UFP INDUSTRIES, INC. FINANCIAL CONDITION AND RESULTS OF OPERATIONS
UFP Industries, Inc. (formerlyUniversal Forest Products, Inc. ) is a holding company with subsidiaries throughoutNorth America ,Europe ,Asia , and inAustralia that supply wood, wood composite and other products to three robust markets: retail, industrial, and construction. The Company is headquartered inGrand Rapids, Mich. For more information aboutUFP Industries, Inc. , or its affiliated operations, go to www.ufpi.com.
On
This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act, as amended, that are based on management's beliefs, assumptions, current expectations, estimates and projections about the markets we serve, the economy and the Company itself. Words like "anticipates," "believes," "confident," "estimates," "expects," "forecasts," "likely," "plans," "projects," "should," variations of such words, and similar expressions identify such forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. The Company does not undertake to update forward-looking statements to reflect facts, circumstances, events, or assumptions that occur after the date the forward-looking statements are made. Actual results could differ materially from those included in such forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty. Among the factors that could cause actual results to differ materially from forward-looking statements are the following: fluctuations in the price of lumber; adverse or unusual weather conditions; adverse economic conditions in the markets we serve; government regulations, particularly involving environmental and safety regulations, government imposed "stay at home" orders and directives to cease or curtail operations; and our ability to make successful business acquisitions. Certain of these risk factors as well as other risk factors and additional information are included in the Company's reports on Form 10-K and 10-Q on file with theSecurities and Exchange Commission . We are pleased to present this overview of the first quarter of 2020. OVERVIEW Our results for the first quarter of 2020 include the following highlights:
Our net sales increased by 2% compared to the first quarter of 2019, which was
comprised of a 5% increase in unit sales, offset by a 3% decrease in selling
? prices primarily due to the commodity lumber market (see Historical Lumber
Prices below). Organic unit growth was 4% and was driven by 8% growth by our
Retail segment and 6% growth by our Construction segment.
Our operating profits increased 21%, which compares very favorably with our 5%
increase in unit sales. The improvement in our profitability was driven by a
? number of factors, including effective positioning of lumber inventories,
favorable changes in product mix, and strong organic growth resulting in
effective leveraging of fixed costs.
? We repurchased approximately 756,000 shares of our common stock for
million resulting in an average price paid of
Available borrowing capacity under our revolving credit facilities and surplus
? cash resulted in total liquidity of approximately$393 million at the end ofMarch 2020 . 15 Table of Contents UFP INDUSTRIES, INC. HISTORICAL LUMBER PRICES
We experience significant fluctuations in the cost of commodity lumber products from primary producers ("Lumber Market"). The following table presents the Random Lengths framing lumber composite price:
Random Lengths Composite
Average $/MBF
2020 2019
January $ 377 $ 331
February 402 370
March 420 365
First quarter average $ 400 $ 355
First quarter percentage change 12.7 %
In addition, a Southern Yellow Pine ("SYP") composite price, which we prepare
and use, is presented below. Our purchases of this species comprised almost
two-thirds of our total lumber purchases, which has generally caused a decrease
in our selling prices of related products.
Random Lengths SYP
Average $/MBF
2020 2019
January $ 346 $ 370
February 345 403
March 360 408
First quarter average $ 350 $ 394 First quarter percentage change (11.2) %
IMPACT OF THE LUMBER MARKET ON OUR OPERATING RESULTS
We generally price our products to pass lumber costs through to our customers so
that our profitability is based on the value-added manufacturing, distribution,
engineering, and other services we provide. As a result, our sales levels (and
working capital requirements) are impacted by the lumber costs of our products.
Lumber costs were 45.6% and 45.9% of our sales in the first three months of 2020 and 2019, respectively.
