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 | 49525 | |
(Address of principal executive offices) (Zip Code) | (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 25, 2011 | |
Common stock, no par value | 19,525,590 |
Page No.
|
||
PART I.
|
FINANCIAL INFORMATION.
|
|
|
||
Item 1.
|
Financial Statements.
|
|
3
|
||
4
|
||
5
|
||
6 | ||
7 - 15 | ||
Item 2.
|
16 - 28 | |
Item 3.
|
29 | |
Item 4.
|
29 | |
PART II.
|
OTHER INFORMATION.
|
|
Item 1.
|
Legal Proceedings - NONE.
|
|
Item 1A.
|
Risk Factors - NONE.
|
|
Item 2.
|
30 | |
Item 3.
|
Defaults Upon Senior Securities - NONE.
|
|
Item 4.
|
(Removed and Reserved).
|
|
Item 5.
|
30 | |
Item 6. | Exhibits. | 31 |
June 25,
|
December 25,
|
June 26,
|
||||||||||
2011
|
2010
|
2010
|
||||||||||
ASSETS
|
||||||||||||
CURRENT ASSETS:
|
||||||||||||
Cash and cash equivalents
|
$ | - | $ | 43,363 | $ | 695 | ||||||
Accounts receivable, net
|
204,220 | 126,780 | 229,199 | |||||||||
Inventories:
|
||||||||||||
Raw materials
|
126,196 | 113,049 | 111,670 | |||||||||
Finished goods
|
78,394 | 77,341 | 79,899 | |||||||||
204,590 | 190,390 | 191,569 | ||||||||||
Assets held for sale
|
5,082 | 2,446 | - | |||||||||
Refundable income taxes
|
2,114 | - | - | |||||||||
Other current assets
|
18,219 | 19,020 | 18,110 | |||||||||
TOTAL CURRENT ASSETS
|
434,225 | 381,999 | 439,573 | |||||||||
OTHER ASSETS
|
11,453 | 11,455 | 5,300 | |||||||||
GOODWILL
|
154,702 | 154,702 | 156,296 | |||||||||
INDEFINITE-LIVED INTANGIBLE ASSETS
|
2,340 | 2,340 | 2,340 | |||||||||
OTHER INTANGIBLE ASSETS, net
|
13,136 | 15,933 | 13,429 | |||||||||
PROPERTY, PLANT AND EQUIPMENT:
|
||||||||||||
Property, plant and equipment
|
525,197 | 517,793 | 518,816 | |||||||||
Accumulated depreciation and amortization
|
(308,200 | ) | (295,642 | ) | (292,390 | ) | ||||||
PROPERTY, PLANT AND EQUIPMENT, NET
|
216,997 | 222,151 | 226,426 | |||||||||
TOTAL ASSETS
|
$ | 832,853 | $ | 788,580 | $ | 843,364 | ||||||
LIABILITIES AND EQUITY
|
||||||||||||
CURRENT LIABILITIES:
|
||||||||||||
Cash overdraft
|
$ | 8,671 | $ | - | $ | - | ||||||
Accounts payable
|
76,521 | 59,481 | 83,467 | |||||||||
Accrued liabilities:
|
||||||||||||
Compensation and benefits
|
39,741 | 43,909 | 48,226 | |||||||||
Income taxes
|
- | 657 | 6,736 | |||||||||
Other
|
15,573 | 15,135 | 22,995 | |||||||||
Current portion of long-term debt and capital lease obligations
|
23,772 | 712 | 692 | |||||||||
TOTAL CURRENT LIABILITIES
|
164,278 | 119,894 | 162,116 | |||||||||
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current portion
|
52,200 | 54,579 | 67,932 | |||||||||
DEFERRED INCOME TAXES
|
20,478 | 20,631 | 21,539 | |||||||||
OTHER LIABILITIES
|
15,040 | 12,300 | 11,929 | |||||||||
TOTAL LIABILITIES
|
251,996 | 207,404 | 263,516 | |||||||||
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 19,525,590, 19,333,122 and 19,329,922
|
$ | 19,526 | $ | 19,333 | $ | 19,330 | ||||||
Additional paid-in capital
|
140,636 | 138,573 | 135,710 | |||||||||
Retained earnings
|
410,814 | 414,108 | 416,562 | |||||||||
Accumulated other comprehensive earnings
|
4,839 | 4,165 | 4,018 | |||||||||
Employee stock notes receivable
|
(1,493 | ) | (1,670 | ) | (1,721 | ) | ||||||
574,322 | 574,509 | 573,899 | ||||||||||
Noncontrolling interest
|
6,535 | 6,667 | 5,949 | |||||||||
TOTAL EQUITY
|
580,857 | 581,176 | 579,848 | |||||||||
TOTAL LIABILITIES AND EQUITY
|
$ | 832,853 | $ | 788,580 | $ | 843,364 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 25,
|
June 26,
|
June 25,
|
June 26,
|
|||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
NET SALES
|
$ | 544,139 | $ | 638,635 | $ | 931,372 | $ | 1,031,593 | ||||||||
COST OF GOODS SOLD
|
487,552 | 560,749 | 833,371 | 902,073 | ||||||||||||
GROSS PROFIT
|
56,587 | 77,886 | 98,001 | 129,520 | ||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
|
45,328 | 54,041 | 91,816 | 102,530 | ||||||||||||
NET LOSS ON DISPOSITION OF ASSETS,EARLY RETIREMENT, AND OTHER IMPAIRMENT AND EXIT CHARGES
|
3,482 | 212 | 3,489 | 384 | ||||||||||||
EARNINGS FROM OPERATIONS
|
7,777 | 23,633 | 2,696 | 26,606 | ||||||||||||
INTEREST EXPENSE
|
929 | 903 | 1,812 | 1,789 | ||||||||||||
INTEREST INCOME
|
(132 | ) | (70 | ) | (380 | ) | (190 | ) | ||||||||
797 | 833 | 1,432 | 1,599 | |||||||||||||
EARNINGS BEFORE INCOME TAXES
|
6,980 | 22,800 | 1,264 | 25,007 | ||||||||||||
INCOME TAXES
|
2,502 | 8,332 | 215 | 8,819 | ||||||||||||
NET EARNINGS
|
4,478 | 14,468 | 1,049 | 16,188 | ||||||||||||
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST
|
(201 | ) | (752 | ) | (442 | ) | (1,485 | ) | ||||||||
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST
|
$ | 4,277 | $ | 13,716 | $ | 607 | $ | 14,703 | ||||||||
EARNINGS PER SHARE - BASIC
|
$ | 0.22 | $ | 0.71 | $ | 0.03 | $ | 0.76 | ||||||||
EARNINGS PER SHARE - DILUTED
|
$ | 0.22 | $ | 0.70 | $ | 0.03 | $ | 0.75 | ||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING
|
19,413 | 19,259 | 19,360 | 19,258 | ||||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING WITH COMMON STOCK EQUIVALENTS
|
19,546 | 19,531 | 19,513 | 19,524 |
Controlling Interest Shareholders' Equity
|
||||||||||||||||||||||||||||
Common Stock
|
Additional Paid-
In Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Earnings
|
Employees
Stock Notes
Receivable
|
Noncontrolling
Interest
|
Total
|
||||||||||||||||||||||
Balance at December 26, 2009
|
$ | 19,285 | $ | 132,765 | $ | 409,278 | $ | 3,633 | $ | (1,743 | ) | $ | 5,728 | $ | 568,946 | |||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net earnings
|
14,703 | 1,485 | ||||||||||||||||||||||||||
Foreign currency translation adjustment
|
385 | 140 | ||||||||||||||||||||||||||
Total comprehensive earnings
|
16,713 | |||||||||||||||||||||||||||
Purchase of additional noncontrolling interest
|
(295 | ) | (932 | ) | (1,227 | ) | ||||||||||||||||||||||
