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UFPI reports record net earnings

July 24, 2019
Net earnings up 24 percent, unit sales up 5 percent

GRAND RAPIDS, Mich., July 24, 2019 (GLOBE NEWSWIRE) -- Universal Forest Products, Inc. (Nasdaq: UFPI) today announced net sales of $1.24 billion and net earnings attributable to controlling interests of $54.5 million, or 88 cents per diluted share, for the quarter ended June 29, 2019. Net earnings were the highest recorded at any time in the company’s history.

“The employees of Universal continue to do a great job growing unit sales, improving our company’s gross profit per unit, and generating robust cash flow despite pressures from rising labor costs and significant fluctuations in the lumber market,” said CEO Matthew J. Missad. “Our strong results are evidence that we are pursuing the right strategies to make our business more efficient and grow through new, value-added products.”

The company’s mix of value-added sales relative to commodity sales improved from 60 percent in the second quarter of 2018 to 67 percent in the second quarter of 2019, and new product sales grew 18 percent over the same period of 2018. Although significantly lower lumber pricing affected the company’s second-quarter net sales, unit sales increased 5 percent over the same period of last year, driven mostly by organic sales growth.

“I am pleased we experienced such strong growth with new products in our retail and industrial markets,” added Missad. “We will continue to closely manage our SG&A expenses, including those needed to grow our value-added products, so that we can better leverage these expenses as we grow revenue.”

Second Quarter 2019 Highlights (comparisons on a year-over-year basis):

  • Operating profit of $74.2 million was up 22 percent and net earnings of $54.5 million was up 24 percent
  • EBITDA of $90.8 million was up 18 percent
  • Net sales of $1.24 billion represented a 4 percent decrease; lower lumber prices contributed significantly to the gross sales reduction as selling prices were down by 9 percent.
  • Unit sales grew 5 percent; organic sales accounted for 4 percent of the growth while acquisitions added 1 percent.  
  • New product sales were $175.3 million, up 18 percent
  • Core SG&A as a percentage of gross profit fell from 54.4 percent in the second quarter of 2018 to 50.7 percent during the same period in 2019.

By market, the Company reported the following second-quarter results.

Retail

  • $521 million in gross sales, down 4 percent compared to the second quarter of 2018. A unit sales increase of 6 percent was offset by selling prices that were 10 percent lower. Organic growth was responsible for all of the unit sales increase and was largely driven by sales of Deckorators decking and deck accessories.

Industrial

  • $357.3 million in gross sales, up 3 percent over the second quarter of 2018. A unit sales increase of 7 percent was offset by lower selling prices of 4 percent. Acquisitions contributed 6 percent of the unit sales increase; organic growth was responsible for 1 percent.

Construction

  • $386.2 million in gross sales, down 10 percent compared to the second quarter of 2018, due to a 14 percent decrease in selling prices and a 4 percent increase in overall unit sales. Unit sales growth was entirely organic, with commercial and residential housing customers each growing at 5 percent and manufactured housing customers growing at 1 percent.

CONFERENCE CALL

Universal Forest Products will conduct a conference call to discuss information included in this news release and related matters at 8:30 a.m. ET on Thursday, July 25, 2019. The call will be hosted by CEO Matthew J. Missad and CFO Michael Cole, and will be available for analysts and institutional investors domestically at 866-518-4547, and internationally at 213-660-0879. Analysts and institutional investors should use conference pass code 1794208. The conference call will be available simultaneously and in its entirety to all interested investors, news media and Universal employees through a webcast at http://www.ufpi.com. A replay of the call will be available through August 25, 2019, at 855-859-2056, 404-537-3406 or 800-585-5367.

UNIVERSAL FOREST PRODUCTS, INC.

Universal Forest Products, Inc. is a holding company whose subsidiaries supply wood, wood composite and other products to three robust markets: retail, construction and industrial.  Founded in 1955, the Company is headquartered in Grand Rapids, Mich., with affiliates throughout North America, Europe, Asia and Australia. For more about Universal Forest Products, go to www.ufpi.com.

