þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Michigan | 38-1465835 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification Number) | |
2801 East Beltline NE, Grand Rapids, Michigan | 49525 | |
(Address of principal executive offices) | (Zip Code) |
Class | Outstanding as of September 30, 2006 | |
Common stock, no par value | 18,851,040 |
Page No. | ||||||||
PART I. FINANCIAL INFORMATION. |
||||||||
Item 1. Financial Statements. |
||||||||
3-4 | ||||||||
5 | ||||||||
6-7 | ||||||||
8-9 | ||||||||
10-23 | ||||||||
24-37 | ||||||||
38 | ||||||||
39 | ||||||||
Item 1. Legal Proceedings NONE. |
||||||||
Item 1A. Risk Factors NONE. |
||||||||
40 | ||||||||
Item 3. Defaults Upon Senior Securities NONE. |
||||||||
Item 4. Submission of Matters to a Vote of Security Holders NONE. |
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41 | ||||||||
42 | ||||||||
Certificate of the Chief Executive Officer to Section 302 | ||||||||
Certificate of the Chief Financial Officer to Section 302 | ||||||||
Certificate of the Chief Executive Officer to Section 906 | ||||||||
Certificate of the Chief Financial Officer to Section 906 |
2
September 30, | December 31, | September 24, | ||||||||||
2006 | 2005 | 2005 | ||||||||||
ASSETS |
||||||||||||
CURRENT ASSETS: |
||||||||||||
Cash and cash equivalents |
$ | 46,184 | $ | 46,215 | $ | 30,767 | ||||||
Accounts receivable, net |
227,428 | 185,080 | 230,762 | |||||||||
Inventories: |
||||||||||||
Raw materials |
121,324 | 144,361 | 121,502 | |||||||||
Finished goods |
111,560 | 109,408 | 105,235 | |||||||||
232,884 | 253,769 | 226,737 | ||||||||||
Other current assets |
24,752 | 17,114 | 13,191 | |||||||||
TOTAL CURRENT ASSETS |
531,248 | 502,178 | 501,457 | |||||||||
OTHER ASSETS |
7,762 | 7,887 | 8,414 | |||||||||
GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS |
146,602 | 131,556 | 129,719 | |||||||||
OTHER INTANGIBLE ASSETS, net |
11,947 | 10,966 | 7,629 | |||||||||
PROPERTY, PLANT AND EQUIPMENT: |
||||||||||||
Property, plant and equipment |
443,751 | 412,475 | 406,595 | |||||||||
Accumulated depreciation and amortization |
(211,323 | ) | (188,142 | ) | (183,488 | ) | ||||||
PROPERTY, PLANT AND EQUIPMENT, NET |
232,428 | 224,333 | 223,107 | |||||||||
TOTAL ASSETS |
$ | 929,987 | $ | 876,920 | $ | 870,326 | ||||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||||||
CURRENT LIABILITIES: |
||||||||||||
Accounts payable |
$ | 109,581 | $ | 106,716 | $ | 131,621 | ||||||
Accrued liabilities: |
||||||||||||
Compensation and benefits |
73,551 | 69,528 | 68,919 | |||||||||
Other |
32,809 | 27,449 | 27,752 | |||||||||
Current portion of long-term debt and capital lease obligations |
697 | 458 | 22,091 | |||||||||
TOTAL CURRENT LIABILITIES |
216,638 | 204,151 | 250,383 | |||||||||
LONG-TERM
DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion |
171,009 | 209,039 | 168,602 | |||||||||
DEFERRED INCOME TAXES |
13,089 | 12,914 | 17,691 | |||||||||
MINORITY INTEREST |
11,922 | 8,577 | 7,826 | |||||||||
OTHER LIABILITIES |
10,926 | 10,387 | 9,910 | |||||||||
TOTAL LIABILITIES |
423,584 | 445,068 | 454,412 |
3
September 30, | December 31, | September 24, | ||||||||||
2006 | 2005 | 2005 | ||||||||||
SHAREHOLDERS EQUITY: |
||||||||||||
Preferred
stock, no par value; shares authorized 1,000,000; issued and
outstanding, none |
||||||||||||
Common
stock, no par value; shares authorized 40,000,000; issued and
outstanding, 18,851,040, 18,402,648 and 18,380,366 |
$ | 18,851 | $ | 18,403 | $ | 18,380 | ||||||
Additional paid-in capital |
113,157 | 97,372 | 96,710 | |||||||||
Deferred stock compensation |
4,212 | 4,133 | ||||||||||
Deferred stock compensation in rabbi trust |
(2,117 | ) | (2,087 | ) | ||||||||
Retained earnings |
372,728 | 312,878 | 297,707 | |||||||||
Accumulated other comprehensive earnings |
2,920 | 2,408 | 2,414 | |||||||||
507,656 | 433,156 | 417,257 | ||||||||||
Employee stock notes receivable |
(1,253 | ) | (1,304 | ) | (1,343 | ) | ||||||
TOTAL SHAREHOLDERS EQUITY |
506,403 | 431,852 | 415,914 | |||||||||
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
$ | 929,987 | $ | 876,920 | $ | 870,326 | ||||||
4
Three Months Ended | Nine Months Ended | |||||||||||||||
Sept. 30, | Sept. 24, | Sept. 30, | Sept. 24, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
NET SALES |
$ | 672,873 | $ | 721,497 | $ | 2,165,329 | $ | 2,038,209 | ||||||||
COST OF GOODS SOLD |
574,048 | 622,435 | 1,851,775 | 1,770,676 | ||||||||||||
GROSS PROFIT |
98,825 | 99,062 | 313,554 | 267,533 | ||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES |
65,970 | 63,877 | 201,272 | 173,233 | ||||||||||||
EARNINGS FROM OPERATIONS |
32,855 | 35,185 | 112,282 | 94,300 | ||||||||||||
OTHER EXPENSE (INCOME): |
||||||||||||||||
Interest expense |
3,214 | 3,714 | 10,757 | 11,755 | ||||||||||||
Interest income |
(875 | ) | (227 | ) | (1,656 | ) | (646 | ) | ||||||||
Gain on sale of real estate |
(63 | ) | (1,240 | ) | ||||||||||||
2,339 | 3,487 | 9,038 | 9,869 | |||||||||||||
EARNINGS BEFORE INCOME TAXES AND
MINORITY INTEREST |
30,516 | 31,698 | 103,244 | 84,431 | ||||||||||||
INCOME TAXES |
11,322 | 12,009 | 38,963 | 32,005 | ||||||||||||
EARNINGS BEFORE MINORITY INTEREST |
19,194 | 19,689 | 64,281 | 52,426 | ||||||||||||
MINORITY INTEREST |
(1,489 | ) | (518 | ) | (3,396 | ) | (1,236 | ) | ||||||||
NET EARNINGS |
$ | 17,705 | $ | 19,171 | $ | 60,885 | $ | 51,190 | ||||||||
EARNINGS PER SHARE BASIC |
$ | 0.94 | $ | 1.04 | $ | 3.24 | $ | 2.79 | ||||||||
EARNINGS PER SHARE DILUTED |
