e10vk
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR FISCAL
YEAR ENDED DECEMBER 30, 2006. |
OR
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| o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the
transition period of ____ to _____. |
Commission File No.: 0-22684
UNIVERSAL FOREST PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
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| Michigan
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38-1465835 |
| (State or other jurisdiction of
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|
(I.R.S. Employer |
| incorporation or organization)
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Identification No.) |
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| 2801 East Beltline, N.E., Grand Rapids, Michigan
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49525 |
| (Address of principal executive offices)
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(Zip Code) |
(616) 364-6161
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| |
|
|
| Title Of Each Class
|
|
Name of Each Exchange on Which Registered |
| None
|
|
|
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes o No þ
Indicate by checkmark whether the registrant: (1) has filed all reports required to be filed by
Section 13, or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements in the past 90 days. Yes þ No o
Indicate by checkmark if disclosure of delinquent filers pursuant to Items 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by
check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the
Exchange Act. (Check one):
Large
accelerated filer þ
Accelerated filer
o Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-2 of the
Act.) Yes o No þ
As of July 1, 2006, 18,836,038 shares of the registrant’s common stock, no par value, were
outstanding. The aggregate market value of the common stock held by non-affiliates of the
registrant (i.e. excluding shares held by executive officers, directors, and control persons as
defined in Rule 405, 17 CFR 230.405) on that date was $964,703,279 computed at the closing price of
$62.73 on that date.
As of February 3, 2007, 18,886,333 shares of the registrant’s common stock, no par value, were
outstanding.
Documents incorporated by reference:
| (1) |
|
Certain portions of the registrant’s Annual Report to Shareholders for the fiscal year ended
December 30, 2006 are incorporated by reference into Part I and II of this Report. |
| (2) |
|
Certain portions of the registrant’s Proxy Statement for its 2007 Annual Meeting of
Shareholders are incorporated by reference into Part III of this Report. |
Exhibit Index located on page E-1.
Page 1 of 17
ANNUAL REPORT ON FORM 10-K
December 30, 2006
TABLE OF CONTENTS
2
PART I
Item 1. Business.
General Development of the Business.
Universal Forest Products, Inc. was organized as a Michigan corporation in 1955. We engineer,
manufacture, treat, distribute and install lumber, composite wood, plastic and other building
products to the do-it-yourself/retail (“DIY/retail”), site-built construction, manufactured
housing, and industrial markets. We currently operate facilities throughout the United States,
Canada, and Mexico.
Information relating to current developments in our business is incorporated by reference from our
Annual Report to Shareholders for the fiscal year ended December 30, 2006 (“2006 Annual Report”)
under the caption “Management’s Discussion and Analysis of Financial Condition and Results of
Operations.” Selected portions of the 2006 Annual Report are filed as Exhibit 13 with this Form
10-K Report.
Financial Information About Industry Segments.
Statement of Financial Accounting Standards (“SFAS”)
No. 131, Disclosures about Segments of an
Enterprise and Related Information (“SFAS 131”) 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. Under the definition of a segment, our Eastern, Western and Consumer Products
Divisions may be considered an operating segment of our business. Under SFAS 131, segments may be
aggregated if the segments have similar economic characteristics and if the nature of the products,
distribution methods, customers and regulatory environments are similar. We have aggregated our
Eastern and Western divisions into one reporting segment, consistent
with SFAS 131. Our Consumer Products Division, which was formed in
2006, is included in “All Other”.
Separate financial information about industry segments is
incorporated by reference from Note P of the Consolidated
Financial Statements presented under Item 8 herein.
Narrative Description of Business.
We presently engineer, manufacture, treat, distribute and install lumber, composite wood, plastic
and other building products for the DIY/retail, site-built construction, manufactured housing, and
industrial markets. Each of these markets is discussed in the paragraphs which follow.
DIY/Retail Market. The customers comprising this market are primarily national home center
retailers, retail-oriented regional lumberyards and contractor-oriented lumberyards. Generally,
terms of sale are established for annual periods, and orders are placed with our regional
facilities in accordance with established terms. One customer, The Home Depot, accounted for
approximately 22% of our total net sales for fiscal 2006, 22% for 2005, and 25% for 2004.
3
From time to time we enter into certain sales contracts with The Home Depot. The contracts are
limited to the establishment of general sales terms and conditions, such as delivery, invoicing,
warranties and other standard, commercial matters. Sales are made by the release of purchase
orders to us for particular quantities of certain products. We also enter into marketing
agreements and rebate agreements with The Home Depot. The marketing agreements provide a certain
percentage of our sales revenue or a minimum dollar amount will be committed to generate sales for
us and The Home Depot.
