Universal Posts Net Sales Increase for Third Quarter Despite Impact of Housing Market
Company Sees Double-Digit Increases in Sales to Three of Four Markets
GRAND RAPIDS, Mich.--(BUSINESS WIRE)--Oct. 17, 2007--Universal Forest Products, Inc. (Nasdaq:UFPI) today announced results for the third quarter of 2007 including net sales of $678.4 million, an increase of $5.5 million over net sales of $672.9 million for the same period of 2006. Net earnings were $11.3 million, down from $17.7 million for the third quarter of 2006. Diluted earnings per share for the quarter were $0.59, down from $0.91 for the same period last year.
While Universal saw double-digit sales increases in three of its four markets, the drop in the housing market continued to have broad impact, especially in hard-hit areas like California, Colorado and Florida, and was responsible for the Company's decline in earnings.
"We're focused on building market share, managing our working capital, reducing costs, and enhancing our balance of business by adding new products and exploring new areas for growth. We're also seeing promising opportunities to grow our business with new customers and markets, and we're achieving positive results from our continuous improvement initiatives," said President and CEO Michael B. Glenn. "By focusing on these objectives, we're positioning ourselves well for the market's return to strength."
By market, Universal posted the following gross sales results for the third quarter:
- $268.0 million in Do-It-Yourself/retail (DIY), an increase of 11.2% over 2006;
- $158.9 million in site-built construction, a decrease of 24.0% from 2006;
- $156.6 million in industrial, an increase of 10.2% over 2006; and
- $109.7 million in manufactured/modular housing, an increase of 18.2% over 2006.
Sales increases in DIY, industrial and manufactured housing were due to market share gains. The decline in site-built sales was due to a severe drop in housing starts coupled with intense price competition, which affected profitability. The lumber market had little impact on sales levels for the quarter.
The Company continues to diversify its product mix and strengthen its market position by targeting the following areas:
- Selling components and building materials into multi-family and light-commercial construction;
- Increasing penetration with national customers in the industrial market;
- Concrete forming products for high-rise buildings, bridges, parking garages, stadiums and other large structures;
- The successful integration of Banks Lumber, a significant manufactured housing supplier that Universal acquired in late 2006. Universal is well-positioned for a rebound in that market; and
- Increased sales of consumer products, including composite decking and railing products and a strong portfolio of accessories such as post caps, decorative balusters and lattice. In addition, with 23 treating plants nationwide, Universal continues to be the leading supplier of pressure-treated lumber to retailers coast-to-coast.
OUTLOOK
With the continued impact of the weak housing market on many sectors of the economy and the Company's prediction that recovery won't begin until 2009, and based on current economic conditions, the Company is revising its annual net sales target to a range of $2.48 billion to $2.52 billion and its net earnings target to a range of $32.0 million to $35.0 million in 2007. This implies the following targets for the fourth quarter of 2007: net sales of $480.0 million to $520.0 million and net earnings of break-even to $3.0 million. By comparison, net sales and net earnings for the fourth quarter of 2006 were $499.2 million and $9.2 million, respectively. Excluding certain nonrecurring tax adjustments, net earnings were approximately $5.8 million in the fourth quarter of 2006.
These targets are based on the following assumptions:
- Continued challenging conditions in site-built construction;
- Manufactured housing production remains stable for the remainder of the year;
- The Company continues to achieve market share gains in DIY/retail, industrial and site-built;
- Weak consumer spending continues to challenge the DIY/retail market;
- No events occur that result in asset impairment charges; and
- The lumber market continues at present levels for the balance of the year.
Universal Forest Products will conduct a conference call to discuss information included in this news release and related matters at 8:30 a.m. EDT on Thursday, October 18, 2007. 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) 901-5231 or internationally at (617) 786-2961. Use conference pass code #84571336. 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 Sunday, November 18, 2007, domestically at (888) 286-8010 and internationally at (617) 801-6888. Use replay pass code #25356962.
