Universal Forest Products Inc. (UFPI) reported its financial results for the first quarter 2011 on April 13. Net earnings were a loss of 19 cents per share compared with a 5 cent per share gain in the year-ago quarter. Results were below the Zacks Consensus Estimate of 1 cent per share gain in the quarter.
Revenue
Universal Forest’s top line in the first quarter plummeted 1.5% year over year to $387.2 million versus $393.0 million in the year-ago quarter and below the Zacks Consensus Estimate of $418.0 million. The decline in sales can be attributed to lost production days owing to bad weather conditions. Site-built and manufactured housing sales also went down because of lower federal incentives and lower DIY/retail sales due to lower inventory stocking compared with prior-year period.
Do-It-Yourself/retail sales (37% of first quarter total revenue) in the quarter decreased 8.8% year over year to $150.0 million. Management contemplates improving long-term growth potential of the DIY segment via new product launches, improving market conditions, pent-up demand and new customers.
Industrial packaging sales (37% of the total revenue) jumped 14.2% year over year to $143.9 million. The growth represents favorable marketing conditions and the company’s efforts in adding new customers and products. Management anticipates favorable conditions for the segment going forward.
Site-built construction sales (14% of the total revenue) were $54.0 million, down 11.3% year over year. The company continues to concentrate on commercial, government and turnkey projects and anticipates better sales performance in the second half of fiscal year 2011.
Manufactured housing sales (12% of the total revenue) were down 4.2% y/y to $46.3 million.
Universal Forest’s cost of goods sold represented 89.3% of the total revenue in the first quarter, up 240 basis points year over year; attributed to higher lumber costs. Thus, gross margin fell by the same magnitude to 10.7%.
Selling, general and administrative expenses were roughly $46.5 million and represented 12.0% of total revenue, a decrease of 30 basis points y/y.
Balance Sheet
Exiting the first quarter 2011, Universal Forest’s cash and cash equivalents were nil compared with $43.4 million in the previous quarter while long-term debt balance was roughly stable at approximately $52.5 million.
Cash flow from operating activities for the first quarter 2011 stood at ($109.4) million versus ($77.6) million in the year-ago quarter. Capital expenditure increased 36.5% y/y to $6.3 million. Share repurchase in the quarter were nil.
Outlook
Universal Forest expects challenging conditions to persist going forward and thus refrained from providing any financial guidance for the year.
Universal Forest Products engineers, manufacturers, treats, distributes, and installs lumber, composite wood, plastic and other building products. The company faces stiff competition from peers like Bluelinx Holdings Inc. (BXC), Builders FirstSource Inc. (BLDR), and Louisiana-Pacific Corp. (LPX).
We currently maintain an Underperform recommendation on the stock.
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