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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.

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UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME

(Unaudited)

(in thousands, except per share data)

Three Months Ended

March 27,

March 28,

2021

    

2020

    

NET SALES

$

1,825,004

    

$

1,032,062

    

COST OF GOODS SOLD

 

1,538,450

 

864,826

GROSS PROFIT

 

286,554

 

167,236

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

150,098

 

109,339

OTHER LOSSES (GAINS), NET

(1,031)

(735)

EARNINGS FROM OPERATIONS

 

137,487

 

58,632

INTEREST EXPENSE

 

3,151

 

1,908

INTEREST AND INVESTMENT (INCOME) LOSS

 

(2,296)

 

2,832

EQUITY IN EARNINGS OF INVESTEE

630

 

1,485

 

4,740

EARNINGS BEFORE INCOME TAXES

 

136,002

 

53,892

INCOME TAXES

 

31,751

 

13,322

NET EARNINGS

 

104,251

 

40,570

LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

(940)

 

(411)

NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST

$

103,311

$

40,159

EARNINGS PER SHARE – BASIC

$

1.67

$

0.65

EARNINGS PER SHARE – DILUTED

$

1.67

$

0.65

OTHER COMPREHENSIVE INCOME:

NET EARNINGS

 

104,251

 

40,570

OTHER COMPREHENSIVE GAIN (LOSS)

 

(2,196)

 

(8,556)

COMPREHENSIVE INCOME

 

102,055

 

32,014

LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

(414)

 

1,924

COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST

$

101,641

$

33,938

See notes to consolidated condensed financial statements.

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UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

(in thousands, except share and per share data)

Controlling Interest Shareholders’ Equity

Accumulated

Additional

Other

Common

Paid-In

Retained

Comprehensive

Noncontrolling

    

Stock

    

Capital

    

Earnings

    

Earnings

    

Interest

    

Total

Balance at December 26, 2020

$

61,206

$

218,224

$

1,182,680

$

(1,794)

$

22,836

  

$

1,483,152

Net earnings

  

  

 

103,311

 

  

 

940

  

 

104,251

Foreign currency translation adjustment

  

  

  

 

(374)

 

(526)

  

 

(900)

Unrealized loss on debt securities

  

  

  

 

(1,296)

 

  

 

(1,296)

Distributions to noncontrolling interest

  

  

  

  

 

(2,914)

 

(2,914)

Additional purchase of noncontrolling interest

Cash dividends - $0.15 per share - quarterly

(9,274)

 

  

 

  

 

(9,274)

Issuance of 5,816 shares under employee stock purchase plan

 

6

357

  

  

  

 

363

Net issuance of 536,970 shares under stock grant programs

 

537

3,888

5

  

  

  

 

4,430

Issuance of 89,690 shares under deferred compensation plans

 

89

(89)

  

  

  

 

Expense associated with share-based compensation arrangements

2,936

 

  

 

  

 

2,936

Accrued expense under deferred compensation plans

5,795

  

  

  

  

  

5,795

Balance at March 27, 2021

$

61,838

$

231,111

  

$

1,276,722

$

(3,464)

  

$

20,336

  

$

1,586,543

(in thousands, except share and per share data)

Controlling Interest Shareholders’ Equity

Accumulated

Additional

Other

Common

Paid-In

Retained

Comprehensive

Noncontrolling

    

Stock

    

Capital

    

Earnings

    

Earnings

    

Interest

    

Total

Balance at December 28, 2019

$

61,409

$

192,173

  

$

995,022

$

(4,889)

  

$

14,018

  

$

1,257,733

Net earnings

  

  

 

40,159

 

  

 

411

  

 

40,570

Foreign currency translation adjustment

  

  

  

 

(5,951)

 

(2,335)

  

 

(8,286)

Unrealized loss on debt securities

  

  

  

 

(270)

 

  

 

(270)

Distributions to noncontrolling interest

  

  

  

  

 

(299)

 

(299)

Additional purchase of noncontrolling interest

130

(225)

 

(95)

Cash dividends - $0.125 per share - quarterly

 

  

  

 

(7,730)

 

  

 

  

