| |
| |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 27, 202126, 2022
OR
| |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 0-22684
UFP INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
| | | | |
| Michigan |
| 38-1465835 | |
| (State or other jurisdiction of incorporation or | | (I.R.S. Employer Identification Number) | |
| organization) | | | |
| | | | |
| 2801 East Beltline NE, Grand Rapids, Michigan | | 49525 | |
| (Address of principal executive offices) | | (Zip Code) | |
Registrant’s telephone number, including area code (616) 364-6161
| | | ||
| NONE | | ||
| (Former name or former address, if changed since last report.) | | ||
| | | ||
| | |
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | |
Large Accelerated Filer ⌧ | Accelerated Filer ◻ | Non-Accelerated Filer ◻ | Smaller Reporting Company ☐ |
| | | Emerging Growth Company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with a new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by checkmark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
| | | | |
| Class |
| Outstanding as of March | |
| Common stock, $1 par value | |
| |
| | |
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
PART I. | | FINANCIAL INFORMATION. | Page No. |
| | | |
| Item 1. | Financial Statements | |
| | | |
| | 3 | |
| | | |
| | 4 | |
| | | |
| | 5 | |
| | | |
| | 6 | |
| | | |
| | Notes to Unaudited Condensed Consolidated Financial Statements | 7 |
| | | |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| |
| | | |
| 28 | ||
| | | |
|
| ||
| | | |
PART II. | | OTHER INFORMATION | |
| | | |
| Item 1. | Legal Proceedings – NONE | |
| | | |
| 29 | ||
| | | |
| 29 | ||
| | | |
| Item 3. | Defaults upon Senior Securities – NONE | |
| | | |
| Item 4. | Mine Safety Disclosures – NONE | |
| | | |
|
| ||
| | | |
|
|
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | |
(in thousands, except share data) | | | | | | | | | | | | | | | ||||||
| | March 27, | | December 26, | | March 28, | | | March 26, | | December 25, | | March 27, | | ||||||
|
| 2021 |
| 2020 |
| 2020 | |
| 2022 |
| 2021 |
| 2021 | | ||||||
ASSETS | | | |
| | |
| | | | | | |
| | |
| | | |
CURRENT ASSETS: | | | |
| | |
| | | | | | |
| | |
| | | |
Cash and cash equivalents | | $ | 44,399 |
| $ | 436,507 |
| $ | 32,129 | | | $ | 73,783 |
| $ | 286,662 |
| $ | 44,399 | |
Restricted cash | |
| 629 | |
| 101 |
|
| 724 | | |
| 729 | |
| 4,561 |
|
| 629 | |
Investments | |
| 31,439 | |
| 24,308 |
|
| 17,778 | | |
| 35,465 | |
| 36,495 |
|
| 31,439 | |
Accounts receivable, net | |
| 808,105 | |
| 470,504 |
|
| 460,821 | | |
| 1,095,362 | |
| 737,805 |
|
| 808,105 | |
Inventories: | | | |
| | |
| | | | | | |
| | |
| | | |
Raw materials | |
| 438,762 | |
| 316,481 |
|
| 263,857 | | |
| 576,023 | |
| 416,043 |
|
| 438,762 | |
Finished goods | |
| 384,652 | |
| 250,813 |
|
| 246,824 | | |
| 654,328 | |
| 547,277 |
|
| 384,652 | |
Total inventories | |
| 823,414 | |
| 567,294 |
|
| 510,681 | | |
| 1,230,351 | |
| 963,320 |
|
| 823,414 | |
Refundable income taxes | |
| — | |
| 5,836 |
|
| 2,624 | | |
| — | |
| 4,806 |
|
| — | |
Other current assets | |
| 29,072 | |
| 33,812 |
|
| 36,152 | | |
| 36,727 | |
| 39,827 |
|
| 29,072 | |
TOTAL CURRENT ASSETS | |
| 1,737,058 | |
| 1,538,362 | |
| 1,060,909 | | |
| 2,472,417 | |
| 2,073,476 | |
| 1,737,058 | |
DEFERRED INCOME TAXES | |
| 2,290 | |
| 2,413 |
|
| 2,145 | | |
| 3,590 | |
| 3,462 |
|
| 2,290 | |
RESTRICTED INVESTMENTS | | | 17,209 | |
| 17,565 |
|
| 16,111 | | | | 19,390 | |
| 19,310 |
|
| 17,209 | |
RIGHT OF USE ASSETS | | | 98,404 | | | 77,245 | | | 81,065 | | | | 99,914 | | | 96,703 | | | 98,404 | |
OTHER ASSETS | |
| 27,358 | |
| 20,298 |
|
| 25,198 | | |
| 32,544 | |
| 31,876 |
|
| 27,358 | |
GOODWILL | |
| 314,189 | |
| 252,193 |
|
| 246,459 | | |
| 317,631 | |
| 315,038 |
|
| 314,189 | |
INDEFINITE-LIVED INTANGIBLE ASSETS | |
| 7,401 | |
| 7,401 |
|
| 7,288 | | |
| 7,396 | |
| 7,369 |
|
| 7,401 | |
OTHER INTANGIBLE ASSETS, NET | |
| 93,812 | |
| 72,252 |
|
| 46,232 | | |
| 120,205 | |
| 109,017 |
|
| 93,812 | |
PROPERTY, PLANT AND EQUIPMENT: | | | |
| | |
| | | | | | |
| | |
| | | |
Property, plant and equipment | | | 1,060,893 | | | 974,497 | | | 906,171 | | | | 1,244,070 | | | 1,212,113 | | | 1,060,893 | |
Less accumulated depreciation and amortization | |
| (572,526) | |
| (557,335) |
|
| (508,596) | | |
| (643,191) | |
| (623,093) |
|
| (572,526) | |
PROPERTY, PLANT AND EQUIPMENT, NET | | | 488,367 | | | 417,162 | | | 397,575 | | | | 600,879 | | | 589,020 | | | 488,367 | |
TOTAL ASSETS | | | 2,786,088 | | | 2,404,891 | | | 1,882,982 | | | | 3,673,966 | | | 3,245,271 | | | 2,786,088 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
| | |
| | | | | | |
| | |
| | | |
CURRENT LIABILITIES: | | | |
| | |
| | | | | | |
| | |
| | | |
Cash overdraft | | $ | 47,140 | | $ | — |
| $ | — | | | $ | 61,711 | | $ | 17,030 |
| $ | 47,140 | |
Accounts payable | | | 299,398 | | | 211,518 |
| | 162,039 | | | | 425,956 | | | 319,125 |
| | 299,398 | |
Accrued liabilities: | | | |
| | |
| | | | | | |
| | |
| | | |
Compensation and benefits | |
| 137,208 | |
| 166,478 |
|
| 92,504 | | |
| 189,509 | |
| 289,196 |
|
| 137,208 | |
Income taxes | | | 25,565 | | | — | | | — | | | | 54,682 | | | — | | | 25,565 | |
Other | |
| 78,560 | |
| 69,104 |
|
| 55,760 | | |
| 102,434 | |
| 84,853 |
|
| 78,560 | |
Current portion of lease liability | | | 23,051 | | | 16,549 | | | 16,180 | | | | 26,015 | | | 23,155 | | | 23,051 | |
Current portion of long-term debt | |
| 109 | |
| 100 |
|
| 2,772 | | |
| 42,895 | |
| 42,683 |
|
| 109 | |
TOTAL CURRENT LIABILITIES | |
| 611,031 | |
| 463,749 |
|
| 329,255 | | |
| 903,202 | |
| 776,042 |
|
| 611,031 | |
LONG-TERM DEBT | |
| 426,310 | |
| 311,607 |
|
| 160,550 | | |
| 379,015 | |
| 277,567 |
|
| 426,310 | |
LEASE LIABILITY | | | 76,408 | | | 61,509 | | | 64,937 | | | | 76,969 | | | 76,632 | | | 76,408 | |
DEFERRED INCOME TAXES | |
| 34,940 | |
| 25,266 |
|
| 22,799 | | |
| 61,278 | |
| 60,964 |
|
| 34,940 | |
OTHER LIABILITIES | |
| 50,856 | |
| 59,608 |
|
| 33,159 | | |
| 35,330 | |
| 37,497 |
|
| 50,856 | |
TOTAL LIABILITIES | |
| 1,199,545 | |
| 921,739 |
|
| 610,700 | | |
| 1,455,794 | |
| 1,228,702 |
|
| 1,199,545 | |
SHAREHOLDERS’ EQUITY: | | | |
| | |
| | | | | | |
| | |
| | | |
Controlling interest shareholders’ equity: | | | |
| | |
| | | | | | |
| | |
| | | |
Preferred stock, 0 par value; shares authorized 1,000,000; issued and outstanding, none | | $ | — | | $ | — |
| $ | — | | ||||||||||
Common stock, $1 par value; shares authorized 80,000,000; issued and outstanding, 61,838,256, 61,205,780 and 61,102,481 | |
| 61,838 | |
| 61,206 |
|
| 61,102 | | ||||||||||
Preferred stock, 0 par value; shares authorized 1,000,000; issued and outstanding, NaN | | $ | — | | $ | — |
| $ | — | | ||||||||||
Common stock, $1 par value; shares authorized 80,000,000; issued and outstanding, 62,734,161, 61,901,851 and 61,838,256 | |
| 62,734 | |
| 61,902 |
|
| 61,838 | | ||||||||||
Additional paid-in capital | |
| 231,111 | |
| 218,224 |
|
| 211,724 | | |
| 266,544 | |
| 243,995 |
|
| 231,111 | |
Retained earnings | |
| 1,276,722 | |
| 1,182,680 |
|
| 998,996 | | |
| 1,851,784 | |
| 1,678,121 |
|
| 1,276,722 | |
Accumulated other comprehensive loss | |
| (3,464) | |
| (1,794) |
|
| (11,110) | | |
| (3,170) | |
| (5,405) |
|
| (3,464) | |
Total controlling interest shareholders’ equity | |
| 1,566,207 | |
| 1,460,316 |
|
| 1,260,712 | | |
| 2,177,892 | |
| 1,978,613 |
|
| 1,566,207 | |
Noncontrolling interest | |
| 20,336 | |
| 22,836 |
|
| 11,570 | | |
| 40,280 | |
| 37,956 |
|
| 20,336 | |
TOTAL SHAREHOLDERS’ EQUITY | |
| 1,586,543 | |
| 1,483,152 |
|
| 1,272,282 | | |
| 2,218,172 | |
| 2,016,569 |
|
| 1,586,543 | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 2,786,088 | | $ | 2,404,891 |
| $ | 1,882,982 | | | $ | 3,673,966 | | $ | 3,245,271 |
| $ | 2,786,088 | |
See notes to consolidated condensed financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE INCOME
(Unaudited)
| | | | | | | | | | | | |
(in thousands, except per share data) | | | | | | | | | ||||
| Three Months Ended | | Three Months Ended | | ||||||||
| March 27, | | March 28, | | March 26, | | March 27, | | ||||
| 2021 |
| 2020 |
| 2022 |
| 2021 |
| ||||
NET SALES | $ | 1,825,004 |
| $ | 1,032,062 |
| $ | 2,489,313 |
| $ | 1,825,004 |
|
COST OF GOODS SOLD |
| 1,538,450 | |
| 864,826 | |
| 2,010,950 | |
| 1,538,450 | |
GROSS PROFIT |
| 286,554 | |
| 167,236 | |
| 478,363 | |
| 286,554 | |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
| 150,098 | |
| 109,339 | |
| 220,150 | |
| 150,098 | |
OTHER LOSSES (GAINS), NET | | (1,031) | | | (735) | | ||||||
OTHER GAINS, NET | | (812) | | | (1,031) | | ||||||
EARNINGS FROM OPERATIONS |
| 137,487 | |
| 58,632 | |
| 259,025 | |
| 137,487 | |
INTEREST EXPENSE |
| 3,151 | |
| 1,908 | |
| 3,302 | |
| 3,151 | |
INTEREST AND INVESTMENT (INCOME) LOSS |
| (2,296) | |
| 2,832 | | ||||||
INTEREST AND INVESTMENT LOSS (INCOME) |
| 1,093 | |
| (2,296) | | ||||||
EQUITY IN EARNINGS OF INVESTEE | | 630 | | | — | | | 515 | | | 630 | |
|
| 1,485 | |
| 4,740 | |
| 4,910 | |
| 1,485 | |
EARNINGS BEFORE INCOME TAXES |
| 136,002 | |
| 53,892 | |
| 254,115 | |
| 136,002 | |
INCOME TAXES |
| 31,751 | |
| 13,322 | |
| 60,984 | |
| 31,751 | |
NET EARNINGS |
| 104,251 | |
| 40,570 | |
| 193,131 | |
| 104,251 | |
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST |
| (940) | |
| (411) | |
| (3,428) | |
| (940) | |
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST | $ | 103,311 | | $ | 40,159 | | $ | 189,703 | | $ | 103,311 | |
| | | | | | | | | | | | |
EARNINGS PER SHARE – BASIC | $ | 1.67 | | $ | 0.65 | | $ | 3.01 | | $ | 1.67 | |
EARNINGS PER SHARE – DILUTED | $ | 1.67 | | $ | 0.65 | | $ | 3.00 | | $ | 1.67 | |
| | | | | | | | | | | | |
OTHER COMPREHENSIVE INCOME: | | | | | | | | | | | | |
NET EARNINGS |
| 104,251 | |
| 40,570 | |
| 193,131 | |
| 104,251 | |
OTHER COMPREHENSIVE GAIN (LOSS) |
| (2,196) | |
| (8,556) | |
| 3,184 | |
| (2,196) | |
COMPREHENSIVE INCOME |
| 102,055 | |
| 32,014 | |
| 196,315 | |
| 102,055 | |
LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST |
| (414) | |
| 1,924 | |
| (4,377) | |
| (414) | |
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST | $ | 101,641 | | $ | 33,938 | | $ | 191,938 | | $ | 101,641 | |
See notes to consolidated condensed financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | |
(in thousands, except share and per share data) | | | | | | | | | | | | | | | | | | |
| | Controlling Interest Shareholders’ Equity | ||||||||||||||||
| | | | | | | | | | | Accumulated | | | | | | | |
| | | | | Additional | | | | | Other | | | | | | | ||
| | Common | | Paid-In | | Retained | | Comprehensive | | Noncontrolling | | | | |||||
|
| Stock |
| Capital |
| Earnings |
| Earnings |
| Interest |
| Total | ||||||
Balance at December 26, 2020 | | $ | 61,206 | | $ | 218,224 | | $ | 1,182,680 | | $ | (1,794) | | $ | 22,836 |
| $ | 1,483,152 |
Net earnings | | | |
| | |
|
| 103,311 | |
|
| |
| 940 |
|
| 104,251 |
Foreign currency translation adjustment | | | |
| | |
| | |
|
| (374) | |
| (526) |
|
| (900) |
Unrealized loss on debt securities | | | |
| | |
| | |
|
| (1,296) | |
|
| |
| (1,296) |
Distributions to noncontrolling interest | | | |
| | |
| | |
| | |
|
| (2,914) | |
| (2,914) |
Additional purchase of noncontrolling interest | | | | | | | | | | | | | | | | | | — |
Cash dividends - $0.15 per share - quarterly | | | | | | | | | (9,274) | |
|
| |
|
| |
| (9,274) |
Issuance of 5,816 shares under employee stock purchase plan | |
| 6 | | | 357 | | | |
| | |
| | |
|
| 363 |
Net issuance of 536,970 shares under stock grant programs | |
| 537 | | | 3,888 | | | 5 |
| | |
| | |
|
| 4,430 |
Issuance of 89,690 shares under deferred compensation plans | |
| 89 | | | (89) | | | |
| | |
| | |
|
| — |
Expense associated with share-based compensation arrangements | | | | | | 2,936 | | | | |
|
| |
|
| |
| 2,936 |
Accrued expense under deferred compensation plans | | | | | | 5,795 | | | | |
