10-Q 1 ufpi-20220326x10q.htm 10-Q
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 26, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-22684

UFP INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Michigan

    

38-1465835

(State or other jurisdiction of incorporation or

(I.R.S. Employer Identification Number)

organization)

2801 East Beltline NE, Grand Rapids, Michigan

49525

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code (616) 364-6161

NONE

(Former name or former address, if changed since last report.)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with a new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by checkmark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes    No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class

    

Outstanding as of March 26, 2022

Common stock, $1 par value

62,734,161

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange On Which Registered

Common Stock, no par value

UFPI

The Nasdaq Stock Market, LLC

Table of Contents

UFP INDUSTRIES, INC.

TABLE OF CONTENTS

PART I.

FINANCIAL INFORMATION.

Page No.

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets at March 26, 2022, December 25, 2021 and March 27, 2021

3

Condensed Consolidated Statements of Earnings and Comprehensive Income for the Three Months Ended March 26, 2022 and March 27, 2021

4

Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 26, 2022 and March 27, 2021

5

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 26, 2022 and March 27, 2021

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

28

Item 4.

Controls and Procedures

29

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings – NONE

Item 1A.

Risk Factors - NONE

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

Item 3.

Defaults upon Senior Securities – NONE

Item 4.

Mine Safety Disclosures – NONE

Item 5.

Other Information – NONE

30

Item 6.

Exhibits

30

2

Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share data)

March 26,

December 25,

March 27,

    

2022

    

2021

    

2021

ASSETS

  

  

CURRENT ASSETS:

  

  

Cash and cash equivalents

$

73,783

    

$

286,662

  

$

44,399

Restricted cash

 

729

 

4,561

  

 

629

Investments

 

35,465

 

36,495

  

 

31,439

Accounts receivable, net

 

1,095,362

 

737,805

  

 

808,105

Inventories:

  

  

Raw materials

 

576,023

 

416,043

  

 

438,762

Finished goods

 

654,328

 

547,277

  

 

384,652

Total inventories

 

1,230,351

 

963,320

  

 

823,414

Refundable income taxes

 

 

4,806

  

 

Other current assets

 

36,727

 

39,827

  

 

29,072

TOTAL CURRENT ASSETS

 

2,472,417

 

2,073,476

 

1,737,058

DEFERRED INCOME TAXES

 

3,590

 

3,462

  

 

2,290

RESTRICTED INVESTMENTS

19,390

 

19,310

  

 

17,209

RIGHT OF USE ASSETS

99,914

96,703

98,404

OTHER ASSETS

 

32,544

 

31,876

  

 

27,358

GOODWILL

 

317,631

 

315,038

  

 

314,189

INDEFINITE-LIVED INTANGIBLE ASSETS

 

7,396

 

7,369

  

 

7,401

OTHER INTANGIBLE ASSETS, NET

 

120,205

 

109,017

  

 

93,812

PROPERTY, PLANT AND EQUIPMENT:

  

  

Property, plant and equipment

1,244,070

1,212,113

1,060,893

Less accumulated depreciation and amortization

 

(643,191)

 

(623,093)

  

 

(572,526)

PROPERTY, PLANT AND EQUIPMENT, NET

600,879

589,020

488,367

TOTAL ASSETS

3,673,966

3,245,271

2,786,088

LIABILITIES AND SHAREHOLDERS’ EQUITY

  

  

CURRENT LIABILITIES:

  

  

Cash overdraft

$

61,711

$

17,030

  

$

47,140

Accounts payable

425,956

319,125

  

299,398

Accrued liabilities:

  

  

Compensation and benefits

 

189,509

 

289,196

  

 

137,208

Income taxes

54,682

25,565

Other

 

102,434

 

84,853

  

 

78,560

Current portion of lease liability

26,015

23,155

23,051

Current portion of long-term debt

 

42,895

 

42,683

  

 

109

TOTAL CURRENT LIABILITIES

 

903,202

 

776,042

  

 

611,031

LONG-TERM DEBT

 

379,015

 

277,567

  

 

426,310

LEASE LIABILITY

76,969

76,632

76,408

DEFERRED INCOME TAXES

 

61,278

 

60,964

  

 

34,940

OTHER LIABILITIES

 

35,330

 

37,497

  

 

50,856

TOTAL LIABILITIES

 

1,455,794

 

1,228,702

  

 

1,199,545

SHAREHOLDERS’ EQUITY:

  

  

Controlling interest shareholders’ equity:

  

  

Preferred stock, no par value; shares authorized 1,000,000; issued and outstanding, none

$

$

  

$

Common stock, $1 par value; shares authorized 80,000,000; issued and outstanding, 62,734,161, 61,901,851 and 61,838,256

 

62,734

 

61,902

  

 

61,838

Additional paid-in capital

 

266,544

 

243,995

  

 

231,111

Retained earnings

 

1,851,784

 

1,678,121

  

 

1,276,722

Accumulated other comprehensive loss

 

(3,170)

 

(5,405)

  

 

(3,464)

Total controlling interest shareholders’ equity

 

2,177,892

 

1,978,613

  

 

1,566,207

Noncontrolling interest

 

40,280

 

37,956

  

 

20,336

TOTAL SHAREHOLDERS’ EQUITY

 

2,218,172

 

2,016,569

  

 

1,586,543

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

3,673,966

$

3,245,271

  

$

2,786,088

See notes to consolidated condensed financial statements.

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Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME

(Unaudited)

(in thousands, except per share data)

Three Months Ended

March 26,

March 27,

2022

    

2021

    

NET SALES

$

2,489,313

    

$

1,825,004

    

COST OF GOODS SOLD

 

2,010,950

 

1,538,450

GROSS PROFIT

 

478,363

 

286,554

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

220,150

 

150,098

OTHER GAINS, NET

(812)

(1,031)

EARNINGS FROM OPERATIONS

 

259,025

 

137,487

INTEREST EXPENSE

 

3,302

 

3,151

INTEREST AND INVESTMENT LOSS (INCOME)

 

1,093

 

(2,296)

EQUITY IN EARNINGS OF INVESTEE

515

630

 

4,910

 

1,485

EARNINGS BEFORE INCOME TAXES

 

254,115

 

136,002

INCOME TAXES

 

60,984

 

31,751

NET EARNINGS

 

193,131

 

104,251

LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

(3,428)

 

(940)

NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST

$

189,703

$

103,311

EARNINGS PER SHARE – BASIC

$

3.01

$

1.67

EARNINGS PER SHARE – DILUTED

$

3.00

$

1.67

OTHER COMPREHENSIVE INCOME:

NET EARNINGS

 

193,131

 

104,251

OTHER COMPREHENSIVE GAIN (LOSS)

 

3,184

 

(2,196)

COMPREHENSIVE INCOME

 

196,315

 

102,055

LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

(4,377)

 

(414)

COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST

$

191,938

$

101,641

See notes to consolidated condensed financial statements.

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UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

(in thousands, except share and per share data)

Controlling Interest Shareholders’ Equity

Accumulated

Additional

Other

Common

Paid-In

Retained

Comprehensive

Noncontrolling

    

Stock

    

Capital

    

Earnings

    

Earnings

    

Interest

    

Total

Balance on December 25, 2021

$

61,902

$

243,995

$

1,678,121

$

(5,405)

$

37,956

  

$

2,016,569

Net earnings

  

  

 

189,703

 

  

 

3,428

  

 

193,131

Foreign currency translation adjustment

  

  

  

 

2,930

 

949

  

 

3,879

Unrealized loss on debt securities

  

  

  

 

(695)

 

  

 

(695)

Distributions to noncontrolling interest

  

  

  

  

 

(2,053)

 

(2,053)

Additional purchase of noncontrolling interest

Cash dividends - $0.20 per share - quarterly

(12,541)

 

  

 

  

 

(12,541)

Issuance of 9,734 shares under employee stock purchase plan

 

10

653

  

  

  

 

663

Issuance of 787,045 shares under stock grant programs

 

787

8,959

  

  

  

 

9,746

Issuance of 79,973 shares under deferred compensation plans

 

80

(80)

  

  

  

 

Repurchase of 44,442 shares

 

(45)

(3,499)

  

  

 

  

 

(3,544)

Expense associated with share-based compensation arrangements

6,883

 

  

 

  

 

6,883

Accrued expense under deferred compensation plans

6,134

  

  

  

  

  

6,134

Balance on March 26, 2022

$

62,734

$

266,544

  

$

1,851,784

$

(3,170)

  

$

40,280

  

$

2,218,172

(in thousands, except share and per share data)

Controlling Interest Shareholders’ Equity

Accumulated

Additional

Other

Common

Paid-In

Retained

Comprehensive

Noncontrolling

    

