GRAND RAPIDS, Mich. - Universal Forest Products, Inc. (Nasdaq: UFPI) today announced third-quarter 2014 results, including net earnings attributable to controlling interests of $19.2 million, up 36.5 percent over $14.1 million in the third quarter of 2013. Earnings per diluted share were $0.96 in the third quarter of 2014, up from $0.71 for the same period last year. Net sales grew in all three markets to total $713.5 million in the third quarter of 2014, up 9.5 percent over $651.8 million in the third quarter of 2013. Earnings attributable to controlling interests for the third quarter of 2014 included a net gain of $700,000 on the sale of certain assets.

“We experienced solid sales growth in each of our markets, and we continued to improve operational efficiencies and maintain our focus on profitability. The third quarter saw profitable growth and progress toward many of our longer-term goals,” said CEO Matthew J. Missad. “Our teams are executing their plans, and their excellent performance clearly shows in the financial results. I am proud of their efforts to create value in this economy.”

Missad noted that the Company’s Board of Directors approved an increase to the Company’s dividend at its October 15, 2014 meeting.

“Due to the strength of our earnings, our solid balance sheet and our optimism, we have decided to return capital to our shareholders while still pursuing our growth goals,” Missad said. “Our board approved an increase in the December 2014 dividend payment, from $0.21 per share to $0.40 per share.”

Missad noted that the Company can support the new dividend rate while retaining ample capital for organic growth and acquisitions. He stated that, in many instances, recent acquisition multiples have been at levels that challenge the ability to create value for shareholders. He added that the Company continues to actively pursue acquisitions as well as reinvest in plants as part of its organic growth goals.

Lumber prices affect the Company’s selling prices, and in the third quarter of 2014, the composite lumber price was up 10.7 percent over the previous year, offset partially by an 18 percent decline in OSB prices in the third quarter of 2014. The Company estimates that higher overall lumber prices raised its selling prices and sales by six percent.

By market, the Company posted the following third-quarter 2014 gross sales results:

Retail: $272.5 million, an increase of 10 percent over the third quarter of 2013. Universal saw increased sales to big box and independent customers alike. Unit sales were up five percent, which was in line with expectations. The Company attributes the increased sales to a better repair-and-remodel market demand and slight increases in housing starts. Big box retailers saw increases in same-store sales during the period. Universal realized margin improvements in this market, due to better operational efficiencies and enhanced product mix with new product sales in the quarter.

Industrial: $211.3 million, an increase of 13 percent over the same period of 2013. Sales to this market continued a path of sustainable growth, with increased sales to existing customers. This remains a healthy market with solid growth opportunities for the Company with both existing and new customers.

Construction, $239.8 million, up six percent over the third quarter of 2013. Results in this market reflect the Company’s focus on sustainable business and more selective pricing strategies. Sales to this market continued to be negatively impacted by the vertical integration of one of the Company’s largest manufactured housing customers and by a drop in prices of OSB during the third quarter. The diversification of markets within UFP continues to improve as the Company becomes less dependent on housing starts for sales growth. In fact, the percent of residential construction sales to total sales has declined from its peak in 2006 of 31.6 percent to the current 12.8 percent.

 
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 2014/2013
      Quarter Period     Year to Date
(In thousands, except per share data)     2014       2013         2014       2013    
                   
 
 
NET SALES $ 713,489 100 % $ 651,780 100 % $ 2,040,239 100 % $ 1,944,711 100.0 %
 
COST OF GOODS SOLD   623,903   87.4   573,491   88.0   1,787,652   87.6   1,729,027   88.9
 
GROSS PROFIT 89,586 12.6 78,289 12.0 252,587 12.4 215,684 11.1
 
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 59,936 8.4 53,020 8.1 172,835 8.5 154,348 7.9
ANTI-DUMPING DUTY ASSESSMENTS - - 887 0.1 1,600 0.1 887 -
NET GAIN ON DISPOSITION AND
IMPAIRMENT OF ASSETS 1   (2,570 ) (0.4 )   (145 ) -   (3,418 ) (0.2 )   (253 ) -
 
EARNINGS FROM OPERATIONS 32,220 4.5 24,527 3.8 81,570 4.0 60,702 3.1
 
OTHER EXPENSE, NET   552   0.1   982   0.2   1,963   0.1   2,969   0.2
 
EARNINGS BEFORE INCOME TAXES 31,668 4.4 23,545 3.6 79,607 3.9 57,733 3.0
 
INCOME TAXES 1   11,176   1.6   8,530   1.3   29,000   1.4   20,589   1.1
 
NET EARNINGS 20,492 2.9 15,015 2.3 50,607 2.5 37,144 1.9
 
LESS NET EARNINGS ATTRIBUTABLE TO
NONCONTROLLING INTEREST 1   (1,258 ) (0.2 )   (924 ) (0.1 )   (2,369 ) (0.1 )   (2,057 ) (0.1 )
 
