Universal Forest Products, Inc. (Nasdaq: UFPI) today reported second-quarter 2011 results, including net sales of $544.1 million, a decrease of almost 15% from net sales of $638.6 million for the same period of 2010. Sales were hampered by weak consumer spending on larger-ticket home-improvement items like fencing and decking during what historically is the busiest selling season of the year. Unit sales decreased an estimated 5% for the quarter; selling prices were down an estimated 10%, due to lower lumber prices, compared to the second quarter of 2010. Additionally, last year’s sales were boosted by the federal stimulus program, including the housing tax credit, which expired at the end of April 2010. Decreases in second-quarter 2011 unit sales to the retail building materials, residential construction and manufactured housing markets were offset by increases in unit sales to the commercial construction and concrete forming and industrial markets.

Net earnings for the quarter were $4.3 million, or $0.22 per diluted share, compared to net earnings of $13.7 million, or $0.70 per diluted share, for the same period of 2010. Profits in the quarter were negatively affected by severance and early retirement charges totaling $0.11 per diluted share after deducting income tax expense.

“These are challenging times, but we are positioning the Company for better results. We have cut costs and implemented plans intended to maintain our strengths and capitalize on our opportunities moving forward,” said outgoing CEO Michael B. Glenn. “We’re maintaining a keen focus on costs and on prudent, conservative decision-making that will create opportunities for sustainable growth and success.”

In June 2011, the Company announced measures to align its costs with its business, including cuts that are expected to result in annualized savings of approximately $10 million. The Company also announced organizational changes intended to more strongly position it for improving sales and profitability.

Weak retail sales posed a major challenge for the Company in the second quarter. Additionally, a declining lumber market in 2011 until June hurt the Company’s margins. However, after 11 straight weeks of decline, the lumber market stopped its fall and remained stable through the month. The composite lumber price was down approximately 16% in the second quarter of 2011 compared to the same period of last year, but was just 1.9% lower in June 2011 from June 2010.

“In June of this year, the lumber market began to stabilize and we began to see improvement in our year-over-year comparisons,” Glenn explained. “While we still have our challenges – a soft economy, rising fuel costs, uncertain markets – we are as well-positioned as ever with a solid balance sheet, efficient operations, highly skilled employees and a diversified business model.”

By market, Universal posted the following gross sales results for the second quarter (the following reflects the Company’s recent reclassification of customers into five categories, from the previous four, to more accurately depict the growing scope of its work):

Retail building materials: $287.5 million, a decrease of 18.6% from the same period of 2010. (This category includes Do-It-Yourself retailers as well as distributors, pro-dealers and other retail customers.) Unit sales were down approximately 8%, coupled with an 11% decrease in selling prices due to the lumber market. The quarter’s results were affected by weak retail sales in some of the Company’s larger product categories, such as decks and fencing. As housing prices have dipped and homeowners have struggled to maintain equity in their real estate investments, they have delayed plans to build larger-ticket items like decks and fences. The Company believes this business will rebound as the economy improves. The Company also remains dedicated to diversifying its customer base by continuing to grow sales with independent retailers and distributors.

Industrial packaging/components: $126.5 million, a decrease of 2.0% from the same period of 2010. (This category still includes packaging, crating and other products for manufacturers; however, it no longer includes concrete forming, which has been grouped with commercial construction.) An increase in unit sales of 7% was offset by a 9% decrease in selling prices due to the lumber market. While growth in this market slowed during the quarter, it remains an area of enormous opportunity for sales and profitability for the Company, and an area of focus. The Company netted approximately 300 new customers in this category during the second quarter of 2011; however, our rate of growth of business with existing customers declined somewhat, reflecting soft manufacturing output in the United States. The Company continues to pick up market share and is focused on growing its business in this still-largely fragmented industry.

Manufactured housing: $64.6 million, down 22.0% from the same period of 2010. (As indicated, this category includes manufactured housing and RV business.) An 11% decline in unit sales was coupled with an 11% decrease in selling prices. The industry saw a 14% decline in HUD-code shipments for the combined months of April and May 2011, the latest statistics available. Second-quarter shipment statistics for modular homes were not available, although the first quarter saw a decline of 3.2% from the same period of 2010. The Company continues to expand the products it offers to customers in this category through its expanded distribution business.

Residential construction: $56.7 million, a decrease of 15.5% from the same period of 2010. (This category includes builders of single- and multifamily homes.) Unit sales were down approximately 7% and selling prices were down approximately 8%, due to the lumber market. The most recent statistics available indicate that single family housing starts were down 20% from March through May 2011 from the same period of 2010, while multifamily starts increased 34% from March through May 2011 over 2010. The Company remains focused on multifamily and government projects, where it sees more opportunity for growth than in single-family residential construction.

