10-Q 1 ufpi-20190330x10q.htm 10-Q ufpi_Current_Folio_10Q

 

 

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0‑22684

UNIVERSAL FOREST PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

Michigan

    

38‑1465835

 

 

(State or other jurisdiction of incorporation or

 

(I.R.S. Employer Identification Number)

 

 

organization)

 

 

 

 

 

 

 

 

 

2801 East Beltline NE, Grand Rapids, Michigan

 

49525

 

 

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code (616) 364‑6161

 

 

 

 

NONE

 

 

(Former name or former address, if changed since last report.)

 

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 for the past 90 days. Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

 

 

 

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller reporting company   

 

 

 

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with an new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by checkmark whether the registrant is a shell company (as defined by Rule 12b‑2 of the Exchange Act). Yes    No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

 

 

 

 

 

Class

    

Outstanding as of March 30, 2019

 

 

Common stock, $1 par value

 

61,352,372

 

 

 

 

 

 

 


 

Table of Contents

UNIVERSAL FOREST PRODUCTS, INC.

 

TABLE OF CONTENTS

PART I.

 

FINANCIAL INFORMATION.

Page No.

 

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets at March 30, 2019, December 29, 2018 and March  31, 2018

3

 

 

 

 

 

 

Condensed Consolidated Statements of Earnings and Comprehensive Income for the Three Months Ended March 30, 2019 and March 31, 2018

4

 

 

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 30, 2019 and March 31, 2018

5

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 30, 2019 and March 31, 2018

6

 

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

29

 

 

 

 

 

Item 4.

Controls and Procedures

29

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings – NONE

 

 

 

 

 

 

Item 1A.

Risk Factors 

30

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

 

 

 

 

 

Item 3.

Defaults upon Senior Securities – NONE

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures – NONE

 

 

 

 

 

 

Item 5.

Other Information – NONE

30

 

 

 

 

 

Item 6.

Exhibits

31

 

 

 

2


 

Table of Contents

UNIVERSAL FOREST PRODUCTS, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

March 30,

 

December 29,

 

March 31,

 

 

    

2019

    

2018

    

2018

 

ASSETS

 

 

 

  

 

 

  

 

 

 

CURRENT ASSETS:

 

 

 

  

 

 

  

 

 

 

Cash and cash equivalents

 

$

17,111

    

$

27,316

  

$

25,326

 

Restricted cash

 

 

1,024

 

 

882

  

 

32,425

 

Investments

 

 

16,197

 

 

14,755

  

 

10,701

 

Accounts receivable, net

 

 

444,111

 

 

343,450

  

 

430,251

 

Inventories:

 

 

 

  

 

 

  

 

 

 

Raw materials

 

 

279,265

 

 

271,871

  

 

261,808

 

Finished goods

 

 

300,898

 

 

284,349

  

 

259,898

 

Total inventories

 

 

580,163

 

 

556,220

  

 

521,706

 

Refundable income taxes

 

 

4,629

 

 

14,130

  

 

 —

 

Other current assets

 

 

40,237

 

 

38,525

  

 

23,304

 

TOTAL CURRENT ASSETS

 

 

1,103,472

 

 

995,278

 

 

1,043,713

 

DEFERRED INCOME TAXES

 

 

2,364

 

 

2,668

  

 

2,273

 

RESTRICTED INVESTMENTS

 

 

13,580

 

 

13,267

  

 

10,238

 

RIGHT OF USE ASSETS

 

 

66,100

 

 

 —

 

 

 —

 

OTHER ASSETS

 

 

8,419

 

 

8,662

  

 

7,123

 

GOODWILL

 

 

224,247

 

 

224,117

  

 

212,596

 

INDEFINITE-LIVED INTANGIBLE ASSETS

 

 

7,364

 

 

7,360

  

 

7,407

 

OTHER INTANGIBLE ASSETS, NET

 

 

39,686

 

 

41,486

  

 

34,543

 

PROPERTY, PLANT AND EQUIPMENT:

 

 

 

  

 

 

  

 

 

 

  Property, plant and equipment

 

 

828,837

 

 

814,645

 

 

754,603

 

Less accumulated depreciation and amortization

 

 

(472,671)

 

 

(459,935)

  

 

(441,032)

 

       PROPERTY, PLANT AND EQUIPMENT, NET

 

 

356,166

 

 

354,710

 

 

313,571

 

TOTAL ASSETS

 

 

1,821,398

 

 

