UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended |
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period of ____ to _____. |
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ◻
Indicate by check mark 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.
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)
Indicate by check mark 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.
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. Yes ◻ No ⌧
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. Yes
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). Yes ◻ No ⌧
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of the common stock held by non-affiliates of the registrant (i.e. excluding shares held by executive officers, directors, and control persons as defined in Rule 405, 17 CFR 230.405) on July 1, 2023 (which was the last trading day of the registrant’s second quarter in the fiscal year ended December 30, 2023) was $
As of February 3, 2024,
Documents incorporated by reference:
(1) | Certain portions of the registrant’s Annual Report to Shareholders for the fiscal year ended December 30, 2023 are incorporated by reference into Part I and II of this Report. |
(2) | Certain portions of the registrant’s Proxy Statement for its 2024 Annual Meeting of Shareholders are incorporated by reference into Part III of this Report. |
Exhibit Index located on page E-21.
ANNUAL REPORT ON FORM 10-K
DECEMBER 30, 2023
TABLE OF CONTENTS
1
PART I
Item 1. Business.
General Development of the Business.
UFP Industries, Inc. (“we” or “our”) is a holding company with subsidiaries throughout North America, Europe, Asia, and Australia that design, manufacture and supply products made from wood, composites, and other materials to three markets: retail, packaging, and construction. We are headquartered in Grand Rapids, Michigan. For more information about UFP Industries, Inc., or our affiliated operations, go to www.ufpi.com.
Information relating to current developments in our business is incorporated by reference from our Annual Report to Shareholders for the fiscal year ended December 30, 2023 ("2023 Annual Report") under the caption "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Selected portions of the 2023 Annual Report are filed as Exhibit 13 with this Form 10-K Report.
Financial Information About Segments.
ASC 280, Segment Reporting (“ASC 280”) defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
Our business segments consist of UFP Retail Solutions, UFP Packaging and UFP Construction and align with the end markets we serve. Among other things, this structure allows for a specialized and consistent sales approach among Company operations, efficient use of resources and capital, and quicker introduction of new products and services. We manage the operations of our individual locations primarily through a market-centered reporting structure under which each location is included in a business unit and business units are included in our Retail, Packaging, and Construction segments. In the case of locations that serve multiple segments, results are allocated and accounted for by segment.
The exception to this market-centered reporting and management structure is our International segment, which comprises our Mexico, Canada, Europe, Asia and Australia operations, and sales and buying offices in other parts of the world. Our International segment and Ardellis, our insurance captive, are referred to as “All Other” throughout this report.
The Corporate segment includes purchasing, transportation, corporate ventures, and administrative functions that serve our operating segments. Operating results of Corporate primarily consists of over (under) allocated costs. The operating results of UFP Real Estate, Inc., which owns and leases real estate, and UFP Transportation Ltd., which owns, leases and operates transportation equipment, are also included in Corporate. Inter-company lease and services charges are assessed to our operating segments for the use of these assets and services at fair market value rates.
Narrative Description of Business.
Historically, we owned and operated a number of manufacturing facilities across North America that served our various markets, and we managed those operations primarily on a geographic basis. As part of that structure, the managers of those facilities and geographic business units were responsible for and compensated on the basis of each facility's, unit's, and region's respective financial performance. This structure fostered a strong entrepreneurial and sales culture, as well as significant revenue growth – from 2011 to 2019 our revenues increased from $1.8 billion to $4.4 billion. We believe that the duration and durability of our relationships with many of our customers, which extend over several decades with certain key customers, is a reflection of our strong sales culture and intense focus on providing custom solutions.
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The growth in our business, and in the size and number of our customers, generated an increased need for a deeper understanding of the markets we serve, as well as the need to offer more complete solutions, services, and products for existing and prospective customers. That need, combined with our growth objectives, required a structure that would reorient the company’s focus from geography to end markets. Our 2020 restructuring accomplished that objective and now allows us to better serve our customers, recognize and exploit market opportunities, enhance the efficiency of our operations, and improve the deployment of capital. At the same time, we continue to maintain our existing compensation philosophy and practices of rewarding the financial performance of our plants, business units, and segments, based upon pre-bonus operating profits and return on investment, to preserve our strong entrepreneurial and sales culture.
Our business segments are functionally interdependent and are supported by common corporate services, such as accounting and finance, information technology, human resources, legal and compliance, and others. We regularly invest in automation and create best practices to improve the efficiency of our manufacturing facilities across each of the segments. The results and improvements from these investments are shared among the segments. This exchange of improvements and ideas has also prompted better and faster innovation for new products, processes, and product improvements.
Importantly, the restructuring allows us to better evaluate market conditions and opportunities, while effectively allocating capital and resources to the appropriate segments and business units. Also, we believe that the diversification and manner in which we operate our business provides an inherent hedge against the inevitable business cycles that our markets experience and over which we have little control. Accordingly, our goal is to provide stable earnings and cash flows to our shareholders. Our diversification and operating practices also mitigate the impact of volatile lumber market conditions experienced by traditional lumber companies.
Retail Solutions segment. Our Retail Solutions segment is comprised of the following business units: ProWood, Deckorators and UFP-Edge. The segment is focused on distinct product offerings which are grouped by brands and business units. These groupings may change periodically as opportunities to gain efficiencies occur or development of products that deliver increased scale and synergy are developed.
ProWood. Our ProWood business unit manufactures and sells pressure-treated lumber products, including decking, fencing, and lattice, as well as decorative and functional lawn and garden products to building products retailers across the nation. This business unit includes our branded ProWood line of pressure-treated and fire-retardant products used primarily for outdoor decking environments, including associated accessories. It also includes our branded Outdoor Essentials line of lawn and garden products, consisting of wood and vinyl fencing and lattice, garden beds and planters, pergolas, picnic tables, and other landscaping products. Numerous pressure-treaters exist on local and regional scales with none approaching the volume sold by UFP. We estimate we produce approximately 28% of all residential treated wood, 9% of all wood fencing, and 8% of all fire-retardant wood products.
Deckorators. This business unit includes the manufacture of wood plastic composite and our patented Surestone mineral based composite decking and related decking accessories, including aluminum railing systems, balusters, post caps, and similar products, as well as customized, aluminum fencing. Customers include big box home improvement retailers, regional home centers and wholesale distributors. We estimate we manufacture 6% of all composite decking and railing in the U.S.
UFP-Edge. This business unit manufactures and sells exterior siding, pattern, trim and facia products. These products include traditional wood, engineered wood and modified wood siding with a variety of finish and profile alternatives as well as primed wood trim boards and facia. It also includes interior pattern and trim products, as well as pre-painted and primed shiplap and project boards. UFP-Edge is sold to home improvement retailers and two-step distributors.
UFP Retail Solutions has numerous competitive advantages. We are not aware of any competitor that currently manufactures, treats and distributes a full line of both value-added and commodity-based products, on a national basis, as we do within this segment. We believe the breadth of our product offering, scale and geographic dispersion, proximity of our plants to core customers and key vendors, product innovation initiatives, purchasing and manufacturing expertise, procurement advantages, and service capabilities provide us a competitive edge in this market.
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We supply customers in this segment from many of our locations. Our facilities supply mixed truckloads of products, delivered to customers with rapid turnaround. Freight costs are a factor in the ability to competitively service this market, especially with treated wood products due to their weight. The proximity of our manufacturing facilities to customer locations is factored into annual sales programs. The Retail segment services two of our largest customers, The Home Depot and Lowes, which accounted for approximately 17% and 12%, respectively, of our total net sales in fiscal 2023, 15% and 11%, respectively, in 2022, and 16% and 10%, respectively, in 2021.
See Note M "Segment Reporting" of our Annual Report to Shareholders for the fiscal year ended December 30, 2023 for our disaggregated net sales by business unit for our Retail Solutions segment.
Packaging segment. Formerly known as our Industrial segment, it is comprised of the following business units: Structural Packaging, PalletOne, and Protective Packaging Solutions.
Structural Packaging. This business unit designs, engineers, manufactures and tests custom packaging products primarily made of wood and metal. These products are custom designed, often including mixed materials, and manufactured based upon specific customer needs and requirements. We serve a wide variety of regional, national, and global customers in several end markets such as building materials, durable goods, agricultural, moving and storage, heavy equipment and automotive. We utilize combinations of various materials through industrial engineering and testing to promote the best value and functionality for our customers. In Structural Packaging there are regional companies that produce similar product lines, and small single-location competitors in most of our markets. We estimate our domestic market share in Structural Packaging to be 10-12%.
PalletOne. This business unit designs and manufactures pallets primarily made of wood and heat-treated wood. Our pallets are designed and manufactured in numerous sizes and configurations and are used by our customers for shipping a wide assortment of consumer and industrial products. This business unit also includes a recycling operation of previously used pallets. Keys to our success in this business unit are low-cost production through expanded automation, including robotics and high efficiency pallet machines, and the procurement of competitively priced industrial grade wood fiber. In 2022 the company acquired a 50% equity stake in Dempsey Wood Products, LLC, which produces pallet lumber and other industrial wood products in Orangeburg, South Carolina. The lumber Dempsey produces is a crucial product for pallet operations and has been in short supply as larger mills produce less of this type of lumber. PalletOne’s investment in Dempsey helps it secure and grow a critical long-term supply source. There are numerous local and regional pallet manufacturers that compete with PalletOne. We estimate that, as the largest supplier, we manufacture approximately 10% of new machine-built pallets nationally.
Protective Packaging Solutions. This business unit consists of a wide variety of products, such as corrugate, foam, labels, strapping and films. These products are primarily sold as additional offerings to our structural packaging products and pallets and are generally sold as a means of providing a more complete solution to our customers' packaging needs and requirements. Over the last five years, we have added additional products and services to this business unit to meet the increasing demand of our customers to provide a wider array of innovative solutions to their packaging and shipping needs. Through the acquisitions of Advantage Label in Grand Rapids, MI, and Titan Manufacturing, a highly-automated corrugate converter in Flower Mound, TX, UFP has become a manufacturer of labels and corrugate boxes, two significant growth categories for UFP Packaging.
Competitive advantages for UFP Packaging include: being a low cost pallet producer due to our supply agreements, investments in vertical integration, and level of automation in our manufacturing plants; our scale and ability to serve large global, national and regional customers; design and engineering expertise, coupled with our ability to manufacture structural packaging with mixed materials, allowing us to provide creative, value-added solutions to our customers; single-source supplier offering a wide breadth of products, allowing customers to buy more efficiently.
We plan to acquire companies across the industrial packaging spectrum with capabilities in product categories that allow us to fill geographical gaps that enhance our ability to offer valuable packaging solutions to our customers.
See Note M "Segment Reporting" of our Annual Report to Shareholders for the fiscal year ended December 30, 2023 for our disaggregated net sales by business unit for our Packaging segment.
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Construction segment. Our construction segment is comprised of the following business units – Factory-Built Housing, Site-Built Construction, Commercial Construction, and Concrete Forming.
Factory-Built Housing. This business unit designs and manufactures roof trusses, cut-to-size dimensional and board lumber, plywood, and oriented strand board, all intended for use in the construction of manufactured housing. Our customers in this market are producers of mobile, modular and prefabricated homes and, to a lesser extent, recreational vehicles (RV) and cargo trailers. Our principal competitive advantages include our product knowledge, the strength of our engineering support services, the proximity of our regional facilities to our customers, our purchasing and manufacturing expertise and our ability to provide national sales programs to certain customers. As a result of these advantages, we estimate we produce approximately 45% of all roof trusses used in factory-built housing in the United States. We also distribute products such as siding, electrical, plumbing, and many other specialty products to factory-built housing and RV customers. Customer vertical integration strategies have affected us in certain regions, and we’ve taken steps to mitigate this risk by increasing our value as a supplier through innovation and low cost production.
Site-Built Construction. This business unit designs and manufactures roof and floor trusses, wall panels, I-joists and lumber packages as well as engineered wood components used to frame residential and light commercial projects. Recent acquisitions, including Atlantic Prefab, Inc., Exterior Designs, LLC, and Patriot Building Systems, LLC, and Endurable Building Products have given the company manufacturing capability in alternate material components such as metal trusses, sheathed and pre-finished light gauge metal wall panels and aluminum balconies, decks and rail accessories. We’ve made a variety of investments in automation, allowing us to enhance efficiency and capacity in numerous UFP Construction operations. Our recently launched proprietary smartphone application, TrussTrax, provides a convenient, simple way for builders to track orders, shipments and engineered documents 24 hours a day, and has enjoyed wide customer adoption. Our customers in this market are primarily large-volume, multi-tract builders and smaller volume custom builders. We also supply builders engaged in multi-family and light commercial construction. We currently estimate that approximately 65% of the unit's business is for single-family homes while 35% is for multi-family structures.
Competition in site-built construction consists of numerous national and regional building products dealers who also manufacture components and/or provide framing services, as well as regional manufacturers of engineered wood components. We believe our primary competitive advantages relate to the engineering and design capabilities of our staff, purchasing and manufacturing expertise, product quality, timeliness of delivery, and financial strength, as well as providing a comprehensive turn-key package, including installation in selected markets. As a result of these strengths, we estimate we produce approximately 12% of all engineered wood components used in housing in the United States. Generally, terms of sale and pricing are determined based on contracts we enter into with our customers. We currently supply customers in these markets from manufacturing facilities in many different states, primarily located in the non-urban Northeast, mid-Atlantic, Southeast, Texas, and Colorado. We have intentionally avoided markets that have experienced more severe demand volatility for housing. Also, the states in which we have a presence are forecast to continue to benefit from migration trends in the United States. Freight costs are a factor in the ability to competitively service this market due to the space requirements of these products on each truckload. We also provide framing services for builders in certain regional markets in which we erect the wood structure.
Commercial Construction. Our commercial construction business unit primarily includes the operations of idX Holdings, Inc. idX is a designer, manufacturer and installer of highly customized interior fixtures, casework and architectural millwork used in a variety of retail and commercial structures. This business unit serves customers throughout North America and to a lesser extent, Asia and Europe, in healthcare, hospitality, quick service restaurants, retail, and financial, offering comprehensive, streamlined solutions and customized products while managing programs from concept through completion, on a global scale. We believe we are one of the top five custom interior environment providers globally and the largest diversified custom solutions provider.
Concrete Forming. This business unit designs, manufactures and supplies wood forms and related products that are used by our customers to set or form concrete for various structures, including large parking garages, stadiums, commercial structures, and infrastructure projects such as bridges. Our customers in this business unit include general contractors as well as distributors. We believe we are unique in our ability to deliver highly engineered, factory-built solutions to job sites.
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We believe the diversification of the end markets we serve in our Construction segment as well as the breadth of our products and services represent a competitive advantage.
See Note M "Segment Reporting" of our Annual Report to Shareholders for the fiscal year ended December 30, 2023 for our disaggregated net sales by business unit for our Construction segment.
UFP Purchasing/Suppliers. Our purchasing team manages and purchases wood fiber for each of our segments. The three main end markets for softwood lumber in North America – retail, construction, and packaging – align with our three business segments We are the largest converter of solid sawn softwood lumber from North American primary producers (lumber mills). For 2023, we estimate we purchased approximately 8% of the 51.5 billion board feet of North America softwood lumber production. The volume and variety of lumber dimensions purchased allows us to consume all grades and dimensions of what many of our mill suppliers produce, effecting and maintaining long-term, beneficial relationships with many of those suppliers. In turn, this has allowed us to better manage our raw materials inventory (including vendor-managed inventory), lower our costs, and mitigate the volatility of lumber prices.
We use primarily southern yellow pine in our pressure-treating operations and our site-built housing, structural packaging, and machine-built pallet operations in the Southeastern United States. Southern yellow pine is sourced from mills ranging from Texas to the Carolinas. We also use spruce-pine-fir from both Eastern and Western Canada; hemlock, douglas fir and cedar from the Pacific Northwest; inland species of pine, plantation grown radiata and southern yellow pines from South America; and various European softwoods. During 2023 our annual purchases of lumber totaled approximately $2.2 billion and consisted of the following species and their respective percent of total lumber purchases: southern yellow pine (69%), spruce-pine-fir (13%), and douglas fir (2%), while the remaining 16% of lumber purchases comprise various other species and imports outside of North America. Additionally, we purchased approximately $571.7 million in plywood in 2023. There are numerous primary producers for all varieties we use, and we are not dependent on any particular source of supply.
Intellectual Property. We own numerous patents and have several patents pending on technologies related to our business. Examples include our Deckorators brand of composite decking and railing and its proprietary, patented Surestone technology used to produce mineral-based composite decking; Trusstrax, mobile application offered to our Site-Built customers; and the ProWood brand of pressure-treated lumber and outdoor living products. In addition, we own numerous registered trademarks and claim common law trademark rights to several others. As we develop proprietary brands, we may pursue registration or other formal protection. While we believe our patent and trademark rights are valuable, the loss of a patent or any trademark would not be likely to have a material adverse impact on our competitive position.
Backlog. Due to the nature of our retail and industrial businesses, backlog information is not meaningful. The maximum time between receipt of a firm order and shipment does not usually exceed a few days. Therefore, we would not normally have a backlog of unfilled orders in a material amount. The relationships with our major customers are such that we are either the exclusive supplier of certain products and/or certain geographic areas, or the designated source for a specified portion of a customer's requirements. In such cases, either we are able to forecast the customer's requirements, or the customer may provide an estimate of its future needs. In neither case, however, will we receive firm orders until just prior to the anticipated delivery dates for the products ordered.
On December 30, 2023 and December 31, 2022, we estimate that backlog orders associated with our customized interior fixture businesses approximated $59.2 million and $90.1 million, respectively. Cancelled orders have been removed from the prior year figure.
On December 30, 2023 and December 31, 2022, we estimate that backlog orders associated with our site-built construction businesses approximated $79.7 million and $91.1 million, respectively. We expect that the orders above will be primarily filled within the next fiscal year; however, it is possible that some orders could be canceled.
Environmental. Information required for environmental disclosures is incorporated by reference from Note L of the Consolidated Financial Statements presented under Item 8 herein.
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Seasonality. Information required for seasonality disclosures is incorporated by reference from Item 1A. Risk Factors under the caption “Seasonality and weather conditions, including those arising from climate change, could adversely affect us.”
Human Capital Management. On December 30, 2023, we had approximately 15,800 employees. For nearly 70 years, the success of our company has rested on the skill, motivation and performance of our employees. We treat our people honestly and fairly, creating career paths and training opportunities to develop and expand their scope of responsibilities and financial rewards. This approach to human capital, which is embedded in the Company's culture, has fostered an environment where our employees often commit their respective careers to UFP Industries, Inc.
Environmental, Social, and Governance. Matters of sustainability, health and safety, employee welfare, supply chain management, and community engagement are managed by our executive team, with oversight from our Nominating and Corporate Governance and Personnel and Compensation Committees. In March 2023, we published on our website our fiscal year 2022 “Governance Report,” detailing our responsible practices as well as our future outlook. We anticipate publishing on our website our fiscal year 2023 Governance Report during the second quarter of 2024.
Our manufacturing operations have a long history of environmental stewardship through efficiency and energy savings, waste management, and responsible product sourcing. We quantified our 2022 Scope 1 and Scope 2 greenhouse gas (GHG) emissions in our fiscal year 2022 Governance Report and plan to disclose our 2023 Scope 1 and Scope 2 GHG emissions in 2024.
We are driven by operational excellence throughout the enterprise and by cultivating a unique culture that provides significant opportunity for professional and personal growth. In managing our human capital, we have focused our efforts on employee health and safety, equal opportunity for all, and learning and development.
At UFP we welcome all who are willing to work hard. We do not discriminate in hiring, promotion, or opportunity – we believe the best performers should be rewarded commensurately. We prefer hiring people with potential and helping them grow and achieve their goals within our company. To provide opportunity to a broader base of our teammates we removed the requirement of a 4-year degree for sales and management positions and give credit for work experience. We use our internal training programs and UFP Business School to help employees gain functional knowledge and hone the skills and competencies that allow them advancement to greater roles and responsibilities.
We have a long history of supporting talented and hard-working employees go from factory floor to management, sales and operations roles. These transformations require diligence and dedication, and they demonstrate that regardless of background, our teammates at UFP have a chance to make a better life for themselves and their families. We also recognize the need to hire talented individuals from outside the company who bring special expertise and innovative skills to UFP.
Available Information.
Our Internet address is www.ufpi.com. Through our Internet website under "Financial Information" in the Investor Relations section, we make available free of charge, as soon as reasonably practical after such information has been filed with the SEC, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act. Also available through our Internet website under "Our Company - Governance" is our Code of Ethics for Senior Financial Officers.
Reports to Security Holders.
Not applicable.
Enforceability of Civil Liabilities Against Foreign Persons.
Not applicable.
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Item 1A. Risk Factors.
Pressures from various global and national macroeconomic events, including recessionary concerns, heightened inflation, uncertainty regarding future interest rates, foreign currency exchange rate fluctuations, recent adverse weather conditions, escalating tensions in the Middle East, the continuation of the Russia-Ukraine war, and potential governmental responses to these events have created, and continue to create, significant economic uncertainty and could materially and adversely impact our financial performance. The extent to which these macroeconomic pressures may impact our business, results of operations, costs and financial condition will depend on future developments, which continue to be highly uncertain and difficult to predict. While we have planned for and anticipate a mild U.S. recession continuing into 2024, any one or more of the above macroeconomic factors could result in a more severe and longer recessionary cycle, which would have an adverse and potentially material impact on our business and financial performance.
We may be impacted by a significant change in the value of the U.S. dollar and our results of operations may be harmed by currency fluctuations and inflation. We purchase a variety of raw materials and finished goods from sources around the world and export certain products. The impact of a change in U.S. dollar exchange rates, and inflation, would impact our import purchases and export sales, which totaled $391.2 million and $246.3 million, respectively, in 2023. In addition, many of our packaging customers export their products; consequently, any adverse impact on those customers from currency fluctuations and inflation may have an adverse impact on our sales to those customers.
Our growth may be limited by the customer demand in the markets we serve, including our construction market which is highly cyclical. Our sales growth is dependent, in part, upon the growth of the markets we serve. If our markets do not achieve anticipated growth, or if we fail to maintain our market share, financial results could be impaired.
We are subject to fluctuations in the price of lumber. We experience significant fluctuations in the cost of commodity lumber products from primary producers (the "Lumber Market"). A variety of factors over which we have no control, including government and environmental regulations, weather conditions, economic conditions, and natural disasters, impact the cost of lumber products and our selling prices. While we attempt to minimize our risk from severe price fluctuations, substantial, prolonged trends in lumber prices can affect our sales, cost of materials, and gross profits. Our products are generally priced to the customer based on a quoted, fixed selling price or "indexed" to the Lumber Market with a fixed dollar adder to cover conversion costs and profit. The impact on our profitability from changes in lumber prices is discussed in the “Historical Lumber Prices” and "Impact of the Lumber Market on Our Operating Results" captions of our Management’s Discussion and Analysis of Financial Condition and Results of Operations section under Item 7 of this Form 10-K. Our lumber costs, including plywood, as a percentage of net sales were 43.5% in 2023.
A significant portion of our sales are concentrated with two customers. Our sales to The Home Depot and Lowes comprised 17% and 12%, respectively, of our total net sales in fiscal 2023, 15% and 11%, respectively, in 2022, and 16% and 10%, respectively, in 2021.
We may be impacted by vertical integration strategies. In certain markets and product lines, our customers or vendors could pursue vertical integration strategies that could have an adverse effect on our sales. We strive to add value and be a low-cost producer while maintaining competitive pricing in each of our markets to mitigate this risk.
We may be impacted by industry capacity of products we supply. From time to time, we may experience excess capacity among suppliers of certain products in some of the markets we serve. Our selling prices and profitability are impacted during periods of shortages or excess industry capacity relative to market demand. We may also experience limited capacity among suppliers of certain products as a result of supply chain challenges, which may impact our profitability and ability to meet sales objectives.
Our growth may be limited by our ability to make successful acquisitions. A key component of our growth strategy is to complete business combinations. Business combinations involve inherent risks, including assimilation and successfully managing growth. While we conduct extensive due diligence and have taken steps to ensure successful assimilation, factors beyond our control could influence the relative success of these acquisitions.
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We may be adversely affected by the impact of environmental and safety regulations. We are subject to the requirements of federal, state, and local environmental and occupational health and safety laws and regulations. There can be no assurance that we are at all times in complete compliance with all of these requirements. We have made and will continue to make capital and other expenditures to comply with environmental regulations. If additional laws and regulations are enacted, which restrict our ability to manufacture and market our products, including our treated lumber products, it could adversely affect our sales and profits. Changes in the interpretation of existing laws could also adversely impact our financial results.
Seasonality and weather conditions, including those arising from climate change, could adversely affect us. Some aspects of our business are seasonal in nature and results of operations vary from quarter to quarter. In addition, the majority of our products sold to the Retail and Construction markets are used or installed in outdoor construction applications; therefore, short-term sales volume, productivity and gross profits can be negatively affected by adverse weather conditions, particularly in our first and fourth quarters. To the extent changes in the world’s climate have a greater impact on adverse weather conditions, we would expect more variability in our business operations and results. Climate change, which could result in more and more severe and adverse weather events, would likely create greater volatility in our financial results. In addition, it is possible that new legislation or regulation enacted to address the impact of climate change could increase costs for us and our suppliers, including costs associated with raw materials, energy, production, transportation, environmental monitoring and reporting, and capital expenditures.
Inbound and outbound transportation costs represent a significant part of our cost structure. An increase in fuel and other operating expenses will significantly increase our costs. While we attempt to pass these costs along to our customers, there can be no assurance that they would agree to these price increases. Our total inbound and outbound transportation costs were approximately 9.4%, 7.4%, and 7.3% of net sales in 2023, 2022, and 2021, respectively.
New alternatives may be developed to replace traditional treated wood products. The manufacturers of wood preservatives continue to develop new preservatives. While we believe treated products are reasonably priced relative to alternative products such as composites or vinyl, new alternatives may impact the sales of treated wood products. In addition, new preservatives could increase our cost of treating products in the future.
Cybersecurity breaches or a failure in our e-commerce operations could disrupt our business. We rely upon information technology systems and network products and the secure operation of these systems and products. Despite security measures, these systems and products may be vulnerable to physical damage, hackers, computer viruses, or breaches due to errors or malfeasance by employees, vendors, or customers. We have experienced such events in the past and, although past events were immaterial, future events may occur and may be material. Additionally, consumers are increasingly shopping online and through mobile commerce applications. As a result, we are vulnerable to additional risks and uncertainties associated with e-commerce sales, including rapid changes in technology, website downtime and other technical failures, security breaches, cyber-attacks, consumer privacy concerns, changes in state tax regimes and government regulation of internet activities. Our failure to successfully respond to these risks and uncertainties could reduce our e-commerce sales and increase our costs, which could negatively impact our results of operations. In addition, there is no guarantee that we will be able to expand our e-commerce business. Our competitors may have e-commerce businesses that are substantially larger and more developed than ours, which could place us at a competitive disadvantage.
We may be impacted by new tariffs and duties on U.S. imports and foreign export sales. Instability of established free trade agreements may lead to raw material and finished goods price volatility. An increase in foreign tariffs on U.S. goods could curtail our export sales to other countries which was approximately $246.3 million in 2023. Increased tariffs and duties on U.S. imports will increase pricing by adding duty cost, where the duty is sustainable in light of overall unit price, or otherwise constrain supply by eliminating historical production sources by country or commodity type with unsustainable duties. Our purchases that are impacted by tariffs were approximately $391.2 million in 2023, including UFP’s U.S. import of Canadian Softwood Lumber of approximately $223.8 million, which is the largest imported commodity. In addition, there is a risk that U.S. tariffs on imports and countering tariffs on U.S. exports could trigger broader international trade conflicts that could adversely impact our business.
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Our financial results could be negatively impacted by costs associated with product liability, casualty, manufacturing and construction defects, and other claims. From time to time, we are exposed to claims relating to product liability, casualty events, manufacturing and construction defects, and similar claims, including as the result of the conduct of our employees and subcontractors. These claims could have a negative impact on our results of operation and financial condition, including through increased litigation costs, insurance-related costs, and damage to our reputation and customer relationships.
We may be adversely affected by the impact of pandemics and similar outbreaks. Disease outbreaks, such as the recent COVID-19 pandemic, could have an adverse impact on the Company's operations and financial results. These outbreaks may adversely impact our business, consolidated results of operations and financial condition. Any such outbreak, as well as measures taken by governmental authorities and businesses to limit the spread of any outbreak, may result in adverse changes in customer demand and our sales, interfere with the ability of our employees and suppliers to perform and function in a manner consistent with targeted objectives and otherwise adversely impact the efficiency of our operations. This may cause us to materially curtail certain segments and could have a material adverse effect on the results of our operations and cash flow.
Adverse economic conditions and our customers’ ability to operate may impact their ability to pay. This may result in higher write-offs of receivables than we normally experience. We continue to monitor our customers’ business activities, payment patterns, and credit profiles carefully and make changes in our terms when necessary in response to this risk. As a result, our accounts receivable aging as of December 30, 2023 was approximately 91% current. Our bad debt expense as a percentage of sales was 0.03%, 0.15%, and 0.01%, in 2023, 2022, and 2021, respectively. During the most difficult collection period of the Great Recession, from 2008 through 2010, our bad debt expense as a percentage of sales averaged 0.25%.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 1C. Cybersecurity.
Risk Management and Strategy.
Risks from Cybersecurity Threats. Information relating to risks from cybersecurity threats is included in this report in Item 1A under the caption “Cybersecurity breaches or a failure in our e-commerce operations and could disrupt our business.”
We manage and oversee a cybersecurity risk program designed to evaluate potential threats, vulnerabilities, and the potential impact on our operations, data, and stakeholders. This program undergoes regular reviews and updates to address emerging risks. Our process for addressing risk aligns with industry standards as outlined in the NIST Cybersecurity Framework, NIST Risk Management Framework, and CIS Top 18 Security Controls.
We utilize a three-step process to effectively manage cybersecurity risks:
Identify We establish an understanding of our critical operational assets and those that could be attractive to potential threat actors. We consider any cyber activity that could diminish an asset’s value, hinder our ability to use or access the asset, or covertly allow a threat actor to gain access to an asset as a potential risk.
Assess We evaluate the exposure of our assets to identified cyber risks and the potential impacts on our operations or reputation if we were unable to access or utilize an asset or realize its value, or if a threat actor gained access to an asset or its value. We also assess the potential materiality of these risks based on their potential impact on our operations or reputation.
10
Manage We apply a multi-layered defense strategy to maintain our ability to access or utilize an asset or its value and prevent threat actors from gaining or increasing their access to an asset or its value. We prioritize our defensive mechanisms, including administrative, procedural, and technical controls, based on their cost-effectiveness and their ability to reduce risk.
Periodically, we engage consultants and other third parties to assist in the continued improvement of our cybersecurity program. These engagements are designed to enhance our cybersecurity posture, and we work closely with these experts to help us identify and address vulnerabilities. Examples of these engagements include penetration testing, risk assessments, and cybersecurity control audits.
We maintain policies and procedures to oversee and identify cybersecurity risks associated with our third-party service providers, especially those with access to customer and employee data. Our selection and oversight of these providers incorporate cybersecurity considerations, including contractual and other mechanisms to mitigate and continually monitor risks.
We undertake proactive activities to prevent, detect, and minimize the impact of cybersecurity incidents. We maintain an incident response plan to respond to breaches and minimize disruption to our operations swiftly. The incident response process is consistently tested and reviewed through simulated incidents. To bolster the incident response process, we have business continuity, contingency, and recovery plans to ensure operational resilience during a cybersecurity incident. Previous cybersecurity incidents guide continuous improvements in our governance, policies, procedures, and technology. We use these lessons to strengthen our cybersecurity defenses.
Cybersecurity threats and risks, to include any previous cybersecurity incidents, have not materially affected, or are not reasonably likely to materially affect, our business strategy, results of operations, or financial condition. We have not, as of the date of this filing, experienced a cybersecurity breach that has materially affected our business or financial condition. However, because our business involves the collection, transmission, and storage of certain customer and employee data, it is possible that we could be susceptible to various cybersecurity threats, including cyberattacks, unauthorized access, and similar events.
We are committed to the ongoing identification and management of cybersecurity risks as part of our business strategy, financial planning, and capital allocation. We strive to incorporate cybersecurity considerations into all aspects of our operations. As the cybersecurity landscape evolves, so does our strategy to identify and mitigate these risks. We continuously work towards enhancing our processes to ensure an effective cybersecurity posture.
Board of Directors and Management Governance.
Board of Directors Oversight. We recognize the critical importance of cybersecurity and data protection and understand the potential harm to our business from cybersecurity incidents. Accordingly, we place a high priority on mitigating risks associated with cybersecurity threats and any cybersecurity incidents.
Company management maintains primary responsibility for the risk management of the Company, including cybersecurity risks. The Board’s Audit Committee is responsible for the oversight of risks associated with cybersecurity threats. The Audit Committee Charter provides that the Committee is responsible for reviewing management’s assessment of the Company’s information technology process framework and practices and the controls implemented to monitor and mitigate information technology risks. In addition, as part of the Audit Committee’s quarterly meetings and as provided for in its Charter, the Committee receives reports and briefings from the Company’s Chief Information Officer (CIO), Director of Cybersecurity, and management’s cybersecurity team. Those reports and briefings include management’s review of emerging cybersecurity developments and threats, the Company’s risk relating to cybersecurity, and the Company’s strategy to mitigate data protection and cybersecurity risks. The Audit Committee has the authority to obtain advice and input from external cybersecurity resources to assist in its oversight functions.
Management’s Role. Our management team is actively engaged in assessing and managing material risks from cybersecurity threats. We have established a robust framework for identifying, evaluating, and mitigating these risks.
11
Responsibility for Cybersecurity Risks. Our CIO has developed expertise in cybersecurity, compliance, enterprise architecture and design, data analytics, digital transformation, and customer service through years of experience in the information technology space. Our Director of Cybersecurity is designated as the senior executive responsible for cybersecurity and reports directly to our CIO. He has a comprehensive information technology background with 30 years of information technology experience, to include 10 years of systems architecture and design, 12 years of management, and 14 years of service in managing, or assisting in managing, cybersecurity related risks.
To support the CIO and Director of Cybersecurity in managing cybersecurity risks, we established a cross-functional cybersecurity team that includes experts in various aspects of information security. Combined, this team of employees includes individuals with over 85 years of prior work experience in cybersecurity and data protection. These individuals are responsible for the day-to-day implementation of our cybersecurity program.
Additionally, the cybersecurity management team regularly consults with additional resources, to include attorneys, accountants, human resources personnel, and other information technology specialists, to determine materiality for cybersecurity related risks and incidents. There is an established Incident Response Plan that clearly identifies escalation measures based on the impact to our organization.
