UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September ~~25, 2021~~24, 2022


☐	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 September ~~25, 2021~~24, 2022
	Common stock, $1 par value		~~61,887,770~~61,637,514


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	3

		Condensed Consolidated Balance Sheets at September 24, 2022, December 25, 2021 ~~December 26, 2020~~ and September ~~26, 2020~~25, 2021	3

		Condensed Consolidated Statements of Earnings and Comprehensive Income for the Three and Nine Months Ended September ~~25, 2021~~24, 2022 and September ~~26, 2020~~25, 2021	4

		Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September ~~25, 2021~~24, 2022 and September ~~26, 2020~~25, 2021	5

		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September ~~25, 2021~~24, 2022 and September ~~26, 2020~~25, 2021	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	3436

	Item 4.	Controls and Procedures	3436

PART II.		OTHER INFORMATION

	Item 1.	Legal Proceedings – NONE

	Item 1A.	Risk Factors - NONE	3537

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3537

	Item 3.	Defaults upon Senior Securities – NONE

	Item 4.	Mine Safety Disclosures – NONE

	Item 5.	Other Information – NONE	3537

	Item 6.	Exhibits	3537

Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share data)

September 25,

December 26,

September 26,


2021

2020

2020

ASSETS





CURRENT ASSETS:





Cash and cash equivalents

$
138,637

$
436,507

$
346,154

Restricted cash

17,592

101


724

Investments

33,723

24,308


20,530

Accounts receivable, net

783,959

470,504


583,079

Inventories:





Raw materials

368,185

316,481


286,418

Finished goods

532,480

250,813


242,316

Total inventories

900,665

567,294


528,734

Refundable income taxes

14,134

5,836


—

Other current assets

34,040

33,812


32,888

TOTAL CURRENT ASSETS

1,922,750

1,538,362

1,512,109

DEFERRED INCOME TAXES

2,330

2,413


2,070

RESTRICTED INVESTMENTS

18,925

17,565


17,327

RIGHT OF USE ASSETS

94,481

77,245

77,412

OTHER ASSETS

29,168

20,298


24,216

GOODWILL

292,318

252,193


245,925

INDEFINITE-LIVED INTANGIBLE ASSETS

7,380

7,401


7,361

OTHER INTANGIBLE ASSETS, NET

93,984

72,252


58,205

PROPERTY, PLANT AND EQUIPMENT:





Property, plant and equipment

1,156,070

974,497

935,639

Less accumulated depreciation and amortization

(603,159)

(557,335)


(529,644)

PROPERTY, PLANT AND EQUIPMENT, NET

552,911

417,162

405,995

TOTAL ASSETS

3,014,247

2,404,891

2,350,620

LIABILITIES AND SHAREHOLDERS’ EQUITY





CURRENT LIABILITIES:





Cash overdraft

$
10,812

$
—

$
—

Accounts payable

292,933

211,518


231,111

Accrued liabilities:





Compensation and benefits

249,242

166,478


171,472

Income taxes

—

—

3,024

Other

90,348

69,104


69,888

Current portion of lease liability

22,242

16,549

15,349

Current portion of long-term debt

93

100


2,760

TOTAL CURRENT LIABILITIES

665,670

463,749


493,604

LONG-TERM DEBT

310,119

311,607


311,267

LEASE LIABILITY

75,548

61,509

62,100

DEFERRED INCOME TAXES

39,198

25,266


22,478

OTHER LIABILITIES

46,238

59,608


47,367

TOTAL LIABILITIES

1,136,773

921,739


936,816

SHAREHOLDERS’ EQUITY:





Controlling interest shareholders’ equity:





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, 61,887,770, 61,205,780 and 61,186,636

61,888

61,206


61,187

Additional paid-in capital

239,563

218,224


216,002

Retained earnings

1,552,593

1,182,680


1,127,375

Accumulated other comprehensive loss

(3,278)

(1,794)


(6,974)

Total controlling interest shareholders’ equity

1,850,766

1,460,316


1,397,590

Noncontrolling interest

26,708

22,836


16,214

TOTAL SHAREHOLDERS’ EQUITY

1,877,474

1,483,152


1,413,804

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$
3,014,247

$
2,404,891

$
2,350,620


(in thousands, except share data)
	September 24,		December 25,		September 25,
	2022		2021		2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	449,135	$	286,662	$	138,637
Restricted cash		729		4,561		17,592
Investments		33,113		36,495		33,723
Accounts receivable, net		877,776		737,805		783,959
Inventories:
Raw materials		425,765		416,043		368,185
Finished goods		581,118		547,277		532,480
Total inventories		1,006,883		963,320		900,665
Refundable income taxes		28,771		4,806		14,134
Other current assets		39,956		39,827		34,040
TOTAL CURRENT ASSETS		2,436,363		2,073,476		1,922,750
DEFERRED INCOME TAXES		3,139		3,462		2,330
RESTRICTED INVESTMENTS		19,552		19,310		18,925
RIGHT OF USE ASSETS		101,001		96,703		94,481
OTHER ASSETS		94,090		31,876		29,168
GOODWILL		319,183		315,038		292,318
INDEFINITE-LIVED INTANGIBLE ASSETS		7,332		7,369		7,380
OTHER INTANGIBLE ASSETS, NET		113,880		109,017		93,984
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment		1,323,896		1,212,113		1,156,070
Less accumulated depreciation and amortization		(679,889)		(623,093)		(603,159)
PROPERTY, PLANT AND EQUIPMENT, NET		644,007		589,020		552,911
TOTAL ASSETS		3,738,547		3,245,271		3,014,247
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Cash overdraft	$	4,174	$	17,030	$	10,812
Accounts payable		323,404		319,125		292,933
Accrued liabilities:
Compensation and benefits		298,384		289,196		249,242
Other		111,596		84,853		90,348
Current portion of lease liability		23,767		23,155		22,242
Current portion of long-term debt		41,536		42,683		93
TOTAL CURRENT LIABILITIES		802,861		776,042		665,670
LONG-TERM DEBT		275,417		277,567		310,119
LEASE LIABILITY		80,903		76,632		75,548
DEFERRED INCOME TAXES		62,436		60,964		39,198
OTHER LIABILITIES		40,628		37,497		46,238
TOTAL LIABILITIES		1,262,245		1,228,702		1,136,773
TEMPORARY EQUITY:
Redeemable noncontrolling interest	$	7,563	$	—	$	—
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 160,000,000; issued and outstanding, 61,637,514, 61,901,851 and 61,887,770		61,638		61,902		61,888
Additional paid-in capital		284,025		243,995		239,563
Retained earnings		2,102,764		1,678,121		1,552,593
Accumulated other comprehensive loss		(11,348)		(5,405)		(3,278)
Total controlling interest shareholders’ equity		2,437,079		1,978,613		1,850,766
Noncontrolling interest		31,660		37,956		26,708
TOTAL SHAREHOLDERS’ EQUITY		2,468,739		2,016,569		1,877,474
TOTAL LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS’ EQUITY	$	3,738,547	$	3,245,271	$	3,014,247

See notes to consolidated condensed financial statements.

Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME

(Unaudited)


(in thousands, except per share data)
	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 25,		September 26,		September 25,		September 26,		September 24,		September 25,		September 24,		September 25,
	2021		2020		2021		2020		2022		2021		2022		2021
NET SALES	$	2,093,784	$	1,486,227	$	6,619,329	$	3,760,290	$	2,322,855	$	2,093,784	$	7,713,042	$	6,619,329
COST OF GOODS SOLD		1,766,229		1,245,153		5,583,926		3,147,049		1,872,679		1,766,229		6,281,051		5,583,926
GROSS PROFIT		327,555		241,074		1,035,403		613,241		450,176		327,555		1,431,991		1,035,403
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		169,467		134,649		504,104		357,770		214,327		169,467		649,015		504,104
OTHER GAINS, NET		(10,037)		(176)		(11,248)		(2,120)
OTHER (GAINS) LOSS, NET										(1,195)		(10,037)		1,341		(11,248)
EARNINGS FROM OPERATIONS		168,125		106,601		542,547		257,591		237,044		168,125		781,635		542,547
INTEREST EXPENSE		3,433		2,486		10,483		6,291		3,516		3,433		10,213		10,483
INTEREST AND INVESTMENT LOSS (INCOME)		371		(1,565)		(3,614)		(1,623)		1,658		371		6,905		(3,614)
EQUITY IN EARNINGS OF INVESTEE		946		—		2,411		—		1,208		946		2,740		2,411
		4,750		921		9,280		4,668		6,382		4,750		19,858		9,280
EARNINGS BEFORE INCOME TAXES		163,375		105,680		533,267		252,923		230,662		163,375		761,777		533,267
INCOME TAXES		37,628		26,819		127,909		63,798		58,561		37,628		188,692		127,909
NET EARNINGS		125,747		78,861		405,358		189,125		172,101		125,747		573,085		405,358
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(4,706)		(1,657)		(7,624)		(5,299)		(4,860)		(4,706)		(13,023)		(7,624)
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST	$	121,041	$	77,204	$	397,734	$	183,826	$	167,241	$	121,041	$	560,062	$	397,734

EARNINGS PER SHARE – BASIC	$	1.94	$	1.25	$	6.40	$	2.98	$	2.68	$	1.94	$	8.93	$	6.40
EARNINGS PER SHARE – DILUTED	$	1.94	$	1.25	$	6.38	$	2.98	$	2.66	$	1.94	$	8.89	$	6.38

OTHER COMPREHENSIVE INCOME:
NET EARNINGS		125,747		78,861		405,358		189,125		172,101		125,747		573,085		405,358
OTHER COMPREHENSIVE GAIN (LOSS)		(2,024)		1,687		(1,500)		(4,030)
OTHER COMPREHENSIVE LOSS										(4,477)		(2,024)		(5,676)		(1,500)
COMPREHENSIVE INCOME		123,723		80,548		403,858		185,095		167,624		123,723		567,409		403,858
LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		(4,496)		(1,922)		(7,608)		(3,354)		(4,273)		(4,496)		(13,290)		(7,608)
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST	$	119,227	$	78,626	$	396,250	$	181,741	$	163,351	$	119,227	$	554,119	$	396,250

See notes to consolidated condensed financial statements.

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 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
Net earnings

121,041

4,706

125,747
Foreign currency translation adjustment

(1,897)

(210)

(2,107)
Unrealized gain on debt securities

83

83
Distributions to noncontrolling interest

—
Additional purchase and adjustment of noncontrolling interest

(822)

(822)
Cash dividends - $0.15 per share - quarterly

(9,281)

(9,281)
Issuance of 10,008 shares under employee stock plans

10

573

583
Net issuance of 17,165 shares under stock grant programs

17

(115)

(98)
Issuance of 9,864 shares under deferred compensation plans

10

(10)

—
Expense associated with share-based compensation arrangements

2,657

2,657
Accrued expense under deferred compensation plans

1,149

1,149
Balance on September 25, 2021

$
61,888

$
239,563

$
1,552,593

$
(3,278)

$
26,708

$
1,877,474


(in thousands, except share and per share data)
	Controlling Interest Shareholders’ Equity
							Accumulated
			Additional				Other
	Common		Paid-In		Retained		Comprehensive		Noncontrolling				Temporary
	Stock		Capital		Earnings		Earnings		Interest		Total		Equity
Balance on December 26, 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)
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	$	—
Net earnings						203,118				4,735		207,853
Foreign currency translation adjustment								(3,660)		(95)		(3,755)
Unrealized loss on debt securities								(628)				(628)
Cash dividends - $0.25 per share - quarterly						(15,474)						(15,474)
Issuance of 13,875 shares under employee stock purchase plan		14		781								795
Issuance of 28,154 shares under stock grant programs		28		1,092								1,120
Issuance of 11,605 shares under deferred compensation plans		12		(12)								—
Repurchase of 1,165,268 shares		(1,165)				(88,506)						(89,671)
Expense associated with share-based compensation arrangements				5,556								5,556
Accrued expense under deferred compensation plans				1,100								1,100
Balance on June 25, 2022	$	61,623	$	275,061	$	1,950,922	$	(7,458)	$	44,920	$	2,325,068	$	—
Net earnings						167,241				4,380		171,621		480
Foreign currency translation adjustment								(3,330)		(29)		(3,359)		(558)
Unrealized loss on debt securities								(560)				(560)
Distributions to noncontrolling interest										(9,970)		(9,970)
Redeemable noncontrolling interest										(7,641)		(7,641)		7,641
Cash dividends - $0.25 per share - quarterly						(15,405)						(15,405)
Issuance of 10,678 shares under employee stock purchase plans		11		641								652
Net forfeitures of 6,396 shares under stock grant programs		(6)		(159)		6						(159)
Issuance of 10,705 shares under deferred compensation plans		10		(10)								—
Expense associated with share-based compensation arrangements				7,407								7,407
Accrued expense under deferred compensation plans				1,085								1,085
Balance on September 24, 2022	$	61,638	$	284,025	$	2,102,764	$	(11,348)	$	31,660	$	2,468,739	$	7,563