Distributions to noncontrolling interest
|
(472 | ) | (472 | ) | ||||||||||||||||||||||||
Cash dividends - $0.200 per share
|
(3,871 | ) | (3,871 | ) | ||||||||||||||||||||||||
Issuance of 62,029 shares under employee stock plans
|
62 | 1,269 | 1,331 | |||||||||||||||||||||||||
Issuance of 76,143 shares under stock grant programs
|
76 | 41 | 117 | |||||||||||||||||||||||||
Issuance of 6,669 shares under deferred compensation plans
|
7 | (7 | ) | - | ||||||||||||||||||||||||
Repurchase of 100,300 shares
|
(100 | ) | (3,548 | ) | (3,648 | ) | ||||||||||||||||||||||
Tax benefits from non-qualified stock options exercised
|
379 | 379 | ||||||||||||||||||||||||||
Expense associated with share-based compensation arrangements
|
1,078 | 1,078 | ||||||||||||||||||||||||||
Accrued expense under deferred compensation plans
|
473 | 473 | ||||||||||||||||||||||||||
Issuance of 1,298 shares in exchange for employees'stock notes receivable
|
1 | 49 | (50 | ) | - | |||||||||||||||||||||||
Notes receivable adjustment
|
(1 | ) | (42 | ) | (9 | ) | (52 | ) | ||||||||||||||||||||
Payments received on employee stock notes receivable
|
81 | 81 | ||||||||||||||||||||||||||
Balance at June 26, 2010
|
$ | 19,330 | $ | 135,710 | $ | 416,562 | $ | 4,018 | $ | (1,721 | ) | $ | 5,949 | $ | 579,848 | |||||||||||||
Balance at December 25, 2010
|
$ | 19,333 | $ | 138,573 | $ | 414,108 | $ | 4,165 | $ | (1,670 | ) | $ | 6,667 | $ | 581,176 | |||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net earnings
|
607 | 442 | ||||||||||||||||||||||||||
Foreign currency translation adjustment
|
674 | 281 | ||||||||||||||||||||||||||
Total comprehensive earnings
|
2,004 | |||||||||||||||||||||||||||
Purchase of additional noncontrolling interest
|
(100 | ) | (100 | ) | ||||||||||||||||||||||||
Capital contribution from noncontrolling interest
|
80 | 80 | ||||||||||||||||||||||||||
Distributions to noncontrolling interest
|
(835 | ) | (835 | ) | ||||||||||||||||||||||||
Cash dividends - $0.200 per share
|
(3,905 | ) | (3,905 | ) | ||||||||||||||||||||||||
Issuance of 30,108 shares under employee stock plans
|
30 | 545 | 575 | |||||||||||||||||||||||||
Issuance of 158,436 shares under stock grant programs
|
159 | (13 | ) | 4 | 150 | |||||||||||||||||||||||
Issuance of 4,245 shares under deferred compensation plans
|
4 | (4 | ) | - | ||||||||||||||||||||||||
Tax benefits from non-qualified stock options exercised
|
154 | 154 | ||||||||||||||||||||||||||
Expense associated with share-based compensation arrangements
|
1,013 | 1,013 | ||||||||||||||||||||||||||
Accrued expense under deferred compensation plans
|
380 | 380 | ||||||||||||||||||||||||||
Notes receivable adjustment
|
(12 | ) | 12 | - | ||||||||||||||||||||||||
Payments received on employee stock notes receivable
|
165 | 165 | ||||||||||||||||||||||||||
Balance at June 25, 2011
|
$ | 19,526 | $ | 140,636 | $ | 410,814 | $ | 4,839 | $ | (1,493 | ) | $ | 6,535 | $ | 580,857 |
Six Months Ended
|
||||||||
June 25,
|
June 26,
|
|||||||
2011
|
2010
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net earnings attributable to controlling interest
|
$ | 607 | $ | 14,703 | ||||
Adjustments to reconcile net earnings attributable to controlling interest to net cash from operating activities:
|
||||||||
Depreciation
|
14,452 | 15,199 | ||||||
Amortization of intangibles
|
2,873 | 3,590 | ||||||
Expense associated with share-based compensation arrangements
|
1,163 | 1,195 | ||||||
Excess tax benefits from share-based compensation arrangements
|
(120 | ) | (265 | ) | ||||
Deferred income tax credit
|
(87 | ) | (195 | ) | ||||
Net earnings attributable to noncontrolling interest
|
442 | 1,485 | ||||||
Net loss on sale or impairment of property, plant and equipment
|
21 | 118 | ||||||
Changes in:
|
||||||||
Accounts receivable
|
(77,166 | ) | (120,961 | ) | ||||
Inventories
|
(13,865 | ) | (26,175 | ) | ||||
Accounts payable
|
16,927 | 33,706 | ||||||
Accrued liabilities and other
|
(3,158 | ) | 21,627 | |||||
NET CASH FROM OPERATING ACTIVITIES
|
(57,911 | ) | (55,973 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchase of property, plant and equipment
|
(12,159 | ) | (11,551 | ) | ||||
Acquisitions, net of cash received
|
- | (5,834 | ) | |||||
Proceeds from sale of property, plant and equipment
|
1,197 | 382 | ||||||
Purchase of product technology
|
(77 | ) | - | |||||
Advances of notes receivable
|
- | (1,000 | ) | |||||
Collections of notes receivable
|
294 | 103 | ||||||
Other, net
|
19 | 21 | ||||||
NET CASH FROM INVESTING ACTIVITIES
|
(10,726 | ) | (17,879 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Net borrowings under revolving credit facilities
|
20,931 | 15,000 | ||||||
Repayment of long-term debt
|
(272 | ) | (255 | ) | ||||
Proceeds from issuance of common stock
|
575 | 1,331 | ||||||
Purchase of additional noncontrolling interest
|
(100 | ) | (1,227 | ) | ||||
Distributions to noncontrolling interest
|
(835 | ) | (472 | ) | ||||
Capital contribution from noncontrolling interest
|
80 | - | ||||||
Dividends paid to shareholders
|
(3,905 | ) | (3,871 | ) | ||||
Repurchase of common stock
|
- | (3,648 | ) | |||||
Excess tax benefits from share-based compensation arrangements
|
120 | 265 | ||||||
Other, net
|
9 | 14 | ||||||
NET CASH FROM FINANCING ACTIVITIES
|
16,603 | 7,137 | ||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
(52,034 | ) | (66,715 | ) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
43,363 | 67,410 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
$ | (8,671 | ) | $ | 695 | |||
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
|
||||||||
Cash paid during the period for:
|
||||||||
Interest
|
$ | 1,820 | $ | 1,777 | ||||
Income taxes
|
2,964 | (8,470 | ) | |||||
NON-CASH FINANCING ACTIVITIES:
|
||||||||
Common stock issued under deferred compensation plans
|
$ | 142 | $ | 178 |
A.