Processes for Monitoring and Mitigating Risks and Incidents. We employ a comprehensive set of processes to monitor and mitigate cybersecurity risks. These processes include:
● | Continuous monitoring of network traffic and systems for signs of potential threats. |
● | Regular vulnerability assessments and penetration testing to identify and address weaknesses. |
● | Implementation of cybersecurity measures, such as firewalls, intrusion detection systems, and data encryption. |
● | Employee training and awareness programs to educate staff about cybersecurity best practices. |
● | Incident response plans to ensure swift and effective responses to cybersecurity incidents. |
● | Software and Vendor Risk Assessments. |
● | Vulnerability management solution to prioritize patches based on risk. |
● | Privileged account management solutions for administrative access. |
These processes are designed to prevent cybersecurity incidents, but also allows our organization to quickly detect and respond to incidents if they do occur. They are regularly reviewed and updated to adapt to evolving cybersecurity threats.
If any incidents occur, we have a comprehensive Incident Response Plan in place. The Plan includes materiality qualifiers based on the size and scope of the incident. Furthermore, there is an escalation matrix that identifies who is directly involved with managing the incident based on the severity. An Incident Report is compiled for all incidents, regardless of materiality. Management reviews the incident reports and ensures all incidents are mitigated and remediated effectively. These reports are shared with the CIO, CFO, and Audit Committee so they can effectively manage resources to reduce risk and prevent future incidents.
Reporting to the Board. As noted above, our CIO, Director of Cybersecurity, and cybersecurity team provide quarterly updates and reports to our Audit Committee on cybersecurity risks as well as a review of the processes described above. Our management personnel are also required to provide more frequent updates to the Audit Committee on major developments regarding cybersecurity matters. The Committee, in turn, provides regular updates to the Board on these matters.
12
Item 2. Properties.
Our corporate headquarters building is located in suburban Grand Rapids, Michigan. We currently have approximately 219 facilities located throughout the United States, Canada, Mexico, Europe, Asia, and Australia. Depending upon function and location, these facilities typically utilize office, manufacturing, and indoor and outdoor storage space.
The following tables summarize our property locations assigned by the primary segment the plant serves.
RETAIL SEGMENT | ||||||
Property Location | Number of Properties | Property Location | Number of Properties | |||
Athens, AL | 1 | Miami, FL* | 1 | |||
Bartow, FL | 2 | Moneta, VA | 1 | |||
Belchertown, MA | 1 | Mosheim, TN | 1 | |||
Bennett, IA | 1 | Moultrie, GA | 1 | |||
Bonner, MT | 2 | Ponce, PR | 1 | |||
Brunswick, GA | 1 | Poulsbo, WA | 1 | |||
Callao, VA | 1 | Prairie du Chien, WI | 1 | |||
Dodgeville, WI | 1 | Rancho Cucamonga, CA* | 1 | |||
Elizabeth City, NC* | 1 | Ranson, WV* | 1 | |||
Fairless Hills, PA | 1 | Ringgold, GA | 1 | |||
Fort Worth, TX | 1 | Rockledge, FL | 1 | |||
Grand Rapids, MI | 1 | Rockwell, NC | 1 | |||
Greeneville, TN | 1 | Saginaw, TX* | 1 | |||
Hamilton, OH | 1 | Schertz, TX* | 1 | |||
Hampton, VA | 1 | Selma, AL | 2 | |||
Hazelhurst, GA | 1 | Silsbee, TX | 1 | |||
Howell, MI | 2 | Stockertown, PA | 1 | |||
Idabel, OK | 1 | Tampa, FL | 2 | |||
Janesville, WI* | 1 | Thomaston, GA | 1 | |||
Kearneysville, WV* | 2 | Tipton, IA | 1 | |||
Lansing, MI* | 1 | Union City, GA* | 1 | |||
Lockhart, FL | 1 | White Bear Lake, MN* | 1 | |||
Louisville, AL | 1 | White Pigeon, MI | 1 | |||
Matthews, NC | 1 | Windsor, CO* | 1 | |||
TOTAL | 54 | |||||
PACKAGING SEGMENT | ||||||
Property Location | Number of Properties | Property Location | Number of Properties | |||
Adairsville, GA | 1 | Martin, TN | 1 | |||
Ashburn, GA* | 1 | McMinnville, OR* | 1 | |||
Auburndale, FL* | 1 | Milwaukee, WI | 2 | |||
Barnesville, GA | 1 | Minneota, MN* | 1 | |||
Bartow, FL | 2 | Mocksville, NC | 1 | |||
Blanchester, OH | 1 | Morristown, TN | 1 | |||
Blue Island, IL* | 1 | Muscle Shoals, AL | 2 | |||
Burnsville, MN | 1 | Nappanee, IN | 1 | |||
Butner, NC | 1 | New Boston, TX | 1 | |||
Chaffee, NY | 1 | New London, WI | 2 | |||
Chandler, AZ* | 1 | Newnan, GA | 2 | |||
Chase City, VA | 1 | Newton, NC | 1 | |||
Clarksville, TX | 1 | Orangeburg, SC | 1 | |||
Clearfield, UT* | 1 | Parker, PA | 1 | |||
Dallas, TX | 1 | Peru, IL | 1 | |||
Delano, PA | 1 | Port Arthur, TX | 1 | |||
Douglas, GA* | 1 | Prattville, AL | 1 | |||
Eatonton, GA | 2 | Riverside, CA* | 1 | |||
Flower Mound, TX | 2 | Robertsdale, AL | 1 | |||
Forsyth, GA | 1 | Rowesville, SC | 1 | |||
Franklinton, NC* | 1 | Salina, KS* | 1 | |||
Gilmer, TX | 1 | Salisbury, NC* | 1 | |||
Grand Rapids, MI | 2 | Sharon, TN | 2 | |||
Grandview, TX | 5 | Shawnee, OK | 1 | |||
Harrisonville, MO* | 1 | Shipshewana, IN | 1 |
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Hartford, WI | 1 | Siler City, NC | 1 | |||
Hazelhurst, GA | 1 | Snohomish, WA* | 1 | |||
Kansas City, MO | 1 | Thornton, CA* | 1 | |||
Lawrenceburg, TN | 1 | Warrens, WI* | 1 | |||
Livermore Falls, ME | 1 | Wenatchee, WA | 1 | |||
Magna, UT* | 1 | Woodburn, OR* | 1 | |||
Marietta, GA | 1 | Yakima, WA | 1 | |||
TOTAL | 77 | |||||
CONSTRUCTION SEGMENT | ||||||
Property Location | Number of Properties | Property Location | Number of Properties | |||
Athena, OR | 1 | Jefferson, GA | 1 | |||
Auburn, NY | 1 | Jeffersonville, IN | 1 | |||
Aurora, CO | 1 | Kyle, TX | 1 | |||
Bangalore, India | 1 | Lafayette, CO | 1 | |||
Belchertown, MA | 1 | Lenoir City, TN | 1 | |||
Berlin, NJ | 2 | Liberty, NC | 1 | |||
Berthoud, CO | 1 | Locust, NC | 1 | |||
Bridgeton, MO | 1 | Londonderry, NH | 1 | |||
Brooklyn Center, MN | 1 | Nampa, ID* | 1 | |||
Burlington, NC | 2 | Naugatuck, CT | 1 | |||
Cedar Hill, TX | 1 | New London, NC* | 1 | |||
Chesapeake, VA | 1 | New Waverly, TX* | 1 | |||
Chicago, IL | 1 | New Windsor, MD | 1 | |||
Chicopee, MA | 1 | Ontario, CA | 1 | |||
Clinton, NC | 1 | Ooltewah, TN | 1 | |||
Conway, SC | 1 | Pearisburg, VA* | 1 | |||
Cordele, GA | 1 | Plainville, MA | 1 | |||
Dayton, OH | 2 | San Antonio, TX | 1 | |||
DuBois, PA | 1 | Shippenville, PA | 1 | |||
Edwardsburg, MI* | 1 | Sidney, NY | 1 | |||
Elkhart, IN | 2 | Stafford, TX | 1 | |||
Folkston, GA | 2 | Stanfield, NC | 2 | |||
Fredericksburg, VA | 1 | Swindon, United Kingdom | 1 | |||
Gordon, PA* | 1 | Temple, TX | 1 | |||
Granger, IN* | 1 | Washington, NC | 1 | |||
Haleyville, AL* | 1 | Westbury, NY | 1 | |||
Hillsboro, TX* | 1 | Wilton, NH | 1 | |||
Hudson, NY | 1 | Wujinang, China | 1 | |||
TOTAL | 62 | |||||
ALL OTHER SEGMENT | ||||||
Property Location | Number of Properties | Property Location | Number of Properties | |||
Abu Dhabi, United Arab Emirates | 1 | Erskine Park, Australia | 1 | |||
Apaseo el Grande, Mexico | 1 | Noida, India | 1 | |||
Bangalore, India | 3 | Guntur, India | 1 | |||
Carole Park, Australia | 1 | Hyderabad, India | 1 | |||
Castellón, Spain | 1 | Lacolle, Canada | 1 | |||
Chennai, India | 1 | Mordialloc, Australia | 1 | |||
Coimbatore, India | 1 | Nuevo Leon, Mexico | 1 | |||
Deer Park, Australia | 1 | Port Melbourne, Australia | 1 | |||
Dubai, United Arab Emirates | 1 | Pune, India | 1 | |||
Durango, Mexico | 2 | Vadodara, India | 1 | |||
TOTAL | 23 | |||||
CORPORATE SEGMENT | ||||||
Property Location | Number of Properties | |||||
Grand Rapids, MI | 2 | |||||
Spring Lake, MI | 1 | |||||
TOTAL | 3 | |||||
* Due to the nature of our business and historical operating strategy, many of our locations service more than one segment.
We own all of our properties, free from any significant mortgage or other encumbrance, except for approximately 74 facilities which are leased. We believe all of these operating facilities are adequate in capacity and condition to service our existing markets.
14
Item 3. Legal Proceedings.
Information regarding our legal proceedings is set forth in Note L of our Consolidated Financial Statements which are presented under Item 8 of this Form 10-K and are incorporated herein by reference.
Item 4. Mine Safety Disclosures.
Not applicable.
Additional Item: Executive Officers of the Registrant.
Our executive officers are appointed annually by our Board of Directors. There are no family relationships among these officers and our directors nor any arrangement or understanding between any of these officers and any other person pursuant to which the officer was appointed.
The following table lists the names, ages, and positions of our executive officers as of February, 2024.
Name |
| Age |
| Position |
Matthew J. Missad | 63 | Chairman of the Board and Chief Executive Officer | ||
Michael R. Cole | 57 | Chief Financial Officer and Treasurer | ||
Patrick M. Benton | 54 | President of UFP Construction, LLC | ||
Scott A. Worthington | 53 | President of UFP Packaging, LLC | ||
William D. Schwartz, Jr. | 46 | President of UFP Retail Solutions, LLC | ||
David A. Tutas | 54 | General Counsel, Chief Compliance Officer and Secretary |
Matthew J. Missad joined us in 1985. In February 1996, Mr. Missad was promoted to Executive Vice President of the Company. On July 13, 2011, Mr. Missad became Chief Executive Officer of the Company.
Michael R. Cole joined us in 1993 from the international public accounting firm Deloitte & Touche. In December 1999, he was promoted to Vice President of Finance. On July 19, 2000, Mr. Cole became Chief Financial Officer of the Company.
Patrick M. Benton joined us in 1993. In 2008 he became Operations Vice President of the South Texas Region, and on July 1, 2014, he became Executive Vice President of UFP Eastern Division – North. On February 1, 2017, Mr. Benton became President of the UFP Northern Division, and on January 1, 2020, he became President of UFP Construction, LLC.
Scott A. Worthington joined us in 1997. In 2014, he was promoted to Regional Vice President of the South Texas Region. On January 1, 2020, he became President of UFP Packaging, LLC.
William D. Schwartz, Jr. joined us in 1998. He became Operations Vice President in 2014 and Executive Vice President of Purchasing and Transportation in 2020. On July 1, 2022, he became Executive Vice President of Operations Services and on September 26, 2022, he became President of UFP Retail Solutions, LLC.
David A. Tutas joined us in 2003 as a staff counsel. In 2007, he was promoted to Director of Legal Services. On August 1, 2011, he was promoted to General Counsel. On January 18, 2013, he became Secretary of the Company, and on February 1, 2019, he became Chief Compliance Officer.
PART II
The following information items in this Part II, which are contained in the 2023 Annual Report, are specifically incorporated by reference into this Form 10-K Report. These portions of the 2023 Annual Report that are specifically incorporated by reference are filed as Exhibit 13 with this Form 10-K Report.
15
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.
(a) | The information relating to market, holders and dividends is incorporated by reference from the 2023 Annual Report under the captions "Market Information for Our Common Stock" and “Stock Performance Graph.” As of February 3, 2024, there were approximately 2,566 record holders of our common stock. |
There were no sales of securities by the Company during fiscal 2023 that were not registered under the Securities Act of 1933.
(b) | Not applicable. |
(c) | Issuer purchases of equity securities during the fourth quarter: |
Fiscal Month |
| (1) |
| (2) |
| (3) |
| (4) | |
October 1 - November 4, 2023 |
| 208,057 | 96.48 |
| 208,057 |
| $ | 173,335,471 | |
November 5 - December 2, 2023 |
| — | — |
| — |
| 173,335,471 | ||
December 3 - 30, 2023 |
| — | — |
| — |
| 173,335,471 |
(1) | Total number of shares purchased. |
(2) | Average price paid per share. |
(3) | Total number of shares purchased as part of publicly announced plans or programs. |
(4) | Approximate dollar value of shares that may yet be purchased under the plans or programs. |
On and effective as of July 26, 2023, our board authorized the repurchase of up to $200 million worth of shares of our common stock through the period ending July 31, 2024, which supersedes and replaces prior authorizations.
Item 6. [RESERVED.]
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The information required by this item is incorporated by reference from the 2023 Annual Report under the caption "Management’s Discussion and Analysis of Financial Condition and Results of Operations."
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
We are exposed to market risks related to fluctuations in interest rates on our variable rate debt, which consists of a revolving credit facility and industrial development revenue bonds. We do not enter into any material interest rate swaps, futures contracts or options on futures, or other types of derivative financial instruments to mitigate this risk.
For fixed rate debt, changes in interest rates generally affect the fair market value, but not earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not influence fair market value, but do affect future earnings and cash flows. We do not have an obligation to prepay fixed rate debt prior to maturity, and as a result, interest rate risk and changes in fair market value should not have a significant impact on such debt until we would be required to refinance it.
On December 30, 2023, the estimated fair value of our long-term debt, including the current portion, was $241.4 million. The estimated fair value is based on rates anticipated to be available to us for debt with similar terms and maturities. The estimated fair value of notes payable included in current liabilities and the revolving credit facility approximated the carrying values as these debt instruments have interest rates that fluctuate with current market conditions.
16
Expected cash flows over the next five years related to debt instruments, excluding debt issuance costs, are as follows:
($US equivalents, in thousands) | 2024 |
| 2025 |
| 2026 |
| 2027 |
| 2028 |
| Thereafter |
| Total | |||||||||||||||||||
Long-term Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Fixed Rate ($US) | $ | 40,098 |
| $ | 671 |
| $ | 194 |
| $ | 212 |
| $ | 40,232 | $ | 185,383 |
| $ | 266,790 | |||||||||||||
Average interest rate |
| 4.01 | % |
| 9.45 | % |
| 9.45 | % |
| — | 4.27 | % |
| 3.36 | % |
| |||||||||||||||
Variable Rate ($US) | $ | 2,802 |
| $ | — |
| $ | — |
| $ | 3,692 | $ | — | $ | 3,300 |
| $ | 9,794 | ||||||||||||||
Average interest rate(1) |
| 9.45 | % | — | % | — | % | 5.44 | % |
| — | % |
| 3.33 | % |
| ||||||||||||||||
(1) Average of rates at December 30, 2023 |
Item 8. Financial Statements and Supplementary Data.
The information required by this Item is incorporated by reference from the 2023 Annual Report under the following captions:
"Report of Independent Registered Public Accounting Firm"
"Report of Independent Registered Public Accounting Firm"
"Consolidated Balance Sheets"
"Consolidated Statements of Earnings and Comprehensive Income"
"Consolidated Statements of Shareholders’ Equity"
"Consolidated Statements of Cash Flows"
"Notes to Consolidated Financial Statements"
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, referred to herein as “Disclosure Controls”) as of the end of the period covered by this Annual Report on Form 10-K. The controls evaluation was performed under the supervision and with the participation of management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO). Based upon our most recent evaluation, we have concluded that the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act and based upon the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our management assessed the effectiveness of our internal control over financial reporting as of December 30, 2023. Based on this assessment, our internal control over financial reporting was effective as of December 30, 2023.
17
Deloitte & Touche LLP, our independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 30, 2023. Deloitte & Touche LLP's opinion, as stated in their report which appears on page 20 of this Form 10-K, is consistent with management's report on internal control over financial reporting as set forth above.
Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 30, 2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
During the quarter ended December 30, 2023, no director or officer
or a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information relating to our directors, compliance with Section 16(a) of the Securities Exchange Act of 1934 and various corporate governance matters is incorporated by reference from our definitive Proxy Statement for the year ended December 30, 2023 for the 2024 Annual Meeting of Shareholders, to be filed with the Commission ("2024 Proxy Statement"), under the captions "Election of Directors," "Corporate Governance and Board Matters," and "Delinquent Section 16(a) Reports." Information relating to executive officers is included in this report in the last Section of Part I under the caption "Additional Item: Executive Officers of the Registrant." Information relating to our code of ethics is included in this report in Part I, Item 1 under the caption “Available Information”.
Item 11. Executive Compensation.
Information relating to director and executive compensation is incorporated by reference from the 2024 Proxy Statement under the caption "Executive Compensation." The "Personnel and Compensation Committee Report" included in the 2024 Proxy Statement is incorporated by reference for the purpose of being furnished herein and is not and shall not be deemed to be filed under the Securities Exchange Act of 1934, as amended.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
Information relating to security ownership of certain beneficial owners and management is incorporated by reference from our 2024 Proxy Statement under the captions "Ownership of Common Stock" and "Securities Ownership of Management."
18
Information relating to securities authorized for issuance under equity compensation plans as of December 30, 2023, is as follows:
Number of shares | |||||||
remaining | |||||||
Number of | Weighted | available for | |||||
shares to be | average | future issuance | |||||
issued upon | exercise | under equity | |||||
exercise of | price of | compensation | |||||
outstanding | outstanding | plans [excluding | |||||
options, warrants, | options, warrants, | shares reflected in | |||||
and rights (a) | and rights | column (a)] (1) | |||||
Equity compensation plans approved by security holders |
| — |
| $ | — |
| 2,132,181 |
Equity compensation plans not approved by security holders | none |
|
|
(1) | The number of shares remaining available for future issuance under equity compensation plans, excluding outstanding options, warrants, or similar rights, as of December 30, 2023, is as follows: 128,821 shares for our Employee Stock Purchase Plan, 167,372 shares for our Director Compensation Plan, and 10,073 shares for our Employee Stock Gift Program. In addition, of the remaining 1,825,915 shares available for future issuance under our Long-Term Stock Incentive Plan, those awards may be made in the form of options as well as stock appreciation rights, restricted stock, performance shares, or other stock-based awards. See Note H "Common Stock" of our 2023 Annual Report for information regarding these plans. |
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information relating to certain relationships and related transactions, and director independence is incorporated by reference from the 2024 Proxy Statement under the captions "Election of Directors", “Affirmative Determination Regarding Director Independence and Other Matters” and "Related Party Transactions."
Item 14. Principal Accountant Fees and Services.
Information relating to the types of services rendered by our Independent Registered Public Accounting Firm and the fees paid for these services is incorporated by reference from our 2024 Proxy Statement under the caption "Independent Registered Public Accounting Firm – Disclosure of Fees.”
19
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) | 1. Financial Statements. The following are incorporated by reference, under Item 8 of this report, from the 2023 Annual Report: |
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Earnings and Comprehensive Income
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial Statement Schedules. All schedules required by this Form 10-K Report have been omitted because they were inapplicable, included in the Consolidated Financial Statements or Notes to Consolidated Financial Statements, or otherwise not required under instructions contained in Regulation S-X.
3. Exhibits. Reference is made to the Exhibit Index which is included in this Form 10-K Report.
(b) | Reference is made to the Exhibit Index which is included in this Form 10-K Report. |
(c) | Not applicable |
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EXHIBIT INDEX
21
31 | Certifications. | |||
(a) | ||||
(b) | ||||
32 | Certifications. | |||
(a) | ||||
(b) | ||||
97 | ||||
101 | Interactive Data File in iXBRL (Inline eXtensible Business Reporting Language). | |||
(INS) XBRL Instance Document. | ||||
(SCH) XBRL Schema Document. | ||||
(CAL) XBRL Taxonomy Extension Calculation Linkbase Document. | ||||
(LAB) XBRL Taxonomy Extension Label Linkbase Document. | ||||
(PRE) XBRL Taxonomy Extension Presentation Linkbase Document. | ||||
(DEF) XBRL Taxonomy Extension Definition Linkbase Document. | ||||
104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded in the inline XBRL document). |
* | Indicates a compensatory arrangement. |
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: February 28, 2024 | UFP INDUSTRIES, INC. | |
By: | /s/ Matthew J. Missad | |
Matthew J. Missad, | ||
Chairman of the Board, | ||
Chief Executive Officer and | ||
Principal Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 28th day of February, 2024, by the following persons on behalf of us and in the capacities indicated.
By: | /s/ Matthew J. Missad | |
Matthew J. Missad, | ||
Chairman of the Board, | ||
Chief Executive Officer and | ||
Principal Executive Officer | ||
/s/ Michael R. Cole | ||
Michael R. Cole, | ||
Chief Financial Officer, | ||
Principal Financial Officer and | ||
Principal Accounting Officer |
Each Director whose signature appears below hereby appoints Matthew J. Missad and Michael R. Cole, and each of them individually, as his or her attorney-in-fact to sign in his or her name and on his or her behalf as a Director, and to file with the Commission any and all amendments to this report on Form 10-K to the same extent and with the same effect as if done personally.
/s/ Joan A. Budden | /s/ William G. Currie | |
Joan A. Budden, Director | William G. Currie, Director | |
/s/ Benjamin J. McLean | ||
Benjamin J. McLean, Director | Bruce A. Merino, Director | |
/s/ Matthew J. Missad | /s/ Thomas W. Rhodes | |
Matthew J. Missad, Director | Thomas W. Rhodes, Director | |
/s/ Mary Tuuk Kuras |
| /s/ Brian C. Walker |
Mary Tuuk Kuras, Director | Brian C. Walker, Director | |
/s/ Michael G. Wooldridge | ||
Michael G. Wooldridge, Director |
23
Exhibit 4(b)
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF
THE SECURITIES EXCHANGE ACT OF 1934
The following is a brief description of the common stock of UFP Industries, Inc. (the “Company”). This summary does not purport to be complete in all respects and is subject to and qualified in its entirety by reference to the Company’s Restated and Amended Articles of Incorporation (the "Articles of Incorporation") and Amended Bylaws (the "Bylaws"), each of which are filed as exhibits to the Annual Report on Form 10-K of which this Exhibit 4(b) is a part.
Authorized Capital Stock
The Company’s authorized capital stock consists of 160,000,000 shares of common stock and 1,000,000 shares of preferred stock. As of December 30, 2023, there were no shares of preferred stock outstanding.
Dividend and Liquidation Rights
Subject to the prior rights of the holders of shares of preferred stock that may be issued and outstanding, if any, the holders of common stock are entitled to receive:
· | dividends when, as, and if declared by the Company’s Board of Directors out of funds legally available for the payment of dividends; and |
· | in the event of dissolution of the Company, to share ratably in all assets remaining after payment of liabilities and satisfaction of the liquidation preferences, if any, of then outstanding shares of preferred stock, as provided in the Articles of Incorporation. |
Voting Rights
Each holder of common stock is entitled to one vote for each share held of record on all matters presented to a vote at a shareholders meeting, including the election of directors. Holders of common stock have no cumulative voting rights.
The Company’s Articles of Incorporation provide that the Company’s Board of Directors be divided into three classes of nearly equal size, with the classes to hold office for staggered terms of three years each.
The vote required for the election of a director shall, except in a contested election, be the affirmative vote of a majority of the votes cast in the election of a nominee. For this purpose, a “majority of the votes cast” means that the number of votes cast “for” a director’s election exceeds the number of votes cast “against” that director’s election. Abstentions and broker non-votes are not counted as votes cast either “for” or “against” a director’s election. In a contested election, directors are elected by a plurality of the votes cast at the meeting of shareholders.
An election is considered contested if there are more nominees for election than positions on the Board of Directors to be filled by election at that meeting.
Listing
The Company’s common stock is currently traded on the Nasdaq Global Select Market under the symbol “ufpi.”
Applicable Anti-Takeover Provisions
The Company's Articles of Incorporation and Bylaws contain provisions that could also have an anti-takeover effect. Some of the provisions also may make it difficult for shareholders to replace incumbent directors with new directors who may be willing to entertain changes that shareholders may believe will lead to improvements in the combined company’s business.
Other
All of the outstanding shares of the Company’s common stock are fully paid and non-assessable. Holders of common stock have no preemptive rights to purchase or subscribe for any additional shares of common stock or other securities, and there are no conversion rights or redemption or sinking fund provisions with respect to the Company’s common stock.
The transfer agent for the Company’s common stock is American Stock Transfer & Trust Co., 6201 15th Avenue, Brooklyn, NY 11219.
Exhibit 10(a)(iii)
Third AMENDMENT TO CREDIT AGREEMENT
This Third Amendment to Credit Agreement, dated as of August 11, 2023 (this “Amendment”), is among UFP INDUSTRIES, INC., a Michigan corporation, the Foreign Subsidiary Borrowers, the other Loan Parties party hereto, the Lenders party hereto, and JPMORGAN CHASE BANK, N.A., as Administrative Agent.
RECITAL
UFP Industries, Inc. (f/k/a Universal Forest Products, Inc.), a Michigan corporation (the "Company"), the Foreign Subsidiary Borrowers party thereto from time to time (the “Foreign Subsidiary Borrowers” and collectively referred to with the Company as the "Borrowers", and each of them individually as a "Borrower"), the lenders party thereto from time to time (such lenders, together with any other lenders now or hereafter parties to the Credit Agreement, collectively referred to as the "Lenders"), and JPMorgan Chase Bank, N.A., as administrative agent for the Lenders (in such capacity, together with any successors or assigns, the "Administrative Agent") are parties to a Credit Agreement dated as of November 1, 2018 (as may be amended or modified from time to time, the "Credit Agreement"). The Borrowers desire to amend the Credit Agreement as set forth herein and the Lenders are willing to do so in accordance with the terms hereof. Capitalized terms used herein, but not otherwise defined shall have the meanings ascribed to them in the Credit Agreement.
TERMS
In consideration of the premises and of the mutual agreements herein contained, the parties agree as follows:
“Ancillary Document” has the meaning assigned to it in Section 9.06(b).
“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or debt or other securities of another Person, or (b) a loan, advance or capital contribution to, Guarantee or assumption of Indebtedness or other obligation or liabilities of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment or write-downs or write-offs thereof.
“Lender-Related Person” means the Administrative Agent, any Issuing Bank and any Lender, and any Related Party of any of the foregoing Persons.
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or target of any Sanctions (at the time of this Agreement, the so-called Donetsk People’s Republic, the so-
1
called Luhansk People’s Republic, the Crimea, Zaporizhzhia and Kherson Regions of Ukraine, Cuba, Iran, North Korea and Syria).
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. The Company will not, and will not permit any of its Restricted Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with or as a Division Successor pursuant to the Division of, any Person that was not a Wholly-Owned Subsidiary prior to such merger) any Equity Interests, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any Investment or any other interest in, any other Person, or make any Acquisition, except:
(a)Investments existing as of the Second Amendment Effective Date and set forth in Schedule 6.04 attached hereto and extensions, renewals and replacements thereof that do not increase the outstanding amount thereof, except to the extent such increase is a Permitted Investment or is otherwise permitted by this Section 6.04;
(b)extensions of trade credit made in the ordinary course of business on customary credit terms and commission, travel, relocation and similar advances made to officers and employees in the ordinary course of business;
(c)Investments made by the Company or any Restricted Subsidiary (i) to the Company or any Wholly-Owned Subsidiary that is a Guarantor or (ii) to any Wholly-Owned Subsidiary that is a Foreign Subsidiary that has at least 65% of its Equity Interests pledged pursuant hereto;
(d)Permitted Investments;
(e)Investments consisting of non-cash consideration for any disposition of assets permitted by Section 6.09;
(f)Acquisitions, provided each of the following conditions is satisfied: (A) there is no Default either before or after such Acquisition, (B) the representations and warranties contained in this Agreement shall be true and correct as if made on and as of the date such Acquisition is consummated, both before and after giving effect thereto, (C) such Acquisition is not a Hostile Acquisition, (D) if such Acquisition is an acquisition of Equity Interests, such Acquisition will not result in any violation of Regulation U, (E) if the total consideration, cash or non-cash, paid or payable for such Acquisition is greater than $100,000,000, prior to the consummation of such Acquisition, the Company shall deliver a satisfactory pro forma covenants compliance certificate to the Administrative Agent and (F) the target of such Acquisition is in the same line of business as conducted by the Company as of the Effective Date or a line of business similar thereto or that supports such business or is related or ancillary thereto;
(g) Investments in Unrestricted Subsidiaries, provided that (i) immediately after giving effect to such Investment (x) no Default then exists or would be caused thereby, on a pro forma basis acceptable to the Administrative Agent and (y) the Company is in compliance with Sections 2.21 and 2.23 and (ii) such amounts of any investments, loans or advances shall be excluded when calculating the assets of the Company and its Restricted Subsidiaries;
2
(h) Investments in Restricted Subsidiaries, provided that immediately after giving effect to such Investment (x) no Default then exists or would be caused thereby, on a pro forma basis acceptable to the Administrative Agent, (y) the Company is in compliance with Section 2.21, and (z) the aggregate amount of the Guarantees by any Loan Parties with respect to the Indebtedness and other obligations and liabilities of Restricted Subsidiaries that are not Loan Parties shall not exceed $40,000,000; and
(i)If no Default exists or would be caused thereby, other Investments not otherwise permitted by this Section 6.04 (excluding Investments in Unrestricted Subsidiaries) in aggregate outstanding amount at any time not to exceed 15% of Net Worth – Restricted Subsidiaries.
(b)Delivery of an executed counterpart of a signature page of (x) this Agreement, (y) any other Loan Document and/or (z) any document, amendment, approval, consent, information, notice (including, for the avoidance of doubt, any notice delivered pursuant to Section 9.01), certificate, request, statement, disclosure or authorization related to this Agreement, any other Loan Document and/or the transactions contemplated hereby and/or thereby (each an “Ancillary Document”) that is an Electronic Signature transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement, such other Loan Document or such Ancillary Document, as applicable. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Agreement, any other Loan Document and/or any Ancillary Document shall be deemed to include Electronic Signatures, deliveries or the keeping of records in any electronic form (including deliveries by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page), each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be; provided that nothing herein shall require the Administrative Agent to accept Electronic Signatures in any form or format without its prior written consent and pursuant to procedures approved by it; provided, further, without limiting the foregoing, (i) to the extent the Administrative Agent has agreed to accept any Electronic Signature, the Administrative Agent and each of the Lenders shall be entitled to rely on such Electronic Signature purportedly given by or on behalf of any Borrower or any other Loan Party without further verification thereof and without any obligation to review the appearance or form of any such Electronic signature and (ii) upon the request of the Administrative Agent or any Lender, any Electronic Signature shall be promptly followed by a manually executed counterpart. Without limiting the generality of the foregoing, each Borrower and each Loan Party hereby (A) agrees that, for all purposes, including without limitation, in connection with any workout, restructuring, enforcement of remedies, bankruptcy proceedings or litigation among the Administrative Agent, the Lenders, the Borrowers and the Loan Parties, Electronic Signatures transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page and/or any electronic images of this Agreement, any other Loan Document and/or any Ancillary Document shall have the same legal effect, validity and enforceability as any paper original, (B) agrees that the Administrative Agent and each of the Lenders may, at its option, create one or more copies of this Agreement, any other Loan Document and/or any Ancillary Document in the form of an imaged electronic record in any format, which shall be deemed created in the ordinary course of such Person’s business, and destroy the original paper document (and all such electronic records shall be considered an original for all purposes and shall have the same legal effect, validity and enforceability as a paper record), (C) waives any argument, defense or right to contest the legal effect, validity or enforceability of this Agreement, any other Loan Document and/or any Ancillary Document based solely on the lack of paper original copies of this Agreement, such other Loan Document and/or such Ancillary Document, respectively, including with respect to any signature pages thereto and (D) waives any claim against any Lender-Related Person for any Liabilities arising solely from the Administrative Agent’s and/or any Lender’s reliance on or use of Electronic Signatures and/or transmissions by telecopy, emailed pdf. or any other electronic means that
3
reproduces an image of an actual executed signature page, including any Liabilities arising as a result of the failure of any Borrower and/or any Loan Party to use any available security measures in connection with the execution, delivery or transmission of any Electronic Signature.
In order to induce the Lenders and the Administrative Agent to enter into this Amendment, each Loan Party represents and warrants to each Lender and the Administrative Agent that the following statements are true, correct and complete as of the Third Amendment Effective Date:
2.5Neither the Company nor any Subsidiary has paid, or agreed to pay, any fees or other consideration for or with respect to any amendment to the Senior Note Purchase Documents other than reimbursement of out-of-pocket fees and expenses of legal counsel.
2.6As of the date hereof, each Restricted Subsidiary of the Company that is required to be a Guarantor under Section 2.21 of the Credit Agreement is obligated as a Guarantor under a Guaranty and the Company is otherwise in compliance with Section 2.21 of the Credit Agreement.
The Amendments to the Credit Agreement in Article 1 hereof shall become effective as of the date hereof (the “Third Amendment Effective Date”) when each of the following conditions is satisfied:
3.2The Administrative Agent shall have received, and be reasonably satisfied with, amendments to the Senior Note Purchase Documents and to the agreements governing any other Principal
4
Credit Facility requested by the Administrative Agent, in each case to close simultaneously with this Amendment and consistent with this Amendment, and otherwise in form and substance to the Administrative Agent.
3.3The Administrative Agent shall have received and be reasonably satisfied with such other documents, and the Loan Parties shall have satisfied such other conditions, as disclosed on the closing list delivered to the Company prior to the date hereof, each satisfactory in form and substance to the Administrative Agent.
5
[Signature Pages Follow]
6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date first above written.
UFP INDUSTRIES, INC., f/k/a Universal Forest Products, Inc., as Company and a Borrower
By _________________________
Name: Michael R. Cole
Title: Chief Financial Officer
UFP CANADA, INC., as a Foreign Subsidiary Borrower
By _________________________
Name: Michael R. Cole
Title: Treasurer
UFP AUSTRALIA PTY LTD., as a Foreign Subsidiary Borrower
By _________________________
Name: Michael R. Cole
Title: Treasurer
JPMORGAN CHASE BANK, N.A., as a Lender and as Administrative Agent |
|
|
|
By _________________________ |
Name: Jonathan Bennett |
Title: Authorized Officer |
|
Signature page – Third Amendment to Credit Agreement – UFP Industries, Inc.
