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Table of Contents

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 April 1, 2023

OR

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

Commission File Number 0-22684

UFP INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Michigan

    

38-1465835

(State or other jurisdiction of incorporation or

(I.R.S. Employer Identification Number)

organization)

2801 East Beltline NE, Grand Rapids, Michigan

49525

(Address of principal executive offices)

(Zip Code)

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

NONE

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

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

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

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

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

Emerging Growth Company

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

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

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

Class

    

Outstanding as of April 1, 2023

Common stock, $1 par value

62,095,570

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

3

Condensed Consolidated Balance Sheets at April 1, 2023, December 31, 2022 and March 26, 2022

3

Condensed Consolidated Statements of Earnings and Comprehensive Income for the Three Months Ended April 1, 2023 and March 26, 2022

4

Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended April 1, 2023 and March 26, 2022

5

Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 1, 2023 and March 26, 2022

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

30

Item 4.

Controls and Procedures

30

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings – NONE

Item 1A.

Risk Factors - NONE

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3.

Defaults upon Senior Securities – NONE

Item 4.

Mine Safety Disclosures – NONE

Item 5.

Other Information – NONE

31

Item 6.

Exhibits

32

2

Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share data)

April 1,

December 31,

March 26,

    

2023

    

2022

    

2022

ASSETS

  

  

CURRENT ASSETS:

  

  

Cash and cash equivalents

$

423,299

    

$

559,397

  

$

73,783

Restricted cash

 

761

 

226

  

 

729

Investments

 

37,534

 

36,013

  

 

35,465

Accounts receivable, net

 

809,389

 

617,604

  

 

1,095,362

Inventories:

  

  

Raw materials

 

425,835

 

398,798

  

 

576,023

Finished goods

 

534,503

 

574,429

  

 

654,328

Total inventories

 

960,338

 

973,227

  

 

1,230,351

Refundable income taxes

 

 

33,126

  

 

Other current assets

 

35,692

 

42,520

  

 

36,727

TOTAL CURRENT ASSETS

 

2,267,013

 

2,262,113

 

2,472,417

DEFERRED INCOME TAXES

 

4,194

 

3,750

  

 

3,590

RESTRICTED INVESTMENTS

22,267

 

19,898

  

 

19,390

RIGHT OF USE ASSETS

116,564

107,517

99,914

OTHER ASSETS

 

99,516

 

101,262

  

 

32,544

GOODWILL

 

337,467

 

337,320

  

 

317,631

INDEFINITE-LIVED INTANGIBLE ASSETS

 

7,336

 

7,339

  

 

7,396

OTHER INTANGIBLE ASSETS, NET

 

142,277

 

143,892

  

 

120,205

PROPERTY, PLANT AND EQUIPMENT:

  

  

Property, plant and equipment

1,408,360

1,379,968

1,244,070

Less accumulated depreciation and amortization

 

(708,205)

 

(690,986)

  

 

(643,191)

PROPERTY, PLANT AND EQUIPMENT, NET

700,155

688,982

600,879

TOTAL ASSETS

3,696,789

3,672,073

3,673,966

LIABILITIES AND SHAREHOLDERS’ EQUITY

  

  

CURRENT LIABILITIES:

  

  

Cash overdraft

$

$

  

$

61,711

Accounts payable

277,989

206,941

  

425,956

Accrued liabilities:

  

  

Compensation and benefits

 

142,603

 

296,120

  

 

189,509

Income taxes

1,855

54,682

Other

 

77,054

 

80,255

  

 

102,434

Current portion of lease liability

27,838

25,577

26,015

Current portion of long-term debt

 

3,020

 

2,942

  

 

42,895

TOTAL CURRENT LIABILITIES

 

530,359

 

611,835

  

 

903,202

LONG-TERM DEBT

 

275,002

 

275,154

  

 

379,015

LEASE LIABILITY

92,182

85,419

76,969

DEFERRED INCOME TAXES

 

51,254

 

51,265

  

 

61,278

OTHER LIABILITIES

 

35,550

 

44,697

  

 

35,330

TOTAL LIABILITIES

 

984,347

 

1,068,370

  

 

1,455,794

TEMPORARY EQUITY:

Redeemable noncontrolling interest

$

6,801

$

6,880

$

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 160,000,000; issued and outstanding, 62,095,570, 61,618,193 and 62,734,161

 

62,096

 

61,618

  

 

62,734

Additional paid-in capital

 

325,730

 

294,029

  

 

266,544

Retained earnings

 

2,293,025

 

2,217,410

  

 

1,851,784

Accumulated other comprehensive loss

 

(5,074)

 

(9,075)

  

 

(3,170)

Total controlling interest shareholders’ equity

 

2,675,777

 

2,563,982

  

 

2,177,892

Noncontrolling interest

 

29,864

 

32,841

  

 

