0001558370-21-005886.txt : 20210505 0001558370-21-005886.hdr.sgml : 20210505 20210505153835 ACCESSION NUMBER: 0001558370-21-005886 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 57 CONFORMED PERIOD OF REPORT: 20210327 FILED AS OF DATE: 20210505 DATE AS OF CHANGE: 20210505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UFP INDUSTRIES INC CENTRAL INDEX KEY: 0000912767 STANDARD INDUSTRIAL CLASSIFICATION: SAWMILLS, PLANNING MILLS, GENERAL [2421] IRS NUMBER: 381465835 STATE OF INCORPORATION: MI FISCAL YEAR END: 1225 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22684 FILM NUMBER: 21892962 BUSINESS ADDRESS: STREET 1: 2801 EAST BELTLINE NE CITY: GRAND RAPIDS STATE: MI ZIP: 49525 BUSINESS PHONE: 6163646161 MAIL ADDRESS: STREET 1: 2801 EAST BELTLINE NE CITY: GRAND RAPIDS STATE: MI ZIP: 49505 FORMER COMPANY: FORMER CONFORMED NAME: UNIVERSAL FOREST PRODUCTS INC DATE OF NAME CHANGE: 19930929 10-Q 1 ufpi-20210327x10q.htm 10-Q
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 27, 2021

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 27, 2021

Common stock, $1 par value

61,838,256

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange On Which Registered

Common Stock, no par value

UFPI

The Nasdaq Stock Market, LLC

Table of Contents

UFP INDUSTRIES, INC.

TABLE OF CONTENTS

PART I.

FINANCIAL INFORMATION.

Page No.

Item 1.

Financial Statements

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

3

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

4

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

5

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

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

28

Item 4.

Controls and Procedures

28

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings – NONE

Item 1A.

Risk Factors - NONE

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

Item 3.

Defaults upon Senior Securities – NONE

Item 4.

Mine Safety Disclosures – NONE

Item 5.

Other Information – NONE

29

Item 6.

Exhibits

29

2

Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share data)

March 27,

December 26,

March 28,

    

2021

    

2020

    

2020

ASSETS

  

  

CURRENT ASSETS:

  

  

Cash and cash equivalents

$

44,399

    

$

436,507

  

$

32,129

Restricted cash

 

629

 

101

  

 

724

Investments

 

31,439

 

24,308

  

 

17,778

Accounts receivable, net

 

808,105

 

470,504

  

 

460,821

Inventories:

  

  

Raw materials

 

438,762

 

316,481

  

 

263,857

Finished goods

 

384,652

 

250,813

  

 

246,824

Total inventories

 

823,414

 

567,294

  

 

510,681

Refundable income taxes

 

 

5,836

  

 

2,624

Other current assets

 

29,072

 

33,812

  

 

36,152

TOTAL CURRENT ASSETS

 

1,737,058

 

1,538,362

 

1,060,909

DEFERRED INCOME TAXES

 

2,290

 

2,413

  

 

2,145

RESTRICTED INVESTMENTS

17,209

 

17,565

  

 

16,111

RIGHT OF USE ASSETS

98,404

77,245

81,065

OTHER ASSETS

 

27,358

 

20,298

  

 

25,198

GOODWILL

 

314,189

 

252,193

  

 

246,459

INDEFINITE-LIVED INTANGIBLE ASSETS

 

7,401

 

7,401

  

 

7,288

OTHER INTANGIBLE ASSETS, NET

 

93,812

 

72,252

  

 

46,232

PROPERTY, PLANT AND EQUIPMENT:

  

  

Property, plant and equipment

1,060,893

974,497

906,171

Less accumulated depreciation and amortization

 

(572,526)

 

(557,335)

  

 

(508,596)

PROPERTY, PLANT AND EQUIPMENT, NET

488,367

417,162

397,575

TOTAL ASSETS

2,786,088

2,404,891

1,882,982

LIABILITIES AND SHAREHOLDERS’ EQUITY

  

  

CURRENT LIABILITIES:

  

  

Cash overdraft

$

47,140

$

  

$

Accounts payable

299,398

211,518

  

162,039

Accrued liabilities:

  

  

Compensation and benefits

 

137,208

 

166,478

  

 

92,504

Income taxes

25,565

Other

 

78,560

 

69,104

  

 

55,760

Current portion of lease liability

23,051

16,549

16,180

Current portion of long-term debt

 

109

 

100

  

 

2,772

TOTAL CURRENT LIABILITIES

 

611,031

 

463,749

  

 

329,255

LONG-TERM DEBT

 

426,310

 

311,607

  

 

160,550

LEASE LIABILITY

76,408

61,509

64,937

DEFERRED INCOME TAXES

 

34,940

 

25,266

  

 

22,799

OTHER LIABILITIES

 

50,856

 

59,608

  

 

33,159

TOTAL LIABILITIES

 

1,199,545

 

921,739

  

 

610,700

SHAREHOLDERS’ EQUITY:

  

  

Controlling interest shareholders’ equity:

  

  

Preferred stock, no par value; shares authorized 1,000,000; issued and outstanding, none

$

$

  

$

Common stock, $1 par value; shares authorized 80,000,000; issued and outstanding, 61,838,256, 61,205,780 and 61,102,481

 

61,838

 

61,206

  

 

61,102

Additional paid-in capital

 

231,111

 

218,224

  

 

211,724

Retained earnings

 

1,276,722

 

1,182,680

  

 

998,996

Accumulated other comprehensive loss

 

(3,464)

 

(1,794)

  

 

(11,110)

Total controlling interest shareholders’ equity

 

1,566,207

 

1,460,316

  

 

1,260,712

Noncontrolling interest

 

20,336

 

22,836

  

 

11,570

TOTAL SHAREHOLDERS’ EQUITY

 

1,586,543

 

1,483,152

  

 

1,272,282

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

2,786,088

$

2,404,891

  

$

1,882,982

See notes to consolidated condensed financial statements.

3

Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME

(Unaudited)

(in thousands, except per share data)

Three Months Ended

March 27,

March 28,

2021

    

2020

    

NET SALES

$

1,825,004

    

$

1,032,062

    

COST OF GOODS SOLD

 

1,538,450

 

864,826

GROSS PROFIT

 

286,554

 

167,236

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

150,098

 

109,339

OTHER LOSSES (GAINS), NET

(1,031)

(735)

EARNINGS FROM OPERATIONS

 

137,487

 

58,632

INTEREST EXPENSE

 

3,151

 

1,908

INTEREST AND INVESTMENT (INCOME) LOSS

 

(2,296)

 

2,832

EQUITY IN EARNINGS OF INVESTEE

630

 

1,485

 

4,740

EARNINGS BEFORE INCOME TAXES

 

136,002

 

53,892

INCOME TAXES

 

31,751

 

13,322

NET EARNINGS

 

104,251

 

40,570

LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

(940)

 

(411)

NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST

$

103,311

$

40,159

EARNINGS PER SHARE – BASIC

$

1.67

$

0.65

EARNINGS PER SHARE – DILUTED

$

1.67

$

0.65

OTHER COMPREHENSIVE INCOME:

NET EARNINGS

 

104,251

 

40,570

OTHER COMPREHENSIVE GAIN (LOSS)

 

(2,196)

 

(8,556)

COMPREHENSIVE INCOME

 

102,055

 

32,014

LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

(414)

 

1,924

COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST

$

101,641

$

33,938

See notes to consolidated condensed financial statements.

4

Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

(in thousands, except share and per share data)

Controlling Interest Shareholders’ Equity

Accumulated

Additional

Other

Common

Paid-In

Retained

Comprehensive

Noncontrolling

    

Stock

    

Capital

    

Earnings

    

Earnings

    

Interest

    

Total

Balance at December 26, 2020

$

61,206

$

218,224

$

1,182,680

$

(1,794)

$

22,836

  

$

1,483,152

Net earnings

  

  

 

103,311

 

  

 

940

  

 

104,251

Foreign currency translation adjustment

  

  

  

 

(374)

 

(526)

  

 

(900)

Unrealized loss on debt securities

  

  

  

 

(1,296)

 

  

 

(1,296)

Distributions to noncontrolling interest

  