Our gross margins are impacted by (1) the relative level of the Lumber Market (i.e. whether prices are higher or lower from comparative periods), and (2) the trend in the market price of lumber (i.e. whether the price of lumber is increasing or decreasing within a period or from period to period). Moreover, as explained below, our products are priced differently. Some of our products have fixed selling prices, while the selling prices of other products are indexed to the reportedLumber Market with a fixed dollar adder to cover conversion costs and profits. Consequently, the level and trend of the Lumber Market impact our products differently.
Below is a general description of the primary ways in which our products are priced.
Products with fixed selling prices. These products include value-added
products, such as manufactured items, sold within all segments. Prices for
these products are generally fixed at the time of the sales quotation for a
? specified period of time. In order to reduce any exposure to adverse trends in
the price of component lumber products, we attempt to lock in costs with our
suppliers or purchase necessary inventory for these sales commitments. The
time period limitation eventually allows us to periodically re-price our
products for changes
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UFP INDUSTRIES, INC.
in lumber costs from our suppliers. We believe our percentage of sales of fixed
price items is greatest in our third and fourth quarters.
Products with selling prices indexed to the reported
dollar "adder" to cover conversion costs and profit. These products primarily
include treated lumber, panel goods, other commodity-type items, and trusses
sold to the manufactured housing industry. For these products, we estimate the
? customers' needs and we carry anticipated levels of inventory. Because lumber
costs are incurred in advance of final sale prices, subsequent increases or
decreases in the market price of lumber impact our gross margins. We believe
our sales of these products are at their highest relative level in our second
quarter, primarily due to treated lumber sold to the retail market.
For each of the product pricing categories above, our margins are exposed to changes in the trend of lumber prices.
The greatest risk associated with changes in the trend of lumber prices is on the following products:
Products with significant inventory levels with low turnover rates, whose
selling prices are indexed to the Lumber Market. In other words, the longer the
period of time these products remain in inventory, the greater the exposure to
changes in the price of lumber. This would include treated lumber, which
comprises approximately 16% of our total sales. This exposure is less
? significant with remanufactured lumber, panel goods, other commodity-type
items, and trusses sold to the manufactured housing market due to the higher
rate of inventory turnover. We attempt to mitigate the risk associated with
treated lumber through inventory consignment programs with our vendors. (Please
refer to the "Risk Factors" section of our annual report on form 10-K, filed
with the
Products with fixed selling prices sold under long-term supply arrangements,
? particularly those involving multi-family construction projects. We attempt to
mitigate this risk through our purchasing practices and longer vendor
commitments.
In addition to the impact of the Lumber Market trends on gross margins, changes
in the level of the market cause fluctuations in gross margins when comparing
operating results from period to period. This is explained in the following
example, which assumes the price of lumber has increased from period one to
period two, with no changes in the trend within each period.
Period 1 Period 2
Lumber cost $ 300 $ 400
Conversion cost 50 50
= Product cost 350 450
Adder 50 50
= Sell price $ 400 $ 500
Gross margin 12.5 % 10.0 %
As is apparent from the preceding example, the level of lumber prices does not
impact our overall profits, but does impact our margins. Gross margins are
negatively impacted during periods of high lumber prices; conversely, we
experience margin improvement when lumber prices are relatively low. In order
to more effectively evaluate our profitability in such periods, we believe it is
useful to compare our change in units shipped with our changes in costs and
profits.
BUSINESS COMBINATIONS
We completed one business acquisition during the first three months of 2020 and
three during all of 2019. The annual historical sales attributable to
acquisitions completed in the first three months of 2020 and all of 2019 were
approximately $22 million and $37 million , respectively. These business
combinations were not significant to our quarterly results individually or in
aggregate and thus pro forma results for 2020 and 2019 are not presented.
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UFP INDUSTRIES, INC.
See Notes to the Unaudited Condensed Consolidated Financial Statements, Note F, "Business Combinations" for additional information.
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the components of our
Unaudited Condensed Consolidated Statements of Earnings as a percentage of
net
sales.