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												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 on December 28, 2019	$	61,409	$	192,173	$	995,022	$	(4,889)	$	14,018	$	1,257,733
Balance on December 27, 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 on 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
Net earnings						66,463				3,231		69,694						173,382				1,978		175,360
Foreign currency translation adjustment								2,026		125		2,151								1,759		720		2,479
Unrealized gain on debt securities								688				688								241				241
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)								—
Cash dividends - $0.15 per share - quarterly																		(9,276)						(9,276)
Issuance of 9,282 shares under employee stock purchase plan														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				824								824				2,728								2,728
Accrued expense under deferred compensation plans				1,082								1,082				1,140								1,140
Balance on June 27, 2020	$	61,169	$	213,809	$	1,057,817	$	(8,396)	$	14,926	$	1,339,325
Balance on June 26, 2021													$	61,851	$	235,309	$	1,440,833	$	(1,464)	$	23,034	$	1,759,563
Net earnings						77,204				1,657		78,861						121,041				4,706		125,747
Foreign currency translation adjustment								1,319		265		1,584								(1,897)		(210)		(2,107)
Unrealized loss on debt securities								103				103
Distributions to noncontrolling interest										(634)		(634)
Cash dividends - $0.125 per share - quarterly						(7,646)						(7,646)
Issuance of 7,511 shares under employee stock plans		7		338								345
Net forfeiture of 1,382 shares under stock grant programs		(1)		(56)								(57)
Issuance of 11,326 shares under deferred compensation plans		12		(12)								—
Unrealized gain on debt securities																				83				83
Additional purchase and adjustment of noncontrolling interest													��									(822)		(822)
Cash dividends - $0.15 per share - quarterly																		(9,281)						(9,281)
Issuance of 10,008 shares under employee stock purchase plan														10		573								583
Net issuance of 17,165 shares under stock grant programs														17		(115)								(98)
Issuance of 9,864 shares under deferred compensation plans														10		(10)								—
Expense associated with share-based compensation arrangements				826								826				2,657								2,657
Accrued expense under deferred compensation plans				1,097								1,097				1,149								1,149
Balance on September 26, 2020	$	61,187	$	216,002	$	1,127,375	$	(6,974)	$	16,214	$	1,413,804
Balance on September 25, 2021													$	61,888	$	239,563	$	1,552,593	$	(3,278)	$	26,708	$	1,877,474

See notes to consolidated condensed financial statements.

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UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(in thousands)	Nine Months Ended				Nine Months Ended
	September 25,		September 26,		September 24,		September 25,
	2021		2020		2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	405,358	$	189,125	$	573,085	$	405,358
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation		61,741		47,226		68,881		61,741
Amortization of intangibles		9,369		5,863		13,448		9,369
Expense associated with share-based and grant compensation arrangements		8,444		3,152		19,979		8,444
Deferred income taxes		(594)		110
Unrealized gain on investments and other		(1,756)		(81)
Equity in earnings of investee		2,411		—
Net gain on sale and disposition of assets		(10,482)		(662)
Deferred income taxes (credit)						(269)		(594)
Unrealized loss (gain) on investments and other						8,453		(1,756)
Equity in loss of investee						2,740		2,411
Net loss (gain) on sale and disposition of assets						352		(10,482)
Changes in:
Accounts receivable		(141,088)		(211,238)		(137,607)		(141,088)
Inventories		(204,144)		(39,167)		(36,259)		(204,144)
Accounts payable and cash overdraft		53,437		85,354		(11,247)		53,437
Accrued liabilities and other		99,067		105,401		31,490		99,067
NET CASH PROVIDED BY OPERATING ACTIVITIES		281,763		185,083
CASH FLOWS FROM INVESTING ACTIVITIES:
NET CASH FROM OPERATING ACTIVITIES						533,046		281,763
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(110,092)		(67,024)		(113,725)		(110,092)
Proceeds from sale of property, plant and equipment		26,597		2,588		2,303		26,597
Acquisitions and purchases of non-controlling interest, net of cash received		(433,275)		(34,820)
Acquisitions, net of cash received and purchase of equity method investment						(105,212)		(433,275)
Purchases of investments		(17,866)		(24,266)		(16,925)		(17,866)
Proceeds from sale of investments		9,857		22,281		10,036		9,857
Other		(3,478)		314		911		(3,478)
NET CASH USED IN INVESTING ACTIVITIES		(528,257)		(100,927)		(222,612)		(528,257)
CASH FLOWS FROM FINANCING ACTIVITIES:
CASH FLOWS USED IN FINANCING ACTIVITIES:
Borrowings under revolving credit facilities		886,966		6,862		570,700		886,966
Repayments under revolving credit facilities		(888,335)		(6,498)		(571,075)		(888,335)
Repayments of debt						(1,957)		—
Contingent consideration payments and other		(2,664)		(3,087)		(2,564)		(2,664)
Issuance of long-term debt		—		150,000
Proceeds from issuance of common stock		1,519		1,042		2,110		1,519
Dividends paid to shareholders		(27,831)		(23,020)		(43,420)		(27,831)
Distributions to noncontrolling interest		(2,914)		(932)		(12,023)		(2,914)
Repurchase of common stock		—		(29,212)		(93,215)		—
Other		(334)		23		(210)		(334)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(33,593)		95,178
NET CASH USED IN FINANCING ACTIVITIES						(151,654)		(33,593)
Effect of exchange rate changes on cash		(292)		(1,122)		(139)		(292)
NET CHANGE IN CASH AND CASH EQUIVALENTS		(280,379)		178,212		158,641		(280,379)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR		436,608		168,666		291,223		436,608
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	156,229	$	346,878	$	449,864	$	156,229

RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents, beginning of period	$	436,507	$	168,336	$	286,662	$	436,507
Restricted cash, beginning of period		101		330		4,561		101
Cash, cash equivalents, and restricted cash, beginning of period	$	436,608	$	168,666	$	291,223	$	436,608

Cash and cash equivalents, end of period	$	138,637	$	346,154	$	449,135	$	138,637
Restricted cash, end of period		17,592		724		729		17,592
Cash, cash equivalents, and restricted cash, end of period	$	156,229	$	346,878	$	449,864	$	156,229

SUPPLEMENTAL INFORMATION:
Interest paid	$	10,360	$	4,112	$	9,997	$	10,360
Income taxes paid		136,893		47,301		213,117		136,893
NON-CASH INVESTING ACTIVITIES
Capital expenditures included in accounts payable		2,366		—		3,211		2,366
NON-CASH FINANCING ACTIVITIES:
Common stock issued under deferred compensation plans		6,778		6,195		8,424		6,778

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.~~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 September ~~26, 2020~~25, 2021 balances in the accompanying unaudited condensed consolidated balance sheets.

In October 2021, the FASB issued ASU 2021-08,Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires that an acquirer recognize and measure contract assets and contract liabilities in a business combination in accordance with Topic 606. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

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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):


	September 25, 2021								September 26, 2020								September 24, 2022								September 25, 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	$	2,631	$	—	$	2,650	$	64	$	3,133	$	—	$	3,197	$	19	$	4,825	$	—	$	4,844	$	19	$	2,631	$	—	$	2,650
Fixed income funds		962		17,021		—		17,983		248		16,522		—		16,770		2,584		16,321		—		18,905		962		17,021		—		17,983
Treasury securities		310		—		—		310		—		—		—		—		343		—		—		343		310		—		—		310
Equity securities		18,543		—		—		18,543		10,524		—		—		10,524		15,674		—		—		15,674		18,543		—		—		18,543
Alternative investments		—		—		3,536		3,536		—		—		1,926		1,926		—		—		4,136		4,136		—		—		3,536		3,536
Mutual funds:
Domestic stock funds		9,968		—		—		9,968		6,826		—		—		6,826		11,859		—		—		11,859		9,968		—		—		9,968
International stock funds		1,675		—		—		1,675		1,243		—		—		1,243		1,279		—		—		1,279		1,675		—		—		1,675
Target funds		23		—		—		23		260		—		—		260		8		—		—		8		23		—		—		23
Bond funds		146		—		—		146		208		—		—		208		132		—		—		132		146		—		—		146
Alternative funds		497		—		—		497		433		—		—		433		527		—		—		527		497		—		—		497
Total mutual funds		12,309		—		—		12,309		8,970		—		—		8,970		13,805		—		—		13,805		12,309		—		—		12,309
Total	$	32,143	$	19,652	$	3,536	$	55,331	$	19,806	$	19,655	$	1,926	$	41,387	$	32,425	$	21,146	$	4,136	$	57,707	$	32,143	$	19,652	$	3,536	$	55,331
Assets at fair value	$	32,143	$	19,652	$	3,536	$	55,331	$	19,806	$	19,655	$	1,926	$	41,387	$	32,425	$	21,146	$	4,136	$	57,707	$	32,143	$	19,652	$	3,536	$	55,331

From the assets measured at fair value as of September ~~25, 2021,~~24, 2022, listed in the table above, ~~$33.6~~$33.2 million of mutual funds, equity securities, and alternative investments are held in Investments, ~~$0.1~~$4.7 million of money market funds are held in Cash and Cash Equivalents, ~~$0.7~~$0.5 million of money market and mutual funds are held in Other Assets for our deferred compensation plan, and ~~$18.3~~$19.2 million of fixed income funds and ~~$2.6~~$0.1 million of money ~~markets~~market 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 ~~$52.0~~$52.4 million as of September ~~25, 2021,~~24, 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.

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UFP INDUSTRIES, INC.

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


	September 25, 2021						September 26, 2020						September 24, 2022						September 25, 2021
			Unrealized						Unrealized						Unrealized						Unrealized
	Cost		Gain		Fair Value		Cost		Gain		Fair Value		Cost		Gain (Loss)		Fair Value		Cost		Gain		Fair Value
Fixed Income	$	17,293	$	690	$	17,983	$	15,750	$	1,020	$	16,770	$	21,199	$	(2,294)	$	18,905	$	17,293	$	690	$	17,983
Treasury Securities		310		—		310		—		—		—		343		—		343		310		—		310
Equity		14,392		4,151		18,543		9,121		1,403		10,524		15,392		282		15,674		14,392		4,151		18,543
Mutual Funds		9,210		2,435		11,645		7,228		852		8,080		13,430		(128)		13,302		9,210		2,435		11,645
Alternative Investments		3,370		166		3,536		1,881		45		1,926		3,079		1,057		4,136		3,370		166		3,536
Total	$	44,575	$	7,442	$	52,017	$	33,980	$	3,320	$	37,300	$	53,443	$	(1,083)	$	52,360	$	44,575	$	7,442	$	52,017

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~~loss of the portfolio was ~~$7.4~~$1.1 million. Carrying amounts above are recorded in the investments and restricted investments line items within the balance sheet as of September ~~25, 2021~~24, 2022 and September ~~26, 2020.~~25, 2021.

C. REVENUE RECOGNITION

Within the 3three 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 3^rdthird party. Installation revenue is recognized upon completion. If ~~the Company uses~~we use a 3^rdthird party for installation, the party will act as an agent to ~~the Company~~us until completion of the installation. Installation revenue represents an immaterial share of ~~the Company’s~~our total net sales.

