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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1997
--------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
Commission File Number 0-22684
-------
UNIVERSAL FOREST PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-1465835
------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2801 East Beltline NE, Grand Rapids, Michigan 49505
--------------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (616) 364-6161
NONE
--------------------------------------------------------------
(Former name or former address, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ----
Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date:
Class Outstanding as of May 1, 1997
-------------------------- -----------------------------
Common stock, no par value 17,170,223
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Page 1 of 17
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INDEX
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<CAPTION>
PAGE NO.
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PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
Consolidated Condensed Balance Sheets at March 29, 1997
and December 28, 1996. 3
Consolidated Condensed Statements of Earnings for the Three
Months Ended March 29, 1997 and March 30, 1996. 4
Consolidated Condensed Statements of Cash Flows for the Three
Months Ended March 29, 1997 and March 30, 1996. 5
Notes to Consolidated Condensed Financial Statements. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 7-13
Forward-Looking Statements and Risk Factors. 14
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings - NONE.
Item 2. Changes in Securities. 15
Item 3. Defaults Upon Senior Securities - NONE.
Item 4. Submission of Matters to a Vote of Security Holders - NONE.
Item 5. Other Information - NONE.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit Index. 17
(b) No reports were filed on Form 8-K during the
three months ended March 29, 1997.
</TABLE>
2
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UNIVERSAL FOREST PRODUCTS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
March 29, December 28,
1997 1996
-------------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................ $ 241,381 $ 1,275,636
Accounts receivable ...................... 59,456,565 32,102,276
Inventories:
Raw materials .......................... 32,367,190 32,752,316
Finished goods ......................... 68,780,280 55,767,455
-------------- ------------
101,147,470 88,519,771
Other current assets ..................... 4,680,834 4,659,749
-------------- ------------
TOTAL CURRENT ASSETS .................. 165,526,250 126,557,432
OTHER ASSETS ................................ 4,476,515 4,092,038
NON-COMPETE AGREEMENTS ...................... 2,931,877 3,051,727
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost. ... 106,424,847 103,643,146
Accumulated depreciation and amortization . (45,707,863) (43,967,364)
-------------- ------------
PROPERTY, PLANT AND EQUIPMENT, NET .... 60,716,984 59,675,782
-------------- ------------
$ 233,651,626 $193,376,979
============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable ............................. $ 17,500,000
Accounts payable .......................... 39,950,502 $ 14,100,269
Accrued liabilities:
Compensation and benefits............... 9,953,443 17,736,451
Income taxes............................ 2,599,666 810,927
Other................................... 1,612,440 1,761,486
Current portion of long-term debt
and capital lease obligations............ 3,652,900 3,652,900
-------------- ------------
TOTAL CURRENT LIABILITIES.............. 75,268,951 38,062,033
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, less current portion........... 48,483,249 48,975,502
OTHER LIABILITIES ........................... 6,557,804 6,461,643
SHAREHOLDERS' EQUITY:
Preferred stock, no par value; shares
authorized 1,000,000; issued and
outstanding, none
Common stock, no par value; shares
authorized 25,000,000; issued and
outstanding, 17,072,720 and 17,040,467 ... 17,072,720 17,040,467
Additional paid-in capital ................ 29,194,209 28,801,707
Retained earnings ......................... 58,785,790 55,530,786
Foreign currency translation adjustment ... (766,314) (830,459)
-------------- ------------
104,286,405 100,542,501
Officers' stock notes receivable .......... (944,783) (664,700)
-------------- ------------
103,341,622 99,877,801
-------------- ------------
$ 233,651,626 $193,376,979
============== ============
See notes to consolidated condensed financial statements.
