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Universal Forest Posts Upbeat 1Q13

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Universal Forest Products Inc. (UFPI - Free Report) reported one of the finest first quarter results on Apr 17, 2013. The company rode high on the back of strong sales performance in its five market segments with a net income surging 25.7% over the year-ago earnings.

On a per share basis, earnings were at 26 cents, reflecting an increase of 24% over 21 cents reported in the year-ago quarter and way above the Zacks Consensus Estimate of one cent.


Net sales in the first quarter were $554.5 million, up 21.3% year over year as Universal Forest benefitted from healthy growth in the lumber market that went up 42.9% year over year. Revenue results in all the end-markets were strong. Revenue detail of each market is discussed below:

Retail Building Materials revenue (37% of first quarter total gross sales) was up 4.9% year over year to $205.7 million. Residential Construction sales (13%) improved 43.4% to $74.3 million. Commercial Construction and Concrete Forming sales (5%) were $30.4 million, up 54.0% year over year. Industrial packaging/components sales (29%) were $160.5 million, up 2.5% year over year. Manufactured Housing sales (16%) were up 42.6% year over year to $89.9 million.


Cost of goods sold for Universal Forest represented 89.7% of total revenue in the first quarter 2013, up 140 basis points year over year while gross margin decreased by the same magnitude to settle at 10.3%. Selling, general and administrative expenses were roughly $48.2 million and accounted for 8.7% of total revenue.
Balance Sheet

During the first quarter 2013, cash position of Universal Forest weakened and after finally exiting the quarter, the company reported a cash overdraft balance of $7.7 million as against a positive cash balance of $14.5 million at the end of the previous quarter.
As far as the debt position was concerned, there was no respite as the long-term debt balance grew roughly 62% sequentially to $155.2 million.

Cash Flow

Net cash position from operating activities in the first quarter 2013 remained in a negative zone for Universal Forest. Cash outflow in the quarter amounted to roughly $64.6 million versus $44.8 million in the year-ago quarter.

Capital spending, on the other hand, reflected a slight year-over-year improvement of 2.9% and came in at $8.1 million.
Going forward, management of Universal Forest anticipates improving its top-line growth through additions of new customers and products to its portfolio. Also, operating margin enhancement remains a prime area of focus for the company.

Universal Forest Products Inc. manufactures, treats, distributes, and installs lumber, composite wood, plastic and other building products.

The stock currently has a Zacks Rank #3 (Hold). Companies, other than Universal Forest, that are worth a mention in the industry are Louisiana-Pacific Corp. (LPX - Free Report) , Plum Creek Timber Co. Inc. and Potlatch Corporation (PCH - Free Report) , each holding a Zacks Rank #1 (Strong Buy).

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