 million Canadian revolving credit facility. Financial covenants on these facilities and senior unsecured notes include a minimum net worth requirement, minimum interest coverage tests and a maximum leverage ratio. We were within our requirements on December 29, 2001. Environmental Considerations and Regulations We are self-insured for environmental impairment liability and accrue for the estimated cost of monitoring or remediation activities. We own or operate 21 wood preserving facilities throughout the United States that treat lumber products with a chemical preservative. In accordance with applicable federal, state and local environmental laws, ordinances and regulations, we may be potentially liable for costs and expenses related to the environmental condition of our real property. We have established reserves for remediation activities at our North East, Maryland; Union City, Georgia; Stockertown, Pennsylvania; Elizabeth City, North Carolina; Auburndale, Florida; and Schertz, Texas facilities. We have accrued, in other long-term liabilities, amounts totaling $2.4 million and $2.3 million on December 29, 2001 and December 30, 2000, respectively, for the activities described above. We believe the potential future costs of known remediation efforts will not have a material adverse effect on our future financial position, results of operations or liquidity. For the past several years, the EPA has been conducting a scientific review of CCA, a wood preservative we use to extend the useful life of wood fiber, as part of its re-registration process and in response to allegations by certain environmental groups that CCA poses health risks. Recently, the EPA announced that the manufacturers 15
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) of CCA preservative agreed to the re-registration of CCA for certain industrial and commercial uses. The manufacturers agreed to voluntarily discontinue the registration of CCA for certain residential applications by December 31, 2003. The manufacturers will continue to produce CCA for use in various industrial, marine, and non-residential uses. This agreement will require us to change the preservative we use to one of several new alternatives over the next 20 months. We estimate that we will incur capital costs totaling approximately $1.5 million to convert our plants to the new alternative preservatives. In addition, an environmental group petitioned the Consumer Products Safety Commission ("CPSC") to ban the use of CCA treated wood in playsets. We have been assured by our vendors and by scientific studies that CCA treated lumber poses no unreasonable risks and its continued use should be permitted. The EPA, in a recent press release concluded that there isn't any reason to remove or replace any CCA treated structures, including decks or playground equipment. We have been requested by a customer to defend it from purported class action lawsuits filed against it in Florida and Louisiana. The complaints allege that CCA treated lumber is defective. As previously stated, our vendors believe and scientific studies support the fact that CCA treated lumber poses no unreasonable risks, and we intend to vigorously defend our Company. We have also been named as a defendant in a purported class action lawsuit in Louisiana, which contains similar allegations as the complaints against our customer. We intend to vigorously defend the complaint. Forward Outlook The following section contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements are based on the beliefs and assumptions of management, together with information available to us when the statements were made. Future results could differ materially from those included in such forward-looking statements as a result of, among other things, the factors set forth in the "Risk Factors" section of this report and certain economic and business factors which may be beyond our control. Investors are cautioned that all forward-looking statements involve risks and uncertainty. PERFORMANCE 2002 In 1997, we announced our goals for growth and diversification entitled Performance 2002. The goals called for us to double our sales by the fiscal year ending 2002, while maintaining or achieving a leadership position in the four markets that consume the vast majority of softwood fiber in the United States. Since the announcement of our goals, the Lumber Market has declined 24.5%. In addition, in November 2001, we decided to re-direct financial resources from acquisitions, a key component of our growth strategy, to a 2 million share redemption from our largest shareholder for $36 million. We believe the share redemption provided the best potential return for our shareholders. While we are currently the leader in each of the markets we serve, as a result of the factors above, we do not believe we will reach our 2002 sales goal of $2 billion. By the end of 2002, we expect to resume our acquisition activities and pursue sales growth objectives. DIY/RETAIL Do-It-Yourself Retailing forecasts a 4.5% increase in total retail sales for home improvement retailers from 2001 to 2002. The consolidation within the DIY/retail industry is expected to continue in 2002 as top performers obtain additional market share. We feel we are in a position to continue to capitalize on these industry conditions as a result of our national presence, service capabilities that meet stringent customer requirements and diversified product offerings. Our goal is to continue to increase market share through business combinations and internal growth, with a continued emphasis on value-added products. 16
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) SITE-BUILT CONSTRUCTION MARKET As a result of higher unemployment levels and other economic factors, we expect the site-built construction market to be "soft" for at least the first six months of this year. Accordingly, we expect continuing pressure on our sales volumes and margins in certain regions. On a long-term basis, we believe the sale of engineered wood products will continue to grow because of the benefits these products provide builders over traditional carpentry methods employed on the job site. Some of these benefits include cost advantages through more efficient labor and better material utilization, faster home construction and improved product quality. In addition, consolidation toward large production-oriented builders, which tend to prefer the use of engineered products and who desire suppliers with a national presence, may provide us with growth opportunities. MANUFACTURED HOUSING MARKET Manufactured Home Merchandiser, in its January 2002 edition, forecasted an increase of industry shipments to retailers of over 3% in 2002. While there has been a prolonged downturn in this market, there is a consensus in the industry that there will be a slight improvement in manufactured home shipments in 2002. In addition, we expect to experience strong sales growth in our first quarter of 2002 as compared to 2001 due to our acquisition of Sunbelt Wood Components in April 2001. INDUSTRIAL MARKET One of our key strategic objectives is to