Universal Forest Products, Inc. Reports 1st Quarter Sales and Earnings Decline
Results Reflect Weak Economy, Continued Drop in Housing Starts, and Lumber Prices Near 17-Year Lows
Company ''Strongly Positioned'' for Future; Continues to Hold or Grow Share in Its Markets
GRAND RAPIDS, Mich.--(BUSINESS WIRE)--April 16, 2008--Universal Forest Products, Inc. (Nasdaq: UFPI) today announced its first quarter results, including net sales of $489.5 million, down from $549.0 million for the first quarter of 2007. The Company lost $4.6 million in the quarter, compared to net earnings of $3.9 million for the same period last year. The results reflect the continued decline in the housing market, a depressed lumber market and weak consumer spending.
"Certainly, we're disappointed with these results, but we also recognize that our performance was affected by challenging conditions in our economy and markets," said President and CEO Michael B. Glenn. The results also reflect adverse weather conditions that extended into March this year. Glenn added that, historically, extended adverse winter weather has pushed demand for the Company's products into the second quarter.
"We're focused on things we can control, such as diversification in our business, ensuring our organization is sized to our business opportunities, growing market share, and creating positive, lasting change through continuous improvement," Glenn said. "Our balance sheet is strong, we have a dynamic business model and, thanks to the hard work of fiercely determined employees, we're strongly positioned in our markets today and poised for growth when the strength of the economy and our markets returns."
Also impacting results was a lumber market that traded near 17-year lows in the quarter, with an average composite price 15% lower than the same period of 2007 (which was 24% lower than the previous year). Lumber prices affect the Company's selling prices.
By market, Universal posted the following gross sales results for the first quarter:
Do-It-Yourself/retail: $172.6 million, a decrease of 11.7% from the same period of 2007. Consumer spending on home improvement remains weak. While the Company anticipates that this market will remain soft throughout 2008, it expects to maintain strong market share driven, in part, by its vast portfolio of consumer products and lumber products that make Universal a preferred supplier to its nationwide customer base.
Industrial packaging/components: $140.7 million, an increase of 5.1% over 2007. This robust market remains a bright spot as unit sales for the quarter increased 12%. Universal expects continued growth for the year in the industrial business, as a result of market share gains. The Company also expects to grow its concrete forming business, which it launched in the second quarter of 2007.
Site-built construction: $108.9 million, a decrease of 21.3% from the same period of 2007. These results are in view of a 39% decline in single-family housing starts year-to-date, March 2008 from March 2007. However, multifamily construction starts and non-residential construction grew in the quarter, confirming the Company's strategy to focus on growth in those areas in order to further balance its business in this market. The Company believes its efforts will drive modest share gains in this market in 2008.
Manufactured housing: $76.3 million, a decrease of 14.2% from 2007. While HUD-code home sales saw a slight increase, sales in modular home construction declined. For 2008, Universal expects to maintain its leading market share in manufactured housing, and believes passage of a lending reform package would have a positive impact on this market.
The Company's overall profitability in the quarter was affected by a decline in unit sales as well as ongoing, intense price pressure that negatively impacted margins, particularly on sales to the site-built construction market.
OUTLOOK
In February, the Company announced the following 2008 targets based on a number of assumptions about markets and economic conditions: net sales of between $2.45 billion and $2.55 billion, and net earnings of between $22 million and $27 million. The Company considers and re-evaluates its targets and assumptions following the end of each quarter in relation to the current business climate, prevailing market conditions, and other relevant factors. Following such a review in the first quarter, the Company did not change its annual targets.
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, April 17, 2008. The call will be hosted by Executive Chairman William G. Currie, President and CEO Michael B. Glenn, and CFO Michael Cole, and will be available for analysts and institutional investors domestically at (800) 901-5218 or internationally at (617) 786-4511. Use conference pass code #13564307. The conference call will be available simultaneously and in its entirety to all interested investors and news media through a Web cast at http://www.ufpi.com. A replay of the call will be available through Friday, May 16, 2008, domestically at (888) 286-8010 and internationally at (617) 801-6888. Use replay pass code number 84550711.