|
| |
|
| |
| 5,795 |
Balance at March 27, 2021 | | $ | 61,838 | | $ | 231,111 |
| $ | 1,276,722 | | $ | (3,464) |
| $ | 20,336 |
| $ | 1,586,543 |
| | | | | | | | | | | | | | | | | | |
(in thousands, except share and per share data) | | | | | | | | | | | | | | | | | | |
| | Controlling Interest Shareholders’ Equity | ||||||||||||||||
| | | | | | | | | | | Accumulated | | | | | | | |
| | | | | Additional | | | | | Other | | | | | | | ||
| | Common | | Paid-In | | Retained | | Comprehensive | | Noncontrolling | | | | |||||
|
| Stock |
| Capital |
| Earnings |
| Earnings |
| Interest |
| Total | ||||||
Balance on December 25, 2021 | | $ | 61,902 | | $ | 243,995 | | $ | 1,678,121 | | $ | (5,405) | | $ | 37,956 |
| $ | 2,016,569 |
Net earnings | | | |
| | |
|
| 189,703 | |
|
| |
| 3,428 |
|
| 193,131 |
Foreign currency translation adjustment | | | |
| | |
| | |
|
| 2,930 | |
| 949 |
|
| 3,879 |
Unrealized loss on debt securities | | | |
| | |
| | |
|
| (695) | |
|
| |
| (695) |
Distributions to noncontrolling interest | | | |
| | |
| | |
| | |
|
| (2,053) | |
| (2,053) |
Additional purchase of noncontrolling interest | | | | | | | | | | | | | | | | | | — |
Cash dividends - $0.20 per share - quarterly | | | | | | | | | (12,541) | |
|
| |
|
| |
| (12,541) |
Issuance of 9,734 shares under employee stock purchase plan | |
| 10 | | | 653 | | | |
| | |
| | |
|
| 663 |
Issuance of 787,045 shares under stock grant programs | |
| 787 | | | 8,959 | | | |
| | |
| | |
|
| 9,746 |
Issuance of 79,973 shares under deferred compensation plans | |
| 80 | | | (80) | | | |
| | |
| | |
|
| — |
Repurchase of 44,442 shares | |
| (45) | | | | | | (3,499) |
| | |
|
|
| |
| (3,544) |
Expense associated with share-based compensation arrangements | | | | | | 6,883 | | | | |
|
| |
|
| |
| 6,883 |
Accrued expense under deferred compensation plans | | | | | | 6,134 | | | | |
|
| |
|
| |
| 6,134 |
Balance on March 26, 2022 | | $ | 62,734 | | $ | 266,544 |
| $ | 1,851,784 | | $ | (3,170) |
| $ | 40,280 |
| $ | 2,218,172 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(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 28, 2019 | | $ | 61,409 | | $ | 192,173 |
| $ | 995,022 | | $ | (4,889) |
| $ | 14,018 |
| $ | 1,257,733 | ||||||||||||||||||
Balance on December 26, 2020 | | $ | 61,206 | | $ | 218,224 | | $ | 1,182,680 | | $ | (1,794) | | $ | 22,836 |
| $ | 1,483,152 | ||||||||||||||||||
Net earnings | | | |
| | |
|
| 40,159 | |
|
| |
| 411 |
|
| 40,570 | | | |
| | |
|
| 103,311 | |
|
| |
| 940 |
|
| 104,251 |
Foreign currency translation adjustment | | | |
| | |
| | |
|
| (5,951) | |
| (2,335) |
|
| (8,286) | | | |
| | |
| | |
|
| (374) | |
| (526) |
|
| (900) |
Unrealized loss on debt securities | | | |
| | |
| | |
|
| (270) | |
|
| |
| (270) | | | |
| | |
| | |
|
| (1,296) | |
|
| |
| (1,296) |
Distributions to noncontrolling interest | | | |
| | |
| | |
| | |
|
| (299) | |
| (299) | | | |
| | |
| | |
| | |
|
| (2,914) | |
| (2,914) |
Additional purchase of noncontrolling interest | | | | | | 130 | | | | | | | | | (225) | |
| (95) | ||||||||||||||||||
Cash dividends - $0.125 per share - quarterly | |
| |
| | |
|
| (7,730) | |
|
| |
|
|
|
| (7,730) | ||||||||||||||||||
Issuance of 10,549 shares under employee stock purchase plan | |
| 10 | |
| 309 |
| | |
| | |
| | |
|
| 319 | ||||||||||||||||||
Net issuance of 350,124 shares under stock grant programs | |
| 350 | |
| 12,454 |
| | 1 |
| | |
| | |
|
| 12,805 | ||||||||||||||||||
Issuance of 89,616 shares under deferred compensation plans | | | 89 | |
| (89) |
| | |
| | |
| | | | | — | ||||||||||||||||||
Repurchase of 756,397 shares | | | (756) | |
| | |
| (28,456) |
| | |
|
|
| |
| (29,212) | ||||||||||||||||||
Cash dividends - $0.15 per share - quarterly | | | | | | | | | (9,274) | |
|
| |
|
|
|
| (9,274) | ||||||||||||||||||
Issuance of 5,816 shares under employee stock purchase plan | |
| 6 | | | 357 | | | |
| | |
| | |
|
| 363 | ||||||||||||||||||
Net issuance of 536,970 shares under stock grant programs | |
| 537 | | | 3,888 | | | 5 |
| | |
| | |
|
| 4,430 | ||||||||||||||||||
Issuance of 89,690 shares under deferred compensation plans | |
| 89 | | | (89) | | | |
| | |
| | | | | — | ||||||||||||||||||
Expense associated with share-based compensation arrangements | | | |
|
| 1,404 | |
|
| |
|
| |
|
| | | 1,404 | | | | | | 2,936 | | | | |
|
| |
|
| | | 2,936 |
Accrued expense under deferred compensation plans | | | |
|
| 5,343 | |
|
| |
|
| |
|
| |
| 5,343 | | | | | | 5,795 | | | | |
|
| |
|
| |
| 5,795 |
Balance at March 28, 2020 | | $ | 61,102 | | $ | 211,724 |
| $ | 998,996 | | $ | (11,110) |
| $ | 11,570 |
| $ | 1,272,282 | ||||||||||||||||||
Balance on March 27, 2021 | | $ | 61,838 | | $ | 231,111 |
| $ | 1,276,722 | | $ | (3,464) |
| $ | 20,336 |
| $ | 1,586,543 |
See notes to consolidated condensed financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | |
(in thousands) | | Three Months Ended | | ||||
| | March 27, | | March 28, | | ||
|
| 2021 |
| 2020 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
| | | |
Net earnings | | $ | 104,251 |
| $ | 40,570 | |
Adjustments to reconcile net earnings to net cash from operating activities: | | | |
| | | |
Depreciation | |
| 18,733 | |
| 15,717 | |
Amortization of intangibles | |
| 3,998 | |
| 1,571 | |
Expense associated with share-based and grant compensation arrangements | |
| 2,981 | |
| 1,444 | |
Deferred income taxes | |
| 142 | |
| 286 | |
Unrealized (gain) loss on investments and other | |
| (1,754) | |
| 3,173 | |
Equity in earnings of investee | | | 630 | | | — | |
Net gain on disposition of assets | |
| (532) | |
| (285) | |
Changes in: | | | |
| | | |
Accounts receivable | |
| (253,323) | |
| (94,253) | |
Inventories | |
| (207,768) | |
| (25,783) | |
Accounts payable and cash overdraft | |
| 121,892 | |
| 20,047 | |
Accrued liabilities and other | |
| 14,090 | |
| (8,648) | |
NET CASH USED IN OPERATING ACTIVITIES | |
| (196,660) | |
| (46,161) | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
| | | |
Purchases of property, plant and equipment | |
| (34,656) | |
| (27,286) | |
Proceeds from sale of property, plant and equipment | |
| 5,062 | |
| 409 | |
Acquisitions and purchases of non-controlling interest, net of cash received | |
| (261,133) | |
| (18,487) | |
Purchases of investments | |
| (8,738) | |
| (14,052) | |
Proceeds from sale of investments | |
| 3,381 | |
| 11,260 | |
Other | |
| (414) | |
| (54) | |
NET CASH USED IN INVESTING ACTIVITIES | |
| (296,498) | |
| (48,210) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
| | | |
Borrowings under revolving credit facilities | |
| 236,280 | |
| 6,759 | |
Repayments under revolving credit facilities | |
| (121,570) | |
| (6,498) | |
Contingent consideration payments and other | | | (627) | | | (3,074) | |
Proceeds from issuance of common stock | |
| 363 | |
| 319 | |
Dividends paid to shareholders | |
| (9,274) | |
| (7,730) | |
Distributions to noncontrolling interest | | | (2,914) | | | (299) | |
Repurchase of common stock | |
| — | |
| (29,212) | |
Other | |
| (331) | |
| 12 | |
NET CASH FROM (USED IN) FINANCING ACTIVITIES | |
| 101,927 | |
| (39,723) | |
Effect of exchange rate changes on cash | |
| (349) | |
| (1,719) | |
NET CHANGE IN CASH AND CASH EQUIVALENTS | |
| (391,580) | |
| (135,813) | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR | |
| 436,608 | |
| 168,666 | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD | | $ | 45,028 | | $ | 32,853 | |
| | | | | | | |
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH: | | | | | | | |
Cash and cash equivalents, beginning of period | | $ | 436,507 | | $ | 168,336 | |
Restricted cash, beginning of period | | | 101 | | | 330 | |
Cash, cash equivalents, and restricted cash, beginning of period | | $ | 436,608 | | $ | 168,666 | |
| | | | | | | |
Cash and cash equivalents, end of period | | $ | 44,399 | | $ | 32,129 | |
Restricted cash, end of period | | | 629 | | | 724 | |
Cash, cash equivalents, and restricted cash, end of period | | $ | 45,028 | | $ | 32,853 | |
| | | | | | | |
SUPPLEMENTAL INFORMATION: | | | |
| | | |
Interest paid | | $ | 2,694 | | $ | 374 | |
Income taxes paid | |
| 249 | |
| 2,307 | |
NON-CASH FINANCING ACTIVITIES: | | | | | | | |
Common stock issued under deferred compensation plans | |
| 5,359 | |
| 4,900 | |
| | | | | | | |
(in thousands) | | Three Months Ended | | ||||
| | March 26, | | March 27, | | ||
|
| 2022 |
| 2021 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
| | | |
Net earnings | | $ | 193,131 |
| $ | 104,251 | |
Adjustments to reconcile net earnings to net cash from operating activities: | | | |
| | | |
Depreciation | |
| 21,842 | | | 18,733 | |
Amortization of intangibles | |
| 4,672 | | | 3,998 | |
Expense associated with share-based and grant compensation arrangements | |
| 6,931 | | | 2,981 | |
Deferred income taxes | |
| 101 | | | 142 | |
Unrealized loss (gain) on investments and other | |
| 1,601 | | | (1,754) | |
Equity in earnings of investee | | | 515 | | | 630 | |
Net gain on sale and disposition of assets | |
| (306) | | | (532) | |
Changes in: | | | | | | | |
Accounts receivable | |
| (352,928) | | | (253,323) | |
Inventories | |
| (258,019) | | | (207,768) | |
Accounts payable and cash overdraft | |
| 143,895 | | | 121,892 | |
Accrued liabilities and other | |
| (6,466) | | | 14,090 | |
NET CASH USED IN OPERATING ACTIVITIES | |
| (245,031) | |
| (196,660) | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
| | | |
Purchases of property, plant and equipment | |
| (32,072) | | | (34,656) | |
Proceeds from sale of property, plant and equipment | |
| 1,207 | | | 5,062 | |
Acquisitions and purchases of non-controlling interest, net of cash received | |
| (24,571) | | | (261,133) | |
Purchases of investments | |
| (6,030) | | | (8,738) | |
Proceeds from sale of investments | |
| 4,725 | | | 3,381 | |
Other | |
| (2,995) | | | (414) | |
NET CASH USED IN INVESTING ACTIVITIES | |
| (59,736) | |
| (296,498) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
| | | |
Borrowings under revolving credit facilities | |
| 242,950 | | | 236,280 | |
Repayments under revolving credit facilities | |
| (141,438) | | | (121,570) | |
Repayments of debt | | | (199) | | | — | |
Contingent consideration payments and other | | | (551) | | | (627) | |
Proceeds from issuance of common stock | |
| 663 | | | 363 | |
Dividends paid to shareholders | |
| (12,541) | | | (9,274) | |
Distributions to noncontrolling interest | | | (2,053) | | | (2,914) | |
Repurchase of common stock | |
| (501) | | | — | |
Other | |
| — | | | (331) | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | |
| 86,330 | |
| 101,927 | |
Effect of exchange rate changes on cash | |
| 1,726 | |
| (349) | |
NET CHANGE IN CASH AND CASH EQUIVALENTS | |
| (216,711) | |
| (391,580) | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR | |
| 291,223 | |
| 436,608 | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD | | $ | 74,512 | | $ | 45,028 | |
| | | | | | | |
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH: | | | | | | | |
Cash and cash equivalents, beginning of period | | $ | 286,662 | | $ | 436,507 | |
Restricted cash, beginning of period | | | 4,561 | | | 101 | |
Cash, cash equivalents, and restricted cash, beginning of period | | $ | 291,223 | | $ | 436,608 | |
| | | | | | | |
Cash and cash equivalents, end of period | | $ | 73,783 | | $ | 44,399 | |
Restricted cash, end of period | | | 729 | | | 629 | |
Cash, cash equivalents, and restricted cash, end of period | | $ | 74,512 | | $ | 45,028 | |
| | | | | | | |
SUPPLEMENTAL INFORMATION: | | | |
| | | |
Interest paid | | $ | 2,896 | | $ | 2,964 | |
Income taxes paid | |
| 1,700 | |
| 249 | |
NON-CASH INVESTING ACTIVITIES | | | |
| | | |
Capital expenditures included in accounts payable | |
| 2,512 | |
| — | |
NON-CASH FINANCING ACTIVITIES: | | | | | | | |
Common stock issued under deferred compensation plans | |
| 6,705 | |
| 5,359 | |
See notes to consolidated condensed financial statements.
