Universal Posts Strong Growth in the Second Quarter of 2004; Net Earnings Increase 15%
GRAND RAPIDS, MI., July 12, 2004– Universal Forest Products (NASDAQ: UFPI) today announced strong second quarter results with a 34.4% increase in net sales to $742.6 million, up from $552.5 million reported for the same period last year. Net sales for the first six months of 2004 were $1.2 billion, a 33.1% increase over net sales of $908.1 million for the same period of 2003.
Net earnings for the quarter were $19.8 million, a 15.1% increase over net earnings of $17.2 million for the same period in 2003. Net earnings for the year to date were $25.3 million, a 16.9% increase over 2003 year-to-date net earnings of $21.7 million.
By market, Universal posted second quarter net sales
of:
· $344.6 million in
D-I-Y/retail, up 14.0% over the same quarter last year;
· $170.3 million in
site-built construction, an increase of 68.2% over last year;
· $124.3 million in
industrial, up 56.2% over last year, and
· $103.4 million in
manufactured housing, a 48.9% increase over last year.
“I'm continually proud of our performance and of the hard work of our people,” said CEO William G. Currie. “We controlled what we could and delivered very strong results, especially in our site-built and industrial markets.”
A few significant factors contributed to the company's performance. Total unit sales increased more than 11% for the quarter thanks to strong unit sales to the site-built, industrial and manufactured housing markets. A decline in units sold to the Do-It-Yourself retail market is attributed to record precipitation in many areas of the country – notably the Midwest, Texas, and portions of the East – that forced homeowners to delay home improvement projects. “This showcases the power of our balanced business model and geographic diversity, which allow us to thrive even when one of our markets faces a challenge,” Currie explained.
The remaining 23% of the company's 34.4% increase in net sales is attributable to the lumber market, which was higher during the second quarter of 2004. Gross profit increased 17.9% for the quarter, exceeding the Company's unit sales increase due, in part, to the impact of the rising lumber market in April and May on products whose selling prices are tied to the lumber market. Other factors affecting the quarter's results included:
· A fire in April that destroyed a truss plant in Thorndale, Ontario at the start of the building season. Although Universal maintained its service to customers by moving the work to other plants in the U.S., transportation costs and operating inefficiencies resulted in greater costs to the company. Management currently estimates that the insured value of the property destroyed will exceed its net book value.
· The opening of several new plants this year. As anticipated, the plants were in a start-up phase and were not profitable during their first months of operation.
· The company continues to bring its multi-family framing operations in the West up to Universal's management standards and profitability targets. “This is a new area of business for us and, as we stated previously, we've experienced some challenges. We believe the changes we've made eventually will lead us to improved profitability,” Currie said.
Outlook
The Company currently anticipates continued growth in its business
in 2004 and reaffirms its targets for both unit sales and diluted
earnings per share growth of 10% to 14% for the year.
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 13, 2004. The conference call will be hosted by William G. Currie and will be available for analysts and institutional investors domestically at (888) 792-1079 or internationally at (703) 871-3092. Use conference call ID #507398. The conference call will be available simultaneously, and in its entirety, to all interested investors and news media through a webcast at www.ufpi.com.