$ | 0.91 | $ | 1.00 | $ | 3.14 | $ | 2.69 | ||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING |
18,906 | 18,465 | 18,788 | 18,325 | ||||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING
WITH COMMON STOCK EQUIVALENTS |
19,394 | 19,193 | 19,368 | 19,050 |
5
Deferred | ||||||||||||||||||||||||||||||||
Deferred | Compen- | Accumulated | ||||||||||||||||||||||||||||||
Additional | Stock | sation | Other | Employees | ||||||||||||||||||||||||||||
Common | Paid-In | Compen- | Rabbi | Retained | Comprehensive | Stock Notes | ||||||||||||||||||||||||||
Stock | Capital | sation | Trust | Earnings | Earnings | Receivable | Total | |||||||||||||||||||||||||
Balance at December 25, 2004 |
$ | 18,002 | $ | 89,269 | $ | 3,423 | ($1,331 | ) | $ | 247,427 | $ | 1,525 | ($1,546 | ) | $ | 356,769 | ||||||||||||||||
Comprehensive earnings: |
||||||||||||||||||||||||||||||||
Net earnings |
51,190 | |||||||||||||||||||||||||||||||
Foreign currency translation
adjustment |
889 | |||||||||||||||||||||||||||||||
Total comprehensive earnings |
52,079 | |||||||||||||||||||||||||||||||
Cash dividends $.050 per share |
(910 | ) | (910 | ) | ||||||||||||||||||||||||||||
Issuance of 389,207 shares under
employee stock plans |
389 | 4,388 | 4,777 | |||||||||||||||||||||||||||||
Issuance of 3,469 shares under
stock grant programs |
3 | 146 | 149 | |||||||||||||||||||||||||||||
Issuance of 33,074 shares under
deferred compensation plans |
33 | 939 | (216 | ) | (756 | ) | 0 | |||||||||||||||||||||||||
Received 49,244 shares for the exercise of
stock options |
(49 | ) | (1,856 | ) | (1,905 | ) | ||||||||||||||||||||||||||
Tax benefits from non-qualified
stock options exercised |
3,764 | 3,764 | ||||||||||||||||||||||||||||||
Accrued expense under deferred
compensation plans |
926 | 926 | ||||||||||||||||||||||||||||||
Issuance of 1,605 shares in exchange for
employee stock notes receivable |
2 | 60 | (62 | ) | 0 | |||||||||||||||||||||||||||
Payments received on employee
stock notes receivable |
265 | 265 | ||||||||||||||||||||||||||||||
Balance at September 24, 2005 |
$ | 18,380 | $ | 96,710 | $ | 4,133 | ($2,087 | ) | $ | 297,707 | $ | 2,414 | ($1,343 | ) | $ | 415,914 |
6
Deferred | ||||||||||||||||||||||||||||||||
Deferred | Compen- | Accumulated | ||||||||||||||||||||||||||||||
Additional | Stock | sation | Other | Employees | ||||||||||||||||||||||||||||
Common | Paid-In | Compen- | Rabbi | Retained | Comprehensive | Stock Notes | ||||||||||||||||||||||||||
Stock | Capital | sation | Trust | Earnings | Earnings | Receivable | Total | |||||||||||||||||||||||||
Balance at December 31, 2005 |
$18,403 | $ 97,372 | $ 4,212 | ($2,117) | $312,878 | $2,408 | ($1,304) | $431,852 | ||||||||||||||||||||||||
Comprehensive earnings: |
||||||||||||||||||||||||||||||||
Net earnings |
60,885 | |||||||||||||||||||||||||||||||
Foreign currency translation
adjustment |
512 | |||||||||||||||||||||||||||||||
Total comprehensive earnings |
61,397 | |||||||||||||||||||||||||||||||
Cash dividends $.055 per share |
(1,035 | ) | (1,035 | ) | ||||||||||||||||||||||||||||
Reversal of deferred compensation
upon adoption of SFAS 123(R) |
2,095 | (4,212 | ) | 2,117 | 0 | |||||||||||||||||||||||||||
Issuance of 341,921 shares under
employee stock plans |
342 | 5,459 | 5,801 | |||||||||||||||||||||||||||||
Issuance of 3,338 shares under
stock grant programs |
3 | 188 | 191 | |||||||||||||||||||||||||||||
Issuance of 101,278 shares under
deferred compensation plans |
101 | (101 | ) | 0 | ||||||||||||||||||||||||||||
Received 1,367 shares for the exercise of
stock options |
(1 | ) | (89 | ) | (90 | ) | ||||||||||||||||||||||||||
Tax benefits from non-qualified
stock options exercised |
4,357 | 4,357 | ||||||||||||||||||||||||||||||
Expense associated with share-based
compensation arrangements |
691 | 691 | ||||||||||||||||||||||||||||||
Accrued expense under deferred
compensation plans |
2,984 | 2,984 | ||||||||||||||||||||||||||||||
Issuance of 3,222 shares in exchange for
employee stock notes receivable |
3 | 201 | (204 | ) | 0 | |||||||||||||||||||||||||||
Payments received on employee
stock notes receivable |
255 | 255 | ||||||||||||||||||||||||||||||
Balance at September 30, 2006 |
$ | 18,851 | $ | 113,157 | $ | 0 | $ | 0 | $ | 372,728 | $ | 2,920 | ($1,253 | ) | $ | 506,403 |
7
Nine Months Ended | ||||||||
September 30, | September 24, | |||||||
2006 | 2005 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net earnings |
$ | 60,885 | $ | 51,190 | ||||
Adjustments to reconcile net earnings to net cash from operating activities: |
||||||||
Depreciation |
25,558 | 23,391 | ||||||
Amortization of intangibles |
3,953 | 1,809 | ||||||
Expense associated with share-based compensation arrangements |
691 | |||||||
Expense associated with stock grant plans |
191 | 149 | ||||||
Deferred income taxes |
(871 | ) | (886 | ) | ||||
Minority interest |
3,396 | 1,236 | ||||||
Net loss (gain) on sale or impairment of property, plant, and equipment |
206 | (561 | ) | |||||
Changes in: |
||||||||
Accounts receivable |
(37,947 | ) | (75,061 | ) | ||||
Inventories |
23,693 | (10,712 | ) | |||||
Accounts payable |
771 | 43,103 | ||||||
Accrued liabilities and other |
11,326 | 26,502 | ||||||
Excess tax benefits from share-based compensation arrangements |
(3,959 | ) | ||||||
NET CASH FROM OPERATING ACTIVITIES |
87,893 | 60,160 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchase of property, plant and equipment |
(27,600 | ) | (31,768 | ) | ||||