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the markets we serve, the economy and the Company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” “likely,” “plans,” “projects,” “should,” variations of such words, and similar expressions identify such forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. The Company does not undertake to update forward-looking statements to reflect facts, circumstances, events, or assumptions that occur after the date the forward-looking statements are made. Actual results could differ materially from those included in such forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty. Among the factors that could cause actual results to differ materially from forward-looking statements are the following: fluctuations in the price of lumber; adverse or unusual weather conditions; adverse economic conditions in the markets we serve; government regulations, particularly involving environmental and safety regulations; and our ability to make successful business acquisitions. Certain of these risk factors as well as other risk factors and additional information are included in the Company's reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission.


Non-GAAP Financial Information

This release includes certain financial information not prepared in accordance with U.S. GAAP. Because not all companies calculate non-GAAP financial information identically (or at all), the presentations herein may not be comparable to other similarly titled measures used by other companies.  Management considers EBITDA, a non-GAAP measure, an alternative performance measure which may provide useful information to investors.

Brandon Froysland
Director of Finance
(616) 365-1589


 
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 2019/2018
                         
(In thousands)                      
ASSETS   2019   2018   LIABILITIES AND EQUITY   2019   2018
                         
CURRENT ASSETS           CURRENT LIABILITIES        
  Cash and cash equivalents   $   20,497   $   27,501     Cash overdraft   $   24,972   $   33,608
  Restricted cash     1,024     14,493     Accounts payable     189,649     197,408
  Investments     16,776     16,758     Accrued liabilities     164,812     138,809
  Accounts receivable     483,263     489,145     Current portion of debt     173     542
  Inventories     528,680     531,874              
  Other current assets     46,868     32,860              
                         
TOTAL CURRENT ASSETS     1,097,108     1,112,631   TOTAL CURRENT LIABILITIES     379,606     370,367
                         
OTHER ASSETS     111,175     20,266   LONG-TERM DEBT AND        
INTANGIBLE ASSETS, NET     273,804     263,024     CAPITAL LEASE OBLIGATIONS     187,471     276,274
PROPERTY, PLANT           OTHER LIABILITIES     100,349     42,255
  AND EQUIPMENT,  NET     368,572     340,698   EQUITY     1,183,233     1,047,723
                         
                         
TOTAL ASSETS   $   1,850,659   $   1,736,619   TOTAL LIABILITIES AND EQUITY   $   1,850,659   $   1,736,619
                         

 

 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED
JUNE 2019/2018
(In thousands)   2019     2018
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net earnings   $   91,147     $   78,714  
Adjustments to reconcile net earnings to net cash from operating activities:          
           
Depreciation     29,200         26,144  
Amortization of intangibles     2,946         2,702  
Expense associated with share-based and grant compensation arrangements     2,209         1,924  
Deferred income taxes credit       (536 )       (565 )
Unrealized gain on investment       (1,518 )       -  
Net gain on disposition of assets       (321 )       (6,057 )
Changes in:          
Accounts receivable       (139,468 )       (155,666 )
Inventories     28,008         (61,828 )
Accounts payable and cash overdraft     49,947         62,665  
Accrued liabilities and other     9,334         15,895  
NET CASH FROM (USED IN) OPERATING ACTIVITIES     70,948         (36,072 )
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchases of property, plant, and equipment       (42,477 )       (54,313 )
Proceeds from sale of property, plant and equipment     977         36,724  
Acquisitions and purchase of noncontrolling interest, net of cash received       (5,034 )       (37,960 )
Purchases of investments       (4,859 )       (9,348 )
Proceeds from sale of investments     3,667         3,180  
Other       (10 )       (1,352 )
NET CASH USED IN INVESTING ACTIVITIES       (47,736 )       (63,069 )
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Borrowings under revolving credit facilities     393,434         488,853  
Repayments under revolving credit facilities       (408,027 )       (431,657 )
Borrowings of debt     -         1,639  
Repayments of debt       (3,061 )       (5,437 )
Issuance of long-term debt     -         75,000  
Proceeds from issuance of common stock     542         500  
Distributions to noncontrolling interest       (900 )       (1,078 )
Dividends paid to shareholders       (12,271 )       (11,090 )
Repurchase of common stock     -         (1,819 )
Other     28         (71 )
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES       (30,255 )       114,840  
           