  

  

  

 

(2,914)

 

(2,914)

Additional purchase of noncontrolling interest

Cash dividends - $0.15 per share - quarterly

(9,274)

 

  

 

  

 

(9,274)

Issuance of 5,816 shares under employee stock purchase plan

 

6

357

  

  

  

 

363

Net issuance of 536,970 shares under stock grant programs

 

537

3,888

5

  

  

  

 

4,430

Issuance of 89,690 shares under deferred compensation plans

 

89

(89)

  

  

  

 

Expense associated with share-based compensation arrangements

2,936

 

  

 

  

 

2,936

Accrued expense under deferred compensation plans

5,795

  

  

  

  

  

5,795

Balance at March 27, 2021

$

61,838

$

231,111

  

$

1,276,722

$

(3,464)

  

$

20,336

  

$

1,586,543

(in thousands, except share and per share data)

Controlling Interest Shareholders’ Equity

Accumulated

Additional

Other

Common

Paid-In

Retained

Comprehensive

Noncontrolling

    

Stock

    

Capital

    

Earnings

    

Earnings

    

Interest

    

Total

Balance at December 28, 2019

$

61,409

$

192,173

  

$

995,022

$

(4,889)

  

$

14,018

  

$

1,257,733

Net earnings

  

  

 

40,159

 

  

 

411

  

 

40,570

Foreign currency translation adjustment

  

  

  

 

(5,951)

 

(2,335)

  

 

(8,286)

Unrealized loss on debt securities

  

  

  

 

(270)

 

  

 

(270)

Distributions to noncontrolling interest

  

  

  

  

 

(299)

 

(299)

Additional purchase of noncontrolling interest

130

(225)

 

(95)

Cash dividends - $0.125 per share - quarterly

 

  

  

 

(7,730)

 

  

 

  

  

 

(7,730)

Issuance of 10,549 shares under employee stock purchase plan

 

10

 

309

  

  

  

  

 

319

Net issuance of 350,124 shares under stock grant programs

 

350

 

12,454

  

1

  

  

  

 

12,805

Issuance of 89,616 shares under deferred compensation plans

89

 

(89)

  

  

  

Repurchase of 756,397 shares

(756)

 

 

(28,456)

  

  

 

  

 

(29,212)

Expense associated with share-based compensation arrangements

  

 

1,404

 

  

 

  

 

  

1,404

Accrued expense under deferred compensation plans

  

 

5,343

  

  

  

  

  

  

 

5,343

Balance at March 28, 2020

$

61,102

$

211,724

  

$

998,996

$

(11,110)

  

$

11,570

  

$

1,272,282

See notes to consolidated condensed financial statements.

5

Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

Three Months Ended

March 27,

March 28,

    

2021

    

2020

    

CASH FLOWS FROM OPERATING ACTIVITIES:

  

Net earnings

$

104,251

    

$

40,570

Adjustments to reconcile net earnings to net cash from operating activities:

  

Depreciation

 

18,733

 

15,717

Amortization of intangibles

 

3,998

 

1,571

Expense associated with share-based and grant compensation arrangements

 

2,981

 

1,444

Deferred income taxes

 

142

 

286

Unrealized (gain) loss on investments and other

 

(1,754)

 

3,173

Equity in earnings of investee

630

Net gain on disposition of assets

 

(532)

 

(285)

Changes in:

  

Accounts receivable

 

(253,323)

 

(94,253)

Inventories

 

(207,768)

 

(25,783)

Accounts payable and cash overdraft

 

121,892

 

20,047

Accrued liabilities and other

 

14,090

 

(8,648)

NET CASH USED IN OPERATING ACTIVITIES

 

(196,660)

 

(46,161)

CASH FLOWS FROM INVESTING ACTIVITIES:

  

Purchases of property, plant and equipment

 

(34,656)

 

(27,286)

Proceeds from sale of property, plant and equipment

 

5,062

 

409

Acquisitions and purchases of non-controlling interest, net of cash received

 

(261,133)

 

(18,487)

Purchases of investments

 

(8,738)

 

(14,052)

Proceeds from sale of investments

 

3,381

 

11,260

Other

 

(414)