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, TORONTO BRANCH, as the Applicable Lending Installation and Related Party designated by JPMorgan Chase Bank, N.A. for Loans to any Borrower in Canada or in Canadian Dollars
By _________________________
Name: Jeffrey Coleman
Title: Authorized Officer
WELLS FARGO BANK, N.A., as a Lender and as Syndication Agent
By _________________________
Name:
Title:
Signature page – Third Amendment to Credit Agreement – UFP Industries, Inc.
PNC BANK, NATIONAL ASSOCIATION as a Lender and as Documentation Agent
By _________________________
Name:
Title:
Signature page – Third Amendment to Credit Agreement – UFP Industries, Inc.
THE HUNTINGTON NATIONAL BANK
By _________________________
Name:
Title:
Signature page – Third Amendment to Credit Agreement – UFP Industries, Inc.
BANK OF AMERICA, N.A.
By _________________________
Name:
Title:
Signature page – Third Amendment to Credit Agreement – UFP Industries, Inc.
BANK OF AMERICA, N.A. (Canada branch) as the Applicable Lending Installation and Related Party designated by Bank of America, N.A. for Loans to any Borrower in Canada or in Canadian Dollars
By _________________________
Name:
Title:
Signature page – Third Amendment to Credit Agreement – UFP Industries, Inc.
COBANK, FBC
By _________________________
Name:
Title:
Signature page – Third Amendment to Credit Agreement – UFP Industries, Inc.
GREENSTONE FARM CREDIT SERVICES
By _________________________
Name:
Title:
Signature page – Third Amendment to Credit Agreement – UFP Industries, Inc.
CONSENT AND AGREEMENT
As of the date and year first above written, each of the undersigned hereby:
(a) fully consents to the terms and provisions of the above Amendment and the consummation of the transactions contemplated thereby and agrees to be bound by the provisions applicable to it (including representations, warranties, and agreements, as applicable);
(b) agrees that each Loan Document to which it is a party is hereby ratified and confirmed and shall remain in full force and effect, and acknowledges that it has no setoff, counterclaim, defense or other claim or dispute with respect to any such Loan Document to which it is a party and each other Loan Document to which it is a party;
(c) acknowledges that its consent and agreement hereto is a condition to the Lenders obligations under the above Amendment and it is in its interest and to its financial benefit to execute this Consent and Agreement; and
(d) represents and warrants to the Administrative Agent and the Lenders that this Consent and Agreement is the legal, valid and binding obligation of it, enforceable against it in accordance with the terms hereof, it is not aware of any claims or causes of action against the Administrative Agent, the Lenders, or any of their affiliates, successors or assigns, and that it has no defense, offsets or counterclaims with respect to any of the Secured Obligations.
Guarantors:
By: ________________________________
Name: Michael R. Cole
Title: Authorized Signer of each Guarantor listed on Schedule 1, on behalf of each Guarantor listed on Schedule 1
Schedule 1
List of Guarantors
234 Springs Rd., LLC
2875 Needmore Rd., LLC
621 Hall St., LLC
Advantage Label and Packaging, Inc.
Aljoma Holding Company, LLC
Aljoma Lumber, Inc.
Caliper Building Systems, LLC
Deckorators, Inc. (f/k/a Universal Consumer Products, Inc.; successor by merger with Maine Ornamental, LLC)
Eovations, LLC
Idaho Western, Inc.
idx Corporation (successor by merger with Horizon Terra, Incorporated, idX Chicago, LLC, idX Dallas, LLC, idX Dayton, LLC, idX Impressions, LLC, idX Los Angeles, LLC
idX Holdings, Inc.
Metaworld Technologies, LLC
North Atlantic Framing, LLC
PR Distribution, LLC
Shawnlee Construction LLC
Shepardville Construction, LLC
Store Fixtures Canada Holdings, Inc.
Tresstar, LLC
Triangle Systems, Inc.
UFP Ashburn, LLC
UFP Auburndale, LLC
UFP Aurora, LLC
UFP Barnesville, LLC
UFP Belchertown, LLC
UFP Berlin, LLC
UFP Biscoe, LLC
UFP Blanchester, LLC
UFP Bonner, LLC
UFP Caldwell, LLC
UFP Cameron, LLC
UFP Chandler, LLC
UFP Chicago, LLC
UFP Concrete Forming Solutions, Inc.
UFP Construction, LLC
UFP Craft and Hobby, LLC
UFP Dallas, LLC
UFP Distribution, LLC
UFP Eagan, LLC
UFP Eastern Division, Inc. (successor by merger to UFP Atlantic, LLC, UFP East Central, LLC, UFP Great Lakes, LLC, UFP Gulf, LLC, UFP North
Atlantic, LLC, UFP Northeast, LLC, and UFP Southeast, LLC)
UFP Eatonton, LLC
UFP Elizabeth City, LLC
UFP Elkwood, LLC
UFP Financial Services, Inc. (f/k/a UFP National Enterprises II, Inc.)
UFP Folkston, LLC
UFP Framing, LLC
UFP Franklinton, LLC
UFP Gainesville, LLC
UFP Gear, LLC
UFP Gordon, LLC
UFP Grand Rapids, LLC
UFP Grandview, LLC
UFP Granger, LLC
UFP Haleyville, LLC
UFP Hamilton, LLC
UFP Hampton Holding Company, LLC
UFP Harrisonville, LLC
UFP Hartford, LLC
UFP Hillsboro, LLC
UFP Industrial, LLC
UFP International Employment Services, LLC
UFP International, LLC
UFP Janesville, LLC
UFP Kyle, LLC
UFP Lafayette, LLC
UFP Lansing, LLC
UFP Magna, LLC
UFP McMinnville, LLC
UFP Mexico Proyectos, LLC
UFP Mid-Atlantic, LLC
UFP Milwaukee, LLC
UFP Minneota, LLC
UFP Morristown, LLC
UFP Moultrie, LLC
UFP NAC, LLC
UFP Nappanee, LLC
UFP New London, LLC
UFP New Waverly, LLC
UFP New Windsor, LLC
UFP New York, LLC
UFP Orlando, LLC
UFP Packaging, LLC
UFP Palm Beach, LLC
UFP Parker, LLC
UFP Purchasing, Inc.
UFP Ranson, LLC
UFP Real Estate, LLC
UFP Retail, LLC
UFP Riverside, LLC
UFP RMS, LLC (f/k/a Universal Forest Products RMS, LLC)
UFP Rockwell, LLC
UFP Saginaw, LLC
UFP Salisbury, LLC
UFP San Antonio, LLC
UFP Sauk Rapids, LLC
UFP Schertz, LLC
UFP Shawnee, LLC
UFP Stafford, LLC
UFP Stockertown, LLC
UFP Tampa, LLC
UFP Thomaston, LLC
UFP Thornton, LLC
UFP Transportation, Inc.
UFP Union City, LLC
UFP Ventures II, Inc.
UFP Warranty Corporation
UFP Warrens, LLC
UFP Washington, LLC
UFP Western Division, Inc. (successor by merger to UFP Central Plains, LLC, UFP Far West, LLC,
UFP Mountain West, LLC, and UFP Southwest, LLC)
UFP White Bear Lake, LLC
UFP Windsor, LLC
UFP Woodburn, LLC
Ultra Aluminum Manufacturing, Inc.
United Lumber & Reman, LLC
Universal Forest Products Texas LLC
Upshur Forest Products, LLC
Yard & Home, LLC
Performance Formulation Solutions, LLC (f/k/a Fire Retardant Chemical Technologies, LLC)
UFP Londonderry, LLC
UFP Rockingham, LLC
UFP Site Built, LLC
PalletOne, Inc.
PalletOne of Maine, Inc.
PalletOne Energy LLC
PalletOne of Wisconsin, Inc.
PalletOne of Wisconsin Manufacturing, LLC
PalletOne of Indiana, Inc.
PalletOne of Indiana Transportation, LLC
PalletOne of North Carolina, Inc.
P1 Catawba Development Company LLC
PalletOne of Florida, Inc.
SunOne Logistics, LLC
PalletOne of Virginia, LLC
PalletOne of Alabama, LLC
Sunbelt Acquisition Corp.
Sunbelt Forest Products Corporation
Sunbelt Acquisition II Florida, LLC
Sunbelt Acquisition III Alabama, LLC
Sunbelt Forest Products Alabama, LLC
Sunbelt Forest Georgia LLC
PalletOne of Texas Holdings, Inc.
PalletOne Acquisition of Texas, Inc.
PalletOne of Texas, L.P.
PalletOne Manufacturing of Texas, LLC
PalletOne of NE Texas, LLC
PalletOne of Mobile, LLC
Dempsey Wood Products, LLC
Exhibit 10(c)
UFP INDUSTRIES, INC.
DEFERRED COMPENSATION PLAN
Amended and Restated effective as of January 1, 2020
(Conformed to reflect 2021-1 Amendment and 2023-1 Amendment)
Table of Contents
16483168_1
16483168_1
UFP INDUSTRIES, INC.
DEFERRED COMPENSATION PLAN
UFP Industries, Inc. (the “Company”) established the UFP Industries, Inc. Deferred Compensation Plan (the “Plan”) as of December 27, 1995. Prior to April 22, 2020, the Company was known as Universal Forest Products, Inc., and prior to this restatement, the Plan was named the Universal Forest Products, Inc. Deferred Compensation Plan. The Plan has periodically been amended, and was most recently amended and restated effective June 1, 2011.
By this document, the Company is amending and restating the Plan effective as of January 1, 2020.
The Company desires to retain the services of a select group of executives who contribute to the profitability and success of the Company. The Company maintains the Plan to provide the executives who participate in the Plan with the opportunity to defer a portion of their Compensation and have additional retirement income.
The Plan is intended to be unfunded and maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of ERISA. Accordingly, the Plan is not intended to be covered by Parts 2 through 4 of Subtitle B of Title I of ERISA. The existence of any Trust Fund is not intended to change this characterization of the Plan.
To the extent the Plan provides deferred compensation under Section 409A of the Code, the Plan is intended to comply with Section 409A. The Plan is intended to be interpreted consistent with the requirements of Section 409A of the Code.
Page 1 of 21
16483168_1
The following terms shall have the meanings described in this Article unless the context clearly indicates another meaning is intended. All references in the Plan to specific articles or sections shall refer to Articles or Sections of the Plan unless otherwise stated.
Page 2 of 21
For purposes of the Plan, the Company is “affiliated with” another person or entity if that person or entity has an ownership interest in the Company.
Page 3 of 21
The Plan Administrator shall determine the Key Employee status of each Participant in accordance with Sections 409A and 416(i)(1) of the Code and the applicable regulations and guidance.
Page 4 of 21
(1)willful misconduct, usurpation of business opportunity or gross negligence related to the Company;
(2)engagement in dishonesty, illegal conduct, or gross misconduct, which is, in each case, materially injurious to the Company;
(3)embezzlement, misappropriation, or fraud, whether or not related to the Participant’s employment with the Company; or
(4)conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent), if such felony is work-related or results in material reputational or financial harm to the Company.
For purposes of determining whether an action constitutes Substantial Cause, no act or failure to act on the part of a Participant shall be considered “willful” unless it is done, or omitted to be done, by the Participant in bad faith or without reasonable belief that the Participant’s action or omission was in the best interests of the Company. Any act, or failure to act, based on authority given pursuant to a resolution duly adopted by the Board or on the advice of counsel for the Company shall be conclusively presumed to be done, or
Page 5 of 21
omitted to be done, by the Participant in good faith and in the best interests of the Company.1
The Administrative Committee, with the approval of the Board, shall determine the Employees who are eligible to participate in the Plan. If the Administrative Committee selects an Employee to participate, the Employee will become a Participant on the effective date of
1 Subsection (w) added by 2021-1 Amendment, effective June 1, 2021.
Page 6 of 21
participation designated by the Administrative Committee, but only if the Employee signs a participation agreement agreeing to the terms of the Plan.
It is intended that participation be limited to Employees who will qualify as members of a “select group of management or other highly compensated employees” under Title I of ERISA. In general, the Employees who are eligible to participate are the officers, general managers of operations, operations managers, managing directors, regional sales managers, plant managers, Executive Account Managers, and past and present members of the President’s Club (as such group is now or hereafter named and constituted) of the Company as well as select corporate directors, purchasing managers and senior managers of the Company.
The Employee shall acknowledge in the participation agreement that he is an unsecured creditor of the Company with regard to any benefits under the Plan and waive any right to a priority claim with regard to the benefits. The Employee may also be required to complete other forms as a condition for participation.
The Administrative Committee may remove an Employee from further active participation in the Plan at any time. If this occurs, the Employee shall not have any additional amounts credited to his Account under Section 4.2, but amounts shall continue to be credited to a Participant’s Account under Section 4.3 until Participant’s Account is distributed pursuant to Article 5.
The Plan Administrator shall maintain an Account for each Participant to record the Participant’s benefits under the terms of the Plan. A Participant’s Account is for bookkeeping purposes only. The Company is not required to make contributions to the Trust Fund to fund the amounts credited to a Participant’s Account. A Participant’s Elective Deferrals shall be credited to his Account as soon as administratively feasible after the amounts otherwise would have been paid to the Participant.
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The Plan Administrator may also periodically establish additional rules relating to a Participant’s Elective Deferrals (for example, a minimum amount permitted).
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If the Participant does not remain employed by the Company or a Related Employer under the elected payment date, the Participant's right to the portion of the Bonus for which the Participant elected to receive an in-service distribution shall be forfeited and cancelled. In the event the Participant is eligible to receive an in-service distribution pursuant to the terms of this subsection (f), the amount distributed will be the lesser of the amount of the Bonus the Participant elected to be paid as of the date it was deferred and the value of the Bonus on the date of distribution. To the extent a Participant’s Bonus deferral for a year is treated as invested in UFP Stock, the Participant’s Elective Deferrals from his or her Bonus will only be distributed in whole shares of UFP Stock, and any fractional shares shall not be distributed, but shall be retained in the Plan until the Participant’s Separation from Service. Except as provided in subsection (e), a Participant’s election to receive an in-service distribution pursuant to this subsection (f) is irrevocable effective after June 30 of the calendar year.
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(x ÷ .85)
z
where x equals the amount the Participant defers and z equals the closing market price of UFP Stock on the day the amount would have been paid to the Participant if he had not elected to defer it. Elective Deferrals that are treated as being invested in UFP Stock shall continue to be treated as invested in UFP Stock until the Elective Deferrals are distributed to the Participant.
Page 10 of 21
For purposes of this subsection, if a Participant’s box 1 W-2 compensation for any calendar year is for work performed for less than a 12-month period, the Participant’s box 1 W-2 compensation for the calendar year shall be annualized by multiplying his box 1 W-2 compensation by 12 and dividing it by the number of full and partial months he worked during the year.
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For purposes of this subsection, if a Participant’s box 1 W-2 compensation for any calendar year is for work performed for less than a 12-month period, the Participant’s box 1 W-2 compensation for the calendar year shall be annualized by multiplying his box 1 W-2 compensation by 12 and dividing it by the number of full and partial months he worked during the year.
Except as provided in Sections 4.6 and 5.3, all amounts credited to a Participant’s Account are always 100% vested.2
If a Participant’s employment is terminated by the Company in connection with Substantial Cause, or if the Company determines that Substantial Cause exists with respect to a Participant at any time prior to payment of the Participant’s benefits from the Plan pursuant to Section 5.3, then the Participant’s Account balance under the Plan shall be reduced by the lesser of (i) the amount of material harm or damages incurred by the Company as a result of the Substantial Cause, including but not limited to any costs related to investigation or prosecution of the Substantial Cause, all as determined in the sole discretion of the Administrative Committee, or (ii) the full balance of the Participant’s Account at the time of the Substantial Cause.3
2 Section 4.5 restated by 2021-1 Amendment, effective June 1, 2021.
3 Section 4.6 added by 2021-1 Amendment, effective June 1, 2021.
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A Participant shall have a Distributable Event for purposes of the Plan on the date the first of the following events occurs:
A Participant’s benefits under the Plan shall be equal to the amount credited to the Participant’s Account on a date determined by the Company that is no more than one month prior to the date the amount is distributed to the Participant.
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A Participant’s benefits from the Plan shall be distributed in cash, except all amounts treated as invested in UFP Stock shall be distributed in the form of certificates for whole shares of UFP Stock and any fractional shares shall be withheld to cover taxes. In addition, no fractional shares shall be paid pursuant to any in-service distribution election made under Section 4.2(f).
“Beneficiary” means the beneficiary designated in writing by the Participant to receive benefits from the Plan in the event of the Participant’s death. The Beneficiary shall be designated on a form provided by the Plan Administrator, and the Participant may change the Beneficiary designation at any time by signing and delivering a new form to the Plan Administrator. A beneficiary designation will become effective upon receipt by the Plan Administrator, but only if received before the Participant’s death.
A trust may be designated as a Beneficiary. If this occurs, the Plan Administrator will determine the rights of any trustee designated as a Beneficiary without responsibility for determining the validity, existence or provisions of that trust, and will have no responsibility for the use of amounts paid to that trustee or for the discharge of the trust.
If a Participant designates the Participant’s Spouse as Beneficiary and the Participant and Spouse are subsequently divorced, the judgment of divorce will be considered to revoke the prior Beneficiary designation of the Spouse.
The rules of this paragraph apply unless provided otherwise in a Participant’s Beneficiary designation form. If a Participant designates one primary Beneficiary and the Beneficiary dies after the Participant but before benefit payments are completed, any remaining benefits will be payable to the secondary Beneficiary. If a Participant fails to designate a secondary Beneficiary, or if no secondary Beneficiary survives the primary Beneficiary, any remaining benefits will be payable to the deceased primary Beneficiary’s heirs in the manner described in the next paragraph. If a Participant designates more than one primary Beneficiary or more than one secondary Beneficiary and a Beneficiary dies before benefit payments are made, the share payable to the deceased Beneficiary will be paid to the deceased Beneficiary’s heirs in the manner described in the next paragraph as if the Beneficiary was the Participant.
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If a Participant fails to designate a Beneficiary, or if no designated Beneficiary survives a Participant, distribution will be made in equal shares to the members of the first of the classes listed below having a living member on the date the distribution is payable. The classes, in order of priority, are as follows:
A Beneficiary is permitted to disclaim the Beneficiary’s rights to a death benefit under the Plan to the extent permitted by applicable law. If this occurs, the Beneficiary will be treated as predeceasing the Participant for purposes of this Section.
The records of the Plan Administrator will be conclusive as to the proper payee and the amount payable. A distribution made based upon these facts will be treated as a complete discharge of all obligations under the Plan.4
If a Participant incurs an unforeseeable emergency within the meaning of Treasury Regulation §1.409A-3(i)(3)(i), the Committee may pay the Participant some or all of the remaining balance of the Award in a lump sum in lieu of following the payment timing set forth in Section 5.3. The Committee will evaluate requests for payment due to unforeseeable emergency under the facts and circumstances of the situation. The amount of any payment made on account of an unforeseeable emergency shall not exceed the amount reasonably necessary to satisfy the financial hardship, including amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the payment, as determined by the Committee. No early payment will be made to extent that the financial hardship can be relieved (i) through reimbursement or compensation by insurance or otherwise or (ii) by liquidation of the Participant’s assets without such liquidation itself causing a severe financial hardship.
Any applicable federal, state, or local taxes shall be withheld from the benefits paid to a Participant or the Participant’s Beneficiary to the extent required by law or elected by the Participant or Beneficiary.
4 Section 5.5 restated by 2023-1 Amendment, effective January 1, 2024.
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The Plan does not create any trust or other fiduciary relationship of any kind with respect to the deferred compensation or any asset of the Company. The Company has complete legal and beneficial ownership of all assets attributable to deferred compensation. The right to deferred compensation under the Plan is merely an unsecured promise of the Company to pay the deferred compensation from the Company’s general assets. The Plan does not require the Company or the Committee to establish any fund or segregate any assets for the benefit of any Participant.
The Company may enter into a trust agreement with an unrelated financial institution, as Trustee, to establish a Trust Fund to accumulate reserve of assets for the payment of benefits under the Plan, but Participants will have no interest in any such reserve (or any other assets of the Company) other than their interests as creditors with unsecured claims for payment of deferred compensation according to the terms of the Plan. If a Trust Fund is established, the Company may, but is not required to, make contributions to the Trust Fund. However, if a Change in Control
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occurs, the Company shall establish a Trust Fund and shall contribute to the Trust Fund an amount, if any, necessary so that the assets of the Trust Fund are sufficient to pay all amounts credited to Participants’ Accounts.
The Company shall have the sole responsibility for the administration of the Plan and is designated as named fiduciary and Plan Administrator. The Plan Administrator shall have the power and duties which are described in this Article. The Administrative Committee shall carry out the functions of the Plan Administrator with respect to the day-to-day operations of the Plan. If a member of the Administrative Committee is a Participant, the member shall abstain from voting on any matter relating to the member’s benefits under the Plan.
The Administrative Committee may adopt such policies and procedures as it deems necessary, desirable, or appropriate. All policies, procedures, and decisions of the Administrative Committee will be uniformly applied to all Participants in similar circumstances. When making a determination or calculation, the Administrative Committee will be entitled to rely upon information furnished by a Participant, Beneficiary, or alternate payee, the Company, or the Company’s legal counsel.
The Plan Administrator has discretionary authority over the administration of the Plan, including the discretionary authority to—
The Plan Adminstrator’s exercise of discretion under the Plan is absolute, need not be uniform among Participants, and may vary from one Participant to another.
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The Committee shall maintain records as necessary or appropriate to comply with the recordkeeping, reporting, and disclosure requirements of ERISA. The Committee shall also maintain records as necessary or appropriate to satisfy the recordkeeping requirements of the Code, including records sufficient to demonstrate compliance with the requirements Code §409A.
Any Participant whose application for benefits under the Plan has been denied, in whole or in part, shall be given written notice of the denial of benefits by the Plan Administrator. The notice shall be in easily understood language and shall indicate the reasons for denial and the specific provisions of the Plan on which the denial is based. The notice shall explain that the Participant may request a review of the denial and the procedure for requesting review. The notice shall describe any additional information necessary to approve the Participant’s claim and explain why such information is necessary.
A Participant may make a written request to the Plan Administrator for a review of any denial of benefits under the Plan. The request for review must be in writing and must be made within 60 days after the mailing date of the notice of denial. The request shall refer to the provisions of the Plan on which it is based and shall set forth the facts relied upon as justifying a reversal or modification of the determination being appealed.
A Participant who requests a review of a denial of benefits in accordance with this appeal procedure may examine pertinent documents and submit pertinent issues and comments in writing. A Participant may have a duly authorized representative act on his behalf in exercising his right to request a review and any other rights granted by this appeal procedure. The Plan Administrator shall provide a review of the decision denying the claim for benefit within 60 days after receiving the written request for review (or 45 days, if the claim involves a determination of Disability).
A Participant shall not be permitted to commence any legal action against the Company regarding benefits under the Plan before exhausting the appeal procedure contained in this Section.
The Company shall indemnify and hold harmless the members of the Administrative Committee and their duly appointed agents against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to the Plan, except in the case of gross negligence or willful misconduct by any such member or agent of the Administrative Committee.
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The Plan does not create any right to employment or restrict the Company’s right to terminate any Employee’s employment.
The Company may amend the Plan at any time, in the Company’s discretion, with or without advance notice to Employees, Participants or Beneficiaries, but no amendment will be effective unless it is set forth in writing and signed by the Chairman of the Board, by the Chief Executive Officer, Corporate Secretary or by any other person specifically authorized by the Board or the bylaws of the Company. However, no amendment shall reduce the amount credited to a Participant’s Account without the written consent of the affected Participant.
The Company may terminate the Plan at any time, in the Company’s discretion, with or without advance notice to Employees, Participants or Beneficiaries. If the Plan is terminated, no additional amounts shall be credited to a Participant’s Account under Section 4.2, but the Participant’s Account shall be adjusted for the results of hypothetical investments under Section 4.3 until the Participant’s benefits are distributed to the Participant.
The Participant shall be entitled to receive the amounts credited to his Account upon satisfying the requirements for payment of benefits under the Plan. However, the Company may pay the Participant the amount credited to the Participant’s Account at any time after the Plan is terminated if the payment is permitted by Section 409A of the Code.
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Words used in the masculine shall apply to the feminine where applicable. Wherever the context of the Plan dictates, the plural shall be read as the singular and the singular as the plural.
The Plan is governed by the law of the State of Michigan, even if principles of Michigan law regarding conflict of laws or choice of law would otherwise require or permit a court to apply the law of another jurisdiction, except to the extent that Michigan law is preempted by the laws of the United States of America (including any common law developed by federal courts under the applicable laws of the United States).
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The Company has signed the amended and restated UFP Industries, Inc. Deferred Compensation Plan effective as of January 1, 2020.
UFP INDUSTRIES, INC.
By
Its
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Exhibit 10(d)
UFP INDUSTRIES, INC.
EXECUTIVE STOCK GRANT PROGRAM
Second Amended and Restated Effective January 1, 2023
Prepared by:
Miller, Johnson, Snell & Cummiskey, P.L.C.
250 Monroe Avenue, N.W., Suite 800
P.O. Box 306
Grand Rapids, MI 49501-0306
(616) 831-1700
INDEX
Page
-i-
Page
ii
UFP INDUSTRIES, INC.
EXECUTIVE STOCK GRANT PROGRAM
_________________________
1.1 | History of the Program |
The Company established this Executive Stock Grant Program (the "Program") under Article 10 of the Company’s Long Term Stock Incentive Plan, as amended and restated (the "Plan"). The Program became effective on January 1, 2009, was amended from time to time thereafter, was amended and restated effective as of January 1, 2020, and is further amended and restated as of January 1, 2023. Except as otherwise provided herein, the Program shall be administered in accordance and subject to the terms of the Plan, and the Shares subject to Awards under this Program shall be granted under the Plan.
1.2 | Status of Program Under ERISA |
The Program is intended to be "unfunded," terminable by the Company, and maintained "primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" for purposes of ERISA. Accordingly, the Program is not intended to be covered by Parts 2 through 4 of Subtitle B of Title I of ERISA.
1.3 | Compliance with Section 409A |
To the extent the Program provides deferred compensation under Section 409A of the Code, the Program is intended to comply with Section 409A. The Program is intended to be interpreted consistent with the requirements of Section 409A of the Code.
The following terms shall have the meanings described in this Article unless the context clearly indicates another meaning. All other defined terms shall have the meanings set forth in the Program.
2.1 | Accounts |
"Accounts" means the bookkeeping records of the Participants’ benefits under the terms of the Program.
2.2 | Administrator |
"Administrator" means the fiduciary responsible for the operation and administration of the Program as provided in Article 7. The Company shall be the Administrator.
2.3 | Beneficiary |
“Beneficiary” means the beneficiary designated in writing by the Participant to receive benefits from the Program in the event of the Participant’s death. The Beneficiary shall be designated on a form provided by the Administrator, and the Participant may change the Beneficiary designation at any time by signing and delivering a new form to the Administrator. A beneficiary designation will become effective upon receipt by the Administrator, but only if received before the Participant’s death.
A trust may be designated as a Beneficiary. If this occurs, the Administrator will determine the rights of any trustee designated as a Beneficiary without responsibility for determining the validity, existence or provisions of that trust, and will have no responsibility for the use of amounts paid to that trustee or for the discharge of the trust.
If a Participant designates the Participant’s spouse as Beneficiary and the Participant and spouse are subsequently divorced, the judgment of divorce will be considered to revoke the prior Beneficiary designation of the spouse.
The rules of this Section 2.3 apply unless provided otherwise in a Participant’s Beneficiary designation form. If a Participant designates one primary Beneficiary and the Beneficiary dies after the Participant but before benefit payments are completed, any remaining benefits will be payable to the secondary Beneficiary. If a Participant fails to designate a secondary Beneficiary, or if no secondary Beneficiary survives the primary Beneficiary, any remaining benefits will be payable to the deceased primary Beneficiary’s heirs in the manner described below. If a Participant designates more than one primary Beneficiary or more than one secondary Beneficiary and a Beneficiary dies before benefit payments are made, the Shares payable to the deceased Beneficiary will be paid to the deceased Beneficiary’s heirs in the manner described below as if the Beneficiary was the Participant.
If a Participant fails to designate a Beneficiary, or if no designated Beneficiary survives a Participant, distribution will be made in equal shares to the members of the first of the classes listed below having a living member on the date the distribution is payable. The classes, in order of priority, are as follows:
2
A Beneficiary is permitted to disclaim the Beneficiary’s rights to a death benefit under the Program to the extent permitted by applicable law. If this occurs, the Beneficiary will be treated as predeceasing the Participant for purposes of this Section.
The records of the Administrator will be conclusive as to the proper payee and the amount payable. A distribution made based upon these facts will be treated as a complete discharge of all obligations under the Program.
2.4 | Change in Control |
"Change in Control" means any of the following but only to the extent that such events meet the requirements of Treas. Reg. §1.409A-3(i)(5), or any successor provisions:
2.5 | Closing Price |
"Closing Price" shall mean the Nasdaq Official Close Price as reported on the NASDAQ Exchange.
2.6 | Committee |
"Committee" shall mean the Committee of the Board of Directors of the Company designated in the Plan to administer such Plan, as such term is defined in the Plan.
2.7 | Company |
"Company" means UFP Industries, Inc.
2.8 | Deferred Compensation Plan |
"Deferred Compensation Plan" means the UFP Industries, Inc. Deferred Compensation Plan, as amended and restated effective January 1, 2020 and as may be amended.
2.9 | Determination Period |
"Determination Period" means with respect to a Participant who has a Separation from Service between January 1 and March 31, the second Year preceding the Year during which the Separation from Service occurred. If the Participant has a Separation from Service between April 1 and December 31, the Determination Period is the preceding Plan Year.
3
2.10 | Distributable Event |
"Distributable Event" means the earliest of the following to occur with respect to a Participant:
2.11 | Employee |
"Employee" means a common-law employee of the Company or a Subsidiary. An individual who is treated as an independent contractor by the Company or Subsidiary is not an Employee.
2.12 | ERISA |
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
2.13 | Gross Misconduct |
"Gross Misconduct" means one or more of the following:
(a)Embezzlement or theft from the Company or any Subsidiary;
(b)An unauthorized disclosure of the trade secrets or other proprietary information of the Company or a Subsidiary; or
(c)A breach of the duty of loyalty described in Section 5.3.
The definition of "Gross Misconduct" is relevant only for purposes of the forfeiture provisions in Section 5.2 and does not change the status of a Participant as an "employee at will."
2.14 | Key Employee |
"Key Employee" means any employee of the Company or a Subsidiary who at any time during the Determination Period was a "specified employee" within the meaning of Treas. Reg. §1.409A-1(i), or any successor provision, and may include.
4
The determination of who is a Key Employee shall be made in accordance with Sections 409A and 416(i)(1) of the Code and the applicable regulations and guidance.
2.15 | Participant |
"Participant" means an Employee or former Employee of the Company or a Subsidiary who has met the requirements for participation under the terms of Article 3 of this Program and who is or may become eligible to receive benefits under this Program.
2.16 | Participant Shares |
"Participant Shares" means the Shares awarded to a Participant pursuant to Sections 4.2 and 4.3 and credited to the Participant's Account pursuant to 4.1, to the extent vested or unvested. Such term shall collectively refer to Unvested Participant Shares and Vested Participant Shares.
2.17 | Separation from Service |
"Separation from Service" means a "separation from service" under Section 409A of the Code. Generally, this occurs if a Participant is reasonably anticipated to have a substantial permanent reduction in the bona fide level of services provided to the Company and all Subsidiaries (whether provided as an employee or an independent contractor). The reduction shall be "substantial" only if the reduced bona fide level of services is less than 50% of the average bona fide level of services provided by Participant to the Company and all Subsidiaries during the immediately preceding 36 months (or the Participant’s entire period of service, if less than 36 months). A member of the Board shall be treated as having a Separation from Service as of the date that he or she is no longer a member of the Board.
2.18 | Shares |
"Shares" means shares of the common stock of the Company.
5
2.19 | Subsidiary |
"Subsidiary" means any corporation, limited liability company, partnership or other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.
2.20 | Total Disability |
"Total Disability" means the Participant meets one of the following requirements, to the extent it qualifies as a Disability within the meaning of Treas. Reg. §1.409A-3(i)(4):
(a)The Participant is unable to engage in any substantial gainful activity by reason of any medically determinable mental or physical impairment which can be expected to result in death or can be expected to last for a continuous period of at least 12 months; or
(b)The Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under a Company-sponsored disability plan.
The existence of a Total Disability shall be established by the certification of a physician or physicians selected by the Administrator, unless the Administrator determines that an examination is unnecessary. Alternatively, a Participant shall be considered to have a Total Disability if the Participant is determined to be disabled by the Social Security Administration.
2.21 | Trust Agreement |
"Trust Agreement" means the trust agreement used to establish the Trust Fund.
2.22 | Trust Fund |
"Trust Fund" means the assets held under the Trust Agreement in a trust, if one is established, that conforms with the model rabbi trust found in Internal Revenue Procedure 92-64, and meets the requirements of Code Section 409A, and is a grantor trust, of which the Company is the grantor, within the meaning of Subpart E, Part I, Subchapter J, Chapter 1, Subtitle A of the Code.
2.23 | Unvested Participant Shares |
"Unvested Participant Shares" means all or a portion of the Participant Shares credited to a Participant's Account pursuant to Article 4 to the extent that they are not Vested Participant Shares.
6
2.24 | Vested Participant Shares |
"Vested Participant Shares" means all or a portion of the Participant Shares credited to a Participant's Account pursuant to Section 4 that have become vested and met the applicable vesting requirements set forth in Section 4.4 of this Program.
2.25 | Year |
"Year" means the 12-consecutive-month period beginning on January 1 and ending on December 31.
3.1 | Eligibility for Participation |
Employees of the Company or a Subsidiary that (a) participate in the Deferred Compensation Plan, (b) elect to have all or a portion of his or her Elective Deferral to be deemed to be invested in Shares, and (c) who qualify as members of a "select group of management or other highly compensated employees" under Title I of ERISA shall automatically become a Participant in the Program.
3.2 | Termination of Active Participation |
The Committee may remove an Employee from further active participation in the Program. If a Participant experiences a Separation from Service or otherwise ceases to be actively employed by the Company, the Participant shall not have any additional amounts credited to his or her Account under Section 4.2; however, credits of Participant Shares to a Participant’s Account may continue as applicable pursuant to Section 4.3 until the balance of Participant's Account and the Participant Shares credited thereunder are distributed or forfeited.
