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Universal Forest Products Inc’s (UFPI - Analyst Report) 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. , Builders FirstSource Inc. (BLDR - Snapshot Report), and Louisiana-Pacific Corp. (LPX - Snapshot Report).

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

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