3
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UNIVERSAL FOREST PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
--------------------------
March 29, March 30,
1997 1996
------------ ------------
NET SALES ..................................... $214,692,009 $159,580,917
COST OF GOODS SOLD ............................ 194,985,651 142,754,952
------------ ------------
GROSS PROFIT .................................. 19,706,358 16,825,965
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES .. 13,535,555 11,690,563
------------ ------------
EARNINGS FROM OPERATIONS ...................... 6,170,803 5,135,402
OTHER EXPENSE (INCOME):
Interest expense ............................ 1,014,516 1,028,045
Interest income ............................. (113,530) (170,175)
Other, net .................................. 66,944 (121,285)
------------ ------------
TOTAL OTHER EXPENSE ....................... 967,930 736,585
------------ ------------
EARNINGS BEFORE INCOME TAXES .................. 5,202,873 4,398,817
INCOME TAXES .................................. 1,947,870 1,782,000
------------ ------------
NET EARNINGS .................................. $ 3,255,003 $ 2,616,817
============ ============
PRIMARY AND FULLY-DILUTED EARNINGS PER SHARE .. $ .18 $ .15
WEIGHTED AVERAGE SHARES OUTSTANDING ........... 17,830,000 17,668,000
See notes to consolidated condensed financial statements.
4
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UNIVERSAL FOREST PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
March 29, March 30,
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings........................................... $ 3,255,003 $ 2,616,817
Adjustments to reconcile net earnings
to net cash used in operating activities:
Depreciation and amortization ...................... 2,133,774 2,027,293
Deferred income taxes .............................. (1,155)
Loss on disposal of property, plant and equipment .. 47,078 8,368
Stock Gift Program expense ......................... 1,331 1,300
Changes in:
Accounts receivable ............................... (27,354,289) (22,705,224)
Inventories ....................................... (12,627,699) (12,312,037)
Other ............................................. (74,916) 56,035
Accounts payable .................................. 25,850,234 16,043,112
Accrued liabilities ............................... (6,143,318) (3,834,956)
----------- ------------
NET CASH USED IN OPERATING ACTIVITIES ............ (14,913,957) (18,099,292)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of notes receivable .......................... (100,000)
Collections of notes receivable ....................... 170,557 134,221
Purchases of property, plant and equipment ............ (3,237,413) (2,423,287)
Proceeds from sale of property, plant and equipment ... 15,378 32,925
----------- ------------
NET CASH USED IN INVESTING ACTIVITIES ............ (3,151,478) (2,256,141)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings of notes payable ....................... 17,500,000
Proceeds from issuance of common stock ................ 23,433 136,990
Repayment of long-term debt ........................... (492,253) (383,090)
Repurchase of common stock ............................ (821,882)
----------- ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES ............................ 17,031,180 (1,067,982)
----------- ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS ............. (1,034,255) (21,423,415)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ........ 1,275,636 21,471,821
----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD .............. $ 241,381 $ 48,406
=========== ============
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ......................................... $ 203,630 $ 215,162
Income taxes...................................... 160,286 125,000
NONCASH INVESTING ACTIVITIES:
Equipment acquired through long-term debt.............. $ 59,000
See notes to consolidated condensed financial statements.
</TABLE>
5
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UNIVERSAL FOREST PRODUCTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
A. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated condensed financial
statements (the "Financial Statements") of Universal Forest Products, Inc.
and its wholly-owned subsidiaries and partnerships (together, the
"Company"), have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, the Financial Statements
do not include all of the information and footnotes normally included in
the annual consolidated financial statements prepared in accordance with
generally accepted accounting principles. All significant intercompany
accounts and transactions have been eliminated in consolidation.
In the opinion of management, the Financial Statements contain all material
adjustments necessary to present fairly the consolidated financial
position, results of operations and cash flows of the Company for the
interim periods presented. All such adjustments are of a normal recurring
nature. These Financial Statements should be read in conjunction with the
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 28, 1996.
Certain reclassifications have been made to the consolidated condensed
statement of earnings for the first quarter of 1996 to conform to the
classifications used in the first quarter of 1997.
B. EARNINGS PER COMMON SHARE
Earnings per common share have been computed based on the weighted average
number of common and common equivalent shares outstanding during the
periods presented, giving effect to options granted in 1989 and 1993,
utilizing the "treasury stock" method, as if the options were granted and
outstanding as of the earliest period presented. Primary and fully-diluted
earnings per common share were not materially different during the periods
presented. Weighted average shares outstanding are as follows:
Three Months Ended
---------------------
March 29, March 30,
1997 1996
---------- ----------
Issued and outstanding ................... 17,057,000 17,022,000
Effect of stock options .................. 773,000 646,000
---------- ----------
Weighted average shares outstanding ...... 17,830,000 17,668,000
========== ==========
6
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UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL IMPACT OF FLUCTUATIONS IN LUMBER PRICES AND SEASONALITY
The Company experiences significant fluctuations in the cost of lumber products
from primary producers. The table below highlights such fluctuations for the
three months ended March 29, 1997 and March 30, 1996. A variety of factors
over which the Company has no control, including government regulations,
environmental regulations, weather conditions, and natural disasters, impact
the cost of lumber products. The Company anticipates that these fluctuations
will continue in the future.
