Universal Forest Products reports strong 4th quarter and annual results for 2004
Net sales up 18% for the 4th quarter and 29% for the year
Diluted EPS increased 35% for the 4th quarter and 19% for the
year
GRAND RAPIDS, MI – January 31, 2005–Universal Forest Products, Inc. (NASDAQ: UFPI) today announced results for the fourth quarter and year ended December 25, 2004 that exceeded its internal targets for sales and earnings growth.
Net sales for the quarter were $535.8 million, an increase of 17.9% over net sales of $454.5 million in the fourth quarter of 2003. Net sales for the year were $2.45 billion compared to 2003 net sales of $1.90 billion, a 29.2% increase. The company estimates that higher lumber and chemical prices contributed approximately 18% to annual net sales growth but only 6% to the growth in the fourth quarter.
Diluted earnings per share for the fourth quarter totaled $0.46, a 35.3% increase over reported results for the same period of 2003. This includes a gain from an insurance settlement and related income taxes associated with a fire at its London, Ontario plant. For the year, diluted earnings per share totaled $2.59, up 18.8% over reported results for 2003.
“We experienced strong unit sales growth, especially in our site-built and industrial market segments, where we're focusing many of our efforts,” said William G. Currie, Universal's chief executive officer and vice chairman. “We're also seeing a continued rebound in the manufactured housing market, led by modular home construction, and we had a powerful increase in unit sales to those customers.”
“Results like these are possible when you have a sound business model, a great management team, and skilled employees committed to best practices,” he added. “We're seeing growth and strong results because we're working hard, making good decisions, and creating opportunity and enthusiasm for the future. It's a great way to begin celebrating our 50th year as a company.”
Unit sales were down only in the company's Do-It-Yourself retail market. Currie attributed that primarily to higher lumber and chemical prices, which appear to be having an impact on demand.
Universal posted the following year-over-year sales results:
· For the year, D-I-Y retail sales
increased 9.0% over 2003 to $981.6 million. Fourth quarter sales
to this market were down 1.3% from 2003;
· Site-built construction sales for 2004 of $631.7
million, up 56.7% over annual sales for 2003; fourth quarter sales
increased 34.3% over 2003;
· Industrial sales for the year totaled $454.7 million,
an increase of 45.1% over 2003. Fourth quarter 2004 sales were
up 28.0% over the same period last year; and
· Manufactured housing sales for 2004 were $385.3
million, up 36.6% for the year. Fourth quarter sales to this market
were up 27.3% over 2003.
The Company achieved those results in spite of financial challenges relating to a disappointing framing venture in the West, which saw significant losses during the year.
“We're putting the problems of that venture behind us,” Currie said. “We also are pleased that our plant in London, Ontario, which was destroyed by a fire last April, is back in operation. That fire had a significant negative impact on our results and on the operations of a number of other Universal plants that took on production to meet our customer needs.”
Outlook
The Company anticipates continued growth in its business in 2005.
Key assumptions with respect to the Company's 2005 outlook include:
· Modest increases in interest rates
are mitigated by favorable demographic trends and economic conditions
resulting in a strong site-built construction market.
· The continued recovery of the manufactured housing
market as many customers switch production to modular housing.
· A stable D-I-Y retail market.
· Continued opportunities for market share gains
in both the site-built construction and industrial business.
· Improved results from our framing operations in
the West.
· The completion of strategic business acquisitions.
· A stable lumber market.
With these factors in mind, the Company is targeting unit sales growth of 7% to 12% and net earnings growth of 10% to 15% in 2005 over results for 2004, adjusted to exclude the gain from the insurance settlement and related income taxes. In addition, these targets do not include the impact of adopting FASB statement 123R which requires the Company to expense the effect of unvested stock options previously granted and any future grants beginning the third quarter of 2005.
Universal Forest Products will conduct a conference call to discuss information included in this news release and related matters at 11:00 a.m. EST on Tuesday, February 1, 2005. The conference call will be hosted by William G. Currie and will be available for analysts and institutional investors domestically at (866) 814-1921 or internationally at (703) 639-1364. Use conference call ID #634528. The conference call will be available simultaneously and in its entirety to all interested investors and news media through a web cast at www.ufpi.com (click on Investor Relations).
