x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Michigan | 38-1465835 | |||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |||
2801 East Beltline NE, Grand Rapids, Michigan | 49525 | |||
(Address of principal executive offices) | (Zip Code) |
NONE | ||
(Former name or former address, if changed since last report.) |
Large Accelerated Filer x | Accelerated Filer o | Non-Accelerated Filer o | Smaller reporting company o |
Class | Outstanding as of June 27, 2015 | |||
Common stock, no par value | 20,132,819 |
PART I. | FINANCIAL INFORMATION. | Page No. | |
Item 1. | Financial Statements. | ||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II. | OTHER INFORMATION. | ||
Item 1. | Legal Proceedings – NONE. | ||
Item 1A. | Risk Factors – NONE. | ||
Item 2. | |||
Item 3. | Defaults upon Senior Securities – NONE. | ||
Item 4. | Mine Safety Disclosures – NONE. | ||
Item 5. | Other Information – NONE. | ||
Item 6. |
(in thousands, except share data) | |||||||||||
June 27, 2015 | December 27, 2014 | June 28, 2014 | |||||||||
ASSETS | |||||||||||
CURRENT ASSETS: | |||||||||||
Cash and cash equivalents | $ | 24,756 | $ | — | $ | — | |||||
Restricted cash | 710 | 405 | 720 | ||||||||
Accounts receivable, net | 302,538 | 195,912 | 286,422 | ||||||||
Inventories: | |||||||||||
Raw materials | 182,286 | 183,770 | 158,646 | ||||||||
Finished goods | 147,949 | 156,278 | 119,143 | ||||||||
Total inventories | 330,235 | 340,048 | 277,789 | ||||||||
Refundable income taxes | — | 11,934 | — | ||||||||
Deferred income taxes | 6,252 | 6,284 | 6,862 | ||||||||
Other current assets | 14,953 | 18,423 | 19,607 | ||||||||
TOTAL CURRENT ASSETS | 679,444 | 573,006 | 591,400 | ||||||||
DEFERRED INCOME TAXES | 1,171 | 1,079 | 1,354 | ||||||||
OTHER ASSETS | 8,815 | 9,565 | 12,315 | ||||||||
GOODWILL | 173,158 | 183,062 | 160,146 | ||||||||
INDEFINITE-LIVED INTANGIBLE ASSETS | 2,340 | 2,340 | 2,340 | ||||||||
OTHER INTANGIBLE ASSETS, NET | 17,007 | 6,479 | 6,871 | ||||||||
PROPERTY, PLANT AND EQUIPMENT: | |||||||||||
Property, plant and equipment | 628,269 | 604,398 | 599,852 | ||||||||
Less accumulated depreciation and amortization | (370,538 | ) | (356,129 | ) | (352,399 | ) | |||||
PROPERTY, PLANT AND EQUIPMENT, NET | 257,731 | 248,269 | 247,453 | ||||||||
TOTAL ASSETS | $ | 1,139,666 | $ | 1,023,800 | $ | 1,021,879 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
CURRENT LIABILITIES: | |||||||||||
Cash overdraft | $ | 21,933 | $ | 621 | $ | 13,659 | |||||
Accounts payable | 114,354 | 89,105 | 107,653 | ||||||||
Accrued liabilities: | |||||||||||
Compensation and benefits | 60,941 | 62,143 | 42,755 | ||||||||
Income taxes | 8,894 | — | 9,010 | ||||||||
Other | 27,234 | 23,591 | 31,321 | ||||||||
Current portion of long-term debt | 893 | — | — | ||||||||
TOTAL CURRENT LIABILITIES | 234,249 | 175,460 | 204,398 | ||||||||
LONG-TERM DEBT | 122,303 | 98,645 | 95,094 | ||||||||
DEFERRED INCOME TAXES | 31,178 | 30,933 | 26,827 | ||||||||
OTHER LIABILITIES | 19,124 | 19,202 | 15,825 | ||||||||
TOTAL LIABILITIES | 406,854 | 324,240 | 342,144 | ||||||||
SHAREHOLDERS' EQUITY: | |||||||||||
Controlling interest shareholders' equity: | |||||||||||
Preferred stock, no par value; shares authorized 1,000,000; issued and outstanding, none | $ | — | $ | — | $ | — | |||||
Common stock, no par value; shares authorized 40,000,000; issued and outstanding, 20,132,819, 19,984,451, and 20,071,026. | 20,133 | 19,984 | 20,071 | ||||||||
Additional paid-in capital | 168,862 | 162,483 | 160,189 | ||||||||
Retained earnings | 530,346 | 502,334 | 486,616 | ||||||||
Accumulated other comprehensive income | 227 | 1,348 | 3,317 | ||||||||
Employee stock notes receivable | (277 | ) | (455 | ) | (530 | ) | |||||
Total controlling interest shareholders' equity | 719,291 | 685,694 | 669,663 | ||||||||
Noncontrolling interest | 13,521 | 13,866 | 10,072 | ||||||||
TOTAL SHAREHOLDERS' EQUITY | 732,812 | 699,560 | 679,735 | ||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,139,666 | $ | 1,023,800 | $ | 1,021,879 |
(in thousands, except per share data) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 27, 2015 | June 28, 2014 | June 27, 2015 | June 28, 2014 | ||||||||||||
NET SALES | $ | 838,171 | $ | 772,752 | $ | 1,471,195 | $ | 1,326,751 | |||||||
COST OF GOODS SOLD | 725,728 | 675,764 | 1,279,170 | 1,163,750 | |||||||||||
GROSS PROFIT | 112,443 | 96,988 | 192,025 | 163,001 | |||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 68,431 | 58,989 | 130,136 | 112,899 | |||||||||||
