UFPI reports record third-quarter earnings

- Net earnings up 26 percent, unit sales up 7 percent -

GRAND RAPIDS, Mich., Oct. 23, 2019 (GLOBE NEWSWIRE) -- Universal Forest Products, Inc. (Nasdaq: UFPI), soon to be known as UFP Industries, Inc., today announced net sales of $1.16 billion and record net earnings attributable to controlling interests of $51.9 million, or 84 cents per diluted share, for the quarter ended September 28, 2019.

“Our record results are the reflection of the hard work of our employees and the successful execution of our strategies to grow and improve our business. Our growth in organic unit sales was very strong, and we continue to successfully add new, value-added products and services to our offerings that are improving our profitabilty,” said CEO Matthew J. Missad.

The Company’s mix of value-added sales relative to commodity sales improved from 62.1 percent in the third quarter of 2018 to 67.6 percent in the third quarter of 2019, and new product sales grew 7 percent over the same period of 2018. Although lower lumber pricing affected the Company’s third-quarter net sales, unit sales increased 7 percent over the same period of last year, driven mostly by organic sales growth. During the third quarter, the Company acquired Hartford, Wisconsin-based Pallet USA and Bonner, Montana-based Northwest Painting, Inc., expanding its value-added offerings and market presence in the Midwest and Northwest.

“While we are pleased that so many of our operations are performing so well, we know we have operations that can do much better given our culture of continuous improvement, and we have been making changes to improve their performance. This summer, we announced a new organizational structure beginning January 1, 2020, that will allow for a more specialized and consistent sales approach, more efficient use of resources and capital, and quicker introduction of new, value-added products and services. I’m happy to say we have already made great progress toward the reorganization, and our employees are very excited about the new UFP Industries and the new business and career opportunities that are being created. This truly is an exciting time for our Company.”

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

• Operating profit of $70.5 million was up 24 percent and net earnings of $51.9 million was up 26 percent
• EBITDA of $89.7 million was up 23 percent, far exceeding the Company’s unit sales increase of 7 percent
• Unit sales grew 7 percent; organic sales accounted for 6 percent of the growth while acquisitions added 1 percent 
• New product sales were $142.9 million, up 7 percent
• Net sales of $1.16 billion represented a 4 percent decrease; lower lumber prices contributed significantly to the gross sales reduction, as selling prices were down by 11 percent
• SG&A, excluding bonus expense, as a percentage of gross profit fell from 55.4 percent in the third quarter of 2018 to 49.8 percent during the third quarter of 2019

By market, the Company reported the following third-quarter 2019 results.

Retail

• $437 million in gross sales, down 1 percent compared to the third quarter of 2018. A unit sales increase of 10 percent was offset by selling prices that were 11 percent lower. Organic growth was responsible for all of the unit sales increase and was largely driven by robust sales of Deckorators decking and deck accessories and new product sales.

Industrial

·$332.5 million in gross sales, down 6 percent from the third quarter of 2018. A unit sales increase of 4 percent was offset by lower selling prices of 10 percent. Organic growth contributed 2 percent of the unit sales increase; acquisitions were responsible for 2 percent. The Company’s focus on improving its product mix has resulted in more value-added sales and fewer commodity sales, improving gross profits.

Construction

·$414.4 million in gross sales, down 5 percent compared to the third quarter of 2018, due to a 13 percent decrease in selling prices and an 8 percent increase in overall unit sales. Unit sales growth was entirely organic, with commercial sales growing 15 percent, residential housing sales growing 6 percent and manufactured housing sales growing 1 percent.

CONFERENCE CALL

Universal Forest Products, soon to be known as UFP Industries, Inc., will conduct a conference call to discuss information included in this news release and related matters at 8:30 a.m. ET on Thursday, October 24, 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 4270679. 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 November 24, 2019, at 855-859-2056 or 404-537-3406.

UNIVERSAL FOREST PRODUCTS, INC.