Commercial construction and concrete forming: $20.8 million, up 23.2% over the second quarter of 2010. (This includes non-residential construction and concrete forming.) A 39% increase in unit sales was offset by a 16% decrease in selling prices, due to the lumber market. Industry wide, nonresidential construction projects were down 6.3% year-to-date in May 2011 from the same period of 2010, indicating the Company is picking up share in this market and substantiating the validity of its focus on growing business in commercial construction and concrete forming.

OUTLOOK

The Company believes continued challenging economic conditions and uncertainties in the housing market limit its ability to provide meaningful guidance for ranges of likely financial performance; therefore, the Company will not resume the practice of providing guidance in the foreseeable future.

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. ET on Thurs., July 14, 2011. The call will be hosted by outgoing CEO Michael B. Glenn and CFO Michael Cole, and will be available for analysts and institutional investors domestically at 866-202-0886 or internationally at 617-213-8841. Use conference pass code 11302414. The conference call will be available simultaneously and in its entirety to all interested investors and news media through a webcast at http://www.ufpi.com. A replay of the call will be available through August 14, 2011, domestically at 888-286-8010 or internationally at 617-801-6888. Use replay pass code 57548930.

UNIVERSAL FOREST PRODUCTS, INC.

Universal Forest Products, Inc. is a holding company that provides capital, management and administrative resources to subsidiaries that design, manufacture and market wood and wood-alternative products for DIY/retail home centers and other retailers, structural lumber products for the manufactured housing industry, engineered wood components for residential and commercial construction, specialty wood packaging and components for various industries, and forming products for concrete construction. The Company's consumer products subsidiary offers a large portfolio of outdoor living products, including wood composite decking, decorative balusters, post caps and plastic lattice. Its lawn and garden group offers an array of products, such as trellises and arches, to retailers nationwide. Universal’s subsidiaries also provide framing services for the site-built construction market. Founded in 1955, Universal Forest Products is headquartered in Grand Rapids, Mich., with operations throughout North America. For more about Universal Forest Products, go to 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.
 
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED
JUNE 2011/2010
               
      Quarter Period         Year to Date    
(In thousands, except per share data)     2011         2010         2011         2010    
       
 
 
NET SALES $ 544,139 100 % $ 638,635 100 % $ 931,372 100 % $ 1,031,593 100 %
 
COST OF GOODS SOLD   487,552   89.6   560,749   87.8   833,371   89.5   902,073   87.4
 
GROSS PROFIT 56,587 10.4 77,886 12.2 98,001 10.5 129,520 12.6
 
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 45,328 8.3 54,041 8.5 91,816 9.9 102,530 9.9
NET LOSS ON DISPOSITION OF ASSETS,
EARLY RETIREMENT, AND
OTHER IMPAIRMENT AND EXIT CHARGES   3,482   0.6   212   -   3,489   0.4   384   -
 
EARNINGS FROM OPERATIONS 7,777 1.4 23,633 3.7 2,696 0.3 26,606 2.6
 
INTEREST, NET   797   0.1   833   0.1   1,432   0.2   1,599   0.2
 
EARNINGS BEFORE INCOME TAXES 6,980 1.3 22,800 3.6 1,264 0.1 25,007 2.4
 
INCOME TAXES   2,502   0.5   8,332   1.3   215   -   8,819   0.9
 
NET EARNINGS 4,478 0.8 14,468 2.3 1,049 0.1 16,188 1.6
 
LESS NET EARNINGS ATTRIBUTABLE TO
NONCONTROLLING INTEREST   (201 ) -   (752 ) (0.1 )   (442 ) -   (1,485 ) (0.1 )
 
NET EARNINGS ATTRIBUTABLE TO
CONTROLLING INTEREST $ 4,277   $ 13,716   $ 607   $ 14,703  
 
 
EARNINGS PER SHARE - BASIC $ 0.22 $ 0.71 $ 0.03 $ 0.76
 
EARNINGS PER SHARE - DILUTED $ 0.22 $ 0.70 $ 0.03 $ 0.75
 
WEIGHTED AVERAGE SHARES OUTSTANDING 19,413 19,259 19,360 19,258
 
WEIGHTED AVERAGE SHARES OUTSTANDING
WITH COMMON STOCK EQUIVALENTS 19,546 19,531 19,513 19,524
 
 