4.1 | Participants’ Accounts |
The Administrator shall maintain an Account for each Participant to record the Participant’s benefits under the terms of the Program. Participant Shares shall be credited and allocated to a Participant’s Account as provided in this Article 4.
4.2 | Amounts Credited to Participant Accounts |
7
4.3 | Amounts Credited for Company Dividends |
If the Company pays a dividend on its Shares, a Participant's Account shall be credited with additional Shares, with respect to both Unvested Participant Shares and Vested Participant Shares credited to a Participant's Account as of the Credit Date as of the end of the immediately preceding Year, in an amount equal to the number of Participant Shares credited the Participant's Account as of the Credit Date, multiplied by a fraction, the numerator of which equals the per Share cash dividend and the denominator of which equals the Closing Price on the date the dividend is paid. The Credit Date means the date, each Year, that all Participant Shares are allocated to a Participant's Account as a result of Elective Deferrals under the Deferred Compensation Plan for the immediately preceding Year.
4.4 | Vesting and Forfeiture |
8
Participants shall have no voting rights with respect to Participant Shares allocated to their Accounts unless and until such Participant Shares are distributed to such Participant or Beneficiary pursuant to the terms of this Program. Participants and Beneficiaries are not shareholders of the Company or any Subsidiary by virtue of the Participant Shares credited to their Accounts and have no equity ownership interest in the Company or any Subsidiary by virtue of this Program, unless and until such Participant Shares are distributed to such Participant or Beneficiary pursuant to the terms of this Program.
5.1 | Hardship Withdrawals |
A Participant who has an unforeseeable financial emergency may receive payment while employed by the Company or a Subsidiary of all or part of the vested amount credited to the Participant’s Account. A Participant may only withdraw the amount reasonably needed to satisfy the financial emergency need, including taxes reasonably anticipated to result from the distribution.
For purposes of this Section 5.1, an unforeseeable financial emergency is a severe financial hardship of the Participant resulting from: a sudden and unexpected illness or accident of the Participant or a dependent of the Participant; loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, to the extent such event qualifies under Treas. Reg. §1.409A-3(i)(3) or any successor provisions. But the Participant will not be considered to have an unforeseeable emergency if the hardship is or may be relieved:
The need to send a Participant’s child to college or the desire to purchase a home are not unforeseeable emergencies for purposes of this Section 5.1.
The Administrator may periodically establish administrative rules regarding withdrawals under this Section 5.1. Any hardship withdrawals made by a Participant shall reduce the number of Participant Shares credited to Participant's Account and correspondingly the amount distributable to the Participant under this Article 5.
9
5.2 | Forfeiture of Vested Benefits |
Notwithstanding anything else herein to the contrary, the Participant shall forfeit all Participant Shares, including Vested Participant Shares and Unvested Participant Shares, credited to his or her Account if:
The amount of any forfeitures under this Section 5.2 shall reduce the Company’s liability under this Program and shall not be reallocated to the Accounts of other Participants.
5.3 | Duty of Loyalty |
Each Participant has a duty of loyalty to the Company and its Subsidiaries. While the Participant is employed by the Company or a Subsidiary, this duty includes the following:
If the Company notifies a Participant that the Participant is in violation of the duty of loyalty described in this Section 5.3, the Participant shall have ten days to cure any violation as required by the Company or forfeit all rights to subsequent benefits from the Program. If the Participant cures a violation of the duty of loyalty, but then violates the duty of loyalty a second time, the Participant shall immediately forfeit all rights to subsequent benefits from the Program without being given the right to cure the violation.
The determination of whether a Participant has violated the duty of loyalty described in this Section 5.3 shall be made by the Administrator in its sole discretion.
10
5.4 | Payment Timing & Terms |
All Vested Participant Shares credited to a Participant's Account shall be distributed to a Participant or the Participant's Beneficiary, as applicable, in a single lump sum payable in the form of certificates for whole Shares of the Company (except for fractional Shares which shall be paid in cash or withheld to cover taxes) at the first of the following to occur:
5.5 | Spendthrift Provision |
No benefit or interest under the Program is subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of a Participant or the Participant’s Beneficiary, and are exempt, to the maximum extent permitted by law, from the claims of creditors. Any attempt by a Participant or Beneficiary to assign or alienate the benefits issued pursuant to the terms of this Program shall cause all of such benefits to be immediately forfeited and neither Participant nor Beneficiary shall be entitled to any payment or other economic benefit with respect to the forfeited Incentive Benefit or otherwise under the terms of the Program. As used in this section, the words assignment and alienation include any sale, transfer, or other disposition; any anticipation, pledge, security agreement, or other method of securing payment or performance of an obligation; any garnishment, execution, attachment, levy, or other method of satisfying creditors’ claims. Notwithstanding the foregoing, the prohibition on assignment and alienation shall not restrict the Company or any Subsidiary’s obligation to engage in tax withholding.
6.1 | Establishment of Trust Fund |
The Company may enter into a Trust Agreement to establish a Trust Fund and shall contribute Shares to the Trust Fund as such Shares are granted to Participants. Any Shares
11
forfeited by Participants may be retained in the Trust and used to reduce future contributions to be made by the Company.
6.2 | Status as Grantor Trust |
The Trust Fund shall be a grantor trust. The Trust Agreement shall provide that the assets of the Trust Fund are subject to the claims of the Company’s general creditors if the Company becomes insolvent. In addition, neither this Program nor the establishment of a Trust Fund shall create any trust or other fiduciary relationship of any kind with respect to the deferred compensation or any asset of the Company. The Company has complete legal and beneficial ownership of all assets in the Trust Fund and Participant Accounts until distributed pursuant to the terms of this Program. The right to benefits under the Program is merely an unsecured promise of the Company to pay the deferred compensation from the Company’s general assets. The Program does not require the Company or the Committee to establish any fund or segregate any assets for the benefit of any Participant.
6.3 | Status of Participants as Unsecured Creditors |
The obligation of the Company to pay benefits under the Plan shall be unsecured. Each Participant is an unsecured creditor of the Company. The Plan constitutes a mere promise by the Company to make benefit payments in the future.
The establishment of an Account for a Participant and the Company’s payment of contributions to the Trust Fund are not intended to create any security for payment of benefits under the Plan or change the status of the Plan as an unfunded plan.
7.1 | Administrator |
The Company shall have the sole responsibility for the administration of the Plan and is designated as named fiduciary and Administrator. The Administrator shall have the power and duties which are described in this Article. The Committee shall carry out the functions of the Administrator with respect to the day-to-day operation of the Program. If a member of the Committee is a Participant, the member shall abstain from voting on any matter relating to the member’s benefits under the Program.
7.2 | Powers of Administrator |
The Administrator shall have all discretionary powers necessary to administer and satisfy its obligations under the Program, including, but not limited to, the following:
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7.3 | Standard of Care |
The Administrator shall administer the Program solely in the interest of Participants and for the exclusive purposes of providing benefits to the Participants and their Beneficiaries. The Administrator shall administer the Program with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of a like character and with like aims.
The Administrator shall not be liable for any act or omission relating to its duties under the Program unless the act or omission violates the standard of care described in this Section 7.3.
7.4 | Appeal Procedure |
Any Participant whose application for benefits under the Program has been denied, in whole or in part, shall be given written notice of the denial of benefits by the Administrator. The notice shall be in easily understood language and shall indicate the reasons for denial and the specific provisions of the Program on which the denial is based. The notice shall explain that the Participant may request a review of the denial and the procedure for requesting review. The notice shall describe any additional information necessary to approve the Participant’s claim and explain why such information is necessary.
A Participant may make a written request to the Committee for a review of any denial of benefits under the Program. The request for review must be in writing and must be made within 60 days after the mailing date of the notice of denial. The request shall refer to the provisions of the Program or Plan on which it is based and shall set forth the facts relied upon as justifying a reversal or modification of the determination being appealed.
A Participant who requests a review of a denial of benefits in accordance with this appeal procedure may examine pertinent documents and submit pertinent issues and comments in writing. A Participant may have a duly authorized representative act on his or her behalf in
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exercising his or her right to request a review and any other rights granted by this appeal procedure. The Committee shall provide a review of the decision denying the claim for benefit within 60 days after receiving the written request for review.
A Participant shall not be permitted to commence any legal action against the Company regarding his or her benefits under the Plan before exhausting the appeal procedure contained in this Section 7.4.
7.5 | Indemnification of Committee |
The Company shall indemnify and hold harmless the members of the Committee and their duly appointed agents against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to the Program, except in the case of gross negligence or willful misconduct by any such member or agent of the Committee.
8.1 | Employment Rights |
The existence of the Plan and the Program shall not grant a Participant any legal right to continue as an employee of the Company or any Subsidiary nor affect the right of the Company or a Subsidiary to discharge a Participant from employment.
8.2 | Tax Withholding |
8.3 | 409A Savings Clause & Severability |
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8.4 | Construction |
8.5 | Facility of Payment. |
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8.6 | Amendment |
The Company shall have the right to amend the Program at any time; however, no amendment or termination shall reduce the number of Participant Shares credited to a Participant’s Accounts.
8.7 | Termination |
The Company shall have the right to terminate the Program at any time. If the Program is terminated, no additional amounts shall be credited to a Participant’s Account under Section 4.2; however, the Participant’s Account shall continue to be adjusted for dividends under Section 4.3 until the Participant’s benefits are distributed to the Participant as his or her Beneficiary. The Participant shall be entitled to receive the amounts credited to his or her Account upon satisfying the requirements for payment of benefits under the Program, unless the Company elects to make payment at an earlier time in accordance with the requirements of Section 409A of the Code.
The Company has amended and restated the UFP Industries, Inc. Executive Stock Grant Program effective as of the 1st day of January, 2023.
UFP INDUSTRIES, INC.
By
Its
21810878
16
APPENDIX A
Deferred Compensation Plan | Exec Stock Grant Plan | ||
Eligible Participants per the Plan Document | Other job titles included in the eligibility category | Maximum Bonus Deferral – (up to 50% of bonus not to exceed amounts below) | Max Deferral for Annual Grant Calculation pursuant to Section 4.2 |
CEO of UFP Industries | | $100,000 | $105,000 |
President, COO of UFP Industries | | $100,000 | $105,000 |
Segment Leads and Executive Officers | | $100,000 | $55,000 |
Officers | | $50,000 | $40,000 |
Managing Directors | | $25,000 | $30,000 |
GMO | Regional GMO | $25,000 | $30,000 |
Regional Sales Managers | | $25,000 | $30,000 |
Operations Managers | | $25,000 | $15,000 |
Plant Managers | | $10,000 | N/A |
Exec Account Managers | | $10,000 | $15,000 |
CEO Club Members (Current & Former) | Former President’s Club Members | $10,000 | $15,000 |
Corporate Directors Segment Directors Business Unit Directors | Segment Controllers, Chief Pilot, certain National Sales Directors and other Directors | $25,000 | $30,000 |
Corporate Senior Managers | | $25,000 | N/A |
Purchasing Managers | | $10,000 | $15,000 |
Transportation Managers | | $10,000 | $15,000 |
Regional and Divisional Senior/Executive Managers | Regional Safety Directors | $10,000 | N/A |
Exhibit 10(e)
SECOND RESTATEMENT OF THE
UFP INDUSTRIES, INC. DIRECTOR COMPENSATION PLAN
i. | The Participating Director's death, |
ii. | The Participating Director's total and permanent disability, as defined in Treas. Reg. 1.409A-3(i)(4), or |
iii. | The date specified in the Participating Director's Election Agreement (the "Optional Payment Date"), unless no Optional Payment Date is specified in the Election Agreement, in which case the Optional Payment Date shall be deemed selected and shall be the date of the Participating Director's Retirement. |
No acceleration of the Deferred Payment Date is permitted unless authorized under the Code or in the regulations or guidance thereunder.
Any portion of an Eligible Director's Retainer Fee that the Eligible Director does not elect to be part of the Deferred Fee (the "Non-Deferred Fee") shall be paid to the Eligible Director as set forth in Section 7.
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i. | Cash Deferrals. The Company shall credit to a Participating Director's Deferral Account a number (to four decimal places) of units that is equal to 110% of the amount of the Participating Directors' Deferred Cash Fee pursuant to Section 5(a) or the Deferred Committee Fee pursuant to Section 5(c) pursuant to an Election Agreement, as periodically earned by the Participating Director divided by the Market Price on the day upon which such amounts are earned. For this purpose, the amounts of a Participating Director's Deferred Cash Fee are deemed earned on May 1 (February through April amounts), August 1 (May through July amounts), November 1 (August through October amounts), and the next February 1 (November through January amounts). |
ii. | Stock Deferrals. The Company shall credit to the Deferral Account, on each day the number of units that is equal to 100% of the number of shares of Company Stock deferred pursuant to the Participating Directors' Deferred Stock Director Retainer under to Section 5(b) (including any fractional shares), as periodically earned by the Participating Director. For this purpose, the amounts of a Participating Director's Deferred Stock Fee are deemed earned on May 1 (February through April amounts), August 1 (May through July amounts), November 1 (August through October amounts), and the next February 1 (November through January amounts). |
iii. | Credits for Dividend Payments. The Company shall credit to the Deferral Account, on each day the Company declares a cash dividend to holders of the Stock, that number (to four decimal places) of units that is equal to the total number of units in the Participating Director's Deferral Account on the declaration date for such dividend, multiplied by the cash dividend per share of Stock dividend by the Market Price on the declaration date for such dividend. |
iv. | Adjustments. The number of units credited to a Deferral Account t shall be adjusted appropriately by the Company in the event of any change in the Stock by reason of stock dividends, split-ups, recapitalizations, combinations, exchanges of shares and other like capital changes, but no adjustment shall be required by reason of any sales of shares of Stock by the Company at any price, whether below, at or above Market Price, and whether by or pursuant to warrant, option, right, conversion right or privilege or otherwise, and a Participating Director shall have |
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no rights as a holder of Stock unless and until a certificate for shares of Stock is issued by the Company. |
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19193209.1
6
Exhibit 10(f)
UFP INDUSTRIES, INC.
LONG-TERM STOCK INCENTIVE PLAN
(as Amended through April 20, 2022)
(Conformed through 2023 Amendment)
ARTICLE 1
ESTABLISHMENT AND PURPOSE OF THE PLAN
ARTICLE 2
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings set forth below:
1 Section 2.9 restated by 2023 Amendment, effective October 24, 2023.
2
ARTICLE 3
ADMINISTRATION
The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, to
3
interpret the terms and provisions of the Plan and any Award issued under the Plan (including any Award Agreement) and to otherwise supervise the administration of the Plan. A majority of the Committee shall constitute a quorum, and the acts of a majority of a quorum at any meeting, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee. The interpretation and construction by the Committee of any provisions of the Plan or any Award granted under the Plan shall be final and binding upon the Company, the Board and Participants, including their respective heirs, executors and assigns. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or an Award granted hereunder.
ARTICLE 4
COMMON STOCK SUBJECT TO THE PLAN
ARTICLE 5
ELIGIBILITY
The persons who shall be eligible to receive Awards under the Plan shall be such key employees of the Company or a Subsidiary as the Committee shall select from time to time. In making such selections, the Committee shall consider the nature of the services rendered by such employees, their present and potential contribution to the Company's success, and the success of the Subsidiary of the Company by which they are employed, and such other factors as the
4
Committee in its discretion shall deem relevant. Participants may hold more than one Award, but only on the terms and subject to the restrictions set forth in the Plan and their respective Award Agreements. No participant may receive Awards under the Plan covering more than twenty-five percent (25%) of Plan Shares.
ARTICLE 6
STOCK OPTIONS
5
6
7
ARTICLE 7
STOCK APPRECIATION RIGHTS
ARTICLE 8
RESTRICTED STOCK
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"The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the UFP Industries, Inc. Long-Term Stock Incentive Plan and related Award Agreement entered into between the registered owner and the Company, dated ______________. Copies of such Plan and Agreement are on file in the offices of the Company, 2801 East Beltline NE, Grand Rapids, Michigan 49525."
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ARTICLE 9
PERFORMANCE SHARES
9.1Award of Performance Shares. Performance Shares may be awarded either alone or in addition to other Awards granted under this Plan. The Committee shall determine the eligible persons to whom and the time or times at which Performance Shares shall be awarded, the number of Performance Shares to be awarded to any person, the duration of the period (the "Performance Period") during which, and the conditions under which, receipt of the Performance Shares will be deferred, and the other terms and conditions of the Award in addition to those set forth in Section 9.2, as specified in the Award Agreement. The Committee may condition the grant of Performance Shares upon the achievement of specific business objectives, measurements of individual or business unit or Company performance, or such other factors or criteria as the Committee shall determine. The provisions of the award of Performance Shares need not be the same with respect to each Participant, and such Awards to individual Participants need not be the same in subsequent years.
9.2Terms and Conditions. Performance Shares awarded pursuant to this Article 9 shall be subject to the following terms and conditions:
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ARTICLE 10
OTHER STOCK-BASED AWARDS
10.1Other Awards. Other Awards of Common Stock and other Awards that are valued in whole or in part by reference to, or are payable in or otherwise based on, Common Stock ("Other Stock-Based Awards"), may be granted either alone or in addition to or in tandem with Options, SARs, Restricted Stock or Performance Shares. Subject to the provisions of this Plan, the Committee shall have authority to determine the persons to whom and the time or times at which such Awards shall be made, the number of shares of Common Stock to be awarded pursuant to such awards, and all other conditions of the Awards. The Committee may also provide for the grant of Common Stock under such Awards upon the completion of a specified performance period. The provisions of Other Stock-Based Awards need not be the same with respect to each Participant and such Awards to individual Participants need not be the same in subsequent years.
10.2Terms and Conditions. Other Stock-Based Awards made pursuant to this Article 10 shall be set forth in an Award Agreement and shall be subject to the following terms and conditions:
ARTICLE 11
TERMINATION OR AMENDMENT OF THE PLAN
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The Board may at any time amend, discontinue or terminate this Plan or any part thereof (including any amendment deemed necessary to ensure that the Company may comply with any applicable regulatory requirement); provided, however, that, unless otherwise required by law, the rights of a Participant with respect to Awards granted prior to such amendment, discontinuance or termination, may not be impaired without the consent of such Participant and, provided further, without the approval of the Company's shareholders, no amendment may be made which would (i) increase the aggregate number of shares of Common Stock that may be issued under this Plan (except by operation of Article 4 or by Section 13.1); or (ii) decrease the option price of any Option to less than one hundred percent (100%) of the Fair Market Value on the date of grant for an Option. Awards may not be granted under the Plan after the Termination Date, but Awards granted prior to such date shall remain in effect or become exercisable pursuant to their respective terms and the terms of this Plan.
ARTICLE 12
UNFUNDED PLAN
This Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payment not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.
ARTICLE 13
ADJUSTMENT PROVISIONS
13.1Antidilution. Subject to the provisions of this Article 13, if the outstanding shares of Common Stock are increased, decreased, or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to such shares of Common Stock or other securities, through merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to such shares of Common Stock or other securities, an appropriate and proportionate adjustment may be made in (i) the maximum number and kind of shares provided in Article 4 of the Plan, (ii) the number and kind of shares or other securities subject to the then outstanding Awards, and (iii) the price for each share or other unit of any other securities subject to the then outstanding Awards.
13.2Change in Control. Notwithstanding Section 13.1, upon dissolution or liquidation of the Company, or upon a reorganization, merger, or consolidation of the Company with one or more corporations as a result of which the Company is not the surviving corporation, or upon the sale of all or substantially all the assets of the Company, all Awards then outstanding under the Plan will be fully vested and exercisable and all restrictions will immediately cease, unless provisions are made in connection with such transaction for the continuance of the Plan and the assumption of or the substitution for such Awards of new Awards covering the stock of a successor employer corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices.
13.3Adjustments by Committee. Any adjustments pursuant to this Article 13 will be made by the Committee, whose determination as to what adjustments will be made and the extent
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thereof will be final, binding, and conclusive. No fractional interest will be issued under the Plan on account of any such adjustments. Only cash payments will be made in lieu of fractional shares.
ARTICLE 14
GENERAL PROVISIONS
14.1Legend. The Committee may require each person purchasing shares pursuant to an Award under the Plan to represent to and agree with the Company in writing that the Participant is acquiring the shares without a view to distribution thereof. In addition to any legend required by this Plan, the certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Common Stock delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Stock is then listed, any applicable Federal or state securities law, and any applicable corporate law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
14.2No Right to Employment. Neither this Plan nor the grant of any Award hereunder shall give any Participant or other employee any right with respect to continuance of employment by the Company or any Subsidiary, nor shall there be a limitation in any way on the right of the Company or any Subsidiary by which an employee is employed to terminate his or her employment at any time.
14.3Withholding of Taxes. The Company shall have the right to deduct from any payment to be made pursuant to this Plan, or to otherwise require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash hereunder, payment by the Participant of, any Federal, state or local taxes required by law to be withheld. Unless otherwise prohibited by the Committee, each Participant may satisfy any such withholding tax obligation by any of the following means or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold from the shares otherwise issuable to the Participant a number of shares having a Fair Market Value as of the "Tax Date", less than or equal to the amount of the withholding tax obligation; or (c) delivering to the Company unencumbered shares owned by the Participant having a Fair Market Value, as of the Tax Date, less than or equal to the amount of the withholding tax obligation. The "Tax Date" shall be the date that the amount of tax to be withheld is determined.
14.4No Assignment of Benefits. No Option, Award or other benefit payable under this Plan shall, except as otherwise specifically transfer, provided by law, be subject in any manner to anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, attach, sell, transfer, assign, pledge, encumber or charge, any such benefits shall be void, and any such benefit shall not in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such benefit, nor shall it be subject to attachment or legal process for or against such person.
14.5Governing Law. This Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws and in the courts of the state of Michigan.
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14.6Application of Funds. The proceeds received by the Company from the sale of shares of Common Stock pursuant to Awards granted under this Plan will be used for general corporate purposes.
14.7Rights as a Shareholder. Except as otherwise provided in an Award Agreement, a Participant shall have no rights as a shareholder of the Company until he or she becomes the holder of record of Common Stock.
21181499.1
14
Exhibit 10(g)
UFP Industries, Inc.
Restricted Stock Grant Agreement
THIS AGREEMENT is made effective as of the _____ day of _______________, 20___ between UFP Industries, Inc., a Michigan corporation (the "Company"), and «Name1» (the "Employee").
RECITALS
The UFP Industries, Inc. Long-Term Stock Incentive Plan as amended and restated (the "Plan") authorizes the award of shares of restricted stock to key employees of the Company upon such terms and conditions as may be determined by the Committee (as defined in the Plan).
The Committee has approved a grant of restricted shares of Company stock to Employee upon the terms and conditions set forth in this agreement (the "Agreement"). This grant is being made in connection with Employee’s performance for the _____ fiscal year. The Company and Employee desire to confirm in this Agreement the terms, conditions, and restrictions applicable to the grant of restricted stock.
NOW, THEREFORE, intending to be bound, the parties agree as follows:
1.DEFINITIONS
1.1 | "Early Retirement" means the termination of employment with the Company or a Subsidiary (as defined in the Plan) prior to Retirement (as defined in the Plan) and approved as early retirement in the sole discretion of the Committee (as defined in the Plan). |
1.2 | "Effective Date of this Agreement" means _______________. |
1.3 | “Lack of Work Separation” means a separation of employment due to an elimination of Employee’s position or insufficient work available for the Employee, absent extenuating circumstances as determined by the Company. By contrast, if Employee is offered a comparable position (as determined by the Company) and Employee rejects the offer, any resulting separation of employment will not be deemed a Lack of Work Separation. |
1.4 | "Restricted Share" means a Share which is subject to the restrictions on sale, pledge or other transfer imposed by Section 3. |
1.5 | "Reverted Shares" means Shares which have reverted to the Company pursuant to Section 5.2. |
1.6 | "Vested Share" means a Share which is no longer a Restricted Share. |
Other terms not specifically defined in this Agreement shall have the same meanings as defined in the Plan.
2.GRANT AND ACCEPTANCE OF AWARD; TAX ELECTION
2.1Grant. The Company confirms the award to Employee of «Shares» shares of Common Stock (the "Shares") as restricted stock, upon the terms, restrictions, and conditions of this Agreement and the Plan. The award of Shares shall be effective as of the Effective Date of this Agreement.
2.2Acceptance. Employee accepts this award of Shares and agrees to hold them subject to the terms, restrictions, and conditions of this Agreement.
2.3Tax Election. Employee may elect to be taxed in _____ on the fair market value of the Shares awarded by signing an election to be so taxed under Section 83(b) of the Internal Revenue Code and filing such election with the Internal Revenue Service within thirty (30) days after the Effective Date of this Agreement. If
Employee chooses not to make such an election, Employee will be taxed on the fair market value of the Shares in the year in which the Shares become Vested Shares.
2.4Withholding. The parties agree that vesting of the Shares in accordance with this Agreement is subject to the satisfaction of applicable withholding tax or other withholding liabilities under federal, state, and local laws.
3.RESTRICTIONS ON TRANSFER OF SHARES; LAPSE OF RESTRICTIONS
3.1Transfer Prohibitions. Employee shall not sell, pledge, or otherwise assign or transfer any Share or any interest in any Share while such Share is a Restricted Share.
3.2Restricted Shares. Every Share shall be a Restricted Share until the restrictions lapse in accordance with the vesting conditions set forth in Section 5.1 or Section 5.4 below.
3.3Securities Law Compliance. Employee shall not sell or transfer any Share or any interest in any Share, whether such Share is or is not a Restricted Share, unless either (a) the Company shall consent in writing to such transfer, or (b) the Company shall have received an opinion of counsel satisfactory to the Company to the effect that such transfer will not violate the registration requirements imposed by the Securities Act of 1933 or any other provision of law which the Company shall desire such opinion to cover.
3.4Stop Transfer Instructions. The Company shall have the right to issue instructions to the transfer agent for the shares of the Company, prohibiting transfer of any Shares except in accordance with the requirements of this Agreement.
3.5Rights as Shareholder. Except for the restrictions imposed in this Section 3 and unless the Shares have reverted to the Company pursuant to Section 5.2 or Section 5.5 below, Employee shall have all the rights of a shareholder with respect to the Restricted Shares, including the right to vote and to receive any dividends declared and paid thereon.
4.ACQUISITION WARRANTIES BY EMPLOYEE. In order to induce the Company to issue and deliver the Shares on the terms of this Agreement, Employee warrants to and agrees with the Company as follows:
4.1No Participating Interest. Employee is acquiring the Shares for Employee’s own account and has not made any arrangement to convey any interest in the Shares to any person, other than to transfer Reverted Shares to the Company pursuant to Section 5.2 or Section 5.5 below.
4.2Ability to Evaluate. Because of Employee’s knowledge of and experience in financial and business matters, Employee is capable of evaluating the merits and risks of acquiring the Shares under the conditions set forth in this Agreement.
4.3Familiarity with Company. Employee is familiar with the business, financial condition, earnings, and prospects of the Company, and confirms that the Company has not made any representation regarding the foregoing matters or the merits of entering into this Agreement or as to the prospective value of the Shares.
5.VESTING AND REALLOCATION
5.1Vesting of Shares. All Shares issued hereunder that have not previously reverted to the Company shall become Vested Shares immediately upon the first to occur of the following:
(a)Upon the death of Employee;
(b)Upon the Disability or Retirement of Employee (each as defined in the Plan);
(c)Upon the five (5) year anniversary of the Effective Date of this Agreement;
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(d) Upon Employee reaching the age of 67 if Employee has experienced an Early Retirement (as defined above) and Employee has fully complied with the covenants and obligations set forth in Section 5.5 and 5.6; or
(e)Upon a Change in Control of the Company (as defined in the Plan).
5.2Reversion. All Shares that have not become Vested Shares shall automatically revert to the Company at any time Employee shall no longer be employed by the Company or a Subsidiary (as defined in the Plan) for any reason whatsoever, except as otherwise provided in Section 5.1 or Section 5.4 of this Agreement.
5.3Effect of Reversion. Upon reversion of any Shares (a) absolute ownership thereof shall automatically revert to the Company at that time, (b) such Shares shall be deemed to be "Reverted Shares" for purposes of this Agreement, and (c) all of Employee’s rights and interests in the Shares shall cease at that time. No compensation shall be payable to Employee for Shares which revert to the Company.
5.4Early Retirement and Lack of Work Separation. If Employee terminates employment with the Company or a Subsidiary due to an Early Retirement or due to a Lack of Work Separation, those Shares that have not become Vested Shares as of the date of Early Retirement or Lack of Work Separation shall not revert to the Company and shall remain subject to vesting in accordance with Section 5.1 provided that Employee fully complies with the covenants and obligations of Employee set forth in Sections 5.5 and 5.6 below at all times subsequent to and including the date of Early Retirement or Lack of Work Separation and until the date the Shares become Vested Shares in accordance with Section 5.1.
5.5Covenant Not to Compete; Non-Solicitation.
(a)Restrictions. Employee acknowledges Employee's potential to terminate employment with the Company or a Subsidiary due to Early Retirement or a Lack of Work Separation prior to the vesting date set forth in Section 5.1(c) and acknowledges and agrees further, that based upon Employee's current health, skills, connections and other factors, including the availability of alternative employment opportunities that may be competitive with the business of the Company, Employee's employment by a competitor of the Company would cause irreparable harm to the Company; consequently, Employee agrees to the following covenants and obligations, from and after the Effective Date of this Agreement until the vesting of the Shares under Section 5.1, as a condition to grant of the Shares under this Agreement:
Employee agrees that he/she will not, directly or indirectly, either alone or in association with others, for himself/herself or for any other person or entity, either as principal, agent, employee, director, officer, member, stockholder, or in any other capacity: (i) conduct, become engaged in, or interested in, any business that competes, directly or indirectly, with the business of the Company or any of its affiliates in any geographic area in which the Company or any of its affiliates does or has reasonably definitive plans to do a material amount of business, (ii) solicit, divert or take away or attempt to solicit, divert or take away, directly or indirectly, any of the Company's or its affiliates current, prior, or prospective customers; or (iii) solicit or attempt to solicit any person who is employed or engaged to perform services by the Company or its affiliates to leave his or his employment or engagement with Company or its affiliates.
(b)Judicial Determination. The Company and Employee agree that the restrictions set forth in this Section 5.5 are reasonable in light of the nature of the parties’ relationship and are necessary to protect the business and goodwill of the Company. However, should any court of competent jurisdiction determine that these restrictions are unreasonable, then the parties agree that the restrictions will, without further acts of the parties, be modified or amended to conform to the judgment of the court as to what would be reasonable, with the restrictions of this Section 5.5 to be limited in accordance with such judgment to the minimum extent determined to be necessary by the court.
(c)Remedies. In the event of any breach of this Section 5.5 by Employee, the Company shall be entitled to injunctive relief and damages, together with any reasonable attorneys' fees or costs incurred as a result of such breach and awarded by the court and that the Shares subject to this Agreement shall immediately be forfeited and become Reverted Shares as provided in Section 5.3 hereof.
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5.6Release of Claims. In consideration of the benefits to Employee of the ability to continue to allow the Shares to become Vested Shares under Section 5.4 above, and as a condition to such benefits, as of the date of Early Retirement or Lack of Work Separation, as applicable, Employee releases and forever discharges the Company and its Subsidiaries and their respective directors, officers, managers, and agents (collectively, the "Released Parties") from any and all claims, suits, actions, causes of action, cross-claims, counter-claims, demands, debts, damages or liabilities of any nature whatsoever in law and in equity, both past and present and whether known or unknown, suspected, or claimed against the Company or any of the Released Parties which Employee has or may have and which arise out of or are connected with Employee's employment with, or separation or termination of service from, the Company or any Subsidiary under any federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance, or under any public policy, contract or tort, or under common law, or arising under any policies, practices or procedures of the Company or any Subsidiary, or any claim for wrongful discharge, retaliation, whistleblowers, breach of contract, or any claim for costs, fees, or other expenses, including attorneys' fees incurred in these matters.
6.GENERAL PROVISIONS
6.1No Right to Employment. This Agreement is not an employment contract. Neither the Plan nor this Agreement or anything else changes the employment status of Employee.
6.2Spendthrift. No benefit or interest hereunder is subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of Employee.
6.3Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be valid and enforceable, but if any provision of this Agreement shall be held to be prohibited or unenforceable under applicable law (a) such provision shall be deemed amended to accomplish the objectives of the provision as originally written to the fullest extent permitted by law, and (b) all other provisions of this Agreement shall remain in full force and effect.
6.4Captions. The captions used in this Agreement are for convenience only, do not constitute a part of this Agreement, and all of the provisions of this Agreement shall be enforced and construed as if no captions had been used.
6.5Complete Agreement. This Agreement contains the complete agreement between the parties relating in any way to the subject matter of this Agreement, and supersedes any prior understandings, agreements, or representations, written or oral, which may have related to such subject matter in any way.
6.6Notices.
(a)Procedures Required. Each communication given or delivered under this Agreement must be in writing and may be given by personal delivery or by certified mail. A written communication shall be deemed to have been given on the date it shall be delivered to the address required by this Agreement.
(b)Communications to the Company. Communications to the Company shall be addressed to it at the principal corporate headquarters and marked to the attention of the Company’s General Counsel.
(c)Communications to the Employee. Every communication to Employee shall be addressed to Employee at the address given immediately below Employee’s signature to this Agreement, or to such other address as Employee shall specify to the Company.
6.7Assignment. This Agreement is not assignable by Employee during the Employee’s lifetime. This Agreement shall be binding upon and inure to the benefit of (a) the successors and assigns of the Company, and (b) any person to whom Employee’s rights under this Agreement may pass by reason of Employee’s death.
6.8Amendment. This Agreement may be amended, modified, or terminated only by written agreement between the Company and Employee.
4
6.9Waiver. No delay or omission in exercising any right hereunder shall operate as a waiver of such right or of any other right hereunder. A waiver upon any one occasion shall not be construed as a bar or waiver of any right or remedy on any other occasion. All of the rights and remedies of the parties hereto, whether evidenced hereby or granted by law, shall be cumulative.
6.10Choice of Law. This Agreement shall be deemed to be a contract made under the laws of the State of Michigan, and for all purposes shall be construed in accordance with and governed by the laws of the State of Michigan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date of this Agreement.
EMPLOYEE:UFP INDUSTRIES, INC.:
By
«Name1»
Its
ADDRESS:
«Address1»
«City», «StateProvince» «Account_Number»
22444696.2
5
Exhibit 10(h)
UFP INDUSTRIES, INC. LONG-TERM INCENTIVE PLAN
PERFORMANCE SHARE AWARD AGREEMENT
This certifies that UFP Industries, Inc. (the "Company") has on _______________, 20___ (the "Award Date"), granted to (the "Participant") an award (the "Award") of ______________ Performance Shares (the "Target Performance Shares") pursuant to and under the UFP Industries, Inc. Long-Term Incentive Plan (the "Plan") and subject to the terms set forth in this agreement (the "Agreement"). The Plan is incorporated into this Agreement by reference, and in the event of any conflict between the terms of the Plan and this Agreement, the terms of the Plan will govern. Any terms not defined herein will have the meaning set forth in the Plan.
