SEC Filing - UFP Industries, Inc.

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 27, 2020


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

Commission File Number 0-22684

UFP INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)


	Michigan		38-1465835
	(State or other jurisdiction of incorporation or		(I.R.S. Employer Identification Number)
	organization)

	2801 East Beltline NE, Grand Rapids, Michigan		49525
	(Address of principal executive offices)		(Zip Code)

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


	NONE
	(Former name or former address, if changed since last report.)

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

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

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


Large Accelerated Filer ⌧	Accelerated Filer ◻	Non-Accelerated Filer ◻	Smaller Reporting Company ☐
			Emerging Growth Company ☐

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

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

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


	Class		Outstanding as of June 27, 2020
	Common stock, $1 par value		61,169,181


Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol	Name of Each Exchange On Which Registered
Common Stock, no par value	UFPI	The Nasdaq Stock Market, LLC

Table of Contents

UFP INDUSTRIES, INC.

TABLE OF CONTENTS

PART I.		FINANCIAL INFORMATION.	Page No.

	Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets at June 27, 2020, December 28, 2019 and June 29, 2019	3

		Condensed Consolidated Statements of Earnings and Comprehensive Income for the Three and Six Months Ended June 27, 2020 and June 29, 2019	4

		Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended June 27, 2020 and June 29, 2019	5

		Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 27, 2020 and June 29, 2019	7

		Notes to Unaudited Condensed Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32

	Item 4.	Controls and Procedures	33

PART II.		OTHER INFORMATION

	Item 1.	Legal Proceedings – NONE

	Item 1A.	Risk Factors	34

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

	Item 3.	Defaults upon Senior Securities – NONE

	Item 4.	Mine Safety Disclosures – NONE

	Item 5.	Other Information – NONE	35

	Item 6.	Exhibits	35

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UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands, except share data)
	June 27,		December 28,		June 29,
	2020		2019		2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	200,546	$	168,336	$	20,497
Restricted cash		724		330		1,024
Investments		19,195		18,527		16,776
Accounts receivable, net		522,930		364,027		483,263
Inventories:
Raw materials		244,073		236,283		258,078
Finished goods		215,351		250,591		270,602
Total inventories		459,424		486,874		528,680
Refundable income taxes		—		13,272		—
Other current assets		33,786		41,706		46,868
TOTAL CURRENT ASSETS		1,236,605		1,093,072		1,097,108
DEFERRED INCOME TAXES		2,058		2,763		2,341
RESTRICTED INVESTMENTS		17,162		16,214		14,856
RIGHT OF USE ASSETS		77,039		80,167		70,650
OTHER ASSETS		24,205		24,884		23,328
GOODWILL		247,482		229,536		225,269
INDEFINITE-LIVED INTANGIBLE ASSETS		7,350		7,354		7,359
OTHER INTANGIBLE ASSETS, NET		45,131		48,313		41,176
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment		922,427		884,963		851,565
Less accumulated depreciation and amortization		(520,851)		(497,789)		(482,993)
PROPERTY, PLANT AND EQUIPMENT, NET		401,576		387,174		368,572
TOTAL ASSETS		2,058,608		1,889,477		1,850,659
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Cash overdraft	$	—	$	—	$	24,972
Accounts payable		199,338		142,479		189,649
Accrued liabilities:
Compensation and benefits		129,290		141,892		100,409
Income taxes		25,109		—		739
Other		63,278		51,572		48,746
Current portion of lease liability		15,411		15,283		14,918
Current portion of long-term debt		2,786		2,816		173
TOTAL CURRENT LIABILITIES		435,212		354,042		379,606
LONG-TERM DEBT		161,057		160,867		187,471
LEASE LIABILITY		61,674		64,884		55,875
DEFERRED INCOME TAXES		22,685		22,880		14,773
OTHER LIABILITIES		38,655		29,071		29,701
TOTAL LIABILITIES		719,283		631,744		667,426
SHAREHOLDERS’ EQUITY:
Controlling interest shareholders’ equity:
Preferred stock, no par value; shares authorized 1,000,000; issued and outstanding, none	$	—	$	—	$	—
Common stock, $1 par value; shares authorized 80,000,000; issued and outstanding, 61,169,181, 61,408,589 and 61,366,680		61,169		61,409		61,367
Additional paid-in capital		213,809		192,173		192,783
Retained earnings		1,057,817		995,022		917,704
Accumulated other comprehensive income		(8,396)		(4,889)		(4,479)
Total controlling interest shareholders’ equity		1,324,399		1,243,715		1,167,375
Noncontrolling interest		14,926		14,018		15,858
TOTAL SHAREHOLDERS’ EQUITY		1,339,325		1,257,733		1,183,233
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,058,608	$	1,889,477	$	1,850,659

See notes to consolidated condensed financial statements.