increase our sales of wood packaging products to industrial users. The vast amount of hardwood and softwood lumber consumed for industrial applications, combined with the highly fragmented nature of this market provides us with significant long-term growth opportunities. Our short-term growth objectives have been impacted by the slowing economy. On a long-term basis, we plan to continue to obtain market share through an internal growth strategy utilizing our current manufacturing capabilities and industrial sales force, while also continuing to evaluate strategic acquisitions. GROSS PROFIT We believe the following factors may impact our gross profits in the future: - - We have a long-term goal of increasing our ratio of value-added sales to total sales to 50%, which in turn should increase gross margins. Our acquisition and internal sales growth strategies will help us continue to make progress toward this objective. Achievement of this goal is dependent, in part, upon certain factors that are beyond our control. See the discussion above under the caption "Impact of the Lumber Market on Our Operating Results." - - Our ability to increase sales and gross margins on products sold to our largest customers. We believe our level of service, geographic diversity and quality of products provide an added value to our customers. If our customers are unwilling to pay for the additional services, our sales and gross margins may be reduced. - - On February 12, 2002, the EPA announced that the registered manufacturers of CCA had agreed to voluntarily limit the future residential uses of CCA treated wood products by December 31, 2003. CCA treated products will still be permitted for a variety of industrial and non-residential applications. If consumer demand for the new preservatives is not as strong as the demand for CCA treated products, it could have a significant adverse impact on our results of operations. See "Environmental Considerations and Regulations." - - We expect activity in the site-built construction market to be "soft" for at least the first six months of 2002. This may cause pressure on pricing and gross margins in certain regions. 17
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES SG&A costs have increased as a percentage of sales in recent years, in part, due to acquisitions of engineered wood product manufacturers which have extensive engineering and design costs, and costs associated with creating new national sales, marketing and manufacturing departments to execute key strategic initiatives. SG&A costs as a percentage of sales may continue to increase in the future as engineered wood products and specialty wood packaging become a greater percentage of our total business. However, we strive to achieve economies of scale in other administrative departments as sales growth objectives are met. In July 2001, the Financial Accounting Standards Board issued SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). This statement changes the accounting and reporting for goodwill and other intangible assets. Upon adoption of this statement, goodwill will no longer be amortized, however tests for impairment will be performed annually or when a triggering event occurs. This statement applies to assets acquired after June 30, 2001, and existing goodwill and other intangible assets upon the adoption of SFAS 142, in fiscal 2002. Pre-tax amortization of goodwill was $3.6 million and $2.8 million for 2001 and 2000, respectively. LIQUIDITY AND CAPITAL RESOURCES Management expects to spend between $22 million and $25 million on capital expenditures in 2002 and incur depreciation and amortization of approximately $23 million. Besides "maintenance" capital expenditures totaling approximately $17 million, we plan to spend an additional $6 million to expand the business, including a new truss plant in Massachusetts. We do not expect any significant acquisition activity for most of 2002 as a result of temporarily re-directing financial resources to the share redemption discussed above. In recent sales negotiations with The Home Depot, we agreed to extend our payment terms by an additional 15 days. We expect this will increase our average accounts receivables by $20 million in 2002 ($35 million increase at our seasonal peak and $10 million increase at the low point). Our intention is to compensate for most of this increase through a combination of consigned inventory programs with vendors and other strategies for reducing working capital. We have no present intention to change our current, semi-annual dividend policy which is currently $0.045 per share paid semi-annually. Our Board of Directors has approved a share repurchase program under which we have authorization to buy back approximately 3.9 million shares as of December 29, 2001. In January 2002, we purchased 2 million shares from our largest shareholder for $36 million. We are obligated to pay amounts due on long-term debt totaling approximately $20.4 million in 2002, which includes a Canadian revolving credit facility with approximately $12.0 million outstanding ($19.0 million Canadian) as of December 29, 2001. We expect to renew this facility through January 2003. We also have a $175 million revolving credit facility used to fund seasonal working capital requirements and growth. We believe our peak seasonal working capital requirements will consume up to $85 million of this availability through June of 2002 and then decrease for the balance of the year in line with historical trends. We plan to finance our capital requirements by using this revolving credit facility. 18
Report of Independent Public Accountants To The Shareholders and Board of Directors of Universal Forest Products, Inc.: We have audited the accompanying consolidated balance sheet of Universal Forest Products, Inc. (a Michigan Corporation) and subsidiaries as of December 29, 2001, and the related consolidated statements of earnings, shareholders' equity, and cash flows for the year ended December 29, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Universal Forest Products, Inc. and subsidiaries as of December 29, 2001 and the results of their operations and their cash flows for the year ended December 29, 2001, in conformity with accounting principles generally accepted in the United States. /s/ ARTHUR ANDERSEN LLP Grand Rapids, Michigan January 25, 2002 19
Independent Auditors' Report Board of Directors Universal Forest Products, Inc. Grand Rapids, Michigan We have audited the accompanying consolidated balance sheet of Universal Forest Products, Inc. and subsidiaries as of December 30, 2000 and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the two fiscal years in the period ended December 30, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Universal Forest Products, Inc. and subsidiaries as of December 30, 2000 and the results of their operations and their cash flows for each of the two fiscal years in the period ended December 30, 2000, in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLP Grand Rapids, Michigan January 29, 2001 20
Consolidated Balance Sheets (In thousands, except share data.)