~~The Company utilizes~~We 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 relative 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 relative 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):


	Three Months Ended					Nine Months Ended					Three Months Ended					Nine Months Ended
	September 25,		September 26,			September 25,		September 26,			September 24,		September 25,			September 24,		September 25,
	2021		2020		% Change	2021		2020		% Change	2022		2021		% Change	2022		2021		% Change
FOB Shipping Point Revenue	$	2,063,647	$	1,454,220	41.9%	$	6,530,204	$	3,663,140	78.3%
Construction Contract Revenue		30,137		32,007	(5.8)%		89,125		97,150	(8.3)%
Point in Time Revenue											$	2,270,438	$	2,063,647	10.0%	$	7,571,128	$	6,530,204	15.9%
Over Time Revenue												52,417		30,137	73.9%		141,914		89,125	59.2%
Total Net Sales		2,093,784		1,486,227	40.9%	$	6,619,329	$	3,760,290	76.0%		2,322,855		2,093,784	10.9%	$	7,713,042	$	6,619,329	16.5%

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):


	September 25,		December 26,		September 26,		September 24,		December 25,		September 25,
	2021		2020		2020		2022		2021		2021
Cost and Earnings in Excess of Billings	$	3,776	$	4,169	$	4,130	$	8,477	$	5,602	$	3,776
Billings in Excess of Cost and Earnings		10,373		11,530		11,264		10,743		10,744		10,373

D. EARNINGS PER SHARE

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


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 25,		September 26,		September 25,		September 26,		September 24,		September 25,		September 24,		September 25,
	2021		2020		2021		2020		2022		2021		2022		2021
Numerator:
Net earnings attributable to controlling interest	$	121,041	$	77,204	$	397,734	$	183,826	$	167,241	$	121,041	$	560,062	$	397,734
Adjustment for earnings allocated to non-vested restricted common stock		(3,952)		(2,195)		(12,800)		(5,110)		(6,857)		(3,952)		(21,970)		(12,800)
Net earnings for calculating EPS	$	117,089	$	75,009	$	384,934	$	178,716	$	160,384	$	117,089	$	538,092	$	384,934
Denominator:
Weighted average shares outstanding		62,266		61,548		62,162		61,642		62,445		62,266		62,743		62,162
Adjustment for non-vested restricted common stock		(2,033)		(1,750)		(2,001)		(1,713)		(2,560)		(2,033)		(2,461)		(2,001)
Shares for calculating basic EPS		60,233		59,798		60,161		59,929		59,885		60,233		60,282		60,161
Effect of dilutive restricted common stock		168		20		137		19		307		168		255		137
Shares for calculating diluted EPS		60,401		59,818		60,298		59,948		60,192		60,401		60,537		60,298
Net earnings per share:
Basic	$	1.94	$	1.25	$	6.40	$	2.98	$	2.68	$	1.94	$	8.93	$	6.40
Diluted	$	1.94	$	1.25	$	6.38	$	2.98	$	2.66	$	1.94	$	8.89	$	6.38

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UFP INDUSTRIES, INC.

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.

In addition, on September ~~25, 2021,~~24, 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 September ~~25, 2021,~~24, 2022, we had outstanding purchase commitments on commenced capital projects of approximately ~~$44.1~~$65.4 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.~~companies. 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.

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 September ~~25, 2021,~~24, 2022, we had approximately ~~$39.6~~$22.7 million in outstanding payment and performance bonds for open projects. We had approximately ~~$2.1~~$30.6 million in payment and performance bonds outstanding for completed projects which are still under warranty.

On September ~~25, 2021,~~24, 2022, we had outstanding letters of credit totaling ~~$52.6~~$59.9 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 September ~~25, 2021,~~24, 2022, we have irrevocable letters of credit outstanding totaling approximately ~~$45.5~~$52.8 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 third quarter of ~~2021~~2022 which would require us to recognize a liability on our balance sheet.

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UFP INDUSTRIES, INC.

F. BUSINESS COMBINATIONS AND EQUITY METHOD INVESTMENTS

We completed the following acquisitions in ~~2021~~fiscal 2022 and since the end of September ~~2020,~~2021, which were accounted for using the purchase ~~method~~or equity method. Dollars below are in thousands unless otherwise noted:

Net

Company

Acquisition

Intangible

Tangible

Operating

Acquisition

Intangible

Tangible

Operating

Name

Date

Purchase Price

Assets

Segment

Date

Purchase Price

Assets

Segment

April 29, 2021

$10,108
cash paid for 100% asset purchase

7,099

3,009

Construction

June 27, 2022

$65,858 cash paid for equity method investment

32,048

33,810

Industrial

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.

Dempsey Wood Products, Inc. (Dempsey)

Located in Orangeburg, South Carolina and founded in 1988, Dempsey is a sawmill which produces products such as kiln dried finished lumber, industrial lumber, green cut stock lumber, pine chips and shavings, landscaping mulch, and sawdust. The Company had sales of approximately $69 million in 2021.

April 19, 2021

$8,549
cash paid for 100% asset purchase

1,526

7,023

Retail

May 9, 2022

$15,398
cash paid for 100% asset purchase

4,821

10,577

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.

Cedar Poly, LLC

Located in Tipton, Iowa, Cedar Poly is a full-service recycler of high-density and low-density polyethylene (HDPE and LDPE) flakes and pellets used in various products, including composite decking. The company also recycles corrugate and operates its own transportation fleet. Cedar Poly had 2021 sales of approximately $17.3 million and will operate in UFP’s Deckorators business unit.

April 12, 2021

$153,462
cash paid for 100% asset purchase

—

153,462

Retail

December 27, 2021

$24,057
cash paid for 100% stock purchase, net of acquired cash

17,484

6,573

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.

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.

March 1, 2021

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

4,264

460

Other

December 20, 2021

$20,754
cash paid for 100% stock purchase

11,417

9,337

Industrial

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).

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.

December 28, 2020

$259,011
cash paid for 100% stock purchase

66,899

192,112

Retail/Industrial

November 22, 2021

$10,831
cash paid for 70% stock purchase and noncontrolling interest, net of acquired cash

9,562

1,269

Other

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.

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.

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UFP INDUSTRIES, INC.

Net

Company

Acquisition

Intangible

Tangible

Operating

Acquisition

Intangible

Tangible

Operating

Name

Date

Purchase Price

Assets

Segment

Date

Purchase Price

Assets

Segment

November 10, 2020

$21,268
cash paid for 100% asset purchase

11,923

9,345

Construction

November 1, 2021

$5,984
cash paid for 100% asset purchase and estimated contingent consideration

5,681

303

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.

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 $6.2 million USD ($8.2 million AUD).

October 1, 2020

$5,936
cash paid for 100% asset purchase

5,222

714

Retail

September 27, 2021

$6,443
cash paid for 100% asset purchase and estimated contingent consideration

4,039

2,404

Construction

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

$3,475
cash paid for 50% stock purchase and estimated contingent consideration

7,267

(1,369)

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 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.

The intangible assets for the above ~~acquisitions~~investments have not been finalized and allocated to their respective identifiable asset and goodwill accounts. In aggregate, ~~acquisitions~~investments completed since the end of September ~~2020~~2021 and not consolidated with other operations contributed approximately ~~$903.0~~$93.3 million in net sales and ~~$26.0~~$6.1 million in operating profits during the first nine months of ~~2021.~~2022.

As a result of the investment in Dempsey on June 27, 2022, we own 50% of the issued equity of the Company, and the remaining 50% of the issued equity is owned by the previous owners (“Sellers”). The investment in Dempsey is an unconsolidated variable interest entity and we have accounted for it using the equity method of accounting because we do not have a controlling financial interest in the entity. Per the contracts, the Sellers have a put right to sell their equity interest to us for $50 million and we have a call right to purchase the Seller’s equity interest for $70 million, which are both first exercisable in June 2025 and expire in June 2030. As of September 24, 2022, the carrying value of our investment in Dempsey is $67.0 million and is recorded in Other Assets. Our maximum exposure to loss consists of our investment amount and any contingent loss that may occur in the future as a result of a change in the fair value of Dempsey relative to the strike price of the put option.

G. SEGMENT REPORTING

~~The Company operates~~We operate manufacturing, treating and distribution facilities internationally, but primarily in the United States. ~~The~~Our business segments ~~align with the following markets:~~consist of UFP Retail Solutions, UFP Industrial and UFP Construction and ~~UFP Industrial. The~~align with the end markets we serve. This segment structure allows for a specialized and consistent sales approach among Company ~~manages~~operations, efficient use of resources and capital, and quicker introduction of new products and services. We manage the operations of ~~its~~our 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.~~

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UFP INDUSTRIES, INC.

The ~~“Corporate” column~~exception to this market-centered reporting and management structure is our International segment, which comprises our Mexico, Canada, Europe, India, and Australia operations and sales and buying offices in other parts of the world and our Ardellis segment, which represents our wholly owned fully licensed captive insurance company based in Bermuda. Our International and Ardellis segments do not meet the quantitative thresholds in order to be separately reported and accordingly, the International and Ardellis segments have been aggregated in the “All Other” segment for reporting purposes.

“Corporate” includes purchasing, transportation and administrative functions that serve our operating segments. Operating results of Corporate primarily ~~consists~~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 ~~leases~~operates transportation equipment, are also included in the Corporate column. ~~An inter-company~~Inter-company lease ~~charge is~~and service charges are assessed to our operating segments for the use of these assets and services at fair market value rates. Total assets ofin 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 ~~Transportation Ltd.~~RMS, LLC. The tables below are presented in thousands:


	Three Months Ended September 25, 2021												Three Months Ended September 24, 2022
	Retail		Industrial		Construction		All Other		Corporate		Total		Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	696,201	$	573,234	$	722,872	$	98,689	$	2,788	$	2,093,784	$	845,304	$	584,808	$	777,126	$	112,203	$	3,414	$	2,322,855
Intersegment net sales		50,546		23,148		27,574		122,470		(223,738)		—		87,362		19,778		31,352		102,927		(241,419)		—
Segment operating profit		(26,153)		70,408		84,205		20,283		19,382		168,125
Earnings from operations														28,932		77,298		110,384		13,705		6,725		237,044


	Three Months Ended September 26, 2020												Three Months Ended September 25, 2021
	Retail		Industrial		Construction		All Other		Corporate		Total		Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	700,522	$	282,124	$	447,103	$	56,700	$	(222)	$	1,486,227	$	696,201	$	573,234	$	722,872	$	98,689	$	2,788	$	2,093,784
Intersegment net sales		45,416		11,773		17,909		76,029		(151,127)		—		50,546		23,148		27,574		122,470		(223,738)		—
Segment operating profit		62,181		22,037		16,513		7,449		(1,579)		106,601
Earnings from operations														(26,153)		70,408		84,205		20,283		19,382		168,125


	Nine Months Ended September 25, 2021												Nine Months Ended September 24, 2022
	Retail		Industrial		Construction		All Other		Corporate		Total		Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	2,714,440	$	1,633,289	$	2,021,106	$	243,736	$	6,758	$	6,619,329	$	2,959,976	$	1,872,510	$	2,538,973	$	332,186	$	9,397	$	7,713,042
Intersegment net sales		163,279		66,039		62,069		345,920		(637,307)		—		220,922		63,438		88,570		338,592		(711,522)		—
Segment operating profit		89,443		190,344		184,330		44,565		33,865		542,547
Earnings from operations														124,856		253,899		322,034		51,268		29,578		781,635


	Nine Months Ended September 26, 2020												Nine Months Ended September 25, 2021
	Retail		Industrial		Construction		All Other		Corporate		Total		Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	1,661,873	$	763,046	$	1,187,429	$	148,503	$	(561)	$	3,760,290	$	2,714,440	$	1,633,289	$	2,021,106	$	243,736	$	6,758	$	6,619,329
Intersegment net sales		109,378		32,788		49,685		196,908		(388,759)		—		163,279		66,039		62,069		345,920		(637,307)		—
Segment operating profit		122,082		53,837		50,544		20,573		10,555		257,591
Earnings from operations														89,443		190,344		184,330		44,565		33,865		542,547

The following table presents goodwill by segment as of September ~~25, 2021,~~24, 2022, and December ~~26, 2020~~25, 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

18,441

43,844

2,427

4,176

—

68,888
2021 Purchase Accounting Adjustments

(1,682)

(17,937)

(6,227)

(2,575)

—

(28,421)
Foreign Exchange, Net

—

—

101

(443)

—

(342)
Balance as of September 25, 2021

$
78,702

$
113,734

$
87,030

$
12,852

$
—

$
292,318


	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		11,958		—		—		—		—		11,958
2022 Purchase Accounting Adjustments		293		(5,830)		(1,074)		659		—		(5,952)
Foreign Exchange, Net		—		—		(215)		(1,646)		—		(1,861)
Balance as of September 24, 2022	$	85,627	$	122,711	$	87,711	$	23,134	$	—	$	319,183

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UFP INDUSTRIES, INC.

The following table presents total assets by segment as of September ~~25, 2021,~~24, 2022, and December ~~26, 2020~~25, 2021 (in thousands).


	Total Assets by Segment						Total Assets by Segment
	September 25,		December 26,				September 24,		December 25,
Segment Classification	2021		2020		% Change		2022		2021		% Change
Retail	$	829,745	$	510,464	62.5	%	$	975,733	$	844,189	15.6	%
Industrial		740,206		416,487	77.7			855,240		741,672	15.3
Construction		725,419		510,972	42.0			834,917		736,157	13.4
All Other		284,626		196,856	44.6			324,113		343,363	(5.6)
Corporate		434,251		770,112	(43.6)			748,544		579,890	29.1
Total Assets	$	3,014,247	$	2,404,891	25.3	%	$	3,738,547	$	3,245,271	15.2	%

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 25.4% in the third quarter of 2022 compared to 23.0% in the third quarter of 2021 ~~compared to 25.4% for same period in 2020~~ and was ~~24.0%~~24.8% in the first nine months of ~~2021~~2022 compared to ~~25.2%~~24.0% for the same period in ~~2020.~~2021. The ~~decrease~~increase was primarily due to ~~a decrease in permanent~~one-time tax ~~differences~~credits recorded as discrete items in 2021 ~~compared to the prior year, none of which~~that are ~~individually significant.~~not available in 2022.