|
BASIS OF PRESENTATION
|
B.
|
FAIR VALUE
|
June 25, 2011
|
June 26, 2010
|
|||||||||||||||||||||||
(in thousands)
|
Quoted
Prices in
Active
Markets
(Level 1)
|
Prices with
Other
Observable
Inputs
(Level 2)
|
Total
|
Quoted
Prices in
Active
Markets
(Level 1)
|
Prices with
Other
Observable
Inputs
(Level 2)
|
Total
|
||||||||||||||||||
Recurring:
|
||||||||||||||||||||||||
Money market funds
|
$ | 84 | $ | 84 | $ | 64 | $ | 64 | ||||||||||||||||
Mutual funds:
|
||||||||||||||||||||||||
Domestic stock funds
|
570 | 570 | 436 | 436 | ||||||||||||||||||||
International stock funds
|
539 | 539 | 395 | 395 | ||||||||||||||||||||
Target funds
|
153 | 153 | 114 | 114 | ||||||||||||||||||||
Bond funds
|
105 | 105 | 49 | 49 | ||||||||||||||||||||
Total mutual funds
|
1,367 | 1,367 | 994 | 994 | ||||||||||||||||||||
Non-Recurring:
|
||||||||||||||||||||||||
Property, plant and equipment
|
$ | 165 | 165 | |||||||||||||||||||||
$ | 1,451 | $ | 1,451 | $ | 1,058 | $ | 165 | $ | 1,223 |
C.
|
REVENUE RECOGNITION
|
June 25, 2011
|
December 25, 2010
|
June 26, 2010
|
||||||||||
Cost and Earnings in Excess of Billings
|
$ | 5,716 | $ | 3,604 | $ | 5,333 | ||||||
Billings in Excess of Cost and Earnings
|
1,751 | 2,126 | 4,426 |
D.
|
EARNINGS PER SHARE
|
Three Months Ended June 25, 2011
|
Three Months Ended June 26, 2010
|
|||||||||||||||||||||||
Income
(Numerator)
|
Shares
(Denominator)
|
Per Share Amount
|
Income
(Numerator)
|
Shares
(Denominator)
|
Per
Share
Amount
|
|||||||||||||||||||
Net Earnings Attributable to Controlling Interest
|
$ | 4,277 | $ | 13,716 | ||||||||||||||||||||
EPS – Basic
Income available to common stockholders
|
4,277 | 19,413 | $ | 0.22 | 13,716 | 19,259 | $ | 0.71 | ||||||||||||||||
Effect of dilutive securities
Options
|
133 | 272 | ||||||||||||||||||||||
EPS - Diluted
Income available to common stockholders and assumed options exercised
|
$ | 4,277 | 19,546 | $ | 0.22 | $ | 13,716 | 19,531 | $ | 0.70 |
Six Months Ended June 25, 2011
|
Six Months Ended June 26, 2010
|
|||||||||||||||||||||||
Income
(Numerator)
|
Shares
(Denominator)
|
Per
Share
Amount
|
Income
(Numerator)
|
Shares
(Denominator)
|
Per
Share
Amount
|
|||||||||||||||||||
Net Earnings Attributable to Controlling Interest
|
$ | 607 | $ | 14,703 | ||||||||||||||||||||
EPS – Basic
Income available to common stockholders
|
607 | 19,360 | $ | 0.03 | 14,703 | 19,258 | $ | 0.76 | ||||||||||||||||
Effect of dilutive securities
Options
|
153 | 266 | ||||||||||||||||||||||
EPS - Diluted
Income available to common stockholders and assumed options exercised
|
$ | 607 | 19,513 | $ | 0.03 | $ | 14,703 | 19,524 | $ | 0.75 |
E.
|
ASSETS HELD FOR SALE AND NET LOSS ON DISPOSITION OF ASSETS, EARLY RETIRMENT AND OTHER IMPAIRMENTS AND EXIT CHARGES
|
Three Months Ended June 25, 2011
|
Three Months Ended June 26, 2010
|
|||||||||||||||||||||||||||||||
Eastern
and
Western
Divisions
|
Atlantic
Division
|
Corporate
|
All
Other
|
Eastern and
Western
Divisions
|
Atlantic
Division
|
Corporate
|
All
Other
|
|||||||||||||||||||||||||
Severances and early retirement
|
$ | 10 | $ | 3,309 | $ | 17 | $ | 8 | $ | 16 | $ | 13 | ||||||||||||||||||||
Property, plant and equipment
|
(28 | ) | 191 | (127 | ) | 285 |
Six Months Ended June 25, 2011
|
Six Months Ended June 26, 2010
|
|||||||||||||||||||||||||||||||
Eastern
and
Western
Divisions
|
Atlantic
Division
|
Corporate
|
All
Other
|
Eastern and
Western
Divisions
|
Atlantic
Division
|
Corporate
|
All
Other
|
|||||||||||||||||||||||||
Severances and early retirement
|
$ | 118 | $ | 16 | $ | 3,334 | $ | 136 | $ | 85 | $ | 21 | $ | 24 | ||||||||||||||||||
Property, plant and equipment
|
(106 | ) | (33 | ) | 158 | $ | 2 | (145 | ) | (11 | ) | 278 | (4 | ) |
Description
|
Net Book
Value
|
Date of Sale
|
Net Sales
Price
|
||||
Assets held for sale as of December 25, 2010
|
$ | 2,446 | |||||
Additions
|
5,082 | ||||||
Transfers to held for use
|
(1,619 | ) | |||||
Sale of certain real estate in Indianapolis, Indiana
|
(827 | ) |
May 17, 2011
|
$0.7 million
|
|||
Assets held for sale as of June 25, 2011
|
$ | 5,082 |
F.
|
COMMITMENTS, CONTINGENCIES, AND GUARANTEES
|
G.
|
BUSINESS COMBINATIONS
|
Company
Name
|
Acquisition
Date
|
Purchase
Price
|
Intangible
Assets
|
Net
Tangible
Assets
|
Operating
Segment
|
Business Description
|
|||||||
Shepherd Distribution Co.