Celebrating its 50th anniversary, 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 services for the site-built sector. In conjunction with its customers, Universal uses its engineering and manufacturing expertise, coupled with highly skilled employees, to design and construct buildings and housing. 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 Twelve Months Ending
December 2004/2003
| (In thousands, except per share data) |
Quarter Period> | |||
|---|---|---|---|---|
| 2004 | 2003 | |||
| Net Sales |
$535,754
|
100% |
$454,470
|
100% |
| Cost of Goods Sold |
472,475
|
88.19 |
399,593
|
87.93 |
| Gross Profit |
63,279
|
11.81 |
54,877
|
12.07 |
| Selling, General and Administrative Expenses |
46,981
|
8.77 |
42,591
|
9.37 |
| Gain on Insurance Settlement1 |
(1,391)
|
-0.26 |
-
|
0.00 |
| Earnings From Operations |
17,689
|
3.30 |
12,286
|
2.70 |
| Other Expense (Income) | ||||
 Interest
Expense |
3,591
|
0.67 |
3,242
|
0.71 |
| Interest
Income |
(60)
|
-0.01 |
(86)
|
-0.02 |
| Net
gain on Sale ofReal
Estate and Interestin
Subsidiary |
(426)
|
-0.08 |
-
|
0.00 |
|
3,105
|
0.58 |
3,156
|
0.69 | |
| Earnings Before Income Taxes and Minority Interest |
14,584
|
2.72 |
9,130
|
2.01 |
| Income Taxes1 |
5,912
|
1.10 |
3,361
|
0.74 |
| Earnings Before Minority Interest |
8,672
|
1.62 |
5,769
|
1.27 |
| Minority Interest |
(18)
|
0.00 |
483
|
0.11 |
| Net Earnings |
$8,654
|
1.62 |
$6,252
|
1.38 |
| Earnings Per Share-Basic |
$0.48
|
$0.35
|
||
| Earnings Per Share-Diluted |
$0.46
|
$0.34
|
||
| Weighted Average Shares Outstanding |
18,112
|
17,808
|
||
| Weighted Average Shares Outstanding with Common Stock Equivalents |
18,964
|
18,647
|
||
| (In thousands, except per share data) |
Year | |||
|---|---|---|---|---|
| 2004 | 2003 | |||
| Net Sales |
$2,453,281
|
100% |
$1,898,830
|
100% |
| Cost of Goods Sold |
2,157,028
|
87.92 |
1,640,844
|
86.41 |
| Gross Profit |
296,253
|
12.08 |
257,986
|
13.59 |
| Selling, General and Administrative Expenses |
201,335
|
8.21 |
177,824
|
9.36 |
| Gain on Insurance Settlement1 |
(1,391)
|
-0.06 |
-
|
0.00 |
| Earnings From Operations |
96,309
|
3.93 |
80,162
|
4.22 |
| Other Expense (Income) | ||||
| Interest
Expense |
14,904
|
0.61 |
14,589
|
0.77 |
| Interest
Income |
(284)
|
-0.01 |
(219)
|
-0.01 |
| Net
gain on Sale ofReal
Estate and Interestin
Subsidiary |
(1,370)
|
-0.06 |
-
|
0.00 |
|
13,250
|
0.54 |
14,370
|
0.76 | |
| Earnings Before Income Taxes and Minority Interest |
83,059
|
3.39 |
65,792
|
3.46 |
| Income Taxes1 |
31,462
|
1.28 |
24,325
|
1.28 |
| Earnings Before Minority Interest |
51,597
|
2.10 |
41,467
|
2.18 |
| Minority Interest |
(2,994)
|
-0.12 |
(1,348)
|
-0.07 |
| Net Earnings |
48,603
|
1.98 |
$40,119
|
2.11 |
| Earnings Per Share-Basic |
$2.70
|
$2.26
|
||
| Earnings Per Share-Diluted |
$2.59
|
$2.18
|
||
| Weighted Average Shares Outstanding |
18,032
|
17,761
|
||
| Weighted Average Shares Outstanding with Common Stock Equivalents |
18,771
|
18,379
|
||
Supplemental Sales Data
| Quarter Period | ||||
|---|---|---|---|---|
| Market Classification | 2004 | 2003 | ||
| Do-It-Yourself/Retail |
$177,395
|
34% |
$179,685
|
39% |
| Site-Built Construction |
151,871
|
28% |
113,047
|
25% |
| Manufactured Housing |
98,398
|
18% |
77,318
|
17% |
| Industrial and Other |
108,090
|
20% |
84,420
|
19% |
| Total |
$535,754
|
100% |
$454,470
|
100% |
Supplemental Sales Data
| Year to Date | ||||
|---|---|---|---|---|
| Market Classification | 2004 | 2003 | ||
| Do-It-Yourself/Retail |
$981,576
|
39% |
900,150