ANTI-DUMPING DUTY ASSESSMENT | — | 1,600 | — | 1,600 | |||||||||||
NET GAIN ON DISPOSITION OF ASSETS AND IMPAIRMENT OF ASSETS | (176 | ) | (324 | ) | (162 | ) | (848 | ) | |||||||
EARNINGS FROM OPERATIONS | 44,188 | 36,723 | 62,051 | 49,350 | |||||||||||
INTEREST EXPENSE | 1,382 | 1,103 | 2,555 | 2,169 | |||||||||||
INTEREST INCOME | (32 | ) | (339 | ) | (167 | ) | (629 | ) | |||||||
EQUITY IN EARNINGS OF INVESTEE | (112 | ) | (78 | ) | (195 | ) | (129 | ) | |||||||
1,238 | 686 | 2,193 | 1,411 | ||||||||||||
EARNINGS BEFORE INCOME TAXES | 42,950 | 36,037 | 59,858 | 47,939 | |||||||||||
INCOME TAXES | 16,066 | 13,588 | 22,170 | 17,824 | |||||||||||
NET EARNINGS | 26,884 | 22,449 | 37,688 | 30,115 | |||||||||||
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST | (908 | ) | (660 | ) | (1,550 | ) | (1,111 | ) | |||||||
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST | $ | 25,976 | $ | 21,789 | $ | 36,138 | $ | 29,004 | |||||||
EARNINGS PER SHARE - BASIC | $ | 1.29 | $ | 1.08 | $ | 1.79 | $ | 1.44 | |||||||
EARNINGS PER SHARE - DILUTED | $ | 1.28 | $ | 1.08 | $ | 1.79 | $ | 1.44 | |||||||
NET EARNINGS | 26,884 | 22,449 | 37,688 | 30,115 | |||||||||||
FOREIGN CURRENCY TRANSLATION ADJUSTMENT | (526 | ) | 511 | (1,529 | ) | (183 | ) | ||||||||
COMPREHENSIVE INCOME | 26,358 | 22,960 | 36,159 | 29,932 | |||||||||||
LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST | (636 | ) | (719 | ) | (1,133 | ) | (1,077 | ) | |||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST | $ | 25,722 | $ | 22,241 | $ | 35,026 | $ | 28,855 |
(in thousands, except share and per share data) | |||||||||||||||||||||||||||
Controlling Interest Shareholders' Equity | |||||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehen- sive Earnings | Employees Stock Notes Receivable | Noncontrolling Interest | Total | |||||||||||||||||||||
Balance at December 28, 2013 | $ | 19,948 | $ | 156,129 | $ | 461,812 | $ | 3,466 | $ | (732 | ) | $ | 9,111 | $ | 649,734 | ||||||||||||
Net earnings | 29,004 | 1,111 | 30,115 | ||||||||||||||||||||||||
Foreign currency translation adjustment | (149 | ) | (34 | ) | (183 | ) | |||||||||||||||||||||
Noncontrolling interest associated with business acquisitions | 985 | 985 | |||||||||||||||||||||||||
Distributions to noncontrolling interest | (1,101 | ) | (1,101 | ) | |||||||||||||||||||||||
Cash Dividends - $0.210 per share | (4,214 | ) | (4,214 | ) | |||||||||||||||||||||||
Issuance of 4,671 shares under employee stock plans | 5 | 196 | 14 | 215 | |||||||||||||||||||||||
Issuance of 78,136 shares under stock grant programs | 78 | 1,113 | 1,191 | ||||||||||||||||||||||||
Issuance of 39,949 shares under deferred compensation plans | 40 | (40 | ) | — | |||||||||||||||||||||||
Expense associated with share-based compensation arrangements | 932 | 932 | |||||||||||||||||||||||||
Accrued expense under deferred compensation plans | 1,859 | 1,859 | |||||||||||||||||||||||||
Payments received on employee stock notes receivable | 202 | 202 | |||||||||||||||||||||||||
Balance at June 28, 2014 | $ | 20,071 | $ | 160,189 | $ | 486,616 | $ | 3,317 | $ | (530 | ) | $ | 10,072 | $ | 679,735 | ||||||||||||
Balance at December 27, 2014 | $ | 19,984 | $ | 162,483 | $ | 502,334 | $ | 1,348 | $ | (455 | ) | $ | 13,866 | $ | 699,560 | ||||||||||||
Net earnings | 36,138 | 1,550 | 37,688 | ||||||||||||||||||||||||
Foreign currency translation adjustment | (1,121 | ) | (408 | ) | (1,529 | ) | |||||||||||||||||||||
Noncontrolling interest associated with business acquisitions | 1,019 | 1,019 | |||||||||||||||||||||||||
Distributions to noncontrolling interest | (1,250 | ) | (1,250 | ) | |||||||||||||||||||||||
Purchases of noncontrolling interest | (1,256 | ) | (1,256 | ) | |||||||||||||||||||||||
Cash Dividends - $0.400 per share | (8,050 | ) | (8,050 | ) | |||||||||||||||||||||||
Issuance of 21,224 shares under employee stock plans | 21 | 703 | 724 | ||||||||||||||||||||||||
Issuance of 75,149 shares under stock grant programs | 75 | 1,780 | 1,855 | ||||||||||||||||||||||||
Issuance of 53,508 shares under deferred compensation plans | 54 | (54 | ) | — | |||||||||||||||||||||||
Repurchase of 1,513 shares | (1 | ) | (76 | ) | 77 | — | |||||||||||||||||||||
Tax benefits from non-qualified stock options exercised | 121 | 121 | |||||||||||||||||||||||||
Expense associated with share-based compensation arrangements | 874 | 874 | |||||||||||||||||||||||||