(“Shepherd”)
|
April 29, 2010
|
$ |
5.9 (asset purchase)
|
$ | 2.2 | $ | 3.7 |
Distribution Division
|
Distributes shingle underlayment, bottom board, house wrap, siding, poly film and other products to manufactured housing and RV customers. Headquartered in Elkhart, Indiana, it has distribution capabilities throughout the United States.
|
||||
Service Supply Distribution, Inc.
(“Service Supply”)
|
March 8, 2010
|
$ |
0.6 (asset purchase)
|
$ | 0.0 | $ | 0.6 |
Distribution Division
|
Distributes certain plumbing, electrical, adhesives, flooring, paint and other products to manufactured housing and RV customers. Headquartered in Cordele, Georgia, it has distribution capabilities throughout the United States.
|
H.
|
SEGMENT REPORTING
|
Six Months Ended June 25, 2011
|
||||||||||||||||||||
Eastern and
Western
Divisions
|
Atlantic
Division
|
Corporate
|
All Other
|
Total
|
||||||||||||||||
Net sales to outside customers
|
$ | 634,267 | $ | 220,765 | $ | - | $ | 76,340 | $ | 931,372 | ||||||||||
Intersegment net sales
|
35,010 | 21,281 | - | 20,847 | 77,138 | |||||||||||||||
Segment operating profit (loss)
|
7,193 | (4,057 | ) | 1,635 | (2,075 | ) | 2,696 |
Six Months Ended June 26, 2010
|
||||||||||||||||||||
Eastern and
Western
Divisions
|
Atlantic
Division
|
Corporate
|
All Other
|
Total
|
||||||||||||||||
Net sales to outside customers
|
$ | 698,847 | $ | 254,280 | $ | - | $ | 78,466 | $ | 1,031,593 | ||||||||||
Intersegment net sales
|
49,590 | 19,456 | - | 34,645 | 103,691 | |||||||||||||||
Segment operating profit (loss)
|
19,753 | 3,090 | (1,530 | ) | 5,293 | 26,606 |
I.
|
INCOME TAXES
|
·
|
Our overall unit sales decreased 4% compared to the second quarter of 2010 due to a decline in sales to our retail building materials, residential construction, and manufactured housing markets, offset by increases in unit sales to our commercial construction and concrete forming and industrial markets. We believe we gained additional share of the commercial construction, concrete forming and industrial markets we serve. Share gains in our industrial market were achieved by adding many new customers. We believe we have maintained our share of the retail building materials market based on the number of stores we serve of our customers compared to last year. Finally, within the last year we closed several plants that supply the site-built construction market in order to achieve profitability and cash flow goals. Consequently, we believe that these actions may temporarily cause us to lose some market share.
|
·
|
The Lumber Market was down 16.4% in the quarter compared to the same period of 2010. We estimate that lower lumber prices reduced our overall selling prices by approximately 10% comparing the second quarter of 2011 and 2010.
|
·
|
National housing starts decreased approximately 11% in the period from March through May of 2011 (our sales trail housing starts by about a month), compared to the same period of 2010, primarily due to the expiration of certain housing-related government tax credits in 2010.
|
·
|
Shipments of HUD code manufactured homes were down 14% in April and May of 2011, compared to the same period of 2010. Shipments of manufactured homes were also positively impacted by certain housing-related tax credits in 2010 that have now expired.
|
·
|
Our gross profit percentage decreased to 10.4% from 12.2% comparing the second quarter of 2011 with the same period of 2010. In addition, our gross profit dollars decreased by 27% comparing the second quarter of 2011 with the same period of 2010, which compares unfavorably to our 4% decrease in unit sales. The decline in our gross margin and profitability this quarter was due to several factors.
|
|
·
|
Most notably, gross margins on sales to the retail building materials market declined 230 basis points for the quarter resulting primarily from an increase in material costs as a percentage of sales to this market. This was primarily due to the Lumber Market, which decreased 11 consecutive weeks from the end of March 2011 through the end of May 2011. As a result, this adversely impacted our gross margins on products whose prices were indexed to the current Lumber Market at the time they are sold.
|
|
·
|
A decline in sales to our retail building materials, residential construction, and manufactured housing markets adversely impacted our margins due to fixed manufacturing costs. In addition, as these markets have contracted, competitive pricing pressure has become greater and adversely impacted 2011 margins.
|
|
·
|
We recorded a $2 million loss during the second quarter of 2011 on a construction project, which represents the entire loss we believe we will incur on the project.
|
|
·
|
Finally, our freight costs increased as a percentage of sales this quarter primarily due to higher year over year fuel prices.
|
·
|
Our chief executive officer resigned on June 20, 2011; on that same date we entered into a consulting and non-competition agreement with him. Therefore, we accrued for the present value of the future payments to him totaling $2.6 million at the end of June 2011.