  

 

(7,730)

Issuance of 10,549 shares under employee stock purchase plan

 

10

 

309

  

  

  

  

 

319

Net issuance of 350,124 shares under stock grant programs

 

350

 

12,454

  

1

  

  

  

 

12,805

Issuance of 89,616 shares under deferred compensation plans

89

 

(89)

  

  

  

Repurchase of 756,397 shares

(756)

 

 

(28,456)

  

  

 

  

 

(29,212)

Expense associated with share-based compensation arrangements

  

 

1,404

 

  

 

  

 

  

1,404

Accrued expense under deferred compensation plans

  

 

5,343

  

  

  

  

  

  

 

5,343

Balance at March 28, 2020

$

61,102

$

211,724

  

$

998,996

$

(11,110)

  

$

11,570

  

$

1,272,282

See notes to consolidated condensed financial statements.

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UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

Three Months Ended

March 27,

March 28,

    

2021

    

2020

    

CASH FLOWS FROM OPERATING ACTIVITIES:

  

Net earnings

$

104,251

    

$

40,570

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

  

Depreciation

 

18,733

 

15,717

Amortization of intangibles

 

3,998

 

1,571

Expense associated with share-based and grant compensation arrangements

 

2,981

 

1,444

Deferred income taxes

 

142

 

286

Unrealized (gain) loss on investments and other

 

(1,754)

 

3,173

Equity in earnings of investee

630

Net gain on disposition of assets

 

(532)

 

(285)

Changes in:

  

Accounts receivable

 

(253,323)

 

(94,253)

Inventories

 

(207,768)

 

(25,783)

Accounts payable and cash overdraft

 

121,892

 

20,047

Accrued liabilities and other

 

14,090

 

(8,648)

NET CASH USED IN OPERATING ACTIVITIES

 

(196,660)

 

(46,161)

CASH FLOWS FROM INVESTING ACTIVITIES:

  

Purchases of property, plant and equipment

 

(34,656)

 

(27,286)

Proceeds from sale of property, plant and equipment

 

5,062

 

409

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

 

(261,133)

 

(18,487)

Purchases of investments

 

(8,738)

 

(14,052)

Proceeds from sale of investments

 

3,381

 

11,260

Other

 

(414)

 

(54)

NET CASH USED IN INVESTING ACTIVITIES

 

(296,498)

 

(48,210)

CASH FLOWS FROM FINANCING ACTIVITIES:

  

Borrowings under revolving credit facilities

 

236,280

 

6,759

Repayments under revolving credit facilities

 

(121,570)

 

(6,498)

Contingent consideration payments and other

(627)

(3,074)

Proceeds from issuance of common stock

 

363

 

319

Dividends paid to shareholders

 

(9,274)

 

(7,730)

Distributions to noncontrolling interest

(2,914)

(299)

Repurchase of common stock

 

 

(29,212)

Other

 

(331)

 

12

NET CASH FROM (USED IN) FINANCING ACTIVITIES

 

101,927

 

(39,723)

Effect of exchange rate changes on cash

 

(349)

 

(1,719)

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

(391,580)

 

(135,813)

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

 

436,608

 

168,666

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

$

45,028

$

32,853

RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:

Cash and cash equivalents, beginning of period

$

436,507

$

168,336

Restricted cash, beginning of period

101

330

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

$

436,608

$

168,666

Cash and cash equivalents, end of period

$

44,399

$

32,129

Restricted cash, end of period

629

724

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

$

45,028

$

32,853

SUPPLEMENTAL INFORMATION:

  

Interest paid

$

2,694

$

374

Income taxes paid

 

249

 

2,307

NON-CASH FINANCING ACTIVITIES:

Common stock issued under deferred compensation plans

 

5,359

 

4,900

See notes to consolidated condensed financial statements.

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UFP INDUSTRIES, INC.