Accrued expense under deferred compensation plans | 2,955 | 2,955 | |||||||||||||||||||||||||
Payments received on employee stock notes receivable | 101 | 101 | |||||||||||||||||||||||||
Balance at June 27, 2015 | $ | 20,133 | $ | 168,862 | $ | 530,346 | $ | 227 | $ | (277 | ) | $ | 13,521 | $ | 732,812 |
Six Months Ended | |||||||
June 27, 2015 | June 28, 2014 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net earnings | $ | 37,688 | $ | 30,115 | |||
Adjustments to reconcile net earnings attributable to controlling interest: | |||||||
Depreciation | 18,406 | 15,644 | |||||
Amortization of intangibles | 1,888 | 1,194 | |||||
Expense associated with share-based compensation arrangements | 874 | 932 | |||||
Excess tax benefits from share-based compensation arrangements | (33 | ) | — | ||||
Expense associated with stock grant plans | 53 | 58 | |||||
Deferred income taxes (credit) | 3 | 46 | |||||
Equity in earnings of investee | (195 | ) | (129 | ) | |||
Net gain on disposition and impairment of assets | (162 | ) | (931 | ) | |||
Changes in: | |||||||
Accounts receivable | (104,929 | ) | (105,695 | ) | |||
Inventories | 9,806 | 10,776 | |||||
Accounts payable and cash overdraft | 45,798 | 47,343 | |||||
Accrued liabilities and other | 27,625 | 23,451 | |||||
NET CASH FROM OPERATING ACTIVITIES | 36,822 | 22,804 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of property, plant and equipment | (27,756 | ) | (20,100 | ) | |||
Proceeds from sale of property, plant and equipment | 1,085 | 1,754 | |||||
Acquisitions, net of cash received | (2,584 | ) | (7,135 | ) | |||
Purchase of remaining noncontrolling interest in subsidiary | (1,256 | ) | — | ||||
Advances of notes receivable | (3,083 | ) | (3,287 | ) | |||
Collections on notes receivable | 7,059 | 888 | |||||
Cash restricted as to use | (305 | ) | — | ||||
Other, net | (58 | ) | (135 | ) | |||
NET CASH FROM INVESTING ACTIVITIES | (26,898 | ) | (28,015 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Borrowings under revolving credit facilities | 259,734 | 190,301 | |||||
Repayments under revolving credit facilities | (235,993 | ) | (179,907 | ) | |||
Debt issuance costs | (9 | ) | (9 | ) | |||
Proceeds from issuance of common stock | 724 | 201 | |||||
Distributions to noncontrolling interest | (1,250 | ) | (1,101 | ) | |||
Dividends paid to shareholders | (8,050 | ) | (4,214 | ) | |||
Repurchase of common stock | (77 | ) | — | ||||
Excess tax benefits from share-based compensation arrangements | 33 | — | |||||
NET CASH FROM FINANCING ACTIVITIES | 15,112 | 5,271 | |||||
Effect of exchange rate changes on cash | (280 | ) | (60 | ) | |||
NET CHANGE IN CASH AND CASH EQUIVALENTS | 24,756 | — | |||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | $ | — | $ | — | |||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 24,756 | $ | — | |||
SUPPLEMENTAL INFORMATION: | |||||||
Interest paid | $ | 2,430 | $ | 2,155 | |||
Income taxes paid | 1,375 | 6,532 | |||||
NON-CASH INVESTING ACTIVITIES | |||||||
Other receivables exchanged for notes receivable | — | 2,768 | |||||
Notes receivable exchanged for property | 389 | — | |||||
NON-CASH FINANCING ACTIVITIES: | |||||||
Common stock issued under deferred compensation plans | 2,728 | 2,122 |
A. | BASIS OF PRESENTATION |
B. | FAIR VALUE |
June 27, 2015 | June 28, 2014 | ||||||
(in thousands) | Quoted Prices in Active Markets (Level 1) | Quoted Prices in Active Markets (Level 1) | |||||
Money market funds | $ | 6,162 | $ | 162 | |||
Mutual funds: | |||||||
Domestic stock funds | 250 | 629 | |||||
International stock funds | 71 | 215 | |||||
Target funds | 240 | 778 | |||||
Bond funds | 173 | 155 | |||||
Total mutual funds | 734 | 1,777 | |||||
6,896 | 1,939 |
C. | REVENUE RECOGNITION |
June 27, 2015 | December 27, 2014 | June 28, 2014 | |||||||||
Cost and Earnings in Excess of Billings | $ | 4,842 | $ | 5,244 | $ | 6,380 | |||||
Billings in Excess of Cost and Earnings | 3,347 | 4,682 | 2,543 |
D. | EARNINGS PER SHARE |
Three Months Ended | Six Months Ended | ||||||||||||||
June 27, 2015 | June 28, 2014 | June 27, 2015 | June 28, 2014 | ||||||||||||
Numerator: | |||||||||||||||
Net earnings attributable to controlling interest | $ | 25,976 | $ | 21,789 | $ | 36,138 | $ | 29,004 | |||||||
Adjustment for earnings allocated to non-vested restricted common stock | (347 | ) | (209 | ) | (462 | ) | (266 | ) | |||||||
Net earnings for calculating EPS | $ | 25,629 | $ | 21,580 | $ | 35,676 | $ | 28,738 | |||||||
