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CST: 12/11/2019 11:07:47   

UFPI reports record third-quarter earnings

19 Days ago

- Net earnings up 26 percent, unit sales up 7 percent -

GRAND RAPIDS, Mich., Oct. 23, 2019 (GLOBE NEWSWIRE) -- Universal Forest Products, Inc. (Nasdaq: UFPI), soon to be known as UFP Industries, Inc., today announced net sales of $1.16 billion and record net earnings attributable to controlling interests of $51.9 million, or 84 cents per diluted share, for the quarter ended September 28, 2019.

“Our record results are the reflection of the hard work of our employees and the successful execution of our strategies to grow and improve our business. Our growth in organic unit sales was very strong, and we continue to successfully add new, value-added products and services to our offerings that are improving our profitabilty,” said CEO Matthew J. Missad.

The Company’s mix of value-added sales relative to commodity sales improved from 62.1 percent in the third quarter of 2018 to 67.6 percent in the third quarter of 2019, and new product sales grew 7 percent over the same period of 2018. Although lower lumber pricing affected the Company’s third-quarter net sales, unit sales increased 7 percent over the same period of last year, driven mostly by organic sales growth. During the third quarter, the Company acquired Hartford, Wisconsin-based Pallet USA and Bonner, Montana-based Northwest Painting, Inc., expanding its value-added offerings and market presence in the Midwest and Northwest.

“While we are pleased that so many of our operations are performing so well, we know we have operations that can do much better given our culture of continuous improvement, and we have been making changes to improve their performance. This summer, we announced a new organizational structure beginning January 1, 2020, that will allow for a more specialized and consistent sales approach, more efficient use of resources and capital, and quicker introduction of new, value-added products and services. I’m happy to say we have already made great progress toward the reorganization, and our employees are very excited about the new UFP Industries and the new business and career opportunities that are being created. This truly is an exciting time for our Company.”

Third Quarter 2019 Highlights (comparisons on a year-over-year basis):

  • Operating profit of $70.5 million was up 24 percent and net earnings of $51.9 million was up 26 percent
  • EBITDA of $89.7 million was up 23 percent, far exceeding the Company’s unit sales increase of 7 percent
  • Unit sales grew 7 percent; organic sales accounted for 6 percent of the growth while acquisitions added 1 percent 
  • New product sales were $142.9 million, up 7 percent
  • Net sales of $1.16 billion represented a 4 percent decrease; lower lumber prices contributed significantly to the gross sales reduction, as selling prices were down by 11 percent
  • SG&A, excluding bonus expense, as a percentage of gross profit fell from 55.4 percent in the third quarter of 2018 to 49.8 percent during the third quarter of 2019

By market, the Company reported the following third-quarter 2019 results.

Retail

  • $437 million in gross sales, down 1 percent compared to the third quarter of 2018. A unit sales increase of 10 percent was offset by selling prices that were 11 percent lower. Organic growth was responsible for all of the unit sales increase and was largely driven by robust sales of Deckorators decking and deck accessories and new product sales.

Industrial

·$332.5 million in gross sales, down 6 percent from the third quarter of 2018. A unit sales increase of 4 percent was offset by lower selling prices of 10 percent. Organic growth contributed 2 percent of the unit sales increase; acquisitions were responsible for 2 percent. The Company’s focus on improving its product mix has resulted in more value-added sales and fewer commodity sales, improving gross profits.

Construction

·$414.4 million in gross sales, down 5 percent compared to the third quarter of 2018, due to a 13 percent decrease in selling prices and an 8 percent increase in overall unit sales. Unit sales growth was entirely organic, with commercial sales growing 15 percent, residential housing sales growing 6 percent and manufactured housing sales growing 1 percent.

CONFERENCE CALL

Universal Forest Products, soon to be known as UFP Industries, Inc., will conduct a conference call to discuss information included in this news release and related matters at 8:30 a.m. ET on Thursday, October 24, 2019. The call will be hosted by CEO Matthew J. Missad and CFO Michael Cole and will be available for analysts and institutional investors domestically at 866-518-4547 and internationally at 213-660-0879. Analysts and institutional investors should use conference pass code 4270679. The conference call will be available simultaneously and in its entirety to all interested investors, news media and Universal employees through a webcast at http://www.ufpi.com. A replay of the call will be available through November 24, 2019, at 855-859-2056 or 404-537-3406.