Consolidated Statements of Earnings (In thousands, except per share data.)
Consolidated Statements of Shareholders' Equity (In thousands, except share and per share data.)
Consolidated Statements of Cash Flows (In thousands.)
Consolidated Statements of Cash Flows (continued) (In thousands.)
Notes to Consolidated Financial Statements A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES OPERATIONS We engineer, manufacture, treat and distribute lumber products for the do-it-yourself/retail ("DIY/retail"), site-built construction, manufactured housing, industrial and wholesale markets. Our principal products include preservative-treated wood, remanufactured lumber, lattice, fence panels, deck components, specialty packaging, engineered trusses, wall panels, I-joists and other building products. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries and partnerships. All significant intercompany transactions and balances have been eliminated. The equity method of accounting is used for our less than 50% owned affiliates. INVESTMENT IN AFFILIATE On December 18, 1998, one of our subsidiaries acquired a 45% interest in Pino Exporta, renamed to Pinelli Universal S. de R.L. de C.V. ("Pinelli"), a manufacturer of mouldings and related products. Pinelli operates out of one facility in Durango, Durango, Mexico. We exchanged $3.0 million for our share of the outstanding common stock of Pinelli, and account for our investment utilizing the equity method of accounting. In addition, we retained an option to acquire an additional 5% interest in Pinelli for $1 million. This option was extended and exercised in January 2002. At the time of acquisition, we advanced $3.2 million to Pinelli for working capital purposes in exchange for a note receivable. On December 29, 2001, approximately $1.8 million was outstanding on this note. MINORITY INTEREST IN SUBSIDIARIES Minority interest in results of operations of consolidated subsidiaries represents the minority shareholders' share of the income or loss of various consolidated subsidiaries. The minority interest included in "Other Liabilities" reflects the original investment by these minority shareholders combined with their proportional share of the earnings or losses of these subsidiaries. FISCAL YEAR Our fiscal year is a 52 or 53 week period, ending on the last Saturday of December. Unless otherwise stated, references to 2001, 2000 and 1999 relate to the fiscal years ended December 29, 2001, December 30, 2000 and December 25, 1999, respectively. Fiscal years 2001 and 1999 were comprised of 52 weeks, and fiscal year 2000 was comprised of 53 weeks. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS In accordance with Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosures about Fair Value of Financial Instruments, the estimated fair values of financial instruments have been determined by us; significant differences in fair market values and recorded values are disclosed in Note D. The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The fair value estimates presented herein are based on pertinent information available to management as of December 29, 2001. Although we are not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and current estimates of fair value may differ significantly from the amounts presented herein. 26
Notes to Consolidated Financial Statements (continued) CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash and highly-liquid investments purchased with an original maturity of three months or less. As a result of our cash management system, checks issued but not presented to our bank for payment creates negative cash balances. These negative balances are included in trade accounts payable and totaled $18.8 million and $11.0 million as of December 29, 2001 and December 30, 2000, respectively. RESTRICTED CASH EQUIVALENTS Unexpended proceeds from certain borrowings, that are restricted as to use, have been excluded from cash and cash equivalents. INVENTORIES Inventories are stated at the lower of average cost or market. Raw materials consist primarily of unfinished wood products expected to be manufactured or treated prior to sale, while finished goods represent various manufactured and treated wood products ready for sale. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Expenditures for renewals and betterments are capitalized, and maintenance and repairs are expensed as incurred. Depreciation is computed principally by the straight-line method over the estimated useful lives of the assets as follows:
Notes to Consolidated Financial Statements (continued) REVENUE RECOGNITION AND ALLOWANCE FOR DOUBTFUL ACCOUNTS Revenue is recognized at the time the product is shipped to the customer. Generally, title passes at the time of shipment. In certain circumstances, the customer takes title when the shipment arrives at the destination. However, our shipping process is typically completed the same day. We accrue for bad debt expense based on our history of accounts receivable write-offs to sales. Individual accounts receivable balances are evaluated on a monthly basis, and those balances considered to be uncollectible are charged to the allowance. Collections of amounts previously written off are recorded as an increase to the allowance. Bad debt expense amounted to approximately $1,412,000, $1,531,000 and $858,000, for 2001, 2000 and 1999, respectively. CUSTOMER REBATES In 2001, the Emerging Issues Task Force ("EITF") released its consensus on Issue No. 00-22, Accounting for "Points" and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to Be Delivered in the Future ("EITF 00-22"). This consensus provides guidance on the classification of expenses related to customer rebate and refund obligations. We adopted EITF 00-22 effective with the first quarter 2001 and have reclassified prior periods to include customer rebates as a component of net sales. EARNINGS PER SHARE Basic earnings per share ("EPS") is calculated based on the weighted average number of common shares outstanding during the periods presented. Diluted EPS is calculated based on the weighted average number of common and common equivalent shares outstanding during the periods presented, giving effect to stock options granted in (see Note I) utilizing the "treasury stock" method. A reconciliation of the changes in the numerator and the denominator from the calculation of basic EPS to the calculation of diluted EPS follows (in thousands, except per share data):