6
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated condensed financial statements (the “Financial Statements”) include our accounts and those of our wholly-owned and majority-owned subsidiaries and partnerships, and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, the Financial Statements do not include all the information and footnotes normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States. All intercompany transactions and balances have been eliminated. Certain prior year amounts have been reclassified to conform to the current year presentation.
In our opinion, the Financial Statements contain all material adjustments necessary to present fairly our consolidated financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. These Financial Statements should be read in conjunction with the annual consolidated financial statements, and footnotes thereto, included in our Annual Report to Shareholders on Form 10-K for the fiscal year ended December 26, 2020.25, 2021.
Seasonality has a significant impact on our working capital from March to August, which historically results in negative or modest cash flows from operations in our first and second quarters. Conversely, we experience a substantial decrease in working capital from September to February which typically results in significant cash flow from operations in our third and fourth quarters. For comparative purposes, we have included the March 28, 202027, 2021 balances in the accompanying unaudited condensed consolidated balance sheets.
B. FAIR VALUE
We apply the provisions of ASC 820, Fair Value Measurements and Disclosures, to assets and liabilities measured at fair value. Assets measured at fair value are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 27, 2021 | | March 28, 2020 | | March 26, 2022 | | March 27, 2021 | ||||||||||||||||||||||||||||||||||||||||
| | 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 | | | | ||||||||
|
| (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 | | $ | 19 |
| $ | 1,127 | | $ | — |
| $ | 1,146 |
| $ | 29,561 |
| $ | 837 | | $ | — |
| $ | 30,398 | | $ | 18 |
| $ | 9,641 | | $ | — |
| $ | 9,659 |
| $ | 19 |
| $ | 1,127 | | $ | — |
| $ | 1,146 |
Fixed income funds | |
| 244 | |
| 16,264 | | | — |
|
| 16,508 | |
| 237 | |
| 15,124 | | | — |
|
| 15,361 | |
| 2,279 | |
| 16,128 | | | — |
|
| 18,407 | |
| 244 | |
| 16,264 | | | — |
|
| 16,508 |
Treasury securities | | | 342 | | | — | | | — | | | 342 | | | — | | | — | | | — | | | — | ||||||||||||||||||||||||
Equity securities | |
| 18,496 | |
| — | | | — |
|
| 18,496 | |
| 9,089 | |
| — | | | — |
|
| 9,089 | |
| 19,289 | |
| — | | | — |
|
| 19,289 | |
| 18,496 | |
| — | | | — |
|
| 18,496 |
Alternative investments | | | — | | | — | | | 2,126 | | | 2,126 | | | — | | | — | | | 1,960 | | | 1,960 | | | — | | | — | | | 3,964 | | | 3,964 | | | — | | | — | | | 2,126 | | | 2,126 |
Mutual funds: | | | |
| | | | | |
| | |
| | |
| | | | | |
| | | | | |
| | | | | |
| | |
| | |
| | | | | |
| | |
Domestic stock funds | |
| 9,388 | |
| — | | | — |
|
| 9,388 | |
| 5,204 | |
| — | | | — |
|
| 5,204 | |
| 10,576 | |
| — | | | — |
|
| 10,576 | |
| 9,388 | |
| — | | | — |
|
| 9,388 |
International stock funds | |
| 1,395 | |
| — | | | — |
|
| 1,395 | |
| 947 | |
| — | | | — |
|
| 947 | |
| 1,621 | |
| — | | | — |
|
| 1,621 | |
| 1,395 | |
| — | | | — |
|
| 1,395 |
Target funds | |
| 21 | |
| — | | | — |
|
| 21 | |
| 242 | |
| — | | | — |
|
| 242 | |
| 22 | |
| — | | | — |
|
| 22 | |
| 21 | |
| — | | | — |
|
| 21 |
Bond funds | |
| 145 | |
| — | | | — |
|
| 145 | |
| 222 | |
| — | | | — |
|
| 222 | |
| 141 | |
| — | | | — |
|
| 141 | |
| 145 | |
| — | | | — |
|
| 145 |
Alternative funds | | | 496 | | | — | | | — | | | 496 | | | 921 | | | — | | | — | | | 921 | | | 501 | | | — | | | — | | | 501 | | | 496 | | | — | | | — | | | 496 |
Total mutual funds | |
| 11,445 | |
| — | | | — |
|
| 11,445 | |
| 7,536 | |
| — | | | — |
|
| 7,536 | |
| 12,861 | |
| — | | | — |
|
| 12,861 | |
| 11,445 | |
| — | | | — |
|
| 11,445 |
Total | | $ | 30,204 | | $ | 17,391 | | $ | 2,126 | | $ | 49,721 | | $ | 46,423 | | $ | 15,961 | | $ | 1,960 | | $ | 64,344 | | $ | 34,789 | | $ | 25,769 | | $ | 3,964 | | $ | 64,522 | | $ | 30,204 | | $ | 17,391 | | $ | 2,126 | | $ | 49,721 |
Assets at fair value | | $ | 30,204 | | $ | 17,391 | | $ | 2,126 |
| $ | 49,721 | | $ | 46,423 | | $ | 15,961 | | $ | 1,960 |
| $ | 64,344 | | $ | 34,789 | | $ | 25,769 | | $ | 3,964 |
| $ | 64,522 | | $ | 30,204 | | $ | 17,391 | | $ | 2,126 |
| $ | 49,721 |
7
From the assets measured at fair value as of March 27, 2021,26, 2022, listed in the table above, $31.4$35.4 million of mutual funds, equity securities, and alternative investments are held in Investments, $0.5$9.0 million of money market funds are held in Cash and Cash Equivalents, $0.6$0.7 million of money market and mutual funds are held in Other Assets for our deferred compensation plan, and $16.9$18.7 million of fixed income funds and $0.3$0.7 million of money markets funds are held in Restricted Investments.
We maintain money market, mutual funds, bonds, and/or equity securities in our non-qualified deferred compensation plan, our wholly owned licensed captive insurance company, and assets held in financial institutions. These funds are valued at prices quoted in an active exchange market and are included in “Cash and Cash Equivalents”, “Investments”, “Other Assets”, and “Restricted Investments”. We have elected not to apply the fair value option under ASC 825, Financial Instruments, to any of our financial instruments except for those expressly required by U.S. GAAP.
In accordance with our investment policy, our wholly-owned captive, Ardellis Insurance Ltd. (“Ardellis”), maintains an investment portfolio, totaling $47.9$54.2 million as of March 27, 2021,26, 2022, which has been included in the aforementioned table of total investments. This portfolio consists of domestic and international equity securities, alternative investments, and fixed income bonds.
Ardellis’ available for sale investment portfolio, including funds held with the State of Michigan, consists of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 27, 2021 | | March 28, 2020 | | March 26, 2022 | | March 27, 2021 | ||||||||||||||||||||||||||||
| | | | | Unrealized | | | | | | | | Unrealized | | | | | | | | Unrealized | | | | | | | Unrealized | | | | |||||
|
| Cost |
| Gain/(Loss) |
| Fair Value |
| Cost |
| Gain/(Loss) |
| Fair Value |
| Cost |
| Gain |
| Fair Value |
| Cost |
| Gain |
| Fair Value | ||||||||||||
Fixed Income | | $ | 15,867 |
| $ | 642 |
| $ | 16,509 | | $ | 15,257 |
| $ | 104 |
| $ | 15,361 | | $ | 19,049 |
| $ | (642) |
| $ | 18,407 | | $ | 15,867 | | $ | 642 |
| $ | 16,509 |
Treasury Securities | | | 342 | | | — | | | 342 | | | — | | | — | | | — | ||||||||||||||||||
Equity | |
| 14,664 | |
| 3,832 |
|
| 18,496 | |
| 9,690 | |
| (601) |
|
| 9,089 | |
| 15,347 | |
| 3,942 |
|
| 19,289 | |
| 14,664 | |
| 3,832 |
|
| 18,496 |
Mutual Funds | | | 8,769 | | | 2,049 |
| | 10,818 | | | 7,298 | | | (569) |
| | 6,729 | | | 9,392 | | | 2,820 |
| | 12,212 | | | 8,769 | | | 2,049 |
| | 10,818 |
Alternative Investments | | | 1,929 | | | 197 |
| | 2,126 | | | 1,834 | | | 126 |
| | 1,960 | | | 3,028 | | | 936 |
| | 3,964 | | | 1,929 | | | 197 |
| | 2,126 |
Total | | $ | 41,229 | | $ | 6,720 |
| $ | 47,949 | | $ | 34,079 | | $ | (940) |
| $ | 33,139 | | $ | 47,158 | | $ | 7,056 |
| $ | 54,214 | | $ | 41,229 | | $ | 6,720 |
| $ | 47,949 |
Our fixed income investments consist of a blend of US Government and Agency bonds and investment grade corporate bonds with varying maturities. Our equity investments consist of small, mid, and large cap growth and value funds, as well as international equity. Our mutual fund investments consist of domestic and international stock. Our alternative investments consist of a private real estate income trust which is valued as a Level 3 asset. The net unrealized gain of the portfolio was $6.7$7.1 million. Carrying amounts above are recorded in the investments and restricted investments line items within the balance sheet as of March 27, 202126, 2022 and March 28, 2020.27, 2021.
C. REVENUE RECOGNITION
Within the 3 primary segments (Retail, Industrial, and Construction) that the Company operates, there are a variety of written agreements governing the sale of our products and 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 3rdthird party. Installation revenue is recognized upon completion. If the Company useswe use a 3rdthird party for installation, the party will act as an agent to the Companyus until completion of the installation. Installation revenue represents an immaterial share of the Company’sour total net sales.
8
The Company utilizesWe utilize rebates, credits, discounts and/or cash-based incentives with certain customers which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized. We believe that there will not be significant changes to our estimates of variable consideration. The allocation of these costs are applied at the invoice level and recognized in conjunction with revenue. Additionally, returns and refunds are estimated on a historical and expected basis which is a reduction of revenue recognized.
