ufpi_Current_Folio_10Q

Table of Contents

 

 

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 1, 2017

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0‑22684

UNIVERSAL FOREST PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

Michigan

    

38‑1465835

 

 

(State or other jurisdiction of incorporation or

 

(I.R.S. Employer Identification Number)

 

 

organization)

 

 

 

 

 

 

 

 

 

2801 East Beltline NE, Grand Rapids, Michigan

 

49525

 

 

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code (616) 364‑6161

 

 

 

 

NONE

 

 

(Former name or former address, if changed since last report.)

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

 

 

 

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller reporting company  

 

 

 

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with an new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by checkmark whether the registrant is a shell company (as defined by Rule 12b‑2 of the Exchange Act). Yes    No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

 

 

 

 

 

Class

    

Outstanding as of July 1, 2017

 

 

Common stock, no par value

 

20,421,775

 

 

 

 

 

 

 


 

Table of Contents

UNIVERSAL FOREST PRODUCTS, INC.

 

TABLE OF CONTENTS

PART I.

 

FINANCIAL INFORMATION.

Page No.

 

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

 

 

Consolidated Condensed Balance Sheets at July 1, 2017, December 31, 2016 and June 25, 2016

3

 

 

 

 

 

 

Consolidated Condensed Statements of Earnings and Comprehensive Income for the Three Months Ended and Six Months Ended July 1, 2017 and June 25, 2016

4

 

 

 

 

 

 

Consolidated Condensed Statements of Shareholders’ Equity for the Six Months Ended July 1, 2017 and June 25, 2016

5

 

 

 

 

 

 

Consolidated Condensed Statements of Cash Flows for the Six Months Ended July 1, 2017 and June 25, 2016

6

 

 

 

 

 

 

Notes to Unaudited Consolidated Condensed Financial Statements

7

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

28

 

 

 

 

 

Item 4.

Controls and Procedures

28

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings – NONE

 

 

 

 

 

 

Item 1A.

Risk Factors – NONE

29

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

 

 

 

 

 

Item 3.

Defaults upon Senior Securities – NONE

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures – NONE

 

 

 

 

 

 

Item 5.

Other Information – NONE

29

 

 

 

 

 

Item 6.

Exhibits

30

 

 

 

2


 

Table of Contents

UNIVERSAL FOREST PRODUCTS, INC.

 

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

July 1,

 

December 31,

 

June 25,

 

 

    

2017

    

2016

    

2016

 

ASSETS

 

 

 

  

 

 

  

 

 

 

CURRENT ASSETS:

 

 

 

  

 

 

  

 

 

 

Cash and cash equivalents

 

$

24,625

    

$

34,091

  

$

87,517

 

Restricted cash

 

 

905

 

 

398

  

 

909

 

Investments

 

 

10,401

 

 

10,348

  

 

9,740

 

Accounts receivable, net

 

 

398,529

 

 

282,253

  

 

318,505

 

Inventories:

 

 

 

  

 

 

  

 

 

 

Raw materials

 

 

218,356

 

 

198,954

  

 

165,857

 

Finished goods

 

 

220,079

 

 

198,273

  

 

131,939

 

Total inventories

 

 

438,435

 

 

397,227

  

 

297,796

 

Refundable income taxes

 

 

 —

 

 

11,459

  

 

 —

 

Other current assets

 

 

21,970

 

 

20,662

  

 

15,238

 

TOTAL CURRENT ASSETS

 

 

894,865

 

 

756,438

 

 

729,705

 

DEFERRED INCOME TAXES

 

 

1,981

 

 

1,546

  

 

2,541

 

RESTRICTED INVESTMENTS

 

 

7,911

 

 

 —

  

 

 —

 

OTHER ASSETS

 

 

7,842

 

 

8,617

  

 

7,470

 

GOODWILL

 

 

213,597

 

 

198,535

  

 

181,381

 

INDEFINITE-LIVED INTANGIBLE ASSETS

 

 

2,340

 

 

2,340

  

 

2,340

 

OTHER INTANGIBLE ASSETS, NET

 

 

37,547

 

 

26,731

  

 

14,170

 

PROPERTY, PLANT AND EQUIPMENT:

 

 

 

  

 

 

  

 

 

 

  Property, plant and equipment

 

 

735,474

 

 

699,462

 

 

649,652

 

Less accumulated depreciation and amortization

 

 

(419,518)

 

 

(401,611)

  

 

(392,753)

 

       PROPERTY, PLANT AND EQUIPMENT, NET

 

 

315,956

 

 

297,851

 

 

256,899

 

TOTAL ASSETS

 