Denominator: | |||||||||||||||
Weighted average shares outstanding | 20,198 | 20,137 | 20,147 | 20,097 | |||||||||||
Adjustment for non-vested restricted common stock | (270 | ) | (193 | ) | (258 | ) | (184 | ) | |||||||
Shares for calculating basic EPS | 19,928 | 19,944 | 19,889 | 19,913 | |||||||||||
Effect of dilutive stock options | 33 | 20 | 33 | 21 | |||||||||||
Shares for calculating diluted EPS | 19,961 | 19,964 | 19,922 | 19,934 | |||||||||||
Net earnings per share: | |||||||||||||||
Basic | $ | 1.29 | $ | 1.08 | $ | 1.79 | $ | 1.44 | |||||||
Diluted | $ | 1.28 | $ | 1.08 | $ | 1.79 | $ | 1.44 |
F. | BUSINESS COMBINATIONS |
Company Name | Acquisition Date | Purchase Price | Intangible Assets | Net Tangible Assets | Operating Segment | Business Description |
Rapid Wood Mfg., LLC (“Rapid Wood”) | February 2, 2015 | $1,638 (asset purchase) | $789 | $849 | Western Division | A supplier of lumber products to the region’s manufactured housing and recreational vehicle industries based in Caldwell, Idaho. Rapid Wood had annual sales of $2.3 million. |
Integra Packaging Proprietary, Ltd (“Integra Packaging”) | January 16, 2015 | $1,102 (51.94% stock purchase) | $1,406 (The Company portion of Intangible Assets $730 or 51.94%) | $715 (The Company portion of Net Tangible Assets $372 or 51.94%) | Other | An Australian-based manufacturer and distributor of industrial wood specialty packaging products. Integra Packaging had annual sales of $12.4 million. |
Bigs Packaging and Lumber, LLC (“Bigs Packaging”) | November 13, 2014 | $20,000 (asset purchase) + $3,976 earnout accrual | $15,031 | $8,945 | Western Division | A Texas-based manufacturer of industrial wood and packaging solutions. Bigs Packaging had annual sales of $50.0 million. |
Packnet Ltd (“Packnet”) | November 24, 2014 | $7,506 (80% asset purchase) | $7,885 (The Company portion of Intangible Assets $6,308 or 80%) | $1,498 (The Company portion of Net Tangible Assets $1,198 or 80%) | Western Division | A supplier of industrial packaging and services based in Eagan, MN. Packnet had annual sales of $9.0 Million. |
High Level Components, LLC (“High Level”) | March 31, 2014 | $2,944 (asset purchase) | $— | $3,232 | North Division | A building component manufacturer based in Locust, NC. High Level had annual sales of $6.8 million. |
Upshur Forest Products, LLC (“Upshur”) | March 28, 2014 (majority interest) June 25, 2015 (minority interest) | $3,548 (asset purchase) | $1,577 | $1,971 | Western Division | A sawmill located in Gilmer, TX. Upshur had annual sales of $8.9 million. |
Container Systems, Inc. (“CSI”) | March 14, 2014 | $2,417 (asset purchase) | $— | $2,417 | South Division | A manufacturer of crates and containers for industrial applications and the moving-and-storage industry, located in Franklinton, NC. CSI had annual sales of $3.0 million. |
G. | SEGMENT REPORTING |
Three Months Ended June 27, 2015 | |||||||||||||||||||||
North | South | Western | All Other | Corporate | Total | ||||||||||||||||
Net sales to outside customers | $ | 281,333 | 185,497 | $ | 309,511 | $ | 61,830 | $ | — | $ | 838,171 | ||||||||||
Intersegment net sales | 14,510 | 7,604 | 15,476 | 4,566 | — | 42,156 | |||||||||||||||
Segment operating profit | 16,394 | 7,997 | 18,272 | 2,997 | (1,472 | ) | 44,188 |
Three Months Ended June 28, 2014 | |||||||||||||||||||||
North | South | Western | All Other | Corporate | Total | ||||||||||||||||
Net sales to outside customers | $ | 253,481 | 172,464 | $ | 295,263 | $ | 51,544 | $ | — | $ | 772,752 | ||||||||||
Intersegment net sales | 10,208 | 6,096 | 13,403 | 5,298 | — | 35,005 | |||||||||||||||
Segment operating profit | 10,701 | 6,730 | 17,643 | 2,217 | (568 | ) | 36,723 |
Six Months Ended June 27, 2015 | |||||||||||||||||||||
North | South | Western | All Other | Corporate | Total | ||||||||||||||||
Net sales to outside customers | $ | 460,832 | 349,692 | $ | 567,090 | $ | 93,581 | $ | — | $ | 1,471,195 | ||||||||||
Intersegment net sales | 24,319 | 14,803 | 25,102 | 8,463 | — | 72,687 | |||||||||||||||
Segment operating profit (loss) | 19,105 | 13,999 | 28,790 | 1,850 | (1,693 | ) | 62,051 |
Six Months Ended June 28, 2014 | |||||||||||||||||||||
North | South | Western | All Other | Corporate | Total | ||||||||||||||||
Net sales to outside customers | $ | 410,116 | 315,824 | $ | 520,663 | $ | 80,148 | $ | — | $ | 1,326,751 | ||||||||||
Intersegment net sales | 19,750 | 10,911 | 24,445 | 9,142 | — | 64,248 | |||||||||||||||
