Universal Forest Products, Inc. Reports 1st Quarter Earnings of $3.9 Million
GRAND RAPIDS, Mich.--(BUSINESS WIRE)--April 16, 2007--Universal Forest Products, Inc. (Nasdaq:UFPI) today announced its first quarter results, including net sales of $549.0 million and net earnings of $3.9 million, down from net sales of $665.6 million and net earnings of $15.9 million for the same period in 2006. The numbers compare with an unusually strong first quarter in 2006 due, in part, to the spike in FEMA orders for manufactured homes in the wake of the 2005 hurricane season, and reflect the impact of the soft lumber and housing markets, as well as adverse weather conditions.
"We predicted that the housing market would be soft, but it turned out to be even weaker than we anticipated. In addition, supply continues to exceed demand in an already depressed lumber market, keeping prices low and adversely affecting our sales numbers," said President and CEO Michael B. Glenn. "These factors combined to create a tough quarter."
Glenn noted that January and February were as weak as the Company has seen, but as the weather improved in March, sales and profits also rebounded. "March provided us with reason to believe we might soon see positive evidence of our efforts to gain market share," he added. "The monthly trend is positive and we believe the moves we've made over the past six months to position the Company for growth contributed to an increase in market share. We are optimistic for stronger months ahead, especially in our Do-It-Yourself/retail and industrial markets."
By market, Universal posted the following gross sales results for the first quarter:
- $196.1 million in Do-It-Yourself/retail, a decrease of 9.4% from 2006;
- $138.8 million in site-built construction, a decrease of 34.9% from 2006;
- $133.5 million in industrial, a decrease of 4.7% from 2006; and
- $88.3 million in manufactured/modular housing, a decrease of 17.3% over 2006.
These results were impacted by the lumber market, which affects the Company's cost of materials and its selling prices. Glenn called the lumber market in the first quarter of 2007 "one of the weakest we have seen in many years." On average, the lumber composite price was 24% lower in the first quarter of 2007 compared to the first quarter of 2006, and sustained over-supply continued to drive prices even lower.
The Company's unit sales declined approximately 8% for the quarter primarily due to weak single family and manufactured housing market conditions; these declines were partially offset by increased unit sales attributable to businesses the Company has acquired since the first quarter of 2006.
Glenn noted that sales to new customers in the first quarter helped mitigate the effect of the struggling site-built and manufactured housing markets.
"Times like these provide us with the opportunity to demonstrate the power of Universal. We put our collective shoulder to the grindstone to gain market share where we could, to enhance our operations, and to position the Company for growth when the markets return," Glenn added.
To enhance its opportunity in 2007 and beyond, Universal is focused on its strategic plan, GO 2010; on fully integrating recent acquisitions including Aljoma Lumber and Banks Lumber; and on a continuous improvement strategy that's being deployed throughout the Company to enhance customer satisfaction, empower employees and improve productivity.
OUTLOOK
At the beginning of 2007, the Company announced annual targets for unit sales growth ranging from 10% to 15% and net earnings growth (excluding certain tax adjustments from 2006 results) of 5% to 10%. These targets continue to be subject to a number of assumptions, including certain key assumptions listed in our press release dated Feb. 5, 2007. Due to the seasonality of our business and to other market factors that might impact our year-end results, it is too early to assess the relative accuracy and scope of those assumptions.
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 17, 2007. The call will be hosted by Executive Chairman William B. Currie, CEO Michael B. Glenn, and CFO Michael Cole and will be available for analysts and institutional investors domestically at (866) 770-7051 or internationally at (617) 213-8064. Use conference pass code #64685407. 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 Thursday, May 17, 2007 domestically at (888) 286-8010 or internationally at (617) 801-6888. Use replay pass code #96698687.
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 $2.66 billion in 2006. 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.
Please be aware that: Any statements included in this call that are not historical 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 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 2007/2006
Quarter Period
(In thousands, except per share
data) 2007 2006
NET SALES $549,038 100% $665,609 100%
COST OF GOODS SOLD 475,518 86.61 571,298 85.83
GROSS PROFIT 73,520 13.39 94,311 14.17
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 63,458 11.56 64,529 9.69
EARNINGS FROM OPERATIONS 10,062 1.83 29,782 4.47
OTHER EXPENSE (INCOME)
Interest expense 4,324 0.79 3,799 0.57
Interest income (582) -0.11 (429) -0.06
3,742 0.68 3,370 0.51
EARNINGS BEFORE INCOME TAXES
