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 ~~September~~March 28, ~~2019~~2020


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

Commission File Number 0-22684

~~UNIVERSAL FOREST PRODUCTS INC~~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~~Universal Forest Products, Inc.
	(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 ~~September~~March 28, ~~2019~~2020
	Common stock, $1 par value		~~61,390,216~~61,102,481


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

~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

TABLE OF CONTENTS

PART I.		FINANCIAL INFORMATION.	Page No.

	Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets at ~~September~~March 28, 2020, December 28, 2019 ~~December 29, 2018~~ and ~~September 29, 2018~~March 30, 2019	3

		Condensed Consolidated Statements of Earnings and Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018~~March 30, 2019	4

		Condensed Consolidated Statements of Shareholders’ Equity for the ~~Nine~~Three Months Ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018~~March 30, 2019	5

		Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September~~March 28, ~~2019~~2020 and ~~September 29, 2018~~March 30, 2019	6

		Notes to Unaudited Condensed Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1915

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3326

	Item 4.	Controls and Procedures	3327

PART II.		OTHER INFORMATION

	Item 1.	Legal Proceedings – NONE

	Item 1A.	Risk Factors	3428

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3428

	Item 3.	Defaults upon Senior Securities – NONE

	Item 4.	Mine Safety Disclosures – NONE

	Item 5.	Other Information – NONE	3429

	Item 6.	Exhibits	3530

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~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands, except share data)
	September 28,		December 29,		September 29,		March 28,		December 28,		March 30,
	2019		2018		2018		2020		2019		2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	64,498	$	27,316	$	26,327	$	32,129	$	168,336	$	17,111
Restricted cash		729		882		1,024		724		330		1,024
Investments		17,028		14,755		15,809		17,778		18,527		16,197
Accounts receivable, net		474,648		343,450		454,935		460,821		364,027		444,111
Inventories:
Raw materials		239,585		271,871		257,983		263,857		236,283		279,265
Finished goods		239,771		284,349		252,074		246,824		250,591		300,898
Total inventories		479,356		556,220		510,057		510,681		486,874		580,163
Refundable income taxes		1,550		14,130		9,124		2,624		13,272		4,629
Other current assets		54,295		38,525		29,575		36,152		41,706		40,237
TOTAL CURRENT ASSETS		1,092,104		995,278		1,046,851		1,060,909		1,093,072		1,103,472
DEFERRED INCOME TAXES		2,284		2,668		2,176		2,145		2,763		2,364
RESTRICTED INVESTMENTS		16,082		13,267		13,117		16,111		16,214		13,580
RIGHT OF USE ASSETS		75,436		—		—		81,065		80,167		66,100
OTHER ASSETS		23,085		8,662		7,052		25,198		24,884		8,419
GOODWILL		232,411		224,117		218,631		246,459		229,536		224,247
INDEFINITE-LIVED INTANGIBLE ASSETS		7,339		7,360		7,373		7,288		7,354		7,364
OTHER INTANGIBLE ASSETS, NET		46,877		41,486		35,662		46,232		48,313		39,686
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment		880,274		814,645		807,023		906,171		884,963		828,837
Less accumulated depreciation and amortization		(495,267)		(459,935)		(460,714)		(508,596)		(497,789)		(472,671)
PROPERTY, PLANT AND EQUIPMENT, NET		385,007		354,710		346,309		397,575		387,174		356,166
TOTAL ASSETS		1,880,625		1,647,548		1,677,171		1,882,982		1,889,477		1,821,398
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Cash overdraft	$	—	$	27,367	$	31,115	$	—	$	—	$	18,732
Accounts payable		180,767		136,901		175,912		162,039		142,479		170,667
Accrued liabilities:
Compensation and benefits		127,500		104,109		99,786		92,504		141,892		70,867
Other		61,463		41,645		51,316		55,760		51,572		45,618
Current portion of lease liability		15,566		—		—		16,180		15,283		14,500
Current portion of long-term debt		152		148		149		2,772		2,816		185
TOTAL CURRENT LIABILITIES		385,448		310,170		358,278		329,255		354,042		320,569
LONG-TERM DEBT		162,853		202,130		186,539		160,550		160,867		266,428
LEASE LIABILITY		59,870		—		—		64,937		64,884		51,600
DEFERRED INCOME TAXES		14,897		15,687		13,701		22,799		22,880		14,622
OTHER LIABILITIES		28,454		30,877		26,929		33,159		29,071		29,813
TOTAL LIABILITIES		651,522		558,864		585,447		610,700		631,744		683,032
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, 61,390,216, 60,883,749, and 61,656,181		61,390		60,884		61,656
Common stock, $1 par value; shares authorized 80,000,000; issued and outstanding, 61,102,481, 61,408,589 and 61,352,372								61,102		61,409		61,352
Additional paid-in capital		189,820		178,540		176,671		211,724		192,173		190,879
Retained earnings		969,564		839,917		841,431		998,996		995,022		875,457
Accumulated other comprehensive income		(5,315)		(5,938)		(3,638)		(11,110)		(4,889)		(4,789)
Total controlling interest shareholders’ equity		1,215,459		1,073,403		1,076,120		1,260,712		1,243,715		1,122,899
Noncontrolling interest		13,644		15,281		15,604		11,570		14,018		15,467
TOTAL SHAREHOLDERS’ EQUITY		1,229,103		1,088,684		1,091,724		1,272,282		1,257,733		1,138,366
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,880,625	$	1,647,548	$	1,677,171	$	1,882,982	$	1,889,477	$	1,821,398

See notes to consolidated condensed financial statements.

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~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME

(Unaudited)


(in thousands, except per share data)
	Three Months Ended				Nine Months Ended				Three Months Ended
	September 28,		September 29,		September 28,		September 29,		March 28,		March 30,
	2019		2018		2019		2018		2020		2019
NET SALES	$	1,163,026	$	1,212,702	$	3,417,969	$	3,500,999	$	1,032,062	$	1,015,125
COST OF GOODS SOLD		975,756		1,054,029		2,889,706		3,045,748		864,826		860,858
GROSS PROFIT		187,270		158,673		528,263		455,251		167,236		154,267
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		115,652		102,704		334,283		300,505		109,339		105,317
NET (GAIN) LOSS ON DISPOSITION OF ASSETS AND IMPAIRMENT OF ASSETS		1,151		(1,022)		830		(7,079)
OTHER										(735)		504
EARNINGS FROM OPERATIONS		70,467		56,991		193,150		161,825		58,632		48,446
INTEREST EXPENSE		1,900		1,945		6,767		5,971		1,908		2,460
INTEREST AND INVESTMENT INCOME		(410)		(211)		(2,685)		(1,109)
NET INTEREST EXPENSE		1,490		1,734		4,082		4,862
INTEREST INCOME										(341)		(245)
UNREALIZED LOSS (GAIN) ON INVESTMENTS AND OTHER										3,173		(1,348)
										4,740		867
EARNINGS BEFORE INCOME TAXES		68,977		55,257		189,068		156,963		53,892		47,579
INCOME TAXES		16,396		13,189		45,340		36,183		13,322		11,577
NET EARNINGS		52,581		42,068		143,728		120,780		40,570		36,002
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(722)		(849)		(1,814)		(2,684)		(411)		(462)
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST	$	51,859	$	41,219	$	141,914	$	118,096	$	40,159	$	35,540

EARNINGS PER SHARE - BASIC	$	0.84	$	0.67	$	2.30	$	1.91	$	0.65	$	0.58
EARNINGS PER SHARE - DILUTED	$	0.84	$	0.66	$	2.30	$	1.91	$	0.65	$	0.58

OTHER COMPREHENSIVE INCOME:
NET EARNINGS		52,581		42,068		143,728		120,780		40,570		36,002
OTHER COMPREHENSIVE GAIN (LOSS)		(1,200)		1,174		644		(3,170)		(8,556)		1,373
COMPREHENSIVE INCOME		51,381		43,242		144,372		117,610		32,014		37,375
LESS COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(358)		(1,583)		(1,835)		(3,296)
LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST										1,924		(686)
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST	$	51,023	$	41,659	$	142,537	$	114,314	$	33,938	$	36,689

See notes to consolidated condensed financial statements.

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~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)


(in thousands, except share and per share data)
	Controlling Interest Shareholders’ Equity												Controlling Interest Shareholders’ Equity
							Accumulated												Accumulated
			Additional				Other								Additional				Other
	Common		Paid-In		Retained		Comprehensive		Noncontrolling				Common		Paid-In		Retained		Comprehensive		Noncontrolling
	Stock		Capital		Earnings		Earnings		Interest		Total		Stock		Capital		Earnings		Earnings		Interest		Total
Balance at December 30, 2017	$	61,192	$	161,928	$	736,212	$	144	$	14,547	$	974,023
Balance at December 29, 2018													$	60,884	$	178,540	$	839,917	$	(5,938)	$	15,281	$	1,088,684
Net earnings						118,096				2,684		120,780						35,540				462		36,002
Foreign currency translation adjustment								(3,562)		612		(2,950)								982		224		1,206
Unrealized gain (loss) on investment & foreign currency								(220)				(220)								167				167
Distributions to noncontrolling interest										(2,239)		(2,239)										(500)		(500)
Cash dividends - $0.180 per share						(11,090)						(11,090)
Issuance of 25,449 shares under employee stock plans		25		731								756
Issuance of 348,140 shares under stock grant programs		348		4,911								5,259
Issuance of 147,188 shares under deferred compensation plans		147		(147)								—
Repurchase of 56,484 shares		(56)				(1,787)						(1,843)
Issuance of 10,259 shares under employee stock plans														10		251								261
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				2,613								2,613				1,226								1,226
Accrued expense under deferred compensation plans				6,635								6,635				4,899								4,899
Balance at September 29, 2018	$	61,656	$	176,671	$	841,431	$	(3,638)	$	15,604	$	1,091,724
Balance at December 29, 2018	$	60,884	$	178,540	$	839,917	$	(5,938)	$	15,281	$	1,088,684
Balance at March 30, 2019													$	61,352	$	190,879	$	875,457	$	(4,789)	$	15,467	$	1,138,366
Balance at December 28, 2019													$	61,409	$	192,173	$	995,022	$	(4,889)	$	14,018	$	1,257,733
Net earnings						141,914				1,814		143,728						40,159				411		40,570
Foreign currency translation adjustment								170		21		191								(5,951)		(2,335)		(8,286)
Unrealized gain on debt securities								453				453
Unrealized loss on debt securities																				(270)				(270)
Distributions to noncontrolling interest										(1,634)		(1,634)										(299)		(299)
Additional purchase of noncontrolling interest				(5,015)						(1,838)		(6,853)				130						(225)		(95)
Cash dividends - $0.200 per share						(12,270)						(12,270)
Issuance of 26,869 shares under employee stock purchase plans		27		785								812
Issuance of 310,320 shares under stock grant programs		310		5,766		3						6,079
Issuance of 169,278 shares under deferred compensation plans		169		(169)								—
Cash dividends - $0.125 per share - quarterly																		(7,730)						(7,730)
Issuance of 10,549 shares under employee stock plans														10		309								319
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				2,968								2,968				1,404								1,404
Accrued expense under deferred compensation plans				6,945								6,945				5,343								5,343
Balance at September 28, 2019	$	61,390	$	189,820	$	969,564	$	(5,315)	$	13,644	$	1,229,103
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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~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(in thousands)	Nine Months Ended				Three Months Ended
	September 28,		September 29,		March 28,		March 30,
	2019		2018		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	143,728	$	120,780	$	40,570	$	36,002
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation		44,652		40,490		15,717		14,475
Amortization of intangibles		4,690		4,274		1,571		1,852
Expense associated with share-based and grant compensation arrangements		3,105		2,762		1,444		1,287
Deferred income taxes credits		(367)		(583)
Unrealized gain on investments		(1,611)		—
Net (gain) loss on disposition of assets and impairment of assets		830		(7,079)
Deferred income taxes (credit)						286		(742)
Unrealized (gain) loss on investments						3,173		(1,348)
Net gain on disposition of assets and impairment of assets						(285)		(122)
Changes in:
Accounts receivable		(127,841)		(121,067)		(94,253)		(100,716)
Inventories		80,178		(39,448)		(25,783)		(23,649)
Accounts payable and cash overdraft		14,293		38,611		20,047		25,056
Accrued liabilities and other		36,423		21,361		(8,648)		(7,924)
NET CASH PROVIDED BY OPERATING ACTIVITIES		198,080		60,101
NET CASH USED IN OPERATING ACTIVITIES						(46,161)		(55,829)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(66,338)		(74,541)		(27,286)		(15,883)
Proceeds from sale of property, plant and equipment		1,180		37,612		409		241
Acquisitions, net of cash received		(38,710)		(38,963)
Acquisitions and purchases of non-controlling interest, net of cash received						(18,487)		—
Investment in life insurance contracts
Purchases of investments		(6,475)		(12,401)		(14,052)		(449)
Proceeds from sale of investments		4,159		3,298		11,260		340
Other		199		(620)		(54)		200
NET CASH USED IN INVESTING ACTIVITIES		(105,985)		(85,615)		(48,210)		(15,551)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities		421,464		636,798		6,759		237,560
Repayments under revolving credit facilities		(460,537)		(668,941)		(6,498)		(173,232)
Borrowings of debt		—		927
Repayment of debt		(3,099)		(5,511)		(3,074)		(3,029)
Issuance of long-term debt		—		75,000
Proceeds from issuance of common stock		812		756		319		261
Dividends paid to shareholders		(12,270)		(11,090)		(7,730)		—
Distributions to noncontrolling interest		(1,634)		(2,239)		(299)		(500)
Repurchase of common stock		—		(1,843)		(29,212)		—
Other		41		(55)		12		9
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(55,223)		23,802		(39,723)		61,069
Effect of exchange rate changes on cash		157		247		(1,719)		248
NET CHANGE IN CASH AND CASH EQUIVALENTS		37,029		(1,465)		(135,813)		(10,063)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR		28,198		28,816		168,666		28,198
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	65,227	$	27,351	$	32,853	$	18,135

RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents, beginning of period	$	27,316	$	28,339	$	168,336	$	27,316
Restricted cash, beginning of period		882		477		330		882
Cash, cash equivalents, and restricted cash, beginning of period	$	28,198	$	28,816	$	168,666	$	28,198

Cash and cash equivalents, end of period	$	64,498	$	26,327	$	32,129	$	17,111
Restricted cash, end of period		729		1,024		724		1,024
Cash, cash equivalents, and restricted cash, end of period	$	65,227	$	27,351	$	32,853	$	18,135

SUPPLEMENTAL INFORMATION:
Interest paid	$	5,287	$	4,955	$	374	$	570
Income taxes paid		33,106		38,675		2,307		2,801
NON-CASH FINANCING ACTIVITIES:
Common stock issued under deferred compensation plans		5,620		5,312		4,900		4,457

See notes to consolidated condensed financial statements.