We currently supply customers in this market from many of our locations. These regional facilities
are able to supply mixed truckloads of products which can be delivered to customers with rapid
turnaround from receipt of an order. Freight costs are a factor in the ability to competitively
service this market, especially with treated wood products because of their heavier weight. The
close proximity of our regional facilities to the various outlets of these customers is a
significant advantage when negotiating annual sales programs.
The products offered to customers in this market include dimensional lumber (both preserved and
unpreserved) and various “value-added products,” some of which are sold under our trademarks. In
addition to our conventional lumber products, we offer composite wood and plastic products. We
also sell engineered wood products to this market, which include roof trusses, wall panels and
engineered floor systems (see “Site-Built Construction Market” below).
We are not aware of any competitor that currently manufactures, treats and distributes a full line
of both value-added and commodity products on a national basis. We face competition on individual
products from several different producers, but the majority of these competitors tend to be
regional in their efforts and/or do not offer a full line of outdoor lumber products. We believe
the breadth of our product offering, geographic dispersion, customer relationships, close proximity
of our plants to core customers, purchasing and manufacturing expertise and service capabilities
provide significant competitive advantages in this market.
Site-Built Construction Market. We entered the site-built construction market through
strategic business acquisitions beginning in 1997. The residential housing customers comprising
this market are primarily large-volume, multi-tract builders and smaller volume custom builders.
We also supply builders engaged in multi-family and commercial construction. Generally, terms of
sale and pricing are determined based on quotes for each order.
We currently supply customers in this market from manufacturing facilities located in many
different states and Canada. These facilities manufacture various engineered wood components used
to frame residential or commercial projects, including roof and floor trusses, wall panels, Open
Joist 2000®, I-joists and lumber packages. Freight costs are a factor in the ability to
competitively service this market due to the space requirements of these products on each
truckload.
We also provide framing services for customers in certain regional markets, in which we erect the
wood structure. We believe that providing a comprehensive framing package, including
4
installation, provides a competitive advantage. Terms of sale are based on a construction
contract.
Competitors in this market include national and regional retail contractor yards who also
manufacture components and provide framing services, as well as regional manufacturers of
components. Our objective is to continue to increase our manufacturing capacity and framing
capabilities for this market while developing a national presence. We believe our primary
competitive advantages relate to the engineering and design capabilities of our regional staff,
customer relationships, purchasing and manufacturing expertise, product quality and timeliness of
delivery.
Manufactured Housing Market. The customers comprising the manufactured housing market are
producers of mobile, modular and prefabricated homes and recreational vehicles. Products sold to
customers in this market consist primarily of roof trusses, lumber cut and shaped to the customer’s
specification, plywood, particle board and dimensional lumber, all intended for use in the
construction of manufactured housing. Sales are made by personnel located at each regional
facility based on customer orders.
While no competitor operates in as widely-dispersed geographic areas as we do, we face competition
from suppliers in many geographic regions. Our principal competitive advantages include our
customer relationships, product knowledge, the strength of our engineering support services, the
close proximity of our regional facilities to our customers, our purchasing and manufacturing
expertise and our ability to provide national sales programs to certain customers.
Industrial Market. We define our industrial market as industrial manufacturers and
agricultural customers who use pallets, specialty crates and wooden boxes for packaging, shipping
and material handling purposes. Many of the products sold to this market may be produced from the
by-product of other manufactured products, thereby allowing us to increase our raw material yields
while expanding our business. Competition is fragmented and includes virtually every supplier of
lumber convenient to the customer. We service this market with our dedicated local sales teams and
national sales support efforts, combined with our competitive advantages in manufacturing,
purchasing, and material utilization.
Suppliers. We are one of the largest domestic buyers of solid sawn lumber from primary
producers (lumber mills). We use primarily Southern Yellow Pine in our pressure-treating
operations and site-built component plants in the Southeastern United States, which we obtain from
mills located throughout the states comprising the Sunbelt. Other species we use include
“spruce-pine-fir” from various provinces in Canada; hemlock, Douglas fir and cedar from the Pacific
Northwest; inland species of pine, plantation grown radiata and southern yellow pines from South
America; and European spruce. There are numerous primary producers for all varieties we use, and
we are not dependent on any particular source of supply. Our financial resources and size, in
combination with our strong sales network and ability to remanufacture lumber, enable us to
purchase a large percentage of a primary producer’s output, (as opposed to only those dimensions or
grades in immediate need), thereby lowering our average cost of raw
5
materials and allowing us to obtain programs such as consigned inventory. We believe this
represents a competitive advantage.
Intellectual Property. We own several patents and have several patents pending on
technologies related to our business. In addition, we own numerous registered trademarks and claim
common law trademark rights to several others. As we develop proprietary brands, we may pursue
registration or other formal protection. While we believe our patent and trademark rights are
valuable, the loss of a patent or any trademark would not be likely to have a material adverse
impact on our competitive position.