Three Months Ended
March 28, March 30,
2020 2019
Net sales 100.0 % 100.0 %
Cost of goods sold 83.8 84.8
Gross profit 16.2 15.2Selling, general, and administrative expenses 10.6
10.4 Other (0.1) 0.1 Earnings from operations 5.7 4.8 Other expense, net 0.5 0.1 Earnings before income taxes 5.2 4.7 Income taxes 1.3 1.1 Net earnings 3.9 3.5
Less net earnings attributable to noncontrolling interest -
-
Net earnings attributable to controlling interest 3.9 %
3.5 %
Note: Actual percentages are calculated and may not sum to total due to rounding.
The following table presents, for the periods indicated, the components of our Consolidated Statements of Earnings as a percentage of net sales, adjusted to restate 2020 net sales and cost of goods sold at prior year lumber prices. The restated sales amounts were calculated by applying the decrease in lumber prices in 2020 to 2019 sales levels. By eliminating the "pass-through" impact of higher or lower lumber prices on net sales and cost of goods sold from year to year, we believe this provides an enhanced view of our change in profitability and costs as a percentage of sales. The amount of the adjustment to 2020 net sales was also applied to cost of goods sold so that gross profit remains unchanged.
Adjusted for Lumber Market Change
Three Months Ended
March 28, March 30,
2020 2019
Net sales 100.0 % 100.0 %
Cost of goods sold 84.3 84.8
Gross profit 15.7 15.2Selling, general, and administrative expenses 10.3
10.4
Other (0.1) 0.1
Earnings from operations 5.5 4.8
Other expense, net 0.4 0.1
Earnings before income taxes 5.1 4.7
Income taxes 1.3 1.1
Net earnings 3.8 3.5
Less net earnings attributable to noncontrolling interest - -
Net earnings attributable to controlling interest 3.8 % 3.5 %
Note: Actual percentages are calculated and may not sum to total due to
rounding.
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UFP INDUSTRIES, INC.
Operating Results by Segment:
EffectiveJanuary 1, 2020 , the Company re-organized around the markets it serves rather than geography. The business segments align with the following markets: UFP Retail Solutions,UFP Construction andUFP Industrial . This change allows for a more specialized and consistent sales approach among Company operations, more efficient use of resources and capital, and quicker introduction of new products and services. The Company manages the operations of its individual locations primarily through the market-centered reporting structure under which each location is included in a business unit and business units are included in our Retail,Industrial, and Construction segments. The exception to this market-centered reporting and management structure is the Company's International segment, which comprises ourMexico ,Canada , andAustralia operations and sales and buying offices in other parts of the world. Our International segment and Ardellis (our insurance captive) have been included in the "All Other" column of the table below. The "Corporate" column includes purchasing, transportation and administrative functions that serve our operating segments. Operating results of Corporate primarily consists of over (under) allocated costs. The operating results ofUFP Real Estate, Inc. , which owns and leases real estate, andUFP Transportation Ltd. , which owns and leases transportation equipment, are also included in the Corporate column. An inter-company lease charge is assessed to our operating segments for the use of these assets at fair market value rates. The following tables present our operating results, for the periods indicated, by segment. Three Months EndedMarch 28, 2020
(in thousands) Retail Industrial Construction All Other Corporate Total Net sales
$ 352,161 $ 256,543 $ 381,155 $ 42,392 $ (189) $ 1,032,062 Cost of goods sold 306,932 212,626 317,817 30,086 (2,635) 864,826 Gross profit 45,229 43,917 63,338 12,306 2,446 167,236 Selling, general, administrative expenses 29,627 25,835 46,386 8,351 (860) 109,339 Other 90 8 (183) (784) 134 (735) Earnings from operations$ 15,512 $ 18,074 $ 17,135 $ 4,739 $ 3,172 $ 58,632 Three Months Ended March 30, 2019
(in thousands) Retail Industrial Construction All Other Corporate Total Net sales
$ 333,100 $ 274,759 $ 365,137 $ 42,110 $ 19 $ 1,015,125 Cost of goods sold 296,240 231,435 303,963 31,652 (2,432) 860,858 Gross profit 36,860 43,324 61,174 10,458 2,451 154,267 Selling, general, administrative expenses 25,785 24,521 45,784 8,107 1,120 105,317 Other 44 (20) 123 303 54 504 Earnings from operations$ 11,031 $ 18,823 $ 15,267 $ 2,048 $ 1,277 $ 48,446 19 Table of Contents UFP INDUSTRIES, INC.