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~~UNIVERSAL FOREST PRODUCTS,~~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 of 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 ~~29, 2018.~~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 ~~September 29, 2018~~March 30, 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 3 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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~~UNIVERSAL FOREST PRODUCTS,~~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:

																															��
	September 28, 2019								September 29, 2018							March 28, 2020								March 30, 2019
	Quoted		Prices with						Quoted		Prices with					Quoted		Prices with						Quoted		Prices with
	Prices in		Other			Prices with			Prices in		Other		Prices with			Prices in		Other			Prices with			Prices in		Other			Prices with
	Active		Observable			Unobservable			Active		Observable		Unobservable			Active		Observable			Unobservable			Active		Observable			Unobservable
	Markets		Inputs			Inputs			Markets		Inputs		Inputs			Markets		Inputs			Inputs			Markets		Inputs			Inputs
(in thousands)	(Level 1)		(Level 2)			(Level 3)	Total		(Level 1)		(Level 2)		(Level 3)	Total		(Level 1)		(Level 2)			(Level 3)	Total		(Level 1)		(Level 2)			(Level 3)	Total
Money market funds	$	56,781	$	843	$	—	$	57,624	$	56	$	1,381	—	$	1,437	$	29,561	$	837	$	—	$	30,398	$	56	$	549	$	—	$	605
Fixed income funds		733		14,566		—		15,299		2,846		9,484	—		12,330		237		15,124		—		15,361		3,860		9,763		—		13,623
Equity securities		8,840		—		—		8,840		8,203		—	—		8,203		9,089		—		—		9,089		8,258		—		—		8,258
Alternative investments		—		—		1,895		1,895		—		—	1,725		1,725		—		—		1,960		1,960		—		—		1,782		1,782
Mutual funds:															—																—
Domestic stock funds		2,630		—		—		2,630		2,970		—	—		2,970		5,204		—		—		5,204		2,151		—		—		2,151
International stock funds		2,054		—		—		2,054		948		—	—		948		947		—		—		947		2,085		—		—		2,085
Target funds		268		—		—		268		255		—	—		255		242		—		—		242		257		—		—		257
Bond funds		825		—		—		825		208		635	—		843		222		—		—		222		799		—		—		799
Alternative funds		1,531		—		—		1,531		1,364		—	—		1,364		921		—		—		921		1,344		—		—		1,344
Total mutual funds		7,308		—		—		7,308		5,745		635	—		6,380		7,536		—		—		7,536		6,636		—		—		6,636
Total	$	73,662	$	15,409		1,895	$	90,966	$	16,850	$	11,500	1,725	$	30,075	$	46,423	$	15,961	$	1,960	$	64,344	$	18,810	$	10,312	$	1,782	$	30,904
Assets at fair value	$	73,662	$	15,409		1,895	$	90,966	$	16,850	$	11,500	1,725	$	30,075	$	46,423	$	15,961	$	1,960	$	64,344	$	18,810	$	10,312	$	1,782	$	30,904

From the assets measured at fair value as of ~~September~~March 28, ~~2019,~~2020, listed in the table above, ~~$56.8~~$29.5 million of money market funds are held in Cash and Cash Equivalents, ~~$17.0~~$17.7 million of mutual funds, equity securities, and alternative investments are held in Investments, ~~$1.1~~$0.9 million of money market and mutual funds are held in Other Assets for our deferred compensation plan, and ~~$15.3~~$15.4 million of fixed income funds and $0.8 million of money markets funds are held in Restricted Investments.

We maintain money market, mutual funds, bonds, and/or stocks 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 2018, we purchased a private real estate income trust which is valued as a Level 3 asset and is categorized as an “Alternative Investment”.~~

In accordance with our investment policy, our wholly-owned captive, Ardellis Insurance Ltd. (“Ardellis”), maintains an investment portfolio, totaling ~~$32.3~~$33.1 million as of ~~September~~March 28, ~~2019,~~2020, consisting of domestic and international stocks, alternative investments, and fixed income bonds.

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~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

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


	September 28, 2019						March 28, 2020
			Unrealized						Unrealized
	Cost		Gain/(Loss)		Fair Value		Cost		Gain/(Loss)		Fair Value
Fixed Income	$	14,969	$	330	$	15,299	$	1,834	$	126	$	1,960
Equity		7,584		1,256		8,840		15,257		104		15,361
Mutual Funds		6,391		(98)		6,293		9,690		(601)		9,089
Alternative Investments		1,790		105		1,895		7,298		(569)		6,729
Total	$	30,734	$	1,593	$	32,327	$	34,079	$	(940)	$	33,139

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 alternative investments consist of the private real estate income trust which is valued as a Level 3 asset. The net unrealized ~~gain~~loss was ~~$1.6~~$0.9 million. Carrying amounts above are recorded in the investments and restricted investments line items within the balance sheet as of ~~September~~March 28, ~~2019.~~2020.

C. REVENUE RECOGNITION

On May 28, 2014, the FASB issued ASU No. 2014-09 (Accounting Standard Codification 606), Revenue from Contracts with Customers. Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, Revenue Recognition, and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. The ASU requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The Company has adopted the requirements of the new standard as of January 1, 2018, and utilized the modified retrospective method of transition which was applied to all contracts.

The Company completed the new revenue recognition standard assessment and determined that there was no material impact to our consolidated financial statements, aside from additional required disclosures, thus no needed adjustment to the opening retained earnings for the annual reporting period.

Within the 3 ~~markets (retail, industrial,~~primary segments (Retail, Industrial, and ~~construction)~~Construction) that the Company operates, there are a variety of written ~~and oral contracts that are utilized to generate revenue from~~agreements governing the sale of ~~wood, wood composite~~our products and ~~other products.~~services. The transaction price is stated at the purchase order level, which includes shipping and/or freight costs and any applicable governmental authority taxes. The majority of our contracts have a single performance obligation concentrated around the delivery of goods to the carrier, Free On Board (FOB) shipping point. Therefore, revenue is recognized when this performance obligation is satisfied. Generally, title and control 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.

Certain customer products that we provide require installation by the Company or a 3^rd party. Installation revenue is recognized upon ~~completion, which is typically 2-3 days after receipt.~~completion. If ~~it is determined to utilize~~the Company uses a 3^rd party for installation, the party will act as an agent to the Company until completion of the installation. Installation revenue represents an immaterial share of the Company’s total sales.

The Company utilizes 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

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revenue. Additionally, ~~the volume~~ 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 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

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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.

The following table presents our gross revenues disaggregated by revenue source:


	Three Months Ended					Nine Months Ended
(in thousands)	September 28,		September 29,			September 28,		September 29,			March 28,		March 30,
Market Classification	2019		2018		% Change	2019		2018		% Change	2020		2019		% Change
FOB Shipping Point Revenue	$	1,140,853	$	1,197,959	-4.8%	$	3,358,520	$	3,461,208	-3.0%	$	1,017,906	$	996,823	2.1%
Construction Contract Revenue		43,177		35,731	20.8%		121,622		104,518	16.4%		32,800		34,782	-5.7%
Total Gross Sales		1,184,030		1,233,690	-4.0%		3,480,142		3,565,726	-2.4%		1,050,706		1,031,605	1.9%
Sales Allowances		(21,004)		(20,988)	0.1%		(62,173)		(64,727)	-3.9%		(18,644)		(16,480)	13.1%
Total Net Sales	$	1,163,026	$	1,212,702	-4.1%	$	3,417,969	$	3,500,999	-2.4%	$	1,032,062	$	1,015,125	1.7%

~~In the third quarter of 2019, the North and West segments comprise~~The Construction segment comprises the construction contract revenue above, $29.6 million and $13.6 million, respectively, compared to $24.8 million and $10.9 million, respectively, during the same period of 2018. Similarly, in the first nine months of 2019, the North and West segments comprise the construction contract revenue above, $77.0 million and $44.6 million, respectively, compared to $72.0 million and $32.5 million, respectively, during the same period of 2018.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 which are included in “Other current assets” and “Accrued liabilities: Other”, respectively (in thousands):


	September 28,		December 29,		September 29,		March 28,		December 28,		March 30,
	2019		2018		2018		2020		2019		2019
Cost and Earnings in Excess of Billings	$	6,815	$	6,945	$	5,167	$	5,744	$	4,960	$	7,880
Billings in Excess of Cost and Earnings		6,666		3,245		4,955		9,920		6,622		5,020

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D. EARNINGS PER SHARE

The computation of earnings per share (“EPS”) is as follows (in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 28,		September 29,		September 28,		September 29,		March 28,		March 30,
	2019		2018		2019		2018		2020		2019
Numerator:
Net earnings attributable to controlling interest	$	51,859	$	41,219	$	141,914	$	118,096	$	40,159	$	35,540
Adjustment for earnings allocated to non-vested restricted common stock		(1,299)		(952)		(3,547)		(2,678)		(1,059)		(865)
Net earnings for calculating EPS	$	50,560	$	40,267	$	138,367	$	115,418	$	39,100	$	34,675
Denominator:
Weighted average shares outstanding		61,717		61,954		61,609		61,838		61,842		61,372
Adjustment for non-vested restricted common stock		(1,546)		(1,430)		(1,540)		(1,402)		(1,630)		(1,493)
Shares for calculating basic EPS		60,171		60,524		60,069		60,436		60,212		59,879
Effect of dilutive restricted common stock		24		90		22		84		18		75
Shares for calculating diluted EPS		60,195		60,614		60,091		60,520		60,230		59,954
Net earnings per share:
Basic	$	0.84	$	0.67	$	2.30	$	1.91	$	0.65	$	0.58
Diluted	$	0.84	$	0.66	$	2.30	$	1.91	$	0.65	$	0.58

E. 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.

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We own and operate a number of facilities throughout the United States that chemically treat lumber products. In connection with the ownership and operation of these and other real properties, and the disposal or treatment of hazardous or toxic substances, we may, under various federal, state, and local environmental laws, ordinances, and regulations, be potentially liable for removal and remediation costs, as well as other potential costs, damages, and expenses. Environmental reserves, calculated with no discount rate, have been established to cover remediation activities at wood preservation facilities in Stockertown, PA; Elizabeth City, NC; and Auburndale, FL. In addition, a reserve was established for our facility in Thornton, CA to remove certain lead containing materials which existed on the property at the time of purchase.

On a consolidated basis, we have reserved approximately $2.0 million on March 28, 2020, and ~~$2.5 million~~ on ~~September 28,~~March 30, 2019, ~~and September 29, 2018,~~ respectively, representing the estimated costs to complete future remediation efforts. These amounts have not been reduced by an insurance receivable.

In addition, on ~~September~~March 28, ~~2019,~~2020, 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 ~~September~~March 28, ~~2019,~~2020, we had outstanding purchase commitments on commenced capital projects of approximately ~~$46.1~~$26.3 million.

We provide a variety of warranties for products we manufacture. Historically, warranty claims have not been material. We also distribute products manufactured by other companies, some of which are no longer in business. While we do not warrant these products, we have received claims as a distributor of these products when the manufacturer no

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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~~ensure the products and installation services are completed in accordance with our contractual obligations. We have agreed to indemnify the surety for claims properly made against these bonds. As of ~~September~~March 28, ~~2019,~~2020, we had approximately ~~$14.6~~$8.7 million outstanding payment and performance bonds for open projects. We had approximately ~~$9.0~~$11.6 million in payment and performance bonds outstanding for completed projects which are still under warranty.

On ~~September~~March 28, ~~2019,~~2020, we had outstanding letters of credit totaling $37.3 million, primarily related to certain insurance contracts and industrial development revenue bonds described further below.

In lieu of cash deposits, we provide irrevocable letters of credit in favor of our insurers to guarantee our performance under certain insurance contracts. As of ~~September~~March 28, ~~2019,~~2020, we have irrevocable letters of credit outstanding totaling approximately ~~$27.5~~$27.4 million for these types of insurance arrangements. We have reserves recorded on our balance sheet, in accrued liabilities, that reflect our expected future liabilities under these insurance arrangements.

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 $9.8 million related to our outstanding industrial development revenue bonds. These letters of credit have varying terms but may be renewed at the option of the issuing banks.

Certain wholly owned domestic subsidiaries have guaranteed the indebtedness of ~~Universal Forest Products,~~UFP Industries, Inc. in certain debt agreements, including the Series 2012 and 2018 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.

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We did not enter into any new guarantee arrangements during the ~~third~~first quarter of ~~2019~~2020 which would require us to recognize a liability on our balance sheet.