Notes to Consolidated Financial Statements (continued) carrying value of the assets, an impairment loss is recognized for the excess of the carrying value over the fair value. The estimated fair value is determined by discounting the expected future cash flows at a rate that would be required for a similar investment with like risks. In August 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 144, Accounting for the Impairment and Disposal of Long-Term Assets ("SFAS 144"). SFAS 144 supercedes SFAS 121, and the accounting and reporting provisions of the Accounting Principles Board ("APB") Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS 144 also amends Accounting Research Bulletin ("ARB") No. 51, Consolidated Financial Statements. SFAS 144 retains the provisions of SFAS 121 for recognition and measurement of impairment of long-lived assets to be held and used, and measurement of long-lived assets to be disposed of by sale. Discontinued operations are no longer measured on a net realizable value basis, and future operating losses are no longer recognized before they occur. SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001. We do not expect the impact of adopting this standard to be significant. USE OF ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. We believe our estimates to be reasonable, however, actual results could differ from these estimates. RECLASSIFICATIONS Certain reclassifications have been made in the 1999 and 2000 consolidated financial statements to conform to the classifications used in 2001. B. BUSINESS COMBINATIONS Each of the following business combinations have been accounted for as a purchase. Accordingly, in each instance, the purchase price was allocated to the assets acquired, liabilities assumed and identifiable intangible assets as applicable based on their fair market values at the date of acquisition. Any excess of the purchase price over the fair value of the acquired assets, including identifiable intangible assets, and assumed liabilities was recorded as goodwill in each transaction. For business combinations prior to June 30, 2001, we amortized goodwill on a straight-line basis over periods ranging from 20 to 40 years. Non-compete agreements are amortized on a straight-line basis over the term of the agreements. In July 2001, the FASB issued SFAS No. 141, Business Combinations ("SFAS 141"). SFAS 141 supercedes APB No. 16, Business Combinations, and requires that all business combinations be accounted for using the purchase method and further clarifies the criteria to recognize intangible assets separately from goodwill. The results of operations of each acquisition is included in our consolidated financial statements since the date it was acquired. On October 15, 2001, one of our subsidiaries acquired the assets of P&R Truss Company, Inc. and the stock of P&R Truss-Sidney, Inc. (collectively "P&R"). P&R has plants in Auburn, Chaffee, Hudson and Sidney, New York. The total purchase price was approximately $21.0 million, and allocated $10.4 million to net assets acquired, $0.7 million to identifiable intangibles (non-compete agreements), and the remaining $9.9 million to goodwill. P&R had net sales in fiscal 2000 totaling approximately $23 million. On June 1, 2001, three of our subsidiaries acquired certain assets of the Superior Truss Division of Banks Corporation ("Superior"). The assets include operations in Syracuse, Indiana and Minneota, Minnesota which serve the site-built construction market. The total purchase price for the assets was approximately $11.0 million. Superior had net sales in fiscal 2000 totaling approximately $20 million. 29
Notes to Consolidated Financial Statements (continued) On April 3, 2001, several of our subsidiaries acquired certain assets of the Sunbelt Wood Component Division ("Sunbelt") of Kevco, Inc. The assets include operations in New London, North Carolina; Haleyville, Alabama; Ashburn, Georgia; and Glendale, Arizona which serve the manufactured housing market. The total purchase price for the assets was approximately $7.8 million. Sunbelt had net sales in fiscal 2000 totaling approximately $63 million. On February 28, 2001, one of our subsidiaries acquired 50% of the assets of D&R Framing Contractors ("D&R") of Englewood, Colorado for approximately $7.6 million. D&R had net sales in fiscal 2000 totaling approximately $44 million. On June 5, 2000, Universal Truss, Inc. ("UTI"), one of our wholly-owned subsidiaries acquired substantially all of the assets and assumed certain liabilities of Gang-Nail Components, Inc. ("Gang-Nail") of Fontana, California, a manufacturer of engineered roof trusses. The total purchase price for the net assets was approximately $29.4 million. Gang-Nail had net sales in fiscal 1999 totaling approximately $41 million. On April 17, 2000, one of our subsidiaries acquired 50% of the stock of ECJW Holdings, Inc. and its two subsidiaries, Thorndale Roof Systems, Inc. and Edcor Floor Systems, Inc. (collectively "TED"), which are located in London, Ontario, Canada. Thorndale Roof Systems, Inc. manufactures engineered roof trusses for residential and light commercial building applications. Edcor Floor Systems, Inc. is a licensed manufacturer of the patented Open Joist 2000(TM) web floor truss system. The total purchase price for the stock of TED was approximately $3.2 million. In fiscal 1999, TED had net sales totaling approximately $15 million. On March 2, 2001, our subsidiary acquired the remaining 50% of the stock of ECJW Holdings. The purchase price for this remaining 50% was approximately $3.5 million. The following unaudited pro forma consolidated results of operations for the years ended December 29, 2001 and December 30, 2000 assumes the acquisitions of P&R, Superior, D&R, TED, and Gang-Nail occurred as of the beginning of the periods presented (in thousands, except per share data).