Earnings on construction contracts are reflected in operations using over time accounting, under either cost to cost or units of delivery methods, depending on the nature of the business at individual operations, which is in accordance with ASC 606 as revenue is recognized when certain performance obligations are performed. Under over time accounting using the cost to cost method, revenues and related earnings on construction contracts are measured by the relationships of actual costs incurred relatedrelative 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 relatedrelative to the total number of units. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent.
Our construction contracts are generally entered into with a fixed price, and completion of the projects can range from 6 to 18 months in duration. Therefore, our operating results are impacted by, among many other things, labor rates and commodity costs. During the year, we update our estimated costs to complete our projects using current labor and commodity costs and recognize losses to the extent that they exist.
The following table presents our net sales disaggregated by revenue source (in thousands):
| | | | | | | | | | | | | | | |||
|
| March 27, |
| March 28, |
| | | Three Months Ended | | ||||||||
| | 2021 | | 2020 | | % Change |
| March 26, |
| March 27, |
| | | ||||
FOB Shipping Point Revenue | | $ | 1,797,399 | | $ | 999,262 |
| 79.9% | |||||||||
Construction Contract Revenue | |
| 27,605 | | | 32,800 |
| (15.8)% | |||||||||
| | 2022 | | 2021 | | % Change | | ||||||||||
Point in Time Revenue | | $ | 2,450,281 | | $ | 1,797,399 |
| 36.3% | | ||||||||
Over Time Revenue | |
| 39,032 | | | 27,605 |
| 41.4% | | ||||||||
Total Net Sales | | $ | 1,825,004 | | $ | 1,032,062 |
| 76.8% | |
| 2,489,313 | | | 1,825,004 |
| 36.4% | |
The Construction segment comprises the construction contract revenue shown above. Construction contract revenue is primarily made up of site-built and framing customers.
The following table presents the balances of over time accounting accounts which are included in “Other current assets” and “Accrued liabilities: Other”, respectively (in thousands):
| | | | | | | | | | |
| | March 27, | | December 26, | | March 28, | | |||
|
| 2021 |
| 2020 |
| 2020 |
| |||
Cost and Earnings in Excess of Billings | | $ | 3,408 |
| $ | 4,169 |
| $ | 5,744 |
|
Billings in Excess of Cost and Earnings | |
| 9,396 | |
| 11,530 |
|
| 9,920 | |
| | | | | | | | | | |
| | March 26, | | December 25, | | March 27, | | |||
|
| 2022 |
| 2021 |
| 2021 |
| |||
Cost and Earnings in Excess of Billings | | $ | 6,759 |
| $ | 5,602 |
| $ | 3,408 |
|
Billings in Excess of Cost and Earnings | |
| 12,634 | |
| 10,744 |
|
| 9,396 | |
9
D. EARNINGS PER SHARE
The computation of earnings per share (“EPS”) is as follows (in thousands):
| | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended | | ||||||||
| March 27, |
| March 28, |
| March 26, |
| March 27, |
| ||||
| 2021 | | 2020 | | 2022 | | 2021 | | ||||
Numerator: | |
|
| |
|
| |
|
| |
|
|
Net earnings attributable to controlling interest | $ | 103,311 | | $ | 40,159 | | $ | 189,703 | | $ | 103,311 | |
Adjustment for earnings allocated to non-vested restricted common stock |
| (3,175) | |
| (1,059) | |
| (6,806) | |
| (3,175) | |
Net earnings for calculating EPS | $ | 100,136 | | $ | 39,100 | | $ | 182,897 | | $ | 100,136 | |
Denominator: |
|
| |
|
| |
|
| |
|
| |
Weighted average shares outstanding |
| 61,889 | |
| 61,842 | |
| 63,009 | |
| 61,889 | |
Adjustment for non-vested restricted common stock |
| (1,902) | |
| (1,630) | |
| (2,261) | |
| (1,902) | |
Shares for calculating basic EPS |
| 59,987 | |
| 60,212 | |
| 60,748 | |
| 59,987 | |
Effect of dilutive restricted common stock |
| 28 | |
| 18 | |
| 225 | |
| 28 | |
Shares for calculating diluted EPS |
| 60,015 | |
| 60,230 | |
| 60,973 | |
| 60,015 | |
Net earnings per share: |
|
| |
|
| |
|
| |
|
| |
Basic | $ | 1.67 | | $ | 0.65 | | $ | 3.01 | | $ | 1.67 | |
Diluted | $ | 1.67 | | $ | 0.65 | | $ | 3.00 | | $ | 1.67 | |
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.
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 0 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 $1.9 million on March 27, 2021 and $2.0 million on March 28, 2020, respectively, representing the estimated costs to complete future remediation efforts. These amounts have not been reduced by an insurance receivable.
In addition, on March 27, 2021,26, 2022, 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 March 27, 2021,26, 2022, we had outstanding purchase commitments on commenced capital projects of approximately $41.3$68.7 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 longer exists or has the ability to pay. Historically, these costs have not had a material effect on our consolidated financial statements.
10
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 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 March 27, 2021,26, 2022, we had approximately $27.0$30.0 million in outstanding payment and performance bonds for open projects. We had approximately $4.0$11.1 million in payment and performance bonds outstanding for completed projects which are still under warranty.
On March 27, 2021,26, 2022, we had outstanding letters of credit totaling $50.9$51.7 million, primarily related to certain insurance contracts and industrial development revenue bonds described further below.
10
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 March 27, 2021,26, 2022, we have irrevocable letters of credit outstanding totaling approximately $43.8$44.6 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 $7.1 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 UFP Industries, Inc. in certain debt agreements, including the Series 2012, 2018 and 2020 Senior Notes and our revolving credit facility. The maximum exposure of these guarantees is limited to the indebtedness outstanding under these debt arrangements and this exposure will expire concurrent with the expiration of the debt agreements.
We did not enter into any new guarantee arrangements during the first quarter of 20212022 which would require us to recognize a liability on our balance sheet.
11
F. BUSINESS COMBINATIONS
We completed the following acquisitions in 2021fiscal 2022 and since the end of March 2020,2021, which were accounted for using the purchase methodmethod. Dollars below are 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 1, 2021 | $4,724 | $ | 4,176 | $ | 548 | Other | December 27, 2021 | $24,571 | $ | 15,959 | $ | 8,612 | Retail |
J.C. Gilmore Pty Ltd (Gilmores) | Founded in 1988 and operating from its distribution facility in Port Melbourne, Australia, Gilmores is a leading distributor in the industrial and construction industries of packaging tapes, stretch films, packaging equipment, strapping, construction protection products and other items, with 2020 sales of $15 million AUD ($10 million USD). | |||||||||||||
Ultra Aluminum Manufacturing, Inc. (Ultra) | Located in Howell, Michigan and founded in 1996, Ultra is a leading manufacturer of aluminum fencing, gates and railing. The company designs and produces an extensive selection of ornamental aluminum fence and railing products for contractors, landscapers, fence dealers and wholesalers. The Company had sales of approximately $45 million in 2021. | |||||||||||||
| December 28, 2020 | $258,770 | $ | 82,546 | $ | 176,224 | Retail/Industrial | December 20, 2021 | $20,817 | $ | 11,480 | $ | 9,337 | Industrial |
PalletOne, Inc. (PalletOne) | Based in Bartow, Florida, PalletOne is a leading manufacturer of new pallets in the U.S., with 17 pallet manufacturing facilities in the southern and eastern regions of the country. The company also supplies other specialized industrial packaging, including custom bins and crates, and its Sunbelt Forest Products (Sunbelt) subsidiary operates 5 pressure-treating facilities in the Southeastern U.S. PalletOne and its affiliates had 2019 and 2020 sales of $525 million and $698 million, respectively. | |||||||||||||
Advantage Labels & Packaging, Inc. (Advantage) | Based in Grand Rapids, Michigan, Advantage provides blank and customized labels, printers, label applicators and other packaging supplies. Key industries served by the company include beer and beverage; body armor; food production and processing; greenhouse and nursery; hobby and craft; manufacturing; and automotive. The company had trailing 12-month sales through November 2021 of approximately $19.8 million. | |||||||||||||
| November 10, 2020 | $27,274 | $ | 17,894 | $ | 9,380 | Construction | November 22, 2021 | $11,155 | $ | 9,106 | $ | 2,049 | Other |
Atlantic Prefab, Inc.; Exterior Designs, LLC; and Patriot Building Systems, LLC | Based in Wilton, New Hampshire, Atlantic Prefab produces prefabricated steel wall panels and light gauge metal trusses. The company’s steel component and prefinished wall panel lines are new, value-added product additions for UFP Construction that help shorten project timelines. Exterior Designs is a leading installer of siding and exterior cladding such as fiber cement, ACM (aluminum composite material) panels, phenolic panels, and EIFS (exterior insulation and finish systems). The company is based in Londonderry, New Hampshire, and serves commercial and multi-family clients throughout the Northeast. Also based in Londonderry, Patriot Building Systems provides commercial and multi-family framing services in the Northeast and will focus on markets not currently served by companies of UFP Industries. The companies had combined annual sales of approximately $28 million. | |||||||||||||
Ficus Pax Private Limited (Ficus) | Headquartered in Bangalore, India, Ficus manufactures mixed-material cases and crates, nail-less plywood boxes, wooden pallets and other packaging products through 10 facilities located in major industrial markets throughout southern India. Ficus also owns a majority stake in Wadpack, a manufacturer of corrugated fiber board containers, corrugated pallets and display solutions. The company had trailing 12-month sales through August 2021 of approximately $39 million USD. | |||||||||||||
| October 1, 2020 | $7,936 | $ | 7,222 | $ | 714 | Retail | November 1, 2021 | $5,984 | $ | 5,681 | $ | 303 | Other |
Fire Retardant Chemical Technologies, LLC (FRCT) | Founded in 2014 and based in Matthews, North Carolina, FRCT’s business includes a research and development laboratory specializing in developing and testing a wide range of high-performance chemicals, including fire retardants and water repellants. The company had annual sales of approximately $6.4 million. | |||||||||||||
Boxpack Packaging (Boxpack) | Based near Melbourne, Australia, Boxpack specializes in flexographic and lithographic cardboard packaging, using the latest CAD design and finishing techniques. Boxpack serves multiple industries, including food and beverage, confectionary, pharmaceutical, industrial and agricultural. The company had trailing 12-month sales through June 30, 2021, of $8.2 million AUD. | |||||||||||||
| September 30, 2020 | $4,465 | $ | 4,607 | $ | (142) | Other | September 27, 2021 | $6,443 | $ | 4,039 | $ | 2,404 | Construction |
Enwrap Logistic & Packaging S.r.l. (Enwrap) | Enwrap is a newly formed company dedicated to the logistics and packaging business of its predecessor, Job Service S.p.A. Headquartered in Milan, Italy, Enwrap provides high-value, mixed material industrial packaging and logistics services through 8 locations in Italy. These locations generated annual sales of approximately $14 million. | |||||||||||||
Shelter Products, Inc. (Shelter) | Based in Haleyville, Alabama, Shelter operates its distribution and logistics business from an 87,800 sq.-ft. warehouse that specializes in manufactured housing industry customers. Shelter’s facility is adjacent to a UFP manufacturing facility that supplies trusses to manufactured housing builders, and the proximity will enable additional operational synergies. The Company had sales of approximately $11.4 million in 2020. |
12
| | | | | | | |
---|---|---|---|---|---|---|---|
| | | | | Net | | |
Company | Acquisition | | Intangible | Tangible | Operating | ||
Name | Date | Purchase Price | Assets | Assets | Segment | ||
| July 14, 2020 | $19,136 | $ | 13,098 | $ | 6,038 | Industrial |
T&R Lumber Company ("T&R") | A manufacturer and distributor of a range of products used primarily by nurseries, including plastic growing containers, pots and trays; wooden stakes; trellises; tree boxes; shipping racks; and other nursery supplies based in Rancho Cucamonga, California. T&R had annual sales of approximately $31 million. The acquisition of T&R will allow us to leverage their expertise using our national manufacturing capacity to grow our agricultural product offerings and customer base across the country. |
The intangible assets for the above acquisitions have not been finalized and allocated to their respective identifiable asset and goodwill accounts. In aggregate, acquisitions completed since the end of March 2020 and not consolidated with other operations contributed approximately $242.8 million in net sales and $14.2 million in operating profits during the first quarter of 2021.
| | | | | | | |
| | | | | Net | | |
Company | Acquisition | | Intangible | Tangible | Operating | ||
Name | Date | Purchase Price | Assets | Assets | Segment | ||
| April 29, 2021 | $10,129 | $ | 7,099 | $ | 3,030 | Construction |
Endurable Building Products, LLC (Endurable) | Based near Minneapolis, Minnesota, Endurable is a leading manufacturer of customized structural aluminum systems and products for exterior purposes, such as deck framing, balconies, sunshades, railings and stairs. The company’s trademarked alumiLAST aluminum deck and balcony systems are known for their low-maintenance design and ease of installation. Endurable serves general contractors in the multifamily market throughout the U.S. and had sales of approximately $15 million in 2020. | ||||||
| April 19, 2021 | $8,549 | $ | 1,526 | $ | 7,023 | Retail |
Walnut Hollow Farm, Inc. | Walnut Hollow Farm, located in Wisconsin, is engaged in the business of designing, manufacturing, selling, and distributing wood products, tools, and accessories for the craft and hobby, outdoor sportsman art, personalized home décor, and hardware categories, with sales of approximately $11.6 million in 2020. | ||||||
| April 12, 2021 | $153,462 | $ | — | $ | 153,462 | Retail |
Spartanburg Forest Products, Inc. | Headquartered in Greer, South Carolina, Spartanburg Forest Products and its affiliates are a premier wood treating operation in the U.S., with approximately 150 employees and operations in 5 states. Its affiliates include Appalachian Forest Products, Innovative Design Industries, Blue Ridge Wood Preserving, Blue Ridge Wood Products, and Tidewater Wood Products and had combined sales of approximately $543.0 million in 2020. |
The intangible assets for the above acquisitions have not been finalized and allocated to their respective identifiable asset and goodwill accounts. In aggregate, acquisitions completed since the end of March 2021 and not consolidated with other operations contributed approximately $124.6 million in net sales and $10.3 million in operating profits during the first three months of 2022.
