Universal Forest Products

Universal Forest Products posts another strong quarter; reports 20% increase in net earnings. The Company raises its target for diluted earnings per share growth to 12% to 15% for the year.

GRAND RAPIDS, MI., October 11, 2004 – Universal Forest Products, Inc. (NASDAQ: UFPI) today announced record results for the third quarter, including a 20% increase in net earnings. Net earnings for the third quarter 2004 were $14.6 million, compared to net earnings of $12.2 million for the same period in 2003. For the year-to-date, 2004 net earnings were $39.9 million, an increase of 18% over year-to-date net earnings of $33.9 million in 2003.

Universal reported net sales for the quarter of $709.3 million, a 32.3% increase over net sales of $536.3 million in the third quarter of 2003. Net sales for the first nine months of 2004 were $1.92 billion, a 32.8% increase over net sales of $1.44 billion for the same period in 2003. The higher lumber market accounted for 21% of the net sales increase for the third quarter 2004 and for 22% of the 2004 year-to-date net sales increase.

“There's not much that can stop the people of Universal when they're focused on aggressive goals,” said CEO and Vice Chairman William G. Currie. “They know how and where to place their energy and resources, and they can adjust direction if circumstances warrant.”

“These numbers are the result of hard work and determination – the very qualities that have spurred Universal's success for nearly 50 years,” he added.

The Company produced significant year-over-year sales increases of 74% and 52% in site-built construction and industrial products, respectively. Both are markets in which Universal sees strong opportunity for continuing growth. “Although we enjoy leadership positions in these arenas, we believe there's a tremendous opportunity to expand market share and we'll continue to leverage our strengths to grow in these fragmented markets,” he said.

In addition, Currie expressed optimism for the growing modular housing segment of the manufactured housing market. “We have some exciting new products that are allowing manufacturers to enhance and customize their homes, and that means opportunity for Universal,” Currie said.

He noted that D-I-Y sales remain soft due to increases in lumber costs, which may be prompting homeowners to delay improvement projects; the hurricanes that effectively put a halt to improvement projects during the quarter in Florida and the Southeastern United States; and the higher cost of treated wood due to industry changes in the treating compounds, which may be affecting consumers' purchasing decisions.

Following are Universal's third-quarter 2004 sales by market:
· $280.7 million in D-I-Y/retail, an increase of 7.2% from the same period last year;
· $194.6 million in site-built construction, an increase of 73.8 % over last year;
· $127.4 million in industrial/other, a 51.5% increase over last year; and
· $106.5 million in manufactured housing, a 35.9% increase over last year.

Based on the strength of its year-to-date results, the Company raised its targeted range for earnings per share growth to between 12% and 15% (previously it was between 10% and 14%). The Company also reaffirmed its unit sales growth targeted range of between 10% and 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, Oct. 12, 2004. The conference call will be hosted by William G. Currie and will be available for analysts and institutional investors domestically at (866) 814-1933 or internationally at (703) 639-1365. Use conference call ID #570112. 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, wood and composite components 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 Nine Months Ended
September 2004/2003

(In thousands,
except per share data)		 Quarter Period
 
2004
2003
Net Sales
$709,294
100%
$536,278
100%
Cost of Goods Sold
625,502
88.19
463,715
86.47
Gross Profit
83,792
11.81
72,563
13.53
Selling, General and Administrative Expenses
54,604
7.70
48,424
9.03
Earnings From Operations
29,188
4.12
24,139
4.50
Other Expense (Income)
Interest Expense
3,641
0.51
3,526
0.66
Interest Income
(39)
-0.01
(2)
0.00
Net gain on sale of real
estate and interest in
subsidiary
-
0.00
-
0.00
 
3,602
0.51
3,524
0.66
Earnings Before Income Taxes, and Minority Interest
25,586
3.61
20,615
3.84
Income Taxes
9,261
1.31
7,715
1.44
Earnings Before Minority Interest
16,325
2.30
12,900
2.41
Minority Interest
(1,699)
-0.24
(695)
-0.13
Net Earnings
$14,626
2.06
$12,205
2.28
Earnings per Share-Basic
$0.81
$0.69
Earnings per Share-Diluted
$0.78
$0.66
Weighted Average Shares Outstanding
18,083
17,765
Weighted Average Shares Outstanding with Common Stock Equivalents
18,784
18,425

Consolidated Statements of Earnings (unaudited)
For the Nine Months Ended
September 2004/2003

(In thousands,
except per share data)		 Year to Date
 
2004
2003
Net Sales
$1,917,527
100%
$1,444,360
100%
Cost of Goods Sold
1,684,553
87.85
1,241,251
85.94
Gross Profit
232,974
12.15
203,109
14.06
Selling, General and Administrative Expenses
154,615
8.06
135,309
9.37
Earnings From Operations
78,358
4.09
67,800
4.69
Other Expense (Income)
Interest Expense
11,052
0.58
11,271
0.78
Interest Income
(224)
-0.01
(133)
-0.01
Net gain on sale of real
estate and interest in
subsidiary
(944)
-0.05
-
0.00
 