Notes to Consolidated Financial Statements (continued) D. DEBT On November 13, 1998, we completed a five-year, $175 million revolving credit facility which includes amounts reserved for letters of credit. Borrowings under the revolver are charged interest at a rate of 50 basis points over the applicable Eurodollar rate. The average rates on these borrowings in 2001 and 2000 were 4.7% and 7.1%, respectively. The amounts outstanding under the revolving credit facility are included in the long-term debt summary below. On November 30, 2000, we completed a revolving credit facility totaling $20 million Canadian. The facility expires on March 1, 2002, and we expect to renew it for an additional one year term. Borrowings under the revolver are currently charged interest at a rate of 75 basis points over the bankers acceptance rate. The amount outstanding under the facility is included in the long-term debt summary below. Outstanding letters of credit extended on our behalf aggregated $25.5 million on December 29, 2001, which includes approximately $14.6 million related to Industrial Development Revenue Bonds. Long-term debt and capital lease obligations are summarized as follows on December 29, 2001 and December 30, 2000 (amounts in thousands):
Notes to Consolidated Financial Statements (continued) The terms of the revolving credit facilities and senior unsecured note agreements (collectively the "agreements") require, in part, us to maintain a minimum net worth and comply with certain financial ratios. The agreements also restrict the amount of additional indebtedness we may incur and the amount of assets which may be sold. On December 29, 2001, the principal maturities of long-term debt and capital lease obligations are as follows (in thousands):
Notes to Consolidated Financial Statements (continued) Rent expense was approximately $11,193,000, $9,238,000 and $6,939,000 in 2001, 2000 and 1999 respectively. F. DEFERRED COMPENSATION We have a program whereby certain executives irrevocably elected to defer receipt of certain compensation in 1985 through 1988. Deferred compensation payments to these executives will commence upon their retirement. We purchased life insurance on such executives, payable to us in amounts which, if assumptions made as to mortality experience, policy dividends and other factors are realized, will accumulate cash values adequate to reimburse us for all payments for insurance and deferred compensation obligations. In the event cash values are not sufficient to fund such obligations, the program allows us to reduce benefit payments to such amounts as may be funded by accumulated cash values. The deferred compensation liabilities and related cash surrender value of life insurance policies are included in "Other Liabilities" and "Other Assets," respectively. We also maintain a non-qualified deferred compensation plan (the "Plan") for the benefit of senior management employees who may elect to defer a portion of their annual bonus payments. The Plan provides investment options similar to our 401(k) plan, including our stock. Investments in shares of our stock are made on a "phantom stock" basis, and may only be distributed in our stock. Assets held by the Plan totaled approximately $1,878,000 and $1,982,000 on December 29, 2001 and December 30, 2000, respectively, and are included in "Other Assets." Related liabilities totaled $3,131,000 and $3,039,000 on December 29, 2001 and December 30, 2000, respectively, and are included in "Other Liabilities." The assets are recorded at fair market value. The related liabilities are recorded at fair market value, with the exception of the phantom stock which is recorded at the market value on the date of deferral. G. STOCK REDEMPTION AGREEMENT During 2001, we entered into an agreement with our Chairman of the Board for the future redemption of 2 million shares of our outstanding stock at a price of $18 per share. The cost of the redemption will be funded by our revolving credit facilities. The shares subject to the agreement have been classified on the balance sheet under temporary equity. At December 29, 2001, the shares subject to redemption were considered outstanding for the purpose of determining weighted average shares outstanding. The redemption was completed on January 15, 2002. H. COMMON STOCK On June 1, 1993, shareholders approved the Incentive Stock Option Plan (the "Plan") for our officers. Options for the purchase of all 1,200,000 shares of our common stock authorized under the Plan have been granted. The Plan provides that the options are exercisable only if the officer is employed by us at the time of exercise and holds at least seventy-five percent of the individuals' shares held on April 1, 1993. The Plan also requires the option shares to be held for periods of six months to three years. The remaining options are exercisable within thirty days of the anniversary of the Plan in 2001 through 2008. In January 1994, the Employee Stock Gift Program was approved by the Board of Directors which allows us to gift shares of stock to eligible employees based on length of service. We gifted 1,552 shares, 400 shares and 275 shares of stock under this Plan in 2001, 2000 and 1999, respectively, and recognized the market value of the shares at the date of issuance as an expense. In April 1994, shareholders approved the Employee Stock Purchase Plan ("Stock Purchase Plan") and Director Retainer Stock Plan ("Stock Retainer Plan"). The Stock Purchase Plan allows eligible employees to purchase shares of our stock at a share price equal to 90% of fair market value on the purchase date. In 2001, 2000 and 1999, 12,264 shares, 19,664 shares and 17,789 shares, respectively, were issued under this Plan for amounts totaling approximately $183,000, $227,000 and $301,000, respectively. The Stock Retainer Plan allows eligible members of the Board of Directors to defer their retainer fees and receive shares of our stock at the time of their 33