Acquisitions, net of cash received |
(27,137 | ) | (13,883 | ) | ||||
Proceeds from sale of property, plant and equipment |
506 | 2,373 | ||||||
Insurance proceeds |
38 | 3,013 | ||||||
Collections of notes receivable |
1,612 | 457 | ||||||
Advances on notes receivable |
(2,473 | ) | (887 | ) | ||||
Other assets, net |
6 | 752 | ||||||
NET CASH FROM INVESTING ACTIVITIES |
(55,048 | ) | (39,943 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Net repayments under revolving credit facilities |
(38,725 | ) | (16,201 | ) | ||||
Repayment of long-term debt |
(1,201 | ) | (1,674 | ) | ||||
Proceeds from issuance of common stock |
5,711 | 4,074 | ||||||
Distributions to minority shareholder |
(1,569 | ) | (749 | ) | ||||
Investment received from minority shareholder |
500 | |||||||
Dividends paid to shareholders |
(1,035 | ) | (910 | ) | ||||
Excess tax benefits from share-based compensation arrangements |
3,959 | |||||||
Other |
(16 | ) | 236 | |||||
NET CASH FROM FINANCING ACTIVITIES |
(32,876 | ) | (14,724 | ) | ||||
NET CHANGE IN CASH AND CASH EQUIVALENTS |
(31 | ) | 5,493 | |||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR |
46,215 | 25,274 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 46,184 | $ | 30,767 | ||||
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION: |
||||||||
Cash paid during the period for: |
||||||||
Interest |
$ | 9,309 | $ | 9,028 | ||||
Income taxes |
44,448 | 29,761 |
8
Nine Months Ended | ||||||||
September 30, | September 24, | |||||||
2006 | 2005 | |||||||
NON-CASH OPERATING ACTIVITIES: |
||||||||
Accounts receivable exchanged for note receivable |
$ | 431 | $ | 765 | ||||
Deferred purchase price of acquisition exchanged for current payable |
53 | 994 | ||||||
Deferred purchase price of acquisition exchanged for long-term liability |
721 | |||||||
NON-CASH INVESTING ACTIVITIES: |
||||||||
Property, plant & equipment exchanged for debt |
$ | 1,379 | 63 | |||||
NON-CASH FINANCING ACTIVITIES: |
||||||||
Common stock issued under deferred compensation plans |
$ | 2,225 | $ | 972 |
9
A. | BASIS OF PRESENTATION | |
The accompanying unaudited, interim, consolidated, condensed financial statements (the Financial Statements) include our accounts and those of our wholly-owned and majority-owned subsidiaries and partnerships, and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, the Financial Statements do not include all of the information and footnotes normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States. All significant intercompany transactions and balances have been eliminated. | ||
In our opinion, the Financial Statements contain all material adjustments necessary to present fairly our consolidated financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. These Financial Statements should be read in conjunction with the annual consolidated financial statements, and footnotes thereto, included in our Annual Report to Shareholders on Form 10-K for the fiscal year ended December 31, 2005. | ||
Certain reclassifications have been made to the Financial Statements for 2005 to conform to the classifications used in 2006. | ||
B. | REVENUE RECOGNITION | |
Earnings on construction contracts are reflected in operations using either percentage-of-completion accounting, which includes the cost to cost and units of delivery methods, or completed contract accounting, depending on the nature of the business at individual operations. Under percentage-of-completion using the cost to cost method, revenues and related earnings on construction contracts are measured by the relationships of actual costs incurred related to the total estimated costs. Under percentage-of-completion using the units of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual units produced related to the total number of units. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent. Under the completed contract method, revenues and related earnings are recorded when the contracted work is complete and losses are charged to operations in their entirety when such losses become apparent. |
10
September 30, | September 24, | |||||||
2006 | 2005 | |||||||
Cost and Earnings in Excess of Billings |
$ | 6,203 | $ | 3,950 | ||||
Billings in Excess of Cost and Earnings |
5,733 | 3,592 |
C. | EARNINGS PER COMMON SHARE | |
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): |
Three Months Ended 09/30/06 | Three Months Ended 09/24/05 | |||||||||||||||||||||||
Per | Per | |||||||||||||||||||||||
Income | Shares | Share | Income | Shares | Share | |||||||||||||||||||
(Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||||||||||||||
Net Earnings |
$ | 17,705 | $ | 19,171 | ||||||||||||||||||||
EPS Basic |
||||||||||||||||||||||||
Income available to
common stockholders |
17,705 | 18,906 | $ | 0.94 | 19,171 | 18,465 | $ | 1.04 | ||||||||||||||||
Effect of dilutive securities |
||||||||||||||||||||||||
Options |
488 | 728 | ||||||||||||||||||||||
EPS Diluted |
||||||||||||||||||||||||
Income available to
common stockholders and
assumed options
exercised |
$ | 17,705 | 19,394 | $ | 0.91 | $ | 19,171 | 19,193 | $ | 1.00 | ||||||||||||||
11
Nine Months Ended 09/30/06 | Nine Months Ended 09/24/05 | |||||||||||||||||||||||
Per | Per | |||||||||||||||||||||||
Income | Shares | Share | Income | Shares | Share | |||||||||||||||||||
(Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||||||||||||||
Net Earnings |
$ | 60,885 | $ | 51,190 | ||||||||||||||||||||
EPS Basic |
||||||||||||||||||||||||
