UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~March 26, 2022~~April 1, 2023


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

Commission File Number 0-22684

UFP INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)


	Michigan		38-1465835
	(State or other jurisdiction of incorporation or		(I.R.S. Employer Identification Number)
	organization)

	2801 East Beltline NE, Grand Rapids, Michigan		49525
	(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (616) 364-6161


	NONE
	(Former name or former address, if changed since last report.)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer ⌧	Accelerated Filer ◻	Non-Accelerated Filer ◻	Smaller Reporting Company ☐
			Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with a new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


	Class		Outstanding as of ~~March 26, 2022~~April 1, 2023
	Common stock, $1 par value		~~62,734,161~~62,095,570


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 April 1, 2023, December 31, 2022 and March 26, 2022 ~~December 25, 2021 and March 27, 2021~~	3

		Condensed Consolidated Statements of Earnings and Comprehensive Income for the Three Months Ended April 1, 2023 and March 26, 2022 ~~and March 27, 2021~~	4

		Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended April 1, 2023 and March 26, 2022 ~~and March 27, 2021~~	5

		Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 1, 2023 and March 26, 2022 ~~and March 27, 2021~~	6

		Notes to Unaudited Condensed Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1716

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2830

	Item 4.	Controls and Procedures	2930

PART II.		OTHER INFORMATION

	Item 1.	Legal Proceedings – NONE

	Item 1A.	Risk Factors - NONE	2931

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2931

	Item 3.	Defaults upon Senior Securities – NONE

	Item 4.	Mine Safety Disclosures – NONE

	Item 5.	Other Information – NONE	3031

	Item 6.	Exhibits	3032

Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share data)

March 26,

December 25,

March 27,


2022

2021

2021

ASSETS





CURRENT ASSETS:





Cash and cash equivalents

$
73,783

$
286,662

$
44,399

Restricted cash

729

4,561


629

Investments

35,465

36,495


31,439

Accounts receivable, net

1,095,362

737,805


808,105

Inventories:





Raw materials

576,023

416,043


438,762

Finished goods

654,328

547,277


384,652

Total inventories

1,230,351

963,320


823,414

Refundable income taxes

—

4,806


—

Other current assets

36,727

39,827


29,072

TOTAL CURRENT ASSETS

2,472,417

2,073,476

1,737,058

DEFERRED INCOME TAXES

3,590

3,462


2,290

RESTRICTED INVESTMENTS

19,390

19,310


17,209

RIGHT OF USE ASSETS

99,914

96,703

98,404

OTHER ASSETS

32,544

31,876


27,358

GOODWILL

317,631

315,038


314,189

INDEFINITE-LIVED INTANGIBLE ASSETS

7,396

7,369


7,401

OTHER INTANGIBLE ASSETS, NET

120,205

109,017


93,812

PROPERTY, PLANT AND EQUIPMENT:





Property, plant and equipment

1,244,070

1,212,113

1,060,893

Less accumulated depreciation and amortization

(643,191)

(623,093)


(572,526)

PROPERTY, PLANT AND EQUIPMENT, NET

600,879

589,020

488,367

TOTAL ASSETS

3,673,966

3,245,271

2,786,088

LIABILITIES AND SHAREHOLDERS’ EQUITY





CURRENT LIABILITIES:





Cash overdraft

$
61,711

$
17,030

$
47,140

Accounts payable

425,956

319,125


299,398

Accrued liabilities:





Compensation and benefits

189,509

289,196


137,208

Income taxes

54,682

—

25,565

Other

102,434

84,853


78,560

Current portion of lease liability

26,015

23,155

23,051

Current portion of long-term debt

42,895

42,683


109

TOTAL CURRENT LIABILITIES

903,202

776,042


611,031

LONG-TERM DEBT

379,015

277,567


426,310

LEASE LIABILITY

76,969

76,632

76,408

DEFERRED INCOME TAXES

61,278

60,964


34,940

OTHER LIABILITIES

35,330

37,497


50,856

TOTAL LIABILITIES

1,455,794

1,228,702


1,199,545

SHAREHOLDERS’ EQUITY:





Controlling interest shareholders’ equity:





Preferred stock, 0 par value; shares authorized 1,000,000; issued and outstanding, NaN

$
—

$
—

$
—

Common stock, $1 par value; shares authorized 80,000,000; issued and outstanding, 62,734,161, 61,901,851 and 61,838,256

62,734

61,902


61,838

Additional paid-in capital

266,544

243,995


231,111

Retained earnings

1,851,784

1,678,121


1,276,722

Accumulated other comprehensive loss

(3,170)

(5,405)


(3,464)

Total controlling interest shareholders’ equity

2,177,892

1,978,613


1,566,207

Noncontrolling interest

40,280

37,956


20,336

TOTAL SHAREHOLDERS’ EQUITY

2,218,172

2,016,569


1,586,543

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$
3,673,966

$
3,245,271

$
2,786,088


(in thousands, except share data)	April 1,		December 31,		March 26,
	2023		2022		2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	423,299	$	559,397	$	73,783
Restricted cash		761		226		729
Investments		37,534		36,013		35,465
Accounts receivable, net		809,389		617,604		1,095,362
Inventories:
Raw materials		425,835		398,798		576,023
Finished goods		534,503		574,429		654,328
Total inventories		960,338		973,227		1,230,351
Refundable income taxes		—		33,126		—
Other current assets		35,692		42,520		36,727
TOTAL CURRENT ASSETS		2,267,013		2,262,113		2,472,417
DEFERRED INCOME TAXES		4,194		3,750		3,590
RESTRICTED INVESTMENTS		22,267		19,898		19,390
RIGHT OF USE ASSETS		116,564		107,517		99,914
OTHER ASSETS		99,516		101,262		32,544
GOODWILL		337,467		337,320		317,631
INDEFINITE-LIVED INTANGIBLE ASSETS		7,336		7,339		7,396
OTHER INTANGIBLE ASSETS, NET		142,277		143,892		120,205
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment		1,408,360		1,379,968		1,244,070
Less accumulated depreciation and amortization		(708,205)		(690,986)		(643,191)
PROPERTY, PLANT AND EQUIPMENT, NET		700,155		688,982		600,879
TOTAL ASSETS		3,696,789		3,672,073		3,673,966
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Cash overdraft	$	—	$	—	$	61,711
Accounts payable		277,989		206,941		425,956
Accrued liabilities:
Compensation and benefits		142,603		296,120		189,509
Income taxes		1,855		—		54,682
Other		77,054		80,255		102,434
Current portion of lease liability		27,838		25,577		26,015
Current portion of long-term debt		3,020		2,942		42,895
TOTAL CURRENT LIABILITIES		530,359		611,835		903,202
LONG-TERM DEBT		275,002		275,154		379,015
LEASE LIABILITY		92,182		85,419		76,969
DEFERRED INCOME TAXES		51,254		51,265		61,278
OTHER LIABILITIES		35,550		44,697		35,330
TOTAL LIABILITIES		984,347		1,068,370		1,455,794
TEMPORARY EQUITY:
Redeemable noncontrolling interest	$	6,801	$	6,880	$	—
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, 62,095,570, 61,618,193 and 62,734,161		62,096		61,618		62,734
Additional paid-in capital		325,730		294,029		266,544
Retained earnings		2,293,025		2,217,410		1,851,784
Accumulated other comprehensive loss		(5,074)		(9,075)		(3,170)
Total controlling interest shareholders’ equity		2,675,777		2,563,982		2,177,892
Noncontrolling interest		29,864		32,841		40,280
TOTAL SHAREHOLDERS’ EQUITY		2,705,641		2,596,823		2,218,172
TOTAL LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS’ EQUITY	$	3,696,789	$	3,672,073	$	3,673,966

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
	Three Months Ended
	March 26,		March 27,		April 1,		March 26,
	2022		2021		2023		2022
NET SALES	$	2,489,313	$	1,825,004	$	1,822,476	$	2,489,313
COST OF GOODS SOLD		2,010,950		1,538,450		1,464,147		2,010,950
GROSS PROFIT		478,363		286,554		358,329		478,363
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		220,150		150,098		194,683		220,150
OTHER GAINS, NET		(812)		(1,031)
OTHER LOSSES (GAINS), NET						1,938		(812)
EARNINGS FROM OPERATIONS		259,025		137,487		161,708		259,025
INTEREST EXPENSE		3,302		3,151		3,118		3,302
INTEREST AND INVESTMENT LOSS (INCOME)		1,093		(2,296)
EQUITY IN EARNINGS OF INVESTEE		515		630
INTEREST AND INVESTMENT (INCOME) LOSS						(6,547)		1,093
EQUITY IN LOSS OF INVESTEE						588		515
		4,910		1,485		(2,841)		4,910
EARNINGS BEFORE INCOME TAXES		254,115		136,002		164,549		254,115
INCOME TAXES		60,984		31,751		38,971		60,984
NET EARNINGS		193,131		104,251		125,578		193,131
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(3,428)		(940)
NET LOSS (EARNINGS) ATTRIBUTABLE TO NONCONTROLLING INTEREST						491		(3,428)
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST	$	189,703	$	103,311	$	126,069	$	189,703

EARNINGS PER SHARE – BASIC	$	3.01	$	1.67	$	2.01	$	3.01
EARNINGS PER SHARE – DILUTED	$	3.00	$	1.67	$	1.98	$	3.00

OTHER COMPREHENSIVE INCOME:
NET EARNINGS		193,131		104,251		125,578		193,131
OTHER COMPREHENSIVE GAIN (LOSS)		3,184		(2,196)
OTHER COMPREHENSIVE INCOME						6,252		3,184
COMPREHENSIVE INCOME		196,315		102,055		131,830		196,315
LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		(4,377)		(414)
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST						(1,760)		(4,377)
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST	$	191,938	$	101,641	$	130,070	$	191,938

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 25, 2021

$
61,902

$
243,995

$
1,678,121

$
(5,405)

$
37,956

$
2,016,569
Net earnings





189,703



3,428


193,131
Foreign currency translation adjustment







2,930

949


3,879
Unrealized loss on debt securities







(695)



(695)
Distributions to noncontrolling interest









(2,053)

(2,053)
Additional purchase of noncontrolling interest

—
Cash dividends - $0.20 per share - quarterly

(12,541)





(12,541)
Issuance of 9,734 shares under employee stock purchase plan

10

653







663
Issuance of 787,045 shares under stock grant programs

787

8,959







9,746
Issuance of 79,973 shares under deferred compensation plans

80

(80)







—
Repurchase of 44,442 shares

(45)

(3,499)






(3,544)
Expense associated with share-based compensation arrangements

6,883





6,883
Accrued expense under deferred compensation plans

6,134








6,134
Balance on March 26, 2022

$
62,734

$
266,544

$
1,851,784

$
(3,170)