Effect of exchange rate changes on cash     366         (256 )
NET CHANGE IN CASH AND CASH EQUIVALENTS       (6,677 )       15,443  
           
ALL CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     28,198         28,816  
           
ALL CASH AND CASH EQUIVALENTS, END OF PERIOD   $   21,521     $   44,259  
           
Reconciliation of cash and cash equivalents and restricted cash:          
Cash and cash equivalents, beginning of period   $   27,316     $   28,339  
Restricted cash, beginning of period     882         477  
All cash and cash equivalents, beginning of period   $   28,198     $   28,816  
           
Cash and cash equivalents, end of period   $   20,497     $   27,501  
Restricted cash, end of period     1,024         16,758  
All cash and cash equivalents, end of period   $   21,521     $   44,259  
           


 
EBITDA RECONCILIATION (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED
JUNE 2019/2018
    Quarter Period Year to Date
(In thousands)   2019 2018 2019 2018
Net earnings     55,145     45,130     91,147     78,714  
Interest  expense     2,407     2,248     4,867     4,025  
Interest and investment income     (682)     (181)     (2,275)     (898)  
Net gain on disposition of assets     (199)     477     (321)     (6,057)  
Income taxes     17,367     13,420     28,944     22,994  
Expense associated with share-based compensation arrangements     922     831     2,209     1,924  
Depreciation expense     14,725     13,432     29,200     26,144  
Amortization of intangibles     1,094     1,474     2,946     2,702  
EBITDA     90,779     76,831     156,717     129,548  
                   


 
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AS A PERCENTAGE OF SALES 
CURRENT YEAR'S SALES STATED AT LAST YEAR'S SELLING PRICES (UNAUDITED)
FOR THE THREE MONTHS ENDED - JUNE 2019/2018
  Quarter Period
  Actual Sales Adjusted to Last Year's Selling Price Actual
    2019     2019     2018  
                   
NET SALES     100.0  %      100.0  %      100.0 %
COST OF GOODS SOLD      84.9       86.2       87.2  
GROSS PROFIT     15.1       13.8       12.8  
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES     9.1       8.3       8.1  
NET GAIN ON DISPOSITION OF ASSETS     -        -        -   
EARNINGS FROM OPERATIONS     6.0       5.5       4.7  
OTHER EXPENSE, NET     0.1       0.1       0.2  
EARNINGS BEFORE INCOME TAXES     5.8       5.3       4.5  
INCOME TAXES     1.4       1.3       1.0  
NET EARNINGS     4.4       4.1       3.5  
LESS NET EARNINGS ATTRIBUTABLE TO                  
NONCONTROLLING INTEREST      (0.1)       -        (0.1)  
NET EARNINGS ATTRIBUTABLE TO                  
CONTROLLING INTEREST     4.4  %      4.0  %      3.4  % 
                   
Note: Actual percentages are calculated and may not sum to total due to rounding.                  
                   
                   
2018 NET SALES  $    1,294,440              
2019 SELL PRICE DECLINE     9.00  %             
DECREASE IN 2019 NET SALES DUE TO SELL PRICE DECLINE  $    116,500              
ACTUAL 2019 NET SALES     1,239,817              
ADJUSTED 2019 NET SALES  $    1,356,317              
                   
ACTUAL 2019 COST OF GOODS SOLD  $    1,053,091              
PLUS DIFFERENCE IN NET SALES (ABOVE)     116,500              
ADJUSTED 2019 COST OF GOODS SOLD  $    1,169,591              
                   

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Source: Universal Forest Products, Inc.