 

1,482,039

 

 

1,292,058

 

 

1,194,506

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

  

 

 

  

 

 

 

CURRENT LIABILITIES:

 

 

 

  

 

 

  

 

 

 

Cash overdraft

 

$

22,769

 

$

19,761

  

$

 —

 

Accounts payable

 

 

160,250

 

 

124,660

  

 

126,095

 

Accrued liabilities:

 

 

 

  

 

 

  

 

 

 

Compensation and benefits

 

 

77,187

 

 

92,441

  

 

74,919

 

Income taxes

 

 

960

 

 

 —

 

 

1,755

 

Other

 

 

48,063

 

 

32,281

  

 

35,321

 

Current portion of long-term debt

 

 

2,378

 

 

2,634

  

 

1,093

 

TOTAL CURRENT LIABILITIES

 

 

311,607

 

 

271,777

  

 

239,183

 

LONG-TERM DEBT

 

 

204,752

 

 

109,059

  

 

84,530

 

DEFERRED INCOME TAXES

 

 

20,360

 

 

20,817

  

 

25,092

 

OTHER LIABILITIES

 

 

28,959

 

 

29,939

  

 

26,066

 

TOTAL LIABILITIES

 

 

565,678

 

 

431,592

  

 

374,871

 

SHAREHOLDERS’ EQUITY:

 

 

 

  

 

 

  

 

 

 

Controlling interest shareholders’ equity:

 

 

 

  

 

 

  

 

 

 

Preferred stock, no par value; shares authorized 1,000,000; issued and outstanding, none

 

$

 —

 

$

 —

  

$

 —

 

Common stock, no par value; shares authorized 80,000,000; issued and outstanding, 20,421,775, 20,342,069 and 20,307,463

 

 

20,422

 

 

20,342

  

 

20,307

 

Additional paid-in capital

 

 

199,092

 

 

185,333

  

 

182,710

 

Retained earnings

 

 

684,808

 

 

649,135

  

 

609,718

 

Accumulated other comprehensive income

 

 

(2,590)

 

 

(5,630)

  

 

(4,149)

 

Total controlling interest shareholders’ equity

 

 

901,732

 

 

849,180

  

 

808,586

 

Noncontrolling interest

 

 

14,629

 

 

11,286

  

 

11,049

 

TOTAL SHAREHOLDERS’ EQUITY

 

 

916,361

 

 

860,466

  

 

819,635

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,482,039

 

$

1,292,058

  

$

1,194,506

 

 

See notes to consolidated condensed financial statements.

3


 

Table of Contents

UNIVERSAL FOREST PRODUCTS, INC.

 

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 1,

 

June 25,

 

July 1,

 

June 25,

 

 

    

2017

    

2016

    

2017

    

2016

    

NET SALES

 

$

1,072,375

    

$

872,093

  

$

1,918,505

    

$

1,554,244

    

COST OF GOODS SOLD

 

 

924,135

 

 

740,606

  

 

1,649,526

 

 

1,320,018

 

GROSS PROFIT

 

 

148,240

 

 

131,487

  

 

268,979

 

 

234,226

 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

 

94,341

 

 

77,822

  

 

181,259

 

 

148,651

 

EARNINGS FROM OPERATIONS

 

 

53,899

 

 

53,665

  

 

87,720

 

 

85,575

 

INTEREST EXPENSE

 

 

1,840

 

 

1,103

  

 

3,343

 

 

2,179

 

INTEREST INCOME

 

 

(329)

 

 

(208)

  

 

(411)

 

 

(312)

 

EQUITY IN EARNINGS OF INVESTEE

 

 

(21)

 

 

(110)

  

 

(26)

 

 

(192)

 

 

 

 

1,490

 

 

785

  

 

2,906

 

 

1,675

 

EARNINGS BEFORE INCOME TAXES

 

 

52,409

 

 

52,880

  

 

84,814

 

 

83,900

 

INCOME TAXES

 

 

17,835

 

 

18,643

  

 

28,605

 

 

29,407

 

NET EARNINGS

 

 

34,574

 

 

34,237

  

 

56,209

 

 

54,493

 

LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

 

(932)

 

 

(839)

  

 

(1,505)

 

 

(1,882)

 

NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST

 

$

33,642

 

$

33,398

  

$

54,704

 

$

52,611

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE - BASIC

 

$

1.64

 

$

1.64

  

$

2.67

 

$

2.59

 

EARNINGS PER SHARE - DILUTED

 

$

1.64

 

$

1.64

  

$

2.66

 

$

2.58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

NET EARNINGS

 

 

34,574

 

 

34,237

  

 

56,209

 

 

54,493

 

OTHER COMPREHENSIVE GAIN (LOSS)

 

 

1,387

 

 

(807)

  

 

4,422

 

 

(365)

 

COMPREHENSIVE INCOME

 

 

35,961

 

 

33,430

  

 

60,631

 

 

54,128

 

LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

 

(1,460)

 

 

(235)

  

 

(2,887)

 

 

(1,081)

 

COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST

 

$

34,501

 

$

33,195

  

$

57,744

 

$

53,047

 

 

See notes to consolidated condensed financial statements.