The following tables present the components of our operating results, for the periods indicated, as a percentage of net sales by segment.
Three Months Ended March 28, 2020
(in thousands) Retail Industrial Construction All Other Corporate Total
Net sales 100.0 % 100.0 % 100.0 % 100.0 % N/A 100.0 %
Cost of goods
sold 87.2 82.9 83.4 71.0 - 83.8
Gross profit 12.8 17.1 16.6 29.0 - 16.2
Selling, general,
administrative
expenses 8.4 10.1 12.2 19.7 - 10.6
Other - - - (1.8) - (0.1)
Earnings from
operations 4.4 % 7.0 % 4.5 % 11.2 % - 5.7 %
Note: Actual percentages are calculated and may not sum to total due to
rounding.
Three Months Ended March 30, 2019
(in thousands) Retail Industrial Construction All Other Corporate Total
Net sales 100.0 % 100.0 % 100.0 % 100.0 % N/A 100.0 %
Cost of goods
sold 88.9 84.2 83.2 75.2 - 84.8
Gross profit 11.1 15.8 16.8 24.8 - 15.2
Selling, general,
administrative
expenses 7.7 8.9 12.5 19.3 - 10.4
Other - - - 0.7 - 0.1
Earnings from
operations 3.3 % 6.9 % 4.2 % 4.9 % - 4.8 %
Note: Actual percentages are calculated and may not sum to total due to rounding.
We design, manufacture and market wood and wood-alternative products for national home centers and other retailers, structural lumber and other products for the manufactured housing industry, engineered wood components for residential and commercial construction, customized interior fixtures used in a variety of retail and commercial applications, and specialty wood packaging, components and packaging materials for various industries. Our strategic long-term sales objectives generally include:
Increasing our sales of "value-added" products and enhancing our product
offering with new or improved products. Value-added products generally consist
of fencing, decking, lattice, and other specialty products sold to the retail
market, specialty wood packaging, engineered wood components, customized
interior fixtures, and "wood alternative" products. Engineered wood components
? include roof trusses, wall panels, and floor systems. Wood alternative
products consist primarily of composite wood and plastics. Although we consider
the treatment of dimensional lumber and panels with certain chemical
preservatives a value-added process, treated lumber is not presently included
in the value-added sales totals. Remanufactured lumber and panels that are
components of finished goods are also generally categorized as
"commodity-based" products.
The following table presents, for the periods indicated, our percentage of value-added and commodity-based sales to total net sales by our primary segments (Retail,Industrial, and Construction ). Value-added products are typically sold at fixed selling prices for a pre-determined time period and carry higher gross margins than our commodity-based products. 20 Table of Contents UFP INDUSTRIES, INC. Three Months Ended March 28, 2020 Three Months Ended March 30, 2019 Value-Added Commodity-Based Value-Added Commodity-Based Retail 56.5 % 43.5 % 56.0 % 44.0 % Industrial 66.8 % 33.2 % 65.8 % 34.2 % Construction 79.1 % 20.9 % 80.0 % 20.0 % Total Net Sales 68.0 % 32.0 % 67.9 % 32.1 % Developing new products. New products are defined as products that will
generate sales of at least a
are still growing sales penetration. New product sales and gross profits in the
? first quarter were up 7% and 16%, respectively. Approximately
new product sales from
and excluded from the table below because they no longer meet the definition
above. Our goal is to achieve annual new product sales of at least$475 million in 2020. New Product Sales by Segment Three Months Ended March 28, March 30, %
Segment Classification 2020 2019 Change Retail$ 64,601 59,038 9.4 % Industrial 16,252 16,268 (0.1) % Construction 13,732 12,820 7.1 % All Other 3,081 3,272 (5.8) % Total New Product Sales 97,666 91,398 6.9 %
Note: Certain prior year product reclassifications and the change in designation of certain products as "new" resulted in a change in prior year's sales.