Universal Forest Products, Inc., soon to be known as UFP Industries, 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, 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 STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 2019/2018
	Quarter Period														Year to Date
(In thousands, except per share data)			2019							2018							2019							2018
NET SALES		$	1,163,026			100	%		$	1,212,702			100	%		$	3,417,969			100	%		$	3,500,999			100.0	%
COST OF GOODS SOLD			975,756			83.9				1,054,029			86.9				2,889,706			84.5				3,045,748			87.0
GROSS PROFIT			187,270			16.1				158,673			13.1				528,263			15.5				455,251			13.0
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES			115,958			10.0				102,292			8.4				334,165			9.8				300,292			8.6
FOREIGN CURRENCY EXCHANGE (GAIN) LOSS			(306	)		-0				412			-0				118			-0				213			-0
NET (GAIN) LOSS ON DISPOSITION OF ASSETS			1,151			0.1				(1,022	)		(0.1	)			830			-0				(7,079	)		(0.2	)
EARNINGS FROM OPERATIONS			70,467			6.1				56,991			4.7				193,150			5.7				161,825			4.6
OTHER EXPENSE, NET			1,490			0.1				1,734			0.1				4,082			0.1				4,862			0.1
EARNINGS BEFORE INCOME TAXES			68,977			5.9				55,257			4.6				189,068			5.5				156,963			4.5
INCOME TAXES			16,396			1.4				13,189			1.1				45,340			1.3				36,183			1.0
NET EARNINGS			52,581			4.5				42,068			3.5				143,728			4.2				120,780			3.4
LESS NET EARNINGS ATTRIBUTABLE TO
NONCONTROLLING INTEREST			(722	)		(0.1	)			(849	)		(0.1	)			(1,814	)		(0.1	)			(2,684	)		(0.1	)
NET EARNINGS ATTRIBUTABLE TO
CONTROLLING INTEREST		$	51,859			4.5			$	41,219			3.4			$	141,914			4.2			$	118,096			3.4
EARNINGS PER SHARE - BASIC		$	0.84						$	0.67						$	2.30						$	1.91
EARNINGS PER SHARE - DILUTED		$	0.84						$	0.66						$	2.30						$	1.91
SUPPLEMENTAL DATA
		Quarter Period														Year to Date
Sales by Market Classification			2019							2018			%				2019							2018			%
Retail		$	437,092						$	441,916			-1	%		$	1,315,543						$	1,356,920			-3	%
Industrial			332,537							353,660			-6	%			1,019,535							986,410			3	%
Construction			414,401							438,115			-5	%			1,145,064							1,222,395			-6	%
Total Gross Sales			1,184,030							1,233,691			-4	%			3,480,142							3,565,725			-2	%
Sales Allowances			(21,004	)						(20,989	)		-0	%			(62,173	)						(64,726	)		4	%
Total Net Sales		$	1,163,026						$	1,212,702			-4	%		$	3,417,969						$	3,500,999			-2	%
			2019			% of Sales				2018			% of Sales				2019			% of Sales				2018			% of Sales
SG&A, Excluding Bonus Expense		$	93,344			8.0			$	87,967			7.3			$	280,898			8.2			$	262,382			7.5
Bonus Expense			22,614			1.9				14,325			1.2				53,267			1.6				37,910			1.1
Total SG&A		$	115,958			10.0			$	102,292			8.4			$	334,165			9.8			$	300,292			8.6
SG&A, Excluding Bonus Expense, as a Percentage of Gross Profit			49.8	%						55.4	%						53.2	%						57.6	%

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 2019/2018
(In thousands)
ASSETS					2019			2018		LIABILITIES AND EQUITY					2019			2018
CURRENT ASSETS										CURRENT LIABILITIES
	Cash and cash equivalents			$	64,498		$	26,327			Cash overdraft			$	-		$	31,115
	Restricted cash				729			1,024			Accounts payable				180,767			175,912
	Investments				17,028			15,809			Accrued liabilities				204,529			151,102
	Accounts receivable				474,648			454,935			Current portion of debt				152			149
	Inventories				479,356			510,057
	Other current assets				55,845			38,699
TOTAL CURRENT ASSETS					1,092,104			1,046,851		TOTAL CURRENT LIABILITIES					385,448			358,278
OTHER ASSETS					116,887			22,345		LONG-TERM DEBT AND
INTANGIBLE ASSETS, NET					286,627			261,666			CAPITAL LEASE OBLIGATIONS				162,853			186,539
PROPERTY, PLANT										OTHER LIABILITIES					103,221			40,630
	AND EQUIPMENT, NET				385,007			346,309		EQUITY					1,229,103			1,091,724
TOTAL ASSETS				$	1,880,625		$	1,677,171		TOTAL LIABILITIES AND EQUITY				$	1,880,625		$	1,677,171