Backlog. Due to the nature of our DIY/retail, manufactured housing and industrial
businesses, backlog information is not meaningful. The maximum time between receipt of a firm
order and shipment does not usually exceed a few days. Therefore, we would not normally have a
backlog of unfilled orders in a material amount. The relationships with our major customers are
such that we are either the exclusive supplier of certain products and/or certain geographic areas,
or the designated source for a specified portion of the customer’s requirements. In such cases,
either we are able to forecast the customer’s requirements or the customer may provide an estimate
of its future needs. In neither case, however, will we receive firm orders until just prior to the
anticipated delivery dates for the products in question.
On December 30, 2006 and December 31, 2005, we estimate that backlog orders associated with the
site-built construction business approximated $119.8 million and $92.4 million, respectively. With
respect to the former, we expect that these orders will be primarily filled within the current
fiscal year.
Environmental. Information required for environmental disclosures is incorporated by
reference from Note M of the Consolidated Financial Statements presented under Item 8 herein.
Seasonality. Information required for seasonality disclosures is incorporated by reference
from Item 1A. Risk Factors under the caption “Seasonality and weather conditions could adversely
affect us.”
Employees. At December 30, 2006, we had approximately 9,200 employees.
Financial Information About Geographic Areas.
The dominant portion of our operations and sales occur in the United States. Separate financial
information about foreign and domestic operations and export sales is incorporated by reference
from Note P of the Consolidated Financial Statements presented under Item 8 herein.
Available Information.
Our Internet address is www.ufpi.com. Through our Internet web site under “Financial” in the
Investor Relations section, we make available free of charge, as soon as reasonably practical
6
after such information has been filed with the SEC, our annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act. Also available through our Internet web
site under “Corporate Governance” in the Investor Relations section is our Code of Ethics for
Senior Financial Officers.
Reports to Security Holders.
Not applicable.
Enforceability of Civil Liabilities Against Foreign Persons.
Not applicable.
Item 1A. Risk Factors.
We are subject to fluctuations in the price of lumber. We experience significant fluctuations
in the cost of commodity lumber products from primary producers (the “Lumber Market”). A variety
of factors over which we have no control, including government regulations, environmental
regulations, weather conditions, economic conditions, and natural disasters, impact the cost of
lumber products and our selling prices. While we attempt to minimize our risk from severe price
fluctuations, substantial, prolonged trends in lumber prices can negatively affect our sales
volume, our gross margins, and our profitability. We anticipate that these fluctuations will
continue in the future.
Our growth may be limited by the markets we serve. Our sales growth is dependent, in part, upon
the growth of the markets we serve. If our markets do not achieve anticipated growth, or if we
fail to maintain our market share, financial results could be impaired.
Our ability to achieve growth in sales and margins, particulary to the site-built construction
market, is impacted by housing starts. If housing starts decline significantly, our financial
results could be negatively impacted.
We are witnessing consolidation by our customers in each of the markets we serve. These
consolidations will result in a larger portion of our sales being made to some customers and may
limit the customer base we are able to serve.
A significant portion of our sales are concentrated with one customer. Our sales to The Home Depot
comprised 22% of our total sales in 2006, 22% in 2005, and 25% in 2004.
Our growth may be limited by our ability to make successful acquisitions. A key component of our
growth strategy is to complete business combinations. Business combinations involve inherent
risks, including assimilation and successfully managing growth. While we conduct
7
extensive due diligence and have taken steps to ensure successful assimilation, factors beyond our
control could influence the results of these acquisitions.
We may be adversely affected by the impact of environmental and safety regulations. We are subject
to the requirements of federal, state, and local environmental and occupational health and safety
laws and regulations. There can be no assurance that we are at all times in complete compliance
with all of these requirements. We have made and will continue to make capital and other
expenditures to comply with environmental regulations. If additional laws and regulations are
enacted in the future, which restrict our ability to manufacture and market our products, including
our treated lumber products, it could adversely affect our sales and profits. If existing laws are
interpreted differently, it could also increase our financial costs. Several states have proposed
legislation to limit the uses and disposal of Chromated Copper Arsenate (“CCA”) treated lumber.
(See Note M to the Consolidated Financial Statements.)
Seasonality and weather conditions could adversely affect us. Some aspects of our business are
seasonal in nature and results of operations vary from quarter to quarter. Our treated lumber and
outdoor specialty products, such as fencing, decking, and lattice, experience the greatest seasonal
effects. Sales of treated lumber, primarily consisting of Southern Yellow Pine, also experience
the greatest Lumber Market risk (see “Historical Lumber Prices” in Management’s
Discussion and Analysis of Financial Condition and Results of Operations which is presented under
Item 7 of this Form 10-K and is incorporated herein by reference). Treated lumber sales are
generally at their highest levels between April and August. This sales peak, combined with
capacity constraints in the wood treatment process, requires us to build our inventory of treated
lumber throughout the winter and spring. (This also has an impact on our receivables balances,
which tend to be significantly higher at the end of the second and third quarters.) Because sales
prices of treated lumber products may be indexed to the Lumber Market at the time they are shipped,
our profits can be negatively affected by prolonged declines in the Lumber Market during our
primary selling season. To mitigate this risk, consignment inventory programs are negotiated with
certain vendors that are intended to decrease our exposure to the Lumber Market by correlating the
purchase price of the material with the related sell price to the customer. These programs include
those materials which are most susceptible to adverse changes in the Lumber Market.