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~~UNIVERSAL FOREST PRODUCTS, INC.~~

F. BUSINESS COMBINATIONS

We completed the following acquisitions in ~~2019~~2020 and ~~2018,~~2019, which were accounted for using the purchase method in thousands unless otherwise noted:


					Net							Net
Company	Acquisition		Intangible		Tangible		Operating	Acquisition		Intangible		Tangible		Operating
Name	Date	Purchase Price	Assets		Assets		Segment	Date	Purchase Price	Assets		Assets		Segment
								March 13, 2020	$21,851 cash paid for 100% asset purchase and estimated contingent consideration	$	18,219	$	3,632	Construction
Quest Design & Fabrication and Quest Architectural Millwork ("Quest")								A designer, fabricator, and installer of premium millwork and case goods for a variety of commercial uses. Quest had annual sales of approximately $22 million. The acquisition of Quest will expand our architectural millwork in the commercial construction business unit, which aligns with our growth goals in the construction segment.
	September 16, 2019	$12,276 cash paid for 100% asset purchase	$	7,318	$	4,958	East	September 16, 2019	$12,422 cash paid for 100% asset purchase	$	7,464	$	4,958	Industrial
Pallet USA, LLC ("Pallet USA")	A manufacturer and distributor of wood pallet and crate products in the Midwest. Pallet USA had annual sales of approximately $18 million. The acquisition of Pallet USA allows us to expand our industrial product capacity and services in the Midwest.							A manufacturer and recycler of wood pallet and crating products in the Midwest. Pallet USA had annual sales of approximately $18 million. The acquisition of Pallet USA allows us to expand our capacity to manufacture wood-based industrial packaging products and offer new services to customers in the Midwest.
	August 12, 2019	$15,100 cash paid for 100% asset purchase	$	5,301	$	9,799	West	August 12, 2019	$17,809 cash paid for 100% asset purchase and estimated contingent consideration	$	8,089	$	9,720	Retail
Northwest Painting, Inc. ("Northwest")	A supplier of pre-painted building materials, including composite lap siding, soffit, panels and trim to the Western U.S. Northwest had annual sales of approximately $14 million. The acquisition of Northwest will expand our capacity to produce value-added siding and trim for customers in the Northwest and Mountain West regions.							A supplier of pre-painted building materials, including siding, soffit, panels and trim to the Western U.S. Northwest had annual sales of approximately $14 million. The acquisition of Northwest will expand our capacity to produce coated siding and trim for customers in the Northwest and Mountain West regions.
	May 1, 2019	$5,034 cash paid for 100% asset purchase	$	4,046	$	988	North	May 1, 2019	$7,168 cash paid for 100% asset purchase and estimated contingent consideration	$	6,180	$	988	Industrial
Wolverine Wood Products, Inc. ("Wolverine")	A manufacturer of wood panel components for furniture, store fixtures and case goods. Wolverine had annual sales of approximately $5 million. The acquisition of Wolverine allows us to expand capacity to produce value-added wood components for customers in the Midwest.							A manufacturer of wood panel components for furniture, store fixtures and case goods manufacturers. Wolverine had annual sales of approximately $5 million. The acquisition of Wolverine allows us to expand capacity to produce value-added wood components for customers in the Midwest.
	October 22, 2018	$15,115 cash paid for 100% asset purchase	$	8,592	$	6,523	North
Pak-Rite, LTD ("Pak-Rite")	A designer and manufacturer of packaging for high-value products, such as medical, aerospace and automation equipment. Pak-Rite had annual sales of approximately $15 million. The acquisition of Pak-Rite allows us to grow our portfolio of packaging products and our presence in this region.
	July 31, 2018	$1,016 cash paid for 100% asset purchase	$	250	$	766	West
The Pallet Place, LLC ("Pallet Place")	A manufacturer and distributor of total packaging solutions in timber, crates, skids, and pallets. Pallet Place had annual sales of approximately $5 million. The acquisition of Pallet Place allows us to increase our industrial business and creates operating leverage by consolidating with another regional operation.
	June 1, 2018	$23,866 cash paid for 100% asset purchase	$	12,497	$	11,369	South
North American Container Corporation ("NACC")	A manufacturer of structural packaging products, including steel, corrugated and hardwood packaging. NACC had annual sales of approximately $71 million. The acquisition of NACC allows us to enhance our presence in this region, expand our product offering, and serve customers more cost effectively.
	April 9, 2018	$3,890 cash paid for 100% asset purchase	$	2,235	$	1,655	West
Fontana Wood Products ("Fontana")	A manufacturer and distributor of lumber and trusses in the Southern California region. Fontana had annual sales of approximately $12 million. The acquisition of Fontana allows us to expand our manufactured housing business and creates operating leverage by consolidating with another regional operation.

The intangible assets for the Quest, Pallet USA, Northwest, and Wolverine acquisitions have not been finalized and allocated to their respective identifiable asset and goodwill accounts. In aggregate, acquisitions completed since the end of March 2019 and not consolidated with other operations contributed approximately $9.1 million in revenue and a $0.4 million in operating profit during the first quarter of 2020.

G. SEGMENT REPORTING

The Company operates manufacturing, treating and distribution facilities internationally, but primarily in the United States. Effective January 1, 2020, the Company re-organized around the markets it serves rather than geography. The prior periods have been recast to reflect the new segment structure. The business segments align with the following markets: UFP Retail Solutions, UFP Construction and UFP Industrial. This change allows for a more specialized and consistent sales approach among Company operations, more efficient use of resources and capital, and quicker introduction of new

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					Net
Company	Acquisition		Intangible	Tangible	Operating
Name	Date	Purchase Price	Assets	Assets	Segment
	April 3, 2018	$1,347 cash paid for 100% asset purchase	$	1,287	$	60	All Other
Expert Packaging ("Expert")	A manufacturer and distributor of total packaging solutions in timber, crates, pallets, and skids. Expert had annual sales of approximately $3.6 million. The acquisition of Expert allows us to make progress on our goal of becoming a global provider of packaging solutions.
	January 23, 2018	$2,942 cash paid for 100% asset purchase	$	850	$	2,092	West
Spinner Wood Products, LLC ("Spinner")	A manufacturer and distributor of agricultural bin and various industrial packaging. Spinner had annual sales of approximately $8 million. The acquisition of Spinner allows us to expand our industrial packaging product offering and creates operating leverage by consolidating with other regional operations.
	January 15, 2018	$5,784 cash paid for 100% asset purchase	$	50	$	5,734	North
Great Northern Lumber, LLC	A manufacturer of industrial products as well as serving the concrete forming market in the Chicago area. Great Northern Lumber had annual sales of approximately $25 million. The acquisition of Great Northern Lumber enables us to expand our concrete forming product offering and regional coverage.

Net

Company
Acquisition

Intangible
Tangible
Operating
Name
Date
Purchase Price
Assets
Assets
Segment

April 3, 2018
$1,347
cash paid for 100% asset purchase
$
1,287
$
60
All Other
Expert Packaging ("Expert")
A manufacturer and distributor of total packaging solutions in timber, crates, pallets, and skids. Expert had annual sales of approximately $3.6 million. The acquisition of Expert allows us to make progress on our goal of becoming a global provider of packaging solutions.

January 23, 2018
$2,942
cash paid for 100% asset purchase
$
850
$
2,092
West
Spinner Wood Products, LLC ("Spinner")
A manufacturer and distributor of agricultural bin and various industrial packaging. Spinner had annual sales of approximately $8 million. The acquisition of Spinner allows us to expand our industrial packaging product offering and creates operating leverage by consolidating with other regional operations.

January 15, 2018
$5,784
cash paid for 100% asset purchase
$
50
$
5,734
North
Great Northern Lumber, LLC
A manufacturer of industrial products as well as serving the concrete forming market in the Chicago area. Great Northern Lumber had annual sales of approximately $25 million. The acquisition of Great Northern Lumber enables us to expand our concrete forming product offering and regional coverage.

The intangible assets for each acquisition were finalized and allocated to their respective identifiable intangible asset and goodwill accounts during 2018 and 2019, except for the Wolverine, Northwest, and Pallet USA acquisitions. In aggregate, acquisitions completed since the end of September 2018 and not consolidated with other operations contributed approximately $7.9 million and $56.8 million in revenue and a $0.7 million and $3.7 million in operating profit during the third quarter and first nine months of 2019, respectively.

~~G. 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.

The Company operates manufacturing, treating and distribution facilities throughout North America, but primarily in the United States. The Company manages the operations of its individual locations primarily through a geographic reporting structure under which each location is included in a region and regions are included in our North, South, West, and International divisions. The exceptions to this geographic reporting and management structure are (a) the Company’s Alternative Materials Division, which offers a portfolio of non-wood products and distributes those products nation-wide (b) the Company’s distribution unit (referred to as UFPD) which distributes a variety of products to the manufactured housing industry nation-wide and is accounted for as a reporting unit within the North segment, and (c) the idX division, which designs, produces, and installs customized in-store environments for customers world-wide.

With respect to the facilities in the North, South, and West segments, these facilities generally supply the 3 markets the Company serves nationally - Retail, Industrial, and Construction. Also, substantially all of our facilities support customers in the immediate geographical region surrounding the facility.

Our Alternative Materials, International and idX division have been included in the “All Other” column of the table below. The “Corporate” column includes unallocated administrative costs and certain incentive compensation expense.

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~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

~~During~~products and services. The Company manages the ~~third quarter~~operations of its individual locations primarily through the market-centered reporting structure under which each location is included in a business unit and business units are included in our Retail, Industrial, and Construction segments. The exception to this market-centered reporting and management structure is the ~~first nine months~~Company’s International segment, which comprises our Mexico, Canada, and Australia operations and sales and buying offices in other parts of ~~2019, management retrospectively reallocated~~ the ~~related bonus expense from~~world.

Our International segment and Ardellis (our insurance captive) have been included in the “All Other” column of the table below.

The “Corporate” column includes purchasing, transportation 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 and leases transportation equipment, are also included in the Corporate column. An inter-company lease charge is assessed to ~~their respective segment to better assess~~our operating segments for the ~~reporting unit’s productivity.~~use of these assets at fair market value rates.


	Three Months Ended September 28, 2019												Three Months Ended March 28, 2020
	North		South		West		All Other		Corporate		Total
(in thousands)													Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	352,642	$	227,896	$	413,183	$	169,305	$	—	$	1,163,026	$	352,161	$	256,543	$	381,155	$	42,392	$	(189)	$	1,032,062
Intersegment net sales		15,928		15,462		12,982		54,512		—		98,884		29,858		11,220		15,423		53,167		(109,668)		—
Segment operating profit		22,914		12,968		28,949		(505)		6,141		70,467		15,512		18,074		17,135		4,739		3,172		58,632


	Three Months Ended September 29, 2018												Three Months Ended March 30, 2019
	North		South		West		All Other		Corporate		Total
(in thousands)													Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	341,334	$	270,077	$	434,123	$	167,168	$	—	$	1,212,702	$	333,100	$	274,759	$	365,137	$	42,110	$	19	$	1,015,125
Intersegment net sales		15,259		21,360		14,121		56,771		—		107,511		29,571		11,062		11,831		53,129		(105,593)		—
Segment operating profit		12,061		8,304		21,404		5,171		10,051		56,991		11,031		18,823		15,267		2,048		1,277		48,446

Nine Months Ended September 28, 2019


      North

      South

      West

  All Other

  Corporate

      Total
Net sales to outside customers

$
1,011,217

$
730,939

$
1,194,553

$
481,260

$
—

$
3,417,969
Intersegment net sales

46,000

54,796

40,602

177,259

—

318,657
Segment operating profit

63,105

42,710

77,626

(421)

10,130

193,150

Intangibles have been transferred and goodwill was re-allocated, based on their relative fair values, to our new segments and reporting units. The following table presents goodwill by segment as of March 28, 2020, and December 28, 2019 (in thousands):


	Nine Months Ended September 29, 2018												Retail		Industrial		Construction		All Other		Corporate		Total
	North		South		West		All Other		Corporate		Total
Net sales to outside customers	$	1,002,341	$	803,417	$	1,253,416	$	441,825	$	—	$	3,500,999
Intersegment net sales		45,841		60,683		44,183		181,450		—		332,157
Segment operating profit		36,680		39,489		65,923		5,894		13,839		161,825
Balance as of December 28, 2019													$	58,098	$	81,276	$	82,911	$	7,251	$	—	$	229,536
2020 Acquisitions														—		—		18,219		—		—		18,219
Foreign Exchange, Net														—		—		—		(1,296)		—		(1,296)
Balance as of March 28, 2020													$	58,098	$	81,276	$	101,130	$	5,955	$	—	$	246,459

The following table presents total assets by segment as of March 28, 2020, and December 28, 2019.


	Total Assets by Segment
(in thousands)	March 28,		December 28,
Segment Classification	2020		2019		% Change
Retail	$	521,977	$	436,397	19.6	%
Industrial		363,508		410,383	(11.4)
Construction		544,826		583,107	(6.6)
All Other		127,406		145,418	(12.4)
Corporate		325,265		314,172	3.5
Total Assets	$	1,882,982	$	1,889,477	(0.3)	%

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UFP INDUSTRIES, INC.

Beginning on January 1, 2020, the Company will be re-organized around the markets it serves rather than geography. The business segments will primarily align with the following markets: UFP Retail, UFP Construction and UFP Industrial. We believe this change in segmentation will, among other factors, allow for a more specialized and consistent sales approach among all Universal operations, more efficient use of resources and capital, and quicker introduction of new products and services.

H. 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 ~~23.8%~~24.7% in the ~~third~~first quarter of ~~2019~~2020 compared to ~~23.9%~~24.3% for same period in ~~2018. Our effective tax rate was 24.0% in the first nine months of 2019 compared to 23.1% for the same period in 2018.~~2019. The slight increase was primarily due to ~~recording certain discrete~~an increase in the permanent tax ~~benefits in 2018 related to state income tax and stock-based compensation deduction, which lowered the effective tax rate last year and additional~~difference for non-deductible ~~compensation in 2019.~~officer compensation.

~~I. LEASES~~

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2016-02, “Leases (Topic 842)” (ASU 2016-02). Under ASU 2016-02, an entity will be required to recognize assets and liabilities for the rights and obligations created by leases on the entity’s balance sheet for both finance and operating leases. For leases with a term of 12 months or less, an entity can elect to not recognize lease assets and lease liabilities and expense the lease over a straight-line basis for the term of the lease. ASU 2016-02 requires new disclosures that depict the

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~~UNIVERSAL FOREST PRODUCTS, INC.~~

amount, timing, and uncertainty of cash flows pertaining to an entity’s leases. Companies are required to adopt the new standard for annual and interim periods beginning after December 15, 2018. Early adoption of ASU 2016-02 is permitted. The FASB decided to amend certain aspects of its new leasing standard in an attempt to provide a relief from implementation costs. Specifically, entities may elect not to restate their comparative periods in the period of adoption when transitioning to the new standard.