The following table presents the Random Lengths framing lumber composite price.
The composite price is a weighted average of nine key framing lumber prices
chosen from major producing areas and species. The composite price is designed
as a broad measure of price movement in the commodity lumber market ("Lumber
Market"). The effects of the Lumber Market on the Company's results of
operations are discussed below under the captions "Net Sales" and "Cost of
Goods Sold and Gross Profit." Depending on the extent of the fluctuation, the
type of product and other factors, it could take up to a month for a
fluctuation in the Lumber Market to be reflected in the Company's selling
prices.
Random Lengths
Average $/MBF
----------------
1997 1996
------- -------
January ......... $ 436 $ 329
February ........ 444 347
March ........... 433 353
------- -------
Period average .. $ 438 $ 343
======= =======
The Company's business is seasonal in nature and results of operations vary
from quarter to quarter. The demand for many of the Company's products is
highest during the period of April to August. Accordingly, the Company's sales
tend to be greater during its second and third quarters. To support this sales
peak, the Company builds its inventory of finished goods throughout the winter
and spring. Therefore, quantities of raw materials and finished goods
inventories tend to be at their highest, relative to sales, during the
Company's first and fourth quarters. As a result, the Company has some
exposure related to sharp declines in the Lumber Market during its primary
selling season. However, the Company maintains supply programs with vendors
which are intended to decrease its exposure. These programs have substantially
reduced the Company's investment in inventories, and include those materials
which are most susceptible to adverse changes in the Lumber Market.
7
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UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the components of the
Company's Consolidated Statements of Earnings as a percentage of net sales.
Three Months Ended
--------------------
March 29, March 30,
1997 1996
--------- ---------
Net sales ..................................... 100.0% 100.0%
Cost of goods sold ............................ 90.8 89.5
--------- ---------
Gross profit .................................. 9.2 10.5
Selling, general and administrative expenses .. 6.3 7.3
--------- ---------
Earnings from operations ...................... 2.9 3.2
Other expense, net ............................ 0.5 0.5
--------- ---------
Earnings before income taxes .................. 2.4 2.7
Income taxes .................................. 0.9 1.1
--------- ---------
Net earnings .................................. 1.5% 1.6%
========= =========
NET SALES
The Company manufactures, treats, and distributes lumber products to the
do-it-yourself, manufactured housing, wholesale lumber, and industrial markets.
Its sales comprise a single industry segment. The following table presents,
for the periods indicated, the Company's net sales (in thousands) and
percentage of total net sales by market classification.
Three Months Ended
--------------------------------
March 29, March 30,
Market Classification 1997 % 1996 %
- ----------------------- -------- ----- -------- -----
Do-It-Yourself ........ $ 92,831 43.2% $ 71,014 44.5%
Manufactured Housing .. 91,096 42.4 66,386 41.6
Wholesale Lumber ...... 14,926 7.0 12,288 7.7
Industrial ............ 15,839 7.4 9,893 6.2
-------- ----- -------- -----
$214,692 100.0% $159,581 100.0%
======== ===== ======== =====
Net Sales in the first quarter of 1997 increased $55.1 million, or 34.5%
compared to 1996, reflecting an estimated 23.0% increase in overall selling
prices due to a higher Lumber Market combined with an estimated 11.5% increase
in the volume of units shipped. The increase in units shipped was primarily
driven by sales resulting from the acquisition of Hi-Tek Forest Products, Inc.
("Hi-Tek")
8
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UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
on October 1, 1996, favorable weather in the first quarter of 1997 compared to
the first quarter of 1996, and increased penetration into the industrial
market.