$
40,280

$
2,218,172


(in thousands, except share and per share data)
	Controlling Interest Shareholders’ Equity
							Accumulated
			Additional				Other
	Common		Paid-In		Retained		Comprehensive		Noncontrolling				Temporary
	Stock		Capital		Earnings		Earnings		Interest (NCI)		Total		Equity
Balance on December 31, 2022	$	61,618	$	294,029	$	2,217,410	$	(9,075)	$	32,841	$	2,596,823	$	6,880
Net earnings (loss)						126,069				(313)		125,756		(178)
Foreign currency translation adjustment								3,850		2,195		6,045		56
Unrealized gain on debt securities								151				151
Distributions to NCI										(4,859)		(4,859)
Other												—		43
Cash dividends - $0.25 per share - quarterly						(15,642)						(15,642)
Issuance of 10,140 shares under employee stock purchase plan		10		675								685
Issuance of 824,669 shares under stock grant programs		825		14,356		6						15,187
Issuance of 93,165 shares under deferred compensation plans		93		(93)								—
Repurchase of 450,597 shares		(450)				(34,818)						(35,268)
Expense associated with share-based compensation arrangements				9,598								9,598
Accrued expense under deferred compensation plans				7,165								7,165
Balance on April 1, 2023	$	62,096	$	325,730	$	2,293,025	$	(5,074)	$	29,864	$	2,705,641	$	6,801

(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


(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 (NCI)		Total		Equity
Balance on December 25, 2021	$	61,902	$	243,995	$	1,678,121	$	(5,405)	$	37,956	$	2,016,569	$	—
Net earnings						189,703				3,428		193,131
Foreign currency translation adjustment								2,930		949		3,879
Unrealized loss on debt securities								(695)				(695)
Distributions to NCI										(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	$	—

See notes to consolidated condensed financial statements.

Table of Contents

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(in thousands)	Three Months Ended				Three Months Ended
	March 26,		March 27,		April 1,		March 26,
	2022		2021		2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net earnings	$	193,131	$	104,251	$	125,578	$	193,131
Adjustments to reconcile net earnings to net cash from operating activities:
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation		21,842		18,733		25,774		21,842
Amortization of intangibles		4,672		3,998		5,009		4,672
Expense associated with share-based and grant compensation arrangements		6,931		2,981		9,637		6,931
Deferred income taxes		101		142
Unrealized loss (gain) on investments and other		1,601		(1,754)
Equity in earnings of investee		515		630
Deferred income taxes (credit)						(242)		101
Unrealized (gain) loss on investments and other						(149)		1,601
Equity in loss of investee						588		515
Net gain on sale and disposition of assets		(306)		(532)		(164)		(306)
Changes in:
Accounts receivable		(352,928)		(253,323)		(191,064)		(352,928)
Inventories		(258,019)		(207,768)		14,674		(258,019)
Accounts payable and cash overdraft		143,895		121,892		68,388		143,895
Accrued liabilities and other		(6,466)		14,090		(95,105)		(6,466)
NET CASH USED IN OPERATING ACTIVITIES		(245,031)		(196,660)		(37,076)		(245,031)
CASH FLOWS FROM INVESTING ACTIVITIES:
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(32,072)		(34,656)		(38,166)		(32,072)
Proceeds from sale of property, plant and equipment		1,207		5,062		319		1,207
Acquisitions and purchases of non-controlling interest, net of cash received		(24,571)		(261,133)
Acquisitions, net of cash received and purchase of equity method investment						—		(24,571)
Purchases of investments		(6,030)		(8,738)		(11,709)		(6,030)
Proceeds from sale of investments		4,725		3,381		8,849		4,725
Other		(2,995)		(414)		(1,151)		(2,995)
NET CASH USED IN INVESTING ACTIVITIES		(59,736)		(296,498)		(41,858)		(59,736)
CASH FLOWS FROM FINANCING ACTIVITIES:
CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities		242,950		236,280		4,437		242,950
Repayments under revolving credit facilities		(141,438)		(121,570)		(4,518)		(141,438)
Repayments of debt		(199)		—		(29)		(199)
Contingent consideration payments and other		(551)		(627)		(6,179)		(551)
Proceeds from issuance of common stock		663		363		685		663
Dividends paid to shareholders		(12,541)		(9,274)		(15,642)		(12,541)
Distributions to noncontrolling interest		(2,053)		(2,914)		(4,859)		(2,053)
Repurchase of common stock		(501)		—		(33,288)		(501)
Other		—		(331)		25		—
NET CASH PROVIDED BY FINANCING ACTIVITIES		86,330		101,927
NET CASH (USED IN) FROM FINANCING ACTIVITIES						(59,368)		86,330
Effect of exchange rate changes on cash		1,726		(349)		2,739		1,726
NET CHANGE IN CASH AND CASH EQUIVALENTS		(216,711)		(391,580)		(135,563)		(216,711)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR		291,223		436,608		559,623		291,223
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	74,512	$	45,028	$	424,060	$	74,512

RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents, beginning of period	$	286,662	$	436,507	$	559,397	$	286,662
Restricted cash, beginning of period		4,561		101		226		4,561
Cash, cash equivalents, and restricted cash, beginning of period	$	291,223	$	436,608	$	559,623	$	291,223

Cash and cash equivalents, end of period	$	73,783	$	44,399	$	423,299	$	73,783
Restricted cash, end of period		729		629		761		729
Cash, cash equivalents, and restricted cash, end of period	$	74,512	$	45,028	$	424,060	$	74,512

SUPPLEMENTAL INFORMATION:
Interest paid	$	2,896	$	2,964	$	3,309	$	2,896
Income taxes paid		1,700		249		4,138		1,700
NON-CASH INVESTING ACTIVITIES
Capital expenditures included in accounts payable		2,512		—		3,122		2,512
NON-CASH FINANCING ACTIVITIES:
Common stock issued under deferred compensation plans		6,705		5,359	$	7,950	$	6,705

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.~~States of America. All significant intercompany ~~transactions~~balances and ~~balances~~transactions have been ~~eliminated.~~eliminated in consolidation.

We consolidate entities in which we have a controlling financial interest. In determining whether we have a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity (“VIE”) and whether we are the primary beneficiary. The primary beneficiary of a VIE is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. The primary beneficiary is required to consolidate the VIE. We account for unconsolidated VIEs using the equity method of accounting.

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 ~~25, 2021.~~31, 2022.

Seasonality has a significant impact on our working capital from March to August, which historically results in negative or modest cash flows from operations in our first and second quarters. Conversely, we experience a substantial decrease in working capital from September to February which typically results in significant cash flow from operations in our third and fourth quarters. For comparative purposes, we have included the March ~~27, 2021~~26, 2022 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 and is being applied prospectively to all business combinations occurring after this date.

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B. FAIR VALUE

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


	March 26, 2022								March 27, 2021								April 1, 2023								March 26, 2022
	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	$	18	$	9,641	$	—	$	9,659	$	19	$	1,127	$	—	$	1,146	$	208,129	$	928	$	—	$	209,057	$	18	$	9,641	$	—	$	9,659
Fixed income funds		2,279		16,128		—		18,407		244		16,264		—		16,508		3,838		17,882		—		21,720		2,279		16,128		—		18,407
Treasury securities		342		—		—		342		—		—		—		—		343		—		—		343		342		—		—		342
Equity securities		19,289		—		—		19,289		18,496		—		—		18,496		16,977		—		—		16,977		19,289		—		—		19,289
Alternative investments		—		—		3,964		3,964		—		—		2,126		2,126		—		—		4,103		4,103		—		—		3,964		3,964
Mutual funds:
Domestic stock funds		10,576		—		—		10,576		9,388		—		—		9,388		10,108		—		—		10,108		10,576		—		—		10,576
International stock funds		1,621		—		—		1,621		1,395		—		—		1,395		1,092		—		—		1,092		1,621		—		—		1,621
Target funds		22		—		—		22		21		—		—		21		8		—		—		8		22		—		—		22
Bond funds		141		—		—		141		145		—		—		145		5,294		—		—		5,294		141		—		—		141
Alternative funds		501		—		—		501		496		—		—		496		468		—		—		468		501		—		—		501
Total mutual funds		12,861		—		—		12,861		11,445		—		—		11,445		16,970		—		—		16,970		12,861		—		—		12,861
Total	$	34,789	$	25,769	$	3,964	$	64,522	$	30,204	$	17,391	$	2,126	$	49,721	$	246,257	$	18,810	$	4,103	$	269,170	$	34,789	$	25,769	$	3,964	$	64,522
Assets at fair value	$	34,789	$	25,769	$	3,964	$	64,522	$	30,204	$	17,391	$	2,126	$	49,721

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~~UFP INDUSTRIES, INC.~~

From the assets measured at fair value as of ~~March 26, 2022,~~April 1, 2023, listed in the table above, ~~$35.4~~$208.8 million of money market funds are held in Cash and Cash Equivalents, $37.5 million of mutual funds, equity securities, and alternative investments are held in Investments, ~~$9.0 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 ~~$18.7~~$22.1 million of fixed income funds and ~~$0.7~~$0.3 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 $59.6 million and $54.2 million as of April 1, 2023 and March 26, 2022, respectively, 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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Ardellis’ available for sale investment portfolio, including funds held with the State of Michigan, consists of the following (in thousands):


	March 26, 2022						March 27, 2021						April 1, 2023						March 26, 2022
			Unrealized						Unrealized						Unrealized						Unrealized
	Cost		Gain		Fair Value		Cost		Gain		Fair Value		Cost		Gain (Loss)		Fair Value		Cost		Gain (Loss)		Fair Value
Fixed Income	$	19,049	$	(642)	$	18,407	$	15,867	$	642	$	16,509	$	23,610	$	(1,890)	$	21,720	$	19,049	$	(642)	$	18,407
Treasury Securities		342		—		342		—		—		—		343		—		343		342		—		342
Equity		15,347		3,942		19,289		14,664		3,832		18,496		14,976		2,001		16,977		15,347		3,942		19,289
Mutual Funds		9,392		2,820		12,212		8,769		2,049		10,818		15,553		901		16,454		9,392		2,820		12,212
Alternative Investments		3,028		936		3,964		1,929		197		2,126		3,131		972		4,103		3,028		936		3,964
Total	$	47,158	$	7,056	$	54,214	$	41,229	$	6,720	$	47,949	$	57,613	$	1,984	$	59,597	$	47,158	$	7,056	$	54,214

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 pre-tax unrealized gain of the portfolio was $2.0 million and $7.1 ~~million.~~million as of April 1, 2023 and March 26, 2022, respectively. Carrying amounts above are recorded in the investments and restricted investments line items within the balance sheet as of April 1, 2023 and March 26, ~~2022 and March 27, 2021.~~2022.