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 2019/2018
(In thousands)						2019				2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings					$	143,728			$	120,780
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation						44,652				40,490
Amortization of intangibles						4,690				4,274
Expense associated with share-based and grant compensation arrangements						3,105				2,762
Deferred income taxes credit						(367	)			(583	)
Unrealized gain on investment						(1,611	)			-
Net gain on disposition of assets						830				(7,079	)
Changes in:
Accounts receivable						(127,841	)			(121,067	)
Inventories						80,178				(39,448	)
Accounts payable and cash overdraft						14,293				38,611
Accrued liabilities and other						36,423				21,361
NET CASH FROM OPERATING ACTIVITIES						198,080				60,101
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment						(66,338	)			(74,541	)
Proceeds from sale of property, plant and equipment						1,180				37,612
Acquisitions and purchase of noncontrolling interest, net of cash received						(38,710	)			(38,963	)
Purchases of investments						(6,475	)			(12,401	)
Proceeds from sale of investments						4,159				3,298
Other						199				(620	)
NET CASH USED IN INVESTING ACTIVITIES						(105,985	)			(85,615	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities						421,464				636,798
Repayments under revolving credit facilities						(460,537	)			(668,941	)
Borrowings of debt						-				927
Repayments of debt						(3,099	)			(5,511	)
Issuance of long-term debt						-				75,000
Proceeds from issuance of common stock						812				756
Distributions to noncontrolling interest						(1,634	)			(2,239	)
Dividends paid to shareholders						(12,270	)			(11,090	)
Repurchase of common stock						-				(1,843	)
Other						41				(55	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES						(55,223	)			23,802
Effect of exchange rate changes on cash						157				247
NET CHANGE IN CASH AND CASH EQUIVALENTS						37,029				(1,465	)
ALL CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD						28,198				28,816
ALL CASH AND CASH EQUIVALENTS, END OF PERIOD					$	65,227			$	27,351
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					$	64,498			$	26,327
Restricted cash, end of period						729				1,024
All cash and cash equivalents, end of period					$	65,227			$	27,351

EBITDA RECONCILIATION (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 2019/2018
		Quarter Period								Year to Date
(In thousands)			2019				2018				2019				2018
Net earnings		$	52,581			$	42,068			$	143,728			$	120,780
Interest expense			1,900				1,945				6,767				5,971
Interest and investment income			(317	)			(211	)			(1,074	)			(1,109	)
Unrealized gain on investments			(93	)			-				(1,611	)			-
Net (gain) loss on disposition of assets			1,151				(1,022	)			830				(7,079	)
Income taxes			16,396				13,189				45,340				36,183
Expense associated with share-based compensation arrangements			896				838				3,105				2,762
Depreciation expense			15,452				14,346				44,652				40,490
Amortization of intangibles			1,744				1,571				4,690				4,274
EBITDA		$	89,710			$	72,724			$	246,427			$	202,272

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 - SEPTEMBER 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		83.9				85.6				86.9
GROSS PROFIT		16.1				14.4				13.1
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		9.9				8.9				8.5
NET GAIN ON DISPOSITION AND IMPAIRMENT OF ASSETS		0.1				0.1				(0.1	)
EARNINGS FROM OPERATIONS		6.1				5.4				4.7
OTHER EXPENSE, NET		0.1				0.1				0.1
EARNINGS BEFORE INCOME TAXES		5.9				5.3				4.6
INCOME TAXES		1.4				1.3				1.1
NET EARNINGS		4.5				4.1				3.5
LESS NET EARNINGS ATTRIBUTABLE TO
NONCONTROLLING INTEREST		(0.1	)			(0.1	)			(0.1	)
NET EARNINGS ATTRIBUTABLE TO
CONTROLLING INTEREST		4.5		%		4.0		%		3.4		%
Note: Actual percentages are calculated and may not sum to total due to rounding.
2018 NET SALES	$	1,212,702
2019 SELL PRICE DECLINE		11.00		%
DECREASE IN 2019 NET SALES DUE TO SELL PRICE DECLINE	$	133,397
ACTUAL 2019 NET SALES		1,163,026
ADJUSTED 2019 NET SALES	$	1,296,423
ACTUAL 2019 COST OF GOODS SOLD	$	975,756
PLUS DIFFERENCE IN NET SALES (ABOVE)		133,397
ADJUSTED 2019 COST OF GOODS SOLD	$	1,109,153

Source: Universal Forest Products, Inc.