1.Definitions.
(a)"Actual Performance Shares" means the number of Performance Shares earned and vested in accordance with Section 2 and payable to the Participant under Section 4 of this Agreement.
(b)"Common Stock" means the Company's, $1.00 par value per share.
(c)"Performance Period" means the period of three (3) consecutive fiscal Years including and from the Award Date (i.e., _____, _____ and _____).
(d)"Performance Share" means the right to receive one (1) share of Common Stock subject to certain restrictions and on the terms and conditions contained in this Agreement and the Plan.
(e)"Pre Bonus Operating Profit" ("PBOP") has the meaning set forth in the Company’s Performance Bonus Plan – Salaried (PPM 4751).
(f)"Pre Bonus Returns On Investment" ("PBROI") means the Company's annual Pre Bonus Operating Profit, divided by the average investment of the Company's business.
(g)"Target PBROI" means twelve percent (12.0%).
2.Determination of Actual Performance Shares. The Actual Performance Shares which may be earned and vested by Participant shall equal (a) the number of Target Performance Shares, multiplied by (b) the Earnout Percentage, as determined under this Section 2.
(a)Determination of PBOP and PBROI.
(i)Determination of PBOP. Within sixty (60) days after the end of the Performance Period, the Committee will determine the Company's PBOP during the Performance Period (the "Performance Period PBOP").
(ii)Determination of PBROI. Within sixty (60) days after the end of the Performance Period, the Committee will determine the PBROI during the Performance Period (the "Performance Period PBROI").
(b)Calculation of Earnout Percentage.
(i)If the Performance Period PBROI is equal to or greater than Target PBROI, the Earnout Percentage shall be determined in accordance with the following:
If the Company's PerformanceThe Earnout
Period PBOP is:Percentage is:
Equal to or greater than $_______________(1)200%
Less than $_______________ but equal to or100%
greater than $_______________(2)
Less than $_______________ but equal to or Actual Period PBOP/
greater than $_______________(3) $
Less than $_______________(3) 0%
(ii)If the Performance Period PBROI is less than Target PBROI, the Earnout Percentage shall be 0%.
The Earnout Percentage between the above performance levels shall be determined based on straight line interpolation.
(c)Calculation of Actual Performance Shares after a Change in Control. If a Change in Control occurs during the Performance Period, the Earnout Percentage shall be 200%.
(d)Certification. Not later than sixty (60) days after the end of the Performance Period, the Committee shall determine the Actual Performance Shares and shall certify such finding to the Company and the Participant.
3.Adjustments to Actual Performance Shares Following Termination of Employment.
(a)Termination Due to Death or Disability. In the event that the Participant's employment with the Company or a Subsidiary terminates prior to the end of the Performance Period due to:
(1) 1.5x Budget
(2) Three-Year Budget PBOP ("Budget")
(3) .5x Budget
2
(i)Death; or
(ii)Disability,
the Participant's Actual Performance Shares will equal the Actual Performance Shares determined under Section 2 multiplied by a fraction, the numerator of which is the number of full calendar months, beginning on the first day of the Performance Period and ending on the date of the Participant's termination of employment, and the denominator of which is 36.
(b)Termination Due to Retirement. In the event the Participant terminates employment with the Company or a Subsidiary during the Performance Period due to Retirement, no adjustment to the Actual Performance Shares shall be made.
(c)Termination of Employment for Other Reasons. In the event that the Participant's employment with the Company or a Subsidiary terminates prior to the end of the Performance Period for any reason other than Death, Disability or Retirement, then Participant's rights to all of the Target Performance Shares granted in this Award will be immediately and irrevocably forfeited upon such termination of employment.
4.Rights of the Participant with Respect to Performance Shares.
(a)No Shareholder Rights. The Performance Shares granted pursuant to this Award do not and will not entitle Participant to any rights of a shareholder of Common Stock, including the right to receive dividends, except as provided in Section 4(b) below. The rights of the Participant with respect to the Performance Shares will remain forfeitable at all times prior to the end of the Performance Period and as otherwise provided in the Plan. Prior to conversion of Performance Shares into Common Stock, such Performance Shares will represent only an unsecured obligation of the Company.
(b)Conversion of Performance Shares; Issuance of Common Stock. No shares of Common Stock will be issued to Participant prior to the date on which the Performance Shares vest and become Actual Performance Shares under the provisions of Section 2 of this Agreement. At the time of issuance of any actual Performance Shares, Participant shall be credited with and paid the aggregate amount of dividends declared and paid per share of Company common stock from the Award Date through the date of issuance of the Actual Performance Shares, multiplied by the number of Actual Performance Shares issued. Neither this subsection (b) nor any action taken pursuant to or in accordance with this subsection (b) will be construed to create a trust of any kind. After any Performance Shares vest and become Actual Performance Shares and any tax withholding obligations related to such Actual Performance Shares have been satisfied pursuant to Section 7, the Company will, within 60 days thereafter, cause to be issued to the Participant or the Participant's legal representatives, beneficiaries or heirs, as the case may be, a stock certificate or book entry representing the number of shares of Common Stock in payment of such vested whole Actual Performance Shares. The value of any fractional Performance Share will be paid in cash at the time certificates are delivered to Participant in payment of the Actual Performance Shares based on
3
the Fair Market Value of a share of Common Stock on the day preceding the date of distribution.
5.Restriction on Transfer.
(a)The Performance Shares and any rights under this Award may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of by Participant otherwise than by will or by the laws of descent and distribution, and any such purported sale, assignment, transfer, pledge, hypothecation or other disposition will be void and unenforceable against the Company. Notwithstanding the foregoing, Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of Participant and receive any property distributable with respect to the Performance Shares upon the death of Participant.
(b)No transfer by will or the applicable laws of descent and distribution of any Performance Shares that vest by reason of Participant's death will be effective to bind the Company unless the Committee will have been furnished with written notice of such transfer and a copy of the will or such other evidence as the Committee may deem necessary to establish the validity of the transfer.
6.Adjustments to Performance Shares for Certain Corporate Transactions. Adjustments to Performance Shares will be determined in accordance with this Section 6.
(a)The Committee will make an appropriate and proportionate adjustment to the number of Target Performance Shares granted under this Award if:
(i)The outstanding shares of Common Stock are increased or decreased, as a result of merger, consolidation, sale of all or substantially all of the assets of the Company, reclassification, stock dividend, stock split, reverse stock split with respect to such shares of Common Stock or other securities, or
(ii)Additional shares or new or different shares or other securities are distributed with respect to such shares of Common Stock or other securities or exchanged for a different number or kind of shares or other securities through merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to such shares of Common Stock or other securities.
(b)The Committee may make an appropriate and proportionate adjustment in the number of Target Performance Shares granted under this Award if the outstanding shares of Common Stock are increased or decreased as a result of a recapitalization or reorganization not included within subsection (a) above.
4
7.Tax Withholding.
(a)In order to comply with all applicable federal, state, and local tax withholding laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state, and local payroll, withholding, income or other taxes, which are the sole and absolute responsibility of Participant, are withheld or collected from Participant.
(b)In accordance with the terms of the Plan, and such rules as may be adopted by the Committee under the Plan, Participant may elect to satisfy Participant's federal, state, and local tax obligations arising from the receipt of, or the lapse of restrictions relating to, the Performance Shares, by any of the following means or by a combination of such means set forth below. If the Participant fails to notify the Company of his or her election, the Company will withhold shares of Common Stock as described in paragraph (ii), below.
(i)Tendering a payment to the Company in the form of cash, check (bank check, certified check or personal check) or money order payable to the Company;
(ii)Authorizing the Company to withhold from the shares of Common Stock otherwise to be delivered to the Participant a number of such shares having a Fair Market Value as of the date that the amount of the tax to be withheld is to be determined (the "Tax Date) less than or equal to the minimum amount of the Company's withholding tax obligation; or
(iii)Delivering to the Company unencumbered shares of Common Stock already owned by Participant having a Fair Market Value, as of the Tax Date, less than or equal to the minimum amount of the Company's withholding tax obligation. Any shares of Common Stock already owned by Participant referred to in this paragraph (iii) must have been owned by Participant for no less than six (6) months prior to the date delivered to the Company if such shares of Common Stock were acquired upon the exercise of an Option or upon the vesting of Restricted Stock or other Restricted Stock Units.
The Company will not deliver any fractional share of Common Stock but will pay, in lieu thereof, will round the number of shares up or down to the nearest number of full shares. Participant's election must be made on or before the Tax Date.
8.Miscellaneous.
(a)Neither this Award Agreement nor the Plan confers on Participant any right with respect to the continuance of employment by the Company or any Subsidiary, nor will there be a limitation in any way on the right of the Company or any Subsidiary by which Participant is employed to terminate his or her employment at any time.
(b)In the event of a restatement of the Company's consolidated financial statements for any interim or annual period ("Restatement"), the Committee may determine that the Award exceeds the amount that would have been awarded or received had the Restatement been
5
known at the time of the original Award or at the time of vesting of any Actual Performance Shares. In the event that the Committee makes such a determination, the Company shall have the right: (i) in the instance of a Participant whose misconduct or violation of a Company policy causes such Restatement ("Cause"), to terminate, require forfeiture of, or adjust any Awards made to Participant and to require the repayment of any gain on any Award or on any Actual Performance Shares, realized within twelve (12) months of the Restatement and; (ii) in the instance where a Participant is an officer subject to Section 16 of the Securities and Exchange Act of 1934, and without regard to whether such Participant caused the Restatement, to adjust any vested or unvested Award made during the period covered by the Restatement to reflect the impact of the Restatement. Both cause and the amount of adjustment and/or repayment shall be determined by the Committee in its sole discretion and its decision shall be final and binding upon the Participant(s).
(c)The Company will not be required to deliver any shares of Common Stock upon vesting of any Actual Performance Shares until the requirements of any federal or state securities laws, rules or regulations or other laws or rules (including the rules of any securities exchange) as may be determined by the Company to be applicable are satisfied.
(d)An original record of this Award and of the Participant's acceptance and acknowledgement will be held on file by the Company. This Agreement and the Participant's acknowledgement may be made by either paper or electronic format as specified by the Company. To the extent there is any conflict between the terms contained in this Agreement and the terms contained in the original held by the Company, the terms of the original held by the Company will control.
UFP INDUSTRIES, INC.
By
Its
ACCEPTANCE AND ACKNOWLEDGEMENT
I accept the Award described herein, acknowledge receipt of a copy of this Agreement and acknowledge that I have read it carefully and that I fully understand its contents.
PARTICIPANT
Dated
22444951
6
Exhibit 13
UFP INDUSTRIES, INC.
FINANCIAL INFORMATION
Table of Contents
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
UFP Industries, Inc. is a holding company with subsidiaries throughout North America, Europe, Asia, and Australia that design, manufacture, and supply products made from wood, wood and non-wood composites, and other materials to three markets: retail, packaging, and construction. We are headquartered in Grand Rapids, Mich. For more information about UFP Industries, Inc., or its affiliated operations, go to www.ufpi.com.
This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the markets we serve, the economy and the Company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” “likely,” “plans,” “projects,” “should,” variations of such words, and similar expressions identify such forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. We do not undertake to update forward-looking statements to reflect facts, circumstances, events, or assumptions that occur after the date the forward-looking statements are made. Actual results could differ materially from those included in such forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty. Among the factors that could cause actual results to differ materially from forward-looking statements are the following: fluctuations in currency and inflation; fluctuations in the price of lumber; adverse economic conditions in the markets we serve; concentration of sales to customers; vertical integration strategies; excess capacity or supply chain challenges; our ability to make successful business acquisitions; government regulations, particularly involving environmental and safety regulations; adverse or unusual weather conditions; inbound and outbound transportation costs; alternatives to replace treated wood products; cybersecurity breaches; tariffs on import and export sales; costs associated with product liability, casualty, manufacturing and construction defects, and other claims; and potential pandemics. Certain of these risk factors as well as other risk factors and additional information are included in our reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission. We are pleased to present this overview of 2023.
OVERVIEW
Our results for 2023 were impacted by the following:
● | Our net sales decreased 25% compared to 2022, which was comprised of a 16% decrease in selling prices and a 9% decrease in unit sales. The overall decrease in our selling prices is primarily due to lower lumber prices and a more competitive pricing environment in certain of our business units. The overall unit decline consists of a 6% decrease in our retail segment, a 6% decrease in our packaging segment, and a 13% decrease in our construction segment. Acquired businesses contributed 2% unit growth in our packaging segment. |
● | Our gross profits decreased by $370.5 million, or 20.7%, compared to last year, exceeding our 9% decline in unit sales. By segment, gross profits decreased by $203 million in Construction and $171 million in Packaging, while Retail experienced a $33 million increase in gross profits. The overall decrease in our gross profits is primarily due to the decline in unit sales, unfavorable cost variances as a result of fixed manufacturing costs, and more competitive pricing in certain business units. These unfavorable factors were partially offset by more favorable lumber price trends in 2023 on products sold in our Retail segment that are based on variable selling prices. The remaining decline in our gross profits is primarily due to our International segment, which is presented under “All Other” in the segment reporting tables below. |
2
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
● | Our operating profits decreased $304 million, or 32.0%, compared to last year. The overall decrease is a result of the decline in gross profits mentioned above offset by a $65 million decrease in selling, general, and administrative (“SG&A”) expenses. Our SG&A declined primarily due to our incentive compensation plans which are tied to profitability and return on investment. More specifically, our sales incentive expense declined by $30 million to approximately $59 million for the year and bonus expense declined by $54 million to $175 million for the year. Our decremental operating margin comparing our decrease in operating profits relative to our decrease in net sales was 12.6%. |
● | Our cash flows from operations in 2023 was $959.9 million compared to $831.6 million in 2022. The $128 million improvement resulted from the change in our investment in net working capital, which was $300 million lower in 2023 than it was in 2022 resulting in an increase in operating cash flows, offset by a $172 million decrease in net earnings and non-cash expenses compared to the prior year. Our investment in net working capital has declined primarily due to a decline in market demand in the industries we serve as well a decline in the cost of lumber. |
● | We invested $180.4 million in capital expenditures to support and grow our existing businesses and invested $52.4 million in an acquired business. |
● | We returned $68.2 million to our shareholders through dividends and repurchased approximately 975,000 shares of our common stock for $82.1 million, at an average price of $84.27 per share. |
● | Our net surplus cash (cash less debt and cash overdraft) at the end of 2023 was $841.9 million compared to $281.4 million at the end of 2022. Our unused borrowing capacity under our revolving credit facility and a shelf agreement with certain lenders along with our cash surplus resulted in total liquidity of approximately $2.4 billion at the end of December 2023. We plan to continue to pursue a balanced and return driven approach to capital allocation focused on continuing to increase our dividend at a rate that is aligned with our anticipated long-term earnings growth rate, repurchasing our common stock to offset dilution from issuances under our equity-based compensation programs, making capital investments needed to execute our organic growth and operating improvement strategies, and completing business acquisitions that complement our existing businesses and provide new avenues for growth. |
3
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HISTORICAL LUMBER PRICES
The following table presents the Random Lengths framing lumber composite price.
Random Lengths Composite |
| ||||||
Average $/MBF |
| ||||||
| 2023 |
| 2022 |
| |||
January | $ | 386 | $ | 1,112 | |||
February |
| 437 |
| 1,225 | |||
March |
| 411 |
| 1,321 | |||
April |
| 420 |
| 1,051 | |||
May |
| 400 |
| 948 | |||
June |
| 398 |
| 670 | |||
July |
| 455 |
| 621 | |||
August |
| 430 |
| 625 | |||
September |
| 430 |
| 556 | |||
October | 400 | 503 | |||||
November | 371 | 483 | |||||
December | 383 | 420 | |||||
Year-to-date average | $ | 410 | $ | 795 | |||
Year-to-date percentage change |
| (48.4) | % |
|
In addition, a Southern Yellow Pine (“SYP”) composite price, which we prepare and use, is presented below. Our purchases of this species comprise almost two-thirds of our total lumber purchases.
Southern Yellow Pine |
| ||||||
Average $/MBF |
| ||||||
| 2023 |
| 2022 |
| |||
January | $ | 406 | $ | 1,010 | |||
February |
| 452 |
| 1,115 | |||
March |
| 464 |
| 1,198 | |||
April |
| 474 |
| 902 | |||
May |
| 437 |
| 732 | |||
June |
| 427 |
| 574 | |||
July |
| 442 |
| 547 | |||
August |
| 417 |
| 589 | |||
September |
| 424 |
| 533 | |||
October | 396 | 490 | |||||
November | 355 | 472 | |||||
December | 369 | 445 | |||||
Year-to-date average | $ | 422 | $ | 717 | |||
Year-to-date percentage change | (41.1) | % |
Lower overall lumber prices in 2023 compared to 2022 is primarily due to increased capacity of the supply of lumber in North America combined with an increase in imports from other countries while demand for lumber has declined. A change in lumber prices impacts our profitability of products sold with fixed and variable prices, as discussed below.
4
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
IMPACT OF THE LUMBER MARKET ON OUR OPERATING RESULTS
We experience significant fluctuations in the cost of commodity lumber products from primary producers ("Lumber Market"). We generally price our products to pass lumber costs through to our customers so that our profitability is based on the value-added manufacturing, distribution, engineering, and other services we provide. As a result, our sales levels (and working capital requirements) are impacted by the lumber costs of our products. Lumber costs, including plywood and other panel products, were 43.5% and 49.6% of our net sales in 2023 and 2022, respectively.
Our gross margins are impacted by (1) the relative level of the Lumber Market (i.e. whether prices are higher or lower from comparative periods), and (2) the trend in the market price of lumber (i.e. whether the price of lumber is increasing or decreasing within a period or from period to period). Moreover, as explained below, our products are priced differently. Some of our products have fixed selling prices, while the selling prices of other products are indexed to the reported Lumber Market with a fixed dollar adder to cover conversion costs and profits. Consequently, the level and trend of the Lumber Market impact our products differently.
Below is a general description of the primary ways in which our products are priced.
● | Products with fixed selling prices. These products include value-added products, such as manufactured items, sold within all segments. Prices for these products are generally fixed at the time of the sales quotation for a specified period of time. In order to reduce any exposure to adverse trends in the price of component lumber products, we attempt to lock in costs with our suppliers or purchase necessary inventory for these sales commitments. The time period limitation eventually allows us to periodically re-price our products for changes in lumber costs from our suppliers. |
● | Products with selling prices indexed to the reported Lumber Market with a fixed dollar "adder" to cover conversion costs and profits. These products primarily include treated lumber, panel goods, other commodity-type items, and trusses sold to the manufactured housing industry. For these products, we estimate the customers’ needs and we carry anticipated levels of inventory. Because lumber costs are incurred in advance of final sale prices, subsequent increases or decreases in the market price of lumber impact our gross margins. We believe our sales of these products are at their highest relative level in our second quarter, primarily due to pressure-treated lumber sold in our retail segment. |
For each of the product pricing categories above, our margins are exposed to changes in the trend of lumber prices. As a result of the balance in our net sales of each category we believe our gross profits are more stable than those of our competitors who are less diversified.
The greatest risk associated with changes in the trend of lumber prices is on the following products:
● | Products with significant inventory levels with low turnover rates, whose selling prices are indexed to the Lumber Market. In other words, the longer the period of time these products remain in inventory, the greater the exposure to changes in the price of lumber. This would include treated lumber, which comprises approximately 21% of our total net sales in 2023. This exposure is less significant with remanufactured lumber, panel goods, other commodity-type items, and trusses sold to the manufactured housing market due to the higher rate of inventory turnover. We attempt to mitigate the risk associated with treated lumber through inventory consignment programs with our vendors. We estimate that 18% of our total purchases for 2023 were completed under these programs. (Please refer to the “Risk Factors” section of our annual report on form 10-K, filed with the United States Securities and Exchange Commission.) |
5
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
● | Products with fixed selling prices sold under long-term supply arrangements, particularly those involving multi-family construction projects. We attempt to mitigate this risk through our purchasing practices and longer vendor commitments. |
In addition to the impact of the Lumber Market trends on gross margins, changes in the level of the market cause fluctuations in gross margins when comparing operating results from period to period. This is explained in the following example, which assumes the price of lumber has increased from period one to period two, with no changes in the trend within each period.
| Period 1 |
| Period 2 |
| |||
Lumber cost | $ | 300 | $ | 400 | |||
Conversion cost |
| 50 |
| 50 | |||
= Product cost |
| 350 |
| 450 | |||
Adder |
| 50 |
| 50 | |||
= Sell price | $ | 400 | $ | 500 | |||
Gross margin |
| 12.5 | % |
| 10.0 | % |
As is apparent from the preceding example, the level of lumber prices does not impact our overall profits but does impact our margins. Gross margins and operating margins are negatively impacted during periods of high lumber prices; conversely, we experience margin improvement when lumber prices are relatively low. As a result of this factor, we believe it is useful to compare our change in units sold with our change in gross profits, selling, general, and administrative expenses, and operating profits as presented in the following table.
Annual Percentage Change from | ||||||
Prior Year Ended | ||||||
| December 30, | December 31, | ||||
| 2023 |
| 2022 | |||
Units sold |
| (9.0) | % | 2.0 | % | |
Gross profit | (20.7) | 27.2 | ||||
Selling, general, and administrative expenses | (7.9) | 22.0 | ||||
Earnings from operations | (32.0) | 28.8 |
It is our long-term goal to increase our gross profits and earnings from operations at a rate of growth that exceeds our unit sales growth, or in other words, increase our profit per unit sold. We also have a long-term goal of improving our efficiencies and leveraging the fixed costs in our selling, general, and administrative expenses as we grow, which would result in a rate of growth of these expenses which is less than our unit sales growth resulting in a lower cost per unit.
BUSINESS COMBINATIONS AND ASSET PURCHASES
We completed one business acquisition during 2023 and four during 2022. The annual historical sales attributable to acquisitions in 2023 and 2022 were approximately $38.0 million and $177.8 million, respectively. These business combinations were not significant to our operating results individually or in aggregate; consequently pro forma results for 2023 and 2022 are not presented.
See Notes to Consolidated Financial Statements, Note C, "Business Combinations" for additional information.
6
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the components of our Consolidated Statements of Earnings as a percentage of net sales. See “Impact of the Lumber Market on our Operating Results”.
Year Ended | ||||
December 30, |
| December 31, |
| |
2023 |
| 2022 |
| |
Net sales | 100.0 | % | 100.0 | % |
Cost of goods sold | 80.3 |
| 81.4 |
|
Gross profit | 19.7 |
| 18.6 |
|
Selling, general, and administrative expenses | 10.6 |
| 8.6 |
|
Other losses (gains), net | 0.1 |
| 0.1 |
|
Earnings from operations | 9.0 |
| 9.9 |
|
Other (income) expense, net | (0.3) |
| 0.2 |
|
Earnings before income taxes | 9.3 |
| 9.7 |
|
Income taxes | 2.2 |
| 2.4 |
|
Net earnings | 7.1 |
| 7.3 |
|
Less net earnings attributable to noncontrolling interest | — |
| (0.1) |
|
Net earnings attributable to controlling interest | 7.1 | % | 7.2 | % |
Note: Actual percentages are calculated and may not sum to total due to rounding.
The following table presents, for the periods indicated, our selling, general, and administrative (SG&A) costs as a percentage of gross profit. We believe this ratio provides an enhanced view of our effectiveness in managing these costs given our strategies to enhance our capabilities and improve our value-added product offering and recognizing the higher relative level of SG&A these strategies require, and mitigates the impact of changing lumber prices.
Year Ended | |||||
| December 30, |
| December 31, | ||
| 2023 |
| 2022 | ||
Gross profit | $ | 1,418,938 | $ | 1,789,461 | |
Selling, general, and administrative expenses | $ | 766,633 | $ | 832,079 | |
SG&A as percentage of gross profit |
| 54.0% |
| 46.5% |
The increase in the ratio above is primarily due to a combination of fixed SG&A costs and more competitive pricing in certain business units as the markets we serve have declined from peak levels experienced during and shortly after the pandemic. For comparison purposes, our SG&A costs as a percentage of gross profits in 2019 (immediately prior to the pandemic) was 64%.
7
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS BY SEGMENT
Our business segments consist of UFP Retail Solutions (“Retail”), UFP Packaging (“Packaging” and formerly known as UFP Industrial) and UFP Construction (“Construction”), and align with the end markets we serve. Among other things, this structure allows for a more specialized and consistent sales approach among Company operations, more efficient use of resources and capital, and quicker introduction of new products and services. We manage the operations of our individual locations primarily through a market-centered reporting structure under which each location is included in a business unit, and business units are included in our Retail, Packaging, and Construction segments. In the case of locations that serve multiple segments, results are allocated and accounted for by segment. The exception to this market-centered reporting and management structure is our International segment, which comprises our Mexico, Canada, Europe, Asia, and Australia operations and sales and buying offices in other parts of the world. Our International segment and Ardellis (our insurance captive) are included in the “All Other” column of the table below. The “Corporate” column includes purchasing, transportation, corporate ventures, and administrative functions that serve our operating segments. Operating results of Corporate primarily consists of over (under) allocated costs. The operating results of UFP Real Estate, Inc., which owns and leases real estate, and UFP Transportation Ltd., which owns, leases, and operates transportation equipment, are also included in the Corporate column. Inter-company lease and service charges are assessed to our operating segments for the use of these assets and services at fair market value rates.
The following tables present our operating results by segment for December 30, 2023 and December 31, 2022.
Year Ended December 30, 2023 | ||||||||||||||||||
Retail | Packaging | Construction | All Other | Corporate | Total | |||||||||||||
Net sales | $ | 2,886,515 | $ | 1,838,200 | $ | 2,161,059 | $ | 328,884 | $ | 3,726 | $ | 7,218,384 | ||||||
Cost of goods sold |
| 2,508,513 |
| 1,422,940 |
| 1,637,329 | 240,106 | (9,442) | 5,799,446 | |||||||||
Gross profit | 378,002 | 415,260 | 523,730 | 88,778 | 13,168 | 1,418,938 | ||||||||||||
Selling, general, administrative expenses | 209,182 | 219,323 | 279,107 | 55,654 | 3,367 | 766,633 | ||||||||||||
Other | 757 | 8 | 1,277 | 4,482 | (753) | 5,771 | ||||||||||||
Earnings from operations | $ | 168,063 | $ | 195,929 | $ | 243,346 | $ | 28,642 | $ | 10,554 | $ | 646,534 |
Year Ended December 31, 2022 | ||||||||||||||||||
Retail | Packaging | Construction | All Other | Corporate | Total | |||||||||||||
Net sales | $ | 3,650,639 | $ | 2,394,681 | $ | 3,143,868 | $ | 431,611 | $ | 5,940 | $ | 9,626,739 | ||||||
Cost of goods sold |
| 3,306,112 |
| 1,808,449 |
| 2,417,212 | 300,307 | 5,198 | 7,837,278 | |||||||||
Gross profit | 344,527 | 586,232 | 726,656 | 131,304 | 742 | 1,789,461 | ||||||||||||
Selling, general, administrative expenses | 193,383 | 250,858 | 328,125 | 66,745 | (7,032) | 832,079 | ||||||||||||
Other | 817 | 129 | 1,097 | 5,929 | (774) | 7,198 | ||||||||||||
Earnings from operations | $ | 150,327 | $ | 335,245 | $ | 397,434 | $ | 58,630 | $ | 8,548 | $ | 950,184 |
8
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following tables present the components of our operating results as a percentage of net sales by segment for December 30, 2023 and December 31, 2022.
Year Ended December 30, 2023 | |||||||||||||
|
|
|
| ||||||||||
Retail | Packaging | Construction | All Other | Corporate | Total | ||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | N/A | 100.0 | % | ||
Cost of goods sold | 86.9 | 77.4 | 75.8 | 73.0 | — | 80.3 | |||||||
Gross profit | 13.1 | 22.6 | 24.2 | 27.0 | — | 19.7 | |||||||
Selling, general, administrative expenses | 7.2 | 11.9 | 12.9 | 16.9 | — | 10.6 | |||||||
Other | — | — | 0.1 | 1.4 | — | 0.1 | |||||||
Earnings from operations | 5.8 | % | 10.7 | % | 11.3 | % | 8.7 | % | — | 9.0 | % |
Note: Actual percentages are calculated and may not sum to total due to rounding.
Year Ended December 31, 2022 | |||||||||||||
|
|
|
| ||||||||||
Retail | Packaging | Construction | All Other | Corporate | Total | ||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | N/A | 100.0 | % | ||
Cost of goods sold | 90.6 | 75.5 | 76.9 | 69.6 | — | 81.4 | |||||||
Gross profit | 9.4 | 24.5 | 23.1 | 30.4 | — | 18.6 | |||||||
Selling, general, administrative expenses | 5.3 | 10.5 | 10.4 | 15.5 | — | 8.6 | |||||||
Other | — | — | — | 1.4 | — | 0.1 | |||||||
Earnings from operations | 4.1 | % | 14.0 | % | 12.6 | % | 13.6 | % | — | 9.9 | % |
Note: Actual percentages are calculated and may not sum to total due to rounding.
NET SALES
We design, manufacture and market wood and wood-alternative products, primarily used to enhance outdoor living environments, for national home centers and other retailers, engineered wood components, structural lumber, and other products for factory-built and site-built residential and commercial construction, customized interior fixtures used in a variety of retail stores, commercial, and other structures, and structural wood packaging, components and packing materials for various industries. Our strategic long-term sales objectives include:
● | Maximizing unit sales growth while achieving return on investment goals. The following table presents estimates, for the periods indicated, of our percentage change in net sales which were attributable to changes in overall selling prices versus changes in units shipped. |
% Change | |||||||||||
| in Sales |
| in Selling |
| in Units |
| Acquisition Unit Change |
| Organic Unit Change |
| |
2023 versus 2022 | (25.0) | % | (16.0) | % | (9.0) | % | 1.0 | % | (10.0) | % | |
2022 versus 2021 | 11.5 | % | 9.5 | % | 2.0 | % | 3.0 | % | (1.0) | % |
● | Expanding geographically in our core businesses, domestically and internationally. |
9
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
● | Increasing our sales of "value-added" products and enhancing our product offering with new or improved products. Value-added products generally consist of fencing, decking, lattice, and other specialty products sold in the Retail segment; structural and protective packaging and machine-built pallets sold in the Packaging segment; engineered wood components, customized interior fixtures, manufactured and assembled concrete forms sold in the Construction segment; and "wood alternative" products. Engineered wood components include roof trusses, wall panels, and floor systems. Wood alternative products consist of products manufactured with wood and non-wood composites, metals and plastics sold in each of our segments. Although we consider the treatment of dimensional lumber and panels with certain chemical preservatives a value-added process, treated lumber is not presently included in the value-added sales totals. Remanufactured lumber and panels that are components of finished goods are also generally categorized as “commodity-based” products. |
The following table presents, for the periods indicated, our percentage of value-added and commodity-based sales to total sales by our segments.
Year Ended December 30, 2023 | Year Ended December 31, 2022 | ||||||||||||
| Value-Added |
| Commodity-Based | Value-Added |
| Commodity-Based |
| ||||||
Retail |
| 50.5 | % | 49.5 | % | 44.9 | % | 55.1 | % | ||||
Packaging | 77.0 | % | 23.0 | % | 72.0 | % | 28.0 | % | |||||
Construction | 83.2 | % | 16.8 | % | 77.2 | % | 22.8 | % | |||||
All Other | 83.8 | % | 16.2 | % | 76.3 | % | 23.7 | % | |||||
Corporate | 27.5 | % | 72.5 | % | 44.3 | % | 55.7 | % | |||||
Total Sales | 68.4 | % | 31.6 | % | 63.4 | % | 36.6 | % | |||||
Note: Certain prior year product reclassifications and the change in designation of certain products as "value-added" resulted in a change in prior year's sales. |
Our overall unit sales of value-added products decreased approximately 9% in 2023 compared to 2022. Our unit sales of commodity-based products also decreased approximately 9% compared to 2022.
● | Developing new products. We define new products as those that will generate sales of at least $1 million per year within 4 years of launch and are still growing and gaining market penetration. New product sales in 2023 decreased 8% compared to the prior year, primarily due to a decline in lumber prices, which were passed to our customers in our selling prices. Approximately $17.4 million of new product sales for 2022, while still sold, were sunset in 2023 and excluded from the table below because they no longer meet the definition above. Our goal was to achieve annual new product sales of at least $795 million in 2023. For 2024, we have redefined our definition of new products as we focus on more value-added products and services. As a result, we have lowered the forecast for new product sales to $510 million for 2024. On a long-term basis, our goal is for new product sales to comprise at least 10% of our total net sales. |
10
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The table below presents new product sales in thousands:
New Product Sales by Segment | ||||||||||||||||
Year Ended | ||||||||||||||||
| December 30, | % of Segment |
| December 31, | % of Segment |
| % Change | |||||||||
2023 | Net Sales | 2022 | Net Sales | in Sales | ||||||||||||
Retail | $ | 327,019 | 11.3 | % | $ | 338,547 | 9.3 | % |
| (3.4) | % | |||||
Packaging |
| 277,703 | 15.1 | % | 277,859 | 11.6 | % |
| (0.1) | % | ||||||
Construction | 109,617 | 5.1 | % | 140,176 | 4.5 | % | (21.8) | % | ||||||||
All Other and Corporate |
| 1,808 | 0.5 | % | 2,508 | 0.6 | % |
| (27.9) | % | ||||||
Total New Product Sales |
| 716,147 | 9.9 | % | 759,090 | 7.9 | % |
| (5.7) | % | ||||||
Note: Certain prior year product reclassifications and the change in designation of certain products as "new" resulted in a change in prior year's sales. |
Retail Segment:
Net sales from the Retail segment decreased 21% in 2023 compared to 2022 due to a 15% decrease in selling prices and a 6% decrease in organic unit growth. Our selling prices of variable-priced products declined due to lower lumber prices. The selling prices of these products are indexed to the lumber market at the time they are shipped. Additionally, our unit sales to big box customers, which we believe are more closely correlated with repair and remodel activity, increased nearly 2%, while unit sales to independent retailers, which we believe are more closely correlated to new housing starts, decreased approximately 20%.
Gross profits increased by $33.5 million, or 9.7%, to $378.0 million in 2023 compared to 2022. Our change in gross profits was attributable to the following:
● | The gross profits of our ProWood business unit increased $28.7 million, primarily due to less volatile lumber prices during 2023 compared to severe, adverse volatility in 2022. The products sold by this unit consists primarily of pressure treated lumber sold at a variable price indexed to the lumber market at the time they are shipped. |
● | Our Deckorator’s business unit increased by approximately $18.2 million due to an increase in overall unit sales, sales of new products, and operational improvements. |
● | The improvements above were offset by a $14 million decrease in gross profits of our Edge business unit. |
Selling, general and administrative (“SG&A”) expenses increased by approximately $15.8 million, or 8.2%, in 2023 compared to 2022. Accrued bonus expense, which varies with the overall profitability and return on investment of the segment, increased approximately $8.8 million and totaled approximately $45.8 million in 2023. The remaining increase is comprised of many smaller increases spread over several accounts.