? Selling to new customers and markets.
Retail Segment Net sales in the first three months of 2020 increased approximately 6% compared to the same period of 2019, due to a 9% increase in unit sales, offset by a 3% decrease in selling prices primarily due to the Lumber Market. Acquired operations contributed 1% to our unit sales growth, and organic unit sales growth was 8%. Our organic unit growth was primarily driven by a 14% increase in each of our ProWood treated products and UFP Edge (siding, pattern, trim) products, an 8% increase in Fence, Lawn & Garden, and a 26% increase in Home & Décor products. These increases were offset by a 14% unit decrease in our Deckorators branded products, which was anticipated due to large first-time store builds that took place in the first quarter of last year. Our new product sales contributed to these increases and were up 9% for the quarter. Finally, our customer mix remained consistent as our sales to big box customers increased 7%, and sales to other independent retailers increased 5%. Gross profits increased by 22.7% to$45.2 million for the first three months of 2020 compared to the same period last year as gross margins increased to 12.8% compared to 11.1% for the same period of 2019. We estimate the lower level of lumber prices (see "Impact of the Lumber Market on Our Operating Results") contributed 40 basis points to our improvement in gross margin. The remaining improvement in our profitability was primarily due to the impact of effective inventory positioning resulting in lower lumber costs, favorable changes in product mix, and strong organic growth which allowed us to leverage fixed costs. Selling, general and administrative ("SG&A") expenses increased by approximately$3.8 million , or 14.9%, in the first quarter of 2020 compared to the same period of 2019, while we reported a 9% increase in unit sales. Acquired operations since the first quarter of 2019 contributed approximately$0.8 million to this increase. Accrued bonus expense, which varies with our overall profitability and return on investment, increased approximately$0.8 million and totaled approximately$3.5 million for the quarter. The remaining increase was due to increases in salaries and wages, benefits, and sales incentive compensation. 21 Table of Contents UFP INDUSTRIES, INC.
Earnings from operations for the Retail reportable segment increased in the
first quarter of 2020 compared to 2019 by
Industrial Segment
Net sales in the first three months of 2020 decreased 7% compared to the same period of 2019, due to a 7% decrease in selling prices due to the Lumber Market.
Unit sales remained flat year over year as recently acquired companies contributed 2% to unit growth but this was offset by a 2% decrease in sales out of existing locations. Sales to new customers contributed$5 million to our sales this quarter and helped mitigate the decline in demand of our existing customers.
Gross profits increased by 1.4% to$43.9 million for the first three months of 2020 compared to the same period of 2019. Gross margin increased to 17.1% from 15.8% for the same period last year. We estimate the lower level of lumber prices (see "Impact of the Lumber Market on Our Operating Results") contributed 110 basis points to our improvement in gross margin. The remaining improvement in our profitability was primarily due to the impact of lower lumber costs on products we sell with fixed selling prices and a modest improvement in our
sales
mix value-added products.
Selling, general and administrative ("SG&A") expenses increased by approximately
$1.3 million , or 5%, in the first quarter of 2020 compared to the same period of
2019. Acquired operations since the first quarter of 2019 contributed
approximately $0.6 million to this increase. The remaining increase was due to
increases in salaries and wages, benefits, and sales incentive compensation.