G. SEGMENT REPORTING
The Company operatesWe operate manufacturing, treating and distribution facilities internationally, but primarily in the United States. TheOur business segments align with the following markets:consist of UFP Retail Solutions, UFP Industrial and UFP Construction and UFP Industrial. Thealign with the end markets we serve. This segment structure allows for a specialized and consistent sales approach among Company managesoperations, efficient use of resources and capital, and quicker introduction of new products and services. We manage the operations of itsour individual locations primarily through a market-centered reporting structure under which each location is included in a business unit and business units are included in our Retail, Industrial, and Construction segments. In the case of locations which serve multiple segments, results are allocated and accounted for by segment.
The exception to this market-centered reporting and management structure is the Company’sour International segment, which comprises our Mexico, Canada, Europe, India, and Australia operations and sales and buying offices in other parts of the world.
world and our Ardellis segment, which represents our wholly owned fully licensed captive insurance company based in Bermuda. Our International segment and Ardellis (our insurance captive)segments do not meet the quantitative thresholds in order to be separately reported and accordingly, the International and Ardellis segments have been includedaggregated 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 segmentssegment for the use of these assets at fair market value rates. Total assets of the Corporate column include unallocated cash and cash equivalents, certain prepaid assets, certain property, equipment and other assets pertaining to the centralized activities of Corporate, UFP Real Estate, Inc., and UFP Transportation Ltd. The tables below are presented in thousands:reporting purposes.
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 27, 2021 | ||||||||||||||||
|
| Retail |
| Industrial |
| Construction |
| All Other |
| Corporate |
| Total | ||||||
Net sales to outside customers | | $ | 759,021 |
| $ | 448,874 | | $ | 559,530 | | $ | 55,577 | | $ | 2,002 | | $ | 1,825,004 |
Intersegment net sales | |
| 47,586 | | | 17,906 | | | 14,461 | | | 97,396 | | | (177,349) | |
| — |
Segment operating profit | | | 53,545 | | | 40,410 | | | 33,018 | | | 7,978 | | | 2,536 | | | 137,487 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 28, 2020 | ||||||||||||||||
|
| Retail |
| Industrial |
| Construction |
| All Other |
| Corporate |
| Total | ||||||
Net sales to outside customers | | $ | 352,161 |
| $ | 256,543 | | $ | 381,155 | | $ | 42,392 | | $ | (189) | | $ | 1,032,062 |
Intersegment net sales | |
| 29,858 | | | 11,220 | | | 15,423 | | | 53,167 | | | (109,668) | |
| — |
Segment operating profit | | | 15,512 | | | 18,074 | | | 17,135 | | | 4,739 | | | 3,172 | | | 58,632 |
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
“Corporate” includes purchasing, transportation and administrative functions that serve our operating segments. Operating results of Corporate primarily consist of net sales to external customers initiated by UFP Purchasing and UFP Transportation and over (under) allocated costs. The operating results of UFP Real Estate, Inc., which owns and leases real estate, and UFP Transportation Ltd., which owns, leases and operates transportation equipment, are also included in the Corporate column. Inter-company lease and service charges are assessed to our operating segments for the use of these assets and services at fair market value rates. Total assets in the Corporate column include unallocated cash and cash equivalents, certain prepaid assets, certain property, equipment and other assets pertaining to the centralized activities of Corporate, UFP Real Estate, Inc., UFP Transportation, Inc., UFP Purchasing, Inc., and UFP RMS, LLC. The tables below are presented in thousands:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 26, 2022 | ||||||||||||||||
|
| Retail |
| Industrial |
| Construction |
| All Other |
| Corporate |
| Total | ||||||
Net sales to outside customers | | $ | 993,232 |
| $ | 611,369 | | $ | 786,471 | | $ | 95,567 | | $ | 2,674 | | $ | 2,489,313 |
Intersegment net sales | |
| 65,948 | | | 22,173 | | | 25,352 | | | 109,772 | | | (223,245) | |
| — |
Segment operating profit | | | 71,397 | | | 82,391 | | | 78,818 | | | 14,815 | | | 11,604 | | | 259,025 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 27, 2021 | ||||||||||||||||
|
| Retail |
| Industrial |
| Construction |
| All Other |
| Corporate |
| Total | ||||||
Net sales to outside customers | | $ | 759,021 |
| $ | 448,874 | | $ | 559,530 | | $ | 55,577 | | $ | 2,002 | | $ | 1,825,004 |
Intersegment net sales | |
| 47,586 | | | 17,906 | | | 14,461 | | | 97,396 | | | (177,349) | |
| — |
Segment operating profit | | | 53,545 | | | 40,410 | | | 33,018 | | | 7,978 | | | 2,536 | | | 137,487 |
| | | | | | | | | | | | | | | | | | |
The following table presents goodwill by segment as of March 27, 2021,26, 2022, and December 26, 202025, 2021 (in thousands):
| | | | | | | | | | | | | | | | | | |
|
| Retail |
| Industrial |
| Construction |
| All Other |
| Corporate |
| Total | ||||||
Balance as of December 26, 2020 |
| $ | 61,943 |
| $ | 87,827 |
| $ | 90,729 |
| $ | 11,694 | | $ | — |
| $ | 252,193 |
2021 Acquisitions |
| | 18,178 | | | 43,844 | | | — | | | 4,176 | | | — |
| | 66,198 |
2021 Purchase Accounting Adjustments | | | — | | | (2,291) | | | (1,653) | | | (145) | | | — | | | (4,089) |
Foreign Exchange, Net |
| | — | | | — | | | | | | (113) | | | — |
| | (113) |
Balance as of March 27, 2021 | | $ | 80,121 |
| $ | 129,380 | | $ | 89,076 | | $ | 15,612 | | $ | — | | $ | 314,189 |
| | | | | | | | | | | | | | | | | | |
|
| Retail |
| Industrial |
| Construction |
| All Other |
| Corporate |
| Total | ||||||
Balance as of December 25, 2021 |
| $ | 73,376 |
| $ | 128,541 |
| $ | 89,000 |
| $ | 24,121 | | $ | — |
| $ | 315,038 |
2022 Acquisitions |
| | 8,012 | | | — | | | — | | | — | | | — |
| | 8,012 |
2022 Purchase Accounting Adjustments | | | 293 | | | (5,715) | | | (674) | | | 99 | | | — | | | (5,997) |
Foreign Exchange, Net |
| | — | | | — | | | 156 | | | 422 | | | — |
| | 578 |
Balance as of March 26, 2022 | | $ | 81,681 |
| $ | 122,826 | | $ | 88,482 | | $ | 24,642 | | $ | — | | $ | 317,631 |
The following table presents total assets by segment as of March 27, 2021,26, 2022, and December 26, 202025, 2021 (in thousands).
| | | | | | | | | | | | | | | | |
| Total Assets by Segment | Total Assets by Segment | ||||||||||||||
| March 27, |
| December 26, |
| | | March 26, |
| December 26, |
| | | ||||
Segment Classification | 2021 | | 2020 | | % Change | 2022 | | 2021 | | % Change | ||||||
Retail | $ | 944,637 | | $ | 510,464 |
| 85.1 | % | $ | 1,205,382 | | $ | 844,189 |
| 42.8 | % |
Industrial |
| 657,572 | |
| 416,487 |
| 57.9 | |
| 857,706 | |
| 741,672 |
| 15.6 | |
Construction |
| 535,527 | |
| 510,972 |
| 4.8 | |
| 858,901 | |
| 736,157 |
| 16.7 | |
All Other | | 214,815 | | | 196,856 | | 9.1 | | | 356,568 | | | 343,363 | | 3.8 | |
Corporate | | 433,537 | | | 770,112 | | (43.7) | | | 395,409 | | | 579,890 | | (31.8) | |
Total Assets | $ | 2,786,088 | | $ | 2,404,891 |
| 15.9 | % | $ | 3,673,966 | | $ | 3,245,271 |
| 13.2 | % |
H. INCOME TAXES
Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for foreign, state and local income taxes and permanent tax differences. Our effective tax rate was 24.0% in the first quarter of 2022 compared to 23.3% for same period in 2021.The increase was primarily due to one-time tax credit refunds recorded as a discrete item in the first quarter of 2021 compared to 24.7% for same periodthat are not available in 2020.The decrease was primarily due to an anticipated decrease in our U.S. tax rate and a variety of other discrete tax items, none of which are individually significant.2022.
I. COMMON STOCK
Below is a summary of common stock issuances for the first three months of 2021 and 2020 (in thousands, except average share price):
| | | | | |
|
| March 27, 2021 | |||
Share Issuance Activity |
| Common Stock | | | Average Share Price |
Shares issued under the employee stock purchase plan | | 6 | | $ | 73.28 |
| | | | | |
Shares issued under the employee stock gift program | | 1 | | | 79.91 |
Shares issued under the director retainer stock program | | 2 | | | 56.80 |
Shares issued under the bonus plan | | 468 | | | 53.68 |
Shares issued under the executive stock match grants plan | | 77 | | | 60.24 |
Forfeitures | | (11) | | | |
Total shares issued under stock grant programs | | 537 | | $ | 54.63 |
| | | | | |
Shares issued under the deferred compensation plans | | 89 | | $ | 59.75 |
14
I. COMMON STOCK
Below is a summary of common stock issuances for the first three months of 2022 and 2021 (in thousands, except average share price):
| | | | | |
|
| March 26, 2022 | |||
Share Issuance Activity |
| Common Stock | | | Average Share Price |
Shares issued under the employee stock purchase plan | | 10 | | $ | 80.04 |
| | | | | |
Shares issued under the employee stock gift program | | 1 | | | 84.85 |
Shares issued under the director retainer stock program | | 1 | | | 80.78 |
Shares issued under the bonus plan | | 725 | | | 79.61 |
Shares issued under the executive stock match plan | | 62 | | | 82.87 |
Forfeitures | | (2) | | | |
Total shares issued under stock grant programs | | 787 | | $ | 79.87 |
| | | | | |
Shares issued under the deferred compensation plans | | 80 | | $ | 83.84 |
| | | | | |
|
| 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 bonus plan | | 271 | | | 47.51 |
Shares issued under the executive stock match grants plan | | 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 |
| | | | | |
|
| March 27, 2021 | |||
Share Issuance Activity |
| Common Stock | | | Average Share Price |
Shares issued under the employee stock purchase plan | | 6 | | $ | 73.28 |
| | | | | |
Shares issued under the employee stock gift program | | 1 | | | 79.91 |
Shares issued under the director retainer stock program | | 2 | | | 56.80 |
Shares issued under the bonus plan | | 468 | | | 53.68 |
Shares issued under the executive stock grants plan | | 77 | | | 60.24 |
Forfeitures | | (11) | | | |
Total shares issued under stock grant programs | | 537 | | $ | 54.63 |
| | | | | |
Shares issued under the deferred compensation plans | | 89 | | $ | 59.75 |
During the first three months of 2022, we repurchased approximately 44,442 shares of our common stock at an average share price of $79.74. In April 2022, we repurchased approximately 756,000 shares for $58.5 million, at an average share price of $77.40.
During the first three months of 2021, we did not repurchase any of our shares of common stock.
15
DuringJ. INVENTORIES
Inventories are stated at the first three monthslower of 2020,cost or net realizable value. The cost of inventories includes raw materials, direct labor, and manufacturing overhead. Cost is determined on a weighted average FIFO basis. Raw materials consist primarily of unfinished wood products and other materials expected to be manufactured or treated prior to sale, while finished goods represent various manufactured and treated wood products ready for sale.
We write down the value of inventory, the impact of which is reflected in cost of goods sold in the Condensed Consolidated Statement of Earnings and Comprehensive Income, if the cost of specific inventory items on hand exceeds the amount we expect to realize from the ultimate sale or disposal of the inventory. These estimates are based on management's judgment regarding future demand and market conditions and analysis of historical experience. There were 0 lower of cost or net realizable value adjustments to inventory as of March 26, 2022 and March 27, 2021.
K. SUBSEQUENT EVENTS
In April 2022, we added $500 million of borrowing capacity by entering into a shelf facility with multiple lenders to support future growth. No amounts have been drawn on this facility.
Additionally in April 2022, we repurchased approximately 756,000 shares of our common stockfor $58.5 million, at an average share price of $38.62.$77.40.