I. COMMON STOCK

Below is a summary of common stock issuances for the first nine months of ~~2021~~2022 and ~~2020~~2021 (in thousands, except average share price):


	September 25, 2021			September 24, 2022
Share Issuance Activity	Common Stock		Average Share Price	Common Stock		Average Share Price
Shares issued under the employee stock purchase plan	25	$	71.18	34	$	71.65

Shares issued under the employee stock gift program	2		76.80	2		78.60
Shares issued under the director retainer stock program	4		69.80	3		83.24
Shares issued under the bonus plan	487		57.06	755		82.73
Shares issued under the executive stock match grants plan	77		60.24
Shares issued under the executive stock match plan				62		82.87
Forfeitures	(21)			(13)
Total shares issued under stock grant programs	549	$	57.64	809	$	82.73

Shares issued under the deferred compensation plans	108	$	62.48	102	$	82.36

During the first nine months of 2022, we repurchased approximately 1,210,000 shares of our common stock at an average share price of $77.06.

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UFP INDUSTRIES, INC.


	September 26, 2020			September 25, 2021
Share Issuance Activity	Common Stock		Average Share Price	Common Stock		Average Share Price
Shares issued under the employee stock purchase plan	28	$	44.14	25	$	71.18

Shares issued under the employee stock gift program	2		45.93	2		76.80
Shares issued under the director retainer stock program	46		24.80	4		69.80
Shares issued under the bonus plan	271		47.51	487		57.06
Shares issued under the executive stock match grants plan	79		47.60
Shares issued under the executive stock grants plan				77		60.24
Forfeitures	(7)			(21)
Total shares issued under stock grant programs	391	$	44.92	549	$	57.64

Shares issued under the deferred compensation plans	115	$	53.85	108	$	62.48

During the first nine months of 2021, we did not repurchase any of our shares of common stock.

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

J. INVENTORIES

Inventories are stated at the lower of 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.

~~The Company writes~~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 ~~the Company expects~~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. ~~The~~There was no lower of cost or net realizable value adjustment to inventory as of September 24, 2022 and the lower of cost or net realizable value adjustment to inventory as September 25, 2021 ~~and September 26, 2020~~ was $1.3 ~~million and $0, respectively.~~million.

K. SUBSEQUENT EVENTS

~~On September 27, 2027,~~Subsequent to our reporting date, we ~~acquired the equity~~repurchased approximately 32,000 shares for $2.2 million, at an average share price of ~~Shelter Products, Inc., for $6.5 million. Based in Haleyville, Alabama, Shelter Products provides distribution and logistics support to factory-built manufacturers through 9 warehouses across the U.S.~~

On October 29, 2021, we acquired the assets of The Box Pack Trust, operating as Boxpack Packaging (Boxpack) for $5.2 million. Based near Melbourne, Australia, Boxpack specializes in flexographic and lithographic cardboard packaging, using the latest CAD design and finishing techniques.

$69.31.

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UFP INDUSTRIES, INC.

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 third quarter of ~~2021.~~2022.

OVERVIEW

Our results for the third quarter of ~~2021~~2022 include the following highlights:

●

Our net sales were up ~~41%~~11% compared to the third quarter of ~~2020,~~2021, which was comprised of a ~~28%~~6% increase in selling prices, ~~primarily due to the commodity lumber market (see Historical Lumber Prices below),~~ a ~~16%~~2% increase in unit sales due to acquisitions completed since September of last year, and a 3% ~~decline~~increase in organic unit sales. The overall increase in our selling prices is due to a combination of higher lumber prices and operating costs, an improvement in our product mix of value-added products which tend to be sold on a fixed price, elevated end market demand, and our value-based selling initiatives. Organic unit growth of ~~16%~~6% in our construction segment and 5% in our retail segment was offset by an organic unit decline of ~~19%~~2% in our ~~retail segment, while~~ industrial ~~units were flat.~~segment.

●

Our gross profits increased by $122.6 million, or 37.4%, compared to the same period of the prior year. Acquired operations contributed $8.3 million to the increase in our gross profits. Excluding the impact of acquisitions, gross profits increased by $114.3 million. We estimate that value-added products contributed $62.9 million and commodity-based products contributed $51.4 to the increase in gross profit.

●

Our operating profits increased ~~$61.5~~$68.9 million, or ~~58%~~41%, compared to the third quarter of ~~2020.~~2021. This increase resulted from a variety of factors including ~~strong demand from our industrial and construction segments,~~improved leveraging of our fixed costs ~~and~~in business units that experienced organic growth, increased sales of new and value-added ~~and new~~ products ~~that~~which have higher ~~margins. These favorable factors more than offset the impact that falling~~gross margins, and our ability to effectively include lumber prices had on the gross profits of commodity-based products sold on a variable price that are not purchased through a vendor managed inventory program, particularly our pressure-treated lumber products soldand other cost increases in the ~~retail segment.~~selling prices of our products. In addition, our value-based and selective selling practices have enabled us to improve our profit per unit. Acquisitions contributed approximately ~~$2.6~~$3.7 million to our increase in operating profits. Excluding the impact of acquisitions, we estimate that value-added products contributed $93 million to our quarter over quarter increase in gross profits, which was offset by a decrease of approximately $23 million in commodity-based products.

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●

Our cash flows ~~provided by~~from operations for the first nine months of ~~2021 was $282~~2022 increased to $535 million compared to ~~$185~~$282 million of cash flows provided by operations during the first nine months of ~~2020 in spite of an increase in our~~2021. The improved cash flows resulted from net ~~working capital, which increased $133~~earnings and non-cash expenses totaling $687 million, compared to ~~the prior year. The~~$475 million last year, offset by a $152 million increase ~~in our net working capital during 2021 is due to a combination of unusually high lumber prices and strong market demand in our industrial and construction segments. In addition, our investment~~ in net working capital atsince the end of last year, compared to a $193 million increase in the ~~third quarter of 2020 was unusually low due to unexpectedly strong~~prior year. This year, customer demand, particularly in our retail segment, ~~and difficulty maintaining an adequate supply of~~followed more typical seasonal trends which allowed us to improve our inventory due to supply chain constraints. As lumber prices and demand in the retail segment began to normalize in the second and third quarters of 2021, our investment in net working capital has decreased, and we now have a cash surplus of $139 million. We anticipate our net working capital will continue to decrease for the balance of the year, assuming lumber prices remain at current levels, as the fourth quarter typically represents a seasonally slower quarter for most of our business units.turns.

●

Our cash surplus at the end of September 2022 was $134.6 million compared to net debt (debt and cash overdraft less cash) ~~at the end~~ of ~~September 2021 was $182 million compared to net cash of $32~~$182.4 million at the end of September ~~2020.~~2021. Our unused borrowing capacity under revolving credit facilities and a shelf agreement with certain lenders along with our cash surplus resulted in total liquidity of approximately ~~$668 million~~$1.5 billion at the end of the third quarter of ~~2021.~~2022.

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
April		1,080			358		1,051			1,080
May		1,428			394		948			1,428
June		1,344			455		670			1,344
July		690			530		621			690
August		443			716		625			443
September		412			934		556			412

Third quarter average	$	515		$	727	$	601		$	515
Year-to-date average	$	920		$	510	$	903		$	920

Third quarter percentage change		(29.2)	%				16.7	%
Year-to-date percentage change		80.4	%				(1.8)	%

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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
April		922			333		902			922
May		1,150			412		732			1,150
June		1,052			494		574			1,052
July		564			552		547			564
August		448			729		589			448
September		438			886		533			438

Third quarter average	$	483		$	722	$	556		$	483
Year-to-date average	$	808		$	495	$	800		$	808

Third quarter percentage change		(33.1)	%				15.1	%
Year-to-date percentage change		63.2	%				(1.0)	%

The sequential ~~increase~~decrease in overall lumber prices for the ~~first half~~third quarter of the year was primarily due to ~~strong market~~ demand ~~as well as certain constraints~~ in the retail and housing markets beginning to return to more normalized levels and improvements in supply chain of lumber. Prices began to fall in June 2021 as pandemic related restrictions were lifted, the economy re-opened, and consumers shifted their spending to other areas. We believe prices in the third quarter of 2021 reflect normalized levels.constraints. A ~~decline~~change in lumber prices impacts our profitability of products sold with fixed and variable prices, as discussed below.

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 ~~58.0%~~51.9% and ~~48.7%~~58.0% of our sales in the first nine months of ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~increase~~decrease from the prior year ratio reflects ~~the impact~~an improvement in our sales mix of ~~higher lumber prices and the results of PalletOne’s subsidiaries, Sunbelt and Spartanburg Forest Products.~~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.

●

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.

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●

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~~third quarter, primarily due to pressure-treated lumber sold in our retail segment.

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 ~~20%~~22% of our total ~~annual~~net sales in ~~2020.~~the first nine months of 2022. This exposure is less significant with remanufactured lumber, panel goods, other commodity-type items, and trusses sold to the manufactured housing market due to the higher rate of inventory turnover. We attempt to mitigate the risk associated with treated lumber through inventory consignment programs with our vendors. ~~Our annual purchases of inventory through these consignment programs totaled approximately 19%~~We estimate that 17.3% of our total ~~lumber~~ purchases ~~in 2020. Our new Sunbelt and Spartanburg Forest Products plants operated with limited amounts~~for the first nine months of ~~vendor consignment inventory and~~2022 were ~~more exposed to the impact of falling lumber prices during the second and third quarters of 2021. We anticipate increasing their use of~~completed under these ~~programs in future periods in a manner consistent with our ProWood pressure-treating operations.~~programs. (Please refer to the “Risk Factors” section of our annual report on form 10-K, filed with the United States Securities and Exchange Commission.)

●

Products with fixed selling prices sold under long-term supply arrangements, particularly those involving multi-family construction projects. We attempt to mitigate this risk through our purchasing practices and longer vendor commitments.

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.

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BUSINESS COMBINATIONS

We completed ~~five~~three business acquisitions during the first nine months of fiscal ~~2021~~2022 and ~~five~~nine during all of fiscal ~~2020.~~2021. The annual historical sales attributable to acquisitions completed in the first nine months of fiscal ~~2021 is~~2022 was approximately ~~$1.3 billion,~~$131 million, while the annual historical sales attributable to acquisitions completed during the last quarter of ~~2020 have annual sales of~~2021 was approximately ~~$48~~$76 million. These business combinations were not significant to our quarterly results individually or in aggregate and thus pro forma results for ~~2021~~2022 and ~~2020~~2021 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				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 25,		September 26,		September 25,		September 26,		September 24,		September 25,		September 24,		September 25,
	2021		2020		2021		2020		2022		2021		2022		2021
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	84.4		83.8		84.4		83.7		80.6		84.4		81.4		84.4
Gross profit	15.6		16.2		15.6		16.3		19.4		15.6		18.6		15.6
Selling, general, and administrative expenses	8.1		9.1		7.6		9.5		9.2		8.1		8.4		7.6
Other gains, net	(0.5)		—		(0.2)		(0.1)
Other (gains) losses, net									(0.1)		(0.5)		—		(0.2)
Earnings from operations	8.0		7.2		8.2		6.9		10.2		8.0		10.1		8.2
Other expense, net	0.2		0.1		0.1		0.1		0.3		0.2		0.3		0.1
Earnings before income taxes	7.8		7.1		8.1		6.7		9.9		7.8		9.9		8.1
Income taxes	1.8		1.8		1.9		1.7		2.5		1.8		2.4		1.9
Net earnings	6.0		5.3		6.1		5.0		7.4		6.0		7.4		6.1
Less net earnings attributable to noncontrolling interest	(0.2)		(0.1)		(0.1)		(0.1)		(0.2)		(0.2)		(0.2)		(0.1)
Net earnings attributable to controlling interest	5.8	%	5.2	%	6.0	%	4.9	%	7.2	%	5.8	%	7.3	%	6.0	%

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

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 comparable period.