NOTES TO UNAUDITED

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A.       BASIS OF PRESENTATION

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

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

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

B.       FAIR VALUE

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

March 27, 2021

March 28, 2020

Quoted

Prices with

Quoted

Prices with

Prices in

Other

Prices with

Prices in

Other

Prices with

Active

Observable

Unobservable

Active

Observable

Unobservable

Markets

Inputs

Inputs

Markets

Inputs

Inputs

    

(Level 1)

    

(Level 2)

    

(Level 3)

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Total

Money market funds

$

19

    

$

1,127

$

    

$

1,146

    

$

29,561

    

$

837

$

    

$

30,398

Fixed income funds

 

244

 

16,264

 

 

16,508

 

237

 

15,124

 

 

15,361

Equity securities

 

18,496

 

 

 

18,496

 

9,089

 

 

 

9,089

Alternative investments

2,126

2,126

1,960

1,960

Mutual funds:

  

 

  

  

 

Domestic stock funds

 

9,388

 

 

 

9,388

 

5,204

 

 

 

5,204

International stock funds

 

1,395

 

 

 

1,395

 

947

 

 

 

947

Target funds

 

21

 

 

 

21

 

242

 

 

 

242

Bond funds

 

145

 

 

 

145

 

222

 

 

 

222

Alternative funds

496

496

921

921

Total mutual funds

 

11,445

 

 

 

11,445

 

7,536

 

 

 

7,536

Total

$

30,204

$

17,391

$

2,126

$

49,721

$

46,423

$

15,961

$

1,960

$

64,344

Assets at fair value

$

30,204

$

17,391

$

2,126

 

$

49,721

$

46,423

$

15,961

$

1,960

 

$

64,344

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UFP INDUSTRIES, INC.

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

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

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

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

March 27, 2021

March 28, 2020

Unrealized

Unrealized

    

Cost

    

Gain/(Loss)

    

Fair Value

    

Cost

    

Gain/(Loss)

    

Fair Value

Fixed Income

$

15,867

    

$

642

  

$

16,509

$

15,257

    

$

104

  

$

15,361

Equity

 

14,664

 

3,832

  

 

18,496

 

9,690

 

(601)

  

 

9,089

Mutual Funds

8,769

2,049

  

10,818

7,298

(569)

  

6,729

Alternative Investments

1,929

197

  

2,126

1,834

126

  

1,960

Total

$

41,229

$

6,720

  

$

47,949

$

34,079

$

(940)

  

$

33,139

Our fixed income investments consist of a blend of US Government and Agency bonds and investment grade corporate bonds with varying maturities. Our equity investments consist of small, mid, and large cap growth and value funds, as well as international equity. Our 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 was $6.7 million. Carrying amounts above are recorded in the investments and restricted investments line items within the balance sheet as of March 27, 2021 and March 28, 2020.

C.       REVENUE RECOGNITION

Within the three 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 3rd party. Installation revenue is recognized upon completion. If the Company uses a 3rd party for installation, the party will act as an agent to the Company until completion of the installation. Installation revenue represents an immaterial share of the Company’s total sales.

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UFP INDUSTRIES, INC.

The Company utilizes rebates, credits, discounts and/or cash-based incentives with certain customers which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized. We believe that there will not be significant changes to our estimates of variable consideration. The allocation of these costs are applied at the invoice level and recognized in conjunction with 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 related to the total estimated costs. Under over time accounting using the units of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual units produced related to the total number of units. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent.

Our construction contracts are generally entered into with a fixed price and completion of the projects can range from 6 to 18 months in duration. Therefore, our operating results are impacted by, among many other things, labor rates 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,

    

2021

2020

% Change

FOB Shipping Point Revenue

$

1,797,399

$

999,262

 

79.9%

Construction Contract Revenue

 

27,605

32,800

 

(15.8)%

Total Net Sales

$

1,825,004

$

1,032,062

 

76.8%

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

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UFP INDUSTRIES, INC.

