Universal Forest Products, Inc. Reports a 72% Increase in Net Earnings and a 24% Increase in Net Sales for the 1st Quarter
GRAND RAPIDS, Mich., Apr 17, 2006 (BUSINESS WIRE) -- Universal Forest Products, Inc. (Nasdaq:UFPI) today announced a robust first quarter marked by increases of 72% in net earnings and 24% in net sales over 2005.
First quarter 2006 net earnings were $15.9 million, an increase of 71.9% over reported results for the first quarter of 2005. Net sales for the quarter were $665.6 million, a 23.9% increase over net sales of $537.2 million for the same period of 2005.
In addition, the company adopted Financial Accounting Standards Board, Statement 123(R), Share-Based Payment (requiring the expensing of share-based compensation arrangements), which had a nominal affect on the quarter.
"We delivered these powerful results by staying true to our business strategy, focusing on exceeding customer expectations and driving costs out of our operations," said CEO William G. Currie. "I'm proud of a team that continually meets and exceeds its goals."
Currie pointed to an innovation program established in 2005 by President and COO Michael B. Glenn that is having a strong impact on the Company's results. The program includes weekly calls with the plants to hear innovation ideas in all areas of operations, sales and administration, which then are shared company-wide. Plants also are asked to enumerate innovation ideas from other plants that they have adopted. A reward system provides semi-annual monetary awards for the best ideas presented in the previous six months.
"The program has provided the framework for great advances in doing what we do better and more cost-effectively," Glenn said. "The entire company, from the CEO's office to the production floor, is focused on improving profitability by driving unnecessary costs out of all aspects of our operations."
Universal achieved healthy increases in each of its markets and posted the following sales results:
-- $214.1 million in D-I-Y/retail, an increase of 20.0% over 2005;
-- $210.2 million in site-built construction, an increase of 39.3% over 2005;
-- $136.5 million in industrial, an increase of 21.6% over 2005; and
-- $104.8 million in manufactured/modular housing, an increase of 9.7% over 2005.
The commodity lumber market had little overall impact on the Company's sales. A mild winter helped extend the building and home improvement seasons, driving some of the increased sales.
"We're seeing solid increases in each of our markets and continued double-digit increases in our site-built and industrial markets," Glenn said. "As we promised, we are realizing growth with our existing D-I-Y customers - thanks, in part, to exciting new products - and we've added new customers as a result of acquisitions we completed last year."
Currie and Glenn said Universal continues to be well-positioned to gain market share in the highly fragmented site-built construction and industrial markets and to grow its manufactured housing business through proprietary products and a focus on modular customers. Universal also is adding customers and gaining market share in the Do-It-Yourself/retail market by aggressively pursing new business and by executing its plan to introduce exciting products through the Company's new Consumer Products Division.
OUTLOOK
In light of the first quarter results, the Company has raised its annual target for net earnings growth to 15% to 20% (from 10% to 15%) and reaffirms its unit sales targets of 10% to 15% growth in 2006 with the following key assumptions:
-- Modest increases in interest rates will be mitigated by favorable demographic trends and economic conditions resulting in a continued strong site-built construction market, although not as strong as 2005.
-- A growing trend among manufactured housing producers to switch to modular housing, which favors use of many Universal proprietary products.
-- A stable D-I-Y/retail market with opportunities for growth with existing customers and increased opportunities for new products, customers and market share through the Company's new Consumer Products Division.
-- Continued opportunities for market share gains in both site-built construction and industrial markets.
-- Weather conditions favoring building and home improvement activities for the remainder of the year.
-- The completion of strategic business acquisitions.
-- A stable lumber market.
Universal Forest Products will conduct a conference call to discuss information included in this news release and related matters at 11:00 a.m. EDT on Tuesday, April 18, 2006. The conference call will be hosted by CEO William G. Currie and will be available for analysts and institutional investors domestically at (866) 543-6411 or internationally at (617) 213-8900. Use conference call ID #45644599.
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 Friday, May 12, 2006 domestically at (888) 286-8010 or internationally at (617) 801-6888. Use replay ID #79296176.