Earnings from operations of the Retail reportable segment increased in 2023 compared to 2022 by $17.7 million, or 11.8%, as a result of the factors mentioned above.
Packaging Segment:
Net sales from the Packaging segment decreased 23% in 2023 compared to 2022 due to a 17% decrease in selling prices and an 8% decrease in organic unit sales, partially offset by unit growth from acquisitions of 2%. The decline in prices is due to competitive price pressure as well as lower lumber costs passed to customers.
11
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Gross profits decreased by $171.0 million, or 29.2%, to $415.3 million in 2023 compared to 2022. The decrease in gross profits is primarily due to lower demand resulting in lower unit sales, as well as competitive price pressure, and unfavorable cost variances as a result of fixed manufacturing costs. Acquisitions contributed $8.1 million to gross profit.
Selling, general and administrative (“SG&A”) expenses decreased by approximately $31.5 million, or 12.6%, in 2023 compared to 2022. Accrued bonus expense, which varies with the overall profitability and return on investment of the segment, decreased approximately $28.4 million, and totaled approximately $53.8 million for 2023. Additionally, our bad debt expense decreased by $8.1 million and incentive compensation expense decreased by $8.5 million. These decreases were partially offset by an increase in salaries and wages of $8.7 million, and acquired operations, which contributed approximately $5.6 million to our SG&A.
Earnings from operations of the Packaging reportable segment in 2023 decreased by $139.3 million, or 41.6%, compared to 2022 due to the factors discussed above.
Construction Segment:
Net sales from the Construction segment decreased 31% in 2023 compared to 2022 due to an 18% decrease in selling prices and a decline in organic unit sales of 13%. Organic unit changes within this segment consisted of decreases of 2% in concrete forming, 12% in site-built housing, 14% in factory-built housing, and 24% in commercial construction. The decline in pricing was due to competitive price pressure as well as the decline in lumber prices, which were passed to our customers.
Gross profits decreased by $202.9 million, or 27.9% to $523.7 million in 2023 compared to 2022. The decrease in our gross profit was comprised of the following factors:
● | Gross profits in our factory-built housing and site-built construction business unit decreased by $65.6 million and $118.2 million, respectively, due to competitive price pressure as well as lower sales volumes and unfavorable cost variances due to fixed manufacturing costs. |
● | The gross profit of our concrete forming business unit decreased by $17.4 million due to a decline in selling prices. |
SG&A expenses decreased by approximately $49.0 million, or 14.9%, in 2023 compared to 2022. Accrued bonus expense, which varies with the overall profitability of the segment and return on investment, decreased approximately $31.0 million compared to last year and totaled approximately $65.0 million for 2023. The remaining decrease was primarily due to decreases in sales incentive compensation of $13.9 million, bad debt expense of $5.3 million, and professional fees of $3.2 million. These decreases were offset by an increase in salaries, wages, and benefits of approximately $3.0 million.
Earnings from operations of the Construction reportable segment increased in 2023 compared to 2022 by $154.1 million, or 38.8%, due to the factors mentioned above.
All Other Segment:
Our All Other reportable segment consists of our International and Ardellis (our insurance captive) segments that are not significant. The decline in sales and earnings from operations is primarily due to our operation in Mexico that exports molding and millwork products to the U.S.
12
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Corporate:
The corporate segment consists of over (under) allocated costs that are not significant.
INTEREST EXPENSE
Interest expense in 2023 was similar to 2022 due to consistent amounts of outstanding debt during each period as well as fixed interest rates on these debts. See “Note C of Notes to the Consolidated Financial Statements”.
INTEREST AND INVESTMENT INCOME
Interest and investment income increased by $39.2 million in 2023 compared to 2022 due to the increase in cash and the higher interest rate environment.
INCOME TAXES
Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for state and local income taxes, and permanent tax differences. Our effective tax rate was 23.4% in 2023 compared to 24.6% in 2022. The decrease in our overall effective tax rate was primarily due to an increase in our tax deduction from stock-based compensation accounted for as a permanent difference, and an increase in the research and development tax credit, and a manufacturing exemption which reduced our income tax in one of the states we operate.
OFF-BALANCE SHEET COMMITMENTS AND CONTRACTUAL OBLIGATIONS
We have no significant off-balance sheet commitments. The following table summarizes our contractual obligations as of December 30, 2023 (in thousands).
Payments Due by Period | |||||||||||||||
| Less than |
| 1 – 3 |
| 3 – 5 |
| After |
| |||||||
Contractual Obligation | 1 Year | Years | Years | 5 Years | Total | ||||||||||
Long-term debt and finance lease obligations | $ | 42,823 | $ | 826 | $ | 44,119 | $ | 188,666 | $ | 276,434 | |||||
Estimated interest on long-term debt and finance lease obligations |
| 10,062 |
| 17,105 |
| 15,643 |
| 26,720 |
| 69,530 | |||||
Operating leases |
| 32,796 |
| 56,539 |
| 31,515 |
| 31,686 |
| 152,536 | |||||
Capital project purchase obligations |
| 93,566 |
| — |
| — |
| — |
| 93,566 | |||||
Total | $ | 179,247 | $ | 74,470 | $ | 91,277 | $ | 247,072 | $ | 592,066 |
As of December 30, 2023, we also had $47.8 million in outstanding letters of credit issued during the normal course of business, as required by some vendor contracts.
13
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The table below presents, for the periods indicated, a summary of our cash flow statement (in thousands):
December 30, | December 31, | ||||||
| 2023 |
| 2022 |
| |||
Cash from operating activities |
| $ | 959,890 |
| $ | 831,567 |
|
Cash used in investing activities |
| (240,164) |
| (353,936) |
| ||
Cash used in financing activities |
| (162,860) |
| (210,210) |
| ||
Effect of exchange rate changes on cash |
| 5,767 |
| 979 |
| ||
Net change in cash and cash equivalents |
| 562,633 |
| 268,400 |
| ||
Cash, cash equivalents, and restricted cash, beginning of year |
| 559,623 |
| 291,223 |
| ||
Cash, cash equivalents, and restricted cash, end of year | $ | 1,122,256 | $ | 559,623 |
In general, we fund our growth through a combination of operating cash flows, our revolving credit facility, and issuance of long-term notes payable at times when interest rates are favorable. We have not issued equity to finance growth except in the case of a large acquisition that occurred many years ago. We manage our capital structure by attempting to maintain a targeted ratio of debt to equity and debt to earnings before interest, taxes, depreciation and amortization. We believe these financial ratios are among many other important factors to maintaining a strong credit profile, which in turn helps ensure timely access to capital when needed.
Seasonality has a significant impact on our working capital due to our primary selling season which occurs during the period from March to September. Consequently, our working capital increases during our first and second quarters resulting in negative or modest cash flows from operations during those periods. Conversely, we experience a substantial decrease in working capital once we move beyond our peak selling season which typically results in significant cash flows from operations in our third and fourth quarters.
Due to the seasonality of our business and the effects of the Lumber Market, we believe our cash cycle (days of sales outstanding plus days supply of inventory less days payables are outstanding) is a good indicator of our working capital management. As indicated in the table below, our cash cycle decreased slightly to 63 days in 2023 from 64 days in 2022.
Year Ended | ||||||
December 30, | December 31, | |||||
2023 | 2022 | |||||
Days of sales outstanding |
| 33 |
| 36 | ||
Days supply of inventory |
| 41 |
| 40 | ||
Days of payables outstanding1 |
| (11) |
| (12) | ||
Days in cash cycle |
| 63 |
| 64 |
1 We’ve modified our calculation of days of payables outstanding to be based on the cost of goods sold and accounts payable balances in our monthly financial statements. In prior periods, our calculation was based on invoice data. We’ve made this change to simplify the calculation and more easily integrate acquired operations into our financial metrics. The prior year metrics have been restated for the new method which reduced days of payables from a previously reported 20 days to 12 days.
We continue to focus on past due account balances with customers, and the percentage of our accounts receivable that are current are 91% in 2023 compared to 87% in 2022, which contributed to the improvement in our days of sales outstanding.
14
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our cash flows from operating activities in 2023 was $960 million, which was comprised of net earnings of $514 million, $158 million of non-cash expenses, and a $288 million decrease in working capital since the end of December 2022. Our cash flows from operations increased by $128 million compared to last year primarily due to a $300 million decrease in our investment in net working capital compared to the prior year period, offset by a decrease in our net earnings and non-cash expenses of $172 million. The elevated decrease in our net working capital this year was due to the drop in lumber prices and a decline in demand in certain markets we serve.
Purchases of property, plant, and equipment of $180 million comprised most of our cash used in investing activities during 2023. Capital spending primarily consists of several projects to expand capacity to manufacture new and value-added products, primarily in our Packaging segment and Deckorators and ProWood business units, achieve efficiencies through automation in all segments, make improvements to a number of facilities, and increase our transportation capacity (tractors, trailers). Cash used for acquisitions during the year totaled $52 million compared to $180 million in 2022. In the current year we made one acquisition, UFP Palets y Embalajes SL. See Notes to Consolidated Financial Statements, Note C, "Business Combinations" for additional information.
Cash flows used in financing activities primarily consisted of:
● | Cash paid for repurchases of common stock of $82 million. We repurchased 974,869 shares of our common stock for the year at an average share price of $84.27. |
● | Dividends paid during 2023 include first quarter dividends of $16 million ($0.25 per share), second quarter dividends of $15 million ($0.25 per share) third quarter dividends of $19 million ($0.30 per share), and fourth quarter dividends of $18 million ($0.30 per share). |
● | Contingent consideration payments of $6 million. |
● | Distributions to noncontrolling interests of $7 million. |
On November 1, 2018, we entered into a five-year, $375 million unsecured revolving credit facility with a syndicate of U.S. banks. On February 28, 2021, this credit agreement was amended to increase the availability from $375 million to $550 million by exercising the accordion feature in the original agreement. On December 6, 2022, a second amendment increased the availability from $550 million to $750 million. The facilities now include up to $60 million which may be advanced in the form of letters of credit, and up to $100 million (U.S. dollar equivalent) which may be advanced in Canadian dollars, Australian dollars, Sterling, Euros and such other foreign currencies as may subsequently be agreed upon among the parties. Cash borrowings are charged interest based upon an index selected by the Company, plus a margin that is determined based upon the index selected and upon the financial performance of the Company and certain of its subsidiaries. We are charged a facility fee on the entire amount of the lending commitment, at a per annum rate ranging from 15.0 to 30.0 basis points, also determined based upon our performance.
On December 30, 2023, we had $3.7 million outstanding on our $750 million revolving credit facility. The revolving credit facility also supports letters of credit totaling $37.3 million which includes approximately $3.3 million related to industrial development revenue bonds. As a result, we have approximately $709.0 million in remaining availability. We also had approximately $10.5 million of outstanding letters of credit that were issued outside of the revolving credit facility. Financial covenants on the unsecured revolving credit facility and unsecured notes include minimum interest tests and a maximum leverage ratio. The agreements also restrict the amount of additional indebtedness we may incur and the amount of assets which may be sold. We were in compliance with all our covenant requirements on December 30, 2023.
15
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ENVIRONMENTAL CONSIDERATIONS AND REGULATIONS
See Notes to Consolidated Financial Statements, Note L, “Commitments, Contingencies, and Guarantees”.
CRITICAL ACCOUNTING POLICIES
In preparing our consolidated financial statements, we follow accounting principles generally accepted in the United States. These principles require us to make certain estimates and apply judgments that affect our financial position and results of operations. We continually review our accounting policies and financial information disclosures. Following is a summary of our more significant accounting policies that require the use of estimates and judgments in preparing the financial statements.
GOODWILL
We evaluate goodwill for indicators of impairment when events or circumstances indicate that this risk may be present. Our judgments regarding the existence of impairment are based on market conditions, operational performance and estimated future cash flows. Determining whether an impairment has occurred requires the valuation of the respective reporting unit, which we have consistently estimated using primarily a weighted average between income and market valuation approaches. We believe this approach is the most appropriate and accurate method to measure the fair value of our intangible assets. We use discounted cash flow analysis with the following assumption: a business is worth today what it can generate in future cash flows; cash received today is worth more than an equal amount of cash received in the future; and future cash flows can be reasonably estimated. The discounted cash flow analysis is based on the present value of projected cash flows and residual values.
If the carrying value of goodwill is considered impaired, an impairment charge is recorded to adjust it to its fair value. Changes in forecasted operations and changes in discount rates can materially affect these estimates. In addition, we test goodwill annually for impairment or more frequently if changes in circumstances or the occurrence of other events suggest impairments exist. The test for impairment requires us to make several estimates about fair value, most of which are based on projected future cash flows and market valuation multiples. Changes in these estimates may result in the recognition of an impairment loss.
On our annual testing date of September 30, 2023, the fair values exceed the carrying values for all reporting units and there were no indicators for impairment. We believe we have sufficient available information, both current and historical, to support our assumptions, judgments and estimates used in the goodwill impairment test.
REVENUE RECOGNITION
Revenue for product sales is recognized at the time the performance obligation is satisfied, which is primarily when the goods are delivered to the carrier, Free On Board (FOB) shipping point. Generally, title passes at the time of shipment. In certain circumstances, the customer takes title when the shipment arrives at the destination. However, our shipping process is typically completed the same day.
16
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Performance on construction contracts is reflected in operations using over time accounting, under either the cost to cost or units of delivery methods, depending on the nature of the business at individual operations. Under over time accounting using the cost to cost method, revenues and related earnings on construction contracts are measured by the relationships of actual costs incurred related to the total estimated costs. Under over time accounting using the units of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual units produced related to the total number of units. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent.
Our construction contracts are generally entered into with a fixed price and completion of the projects can range from 6 to 18 months in duration. Therefore, our operating results are impacted by, among many other things, labor rates and commodity costs. During the year, we update our estimated costs to complete our projects using current labor and commodity costs and recognize losses to the extent that they exist.
SHORT-TERM DEMAND OUTLOOK
We believe effectively executing our strategies will allow us to achieve long-term goals in the future. However, demand in the markets we serve has contracted, which will impact our results and vary depending on the severity and duration of this cycle. The following factors should be considered when evaluating our future results:
● | Lumber prices, which impact our cost of goods sold and selling prices, have normalized due to additional capacity added by sawmills and demand falling from peak levels. We anticipate lumber prices will remain in range near current levels, and experience more typical seasonal trends, until there is a substantial change in the balance of supply and demand. |
● | Retail segment sales accounted for 40% of our net sales in 2023. When evaluating future demand for the segment, we analyze data such as the same-store sales growth of national home improvement retailers and forecasts of home remodeling activity. Based on this data, we currently anticipate market demand to be flat to slightly down in 2024. |
● | Packaging segment sales accounted for 26% of our net sales in 2023. When evaluating future demand, we consider a number of metrics, including the Purchasing Managers Index (PMI), durable goods manufacturing, and U.S. real GDP. We currently believe overall demand in the markets we serve to be slightly up to slightly down in 2024. |
● | Construction segment sales accounted for 30% of our net sales in 2023. |
- | The site-built business unit accounted for approximately 14% of our net sales in 2023. Approximately one-third of site-built customers are multifamily builders. The Mortgage Bankers Association of America forecasts a 1% decrease in national housing starts to an estimated 1.42 million starts in 2024 and the National Association of Home Builders forecasts starts of 1.34 million, a 6% decrease from 2023. |
- | The factory-built business unit accounted for 10% of our net sales in 2023. When evaluating future demand, we analyze data from production and shipments of manufactured housing. The National Association of Home Builders and John Burns Real Estate Consulting forecast the manufactured home shipments in 2024 to be flat to slightly up. |
17
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- | The commercial and concrete forming business units accounted for approximately 6% of our net sales in 2023. When evaluating future demand, we analyze data from non-residential construction spending. We anticipate overall demand in this business unit to be flat to slightly up in 2024. |
LONG-TERM OUTLOOK
GOALS
Our long-term financial goals include:
● | Growing our annual unit sales by 7 to 10 percent. We anticipate smaller tuck-in acquisitions will contribute toward this goal; |
● | Achieving and sustaining a 12.5 percent EBITDA margin by continuing to enhance our capabilities and grow our portfolio and sales of value-added products and by achieving operating improvements; |
● | Earning an incremental return on new investment over our cost of capital; and |
● | Maintaining a conservative capital structure. |
RETAIL SEGMENT
The Home Improvement Research Institute (“HIRI”) anticipates growth in home improvement spending and has forecasted 2.4% growth in 2025 and 3.0% annual growth through 2027. We continue to compete for market share for certain retail customers and face intense pricing pressure from other suppliers to this market.
Our long-term goal is to achieve sales growth by:
● | Increasing our market share of value-added products, including our Deckorators and Edge product lines. Continued investment in capacity for Deckorators and Edge is expected to contribute to this increase. |
● | Developing new products and increasing our emphasis on product innovation and product differentiation in order to counter commoditization trends and influences. |
● | Acquiring businesses in core product categories when those opportunities exist. |
● | Adding new products and customers through strategic business acquisitions or alliances. |
PACKAGING SEGMENT
Our goal is to increase our sales of wood, wood alternative, and protective packaging products to a wide variety of packaging customers and manufactured wood components for OEM users. We believe the vast amount of hardwood and softwood lumber consumed for packaging applications, combined with the highly fragmented nature of this market, provides us with market share growth opportunities as a result of our competitive advantages in manufacturing, purchasing, and material utilization.
18
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In addition, purchasers of packaging products with a wide geographic footprint increasingly desire to reduce the number of suppliers they buy from, which provides an opportunity to gain market share due to our international presence. We plan to continue to obtain market share by expanding our manufacturing capacity, enhancing our capabilities and product offerings to enhance the solutions we offer our customers, and improving our ability to serve large regional and international customers in targeted markets.
We plan to continue to pursue acquisition opportunities that meet our strategic criteria and help us meet these objectives. The recently implemented reorganization of our business to market-based segments is intended to promote higher rates of sales growth through the introduction of new products, including protective and other packaging materials, and enhanced expertise in this market as well as improved earnings through more efficient use of our people, resources and capital.
Market indicators that should be considered when evaluating future demand for our products in the packaging segment include industrial production, the Purchasing Managers Index, and U.S. GDP growth.
CONSTRUCTION SEGMENT
The National Association of Home Builders forecasts a 3% increase in manufactured home shipments from 2023 to 2024 and a 4% compounded annual growth rate through 2026.
The Mortgage Bankers Association of America forecasts national housing starts of 1.42 million in 2024 and 1.47 million in 2025. The National Association of Home Builders forecasts starts of 1.34 million in 2024 and 1.42 million in 2025. The consensus estimate of all housing starts is 1.4 million in 2024, 1.47 million in 2025, and 1.5 million is 2026.
Non-residential construction spending is a market indicator that should be considered when evaluating future demand for our products in our Commercial and Concrete Forming business units within our Construction segment.
GROSS PROFIT
We believe the following factors are likely to impact our gross profits and margins in the future:
● | End market demand and our ability to grow and leverage fixed costs and price our products based on the value we offer our customers. |
● | Our ability to maintain market share and gross margins on products sold to our largest customers. We believe our level of service, geographic diversity, and quality of products provides an added value to our customers. However, if our customers are unwilling to pay for these advantages, our sales and gross margins may be reduced. |
● | Sales mix of value-added and commodity products and our ability to sell new products. |
● | Fluctuations in the relative level of the Lumber Market and trends in the market price of lumber. (See "Impact of the Lumber Market on our Operating Results.") |
● | Fuel and transportation costs. |
● | Rising labor and benefit costs. |
● | Our ability to continue to achieve productivity improvements as our unit sales increase and planned cost reductions through continuous improvement activities, automation, and other initiatives. |
19
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
● | Changes in corporate income tax rates and the cost of complying with new or increased government regulations. |
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
In recent years, selling, general and administrative (SG&A) expenses have increased due to acquisitions and added personnel hired to take advantage of growth opportunities and execute our initiatives intended to increase our sales of new products and improve our sales mix of value-added products. We anticipate our trend of increases in these costs will continue; however, our objective is to reduce these costs on a per unit basis and as a percentage of gross profits as we grow through the improved productivity of our people and as a result of fixed costs. In addition, bonus and other incentive expenses is based on our profitability and the effective management of our assets and will continue to fluctuate based on our results. See Note H — Common Stock for discussion of future compensation costs related to long-term share-based bonus awards.
On a long-term basis, we expect that our SG&A expenses will primarily be impacted by:
● | Our growth in sales to the packaging and the construction segments. Our sales to these segments require a higher ratio of SG&A costs due, in part, to product design and engineering requirements. |
● | Sales of new products and value-added, branded products to the retail segment, which generally require higher product development, marketing, advertising, and other selling costs. |
● | Our incentive compensation programs which are tied to gross profits, pre-bonus earnings from operations and threshold levels of return on investment. |
● | Our growth and success in achieving continuous improvement objectives designed to improve our productivity and leverage our fixed costs as we grow. |
LIQUIDITY AND CAPITAL RESOURCES
Our cash cycle will continue to be impacted in the future by our mix of sales by segment. Sales from our Construction and Packaging segments require a greater investment in receivables than sales to our Retail segment, while our Retail segment generally requires a greater investment in inventory. Also, our net investment in trade receivables, inventory, and accounts payable will continue to be impacted by the level of lumber prices.
Additionally, we expect to spend approximately $250 million to $300 million on capital expenditures, incur depreciation of approximately $110 million, and incur amortization and other non-cash expenses of approximately $45 million in 2024.
On December 30, 2023, we had outstanding purchase commitments on capital projects of approximately $93.6 million. We intend to fund capital expenditures and purchase commitments through our operating cash flows and availability under our revolving credit facility which is considered sufficient to meet these commitments and working capital needs.
Our dividend rates are reviewed and approved at each of our February, April, July, and October board meetings and payments are made in March, June, September, and December of each year. On February 1, 2024, our board approved a quarterly cash dividend of $0.33 per share, which represents a 10% increase from December 2023. This dividend will be payable on March 15, 2024, to shareholders of record on March 1, 2024. Our board considers our dividend yield, payout ratios relative to earnings and operating cash flow, and potential variability of future results, among other factors, as part of its decision-making process.
20
UFP INDUSTRIES, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We have a share repurchase program approved by our Board of Directors, and on July 26, 2023, our board authorized the repurchase of up to $200 million worth of shares of outstanding stock through July 31, 2024. This share authorization supersedes and replaces our prior share repurchase authorizations. We currently have remaining authorization to repurchase up to $173 million through July 31, 2024. In the past, we have repurchased shares in order to offset the effect of issuances resulting from our employee benefit plans and at opportune times when our stock price falls to predetermined levels.
21
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of UFP Industries, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of UFP Industries, Inc. and subsidiaries (the “Company”) as of December 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 30, 2023, of the Company and our report dated February 28, 2024, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Grand Rapids, Michigan
February 28, 2024
22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of UFP Industries, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of UFP Industries, Inc. and subsidiaries (the "Company") as of December 30, 2023 and December 31, 2022, the related consolidated statements of earnings and comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended December 30, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2023, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accounting for Variable Interest Entities - Refer to Note C, Business Combinations, to the financial statements.
Critical Audit Matter Description
The Company periodically purchases a partial ownership interest in other entities. The agreements related to such purchases can be complex, requiring management to evaluate whether the entities should be consolidated or accounted for under the equity method. In addition, management must also evaluate whether the acquired interest in the entity represents a variable interest entity (“VIE”) and if so, whether the Company is the primary beneficiary. This assessment requires judgment by management.
23
We identified the Company’s assessment of consolidation or equity method accounting related to its acquisition of a partial ownership interest in UFP Palets, as well as the VIE primary beneficiary assessment, as a critical audit matter given the judgment required by management. This required a higher degree of auditor judgment and an increased extent of audit effort due to the complexity of the entity structure and the related acquisition agreement.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the determination of equity method or consolidation accounting, inclusive of VIE primary beneficiary assessment, included the following, among others:
● | We tested the effectiveness of the controls over the accounting assessment of the acquisition. |
● | We evaluated the appropriateness of the Company’s accounting conclusion related to consolidation or equity method accounting for a partial ownership interest entity by reading the acquisition agreement and other related documents. |
● | We evaluated the terms of the agreement to determine if the acquired ownership interest should be classified as a VIE. If an entity was determined to be a VIE, we considered whether the Company appropriately determined the primary beneficiary by evaluating the contractual arrangements of the entity to determine if the Company has the power to direct activities, and if the Company has the obligation to absorb losses of the entity or the right to receive benefits from the entity that could be significant to the VIE. |
/s/ Deloitte & Touche LLP
Grand Rapids, Michigan
February 28, 2024
We have served as the Company's auditor since 2014.
24
UFP INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) | December 30, | December 31, | |||||
| 2023 |
| 2022 | ||||
ASSETS |
|
| |||||
CURRENT ASSETS: |
|
| |||||
Cash and cash equivalents |
| $ | |
| $ | | |
Restricted cash |
| |
|
| | ||
Investments |
| |
|
| | ||
Accounts receivable, net |
| |
|
| | ||
Inventories: |
|
| |||||
Raw materials |
| |
|
| | ||
Finished goods |
| |
|
| | ||
Total inventories |
| |
|
| | ||
Refundable income taxes |
| |
|
| | ||
Other current assets |
| |
|
| | ||
TOTAL CURRENT ASSETS |
| |
| | |||
DEFERRED INCOME TAXES |
| |
|
| | ||
RESTRICTED INVESTMENTS | | | |||||
RIGHT OF USE ASSETS | | | |||||
OTHER ASSETS |
| |
|
| | ||
GOODWILL |
| |
|
| | ||
INDEFINITE-LIVED INTANGIBLE ASSETS |
| |
|
| | ||
OTHER INTANGIBLE ASSETS, NET |
| |
|
| | ||
PROPERTY, PLANT AND EQUIPMENT: |
|
| |||||
Property, plant and equipment | | | |||||
Less accumulated depreciation and amortization |
| ( |
|
| ( | ||
PROPERTY, PLANT AND EQUIPMENT, NET | | | |||||
TOTAL ASSETS | $ | | $ | | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
| |||||
CURRENT LIABILITIES: |
|
| |||||
Accounts payable | $ | |
| $ | | ||
Accrued liabilities: |
|
| |||||
Compensation and benefits |
| |
|
| | ||
Other |
| |
|
| | ||
Current portion of lease liability | | | |||||
Current portion of long-term debt |
| |
|
| | ||
TOTAL CURRENT LIABILITIES |
| |
|
| | ||
LONG-TERM DEBT |
| |
|
| | ||
LEASE LIABILITY | | | |||||
DEFERRED INCOME TAXES |
| |
|
| | ||
OTHER LIABILITIES |
| |
|
| | ||
TOTAL LIABILITIES |
| |
|
| | ||
TEMPORARY EQUITY: | |||||||
Redeemable noncontrolling interest | | | |||||
SHAREHOLDERS’ EQUITY: |
|
| |||||
Controlling interest shareholders’ equity: |
|
| |||||
Preferred stock, | $ |
| $ | ||||
Common stock, $ |
| |
|
| | ||
Additional paid-in capital |
| |
|
| | ||
Retained earnings |
| |
|
| | ||
Accumulated other comprehensive loss |
| |
|
| ( | ||
Total controlling interest shareholders’ equity |
| |
|
| | ||
Noncontrolling interest |
| |
|
| | ||
TOTAL SHAREHOLDERS’ EQUITY |
| |
|
| | ||
TOTAL LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS’ EQUITY | $ | |
| $ | |
See notes to consolidated financial statements.
25
UFP INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(in thousands, except per share data) | Year Ended | ||||||||
December 30, | December 31, | December 25, | |||||||
| 2023 |
| 2022 |
| 2021 | ||||
NET SALES |
| $ | |
| $ | |
| $ | |
COST OF GOODS SOLD |
| |
|
| |
|
| | |
GROSS PROFIT |
| |
|
| |
|
| | |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
| |
|
| |
|
| | |
OTHER LOSSES (GAINS), NET | | | ( | ||||||
EARNINGS FROM OPERATIONS |
| |
|
| |
|
| | |
INTEREST EXPENSE |
| |
|
| |
|
| | |
INTEREST AND INVESTMENT INCOME |
| ( |
|
| ( |
|
| ( | |
EQUITY IN LOSS OF INVESTEE | | | | ||||||
INTEREST AND OTHER |
| ( |
|
| |
|
| | |
EARNINGS BEFORE INCOME TAXES |
| |
|
| |
|
| | |
INCOME TAXES |
| |
|
| |
|
| | |
NET EARNINGS |
| |
|
| |
|
| | |
NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST |
| ( |
|
| ( |
|
| ( | |
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST | $ | |
| $ | |
| $ | | |
EARNINGS PER SHARE – BASIC | $ | |
| $ | |
| $ | | |
EARNINGS PER SHARE – DILUTED | $ | |
| $ | |
| $ | | |
OTHER COMPREHENSIVE INCOME: | |||||||||
NET EARNINGS |
| |
|
| |
|
| | |
OTHER COMPREHENSIVE INCOME (LOSS) |
| |
|
| ( |
|
| ( | |
COMPREHENSIVE INCOME |
| |
|
| |
|
| | |
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST |
| ( |
|
| ( |
|
| ( | |
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST | $ | |
| $ | |
| $ | |
See notes to consolidated financial statements.
26
UFP INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except share and per share data) | Controlling Interest Shareholders’ Equity | |||||||||||||||||||||
Additional | Accumulated Other | |||||||||||||||||||||
Common | Paid-In | Retained | Comprehensive | Noncontrolling | Temporary | |||||||||||||||||
| Stock |
| Capital |
| Earnings |
| Earnings |
| Interest (NCI) |
| Total |
| Equity | |||||||||
Balance on December 26, 2020 | $ | | $ | |
| $ | | $ | ( |
| $ | |
| $ | | $ | — | |||||
Net earnings |
|
| |
|
|
| |
|
| | ||||||||||||
Foreign currency translation adjustment |
|
|
| ( |
| ( |
|
| ( | |||||||||||||
Unrealized gain on investments and other |
|
|
| ( |
|
|
| ( | ||||||||||||||
Distributions to noncontrolling interest |
|
|
|
| ( |
| ( | |||||||||||||||
NCI related to business combinations | | | ||||||||||||||||||||
Cash dividends - $ |
|
| ( |
|
|
|
|
| ( | |||||||||||||
Issuance of |
| |
| |
|
|
|
|
| | ||||||||||||
Issuance of |
| |
| |
|
|
|
| | |||||||||||||
Issuance of |
| |
| ( |
|
|
|
|
| — | ||||||||||||
Expense associated with share-based compensation arrangements |
|
| |
|
|
|
|
|
|
| | |||||||||||
Accrued expense under deferred compensation plans |
|
| |
|
|
|
|
|
|
| | |||||||||||
Balance on December 25, 2021 | $ | | $ | |
| $ | | $ | ( |
| $ | |
| $ | | $ | ||||||
Net earnings | | |
|
| | | ||||||||||||||||
Foreign currency translation adjustment | ( | |
|
| ( | ( | ||||||||||||||||
Unrealized gain on investments and other | ( |
| ( | |||||||||||||||||||
Distributions to NCI | ( |
| ( | |||||||||||||||||||
Contributions to NCI | | | ||||||||||||||||||||
NCI related to business combinations | — | ( | ||||||||||||||||||||
Redeemable NCI | ( | ( | | |||||||||||||||||||
Cash dividends - $ | ( |
| ( | |||||||||||||||||||
Issuance of |
| | |
|
| | ||||||||||||||||
Issuance of |
| | | |
|
| | |||||||||||||||
Issuance of |
| | ( |
|
| — | ||||||||||||||||
Repurchase of | ( |
|
| ( | ( | |||||||||||||||||
Expense associated with share-based compensation arrangements | |
| | |||||||||||||||||||
Accrued expense under deferred compensation plans | |
| | |||||||||||||||||||
Balance on December 31, 2022 | $ | | $ | |
| $ | | $ | ( |
| $ | |
| $ | | $ | | |||||
Net earnings (loss) | | | | ( | ||||||||||||||||||
Foreign currency translation adjustment | | | | | ||||||||||||||||||
Unrealized loss on investments and other | | | ||||||||||||||||||||
Other | ( | | | | ||||||||||||||||||
Distributions to NCI | ( | ( | ||||||||||||||||||||
Purchase of remaining NCI of subsidiary | ( | ( | ( | |||||||||||||||||||
NCI related to business combinations | — | | ||||||||||||||||||||
Cash dividends - $ | ( | ( | ||||||||||||||||||||
Issuance of | | | | |||||||||||||||||||
Issuance of | | | | | ||||||||||||||||||
Issuance of | | ( | — | |||||||||||||||||||
Repurchase of | ( | ( | ( | |||||||||||||||||||
Expense associated with share-based compensation arrangements | | | ||||||||||||||||||||
Accrued expense under deferred compensation plans | | | ||||||||||||||||||||
Balance on December 30, 2023 | $ | | $ | | $ | | $ | | $ | | $ | | $ | |
See notes to consolidated financial statements
27
UFP INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) | Year Ended | ||||||||
December 30, | December 31, | December 25, | |||||||
| 2023 |
| 2022 |
| 2021 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
| |||||||
Net earnings | $ | |
| $ | |
| $ | | |
Adjustments to reconcile net earnings to net cash used in operating activities: |
|
| |||||||
Depreciation |
| |
| |
| | |||
Amortization of intangibles |
| |
| |
| | |||
Expense associated with share-based and grant compensation arrangements |
| |
| |
| | |||
Deferred income taxes (credit) |
| ( |
| ( |
| | |||
Unrealized (gain) loss on investments and other |
| ( |
| |
| ( | |||
Equity in loss of investee | | | | ||||||
Net (gain) loss on sale and disposition of assets |
| ( |
| |
| ( | |||
Impairment of goodwill and other intangibles | — | | — | ||||||
Gain from reduction of estimated earnout liability | ( | — | — | ||||||
Changes in: |
|
| |||||||
Accounts receivable |
| |
| |
| ( | |||
Inventories |
| |
| |
| ( | |||
Accounts payable and cash overdraft |
| ( |
| ( |
| | |||
Accrued liabilities and other |
| ( |
| ( |
| | |||
NET CASH FROM OPERATING ACTIVITIES |
| |
| |
| | |||
CASH FLOWS USED IN INVESTING ACTIVITIES: |
|
| |||||||
Purchases of property, plant and equipment |
| ( |
| ( |
| ( | |||
Proceeds from sale of property, plant and equipment |
| |
| |
| | |||
Acquisitions, net of cash received and purchase of equity method investment |
| ( |
| ( |
| ( | |||
Purchase of remaining noncontrolling interest of subsidiary |
| ( |
| — |
| — | |||
Purchases of investments |
| ( |
| ( |
| ( | |||
Proceeds from sale of investments |
| |
| |
| | |||
Other |
| ( |
| |
| ( | |||
NET CASH USED IN INVESTING ACTIVITIES |
| ( |
| ( |
| ( | |||
CASH FLOWS USED IN FINANCING ACTIVITIES: |
|
| |||||||
Borrowings under revolving credit facilities |
| |
| |
| | |||
Repayments under revolving credit facilities |
| ( |
| ( |
| ( | |||
Repayments of debt | ( | ( | — | ||||||
Contingent consideration payments and other | ( | ( | ( | ||||||
Proceeds from issuance of common stock |
| |
| |
| | |||
Dividends paid to shareholders |
| ( |
| ( |
| ( | |||
Distributions to noncontrolling interest | ( | ( | ( | ||||||
Repurchase of common stock |
| ( |
| ( |
| — | |||
Other |
| |
| ( |
| ( | |||
NET CASH USED IN FINANCING ACTIVITIES |
| ( |
| ( |
| ( | |||
Effect of exchange rate changes on cash |
| |
| |
| ( | |||
NET CHANGE IN CASH AND CASH EQUIVALENTS |
| |
| |
| ( | |||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR |
| |
| |
| | |||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD | $ | | $ | | $ | | |||
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH: | |||||||||
Cash and cash equivalents, beginning of period | $ | | $ | | $ | | |||
Restricted cash, beginning of period | | | | ||||||
Cash, cash equivalents, and restricted cash, beginning of period | $ | | $ | | $ | | |||
Cash and cash equivalents, end of period | $ | | $ | | $ | | |||
Restricted cash, end of period | | | | ||||||
Cash, cash equivalents, and restricted cash, end of period | $ | | $ | | $ | | |||
SUPPLEMENTAL INFORMATION: |
|
| |||||||
Interest paid | $ | | $ | | $ | | |||
Income taxes paid |
| |
| |
| | |||
NON-CASH INVESTING ACTIVITIES |
|
| |||||||
Capital expenditures included in accounts payable |
| |
| |
| | |||
NON-CASH FINANCING ACTIVITIES: | |||||||||
Common stock issued under deferred compensation plans | $ | | $ | | $ | |
See notes to consolidated financial statements
28
UFP INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
We are a holding company whose subsidiaries supply products primarily made from wood, wood and non-wood composites, and other materials to
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements, have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission (the "SEC"), represent our assets and liabilities and operating results. The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries and partnerships. All significant intercompany balances and transactions have been eliminated in consolidation.