9,884
0.52
11,138
0.77
Earnings Before Income Taxes, and Minority Interest
68,475
3.57
56,662
3.92
Income Taxes
25,550
1.33
20,964
1.45
Earnings Before Minority Interest
42,925
2.24
35,698
2.47
Minority Interest
(2,976)
-0.16
(1,831)
-0.13
Net Earnings
$39,949
2.08
33,867
2.34
Earnings per Share-Basic
$2.22
$1.91
Earnings per Share-Diluted
$2.13
$1.85
Weighted Average Shares Outstanding
18,015
17,745
Weighted Average Shares Outstanding with Common Stock Equivalents
18,716
18,290

Supplemental Sales Data

  Quarter Period
Market Classification
2004
2003
Do-It-Yourself/Retail
$280,700
40%
$261,812
49%
Site-Built Construction
194,643
27%
111,980
21%
Manufactured Housing
106,555
15%
78,394
14%
Industrial and Other
127,396
18%
84,092
16%
Total
$709,294
100%
$536,278
100%

  Year to Date
Market Classification
2004
2003
Do-It-Yourself/Retail
$804,188
42%
$720,311
50%
Site-Built Construction
479,808
25%
290,225
20%
Manufactured Housing
286,925
15%
204,863
14%
Industrial and Other
346,606
18%
228,961
16%
Total
$1,917,527
100%
$1,444,360
100%

Consolidated Balance Sheets (unaudited)
September 2004/2003

(in thousands)
Assets Liabilities and Shareholders' Equity
  2004
2003
   2004 2003
Current Assets
Current Liabilities
Cash and cash equivalents
$19,285
$15,340
 Notes payable
$-
$645
Accounts receivable
251,045
157,768
 Accounts payable and accrued liabilities
205,221
160,344
Inventories
206,644
160,955
 Current portion of long-term debt and capital leases
527
6,263
Other current assets
10,036
7,795
  
Total Current Assets
487,010
341,858
 Total Current Liabilities
205,748
167,252
Other Assets
6,906
5,679
 Long-Term Debt and Capital Leases, less current portion
247,978
195,833
Intangible Assets, Net
132,285
131,545
 Other Liabilities
34,303
31,123
Property, Plant and Equipment, Net
209,240
214,337
 Shareholders' Equity
347,412
299,211
Total Assets
$835,441
$693,419
 Total Liabilities and Shareholders' Equity
$835,441
$693,419

Consolidated Statements of Cash Flows (unaudited)
For the Nine Months Ended
September 2004/2003

(In thousands) 2004 2003
Cash Flows From Operating Activities:    
Net earnings $39,949 $33,867
Adjustments to reconcile net earnings to net cash from operating activities:    
Depreciation 20,418 18,702
Amortization of intangibles 1,760 1,519
Deferred income taxes (90) (1,301)
Minority Interest 2,976 1,831
Loss on sale of interest in subsidiary 193 -
(Gain) Loss on sale or impairment of property, plant and equipment (432) 918
Changes in:    
Accounts receivable (111,925) (53,545)
Inventories (36,152) 5,051
Accounts payable 39,225 37,717
Accrued liabilities and other 30,877 23,145
Net Cash From Operating Activities (13,201) 67,904
     
Cash Flows From Investing Activities:    
Purchases of property, plant and equipment (25,062) (33,349)
Aquisitions, net of cash received (10,075) (787)
Sale of interest in subsidiary 4,679 -
Proceeds from sale of property, plant and equipment 3,469 6,104
Insurance proceeds 2,000 -
Other, net 1,567 2,909
Net Cash From Investing Activities (23,422) (25,123)
     
Cash Flows From Financing Activities:    
Net (repayments) borrowings under revolving credit facilities and notes payable 43,152 (36,884)
Repayment of long-term debt (6,352) (6,150)
Proceeds from issuance of common stock 2,194 1,719
Distributions to minority shareholder (125) (833)
Dividends paid to shareholders (897) (798)
Repurchase of common stock (129) (2,029)
Other, net 635 -
Net Cash From Financing Activities 38,478 (44,975)
Net Change in Cash and Cash Equivalents 1,855 (2,194)
Cash and Cash Equivalents, Beginning of Period 17,430 17,534
Cash and Cash Equivalents, End of Period $19,285 $15,340

 

Contact

At the Company: Michael R. Cole, Chief Financial Officer of Universal Forest Products, +1-616-364-6161
At Fleishman Hillard: Jim Ankner, Vice President of Fleishman Hillard, +1-212-453-2198