Universal Forest Products markets, manufactures and engineers wood and wood-alternative products for D-I-Y/retail home centers, structural lumber products for the manufactured housing industry, engineered wood components for the site-built construction market and specialty wood packaging for various industries. The Company also provides framing services for the site-built sector. The Company reported sales of nearly $2.7 billion in 2005. Universal has approximately 9,500 employees who work out of more than 100 locations. For information about Universal Forest Products, please visit the Company's Web site at http://www.ufpi.com , or call 888-Buy-UFPI.
Included in this report are certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and 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. 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 are the following: Adverse lumber market trends, competitive activity, negative economic trends, government regulations, and weather. These risk factors and additional information are included in the Company's reports on Form 10K and 10Q on file with the Securities and Exchange Commission.
HIGHLIGHTS TO FOLLOW
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 2006/2005
Quarter Period
---------------------------------
(In thousands, except per share data) 2006 2005
---------------- ----------------
NET SALES $665,609 100% $537,160 100%
COST OF GOODS SOLD 571,298 85.83 469,931 87.48
--------- ---------
GROSS PROFIT 94,311 14.17 67,229 12.52
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 64,529 9.69 49,851 9.28
GAIN ON INSURANCE SETTLEMENT - 0.00 - 0.00
--------- ---------
EARNINGS FROM OPERATIONS 29,782 4.47 17,378 3.24
OTHER EXPENSE (INCOME)
Interest expense 3,799 0.57 3,775 0.70
Interest income (429) -0.06 (149) -0.03
Net (gain) loss on sale of real
estate and interest in
subsidiary - 0.00 (1,272) -0.24
--------- ---------
3,370 0.51 2,354 0.44
--------- ---------
EARNINGS BEFORE INCOME TAXES AND
MINORITY INTEREST 26,412 3.97 15,024 2.80
INCOME TAXES 9,756 1.47 5,759 1.07
--------- ---------
EARNINGS BEFORE MINORITY INTEREST 16,656 2.50 9,265 1.72
MINORITY INTEREST (790) -0.12 (36) -0.01
--------- ---------
NET EARNINGS $15,866 2.38 $9,229 1.72
========= =========
EARNINGS PER SHARE - BASIC $0.85 $0.51
EARNINGS PER SHARE - DILUTED $0.82 $0.49
WEIGHTED AVERAGE SHARES
OUTSTANDING 18,606 18,187
WEIGHTED AVERAGE SHARES OUTSTANDING
WITH COMMON STOCK EQUIVALENTS 19,278 18,972
SUPPLEMENTAL SALES DATA
------------------------------------
Quarter Period
---------------------------------
Market Classification 2006 % 2005 %
------------------------------------ --------- ------ --------- ------
Do-It-Yourself/Retail $214,130 32% $178,474 33%
Site-Built Construction 210,229 32% 150,955 28%
Manufactured Housing 104,779 16% 95,494 18%
Industrial 136,471 20% 112,237 21%
--------- ------ --------- ------
Total $665,609 100% $537,160 100%
Year to Date
---------------------------------
(In thousands, except per share data) 2006 2005
---------------- ----------------
NET SALES $665,609 100% $537,160 100%
COST OF GOODS SOLD 571,298 85.83 469,931 87.48
--------- ---------
GROSS PROFIT 94,311 14.17 67,229 12.52
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 64,529 9.69 49,851 9.28
GAIN ON INSURANCE SETTLEMENT - 0.00 - 0.00
--------- ---------
EARNINGS FROM OPERATIONS 29,782 4.47 17,378 3.24
OTHER EXPENSE (INCOME)
Interest expense 3,799 0.57 3,775 0.70
Interest income (429) -0.06 (149) -0.03
Net (gain) loss on sale of real
estate and interest in
subsidiary - 0.00 (1,272) -0.24
--------- ---------
3,370 0.51 2,354 0.44
--------- ---------
EARNINGS BEFORE INCOME TAXES AND
MINORITY INTEREST 26,412 3.97 15,024 2.80
INCOME TAXES 9,756 1.47 5,759 1.07
--------- ---------