Additionally, accrued bonus expense, which varies with our pre-bonus operating
profit and return on investment, decreased approximately
Earnings from operations for the Industrial reportable segment decreased in the
first quarter of 2020 compared to 2019 by
Construction Segment Net sales in the first three months of 2020 increased 4% compared to the same period of 2019, due to a 6% increase in unit sales, offset by a 2% decrease in selling prices primarily due to the Lumber Market. Our unit growth was organic and driven by a 15% increase in unit sales of concrete forming, a 12% unit increase to factory-built housing, a 3% unit increase to commercial, and a 1% unit increase to site-built construction. The increase in our unit sales of concrete forming was due to share gains. Our unit sales to producers of factory-built homes increased primarily due to an increase in industry production. Gross profits increased by 3.5% to$63.3 million for the first three months of 2020 compared to the same period of 2019. Gross margin declined slightly to 16.6% from 16.8% for the same period last year, in spite of the lower level of lumber prices (see "Impact of the Lumber Market on Our Operating Results").
The
decline in our gross margin was primarily due to our commercial business unit as a result of customer and product mix.
Selling, general and administrative ("SG&A") expenses increased by approximately
$0.6 million , or 1.3%, in the first quarter of 2020 compared to the same period
of 2019, while we reported a 6% increase in unit sales. Accrued bonus expense,
which varies with our overall profitability and return on investment, totaled
approximately $3.5 million for the quarter, which was comparable to last year.
Earnings from operations for the Construction reportable segment increased in
the first quarter of 2020 compared to 2019 by
All Other Segment
Our All Other reportable segment consists of our International and Ardellis (our insurance captive) segments that are not significant.
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Corporate
The corporate segment consists of over (under) allocated costs that are not significant.
INTEREST, NET
Interest expense was lower in the first quarter of 2020 compared to the same period of 2019 primarily due to lower outstanding debt balances and variable interest rates in 2020.
UNREALIZED LOSS (GAIN) ON INVESTMENTS
Ardellis (our insurance captive) recorded a
INCOME TAXES
Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for state and local income taxes and permanent tax differences. Our effective tax rate was 24.7% in the first quarter of 2020 compared to 24.3% for same period in 2019. The slight increase was primarily due to an increase in the permanent tax difference for non-deductible officer compensation.
OFF-BALANCE SHEET TRANSACTIONS
We have no significant off-balance sheet transactions.
LIQUIDITY AND CAPITAL RESOURCES
The table below presents, for the periods indicated, a summary of our cash flow
statement (in thousands):
Three Months Ended
March 28, March 30,
2020 2019
Cash used in operating activities $ (46,161) $ (55,829)
Cash used in investing activities (48,210) (15,551)
Cash (used in)/provided by financing activities (39,723) 61,069
Effect of exchange rate changes on cash (1,719) 248
Net change in all cash and cash equivalents (135,813) (10,063)
Cash, cash equivalents, and restricted cash, beginning of period 168,666 28,198
Cash, cash equivalents, and restricted cash, end of period $ 32,853 $ 18,135
In general, we funded our growth in the past through a combination of operating
cash flows, our revolving credit facility, industrial development bonds (when
circumstances permit), and issuance of long-term notes payable at times when
interest rates are favorable. We have not issued equity to finance growth except
in the case of a large acquisition. We manage our capital structure by
attempting to maintain a targeted ratio of debt to equity and debt to earnings
before interest, taxes, depreciation and amortization. We believe this is one of
many important factors to maintaining a strong credit profile, which in turn
helps ensure timely access to capital when needed.
Seasonality has a significant impact on our working capital due to our primary
selling season which occurs during the period from March to September.
Consequently, our working capital increases during our first and second quarters
which typically results in negative or modest cash flows from operations during
those periods. Conversely, we experience a
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substantial decrease in working capital once we move beyond our peak selling
season which typically results in significant cash flows from operations in our
third and fourth quarters.
Due to the seasonality of our business and the effects of the Lumber Market, we
believe our cash cycle (days of sales outstanding plus days supply of inventory
less days payables outstanding) is a good indicator of our working capital
management. As indicated in the table below, our cash cycle improved to 59 days
from 65 days during the first quarter of 2020 compared to the prior periods.
