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UFPI Reports Record Fourth Quarter and Annual Results

February 22, 2018
- Q4 Earnings Up 50 percent; Tax Rate Reduction Adds to Earnings -

GRAND RAPIDS, Mich., Feb. 22, 2018 (GLOBE NEWSWIRE) --

Universal Forest Products, Inc. (Nasdaq:UFPI) today announced record net earnings and net sales for the fourth quarter and full year 2017.  The Company posted these results in a quarter and year that had one less operational week compared to 2016. In 2016, the extra week accounted for over $60 million in net sales and over $2 million in operating profit.

Fourth Quarter 2017 Highlights (comparisons on a year-over-year basis, 13 weeks over 14 weeks):

  • Diluted earnings per share were $0.51, an increase of 50 percent
  • Net earnings attributable to controlling interest were $31.1 million, up 50 percent; changes to the corporate tax rate contributed $6.4 million or 10 cents per diluted share. Even excluding the tax benefit, net earnings for the quarter and year were records.
  • EBITDA of $57 million, up 16 percent
  • Net sales of $966.1 million represent a 12 percent increase
  • Unit sales accounted for 5 percent of the Company’s gross sales growth due to acquired businesses; price increases accounted for almost 8 percent

Fiscal 2017 Highlights (comparisons on a year-over-year basis, 52 weeks over 53 weeks):

  • Diluted earnings per share were $1.94, an increase of 18 percent
  • Net earnings attributable to controlling interest were $119.5 million, up 18 percent
  • EBITDA of $238 million, up 13 percent
  • Net sales of $3.94 billion, up 22 percent
  • Unit sales accounted for 15 percent of the Company’s gross sales growth (this includes 11 percent from acquired businesses); price increases accounted for 6 percent
  • Generated cash from operating activities of almost $137 million

“The employees of Universal did a great job managing our business through a challenging lumber market that pressured margins for our products at different periods throughout the year,” said CEO Matthew J. Missad. In 2017, average prices for framing lumber and southern yellow pine rose 20 percent and 7 percent, respectively, over 2016, but fell during the Company’s peak selling times, reducing margins on certain products.

“We experienced terrific growth with new products in 2017, making significant inroads in the Retail market with new products such as our UFP-Edge profile lines and several product introductions in our Deckorators line,” Matt added. For the year, new product sales grew 23.5 percent to $418.4 million, compared to $338.6 million in 2016. “Despite the challenges that remain in the lumber market, we are optimistic about our strategic initiatives for 2018 and beyond. To support those initiatives, we are investing a portion of the income we will save from the tax reform bill in capital expenditures.”

By market, the Company reported the following 2017 results.

Retail

  • Fourth Quarter: $330.6 million in gross sales, up 20 percent over the fourth quarter of 2016. Unit sales contributed 13 percent of the growth; price increases accounted for 7 percent. Acquisitions accounted for 10 percent of the increase.
  • Full Year: $1.49 billion in gross sales, up 15 percent over 2016, led by a 10 percent increase in unit sales and a 5 percent increase in selling prices. Acquisitions contributed 7 percent of the sales growth.  Sales to this market were affected by a record hurricane season, which resulted in a temporary increase in sales of low-margin commodity products. 

Construction

  • Fourth Quarter: $305.8 million in gross sales, up 10 percent over the fourth quarter of 2016, mostly due to price increases as a result of the lumber market. Unit sales to manufactured housing customers grew 4 percent during the period, while sales to residential and commercial construction customers fell 2 percent and 3 percent, respectively. Residential construction sales were likely affected by project delays associated with higher lumber prices.
  • Full Year: $1.18 billion in gross sales, up 16 percent over the previous year, driven by a 7 percent increase in unit sales and a 9 percent increase in prices.  Residential construction unit sales grew 7 percent, and unit sales to manufactured housing customers rose 9 percent over 2016.

Industrial

  • Fourth Quarter: $345.1 million in gross sales, up 9 percent over the fourth quarter of 2016; price increases accounted for 7 percent of the growth while unit increases accounted for 2 percent.
  • Full Year: $1.33 billion in gross sales, up 35 percent over the previous year. Unit sales increased 29 percent, primarily due to the Company’s acquisition of idX Corporation in September of 2016. Excluding acquisitions, the Company’s organic unit sales grew 4 percent over 2016.

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 Friday, February 23, 2018. 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. Use conference pass code 4866126. The conference call will be available simultaneously and in its entirety to all interested investors and news media through a webcast at http://www.ufpi.com. A replay of the call will be available through March 25, 2018, 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.