SUPPLEMENTAL SALES DATA
Quarter Period Year to Date

Market Classification
2011 % 2010 % 2011 % 2010 %
Retail Building Materials $ 287,528 51 % $ 353,060 54 % $ 462,809 48 % $ 540,086 51 %
Residential Construction 56,655 10 % 67,035 10 % 104,486 11 % 120,739 12 %
Commercial Construction and Concrete Forming 20,841 4 % 16,914 3 % 35,270 4 % 31,302 3 %
Industrial 126,541 23 % 129,073 20 % 236,186 25 % 224,665 21 %
Manufactured Housing and Recreation Vehicles   64,597   12 %   82,831   13 %   111,633   12 %   131,766   13 %
Total Gross Sales 556,162 100 % 648,913 100 % 950,384 100 % 1,048,558 100 %
Sales Allowances   (12,023 )   (10,278 )   (19,012 )   (16,965 )
Total Net Sales $ 544,139   $ 638,635   $ 931,372   $ 1,031,593  
 
 
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 2011/2010
                       
(In thousands)
ASSETS     2011   2010       LIABILITIES AND EQUITY     2011   2010
 
CURRENT ASSETS CURRENT LIABILITIES
Cash and cash equivalents $ - $ 695 Cash overdraft $ 8,671 $ -
Accounts receivable 204,220 229,199 Accounts payable 76,521 83,467
Inventories 204,590 191,569 Accrued liabilities 55,314 77,957
Assets held for sale 5,082 - Current portion of long-term
Other current assets   20,333   18,110 debt and capital leases 23,772 692
   
TOTAL CURRENT ASSETS 434,225 439,573
TOTAL CURRENT LIABILITIES 164,278 162,116
OTHER ASSETS 11,453 5,300
INTANGIBLE ASSETS, NET 170,178 172,065 LONG-TERM DEBT AND
PROPERTY, PLANT CAPITAL LEASE OBLIGATIONS,
AND EQUIPMENT, NET 216,997 226,426 less current portion 52,200 67,932
    OTHER LIABILITIES 35,518 33,468
EQUITY   580,857   579,848
 
TOTAL ASSETS $ 832,853 $ 843,364 TOTAL LIABILITIES AND EQUITY $ 832,853 $ 843,364
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED
JUNE 2011/2010
(In thousands)     2011       2010
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net earnings attributable to controlling interest $ 607 $ 14,703
Adjustments to reconcile net earnings attributable to controlling interest
to net cash from operating activities:
Depreciation 14,452 15,199
Amortization of intangibles 2,873 3,590
Expense associated with share-based compensation arrangements 1,013 1,078
Excess tax benefits from share-based compensation arrangements (120 ) (265 )
Expense associated with stock grant plans 150 117
Deferred income tax credit (87 ) (195 )
Net earnings attributable to noncontrolling interest 442 1,485
Net loss on sale or impairment of assets 21 118
Changes in:
Accounts receivable (77,166 ) (120,961 )
Inventories (13,865 ) (26,175 )
Accounts payable 16,927 33,706
Accrued liabilities and other   (3,158 )   21,627  
NET CASH FROM OPERATING ACTIVITIES (57,911 ) (55,973 )
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment (12,159 ) (11,551 )
Acquisitions, net of cash received - (5,834 )
Proceeds from sale of property, plant and equipment 1,197 382
Purchase of product technology (77 ) -
Advances of notes receivable - (1,000 )
Collections of notes receivable 294 103
Other, net   19     21  
NET CASH FROM INVESTING ACTIVITIES (10,726 ) (17,879 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facilities 20,931 15,000
Repayment of long-term debt (272 ) (255 )
Proceeds from issuance of common stock 575 1,331
Purchase of additional noncontrolling interest (100 ) (1,227 )
Distributions to noncontrolling interest (835 ) (472 )
Capital contribution from noncontrolling interest 80 -
Dividends paid to shareholders (3,905 ) (3,871 )
Repurchase of common stock - (3,648 )
Excess tax benefits from share-based compensation arrangements 120 265
Other, net   9     14  
NET CASH FROM FINANCING ACTIVITIES   16,603     7,137  
 
NET CHANGE IN CASH AND CASH EQUIVALENTS (52,034 ) (66,715 )
 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   43,363     67,410  
 
CASH (OVERDRAFT) AND CASH EQUIVALENTS, END OF PERIOD $ (8,671 ) $ 695  
 
SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Interest $ 1,820 $ 1,777
Income taxes 2,964 (8,470 )

Copyright Business Wire 2010

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