|
Random Lengths Composite
|
||||||||
Average $/MBF
|
||||||||
2011
|
2010
|
|||||||
January
|
$ | 301 | $ | 264 | ||||
February
|
296 | 312 | ||||||
March
|
294 | 310 | ||||||
April
|
275 | 351 | ||||||
May
|
259 | 333 | ||||||
June
|
262 | 267 | ||||||
Second quarter average
|
$ | 265 | $ | 317 | ||||
Year-to-date average
|
$ | 281 | $ | 306 | ||||
|
||||||||
Second quarter percentagechange from 2010
|
(16.4 | %) | ||||||
Year-to-date percentagechange from 2010
|
(8.2 | %) |
Random Lengths SYP
|
||||||||
|
Average $/MBF
|
|||||||
2011
|
2010
|
|||||||
January
|
$ | 282 | $ | 269 | ||||
February
|
289 | 331 | ||||||
March
|
290 | 337 | ||||||
April
|
266 | 382 | ||||||
May
|
254 | 374 | ||||||
June
|
246 | 293 | ||||||
Second quarter average
|
$ | 255 | $ | 350 | ||||
Year-to-date average
|
$ | 271 | $ | 331 | ||||
Second quarter percentage change from 2010
|
(27.1
|
%) | ||||||
Year-to-date percentage change from 2010
|
(18.1
|
%) |
·
|
Products with fixed selling prices. These products include value-added products such as decking and fencing sold to DIY/retail customers, as well as trusses, wall panels and other components sold to the site-built 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 for these sales commitments with our suppliers. 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 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 17% 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 | % |
For the Three Months Ended
|
For the Six Months Ended
|
|||||||||||||||
June 25, 2011
|
June 26, 2010
|
June 25, 2011
|
June 26, 2010
|
|||||||||||||
Net sales
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of goods sold
|
89.6 | 87.8 | 89.5 | 87.4 | ||||||||||||
Gross profit
|
10.4 | 12.2 | 10.5 | 12.6 | ||||||||||||
Selling, general, and administrative expenses
|
8.3 | 8.5 | 9.9 | 10.0 | ||||||||||||
Net loss on disposition of assets, early retirement, and other impairment and exit charges
|
0.6 | 0.0 | 0.4 | 0.0 | ||||||||||||
Earnings from operations
|
1.4 | 3.7 | 0.3 | 2.6 | ||||||||||||
Interest, net
|
0.2 | 0.1 | 0.2 | 0.2 | ||||||||||||
Earnings before income taxes
|
1.3 | 3.6 | 0.1 | 2.4 | ||||||||||||
Income taxes
|
0.5 | 1.3 | 0.0 | 0.9 | ||||||||||||
Net earnings
|
0.8 | 2.3 | 0.1 | 1.5 | ||||||||||||
Less net earnings attributable to noncontrolling interest
|
(0.0 | ) | (0.1 | ) | (0.0 | ) | (0.1 | ) | ||||||||
Net earnings attributable to controlling interest
|
0.8 | % | 2.2 | % | 0.1 | % | 1.4 | % |
·
|
Diversifying our end market sales mix by increasing sales of specialty wood packaging to industrial users, increasing our penetration of the concrete forms market, increasing our sales of engineered wood components for custom home, multi-family and light commercial construction, increasing our market share with independent retailers, and expanding our product lines in each of the markets we serve.
|
·
|
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 retail building materials 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.
|
·
|
Developing new products and expanding our product offering for existing customers.
|
·
|
Maximizing unit sales growth while achieving return on investment goals.
|
For the Three Months Ended
|
For the Six Months Ended
|
|||||||||||||||||||||||
Market Classification
|
June 25,
2011
|
June 26,
2010
|
%
Change
|
June 25,
2011
|
June 26,
2010
|
%
Change
|
||||||||||||||||||
Retail Building Materials
|
$ | 287,528 | $ | 353,060 | (18.6 | ) | $ | 462,809 | $ | 540,086 | (14.3 | ) | ||||||||||||
Residential Construction
|
56,655 | 67,035 | (15.5 | ) | 104,486 | 120,739 | (13.5 | ) | ||||||||||||||||
Commercial Construction and Concrete Forming
|
20,841 | 16,914 | 23.2 | 35,270 | 31,302 | 12.7 | ||||||||||||||||||
Industrial
|
126,541 | 129,073 | (2.0 | ) | 236,186 | 224,665 | 5.1 | |||||||||||||||||
Manufactured Housing and Recreational Vehicles
|
64,597 | 82,831 | (22.0 | ) | 111,633 | 131,766 | (15.3 | ) | ||||||||||||||||
Total Gross Sales
|
556,162 | 648,913 | (14.3 | ) | 950,384 | 1,048,558 | (9.4 | ) | ||||||||||||||||
Sales Allowances
|
(12,023 | ) | (10,278 | ) | (19,012 | ) | (16,965 | ) | ||||||||||||||||
Total Net Sales
|
$ | 544,139 | $ | 638,635 | (14.8 | ) | $ | 931,372 | $ | 1,031,593 | (9.7 | ) |
Note:
|
In the second quarter of 2011, we made changes to our customer market classifications to improve our reporting by better aligning our customer market designations with available industry reporting and end market research. Prior year information has been restated to reflect these reclassifications. See also Exhibit 99(a).
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 25,
2011
|
June 26,
2010
|
June 25,
2011
|
June 26,
2010
|
|||||||||||||
Value-Added
|
59.9 | % | 58.8 | % | 59.0 | % | 58.5 | % | ||||||||
Commodity-Based
|
40.1 | % | 41.2 | % | 41.0 | % | 41.5 | % |
|
·
|
Most notably, gross margins on sales to the retail building materials market declined 230 basis points for the quarter resulting primarily from an increase in material costs as a percentage of sales to this market. This was primarily due to the Lumber Market, which decreased 11 consecutive weeks from the end of March 2011 through the end of May 2011. As a result, this adversely impacted our gross margins on products whose prices were indexed to the current Lumber Market at the time they are sold.
|
|
·
|
A decline in sales to our retail building materials, residential construction, and manufactured housing markets adversely impacted our margins due to fixed manufacturing costs. In addition, as these markets have contracted, competitive pricing pressure has become greater and adversely impacted 2011 margins.
|
|
·
|
We recorded a $2 million loss during the second quarter of 2011 on a construction project, which represents the entire loss we believe we will incur on the project.
|
|
·
|
Finally, our freight costs increased as a percentage of sales this quarter primarily due to higher year over year fuel prices.
|
·
|
Current and projected earnings, cash flow and return on investment
|
·
|
Current and projected market demand
|
·
|
Market share
|
·
|
Competitive factors
|
·
|
Future growth opportunities
|
·
|
Personnel and management
|
Six Months Ended
|
||||||||
June 25, 2011
|
June 26, 2010
|
|||||||
Cash from operating activities
|
$ | (57,911 | ) | $ | (55,973 | ) | ||
Cash from investing activities
|
(10,726 | ) | (17,879 | ) | ||||
Cash from financing activities
|
16,603 | 7,137 | ||||||
Net change in cash and cash equivalents
|
(52,034 | ) | (66,715 | ) | ||||
Cash and cash equivalents, beginning of period
|
43,363 | 67,410 | ||||||
Cash and cash equivalents, end of period
|
$ | (8,671 | ) | $ | 695 |
(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 Exchange Act Rules 13a – 15e and 15d – 15e) as of the quarter ended June 25, 2011 (the “Evaluation Date”), have concluded that, as of such date, our disclosure controls and procedures were effective.
|
(b)
|
Changes in Internal Controls. During the quarter ended June 25, 2011, 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.
|
Fiscal Month
|
(a)
|
(b)
|
(c)
|
(d)
|
||||
March 27, 2011 – April 30, 2011(1)
|
2,988,229
|
|||||||
May 1 – 28, 2011
|
2,988,229
|
|||||||
May 29 – June 25, 2011
|
2,988,229
|
|
(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, 2010, 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 almost 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).
|
99
|
Additional Exhibits.
|
|
(a)
|
Summary of historical quarterly sales based on our new market classifications.
|
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.