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UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME

(Unaudited)


(in thousands, except per share data)
	Three Months Ended				Six Months Ended
	June 27,		June 29,		June 27,		June 29,
	2020		2019		2020		2019
NET SALES	$	1,242,001	$	1,239,817	$	2,274,063	$	2,254,943
COST OF GOODS SOLD		1,037,070		1,053,091		1,901,896		1,913,950
GROSS PROFIT		204,931		186,726		372,167		340,993
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		113,781		112,891		223,121		218,207
OTHER		(1,209)		(402)		(1,944)		103
EARNINGS FROM OPERATIONS		92,359		74,237		150,990		122,683
INTEREST EXPENSE		1,898		2,407		3,805		4,867
INTEREST INCOME		(189)		(512)		(530)		(757)
UNREALIZED LOSS (GAIN) ON INVESTMENTS AND OTHER		(2,701)		(170)		472		(1,518)
		(992)		1,725		3,747		2,592
EARNINGS BEFORE INCOME TAXES		93,351		72,512		147,243		120,091
INCOME TAXES		23,657		17,367		36,979		28,944
NET EARNINGS		69,694		55,145		110,264		91,147
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(3,231)		(630)		(3,642)		(1,092)
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST	$	66,463	$	54,515	$	106,622	$	90,055

EARNINGS PER SHARE - BASIC	$	1.08	$	0.88	$	1.73	$	1.46
EARNINGS PER SHARE - DILUTED	$	1.08	$	0.88	$	1.73	$	1.46

OTHER COMPREHENSIVE INCOME:
NET EARNINGS		69,694		55,145		110,264		91,147
OTHER COMPREHENSIVE GAIN (LOSS)		2,839		471		(5,717)		1,844
COMPREHENSIVE INCOME		72,533		55,616		104,547		92,991
LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		(3,356)		(791)		(1,432)		(1,477)
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST	$	69,177	$	54,825	$	103,115	$	91,514

See notes to consolidated condensed financial statements.

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UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


(in thousands, except share and per share data)
	Controlling Interest Shareholders’ Equity
							Accumulated
			Additional				Other
	Common		Paid-In		Retained		Comprehensive		Noncontrolling
	Stock		Capital		Earnings		Earnings		Interest		Total
Balance at December 28, 2019	$	61,409	$	192,173	$	995,022	$	(4,889)	$	14,018	$	1,257,733
Net earnings						40,159				411		40,570
Foreign currency translation adjustment								(5,951)		(2,335)		(8,286)
Unrealized loss on debt securities								(270)				(270)
Distributions to noncontrolling interest										(299)		(299)
Additional purchase of noncontrolling interest				130						(225)		(95)
Cash dividends - $0.125 per share - quarterly						(7,730)						(7,730)
Issuance of 10,549 shares under employee stock plans		10		309								319
Net issuance of 350,124 shares under stock grant programs		350		12,454		1						12,805
Issuance of 89,616 shares under deferred compensation plans		89		(89)								—
Repurchase of 756,397 shares		(756)				(28,456)						(29,212)
Expense associated with share-based compensation arrangements				1,404								1,404
Accrued expense under deferred compensation plans				5,343								5,343
Balance at March 28, 2020	$	61,102	$	211,724	$	998,996	$	(11,110)	$	11,570	$	1,272,282
Net earnings						66,463				3,231		69,694
Foreign currency translation adjustment								2,026		125		2,151
Unrealized loss on debt securities								688				688
Cash dividends - $0.125 per share - quarterly						(7,644)						(7,644)
Issuance of 9,714 shares under employee stock plans		10		367								377
Net issuance of 42,880 shares under stock grant programs		43		(174)		2						(129)
Issuance of 14,106 shares under deferred compensation plans		14		(14)								—
Expense associated with share-based compensation arrangements				824								824
Accrued expense under deferred compensation plans				1,082								1,082
Balance at June 27, 2020	$	61,169	$	213,809	$	1,057,817	$	(8,396)	$	14,926	$	1,339,325

See notes to condensed consolidated financial statements.

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UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY, CONTINUED

(Unaudited)