AND MINORITY INTEREST 6,320 1.15 26,412 3.97
INCOME TAXES 2,068 0.38 9,756 1.47
EARNINGS BEFORE MINORITY INTEREST 4,252 0.77 16,656 2.50
MINORITY INTEREST (366) -0.07 (790) -0.12
NET EARNINGS $3,886 0.71 $15,866 2.38
========= =========
EARNINGS PER SHARE - BASIC $0.20 $0.85
EARNINGS PER SHARE - DILUTED $0.20 $0.82
WEIGHTED AVERAGE SHARES
OUTSTANDING 18,985 18,606
WEIGHTED AVERAGE SHARES
OUTSTANDING WITH COMMON
STOCK EQUIVALENTS 19,409 19,278
SUPPLEMENTAL SALES DATA
-----------------------------------
Quarter Period
---------------------------------
Market Classification 2007 % 2006 %
---------------------------------- --------- ------ --------- ------
Do-It-Yourself/Retail $196,136 35% $216,466 32%
Site-Built Construction 138,842 25% 213,132 31%
Industrial 133,452 24% 139,955 21%
Manufactured Housing 88,278 16% 106,803 16%
--------- ------ --------- ------
Total Gross Sales 556,708 100% 676,356 100%
Sales Allowances (7,670) (10,747)
--------- ---------
Total Net Sales $549,038 $665,609
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 2007/2006
Year to Date
(In thousands, except per share
data) 2007 2006
NET SALES $549,038 100% $665,609 100%
COST OF GOODS SOLD 475,518 86.61 571,298 85.83
GROSS PROFIT 73,520 13.39 94,311 14.17
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 63,458 11.56 64,529 9.69
EARNINGS FROM OPERATIONS 10,062 1.83 29,782 4.47
OTHER EXPENSE (INCOME)
Interest expense 4,324 0.79 3,799 0.57
Interest income (582) -0.11 (429) -0.06
3,742 0.68 3,370 0.51
EARNINGS BEFORE INCOME TAXES
AND MINORITY INTEREST 6,320 1.15 26,412 3.97
INCOME TAXES 2,068 0.38 9,756 1.47
EARNINGS BEFORE MINORITY INTEREST 4,252 0.77 16,656 2.50
MINORITY INTEREST (366) -0.07 (790) -0.12
NET EARNINGS $3,886 0.71 $15,866 2.38
========== =========
EARNINGS PER SHARE - BASIC $0.20 $0.85
EARNINGS PER SHARE - DILUTED $0.20 $0.82
WEIGHTED AVERAGE SHARES
OUTSTANDING 18,985 18,606
WEIGHTED AVERAGE SHARES
OUTSTANDING WITH COMMON
STOCK EQUIVALENTS 19,409 19,278
SUPPLEMENTAL SALES DATA
------------------------------------
Year to Date
----------------------------------
Market Classification 2007 % 2006 %
----------------------------------- ---------- ------ --------- ------
Do-It-Yourself/Retail $196,136 35% $216,466 32%
Site-Built Construction 138,842 25% 213,132 31%
Industrial 133,452 24% 139,955 21%
Manufactured Housing 88,278 16% 106,803 16%
---------- ------ --------- ------
Total Gross Sales 556,708 100% 676,356 100%
Sales Allowances (7,670) (10,747)
---------- ---------
Total Net Sales $549,038 $665,609
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 2007/2006
(In thousands)
LIABILITIES
AND
SHAREHOLDERS'
ASSETS 2007 2006 EQUITY 2007 2006
CURRENT CURRENT
ASSETS LIABILITIES
Cash and
cash
equiv- Accounts
alents $44,024 $39,608 payable $119,006 $130,584
Accounts Accrued
receivable 195,617 199,508 liabilities 72,462 93,164
Inventories 285,753 279,577
Current
portion of
long-term
Other debt and
current capital
assets 22,192 21,448 leases 1,223 461
TOTAL
CURRENT TOTAL CURRENT
ASSETS 547,586 540,141 LIABILITIES 192,691 224,209
LONG-TERM DEBT
OTHER ASSETS 7,881 8,083 AND CAPITAL
LEASES, less
INTANGIBLE current
ASSETS, NET 186,358 141,566 portion 278,198 204,010
OTHER
LIABILITIES 51,199 32,303
PROPERTY,
PLANT AND
EQUIPMENT, SHAREHOLDERS'
NET 304,605 225,179 EQUITY 524,342 454,447
TOTAL
LIABILITIES
AND
SHAREHOLDERS'
TOTAL ASSETS $1,046,430 $914,969 EQUITY $1,046,430 $914,969
=========== ========= =========== =========
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 2007/2006
(In thousands) 2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $3,886 $15,866
Adjustments to reconcile net earnings to net cash
from operating activities:
Depreciation 9,146 8,279
Amortization of intangibles 2,367 1,311
Expense associated with share-based
compensation arrangements 127 215
Expense associated with stock grant plans 122 160
Deferred income taxes (50) (88)
Minority interest 366 790
Loss (gain) on sale or impairment of
property, plant and equipment 23 (1)
Changes in:
Accounts receivable (33,439) (14,276)
Inventories (23,321) (25,800)
Accounts payable 24,891 23,927
Accrued liabilities and other (11,249) (4,860)
Excess tax benefits from share-based
compensation arrangements (437) (1,278)
NET CASH FROM OPERATING ACTIVITIES (27,568) 4,245
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (8,638) (8,186)
Acquisitions, net of cash received (54,770) (2,052)
Proceeds from sale of property, plant and
equipment 267 225
Collection of notes receivable 109 1,542
Other, net 103 (55)
NET CASH FROM INVESTING ACTIVITIES (62,929) (8,526)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving credit
facilities 106,488 (5,020)
Repayment of long-term debt (24,525) (15)
Proceeds from issuance of common stock 1,649 1,945
Distributions to minority shareholder (371) (509)
Excess tax benefits from share-based compensation
arrangements 437 1,278
Other, net (265) (5)
NET CASH FROM FINANCING ACTIVITIES 83,413 (2,326)
NET CHANGE IN CASH AND CASH EQUIVALENTS (7,084) (6,607)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 51,108 46,215
CASH AND CASH EQUIVALENTS, END OF PERIOD $44,024 $39,608
======== ========
CONTACT: Universal Forest Products, Inc.
Lynn Afendoulis, 616-365-1502
Director, Corporate Communications
SOURCE: Universal Forest Products