1,647,548

 

 

1,631,464

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

  

 

 

  

 

 

 

CURRENT LIABILITIES:

 

 

 

  

 

 

  

 

 

 

Cash overdraft

 

$

18,732

 

$

27,367

  

$

30,026

 

Accounts payable

 

 

170,667

 

 

136,901

  

 

176,469

 

Accrued liabilities:

 

 

 

  

 

 

  

 

 

 

Compensation and benefits

 

 

70,867

 

 

104,109

  

 

61,976

 

Income taxes

 

 

 —

 

 

 —

 

 

1,600

 

Other

 

 

45,618

 

 

41,645

  

 

42,633

 

Current portion of lease liability

 

 

14,500

 

 

 —

 

 

 —

 

Current portion of long-term debt

 

 

185

 

 

148

  

 

425

 

TOTAL CURRENT LIABILITIES

 

 

320,569

 

 

310,170

  

 

313,129

 

LONG-TERM DEBT

 

 

266,428

 

 

202,130

  

 

261,327

 

LEASE LIABILITY

 

 

51,600

 

 

 —

 

 

 —

 

DEFERRED INCOME TAXES

 

 

14,622

 

 

15,687

  

 

13,894

 

OTHER LIABILITIES

 

 

29,813

 

 

30,877

  

 

26,192

 

TOTAL LIABILITIES

 

 

683,032

 

 

558,864

  

 

614,542

 

SHAREHOLDERS’ EQUITY:

 

 

 

  

 

 

  

 

 

 

Controlling interest shareholders’ equity:

 

 

 

  

 

 

  

 

 

 

Preferred stock, no par value; shares authorized 1,000,000; issued and outstanding, none

 

$

 —

 

$

 —

  

$

 —

 

Common stock, $1 par value; shares authorized 80,000,000; issued and outstanding,  61,352,372,  60,883,749, and 61,543,902

 

 

61,352

 

 

60,884

  

 

61,544

 

Additional paid-in capital

 

 

190,879

 

 

178,540

  

 

172,929

 

Retained earnings

 

 

875,457

 

 

839,917

  

 

768,223

 

Accumulated other comprehensive income

 

 

(4,789)

 

 

(5,938)

  

 

(1,140)

 

Total controlling interest shareholders’ equity

 

 

1,122,899

 

 

1,073,403

  

 

1,001,556

 

Noncontrolling interest

 

 

15,467

 

 

15,281

  

 

15,366

 

TOTAL SHAREHOLDERS’ EQUITY

 

 

1,138,366

 

 

1,088,684

  

 

1,016,922

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,821,398

 

$

1,647,548

  

$

1,631,464

 

See notes to consolidated condensed financial statements.

3


 

Table of Contents

UNIVERSAL FOREST PRODUCTS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME

(Unaudited)

 

 

 

 

 

 

 

(in thousands, except per share data)

 

 

 

 

 

Three Months Ended

 

 

March 30,

 

March 31,

 

 

2019

    

2018

    

NET SALES

$

1,015,125

    

$

993,857

    

COST OF GOODS SOLD

 

860,858

 

 

862,968

 

GROSS PROFIT

 

154,267

 

 

130,889

 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

105,943

 

 

93,206

 

NET GAIN ON DISPOSITION OF ASSETS

 

(122)

 

 

(6,534)

 

EARNINGS FROM OPERATIONS

 

48,446

 

 

44,217

 

INTEREST EXPENSE

 

2,460

 

 

1,778

 

INTEREST AND INVESTMENT INCOME

 

(1,593)

 

 

(717)

 

 

 

867

 

 

1,061

 

EARNINGS BEFORE INCOME TAXES

 

47,579

 

 

43,156

 

INCOME TAXES

 

11,577

 

 

9,574

 

NET EARNINGS

 

36,002

 

 

33,582

 

LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

(462)

 

 

(749)

 

NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST

$

35,540

 

$

32,833

 

 

 

 

 

 

 

 

EARNINGS PER SHARE - BASIC

$

0.58

 

$

0.53

 

EARNINGS PER SHARE - DILUTED

$

0.58

 

$

0.53

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME:

 

 

 

 

 

 

NET EARNINGS

 

36,002

 

 

33,582

 

OTHER COMPREHENSIVE GAIN (LOSS)

 

1,373

 

 

(439)

 

COMPREHENSIVE INCOME

 

37,375

 

 

33,143

 

LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

(686)

 

 

(1,594)

 

COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST

$

36,689

 

$

31,549

 

 

See notes to consolidated condensed financial statements.