C. REVENUE RECOGNITION

Within the 3three primary segments, ~~(Retail, Industrial,~~UFP Retail Solutions (“Retail”), UFP Packaging (“Packaging” and ~~Construction)~~formerly known as UFP Industrial) and UFP Construction (“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 third party. Installation revenue is recognized upon completion. If we use a third party for installation, the party will act as an agent to us until completion of the installation. Installation revenue represents an immaterial share of our total net sales.

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~~UFP INDUSTRIES, INC.~~

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.

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UFP INDUSTRIES, INC.

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.

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					Three Months Ended
	March 26,		March 27,			April 1,		March 26,
	2022		2021		% Change	2023		2022		% Change
Point in Time Revenue	$	2,450,281	$	1,797,399	36.3%	$	1,784,456	$	2,450,281	(27.2)%
Over Time Revenue		39,032		27,605	41.4%		38,020		39,032	(2.6)%
Total Net Sales		2,489,313		1,825,004	36.4%		1,822,476		2,489,313	(26.8)%

The Construction segment comprises the construction contract revenue shown above. Construction contract revenue is primarily made up of site-built and framing customers.

The following table presents the balances of over time accounting accounts which are included in “Other current assets” and “Accrued liabilities: Other”, respectively (in thousands):


	March 26,		December 25,		March 27,		April 1,		December 31,		March 26,
	2022		2021		2021		2023		2022		2022
Cost and Earnings in Excess of Billings	$	6,759	$	5,602	$	3,408	$	5,415	$	6,798	$	6,759
Billings in Excess of Cost and Earnings		12,634		10,744		9,396		10,797		10,184		12,634

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D. EARNINGS PER SHARE

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


	Three Months Ended				Three Months Ended
	March 26,		March 27,		April 1,		March 26,
	2022		2021		2023		2022
Numerator:
Net earnings attributable to controlling interest	$	189,703	$	103,311	$	126,069	$	189,703
Adjustment for earnings allocated to non-vested restricted common stock		(6,806)		(3,175)
Adjustment for earnings allocated to non-vested restricted common stock equivalents						(5,581)		(6,806)
Net earnings for calculating EPS	$	182,897	$	100,136	$	120,488	$	182,897
Denominator:
Weighted average shares outstanding		63,009		61,889		62,725		63,009
Adjustment for non-vested restricted common stock		(2,261)		(1,902)
Adjustment for non-vested restricted common stock equivalents						(2,777)		(2,261)
Shares for calculating basic EPS		60,748		59,987		59,948		60,748
Effect of dilutive restricted common stock		225		28
Effect of dilutive restricted common stock equivalents						855		225
Shares for calculating diluted EPS		60,973		60,015		60,803		60,973
Net earnings per share:
Basic	$	3.01	$	1.67	$	2.01	$	3.01
Diluted	$	3.00	$	1.67	$	1.98	$	3.00

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 ~~March 26, 2022,~~April 1, 2023, we were parties either as plaintiff or defendant to a number of lawsuits and claims arising through the normal course of our business. In the opinion of management, our consolidated financial statements will not be materially affected by the outcome of these contingencies and claims.

On ~~March 26, 2022,~~April 1, 2023, we had outstanding purchase commitments on commenced capital projects of approximately ~~$68.7~~$63.8 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 ~~March 26, 2022,~~April 1, 2023, we had approximately ~~$30.0~~$15.0 million in outstanding payment and performance bonds for open projects. We had approximately ~~$11.1~~$24.8 million in payment and performance bonds outstanding for completed projects which are still under warranty.

On ~~March 26, 2022,~~April 1, 2023, we had outstanding letters of credit totaling ~~$51.7~~$55.3 million, primarily related to certain insurance contracts, ~~and~~ industrial development revenue bonds, and other debt agreements described further below.

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In lieu of cash deposits, we provide irrevocable letters of credit in favor of our insurers and other third parties to guarantee our performance under certain insurance ~~contracts.~~contracts and other legal agreements. As of ~~March 26, 2022,~~April 1, 2023, we have irrevocable letters of credit outstanding totaling approximately ~~$44.6~~$52.0 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~~those 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~~$3.3 million related to our outstanding industrial development revenue bonds. These letters of credit have varying terms but may be renewed at the option of the issuing banks.

Certain wholly owned domestic subsidiaries have guaranteed the indebtedness of UFP Industries, Inc. in certain debt agreements, including the Series 2012, 2018 and 2020 Senior Notes and our revolving credit facility. The maximum exposure of these guarantees is limited to the indebtedness outstanding under these debt arrangements and this exposure will expire concurrent with the expiration of the debt agreements.

We did not enter into any new guarantee arrangements during the first quarter of ~~2022~~2023 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 fiscal 2022 and~~ since the end of March ~~2021,~~2022, which were accounted for using the purchase 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

December 27, 2021

$24,571
cash paid for 100% stock purchase, net of acquired cash

15,959

8,612

Retail

December 6, 2022

$71,009 cash paid for 100% asset purchase

48,812

22,197

Packaging

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.

Titan Corrugated, Inc. (Titan) and All Boxed Up, LLC

Located in Flower Mound, TX and founded in 2003, Titan’s primary products include boxes used in moving and storage, jumbo boxes for industrial products, corrugated shipping containers, and point-of-purchase displays. All Boxed Up distributes common box sizes manufactured by Titan throughout the United States. The combined companies had trailing 12-month sales through October 2022 of approximately $46.5 million.

December 20, 2021

$20,817
cash paid for 100% stock purchase

11,480

9,337

Industrial

June 27, 2022

$69,791 cash paid for equity method investment

34,552

35,239

Packaging

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.

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.

November 22, 2021

$11,155
cash paid for 70% stock purchase

9,106

2,049

Other

May 9, 2022

$15,398
cash paid for 100% asset purchase

4,821

10,577

Retail

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.

November 1, 2021

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

5,681

303

Other

Boxpack Packaging (Boxpack)

Based near Melbourne, Australia, Boxpack specializes in flexographic and lithographic cardboard packaging, using the latest CAD design and finishing techniques. Boxpack serves multiple industries, including food and beverage, confectionary, pharmaceutical, industrial and agricultural. The company had trailing 12-month sales through June 30, 2021, of $8.2 million AUD.

September 27, 2021

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

4,039

2,404

Construction

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.

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.

The intangible assets for the above investments have not been finalized and allocated to their respective identifiable asset and goodwill accounts. In aggregate, investments completed since the end of March 2022 and not consolidated with

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UFP INDUSTRIES, INC.

other operations contributed approximately $12.8 million in net sales and $0.5 million in operating profits during the first three months of 2023.

As a result of the investment in Dempsey on June 27, 2022, we own 50% of the issued equity of that entity, 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 April 1, 2023, the carrying value of our investment in Dempsey is $66.7 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.

The business combinations mentioned above were not significant to our operating results individually or in aggregate, and thus pro forma results for 2023 and 2022 are not presented.

Net

Company
Acquisition

Intangible
Tangible
Operating
Name
Date
Purchase Price
Assets
Assets
Segment

April 29, 2021
$10,129
cash paid for 100% asset purchase
$
7,099
$
3,030
Construction
Endurable Building Products, LLC (Endurable)
Based near Minneapolis, Minnesota, Endurable is a leading manufacturer of customized structural aluminum systems and products for exterior purposes, such as deck framing, balconies, sunshades, railings and stairs. The company’s trademarked alumiLAST aluminum deck and balcony systems are known for their low-maintenance design and ease of installation. Endurable serves general contractors in the multifamily market throughout the U.S. and had sales of approximately $15 million in 2020.

April 19, 2021
$8,549
cash paid for 100% asset purchase
$
1,526
$
7,023
Retail
Walnut Hollow Farm, Inc.
Walnut Hollow Farm, located in Wisconsin, is engaged in the business of designing, manufacturing, selling, and distributing wood products, tools, and accessories for the craft and hobby, outdoor sportsman art, personalized home décor, and hardware categories, with sales of approximately $11.6 million in 2020.

April 12, 2021
$153,462
cash paid for 100% asset purchase
$
—
$
153,462
Retail
Spartanburg Forest Products, Inc.
Headquartered in Greer, South Carolina, Spartanburg Forest Products and its affiliates are a premier wood treating operation in the U.S., with approximately 150 employees and operations in 5 states. Its affiliates include Appalachian Forest Products, Innovative Design Industries, Blue Ridge Wood Preserving, Blue Ridge Wood Products, and Tidewater Wood Products and had combined sales of approximately $543.0 million in 2020.

The intangible assets for the above acquisitions have not been finalized and allocated to their respective identifiable asset and goodwill accounts. In aggregate, acquisitions completed since the end of March 2021 and not consolidated with other operations contributed approximately $124.6 million in net sales and $10.3 million in operating profits during the first three months of 2022.

G. SEGMENT REPORTING

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

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~~UFP INDUSTRIES, INC.~~

“Corporate” includes purchasing, transportation and administrative functions that serve our operating segments. Operating results of Corporate primarily consist of net sales to external customers initiated by UFP Purchasing and UFP Transportation and over (under) allocated costs. The operating results of UFP Real Estate, Inc., which owns and leases real estate, and UFP Transportation Ltd., which owns, leases and operates transportation equipment, are also included in the Corporate column. Inter-company lease and service charges are assessed to our operating segments for the use of these assets and services at fair market value rates. Total assets in the Corporate column include unallocated cash and cash equivalents, certain prepaid assets, certain property, equipment and other assets pertaining to the centralized activities of Corporate, UFP Real Estate, Inc., UFP Transportation, Inc., UFP Purchasing, Inc., and UFP RMS, LLC. The tables below are presented in thousands:

Three Months Ended March 26, 2022


Retail

Industrial

Construction

  All Other

  Corporate

      Total
Net sales to outside customers

$
993,232

$
611,369

$
786,471

$
95,567

$
2,674

$
2,489,313
Intersegment net sales

65,948

22,173

25,352

109,772

(223,245)

—
Segment operating profit

71,397

82,391

78,818

14,815

11,604

259,025

Three Months Ended March 27, 2021


Retail

Industrial

Construction

  All Other

  Corporate

      Total
Net sales to outside customers

$
759,021

$
448,874

$
559,530

$
55,577

$
2,002

$
1,825,004
Intersegment net sales

47,586

17,906

14,461

97,396

(177,349)

—
Segment operating profit

53,545

40,410

33,018

7,978

2,536

137,487

~~The following table presents goodwill by segment as of March 26, 2022, and December 25, 2021 (in thousands):~~

Retail

Industrial

Construction

All Other

Corporate

Total
Balance as of December 25, 2021

$
73,376

$
128,541

$
89,000

$
24,121

$
—

$
315,038
2022 Acquisitions

8,012

—

—

—

—

8,012
2022 Purchase Accounting Adjustments

293

(5,715)