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 and forms for concrete construction. The Company reported sales of nearly $2.66 billion in 2006. Universal has approximately 8,000 employees who work out of approximately 100 locations in North America. For information about Universal Forest Products, visit 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.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 2007/2006
Quarter Period
(In thousands, except per share
data) 2007 2006
----------------------------------------------------------------------
NET SALES $678,398 100% $672,873 100%
COST OF GOODS SOLD 596,233 87.89 574,048 85.31
--------- ---------
GROSS PROFIT 82,165 12.11 98,825 14.69
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 58,783 8.66 65,970 9.80
--------- ---------
EARNINGS FROM OPERATIONS 23,382 3.45 32,855 4.88
OTHER EXPENSE (INCOME)
Interest expense 4,367 0.64 3,214 0.48
Interest income (494) -0.07 (875) -0.13
Net (gain) loss on sale of real
estate 9 0.00 - 0.00
--------- ---------
3,882 0.57 2,339 0.35
--------- ---------
EARNINGS BEFORE INCOME TAXES AND
MINORITY INTEREST 19,500 2.87 30,516 4.54
INCOME TAXES 7,383 1.09 11,322 1.68
--------- ---------
EARNINGS BEFORE MINORITY INTEREST 12,117 1.79 19,194 2.85
MINORITY INTEREST (778) -0.11 (1,489) -0.22
--------- ---------
NET EARNINGS $11,339 1.67 $17,705 2.63
========= =========
EARNINGS PER SHARE - BASIC $0.59 $0.94
EARNINGS PER SHARE - DILUTED $0.59 $0.91
WEIGHTED AVERAGE SHARES OUTSTANDING 19,097 18,906
WEIGHTED AVERAGE SHARES OUTSTANDING
WITH COMMON STOCK EQUIVALENTS 19,361 19,394
Year to Date
(In thousands, except per share
data) 2007 2006
----------------------------------------------------------------------
NET SALES $2,000,541 100% $2,165,329 100%
COST OF GOODS SOLD 1,743,151 87.13 1,851,775 85.52
----------- -----------
GROSS PROFIT 257,390 12.87 313,554 14.48
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 192,623 9.63 201,272 9.30
----------- -----------
EARNINGS FROM OPERATIONS 64,767 3.24 112,282 5.19
OTHER EXPENSE (INCOME)
Interest expense 13,457 0.67 10,757 0.50
Interest income (1,634) -0.08 (1,656) -0.08
Net (gain) loss on sale of
real estate (324) -0.02 (63) 0.00
----------- -----------
11,499 0.57 9,038 0.42
----------- -----------
EARNINGS BEFORE INCOME TAXES AND
MINORITY INTEREST 53,268 2.66 103,244 4.77
INCOME TAXES 19,633 0.98 38,963 1.80
----------- -----------
EARNINGS BEFORE MINORITY
INTEREST 33,635 1.68 64,281 2.97
MINORITY INTEREST (1,610) -0.08 (3,396) -0.16
----------- -----------
NET EARNINGS $32,025 1.60 $60,885 2.81
=========== ===========
EARNINGS PER SHARE - BASIC $1.68 $3.24
EARNINGS PER SHARE - DILUTED $1.65 $3.14
WEIGHTED AVERAGE SHARES
OUTSTANDING 19,070 18,788
WEIGHTED AVERAGE SHARES
OUTSTANDING WITH COMMON STOCK
EQUIVALENTS 19,419 19,368
SUPPLEMENTAL SALES DATA
-----------------------------------
Quarter Period
-----------------------------
Market Classification 2007 % 2006 %
---------------------------------------- --------- ---- --------- ----
Do-It-Yourself/Retail $268,023 39% $241,034 35%
Site-Built Construction 158,940 23% 209,015 30%
Industrial 156,549 22% 142,009 21%
Manufactured Housing 109,656 16% 92,778 14%
--------- ---- --------- ----
Total Gross Sales 693,168 100% 684,836 100%
Sales Allowances (14,770) (11,963)
--------- ---------
Total Net Sales $678,398 $672,873
========= =========
Year to Date
---------------------------------
Market Classification 2007 % 2006 %
------------------------------------ ----------- ---- ----------- ----
Do-It-Yourself/Retail $825,041 41% $812,338 37%
Site-Built Construction 459,751 22% 653,445 29%