(in thousands, except share and per share data)
	Controlling Interest Shareholders’ Equity
							Accumulated
			Additional				Other
	Common		Paid-In		Retained		Comprehensive		Noncontrolling
	Stock		Capital		Earnings		Earnings		Interest		Total
Balance at December 29, 2018	$	60,884	$	178,540	$	839,917	$	(5,938)	$	15,281	$	1,088,684
Net earnings						35,540				462		36,002
Foreign currency translation adjustment								982		224		1,206
Unrealized gain (loss) on investment & foreign currency								167				167
Distributions to noncontrolling interest										(500)		(500)
Issuance of 10,259 shares under employee stock plans		10		251								261
Net issuance of 320,069 shares under stock grant programs		320		6,101								6,421
Issuance of 138,295 shares under deferred compensation plans		138		(138)								—
Expense associated with share-based compensation arrangements				1,226								1,226
Accrued expense under deferred compensation plans				4,899								4,899
Balance at March 30, 2019	$	61,352	$	190,879	$	875,457	$	(4,789)	$	15,467	$	1,138,366
Net earnings						54,515				630		55,145
Foreign currency translation adjustment								151		161		312
Unrealized gain (loss) on investment & foreign currency								159				159
Distributions to noncontrolling interest										(400)		(400)
Cash dividends - $0.200 per share - semiannually						(12,271)						(12,271)
Issuance of 8,694 shares under employee stock plans		9		272								281
Net forfeiture of 10,819 shares under stock grant programs		(11)		(262)		3						(270)
Issuance of 16,433 shares under deferred compensation plans		17		(17)								—
Expense associated with share-based compensation arrangements				885								885
Accrued expense under deferred compensation plans				1,026								1,026
Balance at June 29, 2019	$	61,367	$	192,783	$	917,704	$	(4,479)	$	15,858	$	1,183,233

See notes to consolidated condensed financial statements.

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UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(in thousands)	Six Months Ended
	June 27,		June 29,
	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	110,264	$	91,147
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation		31,330		29,200
Amortization of intangibles		3,129		2,946
Expense associated with share-based and grant compensation arrangements		2,303		2,209
Deferred income taxes (credit)		290		(536)
Unrealized loss (gain) on investments		473		(1,518)
Net gain on disposition of assets and impairment of assets		(271)		(321)
Changes in:
Accounts receivable		(155,554)		(139,468)
Inventories		25,983		28,008
Accounts payable and cash overdraft		57,017		49,947
Accrued liabilities and other		72,246		9,334
NET CASH FROM OPERATING ACTIVITIES		147,210		70,948
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(46,730)		(42,477)
Proceeds from sale of property, plant and equipment		644		977
Acquisitions and purchases of non-controlling interest, net of cash received		(18,689)		(5,034)
Purchases of investments		(20,094)		(4,859)
Proceeds from sale of investments		18,339		3,667
Other		318		(10)
NET CASH USED IN INVESTING ACTIVITIES		(66,212)		(47,736)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities		6,759		393,434
Repayments under revolving credit facilities		(6,498)		(408,027)
Repayment of debt		(3,077)		(3,061)
Proceeds from issuance of common stock		697		542
Dividends paid to shareholders		(15,374)		(12,271)
Distributions to noncontrolling interest		(299)		(900)
Repurchase of common stock		(29,212)		—
Other		32		28
NET CASH USED IN FINANCING ACTIVITIES		(46,972)		(30,255)
Effect of exchange rate changes on cash		(1,422)		366
NET CHANGE IN CASH AND CASH EQUIVALENTS		32,604		(6,677)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR		168,666		28,198
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	201,270	$	21,521

RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents, beginning of period	$	168,336	$	27,316
Restricted cash, beginning of period		330		882
Cash, cash equivalents, and restricted cash, beginning of period	$	168,666	$	28,198

Cash and cash equivalents, end of period	$	200,546	$	20,497
Restricted cash, end of period		724		1,024
Cash, cash equivalents, and restricted cash, end of period	$	201,270	$	21,521

SUPPLEMENTAL INFORMATION:
Interest paid	$	3,793	$	4,658
Income taxes paid		1,778		14,569
NON-CASH FINANCING ACTIVITIES:
Common stock issued under deferred compensation plans		5,538		5,041

See notes to consolidated condensed financial statements.

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UFP INDUSTRIES, INC.

NOTES TO UNAUDITED

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A. BASIS OF PRESENTATION

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

In our opinion, the Financial Statements contain all material adjustments necessary to present fairly our consolidated financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. These Financial Statements should be read in conjunction with the annual consolidated financial statements, and footnotes thereto, included in our Annual Report to Shareholders on Form 10-K for the fiscal year ended December 28, 2019.

On April 22, 2020, the shareholders approved changing the name of the Company from Universal Forest Products, Inc., to UFP Industries, Inc.

Seasonality has a significant impact on our working capital from March to August which historically results in negative or modest cash flows from operations in our first and second quarters. Conversely, we experience a substantial decrease in working capital from September to February which typically results in significant cash flow from operations in our third and fourth quarters. For comparative purposes, we have included the June 29, 2019 balances in the accompanying unaudited condensed consolidated balance sheets.

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide, which subsequently resulted in a variety of “stay at home” orders issued by states in which we operate. As of the date of this filing, the majority of our customers and operations have been deemed to be essential businesses under these state orders. Consequently, all but three of our 150 plant locations remain operating. We cannot reasonably estimate the length or severity of this pandemic and government restrictions on business activity, or the extent to which these restrictions may materially impact our consolidated financial position, consolidated results of operations, and consolidated cash flows in fiscal 2020.

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UFP INDUSTRIES, INC.

B. FAIR VALUE

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