|
UNIVERSAL FOREST PRODUCTS, INC. | |||||
Date: |
August 1, 2011
|
By:
|
/s/ Matthew J. Missad | ||
Matthew J. Missad | |||||
Chief Executive Officer and Principal Executive Officer |
Date: | August 1, 2011 |
|
By:
|
/s/ Michael R. Cole | |
Michael R. Cole, | |||||
Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer |
Exhibit No.
|
Description
|
31
|
Certifications.
|
|
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).
|
|
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.
|
|
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).
|
|
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).
|
99
|
|
Additional Exhibits.
|
|
Summary of historical quarterly sales based on our new market classifications.
|
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.
|
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: |
August 1, 2011
|
|
/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 : |
August 1, 2011
|
|
/s/ Michael R. Cole | |
Michael R. Cole, | ||||
Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer |
UNIVERSAL FOREST PRODUCTS, INC. | |||||
Date: |
August 1, 2011
|
By:
|
/s/ Matthew J. Missad | ||
Matthew J. Missad, | |||||
Chief Executive Officer and Principal Executive Officer |
UNIVERSAL FOREST PRODUCTS, INC. | |||||
Date: |
August 1, 2011
|
By:
|
/s/ Michael R. Cole | ||
Michael R. Cole, | |||||
Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer |
Market
|
Q1 2010 | Q2 2010 | Q3 2010 | Q4 2010 |
Total 2010
|
|||||||||||||||
Retail Building Materials
|
$ | 187,026 | $ | 353,059 | $ | 222,842 | $ | 153,540 | $ | 916,467 | ||||||||||
Industrial
|
95,591 | 129,073 | 120,613 | 105,130 | 450,407 | |||||||||||||||
Commercial Construction and Concrete Forming
|
14,389 | 16,914 | 19,003 | 17,878 | 68,184 | |||||||||||||||
Residential Construction
|
53,704 | 67,035 | 62,857 | 57,718 | 241,314 | |||||||||||||||
Manufactured Housing and Recreational Vehicles
|
48,936 | 82,831 | 64,175 | 49,828 | 245,770 | |||||||||||||||
Total Gross Sales
|
399,646 | 648,912 | 489,490 | 384,094 | 1,922,142 | |||||||||||||||
Sales Allowances
|
(6,688 | ) | (10,277 | ) | (8,916 | ) | (5,409 | ) | (31,291 | ) | ||||||||||
Total Net Sales
|
$ | 392,958 | $ | 638,635 | $ | 480,574 | $ | 378,685 | $ | 1,890,851 |
Market
|
Q1 2009 | Q2 2009 | Q3 2009 | Q4 2009 |
Total 2009
|
|||||||||||||||
Retail Building Materials
|
$ | 186,475 | $ | 320,527 | $ | 236,861 | $ | 146,827 | $ | 890,691 | ||||||||||
Industrial
|
76,837 | 93,157 | 99,476 | 84,534 | 354,004 | |||||||||||||||
Commercial Construction and Concrete Forming
|
16,969 | 16,372 | 18,828 | 19,404 | 71,573 | |||||||||||||||
Residential Construction
|
51,571 | 52,778 | 60,074 | 45,496 | 209,919 | |||||||||||||||
Manufactured Housing and Recreational Vehicles
|
37,255 | 45,485 | 54,252 | 49,186 | 186,178 | |||||||||||||||
Total Gross Sales
|
369,107 | 528,319 | 469,491 | 345,447 | 1,712,365 | |||||||||||||||
Sales Allowances
|
(7,385 | ) | (13,374 | ) | (11,723 | ) | (6,882 | ) | (39,365 | ) | ||||||||||
Total Net Sales
|
$ | 361,722 | $ | 514,945 | $ | 457,768 | $ | 338,565 | $ | 1,673,000 |
Market
|
Q1 2008 | Q2 2008 | Q3 2008 | Q4 2008 |
Total 2008
|
|||||||||||||||
Retail Building Materials
|
$ | 201,800 | $ | 374,326 | $ | 285,595 | $ | 174,006 | $ | 1,035,727 | ||||||||||
Industrial
|
102,570 | 123,048 | 119,869 | 91,477 | 436,964 | |||||||||||||||
Commercial Construction and Concrete Forming
|
25,696 | 29,793 | 30,565 | 30,157 | 116,211 | |||||||||||||||
Residential Construction
|
90,858 | 112,987 | 100,264 | 72,661 | 376,770 | |||||||||||||||
Manufactured Housing and Recreational Vehicles
|
77,593 | 85,444 | 86,580 | 58,902 | 308,519 | |||||||||||||||
Total Gross Sales
|
498,517 | 725,598 | 622,873 | 427,203 | 2,274,191 | |||||||||||||||
Sales Allowances
|
(9,005 | ) | (17,113 | ) | (12,129 | ) | (3,550 | ) | (41,797 | ) | ||||||||||
Total Net Sales
|
$ | 489,512 | $ | 708,485 | $ | 610,744 | $ | 423,653 | $ | 2,232,394 |
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)
|
Jun. 25, 2011
|
Dec. 25, 2010
|
Jun. 26, 2010
|
---|---|---|---|
EQUITY: | Â | Â | Â |
Preferred stock, no par value (in dollars per share) | $ 0 | $ 0 | $ 0 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 | 1,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 | 0 |
Common stock, no par value (in dollars per share) | $ 0 | $ 0 | $ 0 |
Common stock, shares authorized (in shares) | 40,000,000 | 40,000,000 | 40,000,000 |
Common stock, shares issued (in shares) | 19,525,590 | 19,333,122 | 19,329,922 |
Common stock, shares outstanding (in shares) | 19,525,590 | 19,333,122 | 19,329,922 |
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) (USD $)
In Thousands, except Share data |
3 Months Ended | 6 Months Ended | ||
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Jun. 25, 2011
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Jun. 26, 2010
|
Jun. 25, 2011
|
Jun. 26, 2010
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CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) [Abstract] | Â | Â | Â | Â |
NET SALES | $ 544,139 | $ 638,635 | $ 931,372 | $ 1,031,593 |
COST OF GOODS SOLD | 487,552 | 560,749 | 833,371 | 902,073 |
GROSS PROFIT | 56,587 | 77,886 | 98,001 | 129,520 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 45,328 | 54,041 | 91,816 | 102,530 |
NET LOSS ON DISPOSITION OF ASSETS, EARLY RETIREMENT, AND OTHER IMPAIRMENT AND EXIT CHARGES | 3,482 | 212 | 3,489 | 384 |
EARNINGS FROM OPERATIONS | 7,777 | 23,633 | 2,696 | 26,606 |
INTEREST EXPENSE | 929 | 903 | 1,812 | 1,789 |
INTEREST INCOME | (132) | (70) | (380) | (190) |
NON-OPERATING (INCOME)/EXPENSE | 797 | 833 | 1,432 | 1,599 |