J. SUBSEQUENT EVENTS
On April 12, 2021, Sunbelt Forest Products Corporation, a wholly owned subsidiary, closed on its agreement to purchase the net operating assets of Spartanburg Forest Products, Inc. and its affiliates. The purchase price for Spartanburg’s property, plant and equipment is approximately $16.5 million. Sunbelt also purchased Spartanburg’s net working capital for an amount equal to the net book value determined on the date of closing, which totaled approximately $146.5 million. Spartanburg and its affiliates are a wood treating operation in the southeastern U.S., with approximately 150 employees and operations in 5 states.
On April 19, 2021, UFP Craft and Hobby, LLC, a wholly owned subsidiary, closed on its agreement to purchase the net operating assets of Walnut Hollow Farm, Inc., for $8.7 million. Walnut Hollow Farm, located in Wisconsin, is engaged in the business of designing, manufacturing, selling, and distributing wood products, tools, and accessories for the craft and hobby, outdoor sportsman art, personalized home décor, and hardware categories.
On April 29, 2021, UFP Construction, LLC, a wholly owned subsidiary, closed on its agreement to purchase the net operating assets of Endurable Building Products, LLC for $10.5 million. Endurable Building Products, based near Minneapolis, Minnesota, is a leading manufacturer of customized structural aluminum systems and products for exterior purposes, such as deck framing, balconies, sunshades, railings and stairs.
1516
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
UFP Industries, Inc. is a holding company with subsidiaries throughout North America, Europe, Asia, and Australia that supply wood, wood composite and other products to three markets: retail, industrial, and construction. We are headquartered in Grand Rapids, Michigan. For more information about UFP Industries, Inc., or our affiliated operations, go to www.ufpi.com.
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, 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 the first quarter of 2021.2022.
OVERVIEW
Our results for the first quarter of 20212022 include the following highlights:
● | Our net sales were up |
● | Our operating profits increased |
● | Our cash flows used |
1617
● |
Our net debt (debt and cash overdraft less cash) at the end of March |
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 | | | Random Lengths Composite |
| ||||||||
| | Average $/MBF | | | Average $/MBF |
| ||||||||
|
| 2021 |
| 2020 |
|
| 2022 |
| 2021 |
| ||||
January | | $ | 890 | | $ | 377 | | | $ | 1,112 | | $ | 890 | |
February | |
| 954 | |
| 402 | | |
| 1,225 | |
| 954 | |
March | |
| 1,035 | |
| 420 | | |
| 1,321 | |
| 1,035 | |
| | | | | | | | | | | | | | |
First quarter average | | $ | 960 | | $ | 400 | | | $ | 1,219 | | $ | 960 | |
First quarter percentage change | |
| 140.0 | % |
| | | |
| 27.0 | % |
| | |
In addition, a Southern Yellow Pine (“SYP”) composite price, which we prepare and use, is presented below. Our purchases of this species comprise almost two-thirds of our total lumber purchases.
| | | | | | | | | | | | | | |
| | Random Lengths SYP | | | Southern Yellow Pine |
| ||||||||
| | Average $/MBF | | | Average $/MBF |
| ||||||||
|
| 2021 |
| 2020 |
|
| 2022 |
| 2021 |
| ||||
January | | $ | 858 | | $ | 346 | | | $ | 1,010 | | $ | 858 | |
February | |
| 903 | |
| 345 | | |
| 1,115 | |
| 903 | |
March | |
| 938 | |
| 360 | | |
| 1,198 | |
| 938 | |
| | | | | | | | | | | | | | |
First quarter average | | $ | 900 | | $ | 350 | | | $ | 1,108 | | $ | 900 | |
First quarter percentage change | | | 157.1 | % | | | | | | 23.1 | % | | | |
The sequential increase in overall lumber prices above isfor the first quarter of the year was primarily due to the continuation of strong market demand as well as certain constraints in the supply chain of lumber. We anticipate lumber prices will normalize during the last half of this year as these constraints on supply improve. A sequential declinechange in lumber prices will impactimpacts our profitability of products sold with fixed and variable prices, as discussed below.
17
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 63.1%61.4% and 45.6%63.1% of our sales in the first three months of 20212022 and 2020,2021, respectively. The increasedecrease from the prior year ratio reflects the impactan improvement in our sales mix of higher lumber prices and the results of PalletOne and its subsidiaries.value-added products as well as our value-based selling practices.
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.
18
● | Products with fixed selling prices. These products include value-added products, such as manufactured items, sold within all segments. Prices for these products are generally fixed at the time of the sales quotation for a specified period of time. In order to reduce any exposure to adverse trends in the price of component lumber products, we attempt to lock in costs with our suppliers or purchase necessary inventory for these sales commitments. The time period limitation eventually allows us to periodically re-price our products for changes in lumber costs from our suppliers. We believe our percentage of sales of fixed price items is usually greatest in our third and fourth quarters. |
● | Products with selling prices indexed to the reported Lumber Market with a fixed dollar “adder” to cover conversion costs and profit. These products primarily include treated lumber, panel goods, other commodity-type items, and trusses sold to the manufactured housing industry. For these products, we estimate the customers’ needs and we carry anticipated levels of inventory. Because lumber costs are incurred in advance of final sale prices, subsequent increases or decreases in the market price of lumber impact our gross margins. We believe our sales of these products are at their highest relative level in our second quarter, primarily due to pressure-treated lumber sold |
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 comprised approximately |
● | Products with fixed selling prices sold under long-term supply arrangements, particularly those involving multi-family construction projects. We attempt to mitigate this risk through our purchasing practices and longer vendor commitments. |
18
In addition to the impact of the Lumber Market trends on gross margins, changes in the level of the market cause fluctuations in gross margins when comparing operating results from period to period. This is explained in the following example, which assumes the price of lumber has increased from period one to period two, with no changes in the trend within each period.
| | | | | | | |
|
| Period 1 | | Period 2 |
| ||
Lumber cost | | $ | 300 | | $ | 400 | |
Conversion cost | |
| 50 | |
| 50 | |
= Product cost | |
| 350 | |
| 450 | |
Adder | |
| 50 | |
| 50 | |
= Sell price | | $ | 400 | | $ | 500 | |
Gross margin | |
| 12.5 | % |
| 10.0 | % |
As is apparent from the preceding example, the level of lumber prices does not impact our overall profits but does impact our margins. Gross margins and operating margins are negatively impacted during periods of high lumber prices; conversely, we experience margin improvement when lumber prices are relatively low.
19
BUSINESS COMBINATIONS
We completed twoone business acquisitionsacquisition during the first three months of 2021fiscal 2022 and fivenine during all of 2020.fiscal 2021. The annual historical sales attributable to acquisitions completed in the first three months of 2021fiscal 2022 is approximately $708$85 million, while acquisitions completed from April through December 2020during the last nine months of 2021 have annual sales of approximately $79$626 million. These business combinations were not significant to our quarterly results individually or in aggregate and thus pro forma results for 20212022 and 20202021 are not presented.
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 | Three Months Ended | ||||||
| March 27, |
| March 28, |
| March 26, |
| March 27, |
|
| 2021 |
| 2020 |
| 2022 |
| 2021 |
|
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Cost of goods sold | 84.3 |
| 83.8 |
| 80.8 |
| 84.3 |
|
Gross profit | 15.7 |
| 16.2 |
| 19.2 |
| 15.7 |
|
Selling, general, and administrative expenses | 8.2 |
| 10.6 |
| 8.8 |
| 8.2 |
|
Other losses (gains), net | (0.1) |
| (0.1) |
| ||||
Other (gains) losses, net | — |
| (0.1) |
| ||||
Earnings from operations | 7.6 |
| 5.7 |
| 10.4 |
| 7.6 |
|
Other expense, net | 0.1 |
| 0.5 |
| 0.2 |
| 0.1 |
|
Earnings before income taxes | 7.5 |
| 5.2 |
| 10.2 |
| 7.5 |
|
Income taxes | 1.7 |
| 1.3 |
| 2.4 |
| 1.7 |
|
Net earnings | 5.7 |
| 3.9 |
| 7.8 |
| 5.7 |
|
Less net earnings attributable to noncontrolling interest | (0.1) |
| — |
| (0.1) |
| (0.1) |
|
Net earnings attributable to controlling interest | 5.7 | % | 3.9 | % | 7.6 | % | 5.7 | % |
Note: Actual percentages are calculated and may not sum to total due to rounding.
19
As a result of the impact of the level of lumber prices on the percentages displayed in the table above (see Impact of the Lumber Market on Our Operating Results), we believe it is useful to compare our change in units sold with our change in gross profits, selling, general, and administrative expenses, and operating profits as presented in the following table. The percentages displayed below represent the percentage change from the prior year.year comparable period.
| | | | | | | ||||||
| | | | | | | | Percentage Change | ||||
| | Percentage Change | | Three Months Ended | ||||||||
|
| March 27, | | March 28, |
| March 26, | | March 27, | ||||
|
| 2021 | |
| 2020 |
| 2022 |
| 2021 | |||
Units sold |
| 33.0 | % | | 5.0 | % |
| 10.0 | % | | 33.0 | % |
Gross profit | | 71.3 | | | 8.4 | | | 66.9 | | | 71.3 | |
Selling, general, and administrative expenses | | 37.3 | | | 3.8 | | | 46.7 | | | 37.3 | |
Earnings from operations | | 134.5 | | | 21.0 | | | 88.4 | | | 134.5 | |
20
The following table presents, for the periods indicated, our selling, general, and administrative (SG&A) costs as a percentage of gross profit. Given our strategies to enhance our capabilities and improve our value-added product offering, and recognizing the higher relative level of SG&A costs these strategies require, we believe this ratio provides an enhanced view of our effectiveness in managing these costs and mitigates the impact of changing lumber prices.
| | | | | | | | | | |
| | | | | | | | | ||
| | Three Months Ended | Three Months Ended | | ||||||
|
| March 27, |
| March 28, |
| March 26, | |
| March 27, | |
|
| 2021 |
| 2020 |
| 2022 | |
| 2021 | |
Gross profit | $ | 286,554 | $ | 167,236 | $ | 478,363 | | $ | 286,554 | |
Selling, general, and administrative expenses | $ | 150,098 | $ | 109,339 | $ | 220,150 | | $ | 150,098 | |
SG&A as percentage of gross profit |
| 52.4% |
| 65.4% |
| 46.0% | |
| 52.4% | |
Operating Results by Segment:
Our business segments align with the following markets:consist of UFP Retail Solutions, UFP Industrial and UFP Construction, and UFP Industrial. Thealign with the end markets we serve. Among other things, this structure allows for a more specialized and consistent sales approach among Company managesoperations, more efficient use of resources and capital, and quicker introduction of new products and services. We manage the operations of itsour individual locations primarily through a market-centered reporting structure under which each location is included in a business unit and business units are included in our Retail, Industrial, and Construction segments. In the case of locations which serve multiple segments, results are allocated and accounted for by segment. The exception to this market-centered reporting and management structure is the Company’sour International segment, which comprises our Mexico, Canada, Europe, Asia, and Australia operations and sales and purchasingbuying offices in other parts of the world. Our International segment and Ardellis (our insurance captive) have beenare 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, leases, and leasesoperates transportation equipment, are also included in the Corporate column. An inter-companyInter-company lease charge isand services charges are assessed to our operating segments for the use of these assets and services at fair market value rates.
The following tables present our operating results, for the periods indicated, by segment (in thousands).