	Percentage Change								Percentage Change
	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 25,		September 26,		September 25,		September 26,		September 24,		September 25,		September 24,		September 25,
	2021		2020		2021		2020		2022		2021		2022		2021
Units sold	13.0	%	8.0	%	30.0	%	3.0	%	5.0	%	13.0	%	5.0	%	30.0	%
Gross profit	35.9		28.7		68.8		16.1		37.4		35.9		38.3		68.8
Selling, general, and administrative expenses	25.9		16.1		40.9		7.1		26.5		25.9		28.7		40.9
Earnings from operations	57.7		51.3		110.6		33.4		41.0		57.7		44.1		110.6

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The following table presents, for the periods indicated, our selling, general, and administrative expenses (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				Nine Months Ended				Three Months Ended				Nine Months Ended
		September 25,		September 26,		September 25,		September 26,		September 24,		September 25,		September 24,		September 25,
		2021		2020		2021		2020		2022		2021		2022		2021
Gross profit	$	327,555	$	241,074	$	1,035,403	$	613,241	$	450,176	$	327,555	$	1,431,991	$	1,035,403
Selling, general, and administrative expenses	$	169,467	$	134,649	$	504,104	$	357,770	$	214,327	$	169,467	$	649,015	$	504,104
SG&A as percentage of gross profit		51.7%		55.9%		48.7%		58.3%		47.6%		51.7%		45.3%		48.7%

Bonus expense, which is a component of SG&A, increased in the third quarter to $58 million compared to $44 million in the prior year. Modifications made to our bonus plan during 2022 are intended to reduce the payout rate when higher levels of pre-bonus earnings from operations are achieved. The adjustment to reduce bonus expense based on the new parameters was recorded in the second quarter and totaled $17 million. As a result of this change, our year to date bonus accrual rate has decreased to 19.0% of pre-bonus earnings from operations from a historical rate of approximately 21.0%. Bonus rates continue to be derived based on return on investment achieved. Bonus expense in the first nine months of 2022 totaled $183 million compared to $141 million in the prior year.

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. The~~align with the end markets we serve. Among other things, this structure allows for a more specialized and consistent sales approach among Company ~~manages~~operations, more efficient use of resources and capital, and quicker introduction of new products and services. We manage the operations of ~~its~~our 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,~~Retail, Industrial, and ~~construction~~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~~our International segment, which comprises our Mexico, Canada, ~~Australia,~~Europe, Asia, and ~~Italy~~Australia operations and sales and ~~purchasing~~buying offices in other parts of the world. Our International segment and Ardellis (our insurance captive) ~~have been~~are 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~~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 ~~leases~~operates transportation equipment, are also included in the ~~corporate~~Corporate column. ~~An inter-company~~Inter-company lease ~~charge is~~and 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 September 25, 2021												Three Months Ended September 24, 2022

	Retail		Industrial		Construction		All Other		Corporate		Total		Retail		Industrial		Construction		All Other		Corporate		Total
Net sales	$	696,201	$	573,234	$	722,872	$	98,689	$	2,788	$	2,093,784	$	845,304	$	584,808	$	777,126	$	112,203	$	3,414	$	2,322,855
Cost of goods sold		685,369		446,822		568,809		63,082		2,147		1,766,229		767,841		440,975		577,552		82,740		3,571		1,872,679
Gross profit		10,832		126,412		154,063		35,607		641		327,555		77,463		143,833		199,574		29,463		(157)		450,176
Selling, general, administrative expenses		36,899		55,723		70,663		15,996		(9,814)		169,467		48,435		66,521		89,455		16,752		(6,836)		214,327
Other		86		281		(805)		(672)		(8,927)		(10,037)		96		14		(265)		(994)		(46)		(1,195)
Earnings from operations	$	(26,153)	$	70,408	$	84,205	$	20,283	$	19,382	$	168,125	$	28,932	$	77,298	$	110,384	$	13,705	$	6,725	$	237,044

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	Three Months Ended September 26, 2020												Three Months Ended September 25, 2021

	Retail		Industrial		Construction		All Other		Corporate		Total		Retail		Industrial		Construction		All Other		Corporate		Total
Net sales	$	700,522	$	282,124	$	447,103	$	56,700	$	(222)	$	1,486,227	$	696,201	$	573,234	$	722,872	$	98,689	$	2,788	$	2,093,784
Cost of goods sold		594,896		233,971		385,028		38,543		(7,285)		1,245,153		685,369		446,822		568,809		63,082		2,147		1,766,229
Gross profit		105,626		48,153		62,075		18,157		7,063		241,074		10,832		126,412		154,063		35,607		641		327,555
Selling, general, administrative expenses		43,515		26,080		45,411		10,499		9,144		134,649		36,899		55,723		70,663		15,996		(9,814)		169,467
Other		(70)		36		151		209		(502)		(176)		86		281		(805)		(672)		(8,927)		(10,037)
Earnings from operations	$	62,181	$	22,037	$	16,513	$	7,449	$	(1,579)	$	106,601	$	(26,153)	$	70,408	$	84,205	$	20,283	$	19,382	$	168,125



	Nine Months Ended September 25, 2021												Nine Months Ended September 24, 2022

	Retail		Industrial		Construction		All Other		Corporate		Total		Retail		Industrial		Construction		All Other		Corporate		Total
Net sales	$	2,714,440	$	1,633,289	$	2,021,106	$	243,736	$	6,758	$	6,619,329	$	2,959,976	$	1,872,510	$	2,538,973	$	332,186	$	9,397	$	7,713,042
Cost of goods sold		2,480,804		1,292,102		1,644,069		160,853		6,098		5,583,926		2,674,996		1,417,006		1,950,671		230,100		8,278		6,281,051
Gross profit		233,636		341,187		377,037		82,883		660		1,035,403		284,980		455,504		588,302		102,086		1,119		1,431,991
Selling, general, administrative expenses		144,375		150,739		193,144		40,021		(24,175)		504,104		159,490		200,987		266,430		49,733		(27,625)		649,015
Other		(182)		104		(437)		(1,703)		(9,030)		(11,248)		634		618		(162)		1,085		(834)		1,341
Earnings from operations	$	89,443	$	190,344	$	184,330	$	44,565	$	33,865	$	542,547	$	124,856	$	253,899	$	322,034	$	51,268	$	29,578	$	781,635



	Nine Months Ended September 26, 2020												Nine Months Ended September 25, 2021

	Retail		Industrial		Construction		All Other		Corporate		Total		Retail		Industrial		Construction		All Other		Corporate		Total
Net sales	$	1,661,873	$	763,046	$	1,187,429	$	148,503	$	(561)	$	3,760,290	$	2,714,440	$	1,633,289	$	2,021,106	$	243,736	$	6,758	$	6,619,329
Cost of goods sold		1,429,229		635,424		1,002,932		101,240		(21,776)		3,147,049		2,480,804		1,292,102		1,644,069		160,853		6,098		5,583,926
Gross profit		232,644		127,622		184,497		47,263		21,215		613,241		233,636		341,187		377,037		82,883		660		1,035,403
Selling, general, administrative expenses		110,596		73,662		134,098		28,228		11,186		357,770		144,375		150,739		193,144		40,021		(24,175)		504,104
Other		(34)		123		(145)		(1,538)		(526)		(2,120)		(182)		104		(437)		(1,703)		(9,030)		(11,248)
Earnings from operations	$	122,082	$	53,837	$	50,544	$	20,573	$	10,555	$	257,591	$	89,443	$	190,344	$	184,330	$	44,565	$	33,865	$	542,547

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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 September 24, 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	90.8		75.4		74.3		73.7		—	80.6
Gross profit	9.2		24.6		25.7		26.3		—	19.4
Selling, general, administrative expenses	5.7		11.4		11.5		14.9		—	9.2
Other	—		—		—		(0.9)		—	—
Earnings from operations	3.4	%	13.2	%	14.2	%	12.2	%	—	10.2	%

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


	Three Months Ended September 25, 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	98.4		77.9		78.7		63.9		—	84.4
Gross profit	1.6		22.1		21.3		36.1		—	15.6
Selling, general, administrative expenses	5.3		9.7		9.8		16.2		—	8.1
Other	—		—		(0.1)		(0.7)		—	(0.5)
Earnings from operations	(3.8)	%	12.3	%	11.6	%	20.6	%	—	8.0	%

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

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~~UFP INDUSTRIES, INC.~~



	Three Months Ended September 26, 2020											Nine Months Ended September 24, 2022

	Retail		Industrial		Construction		All Other		Corporate	Total		Retail		Industrial		Construction		All Other		Corporate	Total
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	N/A	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	N/A	100.0	%
Cost of goods sold	84.9		82.9		86.1		68.0		—	83.8		90.4		75.7		76.8		69.3		—	81.4
Gross profit	15.1		17.1		13.9		32.0		—	16.2		9.6		24.3		23.2		30.7		—	18.6
Selling, general, administrative expenses	6.2		9.2		10.2		18.5		—	9.1		5.4		10.7		10.5		15.0		—	8.4
Other	—		—		—		0.4		—	—		0.2		—		—		0.3		—	—
Earnings from operations	8.9	%	7.8	%	3.7	%	13.1	%	—	7.2	%	4.2	%	13.6	%	12.7	%	15.4	%	—	10.1	%

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



	Nine Months Ended September 25, 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	91.4		79.1		81.3		66.0		—	84.4
Gross profit	8.6		20.9		18.7		34.0		—	15.6
Selling, general, administrative expenses	5.3		9.2		9.6		16.4		—	7.6
Other	—		—		—		(0.7)		—	(0.2)
Earnings from operations	3.3	%	11.7	%	9.1	%	18.3	%	—	8.2	%

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

Nine Months Ended September 26, 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

86.0

83.3

84.5

68.2

—

83.7

Gross profit

14.0

16.7

15.5

31.8

—

16.3

Selling, general, administrative expenses

6.7

9.7

11.3

19.0

—

9.5

Other

—

—

—

(1.0)

—

(0.1)

Earnings from operations

7.3
%
7.1
%
4.3
%
13.9
%
—

6.9
%

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

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UFP INDUSTRIES, INC.

NET SALES

We design, manufacture and market wood and wood-alternative products, primarily used to enhance outdoor living environments, for national home centers and other retailers, engineered wood components, structural lumber, and other products for ~~the manufactured housing industry, engineered wood components for~~factory-built and site-built residential and commercial construction, customized interior fixtures used in a variety of retail stores, commercial, and other structures, and ~~specialty~~structural 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										% Change
	in Sales		in Selling Prices		in Units		Acquisition Unit Change		Organic Unit Change		in Sales		in Selling Prices		in Units		Acquisition Unit Change		Organic Unit Change
Third quarter 2021 versus Third quarter 2020	40.9	%	27.9	%	13.0	%	16.0	%	(3.0)	%
Year-to-date 2021 versus Year-to-date 2020	76.0	%	46.0	%	30.0	%	25.0	%	5.0	%

Third quarter 2022 versus third quarter 2021											10.9	%	5.9	%	5.0	%	2.0	%	3.0	%
Year-to-date 2022 versus year-to-date 2021											16.5	%	11.5	%	5.0	%	3.0	%	2.0	%

●

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

●	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, ~~specialty~~structural wood packaging, engineered wood components, customized interior fixtures, manufactured and assembled concrete forms, and "wood alternative" products. Engineered wood components include roof trusses, wall panels, and floor systems. Wood alternative products consist of products manufactured with wood and non-wood composites, metal, and plastics. Although we consider the treatment of dimensional lumber and panels with certain chemical preservatives a value-added process, treated lumber is not presently included in the value-added sales totals. Remanufactured lumber and panels that are components of finished goods are also generally categorized as “commodity-based” products. The following table presents, for the periods indicated, our percentage of value-added and commodity-based sales to total sales by our segments (retail, industrial, construction, all other and corporate).

Three Months Ended September 25, 2021

Three Months Ended September 26, 2020


Value-Added

Commodity-Based

Value-Added

Commodity-Based

Retail

48.6
%

51.4
%

49.7
%

50.3
%

Industrial

69.2
%

30.8
%

63.7
%

36.3
%

Construction

74.5
%

25.5
%

74.3
%

25.7
%

All Other and Corporate

70.7
%

29.3
%

74.1
%

25.9
%

Total Sales

64.1
%

35.9
%

60.5
%

39.5
%

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 September 24, 2022				Three Months Ended September 25, 2021
	Value-Added		Commodity-Based		Value-Added		Commodity-Based
Retail	46.6	%	53.4	%	48.6	%	51.4	%
Industrial	73.8	%	26.2	%	69.2	%	30.8	%
Construction	81.1	%	18.9	%	74.5	%	25.5	%
All Other and Corporate	76.7	%	23.3	%	70.7	%	29.3	%
Total Sales	66.3	%	33.7	%	64.1	%	35.9	%

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UFP INDUSTRIES, INC.