4


 

Table of Contents

UNIVERSAL FOREST PRODUCTS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Controlling Interest Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Other

 

 

 

 

 

 

 

 

Common

 

Paid-In

 

Retained

 

Comprehensive

 

Noncontrolling

 

 

 

 

    

Stock

    

Capital

    

Earnings

    

Earnings

    

Interest

    

Total

Balance at December 30, 2017

 

$

61,192

 

$

161,928

  

$

736,212

 

$

144

  

$

14,547

  

$

974,023

Net earnings

 

 

 

  

 

 

  

 

32,833

 

 

  

 

 

749

  

 

33,582

Foreign currency translation adjustment

 

 

 

  

 

 

  

 

 

  

 

(785)

 

 

845

  

 

60

Unrealized gain (loss) on investment & foreign currency

 

 

 

  

 

 

  

 

 

  

 

(499)

 

 

  

 

 

(499)

Distributions to noncontrolling interest

 

 

 

  

 

 

  

 

 

  

 

 

  

 

(775)

 

 

(775)

Issuance of 7,469 shares under employee stock plans

 

 

 8

 

 

199

  

 

 

  

 

 

  

 

 

  

 

207

Issuance of 253,289 shares under stock grant programs

 

 

253

 

 

5,292

  

 

 

  

 

 

  

 

 

  

 

5,545

Issuance of 117,068 shares under deferred compensation plans

 

 

117

 

 

(117)

  

 

 

  

 

 

  

 

 

  

 

 —

Repurchase of 25,812 shares

 

 

(26)

 

 

 

 

 

(822)

 

 

 

 

 

 

 

 

(848)

Expense associated with share-based compensation arrangements

 

 

 

  

 

1,034

 

 

  

 

 

  

 

 

  

 

 

1,034

Accrued expense under deferred compensation plans

 

 

 

  

 

4,593

 

 

  

 

 

  

 

 

  

 

 

4,593

Balance at March 31, 2018

 

$

61,544

 

$

172,929

  

$

768,223

 

$

(1,140)

  

$

15,366

  

$

1,016,922

Balance at December 29, 2018

 

$

60,884

 

$

178,540

  

$

839,917

 

$

(5,938)

  

$

15,281

  

$

1,088,684

Net earnings

 

 

 

  

 

 

  

 

35,540

 

 

  

 

 

462

  

 

36,002

Foreign currency translation adjustment

 

 

 

  

 

 

  

 

 

  

 

982

 

 

224

  

 

1,206

Unrealized gain (loss) on debt securities

 

 

 

  

 

 

  

 

 

  

 

167

 

 

  

 

 

167

Distributions to noncontrolling interest

 

 

 

  

 

 

  

 

 

  

 

 

  

 

(500)

 

 

(500)

Issuance of 10,259 shares under employee stock purchase plans

 

 

10

 

 

251

  

 

 

  

 

 

  

 

 

  

 

261

Issuance of 320,069 shares under stock grant programs

 

 

320

 

 

6,101

  

 

 

  

 

 

  

 

 

  

 

6,421

Issuance of 138,295 shares under deferred compensation plans

 

 

138

 

 

(138)

  

 

 

  

 

 

  

 

 

  

 

 —

Expense associated with share-based compensation arrangements

 

 

 

  

 

1,226

 

 

  

 

 

  

 

 

  

 

 

1,226

Accrued expense under deferred compensation plans

 

 

 

  

 

4,899

 

 

  

 

 

  

 

 

  

 

 

4,899

Balance at March 30, 2019

 

$

61,352

 

$

190,879

  

$

875,457

 

$

(4,789)

  

$

15,467

  

$

1,138,366

 

See notes to consolidated condensed financial statements.