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. Among the company's newest and fastest-growing ventures are framing and installation services for the site-built and retail sectors. In conjunction with its customers, Universal uses its engineering and manufacturing expertise, coupled with highly skilled employees, to design and construct buildings and decks. For information about Universal Forest Products on the Internet, please visit the Company's web site at 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. :
Financial highlights to follow:
Consolidated Statements of Earnings
(unaudited)
For the Six Months Ended
June 2004/2003
| (In thousands, except per share data) |
Quarter Period | |||
|---|---|---|---|---|
| 2004 | 2003 | |||
| Net Sales |
$742,568
|
100% |
$552,463
|
100% |
| Cost of Goods Sold |
649,747
|
87.50 |
473,721
|
85.75 |
| Gross Profit |
92,821
|
12.50 |
78,742
|
14.25 |
| Selling, General and Administrative Expenses |
56,082
|
7.55 |
46,697
|
8.45 |
| Earnings From Operations |
36,739
|
4.95 |
32,045
|
5.80 |
| Other Expense (income) | ||||
| Interest Expense |
3,869
|
0.52 |
3,958
|
0.72 |
| Interest Revenue |
(102)
|
-0.01 |
(84)
|
-0.02 |
| Gain on Sale of Real Estate and Interest in Subsidiary |
(575)
|
-0.08 |
-
|
0.00 |
|
3,192
|
0.43 |
3,874
|
0.70 | |
| Earnings Before Income Taxes and Minority Interest |
33,547
|
4.52 |
28,171
|
5.10 |
| Income Taxes |
12,645
|
1.70 |
10,458
|
1.89 |
| Earnings Before Minority Interest |
20,902
|
2.81 |
17,713
|
3.21 |
| Minority Interest |
(1,146)
|
-0.15 |
(551)
|
-0.10 |
| Net Earnings |
$19,756
|
2.66 |
$17,162
|
3.11 |
| Earnings per Share-Basic |
$1.09
|
$0.97
|
||
| Earnings per Share-Diluted |
$1.06
|
$0.94
|
||
| Weighted Average Shares Outstanding |
18,050
|
17,741
|
||
| Weighted Average Shares Outstanding with Common Stock Equivalents |
18,702
|
18,193
|
||
Consolidated Statements of Earnings
(unaudited)
For the Six Months Ended
June 2004/2003
| (In thousands, except per share data) |
Year to Date | |||
|---|---|---|---|---|
| 2004 | 2003 | |||
| Net Sales |
$1,208,233
|
100% |
$908,082
|
100% |
| Cost of Goods Sold |
1,059,051
|
87.65 |
777,536
|
85.62 |
| Gross Profit |
149,182
|
12.35 |
130,546
|
14.38 |
| Selling, General and Administrative Expenses |
100,011
|
8.28 |
86,885
|
9.57 |
| Earnings From Operations |
49,171
|
4.07 |
43,661
|
4.81 |
| Other Expense (income) | ||||
| Interest Expense |
7,411
|
0.61 |
7,745
|
0.85 |
| Interest Revenue |
(185)
|
-0.02 |
(131)
|
-0.01 |
| Gain on Sale of Real Estate and Interest in Subsidiary |
(944)
|
-0.08 |
-
|
0.00 |
|
6,282
|
0.52 |
7,614
|
0.84 | |
| Earnings Before Income Taxes and Minority Interest |
42,889
|
3.55 |
36,047
|
3.97 |
| Income Taxes |
16,289
|
1.35 |
13,249
|
1.46 |
| Earnings Before Minority Interest |
26,600
|
2.20 |
22,798
|
2.51 |
| Minority Interest |
(1,227)
|
-0.11 |
(1,136)
|
-0.13 |
| Net Earnings |
$25,323
|
2.10 |
$21,662
|
2.39 |
| Earnings per Share-Basic |
$1.41
|
$1.22
|
||
| Earnings per Share-Diluted |
$1.35
|
$1.19
|
||
| Weighted Average Shares Outstanding |
17,994
|
17,735
|
||
| Weighted Average Shares Outstanding with Common Stock Equivalents |
18,694
|
18,222
|
||
Supplemental Sales Data
| Quarter Period | ||||
|---|---|---|---|---|
| Market Classification | 2004 | 2003 | ||
| Do-It-Yourself/Retail |
$344,582
|
46% |
$302,224
|
55% |
| Site-Built Construction |
170,325
|
23% |
101,242
|
18% |
| Manufactured Housing |
103,403
|
14% |
69,453
|
13% |
| Industrial and Other |
124,258
|
17% |
79,544
|
14% |
| Total |
$742,568
|
