UFP Industries 10K 2021 Annual report | UFPI Filing

Exhibit 13

UFP INDUSTRIES, INC.

FINANCIAL INFORMATION

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Selected Financial Data	2

Management’s Discussion and Analysis of Financial Condition and Results of Operations	3

Report of Independent Registered Public Accounting Firm – Opinion on Internal Control over Financial Reporting (PCAOB ID 34)	22

Report of Independent Registered Public Accounting Firm – Opinion on the Financial Statements (PCAOB ID 34)	23

Consolidated Balance Sheets as of December 25, 2021 and December 26, 2020	25

Consolidated Statements of Earnings and Comprehensive Income for the Years Ended December 25, 2021, December 26, 2020, and December 28, 2019	26

Consolidated Statements of Shareholders’ Equity for the Years Ended December 25, 2021, December 26, 2020, and December 28, 2019	27

Consolidated Statements of Cash Flows for the Years Ended December 25, 2021, December 26, 2020, and December 28, 2019	28

Notes to Consolidated Financial Statements	29

Market Information for our Common Stock	55

Stock Performance Graph	55

Directors and Executive Officers	56

Shareholder Information	57

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SELECTED FINANCIAL DATA

(In thousands, except per share and statistics data)


	2021			2020				2019			2018			2017
Consolidated Statement of Earnings Data
Net sales	$	8,636,134		$	5,153,998		$	4,416,009		$	4,489,180		$	3,941,182
Gross profit		1,406,967			800,296			685,518			592,894			542,826
Earnings from operations		737,554			345,826			244,906			207,263			181,469
Earnings before income taxes		726,336			340,983			240,674			197,853			176,007
Net earnings attributable to controlling interest	$	535,640		$	246,778		$	179,650		$	148,598		$	119,512
Diluted earnings per share	$	8.59		$	4.00		$	2.91		$	2.40		$	1.94
Dividends per share	$	0.65		$	0.50		$	0.40		$	0.36		$	0.32
Consolidated Balance Sheet Data
Working capital⁽¹⁾	$	1,297,434		$	1,074,613		$	739,030		$	685,108		$	560,241
Cash and cash equivalents		286,662			436,507			168,336			27,316			28,339
Total assets		3,245,271			2,404,891			1,889,477			1,647,548			1,464,677
Total debt		320,250			311,707			163,683			202,278			146,003
Shareholders’ equity		2,016,569			1,483,152			1,257,733			1,088,684			974,023
Statistics
Gross profit as a percentage of net sales		16.3	%		15.5	%		15.5	%		13.2	%		13.8	%
Net earnings attributable to controlling interest as a percentage of net sales		6.2	%		4.8	%		4.1	%		3.3	%		3.0	%
Return on beginning equity⁽²⁾		36.1	%		19.6	%		16.5	%		15.3	%		13.9	%
Current ratio⁽⁴⁾		2.67			3.32			3.09			3.21			2.85
Debt to equity ratio⁽⁵⁾		0.16			0.21			0.13			0.19			0.15
Book value per common share⁽³⁾	$	32.58		$	24.23		$	20.48		$	17.88		$	15.92

(1)	Current assets less current liabilities.

(2)	Net earnings attributable to controlling interest divided by beginning shareholders’ equity.

(3)	Shareholders’ equity divided by common stock outstanding.

(4)	Current assets divided by current liabilities.

(5)	Total debt divided by shareholders’ equity.

Acquisition growth is one of the primary contributing factors to material increases over the period from 2017 to 2021. Refer to Note C under the “Notes to the Consolidated Financial Statements” for further discussion on our business combinations and impact on our financial statements for the three years ended December 25, 2021.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UFP Industries, Inc. is a holding company with subsidiaries throughout North America, Europe, Asia, and Australia that design, manufacture, and supply products made from wood, wood and non-wood composites, and other materials to three markets: retail, industrial, and construction. We are headquartered in Grand Rapids, Mich. For more information about UFP Industries, Inc., or 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. 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 the price of lumber; adverse or unusual weather conditions; adverse economic conditions in the markets we serve; government regulations, particularly involving environmental and safety regulations, the COVID-19 pandemic (“pandemic”); and our ability to make successful business acquisitions. Certain of these risk factors as well as other risk factors and additional information are included in 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 2021.