|
47% |
| Site-Built Construction |
631,676
|
26% |
403,201
|
21% |
| Manufactured Housing |
385,326
|
16% |
282,139
|
15% |
| Industrial and Other |
454,703
|
19% |
313,340
|
17% |
| Total |
$2,453,281
|
100% |
$1,898,830
|
100% |
| 1 "Income Taxes" includes approximately $451,000 associated with the "Gain on Insurance Settlement". | ||||
Consolidated Balance Sheets (unaudited)
December 2004/2003
| >Assets | Liabilities and Shareholders' Equity | ||||
|---|---|---|---|---|---|
| 2004 | 2003 | 2004 | 2003 | ||
| Current Assets | Current Liabilities | ||||
| Cash and cash equivalents |
$25,274
|
$17,430 | Notes payable |
-
|
$1,726 |
| Accounts receivable |
151,811
|
137,660 | Accounts payable and accrued liabilities |
161,832
|
135,560 |
| Inventories |
212,921
|
169,561 | Current portion of long-term debt and capital leases |
22,033
|
6,411 |
| Other current assets |
16,477
|
9,446 | |||
| Total Current Assets |
406,483
|
334,097 | Total Current Liabilities |
183,865
|
143,697 |
| Other Assets |
7,952
|
6,811 | Long-Term Debt and Capital Leases, less current portion |
185,109
|
205,049 |
| Intangible Assets, Net |
131,652
|
131,819 | Other Liabilities |
36,617
|
33,081 |
| Property, Plant and Equipment, Net |
216,273
|
214,204 | Shareholders' Equity |
356,769
|
305,104 |
| Total Assets |
$762,360
|
$686,931 | Total Liabilities and Shareholders' Equity |
$762,360
|
$686,931 |
Consolidated Statements of Cash
Flows (Unaudited)
For the Twelve Months Ending
December 2004/2003
| (In thousands) | 2004 | 2003 |
|---|---|---|
| Cash Flows From Operating Activities: | ||
| Net earnings | $48,603 | $40,119 |
| Adjustments to reconcile net earnings to net cash from operating activities: | ||
| Depreciation | 28,453 | 25,638 |
| Amortization of intangibles | 2,752 | 1,909 |
| Deferred income taxes | 790 | 1,746 |
| Minority Interest | 2,994 | 1,348 |
| Loss on sale of interest in subsidiary | 193 | |
| Gain on insurance settlement | (1,391) | |
| (Gain) Loss on sale or impairment of property, plant and equipment | (710) | 1,050 |
| Changes in: | ||
| Accounts receivable | (16,107) | (32,074) |
| Inventories | (42,817) | (3,555) |
| Accounts payable | 7,371 | 23,476 |
| Accrued liabilities and other | 20,103 | 10,718 |
| Net Cash From Operating Activities | 50,234 | 70,375 |
| Cash Flows From Investing Activities: | ||
| Purchases of property, plant and equipment | (40,935) | (40,578) |
| Purchases of licensing agreements | - | (150) |
| Aquisitions, net of cash received | (10,075) | (787) |
| Sale of interest in subsidiary | 4,679 | - |
| Proceeds from sale of property, plant and equipment | 5,226 | 6,221 |
| Insurance proceeds | 2,000 | - |
| Othe, net | 1,636 | 3,882 |
| Net Cash From Investing Activities | (37,469) | (31,412) |
| Cash Flows From Financing Activities: | ||
| Net borrowings (repayments) under revolving credit facilities and notes payable | 547 | (29,657) |
| Repayment of long-term debt | (6,392) | (6,140) |
| Proceeds from issuance of common stock | 2,861 | 1,281 |
| Distributions to minority shareholder | (1,123) | (833) |
| Dividends paid to shareholders | (1,796) | (1,689) |
| Repurchase of common stock | (129) | (2,029) |
| Other, net | 1,111 | - |
| Net Cash From Financing Activities | (4,921) | (39,067) |
| Net Change in Cash and Cash Equivalents | 7,844 | (104) |
| Cash and Cash Equivalents, Beginning of Year | 17,430 | 17,534 |
| Cash and Cash Equivalents, End of Year | $25,274 | $17,430 |
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 |