We consolidate entities in which we have a controlling financial interest. In determining whether we have a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity (“VIE”) and whether we are the primary beneficiary. The primary beneficiary of a VIE is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. The primary beneficiary is required to consolidate the VIE. We account for unconsolidated VIEs using the equity method of accounting.
As a result of the investment in Dempsey on June 27, 2022, we own
NONCONTROLLING INTEREST IN SUBSIDIARIES
Noncontrolling interest in results of operations of consolidated subsidiaries represents the noncontrolling shareholders’ share of the income or loss of various consolidated subsidiaries. The noncontrolling interest reflects the original investment by these noncontrolling shareholders combined with their proportional share of the earnings or losses of these subsidiaries, net of distributions paid.
FISCAL YEAR
Our fiscal year is a
29
FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
We follow ASC Topic 820, Fair Value Measurements and Disclosures, which provides a consistent definition of fair value, focuses on exit price, prioritizes the use of market-based inputs over entity-specific inputs for measuring fair value and establishes a three-tier hierarchy for fair value measurements. This topic requires fair value measurements to be classified and disclosed in one of the following three categories:
● | Level 1 — Financial instruments with unadjusted, quoted prices listed on active market exchanges. |
● | Level 2 — Financial instruments lacking unadjusted, quoted prices from active market exchanges, including over-the-counter traded financial instruments. Financial instrument values are determined using prices for recently traded financial instruments with similar underlying terms and direct or indirect observational inputs, such as interest rates and yield curves at commonly quoted intervals. |
● | Level 3 — Financial instruments not actively traded on a market exchange and there is little, if any, market activity. Values are determined using significant unobservable inputs or valuation techniques. |
Our investment portfolio includes restricted investments within our wholly-owned subsidiary, Ardellis Insurance Ltd. There are $
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly liquid investments purchased with an original maturity of three months or less.
INVESTMENTS
Investments are deemed to be "available for sale" and are, accordingly, carried at fair value being the quoted market value.
ACCOUNTS RECEIVABLE AND ALLOWANCES
We perform periodic credit evaluations of our customers and generally do not require collateral. Accounts receivable are due under a range of terms we offer to our customers. Discounts are offered, in most instances, as an incentive for early payment.
We base our allowances related to receivables on historical credit and collections experience, reasonable and supportable forecasts, and the specific identification of other potential problems, including the general economic climate. Actual collections can differ, requiring adjustments to the allowances. Individual accounts receivable balances are evaluated on a monthly basis, and those balances considered uncollectible are charged to the allowance.
The following table presents the activity in our accounts receivable allowances (in thousands):
|
| Additions |
|
| ||||||||
Charged to | ||||||||||||
Beginning | Costs and | Ending | ||||||||||
Balance | Expenses | Deductions* | Balance | |||||||||
Year Ended December 30, 2023: |
|
|
|
|
|
|
|
| ||||
Allowance for possible losses on accounts receivable | $ | | $ | | $ | ( | $ | | ||||
Year Ended December 31, 2022: |
|
|
|
|
|
|
|
| ||||
Allowance for possible losses on accounts receivable | $ | | $ | | $ | ( | $ | | ||||
Year Ended December 25, 2021: |
|
|
|
|
|
|
|
| ||||
Allowance for possible losses on accounts receivable | $ | | $ | | $ | ( | $ | |
* | Includes accounts charged off, discounts given to customers and actual customer returns and allowances. |
30
We record estimated sales returns, discounts, and other applicable adjustments as a reduction of net sales in the same period revenue is recognized.
Accounts receivable retainage amounts related to long term construction contracts totaled $
RECENTLY ISSUED ACCOUNTING GUIDANCE
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which is intended to enhance the transparency, decision usefulness and effectiveness of income tax disclosures. The amendments in this ASU require a public entity to disclose a tabular tax rate reconciliation, using both percentages and currency, with specific categories. A public entity is also required to provide a qualitative description of the states and local jurisdictions that make up the majority of the effect of the state and local income tax category and the net amount of income taxes paid, disaggregated by federal, state and foreign taxes and also disaggregated by individual jurisdictions. The amendments also remove certain disclosures that are no longer considered cost beneficial. The amendments are effective prospectively for annual periods beginning after December 15, 2024, and early adoption and retrospective application are permitted. Although the ASU only modifies our required income tax disclosures, we are currently evaluating the impact of adopting this guidance on the consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, allowing financial statement users to better understand the components of a segment's profit or loss to assess potential future cash flows for each reportable segment and the entity as a whole. The amendments expand a public entity's segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"), clarifying when an entity may report one or more additional measures to assess segment performance, requiring enhanced interim disclosures, providing new disclosure requirements for entities with a single reportable segment, and requiring other new disclosures. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted. Although the ASU only requires additional disclosures about the Company's operating segments, we are currently evaluating the impact of adopting this guidance on the consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires that an acquirer recognize and measure contract assets and contract liabilities in a business combination in accordance with Topic 606. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and has been applied prospectively to all business combinations occurring after this date.
INVENTORIES
Inventories are stated at the lower of cost or net realizable value. The cost of inventories includes raw materials, direct labor, and manufacturing overhead and is determined using the weighted average cost method. Raw materials consist primarily of unfinished wood products and other materials expected to be manufactured or treated prior to sale, while finished goods represent various manufactured and treated wood products ready for sale. We have inventory on consignment at customer locations valued at $
We write down the value of inventory, the impact of which is reflected in cost of goods sold in the Consolidated Statement of Earnings and Comprehensive Income, if the cost of specific inventory items on hand exceeds the amount we expect to realize from the ultimate sale or disposal of the inventory. These estimates are based on management's judgment regarding future demand and market conditions and analysis of historical experience.
31
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Expenditures for renewals and betterments are capitalized, and maintenance and repairs are expensed as incurred. The components of property, plant and equipment as of December 30, 2023 and December 31, 2022 were as follows:
Year Ended | ||||||
| December 30, |
| December 31, | |||
2023 | 2022 | |||||
Land and improvements |
| $ | | $ | | |
Building and improvements | | | ||||
Machinery and equipment | | | ||||
Furniture and fixtures |
| | | |||
Construction in progress |
| | | |||
Total Property, Plant and Equipment, Gross | $ | | $ | |
Amortization of assets held under finance leases is included in depreciation and amortized over the shorter of the estimated useful life of the asset or the lease term. Depreciation is computed principally by the straight-line method over the estimated useful lives of the assets as follows:
Land improvements |
| |
Buildings and improvements |
| |
Machinery, equipment and office furniture |
|
Software costs are included in machinery and equipment on the balance sheet with gross amounts and accumulated amortization totaling $
LONG-LIVED ASSETS
In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), when an indicator of potential impairment exists, we evaluate the recoverability of our long-lived assets by determining whether unamortized balances could be recovered through undiscounted future operating cash flows over the remaining lives of the assets. If the sum of the expected future cash flows was less than the carrying value of the assets, an impairment loss would be recognized for the excess of the carrying value over the fair value.
GOODWILL
Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets of acquired businesses. Goodwill and intangible assets deemed to have indefinite lives are not amortized and are subject to impairment tests at least annually in accordance with ASC 350, Intangibles-Goodwill and Other. We review the carrying amounts of goodwill and other non-amortizable intangibles by reporting unit to determine if such assets may be impaired. As of the date of the most recent goodwill impairment test, which utilized data and assumptions as of September 30, 2023, it was determined that the fair values exceed the carrying values and there were no indicators for impairment for all of our reporting units. In the fourth quarter of 2022, we recorded a non-cash goodwill impairment charge of $
Our annual testing date for evaluating goodwill and indefinite-lived intangible asset impairment is the first day of our fourth fiscal quarter for all reporting units. Additionally, we review various triggering events throughout the year to determine whether a mid-year impairment analysis is required.
32
FOREIGN CURRENCY
Our foreign operations use the local currency as their functional currency. Accordingly, assets and liabilities are translated at exchange rates as of the balance sheet date and revenues and expenses are translated using weighted average rates, with translation adjustments included as a separate component of shareholders’ equity. Gains and losses arising from re-measuring foreign currency transactions are included in earnings.
INSURANCE RESERVES
Our wholly-owned insurance company, Ardellis Insurance Ltd.(“Ardellis”), was incorporated on April 21, 2001 under the laws of Bermuda and is licensed as a Class 3A insurer under the Insurance Act 1978 of Bermuda. On April 14, 2017 the U.S. Branch of Ardellis Insurance Ltd. was granted its Certificate of Authority to transact property and casualty insurance lines as an admitted carrier in the State of Michigan.
We are primarily self-insured for certain employee health benefits, and have self-funded retentions for general liability, automobile liability, property and workers’ compensation. We are fully self-insured for environmental liabilities. The general liability, automobile liability, property, workers’ compensation, and certain environmental liabilities are managed through Ardellis; the related assets and liabilities of which are included in the consolidated financial statements as of December 30, 2023 and December 31, 2022. Our policy is to accrue amounts equal to actuarially determined or internally computed liabilities. The actuarial and internal valuations are based on historical information along with certain assumptions about future events. Changes in assumptions for such matters as legal actions, medical cost trends, and changes in claims experience could cause these estimates to change in the future.
In addition to providing coverage for the Company, Ardellis provides Excess Loss Insurance (primarily medical and prescription drug) and Excess General Liability and Property Insurance to certain third parties. As of December 30, 2023, Ardellis had
INCOME TAXES
Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred income tax assets to the amounts expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred income tax assets and liabilities.
REVENUE RECOGNITION
Within the
Certain customer products that we provide require installation by the Company or a third party. Installation revenue is recognized upon completion. If we use a third party for installation, the party will act as an agent to us until completion of the installation. Installation revenue represents an immaterial share of our total net sales.
33
We utilize rebates, credits, discounts and/or cash-based incentives with certain customers which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized. We believe that there will not be significant changes to our estimates of variable consideration. The allocation of these costs are applied at the invoice level and recognized in conjunction with revenue. Additionally, returns and refunds are estimated on a historical and expected basis which is a reduction of revenue recognized.
Earnings on construction contracts are reflected in operations using over time accounting, under either cost to cost or units of delivery methods, depending on the nature of the business at individual operations, which is in accordance with ASC 606 as revenue is recognized when certain performance obligations are performed. Under over time accounting using the cost to cost method, revenues and related earnings on construction contracts are measured by the relationships of actual costs incurred relative to the total estimated costs. Under over time accounting using the units of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual units produced relative to the total number of units. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent.
Our construction contracts are generally entered into with a fixed price and completion of the projects can range from
The following table presents our net sales disaggregated by revenue source (in thousands):
Year Ended | |||||||||||||
| December 30, |
| December 31, | December 25, |
| 2023 vs. 2022 | 2022 vs. 2021 | ||||||
2023 | 2022 | 2021 | % Change | % Change | |||||||||
Point in Time Revenue | $ | | $ | | $ | |
| ( | |||||
Over Time Revenue |
| | | |
| ( | |||||||
Total Net Sales | $ | | $ | | $ | |
| ( |
The Construction segment comprises the construction contract revenue shown above. Construction contract revenue is primarily made up of site-built and framing customers.
The following table presents the balances of over time accounting accounts on December 30, 2023 and December 31, 2022 which are included in “Other current assets” and “Accrued liabilities: Other”, respectively (in thousands):
December 30, | December 31, | |||||
| 2023 |
| 2022 | |||
Cost and Earnings in Excess of Billings |
| $ | |
| $ | |
Billings in Excess of Cost and Earnings |
| |
|
| |
SHIPPING AND HANDLING OF PRODUCT
Shipping and handling costs that are charged to and reimbursed by the customer are recognized as revenue. Costs incurred related to the shipment and handling of products are classified in cost of goods sold.
SHARE-BASED COMPENSATION
We account for share-based awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”), which requires recognition of share-based compensation costs in financial statements based on fair value. Compensation cost is recognized over the period during which an employee is required to provide services in exchange for the award (the requisite service period). Forfeitures are recognized as they occur.
34
EARNINGS PER SHARE
Earnings per share (“EPS”) is computed using the two-class method. The two-class method determines EPS for each class of common stock and participating securities according to dividends and their respective participation rights in undistributed earnings. Participating securities include non-vested shares of restricted stock in which the participants have non-forfeitable rights to dividends during the performance period. EPS, basic and diluted, is calculated by dividing net earnings attributable to controlling interest, net of applicable taxes, by the weighted average number of shares of common stock outstanding for the period.
| December 30, |
| December 31, |
| December 25, | ||||
2023 | 2022 | 2021 | |||||||
Numerator: |
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| |||
Net earnings attributable to controlling interest | $ | | $ | | $ | | |||
Adjustment for earnings allocated to non-vested restricted common stock equivalents |
| ( |
| ( |
| ( | |||
Net earnings for calculating EPS | $ | | $ | | $ | | |||
Denominator: |
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Weighted average shares outstanding |
| |
| |
| | |||
Adjustment for non-vested restricted common stock equivalents |
| ( |
| ( |
| ( | |||
Shares for calculating basic EPS |
| |
| |
| | |||
Effect of dilutive restricted common stock equivalents |
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| |
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Shares for calculating diluted EPS |
| |
| |
| | |||
Net earnings per share: |
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| |||
Basic | $ | | $ | | $ | | |||
Diluted | $ | | $ | | $ | |
USE OF ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. We believe our estimates to be reasonable; however, actual results could differ from these estimates.
35
B.FAIR VALUE
We apply the provisions of ASC 820, Fair Value Measurements and Disclosures, to assets and liabilities measured at fair value. Assets and liabilities measured at fair value are as follows (in thousands):
December 30, 2023 | December 31, 2022 | |||||||||||||||||||||||
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 | $ | |
| $ | | $ | — |
| $ | |
| $ | |
| $ | | $ | — |
| $ | | |||
Fixed income funds |
| |
| | — |
|
| |
| |
| | — |
|
| | ||||||||
Treasury securities | | — | — | | | — | — | | ||||||||||||||||
Equity securities |
| |
| — | |
|
| |
| |
| — | — |
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| | ||||||||
Alternative investments | — | — | | | — | — | | | ||||||||||||||||
Mutual funds: |
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Domestic stock funds |
| |
| — | — |
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| |
| |
| — | — |
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International stock funds |
| |
| — | — |
|
| |
| |
| — | — |
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| | ||||||||
Target funds |
| |
| — | — |
|
| |
| |
| — | — |
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Bond funds |
| |
| — | — |
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| |
| |
| — | — |
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| | ||||||||
Alternative funds | | — | — | | | — | — | | ||||||||||||||||
Total mutual funds |
| |
| — | — |
|
| |
| |
| — | — |
|
| | ||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | |
From the assets measured at fair value as of December 30, 2023, listed in the table above, $
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.
During 2023, we made $
36
In accordance with our investment policy, our wholly-owned company, Ardellis Insurance Ltd. ("Ardellis"), maintains an investment portfolio, totaling $
Ardellis’ available for sale investment portfolio, including funds held with the State of Michigan, consists of the following (in thousands):
December 30, 2023 | December 31, 2022 | |||||||||||||||||
Unrealized | Unrealized | |||||||||||||||||
| Cost |
| Gain (Loss) |
| Fair Value |
| Cost |
| Gain (Loss) |
| Fair Value | |||||||
Fixed income | $ | |
| $ | ( |
| $ | | $ | |
| $ | ( |
| $ | | ||
Treasury securities | | — | | | — | | ||||||||||||
Equity |
| | |
|
| |
| |
| |
|
| | |||||
Mutual funds | | | | | | | ||||||||||||
Alternative investments | | | | | | | ||||||||||||
Total | $ | | $ | |
| $ | | $ | | $ | |
| $ | |
Our fixed income investments consist of a blend of US Government and Agency bonds and investment grade corporate bonds with varying maturities. Our equity investments consist of small, mid, and large cap growth and value funds, as well as international equity. Our mutual fund investments consist of domestic and international stock. Our alternative investments consist of a private real estate income trust which is valued as a Level 3 asset. The net pre-tax unrealized gain was $
37
C.BUSINESS COMBINATIONS
We completed the following business combinations in fiscal 2023 and 2022, which were accounted for using the purchase or equity method (in thousands).
Net | |||||||
Company | Acquisition | Intangible | Tangible | Operating | |||
Name | Date | Purchase Price | Assets | Assets | Segment | ||
September 20, 2023 | $ | $ | | $ | | International | |
UFP Palets y Embalajes SL (UFP Palets) | Headquartered in Castellón, Spain, UFP Palets (formerly known as Palets Suller Group) is the market leader in machine-built wood pallets, serving the region's large ceramic tile industry. The company had trailing 12-month sales of approximately $ | ||||||
December 6, 2022 | $ | $ | | $ | | Packaging | |
Titan Corrugated, Inc. (Titan) and All Boxed Up, LLC (ABU) | Located in Flower Mound, TX and founded in 2003, Titan’s primary products include boxes used in moving and storage, jumbo boxes for industrial products, corrugated shipping containers, and point-of-purchase displays. ABU distributes common box sizes manufactured by Titan throughout the United States. The combined companies had trailing 12-month sales through October 2022 of approximately $ | ||||||
June 27, 2022 | $ | $ | | $ | | Packaging | |
Dempsey Wood Products, Inc. (Dempsey) | Located in Orangeburg, South Carolina and founded in 1988, Dempsey is a sawmill which produces products such as kiln dried finished lumber, industrial lumber, green cut stock lumber, pine chips and shavings, landscaping mulch, and sawdust. The Company had sales of approximately $ | ||||||
May 9, 2022 | $ | $ | | $ | | Retail | |
Cedar Poly, LLC | Located in Tipton, Iowa, Cedar Poly is a full-service recycler of high-density and low-density polyethylene (HDPE and LDPE) flakes and pellets used in various products, including composite decking. The company also recycles corrugate and operates its own transportation fleet. Cedar Poly had 2021 sales of approximately $ | ||||||
December 27, 2021 | $ | $ | | $ | | Retail | |
Ultra Aluminum Manufacturing, Inc. (Ultra) | Located in Howell, Michigan and founded in 1996, Ultra is a leading manufacturer of aluminum fencing, gates and railing. The company designs and produces an extensive selection of ornamental aluminum fence and railing products for contractors, landscapers, fence dealers and wholesalers. The Company had sales of approximately $ |
The intangible assets for each acquisition were finalized and allocated to their respective identifiable intangible asset and goodwill accounts during 2023, except for the acquisition of UFP Palets. In aggregate, acquisitions made during 2023 and 2022, contributed approximately $
38
We acquired UFP Palets on September 20, 2023, in which we own
The amounts assigned to major intangible classes for the business combinations mentioned above are as follows (in thousands):
| Non- |
|
|
|
|
|
| Intangibles - | |||||||||||||
Compete | Customer | Tax | |||||||||||||||||||
Agreements | Technology | Patents | Relationships | Tradename | Goodwill | Deductible | |||||||||||||||
UFP Palets | $ | — | $ | — | $ | — | $ | | * | $ | — | $ | | * | $ | | |||||
All Boxed Up | — | | — | | | | | ||||||||||||||
Titan | — | | — | | | | | ||||||||||||||
Cedar Poly | | — | — | | | | | ||||||||||||||
Ultra | — | — | — | | | | |
*(estimate)
The business combinations mentioned above were not significant to our operating results individually or in aggregate, and thus pro forma results for 2023 and 2022 are not presented.
D.GOODWILL AND OTHER INTANGIBLE ASSETS
As described in Note M — Segment Reporting, our segment structure is based upon the markets we serve and goodwill has been allocated to the segments using a relative fair value approach.
| Retail |
| Packaging |
| Construction |
| All Other |
| Corporate |
| Total | |||||||
Balance as of December 25, 2021 |
| $ | |
| $ | |
| $ | |
| $ | | $ | — |
| $ | | |
2022 Acquisitions |
| | | — | — | — |
| | ||||||||||
2022 Purchase Accounting Adjustments | | ( | ( | ( | — | ( | ||||||||||||
2022 Impairments | — | — | — | ( | — | ( | ||||||||||||
Foreign Exchange, Net |
| — | — | ( | ( | — |
| ( | ||||||||||
Balance as of December 31, 2022 |
| $ | |
| $ | |
| $ | |
| $ | | $ | — |
| $ | | |
2023 Acquisitions |
| — | — | — | | — |
| | ||||||||||
2023 Purchase Accounting Adjustments | ( | ( | — | — | — | ( | ||||||||||||
Foreign Exchange, Net |
| — | — | | | — |
| | ||||||||||
Balance as of December 30, 2023 | $ | |
| $ | | $ | | $ | | $ | — | $ | |
As of the date of the most recent goodwill impairment test, which utilized data and assumptions as of September 30, 2023, all reporting units had fair values that were substantially in excess of their carrying values. During 2022, we experienced significantly lower than expected operating results within our Italian reporting unit, which is within the all other segment. It was determined that the carrying value of the reporting unit exceeded its fair value and as a result, we recorded a non-cash goodwill impairment charge of $
Indefinite-lived intangible assets totaled $
39
The following amounts were included in other amortizable intangible assets, net as of December 30, 2023 and December 31, 2022 (in thousands):
2023 | 2022 | |||||||||||||||||
|
| Accumulated |
|
|
| Accumulated |
| |||||||||||
Assets | Amortization | Net Value | Assets | Amortization | Net Value | |||||||||||||
Non-compete agreements | $ | | $ | ( | $ | | $ | | $ | ( | $ | | ||||||
Customer relationships and other |
| |
| ( | |
| |
| ( | | ||||||||
Licensing agreements |
| — |
| — | — |
| |
| ( | — | ||||||||
Patents |
| |
| ( | |
| |
| ( | | ||||||||
Technology | | ( | | | ( | | ||||||||||||
Tradename | | ( | | | ( | | ||||||||||||
Software | | ( | | | ( | | ||||||||||||
Total | $ | | $ | ( | $ | | $ | | $ | ( | $ | |
Amortization is computed principally by the straight-line method over the estimated useful lives of the intangible assets as follows:
|
| Weighted Average | ||
Intangible Asset Type | Estimated Useful Life | Amortization Period | ||
Non-compete agreements |
|
| ||
Customer relationships and other |
|
| ||
Licensing agreements |
|
| ||
Patents | ||||
Technology | ||||
Tradename (amortizable) |
|
| ||
Software |
Amortization expense of intangibles totaled $
2024 |
| $ | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
2028 |
| | |
Thereafter |
| | |
Total | $ | |
E.DEBT
On November 1, 2018, we entered into a
40
On August 10, 2020, we entered into an unsecured Note Purchase Agreement under which we issued our
Outstanding letters of credit extended on our behalf on December 30, 2023 and December 31, 2022 aggregated $
Long-term debt obligations are summarized as follows on December 30, 2023 and December 31, 2022 (amounts in thousands):
| 2023 |
| 2022 | |||
Series 2020 Senior Notes E, due on August 10, 2032, interest payable semi-annually at | $ | | $ | | ||
Series 2020 Senior Notes F, due on August 10, 2033, interest payable semi-annually at | | | ||||
Series 2020 Senior Notes G, due on August 10, 2035, interest payable semi-annually at | | | ||||
Series 2018 Senior Notes C, due on June 14, 2028, interest payable semi-annually at | | | ||||
Series 2018 Senior Notes D, due on June 14, 2030, interest payable semi-annually at |
| |
| | ||
Series 2012 Senior Notes Tranche B, due on December 17, 2024, interest payable semi-annually at |
| |
| | ||
Foreign subsidiary borrowings under revolving credit facility, due on December 6, 2027, interest payable monthly at a floating rate ( | | | ||||
Series 1999 Industrial Development Revenue Bonds, due on August 1, 2029, interest payable monthly at a floating rate ( |
| |
| | ||
Finance leases and foreign affiliate debt |
| |
| | ||
| |
| ||||
Less current portion |
| ( |
| ( | ||
Less debt issuance costs |
| ( |
| ( | ||
Long-term portion | $ | | $ |
Financial covenants on the unsecured revolving credit facility and unsecured notes include minimum interest coverage tests and a maximum leverage ratio. The agreements also restrict the amount of additional indebtedness we may incur and the amount of assets which may be sold among other industry standard covenants. We were within all of our lending requirements on December 30, 2023 and December 31, 2022.
41
On December 30, 2023, the principal maturities of long-term debt and finance lease obligations are as follows (in thousands):
2024 |
| $ | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
2028 |
| | |
Thereafter |
| | |
Total | $ | |
On December 30, 2023, the estimated fair value of our long-term debt, including the current portion, was $
F.LEASES
We determine if an arrangement is a lease at inception. We lease certain real estate under non-cancelable operating lease agreements with typical original terms ranging from
We believe finance leases have no significant impact to our consolidated balance sheet and statement of earnings as of December 30, 2023.
As of December 30, 2023, we have no leases that have not yet commenced that would significantly impact the rights, obligations, and our financial position.
There were no lease transactions between related parties as of December 30, 2023.
The rates implicit in our leases are primarily not readily available. To determine the discount rate used to present value the lease payments, we utilize the 7-year treasury note rate plus a blend of rate spreads associated with our 10 to 15 year senior notes along with estimated spreads based on current market conditions. We feel the determined rate is a reasonable representation of our lease population.
Lease costs under non-cancelable operating leases on December 30, 2023 and December 31, 2022 are as follows (in thousands):
2023 | 2022 | |||||
Operating lease cost | $ | | $ | | ||
Short-term lease cost |
| |
| | ||
Variable lease cost |
| |
| | ||
Sublease income |
| ( |
| ( | ||
Total lease cost | $ | | $ | |
Rent expense was approximately $
42
The amounts paid for operating leases, included in the measurement of lease liabilities, were $
Future minimum payments under non-cancelable operating leases on December 30, 2023 are as follows (in thousands):
| Operating | ||
Leases | |||
2024 | $ | | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
2028 |
| | |
Thereafter |
| | |
Total minimum lease payments | $ | | |
Less present value discount | ( | ||
Total lease liability | $ | |
As of December 30, 2023 and December 31, 2022, the weighted average lease term for operating leases was
G.DEFERRED COMPENSATION
We have a program whereby certain executives irrevocably elected to defer receipt of certain compensation in 1985 through 1988. Deferred compensation payments to these executives commenced upon their retirement. There was
We also maintain a non-qualified deferred compensation plan (the "Plan") for the benefit of senior management employees who may elect to defer a portion of their annual bonus payments and salaries. The Plan provides investment options similar to our 401(k) plan, including our stock. The investment in our stock is funded by the issuance of shares to a Rabbi trust, and may only be distributed in kind. Assets held by the Plan totaled approximately $
H.COMMON STOCK
We maintain and administer our shareholder approved Employee Stock Purchase Plan. The Employee Stock Purchase Plan allows eligible employees to purchase shares of our stock at a share price equal to
43
We maintain and administer our shareholder approved Director Compensation Plan. The Director Compensation Plan allows eligible members of the Board of Directors to defer the cash portion of their retainer and committee fees, credited in the form of stock units, and receive shares of our stock at the time of or following their retirement, disability or death. The number of shares to be received is equal to the amount of the cash portion of their retainer and committee fees deferred multiplied by
Finally, we maintain and administer our shareholder approved Long Term Stock Incentive Plan (the "LTSIP”). The LTSIP provides for the grant of stock options, stock appreciation rights, restricted stock, performance shares, sales incentive awards, and other stock-based awards.
Executive Stock Match awards are granted in the year following the requisite service period, which begins at the beginning of each fiscal year, and fully vest on the fifth anniversary of the grant date. Refer to Notes to Consolidated Financial Statements, Note G, "Deferred Compensation" for additional information on the “Plan”.
There is
Below is a summary of common stock issuances for 2023 and 2022 (in thousands, except per share
data):
| December 30, 2023 | ||||
Share Issuance Activity |
| Common Stock | Average Share Price | ||
Shares issued under the employee stock purchase plan | | $ | | ||
Shares issued under the employee stock gift program | | | |||
Shares issued under the director compensation plan | | | |||
Shares issued under the LTSIP | | | |||
Shares issued under the executive stock match plan | | | |||
Forfeitures | ( | ||||
Total shares issued under stock grant programs | | $ | | ||
Shares issued under the deferred compensation plans | | $ | |
44
| December 31, 2022 | ||||
Share Issuance Activity |
| Common Stock | Average Share Price | ||
Shares issued under the employee stock purchase plan | | $ | | ||
Shares issued under the employee stock gift program | | | |||
Shares issued under the director retainer stock program | | | |||
Shares issued under the LTSIP | | | |||
Shares issued under the executive stock grants plan | | | |||
Forfeitures | ( | ||||
Total shares issued under stock grant programs | | $ | | ||
Shares issued under the deferred compensation plans | | $ | |
A summary of the nonvested restricted stock awards granted under the LTSIP is as follows:
|
|
|
| Weighted- | ||||||
Unrecognized | Average | |||||||||
Weighted- | Compensation | Period to | ||||||||
Restricted | Average Grant | Expense | Recognize | |||||||
Awards | Date Fair Value | (in millions) | Expense | |||||||
Nonvested at December 26, 2020 |
| |
| $ | |
| $ | |
| |
Granted |
| |
| |
|
|
|
| ||
Vested |
| ( |
| |
|
|
|
| ||
Forfeited |
| ( |
| |
|
|
|
| ||
Nonvested at December 25, 2021 |
| |
| $ | |
| $ | |
| |
Granted |
| |
| |
|
|
|
| ||
Vested |
| ( |
| |
|
|
|
| ||
Forfeited |
| ( |
| |
|
|
|
| ||
Nonvested at December 31, 2022 |
| | $ | | $ | |
| |||
Granted |
| |
| |
|
|
|
| ||
Vested |
| ( |
| |
|
|
|
| ||
Forfeited |
| ( |
| |
|
|
|
| ||
Nonvested at December 30, 2023 |
| | $ | | $ | |
|
Under the Stock Purchase Plan and LTSIP, we recognized share-based compensation expense of $
For the year-ended December 30, 2023, we determined that $
45
We have a Sales Incentive Plan for certain eligible employees. Under this plan, sales incentives are determined and calculated using a formula-based approach and estimated monthly based on specific performance metrics. This Plan places a cap on cash payments with the remaining earned incentive being settled in share-based awards. For the year-ended December 30, 2023, we determined that $
In 2023, 2022 and 2021, cash received from share issuances under our plans was $
During 2023, we repurchased
I.RETIREMENT PLANS
We have a profit sharing and 401(k) plan for the benefit of substantially all of our employees, excluding the employees of certain wholly-owned subsidiaries. Amounts contributed to the plan are made at the discretion of the Board of Directors. We matched
We maintain a retirement plan for certain officers of the Company (who have at least
J.INCOME TAXES
Income tax provisions for the years ended December 30, 2023, December 31, 2022, and December 25, 2021 are summarized as follows (in thousands):
| 2023 | 2022 |
| 2021 | |||||
Currently Payable: |
|
|
|
|
|
| |||
Federal | $ | | $ | | $ | | |||
State and local |
| |
| |
| | |||
Foreign |
| |
| |
| | |||
| |
| |
| | ||||
Net Deferred: |
|
|
|
|
|
| |||
Federal |
| ( |
| ( |
| | |||
State and local |
| ( |
| ( |
| | |||
Foreign |
| ( |
| ( |
| | |||
| ( |
| ( |
| | ||||
Total income tax expense | $ | | $ | | $ | |
46
The components of earnings before income taxes consist of the following:
| 2023 |
| 2022 |
| 2021 | ||||
U.S. | $ | | $ | | $ | | |||
Foreign |
| |
| |
| | |||
Total | $ | | $ | | $ | |
The effective income tax rates are different from the statutory federal income tax rates for the following reasons:
| 2023 |
| 2022 |
| 2021 |
| |
Statutory federal income tax rate |
| | % | | % | | % |
State and local taxes (net of federal benefits) |
| |
| |
| | |
Tax credits, including foreign tax credit |
| ( |
| ( |
| ( | |
Change in uncertain tax positions reserve |
| |
| ( |
| ( | |
Other permanent differences |
| |
| |
| ( | |
Other, net |
| ( |
| |
| | |
Effective income tax rate |
| | % | | % | | % |
Temporary differences which give rise to deferred income tax assets and (liabilities) on December 30, 2023 and December 31, 2022 are as follows (in thousands):
| 2023 |
| 2022 | |||
Employee benefits | $ | | $ | | ||
Lease liability | | | ||||
Net operating loss carryforwards |
| |
| | ||
Foreign subsidiary capital loss carryforward |
| |
| | ||
Other tax credits |
| |
| | ||
Inventory |
| |
| | ||
Reserves on receivables |
| |
| | ||
Accrued expenses |
| |
| | ||
Capitalized research and development costs | | | ||||
Gross deferred income tax assets |
| |
| | ||
Valuation allowance |
| ( |
| ( | ||
Deferred income tax assets |
|
| |
| | |
Depreciation |
| ( |
| ( | ||
Intangibles |
| ( |
| ( | ||
Right of use assets | ( | ( | ||||
Other, net |
| ( |
| ( | ||
Deferred income tax liabilities |
| ( |
| ( | ||
Net deferred income tax liability | $ | ( | $ | ( |
47
As of December 30, 2023, we had federal, state and foreign net operating loss carryforwards of $
The NOL and credit carryforwards expire as follows:
Net Operating Losses | Tax Credits | ||||||||||||||
| U.S. |
| State |
| Foreign |
| U.S. |
| State | ||||||
2024 - 2028 | $ | — | $ | | $ | | $ | — | $ | — | |||||
2029 - 2033 |
| — | | |
| — |
| — | |||||||
2034 - 2038 |
| — | | |
| — |
| | |||||||
2039 - 2043 |
| | | — |
| — |
| — | |||||||
Thereafter |
| — | — | |
| — |
| — | |||||||
Total | $ | | $ | | $ | | $ | — | $ | |
As of December 30, 2023, we believe that it is more likely than not that the benefit from certain state and foreign NOL carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $
The Organization of Economic Cooperation and Development (“OECD”) reached an agreement among various countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two. Many countries continue to announce changes in their tax laws, many of them effective for tax years beginning Jan 1, 2024. We continue to analyze the impacts of these legislative changes to our effective tax rate, consolidated financial statements, and related disclosures. As of Dec 30, 2023, we do not expect the impact of Pillar Two legislation to have a material impact on our tax expense.