5


 

Table of Contents

UNIVERSAL FOREST PRODUCTS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

(in thousands)

 

Three Months Ended

 

 

 

March 30,

 

March 31,

 

 

    

2019

    

2018

    

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

  

 

 

 

Net earnings

 

$

36,002

    

$

33,582

 

Adjustments to reconcile net earnings to net cash from operating activities:

 

 

 

  

 

 

 

Depreciation

 

 

14,475

 

 

12,712

 

Amortization of intangibles

 

 

1,852

 

 

1,228

 

Expense associated with share-based and grant compensation arrangements

 

 

1,287

 

 

1,094

 

Deferred income taxes credits

 

 

(742)

 

 

(519)

 

Unrealized gain on investments

 

 

(1,348)

 

 

 —

 

Net gain on disposition of assets

 

 

(122)

 

 

(6,534)

 

Changes in:

 

 

 

  

 

 

 

Accounts receivable

 

 

(100,716)

 

 

(99,765)

 

Inventories

 

 

(23,649)

 

 

(57,403)

 

Accounts payable and cash overdraft

 

 

25,056

 

 

39,935

 

Accrued liabilities and other

 

 

(7,924)

 

 

(8,502)

 

NET CASH USED IN OPERATING ACTIVITIES

 

 

(55,829)

 

 

(84,172)

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

  

 

 

 

Purchases of property, plant and equipment

 

 

(15,883)

 

 

(24,362)

 

Proceeds from sale of property, plant and equipment

 

 

241

 

 

36,250

 

Acquisitions, net of cash received

 

 

 —

 

 

(8,787)

 

Purchases of investments

 

 

(449)

 

 

(6,718)

 

Proceeds from sale of investments

 

 

340

 

 

5,045

 

Other

 

 

200

 

 

(124)

 

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

 

 

(15,551)

 

 

1,304

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

  

 

 

 

Borrowings under revolving credit facilities

 

 

237,560

 

 

296,342

 

Repayments under revolving credit facilities

 

 

(173,232)

 

 

(179,429)

 

Borrowings of debt

 

 

 —

 

 

1,376

 

Repayment of debt

 

 

(3,029)

 

 

(5,232)

 

Proceeds from issuance of common stock

 

 

261

 

 

206

 

Distributions to noncontrolling interest

 

 

(500)

 

 

(775)

 

Repurchase of common stock

 

 

 —

 

 

(848)

 

Other

 

 

 9

 

 

(70)

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

61,069

 

 

111,570

 

Effect of exchange rate changes on cash

 

 

248

 

 

233

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

 

(10,063)

 

 

28,935

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR

 

 

28,198

 

 

28,816

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD

 

$

18,135

 

$

57,751

 

 

 

 

 

 

 

 

 

RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

$

27,316

 

$

28,339

 

Restricted cash, beginning of period

 

 

882

 

 

477

 

Cash, cash equivalents, and restricted cash, beginning of period

 

$

28,198

 

$

28,816

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

17,111

 

$

25,326

 

Restricted cash, end of period

 

 

1,024

 

 

32,425

 

Cash, cash equivalents, and restricted cash, end of period

 

$

18,135

 

$

57,751

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION:

 

 

 

  

 

 

 

Interest paid

 

$

570

 

$

843

 

Income taxes paid

 

 

2,801

 

 

1,245

 

NON-CASH FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Common stock issued under deferred compensation plans

 

 

4,457

 

 

4,237

 

See notes to consolidated condensed financial statements.

6


 

Table of Contents

UNIVERSAL FOREST PRODUCTS, INC.

 

NOTES TO UNAUDITED

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 29, 2018.

Seasonality has a significant impact on our working capital from March to August which historically results in negative or modest cash flows from operations in our first and second quarters. Conversely, we experience a substantial decrease in working capital from September to February which typically results in significant cash flow from operations in our third and fourth quarters. For comparative purposes, we have included the March 31, 2018 balances in the accompanying unaudited consolidated condensed balance sheets.

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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 30, 2019

 

March 31, 2018

 

 

Quoted

 

Prices with

 

 

 

 

 

 

 

Quoted

 

Prices with

 

 

 

 

 

Prices in

 

Other

 

 

Prices with

 

 

 

 

Prices in

 

Other

 

 

 

 

 

Active

 

Observable

 

 

Unobservable

 

 

 

 

Active

 

Observable

 

 

 

 

 

Markets

 

Inputs

 

 

Inputs

 

 

 

 

Markets

 

Inputs

 

 

 

(in thousands)

    

(Level 1)

    

(Level 2)

 

 

(Level 3)

 

Total

    

(Level 1)

    

(Level 2)

    

Total

Money market funds

 

$

56

    

$

549

 

$

 —

    

$

605

    

$

65

    

$

4,744

    

$

4,809

Fixed income funds

 

 

3,860

 

 

9,763

 

 

 —

 

 

13,623

 

 

2,159

 

 

7,111

 

 

9,270

Equity securities

 

 

8,258

 

 

 —

 

 

 —

 

 

8,258

 

 

7,202

 

 

 —

 