Lynn Afendoulis
Director, Corporate Communications
(616) 365-1502



CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (UNAUDITED)  
FOR THE THREE AND TWELVE MONTHS ENDED  
DECEMBER 2017/2016  
    Quarter Period       Year to Date      
(In thousands, except per share data)     2017           2016           2017           2016        
                                   
                                   
                                   
NET SALES   $   966,091     100 %   $   859,584     100 %   $   3,941,182     100 %   $   3,240,493     100.0 %  
                                   
COST OF GOODS SOLD        836,932       86.6         737,274       85.8         3,398,356       86.2         2,765,903       85.4    
                                   
GROSS PROFIT       129,159       13.4         122,310       14.2         542,826       13.8         474,590       14.6    
                                   
SELLING,  GENERAL  AND                                   
  ADMINISTRATIVE  EXPENSES       87,751       9.1         87,000       10.1         362,220       9.2         310,152       9.6    
NET GAIN ON DISPOSITION OF ASSETS       (70 )     -          -       -          (863 )     -          -       -     
                                   
EARNINGS FROM OPERATIONS       41,478       4.3         35,310       4.1         181,469       4.6         164,438       5.1    
                                   
OTHER EXPENSE, NET       1,203       0.1         1,164       0.1         5,462       0.1         3,767       0.1    
                                   
EARNINGS BEFORE INCOME TAXES       40,275       4.2         34,146       4.0         176,007       4.5         160,671       5.0    
                                   
INCOME TAXES       7,113       0.7         11,905       1.4         51,967       1.3         55,174       1.7    
                                   
NET EARNINGS       33,162       3.4         22,241       2.6         124,040       3.1         105,497       3.3    
                                   
LESS NET EARNINGS ATTRIBUTABLE TO                                  
  NONCONTROLLING INTEREST        (2,047 )     (0.2 )       (1,491 )     (0.2 )       (4,528 )     (0.1 )       (4,318 )     (0.1 )  
                                   
NET EARNINGS ATTRIBUTABLE TO                                  
  CONTROLLING INTEREST   $   31,115       3.2     $   20,750       2.4     $   119,512       3.0     $   101,179       3.1    
                                   
                                   
EARNINGS PER SHARE - BASIC    $   0.51         $   0.34         $   1.95         $   1.66        
                                   
EARNINGS PER SHARE - DILUTED   $   0.51         $   0.34         $   1.94         $   1.65        
                                   
COMPREHENSIVE INCOME       33,152             21,058             130,170             102,794        
                                   
LESS COMPREHENSIVE INCOME ATTRIBUTABLE                                  
  TO NONCONTROLLING INTEREST       (1,022 )           (1,084 )           (4,884 )           (2,660 )      
                                   
COMPREHENSIVE INCOME                                  
  ATTRIBUTABLE TO CONTROLLING INTEREST   $   32,130         $   19,974         $   125,286         $   100,134        
                                   
SUPPLEMENTAL SALES DATA                                  
    Quarter Period   Year to Date  
Market Classification     2017           2016     %     2017           2016     %  
Retail   $   330,613         $   276,109     20 %   $   1,493,366         $   1,294,273     15 %  
Industrial       345,134             317,932     9 %       1,334,082             984,968     35 %  
Construction       305,758             277,742     10 %       1,178,755             1,018,136     16 %  
Total Gross Sales       981,505             871,783     13 %       4,006,203             3,297,377     21 %  
Sales Allowances       (15,414 )           (12,199 )   -26 %       (65,021 )           (56,884 )   -14 %  
Total Net Sales   $   966,091         $   859,584     12 %   $   3,941,182         $   3,240,493     22 %  
                                   
                                   

 

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)  
DECEMBER 2017/2016  
                               
(In thousands)                          
ASSETS     2017     2016   LIABILITIES AND EQUITY     2017     2016  
                               
CURRENT ASSETS           CURRENT LIABILITIES          
  Cash and cash equivalents   $   28,339   $   34,091     Cash overdraft   $   25,851   $   19,761  
  Restricted cash       477       398     Accounts payable       140,106       124,660  
  Investments       11,269       10,348     Accrued liabilities       135,960       124,722  
  Accounts receivable       327,751       282,253     Current portion of debt       1,329       2,634  
  Inventories       460,308       397,227                  
  Other current assets       35,343       32,121                  
                               
TOTAL CURRENT ASSETS       863,487       756,438   TOTAL CURRENT LIABILITIES       303,246       271,777  
                               
OTHER ASSETS       17,592       10,163   LONG-TERM DEBT AND          
INTANGIBLE ASSETS, NET       254,969       227,606     CAPITAL LEASE OBLIGATIONS       144,674       109,059  
PROPERTY, PLANT           OTHER LIABILITIES       42,734       50,756  
  AND EQUIPMENT,  NET       328,629       297,851   EQUITY       974,023       860,466  
                               