Income available to
common stockholders |
60,885 | 18,788 | $ | 3.24 | 51,190 | 18,325 | $ | 2.79 | ||||||||||||||||
Effect of dilutive securities |
||||||||||||||||||||||||
Options |
580 | 725 | ||||||||||||||||||||||
EPS Diluted |
||||||||||||||||||||||||
Income available to
common stockholders and
assumed options
exercised |
$ | 60,885 | 19,368 | $ | 3.14 | $ | 51,190 | 19,050 | $ | 2.69 | ||||||||||||||
No outstanding options were excluded from the computation of diluted EPS for the quarters and nine months ended September 30, 2006 or September 24, 2005. | ||
D. | SALE OF ACCOUNTS RECEIVABLE | |
On March 8, 2006 we entered into a new accounts receivable sale agreement with a bank. The terms of this new agreement are substantially the same as the agreement that was in place in the first six months of 2005 and subsequently cancelled on October 25, 2005. Under the terms of these agreements: | ||
| We sell specific receivables to the bank at an agreed-upon price at terms ranging from one month to one year. | |
| We service the receivables sold and outstanding on behalf of the bank at a rate of 0.50% per annum. | |
| We receive an incentive servicing fee, which we account for as a retained interest in the receivables sold. Our retained interest is determined based on the fair market value of anticipated collections in excess of the Agreed Base Value of the receivables sold. Appropriate valuation allowances are recorded against the retained interest. | |
| The maximum amount of receivables, net of retained interest, which may be sold and outstanding at any point in time under this arrangement is $50 million. | |
On September 30, 2006 no receivables were sold and outstanding. On September 24, 2005, $27.0 million of receivables were sold and outstanding, and we recorded $2.0 million of |
12
Nine Months Ended | Nine Months Ended | |||||||
September 30, 2006 | September 24, 2005 | |||||||
Accounts receivable sold |
$ | 342,898 | $ | 346,844 | ||||
Retained interest in receivables |
(568 | ) | ||||||
Expense from sale |
(1,519 | ) | (1,214 | ) | ||||
Servicing fee received |
124 | 137 | ||||||
Discounts and sales allowances |
0 | (3,298 | ) | |||||
Net cash received from sale |
$ | 341,503 | $ | 341,901 | ||||
E. | GOODWILL AND OTHER INTANGIBLE ASSETS | |
The following amounts were included in other intangible assets, net (in thousands): |
September 30, 2006 | September 24, 2005 | |||||||||||||||
Accumulated | Accumulated | |||||||||||||||
Assets | Amortization | Assets | Amortization | |||||||||||||
Non-compete agreements |
$ | 16,177 | $ | (8,640 | ) | $ | 10,512 | $ | (5,445 | ) | ||||||
Licensing agreements |
2,510 | (2,295 | ) | 3,684 | (2,021 | ) | ||||||||||
Customer relationships |
5,988 | (1,831 | ) | 1,285 | (386 | ) | ||||||||||
Backlog |
694 | (656 | ) | 190 | (190 | ) | ||||||||||
Total |
$ | 25,369 | $ | (13,422 | ) | $ | 15,671 | $ | (8,042 | ) | ||||||
2006 Remaining |
$ | 1,306 | ||
2007 |
3,701 | |||
2008 |
3,227 | |||
2009 |
2,131 | |||
2010 |
1,158 | |||
Thereafter |
424 |
13
Indefinite- | ||||||||
Lived | ||||||||
Intangible | ||||||||
Goodwill | Assets | |||||||
Balance as of December 31, 2005 |
$ | 131,556 | $ | 0 | ||||
Acquisitions |
18,863 | 2,340 | ||||||
Final purchase price allocation of DecKorators |
(5,925 | ) | ||||||
Other, net |
(232 | ) | ||||||
Balance as
of September 30, 2006 |
$ | 144,262 | $ | 2,340 | ||||
Balance as of December 25, 2004 |
$ | 123,845 | ||||||
Acquisition |
5,604 | |||||||
Other, net |
270 | |||||||
Balance as of September 24, 2005 |
$ | 129,719 | ||||||
14
15
$4.4 million to tangible net assets, $1.7 million to non-compete agreements, $2.1 million to customer relationship related intangibles and $0.2 million to goodwill. Maine Ornamental had net sales in fiscal 2004 totaling approximately $12.4 million. | ||
The business combinations mentioned above were not significant to our operating results individually or in aggregate, and thus pro forma results are not presented. | ||
G. | EMPLOYEE STOCK NOTES RECEIVABLE | |
Employee stock notes receivable represents notes issued to us by certain employees and officers to finance the purchase of our common stock. Directors and executive officers do not, and are not allowed to, participate in this program. | ||
H. | STOCK-BASED COMPENSATION | |
Prior to January 1, 2006, we accounted for our stock option plans and our Employee Stock Purchase Plan using the intrinsic value method of accounting provided under the recognition and measurement provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, (APB 25) and related Interpretations, as permitted by Financial Accounting Standards Board (FASB) Statement No. 123, Accounting for Stock-Based Compensation, (SFAS 123) under which no compensation expense was recognized for stock option grants and issuance of stock pursuant to the Employee Stock Purchase Plan. Accordingly, share-based compensation was included as a pro forma disclosure in the financial statement footnotes and continues to be provided for periods prior to fiscal 2006. | ||
Effective January 1, 2006, we adopted the fair value recognition provisions of FASB Statement No. 123(R), Share-Based Payment, (SFAS 123(R)) using the modified-prospective-transition method. Under that transition method, compensation cost recognized in the first nine months of 2006 includes: a) compensation cost for all share-based payments granted through December 31, 2005, but for which the requisite service period had not been completed as of December 31, 2005, based on the grant date fair market value estimated in accordance with the original provisions of SFAS 123, and b) compensation cost for all share-based payments granted subsequent to December 31, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). Results for prior periods have not been restated. | ||
