UFP INDUSTRIES INC [UFPI] Filings

10-Q 1 ufpi-20220326x10q.htm 10-Q

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


☐	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

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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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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.

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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.

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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

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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):