OVERVIEW

Our results for 2021 were impacted by the following:

●

Our net sales increased 68% in 2021 due to a 40% increase in our overall selling prices (see “Historical Lumber Prices”), a 24% increase in unit sales due to acquired businesses, and a 4% increase in organic unit sales. Organic unit growth of 14% and 5% in our construction and industrial segments, respectively, was offset by an organic unit decline of 4% in our retail segment.

●

Earnings from operations increased 113.3% to $737.6 million. This increase resulted from a variety of factors including strong demand in our industrial and construction segments and leveraging our fixed costs, increased sales of value-added and new products that have higher margins, and increased selling prices as we improve our ability to execute value-based pricing initiatives. Acquisitions contributed approximately $50.5 million to our increase in operating profits. Excluding the impact of acquisitions, we estimate that value-added products contributed $367.1 million to the increase in gross profits and commodity-based products contributed $139.2 million.

●

Our cash flows provided by operations in 2021 was $512.5 million compared to $336.5 million in 2020. This increase is due primarily to an increase in our net earnings and non-cash expenses of $316.0 million, offset by an increase in our investment in net working capital of $140.0 million compared to the prior period. The increase in net working capital was due to higher year over year lumber prices, as noted in the tables below, as well as increased demand in our industrial and construction segments. PalletOne and other acquisitions also contributed to the increase in our net working capital.

●

We invested $151.2 million in capital expenditures to support and grow our business and invested $476.0 million in acquired businesses.

●

We returned $40.2 million to our shareholders through dividends.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

●

Our net debt (debt and cash overdraft less cash) at the end of 2021 was $50.6 million compared to net cash of $124.8 million at the end of 2020.

●

Our available borrowing capacity under revolving credit facilities and cash surplus resulted in total liquidity of approximately $805 million at the end of December 2021.

HISTORICAL LUMBER PRICES

The following table presents the Random Lengths framing lumber composite price.


	Random Lengths Composite
	Average $/MBF
	2021			2020
January	$	890		$	377
February		954			402
March		1,035			420
April		1,080			358
May		1,428			394
June		1,344			455
July		690			530
August		443			716
September		412			934
October		520			826
November		585			571
December		746			643

Year-to-date average	$	844		$	552
Year-to-date percentage change		52.9	%		55.5	%

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In addition, a Southern Yellow Pine (“SYP”) composite price, which we prepare and use, is presented below. Our purchases of this species comprise approximately 57% and 62% of total lumber purchases, excluding plywood and other panel products, for 2021 and 2020, respectively.


	Southern Yellow Pine
	Average $/MBF
	2021			2020
January	$	858		$	346
February		903			345
March		938			360
April		922			333
May		1,150			412
June		1,052			494
July		564			552
August		448			729
September		438			886
October		512			711
November		599			508
December		675			565

Year-to-date average	$	755		$	520
Year-to-date percentage change		45.2	%		42.1	%

IMPACT OF THE LUMBER MARKET ON OUR OPERATING RESULTS

We experience significant fluctuations in the cost of commodity lumber products from primary producers ("Lumber Market"). 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, including plywood and other panel products, were 47.7% and 51.0% of our net sales in 2021 and 2020, respectively.

Our gross margins are impacted by (1) the relative level of the Lumber Market (i.e. whether prices are higher or lower from comparative periods), and (2) the trend in the market price of lumber (i.e. whether the price of lumber is increasing or decreasing within a period or from period to period). Moreover, as explained below, our products are priced differently. Some of our products have fixed selling prices, while the selling prices of other products are indexed to the reported Lumber Market with a fixed dollar adder to cover conversion costs and profits. Consequently, the level and trend of the Lumber Market impact our products differently.