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 26, 2022 | ||||||||||||||||
|
| |
| |
| | | | | | |
| | |||||
| | Retail | | Industrial | | Construction | | All Other | | Corporate | | Total | ||||||
Net sales | | $ | 993,232 | | $ | 611,369 | | $ | 786,471 | | $ | 95,567 | | $ | 2,674 | | $ | 2,489,313 |
Cost of goods sold | |
| 858,895 | |
| 461,815 | |
| 625,059 | |
| 64,024 | | | 1,157 | | | 2,010,950 |
Gross profit | | | 134,337 | | | 149,554 | | | 161,412 | | | 31,543 | | | 1,517 | | | 478,363 |
Selling, general, administrative expenses | | | 62,668 | | | 67,231 | | | 82,337 | | | 16,625 | | | (8,711) | | | 220,150 |
Other | |
| 272 | | | (68) | | | 257 | | | 103 | | | (1,376) | | | (812) |
Earnings from operations | | $ | 71,397 | | $ | 82,391 | | $ | 78,818 | | $ | 14,815 | | $ | 11,604 | | $ | 259,025 |
2021
The following tables present our operating results, for the periods indicated, by segment (in thousands).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ��� | | | | | |
| | Three Months Ended March 27, 2021 | | Three Months Ended March 27, 2021 | ||||||||||||||||||||||||||||||||
|
| |
| |
| | | | | | |
| |
| |
| |
| | | | | | | |
| | |||||||||
| | Retail | | Industrial | | Construction | | All Other | | Corporate | | Total | | Retail | | Industrial | | Construction | | All Other | | Corporate | | Total | ||||||||||||
Net sales | | $ | 759,021 | | $ | 448,874 | | $ | 559,530 | | $ | 55,577 | | $ | 2,002 | | $ | 1,825,004 | | $ | 759,021 | | $ | 448,874 | | $ | 559,530 | | $ | 55,577 | | $ | 2,002 | | $ | 1,825,004 |
Cost of goods sold | |
| 658,548 | |
| 368,549 | |
| 470,846 | |
| 38,026 | | | 2,481 | | | 1,538,450 | |
| 658,548 | |
| 368,549 | |
| 470,846 | | | 38,026 | | | 2,481 | | | 1,538,450 |
Gross profit | | | 100,473 | | | 80,325 | | | 88,684 | | | 17,551 | | | (479) | | | 286,554 | | | 100,473 | | | 80,325 | | | 88,684 | | | 17,551 | | | (479) | | | 286,554 |
Selling, general, administrative expenses | | | 47,100 | | | 40,113 | | | 55,545 | | | 10,421 | | | (3,081) | | | 150,098 | | | 47,100 | | | 40,113 | | | 55,545 | | | 10,421 | | | (3,081) | | | 150,098 |
Other | |
| (172) | |
| (198) | |
| 121 | | | (848) | | | 66 | | | (1,031) | |
| (172) | |
| (198) | |
| 121 | | | (848) | | | 66 | | | (1,031) |
Earnings from operations | | $ | 53,545 | | $ | 40,410 | | $ | 33,018 | | $ | 7,978 | | $ | 2,536 | | $ | 137,487 | | $ | 53,545 | | $ | 40,410 | | $ | 33,018 | | $ | 7,978 | | $ | 2,536 | | $ | 137,487 |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 28, 2020 | ||||||||||||||||
|
| |
| |
| | | | | | | |
| | ||||
| | 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 |
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 26, 2022 | | ||||||||||
|
| |
| |
| | | | | | | |
|
| | 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 | | 86.5 | | 75.5 | | 79.5 | | 67.0 | | — | | 80.8 | |
Gross profit | | 13.5 | | 24.5 | | 20.5 | | 33.0 | | — | | 19.2 | |
Selling, general, administrative expenses | | 6.3 | | 11.0 | | 10.5 | | 17.4 | | — | | 8.8 | |
Other | | — | | — | | — | | 0.1 | | — | | — | |
Earnings from operations | | 7.2 | % | 13.5 | % | 10.0 | % | 15.5 | % | — | | 10.4 | % |
Note: Actual percentages are calculated and may not sum to total due to rounding.
| | | | | | | | | | | | | |
| | Three Months Ended March 27, 2021 | | ||||||||||
|
| |
| |
| | | | | | | |
|
| | 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 | | 86.8 | | 82.1 | | 84.2 | | 68.4 | | — | | 84.3 | |
Gross profit | | 13.2 | | 17.9 | | 15.8 | | 31.6 | | — | | 15.7 | |
Selling, general, administrative expenses | | 6.2 | | 8.9 | | 9.9 | | 18.8 | | — | | 8.2 | |
Other | | — | | — | | — | | (1.5) | | — | | — | |
Earnings from operations | | 7.1 | % | 9.0 | % | 5.9 | % | 14.4 | % | — | | 7.5 | % |
Note: Actual percentages are calculated and may not sum to total due to rounding.
2122
| | | | | | | | | | | | | |
| | Three Months Ended March 28, 2020 | | ||||||||||
|
| |
| |
| | | | | | | |
|
| | 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.
NET SALES
We primarily design, manufacture and market wood and wood-alternative products, primarily used to enhance outdoor living environments, 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, customized interior fixtures used in a variety of retail stores, commercial, and other structures, and specialty wood packaging, components and packing materials for various industries. Our strategic long-term sales objectives include:
● | Maximizing unit sales growth while achieving return on investment goals. The following table presents estimates, for the periods indicated, of our percentage change in net sales which were attributable to changes in overall selling prices versus changes in units shipped. |
| | | | | | | | | | | |
| | % Change | |||||||||
|
| in Sales |
| in Selling |
| in Units |
| Acquisition Unit Change |
| Organic Unit Change |
|
First quarter 2022 versus First quarter 2021 | | 36.4 | % | 26.4 | % | 10.0 | % | 6.8 | % | 3.2 | % |
| | | | | | | | | | | |
| | % Change | |||||||||
|
| in Sales |
| in Selling Prices |
| in Units |
| Acquisition Unit Change |
| Organic Unit Change |
|
First Quarter 2021 versus First Quarter 2020 | | 76.8 | % | 43.8 | % | 33.0 | % | 23.0 | % | 10.0 | % |
|
| | | | | | | | | | |
● | Diversifying our end market sales mix by increasing sales of |
● | Expanding geographically in our core businesses, domestically and internationally. |
● | Increasing our sales of "value-added" products and enhancing our product offering with new or improved products. Value-added products generally consist of fencing, decking, lattice, and other specialty products sold to the retail market, |
The following table presents, for the periods indicated, our percentage of value-added and commodity-based sales to total sales by our segments:
| | | | | | | | | | | | | |
| | Three Months Ended March 26, 2022 | | Three Months Ended March 27, 2021 | | ||||||||
|
| Value-Added |
| Commodity-Based | | Value-Added |
| Commodity-Based | | ||||
Retail |
| 40.8 | % | | 59.2 | % | | 44.5 | % | | 55.5 | % | |
Industrial | | 67.8 | % | | 32.2 | % | | 66.9 | % | | 33.1 | % | |
Construction | | 72.4 | % | | 27.6 | % | | 68.9 | % | | 31.1 | % | |
All Other and Corporate | | 72.4 | % | | 27.6 | % | | 71.3 | % | | 28.7 | % | |
Total Sales | | 58.4 | % | | 41.6 | % | | 58.2 | % | | 41.8 | % | |
| | | | | | | | | | | | | |
Note: Certain prior year product reclassifications and the change in designation of certain products as "value-added" resulted in a change in prior year's sales. |
2223
| | | | | | | | | | | | | |
| | Three Months Ended March 27, 2021 | | Three Months Ended March 28, 2020 | | ||||||||
|
| | | | | | | | | ||||
|
| Value-Added |
| Commodity-Based |
| Value-Added |
| Commodity-Based | | ||||
Retail |
| 44.5 | % | | 55.5 | % | | 56.5 | % | | 43.5 | % | |
Industrial | | 66.9 | % | | 33.1 | % | | 66.8 | % | | 33.2 | % | |
Construction | | 68.9 | % | | 31.1 | % | | 79.1 | % | | 20.9 | % | |
All Other and Corporate | | 71.3 | % | | 28.7 | % | | 72.4 | % | | 27.6 | % | |
Total Sales | | 58.2 | % | | 41.8 | % | | 68.0 | % | | 32.0 | % | |
The increase in our ratio of commodity-based product sales to total sales in the retail segment reflected in the table above is primarily due to the impact of dramatically higher lumber prices in the first quarter of 20212022 as the selling prices of these products are generally indexed to the current Lumber Market at the time they are shipped and lumber costs comprise a much higher percentage of the selling price than they do for value-added products. The acquisition of SunbeltSpartanburg also contributed to the increase in commodity-based sales of treated lumber in our retail segment, while PalletOne contributed to the increase in value-added sales in the industrial segment. Our overall unit sales of value-added products increased approximately 30%6% in the first quarter of 20212022 compared to 2020,2021, including an 18%a 3% contribution from acquisitions and 12%3% organic growth. Our unit sales of commodity-based products increased approximately 41%15%, including a 34%12% contribution from acquisitions and 7%3% organic growth.
● | Developing new products. We define new products as those that will generate sales of at least a $1 million per year within 4 years of launch and are still growing and gaining market penetration. New product sales |
| | | | | | | | | |
| | New Product Sales by Segment | |||||||
| | Three Months Ended | |||||||
|
| March 27, |
| March 28, |
| % | |||
| | 2021 | | 2020 | | Change | |||
Retail | | $ | 102,699 | | $ | 67,547 | | 52.0 | % |
Industrial | |
| 31,292 | |
| 15,881 | | 97.0 | % |
Construction | | | 22,712 | | | 14,268 | | 59.2 | % |
All Other and Corporate | |
| 2,703 | |
| 2,958 | | (8.6) | % |
Total New Product Sales | |
| 159,406 | |
| 100,654 | | 58.4 | % |
| | | | | | | | | |
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. |
23The table below presents new product sales in thousands:
| | | | | | | | | | |
| | New Product Sales by Segment | | | ||||||
| | Three Months Ended | | | ||||||
|
| March 26, |
| March 27, |
| % |
| |||
| | 2022 | | 2021 | | Change | | |||
Retail | | $ | 65,765 | | | 51,902 |
| 26.7 | % | |
Industrial | |
| 48,705 | | | 27,200 |
| 79.1 | % | |
Construction | | | 35,662 | | | 15,794 | | 125.8 | % | |
All Other and Corporate | |
| 770 | | | 313 |
| 146.0 | % | |
Total New Product Sales | |
| 150,902 | | | 95,209 |
| 58.5 | % | |
| | | | | | | | | | |
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. |
UFP INDUSTRIES, INC.
Retail Segment
Net sales in the first quarter of 20212022 increased approximately 116%by 31% compared to the same period of 2020,2021, due to a 19% increase in selling prices, acquisition unit growth of 12%, a 3% decrease due to the transfer of certain sales to the Construction segment, and an organic unit sales, a 56% increase in selling prices, and a 41% increase in unit sales due to acquisitions. Ourof 1%. We experienced organic unit growth was primarily driven by a 64% increase in Deckorators composite decking and railing, a 30% increase in our Handprint Home & Décor products including project panels and short lumber, a 28% increase in Outdoor Essentials Fence, Lawn & Garden products, and a 24% increase in our UFP Edge siding, pattern,(7%) and trim products.Retail Building Products (4%) business units. These increases were offset by organic unit decreases in our Sunbelt (3%), ProWood (2%), Deckorators (7%), Handprint (21%), and Outdoor Essentials (2%) business units. Our new productDeckorators business unit includes a variety of other products besides composite decking. Sales of accessories, such as plastic lattice, post caps, and balusters, reported a decline of 13%, while our composite decking unit sales increased by 5%. Capacity expansion contributed to our unit increases in Deckorators decking and UFP Edge, and we believe the investments we’ve made in these increases and were up 52% forbusiness units will add planned sales of nearly $100 million to the quarter.Retail segment in 2022. Finally, our sales to big box customers increased 118%were up 30%, andwhile sales to other independent retailers increased 112%31%. Our organic unit sales increases were primarily due to an increase in demand as consumers continue to invest in home improvement activities over other alternatives. We believe this consumer demand trend is largely due to the impact of the pandemic. Lastly, approximately $8 million of sales to customers that distribute products for concrete forming were transferred from the construction segment to the retail segment. This change in structure was made so the personnel in our construction segment can more effectively focus their efforts on the design, manufacturing and sales of assembled forms and other value-added products for concrete forming.
Gross profits increased by $55.2$33.9 million, or 122.1%33.7% to $100.5$134.3 million for the first quarter of 20212022 compared to the same period last year. Our increase in gross profit was comprised ofattributable to the following:
● |
● |
Selling, general and administrative (“SG&A”) expenses increased by approximately $17.5 million, or 59.0%, in the first quarter of 2021 compared to the same period of 2020. The SG&A of recently acquired businesses contributed $3.4 million to the increase. Accrued bonus expense, which varies with our overall profitability and return on investment, increased approximately $10.4 million and totaled approximately $14.0 million for the quarter. The remaining increase was primarily due to increases in salaries and wages and sales compensation, which were offset by decreases in travel related expenses.
Earnings from operations for the Retail reportable segment increased in the first quarter of 2021 compared to 2020 by $38.0 million, or 245%, well in excess of our 60% increase in total unit sales as a result of the factors above.
Industrial Segment
Net sales in the first quarter of 2021 increased 75% compared to the same period of 2020, due to a 5% increase in organic unit sales, a 38% increase in selling prices attributable to the Lumber Market, and a 32% increase in unit sales from recent acquisitions.
Gross profits increased by $36.4 million, or 82.9%, for the first quarter of 2021 compared to the same period last year. Acquisitions contributed $13.4 million to the increase in gross profit. The remaining increase was primarily due to organic unit sales growth and leveraging fixed costs and favorable changes in product mix of value-added products. In addition, we were able to maintain our profit per unit by more effectively passing on commodity lumber price increases in our selling prices.
24
● | Our UFP Edge and Retail Building Products business units contributed $8 million to the increase in gross profits. |
● | Deckorators contributed $3 million to the increase in gross profits. |
Selling, general and administrative (“SG&A”) expenses increased by approximately $14.3$15.6 million, or 55.3%33.1%, in the first quarter of 20212022 compared to the same period of 2020.2021. The SG&A of recently acquired businesses contributed $2.6 million to the change in SG&A. Accrued bonus expense, which varies with our overall profitability and return on investment, increased approximtely $6.7 million and totaled approximately $20.7 million for the quarter. The remaining change was primarily due to increases in salaries and wages of $2.9 million, travel related expenses of $0.8 million, and sales incentive compensation of $0.6 million.
Earnings from operations for the Retail reportable segment increased in the first quarter of 2022 compared to 2021 by $17.8 million, or 33%, as a result of the factors mentioned above.
Industrial Segment
Net sales in the first quarter of 2022 increased 36% compared to the same period of 2021, due to a 39% increase in selling prices, acquisition unit growth of 1%, and a 4% decrease in organic unit sales. The increase in our selling prices is a result of increases in lumber and other operating costs we’ve been able to pass on to customers, executing value-based selling initiatives, and maintaining pricing discipline as we operate in an environment of elevated demand and capacity constraints.The components of our change in organic unit sales includes market share gains associated with $36 million in sales to new customers, $18 million of sales to new locations of existing customers, and $22 million of new product sales. These gains were offset by the loss of unit sales on less profitable accounts.
