Add
UFPI to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| UFPI > SEC Filings for UFPI > Form 10-Q on 23-Apr-2009 | All Recent SEC Filings |
23-Apr-2009
Quarterly Report
• Our overall unit sales decreased 23%, as sales out of existing facilities and operations we closed decreased by 24% this quarter and we experienced a 1% increase in unit sales as a result of acquisitions.
• Single-family housing starts decreased approximately 53% in January and February of 2009 compared to 2008 as a result of an excess supply of homes, tight credit conditions, and an increase in foreclosures. In addition multi-family and commercial construction has decreased approximately 50% and 23%, respectively, in January and February 2009 compared to the same period of 2008.
• Consumer spending for large repair/remodel projects has decreased due to general economic conditions, among other factors. The Consumer Confidence Index has fallen from 66 in March of 2008 to 26 in March of 2009, and the same store sales of "big box" home improvement retailers have declined at double-digit rates.
• Shipments of HUD code manufactured homes were down 46% in January and February and industry sales of modular homes have also continued to decline due, in part, to an excess supply of site-built homes and tight credit conditions.
• Our gross margin increased to 12.9% from 11.2% in 2008 primarily due to our improvement in labor costs as a percentage of net sales as a result of plant consolidation and right-sizing efforts in 2008.
• Our SG&A expenses are down approximately $9.5 million, or 16%, from the first quarter of 2008, due to our right-sizing efforts and plant consolidation actions we took last year.
• Our interest expense decreased by $2.5 million, or 70%, as our interest-bearing debt and sale of receivables program declined to $112 million at the end of March of 2009 compared to $245 million at the end of March of 2008.
Outlook
We expect the current challenging conditions to prevail throughout 2009;
however, our strong financial position, solid business model, diverse business
opportunities and ability to adjust appropriately to our opportunities position
us well to endure challenging times. We believe that current economic conditions
and uncertainties limit our ability to provide meaningful guidance for ranges of
likely financial performance; therefore, we will not provide annual sales or net
earnings targets for the foreseeable future.
Route 2012
Since we discussed our Growth & Opportunity 2010 ("GO 2010") goals in our annual
report on form 10-K for the period ended December 30, 2006, industry and general
economic conditions have significantly deteriorated. In addition, the Lumber
Market has declined from an average of $388/mbf in 2005 to an average of
$197/mbf in 2009; a 49% decline from when we first set our goals, which has
adversely impacted our sales.
In place of our GO 2010 goals, we have a new four-year growth plan titled "Route
2012," which includes goals to be achieved by the end of our fiscal year 2012
including:
• Increase sales to $3 billion.
• Improve productivity by 15%.
• Improve profitability by three hundred basis points through productivity improvements, cost reductions, and growth.
• Improve receivables cycles in our industrial, site-built and manufactured housing markets by 10% by reducing the amount of our receivables that are paid past the agreed upon due date.
• Improve inventory turnover by 10%.
UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
HISTORICAL LUMBER PRICES
The following table presents the Random Lengths framing lumber composite price
for the three months ended March 28, 2009 and March 29, 2008:
Random Lengths Composite
Average $/MBF
2009 2008
January $ 198 $ 249
February 199 244
March 195 240
First quarter average $ 197 $ 244
First quarter percentage change from 2008 (19.3 %)
|
In addition, a Southern Yellow Pine ("SYP") composite price, which we prepare and use, is presented below. Sales of products produced using this species, which primarily consists of our preservative-treated products, may comprise up to 50% of our sales volume.
Random Lengths SYP
Average $/MBF
2008 2007
January $ 328 $ 337
February 321 330
March 319 331
First quarter average $ 323 $ 333
First quarter percentage change from 2008 (3.0 %)
|
• Products with selling prices indexed to the reported Lumber Market with a fixed dollar "adder" to cover conversion costs and profits. These products primarily include treated lumber, remanufactured lumber, and trusses sold to the manufactured housing industry. For these products, we estimate the customers' needs and carry anticipated levels of inventory. Because lumber costs are incurred in advance of final sale prices, subsequent increases or decreases in the market price of lumber impact our gross margins. For these products, our margins are exposed to changes in the trend of lumber prices.