Segment operating profit | 11,925 | 13,003 | 26,488 | 1,128 | (3,194 | ) | 49,350 |
H. | INCOME TAXES |
• | Our sales increased by 8.5% compared to the second quarter of 2014, which was comprised of a 10% increase in unit sales offset by a 1.5% decrease in selling prices due to the commodity lumber market (See Historical Lumber Prices). Our unit sales increase was driven by a combination of acquisition-related and organic growth in sales to the Industrial market and an increase in sales to the Retail market as a result of market share gains and improving demand. |
• | Our operating profits increased by over 20%, and our operating profit as a percentage of net sales increased to 5.3% from 4.8%, comparing 2015 and 2014. These improvements were primarily due to our growth in sales to the Industrial market, continued improvements in profitability on sales to the Construction market, and our growth in sales to the Retail market. |
Random Lengths Composite Average $/MBF | |||||||
2015 | 2014 | ||||||
January | $ | 375 | $ | 395 | |||
February | 358 | 394 | |||||
March | 336 | 387 | |||||
April | 334 | 367 | |||||
May | 315 | 377 | |||||
June | 328 | 375 | |||||
Second quarter average | $ | 326 | $ | 373 | |||
Year-to-date average | 341 | 383 | |||||
Second quarter percentage change | (12.6 | )% | |||||
Year-to-date percentage change | (11.0 | )% |
Random Lengths SYP Average $/MBF | |||||||
2015 | 2014 | ||||||
January | $ | 408 | $ | 375 | |||
February | 399 | 398 | |||||
March | 393 | 406 | |||||
April | 400 | 392 | |||||
May | 368 | 402 | |||||
June | 354 | 406 | |||||
Second quarter average | $ | 374 | $ | 400 | |||
Year-to-date average | 387 | 397 | |||||
Second quarter percentage change | (6.5 | )% | |||||
Year-to-date percentage change | (2.5 | )% |
• | Products with fixed selling prices. These products include value-added products such as deck components and fencing sold to retail building materials customers, as well as trusses, wall panels and other components sold to the residential construction market, and most industrial packaging products. Prices for these products are generally fixed at the time of the sales quotation for a specified period of time or are based upon a specific quantity. In order to maintain margins and reduce any exposure to adverse trends in the price of component lumber products, we attempt to lock in costs with our suppliers for these sales commitments. Also, the time period and quantity limitations generally allow us to re-price our products for changes in lumber costs from our suppliers. |
• | 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 we 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. As a result of the decline in the housing market and our sales to residential and commercial builders, a greater percentage of our sales fall into this general pricing category. Consequently, we believe our profitability may be impacted to a much greater extent to changes in the trend of lumber prices. |
• | 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 15% 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. |
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 | % |
Three Months Ended | Six months Ended | |||||||
June 27, 2015 | June 28, 2014 | June 27, 2015 | June 28, 2014 | |||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Cost of goods sold | 86.6 | 87.5 | 87.0 | 87.7 | ||||
Gross profit | 13.4 | 12.6 | 13.0 | 12.3 | ||||
Selling, general, and administrative expenses | 8.2 | 7.7 | 8.8 | 8.5 | ||||
Anti-dumping duty assessments | — | 0.2 | — | 0.1 | ||||
Net gain on disposition and impairment of assets | — | — | — | (0.1 | ) | |||
Earnings from operations | 5.3 | 4.8 | 4.2 | 3.7 | ||||
Other expense (income), net | 0.2 | 0.1 | 0.2 | 0.1 | ||||
Earnings before income taxes | 5.1 | 4.7 | 4.0 | 3.6 | ||||
Income taxes | 2.0 | 1.8 | 1.5 | 1.4 | ||||
Net earnings | 3.2 | 2.9 | 2.6 | 2.3 | ||||
Less net earnings attributable to noncontrolling interest | (0.1 | ) | (0.1 | ) | (0.1 | ) | (0.1 | ) |
Net earnings attributable to controlling interest | 3.1 | % | 2.8 | % | 2.5 | % | 2.2 | % |
• | Diversifying our end market sales mix by increasing sales of specialty wood packaging to industrial users, increasing our penetration of the commercial market, increasing our sales of engineered wood components for custom home, multi-family, military and light commercial construction, and increasing our market share with independent retailers. |