As a result of adopting SFAS 123(R) on January 1, 2006, our earnings before income taxes and net earnings for the third quarter of 2006, are $169,000 and $115,000 lower, respectively, than if we had continued to account for share-based compensation under APB 25. Basic and diluted earnings per share for the third quarter of 2006 are $0.01 and $0.01 lower, respectively, than if we had continued to account for share-based compensation under APB 25. |
16
17
Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Stock | Average | Remaining | Aggregate | |||||||||||||
Under | Exercise Price | Contractual | Intrinsic | |||||||||||||
Option | Per Share | Term | Value | |||||||||||||
Outstanding at January 1, 2006 |
1,384,879 | $ | 19.08 | |||||||||||||
Exercised |
(328,845 | ) | $ | 15.60 | ||||||||||||
Forfeited or expired |
(14,195 | ) | $ | 21.07 | ||||||||||||
Outstanding at September 30, 2006 |
1,041,839 | $ | 20.15 | 4.99 | $ | 30,132,159 | ||||||||||
Vested or expected to vest
at September 30, 2006 |
808,511 | $ | 20.13 | 5.21 | $ | 23,414,985 | ||||||||||
Exercisable at September 30, 2006 |
232,313 | $ | 16.96 | 4.06 | $ | 7,455,566 | ||||||||||
18
19
Three Months | Nine Months | |||||||
Ended | Ended | |||||||
September 24, | September 24, | |||||||
2005 | 2005 | |||||||
Net Earnings: |
||||||||
As reported |
$ | 19,171 | $ | 51,190 | ||||
Deduct: Stock-based employee
compensation expense determined
under fair value based method for all
awards, net of related tax effects |
(141 | ) | (542 | ) | ||||
Pro Forma |
$ | 19,030 | $ | 50,648 | ||||
EPS Basic: |
||||||||
As reported |
$ | 1.04 | $ | 2.79 | ||||
Pro forma |
$ | 1.03 | $ | 2.76 | ||||
EPS Diluted: |
||||||||
As reported |
$ | 1.00 | $ | 2.69 | ||||
Pro forma |
$ | 0.99 | $ | 2.67 |
I. | COMMITMENTS, CONTINGENCIES, AND GUARANTEES | |
We are self-insured for environmental impairment liability through a wholly owned subsidiary, UFP Insurance Ltd., a licensed captive insurance company. 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. Insurance reserves, calculated with no discount rate, have been established to cover remediation activities at our Union City, GA; Stockertown, PA; Elizabeth City, NC; Auburndale, FL; Schertz, TX; and Janesville, WI wood preservation facilities. In addition, a small reserve was established for our Thornton, CA property to remove asbestos and certain lead containing materials which existed on the property at the time of purchase. | ||
Including amounts from our wholly owned captive insurance company, we have reserved approximately $1.7 million on September 30, 2006 and $1.7 million on September 24, 2005, representing the estimated costs to complete future remediation efforts without reduction for an insurance receivable. | ||
The manufacturers of CCA preservative voluntarily discontinued the registration of CCA for certain residential applications as of December 31, 2003. Our wood preservation facilities have been converted to alternate preservatives, either ACQ or borates. In March 2005, one |
20
21
22
Certain wholly owned domestic subsidiaries have guaranteed the indebtedness of Universal Forest Products, Inc. in certain debt agreements, including the Series 1998-A Senior Notes, Series 2002-A Senior Notes and our revolving credit facility. The maximum exposure of these guarantees is limited to the indebtedness outstanding under these debt arrangements and this exposure will expire concurrent with the expiration of the debt agreements. | ||
Our treating operations utilize Subpart W drip pads, defined as hazardous waste management units by the EPA. The rules regulating drip pads require that the pad be closed at the point that it is no longer used to manage hazardous waste. Closure involves identification and disposal of contamination which requires removal from the wood treating operations. The ultimate cost of closure is dependent upon a number of factors including, but not limited to, identification and removal of contamination, cleanup standards that vary from state to state, and the time period over which the cleanup would be completed. Based on our knowledge of existing circumstances, it is considered probable that these costs will approximate $465,000. As a result, this amount is recorded in other long-term liabilities on September 30, 2006. | ||
We did not enter into any new guarantee arrangements during the third quarter of 2006 which would require us to recognize a liability on our balance sheet. | ||
J. | SALE OF REAL ESTATE | |
On January 3, 2005, we sold real estate located in Stockton, CA for $2.3 million and recorded a pre-tax gain totaling approximately $1.2 million. |
23
| Our unit sales out of existing facilities decreased by 4% this quarter, while we experienced a 2% increase in sales growth as a result of acquisitions and new operations. | |
| Lumber prices were approximately 21% lower compared to the same period of 2005. This primarily impacted our overall selling prices (see Impact of the Lumber Market on Our Operating Results below) and working capital requirements. | |
