Universal Keeps Plowing Ahead
Sales were 4 percent higher than 2001’s second quarter, and earnings per share were 82 cents for the quarter compared with 70 cents for the year-ago period.
Year-to-date, net sales were $846.6 million, or 10 percent higher than sales for the first six months of last year. Earnings per share were 90 cents for the first half.
William Currie, vice chairman and CEO, said the second quarter is usually very productive and that the company had good sales volumes, but the market being down an average of 15 percent over the period hurt.
“We were able to absorb one of the worst declines in the lumber market I’ve seen in my 31 years at Universal — at a time when our operations are at maximum inventory levels for the spring selling season — and still stay on pace to meet our targets,” he said.
Universal increased unit sales in each of its four markets, though increases were partially offset by the drop in lumber prices beginning in April.
By market, the company posted the following second quarter sales:
- $265.2 million in D-I-Y/retail, down 2 percent from last year’s second quarter.
- $88.9 million in site-built construction, an increase of 9 percent over last year.
- $80.9 million in manufactured housing, up 8 percent from last year.
- $69.8 million in industrial/agricultural, a 22 percent increase over the year before.
Currie said Universal is already starting to see some recovery in the lumber market particularly over the last two weeks, but the company doesn’t expect that will be long term.
He said that given that lumber is coming in from Europe, South America and Canada, along with the high production levels of domestic producers, it appears that plenty of lumber is available.
There are a couple of lawsuits that are seeking class action status regarding the use of CCA (chromated copper arsenate), a waterborne chemical preservative used in pressure-treating lumber.
“We have the same belief we’ve always had — that the CCA product is safe,” Currie said. “It’s been used for many years and no one has ever been hurt by it. We don’t see that this litigation has many legs.
“But you’re dealing with a different kind of society than we had in the past and the environmentalists have a lot to say. We’ll just to have to continue to do the right thing all the time and see how that ends up.”
Universal has had 75 percent of its plants “re-plumbed” for a new chemical product to treat lumber, ACQ (ammoniacal copper quaternary compound), the most popular copper-based alternative to CCA. All the company’s plants will be ready to go by the third quarter, Currie said.
Currie said the company has “increased its reputation and relationships” with new Home Depot management and is starting to see some increased sales as well as new opportunities on that end.
“We picked up a lot of new business on the West Coast and in the southern and Midwest areas,” he noted. “We look for our Home Depot relationship to again firm up and for that business to be a growing business.”
The Home Depot comprised 32.8 percent of the company’s total sales and nearly 68 percent of its D-I-Y/retail sales in 2001.
The company has been quiet on the acquisition front while it has been “gulping down” the $36 million buyback of 2 million shares from Chairman Peter Secchia, Currie noted.
But he anticipates some acquisition announcements before the end of the year.
Universal is still targeting annual sales growth of 6 percent to 10 percent and earnings per share growth of 18 percent to 22 percent.
Currie also pointed out that he and Michael Cole, chief financial officer and treasurer, have received and signed the required SEC affidavits.
The Senate passed a bill June 15 aimed at toughening regulation of the accounting industry that includes the provision that corporate chief executives and chief financial officers now must personally attest to the accuracy of their financial reports. President Bush is expected to sign the bill into law.