(674)

99

—

(5,997)
Foreign Exchange, Net

—

—

156

422

—

578
Balance as of March 26, 2022

$
81,681

$
122,826

$
88,482

$
24,642

$
—

$
317,631

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

Total Assets by Segment

March 26,

December 26,

Segment Classification
2022

2021

% Change
Retail
$
1,205,382

$
844,189

42.8
%
Industrial

857,706

741,672

15.6

Construction

858,901

736,157

16.7

All Other

356,568

343,363

3.8

Corporate

395,409

579,890

(31.8)

Total Assets
$
3,673,966

$
3,245,271

13.2
%

~~H. INCOME TAXES~~

Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for foreign, state and local income taxes and permanent tax differences. Our effective tax rate was 24.0% in the first quarter of 2022 compared to 23.3% for same period in 2021.~~The increase was primarily due to one-time tax credit refunds recorded as a discrete item in the first quarter of 2021 that are not available in 2022.~~


	Three Months Ended April 1, 2023
	Retail		Packaging		Construction		All Other		Corporate		Total
Net sales to outside customers	$	749,577	$	486,561	$	515,593	$	67,512	$	3,233	$	1,822,476
Intersegment net sales		223,325		20,050		25,836		77,487		(346,698)		—
Earnings from operations		41,056		54,732		54,248		4,034		7,638		161,708

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	Three Months Ended March 26, 2022
	Retail		Packaging		Construction		All Other		Corporate		Total
Net sales to outside customers	$	993,232	$	611,369	$	786,471	$	95,567	$	2,674	$	2,489,313
Intersegment net sales		65,948		22,173		25,352		109,772		(223,245)		—
Earnings from operations		71,397		82,391		78,818		14,815		11,604		259,025

The following table presents goodwill by segment as of April 1, 2023, and December 31, 2022 (in thousands):


	Retail		Packaging		Construction		All Other		Corporate		Total
Balance as of December 31, 2022	$	84,640	$	148,909	$	87,670	$	16,101	$	—	$	337,320
Foreign Exchange, Net		—		—		28		119		—		147
Balance as of April 1, 2023	$	84,640	$	148,909	$	87,698	$	16,220	$	—	$	337,467

The following table presents total assets by segment as of April 1, 2023, and December 31, 2022 (in thousands).


	Total Assets by Segment
	April 1,		December 31,
Segment Classification	2023		2022		% Change
Retail	$	1,077,283	$	889,417	21.1	%
Packaging		856,966		885,878	(3.3)
Construction		709,347		712,837	(0.5)
All Other		299,510		308,688	(3.0)
Corporate		753,683		875,253	(13.9)
Total Assets	$	3,696,789	$	3,672,073	0.7	%

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 23.7% in the first quarter of 2023 compared to 24.0% in the first quarter of 2022.The decrease was primarily due to a reduction in foreign income in higher tax jurisdictions.

I. COMMON STOCK

Below is a summary of common stock issuances for the first three months of ~~2022~~2023 and ~~2021~~2022 (in thousands, except average share price):

March 26, 2022
Share Issuance Activity

Common Stock

Average Share Price
Shares issued under the employee stock purchase plan

10

$
80.04

Shares issued under the employee stock gift program

1

84.85
Shares issued under the director retainer stock program

1

80.78
Shares issued under the bonus plan

725

79.61
Shares issued under the executive stock match plan

62

82.87
Forfeitures

(2)

Total shares issued under stock grant programs

787

$
79.87

Shares issued under the deferred compensation plans

80

$
83.84


	April 1, 2023
Share Issuance Activity	Common Stock		Average Share Price
Shares issued under the employee stock purchase plan	10	$	79.47

Shares issued under the employee stock gift program	1		90.30
Shares issued under the director retainer stock program	1		96.33
Shares issued under the bonus plan	756		86.14
Shares issued under the executive stock match plan	75		85.89
Forfeitures	(8)
Total shares issued under stock grant programs	825	$	86.12

Shares issued under the deferred compensation plans	93	$	85.33

March 27, 2021
Share Issuance Activity

Common Stock

Average Share Price
Shares issued under the employee stock purchase plan

6

$
73.28

Shares issued under the employee stock gift program

1

79.91
Shares issued under the director retainer stock program

2

56.80
Shares issued under the bonus plan

468

53.68
Shares issued under the executive stock grants plan

77

60.24
Forfeitures

(11)

Total shares issued under stock grant programs

537

$
54.63

Shares issued under the deferred compensation plans

89

$
59.75

During the first three months of 2022, we repurchased approximately 44,442 shares of our common stock at an average share price of $79.74. In April 2022, we repurchased approximately 756,000 shares for $58.5 million, at an average share price of $77.40.

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

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During the first three months of 2023, we repurchased 450,597 shares of our common stock at an average share price of $78.27.


	March 26, 2022
Share Issuance Activity	Common Stock		Average Share Price
Shares issued under the employee stock purchase plan	10	$	80.04

Shares issued under the employee stock gift program	1		84.85
Shares issued under the director retainer stock program	1		80.78
Shares issued under the bonus plan	725		79.61
Shares issued under the executive stock grants plan	62		82.87
Forfeitures	(2)
Total shares issued under stock grant programs	787	$	79.87

Shares issued under the deferred compensation plans	80	$	83.84

During the first three months of 2022, we repurchased 44,442 shares of our common stock at an average share price of $79.74.

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~~overhead and is determined ~~on a~~using the weighted average ~~FIFO basis.~~cost method. Raw materials consist primarily of unfinished wood products and other materials expected to be manufactured or treated prior to sale, while finished goods represent various manufactured and treated wood products ready for sale.

We write down the value of inventory, the impact of which is reflected in cost of goods sold in the Condensed Consolidated Statement of Earnings and Comprehensive Income, if the cost of specific inventory items on hand exceeds the amount we expect to realize from the ultimate sale or disposal of the inventory. These estimates are based on management's judgment regarding future demand and market conditions and analysis of historical experience. There ~~were 0~~was a $0.7 million lower of cost or net realizable value ~~adjustments~~adjustment to inventory as of April 1, 2023 and no adjustment as of March 26, ~~2022 and March 27, 2021.~~2022.

K. SUBSEQUENT EVENTS

~~In April 2022, we added $500 million of borrowing capacity by entering into a shelf facility with multiple lenders~~Subsequent to ~~support future growth.~~ No ~~amounts have been drawn on this facility.~~

~~Additionally in April 2022,~~our reporting date, we repurchased 150,000 shares of our common stock for approximately ~~756,000 shares for $58.5~~$12.0 million, at an average share price of ~~$77.40.~~$79.73.

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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 design, manufacture, and supply products made from wood, wood ~~composite~~and non-wood composites, and other ~~products~~materials to three ~~markets:~~segments: retail, ~~industrial,~~packaging, and construction. Our business segments are functionally interdependent and are supported by common corporate services, such as accounting and finance, information technology, human resources, marketing, legal and compliance, and others. We regularly invest in automation and create best practices to improve the efficiency of our manufacturing facilities across each of the segments. The results and improvements from these investments are shared among the segments. This exchange of improvements and ideas has also prompted better and faster innovation for new products, processes, and product improvements. While the majority of our facilities serve only one business segment, a variety of our larger facilities serve two or more segments.

We believe that our operating structure allows us to better evaluate market conditions and opportunities and more effectively allocate capital and resources to the appropriate segments and business units. Also, we believe that the diversification and manner in which we operate our business provides an inherent hedge against the inevitable business cycles that our markets experience and over which we have little control. Accordingly, our goal is to provide more stable earnings and cash flows to our shareholders. Our diversification and operating practices also mitigate the impact of more volatile lumber market conditions experienced by traditional lumber companies. We are headquartered in Grand Rapids, ~~Michigan.~~Mich. For more information about UFP Industries, Inc., or ~~our~~its 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~~We do 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 currency and inflation; fluctuations in the price of lumber; ~~adverse or unusual weather conditions;~~ adverse economic conditions in the markets we serve; concentration of sales to customers; vertical integration strategies; excess capacity or supply chain challenges; our ability to make successful business acquisitions; government regulations, particularly involving environmental and safety ~~regulations, government imposed “stay at home” orders~~regulations; adverse or unusual weather conditions; inbound and ~~directives~~outbound transportation costs; alternatives to ~~cease or curtail operations;~~replace treated wood products; Cybersecurity breaches; tariffs on import and ~~our ability to make successful business acquisitions.~~export sales; and potential pandemics. Certain of these risk factors as well as other risk factors and additional information are included in ~~the Company's~~our reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission. We are pleased to present this overview of the first quarter of ~~2022.~~2023.

OVERVIEW

Our results for the first quarter of ~~2022~~2023 include the following highlights:

●

Our net sales ~~were up 36%~~decreased 27% compared to the first quarter of ~~2021,~~2022, which was comprised of a ~~26% increase~~20% decrease in selling prices ~~primarily due to the commodity lumber market (see Historical Lumber Prices below),~~and an 8% decrease in organic unit sales, offset by a 7%1% increase in unit sales due to acquisitions completed since March of last ~~year,~~year. The overall decrease in our selling prices is primarily due to lower lumber prices and ~~a 3% increase~~more competitive pricing in ~~organic unit sales.~~certain business units. Organic unit ~~growth of 14% in our construction segment was offset by an organic unit decline of~~declines include 2% in our retail segment, ~~and~~ 4% in our ~~industrial segment.~~

●

Our operating profits increased $121.5 million, or 88%, compared to the first quarter of 2021. This increase resulted from a variety of factors including improved leveraging of our fixed costs, the impact of rising lumber prices on the selling prices of commodity-based products sold on a variable price formula, and growth of our new and value-added products which have higher gross margins. In addition, our ability to effectively include lumber and other cost increases in the selling prices of our products as well as value-based selling practices has enabled us to maintain our profit per unit. Acquisitions contributed approximately $10.3 million to our increase in operating profits. Excluding the impact of acquisitions, gross profits increased by $176 million and we estimate that value-added and commodity-based products contributed $133 million and $43 million, respectively, to this increase.

●

Our cash flows used by operations for the first three months of 2022 increased to $245 million compared to $197 million during the first three months of 2021, primarily due to an increased investment in net working capital of $148 million, offset by an increase in net earnings and non-cash expenses of $100 million. The increasepackaging segment, 16% in our ~~net working capital requirements during the first quarter of 2022 was due to higher lumber prices, growth~~construction segment, and 20% in our ~~business, and an increase in our days supply of inventory to ensure we meet the delivery expectations of our customers.~~international segment.