4


 

Table of Contents

UNIVERSAL FOREST PRODUCTS, INC.

 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Controlling Interest Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Other

 

 

 

 

 

 

 

 

Common

 

Paid-In

 

Retained

 

Comprehensive

 

Noncontrolling

 

 

 

 

    

Stock

    

Capital

    

Earnings

    

Earnings

    

Interest

    

Total

Balance at December 26, 2015

 

$

20,142

 

$

171,562

  

$

565,636

 

$

(4,585)

  

$

13,654

  

$

766,409

Net earnings

 

 

 

  

 

 

  

 

52,611

 

 

  

 

 

1,882

  

 

54,493

Foreign currency translation adjustment

 

 

 

  

 

 

  

 

 

  

 

250

 

 

(801)

  

 

(551)

Unrealized gain (loss) on investment & foreign currency

 

 

 

  

 

 

  

 

 

  

 

186

 

 

  

 

 

186

Distributions to noncontrolling interest

 

 

 

  

 

 

  

 

 

  

 

 

  

 

(1,731)

 

 

(1,731)

Purchases of noncontrolling interest

 

 

 

  

 

855

  

 

 

  

 

 

  

 

(1,955)

 

 

(1,100)

Cash dividends $0.420 per share

 

 

 

  

 

 

  

 

(8,529)

 

 

  

 

 

  

 

 

(8,529)

Issuance of 3,708 shares under employee stock plans

 

 

 3

 

 

287

  

 

 

  

 

 

  

 

 

  

 

290

Issuance of 114,132 shares under stock grant programs

 

 

114

 

 

5,134

  

 

 

  

 

 

  

 

 

  

 

5,248

Issuance of 47,914 shares under deferred compensation plans

 

 

48

 

 

(48)

  

 

 

  

 

 

  

 

 

  

 

 —

Expense associated with share-based compensation arrangements

 

 

 

  

 

977

 

 

  

 

 

  

 

 

  

 

 

977

Accrued expense under deferred compensation plans

 

 

 

  

 

3,943

 

  

  

 

  

  

 

  

  

 

  

3,943

Balance at June 25, 2016

 

$

20,307

 

$

182,710

  

$

609,718

 

$

(4,149)

  

$

11,049

  

$

819,635

Balance at December 31, 2016

 

 

20,342

 

 

185,333

 

 

649,135

 

 

(5,630)

 

 

11,286

 

 

860,466

Net earnings

 

 

 

  

 

 

  

 

54,704

 

 

  

 

 

1,505

  

 

56,209

Foreign currency translation adjustment

 

 

 

  

 

 

  

 

 

  

 

2,817

 

 

1,382

  

 

4,199

Unrealized gain (loss) on investment & foreign currency

 

 

 

  

 

 

  

 

 

  

 

223

 

 

  

 

 

223

Distributions to noncontrolling interest

 

 

 

  

 

 

  

 

 

  

 

 

  

 

(1,953)

 

 

(1,953)

Additional purchases of noncontrolling interest

 

 

 

  

 

 

 

 

  

 

 

  

 

 

2,409

  

 

2,409

Cash dividends - $0.450 per share

 

 

 

  

 

 

  

 

(9,208)

 

 

  

 

 

  

 

 

(9,208)

Issuance of 4,233 shares under employee stock plans

 

 

 5

 

 

327

  

 

 

  

 

 

  

 

 

  

 

332

Issuance of 142,145 shares under stock grant programs

 

 

142

 

 

7,068

  

 

 

  

 

 

  

 

 

  

 

7,210

Issuance of 44,208 shares under deferred compensation plans

 

 

44

 

 

(44)

  

 

 

  

 

 

  

 

 

  

 

 —

Repurchase of 110,880 shares

 

 

(111)

 

 

 

 

 

(9,823)

 

 

 

 

 

 

 

 

(9,934)

Expense associated with share-based compensation arrangements

 

 

 

  

 

1,282

 

 

  

 

 

  

 

 

  

 

 

1,282

Accrued expense under deferred compensation plans

 

 

 

  

 

5,126

 

 

  

 

 

  

 

 

  

 

 

5,126

Balance at July 1, 2017

 

$

20,422

 

$

199,092

  

$

684,808

 

$

(2,590)

  

$

14,629

  

$

916,361

 

See notes to consolidated condensed financial statements.