Notes to Consolidated Financial Statements (continued) retirement, disability or death. The number of shares to be received is equal to the amount of the retainer fee deferred multiplied by 110% divided by the fair market value of a share of our stock at the time of deferral, and is increased for dividends declared. We have accrued, in "Accrued Liabilities -- Other," approximately $300,000 and $247,000 on December 29, 2001 and December 30, 2000, respectively, for amounts incurred under this Plan. In January 1997, we instituted a Directors' Stock Grant Program. In lieu of a cash increase in the amount of Director fees, each outside Director receives 100 shares of stock for each board meeting attended up to a maximum of 400 shares per year. In 2001, 2000 and 1999, we issued 1,500 shares, 1,700 shares and 1,800 shares, respectively, and recognized the market value of the shares on the date of issuance as an expense. On April 22, 1997, the shareholders approved the Long Term Stock Incentive Plan (the "1997 Plan") to succeed our 1994 Employee Stock Option Plan. The 1997 Plan reserved a maximum of 1,100,000 shares, and provided for the granting of incentive stock options, reload options, stock appreciation rights, restricted stock, performance shares and other stock-based awards. The term of the Plan was ten years. In 1999, we granted incentive stock options for 231,161 shares under the 1997 Plan. On April 28, 1999, the shareholders approved the Long Term Stock Incentive Plan (the "1999 Plan") to succeed the 1997 Plan. The 1999 Plan reserves a maximum of 1,000,000 shares, plus 406,029 shares remaining under the 1997 Plan, plus an annual increase of no more than 200,000 shares which may be added on the date of the annual meeting of shareholders each year. The 1999 Plan provides for the granting of incentive stock options, reload options, stock appreciation rights, restricted stock, performance shares and other stock-based awards. The term of the 1999 Plan is ten years. In 2001 and 2000, we granted incentive stock options for 390,597 shares and 505,934 shares, respectively. On December 29, 2001, a total of 2,731,174 shares are reserved for issuance under the plans mentioned above and under Note I below. On October 21, 1998, the Board of Directors approved a share repurchase program (which succeeded a previous program) allowing us to repurchase up to 1,800,000 shares of our common stock. On October 18, 2000 and November 14, 2001, the Board of Directors authorized an additional 1,000,000 shares and 2,500,000 shares, respectively, to be repurchased under the program. In 2001, 2000 and 1999, we repurchased 109,482 shares, 635,411 shares and 677,801 shares, respectively, under these programs. I. STOCK OPTIONS AND STOCK-BASED COMPENSATION Stock options issued under the Long Term Stock Incentive Plan are granted to employees and officers at exercise prices which equaled or exceeded the market value of the stock on the date of grant. The options are exercisable from three to fifteen years from the date of grant and the recipients must be employed by us at the date of exercise. Stock purchased under the Employee Stock Purchase Plan is purchased at a price equal to 90% of fair market value on the purchase date. As permitted under SFAS No. 123, Accounting for Stock-Based Compensation, ("SFAS 123"), we continue to apply the provisions of APB Opinion No. 25 which recognizes compensation expense under the intrinsic value method. Had compensation cost for the stock options granted and stock purchased in 2001, 2000 and 1999 34
Notes to Consolidated Financial Statements (continued) been determined under the fair value based method defined in SFAS 123, our net earnings and earnings per share would have been reduced to the following pro forma amounts (in thousands, except per share data):
Notes to Consolidated Financial Statements (continued) The following table summarizes information concerning options on December 29, 2001 (there are no options exercisable on December 29, 2001):
Notes to Consolidated Financial Statements (continued) M. INCOME TAXES Income tax provisions for the years ended December 29, 2001, December 30, 2000, and December 25, 1999 are summarized as follows (in thousands):