| We faced adverse industry conditions in our D-I-Y/retail, site-built construction and manufactured housing markets, which impacted our unit sales. We were able to mitigate the impact of these adverse conditions by gaining share in each one of our markets. | |
| Our operating profits decreased almost 7% compared to the same period of 2005 as a result of a 2% decline in unit sales combined with a 3% increase in selling, general, and administrative expenses. | |
| We improved our cash flows from operating activities due to a combination of improvements in our cash cycle, a 23% increase in our year-to-date earnings and non-cash expenses, a lower Lumber Market which reduced working capital requirements this year, and very strong sales levels and, therefore, greater working capital requirements last year. | |
| A reduction in interest-bearing debt to $171.7 million from $190.7 million due to strong operating cash flows. | |
| Our purchase of a 50% membership interest in United Lumber & Reman, LLC in Muscle Shoals, AL in July 2006 and our purchase of the assets and assumption of certain liabilities of GeoMatrix, Inc. in Troy, MI in August 2006. |
24
| A continued significant decline in housing starts; | ||
| A soft D-I-Y/retail market as a result of a decline in consumer spending; | ||
| A weak manufactured housing and modular market; and | ||
| The impact of FEMA orders in 2005 in the wake of hurricanes. |
Random Lengths Composite | ||||||||
Average $/MBF | ||||||||
2006 | 2005 | |||||||
January |
$ | 382 | $ | 381 | ||||
February |
377 | 420 | ||||||
March |
368 | 422 | ||||||
April |
369 | 407 | ||||||
May |
341 | 386 | ||||||
June |
326 | 405 | ||||||
July |
309 | 381 | ||||||
August |
296 | 360 | ||||||
September |
292 | 395 | ||||||
Third quarter average |
$ | 299 | $ | 379 | ||||
Year-to-date average |
$ | 340 | $ | 395 | ||||
Third quarter percentage
change from 2005 |
(21.1 | %) | ||||||
Year-to-date percentage
change from 2005 |
(13.9 | %) |
25
Random Lengths SYP | ||||||||
Average $/MBF | ||||||||
2006 | 2005 | |||||||
January |
$ | 496 | $ | 446 | ||||
February |
503 | 489 | ||||||
March |
514 | 501 | ||||||
April |
510 | 511 | ||||||
May |
488 | 500 | ||||||
June |
444 | 538 | ||||||
July |
409 | 536 | ||||||
August |
394 | 503 | ||||||
September |
387 | 501 | ||||||
Third quarter average |
$ | 397 | $ | 513 | ||||
Year-to-date average |
$ | 461 | $ | 503 | ||||
Third quarter percentage
change from 2005 |
(22.6 | %) | ||||||
Year-to-date percentage
change from 2005 |
(8.4 | %) |
26
| Products with fixed selling prices. These products include value-added products such as decking and fencing sold to DIY/retail customers, as well as trusses, wall panels and other components sold to the site-built construction market, and most industrial packaging products. Prices for these products are generally fixed at the time of the sales quotation for a specified period of time or are based upon a specific quantity. In order to maintain margins and reduce any exposure to adverse trends in the price of component lumber products, we attempt to lock in costs for these sales commitments with our suppliers. Also, the time period and quantity limitations generally allow us to re-price our products for changes in lumber costs from our suppliers. | |
| Products with selling prices indexed to the reported Lumber Market with a fixed dollar adder to cover conversion costs and profits. These products primarily include treated lumber, remanufactured lumber, and trusses sold to the manufactured housing industry. For these products, we estimate the customers needs and carry anticipated levels of inventory. Because lumber costs are incurred in advance of final sale prices, subsequent increases or decreases in the market price of lumber impact our gross margins. For these products, our margins are exposed to changes in the trend of lumber prices. |
| Products with significant inventory levels with low turnover rates, whose selling prices are indexed to the Lumber Market. In other words, the longer the period of time these products remain in inventory, the greater the exposure to changes in the price of lumber. This would include treated lumber, which comprises almost eighteen percent of our total sales. This exposure is less significant with remanufactured lumber, trusses sold to the manufactured housing market, and other similar products, due to the higher rate of inventory turnover. We attempt to mitigate the risk associated with treated lumber through vendor consignment inventory programs. (Please refer to the Risk Factors section of our annual report on form 10-K, filed with the United States Securities and Exchange Commission.) | |
| Products with fixed selling prices sold under long-term supply arrangements, particularly those involving multi-family construction projects. We attempt to mitigate this risk through our purchasing practices by locking in costs. |
27
Period 1 | Period 2 | |||||||
Lumber cost |
$ | 300 | $ | 400 | ||||
Conversion cost |
50 | 50 | ||||||
= Product cost |
350 | 450 | ||||||
Adder |
50 | 50 | ||||||
= Sell price |
400 | 500 | ||||||
Gross margin |
12.5 | % | 10.0 | % |
Company Name | Acquisition Date | Business Description | ||
GeoMatrix, Inc. (GeoMatrix) |
August 18, 2006 |
A developer and distributor of plastic lattice products and other proprietary plastic products located in Troy, MI. | ||
United Lumber &
Reman, LLC (United)
|
July 10, 2006 | An industrial wood manufacturing plant located in Muscle Shoals, AL. Acquired a 50% membership interest. | ||
Dura-Bilt Mfg Co.