5


 

Table of Contents

UNIVERSAL FOREST PRODUCTS, INC.

 

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

(in thousands)

 

Six Months Ended

 

 

 

July 1,

 

June 25,

 

 

    

2017

    

2016

    

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

  

 

 

 

Net earnings

 

$

56,209

    

$

54,493

 

Adjustments to reconcile net earnings to net cash from operating activities:

 

 

 

  

 

 

 

Depreciation

 

 

23,248

 

 

19,178

 

Amortization of intangibles

 

 

2,377

 

 

1,285

 

Expense associated with share-based compensation arrangements

 

 

1,282

 

 

977

 

Expense associated with stock grant plans

 

 

99

 

 

70

 

Deferred income taxes

 

 

355

 

 

55

 

Equity in earnings of investee

 

 

(26)

 

 

(192)

 

Net loss on disposition and impairment of assets

 

 

(328)

 

 

50

 

Changes in:

 

 

 

  

 

 

 

Accounts receivable

 

 

(101,239)

 

 

(95,198)

 

Inventories

 

 

(26,979)

 

 

7,564

 

Accounts payable and cash overdraft

 

 

38,146

 

 

31,320

 

Accrued liabilities and other

 

 

22,067

 

 

20,439

 

NET CASH FROM OPERATING ACTIVITIES

 

 

15,211

 

 

40,041

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

  

 

 

 

Purchases of property, plant and equipment

 

 

(34,549)

 

 

(24,269)

 

Proceeds from sale of property, plant and equipment

 

 

1,039

 

 

309

 

Acquisitions, net of cash received

 

 

(59,658)

 

 

(1,682)

 

Purchase of remaining noncontrolling interest, net of cash received

 

 

 —

 

 

(1,100)

 

Cash contributed from noncontrolling interest

 

 

464

 

 

 —

 

Advances of notes receivable

 

 

(228)

 

 

(2,946)

 

Collections on notes receivable

 

 

1,041

 

 

3,731

 

Purchases of investments

 

 

(15,118)

 

 

(3,571)

 

Proceeds from sale of investments

 

 

7,247

 

 

901

 

Other

 

 

(125)

 

 

(736)

 

NET CASH USED IN INVESTING ACTIVITIES

 

 

(99,887)

 

 

(29,363)

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

  

 

 

 

Borrowings under revolving credit facilities

 

 

444,601

 

 

3,162

 

Repayments under revolving credit facilities

 

 

(349,311)

 

 

(3,210)

 

Proceeds from issuance of common stock

 

 

331

 

 

290

 

Dividends paid to shareholders

 

 

(9,207)

 

 

(8,529)

 

Distributions to noncontrolling interest

 

 

(1,953)

 

 

(1,731)

 

Repurchase of common stock

 

 

(9,934)

 

 

 —

 

Other

 

 

(6)

 

 

(15)

 

NET CASH FROM (USED IN) FINANCING ACTIVITIES

 

 

74,521

 

 

(10,033)

 

Effect of exchange rate changes on cash

 

 

1,196

 

 

(561)

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

(8,959)

 

 

84

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR

 

 

34,489

 

 

88,342

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD

 

$

25,530

 

$

88,426

 

 

 

 

 

 

 

 

 

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

 

Cash, cash equivalents, and restricted cash, beginning of period

 

$

34,489

 

$

88,342

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

24,625

 

$

87,517

 

Restricted cash, end of period

 

 

905

 

 

909

 

Cash, cash equivalents, and restricted cash, end of period

 

$

25,530

 

$

88,426

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION:

 

 

 

  

 

 

 

Interest paid

 

$

3,049

 

$

2,220

 

Income taxes paid

 

 

15,895

 

 

19,789

 

NON-CASH FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Common stock issued under deferred compensation plans

 

 

4,231

 

 

3,375

 

See notes to consolidated condensed financial statements.

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UNIVERSAL FOREST PRODUCTS, INC.

 

 

NOTES TO UNAUDITED

CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

A.       BASIS OF PRESENTATION

The accompanying unaudited interim consolidated condensed financial statements (the “Financial Statements”) include our accounts and those of our wholly-owned and majority-owned subsidiaries and partnerships, and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, the Financial Statements do not include all of the information and footnotes normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States. All intercompany transactions and balances have been eliminated.