• | Expanding geographically in our core businesses, domestically and internationally. |
• | Increasing sales of “value-added” products, which primarily consist of fencing, decking, lattice, and other specialty products sold to the 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, which comprises approximately 20% of our total sales, is not presently included in the value-added sales totals. |
• | Developing new products and expanding our product offering for existing customers. New product sales were $73.2 million in the second quarter of 2015 compared to $60.0 million during the second quarter of 2014. New product sales year-to-date for 2015 and 2014 were $120.3 million and $95.4 million, respectively. |
• | Maximizing unit sales growth while achieving return on investment goals. |
(in thousands) | Three Months Ended | Six Months Ended | ||||||||||||||
Market Classification | June 27, 2015 | June 28, 2014 | % Change | June 27, 2015 | June 28, 2014 | % Change | ||||||||||
Retail | $ | 376,219 | $ | 347,371 | 8.3 | $ | 606,104 | $ | 548,355 | 10.5 | ||||||
Industrial | 240,067 | 205,334 | 16.9 | 451,228 | 376,985 | 19.7 | ||||||||||
Construction | 234,555 | 231,507 | 1.3 | 435,278 | 421,069 | 3.4 | ||||||||||
Total Gross Sales | 850,841 | 784,212 | 8.5 | 1,492,610 | 1,346,409 | 10.9 | ||||||||||
Sales Allowances | (12,670 | ) | (11,460 | ) | 10.6 | (21,415 | ) | (19,658 | ) | 8.9 | ||||||
Total Net Sales | $ | 838,171 | $ | 772,752 | 8.5 | $ | 1,471,195 | $ | 1,326,751 | 10.9 |
Three Months Ended | Six Months Ended | ||||||||||
June 27, 2015 | June 28, 2014 | June 27, 2015 | June 28, 2014 | ||||||||
Value-Added | 59.4 | % | 59.3 | % | 58.7 | % | 58.6 | % | |||
Commodity-Based | 40.6 | % | 40.7 | % | 41.3 | % | 41.4 | % |
• | Over $3.0 million of our gross profit increase reflects our efforts to be more selective in the business that we take on sales to the residential construction market and our growth in sales to the commercial and construction market added over $1.0 million to our gross profits. |
• | Nearly $3.4 million of our gross profit increase is attributable to our growth in sales to the retail market, due to market share gains and improving demand. Furthermore, operating leverage on our sales growth along with effective inventory positioning helped us withstand the adverse impact of a falling lumber market. |
• | Almost $10 million of our gross profit improvement was due to growth and a more favorable product mix on sales to the industrial market. |
Net Sales | Segment Operating Profit | |||||||||||||||||||||||
(in thousands) | Three Months Ended | Three Months Ended | ||||||||||||||||||||||
June 27, 2015 | June 28, 2014 | $ Change | % Change | June 27, 2015 | June 28, 2014 | $ Change | % Change | |||||||||||||||||
North | $ | 281,333 | $ | 253,481 | $ | 27,852 | 11.0 | % | $ | 16,394 | $ | 10,701 | $ | 5,693 | 53.2 | % | ||||||||
South | 185,497 | 172,464 | 13,033 | 7.6 | % | 7,997 | 6,730 | 1,267 | 18.8 | % | ||||||||||||||
Western | 309,511 | 295,263 | 14,248 | 4.8 | % | 18,272 | 17,643 | 629 | 3.6 | % | ||||||||||||||
All Other | 61,830 | 51,544 | 10,286 | 20.0 | % | 2,997 | 2,217 | 780 | 35.2 | % | ||||||||||||||
Corporate1 | — | — | (1,472 | ) | (568 | ) | (904 | ) | 159.2 | % | ||||||||||||||
Total | $ | 838,171 | $ | 772,752 | $ | 65,419 | 8.5 | % | $ | 44,188 | $ | 36,723 | $ | 7,465 | 20.3 | % |
Net Sales | Segment Operating Profit | |||||||||||||||||||||||
(in thousands) | Six Months Ended | Six Months Ended | ||||||||||||||||||||||
June 27, 2015 | June 28, 2014 | $ Change | % Change | June 27, 2015 | June 28, 2014 | $ Change | % Change | |||||||||||||||||
North | $ | 460,832 | $ | 410,116 | $ | 50,716 | 12.4 | % | $ | 19,105 | $ | 11,925 | $ | 7,180 | 60.2 | % | ||||||||
South | 349,692 | 315,824 | 33,868 | 10.7 | % | 13,999 | 13,003 | 996 | 7.7 | % | ||||||||||||||
Western | 567,090 | 520,663 | 46,427 | 8.9 | % | 28,790 | 26,488 | 2,302 | 8.7 | % | ||||||||||||||
All Other | 93,581 | 80,148 | 13,433 | 16.8 | % | 1,850 | 1,128 | 722 | 64.0 | % | ||||||||||||||
Corporate1 | — | — | — | (1,693 | ) | (3,194 | ) | 1,501 | (47.0 | )% | ||||||||||||||
Total | $ | 1,471,195 | $ | 1,326,751 | $ | 144,444 | 10.9 | % | $ | 62,051 | $ | 49,350 | $ | 12,701 | 25.7 | % |
Six Months Ended | |||||||
June 27, 2015 | June 28, 2014 | ||||||
Cash from operating activities | $ | 36,822 | $ | 22,804 | |||
Cash from investing activities | (26,898 | ) | (28,015 | ) | |||