Changes in the trend of lumber prices have their greatest impact on the
following products:
• Products with significant inventory levels with low turnover rates, whose
selling prices are indexed to the Lumber Market. In other words, the longer
the period of time these products remain in inventory, the greater the
exposure to changes in the price of lumber. This would include treated
lumber, which comprises approximately 12% of our total sales. This exposure
is less significant with remanufactured lumber, trusses sold to the
manufactured housing market, and other similar products, due to the higher
rate of inventory turnover. We attempt to mitigate the risk associated with
treated lumber through vendor consignment inventory programs. (Please refer
to the "Risk Factors" section of our annual report on form 10-K, filed with
the United States Securities and Exchange Commission.)
• Products with fixed selling prices sold under long-term supply arrangements, particularly those involving multi-family construction projects. We attempt to mitigate this risk through our purchasing practices by locking in costs.
UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
In addition to the impact of the Lumber Market trends on gross margins, changes
in the level of the market cause fluctuations in gross margins when comparing
operating results from period to period. This is explained in the following
example, which assumes the price of lumber has increased from period one to
period two, with no changes in the trend within each period.
Period 1 Period 2
Lumber cost $ 300 $ 400
Conversion cost 50 50
= Product cost 350 450
Adder 50 50
= Sell price $ 400 $ 500
Gross margin 12.5 % 10.0 %
|
As is apparent from the preceding example, the level of lumber prices does not impact our overall profits, but does impact our margins. Gross margins are negatively impacted during periods of high lumber prices; conversely, we experience margin improvement when lumber prices are relatively low.
BUSINESS COMBINATIONS
See Notes to Consolidated Condensed Financial Statements, Note H, "Business
Combinations."
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the components of our
Consolidated Condensed Statements of Earnings as a percentage of net sales.
For the Three Months Ended
March 28, March 29,
2009 2008
Net sales 100.0 % 100.0 %
Cost of goods sold 87.1 88.8
Gross profit 12.9 11.2
Selling, general, and administrative expenses 13.5 12.0
Net (gain) loss on disposition of assets and other
impairment and exit charges (0.3 ) 0.1
Loss from operations (0.3 ) (0.9 )
Interest, net 0.3 0.7
Loss before income taxes (0.6 ) (1.6 )
Income tax benefit (0.3 ) (0.7 )
Net loss (0.3 ) (0.9 )
Less net earnings attributable to noncontrolling
interest (0.0 ) (0.0 )
Net loss attributable to controlling interest (0.3 )% (0.9 )%
|
• Expanding geographically in our core businesses.
• Increasing sales of "value-added" products and framing services. Value-added product sales primarily consist of fencing, decking, lattice, and other specialty products sold to the DIY/retail market, specialty wood packaging, engineered wood components, and "wood alternative" products. Engineered wood components include roof trusses, wall panels, and floor systems. Wood alternative products consist primarily of composite wood and plastics. Although we consider the treatment of dimensional lumber with certain chemical preservatives a value-added process, treated lumber is not presently included in the value-added sales totals.
• Maximizing unit sales growth while achieving return on investment goals.
The following table presents, for the periods indicated, our gross sales (in thousands) and percentage change in gross sales by market classification.
For the Three Months Ended
March 28, % March 29,
Market Classification 2009 Change 2008
DIY/Retail $ 168,134 (4.2 ) $ 175,460
Site-Built Construction 60,765 (43.2 ) 107,008
Industrial 103,658 (25.8 ) 139,608
Manufactured Housing 36,550 (52.2 ) 76,441
Total Gross Sales 369,107 (26.0 ) 498,517
Sales Allowances (7,385 ) (9,005 )
Total Net Sales $ 361,722 $ 489,512
|
Note: In the first quarter of 2009, we reviewed the classification of our customers and made certain reclassifications. Prior year information has been restated to reflect these reclassifications.
Three Months Ended
March 28, March 29,
2009 2008
Value-Added 60.6 % 60.9 %
Commodity-Based 39.4 % 39.1 %
|
Value-added sales decreased 26% in the first quarter of 2009 compared to 2008,
primarily due to decreased sales of trusses, turn-key framing and installed
sales, engineered wood products, and manufactured component lumber.
