Universal Forest Products


By Mark Deremo

Universal Forest Products Inc. At-A-Glance

The Lumber Market

For years, lumber industry pricing was driven by pulp contracts. The market for commodity bright lumber was without margin. With environmental concerns and diminished production possibilities, the lumber market rises from time to time. When that happens:

What's more, Universal's relationship-building practices are the same with the company's suppliers as it is with customers, through Mill Appreciation Weeks and special forums. Major producers choose to work with Universal because they want as their customers companies who can buy on a consistent basis, and who can distribute the products they want to produce. Universal's ability to regrade lumber gives major producers yet another reason to choose Universal.

On February 10, 1955, Universal Forest Products, a lumber wholesale office specializing in sales to the manufactured housing industry, was incorporated with William F. Grant as major stockholder, and sole salesman. In 1971, when the company had sales of $11 million, Peter F. Secchia, then vice president of sales, purchased control of the company and led it through three decades of strong, steady growth and great success.

Today, Universal is the largest producer of roof trusses for manufactured housing in North America, and the nation's largest residential truss manufacturer, and the largest producer of pressure-treated lumber in the world. Universal also is a leading supplier of value-added products to the Do-It-Yourself market, maintaining this leadership role as a result of the company's commitment to manufacture, distribute, and market its own products.

In 2002, Forbes once again (4th time) named Universal to its Platinum 400 list, an annual ranking of the 400 best-performing companies in the U.S. with more than $1 billion in revenue.

With more than 100 locations throughout the United States, Canada, and Mexico, Universal produces finished goods within the markets it serves, offering unparalleled distribution and service to its customers. The company employs 10,000 people.

The history of Universal success

When Universal founder Bill Grant decided to grow his business, he hired Michigan State University graduate Peter F. Secchia. The year was 1962.

Throughout the 1960s, nearly all of Universal's growth was in sales to manufactured housing. The retailing trade was left to local distributors who dealt primarily with small, locally owned lumberyards. Universal already was emphasizing customer service and inventory control, and had a philosophy of working closely with customers to teach them how to use wood fiber efficiently, a practice that was to become widely practiced throughout the industry in the future. But back then, it was not common business in the retail industry.

In 1971, the company had sales of under $11 million, and four employees. Ambassador Secchia purchased control of the company and hired William G. Currie as his first employee. Today, Currie is Executive Chairman.

Quickly, Universal became known for innovative programs and policies in the manufacturing, distribution, and marketing of its products, as well as in the company's unique culture. For instance, in 1972, the Universal Employee's Profit Sharing and Retirement Trust Fund was instituted to reward long-term employees for their part in the company's success. While not required to offer such a plan, Universal wanted to assist faithful workers at retirement (today, it's just one of the many ways the company seeks to build its spirit). The initial contribution from corporate profits was $10,000. Subsequent annual contributions and earnings from investments have added to its value so that, as of 2005, the fund, which now has a 401(k) feature, is worth approximately $157 million.

Other groundbreaking practices came from Universal's ability to meet changing market and industry needs through innovative moves. For example, Universal was a pioneer of "just-in-time" inventory systems for the construction industry. In the 1960s and 1970s, manufactured housing production increased rapidly nationwide, but a shortage of working capital, declining rail service, and a need for accelerated expansion called for a system of distribution that required manufactured housing plants to order components on an "as-needed" basis. To respond to these factors, Universal entered the component yard business, establishing manufacturing-cutting facilities near customer bases.

Universal Forest Products was the first company in the United States to be licensed by the Canadian Association to remanufacture (cut-trim-and regrade) and grade stamp Canadian species to meet U.S. engineering standards.

Customers preferred the company's "just-in-time" component system. So, to facilitate its innovative approach to distribution, Universal grew rapidly: Throughout the 1970s, it added several facilities to increase its capacity and geographic reach.

In the late 1970s, Universal entered the wood-treating business in Florida and designed an environmentally sound, state-of-the-art system for producing pressure-treated products. (Universal's Florida plants produced their first "charge" of treated lumber in November 1978. Enthusiastic acceptance of treated lumber led to additional facilities.) The company's goal was to expand and diversify its customer base. And, as they've done throughout their history, they met and exceeded their goals. Late in the 1980s, Universal targeted the Do-It-Yourself market. Little did they realize that the percentage of their business in the retail industry would increase from 5% to 51% in just five years.