~~Upon adoption of ASC 842, there was no cumulative effect adjustment to retained earnings or other components of equity.~~

We elected the package of practical expedients whereby we are not required to 1) reassess whether any expired or existing contracts contain leases, 2) reassess the lease classification of existing leases, and 3) reassess initial direct costs for any existing leases. Additionally, we did not elect the hindsight practical expedient to determine the reasonably certain lease term for existing leases. We did elect to account for lease and related non-lease components as a single lease component. We elected to not recognize leases with an original term of 12 months or less as they are not significant to our consolidated balance sheet and income statement. We have assessed and updated our business processes, systems, and controls to ensure compliance with the new accounting and disclosure requirements in accordance with the new standard.

We lease certain real estate under non-cancelable operating lease agreements with typical original terms ranging from one to ten years. We are required to pay real estate taxes and other occupancy costs under certain leases, which are variable in nature and not included in the right of use asset or lease liability. Certain leases carry renewal options of five to fifteen years. We believe that future leases will likely have similar terms. We also lease motor vehicles, equipment, and an aircraft under operating lease agreements for periods of one to ten years. We do not typically enter into leases with residual value guarantees.

~~We believe finance leases will have no significant impact to our consolidated balance sheet and income statement as of September 28, 2019.~~

~~As of September 28, 2019, we have no leases that have not yet commenced that would significantly impact the rights, obligations, and financial position of the Company.~~

The rates implicit in our leases are primarily not readily available. To determine the discount rate used to present value the lease payments, the Company utilized the 5-year treasury note rate plus a blend of rate spreads associated with our revolver and 10-12-year senior notes along with estimated spreads based on current market conditions. We feel the determined rate is a reasonable collectively representation of our lease population.

~~Future minimum payments under non-cancelable operating leases on September 28, 2019 are as follows (in thousands):~~

Operating

Leases
2019 (remainder of year)

$
4,389
2020

16,258
2021

13,945
2022

11,511
2023

8,907
Thereafter

22,471
Total minimum lease payments

$
77,481
Less present value discount

(2,045)
Total lease liability

$
75,436

~~Rent expense was approximately $7.0 million and $4.7 million during the third quarter of 2019 and 2018, respectively.~~

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~~UNIVERSAL FOREST PRODUCTS, INC.~~

~~For comparison purposes, we have included the future minimum payments under non-cancelable operating leases on December 29, 2018, (in thousands):~~

Operating

Leases

12/29/2018
2019

$
17,242
2020

11,969
2021

9,784
2022

8,346
2023

6,382
Thereafter

22,498
Total minimum lease payments

$
76,221

During the first quarter of 2018, the Company completed a sale and leaseback transaction related to one facility in Medley, Florida. The sale price for the property was approximately $36 million and created a $7 million pre-tax gain, which was entirely recognized in 2018. The Company leased back the facility for two years as it executes its long-term plan for Florida and the Southeast region, however, only a minor portion of the property sold was leased back.

~~As of September 28, 2019, the weighted average lease term for operating leases is 7.25 years. Similarly, the weighted average discount rate for operating leases is 3.02%.~~

J.I. COMMON STOCK

Below is a summary of common stock issuances for the first ~~nine~~three months of 2020 and 2019 (in thousands, except average share price):


	March 28, 2020
Share Issuance Activity	Common Stock		Average Share Price
Shares issued under the employee stock purchase plan	10	$	35.59

Shares issued under the employee stock gift program	1		45.22
Shares issued under the director retainer stock program	1		47.90
Shares issued under the long term stock incentive plan	271		47.51
Shares issued under the executive stock match grants	80		47.60
Forfeitures	(3)
Total shares issued under stock grant programs	350	$	47.52

Shares issued under the deferred compensation plans	89	$	54.68

During the first three months of 2020, we repurchased approximately 756,000 shares of our common stock at an average share price of $38.62.


	March 30, 2019
Share Issuance Activity	Common Stock		Average Share Price
Shares issued under the employee stock purchase plan	10	$	29.88

Shares issued under the employee stock gift program	2		30.90
Shares issued under the director retainer stock program	1		31.00
Shares issued under the long term stock incentive plan	211		30.83
Shares issued under the executive stock match grants	109		31.57
Forfeitures	(3)
Total shares issued under stock grant programs	320	$	31.08

Shares issued under the deferred compensation plans	138	$	32.23

During the first three months of 2019, ~~and 2018:~~

September 28, 2019
Share Issuance Activity

Common Stock

Average Share Price
Shares issued under the employee stock purchase plan

27

$
35.52

Shares issued under the employee stock gift program

3

33.91
Shares issued under the director retainer stock program

4

35.44
Shares issued under the long term stock incentive plan

211

30.83
Shares issued under the executive stock match grants

109

31.57
Forfeitures

(17)

-
Total shares issued under stock grant programs

310

$
31.17

Shares issued under the deferred compensation plans

169

$
33.20
Total

506

$
32.05

~~Table~~we did not repurchase any of ~~Contents~~

~~UNIVERSAL FOREST PRODUCTS, INC.~~

September 29, 2018
Share Issuance Activity

Common Stock

Average Share Price
Shares issued under the employee stock purchase plan

25

$
34.97

Shares issued under the employee stock gift program

2

35.91
Shares issued under the director retainer stock program

99

16.91
Shares issued under the long term stock incentive plan

164

34.75
Shares issued under the executive stock match grants

94

32.94
Forfeitures

(10)

-
Total shares issued under stock grant programs

349

$
29.38

Shares issued under the deferred compensation plans

147

$
36.09
Total

521

$
31.50

our common stock.

1814

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~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UFP Industries, Inc. (formerly Universal Forest Products, Inc.) is a holding company with subsidiaries throughout North America, Europe, Asia, and in Australia that supply wood, wood composite and other products to three robust markets: retail, industrial, and construction. The Company is headquartered in Grand Rapids, Mich. For more information about ~~Universal Forest Products,~~UFP Industries, Inc., or its affiliated operations, go to www.ufpi.com.

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

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. The Company does 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 the price of lumber; adverse or unusual weather conditions; adverse economic conditions in the markets we serve; government regulations, particularly involving environmental and safety ~~regulations;~~regulations, government imposed “stay at home” orders and directives to cease or curtail operations; and our ability to make successful business acquisitions. Certain of these risk factors as well as other risk factors and additional information are included in the Company's reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission. We are pleased to present this overview of ~~2019.~~the first quarter of 2020.

OVERVIEW

Our results for the ~~third~~first quarter of ~~2019 were impacted by~~2020 include the ~~following:~~following highlights:

●

Our ~~gross~~net sales ~~decreased~~increased by 4%2% compared to the ~~third~~first quarter of ~~2018,~~2019, which was comprised of a 7%5% increase in unit sales, offset by ~~an 11%~~a 3% decrease in selling prices primarily due to the commodity lumber market (see Historical Lumber Prices below). Organic ~~growth contributed 6% of our unit sales increase, while acquisitions contributed 1%. We experienced favorable~~ unit growth ~~to each of the primary markets we serve.~~was 4% and was driven by 8% growth by our Retail segment and 6% growth by our Construction segment.

●

Our operating profits increased ~~nearly 24%~~21%, which compares very favorably with our 7%5% increase in unit sales. The improvement in our profitability was ~~primarily due to~~driven by a number of factors, including effective positioning of lumber inventories, favorable ~~change~~changes in ~~our~~ product mix, ~~to sales of more value-added products,~~and strong organic growth ~~combined with~~resulting in effective leveraging of fixed costs, the impact of lower lumber costs on products we sell with fixed selling prices and a more favorable trend in lumber prices in 2019 which resulted in a higher profit per unit of products sold with a variable price.costs.

●

~~Our~~We repurchased approximately 756,000 shares of our common stock for $29.2 million resulting in an average price paid of $38.62.

●

Available borrowing capacity under our revolving credit facilities and surplus cash ~~flow from operating activities for~~resulted in total liquidity of approximately $393 million at the ~~third quarter improved by $138 million compared to 2018 primarily due to lower lumber prices, which lowered our investment in working capital, and opportunistic buying~~end of ~~inventory in the fourth quarter of 2018 which was sold in 2019.~~March 2020.

1915

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~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

HISTORICAL LUMBER PRICES

We experience significant fluctuations in the cost of commodity lumber products from primary producers (“Lumber Market”). The following table presents the Random Lengths framing lumber composite price:

Random Lengths Composite

Average $/MBF


2019

2018

January

$
331

$
449

February

370

496

March

365

505

April

354

496

May

346

554

June

329

572

July

356

525

August

346

449

September

364

443

Third quarter average

$
355

$
472

Year-to-date average

$
351

$
499

Third quarter percentage change

(24.8)
%



Year-to-date percentage change

(29.7)
%


	Random Lengths Composite
	Average $/MBF
	2020			2019
January	$	377		$	331
February		402			370
March		420			365

First quarter average	$	400		$	355
First quarter percentage change		12.7	%

In addition, a Southern Yellow Pine (“SYP”) composite price, which we prepare and use, is presented below. Our purchases of this species comprised ~~approximately 45% and 44%~~almost two-thirds of our total lumber purchases, ~~through the first nine months~~which has generally caused a decrease in our selling prices of ~~2019 and 2018, respectively.~~related products.

Southern Yellow Pine

Average $/MBF


2019

2018
January

$
370

$
418
February

403

459
March

408

480
April

401

483
May

383

535
June

344

562
July

359

512
August

348

449
September

355

440

Third quarter average

$
354

$
467
Year-to-date average

$
375

$
482

Third quarter percentage change

(24.2)
%

Year-to-date percentage change

(22.2)
%


	Random Lengths SYP
	Average $/MBF
	2020			2019
January	$	346		$	370
February		345			403
March		360			408

First quarter average	$	350		$	394
First quarter percentage change		(11.2)	%

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~~UNIVERSAL FOREST PRODUCTS, INC.~~

IMPACT OF THE LUMBER MARKET ON OUR OPERATING RESULTS

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 were ~~42.6%~~45.6% and ~~51.5%~~45.9% of our sales in the first ~~nine~~three months of ~~2019~~2020 and ~~2018,~~2019, 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 ~~deck components and fencing~~manufactured items, sold ~~to retail customers, as well as trusses, wall panels and other components sold to the construction market, and most industrial packaging products.~~within all segments. Prices for these products are generally fixed at the time of the sales quotation for a specified period of ~~time or are based upon a specific quantity.~~time. In order to ~~maintain margins and~~ 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. ~~Also, the~~The time period ~~and quantity limitations~~limitation eventually ~~allow~~allows us to periodically re-price our products for changes

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UFP INDUSTRIES, INC.

in lumber costs from our suppliers. We believe our percentage of sales of ~~these products are at their highest relative level~~fixed price items is greatest in our third and fourth ~~quarter.~~quarters.

●

Products with selling prices indexed to the reported Lumber Market with a fixed dollar “adder” to cover conversion costs and ~~profits.~~profit. These products primarily include treated lumber, ~~remanufactured 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 treated lumber sold to the retail market.

For each of the product pricing categories above, our margins are exposed to changes in the trend of lumber prices.

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 16% of our total sales. This exposure is less significant with remanufactured lumber, panel goods, other commodity-type items, and trusses sold to the manufactured housing market ~~and other similar products,~~ due to the higher rate of inventory turnover. We attempt to mitigate the risk associated with treated lumber through ~~vendor~~inventory consignment ~~inventory programs.~~programs with our vendors. (Please refer to the “Risk Factors” section of our annual report on form 10-K, filed with the United States Securities and Exchange Commission.)

●

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 ~~by locking in costs.~~and longer vendor commitments.

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~~UNIVERSAL FOREST PRODUCTS, INC.~~

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			Period 1			Period 2
Lumber cost	$	300		$	400		$	300		$	400
Conversion cost		50			50			50			50
= Product cost		350			450			350			450
Adder		50			50			50			50
= Sell price	$	400		$	500		$	400		$	500
Gross margin		12.5	%		10.0	%		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 are negatively impacted during periods of high lumber prices; conversely, we experience margin improvement when lumber prices are relatively low. In order to more effectively evaluate our profitability in such periods, we believe it is useful to compare our change in units shipped with our changes in costs and profits.

BUSINESS COMBINATIONS

We completed ~~three~~one business ~~acquisitions~~acquisition during the first ~~nine~~three months of ~~2019~~2020 and ~~seven~~three during all of ~~2018.~~2019. The annual historical sales attributable to acquisitions completed in the first ~~nine~~three months of ~~2019~~2020 and all of ~~2018~~2019 were approximately ~~$37~~$22 million and ~~$140~~$37 million, respectively. These business combinations were not significant to our quarterly ~~or year-to-date operating~~ results individually or in aggregate and thus pro forma results for 2020 and 2019 ~~or 2018~~ are not presented.

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UFP INDUSTRIES, INC.

See Notes to the Unaudited Condensed Consolidated Financial Statements, Note F, “Business Combinations” for additional information.

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, the components of our Unaudited Condensed Consolidated Statements of Earnings as a percentage of net sales.


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 28,		September 29,		September 28,		September 29,		March 28,		March 30,
	2019		2018		2019		2018		2020		2019
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	83.9		86.9		84.5		87.0		83.8		84.8
Gross profit	16.1		13.1		15.5		13.0		16.2		15.2
Selling, general, and administrative expenses	9.9		8.5		9.8		8.6		10.6		10.4
Net gain on disposition and impairment of assets	0.1		(0.1)		—		(0.2)
Other									(0.1)		0.1
Earnings from operations	6.1		4.7		5.7		4.6		5.7		4.8
Other expense, net	0.1		0.1		0.1		0.1		0.5		0.1
Earnings before income taxes	5.9		4.6		5.5		4.5		5.2		4.7
Income taxes	1.4		1.1		1.3		1.0		1.3		1.1
Net earnings	4.5		3.5		4.2		3.4		3.9		3.5
Less net earnings attributable to noncontrolling interest	(0.1)		(0.1)		(0.1)		(0.1)		—		—
Net earnings attributable to controlling interest	4.5	%	3.4	%	4.2	%	3.4	%	3.9	%	3.5	%

Note: Actual percentages are calculated and may not sum to total due to rounding.

