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UFPI Posts 4th Quarter Sales Increase; Sales Grow in Three of Four Markets
GRAND RAPIDS, Mich.-(Business Wire)-February 6, 2008 - Universal Forest Products, Inc. (NASDAQ:UFPI) today announced fourth quarter 2007 results including net sales of $512.6 million, an increase of $13.4 million over net sales of $499.2 million for the same period of 2006. For the year, net sales of $2.51 billion were down from net sales of $2.66 billion in 2006; however, the Company increased sales to each of its markets with the exception of site-built construction, which was impacted by a 28.6% drop in single-family housing starts for the year ended December 2007 compared to the year ended December 2006.
For the year, Universal reported net earnings of $21.0 million, down from net earnings of $70.1 million in 2006. The Company pointed to mounting price pressure that negatively impacted margins, especially in the site-built construction market, and its recent decision to close and sell certain operations that resulted in severance and impairment charges of nearly $7 million after taxes as the main contributors to a loss of $11.0 million in the fourth quarter of 2007. For the same period in 2006, the Company reported net earnings of $9.2 million. Excluding certain favorable nonrecurring tax adjustments of $3.4 million, net earnings would have been $5.8 million for the fourth quarter of 2006.
"Despite some of the toughest conditions I can remember in 34 years in the industry, we gained market share and increased sales in the fourth quarter," said President and CEO Michael B. Glenn. "We also took aggressive actions to align our manufacturing capacity with current business conditions, take excess costs and capital out of our operations, and establish a more efficient structure to meet current and future needs. I'm confident in our position moving forward."
By market, Universal posted the following gross sales results:
— D-I-Y/retail annual sales for 2007 of $990.7, a 3.0% increase over 2006. Fourth quarter 2007 sales to this market were $165.6 million, up 10.5% over the same period last year.
— Site-built construction annual sales of $592.1 million for 2007, down 27.1% from 2006. Fourth quarter 2007 sales to this market were $132.4 million, a decrease of 16.5% from 2006.
— Industrial sales for the year of $588.2 million, an increase of 6.8% over 2006. Fourth quarter 2007 sales increased 16.0% over the same period last year to $135.8 million.
— Manufactured housing sales for 2007 of $390.5 million, up 2.2% over 2006. Fourth quarter sales to this market were up 7.9% over the fourth quarter of 2006 to $87.3 million. The Company posted those results despite an estimated 18.5% drop in annual shipments of HUD-code homes in 2007 from 2006. Annual data for fourth-quarter modular shipments was not available; year-to-date modular shipments were down 17.9% in the third quarter 2007 from the same period in 2006.
Selling prices were impacted by a weak lumber market, which was off 13% for the year and more than 5% for the fourth quarter (following a 16% decline in 2006).
The Company is focused on: balancing its site-built business by growing multifamily and light commercial construction; adding to its consumer products portfolio; adding new customers in industrial, including concrete forming; and seeking acquisition opportunities that enhance its long-term growth potential. On February 5, 2008, the Company closed on the $14 million purchase of International Wood Industries, Inc., a California-based manufacturer of crates, boxes and pallets used to transport agricultural products, home furnishings and equipment, and goods for a variety of industries. IWI also has facilities in Alaska and Hawaii, expanding Universal's geographic reach.
Glenn also pointed to early successes in managing expenses and working capital through a philosophy of continuous improvement that is eliminating waste and creating capacity for growth, and that has allowed for the effective consolidation of a few operations serving the same geographic location.
"In the fourth quarter of a challenging year, our people helped maintain the flexibility and determination for which Universal is known by adapting our company and strategies to the new realities of the marketplace," Glenn said. "We're prepared for exciting growth and opportunity when the markets return to strength."
OUTLOOK
Key assumptions with respect to the Company's 2008 outlook include:
— A continued decline in housing starts for the year and a soft DIY market.
— A continued depressed lumber market as mills face lower demand and as the global supply of wood continues to expand.
— Persistent price pressure, especially early in the year, from competition among suppliers who continue to offer price concessions to win business.
— Continued market share gains in the site-built market due in part to gains in multifamily and commercial construction, and in the industrial market.
— Maintaining a strong market share with DIY and manufactured housing customers.
— No permanent plant closures (or closures that could result in asset impairment charges). Any plant consolidations or closures will be temporary in nature, creating no asset impairment charges.
With these factors in mind, including the anticipated net sales and net earnings of IWI, the Company is targeting net sales of between $2.45 billion and $2.55 billion, and net earnings of between $22 million and $27 million for 2008.