The Company's ratio of value-added product sales to total sales decreased
slightly to 34.2% in the first quarter of 1997 compared to 34.7% in the first
quarter of 1996. Value-added product sales consist primarily of items sold to
the DIY market under the Company's Fence Fundamentals(TM), Lattice Basics(TM),
Deck Necessities(R), Outdoor Essentials(R), Storage Solutions(TM) and
YardLine(R) trade names, trusses sold to the manufactured housing market, and
products sold to the industrial market. The Company includes these products in
its "value-added" category due to the higher margins it recognizes on the sale
of these products versus those recognized on commodity-based products such as
treated, untreated and remanufactured lumber. A long-term goal of the Company
is to achieve a ratio of value-added product sales to total sales of at least
50%. It plans to achieve this goal through strategic acquisitions into new
markets, new product introduction, enhanced marketing of existing products, and
eliminating sales which do not meet profitability targets.
Do-It-Yourself (DIY):
Net sales to the DIY market increased approximately $21.8 million, or 30.7%, in
the first quarter of 1997 compared to the first quarter of 1996, due to a
higher Lumber Market which increased the overall selling prices of the
Company's commodity-based products, supplemented by an increase in unit sales
of commodity-based and value-added products.
The following table presents, for the periods indicated, the Company's
value-added and commodity-based and distributed product sales to the DIY
market, in thousands:
Three Months Ended
--------------------------------
March 29, % of March 30, % of
1997 Total 1996 Total
-------- ------ --------- -----
Value-added product sales...................... $ 33,113 35.7% $26,936 37.9%
Commodity-based and distributed product sales.. 59,718 64.3 44,078 62.1
-------- ------ --------- -----
Total.......................................... $ 92,831 100.0% $71,014 100.0%
======== ====== ========= =====
Although unit sales of value-added products increased, the Company's ratio of
value-added product sales to total sales decreased in the first quarter of 1997
due to the effects of the higher Lumber Market on sales of commodity-based
products. Sales of these products are generally indexed to the Lumber Market,
while value-added products sold to the DIY market generally have fixed sales
prices for a specified period or quantity. Therefore, a higher Lumber Market
will cause commodity-based products to represent a proportionately higher
percentage of total DIY sales dollars.
9
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UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
Manufactured Housing (MH):
Net sales to the manufactured housing market increased approximately $24.7
million, or 37.2%, in the first quarter of 1997 compared to first quarter of
1996, due to a higher Lumber Market which increased the overall selling prices
of the Company's products, combined with an increase in unit sales. Unit
shipments increased in the first quarter of 1997, compared to the first quarter
of 1996, primarily due to the acquisition of Hi-Tek.
The following table presents, for the periods indicated, the Company's truss
and commodity-based and distributed product sales to the manufactured housing
market, in thousands:
Three Months Ended
--------------------------------
March 29, % of March 30, % of
1997 Total 1996 Total
-------- ----- -------- -----
Truss sales................................... $25,122 27.6% $19,070 28.7%
Commodity-based and distributed product sales 65,974 72.4 47,316 71.3
------- ----- -------- -----
Total......................................... $91,096 100.0% $66,386 100.0%
======= ===== ======== =====
A decrease in the Company's ratio of truss sales to total sales in the first
quarter of 1997, compared to the first quarter of 1996 is due to the effect
of the Lumber Market which increased the overall selling prices of
commodity-based and distributed products in 1997, while certain regional
competition caused downward pressure on the selling prices of trusses.
Wholesale:
Net sales to the wholesale lumber market increased $2.6 million, or 21.5% in
the first quarter of 1997 compared to the first quarter of 1996 primarily due
to the higher Lumber Market in 1997. The Company does not expect unit sales to
this market to increase in the foreseeable future as a result of its goals to
increase its ratio of value-added product sales to total sales, and increase
the Company's geographic coverage to sell directly to customers.
Industrial:
Net sales to the industrial market increased $5.9 million, or 60.1% in the
first quarter of 1997 compared to the first quarter of 1996, due to a higher
Lumber Market which increased overall selling prices, combined with an increase
in units shipped. In many cases, the products sold to this market are produced
from the by-products of manufactured products sold to other markets.