Commodity-based sales decreased 25% comparing the first quarter of 2009 with the
same period of 2008, primarily due to decreased sales of non-manufactured brite
and other lumber and panels.
COST OF GOODS SOLD AND GROSS PROFIT
Our gross profit percentage increased to 12.9% from 11.2%. In addition, our
gross profit dollars decreased by almost 15% comparing the first quarter of 2009
with the same period of 2008, which compares favorably with our 23% decrease in
unit sales. Our improved gross margin is primarily due to:
• a reduction in our labor costs as a percentage of net sales due to plant
consolidation and right-sizing efforts previously taken
• a reduction in our material costs as percentage of sales as a result of better inventory management to protect margins and a rebate received from a vendor
• efforts to rationalize business and receive price increases or turn down business that does not meet minimum margin requirements
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("SG&A") expenses decreased by approximately
$9.5 million, or 16.1%, in the first quarter of 2009 compared to the same period
of 2008, while we reported a 23% decrease in unit sales. Existing operations
decreased $6.5 million, operations we closed decreased $3.6 million, and
business acquisitions added $0.6 million in SG&A expenses. The decrease in SG&A
expenses at our existing operations was primarily due to a decline in wages and
related costs due to a reduction in headcount and a decline in many other
account categories as a result of efforts to control costs. These decreases were
partially offset by an increase in bad debt expense and amortization expense
associated with intangible assets we acquired in 2008. Our SG&A expenses
increased as a percentage of sales due to a combination of certain fixed costs
(e.g. building rent, property insurance, and amortization expense) and bad debt
expense.
NET (GAIN) LOSS ON DISPOSITION OF ASSETS AND OTHER IMPAIRMENT AND EXIT CHARGES
We incurred $1.3 million of asset impairments and other costs associated with
idled facilities and down-sizing efforts in the first quarter of 2009. These
costs were offset by a $2.4 million gain on the sale of certain real estate. We
believe these actions will improve our cost structure, profitability and cash
flow in future reporting periods.
INTEREST, NET
Net interest costs were lower in the first quarter of 2009 compared to the same
period of 2008 due to lower debt balances combined with a decrease in short-term
interest rates upon which our variable rate debt is based.
INCOME TAXES
Effective tax rates differ from statutory federal income tax rates, primarily
due to provisions for state and local income taxes and permanent tax
differences. Our effective tax rate increased to 45.3% in the first three months
of 2009, compared to 43.2% in the first three months of 2008 primarily due to
the timing of certain permanent tax differences.
OFF-BALANCE SHEET TRANSACTIONS
We have no significant off-balance sheet transactions other than operating
leases.
UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
LIQUIDITY AND CAPITAL RESOURCES
The table below presents, for the periods indicated, a summary of our cash flow
statement (in thousands):
Three Months Ended
March 28, March 29,
2009 2008
Cash from operating activities $ (18,057 ) $ (5,426 )
Cash from investing activities 2,625 6,524
Cash from financing activities 11,522 (11,119 )
Net change in cash and cash equivalents (3,910 ) (10,021 )
Cash and cash equivalents, beginning of period 13,337 43,605
Cash and cash equivalents, end of period $ 9,427 $ 33,584
|
In general, we financed our growth in the past through a combination of
operating cash flows, our revolving credit facility, industrial development
bonds (when circumstances permit), and issuance of long-term notes payable at
times when interest rates are favorable. We have not issued equity to finance
growth except in the case of a large acquisition. We manage our capital
structure by attempting to maintain a targeted ratio of debt to equity and debt
to earnings before interest, taxes, depreciation and amortization. We believe
this is one of many important factors to maintaining a strong credit profile,
which in turn helps ensure timely access to capital when needed. We are
currently below our internal targets and plan to manage our capital structure
conservatively in light of current economic conditions.
Seasonality has a significant impact on our working capital from March to August
which historically resulted in negative or modest cash flows from operations in
our first and second quarters. Conversely, we experience a substantial decrease
in working capital from September to February which results in significant cash
. . .
|
|