The majority of our products are used or installed in outdoor construction activities; therefore,
short-term sales volume, our gross margins, and our profits can be negatively affected by adverse
weather conditions, particularly in our first and fourth quarters. In addition, adverse weather
conditions can negatively impact our productivity and costs per unit.
New preservatives will be developed to treat our products. The manufacturers of preservatives
continue to develop new preservatives. All of our wood preservation facilities, except the one
described below, utilize either Amine Copper Quaternary (“ACQ”), ProWood Micro or borates. In
March 2005, one facility began using CCA to treat certain marine products and panel goods for which
ACQ is not a suitable preservative. While we believe treated products are reasonably priced
relative to alternative products such as composites or vinyl, consumer acceptance may be
8
impacted which would in turn affect our future operating results. In addition, new preservatives
could increase our cost of treating products in the future.
Market conditions for the supply of certain lumber products and inbound transportation may be
limited. These conditions, which occur on occasion, have resulted in difficulties procuring
desired quantities and receiving orders on a timely basis for all industry participants. We are not
certain how these conditions may impact our short-term sales volumes and profitability. However,
we attempt to mitigate the risks of these conditions by:
| • |
|
Our pricing practices (see “Impact of the Lumber Market on Our Operating Results” in Management’s Discussion and
Analysis of Financial Condition and Results of Operations which is presented under Item 7 of this Form 10-K and is
incorporated herein by reference); |
| |
| • |
|
Leveraging our size with mill and transportation suppliers to ensure they achieve supply and service requirements; |
| |
| • |
|
Increasing our utilization of consigned inventory programs with mills; and |
| |
| • |
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Expanding our supply base of dedicated carriers. |
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
Our corporate headquarters building is located in suburban Grand Rapids, Michigan. We
currently have approximately 90 facilities located throughout the United States, Canada, and
Mexico. Depending upon function and location, these facilities typically utilize office space,
manufacturing space, treating space and covered storage.
We own all of our properties, free from any significant mortgage or other encumbrance, except for
approximately 20 regional facilities which are leased. We believe all of these operating
facilities are adequate in capacity and condition to service existing customer locations.
Item 3. Legal Proceedings.
Information regarding our legal proceedings is set forth in Note M of our Consolidated
Financial Statements which are presented under Item 8 of this Form 10-K and are incorporated herein
by reference.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
9
Additional Item: Executive Officers of the Registrant.
The following table lists the names, ages, and positions of our executive officers as of
February 1, 2007. Executive officers are elected annually by the Board of Directors at the first
meeting of the Board following the annual meeting of shareholders.
| |
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| Name |
|
Age |
|
Position |
William G. Currie |
|
59 |
|
Executive Chairman, Universal Forest Products, Inc. |
Michael B. Glenn |
|
55 |
|
Chief Executive Officer, Universal Forest Products, Inc. |
C. Scott Greene |
|
51 |
|
President, Universal Forest Products Eastern Division, Inc. |
Robert K. Hill |
|
59 |
|
President, Universal Forest Products Western Division, Inc. |
Robert D. Coleman |
|
52 |
|
Executive Vice President Manufacturing, Universal Forest Products, Inc. |
Matthew J. Missad |
|
46 |
|
Executive Vice President and Secretary, Universal Forest Products, Inc. |
Michael R. Cole |
|
40 |
|
Chief Financial Officer and Treasurer, Universal Forest Products, Inc. |
Ronald G. Klyn |
|
49 |
|
Chief Information Officer, Universal Forest Products, Inc. |
Joseph F. Granger |
|
41 |
|
Executive Vice President of Sales and Marketing, Universal Forest Products, Inc. |
William G. Currie joined us in 1971. From 1983 to 1990, Mr. Currie was President of
Universal Forest Products, Inc., and he was the President and Chief Executive Officer of The
Universal Companies, Inc. from 1989 until the merger to form Universal Forest Products, Inc. in
1993. On January 1, 2000, Mr. Currie also became Vice Chairman of the Board. On April 19, 2006,
Mr. Currie became Executive Chairman.
Michael B. Glenn has been employed by us since 1974. In June of 1989, Mr. Glenn was elected
Senior Vice President of our Southwest Operations, and on December 1, 1997, became President of
Universal Forest Products Western Division, Inc. Effective January 1, 2000, Mr. Glenn was
promoted to President and Chief Operating Officer. On July 1, 2006, Mr. Glenn became Chief
Executive Officer.