Cash from financing activities | 15,112 | 5,271 | |||||
Effect of exchange rate changes on cash | (280 | ) | (60 | ) | |||
Net change in cash and cash equivalents | 24,756 | — | |||||
Cash and cash equivalents, beginning of period | — | — | |||||
Cash and cash equivalents, end of period | $ | 24,756 | $ | — |
(a) | Evaluation of Disclosure Controls and Procedures. With the participation of management, our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in |
(b) | Changes in Internal Controls. During the quarter ended June 27, 2015, there were no changes in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. |
(a) | None. |
(b) | None. |
(c) | Issuer purchases of equity securities. |
Fiscal Month | (a) | (b) | (c) | (d) | ||||
March 29 – May 2, 2015(1) | 2,881,703 | |||||||
May 3 – 30, 2015 | 2,881,703 | |||||||
May 31 – June 27, 2015 | 2,881,703 |
(a) | Total number of shares purchased. |
(b) | Average price paid per share. |
(c) | Total number of shares purchased as part of publicly announced plans or programs. |
(d) | Maximum number of shares that may yet be purchased under the plans or programs. |
(1) | On November 14, 2001, the Board of Directors approved a share repurchase program (which succeeded a previous program) allowing us to repurchase up to 2.5 million shares of our common stock. On October 14, 2011, our Board authorized an additional 2 million shares to be repurchased under our share repurchase program. The total number of shares that may be repurchased under the program is approximately 3 million shares. |
31 | Certifications. | |
(a) | Certificate of the Chief Executive Officer of Universal Forest Products, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | |
(b) | Certificate of the Chief Financial Officer of Universal Forest Products, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | |
32 | Certifications. | |
(a) | Certificate of the Chief Executive Officer of Universal Forest Products, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | |
(b) | Certificate of the Chief Financial Officer of Universal Forest Products, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | |
101 | Interactive Data File. | |
(INS) | XBRL Instance Document. | |
(SCH) | XBRL Schema Document. | |
(CAL) | XBRL Taxonomy Extension Calculation Linkbase Document. | |
(LAB) | XBRL Taxonomy Extension Label Linkbase Document. | |
(PRE) | XBRL Taxonomy Extension Presentation Linkbase Document. | |
(DEF) | XBRL Taxonomy Extension Definition Linkbase Document. |
* | Indicates a compensatory arrangement. |
UNIVERSAL FOREST PRODUCTS, INC. | ||
Date: July 29, 2015 | By: | /s/ Matthew J. Missad |
Matthew J. Missad, | ||
Chief Executive Officer and Principal Executive Officer | ||
Date: July 29, 2015 | By: | /s/ Michael R. Cole |
Michael R. Cole, | ||
Chief Financial Officer, | ||
Principal Financial Officer and | ||
Principal Accounting Officer |
Exhibit No. | Description | ||
31 | Certifications. | ||
(a) | Certificate of the Chief Executive Officer of Universal Forest Products, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | ||
(b) | Certificate of the Chief Financial Officer of Universal Forest Products, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | ||
32 | Certifications. | ||
(a) | Certificate of the Chief Executive Officer of Universal Forest Products, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | ||
(b) | Certificate of the Chief Financial Officer of Universal Forest Products, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). | ||
101 | Interactive Data File. | ||
(INS) | XBRL Instance Document. | ||
(SCH) | XBRL Schema Document. | ||
(CAL) | XBRL Taxonomy Extension Calculation Linkbase Document. | ||
(LAB) | XBRL Taxonomy Extension Label Linkbase Document. | ||
(PRE) | XBRL Taxonomy Extension Presentation Linkbase Document. | ||
(DEF) | XBRL Taxonomy Extension Definition Linkbase Document |
* | Indicates a compensatory arrangement. |
1. | I have reviewed this report on Form 10-Q of Universal Forest Products, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: July 29, 2015 | /s/ Matthew J. Missad | |
Matthew J. Missad, | ||
Chief Executive Officer and Principal Executive Officer |
1. | I have reviewed this report on Form 10-Q of Universal Forest Products, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: July 29, 2015 | /s/ Michael R. Cole | |
Michael R. Cole | ||
Chief Financial Officer and Principal Accounting Officer |