Three Months Ended
March 28, March 30,
2020 2019
Days of sales outstanding 34 34
Days supply of inventory 46 52
Days payables outstanding (21) (21)
Days in cash cycle 59 65
The decrease in our days supply of inventory for the first three months of 2020 was primarily due to opportunistic buying when lumber prices were low during the fourth quarter of 2018 and into early 2019 to improve gross profits and higher levels of "safety stock" we carried to address transportation challenges and ensure timely deliveries to our customers. The company did not engage in this level of opportunistic buying in late 2019 and early 2020. In the first three months of 2020, our cash used in operating activities was$46.2 million , which was comprised of net earnings of$40.6 million and$21.9 million of non-cash expenses, offset by a$108.6 million seasonal increase in working capital since the end ofDecember 2019 . Our operating cash flow this year improved by$9.7 million compared to the same period of last year primarily due to an improvement in earnings and an increase in non-cash expenses and losses. Acquisitions and purchases of property, plant, and equipment comprised most of our cash used in investing activities during the first three months of 2020 and totaled$18.5 million and$27.2 million , respectively. Outstanding purchase commitments on existing capital projects totaled approximately$26.3 million onMarch 28, 2020 . Notable areas of capital spending include projects to expand capacity and enhance the productivity of our Deckorators product line, several projects to expand manufacturing capacity to serve industrial customers and achieve efficiencies through automation, improvements to a number of facilities, and increase our transportation capacity (tractors, trailers) in order to meet higher volumes and replace old rolling stock. We intend to fund capital expenditures and purchase commitments through our operating cash flows or our revolving credit facility for the balance of the year. The sales and purchases of investments totaling$11.3 million and$14 million , respectively, are due to investment activity in our captive insurance subsidiary. Cash flows from financing activities primarily consisted of net repayments of debt of approximately$2.8 million . Additionally, we paid a quarterly dividend totaling$7.8 million , or$0.125 per share, and repurchased approximately 756,000 shares of our common stock for$29.2 million resulting in an average price paid of$38.62 . OnMarch 28, 2020 , we had$3.7 million outstanding on our$375 million revolving credit facility, and we had approximately$361.5 million in remaining availability after considering$9.8 million in outstanding letters of credit. Additionally, we have$150 million in availability under an existing "shelf agreement" for long term debt. Financial covenants on the unsecured revolving credit facility and unsecured notes include minimum interest tests and a maximum leverage ratio. The agreements also restrict the amount of additional indebtedness we may incur and the amount of assets which may be sold. We were in compliance with all our covenant requirements onMarch 28, 2020 .
ENVIRONMENTAL CONSIDERATIONS AND REGULATIONS
See Notes to Unaudited Consolidated Condensed Financial Statements, Note E, "Commitments, Contingencies, and Guarantees."
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CRITICAL ACCOUNTING POLICIES
In preparing our consolidated financial statements, we follow accounting principles generally accepted inthe United States . These principles require us to make certain estimates and apply judgments that affect our financial position and results of operations. We continually review our accounting policies and financial information disclosures. There have been no material changes in our policies or estimates sinceDecember 28, 2019 . Under the recent re-organization of our reportable segments now centered on our primary markets (retail, industrial, and construction), there were no indicators for impairment for any of the new reporting units. We continue to monitor the results of idX (a reporting unit under the Construction segment) as they have performed below expectations through 2019. While it has faced challenging end market conditions resulting in this under-performance, we believe our growth and operating improvement strategies and related long-term projections for idX are still reasonable and attainable. Consequently, while the risk of impairment exists, management does not believe an impairment is currently required. Should the Company's future analysis indicate a significant change in any of the triggering events for this reporting unit, it could result in impairment of the carrying value of goodwill to its implied fair value. There can be no assurance that the Company's future goodwill impairment testing will not result in a charge to earnings. The total value of goodwill and identifiable intangibles associated with the idX reporting unit is$12.3 million and$4.5 million , respectively, at the end ofMarch 2020 . FORWARD OUTLOOK
Most recently, the Company's goals have been to:
? Achieve long-term unit sales growth that exceeds positive
to 6 percent;
? Grow earnings from operations in excess of our unit sales growth; and
? Earn a return on invested capital in excess of our weighted average cost of
capital.