UNIVERSAL FOREST PRODUCTS, INC.

Universal Forest Products, Inc., soon to be known as UFP Industries, Inc., is a holding company whose subsidiaries supply wood, wood composite and other products to three robust markets: retail, construction and industrial.  Founded in 1955, the Company is headquartered in Grand Rapids, Mich., with affiliates throughout North America, Europe, Asia and Australia. For more, go to www.ufpi.com.

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the markets we serve, the economy and the Company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” “likely,” “plans,” “projects,” “should,” variations of such words, and similar expressions identify such forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. The Company does not undertake to update forward-looking statements to reflect facts, circumstances, events, or assumptions 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: fluctuations in the price of lumber; adverse or unusual weather conditions; adverse economic conditions in the markets we serve; government regulations, particularly involving environmental and safety regulations; and our ability to make successful business acquisitions. Certain of these risk factors as well as other 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.

Non-GAAP Financial Information

This release includes certain financial information not prepared in accordance with U.S. GAAP. Because not all companies calculate non-GAAP financial information identically (or at all), the presentations herein may not be comparable to other similarly titled measures used by other companies. Management considers EBITDA, a non-GAAP measure, an alternative performance measure which may provide useful information to investors.

Brandon Froysland
Director of Finance
(616) 365-1589


CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (UNAUDITED)    
FOR THE THREE AND NINE MONTHS ENDED    
SEPTEMBER 2019/2018    
  Quarter Period Year to Date    
(In thousands, except per share data)     2019         2018         2019         2018        
                             
                             
                             
NET SALES   $ 1,163,026     100 %   $ 1,212,702     100 %   $ 3,417,969     100 %   $ 3,500,999     100.0 %    
                                     
COST OF GOODS SOLD     975,756     83.9       1,054,029     86.9       2,889,706     84.5       3,045,748     87.0      
                                     
GROSS PROFIT     187,270     16.1       158,673     13.1       528,263     15.5       455,251     13.0      
                                     
SELLING, GENERAL AND                                    
  ADMINISTRATIVE EXPENSES     115,958     10.0       102,292     8.4       334,165     9.8       300,292     8.6      
FOREIGN CURRENCY EXCHANGE (GAIN) LOSS     (306 )   -0       412     -0       118     -0       213     -0      
NET (GAIN) LOSS ON DISPOSITION OF ASSETS     1,151     0.1       (1,022 )   (0.1 )     830     -0       (7,079 )   (0.2 )    
                                     
EARNINGS FROM OPERATIONS     70,467     6.1       56,991     4.7       193,150     5.7       161,825     4.6      
                                     
OTHER EXPENSE, NET     1,490     0.1       1,734     0.1       4,082     0.1       4,862     0.1      
                                     
EARNINGS BEFORE INCOME TAXES     68,977     5.9       55,257     4.6       189,068     5.5       156,963     4.5      
                                     
INCOME TAXES     16,396     1.4       13,189     1.1       45,340     1.3       36,183     1.0      
                                     
NET EARNINGS     52,581     4.5       42,068     3.5       143,728     4.2       120,780     3.4      
                                     
LESS NET EARNINGS ATTRIBUTABLE TO                                    
  NONCONTROLLING INTEREST     (722 )   (0.1 )     (849 )   (0.1 )     (1,814 )   (0.1 )     (2,684 )   (0.1 )    
                                     
NET EARNINGS ATTRIBUTABLE TO                                    
  CONTROLLING INTEREST   $ 51,859     4.5     $ 41,219     3.4     $ 141,914     4.2     $ 118,096     3.4      
                                     
                                     
EARNINGS PER SHARE - BASIC   $ 0.84         $ 0.67         $ 2.30         $ 1.91          
                                     
EARNINGS PER SHARE - DILUTED   $ 0.84         $ 0.66         $ 2.30         $ 1.91          
                                     
                                     
SUPPLEMENTAL DATA                                    
    Quarter Period   Year to Date    
Sales by Market Classification     2019           2018     %     2019           2018     %    
Retail   $ 437,092         $ 441,916     -1 %   $ 1,315,543         $ 1,356,920     -3 %    
Industrial     332,537           353,660     -6 %     1,019,535           986,410     3 %    
Construction     414,401           438,115     -5 %     1,145,064           1,222,395     -6 %    
Total Gross Sales     1,184,030           1,233,691     -4 %     3,480,142           3,565,725     -2 %    
Sales Allowances     (21,004 )         (20,989 )   -0 %     (62,173 )         (64,726 )   4 %    
Total Net Sales   $ 1,163,026         $ 1,212,702     -4 %   $ 3,417,969         $ 3,500,999     -2 %    
                                     