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~~UNIVERSAL FOREST PRODUCTS, INC.~~

The following table presents, for the periods indicated, the components of our Consolidated Statements of Earnings as a percentage of net sales, adjusted to restate ~~2019~~2020 net sales and cost of goods sold at prior year lumber prices. The restated sales amounts were calculated by applying the decrease in lumber prices in ~~2019~~2020 to ~~2018~~2019 sales levels. By eliminating the “pass-through” impact of higher or lower lumber prices on net sales and cost of goods sold from year to year, we believe this provides an enhanced view of our change in profitability and costs as a percentage of sales. The amount of the adjustment to ~~2019~~2020 net sales was also applied to cost of goods sold so that gross profit remains unchanged.


	Adjusted for Lumber Market Change				Adjusted for Lumber Market Change				Adjusted for Lumber Market Change
	Three Months Ended				Nine Months Ended				Three Months Ended
	September 28,		September 29,		September 28,		September 29,		March 28,		March 30,
	2019		2018		2019		2018		2020		2019
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	85.6		86.9		85.7		87.0		84.3		84.8
Gross profit	14.4		13.1		14.3		13.0		15.7		15.2
Selling, general, and administrative expenses	8.9		8.5		9.0		8.6		10.3		10.4
Net gain on disposition and impairment of assets	0.1		(0.1)		—		(0.2)
Other									(0.1)		0.1
Earnings from operations	5.4		4.7		5.2		4.6		5.5		4.8
Other expense, net	0.1		0.1		0.1		0.1		0.4		0.1
Earnings before income taxes	5.3		4.6		5.1		4.5		5.1		4.7
Income taxes	1.3		1.1		1.2		1.0		1.3		1.1
Net earnings	4.1		3.5		3.9		3.4		3.8		3.5
Less net earnings attributable to noncontrolling interest	(0.1)		(0.1)		—		(0.1)		—		—
Net earnings attributable to controlling interest	4.0	%	3.4	%	3.8	%	3.4	%	3.8	%	3.5	%

Note: Actual percentages are calculated and may not sum to total due to rounding.

Table of Contents

UFP INDUSTRIES, INC.

Operating Results by Segment:

Effective January 1, 2020, the Company re-organized around the markets it serves rather than geography. The business segments align with the following markets: UFP Retail Solutions, UFP Construction and UFP Industrial. This change 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. The Company manages the operations of its individual locations primarily through the market-centered reporting structure under which each location is included in a business unit and business units are included in our Retail, Industrial, and Construction segments. The exception to this market-centered reporting and management structure is the Company’s International segment, which comprises our Mexico, Canada, and Australia operations and sales and buying offices in other parts of the world. Our International segment and Ardellis (our insurance captive) have been included in the “All Other” column of the table below. The “Corporate” column includes purchasing, transportation 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 and leases transportation equipment, are also included in the Corporate column. An inter-company lease charge is assessed to our operating segments for the use of these assets at fair market value rates.

The following tables present our operating results, for the periods indicated, by segment.


	Three Months Ended March 28, 2020

(in thousands)	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales	$	352,161	$	256,543	$	381,155	$	42,392	$	(189)	$	1,032,062
Cost of goods sold		306,932		212,626		317,817		30,086		(2,635)		864,826
Gross profit		45,229		43,917		63,338		12,306		2,446		167,236
Selling, general, administrative expenses		29,627		25,835		46,386		8,351		(860)		109,339
Other		90		8		(183)		(784)		134		(735)
Earnings from operations	$	15,512	$	18,074	$	17,135	$	4,739	$	3,172	$	58,632


	Three Months Ended March 30, 2019

(in thousands)	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales	$	333,100	$	274,759	$	365,137	$	42,110	$	19	$	1,015,125
Cost of goods sold		296,240		231,435		303,963		31,652		(2,432)		860,858
Gross profit		36,860		43,324		61,174		10,458		2,451		154,267
Selling, general, administrative expenses		25,785		24,521		45,784		8,107		1,120		105,317
Other		44		(20)		123		303		54		504
Earnings from operations	$	11,031	$	18,823	$	15,267	$	2,048	$	1,277	$	48,446

Table of Contents

UFP INDUSTRIES, INC.

The following tables present the components of our operating results, for the periods indicated, as a percentage of net sales by segment.


	Three Months Ended March 28, 2020

(in thousands)	Retail		Industrial		Construction		All Other		Corporate	Total
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	N/A	100.0	%
Cost of goods sold	87.2		82.9		83.4		71.0		—	83.8
Gross profit	12.8		17.1		16.6		29.0		—	16.2
Selling, general, administrative expenses	8.4		10.1		12.2		19.7		—	10.6
Other	—		—		—		(1.8)		—	(0.1)
Earnings from operations	4.4	%	7.0	%	4.5	%	11.2	%	—	5.7	%

Note: Actual percentages are calculated and may not sum to total due to rounding.


	Three Months Ended March 30, 2019

(in thousands)	Retail		Industrial		Construction		All Other		Corporate	Total
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	N/A	100.0	%
Cost of goods sold	88.9		84.2		83.2		75.2		—	84.8
Gross profit	11.1		15.8		16.8		24.8		—	15.2
Selling, general, administrative expenses	7.7		8.9		12.5		19.3		—	10.4
Other	—		—		—		0.7		—	0.1
Earnings from operations	3.3	%	6.9	%	4.2	%	4.9	%	—	4.8	%

Note: Actual percentages are calculated and may not sum to total due to rounding.

~~GROSS~~NET SALES

We design, manufacture and market wood and wood-alternative products for national home centers and other retailers, structural lumber and other products for the manufactured housing industry, engineered wood components for residential and commercial construction, ~~specialty wood packaging, components and packing materials for various industries, and~~ customized interior fixtures used in a variety of retail ~~stores,~~and commercial applications, and ~~other structures.~~specialty wood packaging, components and packaging materials for various industries. Our strategic long-term sales objectives generally include:

●

~~Diversifying~~Increasing our end market sales mix by increasing sales of specialty wood and non-wood packaging to industrial users, increasing our penetration of the concrete forming market, increasing our sales of engineered wood components for custom home, multi-family, military and light commercial construction, increasing our market share with independent retailers, and increasing our sales of customized interior fixtures used in a variety of markets.

●

~~Expanding geographically in our core businesses, domestically and internationally.~~

●

~~Increasing~~ sales of "value-added" products ~~which primarily~~and enhancing our product offering with new or improved products. Value-added products generally consist of fencing, decking, lattice, and other specialty products sold to the retail market, specialty wood packaging, engineered wood components, customized interior fixtures, and "wood alternative" products. Engineered wood components include roof trusses, wall panels, and floor systems. Wood alternative products consist primarily of composite wood and plastics. 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.

●

~~Maximizing unit sales growth while achieving return on investment goals.~~

The following table presents, for the periods indicated, our percentage of value-added and commodity-based sales to total net sales by our primary segments (Retail, Industrial, and Construction). Value-added products are typically sold at fixed selling prices for a pre-determined time period and carry higher gross margins than our commodity-based products.

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~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.


	Three Months Ended March 28, 2020				Three Months Ended March 30, 2019

	Value-Added		Commodity-Based		Value-Added		Commodity-Based
Retail	56.5	%	43.5	%	56.0	%	44.0	%
Industrial	66.8	%	33.2	%	65.8	%	34.2	%
Construction	79.1	%	20.9	%	80.0	%	20.0	%
Total Net Sales	68.0	%	32.0	%	67.9	%	32.1	%

●

Developing new ~~products and expanding our value-added product offering for existing customers.~~products. New products are defined as products that ~~are within a 4-year cycle (launch year plus 3 full fiscal years),~~will generate sales of at least a $1 million per year within 4 years of launch and are still ~~growing.~~growing sales penetration. New product sales and gross profits in the ~~third~~first quarter were up 7% and ~~28%~~16%, respectively. ~~New~~Approximately $24 million of new product sales from March 30, 2019, while still sold, were sunset in 2020 and ~~gross profits for~~excluded from the ~~year-to-date were up 12% and 25%, respectively.~~table below because they no longer meet the definition above. Our goal is to achieve annual new product sales of at least ~~$525~~$475 million in ~~2019.~~2020.


	New Product Sales by Market						New Product Sales by Market						New Product Sales by Segment
	Three Months Ended						Nine Months Ended						Three Months Ended
	September 28,		September 29,		%		September 28,		September 29,		%		March 28,		March 30,		%
Market Classification	2019		2018		Change		2019		2018		Change
Segment Classification													2020		2019		Change
Retail	$	97,022		88,949	9.1	%	$	295,962	$	258,171	14.6	%	$	64,601		59,038	9.4	%
Industrial		25,562		26,364	(3.0)	%		72,797		64,444	13.0	%		16,252		16,268	(0.1)	%
Construction		20,302		18,698	8.6	%		60,029		58,959	1.8	%		13,732		12,820	7.1	%
All Other														3,081		3,272	(5.8)	%
Total New Product Sales		142,886		134,011	6.6	%		428,788		381,574	12.4	%		97,666		91,398	6.9	%

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.

~~Value-Added and Commodity-Based Sales:~~

The following table presents, for the periods indicated, our percentage of value-added and commodity-based sales to total sales. Value-added products generally carry higher gross margins than our commodity-based products.

Three Months Ended

Nine Months Ended


September 28,

September 29,

September 28,

September 29,

2019

2018

2019

2018
Value-Added

67.6
%

62.1
%

66.9
%

61.2
%
Commodity-Based

32.4
%

37.9
%

33.1
%

38.8
%

~~The following table presents, for the periods indicated, our gross sales and percentage change in gross sales by market classification.~~

Three Months Ended

Nine Months Ended
(in thousands)

September 28,

September 29,


September 28,

September 29,



Market Classification

2019

2018

% Change

2019

2018

% Change
Retail

$
437,092

$
441,916

(1.1)
%

$
1,315,543

$
1,356,920

(3.0)
%
Industrial ⁽¹⁾

332,537

353,660

(6.0)
%

1,019,535

986,410

3.4
%
Construction ⁽¹⁾

414,401

438,115

(5.4)
%

1,145,064

1,222,395

(6.3)
%
Total Gross Sales

1,184,030

1,233,691

(4.0)
%

3,480,142

3,565,725

(2.4)
%
Sales Allowances

(21,004)

(20,989)

0.1
%

(62,173)

(64,726)

(3.9)
%
Total Net Sales

$
1,163,026

$
1,212,702

(4.1)
%

$
3,417,969

$
3,500,999

(2.4)
%

~~Note: During 2019, certain customers were reclassified to a different market. Prior year information has been restated to reflect these changes.~~

~~(1)~~●

~~We reclassified idX from industrial~~Selling to ~~the construction market to better align idX's core business, design, manufacture, distribution~~new customers and ~~installation of customized interior fixtures for a variety of retail and commercial structures, with the commercial construction market. The reclassification was recorded retrospectively.~~markets.

~~Gross~~Retail Segment

Net sales in the ~~third quarter~~first three months of ~~2019 decreased 4%~~2020 increased approximately 6% compared to the same period of ~~2018,~~2019, due to a 7%9% increase in unit sales, offset by ~~an 11%~~a 3% decrease in selling prices primarily due to the Lumber Market. Acquired operations contributed 1% to our unit sales growth, and ~~our~~ organic unit sales growth was 6%8%.

~~Table~~ Our organic unit growth was primarily driven by a 14% increase in each of ~~Contents~~

~~UNIVERSAL FOREST PRODUCTS, INC.~~

~~Gross sales~~our ProWood treated products and UFP Edge (siding, pattern, trim) products, an 8% increase in Fence, Lawn & Garden, and a 26% increase in Home & Décor products. These increases were offset by a 14% unit decrease in our Deckorators branded products, which was anticipated due to large first-time store builds that took place in the first nine months of 2019 decreased 2% compared to the same period of 2018, due to a 6% increase in unit sales, offset by an 8% decrease in selling prices primarily due to the Lumber Market. Acquired operations contributed 2% to our unit sales growth, and our organic unit sales growth was 4%.

~~Changes in our gross sales by market are discussed below.~~

~~Retail:~~

~~Gross sales to the retail market decreased 1% in the third~~ quarter of ~~2019 compared~~last year. Our new product sales contributed to these increases and were up 9% for the ~~same period of 2018, due to a 10% increase in unit sales, offset by an 11% decrease in selling prices. Within this market,~~quarter. Finally, our customer mix remained consistent as our sales to ~~our~~ big box customers increased ~~over 5%~~7%, and sales to other independent retailers ~~decreased almost 10%~~increased 5%. Our organic unit growth was primarily due to an increase in new product sales, market share gains we achieved in our Deckorators product category and an increase in demand with one of our big box customers.

Gross ~~sales~~profits increased by 22.7% to ~~the retail market decreased 3% in~~$45.2 million for the first ~~nine~~three months of ~~2019~~2020 compared to the same period last year as gross margins increased to 12.8% compared to 11.1% for the same period of ~~2018, due to a 6% increase in organic unit sales, offset by a 9% decrease in selling prices. Within this market, sales~~2019. We estimate the lower level of lumber prices (see “Impact of the Lumber Market on Our Operating Results”) contributed 40 basis points to our ~~big box customers increased over 3%, and sales to other independent retailers decreased over 12%. Our organic unit growth~~improvement in gross margin. The remaining improvement in our profitability was primarily due to the ~~same reasons mentioned above.~~

~~Industrial:~~

~~Gross sales to the industrial market decreased 6%~~impact of effective inventory positioning resulting in ~~the third quarter of 2019 compared to the same period of 2018, resulting from a 4% increase~~lower lumber costs, favorable changes in unit sales, offset by a 10% decrease in selling prices. Businesses we acquired since the third quarter of 2018 contributed 2% to our growth in unit sales. Our organic unit growth was primarily due to gaining $10 million of sales to new customers in 2019.

Gross sales to the industrial market increased 3% in the first nine months of 2019 compared to the same period of 2018, resulting from an 8% increase in unit sales, offset by a 5% decrease in selling prices. Businesses we acquired since the third quarter of 2018 contributed 5% to our growth in unit sales. Ourproduct mix, and strong organic growth ~~in unit sales of 3% was primarily due~~which allowed us to ~~increasing our share of business with existing customers and adding new products and customers.~~

~~Construction:~~

Gross sales to the construction market decreased 5% in the third quarter of 2019 compared to 2018. The decrease was due to an 8% increase in unit sales, offset by a 13% decrease in our selling prices. Our increase in unit sales was driven by a 15% increase to commercial construction customers, a 6% increase to residential construction customers, and a 1% increase to manufactured housing customers.