In the 1980s, the number of manufactured housing units began to decline. To maintain sales growth, Universal needed a greater market share. And they got it. How? By offering more manufactured components, re-graded more items, mixed loads of lumber, particleboard, and plywood. They also accomplished this through another industry first: Universal was the first company in the wholesale lumber industry to employ a full-time engineering staff. With that capacity and expertise, Universal became one of the world's largest manufacturers of industrial housing-type rafters and conventional roof trusses.

In the fall of 1983, Universal Forest Products was reorganized into five geographic divisions: Northeast, Atlantic, Southeast, Midwest, and Southwest. The company phased out its previous corporate names to operate all regional facilities under the Universal Forest Products umbrella.

At the end of 1986, Universal became truly nationwide with the purchase of Far West Fir Sales, a well-established and highly respected wholesaler of softwood lumber products in California and Arizona.

Universal expanded its service to customers and began its on-going practice of enhancing knowledge of its products by offering technical seminars. Today, engineers in the company's Research and Development Department continue to consult with users, assist with designs, aid in obtaining code approvals for trusses and other components, and develop new products and manufacturing processes.

To maintain its position in the treatment of wood and to augment ongoing concern for the environment Universal added Ian Stalker as vice president of wood preservation in 1987. Ian was (and is) an international authority on chemical pressure treatment of lumber, an instructor in the field, and a former executive with one of the world's leading producers of timber preservatives. Now retired, Ian built a Wood Preservation Department by bringing to Universal leading experts in wood treatment who, with Ian, helped to establish industry standards on the special science of treating wood.

The 1980s and 90s were rewarding years for Chairman of the Board Peter Secchia: He was appointed United States Ambassador to Italy by President George H.W. Bush in 1989. It was at that time that Mr. Currie succeeded Ambassador Secchia as CEO.

Universal continued its trend of growth through the 1990s and into the early 2000s by capitalizing on its growing capabilities and by adding new capabilities and facilities through an aggressive strategy of prudent acquisition.

After the Ambassador's return, it was decided that to finance growth to meet the increasing demand for its products, Universal went public in 1993. Its initial offering of 5.7 million shares raised $20 million in additional equity. (Universal is traded on the NASDAQ exchange as UFPI.)

In November 1997, the company announced Performance 2002, an initiative designed to propel the company towards profitable growth into the next century. Over the course of the next five years, the company's success at hitting the targets, despite formidable obstacles, was impressive.

Universal also consolidated its five regional operating companies into two divisions — Eastern and Western — and its five purchasing offices into two — one in the Eastern Division headquartered in Atlanta, GA, and one in the Western Division headquartered in Windsor, CO (near Denver).

In December 1997, the company entered the site-built residential housing market with the acquisition of Consolidated Building Components, Inc. (locations in Emlenton and Parker, PA), and Structural Lumber Products, Inc. (with locations in Carrollton, San Antonio, and Kyle, TX).

A number of other changes at the dawn of the 21st Century firmly established the future leadership of Universal.

In 2001, Universal announced the mandatory retirement from active employment of Chairman Secchia, effective at the end of 2002. (All Universal employees must retire at the end of the fiscal year in which they turn 65, a policy Secchia instituted "to allow for a more continuous regeneration of management.") Although Secchia retired from employment, he remains as Universal Forest Products' Chairman of the Board.

In 2001, Universal also announced a stock repurchase from Chairman Secchia's family, a move made because of the favorable stock price and historically low interest rates. The company agreed to purchase two million shares at $18 per share. At the same time, Secchia announced that he intended to reinvest much of the proceeds of the sale into the Grand Rapids community, where he has actively lead revitalization, conservation, and urban development efforts.

In 2002, Universal acquired certain assets of and entered into an exclusive licensing agreement with Springfield, IL-based Inno-Tech Plastics, Inc., opening the door to the wood-alternative products industry, which has become the future of consumer products. The company also acquired a facility from Quality Wood Treating, Co., Inc. in Prairie du Chien, WI, which produced EverX composite decking. Today, both plants operate out of Prairie du Chien. This same year, Universal opened its first Michigan manufacturing facility, in White Pigeon, which employs more than 150 people.

Universal is named to the list of the "Top 50 U.S. Manufacturers" as compiled by IndustryWeek magazine. Sales were $1.89 billion.