 

(54)

NET CASH USED IN INVESTING ACTIVITIES

 

(296,498)

 

(48,210)

CASH FLOWS FROM FINANCING ACTIVITIES:

  

Borrowings under revolving credit facilities

 

236,280

 

6,759

Repayments under revolving credit facilities

 

(121,570)

 

(6,498)

Contingent consideration payments and other

(627)

(3,074)

Proceeds from issuance of common stock

 

363

 

319

Dividends paid to shareholders

 

(9,274)

 

(7,730)

Distributions to noncontrolling interest

(2,914)

(299)

Repurchase of common stock

 

 

(29,212)

Other

 

(331)

 

12

NET CASH FROM (USED IN) FINANCING ACTIVITIES

 

101,927

 

(39,723)

Effect of exchange rate changes on cash

 

(349)

 

(1,719)

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

(391,580)

 

(135,813)

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

 

436,608

 

168,666

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

$

45,028

$

32,853

RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:

Cash and cash equivalents, beginning of period

$

436,507

$

168,336

Restricted cash, beginning of period

101

330

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

$

436,608

$

168,666

Cash and cash equivalents, end of period

$

44,399

$

32,129

Restricted cash, end of period

629

724

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

$

45,028

$

32,853

SUPPLEMENTAL INFORMATION:

  

Interest paid

$

2,694

$

374

Income taxes paid

 

249

 

2,307

NON-CASH FINANCING ACTIVITIES:

Common stock issued under deferred compensation plans

 

5,359

 

4,900

See notes to consolidated condensed financial statements.

6

Table of Contents

UFP INDUSTRIES, INC.

NOTES TO UNAUDITED

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A.       BASIS OF PRESENTATION

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

In our opinion, the Financial Statements contain all material adjustments necessary to present fairly our consolidated financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. These Financial Statements should be read in conjunction with the annual consolidated financial statements, and footnotes thereto, included in our Annual Report to Shareholders on Form 10-K for the fiscal year ended December 26, 2020.

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

B.       FAIR VALUE

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

March 27, 2021

March 28, 2020

Quoted

Prices with

Quoted

Prices with

Prices in

Other

Prices with

Prices in

Other

Prices with

Active

Observable

Unobservable

Active

Observable

Unobservable

Markets

Inputs

Inputs

Markets

Inputs

Inputs

    

(Level 1)

    

(Level 2)

    

(Level 3)

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Total

Money market funds

$

19

    

$

1,127

$

    

$

1,146

    

$

29,561

    

$

837

$

    

$

30,398

Fixed income funds

 

244

 

16,264

 

 

16,508

 

237

 

15,124

 

 

15,361

Equity securities

 

18,496

 

 

 

18,496

 

9,089

 

 

 

9,089

Alternative investments

2,126

2,126

1,960

1,960

Mutual funds:

  

 

  

  

 

Domestic stock funds

 

9,388

 

 

 

9,388

 

5,204

 

 

 

5,204

International stock funds

 

1,395

 

 

 

1,395

 

947

 

 

 

947

Target funds

 

21

 

 

 

21

 

242

 

 

 

242

Bond funds

 

145

 

 

 

145

 

222

 

 

 

222

Alternative funds

496

496

921

921

Total mutual funds

 

11,445

 

 

 

11,445

 

7,536

 

 

 

7,536

Total

$

30,204

$

17,391

$

2,126

$

49,721

$

46,423

$

15,961

$

1,960

$

64,344

Assets at fair value

$

30,204

$

17,391

$

2,126

 

$

49,721

$

46,423

$

15,961

$

1,960

 

$

64,344

7

Table of Contents

UFP INDUSTRIES, INC.

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

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

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

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

March 27, 2021

March 28, 2020

Unrealized

Unrealized

    

Cost

    

Gain/(Loss)

    

Fair Value

    

Cost

    

Gain/(Loss)

    

Fair Value

Fixed Income

$

15,867

    

$

642

  

$

16,509

$

15,257

    

$

104

  

$

15,361

Equity

 

14,664

 

3,832

  

 

18,496

 

9,690

 

(601)

  

 

9,089

Mutual Funds

8,769

2,049