Therefore,
10
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UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
products produced for the industrial market provide an opportunity for the
Company to improve its raw material yields. The Company plans to grow its
sales to this market in the future through internal expansion and strategic
acquisitions. New sales positions have been created to exclusively serve and
grow this market and sales incentive programs have been implemented to achieve
this growth strategy.
COST OF GOODS SOLD AND GROSS PROFIT
Gross profit as a percentage of net sales decreased to 9.2% in the first
quarter of 1997, compared to 10.5% in the first quarter of 1996. This decrease
was due to a combination of the following factors:
- - The effect of the higher Lumber Market on the gross profit percentage of the
Company's commodity-based products. Selling prices of these products are
generally indexed to the Lumber Market, along with a fixed dollar "adder" to
cover production costs plus profit. Therefore, in a stable but high Lumber
Market, the Company's gross profit percentage will be lower than the gross
profit percentage it would realize with a stable but low Lumber Market. This
is the situation the Company encountered as the average monthly Random Lengths
composite price ranged from $80/MBF to $107/MBF higher during the first
quarter of 1997, compared to the first quarter of 1996.
- - The effect of the higher Lumber Market on the gross profit percentage of the
Company's value-added products. Selling prices of these products tend to be
fixed for a specific time period or quantity. Therefore, in periods of high
or increasing lumber costs, the Company's gross profit percentage will
decrease.
- - The effect of competition in the manufactured housing market in certain
geographic regions.
- - The Lumber Market was on an upward trend in the first quarter of 1996,
compared to the relative stability of the Lumber Market in the first
quarter of 1997, resulting in a comparatively higher gross profit percentage
on the sale of commodity-based products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased approximately $1.8
million or 15.7% comparing the first quarter of 1997 to the first quarter of
1996. This increase was primarily due to:
- - Increases in accrued incentive compensation expenses related to
profitability.
- - General increases in selling and administrative head count.
11
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UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
- - Expenses added through the acquisition of Hi-Tek.
- - The creation of new centralized Marketing, National Sales, and Manufacturing
Design departments.
- - Increased depreciation expense related to upgraded information systems.
- - Increases in certain variable expenses related to sales.
OTHER EXPENSE, NET
Other expense, net is primarily comprised of interest expense and interest
income. Net interest costs (interest expense less interest income) increased
approximately $50,000 comparing the first quarter of 1997 to the first quarter
of 1996 as average indebtedness remained consistent comparing the two periods.
INCOME TAXES
The Company's effective tax rate is 37.4% for the first quarter of 1997
compared to 40.5% for the first quarter of 1996. Effective tax rates differ
from statutory federal income tax rates primarily due to provisions for state
and local income taxes, which can vary from year to year based on changes in
income generated by the company in each of the states in
which it operates. Due to the reorganization it completed on December 28, 1996
to formalize its existing operating structure, the Company realized a reduction
in its state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used in operating activities in the first quarter of 1997 improved
to $14.9 million, from $18.1 million in the first quarter of 1996, due to an
increase in net earnings combined with a net decrease in its working capital
investment comparing March 28, 1997 with March 30, 1996. The Company continues
to improve its working capital management practices, evidenced by a 3.4%
decrease in its cash cycle (days sales outstanding plus days supply of
inventory less days payable outstanding) to 52.7 days from 54.5 days, comparing
the first quarter of 1997 and 1996, respectively.
Capital expenditures totaled $3.2 million in the first quarter of 1997, as the
Company remains on pace to spend approximately $13 to $15 million for the year
to replace existing machinery and equipment, upgrade information systems,
improve production efficiencies, and expand current production capacity.
12
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UNIVERSAL FOREST PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
Cash flows from investing activities consisted of repayments of long-term debt
and borrowings of $17.5 million on short-term lines of credit. On March 29,
1997, approximately $102 million remains available on revolving credit
facilities.
ENVIRONMENTAL CONSIDERATIONS AND REGULATIONS
The Company is self-insured for environmental impairment liability, and accrues
for the estimated cost of remedial actions when situations requiring such
action arise. The Company owns and operates seventeen facilities throughout
the United States that chemically treat lumber products. In connection with
the ownership and operation of these and other real properties, and the
disposal or treatment of hazardous or toxic substances, the Company may, under
various federal, state and local environmental laws, ordinances and
regulations, be potentially liable for removal and remediation costs, as well
as other potential costs, damages and expenses. Remediation activities are
currently being conducted at the Company's Granger, Indiana; Union City,
Georgia; and Elizabeth City, North Carolina treatment facilities.