EARNINGS BEFORE INCOME TAXES | 6,980 | 22,800 | 1,264 | 25,007 |
INCOME TAXES | 2,502 | 8,332 | 215 | 8,819 |
NET EARNINGS | 4,478 | 14,468 | 1,049 | 16,188 |
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST | (201) | (752) | (442) | (1,485) |
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST | $ 4,277 | $ 13,716 | $ 607 | $ 14,703 |
EARNINGS PER SHARE - BASIC | $ 0.22 | $ 0.71 | $ 0.03 | $ 0.76 |
EARNINGS PER SHARE - DILUTED | $ 0.22 | $ 0.70 | $ 0.03 | $ 0.75 |
WEIGHTED AVERAGE SHARES OUTSTANDING | 19,413 | 19,259 | 19,360 | 19,258 |
WEIGHTED AVERAGE SHARES OUTSTANDING WITH COMMON STOCK EQUIVALENTS | 19,546 | 19,531 | 19,513 | 19,524 |
Document And Entity Information (USD $)
|
6 Months Ended | |
---|---|---|
Jun. 25, 2011
|
Jun. 26, 2010
|
|
Entity Registrant Name | UNIVERSAL FOREST PRODUCTS INC | Â |
Entity Central Index Key | 0000912767 | Â |
Current Fiscal Year End Date | --12-31 | Â |
Entity Well-known Seasoned Issuer | No | Â |
Entity Voluntary Filers | No | Â |
Entity Current Reporting Status | Yes | Â |
Entity Filer Category | Accelerated Filer | Â |
Entity Public Float | Â | $ 551,897,562.00 |
Entity Common Stock, Shares Outstanding | 19,525,590 | Â |
Document Fiscal Year Focus | 2011 | Â |
Document Fiscal Period Focus | Q2 | Â |
Document Type | 10-Q | Â |
Amendment Flag | false | Â |
Document Period End Date | Jun. 25, 2011 |
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ASSETS HELD FOR SALE AND NET LOSS (GAIN) ON DISPOSITION OF ASSETS AND OTHER IMPAIRMENTS AND EXIT CHARGES
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Jun. 25, 2011
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ASSETS HELD FOR SALE AND NET LOSS (GAIN) ON DISPOSITION OF ASSETS AND OTHER IMPAIRMENTS AND EXIT CHARGES [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ASSETS HELD FOR SALE AND NET LOSS (GAIN) ON DISPOSITION OF ASSETS AND OTHER IMPAIRMENTS AND EXIT CHARGES |
Included in “Assets held for sale” on our Consolidated Condensed Balance Sheets are certain property, plant and equipment totaling $5.1 million on June 25, 2011. The assets held for sale consist of certain vacant land and facilities we previously closed to better align manufacturing capacity with the current business environment. The fair values were determined based on appraisals or recent offers to acquire assets. These and other idle assets were evaluated based on the requirements of ASC 360, which resulted in impairment and other exit charges included in “Net loss on disposition of assets, early retirement and other impairment and exit charges” for the periods presented below. These amounts include the following, separated by reporting segment (in thousands):
Our chief executive officer resigned on June 20, 2011; on that same date we entered into a consulting and non-competition agreement with him. Therefore, we accrued for the present value of the future payments to him totaling $2.6 million at the end of June 2011. This amount is included in “severances and early retirement” expenses under Corporate in the table above. The changes in assets held for sale are as follows (in thousands):
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BASIS OF PRESENTATION
|
6 Months Ended |
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Jun. 25, 2011
|
|
BASIS OF PRESENTATION [Abstract] | Â |
BASIS OF PRESENTATION | A. 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 25, 2010. Certain prior year information has been reclassified to conform to the current year presentation. In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”). ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. Under ASU 2011-05, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a continuous statement of comprehensive income or in two separate consecutive statements. The amended guidance is effective for financial periods beginning after December 15, 2011. ASU 2011-05 is not expected to have a material effect on the Company's consolidated financial position or results of operations. |
BUSINESS COMBINATIONS
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Jun. 25, 2011
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BUSINESS COMBINATIONS | Â | |||||||||||||||||||||||||||||||||||||||
BUSINESS COMBINATIONS | G. BUSINESS COMBINATIONS No business combinations were completed in fiscal 2011. We completed the following business combinations in fiscal 2010 which were accounted for using the purchase method (in millions):
The business combinations mentioned above were not significant to our operating results individually or in aggregate, and thus pro forma results are not presented. |
SEGMENT REPORTING
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Jun. 25, 2011
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SEGMENT REPORTING | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT REPORTING | H. SEGMENT REPORTING ASC 280, Segment Reporting (“ASC 280”), defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our operating segments consist of Eastern, Western, Atlantic, Consumer Products and Distribution divisions. In accordance with ASC 280, due to similar economic characteristics, nature of products, distribution methods, and customers, we have aggregated our Eastern and Western operating segments into one reportable segment. The Atlantic division is considered a separate reportable segment. Our other divisions do not collectively form a reportable segment because their respective operations are dissimilar and they do not meet the applicable quantitative requirements. These operations have been included in the “All Other” column of the table below.
