UFPI's 3Q Lags Estimate


Universal Forest Products Inc’s (UFPI) third quarter 2012 financial results suffered a set-back from a pre-tax contingency loss of $2 million related to Canadian anti-dumping duty assessment on certain imported Chinese products. Earnings per share, including this effect, came in at 21 cents, down from 29 cents earned in the year-ago quarter.

Results were also far below the Zacks Consensus Estimate of 38 cents per share earnings.


Net sales in the quarter jumped 13.7% year over year to $533.4 million as strong demands enabled double-digit increases in four of five end markets. Revenue detail of each market is discussed below:

Retail Building Materials revenue (39% of third quarter total gross sales) was down 3.1% year over year to $204.4 million. Residential Construction sales (13%) improved 33.8% to $69.6 million. Commercial Construction and Concrete Forming sales (4%) were $23.9 million, up 11.4% year over year.

Industrial packaging sales (28%) were $153.9 million, up 20.0% year over year. Manufactured Housing and recreational vehicle sales (16%) were up 35.5% year over year to $89.0 million.


In the third quarter, Universal Forest’s cost of goods sold represented 89.6% of total revenue, up 120 basis points year over year while gross margin decreased by the same magnitude to settle at 10.4%. Selling, general and administrative expenses were roughly $44.4 million and represented 8.3% of total revenue.
Balance Sheet

Exiting the third quarter, Universal Forest’s cash and cash equivalents were roughly $4.9 million, down compared with $5.3 million in the previous quarter. Debt repayments during the quarter lowered long-term debt balance to $16.7 million from $32.9 million in the sequential quarter.

Cash Flow

Cash flow from operating activities in the quarter was $22.8 million compared with $60 million generated in the year-ago comparable quarter. Capital spending amounted to $6.0 million, lower than $9.6 million in the year-ago quarter.
Universal Forest Products Inc. manufactures, treats, distributes, and installs lumber, composite wood, plastic and other building products. The company competes stiffly with peers including Bluelinx Holdings Inc. (BXC), Builders FirstSource Inc. (BLDR), and Louisiana-Pacific Corp. (LPX).

We currently have a Neutral recommendation on Universal Forest while the stock also bears a Zacks #3 (Hold) Rank.

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