C. Scott Greene joined us in February of 1991. In November of 1996 he became General Manager of
Operations for our Florida Region, and in January of 1999 became Vice President of Marketing for
Universal Forest Products, Inc. During early 2000, Mr. Greene became President of Universal
Forest Products Eastern Division, Inc.
Robert K. Hill has been with us since 1986. In March of 1993, Mr. Hill was elected Senior Vice
President of our Far West Operations. On December 1, 1997, Mr. Hill became the Executive Vice
President of Operations of Universal Forest Products Western Division, Inc., and on January 1,
2000, became President of that Division.
Robert D. Coleman, has been an employee since 1979. Mr. Coleman was promoted to Senior Vice
President of our Midwest Operations in September 1993. On December 1, 1997, Mr. Coleman became
the Executive Vice President of Manufacturing of the Universal Forest
10
Products Eastern Division, Inc. On January 1, 1999, Mr. Coleman was named the Executive Vice
President of Manufacturing.
Matthew J. Missad has been employed since 1985. Mr. Missad has served as General Counsel and
Secretary since December 1, 1987, and Vice President Corporate Compliance since August 1989. In
February 1996, Mr. Missad was promoted to Executive Vice President.
Michael R. Cole, CPA, CMA, joined us in November of 1993. In January of 1997, Mr. Cole was
promoted to Director of Finance, and on January 1, 2000 was made Vice President of Finance and
Treasurer. On July 19, 2000, Mr. Cole became Chief Financial Officer.
Ronald G. Klyn joined us in May of 1993 as Information Services Manager. In October of 1999, Mr.
Klyn was promoted to Chief Information Officer.
Joseph F. Granger has been with us since 1988. In 1997 he became Vice President of the Atlantic
Region, in 2002 he became Regional Vice President of the Southeast Region, and on January 1, 2007,
he became Executive Vice President of Sales and Marketing.
PART II
The following information items in this Part II, which are contained in the 2006 Annual
Report, are specifically incorporated by reference into this Form 10-K Report. These portions of
the 2006 Annual Report that are specifically incorporated by reference are filed as Exhibit 13 with
this Form 10-K Report.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer
Purchases of Equity Securities.
| (a) |
|
The information relating to market, holders and dividends is incorporated by reference
from the 2006 Annual Report under the caption “Price Range of Common Stock and Dividends.” |
| |
| |
|
There were no recent sales of unregistered securities. |
| |
| (b) |
|
Not applicable. |
| |
| (c) |
|
There were no issuer purchases of equity securities during the fourth quarter. |
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|
| Fiscal Month |
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
(d) |
|
October 1 - November 4, 2006(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,499,976 |
|
November 5 - December 2, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,499,976 |
|
December 3 – 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,499,976 |
|
11
|
|
|
| (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. As of December 30, 2006, the cumulative total
of authorized shares available for repurchase is 1.5 million shares. |
Item 6. Selected Financial Data.
The information required by this Item is incorporated by reference from the 2006 Annual Report
under the caption “Selected Financial Data.”
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
The information required by this item is incorporated by reference from the 2006 Annual Report
under the caption “Management’s Discussion and Analysis of Financial Condition and Results of
Operations.”
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
We are exposed to market risks related to fluctuations in interest rates on our variable rate
debt, which consists of a revolving credit facility and industrial development revenue bonds. We
do not currently use interest rate swaps, futures contracts or options on futures, or other types
of derivative financial instruments to mitigate this risk.
For fixed rate debt, changes in interest rates generally affect the fair market value, but not
earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do
not influence fair market value, but do affect future earnings and cash flows. We do not have an
obligation to prepay fixed rate debt prior to maturity, and as a result, interest rate
risk and changes in fair market value should not have a significant impact on such debt until we
would be required to refinance it.
On December 30, 2006, the estimated fair value of our long-term debt, including the current
portion, was $172.6 million, which was $2.5 million greater than the carrying value. The estimated
fair value is based on rates anticipated to be available to us for debt with similar terms and
maturities. The estimated fair value of notes payable included in current liabilities and the
revolving credit facility approximated the carrying values.
12
Expected cash flows over the next five years related to debt instruments are as follows:
| |
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($US equivalents, in thousands) |
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
Thereafter |
|
|
Total |
|
Long-term Debt: |
|
|
|
|
|
|
|
|
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|
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|
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|
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|
|
Fixed Rate ($US) |
|
|
|
|
|
$ |
78,500 |
|
|
$ |
15,000 |
|
|
|
|
|
|
|
|
|
|
$ |
40,000 |
|
|
$ |
133,500 |
|
Average interest rate |
|
|
|
|
|
|
6.98 |
% |
|
|
5.63 |
% |
|
|
|
|
|
|
|
|
|
|
6.16 |
% |
|
|
|
|
Variable Rate ($US) |
|
$ |
680 |
|
|
$ |
712 |
|
|
$ |
16,130 |
|
|
$ |
249 |
|
|
$ |
256 |
|
|
$ |
18,570 |
|
|
$ |
36,597 |
|
Average interest rate(1) |
|
|
5.68 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
|
Average of rates at December 30, 2006. |
Item 8. Financial Statements and Supplementary Data.