UNIVERSAL FOREST PRODUCTS
Headquartered in Grand Rapids, MI, with approximately 100 facilities throughout North America, Universal Forest Products engineers, manufactures and markets wood and wood-alternative products for DIY/ retail home centers, structural lumber products for the manufactured housing industry, engineered wood components for the site-built construction market, and specialty wood packaging and components for various industries. The Company also provides framing services for the site-built market, and wood forms for concrete construction. For 2007, the Company reported sales of more than $2.5 billion. For information about Universal Forest Products, visit www.ufpi.com.
Please be aware that: Any statements included in this press release that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are based on the beliefs of the Company's management as well as on assumptions made by, and information currently available to, the Company at the time such statements were made. The Company does not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events 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: Adverse lumber market trends, competitive activity, negative economic trends, government regulations and weather. Certain of these 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.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 2008/2007
Quarter Period
(In thousands, except per share
data) 2008 2007
NET SALES $489,512 100% $549,038 100%
COST OF GOODS SOLD 434,692 88.8 475,518 86.6
--------- ---------
GROSS PROFIT 54,820 11.2 73,520 13.4
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 59,351 12.1 63,458 11.6
--------- ---------
EARNINGS (LOSS) FROM OPERATIONS (4,531) (0.9) 10,062 1.8
Interest expense 3,594 0.7 4,324 0.8
Interest income (373) (0.1) (582) (0.1)
--------- ---------
3,221 0.7 3,742 0.7
--------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST (7,752) (1.6) 6,320 1.2
INCOME TAXES (3,350) (0.7) 2,068 0.4
--------- ---------
EARNINGS (LOSS) BEFORE
MINORITY INTEREST (4,402) (0.9) 4,252 0.8
MINORITY INTEREST (174) - (366) (0.1)
--------- ---------
NET EARNINGS (LOSS) $(4,576) (0.9) $3,886 0.7
========= =========
EARNINGS (LOSS) PER SHARE - BASIC $(0.24) $0.20
EARNINGS (LOSS) PER SHARE - DILUTED $(0.24) $0.20
WEIGHTED AVERAGE SHARES
OUTSTANDING FOR BASIC EARNINGS
(LOSS) 18,996 18,985
WEIGHTED AVERAGE SHARES
OUTSTANDING FOR DILUTED
EARNINGS (LOSS) 18,996 19,409
SUPPLEMENTAL SALES DATA
------------------------------------
Quarter Period
-------------------------------
Market Classification 2008 % 2007 %
------------------------------------ --------- ----- --------- -----
Do-It-Yourself/Retail $172,646 35% $195,601 35%
Site-Built Construction 108,899 22% 138,419 25%
Industrial 140,657 28% 133,790 24%
Manufactured Housing 76,315 15% 88,898 16%
--------- ---------
Total Gross Sales 498,517 100% 556,708 100%
Sales Allowances (9,005) (7,670)
--------- ---------
Total Net Sales $489,512 $549,038
========= =========
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 2008/2007
Year to Date
(In thousands, except per share data) 2008 2007
NET SALES $489,512 100% $549,038 100%
COST OF GOODS SOLD 434,692 88.8 475,518 86.6
---------- ---------
GROSS PROFIT 54,820 11.2 73,520 13.4
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 59,351 12.1 63,458 11.6
---------- ---------
EARNINGS (LOSS) FROM OPERATIONS (4,531) (0.9) 10,062 1.8
Interest expense 3,594 0.7 4,324 0.8
Interest income (373) (0.1) (582) (0.1)
---------- ---------
3,221 0.7 3,742 0.7
---------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES
AND MINORITY INTEREST (7,752) (1.6) 6,320 1.2
INCOME TAXES (3,350) (0.7) 2,068 0.4
---------- ---------
EARNINGS (LOSS) BEFORE
MINORITY INTEREST (4,402) (0.9) 4,252 0.8
MINORITY INTEREST (174) - (366) (0.1)
---------- ---------