		Nine Months Ended September 25, 2021				Nine Months Ended September 26, 2020					Nine Months Ended September 24, 2022				Nine Months Ended September 25, 2021
		Value-Added		Commodity-Based		Value-Added		Commodity-Based			Value-Added		Commodity-Based		Value-Added		Commodity-Based
Retail		43.3	%	56.7	%	54.4	%	45.6	%		44.2	%	55.8	%	43.3	%	56.7	%
Industrial		66.6	%	33.4	%	65.5	%	34.5	%		70.6	%	29.4	%	66.6	%	33.4	%
Construction		70.5	%	29.5	%	77.4	%	22.6	%		75.9	%	24.1	%	70.5	%	29.5	%
All Other and Corporate		71.6	%	28.4	%	75.0	%	25.0	%		74.9	%	25.1	%	71.6	%	28.4	%
Total Sales		58.2	%	41.8	%	64.6	%	35.4	%		62.2	%	37.8	%	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.	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.									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.

The increase in our ratio of commodity-based sales to total sales during the first nine months of 2021 reflected in the table above is primarily due to the impact of dramatically higher lumber prices in the first half of 2021, which have normalized during the third quarter. This is due to the fact that 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 Sunbelt and Spartanburg 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 ~~17%~~9% in the third quarter of ~~2021~~2022 compared to ~~2020, including~~2021, comprised of a ~~15%~~4% contribution from acquisitions and 2%5% organic growth. Our overall unit sales of value-added products increased approximately 7% in the first nine months of 2022 compared to the same period last year, comprised of a 3% contribution from acquisitions and 4% organic growth. Our organic unit sales of commodity-based products increased approximately ~~7%, including~~1% quarter-over-quarter and our overall unit sales of commodity-based products increased approximately 4% in the first nine months of 2022 compared to the same period last year, comprised of a ~~19%~~3% contribution from acquisitions and an1% organic ~~unit decline of 12%.~~growth.

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~~UFP INDUSTRIES, INC.~~

●

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 in the third quarter of ~~2021~~2022 increased ~~24%~~38%. Approximately ~~$10~~$303 million of new product sales for the first nine months of ~~2020,~~2021, while still sold, were sunset in ~~2021~~2022 and excluded from the table below because they no longer meet the definition above. ~~Our~~Through the first nine months of the year, we will have exceeded our goal ~~is to achieve~~of annual new product sales of at least ~~$575~~$525 million in ~~2021, which we have already attained. The table below presents new product sales in thousands:~~2022.

New Product Sales by Segment

New Product Sales by Segment

Three Months Ended

Nine Months Ended


September 25,

September 26,

%

September 25,

September 26,

%

2021

2020

Change

2021

2020

Change
Retail

$
111,795

118,731

(5.8)
%

$
375,798

$
301,602

24.6
%
Industrial

41,436

21,468

93.0
%

115,542

51,582

124.0
%
Construction

37,524

16,229

131.2
%

95,414

42,038

127.0
%
All Other and Corporate

5,998

2,495

140.4
%

13,419

8,082

66.0
%
Total New Product Sales

196,753

158,923

23.8
%

600,173

403,304

48.8
%

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.

The table below presents new product sales in thousands:


	New Product Sales by Segment						New Product Sales by Segment
	Three Months Ended						Nine Months Ended
	September 24,		September 25,		%		September 24,		September 25,		%
	2022		2021		Change		2022		2021		Change
Retail	$	80,237		56,847	41.1	%	$	247,410	$	176,814	39.9	%
Industrial		63,965		42,066	52.1	%		203,388		107,544	89.1	%
Construction		33,300		28,858	15.4	%		111,098		71,157	56.1	%
All Other and Corporate		481		763	(37.0)	%		1,875		1,671	12.2	%
Total New Product Sales		177,983		128,534	38.5	%	$	563,771	$	357,186	57.8	%

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.

Retail Segment

Net sales in the third quarter of ~~2021 decreased~~2022 increased by 1%21% compared to the same period of ~~2020,~~2021, primarily due to ~~acquisition unit growth~~a 15% increase in selling prices, a 2% decrease due to the transfer of ~~18%, which was offset by~~certain product sales to the Construction segment this year, an organic unit ~~decline~~increase of ~~19%~~5%, and unit growth from acquisitions of 3%. The price variance for this period was flat as the impact of lower prices on commodity-based products was offset by higher prices on value-added products which are generally sold at a fixed price. OrganicWe experienced organic unit ~~decreases of 29%~~growth in our ~~Handprint Home & Décor products, 28% in our~~Sunbelt (20%), UFP Edge (17%), Deckorators (8%), and ProWood ~~pressure-treated products, 14% in our Deckorators composite decking and railing products, and 8% in our Outdoor Essentials Fence, Lawn & Garden products~~(8%) business units. These increases were offset by organic unit ~~growth of 12%~~decreases in our Outdoor Essentials (17%) and Handprint (13%) business units. Capacity expansion contributed to our unit increases in UFP Edge ~~siding, pattern,~~ and ~~trim products. The decline in~~ our ~~unit~~Deckorators mineral-based composite decking. Finally, sales is primarily due to a shift in consumer spending as a result of the end of pandemic-related restrictions on certain activities. The increase in unit sales of UFP Edge was largely due to investments made to increase our capacity to produce these products as well as market share gains. Lastly, approximately $13 million of sales to customers that distribute products for concrete forming were transferred from the construction segment to the retail segment. Sales to big box customers were ~~down 8%~~up 30%, while sales to independent retailers increased ~~14%~~7%.

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UFP INDUSTRIES, INC.

Gross profits ~~decreased~~increased by ~~$94.8~~$66.6 million, or ~~89.7%~~615% to ~~$10.8~~$77.5 million for the third quarter of ~~2021~~2022 compared to the same period last year. ~~Our decrease~~The increase in gross profit was attributable to the following:

●

The gross profits of our Sunbelt and ProWood business ~~unit decreased~~units increased by ~~$68.7~~a total of $54.4 million, primarily due to a more stable lumber market this year compared to the ~~impact that declining lumber prices had on ProWood’s~~same period of 2021. The products sold by these units consist primarily of pressure treated ~~products that are~~lumber sold at a variable ~~price. Decreased unit sales also contributed~~price tied to the ~~reduction~~lumber market.

●

Our UFP Edge and Deckorators business units contributed $7.8 million to the increase in gross ~~profit.~~profits.

●

Acquired operations ~~reported a loss in gross profits and~~ contributed ~~$7.2~~$2.9 million to the ~~decrease due to the drop~~increase in ~~lumber prices.~~gross profits.

●

~~Unit~~The transfer of certain concrete forming business unit sales to the Construction segment partially offset the increase in gross profit by $2.7 million.

SG&A increased by approximately $11.5 million, or 31.3%, in the third quarter of 2022 compared to the same period of 2021. SG&A of recently acquired businesses added roughly $1.7 million to overall SG&A. Accrued bonus expense, which varies with our overall profitability and return on investment, increased approximately $5.1 million from the third quarter of 2021 and totaled approximately $8.0 million for the quarter. The remaining increase was primarily due to increases in salaries and wages of $1.9 million, sales incentive compensation of $0.5 million, and travel related expenses of $0.5 million.

Earnings from operations for the Retail reportable segment in the third quarter of 2022 were $28.9 million compared to a loss from operations in 2021 of $26.2 million, as a result of the factors mentioned above.

Net sales in the first nine months of 2022 increased by 9% compared to the same period of 2021, due to a 7% increase in selling prices and acquisition unit growth of 5%, offset by a 2% decrease due to the transfer of certain sales to the Construction segment, and an organic unit decrease of 1%. We experienced organic unit growth in our UFP Edge (9%), ProWood (1%), and Sunbelt (1%) business units. This increase was offset by organic unit decreases in our Deckorators (5%),Outdoor Essentials (15%), and Handprint (18%) business units. Capacity expansion contributed to our unit increase in UFP Edge. Finally, sales to big box customers increased 11%, while sales to independent retailers increased 3%.

Gross profits increased by $51.3 million, or 22.0% to $285.0 million for the first nine months of 2022 compared to the same period last year. Our increase in gross profit was attributable to the following:

●

The gross profits of our Sunbelt and ProWood business units increased by a total of $36.6 million, primarily due to the same factors discussed above.

●

Acquired operations contributed ~~$13.2~~$17.3 million to the ~~decline~~increase in gross profits.

●

The transfer of certain concrete forming business unit sales to the Construction segment partially offset the increase in gross profit for our Deckorators, Retail Building Products, Handprint, and Outdoor Essentials Fence, Lawn & Garden business units. UFP Edge experienced organic unit growth of 12% due to an increase in capacity, but had a reduction in gross profit of $5.7 million due to the fluctuation of lumber prices.by $9.4 million.

SG&A increased by approximately $15.1 million, or 10.5%, in the first nine months of 2022 compared to the same period of 2021. SG&A of recently acquired businesses added $5.8 million to overall SG&A. Accrued bonus expense, which varies with our overall profitability and return on investment, decreased approximately $5.4 million and totaled approximately $32.5 million for the first nine months of 2022. Bonus expense decreased due to the plan modification disclosed above. The remaining increase in SG&A was primarily due to increases in salaries and wages of $3.8 million, advertising of $2.0 million, travel-related expenses of $1.9 million, bad debt expenses of $1.1 million and employee benefits of $1.1 million.

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UFP INDUSTRIES, INC.

Selling, general and administrative (“SG&A”) expenses decreased by approximately $6.6 million, or 15.2%, in the third quarter of 2021 compared to the same period of 2020. The SG&A of recently acquired businesses contributed $4.8 million to the change in SG&A. This was offset by accrued bonus expense, which varies with our overall profitability and return on investment, which decreased by $12.0 million and totaled approximately $3.0 million for the quarter. The remaining change was primarily due to increases in salaries and wages and travel related expenses, offset by decreases in sales incentive compensation and bad debt expense.

Earnings from operations for the Retail reportable segment ~~decreased~~increased in the ~~third quarter~~first nine months of ~~2021~~2022 compared to ~~2020~~2021 by ~~$88.3~~$35.4 million, or ~~142%~~39.6%, as a result of the factors mentioned above.

Net sales in the first nine months of 2021 increased 63% compared to the same period of 2020, due to a 33% increase in selling prices and a 36% increase in unit sales from acquired operations, offset by a 6% decrease in organic unit sales. Organic unit increases of 21% of UFP Edge, 13% of Deckorators, and 7% of Outdoor Essentials, were offset by organic unit declines of 19% of ProWood and 11% of Handprint. The transfer of approximately $29 million in sales to the retail segment from the construction segment discussed above contributed to unit growth in the retail segment. Sales to big box customers were up 55% (12% organic), while sales to independent retailers decreased 5% (6% organic).

~~Gross profits increased 0.4% to $233.6 million in the first nine months of 2021 compared to the same period of 2020. Our change in gross profit was attributable to the following:~~

●

Our Retail Building Materials business unit contributed $26.3 million to the increase. This increase is primarily due to unit sales growth and rising lumber and panel prices combined with effective inventory positioning.

●

~~Our Deckorators, Outdoor Essentials, Handprint, E-Commerce, and UFP Edge business units contributed $0.2 million of additional gross profit.~~

●

~~Acquisitions contributed $6.7 million to the increase.~~

●

The gross profit of our ProWood business unit decreased by $31.8 million, primarily due to the impact that fluctuating lumber prices during the first nine months of the year had on ProWood’s pressure-treated products that are sold at a variable price.

Selling, general and administrative (“SG&A”) expenses increased by approximately $33.8 million, or 30.5%, in the first nine months of 2021 compared to the same period of 2020. The SG&A of recently acquired businesses contributed approximately $12.7 million to this increase. Accrued bonus expense, which varies with our overall profitability and return on investment, increased approximately $11.0 million and totaled approximately $37.9 for the first nine months of 2021. The remaining increase was primarily due to increases in salaries and wages, sales incentive compensation, and travel related expenses.

~~Earnings from operations for the Retail reportable segment decreased in the first nine months of 2021 compared to 2020 by $32.6 million, or 26.7% as a result of the factors mentioned above.~~

Industrial Segment

Net sales in the third quarter of ~~2021~~2022 increased ~~103%~~2% compared to the same period of ~~2020,~~2021, due to a ~~34% increase in unit sales from recent acquisitions and a 69%~~1% increase in selling prices ~~attributable~~and acquisition unit growth of 3%, offset by a 2% decrease in organic unit sales. The components of our change in organic unit sales includes increases associated with $12 million in sales to ~~favorable~~new customers, $22 million of sales ~~mix changes as well as the Lumber Market.~~to new locations of existing customers, and $12 million of new product sales. These increases were offset by decreases in unit sales on other accounts.

Gross profits increased by ~~$78.3~~$17.4 million, or ~~162.5%~~13.8%, for the third quarter of ~~2021~~2022 compared to the same period last year. Acquisitions contributed ~~$21.5~~$3.7 million to the increase in gross profit. The remaining increase ~~was primarily due to~~is a result of executing value-based selling initiatives and maintaining pricing discipline as we operate in an environment of elevated demand and capacity constraints, as well as favorable changes in our value-added sales ~~mix and the decline in lumber costs. We~~mix. Excluding acquisitions, we estimate that value-added ~~and commodity-based~~ products contributed ~~$36.5~~an $18.6 million ~~and $20.2 million, respectively, to the~~ increase in gross profit, while commodity-based products experienced a $4.9 million decline in gross profit.