The information required by this Item is incorporated by reference from the 2006 Annual Report
under the following captions:
“Management’s Annual Report on Internal Control Over Financial Reporting”
“Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting”
“Report of Independent Registered Public Accounting Firm”
“Consolidated Balance Sheets”
“Consolidated Statements of Earnings”
“Consolidated Statements of Shareholders’ Equity”
“Consolidated Statements of Cash Flows”
“Notes to Consolidated Financial Statements”
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
| (1) |
|
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 year ended December 30, 2006 (the “Evaluation Date”), have
concluded that, as of such date, our disclosure controls and procedures were effective. |
| |
| (2) |
|
Management’s Annual Report on Internal Control Over Financial Reporting.
Management’s Annual Report on Internal Control Over Financial Reporting is included in the
2006 Annual Report under the caption “Management’s Annual Report on Internal Control Over
Financial Reporting” and is incorporated herein by reference. Our accounting firm’s
attestation on that Report is also included in the 2006 Annual Report in |
13
| |
|
the caption “Report of Independent Registered Public Accounting Firm on Internal Control Over
Financial Reporting” and is incorporated herein by reference. |
| |
| (3) |
|
Changes in Internal Controls. During the fourth quarter ended December 30, 2006,
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. |
Item 9B. Other Information.
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information relating to executive officers is included in this report in the last Section of
Part I under the caption “Additional Item: Executive Officers of the Registrant.” Information
relating to our directors, compliance with Section 16(a) of the Securities and Exchange Act of 1934
and various corporate governance matters is incorporated by reference from our definitive Proxy
Statement for the year ended December 30, 2006 for the 2007 Annual Meeting of Shareholders, as
filed with the Commission (“2007 Proxy Statement”), under the captions “Election of Directors,”
“Corporate Governance and Board Matters,” and “Section 16(a) Beneficial Ownership Reporting
Compliance.” Information relating to our code of ethics is included in this report in Part I, Item
1 under the caption “Available Information”.
Item 11. Executive Compensation.
Information relating to director and executive compensation is incorporated by reference from
the 2007 Proxy Statement under the caption “Executive Compensation.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters.
Information relating to security ownership of certain beneficial owners and management is
incorporated by reference from our 2007 Proxy Statement under the captions “Ownership of Common
Stock” and “Securities Ownership of Management.”
14
Information relating to securities authorized for issuance under equity compensation plans as of
December 30, 2006, is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Number of shares |
|
| |
|
|
|
|
|
|
|
|
|
remaining |
|
| |
|
|
|
|
|
|
|
|
|
available for future |
|
| |
|
Number of |
|
|
Weighted |
|
|
issuance under |
|
| |
|
shares to be |
|
|
average |
|
|
equity |
|
| |
|
issued upon |
|
|
exercise |
|
|
compensation |
|
| |
|
exercise of |
|
|
price of |
|
|
plans [excluding |
|
| |
|
outstanding |
|
|
outstanding |
|
|
shares reflected in |
|
| |
|
options |
|
|
options |
|
|
column (a)] |
|
| |
|
(a) |
|
|
(b) |
|
|
(c) |
|
Equity compensation plans approved by security holders |
|
|
1,036,284 |
|
|
$ |
20.18 |
|
|
|
948,062 |
|
Equity compensation plans not approved by security holders |
|
none |
|
|
|
|
|
|
|
|
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information relating to certain relationships and related transactions, and director
independence is incorporated by reference from the 2007 Proxy Statement under the captions
“Election of Directors”, “Affirmative Determination Regarding Director Independence and Other
Matters” and “Related Party Transactions.”
Item 14. Principal Accountant Fees and Services.
Information relating to the types of services rendered by our Independent Auditors and the
fees paid for these services is incorporated by reference from our 2007 Proxy Statement under the
caption “Independent Public Accountants – Fees and Services.”