(1) | The quarterly report on Form 10-Q for the quarterly period ended June 27, 2015, which this statement accompanies, fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in this quarterly report on Form 10-Q for the quarterly period ended June 27, 2015 fairly presents, in all material respects, the financial condition and results of operations of Universal Forest Products, Inc. |
UNIVERSAL FOREST PRODUCTS, INC. | ||
Date: July 29, 2015 | By: /s/ Matthew J. Missad | |
Matthew J. Missad, | ||
Chief Executive Officer and Principal Executive Officer |
(1) | The quarterly report on Form 10-Q for the quarterly period ended June 27, 2015, which this statement accompanies, fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in this quarterly report on Form 10-Q for the quarterly period ended June 27, 2015 fairly presents, in all material respects, the financial condition and results of operations of Universal Forest Products, Inc. |
UNIVERSAL FOREST PRODUCTS, INC. | ||
Date: July 29, 2015 | By: /s/ Michael R. Cole | |
Michael R. Cole, | ||
Chief Financial Officer and Principal Financial Officer |
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COMMITMENTS, CONTINGENCIES, AND GUARANTEES (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 27, 2015 |
Jun. 28, 2014 |
|
Commitments and Contingencies Disclosure [Abstract] | ||
Estimated costs to complete future remediation efforts | $ 3.4 | $ 3.2 |
Surety Bonds and Letters of Credit [Abstract] | ||
Payment and performance bonds outstanding | $ 0.5 | |
Expiration period of surety bonds | 2 years | |
Completed projects still under warranty | $ 13.0 | |
Outstanding letters of credit | 25.4 | |
Irrevocable letters of credit in favor of our insurers outstanding | 15.6 | |
Irrevocable letters of credit in favor of our industrial development revenue bonds outstanding | 9.8 | |
Approximate identification and removal of contaminants costs | 0.6 | |
Capital addition purchase commitments | ||
Long-term Purchase Commitment [Line Items] | ||
Outstanding purchase commitments on capital projects | $ 5.8 |
FAIR VALUE |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 27, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE | FAIR VALUE We apply the provisions of ASC 820, Fair Value Measurements and Disclosures, to assets and liabilities measured at fair value. Assets measured at fair value are as follows:
We maintain money market and/or mutual funds in our non-qualified deferred compensation plan and our wholly owned licensed captive insurance. These funds are valued at prices quoted in an active exchange market and are included in “Other Assets” and "Cash and Cash Equivalents", respectively. We have elected not to apply the fair value option under ASC 825, Financial Instruments, to any of our financial instruments except for those expressly required by U.S. GAAP. We did not maintain any Level 2 or 3 assets or liabilities at June 27, 2015 or June 28, 2014. |
INCOME TAXES (Details) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 27, 2015 |
Jun. 28, 2014 |
Jun. 27, 2015 |
Jun. 28, 2014 |
|
Income Tax Disclosure [Abstract] | ||||
Effective income tax rate (in hundredths) | 37.40% | 37.70% | 37.00% | 37.20% |
BASIS OF PRESENTATION |
6 Months Ended |
---|---|
Jun. 27, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying unaudited interim consolidated condensed financial statements (the "Financial Statements") include our accounts and those of our wholly-owned and majority-owned subsidiaries and partnerships, and 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 accounting principles generally accepted in the United States. All intercompany transactions and balances have been eliminated. In our opinion, the Financial Statements contain all material adjustments necessary to present fairly our consolidated financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. These Financial Statements should be read in conjunction with the annual consolidated financial statements, and footnotes thereto, included in our Annual Report to Shareholders on Form 10-K for the fiscal year ended December 27, 2014. Seasonality has a significant impact on our working capital from March to August which historically results 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 typically results in significant cash flow from operations in our third and fourth quarters. For comparative purposes, we have included the June 28, 2014 balances in the accompanying unaudited consolidated condensed balance sheets. |