NET EARNINGS ATTRIBUTABLE TO
CONTROLLING INTEREST $ 19,234   2.7 $ 14,091   2.2 $ 48,238   2.4 $ 35,087   1.8
 
 
EARNINGS PER SHARE - BASIC $ 0.96 $ 0.71 $ 2.40 $ 1.76
 
EARNINGS PER SHARE - DILUTED $ 0.96 $ 0.71 $ 2.40 $ 1.76
 
COMPREHENSIVE INCOME 20,001 15,767 49,869 36,828
 
LESS COMPREHENSIVE INCOME ATTRIBUTABLE
TO NONCONTROLLING INTEREST   (1,317 )   (1,106 )   (2,330 )   (2,098 )
 
COMPREHENSIVE INCOME
ATTRIBUTABLE TO CONTROLLING INTEREST $ 18,684   $ 14,661   $ 47,539   $ 34,730  
 
1 Included within net gain on disposition and impairment of assets for the third quarter of 2014 was a gain on the sale of certain property totaling $2.7 million completed by a 50% owned subsidiary of the Company. After considering the $1.35 million noncontrolling interest of this gain and income taxes, net earnings attributable to controlling interest was approximately $700,000 higher as a result of these transactions.
 

SUPPLEMENTAL SALES DATA

Quarter Period Year to Date

Market Classification

2014 2013 % 2014 2013 %
Retail $ 272,469 $ 247,182 10 % $ 823,861 $ 768,174 7 %
Industrial 211,344 186,385 13 % 585,211 539,213 9 %
Construction   239,812     227,093   6 %   660,962     663,795   0 %
Total Gross Sales 723,625 660,660 10 % 2,070,034 1,971,182 5 %
Sales Allowances   (10,136 )   (8,880 )   (29,795 )   (26,471 )
Total Net Sales $ 713,489   $ 651,780   $ 2,040,239   $ 1,944,711  

 
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 2014/2013
 
(In thousands)                    
ASSETS     2014   2013         LIABILITIES AND EQUITY     2014   2013
 
CURRENT ASSETS CURRENT LIABILITIES
Cash and cash equivalents $ 26,184 $ 5,151 Accounts payable 99,008 85,520
Restricted cash 720 720 Accrued liabilities   93,933   78,820
Accounts receivable 257,235 241,990
Inventories 273,665 232,209
Other current assets   27,591   29,483
 
TOTAL CURRENT ASSETS 585,395 509,553 TOTAL CURRENT LIABILITIES 192,941 164,340
 
OTHER ASSETS 16,227 14,312 LONG-TERM DEBT AND
INTANGIBLE ASSETS, NET 168,825 170,301 CAPITAL LEASE OBLIGATIONS 84,700 84,700
PROPERTY, PLANT OTHER LIABILITIES 42,758 41,072
AND EQUIPMENT, NET   245,036   239,347 EQUITY   695,084   643,401
 
 
TOTAL ASSETS $ 1,015,483 $ 933,513 TOTAL LIABILITIES AND EQUITY $ 1,015,483 $ 933,513
 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 2014/2013
(In thousands)     2014     2013
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net earnings $ 50,607 $ 37,144
Adjustments to reconcile net earnings attributable to controlling interest
to net cash from operating activities:
Depreciation 24,241 22,333
Amortization of intangibles 1,743 1,880
Expense associated with share-based compensation arrangements 1,445 1,442
Excess tax benefits from share-based compensation arrangements (2 ) (8 )
Expense associated with stock grant plans 81 49
Deferred income taxes (credit) 127 (83 )
Equity in earnings of investee (246 ) (152 )
Net gain on sale of property, plant and equipment (3,418 ) (253 )
Changes in:
Accounts receivable (76,642 ) (79,849 )
Inventories 14,754 11,261
Accounts payable and cash overdraft 25,078 19,336
Accrued liabilities and other   32,760     34,580  
NET CASH FROM OPERATING ACTIVITIES 70,528 47,680
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (31,676 ) (32,108 )
Proceeds from sale of property, plant and equipment 6,463 1,319
Acquisitions, net of cash received (7,135 ) (9,296 )
Advances of notes receivable (2,229 ) (1,990 )
Collections of notes receivable and related interest 983 1,441
Cash restricted as to use - 6,111
Other, net   (95 )   28  
NET CASH FROM INVESTING ACTIVITIES (33,689 ) (34,495 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities 192,475 251,801
Repayments under revolving credit facilities (192,475 ) (262,891 )
Debt issuance costs (11 ) (15 )
Proceeds from issuance of common stock 297 839
Distributions to noncontrolling interest (1,710 ) (1,460 )
Dividends paid to shareholders (4,214 ) (3,977 )
Repurchase of common stock (4,772 ) -
Excess tax benefits from share-based compensation arrangements   2     8  
NET CASH FROM FINANCING ACTIVITIES (10,408 ) (15,695 )
 
Effect of exchange rate changes on cash   (247 )   14  
NET CHANGE IN CASH AND CASH EQUIVALENTS 26,184 (2,496 )
 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   -     7,647  
 
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 26,184   $ 5,151  
 
SUPPLEMENTAL INFORMATION:
Interest paid $ 2,475 $ 2,850
Income taxes paid       26,605         6,780  
 

Source: Universal Forest Products, Inc.

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