While we believe the effective execution of our strategies will allow us to continue to achieve these long-term goals in the future, our ability to achieve them in 2020 has been adversely impacted by the COVID-19 pandemic. The following variables should be considered when evaluating our performance for the remainder of 2020.
We have experienced a decrease in customer demand and sales. While the vast
majority of our customers and operations have been deemed to be essential
businesses under the numerous stay at home orders that have been issued by
? states in which we operate, some of our customers do not meet these
requirements and have temporarily shut down. For those customers who remain
operating, demand has declined for the majority of them. Market indicators that
should be considered when evaluating future demand for our products include:
Same store sales growth of national home improvement retail customers, the
- leading indicator for remodeling activity and home improvement spending
forecasts. Sales of our Retail segment comprises approximately 35% of our
annual total sales.
Housing starts in the northeast and mid-
- Sales of our Site Built business unit within our Construction segment comprises
approximately 16% of our total annual sales.
- Production of manufactured housing. Sales of our Factory Built business unit
within our Construction segment comprises 10% of our total annual sales.
Non-residential construction spending. Sales of our Commercial and Concrete
- Forming business units within our Construction segment comprises approximately
10% of our total annual sales.
- Industrial production, Purchasing Managers Index, and
Industrial segment comprises approximately 25% of our total annual sales.
We have over 150 geographically dispersed plant locations, many of which have
? the ability to serve multiple market segments. These capabilities enhance our
ability to supply our customers from multiple locations in
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the event an operation is idled due to the pandemic. To date, two of ouroperations have been temporarily idled and one has been permanently idled. We
do not anticipate a significant loss of sales from these actions. Depending on
the length of the "stay at home" orders and the severity of the impact on future
customer demand, we may temporarily or permanently idle additional locations in
the future. These actions could result in certain losses including asset
impairment charges to property, plant and equipment, right of use leased assets,
inventory and other long-lived assets as well certain exit costs. On a consolidated basis, and based on our 2019 results of operations and
business mix, we believe our decremental operating margin is in a range of 10%
to 15% of net sales. In other words, we believe for every dollar decrease in
? sales, relative to the prior year, our earnings from operations may decline by
operating margin during the Great Recession was approximately 13.5% (2006 peak
to 2011 trough). In addition to the variables above, factors that may cause
our actual results to vary significantly from this range include:
- Changes in our selling prices
- Changes in our sales mix by market segment and product
- The impact and level of the Lumber Market and trends in the commodity costs of
our products - Changes in labor rates
Our ability to reduce variable manufacturing, freight, selling, general, and
- administrative costs, particularly certain personnel costs, in line with net
sales
The results of our salaried bonus plan, which is based on pre-bonus profits and
- achieving minimum levels of pre-bonus return on investment over a required
hurdle rate
? We have reduced our capital expenditure budget to
for 2020.
The CARES act allows us to defer certain payroll taxes from the end of March
? through the end of our 2020 fiscal year, which we estimate will total
approximately
installments on
? We believe our cash cycle will remain consistent with historical trends and
result in a reduction in working capital and increase in cash as sales decline.
The Company has a strong balance sheet and liquidity position, which improved to$433 million at the end ofApril 2020 . Based on current economic forecasts of GDP and other factors above, as well as our assumptions for projected sales for the balance of the year, we believe the Company will generate positive cash flow and net earnings for the full fiscal year of 2020, while continuing to enhance its strong liquidity position.
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