~~Table~~ Value-added sales increased to 73.8% of ~~Contents~~

~~UFP INDUSTRIES, INC.~~total net sales in the third quarter of 2022 compared to 69.2% of total net sales in the third quarter of 2021. The increase in value-added sales and gross profits is due in part to new products which contributed $7.3 million to gross profits this year ($1.5 million from acquisitions).

~~Selling, general and administrative (“~~SG~~&A”) expenses~~&A increased by approximately ~~$29.6~~$10.8 million, or ~~113.7%~~19.4%, in the third quarter of ~~2021~~2022 compared to the same period of ~~2020.~~2021. Acquired operations since the third quarter of ~~2020~~2021 contributed approximately ~~$7.4~~$2.2 million to our increase in costs. Accrued bonus expense, which varies with our overall profitability and return on investment, increased approximately ~~$12.6~~$1.2 million relative to the third quarter of 2021, and totaled ~~$18.7~~$19.9 million for the quarter. Bonus expense was impacted by the plan modification disclosed above. The remaining increase was primarily due to increases in ~~salaries and wages, sales incentive compensation,~~bad debt expense of $4.9 million and travel related ~~expenses.~~expenses of $0.6 million.

Earnings from operations for the Industrial reportable segment increased in the third quarter of ~~2021~~2022 compared to ~~2020~~2021 by ~~$48.4~~$6.9 million, or ~~219.5%~~9.8%, due to the factors discussed above.

Net sales in the first nine months of ~~2021~~2022 increased ~~114%~~15% compared to the same period of ~~2020,~~2021, due to a ~~67%~~16% increase in selling prices ~~attributable to the Lumber Market~~ and ~~favorable sales mix changes,~~acquisition unit growth of 2%, offset by a ~~10%~~3% decrease in organic unit sales. The increase in our selling prices is a result of passing along higher lumber prices and other operating costs, 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 increases associated with $44 million in sales to new customers, $64 million of sales to new locations of existing customers, and ~~a 37% increase~~$80 million of new product sales ($16.7 million from acquisitions). These increases were offset by decreases in unit sales ~~from recent acquisitions.~~on other accounts.

Gross profits inincreased by $114.3 million, or 33.5%, for the first nine months of ~~2021 increased 167.3% to $213.6 million~~2022 compared to the same period ~~of 2020.~~last year. Acquisitions contributed ~~$57.9~~$6.8 million to the increase in gross profit. The remaining increase ~~was primarily due to organic unit sales growth and leveraging fixed costs~~is a result of the pricing increases discussed above as well as favorable changes in our value-added sales mix. ~~In addition,~~Excluding acquisitions, we estimate that value-added products and commodity-based products contributed $104.7 million and $2.8 million, respectively, to the increase in gross profit. Value-added sales increased to 70.6% of total net sales in the first ~~six~~nine months of 2022 compared to 66.6% of total net sales in the first nine months of 2021. The increase in value-added sales and gross profits is due in part to new products which contributed $33 million to gross profits this year ~~we were able to maintain our profit per unit by more effectively passing on commodity lumber and other cost increases in our selling prices.~~($4.6 million from acquisitions).

~~Selling, general and administrative (“~~29

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UFP INDUSTRIES, INC.

SG~~&A”) expenses~~&A increased by approximately ~~$77.1~~$50.2 million, or ~~104.6%~~33.3%, in the first nine months of ~~2021~~2022 compared to the same period of ~~2020.~~2021. Acquired operations since the third quarter of 2020 contributed approximately $21.3 million to total SG&A expenses. Accrued bonus expense increased approximately $37.9 million compared to the same period of 2020 and totaled approximately $50.4 for the first nine months of ~~2021.~~2021 contributed approximately $4.5 million to our increase in costs. Accrued bonus expense, which varies with our overall profitability and return on investment, increased approximately $12.9 million, and totaled $63.3 million for the nine months of 2022. Bonus expense was also impacted by the plan modification disclosed above. The remaining increase was primarily due to increases in bad debt expense of $12.9 million, sales incentive compensation of $6.2 million, travel related expenses of $1.6 million, medical benefits expense of $1.3 million, and salaries and wages ~~and sales incentive compensation.~~of $1.0 million.

Earnings from operations for the Industrial reportable segment increased in the first nine months of ~~2021~~2022 compared to ~~2020~~2021 by ~~$136.5~~$63.6 million, or ~~253.6%~~33.4%, due to the factors ~~mentioned~~discussed above.

Construction Segment

Net sales in the third quarter of ~~2021~~2022 increased ~~62%~~8% compared to the same period of ~~2020,~~2021, due to ~~a 43% increase in selling prices attributable to the Lumber Market and~~organic unit sales growth of ~~19%, including 3%~~6% and a 2% increase due to the transfer of certain sales from ~~recent acquisitions.~~the Retail segment. Organic unit changes within this segment ~~consisted~~consist of increases of ~~26%~~36% in commercial construction, ~~23%~~36% in ~~site-built construction, and 17%~~concrete forming, 9% in factory-built housing, offset by a ~~37%~~7% decrease in concrete forming. The transfer of approximately $13 million in sales to the retail segment from the construction segment discussed above contributed to the unit decline in the concrete forming business unit.site-built construction.

●

The organic increase in commercial is due primarily to an increase in customer demand in its retail business. As of September 24, 2022 and December 25, 2021, we estimate that backlog orders associated with commercial construction approximated $101.2 million and $84.6 million, respectively.

●

The organic unit increase in concrete forming is comprised of a 30% increase in our value-added unit sales and a 6% increase in our commodity-based unit sales. The unit increase in value-added sales is due to an increase in manufactured and assembled concrete forms and engineered wood product sales to new customers and existing customers as well as geographic expansion in the northeast.

●

The organic unit increase in factory-built is primarily due to an increase in industry production.

●

Capacity constraints impacted our ability to grow our site-built business unit. Consequently we have been selective in the business we take in order to maximize profitability. As of September 24, 2022 and December 25, 2021, we estimate that backlog orders associated with site-built construction approximated $118.1 million and $113.5 million, respectively.

Gross profits increased by ~~$92.0~~$45.5 million, or ~~148.2%~~29.5%, for the third quarter of ~~2021~~2022 compared to the same period of ~~2020.~~2021. The increase in our gross profit was comprised of the following factors:

●

Gross profits in our ~~factory-built housing~~site-built construction business unit increased ~~$20.6~~by $39.2 million as a result of ~~increased unit sales~~being more selective in the business that we take during this period of elevated demand and ~~leveraging fixed costs.~~capacity constraints.

●

Gross profits in our ~~site-built construction~~factory-built housing business unit ~~increased by $63.2~~decreased $4.6 million due to ~~unit sales growth and leveraging fixed costs and as a result~~the impact of ~~a decrease in lumber costs.~~falling market prices on certain variable priced products.

●

The gross profit of our commercial construction business unit increased ~~$7.1~~$6.4 million as a result of increased unit sales, better productivity and other operational ~~improvements.~~improvements, as well as improved pricing discipline.

●

The gross profit of our concrete forming business unit ~~decreased~~increased by ~~$0.3 million.~~$4.5 million, including $2.7 million as a result of the transfer of sales from the Retail segment.

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●

~~Acquired businesses contributed $1.3 million.~~

~~Selling, general and administrative (“~~SG~~&A”) expenses~~&A increased by approximately ~~$25.2~~$18.8 million, or ~~55.6%~~26.6%, in the third quarter of ~~2021~~2022 compared to the same period of ~~2020. Acquired operations since the third quarter of 2020 contributed approximately $1.1 million to total SG&A expenses for the quarter.~~2021. Accrued bonus expense, which varies with our overall profitability and return on investment, increased approximately ~~$14.8~~$8.0 million, and totaled ~~$19.5~~$27.5 million for the quarter. Bonus expense was also impacted by previously discussed modifications in our plan. The remaining increase was primarily due to increases in professional fees of $2.6 million, sales incentive compensation of $2.2 million, bad debt expense of $1.3 million, salaries and wages ~~sales incentive compensation, medical expenses,~~of $1.1 million, and travel related ~~expenses.~~

expenses of $0.5 million.

Earnings from operations for the Construction reportable segment increased in the third quarter of ~~2021~~2022 compared to ~~2020~~2021 by ~~$67.7~~$26.2 million, or ~~409.9%~~31.1%, due to the factors mentioned above.

Net sales in the first nine months of ~~2021~~2022 increased ~~70%~~25.6% compared to the same period of ~~2020,~~2021, due to a ~~52%~~13% increase in selling prices, ~~primarily~~3% due to the ~~Lumber Market~~transfer of certain product sales from the Retail segment, and organic unit sales growth of ~~18%, including 3% from acquisitions.~~10%. Organic unit changes within this segment consisted of increases of ~~27%~~30% in concrete forming, 43% in commercial construction, and 14% in factory-built ~~housing, 21% in~~housing. The organic unit sales of our site-built ~~construction, and 8% in commercial construction. These increases were offset~~business unit decreased by ~~a unit decline of 37% in concrete forming. The transfer of approximately $29 million in sales~~3% due to ~~the retail segment from the construction segment discussed above contributed to the unit decline in the concrete forming business unit.~~capacity constraints.

Gross profits increased by ~~$192.5~~$211.3 million, or ~~104.4%~~56.0%, for the first nine months of ~~2021~~2022 compared to the same period of ~~2020.~~2021. The increase in our gross ~~profits~~profit was comprised of the following factors:

●

Gross profits in our site-built construction business unit increased by $147.6 million as a result of being more selective in the business that we take during this period of elevated demand and capacity constraints.

●

Gross profits in our factory-built housing business unit increased ~~by $68.8~~$31.6 million as a result of increased unit sales and leveraging fixed costs. In addition, value-added sales in this business unit increased to 56.5% of total net sales in the first nine months of 2022 compared to 49.4% of total net sales in the first nine months of 2021. The increase in new product sales contributed approximately $2.5 million in gross profits this year.

●

~~Gross profits in~~The gross profit of our ~~site-built construction~~concrete forming business unit increased by ~~$105.6~~$14.6 million, due to unit sales growth and leveraging fixed costs. In addition, we were able to maintain our profit per unit by more effectively passing on commodity lumber and other cost increases in our selling prices in the first six monthsincluding $9.4 million as a result of the ~~year.~~transfer of sales from the Retail segment.

●

The gross profit of our commercial construction business unit increased ~~$8.2~~$16.2 million as a result of increased unit sales, better productivity and other operational ~~improvements.~~

●

~~The gross profit of our concrete forming business unit increased $5.0 million due to the factors discussed above.~~improvements, as well as improved pricing discipline.

●

Acquired businesses contributed ~~$5.0~~$1.2 million.

~~Selling, general and administrative (“~~SG~~&A”) expenses~~&A increased by approximately ~~$59.0~~$73.3 million, or ~~44.0%~~37.9%, in the first nine months of ~~2021~~2022 compared to the same period of ~~2020.~~2021. Acquired operations since the ~~third quarter~~first nine months of ~~2020~~2021 contributed approximately ~~$3.8~~$1.2 million to ~~total~~the increase in SG~~&A expenses.~~&A. Accrued bonus expense, which varies with our overall profitability and return on investment, increased approximately ~~$34.8~~$32.6 million, ~~compared to the same period of 2020~~ and totaled ~~approximately $46.2~~$78.8 million for the first nine months of ~~2021.~~2022. Bonus expense was also impacted by previously discussed modifications in our plan. The remaining increase was primarily due to increases in sales incentive compensation of $18.0 million, bad debt expense of $4.0 million, salaries and wages ~~sales incentive compensation,~~of $3.0 million, professional fees of $2.2 million, travel related expenses of $1.9 million, and medical ~~expenses, and professional design fees.~~

benefits of $1.2 million.

Earnings from operations for the Construction reportable segment increased in the first nine months of ~~2021~~2022 compared to ~~2020~~2021 by ~~$133.8~~$137.7 million, or ~~264.7%~~74.7%, 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.

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Corporate

The corporate segment consists of over (under) allocated costs that are not significant, and in the prior year it also consisted of gains on the sale of certain real estate.

INCOME TAXES

OFF-BALANCE SHEET TRANSACTIONS

We have no significant off-balance sheet transactions.