In our opinion, the Financial Statements contain all material adjustments necessary to present fairly our consolidated financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. These Financial Statements should be read in conjunction with the annual consolidated financial statements, and footnotes thereto, included in our Annual Report to Shareholders on Form 10‑K for the fiscal year ended December 31, 2016.

Seasonality has a significant impact on our working capital from March to August which historically results in negative or modest cash flows from operations in our first and second quarters. Conversely, we experience a substantial decrease in working capital from September to February which typically results in significant cash flow from operations in our third and fourth quarters. For comparative purposes, we have included the June 25, 2016 balances in the accompanying unaudited consolidated condensed balance sheets.

 

B.       FAIR VALUE

We apply the provisions of ASC 820, Fair Value Measurements and Disclosures, to assets and liabilities measured at fair value. Assets measured at fair value are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

July 1, 2017

 

June 25, 2016

 

 

Quoted

 

Prices with

 

 

 

 

Quoted

 

Prices with

 

 

 

 

 

Prices in

 

Other

 

 

 

 

Prices in

 

Other

 

 

 

 

 

Active

 

Observable

 

 

 

 

Active

 

Observable

 

 

 

 

 

Markets

 

Inputs

 

 

 

 

Markets

 

Inputs

 

 

 

(in thousands)

    

(Level 1)

    

(Level 2)

    

Total

    

(Level 1)

    

(Level 2)

    

Total

Money market funds

 

$

64

    

$

891

    

$

955

    

$

65

    

$

506

    

$

571

Fixed income funds

 

 

1,495

 

 

6,451

 

 

7,946

 

 

1,935

 

 

2,383

 

 

4,318

Equity securities

 

 

9,822

 

 

 —

 

 

9,822

 

 

4,944

 

 

 

 

4,944

Mutual funds:

 

 

 

  

 

 

 

 

 

  

 

 

 

 

 

  

 

 

Domestic stock funds

 

 

330

 

 

 —

 

 

330

 

 

756

 

 

 

 

756

International stock funds

 

 

84

 

 

 —

 

 

84

 

 

69

 

 

 

 

69

Target funds

 

 

254

 

 

 —

 

 

254

 

 

231

 

 

 

 

231

Bond funds

 

 

206

 

 

 —

 

 

206

 

 

199

 

 

 

 

199

Total mutual funds

 

 

874

 

 

 —

 

 

874

 

 

1,255

 

 

 

 

1,255

Assets at fair value

 

$

12,255

 

$

7,342

 

$

19,597

 

$

8,199

 

$

2,889

 

$

11,088

 

We maintain money market, mutual funds, bonds, and/or stocks in our non-qualified deferred compensation plan and our wholly owned licensed captive insurance company. These funds are valued at prices quoted in an active exchange market and are included in “Cash and Cash Equivalents”, “Investments”, “Restricted Cash”, and

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UNIVERSAL FOREST PRODUCTS, INC.

 

“Restricted Investments”. We have elected not to apply the fair value option under ASC 825, Financial Instruments, to any of our financial instruments except for those expressly required by U.S. GAAP.

We did not maintain any Level 3 assets or liabilities at July 1, 2017 or June 25, 2016. 

In November 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2016-18, “Statement of Cash Flows (Topic 230)” (ASU 2016-18). Under ASU 2016-18, an entity will be required to explain changes in the statement of cash flows during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.  Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.  The amendments in this update should be applied using retrospective transition method to each period presented.  Companies are required to adopt the new standard for fiscal years beginning after December 15, 2017. Early adoption of ASU 2016-18 is permitted, including adoption in an interim period. The Company has early adopted this standard during the first quarter of 2017.

 

In the first six months of 2017, our wholly-owned captive, Ardellis Insurance Ltd. (“Ardellis”) transferred $4.1 million in fixed income securities from its Investment Account and purchased an additional $3.8 million in fixed income securities which are held in a newly formed collateral trust account in line with regulatory requirements in the State of Michigan to allow Ardellis to act as an admitted carrier in the State.  These funds are intended to safeguard the insureds of the Michigan Branch of Ardellis.  The funds are classified as “Restricted Investments”.

In accordance with our investment policy, our wholly-owned captive, Ardellis Insurance Ltd. (“Ardellis”), maintains an investment portfolio, totaling $17.8 million as of July 1, 2017, consisting of domestic and international stocks, and fixed income bonds. 

Ardellis’ available for sale investment portfolio, including funds held with the State of Michigan, consists of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized

 

 

 

 

    

Cost

    

Gain/(Loss)

    

Fair Value

Fixed Income

 

$

7,939

    

$

 8

  

$

7,947