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●

Our gross profits decreased by $120 million, or 25.1%, compared to the same period of the prior year. Acquired operations contributed $2.2 million to our gross profits. We estimate that gross profits on value-added product sales decreased by $49.9 million and gross profits on commodity-based product sales decreased by $72.3. Our gross profits declined by $39.9 million in Retail, $39.8 million in Construction, $28.7 million in Packaging, and $12.5 million in International. The overall decline in gross profits is primarily due to the decline in unit sales, unfavorable cost variances as a result of fixed manufacturing costs, more competitive pricing in certain business units, and the favorable impact of rising lumber prices in the first quarter of 2022 on products we sell in the Retail segment that are based on variable selling price.

●

Our operating profits decreased $97 million, or 37.6%, compared to the first quarter of 2022. Acquisitions contributed approximately $0.5 million to our operating profits. The overall decrease is a result of the decline in gross profits mentioned above offset by a $25.5 million decrease in selling, general, and administrative (“SG&A”) expenses. Our SG&A declined primarly due to our incentive compensation plans which are tied to profitability and return on investment. Our decremental operating margin comparing our decrease in operating profits relative to decrease in net sales was 14.6%, which was slightly better than the estimated range of 15% to 20% we previously disclosed.

●

Our cash flows used in operations was $37 million in the first three months of 2023 compared to $245 million during the first three months of 2022. The $208 million improvement resulted from a seasonal increase in net working capital that was $270 million lower in the first quarter of 2023 than it was in the first quarter of 2022 and a $5 million increase in non-cash expenses in 2023, offset by a $67 million decrease in net earnings compared to the prior year.

●

Our cash surplus at the end of March 2023 was $145 million compared to net debt (debt and cash overdraft less cash) ~~at the end~~ of ~~March 2022 was~~ $410 ~~million compared to $429~~ million at the end of March ~~2021.~~2022. 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 ~~$445.3 million~~$1.7 billion at the end of the first quarter of ~~2022.~~2023.

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
	2022			2021		2023			2022
January	$	1,112		$	890	$	386		$	1,112
February		1,225			954		437			1,225
March		1,321			1,035		411			1,321

First quarter average	$	1,219		$	960	$	411		$	1,219

First quarter percentage change		27.0	%				(66.3)	%

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UFP INDUSTRIES, INC.

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.


	Southern Yellow Pine					Southern Yellow Pine
	Average $/MBF					Average $/MBF
	2022			2021		2023			2022
January	$	1,010		$	858	$	406		$	1,010
February		1,115			903		452			1,115
March		1,198			938		464			1,198

First quarter average	$	1,108		$	900	$	441		$	1,108

First quarter percentage change		23.1	%				(60.2)	%

~~The sequential increase in~~Lower overall lumber prices ~~for~~in the first quarter of 2023 compared to the ~~year was~~first quarter of 2022 is primarily due to ~~strong market~~increased capacity and supply of lumber in North America while demand ~~as well as certain constraints in the supply chain of lumber.~~for lumber has declined. A 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 ~~61.4%~~40.3% and ~~63.1%~~61.4% of our sales in the first three months of ~~2022~~2023 and ~~2021,~~2022, respectively. The decrease from the prior year ratio reflects the significant decrease in the Lumber Market as well as an improvement in our sales mix of value-added products ~~as well as~~and 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.

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~~UFP INDUSTRIES, INC.~~

●

Products with fixed selling prices. These products include value-added products, such as manufactured items, sold within all segments. Prices for these products are generally fixed at the time of the sales quotation for a specified period of time. In order to reduce any exposure to adverse trends in the price of component lumber products, we attempt to lock in costs with our suppliers or purchase necessary inventory for these sales commitments. The time period limitation eventually allows us to periodically re-price our products for changes in lumber costs from our suppliers. ~~We believe our percentage of sales of fixed price items is usually greatest in our third and fourth quarters.~~

●

Products with selling prices indexed to the reported Lumber Market with a fixed dollar “adder” to cover conversion costs and profit. These products primarily include treated lumber, panel goods, other commodity-type items, and trusses sold to the manufactured housing industry. For these products, we estimate the customers’ needs and we carry anticipated levels of inventory. Because lumber costs are incurred in advance of final sale prices, subsequent increases or decreases in the market price of lumber impact our gross margins. We believe our sales of these products are at their highest relative level in our ~~second~~third quarter, primarily due to pressure-treated lumber sold in our retail segment.

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For each of the product pricing categories above, our margins are exposed to changes in the trend of lumber prices. As a result of the balance in our net sales of each category we believe our gross profits are more stable than those of our competitors who are less diversified.

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~~includes treated lumber, which comprised approximately ~~16%~~20% of our total ~~annual~~net sales in ~~2021.~~the first three months of 2023. 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 new Sunbelt and Spartanburg Forest Products plants began participating in these consignment programs in 2022, and we~~We estimate that ~~24.2%~~17% of ~~their inventory was consigned with vendors.~~our total purchases for the first three months of 2023 were completed under these 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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~~UFP INDUSTRIES, INC.~~

BUSINESS COMBINATIONS

We completed ~~one~~no business ~~acquisition~~acquisitions during the first three months of fiscal ~~2022~~2023 and ~~nine~~four during all of fiscal ~~2021.~~2022. The annual historical sales attributable to acquisitions completed ~~in the first three months of fiscal 2022 is approximately $85 million, while acquisitions completed~~ during the ~~last~~ nine months of ~~2021 have annual sales of~~2022 was approximately ~~$626~~$133 million. These business combinations were not significant to our quarterly results individually or in aggregate and thus pro forma results for ~~2022~~2023 and ~~2021~~2022 are not presented.

See Notes to the Unaudited Condensed Consolidated Financial Statements, Note F, “Business Combinations” for additional information.

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RESULTS OF OPERATIONS

The following table presents, for the periods indicated, the components of our Unaudited Condensed Consolidated Statements of Earnings as a percentage of net sales.


	Three Months Ended				Three Months Ended
	March 26,		March 27,		April 1,		March 26,
	2022		2021		2023		2022
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	80.8		84.3		80.3		80.8
Gross profit	19.2		15.7		19.7		19.2
Selling, general, and administrative expenses	8.8		8.2		10.7		8.8
Other (gains) losses, net	—		(0.1)
Other losses (gains), net					0.1		—
Earnings from operations	10.4		7.6		8.9		10.4
Other expense, net	0.2		0.1		(0.2)		0.2
Earnings before income taxes	10.2		7.5		9.0		10.2
Income taxes	2.4		1.7		2.1		2.4
Net earnings	7.8		5.7		6.9		7.8
Less net earnings attributable to noncontrolling interest	(0.1)		(0.1)		—		(0.1)
Net earnings attributable to controlling interest	7.6	%	5.7	%	6.9	%	7.6	%

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

Three Months Ended


March 26,

March 27,


2022

2021
Units sold

10.0
%

33.0
%
Gross profit

66.9

71.3

Selling, general, and administrative expenses

46.7

37.3

Earnings from operations

88.4

134.5

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	Percentage Change
	Three Months Ended
	April 1,		March 26,
	2023		2022
Units sold	(7.0)	%	10.0	%
Gross profit	(25.1)		66.9
Selling, general, and administrative expenses	(11.6)		46.7
Earnings from operations	(37.6)		88.4

The following table presents, for the periods indicated, our selling, general, and administrative (SG&A) costs as a percentage of gross profit. Given our strategies to enhance our capabilities and improve our value-added product offering, and recognizing the higher relative level of SG&A ~~costs~~ these strategies require, we believe this ratio provides an enhanced view of our effectiveness in managing these costs and mitigates the impact of changing lumber prices.

Three Months Ended

March 26,

March 27,

2022

2021

Gross profit
$
478,363

$
286,554

Selling, general, and administrative expenses
$
220,150

$
150,098

SG&A as percentage of gross profit

46.0%

52.4%



	Three Months Ended
		April 1,		March 26,
		2023		2022
Gross profit	$	358,329	$	478,363
Selling, general, and administrative expenses	$	194,683	$	220,150
SG&A as percentage of gross profit		54.3%		46.0%

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UFP INDUSTRIES, INC.

Operating Results by Segment:

Our business segments consist of UFP Retail Solutions (“Retail”), UFP ~~Industrial~~Packaging (“Packaging” and formerly known as UFP Industrial) and UFP Construction (“Construction”), and align with the end markets we serve. Among other things, this structure allows for a more specialized and consistent sales approach among Company operations, more efficient use of resources and capital, and quicker introduction of new products and services. We manage the operations of 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,~~Packaging, and Construction segments. The exception to this market-centered reporting and management structure is our International segment, which comprises our Mexico, Canada, Europe, Asia, and Australia operations and sales and buying offices in other parts of the world. Our International segment and Ardellis (our insurance captive) 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 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 operates transportation equipment, are also included in the Corporate column. Inter-company lease 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 March 26, 2022												Three Months Ended April 1, 2023

	Retail		Industrial		Construction		All Other		Corporate		Total		Retail		Packaging		Construction		All Other		Corporate		Total
Net sales	$	993,232	$	611,369	$	786,471	$	95,567	$	2,674	$	2,489,313	$	749,577	$	486,561	$	515,593	$	67,512	$	3,233	$	1,822,476
Cost of goods sold		858,895		461,815		625,059		64,024		1,157		2,010,950		655,139		365,663		393,934		47,876		1,535		1,464,147
Gross profit		134,337		149,554		161,412		31,543		1,517		478,363		94,438		120,898		121,659		19,636		1,698		358,329
Selling, general, administrative expenses		62,668		67,231		82,337		16,625		(8,711)		220,150		53,355		66,252		67,338		13,522		(5,784)		194,683
Other		272		(68)		257		103		(1,376)		(812)		27		(86)		73		2,080		(156)		1,938
Earnings from operations	$	71,397	$	82,391	$	78,818	$	14,815	$	11,604	$	259,025	$	41,056	$	54,732	$	54,248	$	4,034	$	7,638	$	161,708


	Three Months Ended March 26, 2022

	Retail		Packaging		Construction		All Other		Corporate		Total
Net sales	$	993,232	$	611,369	$	786,471	$	95,567	$	2,674	$	2,489,313
Cost of goods sold		858,895		461,815		625,059		64,024		1,157		2,010,950
Gross profit		134,337		149,554		161,412		31,543		1,517		478,363
Selling, general, administrative expenses		62,668		67,231		82,337		16,625		(8,711)		220,150
Other		272		(68)		257		103		(1,376)		(812)
Earnings from operations	$	71,397	$	82,391	$	78,818	$	14,815	$	11,604	$	259,025

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UFP INDUSTRIES, INC.

��

Three Months Ended March 27, 2021









Retail

Industrial

Construction

All Other

Corporate

Total
Net sales

$
759,021

$
448,874

$
559,530

$
55,577

$
2,002

$
1,825,004
Cost of goods sold

658,548

368,549

470,846

38,026

2,481

1,538,450
Gross profit

100,473

80,325

88,684

17,551

(479)

286,554
Selling, general, administrative expenses

47,100

40,113

55,545

10,421

(3,081)

150,098
Other

(172)

(198)

121

(848)

66

(1,031)
Earnings from operations

$
53,545

$
40,410

$
33,018

$
7,978

$
2,536

$
137,487

The following tables present the components of our operating results, for the periods indicated, as a percentage of net sales by segment.