Advancing its commitment to grow its framing business, Universal acquired a 50% interest in the largest framer of multi-family structures in the Massachusetts area, Shawnlee Construction, LLC (the company has options to purchase the remaining 50% over a number of years). Based in Plainville, MA, Shawnlee had been in business for more than 30 years. That year, Universal also purchased the assets of Midwest Building Systems, Inc. in Indianapolis, IN and acquired the assets of Slaughter House Industries in Dallas, TX.

2005 was a big year for Universal Forest Products. It celebrated 50 years of business. As one recognition of this milestone, the company donated more than $200,000 in cash, material and time to Habitat for Humanity, International. The donations were made in each of Universal's locations across the United States, Canada and Mexico. The company also hosted nearly 1,000 employees, business partners, friends, and dignitaries at a celebration at its headquarters in Grand Rapids, MI.

Universal expanded its DIY products by purchasing the assets of Maine Ornamental Woodworkers, Inc., the leading manufacturer, importer, and distributor of decorative caps used on decking and fencing posts. The post caps complement Universal's decking and fencing lines and add to the company's product mix. Universal also acquired the leading importer and marketer of decorative balusters, DecKorators™, and became the exclusive distributor for a superior and popular plastic decking and railing product, eon® in November. In October, to create new distribution opportunities for the company's growing portfolio of consumer products, the company announced the launch of Universal Consumer Products, Inc., a wholly owned subsidiary.

The company purchased an additional 25% interest in Shawnlee Construction, LLC and agreed to purchase the remaining 25% over the next five years. In addition, Shawnlee Construction announced the purchase of assets and assumption of certain liabilities of Shepardville Construction, Inc. and AW Construction, LLC, which install interior products — such as base boards, crown moldings, window sills and casing, doors, and cabinets — for commercial and multi-family construction projects. These companies provide an outlet for the interior trim products Universal produces at its Durango, Mexico operations and add additional interior products to the Universal portfolio.

In 2006, Universal announced its plan for transition of leadership with the appointment of President Mike Glenn, to the position of CEO effective July 1, 2006. Former CEO William G. Currie was appointed to the newly created position of Executive Chairman and former Chairman Peter F. Secchia became Chairman Emeritus and remains on the board as a director.

Universal acquired certain assets of Classic Truss Company Inc., a truss manufacturer based in Ft. Pierce, FL in January. It also acquired certain assets of Dura-Bilt Mfg. Co., a roof and floor truss manufacturer based in Riverbank, California, and its shareholders in June. The name was changed to DuraBilt Truss. And in June, Universal Forest Products and Mississippi-based Goldin Building Systems joined forces to serve builders in the Mississippi and Louisiana Gulf coast region with trusses and other engineered building components. Gulf Coast Components LLC, in Gulfport, Mississippi, will serve area builders with roof and floor trusses, wall panels and other lumber products. The business is expected to be operational by the end of the third quarter of 2006.

Creating Partnerships with customers

With its pioneering experience in just-in-time delivery, servicing the DIY market has been a natural extension of Universal's business. The company has an acute understanding of the need to have product on hand at all times, but never to have too much. In the DIY business, "out of stock" can easily translate to "out of business," so Universal makes sure not to let a customer run out of a product.

Universal's success is built on partnerships with its customers. The company's philosophy and training are based on face-to-face customer contact. These personal relationships enable Universal to understand the diverse and intricate needs of its customers, and to build trust by demonstrating how it can meet those needs. Universal's salespeople visit each customer, meet with store personnel to make sure they know about the company — who it is and what it does — and to ensure that they're satisfied with Universal's products and service.

Marketing and Merchandising

One of Universal's competitive edges in the DIY industry is its national marketing organization, staffed by experienced marketing specialists. This group works on new products, designs the literature needed to introduce them, "plan-o-grams" stores, and designs marketing and advertising banners, posters, and point-of-purchase literature.

The Universal marketing team not only creates the displays that are so important in merchandising products, but they also create literature to communicate to the end-user essential information regarding the best, most effective use and handling of Universal's products. A fundamental component of the company's success is its ability to provide instructions and support material to guide consumers easily through their Do-It-Yourself projects.

The Universal marketing group also seeks comments from customers and consumers to ascertain their needs. By focusing on customers' needs, Universal can continually enhance its product mix and delivery systems. Universal marketing experts communicate back to the company the desires and needs of customers, and spearhead efforts to continually enhance lines with innovative products.