(Dura-Bilt)
|
June 5, 2006 | Designs and manufactures roof and floor trusses for site-built construction. The company is located in Riverbank, CA. | ||
Shawnlee
Construction, LLC
(Shawnlee)
|
April 3, 2006, June 27, 2005 and April 2, 2004 | Provides framing services for multi-family construction in the northeast. Located in Plainville, MA. Purchased initial 50% membership interest on April 2, 2004, an additional 25% membership interest on June 27, 2005, and an additional 5% membership interest on April 3, 2006. |
28
Classic Truss Company,
Inc. (Classic)
|
January 9, 2006 | Manufactures and distributes engineered wood components for site-built construction. The company is located in Fort Pierce, FL. | ||
DecKorators, Inc.
(DecKorators)
|
November 14, 2005 | Provides decorative balusters and accessories for residential decks and porches to independent dealers and certain big box home improvement retailers. The company has locations in Crestwood and St. Louis, MO. | ||
Shepardville
Construction, Inc. and
AW Construction, LLC
(Shepardville and AW)
|
June 27, 2005 | Installs interior products such as base boards, crown moldings, window sills and casings, doors, and cabinets for commercial and multi-family construction projects. Located in Warwick, RI and Wolcott, CT. These entities were merged on January 1, 2006. | ||
Maine Ornamental
Woodworkers, Inc.
(Maine Ornamental)
|
June 2, 2005 | Provides decorative post caps for fencing and decking applications to two-step distributors and certain big box home improvement retailers. The company has locations in Winthrop, ME and Bainbridge Island, WA. |
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
Sept. 30, | Sept. 24, | Sept. 30, | Sept. 24, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Net sales |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of goods sold |
85.3 | 86.3 | 85.5 | 86.9 | ||||||||||||
Gross profit |
14.7 | 13.7 | 14.5 | 13.1 | ||||||||||||
Selling, general, and
administrative expenses |
9.8 | 8.8 | 9.3 | 8.5 | ||||||||||||
29
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
Sept. 30, | Sept. 24, | Sept. 30, | Sept. 24, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Earnings from operations |
4.9 | 4.9 | 5.2 | 4.6 | ||||||||||||
Interest, net |
0.4 | 0.5 | 0.4 | 0.6 | ||||||||||||
Net gain on sale of real estate |
0.0 | 0.0 | 0.0 | (0.1 | ) | |||||||||||
0.4 | 0.5 | 0.4 | 0.5 | |||||||||||||
Earnings before income taxes
and minority interest |
4.5 | 4.4 | 4.8 | 4.1 | ||||||||||||
Income taxes |
1.7 | 1.7 | 1.8 | 1.5 | ||||||||||||
Earnings before minority interest |
2.8 | 2.7 | 3.0 | 2.6 | ||||||||||||
Minority interest |
(0.2 | ) | (0.0 | ) | (0.2 | ) | (0.1 | ) | ||||||||
Net earnings |
2.6 | % | 2.7 | % | 2.8. | % | 2.5 | % | ||||||||
| Diversifying our end market sales mix by increasing sales of specialty wood packaging to industrial users and engineered wood components and framing services to the site-built construction market. Engineered wood components include roof trusses, wall panels, and floor systems. | |
| Increasing sales of value-added products and framing services. Value-added product sales consist of fencing, decking, lattice, and other specialty products sold to the DIY/retail market, specialty wood packaging, engineered wood components, and wood alternative products. Wood alternative products consist primarily of composite wood and plastics. Although we consider the treatment of dimensional lumber with certain chemical preservatives a value-added process, treated lumber is not presently included in the value-added sales totals. | |
| Maximizing unit sales growth while achieving return on investment goals. |
30
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||
Sept. 30, | % | Sept. 24, | Sept. 30, | % | Sept. 24, | |||||||||||||||||||
Market Classification | 2006 | Change | 2005 | 2006 | Change | 2005 | ||||||||||||||||||
DIY/Retail |
$ | 236,825 | (14.9 | )% | $ | 278,416 | $ | 799,310 | (0.2 | )% | $ | 801,155 | ||||||||||||
Site-Built Construction |
205,363 | 0.5 | 204,344 | 642,964 | 18.7 | 541,878 | ||||||||||||||||||
Manufactured Housing |
91,157 | (12.4 | ) | 104,089 | 296,409 | (3.6 | ) | 307,466 | ||||||||||||||||
Industrial |
139,528 | 3.6 | 134,648 | 426,646 | 10.0 | 387,710 | ||||||||||||||||||
Total |
$ | 672,873 | (6.7 | ) | $ | 721,497 | $ | 2,165,329 | 6.2 | $ | 2,038,209 | |||||||||||||
Note: | In the second quarter of 2006, we reviewed the classification of our customers and made certain reclassifications. Prior year information has been restated to reflect these reclassifications. |
31
32
Three Months Ended | Nine Months Ended | |||||||||||||||
Sept. 30, | Sept. 24, | Sept. 30, | Sept. 24, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Value-Added |
56.5 | % | 52.6 | % | 56.3 | % | 51.7 | % | ||||||||
Commodity-Based |
43.5 | % | 47.4 | % | 43.7 | % | 48.3 | % |
| Increased sales of higher margin, value-added products; | ||
| Improved profitability on sales to our industrial market; |
33
| Economies of scale realized from our organic sales growth during the first six months of 2006; and | ||
| Cost efficiencies we have achieved through our company-wide innovation program. |