Industrial 452,442 22% 433,601 20%
Manufactured Housing 303,157 15% 301,241 14%
----------- ---- ----------- ----
Total Gross Sales 2,040,391 100% 2,200,625 100%
Sales Allowances (39,850) (35,296)
----------- -----------
Total Net Sales $2,000,541 $2,165,329
=========== ===========
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 2007/2006
(In thousands)
ASSETS 2007 2006
====================================================================
CURRENT ASSETS
Cash and cash equivalents $46,747 $46,184
Accounts receivable 191,023 227,428
Inventories 228,799 232,884
Assets held for sale 18,111
Other current assets 31,669 24,752
------------------
TOTAL CURRENT ASSETS 516,349 531,248
OTHER ASSETS INTANGIBLE ASSETS, 7,744 7,762
NET 184,474 158,549
PROPERTY, PLANT AND EQUIPMENT,
NET 283,179 232,428
------------------
TOTAL ASSETS $991,746 $929,987
==================
LIABILITIES AND SHAREHOLDERS' EQUITY 2007 2006
=====================================================================
CURRENT LIABILITIES
Accounts payable $105,938 $109,581
Accrued liabilities 85,997 106,360
Current portion of long-term debt and capital
leases 1,086 697
------------------
TOTAL CURRENT LIABILITIES 193,021 216,638
LONG-TERM DEBT AND CAPITAL
LEASES, less current portion 197,435 171,009
OTHER LIABILITIES 50,168 35,937
SHAREHOLDERS' EQUITY 551,122 506,403
------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $991,746 $929,987
==================
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 2007/2006
(In thousands) 2007 2006
----------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $32,025 $60,885
Adjustments to reconcile net earnings to net cash
from operating activities:
Depreciation 29,105 25,558
Amortization of intangibles 6,402 3,953
Expense associated with share-based
compensation arrangements 391 691
Expense associated with stock grant plans 160 191
Deferred income taxes (255) (871)
Minority interest 1,610 3,396
Gain on sale of interest in subsidiary (140) -
Loss (gain) on sale or impairment of
property, plant and equipment 32 206
Changes in:
Accounts receivable (30,298) (37,947)
Inventories 34,736 23,693
Accounts payable 12,874 771
Accrued liabilities and other (5,483) 11,326
Excess tax benefits from share-based
compensation arrangements (745) (3,959)
-------- --------
NET CASH FROM OPERATING ACTIVITIES 80,414 87,893
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (26,909) (27,600)
Acquisitions, net of cash received (57,087) (27,137)
Proceeds from sale of interest in subsidiary 400 -
Proceeds from sale of property, plant and
equipment 3,551 506
Advances on notes receivable (122) (2,473)
Collection of notes receivable 151 1,612
Other, net (6) 44
-------- --------
NET CASH FROM INVESTING ACTIVITIES (80,022) (55,048)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving credit
facilities 27,204 (38,725)
Repayment of long-term debt (28,200) (1,201)
Proceeds from issuance of common stock 3,321 5,711
Distributions to minority shareholder (1,225) (1,569)
Dividends paid to shareholders (1,047) (1,035)
Repurchase of common stock (5,273) -
Excess tax benefits from share-based compensation
arrangements 745 3,959
Other, net (278) (16)
-------- --------
NET CASH FROM FINANCING ACTIVITIES (4,753) (32,876)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (4,361) (31)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 51,108 46,215
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $46,747 $46,184
======== ========
CONTACT: Universal Forest Products
Lynn Afendoulis, 616-365-1502
Director, Corporate Communications
SOURCE: Universal Forest Products