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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 June 26, 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 June 26, 2021

Common stock, $1 par value

61,850,733

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 June 26, 2021, December 26, 2020 and June 27, 2020

3

Condensed Consolidated Statements of Earnings and Comprehensive Income for the Three and Six Months Ended June 26, 2021 and June 27, 2020

4

Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended June 26, 2021 and June 27, 2020

5

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 26, 2021 and June 27, 2020

7

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

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

18

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

34

Item 4.

Controls and Procedures

34

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings – NONE

Item 1A.

Risk Factors - NONE

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 3.

Defaults upon Senior Securities – NONE

Item 4.

Mine Safety Disclosures – NONE

Item 5.

Other Information – NONE

35

Item 6.

Exhibits

35

2

Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share data)

June 26,

December 26,

June 27,

    

2021

    

2020

    

2020

ASSETS

  

  

CURRENT ASSETS:

  

  

Cash and cash equivalents

$

44,286

    

$

436,507

  

$

200,546

Restricted cash

 

629

 

101

  

 

724

Investments

 

33,827

 

24,308

  

 

19,195

Accounts receivable, net

 

980,571

 

470,504

  

 

522,930

Inventories:

  

  

Raw materials

 

540,289

 

316,481

  

 

244,073

Finished goods

 

486,199

 

250,813

  

 

215,351

Total inventories

 

1,026,488

 

567,294

  

 

459,424

Refundable income taxes

 

 

5,836

  

 

Other current assets

 

36,699

 

33,812

  

 

33,786

TOTAL CURRENT ASSETS

 

2,122,500

 

1,538,362

 

1,236,605

DEFERRED INCOME TAXES

 

2,362

 

2,413

  

 

2,058

RESTRICTED INVESTMENTS

18,896

 

17,565

  

 

17,162

RIGHT OF USE ASSETS

97,597

77,245

77,039

OTHER ASSETS

 

29,631

 

20,298

  

 

24,205

GOODWILL

 

318,108

 

252,193

  

 

247,482

INDEFINITE-LIVED INTANGIBLE ASSETS

 

7,401

 

7,401

  

 

7,350

OTHER INTANGIBLE ASSETS, NET

 

98,601

 

72,252

  

 

45,131

PROPERTY, PLANT AND EQUIPMENT:

  

  

Property, plant and equipment

1,120,381

974,497

922,427

Less accumulated depreciation and amortization

 

(587,194)

 

(557,335)

  

 

(520,851)

PROPERTY, PLANT AND EQUIPMENT, NET

533,187

417,162

401,576

TOTAL ASSETS

3,228,283

2,404,891

2,058,608

LIABILITIES AND SHAREHOLDERS’ EQUITY

  

  

CURRENT LIABILITIES:

  

  

Cash overdraft

$

34,229

$

  

$

Accounts payable

359,484

211,518

  

199,338

Accrued liabilities:

  

  

Compensation and benefits

 

213,655

 

166,478

  

 

129,290

Income taxes

11,188

25,109

Other

 

90,153

 

69,104

  

 

63,278

Current portion of lease liability

22,511

16,549

15,411

Current portion of long-term debt

 

97

 

100

  

 

2,786

TOTAL CURRENT LIABILITIES

 

731,317

 

463,749

  

 

435,212

LONG-TERM DEBT

 

571,856

 

311,607

  

 

161,057

LEASE LIABILITY

78,564

61,509

61,674

DEFERRED INCOME TAXES

 

34,983

 

25,266

  

 

22,685

OTHER LIABILITIES

 

52,000

 

59,608

  

 

38,655

TOTAL LIABILITIES

 

1,468,720

 

921,739

  

 

719,283

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, 61,850,733, 61,205,780 and 61,169,181

 

61,851

 

61,206

  

 

61,169

Additional paid-in capital

 

235,309

 

218,224

  

 

213,809

Retained earnings

 

1,440,833

 

1,182,680

  

 

1,057,817

Accumulated other comprehensive loss

 

(1,464)

 

(1,794)

  

 

(8,396)

Total controlling interest shareholders’ equity

 

1,736,529

 

1,460,316

  

 

1,324,399

Noncontrolling interest

 

23,034

 

22,836

  

 

14,926

TOTAL SHAREHOLDERS’ EQUITY

 

1,759,563

 

1,483,152

  

 

1,339,325

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

3,228,283

$

2,404,891

  

$

2,058,608

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

Six Months Ended

June 26,

June 27,

June 26,

June 27,

    

2021

    

2020

    

2021

    

2020

    

NET SALES

$

2,700,541

    

$

1,242,001

  

$

4,525,545

    

$

2,274,063

    

COST OF GOODS SOLD

 