K.ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES
ASC 740, Income Taxes (“ASC 740”) clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. ASC 740 also provides guidance on derecognition, measurement, classification, interest and penalties, and disclosure requirements.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
| 2023 |
| 2022 |
| 2021 | ||||
Gross unrecognized tax benefits beginning of year | $ | | $ | | $ | | |||
(Decrease) increase in tax positions for prior years |
| |
| ( |
| | |||
Increase in tax positions for current year |
| |
| |
| | |||
Lapse in statute of limitations |
| ( |
| ( |
| ( | |||
Gross unrecognized tax benefits end of year | $ | | $ | | $ | |
Our effective tax rate would have been affected by the unrecognized tax benefits had this amount been recognized as a reduction to income tax expense.
We recognized interest and penalties for unrecognized tax benefits in our provision for income taxes. The liability for unrecognized tax benefits included accrued interest and penalties of $
48
We file income tax returns in the United States and in various state, local and foreign jurisdictions. The federal and a majority of state and foreign jurisdictions are no longer subject to income tax examinations for years before 2019. A number of routine state and local examinations are currently ongoing. Due to the potential for resolution of state examinations, the expiration of various statutes of limitation, and new positions that may be taken, it is reasonably possible that the amount of unrecognized tax benefits that would reverse through the income statement in the next twelve months is $
L.COMMITMENTS, CONTINGENCIES, AND GUARANTEES
We are self-insured for environmental impairment liability, including certain liabilities which are insured through a wholly owned subsidiary, Ardellis Insurance Ltd., a licensed captive insurance company.
In addition, on December 30, 2023, we were parties either as plaintiff or defendant to a number of lawsuits and claims arising through the normal course of our business. In the opinion of management, our consolidated financial statements will not be materially affected by the outcome of these contingencies and claims.
On December 30, 2023, we had outstanding purchase commitments on commenced capital projects of approximately $
We provide a variety of warranties for products we manufacture. Historically, warranty claims have not been material. We distribute products manufactured by other companies. While we do not warrant these products, we have received claims as a distributor of these products when the manufacturer no longer exists or has the ability to pay. Historically, these costs have not had a material effect on our consolidated financial statements.
As part of our operations, we supply building materials and labor to site-built construction projects or we jointly bid on contracts with framing companies for such projects. In some instances we are required to post payment and performance bonds to insure the project owner that the products and installation services are completed in accordance with our contractual obligations. We have agreed to indemnify the surety for claims made against the bonds. As of December 30, 2023, we had approximately $
On December 30, 2023, we had outstanding letters of credit totaling $
In lieu of cash deposits, we provide irrevocable letters of credit in favor of our insurers and other third parties to guarantee our performance under certain insurance contracts and other legal agreements. As of December 30, 2023, we have irrevocable letters of credit outstanding totaling approximately $
We are required to provide irrevocable letters of credit in favor of the bond trustees for all industrial development revenue bonds that have been issued. These letters of credit guarantee principal and interest payments to the bondholders. We currently have irrevocable letters of credit outstanding totaling approximately $
Certain wholly owned domestic subsidiaries have guaranteed the indebtedness of UFP Industries, Inc. in certain debt agreements, including the Series 2012, 2018 and 2020 Senior Notes and our revolving credit facility. The maximum exposure of these guarantees is limited to the indebtedness outstanding under these debt arrangements and this exposure will expire concurrent with the expiration of the debt agreements.
We did not enter into any new guarantee arrangements during 2023 which would require us to recognize a liability on our balance sheet.
49
M.SEGMENT REPORTING
ASC 280, Segment Reporting (“ASC 280”), defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
We operate manufacturing, treating and distribution facilities internationally, but primarily in the United States. Our business segments consist of UFP Retail Solutions, UFP Packaging and UFP Construction and align with the end markets we serve. This segment structure allows for a specialized and consistent sales approach among Company operations, efficient use of resources and capital, and quicker introduction of new products and services. We manage the operations of our individual locations primarily through a market-centered reporting structure under which each location is included in a business unit and business units are included in our Retail, Packaging, and Construction segments. In the case of locations which serve multiple segments, results are allocated and accounted for by segment.
The exception to this market-centered reporting and management structure is our International segment, which comprises our Mexico, Canada, Europe, Asia, and Australia operations and sales and buying offices in other parts of the world and our Ardellis segment, which represents our wholly owned fully licensed captive insurance company based in Bermuda. Our International and Ardellis segments do not meet the quantitative thresholds in order to be separately reported and accordingly, the International and Ardellis segments have been aggregated in the “All Other” segment for reporting purposes.
“Corporate” includes purchasing, transportation, corporate ventures, and administrative functions that serve our operating segments. Operating results of Corporate primarily consist of net sales to external customers initiated by UFP Purchasing and UFP Transportation and over (under) allocated costs. The operating results of UFP Real Estate, Inc., which owns and leases real estate, and UFP Transportation Ltd., which owns, leases and operates transportation equipment, are also included in the Corporate column. Inter-company lease and service charges are assessed to our operating segments for the use of these assets and services at fair market value rates. Total assets in the Corporate column include unallocated cash and cash equivalents, certain prepaid assets, certain property, equipment and other assets pertaining to the centralized activities of Corporate, UFP Real Estate, Inc., UFP Transportation Ltd, UFP Purchasing, and UFP RMS, LLC.
2023 | ||||||||||||||||||
All | ||||||||||||||||||
| Retail |
| Packaging |
| Construction |
| Other |
| Corporate |
| Total | |||||||
Net sales to outside customers | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Intersegment net sales |
| |
| |
| |
| |
| ( |
| — | ||||||
Interest expense(1) |
| |
| |
| — |
| ( |
| |
| | ||||||
Amortization expense |
| | | | | |
| | ||||||||||
Depreciation expense |
| | | | | |
| | ||||||||||
Segment earnings before income taxes |
| |
| |
| |
| |
| |
| | ||||||
Segment assets |
| | | | | |
| | ||||||||||
Capital expenditures |
| | | | | |
| |
50
2022 | ||||||||||||||||||
All | ||||||||||||||||||
| Retail |
| Packaging |
| Construction |
| Other |
| Corporate |
| Total | |||||||
Net sales to outside customers | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Intersegment net sales |
| |
| |
| |
| |
| ( |
| — | ||||||
Interest expense(1) |
| |
| ( |
| — |
| ( |
| |
| | ||||||
Amortization expense |
| |
| |
| |
| |
| |
| | ||||||
Depreciation expense |
| |
| |
| |
| |
| |
| | ||||||
Segment earnings before income taxes |
| |
| |
| |
| |
| ( |
| | ||||||
Segment assets |
| | | | | |
| | ||||||||||
Capital expenditures |
| | | | | |
| |
2021 | ||||||||||||||||||
All | ||||||||||||||||||
| Retail |
| Packaging |
| Construction |
| Other |
| Corporate |
| Total | |||||||
Net sales to outside customers | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Intersegment net sales |
| |
| |
| |
| |
| ( |
| — | ||||||
Interest expense(1) |
| |
| |
| |
| |
| |
| | ||||||
Amortization expense |
| |
| |
| |
| |
| |
| | ||||||
Depreciation expense |
| |
| |
| |
| |
| |
| | ||||||
Segment earnings before income taxes |
| |
| |
| |
| |
| ( |
| | ||||||
Segment assets |
| | | | | |
| | ||||||||||
Capital expenditures |
| | | | | |
| |
(1) Interest expense includes intercompany interest between segments.
Information regarding principal geographic areas was as follows (in thousands):
2023 | 2022 | 2021 | ||||||||||||||||
Long-Lived | Long-Lived | Long-Lived | ||||||||||||||||
Tangible | Tangible | Tangible | ||||||||||||||||
| Net Sales |
| Assets |
| Net Sales |
| Assets |
| Net Sales |
| Assets | |||||||
United States | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Foreign |
| | | | | | | |||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | |
51
The following table presents, for the periods indicated, our disaggregated net sales (in thousands) by business unit for each segment.
| 2023 |
| 2022 |
| 2021 | ||||
Retail | |||||||||
Deckorators | $ | | $ | | $ | | |||
ProWood |
| |
| |
| | |||
UFP Edge |
| |
| |
| | |||
Other |
| |
| |
| | |||
Total Retail | $ | | $ | | $ | | |||
Packaging(1) | |||||||||
Structural Packaging | $ | | $ | | $ | | |||
PalletOne | | | | ||||||
Protective Packaging | | | | ||||||
Total Packaging | $ | | $ | | $ | | |||
Construction | |||||||||
Factory Built | $ | | $ | | $ | | |||
Site Built |
| |
| |
| | |||
Commercial | | | | ||||||
Concrete Forming |
| |
| |
| | |||
Total Construction | $ | | $ | | $ | | |||
All Other | $ | | $ | | $ | | |||
Corporate | $ | | $ | | $ | | |||
Total Net Sales | $ | | $ | | $ | |
(1) Effective January 1, 2023, the Packaging segment established new business units as follows: Structural Packaging, PalletOne, and Protective Packaging Solutions. This change resulted in the transfer of net sales from the these geographic business units to Structural Packaging, PalletOne and Protective Packaging in 2023. Product codes have been transferred within these three business units during 2023, and prior year figures have been updated to reflect the change for comparability purposes.
52
The following table presents, for the periods indicated, our percentage of value-added and commodity-based sales to total net sales by segment.
2023 |
| 2022 |
| 2021 | |||||
Value-Added | |||||||||
Retail | |||||||||
Packaging | |||||||||
Construction | |||||||||
All Other | |||||||||
Corporate | |||||||||
Total | |||||||||
Commodity-Based | |||||||||
Retail | |||||||||
Packaging | |||||||||
Construction | |||||||||
All Other | |||||||||
Corporate | |||||||||
Total |
N.QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth selected financial information for all of the quarters, consisting of
First | Second | Third | Fourth | |||||||||||||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||||||
Net sales | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Gross profit |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Net earnings |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Net earnings attributable to controlling interest |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Basic earnings per share |
| |
| |
| |
| |
| |
| |
| |
| | ||||||||
Diluted earnings per share |
| |
| |
| |
| |
| |
| |
| |
| |
53
MARKET INFORMATION FOR OUR COMMON STOCK
Our common stock trades on The Nasdaq Stock Market (“NASDAQ”) under the symbol UFPI.
STOCK PERFORMANCE GRAPH
The following stock price performance graph compares the annual percentage change in the cumulative total return on our common stock with the cumulative total returns of companies comprising the NASDAQ US Benchmark TR index and an industry peer group we selected. The NASDAQ US Benchmark TR index replaces the NASDAQ Stock Market (US Companies) Index in this analysis and going forward, as the CRSP Index data is no longer accessible. The CRSP indexes has been included with data through 2020. The graph assumes an investment of $100 on December 29, 2018, and reinvestment of dividends in all cases.
The companies included in our self-determined industry peer group are as follows:
American Woodmark Corporation | Masco Corporation |
Boise Cascade Company | Patrick Industries, Inc. |
Builders FirstSource, Inc. | Simpson Manufacturing Company, Inc. |
Gibraltar Industries, Inc. | Sonoco Products Company |
Greif, Inc. | Trex Company, Inc. |
Louisiana-Pacific Corporation | WestRock Company |
The returns of each company included in the self-determined peer group are weighted according to each respective company’s stock market capitalization at the beginning of each period presented in the graph above. In determining the members of our peer group, we considered companies who selected UFPI as a member of their peer group, and looked for similarly sized companies or companies that are a good fit with the markets we serve.
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DIRECTORS AND EXECUTIVE OFFICERS
BOARD OF DIRECTORS | SECTION 16 OFFICERS |
Matthew J. Missad Chairman of the Board and Chief Executive Officer UFP Industries, Inc. | Matthew J. Missad Chairman of the Board and Chief Executive Officer |
William G. Currie Director UFP Industries, Inc. | Michael R. Cole Chief Financial Officer and Treasurer |
Thomas W. Rhodes President and Chief Executive Officer TWR Enterprises, Inc. | Patrick Benton President UFP Construction, LLC |
Bruce A. Merino Director UFP Industries, Inc. | Scott A. Worthington President UFP Packaging, LLC |
Mary Tuuk Kuras Director UFP Industries, Inc. | William D. Schwartz, Jr. President UFP Retail Solutions, LLC |
Brian C. Walker Partner-Strategic Leadership Huron Capital | David A. Tutas Chief Compliance Officer General Counsel |
Michael G. Wooldridge Partner Varnum, LLP | |
Joan A. Budden Former President Priority Health | |
Benjamin J. McLean Chief Executive Officer Ruan Transportation Management Systems, Inc. |
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SHAREHOLDER INFORMATION
ANNUAL MEETING
The 2024 Annual Shareholder’s Meeting of UFP Industries, Inc. will be held at 8:30 a.m. on April 24, 2024, at 2880 East Beltline Lane NE, Grand Rapids, MI 49525.
SHAREHOLDER INFORMATION
Shares of our stock are traded under the symbol UFPI on the NASDAQ Stock Market. Our 10-K report, filed with the Securities and Exchange Commission, will be provided free of charge to any shareholder upon written request. For more information contact:
Investor Relations Department
UFP Industries, Inc.
2801 East Beltline NE
Grand Rapids, MI 49525
Telephone: (616) 364-6161
Web: www.ufpi.com
SECURITIES COUNSEL
Varnum, LLP
Grand Rapids, MI
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TRANSFER AGENT/SHAREHOLDER INQUIRIES
American Stock Transfer & Trust Company serves as the transfer agent for the Corporation. Inquiries relating to stock transfers, changes of ownership, lost or stolen stock certificates, changes of address, and dividend payments should be addressed to:
American Stock Transfer & Trust Co.
6201 15th Ave
Brooklyn, NY 11219
Telephone: (800) 937-5449
UFP INDUSTRIES®, INC., CORPORATE HEADQUARTERS
2801 East Beltline NE
Grand Rapids, MI 49525
Telephone: (616) 364-6161
Facsimile: (616) 364-5558
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EXHIBIT 21
LIST OF REGISTRANT'S SUBSIDIARIES AND AFFILIATES
11032 Tidewater Trail, LLC | | Delaware | | UFP Eastern Division, Inc. | | Michigan |
234 Springs Rd., LLC | | Delaware | | UFP Eatonton, LLC | | Michigan |
2875 Needmore Rd. LLC | | Delaware | | UFP Edge, LLC | | Michigan |
621 Hall St., LLC | | Delaware | | UFP Elizabeth City, LLC | | Michigan |
A1 Mfg. S. de R.L. de C.V. | | Mexico | | UFP Elkwood, LLC | | Michigan |
Advantage Label & Packaging, Inc. | | Michigan | | UFP Factory Built, LLC | | Michigan |
Aljoma Holding Company, LLC | | Michigan | | UFP Financial Services, Inc. | | Michigan |
Aljoma Lumber, Inc. | | Florida | | UFP Folkston, LLC | | Michigan |
Ardellis Insurance Ltd. | | Bermuda | | UFP Franklinton, LLC | | Michigan |
Caliper Building Systems, LLC | | Michigan | | UFP Gainesville, LLC | | Michigan |
Deckorators, Inc. | | Michigan | | UFP Gear, LLC | | Michigan |
Dempsey Wood Products, LLC | | Michigan | | UFP Global Holdings Limited | | United Kingdom |
Eovations, LLC | | Michigan | | UFP Gordon, LLC | | Michigan |
Ficus Pax | | India | | UFP Grand Rapids, LLC | | Michigan |
Forestal Universal SA de CV | | Mexico | | UFP Grandview, LLC | | Michigan |
Idaho Western, Inc. | | Idaho | | UFP Granger, LLC | | Michigan |
idX (China) Display System Co., Ltd. | | China | | UFP Haleyville, LLC | | Michigan |
idX (India) Display Private Ltd. | | India | | UFP Hamilton, LLC | | Michigan |
idX Amsterdam B.V. | | Netherlands | | UFP Hampton Holding Company, LLC | | Michigan |
idX Asia Fixtures Limited | | China | | UFP Harrisonville, LLC | | Michigan |
idX Asia Trading Limited | | Chhina | | UFP Hartford, LLC | | Wisconsin |
idX Chicago, LLC | | Delaware | | UFP Hillsboro, LLC | | Michigan |
idX Corporation | | Delaware | | UFP Industrial, LLC | | Michigan |
idX Corporation London Limited | | United Kingdom | | UFP Industries, Inc. | | Michigan |
idX Holdings, Inc. | | Delaware | | UFP International Employment Services, LLC | | Michigan |
idX Mexico, S. de R.L. de C.V. | | Mexico | | UFP International, LLC | | Michigan |
idX Shanghai Trading Company Ltd. | | China | | UFP Janesville, LLC | | Michigan |
Innov8 Fund I, LLC | | Michigan | | UFP Kyle, LLC | | Michigan |
Job service Middle East LLC | | United Arab Emirates | | UFP Lafayette, LLC | | Michigan |
Landura, LLC | | Texas | | UFP Lansing, LLC | | Michigan |
Metaworld Technologies, LLC | | Michigan | | UFP Londonderry, LLC | | Michigan |
Norpal S. de R.L. de C.V. | | Mexico | | UFP Magna, LLC | | Michigan |
North Atlantic Framing, LLC | | Michigan | | UFP McMinnville, LLC | | Michigan |
P1 Catawba Development Company, LLC | | North Carolina | | UFP Mexico Embalaje y Distribution, S. de R.L. de C. V. | | Mexico |
PalletOne Manufacturing of Texas, LLC | | Texas | | UFP Mid-Atlantic, LLC | | Michigan |
PalletOne of Acquisition of Texas, Inc. | | Delaware | | UFP Middle East Packaging FZE | | United Arab Emirates |
PalletOne of Alabama, LLC | | Alabama | | UFP Middle East Wood Trading- Sole Proprietorship L.L.C. | | United Arab Emirates |
PalletOne of Florida, Inc. | | Florida | | UFP Milwaukee, LLC | | Michigan |
PalletOne of Indiana Transportation, LLC | | Indiana | | UFP Minneota, LLC | | Michigan |
PalletOne of Indiana, Inc. | | Indiana | | UFP Morristown, LLC | | Michigan |
PalletOne of Maine, Inc. | | Maine | | UFP Moultrie, LLC | | Michigan |
PalletOne of Mobile, LLC | | Alabama | | UFP NAC, LLC | | Michigan |
PalletOne of NE Texas, LLC | | Delaware | | UFP Nappanee, LLC | | Michigan |
PalletOne of North Carolina, Inc. | | North Carolina | | UFP New London, LLC | | Michigan |
PalletOne of Texas Holdings, Inc. | | Delaware | | UFP New Waverly, LLC | | Michigan |
PalletOne of Texas, LP | | Texas | | UFP New Windsor, LLC | | Michigan |
PalletOne of Virginia, LLC | | Virginia | | UFP New York, LLC | | Michigan |
PalletOne of Wisconsin Manufacturing, LLC | | Wisconsin | | UFP Orlando, LLC | | Michigan |
PalletOne of Wisconsin, Inc. | | Wisconsin | | UFP Packaging, LLC | | Michigan |
PalletOne, Inc. | | Delaware | | UFP Palets y Embalajes, S. de R.L. de C.V. | | Mexico |
Performance Formulation Solutions, LLC | | Illinois | | UFP Palets y Embalajes, S.L. | | Spain |
Pinelli Lumber, Inc. | | Texas | | UFP Palm Beach, LLC | | Michigan |
Pinelli Universal Chile S.A. | | Mexico | | UFP Parker, LLC | | Michigan |
Pinelli Universal TKT, S de R.L. de C.V. | | Mexico | | UFP Protective Packaging, LLC | | Michigan |
Pinelli Universal, S de R.L. de C.V. | | Mexico | | UFP Purchasing, Inc. | | Michigan |
PR Distribution, LLC | | Puerto Rico | | UFP Rancho Cucamonga, LLC | | Michigan |
Prowood, LLC | | Michigan | | UFP Ranson, LLC | | Michigan |
Shawnlee Construction, LLC | | Michigan | | UFP Real Estate, LLC | | Michigan |
Shepardville Construction, LLC | | Michigan | | UFP Retail, LLC | | Michigan |
Store Fixtures Canada Holdings, Inc. | | Delaware | | UFP Riverside, LLC | | Michigan |
Sunbelt Acquisition Florida II, LLC | | Florida | | UFP RMS, LLC | | Michigan |
Sunbelt Acquistion Corp. | | Delaware | | UFP Rockingham, LLC | | Michigan |
Sunbelt Acqusition Alabama III, LLC | | Alabama | | UFP Rockwell, LLC | | Michigan |
Sunbelt Forest Georgia, LLC | | Georgia | | UFP Saginaw, LLC | | Michigan |
Sunbelt Forest Products Alabama, LLC | | Florida | | UFP Salisbury, LLC | | Michigan |
Sunbelt Forest Products Corporation | | Florida | | UFP San Antonio, LLC | | Michigan |
SunOne Logistics, LLC | | Georgia | | UFP Sauk Rapids, LLC | | Michigan |
The UBEECO Group Pty Ltd | | Australia | | UFP Schertz, LLC | | Michigan |
Tibasa Universal Forest Products S. de R.L. de C.V. | | Mexico | | UFP Shawnee, LLC | | Michigan |
Tresstar, LLC | | Michigan | | UFP Shelf 2, LLC | | Michigan |
Triangle Systems, Inc. | | New York | | UFP Site Built, LLC | | Michigan |
U.F.P. Mexico Holdings, S. de R.L.de CV | | Mexico | | UFP Stafford, LLC | | Michigan |
UFP Ashburn, LLC | | Michigan | | UFP Stockertown, LLC | | Michigan |
UFP Atlantic Division, LLC | | Michigan | | UFP Structural Packaging, LLC | | Michigan |
UFP Auburndale, LLC | | Michigan | | UFP Tampa, LLC | | Michigan |
UFP Aurora, LLC | | Michigan | | UFP Thomaston, LLC | | Michigan |
UFP Australia Pty Ltd | | Australia | | UFP Thornton, LLC | | Michigan |
UFP Australia Real Estate Pty Ltd | | Australia | | UFP Transportation, Inc. | | Michigan |
UFP Barnesville, LLC | | Michigan | | UFP Union City, LLC | | Michigan |
UFP Belchertown, LLC | | Michigan | | UFP Ventures II, Inc. | | Michigan |
UFP Berlin, LLC | | Michigan | | UFP Warranty Corporation | | Michigan |
UFP Biscoe, LLC | | Michigan | | UFP Warrens, LLC | | Michigan |
UFP Blanchester, LLC | | Michigan | | UFP Washington, LLC | | Michigan |
UFP Bonner, LLC | | Michigan | | UFP Western Division, Inc. | | Michigan |
UFP Caldwell, LLC | | Michigan | | UFP White Bear Lake, LLC | | Michigan |
UFP Cameron, LLC | | Michigan | | UFP Windsor, LLC | | Michigan |
UFP Canada, Inc. | | Canada | | UFP Woodburn, LLC | | Michigan |
UFP Chandler, LLC | | Michigan | | Ultra Aluminum Manufacturing, Inc. | | Michigan |
UFP Chicago, LLC | | Michigan | | United Lumber & Reman, LLC | | Alabama |
UFP Concrete Forming Solutions, Inc. | | Michigan | | Universal Forest Products de Mexico S.A. de C.V. | | Mexico |
UFP Construction, LLC | | Michigan | | Universal Forest Products Texas, LLC | | Michigan |
UFP Corrugated, LLC | | Michigan | | Universal Showcase ULC | | Canada |
UFP Craft and Hobby, LLC | | Michigan | | Upshur Forest Products, LLC | | Michigan |
UFP Dallas, LLC | | Michigan | | Wadpack Pvt. Ltd | | India |
UFP Distribution, LLC | | Michigan | | Yard & Home, LLC | | Michigan |
UFP Eagan, LLC | | Michigan | | | | |
Exhibit 23
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in Registration Statement Nos. 333-60630, 333-150345, 333-156596, and 333-274461 on Form S-8 of our reports dated February 28, 2024, relating to the consolidated financial statements of UFP Industries, Inc. and subsidiaries (the “Company”), and the effectiveness of the Company’s internal control over financial reporting appearing in this Annual Report on Form 10-K for the year ended December 30, 2023.
/s/ Deloitte & Touche LLP
Grand Rapids, Michigan
February 28, 2024
Exhibit 31(a)
UFP Industries, Inc.
Certification
I, Matthew J. Missad, certify that:
1. I have reviewed this report on Form 10-K of UFP Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the Audit Committee of registrant's Board of Directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| | | |
Date: | February 28, 2024 | | /s/ Matthew J. Missad |
| | | Matthew J. Missad |
| | | Chief Executive Officer and |
| | | Principal Executive Officer |
Exhibit 31(b)
UFP Industries, Inc.
Certification
I, Michael R. Cole, certify that:
1. I have reviewed this report on Form 10-K of UFP Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the Audit Committee of registrant's Board of Directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| | | |
Date: | February 28, 2024 | | /s/ Michael R. Cole |
| | | Michael R. Cole |
| | | Chief Financial Officer, |
| | | Principal Financial Officer and |
| | | Principal Accounting Officer |
Exhibit 32(a)
CERTIFICATE OF THE
CHIEF EXECUTIVE OFFICER OF
UFP INDUSTRIES, INC.
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350):
I, Matthew J. Missad, Chief Executive Officer of UFP Industries, Inc., certify, to the best of my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) that:
(1) The report on Form 10-K for the year ended December 30, 2023, which this statement accompanies, fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in this report on Form 10-K for the period ended December 30, 2023 fairly presents, in all material respects, the financial condition and results of operations of Universal Forest Products, Inc.
| | | | |
| | | UFP INDUSTRIES, INC. | |
| | | | |
Date: | February 28, 2024 | | By: | /s/ Matthew J. Missad |
| | | | Matthew J. Missad |
| | | Its: | Chief Executive Officer and |
| | | | Principal Executive Officer |
The signed original of this written statement required by Section 906, or any other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to UFP Industries, Inc. and will be retained by UFP Industries, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32(b)
CERTIFICATE OF THE
CHIEF FINANCIAL OFFICER OF
UFP INDUSTRIES, INC.
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350):
I, Michael R. Cole, Chief Financial Officer of UFP Industries, Inc., certify, to the best of my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) that:
(1) The report on Form 10-K for the period ended December 30, 2023, which this statement accompanies, fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in this report on Form 10-K for the period ended December 30, 2023 fairly presents, in all material respects, the financial condition and results of operations of UFP Industries, Inc.
| | | | |
| | | UFP INDUSTRIES, INC. | |
| | | | |
Date: | February 28, 2024 | | By: | /s/ Michael R. Cole |
| | | | Michael R. Cole |
| | | Its: | Chief Financial Officer, |
| | | | Principal Financial Officer and |
| | | | Principal Accounting Officer |
The signed original of this written statement required by Section 906, or any other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to UFP Industries, Inc. and will be retained by UFP Industries, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 97
UFP INDUSTRIES, INC. ["the Company"]
CLAWBACK POLICY
This Clawback Policy (the "Policy") is intended to comply with Section 10D of the Securities Exchange Act of 1934 (the "Exchange Act"), as well as Nasdaq Listing Rule 5608 (the "Listing Standard") and Section 304 of the Sarbanes-Oxley Act of 2002, and provides for the recoupment of certain compensation from Executive Officers in the event of a Restatement (as defined herein) or Improper Conduct (as defined herein).
RECOUPMENT
(a) | Mandatory Recoupment. If the Company is required to prepare a Restatement, the Company shall promptly recoup the amount of any Erroneous Awarded Compensation received by any Executive Officer during the Applicable Period. |
(b) | Discretionary Recoupment. If any person who is or was an Executive Officer has engaged in Improper Conduct that either has resulted in, or could reasonably be expected to result in, an Adverse Effect, then the Board may, in its sole discretion, after evaluating the associated costs and benefits, seek to recover all or any portion of the Recoverable Incentive paid to any such Executive Officer during the Applicable Period. |
(c) | Discretionary Recoupment; Further Actions. In addition, the Board may, in its sole discretion and in the reasonable exercise of its business judgment, determine whether and to what extent additional action is appropriate to address the circumstances surrounding such Improper Conduct so as to minimize the likelihood of any recurrence and to impose such other discipline as it deems appropriate. |
DEFINITIONS
For purposes of this Policy, the following terms shall have the following meanings:
● | "Adverse Effect" means any significant adverse impact on the reputation of, or a significant adverse economic consequence for, the Company or any of its subsidiaries. |
● | "Applicable Period" means (i) in the case of any Restatement, the three-year period preceding the date on which the Company is required to prepare the Restatement and (ii) in the case of any Improper Conduct, the three-year period preceding the date of the Improper Conduct, as determined by the Board. The date on which the Company is required to prepare a Restatement is the earlier to occur of (1) the date the Board concludes, or reasonably should have concluded, that the Company is required to prepare a Restatement or (2) the date a court, regulator or other legally authorized body directs the Company to prepare a Restatement, in each case regardless of if or when the restated financial statements are filed. |
● | "Board" means the Board of Directors, the Compensation Committee of the Board of Directors or such other committee of the Board of Directors that, at the relevant time, has authority for making determinations as to the compensation of Executive Officers. |
● | "Erroneously Awarded Compensation" means the amount of Performance-Based Compensation received by the Executive Officer on or after October 2, 2023, that exceeds the amount of Performance-Based Compensation that would have been received by the Executive Officer had it been determined based upon the restated amounts. In addition, Erroneously Awarded Compensation shall be determined by the Board without regard to any taxes paid by the Executive Officer with respect to any Erroneously Awarded Compensation. |
● | "Exchange Act" means the Securities Exchange Act of 1934, as amended. |
● | "Executive Officer" means any person who is or was during the Applicable Period an executive officer of the Company, as determined pursuant to Rule 3b-7 promulgated under the Exchange Act (or any successor rule). |
● | "Improper Conduct" means an Executive Officer's willful misconduct (including, but not limited to, fraud, bribery or other illegal acts) or gross negligence, which, in either case, includes any failure to report properly, or to take appropriate remedial action with respect to, such misconduct or gross negligence by another person. |
● | "Incentive Compensation" means any compensation paid or payable under the Company's annual incentive plan or program and/or Long Term Incentive Plan or any successor plan, respectively. |
● | "Performance-Based Compensation" means any Incentive Compensation that is granted, earned or vested based wholly or in part upon the attainment of a financial reporting measure. |
● | "Recoverable Incentive" means the amount of any Incentive Compensation paid to or in respect of an Executive Officer during the Applicable Period that, in the case of any Improper Conduct, the Board determines, in its sole discretion, to be appropriate in light of the scope and nature of the Improper Conduct. |
● | "Restatement" means an accounting restatement of the Company's financial statements due to the Company's material noncompliance with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. |
● | "SEC" means the Securities and Exchange Commission. |
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METHOD OF RECOUPMENT
The Board will determine, in its sole discretion, the method for recouping any Recoverable Incentive or Erroneously Awarded Compensation which may include, without limitation:
(a) | requiring reimbursement of cash Incentive Compensation previously paid; |
(b) | seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer or other disposition of any equity-based awards under the Company's Long Term Incentive Plan; |
(c) | offsetting the recouped amount from any compensation otherwise owed by the Company to the Executive Officer; |
(d) | cancelling outstanding vested or unvested equity awards; and/or |
(e) | taking any other remedial and recovery action permitted by law, as determined by the Board. |
NO INDEMNIFICATION
The Company shall not indemnify any Executive Officer against the loss of any Recoverable Incentive or Erroneously Awarded Compensation.
DISCLOSURE
The Company shall disclose to its shareholders no later than the filing of the next following proxy statement the actions taken or the decision not to take action with regard to recovery or non-recovery, as the case may be, of Recoverable Incentive or Erroneously Awarded Compensation (including reporting the aggregate amounts recovered) related to any Restatement or to any Improper Conduct, so long as such event has been previously disclosed in the Company's filings with the SEC.
EFFECTIVE DATE
This Amended and Restated Policy shall be effective as of the date it is adopted by the Board (the "Effective Date") and shall apply to Incentive Compensation that is approved, awarded or granted to Executive Officers on, after or prior to that date, as well as any Performance-Based Compensation received after October 2, 2023.
OTHER RECOUPMENT RIGHTS
The Board intends that this Policy will be applied to the fullest extent of the law. The Board may require that any employment agreement, equity award agreement or similar agreement entered into on or after the Effective Date shall, as a condition to the grant of any benefit thereunder, require an Executive Officer to agree to abide by the terms of this Policy. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may
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be available to the Company pursuant to the terms of any similar policy in any employment agreement, equity award agreement, or similar agreement and any other legal remedies available to the Company.
ADMINISTRATION; INTERPRETATION
This Policy shall be administered by the Board or, if so designated by the Board, the Compensation Committee, in which case references herein to the Board shall be deemed references to the Compensation Committee. Any determinations made by the Board shall be final and binding. The Board is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate or advisable for the administration of this Policy.
AMENDMENT; TERMINATION
The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary to reflect the rules and regulations adopted by the Securities and Exchange Commission under Section 10D of the Exchange Act and to comply with the Listing Standard.
IMPRACTICABILITY
The Board shall recover any Erroneously Awarded Compensation or Recoverable Incentive in accordance with this Policy unless such recovery would be impracticable, as determined by the Board in accordance with Rule 10D-1 of the Exchange Act and the Listing Standard.
SUCCESSORS
This Policy shall be binding and enforceable against all Executive Officers and their respective beneficiaries, heirs, executors, administrators or other legal representatives.
10444710_6
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