	Three Months Ended March 26, 2022											Three Months Ended April 1, 2023

	Retail		Industrial		Construction		All Other		Corporate	Total		Retail		Packaging		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	86.5		75.5		79.5		67.0		—	80.8		87.4		75.2		76.4		70.9		—	80.3
Gross profit	13.5		24.5		20.5		33.0		—	19.2		12.6		24.8		23.6		29.1		—	19.7
Selling, general, administrative expenses	6.3		11.0		10.5		17.4		—	8.8		7.1		13.6		13.1		20.0		—	10.7
Other	—		—		—		0.1		—	—		—		—		—		3.1		—	0.1
Earnings from operations	7.2	%	13.5	%	10.0	%	15.5	%	—	10.4	%	5.5	%	11.2	%	10.5	%	6.0	%	—	8.9	%

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


	Three Months Ended March 27, 2021											Three Months Ended March 26, 2022

	Retail		Industrial		Construction		All Other		Corporate	Total		Retail		Packaging		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	86.8		82.1		84.2		68.4		—	84.3		86.5		75.5		79.5		67.0		—	80.8
Gross profit	13.2		17.9		15.8		31.6		—	15.7		13.5		24.5		20.5		33.0		—	19.2
Selling, general, administrative expenses	6.2		8.9		9.9		18.8		—	8.2		6.3		11.0		10.5		17.4		—	8.8
Other	—		—		—		(1.5)		—	—		—		—		—		0.1		—	—
Earnings from operations	7.1	%	9.0	%	5.9	%	14.4	%	—	7.5	%	7.2	%	13.5	%	10.0	%	15.5	%	—	10.4	%

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
First quarter 2022 versus First quarter 2021	36.4	%	26.4	%	10.0	%	6.8	%	3.2	%
First quarter 2023 versus first quarter 2022											(26.8)	%	(19.8)	%	(7.0)	%	0.5	%	(7.5)	%

●

Diversifying our end market sales mix by increasing sales of 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.

●	Expanding geographically in our core businesses, domestically and internationally.

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UFP INDUSTRIES, INC.

●

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 toin the ~~retail market,~~Retail segment; structural ~~wood~~and protective packaging and machine-built pallets sold in the Packaging segment; engineered wood components, customized interior fixtures, manufactured and assembled concrete forms sold in the Construction segment; 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,~~metals and ~~plastics.~~plastics sold in each of our segments. 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:

Three Months Ended March 26, 2022

Three Months Ended March 27, 2021


Value-Added

Commodity-Based

Value-Added

Commodity-Based

Retail

40.8
%

59.2
%

44.5
%

55.5
%

Industrial

67.8
%

32.2
%

66.9
%

33.1
%

Construction

72.4
%

27.6
%

68.9
%

31.1
%

All Other and Corporate

72.4
%

27.6
%

71.3
%

28.7
%

Total Sales

58.4
%

41.6
%

58.2
%

41.8
%

Note: Certain prior year product reclassifications and the change in designation of certain products as "value-added" resulted in a change in prior year's sales.

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~~UFP INDUSTRIES, INC.~~


	Three Months Ended April 1, 2023				Three Months Ended March 26, 2022
	Value-Added		Commodity-Based		Value-Added		Commodity-Based
Retail	50.1	%	49.9	%	40.8	%	59.2	%
Packaging	76.9	%	23.1	%	67.8	%	32.2	%
Construction	83.3	%	16.7	%	72.4	%	27.6	%
All Other	77.4	%	22.6	%	71.9	%	28.1	%
Corporate	61.6	%	38.4	%	73.0	%	27.0	%
Total Sales	67.5	%	32.5	%	58.4	%	41.6	%

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 product sales to total sales in the retail segment reflected in the table above is primarily due to the impact of higher lumber prices in the first quarter of 2022 as the selling prices of these products are generally indexed to the current Lumber Market at the time they are shipped and lumber costs comprise a much higher percentage of the selling price than they do for value-added products. The acquisition of Spartanburg also contributed to the increase in commodity-based sales of treated lumber in our retail segment. Our overall unit sales of value-added products ~~increased~~decreased approximately 6%11% in the first quarter of ~~2022~~2023 compared to ~~2021, including~~2022 and was comprised of a 3%12% decline in organic unit sales, partially offset by a 1% contribution from ~~acquisitions and 3% organic growth.~~acquisitions. Our overall unit sales of commodity-based products ~~increased~~decreased approximately ~~15%, including a 12% contribution from acquisitions and 3%~~5% quarter-over-quarter, which was all comprised of organic ~~growth.~~unit sales.

●

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.~~penetration and meet our internal definition of value-added products. New product sales in the first quarter of ~~2022 increased 58%.~~2023 decreased 10% due to a decline in lumber prices which were passed to customers in our selling prices. Approximately ~~$80~~$4.5 million of new product sales for the first three months of ~~2021,~~2022, while still sold, were sunset in ~~2022~~2023 and excluded from the table below because they no longer meet the definition above. Our goal is to achieve annual new product sales of at least ~~$525~~$795 million in ~~2022.~~2023.

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UFP INDUSTRIES, INC.

The table below presents new product sales in thousands:


		New Product Sales by Segment							New Product Sales by Segment
		Three Months Ended							Three Months Ended
		March 26,		March 27,		%			April 1,		% of Segment		March 26,		% of Segment		% Change
		2022		2021		Change			2023		Net Sales		2022		Net Sales		in Sales
Retail		$	65,765		51,902	26.7	%		$	68,169	9.1	%		78,648	7.9	%	(13.3)	%
Industrial			48,705		27,200	79.1	%
Packaging										70,041	14.4	%		68,098	11.1	%	2.9	%
Construction			35,662		15,794	125.8	%			27,928	5.4	%		37,909	4.8	%	(26.3)	%
All Other and Corporate			770		313	146.0	%			434	0.6	%		767	0.8	%	(43.4)	%
Total New Product Sales			150,902		95,209	58.5	%			166,572	9.1	%		185,422	7.4	%	(10.2)	%

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.	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.							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 first quarter of ~~2022 increased~~2023 decreased by ~~31%~~25% compared to the same period of ~~2021,~~2022, primarily due to a ~~19% increase~~23% decrease in selling prices ~~acquisition unit growth of 12%, a 3% decrease due to the transfer of certain sales to the Construction segment,~~ and an organic unit ~~increase~~decrease of 1%2%. We experienced organic unit growth in our UFP Edge (7%) and Retail Building Products (4%) business units. These increases were offset by organic unit decreases in our Sunbelt (3%), ProWood (2%), Deckorators (7%), Handprint (21%), and Outdoor Essentials (2%) business units. Our ~~Deckorators business unit includes a variety~~selling prices of ~~other~~variable-priced products ~~besides composite decking. Sales~~declined due to lower lumber prices. The selling prices of accessories, such as plastic lattice, post caps, and balusters, reported a decline of 13%, while our composite decking unit sales increased by 5%. Capacity expansion contributed to our unit increases in Deckorators decking and UFP Edge, and we believe the investments we’ve made in these ~~business units will add planned sales of nearly $100 million~~products are indexed to the ~~Retail segment in 2022. Finally,~~lumber market at the time they are shipped. Our unit sales to big box customers ~~were up 30%~~increased 6%, while unit sales to independent retailers ~~increased 31%~~decreased 17%.

Gross profits ~~increased~~decreased by ~~$33.9~~$39.9 million, or ~~33.7%~~29.7% to ~~$134.3~~$94.4 million for the first quarter of ~~2022~~2023 compared to the same period last year. ~~Our increase~~The decrease in gross profit was attributable to the following:

●

~~Acquired operations contributed $12~~The gross profits of our Sunbelt and ProWood and Outdoor Essentials business units decreased by a total of $36.0 million, primarily due to decreases in unit sales and the favorable impact of rising lumber prices throughout the first quarter of 2022. The products sold by these units consist primarily of pressure treated lumber sold at a variable price indexed to the ~~increase in gross profits.~~lumber market at the time they are shipped.

●

The gross ~~profits~~profit of our ~~Sunbelt and ProWood~~UFP Edge business ~~units increased~~unit decreased by ~~a total of $12.1~~$6.3 million ~~primarily~~ due to ~~the favorable trend of rising lumber prices as the selling prices of these products are primarily determined on a variable price formula.~~decreases in unit sales.

●

These decreases were offset by our Deckorators business unit, which experienced a $2.4 million increase in gross profit due to an increase in unit sales.

SG&A decreased by approximately $9.3 million, or 14.9%, in the first quarter of 2023 compared to the same period of 2022. Accrued bonus expense, which varies with our overall profitability and return on investment, decreased approximately $9.3 million from the first quarter of 2022 and totaled approximately $11.4 million for the quarter. Sales incentive compensation also contributed to the decrease in SG&A and decreased by $2.0 million from the prior year. The overall decrease in SG&A was partially offset by other minimal increases in various accounts.

Earnings from operations for the Retail reportable segment decreased in the first quarter of 2023 compared to 2022 by $30.3 million, or 42.5%, as a result of the factors mentioned above.

Packaging Segment

Net sales in the first quarter of 2023 decreased 20% compared to the same period of 2022, due to an 18% decrease in selling prices and 4% decrease in organic unit sales, offset by acquisition unit growth of 2%. The components of our change in organic unit sales includes approximately $28 million of sales to new accounts and $7.4 million of sales to new locations of existing customers. These increases were offset by a decline in prices and unit sales to existing accounts as market demand declined.

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UFP INDUSTRIES, INC.

●

~~Our UFP Edge and Retail Building Products business units contributed $8 million to the increase in gross profits.~~

●

~~Deckorators contributed $3 million to the increase in gross profits.~~

~~Selling, general and administrative (“SG&A”) expenses increased~~Gross profits decreased by ~~approximately $15.6~~$28.7 million, or 33.1%, in the first quarter of 2022 compared to the same period of 2021. The SG&A of recently acquired businesses contributed $2.6 million to the change in SG&A. Accrued bonus expense, which varies with our overall profitability and return on investment, increased approximtely $6.7 million and totaled approximately $20.7 million for the quarter. The remaining change was primarily due to increases in salaries and wages of $2.9 million, travel related expenses of $0.8 million, and sales incentive compensation of $0.6 million.