40,280

TOTAL SHAREHOLDERS’ EQUITY

 

2,705,641

 

2,596,823

  

 

2,218,172

TOTAL LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS’ EQUITY

$

3,696,789

$

3,672,073

  

$

3,673,966

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

April 1,

March 26,

    

2023

    

2022

    

NET SALES

$

1,822,476

    

$

2,489,313

    

COST OF GOODS SOLD

 

1,464,147

 

2,010,950

GROSS PROFIT

 

358,329

 

478,363

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

194,683

 

220,150

OTHER LOSSES (GAINS), NET

1,938

(812)

EARNINGS FROM OPERATIONS

 

161,708

 

259,025

INTEREST EXPENSE

 

3,118

 

3,302

INTEREST AND INVESTMENT (INCOME) LOSS

 

(6,547)

 

1,093

EQUITY IN LOSS OF INVESTEE

588

515

 

(2,841)

 

4,910

EARNINGS BEFORE INCOME TAXES

 

164,549

 

254,115

INCOME TAXES

 

38,971

 

60,984

NET EARNINGS

 

125,578

 

193,131

NET LOSS (EARNINGS) ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

491

 

(3,428)

NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST

$

126,069

$

189,703

EARNINGS PER SHARE – BASIC

$

2.01

$

3.01

EARNINGS PER SHARE – DILUTED

$

1.98

$

3.00

OTHER COMPREHENSIVE INCOME:

NET EARNINGS

 

125,578

 

193,131

OTHER COMPREHENSIVE INCOME

 

6,252

 

3,184

COMPREHENSIVE INCOME

 

131,830

 

196,315

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

(1,760)

 

(4,377)

COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST

$

130,070

$

191,938

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

Temporary

    

Stock

    

Capital

    

Earnings

    

Earnings

    

Interest (NCI)

    

Total

Equity

Balance on December 31, 2022

$

61,618

$

294,029

$

2,217,410

$

(9,075)

$

32,841

  

$

2,596,823

$

6,880

Net earnings (loss)

126,069

(313)

125,756

 

(178)

Foreign currency translation adjustment

3,850

2,195

6,045

 

56

Unrealized gain on debt securities

151

151

 

Distributions to NCI

(4,859)

(4,859)

 

Other

43

Cash dividends - $0.25 per share - quarterly

(15,642)

(15,642)

 

Issuance of 10,140 shares under employee stock purchase plan

 

10

675

685

 

Issuance of 824,669 shares under stock grant programs

 

825

14,356

6

15,187

 

Issuance of 93,165 shares under deferred compensation plans

 

93

(93)

 

Repurchase of 450,597 shares

 

(450)

(34,818)

(35,268)

 

Expense associated with share-based compensation arrangements

9,598

9,598

 

Accrued expense under deferred compensation plans

7,165

7,165

  

Balance on April 1, 2023

$

62,096

$

325,730

  

$

2,293,025

$

(5,074)

  

$

29,864

  

$

2,705,641

$

6,801

(in thousands, except share and per share data)

Controlling Interest Shareholders’ Equity

Accumulated

Additional

Other

Common

Paid-In

Retained

Comprehensive

Noncontrolling

Temporary

    

Stock

    

Capital

    

Earnings

    

Earnings

    

Interest (NCI)

    

Total

Equity

Balance on December 25, 2021

$

61,902

$

243,995

$

1,678,121

$

(5,405)

$

37,956

  

$

2,016,569

$

Net earnings

  

  

 

189,703

 

  

 

3,428

  

 

193,131

Foreign currency translation adjustment

  

  

  

 

2,930

 

949

  

 

3,879

Unrealized loss on debt securities

  

  

  

 

(695)

 

  

 

(695)

Distributions to NCI

  

  

  

  

 

(2,053)

 

(2,053)

Cash dividends - $0.20 per share - quarterly

(12,541)

 

  

 

  

  

 

(12,541)

Issuance of 9,734 shares under employee stock purchase plan

 

10

653

  

  

  

 

663

Issuance of 787,045 shares under stock grant programs

 

787

8,959

  

  

  

 

9,746

Issuance of 79,973 shares under deferred compensation plans

 

80

(80)

  

  

Repurchase of 44,442 shares

 

(45)

(3,499)

  

  

 

  

 

(3,544)

Expense associated with share-based compensation arrangements

6,883

 

  

 

  

6,883

Accrued expense under deferred compensation plans

6,134

  

  

  

  

 

6,134

Balance on March 26, 2022

$

62,734

$

266,544

  

$

1,851,784

$

(3,170)

  

$

40,280

  

$

2,218,172

$

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

April 1,

March 26,

    

2023

    

2022

CASH FLOWS USED IN OPERATING ACTIVITIES:

  

Net earnings

$

125,578

    

$

193,131

Adjustments to reconcile net earnings to net cash used in operating activities:

  

Depreciation

 

25,774

 

21,842

Amortization of intangibles

 

5,009

 

4,672

Expense associated with share-based and grant compensation arrangements

 

9,637

 

6,931

Deferred income taxes (credit)

 

(242)

 

101

Unrealized (gain) loss on investments and other

 

(149)

 

1,601

Equity in loss of investee

588

515

Net gain on sale and disposition of assets

 

(164)

 

(306)

Changes in:

  

Accounts receivable

 

(191,064)

 

(352,928)

Inventories

 

14,674

 

(258,019)

Accounts payable and cash overdraft

 

68,388

 

143,895

Accrued liabilities and other

 

(95,105)

 

(6,466)

NET CASH USED IN OPERATING ACTIVITIES

 

(37,076)

 

(245,031)

CASH FLOWS USED IN INVESTING ACTIVITIES:

  

Purchases of property, plant and equipment

 

(38,166)

 

(32,072)

Proceeds from sale of property, plant and equipment

 

319

 

1,207

Acquisitions, net of cash received and purchase of equity method investment

 

 

(24,571)

Purchases of investments

 

(11,709)

 

(6,030)

Proceeds from sale of investments

 

8,849

 

4,725

Other

 

(1,151)

 

(2,995)

NET CASH USED IN INVESTING ACTIVITIES

 

(41,858)

 

(59,736)

CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES:

  

Borrowings under revolving credit facilities

 

4,437

 

242,950

Repayments under revolving credit facilities

 

(4,518)

 

(141,438)

Repayments of debt

(29)

(199)

Contingent consideration payments and other

(6,179)

(551)

Proceeds from issuance of common stock

 

685

 

663

Dividends paid to shareholders

 

(15,642)

 

(12,541)

Distributions to noncontrolling interest

(4,859)

(2,053)

Repurchase of common stock

 

(33,288)

 

(501)

Other

 

25

 

NET CASH (USED IN) FROM FINANCING ACTIVITIES

 

(59,368)

 

86,330

Effect of exchange rate changes on cash

 

2,739

 

1,726

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

(135,563)

 

(216,711)

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

 

559,623

 

291,223

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

$

424,060

$

74,512

RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:

Cash and cash equivalents, beginning of period

$

559,397

$

286,662

Restricted cash, beginning of period

226

4,561

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

$

559,623

$

291,223

Cash and cash equivalents, end of period

$

423,299

$

73,783

Restricted cash, end of period

761

729

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

$

424,060

$

74,512

SUPPLEMENTAL INFORMATION:

  

Interest paid

$

3,309

$

2,896

Income taxes paid

 

4,138

 

1,700

NON-CASH INVESTING ACTIVITIES

  

Capital expenditures included in accounts payable

 

3,122

 

2,512

NON-CASH FINANCING ACTIVITIES:

Common stock issued under deferred compensation plans

$

7,950

$

6,705

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 of America. 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.

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 31, 2022.

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 26, 2022 balances in the accompanying unaudited condensed consolidated balance sheets.

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 is being applied prospectively to all business combinations occurring after this date.

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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 (in thousands):

April 1, 2023

March 26, 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

$

208,129

    

$

928

$

    

$

209,057

    

$

18

    

$

9,641

$

    

$

9,659

Fixed income funds

 

3,838

 

17,882

 

 

21,720

 

2,279

 

16,128

 

 

18,407

Treasury securities

343

343

342

342

Equity securities

 

16,977

 

 

 

16,977

 

19,289

 

 

 

19,289

Alternative investments

4,103

4,103

3,964

3,964

Mutual funds:

  

 

  

  

 

Domestic stock funds

 

10,108

 

 

 

10,108

 

10,576

 

 

 

10,576

International stock funds

 

1,092

 

 

 

1,092

 

1,621

 

 

 

1,621

Target funds

 

8

 

 

 

8

 

22

 

 

 

22

Bond funds

 

5,294

 

 

 

5,294

 

141

 

 

 

141

Alternative funds

468

468

501

501

Total mutual funds

 

16,970

 

 

 

16,970

 

12,861

 

 

 

12,861

Total

$

246,257

$

18,810

$

4,103

$

269,170

$

34,789

$

25,769

$

3,964

$

64,522

From the assets measured at fair value as of April 1, 2023, listed in the table above, $208.8 million of money market funds are held in Cash and Cash Equivalents, $37.5 million of mutual funds, equity securities, and alternative investments are held in Investments, $0.5 million of money market and mutual funds are held in Other Assets for our deferred compensation plan, and $22.1 million of fixed income funds and $0.3 million of money market 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 $59.6 million and $54.2 million as of April 1, 2023 and March 26, 2022, respectively, 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.

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UFP INDUSTRIES, INC.

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

April 1, 2023

March 26, 2022

Unrealized

Unrealized