UFP posts 4th quarter sales increase; sales grow in three of four markets
Net earnings for the year were $21.0 million; Q4 loss attributed to housing market
GRAND RAPIDS, Mich., 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.
Click here to view 4th quarter 2007 financial highlights (pdf – 11 KB)