Notes to Consolidated Financial Statements (continued) N. COMMITMENTS AND CONTINGENCIES We are self-insured for environmental impairment liability and accrue an expense for the estimated cost of required remediation actions when situations requiring such action arise. We own and operate a number of 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, we 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 activities are currently being conducted or planned at our North East, Maryland; Union City, Georgia; Stockertown, Pennsylvania; Elizabeth City, North Carolina; Auburndale, Florida; and Schertz, Texas wood preservation facilities. We have accrued, in "Other Liabilities," amounts totaling approximately $2.4 million and $2.3 million on December 29, 2001 and December 30, 2000, respectively, representing the estimated costs to complete remediation efforts currently in process and those expected to occur in the future. The accrued costs include operating ground water reclamation wells, estimated costs of chemical treatments and consultant fees. For the past several years, the EPA has been conducting a scientific review of CCA, a wood preservative we use to extend the useful life of wood fiber, as part of its re-registration process and in response to allegations by certain environmental groups that CCA poses health risks. Recently, the EPA announced that the manufacturers of CCA preservative agreed to the re-registration of CCA for certain industrial and commercial uses. The manufacturers agreed to voluntarily discontinue the registration of CCA for certain residential applications by December 31, 2003. The manufacturers will continue to produce CCA for use in various industrial, marine, and non-residential uses. This agreement will require us to change the preservative we use to one of several new alternatives over the next 20 months. We estimate that we will incur capital costs totaling approximately $1.5 million to convert our plants to the new alternative preservatives. In addition, an environmental group petitioned the Consumer Products Safety Commission ("CPSC") to ban the use of CCA treated wood in playsets. We have been assured by our vendors and by scientific studies that CCA treated lumber poses no unreasonable risks and its continued use should be permitted. The EPA, in a recent press release concluded that there isn't any reason to remove or replace any CCA treated structures, including decks or playground equipment. We have been requested by a customer to defend it from purported class action lawsuits filed against it in Florida and Louisiana. The complaints allege that CCA treated lumber is defective. As previously stated, our vendors believe and scientific studies support the fact that CCA treated lumber poses no unreasonable risks, and we intend to vigorously defend our Company. We have also been named as a defendant in a purported class action lawsuit in Louisiana, which contains similar allegations as the complaints against our customer. We intend to vigorously defend the complaint. In addition, various lawsuits and claims, including those involving ordinary routine litigation incidental to our business, to which we are a party, are pending, or have been asserted, against us. Although the outcome of these matters cannot be predicted with certainty, and some of them may be disposed of unfavorably to us, management has no reason to believe that their disposition will have a material adverse effect on our consolidated financial position, operating results or liquidity. On December 29, 2001, we had outstanding purchase commitments on capital projects totaling $1.7 million. O. DERIVATIVE AND HEDGING ACTIVITIES In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective date of FASB Statement No. 133. In June 2000, the FASB issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of SFAS 133. 38
Notes to Consolidated Financial Statements (continued) Based on the revised effective date, we adopted SFAS 133, as amended, effective December 31, 2000 (the first day of our fiscal year ending December 29, 2001). The adoption of SFAS 133 did not have a significant impact on our financial position or results of operations because we do not have significant derivative activity. P. SEGMENT REPORTING SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131") defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Under the definition of a segment, our Eastern and Western Divisions may be considered an operating segment of our business. Under SFAS 131, segments may be aggregated if the segments have similar economic characteristics and if the nature of the products, distribution methods, customers and regulatory environments are similar. We have chosen to aggregate our divisions into one reporting segment. Our divisions operate manufacturing and treating facilities throughout North America. In 2001, 2000 and 1999, 33%, 32% and 26% of net sales, respectively, were to a single customer. Information regarding principal geographic areas was as follows (in thousands):
Notes to Consolidated Financial Statements (continued) Q. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following table sets forth selected financial information for all of the quarters during the years ended December 29, 2001 and December 30, 2000 (in thousands, except per share data):
Price Range of Common Stock and Dividends Our common stock trades on the Nasdaq National Market tier of the Nasdaq Stock Market under the symbol UFPI. The following table sets forth the range of high and low sales prices as reported by Nasdaq.