Gross profits increased by $69.2 million, or 86.2%, for the first quarter of 2022 compared to the same period last year. Acquisitions contributed $1.7 million to the increase in gross profit. The remaining increase is a result of the pricing increases discussed above as well as favorable changes in our value-added sales mix. Excluding acquisitions, we estimate that value-added and commodity-based products contributed $49.9 million and $17.8 million, respectively, to the increase in gross profit.
Selling, general and administrative (“SG&A”) expenses increased by approximately $27.1 million, or 67.6%, in the first quarter of 2022 compared to the same period of 2021. Acquired operations since the firstsecond quarter of 20202021 contributed approximately $5.7$1.3 million to our increase in costs. Accrued bonus expense, which varies with our overall profitability and return on investment, increased approximately $6.5$13.0 million, and totaled $10.7$23.7 million for the quarter. The remaining increase was primarily due to increases in sales incentive compensation of $4.7 million, salaries and wages of $2.7 million, bed debt expense of $1.7 million, and sales compensation, which were offset by decreases in travel related expenses.expenses of $0.7 million.
Earnings from operations for the Industrial reportable segment increased in the first quarter of 20212022 compared to 20202021 by $22.3$42.0 million, or 123.6%103.9%, due to the factors discussed above.
Construction Segment
Net sales in the first quarter of 20212022 increased 47%41% compared to the same period of 2020,2021, due to unit growth of 8% (including 2% from acquisitions) and a 39%26% increase in selling prices, attributable3% due to the Lumber Market. Unittransfer of certain sales from the Retail segment, organic unit sales growth of 11%, and 1% growth from recent acquisitions. Organic unit changes within this segment consisted of increases of 21%30% in commercial construction, 16% in factory-built housing, 1% in site-built construction, and 15% in factory-built housing, offset by a 9% decline in commercial construction and a 40% decrease13% in concrete forming. The transferAs of approximately $8March 26, 2022 and December 25, 2021, we estimate that backlog orders associated with commercial construction approximated $93.0 million in sales toand $84.6 million, respectively. As of March 26, 2022 and December 25, 2021, we estimate that backlog orders associated with site-built construction approximated $141 million and $113.5 million, respectively. We expect that the retail segment fromorders above will be primarily filled within the construction segment discussed above contributed to the unit decline in the concrete forming business unit.next fiscal year; however, it is possible that some orders could be canceled.
25
Gross profits increased by $25.3$73.0 million, or 40.0% to $88.7 million82.0%, for the first quarter of 20212022 compared to the same period of 2020.2021. The increase in our gross profit was comprised of the following factors:
● | Gross profits in our site-built construction business unit increased by |
● |
● | The gross profit of our concrete forming business unit increased by $8.5 million, including $3.8 million as a result of the transfer of sales from the Retail segment. |
● | The gross profit of our commercial construction business unit increased $2.2 million as a result of increased unit sales, better productivity and |
● | Acquired businesses contributed |
Selling, general and administrative (“SG&A”) expenses increased by approximately $9.2$26.8 million, or 19.7%48.2%, in the first quarter of 20212022 compared to the same period of 2020, while we reported an 8% increase in unit sales.2021. Acquired operations since the firstsecond quarter of 20202021 contributed approximately $1.9$0.9 million to total SG&A expenses for the quarter. Accrued bonus expense, which varies with our overall profitability and return on investment, increased approximately $5.5$13.7 million, and totaled $9.0$22.7 million for the quarter. The remaining increase was primarily due to increases in sales incentive compensation of $5.0 million, salaries and wages of $1.9 million, bad debt expense of $1.4 million, and sales compensation, which were offset by decreases in travel related expenses.
expenses of $0.6 million.
Earnings from operations for the Construction reportable segment increased in the first quarter of 20212022 compared to 20202021 by $15.9$45.8 million, or 92.7%138.7%, due to the factors mentioned above.
All Other Segment
Our All Other reportable segment consists of our International and Ardellis (our insurance captive) segments that are not significant.
25
Corporate
The corporate segment consists of over (under) allocated costs that are not significant.
INCOME TAXES
Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for foreign, state and local income taxes and permanent tax differences. Our effective tax rate was 24.0% in the first quarter of 2022 compared to 23.3% for same period in 2021. The increase was primarily due to one-time tax credit refunds recorded as a discrete item in the first quarter of 2021 compared to 24.7% for same periodthat are not available in 2020. The decrease was primarily due to an anticipated decrease in our U.S. tax rate and a variety of other discrete tax items, none of which are individually significant.2022.
OFF-BALANCE SHEET TRANSACTIONS
We have no significant off-balance sheet transactions.
26
LIQUIDITY AND CAPITAL RESOURCES
The table below presents, for the periods indicated, a summary of our cash flow statement (in thousands):
| | | | | | | | | | | | |
| | Three Months Ended | | Three Months Ended | ||||||||
|
| March 27, |
| March 28, |
| March 26, |
| March 27, | ||||
| | 2021 | | 2020 | | 2022 | | 2021 | ||||
Cash used in operating activities | | $ | (196,660) | | $ | (46,161) | | $ | (245,031) | | $ | (196,660) |
Cash used in investing activities | |
| (296,498) | |
| (48,210) | |
| (59,736) | |
| (296,498) |
Cash from (used in) financing activities | |
| 101,927 | |
| (39,723) | ||||||
Cash from financing activities | |
| 86,330 | |
| 101,927 | ||||||
Effect of exchange rate changes on cash | |
| (349) | |
| (1,719) | |
| 1,726 | |
| (349) |
Net change in all cash and cash equivalents | |
| (391,580) | |
| (135,813) | |
| (216,711) | |
| (391,580) |
Cash, cash equivalents, and restricted cash, beginning of period | |
| 436,608 | |
| 168,666 | |
| 291,223 | |
| 436,608 |
Cash, cash equivalents, and restricted cash, end of period | | $ | 45,028 | | $ | 32,853 | | $ | 74,512 | | $ | 45,028 |
In general, we fundedfund 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 typically experience a substantial decrease in working capital once we move beyond our peak selling season which typically results in significant cash flows from operations in our third and fourth quarters. As explained in more detail below, the unusually large increase in lumber prices this year, as well as the significant increase in sales attributable to our Retail segment, resulted in a more significant increase in net working capital this year relative to prior years.
26
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 improvedincreased to 53 days from 48 days from 59 days induring the first quarter of 2022 compared to the prior year period.
| | | | | | | | | | | | | |
| | Three Months Ended | | Three Months Ended | | ||||||||
| | March 27, | | March 28, | | March 26, | | March 27, | | ||||
| | 2021 | | 2020 | | 2022 | | 2021 | | ||||
Days of sales outstanding |
| | 30 |
| | 34 |
| | 32 |
| | 30 |
|
Days supply of inventory | |
| 38 | |
| 46 | |
| 41 | |
| 38 | |
Days payables outstanding | |
| (20) | |
| (21) | |
| (20) | |
| (20) | |
Days in cash cycle | |
| 48 | |
| 59 | |
| 53 | |
| 48 | |
The decrease in our days sales outstanding is a result of better focus on timely collection efforts in all of our segments. The decreaseincrease in our days supply of inventory forin the first three months of 2022 compared to the same period of 2021 was primarily due to strong market demanda four day increase in our days supply of inventory to ensure we meet the delivery expectations or our customers and certain supply constraints, which contributed to higher inventory turnsa one day increase in the first quarter of 2021.our receivables cycle.
In the first three months of 2021,2022, our cash consumed by operating activities was $196.7$245.0 million, which was comprised of net earnings of $104.3$193.1 million and $24.1$35.4 million of non-cash expenses, offset by a $325.1$473.5 million increase in working capital since the end of December 2020.2021. Our operating cash flow this year declinedflows used by $150.5operations increased by $48.4 million compared to the same period of last year primarily due to an increase in our seasonal investment in net working capital since the end of 2020,$148.4 million compared to the prior year period. Thisperiod, offset by an increase in our net earnings and non-cash expenses of $100.0 million. The increase in net working capital was due to unusually highhigher lumber prices and increased market demand and net sales in eachprices. the growth of our segments. PalletOne also contributed to thebusiness, and an increase in our seasonal investment in net working capital.days supply of inventory.
27
Purchases of property, plant, and equipment and acquisitions (refer to Note F for Business Combinations) and comprised most of our cash used in investing activities during the first three months of 20212022 and totaled $261.1$32.1 million and $34.7$24.6 million, respectively. Total proceeds from the sales of property, plant, and equipment were $1.2 million. Outstanding purchase commitments on existing capital projects totaled approximately $41.3$68.7 million on March 27, 2021.26, 2022. Capital spending primarily consists of several projects to expand manufacturing capacity to serve retail, industrialmanufacture new and construction customers andvalue-added products, achieve efficiencies through automation, make 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 for the balance of the year. We currently plan to spend approximately $115.5between $175 million to $225 million on capital projects for the year.year with variability due to uncertainty about supplier lead times. Notable areas of capital spending include projects to increase the capacity and efficiency of our plants that produce our Deckorators mineral-based composite decking and wood-plastic composite decking and our UFP Edge siding, pattern and trim products.products, expand the capacity of machine-built pallet and site-built business units, and take advantage of automation opportunities.
Cash flows from financing activities primarily consisted of net borrowings of debt of approximately $115$101.5 million, the payment of quarterly dividends totaling $9.3$12.5 million ($0.150.20 per share), cash paid for repurchases of common stock of $0.5 million, and distributions to noncontrolling interests of $2.9$2.1 million. On April 20, 2022, our board of directors approved an increase in our second quarter dividend to $0.25 per share, payable on June 15, 2022, to shareholders of record on June 1, 2022. Additionally, in April 2022, we repurchased approximately 756,000 shares for $58.5 million, at an average share price of $77.40.
On March 27, 2021,26, 2022, we had $119.4$109.7 million outstanding on our $550 million revolving credit facility, and we had approximately $423.5$433.2 million in remaining availability after considering $7.1 million in outstanding letters of credit. 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 March 27, 2021.26, 2022.
At the end of the first quarter of 20212022, we have approximately $420.8$445.3 million in total liquidity, consisting of our net cash surplus and remaining availability under our revolving credit facility. We plan to use a portion of this amount to fundAs lumber prices normalize and we move beyond our future growth, includingpeak selling season we anticipate the purchase of Spartanburg Forest Products, Walnut Hollow,increase in net working capital will turn into strong operating cash flow in the third and Endurable Building Products. See Notes to Unaudited Consolidated Condensed Financial Statements, Note J, “Subsequent Events.”fourth quarters.
27
ENVIRONMENTAL CONSIDERATIONS AND REGULATIONS
See Notes to Unaudited Consolidated Condensed Financial Statements, Note E, “Commitments, Contingencies, and Guarantees.”
CRITICAL ACCOUNTING POLICIES
In preparing our consolidated financial statements, we follow accounting principles generally accepted in the United States. These principles require us to make certain estimates and apply judgments that affect our financial position and results of operations. We continually review our accounting policies and financial information disclosures. There have been no material changes in our policies or estimates since December 26, 2020.25, 2021.
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.
28
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.
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 may enter into forward foreign exchange rate contracts in the future to mitigate 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 March |
(b) | Changes in Internal Controls. During the quarter ended March |
28
PART II. OTHER INFORMATION
Item 1A. Risk Factors.
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) | None. |
(b) | None. |
(c) | Issuer purchases of equity securities. |
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Fiscal Month |
| (a) |
| (b) |
| (c) |
| (d) |
December 26, 2021 – January 29, 2022 |
| — |
| — |
| — |
| 2,603,958 |
January 30 – February 26, 2022 |
| 6,300 | | 79.53 |
| 6,300 |
| 2,597,658 |
February 27 – March 26, 2022 |
| 38,142 | | 79.77 |
| 38,142 |
| 2,559,516 |
(a) | Total number of shares purchased. |
29
(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. On February 15, 2022, our Board authorized an additional 1.5 million shares to be repurchased under our existing share repurchase program. The total number of remaining shares that may be repurchased under the program is approximately 1.12.6 million.
Item 5. Other Information.
None.
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:
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31 | Certifications. | |
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| (a) | |
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| (b) |
29
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32 | Certifications. | |
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| (a) | |
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| (b) | |
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101 | Interactive Data File formatted in iXBRL (Inline eXtensible Business Reporting Language). | |
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| (INS) | iXBRL Instance Document. |
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| (SCH) | iXBRL Schema Document. |
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| (CAL) | iXBRL Taxonomy Extension Calculation Linkbase Document. |
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| (LAB) | iXBRL Taxonomy Extension Label Linkbase Document. |
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| (PRE) | iXBRL Taxonomy Extension Presentation Linkbase Document. |
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| (DEF) | iXBRL Taxonomy Extension Definition Linkbase Document. |
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104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document). |
30
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.
| UFP INDUSTRIES, INC. | |
| | |
Date: May | By: | /s/ Matthew J. Missad |
| Matthew J. Missad, | |
| Chief Executive Officer and Principal Executive Officer | |
| | |
| | |
Date: May | By: | /s/ Michael R. Cole |
| Michael R. Cole, | |
| Chief Financial Officer, | |
| Principal Financial Officer and | |
| Principal Accounting Officer |
31