NET EARNINGS (LOSS) $(4,576) (0.9) $3,886 0.7
========== =========
EARNINGS (LOSS) PER SHARE - BASIC $(0.24) $0.20
EARNINGS (LOSS) PER SHARE - DILUTED $(0.24) $0.20
WEIGHTED AVERAGE SHARES
OUTSTANDING FOR BASIC EARNINGS
(LOSS) 18,996 18,985
WEIGHTED AVERAGE SHARES
OUTSTANDING FOR DILUTED
EARNINGS (LOSS) 18,996 19,409
SUPPLEMENTAL SALES DATA
-------------------------------------
Year to Date
--------------------------------
Market Classification 2008 % 2007 %
------------------------------------- ---------- ----- --------- -----
Do-It-Yourself/Retail $172,646 35% $195,601 35%
Site-Built Construction 108,899 22% 138,419 25%
Industrial 140,657 28% 133,790 24%
Manufactured Housing 76,315 15% 88,898 16%
---------- ---------
Total Gross Sales 498,517 100% 556,708 100%
Sales Allowances (9,005) (7,670)
---------- ---------
Total Net Sales $489,512 $549,038
========== =========
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 2008/2007
LIABILITIES AND
(In thousands) SHAREHOLDERS'
ASSETS 2008 2007 EQUITY 2008 2007
CURRENT
CURRENT ASSETS LIABILITIES
Cash and cash Accounts
equivalents $33,584 $44,024 payable $103,198 $119,006
Accounts Accrued
receivable 161,896 195,617 liabilities 77,276 72,462
Current
portion of
Inventories 260,292 285,753 long-term
debt and
Assets held capital
for sale 10,412 17,115 leases 1,012 1,223
Other current
assets 38,003 22,192
-------- ---------- -------- ----------
TOTAL CURRENT TOTAL CURRENT
ASSETS 504,187 564,701 LIABILITIES 181,486 192,691
OTHER ASSETS 7,747 7,881 LONG-TERM DEBT
INTANGIBLE AND CAPITAL
ASSETS, NET LEASE
182,460 186,358 OBLIGATIONS,
PROPERTY, less current
PLANT AND portion 194,277 278,198
EQUIPMENT, OTHER
NET 267,048 287,490 LIABILITIES 52,682 51,199
SHAREHOLDERS'
EQUITY 532,997 524,342
-------- ---------- -------- ----------
TOTAL
LIABILITIES
AND
SHAREHOLDERS'
TOTAL ASSETS $961,442 $1,046,430 EQUITY $961,442 $1,046,430
======== ========== ======== ==========
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 2008/2007
(In thousands) 2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $(4,576) $3,886
Adjustments to reconcile net earnings to net cash
from operating activities:
Depreciation 9,601 9,146
Amortization of intangibles 2,280 2,367
Expense associated with share-based
compensation arrangements 250 127
Expense associated with stock grant plans 67 122
Deferred income taxes (85) (50)
Minority interest 174 366
Net loss on sale or impairment of property,
plant and equipment 262 23
Changes in:
Accounts receivable (17,053) (33,439)
Inventories (21,954) (23,321)
Accounts payable 18,600 24,891
Accrued liabilities and other 7,077 (11,249)
Excess tax benefits from share-based
compensation arrangements (26) (437)
-------- --------
NET CASH FROM OPERATING ACTIVITIES (5,383) (27,568)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment (5,612) (8,638)
Acquisitions, net of cash received (14,100) (54,770)
Proceeds from sale of property, plant and equipment 26,660 267
Advances on notes receivable (815) -
Collection of notes receivable 332 109
Other, net 16 103
-------- --------
NET CASH FROM INVESTING ACTIVITIES 6,481 (62,929)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving credit
facilities (11,271) 106,488
Repayment of long-term debt (104) (24,525)
Proceeds from issuance of common stock 389 1,649
Distributions to minority shareholder (146) (371)
Excess tax benefits from share-based compensation
arrangements 26 437
Other, net (13) (265)
-------- --------
NET CASH FROM FINANCING ACTIVITIES (11,119) 83,413
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (10,021) (7,084)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 43,605 51,108
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $33,584 $44,024
======== ========
CONTACT: Universal Forest Products, Inc.
Lynn Afendoulis, 616-365-1502
Director, Corporate Communications
SOURCE: Universal Forest Products