~~Earnings from operations for the Retail reportable segment increased in the first quarter of 2022 compared to 2021 by $17.8 million, or 33%, as a result of the factors mentioned above.~~

~~Industrial Segment~~

Net sales in the first quarter of 2022 increased 36% compared to the same period of 2021, due to a 39% increase in selling prices, acquisition unit growth of 1%, and a 4% decrease in organic unit sales. The increase in our selling prices is a result of increases in lumber and other operating costs we’ve been able to pass on to customers, executing value-based selling initiatives, and maintaining pricing discipline as we operate in an environment of elevated demand and capacity constraints.The components of our change in organic unit sales includes market share gains associated with $36 million in sales to new customers, $18 million of sales to new locations of existing customers, and $22 million of new product sales. These gains were offset by the loss of unit sales on less profitable accounts.

~~Gross profits increased by $69.2 million, or 86.2%~~19.2%, for the first quarter of ~~2022~~2023 compared to the same period last year. Acquisitions contributed ~~$1.7~~$2.4 million to ~~the increase in~~ gross profit. ~~The remaining increase is a result of the pricing increases discussed above as well as favorable changes in our value-added sales mix.~~ Excluding acquisitions, we estimate that gross profits on sales of value-added and commodity-based products ~~contributed $49.9~~declined by $8.3 million and ~~$17.8~~$22.7 million, ~~respectively,~~respectively. Value-added sales increased to 76.9% of total net sales in the ~~increase~~first quarter of 2023 compared to 67.8% of total net sales in ~~gross profit.~~the first quarter of 2022 and is reflective of an improvement in sales mix.

~~Selling, general and administrative (“~~SG~~&A”) expenses increased~~&A decreased by approximately ~~$27.1~~$1.0 million, or ~~67.6%~~1.5%, in the first quarter of ~~2022~~2023 compared to the same period of ~~2021.~~2022. Acquired operations since the ~~second~~first quarter of ~~2021~~2022 contributed approximately ~~$1.3~~$1.5 million to our ~~increase in~~SG&A costs. Accrued bonus expense, which varies with our overall profitability and return on investment, ~~increased~~decreased approximately ~~$13.0~~$7.9 million relative to the first quarter of 2022, and totaled ~~$23.7~~$15.8 million for the quarter. ~~The remaining increase was primarily due~~Sales incentive compensation also contributed to the decline in SG&A and decreased by $2.0 million from the prior year. These decreases were offset by increases in ~~sales incentive compensation of $4.7 million, salaries and wages of $2.7 million, bed debt~~earnout expense of ~~$1.7~~$3.7 million, professional fees of $1.4 million, and ~~travel related expenses of $0.7 million.~~other minimal increases in several SG&A accounts.

Earnings from operations for the ~~Industrial~~Packaging reportable segment ~~increased~~decreased in the first quarter of ~~2022~~2023 compared to ~~2021~~2022 by ~~$42.0~~$27.7 million, or ~~103.9%~~33.6%, due to the factors discussed above.

Construction Segment

Net sales in the first quarter of ~~2022 increased 41%~~2023 decreased 34% compared to the same period of ~~2021,~~2022, due to ~~a 26% increase~~an 18% decrease in selling prices ~~3% due to the transfer of certain sales from the Retail segment,~~and an organic unit ~~sales growth~~decline of ~~11%, and 1% growth from recent acquisitions.~~16%. Organic unit changes within this segment ~~consisted~~consist of ~~increases~~decreases of ~~30%~~19% in factory-built housing and 22% in site-built construction, which were partially offset by an increase of 8% in commercial construction ~~16% in factory-built housing, 1% in site-built construction,~~ and ~~13%~~5% in concrete forming. The organic unit declines in our factory-built housing and site-built construction business units is due to the impact of higher interest rates on the demand for housing. As of April 1, 2023 and March 26, 2022, ~~and December 25, 2021,~~ we estimate that our backlog of orders ~~associated with~~in the commercial construction ~~approximated $93.0~~business unit were $139 million and ~~$84.6~~$93 million, respectively. As of April 1, 2023 and March 26, 2022, ~~and December 25, 2021,~~ we estimate that our backlog of orders ~~associated with~~in our site-built construction ~~approximated~~business unit were $91 million and $141 million, ~~and $113.5 million,~~ respectively. ~~We expect that the orders above will be primarily filled within the next fiscal year; however, it is possible that some orders could be canceled.~~

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~~UFP INDUSTRIES, INC.~~

Gross profits ~~increased~~decreased by ~~$73.0~~$39.8 million, or ~~82.0%~~24.6%, for the first quarter of ~~2022~~2023 compared to the same period of ~~2021.~~2022. The ~~increase~~decrease in our gross profit was comprised of the following factors:

●

Gross profits in our factory-built housing and site-built construction business ~~unit increased~~units decreased by ~~$36.2~~$13.5 million asand $29.0 million, respectively, due to a ~~result of being~~lower sales volumes, unfavorable cost variances due to fixed manufacturing costs, and more ~~selective in the business that we take during this period of elevated demand and capacity constraints. As a result, our profit per unit has improved.~~

●

~~Gross profits in our factory-built housing business unit increased $25.2 million as a result of increased unit sales and leveraging fixed costs.~~

●

~~The gross profit of our concrete forming business unit increased by $8.5 million, including $3.8 million as a result of the transfer of sales from the Retail segment.~~competitive pricing.

●

The gross profit of our commercial construction business unit increased ~~$2.2~~$4.8 million as a result of increased unit sales, better productivity and other operational improvements, ~~and~~as well as improved pricing discipline.

●

~~Acquired businesses contributed $0.9 million.~~

~~Selling, general and administrative (“~~SG~~&A”) expenses increased~~&A decreased by approximately ~~$26.8~~$15.0 million, or ~~48.2%~~18.2%, in the first quarter of ~~2022~~2023 compared to the same period of ~~2021. Acquired operations since the second quarter of 2021 contributed approximately $0.9 million to total SG&A expenses for the quarter.~~2022. Accrued bonus expense, which varies with our overall profitability and return on investment, ~~increased~~decreased approximately ~~$13.7~~$7.9 million, and totaled ~~$22.7~~$14.7 million for the quarter. The remaining ~~increase~~decrease was primarily due to ~~increases~~decreases in sales incentive compensation of ~~$5.0~~$4.0 million ~~salaries~~ and ~~wages of $1.9 million,~~ bad debt expense of ~~$1.4 million, and travel related expenses of $0.6~~$1.9 million.

Earnings from operations for the Construction reportable segment ~~increased~~decreased in the first quarter of ~~2022~~2023 compared to ~~2021~~2022 by ~~$45.8~~$24.6 million, or ~~138.7%~~31.2%, 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. The decline in sales and earnings from operations is primarily due to our operation in Mexico that exports moulding and millwork products to the the U.S.

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UFP INDUSTRIES, INC.

Corporate

The corporate segment consists of over (under) allocated costs that are not significant.

INCOME TAXES

Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for foreign, state and local income taxes and permanent tax differences. Our effective tax rate was 23.7% in the first quarter of 2023 compared to 24.0% in the first quarter of ~~2022 compared to 23.3% for same period in 2021. The increase was primarily due to one-time tax credit refunds recorded as a discrete item in the first quarter of 2021 that are not available in~~ 2022.

OFF-BALANCE SHEET TRANSACTIONS

We have no significant off-balance sheet transactions.

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~~UFP INDUSTRIES, INC.~~

LIQUIDITY AND CAPITAL RESOURCES

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


	Three Months Ended				Three Months Ended
	March 26,		March 27,		April 1,		March 26,
	2022		2021		2023		2022
Cash used in operating activities	$	(245,031)	$	(196,660)	$	(37,076)	$	(245,031)
Cash used in investing activities		(59,736)		(296,498)		(41,858)		(59,736)
Cash from financing activities		86,330		101,927
Cash (used in) from financing activities						(59,368)		86,330
Effect of exchange rate changes on cash		1,726		(349)		2,739		1,726
Net change in all cash and cash equivalents		(216,711)		(391,580)		(135,563)		(216,711)
Cash, cash equivalents, and restricted cash, beginning of period		291,223		436,608		559,623		291,223
Cash, cash equivalents, and restricted cash, end of period	$	74,512	$	45,028	$	424,060	$	74,512

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.~~acquisition that occurred many years ago. 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~~resulting in negative or modest cash flows from operations during those periods. Conversely, we ~~typically~~tend to 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.

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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 to 5371 days from 4861 days during the first quarter of ~~2022~~2023 compared to the prior year period.


	Three Months Ended				Three Months Ended
	March 26,		March 27,		April 1,		March 26,
	2022		2021		2023		2022
Days of sales outstanding		32		30		36		32
Days supply of inventory		41		38		48		41
Days payables outstanding		(20)		(20)
Days payables outstanding¹						(13)		(12)
Days in cash cycle		53		48		71		61

¹We’ve modified our calculation of days payables outstanding to be based on the cost of goods sold and accounts payable balances in our monthly financial statements. In prior periods, our calculation was based on invoice data. We’ve made this change to simplify the calculation and more easily integrate acquired operations into our financial metrics. The prior year metric has been restated for the new method which reduced days payables from a previously reported 20 days to 12 days.

The increase in our cash cycle in the first quarter of 2023 compared to the same period of 2022 was primarily due to a seven day increase in our days supply of inventory and a four day increase in our days of sales outstanding. The increase in our days supply of inventory ~~in the first three months of 2022 compared to the same period of 2021 was~~is primarily due to carrying higher levels of safety stock and a ~~four day~~drop in demand. The increase in our days ~~supply~~ of ~~inventory~~sales outstanding is due to ~~ensure we meet the delivery expectations or~~receiving less timely payments from our customers. We continue to focus on past due account balances with customers and ~~a one day increase in~~the percentage of our ~~receivables cycle.~~accounts receivable that are current is 93% at the end of the first quarter of 2023.

In the first three months of ~~2022,~~2023, our cash consumed by operating activities was ~~$245.0~~$37 million ~~which~~and was comprised of net earnings of ~~$193.1~~$126 million and ~~$35.4~~$40 million of non-cash expenses, offset by a ~~$473.5~~$203 million increase in working capital since the end of December ~~2021.~~2022. Our cash flows used by operations ~~increased~~decreased by ~~$48.4~~$208 million compared to the same period of last year primarily due to ~~an increase~~a decrease in our investment in net working capital of ~~$148.4~~$270 million compared to the prior year period, offset by ~~an increase~~a decrease in our net earnings and non-cash expenses of ~~$100.0~~$62 million. The ~~increase~~decrease in net working capital was due to ~~higher~~lower lumber ~~prices.~~prices and the ~~growth~~softening of ~~our business, and an increase in our days supply of inventory.~~demand.