Stock

    

Capital

    

Earnings

    

Earnings

    

Interest

    

Total

Balance on December 26, 2020

$

61,206

$

218,224

$

1,182,680

$

(1,794)

$

22,836

  

$

1,483,152

Net earnings

  

  

 

103,311

 

  

 

940

  

 

104,251

Foreign currency translation adjustment

  

  

  

 

(374)

 

(526)

  

 

(900)

Unrealized loss on debt securities

  

  

  

 

(1,296)

 

  

 

(1,296)

Distributions to noncontrolling interest

  

  

  

  

 

(2,914)

 

(2,914)

Cash dividends - $0.15 per share - quarterly

(9,274)

 

  

 

  

  

 

(9,274)

Issuance of 5,816 shares under employee stock purchase plan

 

6

357

  

  

  

 

363

Net issuance of 536,970 shares under stock grant programs

 

537

3,888

5

  

  

  

 

4,430

Issuance of 89,690 shares under deferred compensation plans

 

89

(89)

  

  

Expense associated with share-based compensation arrangements

2,936

 

  

 

  

2,936

Accrued expense under deferred compensation plans

5,795

  

  

  

  

 

5,795

Balance on March 27, 2021

$

61,838

$

231,111

  

$

1,276,722

$

(3,464)

  

$

20,336

  

$

1,586,543

See notes to consolidated condensed financial statements.

5

Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

Three Months Ended

March 26,

March 27,

    

2022

    

2021

    

CASH FLOWS FROM OPERATING ACTIVITIES:

  

Net earnings

$

193,131

    

$

104,251

Adjustments to reconcile net earnings to net cash from operating activities:

  

Depreciation

 

21,842

18,733

Amortization of intangibles

 

4,672

3,998

Expense associated with share-based and grant compensation arrangements

 

6,931

2,981

Deferred income taxes

 

101

142

Unrealized loss (gain) on investments and other

 

1,601

(1,754)

Equity in earnings of investee

515

630

Net gain on sale and disposition of assets

 

(306)

(532)

Changes in:

Accounts receivable

 

(352,928)

(253,323)

Inventories

 

(258,019)

(207,768)

Accounts payable and cash overdraft

 

143,895

121,892

Accrued liabilities and other

 

(6,466)

14,090

NET CASH USED IN OPERATING ACTIVITIES

 

(245,031)

 

(196,660)

CASH FLOWS FROM INVESTING ACTIVITIES:

  

Purchases of property, plant and equipment

 

(32,072)

(34,656)

Proceeds from sale of property, plant and equipment

 

1,207

5,062

Acquisitions and purchases of non-controlling interest, net of cash received

 

(24,571)

(261,133)

Purchases of investments

 

(6,030)

(8,738)

Proceeds from sale of investments

 

4,725

3,381

Other

 

(2,995)

(414)

NET CASH USED IN INVESTING ACTIVITIES

 

(59,736)

 

(296,498)

CASH FLOWS FROM FINANCING ACTIVITIES:

  

Borrowings under revolving credit facilities

 

242,950

236,280

Repayments under revolving credit facilities

 

(141,438)

(121,570)

Repayments of debt

(199)

Contingent consideration payments and other

(551)

(627)

Proceeds from issuance of common stock

 

663

363

Dividends paid to shareholders

 

(12,541)

(9,274)

Distributions to noncontrolling interest

(2,053)

(2,914)

Repurchase of common stock

 

(501)

Other

 

(331)

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

86,330

 

101,927

Effect of exchange rate changes on cash

 

1,726

 

(349)

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

(216,711)

 

(391,580)

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR

 

291,223

 

436,608

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD

$

74,512

$

45,028

RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:

Cash and cash equivalents, beginning of period

$

286,662

$

436,507

Restricted cash, beginning of period

4,561

101

Cash, cash equivalents, and restricted cash, beginning of period

$

291,223

$

436,608

Cash and cash equivalents, end of period

$

73,783

$

44,399

Restricted cash, end of period

729

629

Cash, cash equivalents, and restricted cash, end of period

$

74,512

$

45,028

SUPPLEMENTAL INFORMATION:

  

Interest paid

$

2,896

$

2,964

Income taxes paid

 

1,700

 

249

NON-CASH INVESTING ACTIVITIES

  

Capital expenditures included in accounts payable

 

2,512

 

NON-CASH FINANCING ACTIVITIES:

Common stock issued under deferred compensation plans

 

6,705

 

5,359

See notes to consolidated condensed financial statements.

