Universal Forest Products Posts 20% Increase in 2nd Quarter Net Earnings; Year-to-Date Earnings up 35%
GRAND RAPIDS, Mich.--(BUSINESS WIRE)--July 17, 2006--Universal Forest Products (Nasdaq:UFPI) today announced a strong second quarter marked by net earnings of $27.3 million, an increase of 19.9% over the same period last year. Year-to-date net earnings were $43.2 million, a 34.9% increase over the first six months of 2005.
Net sales for the quarter were $826.8 million, up 6.1% over net sales of $779.6 million for the second quarter of 2005. Net sales for the first six months of 2006 were $1.49 billion, up 13.3% over net sales of $1.32 billion for the same period in 2005.
"Our strengths for the quarter included continued market share gains in the site-built construction and industrial markets where we again saw double-digit unit growth," said CEO Michael B. Glenn.
Sales were adversely impacted by the lumber market, with prices down approximately 14% from the prior year quarter. The increase in earnings was driven by a combination of increased sales of value-added products and a continued focus on innovations and cost reductions. Value-added products made up 56% of total sales for the quarter, up from 50% for the same period last year.
"We're continuing our strategy of focusing on sales of value-added products by growing our market share in site-built construction and industrial, as well as introducing products through our new division, Universal Consumer Products," Glenn said.
By market, Universal posted second-quarter sales of:
- $349.5 million in D-I-Y/retail, up 1.4% compared to the same quarter last year;
- $227.8 million in site-built construction, an increase of 22.1% over the same quarter last year;
- $149.4 million in industrial, up 6.4% over the second quarter 2005; and
- $100.1 million in manufactured housing, a 7.2% decrease from the second quarter of 2005, which reflected a significant decline in lumber prices in 2006 of species relevant to this market.
OUTLOOK
The Company reaffirms its annual target for net earnings growth of 15% to 20% and its unit sales target of 10% to 15% growth in 2006 based upon the following assumptions:
- Stable housing markets where we have a strong site-built presence and continued opportunities for market share gains.
- Stability in our D-I-Y/retail and manufacturing housing markets, as well as in lumber prices.
- Favorable weather conditions for building and home improvement activities, particularly in the fourth quarter.
- Continuing to gain market share and realize strong unit sales growth in the industrial market.
- The completion of strategic business acquisitions.
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, July 18, 2006. The conference call will be hosted by CEO Michael B. Glenn and Executive Chairman William G. Currie and will be available for analysts and institutional investors domestically at (866) 383-8008 or internationally at (617) 597-5341. Use conference call ID #73805629.
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 Wednesday, August 16, 2006 domestically at (888) 286-8010 or internationally at (617) 801-6888. Use replay ID # 22096875.
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 10,000 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.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE SIX MONTHS ENDED
JUNE 2006/2005
Quarter Period
(In thousands, except per share data) 2006 2005
---------------- ----------------
NET SALES $826,847 100% $779,552 100%
COST OF GOODS SOLD 706,429 85.44 678,310 87.01
--------- ---------
GROSS PROFIT 120,418 14.56 101,242 12.99
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 70,773 8.56 59,505 7.63
--------- ---------
EARNINGS FROM OPERATIONS 49,645 6.00 41,737 5.35
OTHER EXPENSE (INCOME)
Interest expense 3,744 0.45 4,266 0.55
Interest income (352) -0.04 (270) -0.03
Net (gain) loss on sale of real
estate and interest in subsidiary (63) -0.01 32 0.00
--------- ---------
3,329 0.40 4,028 0.52
--------- ---------
EARNINGS BEFORE INCOME TAXES
AND MINORITY INTEREST 46,316 5.60 37,709 4.84
INCOME TAXES 17,885 2.16 14,237 1.83
--------- ---------
EARNINGS BEFORE MINORITY INTEREST 28,431 3.44 23,472 3.01
MINORITY INTEREST (1,117) -0.14 (682) -0.09
--------- ---------
NET EARNINGS $27,314 3.30 $22,790 2.92
========= =========
EARNINGS PER SHARE - BASIC $1.45 $1.24
EARNINGS PER SHARE - DILUTED $1.41 $1.20
WEIGHTED AVERAGE SHARES
OUTSTANDING 18,851 18,323
WEIGHTED AVERAGE SHARES
OUTSTANDING WITH COMMON
STOCK EQUIVALENTS 19,432 18,984
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE SIX MONTHS ENDED
JUNE 2006/2005
Year to Date
(In thousands, except per share
data) 2006 2005
------------------ ------------------
NET SALES $1,492,456 100% $1,316,712 100%
COST OF GOODS SOLD 1,277,727 85.61 1,148,241 87.21
