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 March 27, 2021


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

Commission File Number 0-22684

UFP INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)


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

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

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


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

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

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

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


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

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

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

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


	Class		Outstanding as of March 27, 2021
	Common stock, $1 par value		61,838,256


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

Table of Contents

UFP INDUSTRIES, INC.

TABLE OF CONTENTS

PART I.		FINANCIAL INFORMATION.	Page No.

	Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets at March 27, 2021, December 26, 2020 and March 28, 2020	3

		Condensed Consolidated Statements of Earnings and Comprehensive Income for the Three Months Ended March 27, 2021 and March 28, 2020	4

		Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 27, 2021 and March 28, 2020	5

		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 27, 2021 and March 28, 2020	6

		Notes to Unaudited Condensed Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28

	Item 4.	Controls and Procedures	28

PART II.		OTHER INFORMATION

	Item 1.	Legal Proceedings – NONE

	Item 1A.	Risk Factors - NONE	29

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

	Item 3.	Defaults upon Senior Securities – NONE

	Item 4.	Mine Safety Disclosures – NONE

	Item 5.	Other Information – NONE	29

	Item 6.	Exhibits	29

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UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands, except share data)
	March 27,		December 26,		March 28,
	2021		2020		2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	44,399	$	436,507	$	32,129
Restricted cash		629		101		724
Investments		31,439		24,308		17,778
Accounts receivable, net		808,105		470,504		460,821
Inventories:
Raw materials		438,762		316,481		263,857
Finished goods		384,652		250,813		246,824
Total inventories		823,414		567,294		510,681
Refundable income taxes		—		5,836		2,624
Other current assets		29,072		33,812		36,152
TOTAL CURRENT ASSETS		1,737,058		1,538,362		1,060,909
DEFERRED INCOME TAXES		2,290		2,413		2,145
RESTRICTED INVESTMENTS		17,209		17,565		16,111
RIGHT OF USE ASSETS		98,404		77,245		81,065
OTHER ASSETS		27,358		20,298		25,198
GOODWILL		314,189		252,193		246,459
INDEFINITE-LIVED INTANGIBLE ASSETS		7,401		7,401		7,288
OTHER INTANGIBLE ASSETS, NET		93,812		72,252		46,232
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment		1,060,893		974,497		906,171
Less accumulated depreciation and amortization		(572,526)		(557,335)		(508,596)
PROPERTY, PLANT AND EQUIPMENT, NET		488,367		417,162		397,575
TOTAL ASSETS		2,786,088		2,404,891		1,882,982
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Cash overdraft	$	47,140	$	—	$	—
Accounts payable		299,398		211,518		162,039
Accrued liabilities:
Compensation and benefits		137,208		166,478		92,504
Income taxes		25,565		—		—
Other		78,560		69,104		55,760
Current portion of lease liability		23,051		16,549		16,180
Current portion of long-term debt		109		100		2,772
TOTAL CURRENT LIABILITIES		611,031		463,749		329,255
LONG-TERM DEBT		426,310		311,607		160,550
LEASE LIABILITY		76,408		61,509		64,937
DEFERRED INCOME TAXES		34,940		25,266		22,799
OTHER LIABILITIES		50,856		59,608		33,159
TOTAL LIABILITIES		1,199,545		921,739		610,700
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, 61,838,256, 61,205,780 and 61,102,481		61,838		61,206		61,102
Additional paid-in capital		231,111		218,224		211,724
Retained earnings		1,276,722		1,182,680		998,996
Accumulated other comprehensive loss		(3,464)		(1,794)		(11,110)
Total controlling interest shareholders’ equity		1,566,207		1,460,316		1,260,712
Noncontrolling interest		20,336		22,836		11,570
TOTAL SHAREHOLDERS’ EQUITY		1,586,543		1,483,152		1,272,282
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,786,088	$	2,404,891	$	1,882,982

See notes to consolidated condensed financial statements.

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UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME

(Unaudited)


(in thousands, except per share data)
	Three Months Ended
	March 27,		March 28,
	2021		2020
NET SALES	$	1,825,004	$	1,032,062
COST OF GOODS SOLD		1,538,450		864,826
GROSS PROFIT		286,554		167,236
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		150,098		109,339
OTHER LOSSES (GAINS), NET		(1,031)		(735)
EARNINGS FROM OPERATIONS		137,487		58,632
INTEREST EXPENSE		3,151		1,908
INTEREST AND INVESTMENT (INCOME) LOSS		(2,296)		2,832
EQUITY IN EARNINGS OF INVESTEE		630		—
		1,485		4,740
EARNINGS BEFORE INCOME TAXES		136,002		53,892
INCOME TAXES		31,751		13,322
NET EARNINGS		104,251		40,570
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(940)		(411)
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST	$	103,311	$	40,159

EARNINGS PER SHARE – BASIC	$	1.67	$	0.65
EARNINGS PER SHARE – DILUTED	$	1.67	$	0.65

OTHER COMPREHENSIVE INCOME:
NET EARNINGS		104,251		40,570
OTHER COMPREHENSIVE GAIN (LOSS)		(2,196)		(8,556)
COMPREHENSIVE INCOME		102,055		32,014
LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		(414)		1,924
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST	$	101,641	$	33,938

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 26, 2020	$	61,206	$	218,224	$	1,182,680	$	(1,794)	$	22,836	$	1,483,152
Net earnings						103,311				940		104,251
Foreign currency translation adjustment								(374)		(526)		(900)
Unrealized loss on debt securities								(1,296)				(1,296)
Distributions to noncontrolling interest										(2,914)		(2,914)
Additional purchase of noncontrolling interest												—
Cash dividends - $0.15 per share - quarterly						(9,274)						(9,274)
Issuance of 5,816 shares under employee stock purchase plan		6		357								363
Net issuance of 536,970 shares under stock grant programs		537		3,888		5						4,430
Issuance of 89,690 shares under deferred compensation plans		89		(89)								—
Expense associated with share-based compensation arrangements				2,936								2,936
Accrued expense under deferred compensation plans				5,795								5,795
Balance at March 27, 2021	$	61,838	$	231,111	$	1,276,722	$	(3,464)	$	20,336	$	1,586,543


(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 purchase plan		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

See notes to consolidated condensed financial statements.