The Company has accrued, in other long-term liabilities, an amount totaling
$1.7 million on March 29, 1997 and December 28, 1996, representing the
estimated costs to complete remediation efforts currently in process and those
expected to occur in the future. The Company believes the potential future
costs of known remediation efforts will not have a material adverse effect on
its future financial position, results of operations, or liquidity.
13
<PAGE> 14
UNIVERSAL FOREST PRODUCTS, INC.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
Included in this report, and from time to time, certain forward-looking
statements may be made by the Company 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 are
made. Actual results could differ materially from those included in such
forward-looking statements as a result of, among other things, the factors set
forth below, the matters included in this report generally and certain economic
and business factors, some of which may be beyond the control of the Company.
Investors are cautioned that all forward-looking statements involve risks and
uncertainty.
Competition:
The Company is subject to competitive selling and pricing pressures in its
major markets. While the Company is generally aware of its existing
competitors' capabilities, it is subject to entry in its markets by new
competitors, which could negatively impact financial results.
Market Growth:
The Company's sales growth is dependent, in part, upon growth within the
markets it serves. If the Company's markets do not maintain anticipated
growth, or if the Company fails to maintain its market share, financial results
could be impaired.
Government Regulations:
The Company is subject to a substantial amount of existing government
regulations which create a burden on the Company. Should the Company become
subject to additional laws and regulations enacted in the future, or changes in
interpretation of existing laws, it could have an adverse affect on the
Company's financial results.
Lumber Market Volatility:
The Company experiences significant fluctuations in the cost of lumber products
from primary producers. While the Company attempts to minimize its risk from
severe price fluctuations, substantial, rapid changes in lumber prices can
affect the Company's financial results.
14
<PAGE> 15
UNIVERSAL FOREST PRODUCTS, INC.
PART II. OTHER INFORMATION
Item 2. Changes in Securities.
- -------------------------------
(a) None.
(b) None.
(c) Sales of equity securities not registered under the Securities Act.
<TABLE>
<CAPTION>
Date of Class of Number Consideration
Sale Stock of Shares Purchasers Exchanged
---------- -------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Officers stock notes receivable 01/01/97 Common 30,188 Eligible officers $399,989
note receivable
at 7% interest
per annum
Employee Stock Gift Program 01/27/97 Common 50 Eligible officers None
and employees
02/20/97 Common 50 Eligible officers None
and employees
</TABLE>
15
<PAGE> 16
UNIVERSAL FOREST PRODUCTS, INC.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIVERSAL FOREST PRODUCTS, INC.
Date: 5-12-97 By: /s/ William G. Currie
------------------------------- ----------------------------------
William G. Currie
Its: President and Chief Executive
Officer
Date: 5-12-97 By: /s/ Elizabeth A. Bowman
------------------------------- ----------------------------------
Elizabeth A. Bowman
Its: Executive Vice President of
Finance and Administration and
Treasurer (Principal Financial
Officer)
16
<PAGE> 17
UNIVERSAL FOREST PRODUCTS, INC.
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
27 Financial Data Schedule 18
17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> MAR-29-1997
<CASH> 241,381
<SECURITIES> 0
<RECEIVABLES> 59,885,136
<ALLOWANCES> 428,571
<INVENTORY> 101,147,470
<CURRENT-ASSETS> 165,526,250
<PP&E> 106,424,847
<DEPRECIATION> 45,707,863
<TOTAL-ASSETS> 233,651,626
<CURRENT-LIABILITIES> 75,268,951
<BONDS> 0
0
0
<COMMON> 17,072,720
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 233,651,626
<SALES> 214,692,009
<TOTAL-REVENUES> 214,692,009
<CGS> 194,985,651
<TOTAL-COSTS> 194,985,651
<OTHER-EXPENSES> 6,170,803
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,014,516
<INCOME-PRETAX> 5,202,873
<INCOME-TAX> 1,947,870
<INCOME-CONTINUING> 3,255,003
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,255,003
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