CONFERENCE CALL
Universal Forest Products will conduct a conference call to discuss information included in this news release and related matters at 8:30 a.m. EST on Thursday, Feb. 7, 2008. 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 (866) 700-6979 or internationally at (617) 213-8836. Use conference pass code number 45547193. 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 Friday, March 7, 2008, domestically at (888) 286-8010 and internationally at (617) 801-6888. Use replay pass code number 77384183.
UNIVERSAL FOREST PRODUCTS
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 market and forms for concrete construction. For information about Universal Forest Products, visit www.ufpi.com.
Please be aware that: Any statements included in this press release that are not historical facts 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 from forward-looking statements are the following: Adverse lumber market trends, competitive activity, negative economic trends, government regulations, and weather. Certain of these risk factors and additional information are included in the Company's reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission. -0- *T CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) FOR THE TWELVE MONTHS ENDED DECEMBER 2007/2006 Quarter Period ————————————————- (In thousands, except per share data) 2007 2006 ———————— ———————— NET SALES $512,637 100% $499,243 100% COST OF GOODS SOLD 460,998 89.93 431,115 86.35 ————- ————- GROSS PROFIT 51,639 10.07 68,128 13.65 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 56,470 11.02 56,792 11.38 NET LOSS ON SALE OR IMPAIRMENT OF PROPERTY, PLANT & EQUIPMENT 6,768 1.32 (64) -0.01 ————- ————- EARNINGS FROM OPERATIONS (11,599) -2.26 11,400 2.28 OTHER EXPENSE (INCOME) Interest expense 3,576 0.70 3,296 0.66 Interest income (516) -0.10 (787) -0.16 ————- ————- 3,060 0.60 2,509 0.50 ————- ————- EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST (14,659) -2.86 8,891 1.78 INCOME TAXES (4,237) -0.83 (203) -0.04 ————- ————- EARNINGS BEFORE MINORITY INTEREST (10,422) -2.03 9,094 1.82 MINORITY INTEREST (558) -0.11 146 0.03 ————- ————- NET EARNINGS $(10,980) -2.14 $ 9,240 1.85 ========= ========= EARNINGS PER SHARE - BASIC $ (0.58) $ 0.49 EARNINGS PER SHARE - DILUTED $ (0.57) $ 0.48 WEIGHTED AVERAGE SHARES OUTSTANDING 19,016 18,918 WEIGHTED AVERAGE SHARES OUTSTANDING WITH COMMON STOCK EQUIVALENTS 19,190 19,375 CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) FOR THE TWELVE MONTHS ENDED DECEMBER 2007/2006 Year to Date ——————————————————- (In thousands, except per share data) 2007 2006 ————————— ————————— NET SALES $2,513,178 100% $2,664,572 100% COST OF GOODS SOLD 2,204,149 87.70 2,282,890 85.68 —————- —————- GROSS PROFIT 309,029 12.30 381,682 14.32 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 248,782 9.90 257,796 9.67 NET LOSS ON SALE OR IMPAIRMENT OF PROPERTY, PLANT & EQUIPMENT 6,755 0.27 141 0.01 —————- —————- EARNINGS FROM OPERATIONS 53,492 2.13 123,745 4.64 OTHER EXPENSE (INCOME) Interest expense 17,033 0.68 14,053 0.53 Interest income (2,150) -0.09 (2,443) -0.09 —————- —————- 14,883 0.59 11,610 0.44 —————- —————- EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST 38,609 1.54 112,135 4.21 INCOME TAXES 15,396 0.61 38,760 1.45 —————- —————- EARNINGS BEFORE MINORITY INTEREST 23,213 0.92 73,375 2.75 MINORITY INTEREST (2,168) -0.09 (3,250) -0.12 —————- —————- NET EARNINGS $ 21,045 0.84 $ 70,125 2.63 ============ =========== EARNINGS PER SHARE - BASIC $ 1.10 $ 3.73 EARNINGS PER SHARE - DILUTED $ 1.09 $ 3.62 WEIGHTED AVERAGE SHARES OUTSTANDING 19,056 18,820 WEIGHTED AVERAGE SHARES OUTSTANDING WITH COMMON STOCK EQUIVALENTS 19,362 19,370 SUPPLEMENTAL SALES DATA ———————————————————- Quarter Period ——————————————— Market Classification 2007 % 2006 % ———————————————————- ————- —— ————- —— Do-It-Yourself/Retail $165,619 32% $149,902 30% Site-Built