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COMMITMENTS, CONTINGENCIES, AND GUARANTEES
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6 Months Ended |
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Jun. 25, 2011
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COMMITMENTS, CONTINGENCIES, AND GUARANTEES [Abstract] | Â |
COMMITMENTS, CONTINGENCIES, AND GUARANTEES | F. COMMITMENTS, CONTINGENCIES, AND GUARANTEES We are self-insured for environmental impairment liability, including certain liabilities which are insured through a wholly owned subsidiary, UFP Insurance Ltd., a licensed captive insurance company. We own and operate a number of 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, we 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. Environmental reserves, calculated with no discount rate, have been established to cover remediation activities at our affiliates' wood preservation facilities in Stockertown, PA; Elizabeth City, NC; Auburndale, FL; Gordon, PA; Janesville, WI; and Medley, FL. In addition, a reserve was established for our affiliate's facility in Thornton, CA to remove certain lead containing materials which existed on the property at the time of purchase. During 2009, a subsidiary entered into a consent order with the State of Florida to conduct additional testing at the Auburndale, FL facility. We admitted no liability and the costs are not expected to be material. On a consolidated basis, we have reserved approximately $3.3 million on June 25, 2011 and $4.2 million on June 26, 2010, representing the estimated costs to complete future remediation efforts. These amounts have not been reduced by an insurance receivable. From time to time, various special interest environmental groups have petitioned certain states requesting restrictions on the use or disposal of CCA treated products. The wood preservation industry trade groups are working with the individual states and their regulatory agencies to provide an accurate, factual background which demonstrates that the present method of uses and disposal is scientifically supported. Our affiliates market a modest amount of CCA treated products for permitted, non-residential applications. We have not accrued for any potential loss related to the contingencies above. However, potential liabilities of this nature are not conducive to precise estimates and are subject to change. In addition, on June 25, 2011, we were parties either as plaintiff or defendant to a number of lawsuits and claims arising through the normal course of our business. In the opinion of management, our consolidated financial statements will not be materially affected by the outcome of these contingencies and claims. On June 25, 2011, we had outstanding purchase commitments on capital projects of approximately $4.9 million. We provide a variety of warranties for products we manufacture. Historically, warranty claims have not been material. We distribute products manufactured by other companies, some of which are no longer in business. While we do not warrant these products, we have received claims as a distributor of these products when the manufacturer no longer exists or has the ability to pay. Historically, these costs have not had a material affect on our consolidated financial statements. In certain cases we supply building materials and labor to site-built construction projects or we jointly bid on contracts with framing companies for such projects. In some instances we are required to post payment and performance bonds to insure the owner that the products and installation services are completed in accordance with our contractual obligations. We have agreed to indemnify the surety for claims made against the bonds. As of June 25, 2011, we had approximately $26.8 million in outstanding payment and performance bonds, which expire during the next two years. In addition, approximately $19.7 million in payment and performance bonds are outstanding for completed projects which are still under warranty. We have entered into operating leases for certain assets that include a guarantee of a portion of the residual value of the leased assets. If, at the expiration of the initial lease term we do not exercise our option to purchase the leased assets and these assets are sold by the lessor for a price below a predetermined amount, we will reimburse the lessor for a certain portion of the shortfall. These operating leases will expire periodically over the next three years. The estimated maximum aggregate exposure of these guarantees is approximately $0.6 million. On June 25, 2011, we had outstanding letters of credit totaling $31.3 million, primarily related to certain insurance contracts and industrial development revenue bonds described further below. In lieu of cash deposits, we provide irrevocable letters of credit in favor of our insurers to guarantee our performance under certain insurance contracts. We currently have irrevocable letters of credit outstanding totaling approximately $18.9 million for these types of insurance arrangements. We have reserves recorded on our balance sheet, in accrued liabilities, that reflect our expected future liabilities under these insurance arrangements. We are required to provide irrevocable letters of credit in favor of the bond trustees for all of the industrial development revenue bonds that we have issued. These letters of credit guarantee principal and interest payments to the bondholders. We currently have irrevocable letters of credit outstanding totaling approximately $12.4 million related to our outstanding industrial development revenue bonds. These letters of credit have varying terms but may be renewed at the option of the issuing banks. Certain wholly owned domestic subsidiaries have guaranteed the indebtedness of Universal Forest Products, Inc. in certain debt agreements, including the Series 2002-A Senior Notes and our revolving credit facility. The maximum exposure of these guarantees is limited to the indebtedness outstanding under these debt arrangements and this exposure will expire concurrent with the expiration of the debt agreements. Many of our wood treating operations utilize "Subpart W" drip pads, defined as hazardous waste management units by the EPA. The rules regulating drip pads require that the pad be “closed” at the point that it is no longer intended to be used for wood treating operations or to manage hazardous waste. Closure involves identification and disposal of contaminants which are required to be removed from the facility. The cost of closure is dependent upon a number of factors including, but not limited to, identification and removal of contaminants, cleanup standards that vary from state to state, and the time period over which the cleanup would be completed. Based on our present knowledge of existing circumstances, it is considered probable that these costs will approximate $0.7 million. As a result, this amount is recorded in other long-term liabilities on June 25, 2011. We did not enter into any new guarantee arrangements during the second quarter of 2011 which would require us to recognize a liability on our balance sheet. |
CONSOLIDATED CONDENSED STATEMENTS OF EQUITY (Unaudited) (Parenthetical) (USD $)
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6 Months Ended | |
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Jun. 25, 2011
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Jun. 26, 2010
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CONSOLIDATED CONDENSED STATEMENTS OF EQUITY (Unaudited) [Abstract] | Â | Â |
Cash dividends per share (in dollars per share) | $ 0.200 | $ 0.200 |
Issuance of shares under employee stock plans (in shares) | 30,108 | 62,029 |
Issuance of shares under stock grant programs (in shares) | 158,436 | 76,143 |
Issuance of shares under deferred compensation plans (in shares) | 4,245 | 6,669 |
Repurchase of shares (in shares) | Â | 100,300 |
Issuance of shares in exchange for employees' stock notes receivable (in shares) | Â | 1,298 |
FAIR VALUE
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Jun. 25, 2011
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FAIR VALUE [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE | B. 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:
Mutual funds are valued at prices quoted in an active exchange market and are held in “Other Assets”. Property, plant and equipment are valued based on active market prices and other relevant information for sales of similar assets. 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 do not maintain any Level 3 assets or liabilities that would be based on significant unobservable inputs. |
REVENUE RECOGNITION
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Jun. 25, 2011
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Revenue Recognition [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE RECOGNITION | C. REVENUE RECOGNITION Earnings on construction contracts are reflected in operations using either percentage-of-completion accounting, which includes the cost to cost and units of delivery methods, or completed contract accounting, depending on the nature of the business at individual operations. Under percentage-of-completion using the cost to cost method, revenues and related earnings on construction contracts are measured by the relationships of actual costs incurred related to the total estimated costs. Under percentage-of-completion using the units of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual units produced related to the total number of units. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent. Under the completed contract method, revenues and related earnings are recorded when the contracted work is complete and losses are charged to operations in their entirety when such losses become apparent. The following table presents the balances of percentage-of-completion accounts which are included in “Other current assets” and “Accrued liabilities: Other”, respectively (in thousands):
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EARNINGS PER SHARE
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Jun. 25, 2011
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Earnings Per Share [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE | D. EARNINGS PER SHARE A reconciliation of the changes in the numerator and the denominator from the calculation of basic EPS to the calculation of diluted EPS follows (in thousands, except per share data):
Options to purchase 30,000 shares were not included in the computation of diluted EPS for the quarter ended June 25, 2011 because the options' exercise price was greater than the average market price of the common stock during the period and, therefore would be antidilutive. Options to purchase 10,000 shares were not included in the computation of diluted EPS for the six months ended June 25, 2011 because the options' exercise price was greater than the average market price of the common stock during the period and, therefore would be antidilutive. No options were excluded from the computation of diluted EPS for the quarter and six months ended June 26, 2010. |
INCOME TAXES
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6 Months Ended |
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Jun. 25, 2011
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INCOME TAXES [Abstract] | Â |
INCOME TAXES | I. 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 was 35.8% in the second quarter of 2011 and 36.5% for same period of 2010. Our effective tax rate was 17.0% in the first six months of 2011, which was well below our statutory rate, primarily due to the profits of our non-U.S. subsidiaries, which have a lower tax rate, and our non-wholly owned partnerships that we consolidate, which comprised a greater percentage of our year to date profits than in the prior year period. |
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