6

Table of Contents

UFP INDUSTRIES, INC.

NOTES TO UNAUDITED

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A.       BASIS OF PRESENTATION

The accompanying unaudited interim consolidated condensed financial statements (the “Financial Statements”) include our accounts and those of our wholly-owned and majority-owned subsidiaries and partnerships, and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, the Financial Statements do not include all the information and footnotes normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States. All intercompany transactions and balances have been eliminated.

In our opinion, the Financial Statements contain all material adjustments necessary to present fairly our consolidated financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. These Financial Statements should be read in conjunction with the annual consolidated financial statements, and footnotes thereto, included in our Annual Report to Shareholders on Form 10-K for the fiscal year ended December 25, 2021.

Seasonality has a significant impact on our working capital from March to August, which historically results in negative or modest cash flows from operations in our first and second quarters. Conversely, we experience a substantial decrease in working capital from September to February which typically results in significant cash flow from operations in our third and fourth quarters. For comparative purposes, we have included the March 27, 2021 balances in the accompanying unaudited condensed consolidated balance sheets.

B.       FAIR VALUE

We apply the provisions of ASC 820, Fair Value Measurements and Disclosures, to assets and liabilities measured at fair value. Assets measured at fair value are as follows (in thousands):

March 26, 2022

March 27, 2021

Quoted

Prices with

Quoted

Prices with

Prices in

Other

Prices with

Prices in

Other

Prices with

Active

Observable

Unobservable

Active

Observable

Unobservable

Markets

Inputs

Inputs

Markets

Inputs

Inputs

    

(Level 1)

    

(Level 2)

    

(Level 3)

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Total

Money market funds

$

18

    

$

9,641

$

    

$

9,659

    

$

19

    

$

1,127

$

    

$

1,146

Fixed income funds

 

2,279

 

16,128

 

 

18,407

 

244

 

16,264

 

 

16,508

Treasury securities

342

342

Equity securities

 

19,289

 

 

 

19,289

 

18,496

 

 

 

18,496

Alternative investments

3,964

3,964

2,126

2,126

Mutual funds:

  

 

  

  

 

Domestic stock funds

 

10,576

 

 

 

10,576

 

9,388

 

 

 

9,388

International stock funds

 

1,621

 

 

 

1,621

 

1,395

 

 

 

1,395

Target funds

 

22

 

 

 

22

 

21

 

 

 

21

Bond funds

 

141

 

 

 

141

 

145

 

 

 

145

Alternative funds

501

501

496

496

Total mutual funds

 

12,861

 

 

 

12,861

 

11,445

 

 

 

11,445

Total

$

34,789

$

25,769

$

3,964

$

64,522

$

30,204

$

17,391

$

2,126

$

49,721

Assets at fair value

$

34,789

$

25,769

$

3,964

 

$

64,522

$

30,204

$

17,391

$

2,126

 

$

49,721

7

Table of Contents

UFP INDUSTRIES, INC.

From the assets measured at fair value as of March 26, 2022, listed in the table above, $35.4 million of mutual funds, equity securities, and alternative investments are held in Investments, $9.0 million of money market funds are held in Cash and Cash Equivalents, $0.7 million of money market and mutual funds are held in Other Assets for our deferred compensation plan, and $18.7 million of fixed income funds and $0.7 million of money markets funds are held in Restricted Investments.

We maintain money market, mutual funds, bonds, and/or equity securities in our non-qualified deferred compensation plan, our wholly owned licensed captive insurance company, and assets held in financial institutions. These funds are valued at prices quoted in an active exchange market and are included in “Cash and Cash Equivalents”, “Investments”, “Other Assets”, and “Restricted Investments”. We have elected not to apply the fair value option under ASC 825, Financial Instruments, to any of our financial instruments except for those expressly required by U.S. GAAP.

In accordance with our investment policy, our wholly-owned captive, Ardellis Insurance Ltd. (“Ardellis”), maintains an investment portfolio, totaling $54.2 million as of March 26, 2022, which has been included in the aforementioned table of total investments. This portfolio consists of domestic and international equity securities, alternative investments, and fixed income bonds.

Ardellis’ available for sale investment portfolio, including funds held with the State of Michigan, consists of the following (in thousands):