~~By comparison (and based upon various industry publications):~~

●

~~Production of HUD-code manufactured homes in July and August 2019, the most recent period reported, was down 1.0% compared to the same period of 2018.~~

●

~~Housing starts increased by approximately 4.1% in the period from June through August 2019 (our sales trail housing starts by about a month) compared to the same period of 2018.~~

~~Our growth in sales to commercial construction was primarily due to idX and adding 5 new customers in our Texas and Great Lakes regions.~~

Gross sales to the construction market decreased 6% in the first nine months of 2019 compared to 2018. The decrease was due to a 5% increase in unit sales, offset by an 11% decrease in our selling prices. Our increase in unit sales was driven by

~~Table of Contents~~

~~UNIVERSAL FOREST PRODUCTS, INC.~~leverage fixed costs.

~~an 11% increase to commercial construction customers and a 6% increase to residential construction customers, offset by a 1% decrease to manufactured housing customers.~~

~~COST OF GOODS SOLD AND GROSS PROFIT~~

~~Our gross margin increased to 16.1% from 13.1% comparing the third quarter of 2019 to the same period of 2018 due to:~~

●

~~The lower~~ ~~level~~ ~~of lumber prices (See “Impact of the Lumber Market on Our Operating Results”).~~

●

~~An improvement in our sales mix of value-added products.~~

●

~~The impact of lower lumber costs on products we sell with fixed selling prices.~~

●

~~A more favorable lumber trend in lumber prices in 2019 which resulted in a higher profit per unit on products sold with variable price.~~

Our $28.6 million, or 18.0%, increase in gross profit dollars compares favorably to our 7% increase in unit sales during the same period due to the factors above. In addition, acquired operations contributed $2.2 million of gross profit in the third quarter of 2019. Excluding acquisitions, our gross profits increased by $26 million, or 16.3%, over the same period and was comprised of the following changes by market:

●

~~Retail increased by approximately $13 million.~~

●

~~Industrial increased by approximately $9 million.~~

●

~~Construction declined by approximately $2 million.~~

●

~~The remaining $6 million increase was due to a variety of factors including favorable labor and overhead cost variances in certain areas of our business.~~

Our gross margin increased to 15.5% from 13.0% comparing the first nine months of 2019 to the same period of 2018 due to the same factors discussed above along with atypical buying opportunities when lumber prices were low in the fourth quarter of 2018, which benefitted our gross profits in Q1 and Q2. Our $73 million, or 16.0%, increase in gross profit dollars compares favorably to our 6% increase in unit sales during the same period due to the factors above. In addition, acquired operations contributed $9.5 million of gross profit in the first nine months of 2019. Excluding acquisitions, our gross profits increased by $64 million, or 14%, over the same period last year was comprised of the following changes by market:

●

~~Retail increased by approximately $23 million.~~

●

~~Industrial increased by approximately $24 million.~~

●

~~Construction increased by approximately $10 million.~~

●

~~The remaining $7 million increase was due to a variety of factors including favorable labor and overhead cost variances in certain areas of our business.~~

Due to several factors, including the variety of species we buy, the variety and number of products we sell, and pricing methodologies, estimating the impact of market-favorable lumber buying, that occurred in the fourth quarter of 2018, on our gross profits is difficult. Nevertheless, we estimate this contributed approximately $6 million to $7 million in additional gross profits in 2019.

~~SELLING, GENERAL AND ADMINISTRATIVE EXPENSES~~

Selling, general and administrative (“SG&A”) expenses increased by approximately ~~$13.7~~$3.8 million, or ~~13.4%~~14.9%, in the ~~third~~first quarter of ~~2019~~2020 compared to the same period of ~~2018,~~2019, while we reported a 7%9% increase in unit sales. Acquired operations since the first quarter of 2019 contributed approximately $0.8 million to this increase. Accrued bonus expense, which varies with our overall profitability and return on investment, increased approximately $0.8 million and totaled ~~$22.6~~approximately $3.5 million infor the ~~third quarter of 2019 compared to $14.3 million in 2018. Acquired operations since the third quarter of 2018 contributed approximately $1.4 million to our year over year increase in SG&A.~~quarter. The remaining increase was ~~primarily~~ due to ~~sales incentives, marketing costs, and~~ increases in salaries and wages, benefits, and ~~payroll taxes associated with headcount and rate increases.~~sales incentive compensation.

2621

Table of Contents

~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

Earnings from operations for the Retail reportable segment increased in the first quarter of 2020 compared to 2019 by $4.5 million, or 40.6%, well in excess of our 9% increase in unit sales as a result of the factors above.

Industrial Segment

Net sales in the first three months of 2020 decreased 7% compared to the same period of 2019, due to a 7% decrease in selling prices due to the Lumber Market. Unit sales remained flat year over year as recently acquired companies contributed 2% to unit growth but this was offset by a 2% decrease in sales out of existing locations. Sales to new customers contributed $5 million to our sales this quarter and helped mitigate the decline in demand of our existing customers.

Gross profits increased by 1.4% to $43.9 million for the first three months of 2020 compared to the same period of 2019. Gross margin increased to 17.1% from 15.8% for the same period last year. We estimate the lower level of lumber prices (see “Impact of the Lumber Market on Our Operating Results”) contributed 110 basis points to our improvement in gross margin. The remaining improvement in our profitability was primarily due to the impact of lower lumber costs on products we sell with fixed selling prices and a modest improvement in our sales mix value-added products.

Selling, general and administrative (“SG&A”) expenses increased by approximately ~~$33.9~~$1.3 million, or ~~11.3%~~5%, in the first ~~nine months~~quarter of ~~2019~~2020 compared to the same period of ~~2018,~~2019. Acquired operations since the first quarter of 2019 contributed approximately $0.6 million to this increase. The remaining increase was due to increases in salaries and wages, benefits, and sales incentive compensation. Additionally, accrued bonus expense, which varies with our pre-bonus operating profit and return on investment, decreased approximately $0.5 million, and totaled $4.2 million for the quarter.

Earnings from operations for the Industrial reportable segment decreased in the first quarter of 2020 compared to 2019 by $0.7 million, or 4.0%, due to the factors discussed above.

Construction Segment

Net sales in the first three months of 2020 increased 4% compared to the same period of 2019, due to a 6% increase in unit sales, offset by a 2% decrease in selling prices primarily due to the Lumber Market. Our unit growth was organic and driven by a 15% increase in unit sales of concrete forming, a 12% unit increase to factory-built housing, a 3% unit increase to commercial, and a 1% unit increase to site-built construction. The increase in our unit sales of concrete forming was due to share gains. Our unit sales to producers of factory-built homes increased primarily due to an increase in industry production.

Gross profits increased by 3.5% to $63.3 million for the first three months of 2020 compared to the same period of 2019. Gross margin declined slightly to 16.6% from 16.8% for the same period last year, in spite of the lower level of lumber prices (see “Impact of the Lumber Market on Our Operating Results”). The decline in our gross margin was primarily due to our commercial business unit as a result of customer and product mix.

Selling, general and administrative (“SG&A”) expenses increased by approximately $0.6 million, or 1.3%, in the first quarter of 2020 compared to the same period of 2019, while we reported a 6% increase in unit sales. Accrued bonus expense, which varies with our overall profitability and return on investment, totaled ~~$53.3~~approximately $3.5 million for the quarter, which was comparable to last year.

Earnings from operations for the Construction reportable segment increased in the first ~~nine months~~quarter of ~~2019~~2020 compared to ~~$37.9~~2019 by $1.9 million, ~~in 2018. Acquired operations since the third quarter of 2018 contributed approximately $5.8 million to~~or 12.2%, which compares favorably with our ~~year over year~~6% increase in ~~SG&A. The remaining increase was primarily~~unit sales due to ~~an increase in wages~~the factors above.

All Other Segment

Our All Other reportable segment consists of our International and ~~benefits~~Ardellis (our insurance captive) segments that are not significant.

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UFP INDUSTRIES, INC.

Corporate

The corporate segment consists of over (under) allocated costs ~~associated with headcount and rate increases, sales incentives, medical costs, and marketing expenses.~~that are not significant.

INTEREST, NET

Interest expense was ~~flat in the third quarter and higher~~lower in the first ~~nine months~~quarter of ~~2019~~2020 compared to the same ~~periods~~period of ~~2018. Our year~~2019 primarily due to ~~date~~lower outstanding debt balances and variable interest ~~rate increased as~~rates in 2020.

UNREALIZED LOSS (GAIN) ON INVESTMENTS

Ardellis (our insurance captive) recorded a ~~result~~$3.2 million unrealized loss on equity investments held in its portfolio in the first three months of 2020 compared to a ~~long-term debt issuance that we completed~~$1.3 million gain in ~~June 2018 and used~~ the ~~proceeds to pay down our revolving credit facility. The impact~~same period of ~~a higher overall rate was offset by lower debt levels in 2019.~~the prior year.

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 ~~23.8%~~24.7% in the ~~third~~first quarter of ~~2019~~2020 compared to ~~23.9%~~24.3% for same period in ~~2018. Our effective tax rate was 24.0% in the first nine months of 2019 compared to 23.1% for the same period in 2018.~~2019. The slight increase was primarily due to recording certain discrete tax benefits in 2018 related to state income tax and stock-based compensation deduction, which lowered the effective tax rate last year, and additional non-deductible compensation in 2019.

~~SEGMENT REPORTING~~

Net Sales

Earnings from Operations

Three Months Ended

Three Months Ended


September 28,

September 29,

$

%


September 28,

September 29,

$

%
(in thousands)

2019

2018

    Change

Change

2019

2018

    Change

Change
North

$
352,642

$
341,334

$
11,308

3.3
%

$
22,914

$
12,061

$
10,853

90.0
%
South

227,896

270,077

(42,181)

(15.6)
%

12,968

8,304

4,664

56.2
%
West

413,183

434,123

(20,940)

(4.8)
%

28,949

21,404

7,545

35.3
%
All Other

169,305

167,168

2,137

1.3
%

(505)

5,171

(5,676)

(109.8)
%
Corporate

—

—

—

—

6,141

10,051

(3,910)

(38.9)
%
Total

$
1,163,026

$
1,212,702

$
(49,676)

(4.1)
%

$
70,467

$
56,991

$
13,476

23.6
%

Net Sales

Earnings from Operations

Nine Months Ended

Nine Months Ended


September 28,

September 29,

$

%


September 28,

September 29,

$

%

(in thousands)

2019

2018

    Change

Change

2019

2018

    Change

Change
North

$
1,011,217

$
1,002,341

$
8,876

0.9
%

$
63,105

$
36,680

$
26,425

72.0
%
South

730,939

803,417

(72,478)

(9.0)
%

42,710

39,489

3,221

8.2
%
West

1,194,553

1,253,416

(58,863)

(4.7)
%

77,626

65,923

11,703

17.8
%
All Other

481,260

441,825

39,435

8.9
%

(421)

5,894

(6,315)

(107.1)
%
Corporate

—

—

—

—

10,130

13,839

(3,709)

(26.8)
%
Total

$
3,417,969

$
3,500,999

$
(83,030)

(2.4)
%

$
193,150

$
161,825

$
31,325

19.4
%

~~(1)~~

~~Corporate primarily represents over (under) allocated administrative costs.~~

During the third quarter and the first nine months of 2019, management retrospectively reallocated the related bonus expense from Corporate to their respective segment to better assess the reporting unit’s productivity.

~~Table of Contents~~

~~UNIVERSAL FOREST PRODUCTS, INC.~~

~~North~~

Net Sales

Net Sales

North Segment by Market

North Segment by Market

Three Months Ended

Nine Months Ended
(in thousands)

September 28,

September 29,



September 28,

September 29,


Market Classification

2019

2018

% Change

2019

2018

% Change
Retail

$
162,170

$
152,538

6.3
%

$
448,055

$
439,432

2.0
%
Industrial

60,278

53,281

13.1
%

187,234

161,267

16.1
%
Construction

138,015

143,666

(3.9)
%

397,315

423,728

(6.2)
%
Total Gross Sales

360,463

349,485

3.1
%

1,032,604

1,024,427

0.8
%
Sales Allowances

(7,821)

(8,151)

(4.0)
%

(21,387)

(22,086)

(3.2)
%
Total Net Sales

$
352,642

$
341,334

3.3
%

$
1,011,217

$
1,002,341

0.9
%

~~Note: During 2019, certain customers were reclassified to a different market. Prior year information has been restated to reflect these changes.~~

~~The increase in sales to the industrial market was primarily due to acquired operations, which contributed $6.0 million to sales. The increase to the retail market~~ was primarily due to an increase in ~~demand with one of our big box customers. The decrease to~~ the ~~construction market was due to a combination of market growth and market share gains, offset by lower lumber prices.~~

~~Earnings from operations~~permanent tax difference for the North reportable segment increased in the third quarter of 2019 by $10.9 million, or 90.0%, due to a $14.4 million increase in gross profits, offset by a $3.5 million increase in SG&A expenses compared to last year. Gross profits were higher due to increases of $4.8 million, $4.2 million, and $3.5 million within the retail, industrial, and construction markets, respectively, and due to the same factors discussed above. non-deductible officer compensation.

In spite of lower lumber prices, net sales attributable to the North reportable segment increased in the first nine months of 2019 compared to 2018 primarily due to an increase in unit sales to existing retail customers and acquired operations, which contributed $15 million in sales to the industrial market. The decrease to the construction market was due to market growth and market share gains, offset by lower lumber prices.

Earnings from operations for the North reportable segment increased in the first nine months of 2019 by $26.4 million, or 72.0%, due to a $33.8 million increase in gross profits, offset by a $7.4 million increase in SG&A expenses compared to last year. Gross profits were higher due to increases of $10.2 million, $11.1 million, and $12.5 million within the retail, industrial, and construction markets, respectively, and was due to the same factors discussed above.