      2019     % of Sales     2018     % of Sales     2019     % of Sales     2018     % of Sales    
SG&A, Excluding Bonus Expense   $ 93,344     8.0     $ 87,967     7.3     $ 280,898     8.2     $ 262,382     7.5      
Bonus Expense     22,614     1.9       14,325     1.2       53,267     1.6       37,910     1.1      
Total SG&A   $ 115,958     10.0     $ 102,292     8.4     $ 334,165     9.8     $ 300,292     8.6      
                                     
SG&A, Excluding Bonus Expense, as a Percentage of Gross Profit     49.8 %         55.4 %         53.2 %         57.6 %        
                                     



CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)      
SEPTEMBER 2019/2018      
       
(In thousands)                              
ASSETS     2019     2018   LIABILITIES AND EQUITY     2019     2018      
                                   
CURRENT ASSETS           CURRENT LIABILITIES              
  Cash and cash equivalents   $ 64,498   $ 26,327     Cash overdraft   $ -   $ 31,115      
  Restricted cash     729     1,024     Accounts payable     180,767     175,912      
  Investments     17,028     15,809     Accrued liabilities     204,529     151,102      
  Accounts receivable     474,648     454,935     Current portion of debt     152     149      
  Inventories     479,356     510,057                      
  Other current assets     55,845     38,699                      
                                   
TOTAL CURRENT ASSETS     1,092,104     1,046,851   TOTAL CURRENT LIABILITIES     385,448     358,278      
                                 
OTHER ASSETS     116,887     22,345   LONG-TERM DEBT AND              
INTANGIBLE ASSETS, NET     286,627     261,666     CAPITAL LEASE OBLIGATIONS     162,853     186,539      
PROPERTY, PLANT           OTHER LIABILITIES     103,221     40,630      
  AND EQUIPMENT, NET     385,007     346,309   EQUITY     1,229,103     1,091,724      
                                   
                                   
TOTAL ASSETS   $ 1,880,625   $ 1,677,171   TOTAL LIABILITIES AND EQUITY   $ 1,880,625   $ 1,677,171      
                                   



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)    
FOR THE NINE MONTHS ENDED    
SEPTEMBER 2019/2018    
(In thousands)         2019       2018      
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net earnings       $ 143,728     $ 120,780      
Adjustments to reconcile net earnings to net cash from operating activities:            
                   
  Depreciation         44,652       40,490      
  Amortization of intangibles       4,690       4,274      
  Expense associated with share-based and grant compensation arrangements     3,105       2,762      
  Deferred income taxes credit       (367 )     (583 )    
  Unrealized gain on investment       (1,611 )     -      
  Net gain on disposition of assets       830       (7,079 )    
  Changes in:                
  Accounts receivable       (127,841 )     (121,067 )    
  Inventories         80,178       (39,448 )    
  Accounts payable and cash overdraft       14,293       38,611      
  Accrued liabilities and other       36,423       21,361      
  NET CASH FROM OPERATING ACTIVITIES     198,080       60,101      
                   
CASH FLOWS FROM INVESTING ACTIVITIES:            
Purchases of property, plant, and equipment       (66,338 )     (74,541 )    
Proceeds from sale of property, plant and equipment       1,180       37,612      
Acquisitions and purchase of noncontrolling interest, net of cash received     (38,710 )     (38,963 )    
Purchases of investments       (6,475 )     (12,401 )    
Proceeds from sale of investments       4,159       3,298      
Other           199       (620 )    
  NET CASH USED IN INVESTING ACTIVITIES     (105,985 )     (85,615 )    
                   