Directors and Executive Officers
Shareholder Information NOTICE OF ANNUAL MEETING The annual meeting of Universal Forest Products,(R) Inc. will be held at 8:00 a.m. on April 17, 2002, at the Amway Grand Plaza Hotel, Pearl and Monroe, Grand Rapids, Michigan. SHAREHOLDER INFORMATION Shares of the Company's stock are traded under the symbol UFPI on the NASDAQ Stock Market. The Company's 10-K report filed with the Securities and Exchange Commission will be provided free of charge to any shareholder upon written request. For more information, contact: Investor Relations Department Universal Forest Products,(R) Inc. 2801 East Beltline, NE Grand Rapids, MI 49525 Telephone: (616) 364-6161 Web: www.ufpi.com SECURITIES COUNSEL Varnum, Riddering, Schmidt & Howlett, Grand Rapids, Michigan INDEPENDENT ACCOUNTANTS Arthur Andersen LLP, Grand Rapids, Michigan TRANSFER AGENT/ SHAREHOLDER'S INQUIRIES American Stock Transfer & Trust Company serves as the transfer agent for the Corporation. Inquiries relating to stock transfers, changes of ownership, lost or stolen stock certificates, changes of address and dividend payments should be addressed to: American Stock Transfer & Trust Co. 59 Maiden Lane New York, NY 10005 Telephone: (718) 921-8210 UNIVERSAL FOREST PRODUCTS,(R) INC. Corporate Headquarters 2801 East Beltline, NE Grand Rapids, MI 49525 Telephone: (616) 364-6161 Facsimile: (616) 361-7534 43
Universal Forest Products,(R) Inc. and its Affiliates
EXHIBIT 21 LIST OF REGISTRANT'S SUBSIDIARIES AND AFFILIATES 1. Universal Forest Products Eastern Division, Inc., a Michigan Corporation. 2. Universal Forest Products Western Division, Inc., a Michigan Corporation. 3. Shoffner Holding Company, Inc., a Michigan Corporation. 4. Universal Forest Products Shoffner LLC, a Michigan Limited Liability Company. 5. Consolidated Building Components, Inc., a Pennsylvania Corporation. 6. Universal Forest Products of Canada, Inc., a Canadian Corporation. 7. Universal Forest Products Mexico Holdings, S. de R.L. de C.V., a Mexican Corporation. 8. Nascor Incorporated, a Canadian Corporation (57% owned). 9. Universal Truss, Inc., a Michigan Corporation. 10. Pinelli Universal, S. de R.L. de C.V., a Mexican Corporation (45% owned). 11. Universal Forest Products - FSC, Inc., a Barbados Corporation. 12. Universal Forest Products Holding Company, Inc., a Michigan Corporation. 13. D&R Framing Contractors, L.L.C., a Michigan Limited Liability Company (50% owned). 14. Nascor Structures, Inc., a Nevada Corporation. 15. UFP Real Estate, Inc., a Michigan Corporation. 16. Universal Forest Products Nova Scotia ULC, a Canadian Corporation. 17. ECJW Holdings Ltd., a Canadian Corporation. 18. Universal Forest Products Canada Limited Partnership. 19. Universal Forest Products Indiana Limited Partnership. 20. Universal Forest Products Texas Limited Partnership. 21. Euro-Pacific Building Materials, Inc., an Oregon Corporation. 22. Universal Forest Products Reclamation Center, Inc., a Michigan Corporation. 23. Syracuse Real Estate, L.L.C., a Michigan Limited Liability Company. 24. Universal Consumer Products, Inc., a Michigan Corporation. 25. UFP Insurance Ltd., an exempted company organized under the laws of Bermuda.
EXHIBIT 23(a) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated January 25, 2002 incorporated by reference in this Form 10-K, into Universal Forest Products, Inc.'s previously filed Registration Statement Nos. 333-60630, 33-81128, 33-81116, 33-84632 and 33- 81450 on Form S-8 and Registration Statement No. 333-75278 on Form S-3. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Grand Rapids, Michigan March 27, 2002
EXHIBIT 23(b) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 33-81128, 33-81116, 33-84632, 33-81450 and 333-60630 of Universal Forest Product, Inc. on Form S-8 and Registration Statement No. 333-75278 on Form S-3 of our report dated January 29, 2001, appearing in and incorporated by reference in this Annual Report on Form 10-K of Universal Forest Products, Inc. for the fiscal year ended December 29, 2001. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Grand Rapids, Michigan March 27, 2002
EXHIBIT 99 March 27, 2002 Securities and Exchange Commission 450 Fifth Street, NW Washington, D.C. 20549 RE: Letter to Commission Pursuant to Temporary Note 3T Ladies and Gentlemen: Pursuant to Temporary Note 3T to Article 3 of Regulation S-X, Arthur Andersen, LLP ("Andersen") has represented to us, by letter dated March 27, 2002, that its audit of the financial statements of Universal Forest Products, Inc., for the period ended December 29, 2001, was subject to Andersen's quality control system for the U.S. accounting and auditing practice to provide reasonable assurance that the engagement was conducted in compliance with professional standards, that there was appropriate continuity of Andersen personnel working on the audit, availability of national office consultation and availability of personnel at foreign affiliates of Andersen to conduct the relevant portions of the audit. Very truly yours, /s/ Michael R. Cole Michael R. Cole Chief Financial Officer Universal Forest Products, Inc.