EARNINGS BEFORE MINORITY INTEREST 16,656 2.50 9,265 1.72
MINORITY INTEREST (790) -0.12 (36) -0.01
--------- ---------
NET EARNINGS $15,866 2.38 $9,229 1.72
========= =========
EARNINGS PER SHARE - BASIC $0.85 $0.51
EARNINGS PER SHARE - DILUTED $0.82 $0.49
WEIGHTED AVERAGE SHARES
OUTSTANDING 18,606 18,187
WEIGHTED AVERAGE SHARES OUTSTANDING
WITH COMMON STOCK EQUIVALENTS 19,278 18,972
SUPPLEMENTAL SALES DATA
------------------------------------
Year to Date
---------------------------------
Market Classification 2006 % 2005 %
------------------------------------ --------- ------ --------- ------
Do-It-Yourself/Retail $214,130 32% $178,474 33%
Site-Built Construction 210,229 32% 150,955 28%
Manufactured Housing 104,779 16% 95,494 18%
Industrial 136,471 20% 112,237 21%
--------- ------ --------- ------
Total $665,609 100% $537,160 100%
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 2006/2005
(In thousands)
ASSETS 2006 2005
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $39,608 $28,396
Accounts receivable 199,508 179,954
Inventories 279,577 286,835
Other current assets 21,448 15,429
----------- -----------
TOTAL CURRENT ASSETS 540,141 510,614
OTHER ASSETS 8,083 8,303
INTANGIBLE ASSETS, NET 141,566 131,108
PROPERTY, PLANT
AND EQUIPMENT, NET 225,179 218,369
----------- -----------
TOTAL ASSETS $914,969 $868,394
=========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY 2006 2005
----------- -----------
CURRENT LIABILITIES
Accounts payable and
accrued liabilities $223,748 $188,786
Current portion of long-term
debt and capital leases 461 21,910
----------- -----------
TOTAL CURRENT LIABILITIES 224,209 210,696
LONG-TERM DEBT AND CAPITAL
LEASES, less current portion 204,010 251,806
OTHER LIABILITIES 32,303 36,515
SHAREHOLDERS' EQUITY 454,447 369,377
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $914,969 $868,394
=========== ===========
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 2006/2005
(In thousands) 2006 2005
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $15,866 $9,229
Adjustments to reconcile net earnings to net cash
from operating activities:
Depreciation 8,279 7,345
Amortization of intangibles 1,311 601
Expense associated with share-based
compensation arrangements 215 -
Expense associated with stock grant plans 160 163
Deferred income taxes (88) 19
Minority interest 790 36
Gain on sale of property, plant and
equipment (1) (1,131)
Changes in:
Accounts receivable (14,276) (28,643)
Inventories (25,800) (73,913)
Accounts payable 23,927 36,108
Accrued liabilities and other (4,860) (6,323)
Tax benefits from share-based compensation
arrangements (1,419)
-------- --------
NET CASH FROM OPERATING ACTIVITIES 4,104 (56,509)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (8,186) (10,604)
Acquisitions, net of cash received (2,052) -
Proceeds from sale of property, plant and
equipment 225 2,295
Collection of notes receivable 1,542 -
Insurance proceeds (1) -
Other, net (54) 366
-------- --------
NET CASH FROM INVESTING ACTIVITIES (8,526) (7,943)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving credit
facilities (5,020) 66,713
Repayment of long-term debt (15) (138)
Proceeds from issuance of common stock 1,945 1,462
Distributions to minority shareholders (509) (536)
Repurchase of common stock - 73
Tax benefits from share-based compensation
arrangements 1,419 -
Other, net (5) -
-------- --------
NET CASH FROM FINANCING ACTIVITIES (2,185) 67,574
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (6,607) 3,122
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 46,215 25,274
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $39,608 $28,396
======== ========
SOURCE: Universal Forest Products, Inc.
Universal Forest Products, Inc.
Lynn Afendoulis, 616-365-1502