CASH FLOWS FROM FINANCING ACTIVITIES:            
Borrowings under revolving credit facilities       421,464       636,798      
Repayments under revolving credit facilities       (460,537 )     (668,941 )    
Borrowings of debt         -       927      
Repayments of debt         (3,099 )     (5,511 )    
Issuance of long-term debt       -       75,000      
Proceeds from issuance of common stock       812       756      
Distributions to noncontrolling interest       (1,634 )     (2,239 )    
Dividends paid to shareholders       (12,270 )     (11,090 )    
Repurchase of common stock       -       (1,843 )    
Other           41       (55 )    
  NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES     (55,223 )     23,802      
                   
Effect of exchange rate changes on cash       157       247      
NET CHANGE IN CASH AND CASH EQUIVALENTS     37,029       (1,465 )    
                   
ALL CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     28,198       28,816      
                   
ALL CASH AND CASH EQUIVALENTS, END OF PERIOD   $ 65,227     $ 27,351      
                   
Reconciliation of cash and cash equivalents and restricted cash:            
Cash and cash equivalents, beginning of period     $ 27,316     $ 28,339      
Restricted cash, beginning of period       882       477      
All cash and cash equivalents, beginning of period     $ 28,198     $ 28,816      
                   
Cash and cash equivalents, end of period     $ 64,498     $ 26,327      
Restricted cash, end of period       729       1,024      
All cash and cash equivalents, end of period     $ 65,227     $ 27,351      
                   
                   



EBITDA RECONCILIATION (UNAUDITED)  
FOR THE THREE AND NINE MONTHS ENDED  
SEPTEMBER 2019/2018  
    Quarter Period Year to Date  
(In thousands)     2019   2018   2019   2018  
Net earnings   $ 52,581     $ 42,068     $ 143,728     $ 120,780      
Interest expense     1,900       1,945       6,767       5,971      
Interest and investment income     (317 )     (211 )     (1,074 )     (1,109 )    
Unrealized gain on investments     (93 )     -       (1,611 )     -      
Net (gain) loss on disposition of assets     1,151       (1,022 )     830       (7,079 )    
Income taxes     16,396       13,189       45,340       36,183      
Expense associated with share-based compensation arrangements     896       838       3,105       2,762      
Depreciation expense     15,452       14,346       44,652       40,490      
Amortization of intangibles     1,744       1,571       4,690       4,274      
EBITDA   $ 89,710     $ 72,724     $ 246,427     $ 202,272      
                     



CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AS A PERCENTAGE OF SALES    
CURRENT YEAR'S SALES STATED AT LAST YEAR'S SELLING PRICES (UNAUDITED)    
FOR THE THREE MONTHS ENDED - SEPTEMBER 2019/2018    
  Quarter Period    
  Actual Sales Adjusted to
Last Year's
Selling Price
Actual    
    2019       2019       2018        
                       
NET SALES   100.0   %   100.0   %   100.0   %    
COST OF GOODS SOLD   83.9       85.6       86.9        
GROSS PROFIT   16.1       14.4       13.1        
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES   9.9       8.9       8.5        
NET GAIN ON DISPOSITION AND IMPAIRMENT OF ASSETS   0.1       0.1       (0.1 )      
EARNINGS FROM OPERATIONS   6.1       5.4       4.7        
OTHER EXPENSE, NET   0.1       0.1       0.1        
EARNINGS BEFORE INCOME TAXES   5.9       5.3       4.6        
INCOME TAXES   1.4       1.3       1.1        
NET EARNINGS   4.5       4.1       3.5        
LESS NET EARNINGS ATTRIBUTABLE TO                      
  NONCONTROLLING INTEREST   (0.1 )     (0.1 )     (0.1 )      
NET EARNINGS ATTRIBUTABLE TO                      
  CONTROLLING INTEREST   4.5   %   4.0   %   3.4   %    
                       
Note: Actual percentages are calculated and may not sum to total due to rounding.                      
                       
                       
2018 NET SALES $ 1,212,702                    
2019 SELL PRICE DECLINE   11.00   %                
DECREASE IN 2019 NET SALES DUE TO SELL PRICE DECLINE $ 133,397                    
ACTUAL 2019 NET SALES   1,163,026                    
ADJUSTED 2019 NET SALES $ 1,296,423                    
                       
ACTUAL 2019 COST OF GOODS SOLD $ 975,756                    
PLUS DIFFERENCE IN NET SALES (ABOVE)   133,397                    
ADJUSTED 2019 COST OF GOODS SOLD $ 1,109,153                    
                       

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