Universally the Best Products

Because of its commitment to providing the best products on the market, and to setting industry standards, "Universal" has become synonymous with "quality." It's the reason for the company's success and offers a significant competitive edge in the markets it serves. For instance, every piece of Universal treated lumber is grade-stamped or end-tagged to ensure proper penetration and retention; Universal's fencing products are made with jigs and automatic nailing equipment; and they produce grades that the end consumer wants, not simply what's required by grading rule standards.

A good example of the company's commitment to quality is its development of Clinch Lattice™. Historically, lattice had been constructed using straight staples driven through overlapped lath to form its numerous joints. Even using glue, ordinary lattice often was flimsy, and frequently came apart under stress. Universal's lattice is produced on its patented lattice machinery and uses an exclusive Clinch Staple System. When the slightly offset chisel points of galvanized staples are driven through the wood, they hit a striker plate, which forces them to cross themselves 180. The ends curl back up into the wood to form a smooth, no-snag joint. The result is a bond so strong that under strength testing the wood breaks before the joints come apart. Universal's exclusive Clinch Lattice™ is the new standard by which all lattice will be judged. Universal's custom manufacturing equipment, installed nationwide, can produce more than 50 miles of lattice panels daily!

Universal: Everywhere they need to be

With 25 pressure treating plants in operation, Universal has a unique advantage: The company can take on multiple market areas being served by the same merchant. They're familiar with programs and long-term selling contracts. So once a DIY chain is secure, and agrees to Universal's programs, they can enjoy a long-term relationship. It's comforting security for retailers to know that they can be competitively serviced by any of Universal's nearby facilities.

In all, by 2006, Universal has 107 locations (including treating plants, manufacturing and distribution centers, industrial and engineered building component facilities) throughout the United States, Canada, and Mexico, in addition to the company's headquarters in Grand Rapids, MI. Universal's Lacolle, Canada site is one of the world's largest fence manufacturing plants.

Universal Forest Products seeks out people who are dedicated to personal growth and to the advancement of the corporation's goals. The company's informal slogan is, "The harder we work, the luckier we get."

Product Mix

Another competitive edge for Universal in the DIY market is that the company can combine value-added manufacturing (ripping, trimming, painting, assembly) with wood treating and nationwide distribution. This allows a multitude of products to be put on the same truck for delivery to a DIY store.

DIY retailers recognize the advantage in unloading trucks at their locations. Instead of having one truck arrive with four bundles of treated wood, a next with three bundles of fence, and yet another with spindles, a single Universal truck arrives with a mixed load of all a customer's product needs. It's a logical, streamlined way of doing business that is followed by few others in the industry -- because few suppliers have the same Universal ability to mix treated products with other items.

In 2002 (Secchia's last year in management), sales were $1.64 billion, including:

Universal is now:

The Universal family of facilities: growth and acquisitions

1970

Universal purchases the assets of a component yard in Thomasville, GA. The facility later moved to Moultrie.

1971

1972

Florida Component Products opens in Auburndale, serving both the retail industry and the state's manufactured housing market.

1973

The Granger, IN plant begins operations. Universal's first business acquisition occurs in the important Northern Indiana mobile/RV/manufactured home building area with the purchase of the assets of Lumber Specialties of Granger, IN

1974

Universal next goes to the Mid-Atlantic, opening a new component yard and manufacturing facility in North Carolina, centrally located between High Point and Charlotte, just outside of Salisbury.

1978

1981

January 1981: Gordon, PA plant begins operations.

1982

1984

Universal opens the Windsor, CO plant.

1986

Universal purchases Far West Fir Sales, a well-established and highly respected wholesaler of softwood lumber products in California and Arizona, and truly becomes nationwide.

1987

The Janesville, WI plant opens to meet the growing demand for treated lumber in the Chicago/ Milwaukee/Madison market.

1988

Universal opens a large, multi-market pressure treating facility in Ranson, WV to serve the Greater Tidewater area encompassing Pittsburgh, Philadelphia, Baltimore, Washington, D.C., and Richmond, VA.

1989

1991

Universal purchases a fence manufacturing facility in Lacolle, Quebec.

1992

The Salisbury, NC plant moves to a new, state-of-the-art facility and adds lumber treatment capabilities.

1993

1994

Universal opens a manufacturing and distribution center in Hamilton, OH.

1995

1996

Universal acquires three facilities from Hi-Tek Forest Products (one each in Bend, OR, Boise, ID, and Corona, CA).

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

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