----------- -----------
GROSS PROFIT 214,729 14.39 168,471 12.79
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 135,302 9.07 109,356 8.31
----------- -----------
EARNINGS FROM OPERATIONS 79,427 5.32 59,115 4.49
OTHER EXPENSE (INCOME)
Interest expense 7,543 0.51 8,041 0.61
Interest income (781) -0.05 (419) -0.03
Net (gain) loss on sale of real
estate and interest in
subsidiary (63) 0.00 (1,240) -0.09
----------- -----------
6,699 0.45 6,382 0.48
----------- -----------
EARNINGS BEFORE INCOME TAXES
AND MINORITY INTEREST 72,728 4.87 52,733 4.00
INCOME TAXES 27,641 1.85 19,996 1.52
----------- -----------
EARNINGS BEFORE MINORITY INTEREST 45,087 3.02 32,737 2.49
MINORITY INTEREST (1,907) -0.13 (718) -0.05
----------- -----------
NET EARNINGS $43,180 2.89 $32,019 2.43
=========== ===========
EARNINGS PER SHARE - BASIC $2.31 $1.75
EARNINGS PER SHARE - DILUTED $2.23 $1.69
WEIGHTED AVERAGE SHARES
OUTSTANDING 18,729 18,255
WEIGHTED AVERAGE SHARES
OUTSTANDING WITH COMMON
STOCK EQUIVALENTS 19,355 18,978
SUPPLEMENTAL SALES DATA
-----------------------
Quarter Period
-----------------------------
Market Classification 2006 % 2005 %
--------------------- --------- ---- --------- ----
Do-It-Yourself/Retail $349,519 42% $344,624 44%
Site-Built Construction 227,830 28% 186,626 24%
Manufactured Housing 100,134 12% 107,925 14%
Industrial 149,364 18% 140,377 18%
--------- ---- --------- ----
Total $826,847 100% $779,552 100%
SUPPLEMENTAL SALES DATA
-----------------------
Year to Date
---------------------------------
Market Classification 2006 % 2005 %
--------------------- ----------- ---- ----------- ----
Do-It-Yourself/Retail $562,511 38% $522,733 40%
Site-Built Construction 437,588 29% 337,549 26%
Manufactured Housing 205,254 14% 203,371 15%
Industrial 287,103 19% 253,059 19%
----------- ---- ----------- ----
Total $1,492,456 100% $1,316,712 100%
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 2006/2005
(In thousands)
LIABILITIES
AND
SHAREHOLDERS'
ASSETS 2006 2005 EQUITY 2006 2005
======================================================================
CURRENT ASSETS CURRENT
LIABILITIES
Cash and cash Accounts
equivalents $43,309 $27,586 payable and
Accounts accrued
receivable 242,829 232,600 liabilities $247,524 $229,835
Inventories 246,810 247,829 Current
Other current portion of
assets 22,495 13,114 long-term
debt and
capital
leases 902 21,937
TOTAL CURRENT TOTAL CURRENT
ASSETS 555,443 521,129 LIABILITIES 248,426 251,772
OTHER ASSETS 8,003 8,056 LONG-TERM DEBT
AND CAPITAL
INTANGIBLE LEASES, less
ASSETS, NET 147,901 134,373 current
portion 170,192 206,000
OTHER
LIABILITIES 33,050 36,717
PROPERTY, PLANT
AND EQUIPMENT, SHAREHOLDERS'
NET 227,995 222,304 EQUITY 487,674 391,373
TOTAL
LIABILITIES
AND
SHAREHOLDERS'
TOTAL ASSETS $939,342 $885,862 EQUITY $939,342 $885,862
========= ========= ========= =========
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED
JUNE 2006/2005
(In thousands) 2006 2005
-------------- --------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $43,180 $32,019
Adjustments to reconcile net earnings to net cash
from operating activities:
Depreciation 16,730 15,200
Amortization of intangibles 2,151 1,190
Expense associated with share-based
compensation arrangements 522 -
Expense associated with stock grant plans 177 133
Deferred income taxes (867) (516)
Minority interest 1,907 718
Loss (gain) on sale or impairment of
property, plant and equipment (183) (1,133)
Changes in:
Accounts receivable (57,246) (80,206)
Inventories 7,768 (31,838)
Accounts payable 39,426 50,881
Accrued liabilities and other 8,237 17,131
Excess tax benefits from share-based
compensation arrangements (3,866) -
NET CASH FROM OPERATING ACTIVITIES 57,936 3,579
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (16,234) (21,985)
Acquisitions, net of cash received (11,298) (7,500)
Proceeds from sale of property, plant and equipment 565 2,318
Collection of notes receivable 1,600 323
Advances on notes receivable (2,473) -
Insurance proceeds 38 3,013
Other, net - 135
NET CASH FROM INVESTING ACTIVITIES (27,802) (23,696)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving credit
facilities (40,000) 21,140
Repayment of long-term debt (325) (454)
Proceeds from issuance of common stock 5,389 2,865
Distributions to minority shareholder (930) (369)
Dividends paid to shareholders (1,035) (910)
Excess tax benefits from share-based compensation
arrangements 3,866 -
Other, net (5) 157
NET CASH FROM FINANCING ACTIVITIES (33,040) 22,429
NET CHANGE IN CASH AND CASH EQUIVALENTS (2,906) 2,312
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 46,215 25,274
CASH AND CASH EQUIVALENTS, END OF PERIOD $43,309 $27,586
========= ========
CONTACT: Universal Forest Products Lynn Afendoulis, 616-365-1502
SOURCE: Universal Forest Products