~~South~~

Net Sales

Net Sales

South Segment by Market

South Segment by Market

Three Months Ended

Nine Months Ended
(in thousands)

September 28,

September 29,




September 28,

September 29,


Market Classification

2019

2018

% Change

2019

2018

% Change
Retail

$
97,104

$
109,212

(11.1)
%

$
309,888

$
355,271

(12.8)
%
Industrial

90,291

111,564

(19.1)
%

301,389

295,106

2.1
%
Construction

45,251

54,337

(16.7)
%

134,698

168,964

(20.3)
%
Total Gross Sales

232,646

275,113

(15.4)
%

745,975

819,341

(9.0)
%
Sales Allowances

(4,750)

(5,036)

(5.7)
%

(15,036)

(15,924)

(5.6)
%
Total Net Sales

$
227,896

$
270,077

(15.6)
%

$
730,939

$
803,417

(9.0)
%

~~Note: During 2019, certain customers were reclassified to a different market. Prior year information has been restated to reflect these changes.~~

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~~UNIVERSAL FOREST PRODUCTS, INC.~~

Net sales attributable to the South reportable segment decreased in the third quarter of 2019 compared to 2018 primarily due to the impact of a lower lumber market. In addition, sales to our manufactured housing customers in the Southeast and East Central regions decreased in certain commodity product categories.

Earnings from operations for the South reportable segment increased in the third quarter of 2019 by $4.7 million, or 56.2%, due to a $6.7 million increase in gross profits, offset by a $2.0 million increase in SG&A expenses compared to last year. Gross profits were higher due to increases of $3.5 million, $3.2 million, and $1 million within the retail, industrial and construction markets, respectively.

Net sales attributable to the South reportable segment decreased in the first nine months of 2019 compared to 2018 primarily due to a lower lumber market, offset by acquired operations which contributed $37.0 million in sales to the industrial market. In addition, sales to our manufactured housing customers in the Southeast and East Central regions declined in certain commodity product categories.

Earnings from operations for the South reportable segment increased in the first nine months of 2019 compared to the same period of 2018. Excluding the impact of the gain on the sale of our Medley, FL, plant in 2018, earnings from operations increased $10.2 million due to an increase of $17.8 million in gross profits offset by an increase in SG&A expenses of $7.6 million compared to the same period of 2018. Gross profits were higher due to increases of $3.4 million, $12.0 million, and $2.7 million within the retail, industrial, and construction markets, respectively, and due to the same factors discussed above. Acquired operations contributed $1.6 million to our earnings from operations during the first nine months of 2019.

~~West~~

Net Sales

Net Sales

West Segment by Market

West Segment by Market

Three Months Ended

Nine Months Ended

(in thousands)

September 28,

September 29,



September 28,

September 29,


Market Classification

2019

2018

% Change

2019

2018

% Change

Retail

$
127,431

$
125,534

1.5
%

$
371,666

$
391,713

(5.1)
%

Industrial

144,935

151,771

(4.5)
%

427,081

432,671

(1.3)
%

Construction

147,011

162,981

(9.8)
%

413,765

447,463

(7.5)
%

Total Gross Sales

419,377

440,286

(4.7)
%

1,212,512

1,271,847

(4.7)
%

Sales Allowances

(6,194)

(6,163)

0.5
%

(17,959)

(18,431)

(2.6)
%

Total Net Sales

$
413,183

$
434,123

(4.8)
%

$
1,194,553

$
1,253,416

(4.7)
%

~~Note: During 2019, certain customers were reclassified to a different market. Prior year information has been restated to reflect these changes.~~

Net sales attributable to the West reportable segment decreased in the third quarter of 2019 compared to 2018 primarily due to the impact of a lower lumber market, offset by increases in unit sales to the retail and industrial markets.

Earnings from operations for the West reportable segment increased in the third quarter of 2019 by $7.5 million, or 35.3%, compared to the same period in 2018 due to a $11.4 million increase in gross profit, offset by a $3.9 million increase in SG&A expenses. Gross profits were higher due to increases of $4.0 million and $5.9 million in the retail and industrial markets, respectively, offset by a $0.5 million decrease in our construction market, as well as the same factors discussed above.

Net sales attributable to the West reportable segment decreased in the first nine months of 2019 compared to 2018 primarily due to the lower lumber market, offset by increases in unit sales to the retail and industrial markets.

Earnings from operations for the West reportable segment increased in the first nine months of 2019 by $11.7 million, or 17.8%, compared to the same period in 2018 due to a $19.5 million increase in gross profit, offset by a $7.8 million

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~~UNIVERSAL FOREST PRODUCTS, INC.~~

increase in SG&A expenses. Gross profits were higher due to increases of $2.1 million, $13.8 million, and $1.3 million within the retail, industrial and construction markets, respectively, and due to the same factors discussed above.

~~All Other~~

Net Sales

Net Sales

All Other Segment by Market

All Other Segment by Market

Three Months Ended

Nine Months Ended

(in thousands)

September 28,

September 29,



September 28,

September 29,



Market Classification

2019

2018

% Change

2019

2018

% Change

Retail

$
50,386

$
54,631

(7.8)
%

$
185,934

$
170,505

9.0
%

Industrial ⁽¹⁾

37,033

37,045

(0.0)
%

103,831

97,367

6.6
%

Construction ⁽¹⁾

84,124

77,130

9.1
%

199,362

182,240

9.4
%

Total Gross Sales

171,543

168,806

1.6
%

489,127

450,112

8.7
%

Sales Allowances & Other

(2,238)

(1,638)

36.6
%

(7,867)

(8,287)

(5.1)
%

Total Net Sales

$
169,305

$
167,168

1.3
%

$
481,260

$
441,825

8.9
%

~~Note: During 2019, certain customers were reclassified to a different market. Prior year information has been restated to reflect these changes.~~

~~(1)~~

We reclassified idX from industrial to the construction market to better align idX's core business, design, manufacture, distribution and installation of customized interior fixtures for a variety of retail and commercial structures, with the commercial construction market. The reclassification was recorded retrospectively.

~~Our All Other reportable segment consists of our Alternative Materials, International, idX, and certain other segments that are not significant.~~

Net sales attributable to All Other reportable segments increased in the third quarter of 2019 compared to 2018 primarily due to our sales to the construction market which increased primarily due to our idX business unit.

Earnings from operations for All Other reportable segments decreased during the third quarter of 2019 by $5.7 million primarily due to losses realized in our construction market within our idX business unit.

Net sales attributable to All Other reportable segments increased in the first nine months of 2019 compared to 2018 due to increases in sales to all our markets. The increase in sales to the retail market was primarily due to a $50.3 million increase to one of our big-box customers within our Alternative Materials segment, offset by decreases in sales to certain independent retailers. Our sales to the construction market increased primarily due to our idX business unit.

Earnings from operations for All Other reportable segments decreased during the first nine months of 2019 by $6.3 million primarily due to losses realized in our construction market within our idX business unit and expenses associated with an advertising campaign launched in 2019 for our Deckorators brand within our Alternative Materials segment.

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~~UNIVERSAL FOREST PRODUCTS, INC.~~

OFF-BALANCE SHEET TRANSACTIONS

We have no significant off-balance sheet transactions.

LIQUIDITY AND CAPITAL RESOURCES

The table below presents, for the periods indicated, a summary of our cash flow statement (in thousands):


	Nine Months Ended				Three Months Ended
	September 28,		September 29,		March 28,		March 30,
	2019		2018		2020		2019
Cash provided by (used in) operating activities	$	198,080	$	60,101
Cash used in operating activities					$	(46,161)	$	(55,829)
Cash used in investing activities		(105,985)		(85,615)		(48,210)		(15,551)
Cash (used in) provided by financing activities		(55,223)		23,802
Cash (used in)/provided by financing activities						(39,723)		61,069
Effect of exchange rate changes on cash		157		247		(1,719)		248
Net change in all cash and cash equivalents		37,029		(1,465)		(135,813)		(10,063)
Cash, cash equivalents, and restricted cash, beginning of period		28,198		28,816		168,666		28,198
Cash, cash equivalents, and restricted cash, end of period	$	65,227	$	27,351	$	32,853	$	18,135

In general, we funded our growth in the past through a combination of operating cash flows, our revolving credit facility, industrial development bonds (when circumstances permit), 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. 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 this is one of many 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 which typically results in negative or modest cash flows from operations during those periods. Conversely, we experience a

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UFP INDUSTRIES, INC.

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 outstanding) is a good indicator of our working capital management. As indicated in the table below, our cash cycle ~~increased~~improved to 5259 days from 5165 days during the ~~third~~first quarter of ~~2019~~2020 compared to the prior periods.


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 28,		September 29,		September 28,		September 29,		March 28,		March 30,
	2019		2018		2019		2018		2020		2019
Days of sales outstanding		33		32		33		32		34		34
Days supply of inventory		40		39		44		41		46		52
Days payables outstanding		(21)		(20)		(21)		(21)		(21)		(21)
Days in cash cycle		52		51		56		52		59		65

The ~~increase~~decrease in our days supply of inventory for the first ~~nine~~three months of 2020 was primarily due to opportunistic buying when lumber prices were low during the fourth quarter of 2018 and into early 2019 to improve ~~2019~~ gross profits and higher levels of “safety stock” we carried to address transportation challenges and ensure timely deliveries to our customers. The company did not engage in this level of opportunistic buying in late 2019 and early 2020.

In the first ~~nine~~three months of ~~2019,~~2020, our cash ~~provided by~~used in operating activities was ~~$198.1~~$46.2 million, which was comprised of net earnings of ~~$143.7 million, $51.3 million of non-cash expenses, and $3.1 million decrease in working capital since the~~

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~~UNIVERSAL FOREST PRODUCTS, INC.~~

~~end of December 2018. Comparatively, in the first nine months of 2018, our cash provided by operating activities was $60.1 million, which was comprised of net earnings of $120.8~~$40.6 million and ~~$39.9~~$21.9 million of non-cash expenses, offset by a ~~$100.5~~$108.6 million seasonal increase in working capital since the end of December ~~2017.~~2019. Our ~~investment in working capital declined in 2019~~operating cash flow this year improved by $9.7 million compared to the same period of last year primarily due to ~~opportunistic inventory buying~~an improvement in ~~the fourth quarter of 2018 of products sold~~earnings and an increase in ~~2019,~~non-cash expenses and ~~lower lumber prices in 2019.~~losses.

Acquisitions and purchases of property, plant, and equipment comprised most of our cash used in investing activities during the first ~~nine~~three months of ~~2019~~2020 and totaled ~~$38.7~~$18.5 million and ~~$66~~$27.2 million, respectively. Outstanding purchase commitments on existing capital projects totaled approximately ~~$46.1~~$26.3 million on ~~September~~March 28, ~~2019. We currently plan to spend up to $100 million for the year on capital expenditures.~~2020. Notable areas of capital spending include projects to ~~replace our capacity in South Florida resulting from the sale of our Medley facility last year,~~ expand capacity and enhance the productivity of our Deckorators ~~decking~~ product line, ~~due to favorable demand trends and share gains we’ve achieved, as well as~~ several projects to expand manufacturing capacity to serve industrial customers and achieve efficiencies through ~~automation.~~automation, improvements to a number of facilities, and increase our transportation capacity (tractors, trailers) in order to meet higher volumes and replace old rolling stock. We intend to fund capital expenditures and purchase commitments through our operating cash flows or our revolving credit facility for the balance of the year. The ~~sale~~sales and ~~purchase~~purchases of investments totaling ~~$4.2~~$11.3 million and ~~$6.5~~$14 million, respectively, are due to investment activity in our captive insurance subsidiary. Comparatively, acquisitions and purchases of property, plant, and equipment during the first nine months of 2018 totaled $39.0 million and $74.5 million, respectively, and proceeds from the sale of our Medley, FL, plant provided approximately $36 million in net cash proceeds.

Cash flows from financing activities primarily consisted of net repayments ~~under our revolving credit facility~~of debt of approximately ~~$39.1~~$2.8 million. Additionally, we paid a ~~semi-annual~~quarterly dividend totaling ~~$12.3~~$7.8 million, or ~~$0.20~~$0.125 per ~~share.~~share, and repurchased approximately 756,000 shares of our common stock for $29.2 million resulting in an average price paid of $38.62.

On ~~September~~March 28, ~~2019,~~2020, we had ~~$3.3~~$3.7 million outstanding on our $375 million revolving credit facility, and we had approximately ~~$361.9~~$361.5 million in remaining availability after considering $9.8 million in outstanding letters of credit. Additionally, we have $150 million in availability under an ~~amended~~existing “shelf agreement” for long term ~~debt with a current lender after considering the second quarter 2018 issuance of long-term Senior Notes.~~debt. 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 ~~September~~March 28, ~~2019.~~2020.

ENVIRONMENTAL CONSIDERATIONS AND REGULATIONS

See Notes to Unaudited Consolidated Condensed Financial Statements, Note E, “Commitments, Contingencies, and Guarantees.”

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UFP INDUSTRIES, INC.

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. There have been no material changes in our policies or estimates since December ~~29, 2018.~~28, 2019.

~~On an ongoing basis, we evaluate long-lived assets for indicators~~Under the recent re-organization of ~~impairment. Although~~our reportable segments now centered on our primary markets (retail, industrial, and construction), there were no indicators for impairment for any of ~~our~~the new reporting ~~units, we~~units. We continue to monitor the results of idX (a reporting unit under the ~~idX reporting unit. They~~Construction segment) as they have performed below expectations ~~year-to-date~~ through ~~September; however, management believes the~~2019. While it has faced challenging end market conditions resulting in this under-performance, we believe our growth and operating improvement strategies and related long-term ~~projection~~projections for idX isare still reasonable and attainable. ~~While~~Consequently, while the risk of impairment exists, management does not ~~feel~~believe an impairment is ~~necessary.~~currently required. Should the Company’s future analysis indicate a significant change in any of the triggering events for this reporting unit, it could result in impairment of the carrying value of goodwill to its implied fair value. There can be no assurance that the Company’s future goodwill impairment testing will not result in a charge to earnings. The total value of goodwill and identifiable intangibles associated with the idX reporting unit is $12.3 million and $4.5 million, respectively, at the end of March 2020.