LIQUIDITY AND CAPITAL RESOURCES

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


	Nine Months Ended				Nine Months Ended
	September 25,		September 26,		September 24,		September 25,
	2021		2020		2022		2021
Cash from operating activities	$	281,763	$	185,083	$	533,046	$	281,763
Cash used in investing activities		(528,257)		(100,927)		(222,612)		(528,257)
Cash (used in) from financing activities		(33,593)		95,178
Cash used in financing activities						(151,654)		(33,593)
Effect of exchange rate changes on cash		(292)		(1,122)		(139)		(292)
Net change in all cash and cash equivalents		(280,379)		178,212		158,641		(280,379)
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	$	156,229	$	346,878	$	449,864	$	156,229

In general, we fund our growth 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, resulted in a more significant increase in net working capital this year relative to prior years.

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UFP INDUSTRIES, INC.

Due to the seasonality of our business and the effects of the Lumber Market, we believe our cash cycle (days of sales outstanding plus days supply of inventory less days payables outstanding) is a good indicator of our working capital management. As indicated in the table below, our cash cycle ~~increased~~decreased to 5755 days from 4357 days during the third quarter ~~and to 52 days from 49 days during the first nine months~~ of ~~2021~~2022 compared to the ~~respective~~ prior ~~periods.~~year period.


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 25,		September 26,		September 25,		September 26,		September 24,		September 25,		September 24,		September 25,
	2021		2020		2021		2020		2022		2021		2022		2021
Days of sales outstanding		35		31		34		32		35		35		34		34
Days supply of inventory		43		31		38		37		40		43		39		38
Days payables outstanding		(21)		(19)		(20)		(20)		(20)		(21)		(20)		(20)
Days in cash cycle		57		43		52		49		55		57		53		52

The ~~increase~~decrease in our cash cycle in the third quarter of 2022 compared to the same period of 2021 was primarily due to a three day decrease in our days supply of inventory partially offset by a one day decrease in our payables cycle. The decrease in our days supply of inventory in the ~~first nine months of 2021 compared to the same period of 2020~~third quarter was ~~primarily~~ due to ~~lower retail~~more typical seasonal demand ~~than our customers anticipated for~~trends in the current year which allowed us to improve our inventory ~~planning. The four day increase in our receivables cycle was primarily due to longer payment terms~~turns.

Our cash flows from operations for ~~new customers attributable to recent acquisitions.~~

In the first nine months of ~~2021, our~~2022 increased to $533 million compared to $282 million of cash ~~provided by operating activities was $281.8 million, which was comprised~~from operations during the first nine months of 2021. This improvement in operational cash flows is due to net earnings ~~of $405.4~~and non-cash expenses totaling $687 million, ~~and $69.1~~compared to $475 million ~~of non-cash expenses,~~last year, offset by a ~~$192.7~~$154 million increase in net working capital since the end of ~~December 2020. Our operating cash flow this~~last year, ~~increased by $96.7 million~~ compared to ~~the same period of last year primarily due to an~~a $193 million increase in ~~our net earnings and non-cash expenses of $229.8 million, offset by an increase~~the prior year. This year, customer demand, particularly in our ~~investment in net working capital of $133.1 million compared~~retail segment, followed more typical seasonal trends which allowed us to ~~the prior year period. This increase was due to unusually high lumber prices and increased demand in~~improve our ~~industrial and construction segments. PalletOne and other acquisitions also contributed to the increase in our seasonal investment in net working capital.~~inventory turns.

~~Acquisitions and purchases~~Purchases of property, plant, and equipment and acquisitions (refer to Note F for Business Combinations) comprised most of our cash used in investing activities during the first nine months of ~~2021~~2022 and totaled ~~$433.3~~$113.7 million and ~~$110.1~~$105.2 million, respectively. Net purchases of investments totaled $6.9 million. Total proceeds from the sales of property, plant, and equipment were ~~$26.6~~$2.3 million. Outstanding purchase commitments on existing capital projects totaled approximately ~~$44.1~~$65.4 million on September ~~25, 2021.~~24, 2022. Capital spending primarily consists of several projects to expand capacity to manufacture new and value-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~~older 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 ~~$147~~$175 million on capital projects for the ~~year.~~year subject to significant variability due to extended 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 and wood-plastic composite decking and our UFP Edge siding, pattern and trim products, expand our capacity to produce machine-built ~~pallet capacity,~~pallets and engineered wood components, and take advantage of automation opportunities.

Cash flows from financing activities ~~primarily~~ consisted of ~~net repayments~~cash paid for repurchases of ~~debt~~common stock of $93.2 million. We repurchased approximately ~~$1.4~~1.21 million shares of our common stock for $93.2 million for the year at an average share price of $77.06. The total number of remaining shares that may be repurchased under the program is approximately 1.4 million. Dividends paid during the first nine months of 2022 include first quarter dividends of $12.5 million ($0.20 per share) and second and third quarter dividends of $30.9 million ($0.25 per share). On October 19, 2022, the Board approved a quarterly dividend payment of quarterly dividends totaling $27.8 million ($0.15 per share), and distributions to noncontrolling interests of $2.9 million. On October 20, 2021, our board of directors approved an increase in our fourth quarter dividend to $0.20$0.25 per share, payable on December 15, ~~2021,~~2022, to shareholders of record on December 1, ~~2021.~~2022. Net repayments of debt were approximately $2.3 million and distributions to noncontrolling interests were $12.0 million. We have debt maturities of $38.7 million due in December of this year which we intend to repay through operating cash flows and available cash balances.

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UFP INDUSTRIES, INC.

On September ~~25, 2021,~~24, 2022, we had ~~$3.2~~$6.9 million outstanding on our $550 million revolving credit facility, and we had approximately ~~$539.7~~$536.0 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 September ~~25, 2021.~~24, 2022.

At the end of the third quarter of ~~2021,~~2022, we have approximately ~~$667.5 million~~$1.5 billion in total liquidity, consisting of our net cash surplus and remaining availability under our revolving credit ~~facility. We anticipate our liquidity will continue~~facility and a shelf agreement with certain lenders providing up to ~~increase~~$500 million in ~~the last three months of 2021 as lumber prices and demand continue to normalize and we convert our seasonal increase in net working capital to cash.~~borrowing capacity.

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~~UFP INDUSTRIES, INC.~~

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.

FORWARD OUTLOOK

Most recently, our long-term goals have been to:

●

Grow our annual unit sales by 5-7%. We anticipate smaller tuck in acquisitions will continue to contribute toward this goal.

●

Achieve and sustain a 10% EBITDA margin by continuing to enhance our capabilities and grow our portfolio of value-added products.

●

Earn an incremental return on new investment over our cost of capital.

●

Maintain a conservative capital structure.

We believe the effective execution of our strategies will allow us to achieve these long-term goals in the future. However, current economic conditions indicate the U.S. economy is either in or headed towards a recession, which will impact our results and vary depending on its severity and duration. The following factors should be considered when evaluating our future results:

●

Retail sales accounted for 38% of our net sales for the first nine months of 2022. When evaluating future demand for the segment, we analyze data such as the same-store sales growth of national home improvement retailers and forecasts of home remodeling activity.

●

Industrial sales accounted for 24% of our net sales for the first nine months of 2022. When evaluating future demand, we consider a number of metrics, including the Purchasing Managers Index (PMI), durable goods manufacturing, and U.S. real GDP.

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●

Construction sales accounted for 31% of our net sales for the first nine months of 2022.

The site-built business unit accounted for approximately 14% of our net sales for the first nine months of 2022. Approximately one-third of site-built customers are multifamily builders. More than 75% of our site-built residential housing sales are in areas such as Texas and the Mid-Atlantic, Southeast and Mountain West regions, which have experienced significant population growth through migration from other states and are forecasted to continue to grow in the long term. When evaluating future demand, we analyze data from housing starts in those regions.

The factory-built business unit accounted for 13% of our net sales for the first nine months of 2022. This business, along with our multifamily business, could benefit from higher interest rates as buyers seek more affordable housing alternatives. As a result of these factors, we believe these customers are better insulated from downturns in the housing market. When evaluating future demand, we analyze data from production of manufactured housing.

The commercial and concrete forming business units accounted for approximately 6% of our net sales for the first nine months of 2022. When evaluating future demand, we analyze data from non-residential construction spending.

●

On a consolidated basis, and based on our 2022 forecasted results of operations and business mix, we believe our decremental operating margin is in a range of 15% to 20% of net sales. In other words, we believe for every dollar decrease in sales, relative to the prior year, our earnings from operations may decline by $0.15 to $0.20. As a point of reference, our peak to trough decremental operating margin during the Great Recession was approximately 13.5% (2006 peak to 2011 trough). We estimate that our decremental margins by segment are as follows:

Retail is in a range of 5% to 10%

Industrial is in a range of 20% to 25%

Construction is in a range of 20% to 25%

●

Key factors that may impact the ranges provided above include estimates of:

Changes in our selling prices

Changes in our sales mix by segment, business unit, and product

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

Changes in labor rates

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

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

Inflation and other changes in costs

Capital Allocation:

We believe the strength of our cash flow generation and conservative capital structure will provide us with sufficient resources to grow our business and also return to shareholders. We plan to continue to pursue a balanced and return driven approach to capital allocation across dividends, share buybacks, capital investments and acquisitions. Specifically:

●

Our board just approved another quarterly dividend of $0.25 per share share, representing an increase of 67% from the prior year. We continue to consider our payout ratios and yield when determining the appropriate rate.

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UFP INDUSTRIES, INC.

●

For the first nine months of 2022, we repurchased 1.2 million shares of our stock at an average price of $77.06. We have remaining authorization to repurchase up to an additional 1.4 million shares through the balance of the year and will continue to do so at times when the price hits our pre-established target.

●

Capital expenditures in 2022 are likely to be at or below the low end of our targeted capital expenditures range of $175-$225 million, due to the extended lead times required for most equipment and rolling stock. Priority continues to be given to projects that enhance the working environments of our plants, take advantage of automation opportunities, and drive strategies that have strong long-term growth potential of new and value-added products.

●

We continue to pursue a healthy pipeline of acquisition opportunities of companies that are a strong strategic fit and enhance our capabilities while providing higher margin, return, and growth potential.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We are exposed to market risks related to fluctuations in interest rates on our variable rate debt, which consists of a revolving credit facility and industrial development revenue bonds. We do not currently use interest rate swaps, futures contracts or options on futures, or other types of derivative financial instruments to mitigate this risk.

For fixed rate debt, changes in interest rates generally affect the fair market value, but not earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not influence fair market value, but do affect future earnings and cash flows. We do not have an obligation to prepay fixed rate debt prior to maturity, and as a result, interest rate risk and changes in fair market value should not have a significant impact on such debt until we would be required to refinance it.

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 September ~~25, 2021~~24, 2022 (the “Evaluation Date”), have concluded that, as of such date, our disclosure controls and procedures were effective.

(b)

Changes in Internal Controls. During the quarter ended September ~~25, 2021,~~24, 2022, there were no changes in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, except for the implementation of a control to address the material weakness in control over our share-based bonus awards disclosed in our 2020 Form 10-K, which was remediated in the first quarter of 2021.reporting.

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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.


Fiscal Month	(a)	(b)	(c)	(d)
June 2726 – July ~~31, 2021~~30, 2022	—	—	—	~~1,103,957~~1,394,248
July 31 – August ~~1 – 28, 2021~~27, 2022	—	—	—	~~1,103,957~~1,394,248
August 2928 – September ~~25, 2021~~24, 2022	—	—	—	~~1,103,957~~1,394,248

(a)	Total number of shares purchased.

(b)	Average price paid per share.

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

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

On November 14, 2001, the Board of Directors approved a share repurchase program (which succeeded a previous program) allowing us to repurchase up to 2.5 million shares of our common stock. On October 14, 2010, our Board authorized ~~an additional~~ 2 million shares to be repurchased under our share repurchase program. 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 ~~1.1~~1.4 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:


31	Certifications.

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

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

32	Certifications.

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UFP INDUSTRIES, INC.

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

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

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

	(INS)	iXBRL Instance Document.

~~��~~	(SCH)	iXBRL Schema Document.

	(CAL)	iXBRL Taxonomy Extension Calculation Linkbase Document.

	(LAB)	iXBRL Taxonomy Extension Label Linkbase Document.

	(PRE)	iXBRL Taxonomy Extension Presentation Linkbase Document.

	(DEF)	iXBRL Taxonomy Extension Definition Linkbase Document.

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

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~~UFP INDUSTRIES, INC.~~

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	UFP INDUSTRIES, INC.

Date: November 3, ~~2021~~2022	By:	/s/ Matthew J. Missad
	Matthew J. Missad,
	Chief Executive Officer and Principal Executive Officer


Date: November 3, ~~2021~~2022	By:	/s/ Michael R. Cole
	Michael R. Cole,
	Chief Financial Officer,
	Principal Financial Officer and
	Principal Accounting Officer

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