 

7,202

Hedge funds

 

 

 —

 

 

 —

 

 

1,782

 

 

1,782

 

 

 

 

 

 

 

 

 

Mutual funds:

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

  

 

 

 

 

 

Domestic stock funds

 

 

2,151

 

 

 —

 

 

 —

 

 

2,151

 

 

1,158

 

 

 —

 

 

1,158

International stock funds

 

 

2,085

 

 

 —

 

 

 —

 

 

2,085

 

 

1,159

 

 

 —

 

 

1,159

Target funds

 

 

257

 

 

 —

 

 

 —

 

 

257

 

 

281

 

 

743

 

 

1,024

Bond funds

 

 

799

 

 

 —

 

 

 —

 

 

799

 

 

207

 

 

347

 

 

554

Alternative funds

 

 

1,344

 

 

 —

 

 

 —

 

 

1,344

 

 

 

 

 

 

 

 

 

Total mutual funds

 

 

6,636

 

 

 —

 

 

 —

 

 

6,636

 

 

2,805

 

 

1,090

 

 

3,895

Total

 

$

18,810

 

$

10,312

 

 

1,782

 

$

30,904

 

$

12,231

 

$

12,945

 

$

25,176

Assets at fair value

 

$

18,810

 

$

10,312

 

 

1,782

 

$

30,904

 

$

12,231

 

$

12,945

 

$

25,176

 

We maintain money market, mutual funds, bonds, and/or stocks in our non-qualified deferred compensation plan and our wholly owned licensed captive insurance company. These funds are valued at prices quoted in an active exchange market and are included in “Cash and Cash Equivalents”, “Investments”, “Restricted Cash”, and

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“Restricted Investments”. 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.

During 2018, we purchased a private real estate income trust which are valued as a Level 3 asset.  We did not maintain any Level 3 assets or liabilities at March 31, 2018.  

In accordance with our investment policy, our wholly-owned captive, Ardellis Insurance Ltd. (“Ardellis”), maintains an investment portfolio, totaling $29.3 million as of March 30, 2019, consisting of domestic and international stocks, hedge funds, and fixed income bonds. 

Ardellis’ available for sale investment portfolio, including funds held with the State of Michigan, consists of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

March 30,2019

 

 

 

 

 

Unrealized

 

 

 

 

    

Cost

    

Gain/(Loss)

    

Fair Value

Fixed Income

 

$

13,565

    

$

58

  

$

13,623

Equity

 

 

7,235

 

 

1,023

  

 

8,258

Mutual Funds

 

 

5,815

 

 

(150)

  

 

5,665

Hedge Funds

 

 

1,744

 

 

38

  

 

1,782

Total

 

$

28,359

 

$

969

  

$

29,328

 

Our fixed income investments consist of a blend of US Government and Agency bonds and investment grade corporate bonds with varying maturities.  Our equity investments consist of small, mid, and large cap growth and value funds, as well as international equity. Our hedge funds consist of the private real estate income trust which is valued as a Level 3 asset.  The net unrealized gain was $1.0 million. Carrying amounts above are recorded in the investments and restricted investments line items within the balance sheet as of March 30, 2019.  

 

C.       REVENUE RECOGNITION

On May 28, 2014, the FASB issued ASU No. 2014-09 (Accounting Standard Codification 606), Revenue from Contracts with Customers.  Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, Revenue Recognition, and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services.  The ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The Company has adopted the requirements of the new standard as of January 1, 2018, and utilized the modified retrospective method of transition which was applied to all contracts.

The Company completed the new revenue recognition standard assessment and determined that there was no material impact to our consolidated financial statements, aside from additional required disclosures, thus no needed adjustment to the opening retained earnings for the annual reporting period.

Within the three markets (retail, industrial, and construction) that the Company operates, there are a variety of written and oral contracts that are utilized to generate revenue from the sale of wood, wood composite and other products.  The transaction price is stated at the purchase order level, which includes shipping and/or freight costs and any applicable governmental authority taxes.  The majority of our contracts have a single performance obligation concentrated around the delivery of goods to the carrier, Free On Board (FOB) shipping point.  Therefore, revenue is recognized when this performance obligation is satisfied.  Generally, title and control passes at the time of shipment. In certain circumstances, the customer takes title when the shipment arrives at the destination. However, our shipping process is typically completed the same day.

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UNIVERSAL FOREST PRODUCTS, INC.

 

Certain customer products that we provide require installation by the Company or a 3