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~~UFP INDUSTRIES, INC.~~

Purchases of property, plant, and equipment ~~and acquisitions (refer to Note F for Business Combinations) and~~of $38 million comprised most of our cash used in investing activities during the first three months of ~~2022 and totaled $32.1 million and $24.6 million, respectively. Total proceeds from the sales of property, plant, and equipment were $1.2 million.~~2023. Outstanding purchase commitments on existing capital projects totaled approximately ~~$68.7~~$64 million on ~~March 26, 2022.~~April 1, 2023. Capital spending primarily consists of several projects to expand capacity to manufacture new and value-added products, primarily in our Packaging segment and Deckorators and ProWood business units, achieve efficiencies through automation in all segments, make improvements to a number of facilities, and increase our transportation capacity (tractors, trailers) ~~in order to meet higher volumes and replace old rolling stock.~~. We intend to fund capital expenditures and purchase commitments through our operating cash flows for the balance of the year. We currently plan to spend between ~~$175~~$200 million to $225 million on capital projects for the year ~~with~~subject to significant variability due to ~~uncertainty about~~extended supplier lead times. ~~Notable areas~~We completed no acquisitions during the first three months of ~~capital spending include projects~~2023, while cash used for acquisitions in the same period of the prior year amounted 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 the capacity of machine-built pallet and site-built business units, and take advantage of automation opportunities.$25 million.

Cash flows from financing activities ~~primarily~~ consisted of ~~net borrowings of debt of approximately $101.5 million, the payment of quarterly dividends totaling $12.5 million ($0.20 per share),~~ cash paid for repurchases of common stock of ~~$0.5~~$33 million. We repurchased approximately 451,000 shares of our common stock for $35 million ~~and distributions to noncontrolling interests~~($2 million is recorded in accounts payable at the end of ~~$2.1~~the quarter) for the year at an average share price of $78.27. The total number of remaining shares that may be repurchased under the program is approximately 1.5 million. Dividends paid during the first three months of 2023 include first quarter dividends of $16 million ($0.25 per share), a 25% increase over the quarterly dividend of $0.20 per share paid in the first quarter of 2022. On April ~~20, 2022,~~26, 2023, our board of directors approved ~~an increase in~~ our second quarter dividend toof $0.25 per share, payable on June 15, ~~2022,~~2023, to shareholders of record on June 1, ~~2022. Additionally, in~~2023. Distributions to noncontrolling interests were $5 million. We have debt maturities of $3 million due later this year which we intend to repay through operating cash flows and available cash balances.

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UFP INDUSTRIES, INC.

On April ~~2022, we repurchased approximately 756,000 shares for $58.5 million, at an average share price of $77.40.~~

~~On March 26, 2022,~~1, 2023, we had ~~$109.7~~$5 million outstanding on our ~~$550~~$750 million revolving credit facility, and we had approximately ~~$433.2~~$741 million in remaining availability after considering ~~$7.1~~$3 million in outstanding letters of credit. Financial covenants on the unsecured revolving credit facility and unsecured notes include minimum interest tests and a maximum leverage ratio. The agreements also restrict the amount of additional indebtedness we may incur and the amount of assets which may be sold. We were in compliance with all our covenant requirements on ~~March 26, 2022.~~April 1, 2023.

At the end of the first quarter of ~~2022,~~2023, we have approximately ~~$445.3 million~~$1.7 billion in total liquidity, consisting of our ~~net~~ cash surplus, ~~and~~ remaining availability under our revolving credit ~~facility. As lumber prices normalize~~facility, and ~~we move beyond our peak selling season we anticipate the increase~~a shelf agreement with certain lenders providing up to $535 million in ~~net working capital will turn into strong operating cash flow in the third and fourth quarters.~~remaining borrowing capacity.

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 ~~25, 2021.~~31, 2022.

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 and sales of value-added products;

●

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

●

Maintain a conservative capital structure.

We believe effectively executing 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:

●

Lumber prices, which impact our cost of goods sold and selling prices, have normalized due to additional capacity added by sawmills and demand falling from peak levels as a result of inflation and an increase in interest rates. We anticipate lumber prices will follow more typical seasonal patterns consistent with historical trends and demand and remain at lower levels in 2023.

●

Retail sales accounted for 41% of our net sales for the first three months of 2023. 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. Based on this data, we currently anticipate market demand to be flat to slightly down in 2023.

●

Packaging sales accounted for 27% of our net sales for the first three months of 2023. When evaluating future demand, we consider a number of metrics, including the Purchasing Managers Index (PMI), durable goods manufacturing, and U.S. real GDP. We currently estimate industrial production to be flat to slightly down in 2023.

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UFP INDUSTRIES, INC.

●

Construction sales accounted for 28% of our net sales for the first three months of 2023.

The site-built business unit accounted for approximately 12% of our net sales for the first three months of 2023. Approximately 30% of site-built sales are to 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 over the long term. When evaluating future demand, we analyze data from housing starts in those regions. The consensus estimates of all housing starts is for a 15% to 20% decline in 2023.

The factory-built housing business unit accounted for 9% of our net sales for the first three months of 2023. This business, along with our multifamily business, could benefit from higher interest rates as buyers seek more affordable housing alternatives over time. 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 National Association of Home Builders forecasts a 24% decrease in manufactured home shipments in 2023.

The commercial construction and concrete forming business units accounted for approximately 7% of our net sales for the first three months of 2023. When evaluating future demand, we analyze data from non-residential construction spending.

●

On a consolidated basis, and based on our 2023 forecasted results of operations and business mix, we believe our annual 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:

Packaging is in a range of 20% to 25%

Construction is in a range of 20% to 25%

We currently anticipate improvement in operating profits in our Retail segment in 2023, primarily due to an expectation of less volatile lumber prices in 2023 and other operational improvements. The severe volatility of lumber prices in 2022 and 2021 adversely impacted the results of this segment.

In the first quarter of 2023 compared to the first quarter of 2022, our decremental operating margin on a consolidated basis was 14.6% (Retail 12.5%, Packaging 22.2%, and Construction 9.0%).

●

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

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

Changes in our selling prices

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

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

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UFP INDUSTRIES, INC.

Capital Allocation:

We believe the strength of our cash flow generation and conservative capital structure provides us with sufficient resources to grow our business and also fund returns to our 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:

●

On April 26, 2023, our board approved another quarterly dividend of $0.25 per share. We continue to consider our payout ratios and yield when determining the appropriate rate.

●

For the first three months of 2023, we repurchased 450,597 shares of our common stock at an average share price of $78.27. We have remaining authorization to repurchase up to an additional 1.5 million shares through the balance of the year and intend to continue to do so at times when the price hits our pre-established target.

●

Our targeted range for capital expenditures is $200-$225 million and may be impacted by 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~~enter into any material interest rate swaps, futures contracts or options on futures, or other types of derivative financial instruments to mitigate this risk.

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~~UFP INDUSTRIES, INC.~~

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

We are subject to fluctuations in the price of lumber. We experience significant fluctuations in the cost of commodity lumber products from primary producers (the “Lumber Market”). A variety of factors over which we have no control, including government regulations, transportation, environmental regulations, weather conditions, economic conditions, and natural disasters, impact the cost of lumber products and our selling prices. While we attempt to minimize our risk from severe price fluctuations, substantial, prolonged trends in lumber prices can affect our sales volume, our gross margins, and our profitability. We anticipate that these fluctuations will continue in the future. (See “Impact of the Lumber Market on Our Operating Results.”)

Our international operations have exposure to foreign currency rate risks, primarily due to fluctuations in their local currency, which is their functional currency, compared to the U.S. Dollar. Additionally, certain of our operations enter into transactions that will be settled in a currency other than the U.S. Dollar. We may enter into forward foreign exchange rate contracts in the future to mitigate foreign currency exchange risk. Historically, our hedge contracts are deemed immaterial to the financial statements, however any material hedge contract in the future will be disclosed.

Item 4. Controls and Procedures.

(a)

Evaluation of Disclosure Controls and Procedures. With the participation of management, our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15e and 15d – 15e) as of the quarter ended ~~March 26, 2022~~April 1, 2023 (the “Evaluation Date”), have concluded that, as of such date, our disclosure controls and procedures were effective.

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UFP INDUSTRIES, INC.

(b)

Changes in Internal Controls. During the quarter ended ~~March 26, 2022,~~April 1, 2023, 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.

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)
December 26, 2021 – January 29, 2022

—

—

—

2,603,958
January 30 – February 26, 2022

6,300

79.53

6,300

2,597,658
February 27 – March 26, 2022

38,142

79.77

38,142

2,559,516


Fiscal Month	(1)	(2)	(3)	(4)
January 1 – February 4, 2023	—	—	—	2,000,000
February 5 – March 4, 2023	—	—	—	2,000,000
March 5 – April 1, 2023	450,597	78.27	450,597	1,549,403

~~(a)~~(1)

Total number of shares purchased.

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~~UFP INDUSTRIES, INC.~~

~~(b)~~(2)

Average price paid per share.

~~(c)~~(3)

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

~~(d)~~(4)

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 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. Upon expiration of this authorization on February 3, 2023, the Board gave management authorization to repurchase up to 2 million shares by February 5, 2024. The total number of remaining shares that may be repurchased under the program is approximately ~~2.6~~1.5 million.

Item 5. Other Information.

None.

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UFP INDUSTRIES, INC.

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.

	(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).

3032

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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: May ~~4, 2022~~10, 2023	By:	/s/ Matthew J. Missad
	Matthew J. Missad,
	Chief Executive Officer and Principal Executive Officer


Date: May ~~4, 2022~~10, 2023	By:	/s/ Michael R. Cole
	Michael R. Cole,
	Chief Financial Officer,
	Principal Financial Officer and
	Principal Accounting Officer

3133


	Total Assets by Segment
	March 26,		December 26,
Segment Classification	2022		2021		% Change
Retail	$	1,205,382	$	844,189	42.8	%
Industrial		857,706		741,672	15.6
Construction		858,901		736,157	16.7
All Other		356,568		343,363	3.8
Corporate		395,409		579,890	(31.8)
Total Assets	$	3,673,966	$	3,245,271	13.2	%

									��
	Three Months Ended March 27, 2021

	Retail		Industrial		Construction		All Other			Corporate		Total
Net sales	$	759,021	$	448,874	$	559,530	$	55,577		$	2,002	$	1,825,004
Cost of goods sold		658,548		368,549		470,846		38,026			2,481		1,538,450
Gross profit		100,473		80,325		88,684		17,551			(479)		286,554
Selling, general, administrative expenses		47,100		40,113		55,545		10,421			(3,081)		150,098
Other		(172)		(198)		121		(848)			66		(1,031)
Earnings from operations	$	53,545	$	40,410	$	33,018	$	7,978		$	2,536	$	137,487


Fiscal Month	(a)	(b)	(c)	(d)
December 26, 2021 – January 29, 2022	—	—	—	2,603,958
January 30 – February 26, 2022	6,300	79.53	6,300	2,597,658
February 27 – March 26, 2022	38,142	79.77	38,142	2,559,516