                               
TOTAL ASSETS   $   1,464,677   $   1,292,058   TOTAL LIABILITIES AND EQUITY   $   1,464,677   $   1,292,058  
                               
                               

 

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)  
FOR THE TWELVE MONTHS ENDED  
DECEMBER 2017/2016  
(In thousands)         2017           2016    
CASH FLOWS FROM OPERATING ACTIVITIES:              
Net earnings       $   124,040         $   105,497    
Adjustments to reconcile net earnings to net cash from operating activities:              
                     
  Depreciation           48,536             40,823    
  Amortization of intangibles         4,860             2,795    
  Expense associated with share-based and grant compensation arrangements       3,805             2,335    
  Deferred income taxes (credit)         (8,629 )           2,464    
  Equity in earnings of investee         (25 )           (267 )  
  Net gain on disposition of assets         (863 )           -    
  Changes in:                  
  Accounts receivable         (30,787 )           (5,119 )  
  Inventories           (49,262 )           (3,245 )  
  Accounts payable and cash overdraft         21,159             11,259    
  Accrued liabilities and other         23,749             15,978    
  NET CASH FROM OPERATING ACTIVITIES       136,583             172,520    
                     
CASH FLOWS FROM INVESTING ACTIVITIES:              
Purchases of property, plant, and equipment         (71,116 )           (53,762 )  
Proceeds from sale of property, plant and equipment       2,919             3,126    
Acquisitions and purchase of noncontrolling interest, net of cash received       (60,587 )           (80,077 )  
Repayments of debt of acquiree         -             (92,830 )  
Purchase and dissolution of remaining noncontrolling interest of subsidiary       -             (892 )  
Advances of notes receivable         (234 )           (6,012 )  
Collections of notes receivable and related interest       1,509             7,899    
Purchases of investments         (13,518 )           (5,666 )  
Proceeds from sale of investments         5,103             2,568    
Other             (1,735 )           (2,011 )  
  NET CASH USED IN INVESTING ACTIVITIES       (137,659 )           (227,657 )  
                     
CASH FLOWS FROM FINANCING ACTIVITIES:              
Borrowings under revolving credit facilities         758,287             131,002    
Repayments under revolving credit facilities         (722,725 )           (107,294 )  
Borrowings of debt           8,525             -    
Repayments of debt           (13,347 )           -    
Proceeds from issuance of common stock         661             536    
Distributions to noncontrolling interest         (4,032 )           (3,280 )  
Dividends paid to shareholders         (19,607 )           (17,680 )  
Repurchase of common stock         (12,977 )           -    
Other             (32 )           (73 )  
  NET CASH FROM (USED IN) FINANCING ACTIVITIES       (5,247 )           3,211    
                     
Effect of exchange rate changes on cash         650             (1,927 )  
NET CHANGE IN CASH AND CASH EQUIVALENTS       (5,673 )           (53,853 )  
                     
ALL CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD       34,489             88,342    
                     
ALL CASH AND CASH EQUIVALENTS, END OF PERIOD   $   28,816         $   34,489    
                     
Reconciliation of cash and cash equivalents and restricted cash:              
Cash and cash equivalents, beginning of period     $   34,091         $   87,756    
Restricted cash, beginning of period         398             586    
All cash and cash equivalents, beginning of period   $   34,489         $   88,342    
                     
Cash and cash equivalents, end of period     $   28,339         $   34,091    
Restricted cash, end of period         477             398    
All cash and cash equivalents, end of period     $   28,816         $   34,489    
                     
                     

 

EBITDA RECONCILIATION (UNAUDITED)  
FOR THE THREE AND TWELVE MONTHS ENDED  
DECEMBER 2017/2016  
    Quarter Period Year to Date  
(In thousands)   2017 2016 2017 2016  
Net Earnings Attributable to Controlling Interest     31,115       20,750     119,512       101,179    
Interest  Expense     1,393       1,301     6,218       4,575    
Taxes     7,112       11,905     51,967       55,174    
Expense associated with Share-Based Compensation Arrangements     748       663     3,618       2,336    
Net Earnings Attributable to Noncontrolling Interest     2,048       1,490     4,528       4,318    
Net Gain on Disposition of Asset     (70 )     -     (863 )     -    
      42,346       36,109     184,980       167,582    
Depreciation Expense     12,881       11,809     48,536       40,823    
Amortization of Intangibles     1,311       926     4,860       2,795    
EBITDA     56,538       48,844     238,376       211,200    
                     

 

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