D.       EARNINGS PER SHARE

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

Three Months Ended

March 27,

    

March 28,

    

2021

2020

Numerator:

  

 

  

 

Net earnings attributable to controlling interest

$

103,311

$

40,159

Adjustment for earnings allocated to non-vested restricted common stock

 

(3,175)

 

(1,059)

Net earnings for calculating EPS

$

100,136

$

39,100

Denominator:

 

  

 

  

Weighted average shares outstanding

 

61,889

 

61,842

Adjustment for non-vested restricted common stock

 

(1,902)

 

(1,630)

Shares for calculating basic EPS

 

59,987

 

60,212

Effect of dilutive restricted common stock

 

28

 

18

Shares for calculating diluted EPS

 

60,015

 

60,230

Net earnings per share:

 

  

 

  

Basic

$

1.67

$

0.65

Diluted

$

1.67

$

0.65

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 no discount rate, have been established to cover remediation activities at wood preservation facilities in Stockertown, PA; Elizabeth City, NC; and Auburndale, FL. In addition, a reserve was established for our facility in Thornton, CA to remove certain lead containing materials which existed on the property at the time of purchase.

On a consolidated basis, we have reserved approximately $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, 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, we had outstanding purchase commitments on commenced capital projects of approximately $41.3 million.

We provide a variety of warranties for products we manufacture. Historically, warranty claims have not been material. We also distribute products manufactured by other companies, some of which are no longer in business. While we do not warrant these products, we have received claims as a distributor of these products when the manufacturer no longer exists or has the ability to pay. Historically, these costs have not had a material effect on our consolidated financial statements.

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UFP INDUSTRIES, INC.

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, we had approximately $27.0 million outstanding payment and performance bonds for open projects. We had approximately $4.0 million in payment and performance bonds outstanding for completed projects which are still under warranty.

On March 27, 2021, we had outstanding letters of credit totaling $50.9 million, primarily related to certain insurance contracts and industrial development revenue bonds described further below.

In lieu of cash deposits, we provide irrevocable letters of credit in favor of our insurers to guarantee our performance under certain insurance contracts. As of March 27, 2021, we have irrevocable letters of credit outstanding totaling approximately $43.8 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 2021 which would require us to recognize a liability on our balance sheet.

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UFP INDUSTRIES, INC.

F.       BUSINESS COMBINATIONS

We completed the following acquisitions in 2021 and since the end of March 2020, which were accounted for using the purchase method in thousands unless otherwise noted:

Net 

Company

Acquisition 

Intangible 

Tangible 

Operating

Name

Date

Purchase Price

Assets

Assets

Segment

March 1, 2021

$4,724
cash paid for 100% asset purchase and estimated contingent consideration

$

4,176

$

548

Other

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).

December 28, 2020

$258,770
cash paid for 100% stock purchase

$

82,546

$

176,224

Retail/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 five pressure-treating facilities in the Southeastern U.S. PalletOne and its affiliates had 2019 and 2020 sales of $525 million and $698 million, respectively.

November 10, 2020

$27,274
cash paid for 100% asset purchase and estimated contingent consideration

$

17,894

$

9,380

Construction

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.

October 1, 2020

$7,936
cash paid for 100% asset purchase and estimated contingent consideration

$

7,222

$

714

Retail

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.

September 30, 2020

$4,465
cash paid for 50% stock purchase and estimated contingent consideration

$

4,607

$

(142)

Other

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 eight locations in Italy. These locations generated annual sales of approximately $14 million.

12

Table of Contents

UFP INDUSTRIES, INC.

Net 

Company

Acquisition 

Intangible 

Tangible 

Operating

Name

Date

Purchase Price

Assets

Assets

Segment

July 14, 2020

$19,136
cash paid for 100% asset purchase and estimated contingent consideration

$

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.

G.       SEGMENT REPORTING

The Company operates manufacturing, treating and distribution facilities internationally, but primarily in the United States. The business segments align with the following markets: UFP Retail Solutions, UFP Construction and UFP Industrial. The Company manages the operations of its 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’s International segment, which comprises our Mexico, Canada, and Australia operations and sales and buying offices in other parts of the world.

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

The “Corporate” column includes purchasing, transportation and administrative functions that serve our operating segments. Operating results of Corporate primarily consists of over (under) allocated costs. The operating results of UFP Real Estate, Inc., which owns and leases real estate, and UFP Transportation Ltd., which owns and leases transportation equipment, are also included in the Corporate column. An inter-company lease charge is assessed to our operating segments for the use of these assets at fair market value rates. 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:

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