34
Sept. 30, | Sept. 24, | |||||||
2006 | 2005 | |||||||
Cash from operating activities |
$ | 87,893 | $ | 60,160 | ||||
Cash from investing activities |
(55,048 | ) | (39,943 | ) | ||||
Cash from financing activities |
(32,876 | ) | (14,724 | ) | ||||
Net change in cash and cash equivalents |
(31 | ) | 5,493 | |||||
Cash and cash equivalents, beginning of period |
46,215 | 25,274 | ||||||
Cash and cash equivalents, end of period |
$ | 46,184 | $ | 30,767 | ||||
35
| A $4.2 million decrease in capital expenditures as a result of canceling certain projects in 2006 that were originally planned in the beginning of the year. |
| A $13.3 million increase in amounts spent for business acquisitions, consisting of approximately $2.1 million used to acquire the assets of Classic, $8.4 million used to acquire the assets of Dura-Bilt, approximately $0.8 million used to acquire another 5% interest in Shawnlee, $4.9 million used to acquire a 50% membership interest in United, and $11.3 million used to acquire the assets of GeoMatrix. |
| A $3.0 million decrease in the collection of insurance proceeds. |
36
37
38
(a) | Evaluation of Disclosure Controls and Procedures. With the participation of management, our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a 15e and 15d 15e) as of the quarter ended September 30, 2006 (the Evaluation Date), have concluded that, as of such date, our disclosure controls and procedures were effective. |
(b) | Changes in Internal Controls. During the third quarter ended September 30, 2006, there were no changes in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. |
39
(a) | None. | |
(b) | None. | |
(c) | Issuer purchases of equity securities. |
Fiscal Month | (a) | (b) | (c) | (d) | ||||||||||||
July 2, 2006 August 5, 2006(1) |
||||||||||||||||
August 6, 2006 September 2, 2006 |
||||||||||||||||
September 3, 2006 September 30, 2006 |
(a) | Total number of shares purchased. | |
(b) | Average price paid per share. | |
(c) | Total number of shares purchased as part of publicly announced plans or programs. | |
(d) | Maximum number of shares that may yet be purchased under the plans or programs. | |
(1) | On November 14, 2001, the Board of Directors approved a share repurchase program (which succeeded a previous program) allowing us to repurchase up to 2.5 million shares of our common stock. As of September 30, 2006, cumulative total authorized shares available for repurchase is 1.5 million shares. |
40
41
31(a)
|
Certificate of the Chief Executive Officer of Universal Forest Products, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | |
31(b)
|
Certificate of the Chief Financial Officer of Universal Forest Products, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | |
32(a)
|
Certificate of the Chief Executive Officer of Universal Forest Products, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | |
32(b)
|
Certificate of the Chief Financial Officer of Universal Forest Products, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
42
UNIVERSAL FOREST PRODUCTS, INC. | ||||||
Date: October 25, 2006
|
By: | /s/ Michael B. Glenn | ||||
Michael B. Glenn | ||||||
Its: | Chief Executive Officer | |||||
Date: October 25, 2006
|
By: | /s/ Michael R. Cole | ||||
Michael R. Cole | ||||||
Its: | Chief Financial Officer |
43
Exhibit No. | Description | |
31(a)
|
Certificate of the Chief Executive Officer of Universal Forest Products, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | |
31(b)
|
Certificate of the Chief Financial Officer of Universal Forest Products, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | |
32(a)
|
Certificate of the Chief Executive Officer of Universal Forest Products, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | |
32(b)
|
Certificate of the Chief Financial Officer of Universal Forest Products, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
1. | I have reviewed this report on Form 10-Q of Universal Forest Products, Inc.; | |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and | ||
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially |
affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent function): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and | ||
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: October 25, 2006
|
/s/ Michael B. Glenn | |||
Michael B. Glenn | ||||
Chief Executive Officer |
1. | I have reviewed this report on Form 10-Q of Universal Forest Products, Inc.; | |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and | ||
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially |
affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent function): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and | ||
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: October 25, 2006
|
/s/ Michael R. Cole | |||
Michael R. Cole | ||||
Chief Financial Officer |
UNIVERSAL FOREST PRODUCTS, INC. | ||||||
Date: October 25, 2006
|
By: | /s/ Michael B. Glenn | ||||
Michael B. Glenn | ||||||
Its: | Chief Executive Officer |
UNIVERSAL FOREST PRODUCTS, INC. | ||||||
Date: October 25, 2006
|
By: | /s/ Michael R. Cole | ||||
Michael R. Cole | ||||||
Its: | Chief Financial Officer |