FORWARD OUTLOOK

Most recently, the Company’s goals have been to:

●

Achieve long-term unit sales growth that exceeds positive U.S. GDP by 4 percent to 6 percent;

●

Grow earnings from operations in excess of our unit sales growth; and

●

Earn a return on invested capital in excess of our weighted average cost of capital.

While we believe the effective execution of our strategies will allow us to continue to achieve these long-term goals in the future, our ability to achieve them in 2020 has been adversely impacted by the COVID-19 pandemic. The following variables should be considered when evaluating our performance for the remainder of 2020.

●

We have experienced a decrease in customer demand and sales. While the vast majority of our customers and operations have been deemed to be essential businesses under the numerous stay at home orders that have been issued by states in which we operate, some of our customers do not meet these requirements and have temporarily shut down. For those customers who remain operating, demand has declined for the majority of them. Market indicators that should be considered when evaluating future demand for our products include:

Same store sales growth of national home improvement retail customers, the leading indicator for remodeling activity and home improvement spending forecasts. Sales of our Retail segment comprises approximately 35% of our annual total sales.

Housing starts in the northeast and mid-Atlantic states, Colorado, and Texas. Sales of our Site Built business unit within our Construction segment comprises approximately 16% of our total annual sales.

Production of manufactured housing. Sales of our Factory Built business unit within our Construction segment comprises 10% of our total annual sales.

Non-residential construction spending. Sales of our Commercial and Concrete Forming business units within our Construction segment comprises approximately 10% of our total annual sales.

Industrial production, Purchasing Managers Index, and U.S. GDP. Sales of our Industrial segment comprises approximately 25% of our total annual sales.

●

We have over 150 geographically dispersed plant locations, many of which have the ability to serve multiple market segments. These capabilities enhance our ability to supply our customers from multiple locations in

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~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

the event an operation is idled due to the pandemic. To date, two of our operations have been temporarily idled and one has been permanently idled. We do not anticipate a significant loss of sales from these actions. Depending on the length of the “stay at home” orders and the severity of the impact on future customer demand, we may temporarily or permanently idle additional locations in the future. These actions could result in certain losses including asset impairment charges to property, plant and equipment, right of use leased assets, inventory and other long-lived assets as well certain exit costs.

●

On a consolidated basis, and based on our 2019 results of operations and business mix, we believe our decremental operating margin is in a range of 10% to 15% of net sales. In other words, we believe for every dollar decrease in sales, relative to the prior year, our earnings from operations may decline by 10 cents to 15 cents. As a point of reference, our peak to trough decremental operating margin during the Great Recession was approximately 13.5% (2006 peak to 2011 trough). In addition to the variables above, factors that may cause our actual results to vary significantly from this range include:

Changes in our selling prices

Changes in our sales mix by market segment and product

The impact and level of the Lumber Market and trends in the commodity costs of our products

Changes in labor rates

Our ability to reduce variable manufacturing, freight, selling, general, and administrative costs, particularly certain personnel costs, in line with net sales

The results of our salaried bonus plan, which is based on pre-bonus profits and achieving minimum levels of pre-bonus return on investment over a required hurdle rate

●

We have reduced our capital expenditure budget to $80 million from $100 million for 2020.

●

The CARES act allows us to defer certain payroll taxes from the end of March through the end of our 2020 fiscal year, which we estimate will total approximately $20 million. This liability must be paid in equal annual installments on December 31, 2021 and December 31, 2022.

●

We believe our cash cycle will remain consistent with historical trends and result in a reduction in working capital and increase in cash as sales decline.

The Company has a strong balance sheet and liquidity position, which improved to $433 million at the end of April 2020. Based on current economic forecasts of GDP and other factors above, as well as our assumptions for projected sales for the balance of the year, we believe the Company will generate positive cash flow and net earnings for the full fiscal year of 2020, while continuing to enhance its strong liquidity position.

Item 3. 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 currently use 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.

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UFP INDUSTRIES, INC.

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 regulations, transportation, 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 volume, our gross margins, and our profitability. We anticipate that these fluctuations will continue in the future. (See “Impact of the Lumber Market on Our Operating Results.”)

Our international operations have exposure to foreign currency rate risks, primarily due to fluctuations in their local currency, which is their functional currency, compared to the U.S. Dollar. Additionally, certain of our operations enter into transactions that will be settled in a currency other than the U.S. Dollar. We entered into forward foreign exchange rate contracts in 2018, which have since expired, and may enter into further forward contracts in the future associated with mitigating the foreign currency exchange risk. Historically, our hedge contracts are deemed immaterial to the financial statements, however any material hedge contract in the future will be disclosed.

Item 4. Controls and Procedures.

(a)

Evaluation of Disclosure Controls and Procedures. With the participation of management, our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15e and 15d – 15e) as of the quarter ended ~~September~~March 28, ~~2019~~2020 (the “Evaluation Date”), have concluded that, as of such date, our disclosure controls and procedures were effective.

(b)

Changes in Internal Controls. During the quarter ended ~~September~~March 28, ~~2019,~~2020, there were no changes in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial ~~reporting.~~reporting; however, due to the segment structure change, there was a material change in our internal controls specific to the segment structure change process.

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~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

PART II. OTHER INFORMATION

Item 1A. Risk Factors.

~~None.~~We may be adversely affected by the impact of COVID-19 (Coronavirus) pandemic. Disease outbreaks, such as the 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, such as the current COVID-19 pandemic. COVID-19, as well as measures taken by governmental authorities and businesses to limit the spread of this virus, may result in an adverse change 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 has caused, and may continue to cause, us to materially curtail certain of our business operations, and has had and could continue to 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 at the end of April was over 90% current. Most recently our bad debt expense as a percentage of sales was 0.09%, 0.03%, and 0.03%, in 2019, 2018, and 2017, 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%.

There could be limited future availability of materials from our suppliers. While many of our suppliers have reduced their manufacturing capacity in response to the anticipated reduction in demand, we currently believe we have sufficient sources of supply to meet our customers’ needs in our primary product categories.

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

(a)

None.

(b)

None.

(c)

Issuer purchases of equity securities.


~~Fiscal Month~~	~~(a)~~	~~(b)~~	~~(c)~~	~~(d)~~
~~June 30 - August 3, 2019~~	—	—	—	~~1,860,354~~
~~August 4 - August 31, 2019~~	—	—	—	~~1,860,354~~
~~September 1 - 28, 2019~~	—	—	—	~~1,860,354~~


Fiscal Month	(a)	(b)	(c)	(d)
December 29, 2019 – February 1, 2020	—	—	—	1,860,354
February 2 – February 29, 2020	—	—	—	1,860,354
March 1 – March 28, 2020	756,397	38.62	756,397	1,103,957

(a)	Total number of shares purchased.

(b)	Average price paid per share.

(c)	Total number of shares purchased as part of publicly announced plans or programs.

(d)	Maximum number of shares that may yet be purchased under the plans or programs.

On November 14, 2001, the Board of Directors approved a share repurchase program (which succeeded a previous program) allowing us to repurchase up to 2.5 million shares of our common stock. On October 14, 2010, our Board authorized an additional 2 million shares to be repurchased under our share repurchase program. The total number of remaining shares that may be repurchased under the program is approximately ~~1.9~~1.1 million.

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UFP INDUSTRIES, INC.

Item 5. Other Information.

None.

3429

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~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

PART II. OTHER INFORMATION

Item 6. Exhibits.

The following exhibits (listed by number corresponding to the Exhibit Table as Item 601 in Regulation S-K) are filed with this report:


31	Certifications.

	(a)	Certificate of the Chief Executive Officer of ~~Universal Forest Products,~~UFP Industries, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

	(b)	Certificate of the Chief Financial Officer of ~~Universal Forest Products,~~UFP Industries, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

32	Certifications.

	(a)	Certificate of the Chief Executive Officer of ~~Universal Forest Products,~~UFP Industries, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

	(b)	Certificate of the Chief Financial Officer of ~~Universal Forest Products,~~UFP Industries, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

101	Interactive Data File formatted in iXBRL (Inline eXtensible Business Reporting Language).

	(INS)	iXBRL Instance Document.

	(SCH)	iXBRL Schema Document.

	(CAL)	iXBRL Taxonomy Extension Calculation Linkbase Document.

	(LAB)	iXBRL Taxonomy Extension Label Linkbase Document.

	(PRE)	iXBRL Taxonomy Extension Presentation Linkbase Document.

	(DEF)	iXBRL Taxonomy Extension Definition Linkbase Document.

104	Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document).

3530

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~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

SIGNATURES

Pursuant to the requirements 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.

	~~UNIVERSAL FOREST PRODUCTS,~~UFP INDUSTRIES, INC.

Date: ~~October 30, 2019~~May 6, 2020	By:	/s/ Matthew J. Missad
	Matthew J. Missad,
	Chief Executive Officer and Principal Executive Officer


Date: ~~October 30, 2019~~May 6, 2020	By:	/s/ Michael R. Cole
	Michael R. Cole,
	Chief Financial Officer,
	Principal Financial Officer and
	Principal Accounting Officer

3631


	Operating
	Leases
2019 (remainder of year)	$	4,389
2020		16,258
2021		13,945
2022		11,511
2023		8,907
Thereafter		22,471
Total minimum lease payments	$	77,481
Less present value discount		(2,045)
Total lease liability	$	75,436


	Operating
	Leases
	12/29/2018
2019	$	17,242
2020		11,969
2021		9,784
2022		8,346
2023		6,382
Thereafter		22,498
Total minimum lease payments	$	76,221


	Southern Yellow Pine
	Average $/MBF
	2019			2018
January	$	370		$	418
February		403			459
March		408			480
April		401			483
May		383			535
June		344			562
July		359			512
August		348			449
September		355			440

Third quarter average	$	354		$	467
Year-to-date average	$	375		$	482

Third quarter percentage change		(24.2)	%
Year-to-date percentage change		(22.2)	%


	Net Sales								Earnings from Operations
	Three Months Ended								Three Months Ended
	September 28,		September 29,		$		%		September 28,		September 29,		$		%
(in thousands)	2019		2018		Change		Change		2019		2018		Change		Change
North	$	352,642	$	341,334	$	11,308	3.3	%	$	22,914	$	12,061	$	10,853	90.0	%
South		227,896		270,077		(42,181)	(15.6)	%		12,968		8,304		4,664	56.2	%
West		413,183		434,123		(20,940)	(4.8)	%		28,949		21,404		7,545	35.3	%
All Other		169,305		167,168		2,137	1.3	%		(505)		5,171		(5,676)	(109.8)	%
Corporate		—		—		—	—			6,141		10,051		(3,910)	(38.9)	%
Total	$	1,163,026	$	1,212,702	$	(49,676)	(4.1)	%	$	70,467	$	56,991	$	13,476	23.6	%


	Net Sales						Net Sales
	North Segment by Market						North Segment by Market
	Three Months Ended						Nine Months Ended
(in thousands)	September 28,		September 29,				September 28,		September 29,
Market Classification	2019		2018		% Change		2019		2018		% Change
Retail	$	162,170	$	152,538	6.3	%	$	448,055	$	439,432	2.0	%
Industrial		60,278		53,281	13.1	%		187,234		161,267	16.1	%
Construction		138,015		143,666	(3.9)	%		397,315		423,728	(6.2)	%
Total Gross Sales		360,463		349,485	3.1	%		1,032,604		1,024,427	0.8	%
Sales Allowances		(7,821)		(8,151)	(4.0)	%		(21,387)		(22,086)	(3.2)	%
Total Net Sales	$	352,642	$	341,334	3.3	%	$	1,011,217	$	1,002,341	0.9	%


	Net Sales						Net Sales
	South Segment by Market						South Segment by Market
	Three Months Ended						Nine Months Ended
(in thousands)	September 28,		September 29,				September 28,		September 29,
Market Classification	2019		2018		% Change		2019		2018		% Change
Retail	$	97,104	$	109,212	(11.1)	%	$	309,888	$	355,271	(12.8)	%
Industrial		90,291		111,564	(19.1)	%		301,389		295,106	2.1	%
Construction		45,251		54,337	(16.7)	%		134,698		168,964	(20.3)	%
Total Gross Sales		232,646		275,113	(15.4)	%		745,975		819,341	(9.0)	%
Sales Allowances		(4,750)		(5,036)	(5.7)	%		(15,036)		(15,924)	(5.6)	%
Total Net Sales	$	227,896	$	270,077	(15.6)	%	$	730,939	$	803,417	(9.0)	%


	Net Sales						Net Sales
	West Segment by Market						West Segment by Market
	Three Months Ended						Nine Months Ended
(in thousands)	September 28,		September 29,				September 28,		September 29,
Market Classification	2019		2018		% Change		2019		2018		% Change
Retail	$	127,431	$	125,534	1.5	%	$	371,666	$	391,713	(5.1)	%
Industrial		144,935		151,771	(4.5)	%		427,081		432,671	(1.3)	%
Construction		147,011		162,981	(9.8)	%		413,765		447,463	(7.5)	%
Total Gross Sales		419,377		440,286	(4.7)	%		1,212,512		1,271,847	(4.7)	%
Sales Allowances		(6,194)		(6,163)	0.5	%		(17,959)		(18,431)	(2.6)	%
Total Net Sales	$	413,183	$	434,123	(4.8)	%	$	1,194,553	$	1,253,416	(4.7)	%


	Net Sales						Net Sales
	All Other Segment by Market						All Other Segment by Market
	Three Months Ended						Nine Months Ended
(in thousands)	September 28,		September 29,				September 28,		September 29,
Market Classification	2019		2018		% Change		2019		2018		% Change
Retail	$	50,386	$	54,631	(7.8)	%	$	185,934	$	170,505	9.0	%
Industrial ⁽¹⁾		37,033		37,045	(0.0)	%		103,831		97,367	6.6	%
Construction ⁽¹⁾		84,124		77,130	9.1	%		199,362		182,240	9.4	%
Total Gross Sales		171,543		168,806	1.6	%		489,127		450,112	8.7	%
Sales Allowances & Other		(2,238)		(1,638)	36.6	%		(7,867)		(8,287)	(5.1)	%
Total Net Sales	$	169,305	$	167,168	1.3	%	$	481,260	$	441,825	8.9	%