100% | $552,463 | 100% |
| Year to Date | ||||
|---|---|---|---|---|
| Market Classification | 2004 | 2003 | ||
| Do-It-Yourself/Retail |
$523,491
|
43% |
$458,510
|
50% |
| Site-Built Construction |
285,163
|
24% |
178,237
|
20% |
| Manufactured Housing |
180,370
|
15% |
126,465
|
14% |
| Industrial and Other |
219,209
|
18% |
144,870
|
16% |
| Total |
$1,208,233
|
100% |
$908,082
|
100% |
Consolidated Balance Sheets (unaudited)
June 2004/2003
| Assets | Liabilities and Shareholders' Equity | ||||
|---|---|---|---|---|---|
2004 |
2003 | 2004 |
2003 | ||
| Current Assets | Current Liabilities | ||||
| Cash and cash equivalents |
$25,080
|
$20,574 | Notes payable |
-
|
$1,679 |
| Accounts receivable |
246,850
|
200,033 | Accounts payable and accrued liabilities |
206,156
|
162,402 |
| Inventories |
227,455
|
166,742 | Current portion of long-term debt and capital leases |
498
|
6,271 |
| Other current assets |
11,809
|
5,424 | |||
| Total Current Assets |
511,194
|
392,773 | Total Current Liabilities |
206,654
|
170,352 |
| Other Assets |
6,974
|
6,401 | Long-Term Debt and Capital Leases, less current portion |
287,387
|
255,975 |
| Intangible Assets, net |
132,748
|
131,858 | Other Liabilities |
33,317
|
29,819 |
| Property, Plant and Equipment, Net |
208,142
|
211,277 | Shareholders' Equity |
331,700
|
286,163 |
| Total Assets |
$859,058
|
$742,309 | Total Liabilities and Shareholders' Equity |
$859,058
|
$742,309 |
Consolidated Statements of Cash
Flows (unaudited)
For the Six Months Ended
June 2004/2003
| (In thousands) | 2004 | 2003 |
|---|---|---|
| Cash Flows From Operating Activities: | ||
| Net earnings | $25,323 | $21,662 |
| Adjustments to reconcile net earnings to net cash from operating activities: | ||
| Depreciation | 13,408 | 12,202 |
| Amortization of intangibles | 940 | 1,033 |
| Deferred income taxes | 366 | (1,438) |
| Minority Interest | 1,277 | 1,136 |
| Loss on sale of interest in subsidiary | 193 | - |
| (Gain) Loss on sale or impairment of property, plant and equipment | (730) | 640 |
| Changes in: | ||
| Accounts receivable | (112,052) | (94,237) |
| Inventories | (56,963) | (736) |
| Accounts payable | 54,711 | 52,039 |
| Accrued liabilities and other | 20,714 | 10,974 |
| Net Cash From Operating Activities | (52,813) | 3,275 |
| Cash Flows From Investing Activities: | ||
| Purchases of property, plant and equipment | (16,607) | (20,689) |
| Purchases of licensing agreements | - | (150) |
| Aquisitions, net of cash received | (10,075) | (187) |
| Sale of interest in subsidiary | 4,679 | - |
| Proceeds from sale of property, plant and equipment | 3,287 | 1,147 |
| Other | 1,678 | 1,961 |
| Net Cash From Investing Activities | (17,038) | (17,918) |
| Cash Flows From Financing Activities: | ||
| Net (repayments) borrowings under revolving credit facilities and notes payable | 83,062 | 26,437 |
| Repayment of long-term debt | (6,117) | (6,167) |
| Proceeds from issuance of common stock | 1,828 | 873 |
| Distributions to minority shareholder | (125) | (633) |
| Dividends paid to shareholders | (879) | (798) |
| Repurchase of common stock | (129) | (2,029) |
| Other | (121) | - |
| Net Cash From Financing Activities | 77,501 | 17,683 |
| Net Change in Cash and Cash Equivalents | 7,650 | 3,040 |
| Cash and Cash Equivalents, Beginning of Period | 17,430 | 17,534 |
| Cash and Cash Equivalents, End of Period | $25,080 | $20,574 |
Contact
| At the Company: | Lynn Afendoulis, Director of Public Affairs, 616-364-6161 |
| At Fleishman Hillard: | Jeremy Skule, Vice President, 212-453-2245 |