2,279,247

 

1,037,070

  

 

3,817,697

 

1,901,896

GROSS PROFIT

 

421,294

 

204,931

  

 

707,848

 

372,167

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

184,539

 

113,781

  

 

334,637

 

223,121

OTHER GAINS, NET

(180)

(1,209)

(1,211)

(1,944)

EARNINGS FROM OPERATIONS

 

236,935

 

92,359

  

 

374,422

 

150,990

INTEREST EXPENSE

 

3,899

 

1,898

  

 

7,050

 

3,805

INTEREST AND INVESTMENT INCOME

 

(1,689)

 

(2,890)

  

 

(3,985)

 

(58)

EQUITY IN EARNINGS OF INVESTEE

835

1,465

 

3,045

 

(992)

  

 

4,530

 

3,747

EARNINGS BEFORE INCOME TAXES

 

233,890

 

93,351

  

 

369,892

 

147,243

INCOME TAXES

 

58,530

 

23,657

  

 

90,281

 

36,979

NET EARNINGS

 

175,360

 

69,694

  

 

279,611

 

110,264

LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

(1,978)

 

(3,231)

  

 

(2,918)

 

(3,642)

NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST

$

173,382

$

66,463

  

$

276,693

$

106,622

EARNINGS PER SHARE – BASIC

$

2.79

$

1.08

  

$

4.46

$

1.73

EARNINGS PER SHARE – DILUTED

$

2.78

$

1.08

  

$

4.45

$

1.73

OTHER COMPREHENSIVE INCOME:

NET EARNINGS

 

175,360

 

69,694

  

 

279,611

 

110,264

OTHER COMPREHENSIVE GAIN (LOSS)

 

2,720

 

2,839

  

 

524

 

(5,717)

COMPREHENSIVE INCOME

 

178,080

 

72,533

  

 

280,135

 

104,547

LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

(2,698)

 

(3,356)

  

 

(3,112)

 

(1,432)

COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST

$

175,382

$

69,177

  

$

277,023

$

103,115

See notes to consolidated condensed financial statements.

4

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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 on 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)

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 on March 27, 2021

$

61,838

$

231,111

  

$

1,276,722

$

(3,464)

  

$

20,336

  

$

1,586,543

Net earnings

173,382

1,978

 

175,360

Foreign currency translation adjustment

1,759

720

 

2,479

Unrealized gain on debt securities

241

 

241

Cash dividends - $0.15 per share - quarterly

(9,276)

 

(9,276)

Issuance of 9,282 shares under employee stock plans

 

9

564

 

573

Net forfeitures of 5,718 shares under stock grant programs

 

(6)

(224)

5

 

(225)

Issuance of 8,913 shares under deferred compensation plans

 

10

(10)

 

Expense associated with share-based compensation arrangements

2,728

 

2,728

Accrued expense under deferred compensation plans

1,140

 

1,140

Balance on June 26, 2021

$

61,851

$

235,309

  

$

1,440,833

$

(1,464)

  

$

23,034

  

$

1,759,563

5

Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY, CONTINUED

(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 on 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 on March 28, 2020

$

61,102

$

211,724

  

$

998,996

$

(11,110)

  

$

11,570

  

$

1,272,282

Net earnings

66,463

3,231

  

 

69,694

Foreign currency translation adjustment

2,026

125

  

 

2,151

Unrealized gain on debt securities

688

 

688

Cash dividends - $0.125 per share - quarterly

(7,644)

 

(7,644)

Issuance of 9,714 shares under employee stock plans

10

367

 

377

Net issuance of 42,880 shares under stock grant programs

 

43

(174)

2

  

 

(129)

Issuance of 14,106 shares under deferred compensation plans

 

14

(14)

  

 

Expense associated with share-based compensation arrangements

 

824

  

 

824

Accrued expense under deferred compensation plans

1,082

 

1,082

Balance on June 27, 2020

$

61,169

$

213,809

  

$

1,057,817

$

(8,396)

  

$

14,926

  

$

1,339,325

See notes to consolidated condensed financial statements.