Construction 132,397 25% 158,477 31% Industrial 135,752 26% 117,069 23% Manufactured Housing 87,326 17% 80,962 16% ————- —— ————- —— Total Gross Sales 521,094 100% 506,410 100% Sales Allowances (8,457) (7,167) ————- ————- Total Net Sales $512,637 $499,243 ========= ========= SUPPLEMENTAL SALES DATA —————————————————— Year to Date ————————————————- Market Classification 2007 % 2006 % —————————————————— —————- —— —————- —— Do-It-Yourself/Retail $ 990,659 39% $ 962,240 36% Site-Built Construction 592,148 23% 811,923 30% Industrial 588,195 23% 550,669 20% Manufactured Housing 390,483 15% 382,203 14% —————- —— —————- —— Total Gross Sales 2,561,485 100% 2,707,035 100% Sales Allowances (48,307) (42,463) —————- —————- Total Net Sales $2,513,178 $2,664,572 =========== =========== *T -0- *T CONSOLIDATED BALANCE SHEETS (UNAUDITED) DECEMBER 2007/2006 (In thousands) LIABILITIES AND SHAREHOLDERS' ASSETS 2007 2006 EQUITY 2007 2006 ——————————————————————————————————— CURRENT CURRENT ASSETS LIABILITIES Cash and cash Accounts equivalents $43,605 $51,108 payable $83,505 $94,441 Accounts Accrued receivable 142,562 148,242 liabilities 78,275 97,101 Inventories 235,868 245,118 Current portion of long-term debt and Assets held for capital sale 33,624 leases 945 680 Other current assets 44,866 30,667 ————————- TOTAL CURRENT LIABILITIES 162,725 192,222 ————————— TOTAL CURRENT ASSETS 500,525 475,135 LONG-TERM DEBT AND CAPITAL LEASES, less current OTHER ASSETS 8,094 7,404 portion 205,126 169,417 INTANGIBLE ASSETS, OTHER NET 174,121 180,567 LIABILITIES 52,481 37,060 PROPERTY, PLANT SHAREHOLDERS' AND EQUIPMENT, EQUITY 536,668 514,742 NET 274,260 250,335 ————————— ————————- TOTAL LIABILITIES AND SHAREHOLDERS' TOTAL ASSETS $957,000 $913,441 EQUITY $957,000 $913,441 ======== ======== ======== ======== *T -0- *T CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE TWELVE MONTHS ENDED DECEMBER 2007/2006 (In thousands) 2007 2006 ——————————— CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 21,045 $ 70,125 Adjustments to reconcile net earnings to net cash from operating activities: Depreciation 39,547 33,771 Amortization of intangibles 8,034 5,751 Expense associated with share-based compensation arrangements 505 972 Expense associated with stock grant plans 174 197 Deferred income taxes (4,134) (1,100) Minority interest 2,168 3,250 Gain on sale of interest in subsidiary (140) - Net loss on sale or impairment of property, plant and equipment 6,755 141 Changes in: Accounts receivable 19,538 41,912 Inventories 27,795 22,262 Accounts payable (9,569) (14,576) Accrued liabilities and other (23,885) (6,385) Excess tax benefits from share-based compensation arrangements (755) (3,998) ————- ————— NET CASH FROM OPERATING ACTIVITIES 87,078 152,322 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant, and equipment (39,360) (43,504) Acquisitions, net of cash received (57,087) (71,814) Proceeds from sale of interest in subsidiary 400 - Proceeds from sale of property, plant and equipment 4,769 1,245 Advances on notes receivable (1,002) - Collection of notes receivable 347 1,614 Other, net (38) 754 ————- ————— NET CASH FROM INVESTING ACTIVITIES (91,971) (111,705) CASH FLOWS FROM FINANCING ACTIVITIES: Net (repayments) borrowings under revolving credit facilities 34,648 (37,700) Repayment of long-term debt (28,466) (3,228) Proceeds from issuance of common stock 3,539 5,938 Distributions to minority shareholder (1,797) (2,586) Dividends paid to shareholders (2,185) (2,072) Repurchase of common stock (8,777) - Excess tax benefits from share-based compensation arrangements 755 3,998 Other, net (327) (74) ————- ————— NET CASH FROM FINANCING ACTIVITIES (2,610) (35,724) ————- ————— NET CHANGE IN CASH AND CASH EQUIVALENTS (7,503) 4,893 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 51,108 46,215 ————- ————— CASH AND CASH EQUIVALENTS, END OF PERIOD $ 43,605 $ 51,108 ========= ========== *T
