Grand Rapids, Michigan, USA, 15 October 2008 – Universal Forest Products, Inc. (Nasdaq: UFPI) today announced results for the third quarter of 2008, including net sales of USD 610.7 million, which compared to net sales of USD 678.4 for the same period last year.
A net loss of USD 2.0 million, or USD 0.10 per diluted share, was reported for the quarter, compared with third-quarter net earnings of USD 11.3 million, or USD 0.59 per diluted share, in 2007. Third-quarter 2008 results include noncash and other charges totaling USD 6.2 million for asset impairments and costs associated with idled facilities; there were no such charges for the same period of 2007.
Continued deterioration in housing and unprecedented turmoil in the financial markets weighed heavily on the company’s performance in the third quarter. Universal said its accomplishments in this current market environment are testament to the strength of its strategies and bode well for its future. “In the toughest conditions in memory, our focus on growing market share, ensuring we’re sized right for our business opportunities, containing costs through continuous improvement, and managing our working capital are paying off,” said Michael B. Glenn, president and CEO. “Excluding the impact of the impairments and other costs, we would have had net earnings of nearly USD 3 million for the quarter.
“I’m pleased with the strength of our balance sheet, which we’ve maintained by focusing on accounts receivable and inventory, resulting in strong cash flow,” he added. “We believe we have the right focus and are doing the right things to take advantage of near-term opportunities while positioning the company well for a brighter tomorrow.”
The quarter-to-date composite lumber price, which affects the company’s selling prices, was 4.9% lower in the third quarter of 2008 than the same period of 2007 and had little effect on sales. Moving forward, lumber mill closures may better align supply and demand, but the company believes weak demand will keep the lumber market depressed through the fourth quarter.
By market, Universal posted the following gross sales results for the third quarter of 2008:
Do-It-Yourself/retail -- USD 251.6 million, a decrease of 5.9% from the same period of 2007. Spending was weak during the quarter, as consumer confidence remained near 16-year lows through late September. Sales to big box customers, who saw declines in same-store sales, were down 4%; sales to other retailers, whose business is more closely tied to housing, were down 10%. The company expects to maintain market share in DIY/retail through the end of the year.
Industrial packaging/components -- USD 166.3 million, an increase of 5.4% over the third quarter of 2007. The weak economy had an impact on U.S. manufacturing and, therefore, on Universal’s industrial business, in which the company engineers and manufactures packaging and components primarily for manufacturing and agricultural customers. Universal is selling less to existing customers, whose output has been diminished, but continues to grow its customer base. Acquisitions had a positive impact on sales as did the concrete forming business, an area in which the company anticipates market share growth in 2009.
Site-built construction -- USD 119.8 million, a decrease of 24.2% from the same period of 2007. Quarter-to-date, single-family housing starts declined 38.8% as of August 2008 from the same period of 2007. The company continues to focus on ensuring it is sized right to its business opportunities and on adding new business opportunities.
Manufactured housing -- USD 85.2 million, a decrease of 22.5% from 2007. According to the most recent statistics available, in August 2008 the industry saw a 16.9% quarter-to-date decrease in shipments of HUD-code homes from the same period of 2007. Modular shipments decreased 34% in the second quarter of 2008 from the same period of 2007, and the company expects that this trend will have continued into the third quarter. The company believes the manufactured housing market will remain depressed until the oversupply of site-built homes is absorbed and credit conditions improve.
Overall, the company faces continued price pressure due to low volumes and struggling competition. The company believes its cost reduction efforts will continue to drive down its costs and will have a more significant impact in future reporting periods.
As a result of the unprecedented and prevailing uncertainties throughout the capital markets, which have a direct and material effect on the markets Universal serves, the company does not believe its previous sales and earnings targets for 2008 are achievable. In addition, the company believes that current economic conditions limit its ability to provide meaningful guidance for the ranges of likely financial performance; therefore, the company will not provide guidance for the foreseeable future.
Universal Forest Products will conduct a conference call to its financial results and related matters at 8:30 a.m. Eastern Time on 16 October 2008. The call will be available for analysts and institutional investors domestically at (866) 700-6979 and internationally at (617) 213-8836. Use participant password 30016238. The conference call will be available simultaneously and in its entirety through a webcast at http://www.ufpi.com. A replay of the call will be available through 17 November 2008, domestically at (888) 286-8010 and internationally at (617) 801-6888. Use participant password 35349732.
Universal Forest Products, Inc.
Headquartered in Grand Rapids, Michigan, with approximately 85 facilities throughout North America, Universal Forest Products engineers, manufactures, and markets wood and wood-alternative products for DIY/retail home centers, structural lumber products for the manufactured housing industry, engineered wood components for the site-built construction market, and specialty wood packaging and components for various industries. The 53-year-old company also provides framing services for the site-built market, and forms for concrete construction. For 2007, the company reported sales of more than USD 2.5 billion. For information about Universal Forest Products, visit www.ufpi.com.