6

Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

Six Months Ended

June 26,

June 27,

    

2021

    

2020

    

CASH FLOWS FROM OPERATING ACTIVITIES:

  

Net earnings

$

279,611

    

$

110,264

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

  

Depreciation

 

38,342

31,330

Amortization of intangibles

 

7,193

3,129

Expense associated with share-based and grant compensation arrangements

 

5,742

2,303

Deferred income taxes

 

177

290

Unrealized (gain) loss on investments and other

 

(2,784)

473

Equity in earnings of investee

1,465

Net gain on sale and disposition of assets

 

(1,577)

(271)

Changes in:

Accounts receivable

 

(336,094)

(155,554)

Inventories

 

(329,577)

25,983

Accounts payable and cash overdraft

 

143,018

57,017

Accrued liabilities and other

 

78,751

72,246

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

 

(115,733)

 

147,210

CASH FLOWS FROM INVESTING ACTIVITIES:

  

Purchases of property, plant and equipment

 

(79,028)

(46,730)

Proceeds from sale of property, plant and equipment

 

6,673

644

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

 

(433,239)

(18,689)

Purchases of investments

 

(14,581)

(20,094)

Proceeds from sale of investments

 

6,885

18,339

Other

 

(708)

318

NET CASH USED IN INVESTING ACTIVITIES

 

(513,998)

 

(66,212)

CASH FLOWS FROM FINANCING ACTIVITIES:

  

Borrowings under revolving credit facilities

 

849,944

6,759

Repayments under revolving credit facilities

 

(589,695)

(6,498)

Contingent consideration payments and other

(1,464)

(3,077)

Proceeds from issuance of common stock

 

936

697

Dividends paid to shareholders

 

(18,550)

(15,374)

Distributions to noncontrolling interest

(2,914)

(299)

Repurchase of common stock

 

(29,212)

Other

 

(331)

32

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

 

237,926

 

(46,972)

Effect of exchange rate changes on cash

 

112

 

(1,422)

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

(391,693)

 

32,604

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

 

436,608

 

168,666

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

$

44,915

$

201,270

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

$

44,286

$

200,546

Restricted cash, end of period

629

724

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

$

44,915

$

201,270

SUPPLEMENTAL INFORMATION:

  

Interest paid

$

7,107

$

3,793

Income taxes paid

 

73,174

 

1,778

NON-CASH FINANCING ACTIVITIES:

Common stock issued under deferred compensation plans

 

6,064

 

5,538

See notes to consolidated condensed financial statements.

7

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 June 27, 2020 balances in the accompanying unaudited condensed consolidated balance sheets.

8

Table of Contents

UFP INDUSTRIES, INC.

B.       FAIR VALUE

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

June 26, 2021

June 27, 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

    

$

2,840

$

    

$

2,859

    

$

57

    

$

3,084

$

    

$

3,141

Fixed income funds

 

244

 

17,610

 

 

17,854

 

247

 

16,209

 

 

16,456

Treasury securities

307

307

Equity securities

 

19,014

 

 

 

19,014

 

9,958

 

 

 

9,958

Alternative investments

3,304

3,304

1,836

1,836

Mutual funds:

  

 

  

  

 

Domestic stock funds

 

10,037

 

 

 

10,037

 

6,359

 

 

 

6,359

International stock funds

 

1,463

 

 

 

1,463

 

1,124

 

 

 

1,124

Target funds

 

22

 

 

 

22

 

270

 

 

 

270

Bond funds

 

145

 

 

 

145

 

232

 

 

 

232

Alternative funds

501

501

332

332

Total mutual funds

 

12,168

 

 

 

12,168

 

8,317

 

 

 

8,317

Total

$

31,752

$

20,450

$

3,304

$

55,506

$

18,579

$

19,293

$

1,836

$

39,708

Assets at fair value

$

31,752

$

20,450

$

3,304

 

$

55,506

$

18,579

$

19,293

$

1,836

 

$

39,708

From the assets measured at fair value as of June 26, 2021, listed in the table above, $33.7 million of mutual funds, equity securities, and alternative investments are held in Investments, $0.1 million of money market funds are held in Cash and Cash Equivalents, $0.7 million of money market and mutual funds are held in Other Assets for our deferred compensation plan, and $18.2 million of fixed income funds and $2.8 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 $51.7 million as of June 26, 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.

9

Table of Contents

UFP INDUSTRIES, INC.

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

June 26, 2021

June 27, 2020

Unrealized

Unrealized

  

Cost

    

Gain

   

Fair Value

Cost

    

Gain/(Loss)

Fair Value

Fixed Income

$

17,066

    

$

788

  

$

17,854

$

15,497

    

$

959

  

$

16,456

Equity

 

14,760

 

4,254

  

 

19,014

 

9,107

 

850

  

 

9,957

Mutual Funds

8,769

2,740

  

11,509

6,553

849

  

7,402

Alternative Investments

2,953

351

  

3,304

1,857

(22)

  

1,835

Total

$

43,548

$

8,133

  

$

51,681

$

33,014

$

2,636

  

$

35,650

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 $8.1 million. Carrying amounts above are recorded in the investments and restricted investments line items within the balance sheet as of June 26, 2021 and June 27, 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.

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.

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UFP INDUSTRIES, INC.

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):