PART IV
Item 15. Exhibits, Financial Statement Schedules.
| (a) |
|
1. Financial Statements. The following Management’s Annual Report, Reports of Independent Registered Public
Accounting Firm and Consolidated Financial Statements are incorporated by reference, under Item 8 of this report, from
the 2006 Annual Report: |
| |
| |
|
Management’s Annual Report on Internal Control Over Financial Reporting |
| |
| |
|
Report of Independent Registered Public Accounting Firm on Internal Control Over
Financial Reporting |
| |
| |
|
Report of Independent Registered Public Accounting Firm |
| |
| |
|
Consolidated Balance Sheets as of December 30, 2006 and December 31, 2005 |
15
| |
|
Consolidated Statements of Earnings for the Years Ended
December 30, 2006, December 31, 2005 and December 25, 2004 |
| |
| |
|
Consolidated Statements of Shareholders’ Equity for the
Years Ended December 30, 2006, December 31, 2005 and December 25, 2004 |
| |
| |
|
Consolidated Statements of Cash Flows for the Years Ended
December 30, 2006, December 31, 2005 and December 25, 2004 |
| |
| |
|
Notes to Consolidated Financial Statements |
| |
| |
|
2. Financial Statement Schedules. All schedules required by this Form 10-K
Report have been omitted because they were inapplicable, included in the Consolidated
Financial Statements or Notes to Consolidated Financial Statements, or otherwise not required
under instructions contained in Regulation S-X. |
| |
| |
|
3. Exhibits. Reference is made to the Exhibit Index which is included in this
Form 10-K Report. |
| |
| (b) |
|
Reference is made to the Exhibit Index which is included in this Form 10-K Report. |
| |
| (c) |
|
Not applicable. |
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
| |
|
|
|
|
|
|
| Dated: February 27, 2007 |
|
UNIVERSAL FOREST PRODUCTS, INC. |
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Michael B. Glenn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael B. Glenn, Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Michael R. Cole |
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael R. Cole, Chief Financial Officer |
|
|
|
|
|
|
and Treasurer |
|
|
17
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below on this 27th day of February, 2007, by the following persons on behalf of us and in
the capacities indicated.
Each Director whose signature appears below hereby appoints Matthew J. Missad and Michael R.
Cole, and each of them individually, as his attorney-in-fact to sign in his name and on his behalf
as a Director, and to file with the Commission any and all amendments to this report on Form 10-K
to the same extent and with the same effect as if done personally.
| |
|
|
/s/ Peter F. Secchia
|
|
/s/ William G. Currie |
|
|
|
Peter F. Secchia, Director
|
|
William G. Currie, Director |
|
|
|
/s/ Dan M. Dutton
|
|
/s/ John M. Engler |
|
|
|
Dan M. Dutton, Director
|
|
John M. Engler, Director |
|
|
|
/s/ John W. Garside
|
|
/s/ Michael B. Glenn |
|
|
|
John W. Garside, Director
|
|
Michael B. Glenn, Director |
|
|
|
/s/ Gary F. Goode
|
|
/s/ Mark A. Murray |
|
|
|
Gary F. Goode, Director
|
|
Mark A. Murray, Director |
|
|
|
/s/ Louis A. Smith |
|
|
| |
|
|
Louis A. Smith, Director |
|
|
18
EXHIBIT INDEX
| |
|
|
|
|
| Exhibit # |
|
Description |
| 3 |
|
Articles of Incorporation and Bylaws. |
|
|
|
|
|
|
|
(a)
|
|
Registrant’s Articles of Incorporation were filed as Exhibit 3(a) to a
Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated
herein by reference. |
|
|
|
|
|
|
|
(b)
|
|
Registrant’s Bylaws were filed as Exhibit 3(b) to a Registration
Statement on Form S-1 (No. 33-69474) and the same is incorporated herein by
reference. |
|
|
|
|
|
| 4 |
|
Instruments Defining the Rights of Security Holders. |
|
|
|
|
|
|
|
(a)
|
|
Specimen form of Stock Certificate for Common Stock was filed as
Exhibit 4(a) to a Registration Statement on Form S-1 (No. 33-69474) and the same is
incorporated herein by reference. |
|
|
|
|
|
| 10 |
|
Material Contracts. |
|
|
|
|
|
|
|
*(a)(3)
|
|
Consulting Agreement with Peter F. Secchia, dated December 31, 2002, and
Assignment dated January 1, 2003 was filed as Exhibit 10(a)(3) to a Form 10-K,
Annual Report for the year ended December 28, 2002 and the same is incorporated
herein by reference. |
|
|
|
|
|
|
|
*(a)(4)
|
|
Nondisclosure and Non-Compete Agreement with Peter F. Secchia, dated December
31, 2002 was filed as Exhibit 10(a)(4) to a Form 10-K, Annual Report for the year
ended December 28, 2002 and the same is incorporated herein by reference. |