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UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(in thousands)	Three Months Ended
	March 27,		March 28,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	104,251	$	40,570
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation		18,733		15,717
Amortization of intangibles		3,998		1,571
Expense associated with share-based and grant compensation arrangements		2,981		1,444
Deferred income taxes		142		286
Unrealized (gain) loss on investments and other		(1,754)		3,173
Equity in earnings of investee		630		—
Net gain on disposition of assets		(532)		(285)
Changes in:
Accounts receivable		(253,323)		(94,253)
Inventories		(207,768)		(25,783)
Accounts payable and cash overdraft		121,892		20,047
Accrued liabilities and other		14,090		(8,648)
NET CASH USED IN OPERATING ACTIVITIES		(196,660)		(46,161)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(34,656)		(27,286)
Proceeds from sale of property, plant and equipment		5,062		409
Acquisitions and purchases of non-controlling interest, net of cash received		(261,133)		(18,487)
Purchases of investments		(8,738)		(14,052)
Proceeds from sale of investments		3,381		11,260
Other		(414)		(54)
NET CASH USED IN INVESTING ACTIVITIES		(296,498)		(48,210)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities		236,280		6,759
Repayments under revolving credit facilities		(121,570)		(6,498)
Contingent consideration payments and other		(627)		(3,074)
Proceeds from issuance of common stock		363		319
Dividends paid to shareholders		(9,274)		(7,730)
Distributions to noncontrolling interest		(2,914)		(299)
Repurchase of common stock		—		(29,212)
Other		(331)		12
NET CASH FROM (USED IN) FINANCING ACTIVITIES		101,927		(39,723)
Effect of exchange rate changes on cash		(349)		(1,719)
NET CHANGE IN CASH AND CASH EQUIVALENTS		(391,580)		(135,813)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR		436,608		168,666
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	45,028	$	32,853

RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents, beginning of period	$	436,507	$	168,336
Restricted cash, beginning of period		101		330
Cash, cash equivalents, and restricted cash, beginning of period	$	436,608	$	168,666

Cash and cash equivalents, end of period	$	44,399	$	32,129
Restricted cash, end of period		629		724
Cash, cash equivalents, and restricted cash, end of period	$	45,028	$	32,853

SUPPLEMENTAL INFORMATION:
Interest paid	$	2,694	$	374
Income taxes paid		249		2,307
NON-CASH FINANCING ACTIVITIES:
Common stock issued under deferred compensation plans		5,359		4,900

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. Certain prior year amounts have been reclassified to conform to the current year presentation.

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 26, 2020.

Seasonality has a significant impact on our working capital from March to August, which historically results in negative or modest cash flows from operations in our first and second quarters. Conversely, we experience a substantial decrease in working capital from September to February which typically results in significant cash flow from operations in our third and fourth quarters. For comparative purposes, we have included the March 28, 2020 balances in the accompanying unaudited condensed consolidated balance sheets.

B. FAIR VALUE

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


	March 27, 2021								March 28, 2020
	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	$	19	$	1,127	$	—	$	1,146	$	29,561	$	837	$	—	$	30,398
Fixed income funds		244		16,264		—		16,508		237		15,124		—		15,361
Equity securities		18,496		—		—		18,496		9,089		—		—		9,089
Alternative investments		—		—		2,126		2,126		—		—		1,960		1,960
Mutual funds:
Domestic stock funds		9,388		—		—		9,388		5,204		—		—		5,204
International stock funds		1,395		—		—		1,395		947		—		—		947
Target funds		21		—		—		21		242		—		—		242
Bond funds		145		—		—		145		222		—		—		222
Alternative funds		496		—		—		496		921		—		—		921
Total mutual funds		11,445		—		—		11,445		7,536		—		—		7,536
Total	$	30,204	$	17,391	$	2,126	$	49,721	$	46,423	$	15,961	$	1,960	$	64,344
Assets at fair value	$	30,204	$	17,391	$	2,126	$	49,721	$	46,423	$	15,961	$	1,960	$	64,344

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UFP INDUSTRIES, INC.

From the assets measured at fair value as of March 27, 2021, listed in the table above, $31.4 million of mutual funds, equity securities, and alternative investments are held in Investments, $0.5 million of money market funds are held in Cash and Cash Equivalents, $0.6 million of money market and mutual funds are held in Other Assets for our deferred compensation plan, and $16.9 million of fixed income funds and $0.3 million of money markets funds are held in Restricted Investments.

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

In accordance with our investment policy, our wholly-owned captive, Ardellis Insurance Ltd. (“Ardellis”), maintains an investment portfolio, totaling $47.9 million as of March 27, 2021, which has been included in the aforementioned table of total investments. This portfolio consists of domestic and international equity securities, alternative investments, and fixed income bonds.

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


	March 27, 2021						March 28, 2020
			Unrealized						Unrealized
	Cost		Gain/(Loss)		Fair Value		Cost		Gain/(Loss)		Fair Value
Fixed Income	$	15,867	$	642	$	16,509	$	15,257	$	104	$	15,361
Equity		14,664		3,832		18,496		9,690		(601)		9,089
Mutual Funds		8,769