|
|
|
|
|
|
|
*(a)(5)
|
|
Conditional Share Grant Agreement with William G. Currie dated April 17, 2002
was filed as Exhibit 10(a)(5) to a Form 10-K, Annual Report for the year ended
December 28, 2002 and the same is incorporated herein by reference. |
|
|
|
|
|
|
|
*(a)(6)
|
|
Form of Conditional Share Grant Agreement utilized under the Company’s Long Term
Stock Incentive Plan, was filed as Exhibit 10(a) to a Form 10-Q Quarterly Report
for the quarter ended September 25, 2004 and the same is incorporated herein by
reference. |
|
|
|
|
|
|
|
(b)
|
|
Form of Indemnity Agreement entered into between the Registrant and
each of its directors was filed as Exhibit 10(b) to a Registration Statement on
Form S-1 (No. 33-69474) and the same is incorporated herein by reference. |
E-1
| |
|
|
|
|
| Exhibit # |
|
Description |
|
|
*(e)(1)
|
|
Form of Executive Stock Option Agreement was filed as Exhibit 10(e)(1) to a
Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated
herein by reference. |
|
|
|
|
|
|
|
*(e)(2)
|
|
Form of Officers’ Stock Option Agreement was filed as Exhibit 10(e)(2) to a
Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated
herein by reference. |
|
|
|
|
|
|
|
*(f)
|
|
Salaried Employee Bonus Plan was filed as Exhibit 10(f) to a
Registration Statement on Form S-1 (No. 33-69474) and the same is incorporated
herein by reference. |
|
|
|
|
|
|
|
(i)(4)
|
|
Series 2004-A, Credit Agreement dated December 20, 2004 was filed as Exhibit
10(i) to a Form 8-K Current Report dated December 21, 2004 and the same is
incorporated herein by reference. |
|
|
|
|
|
|
|
(i)(5)
|
|
First Amendment dated February 12, 2007 relating to Series 2004-A, Credit
Agreement dated December 20, 2004 was filed as Exhibit 10(i) to a Form 8-K Current
Report dated February 15, 2007 and the same is incorporated herein by reference. |
|
|
|
|
|
|
|
(j)(1)
|
|
Series 1998-A, Senior Note
Agreement dated December 21, 1998 was filed as Exhibit
10(j)(1) to a Form 10-K Annual Report for the year ended December 26, 1998, and the
same is incorporated herein by reference. |
|
|
|
|
|
|
|
(j)(2)
|
|
Series 2002-A, Senior Note Agreement dated December 18, 2002 was filed as Exhibit
10(j)(2) to a Form 10-K Annual Report for the year ended December 28, 2002 and the
same is incorporated herein by reference. |
|
|
|
|
|
|
|
(k)(1)
|
|
Program for Accounts Receivable Transfer (“PARTS”) Agreement dated September 22,
2003 was filed as Exhibit 10(k)(1) to a Form 10-Q Quarterly Report for the quarter
ended September 27, 2003 and the same is incorporated herein by reference. |
|
|
|
|
|
|
|
(k)(2)
|
|
Deposit Account Control Agreement dated September 22, 2003, completed pursuant to
the PARTS Agreement, was filed as Exhibit 10(k)(2) to a Form 10-Q, Quarterly Report
for the quarter ended September 27, 2003 and the same is incorporated herein by
reference. |
|
|
|
|
|
|
|
(k)(3)
|
|
Program for Accounts Receivable Transfer (“PARTS”) Agreement dated November 12,
2004 was filed as Exhibit 10(k) to a Form 8-K Current Report dated November 15,
2004 and the same is incorporated herein by reference. |
E-2
| |
|
|
|
|
| Exhibit # |
|
Description |
|
|
|
|
|
|
|
(k)(4)
|
|
Program for Accounts Receivable Transfer (“PARTS”) Agreement dated March 7, 2006
was filed as Exhibit 10(k)(4) to a Form 10-K Annual Report for the year ended
December 31, 2005 and the same is incorporated herein by reference. |
| |
| 13 |
|
Selected portions of the Company’s Annual Report to Shareholders for the fiscal year ended
December 30, 2006. |
|
|
|
|
|
| 14 |
|
Code of Ethics for Senior Financial Officers |
|
|
|
|
|
|
|
(a)
|
|
Code of Ethics for Chief Financial Officer was filed as Exhibit 14(a)
to a Form 10-K, Annual Report for the year ended December 25, 2004 and the same is
incorporated herein by reference. |
|
|
|
|
|
|
|
(b)
|
|
Code of Ethics for Vice President of Accounting and Administration was
filed as Exhibit 14(a) to a Form 10-K, Annual Report for the year ended December
25, 2004 and the same is incorporated herein by reference. |
|
|
|
|
|
|
|
(c)
|
|
Code of Ethics for Vice President of Accounting was filed as Exhibit
14(c) to a Form 10-K, Annual Report for the year ended December 31, 2005 and the
same is incorporated herein by reference. |
| |
| 21 |
|
Subsidiaries of the Registrant. |
|
|
|
|
|
| 23 |
|
Consent of Ernst & Young LLP. |
|
|
|
|
|
| 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). |
|
|
|
| * |
|
Indicates a compensatory arrangement. |
E-3