Below is a general description of the primary ways in which our products are priced.

●

Products with fixed selling prices. These products include value-added products such as decking and fencing sold to retail building materials customers, as well as trusses, wall panels and other components sold to the residential construction market, and most industrial packaging and other manufactured products for industrial users. Prices for these products are generally fixed at the time of the sales quotation for a specified period of time or are based upon a specific quantity. In order to maintain margins and reduce any exposure to adverse trends in the price of component lumber products, we attempt to lock in costs with our suppliers for these sales commitments. Also, the time period and quantity limitations allow us to eventually re-price our products for changes in lumber prices from our suppliers. In 2021, strong demand and unusually high lumber market volatility has allowed us to re-price these products more frequently to protect margins.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

●

Products with selling prices indexed to the reported Lumber Market with a fixed dollar "adder" to cover conversion costs and profits. These products primarily include treated lumber, remanufactured lumber, 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 profitability. In other words, for these products, our margins are exposed to changes in the trend of lumber prices. We believe our sales of these products are at their highest relative level in our second quarter, primarily due to treated lumber sold to the retail market.

The greatest risk associated with changes in the trend of lumber prices is on the following products:

●

Products with significant inventory levels with low turnover rates, whose selling prices are indexed to the Lumber Market. In other words, the longer the period of time these products remain in inventory, the greater the exposure to changes in the price of lumber. This would include treated lumber, which comprises approximately 16% of our total sales. This exposure is less significant with remanufactured lumber, trusses sold to the manufactured housing market, and other similar products, due to our higher rate of inventory turnover of these products. We attempt to mitigate the risk associated with treated lumber through vendor consignment inventory 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 by locking in costs or including re-pricing triggers with customers if lumber prices change in excess of an agreed upon percentage.

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. As a result of this factor, 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.



	Year Ended
	December 25,		December 26,
	2021		2020
Units sold	28.0	%	6.0	%
Gross profit	75.8		16.7
Selling, general, and administrative expenses	53.5		1.3
Earnings from operations	113.3		41.2

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

It is our goal to increase our gross profits and earnings from operations at a rate of growth that exceeds our unit sales growth, or in other words, increasing our profitability per unit sold. We also have a long-term goal of improving our efficiencies and leveraging the fixed costs in our selling, general, and administrative expenses as we grow, which will result in a rate of growth of these expenses which is less than our unit sales growth and a lower cost per unit.

BUSINESS COMBINATIONS AND ASSET PURCHASES

We completed nine business acquisitions during 2021 and five during 2020. The annual historical sales attributable to acquisitions in 2021 and 2020 were approximately $1.3 billion and $101 million, respectively. These business combinations were not significant to our operating results individually or in aggregate; consequently pro forma results for 2021 and 2020 are not presented.

See Notes to Consolidated Financial Statements, Note C, "Business Combinations" and Note O, “Subsequent Events” for additional information.

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, the components of our Consolidated Statements of Earnings as a percentage of net sales. See “Impact of the Lumber Market on our Operating Results”.


	Year Ended
	December 25,		December 26,
	2021		2020
Net sales	100.0	%	100.0	%
Cost of goods sold	83.7		84.5
Gross profit	16.3		15.5
Selling, general, and administrative expenses	7.9		8.6
Other (gains) losses, net	(0.1)		0.2
Earnings from operations	8.5		6.7
Other expense, net	0.1		0.1
Earnings before income taxes	8.4		6.6
Income taxes	2.0		1.7
Net earnings	6.4		4.9
Less net earnings attributable to noncontrolling interest	(0.2)		(0.1)
Net earnings attributable to controlling interest	6.2	%	4.8	%

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

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.



	Year Ended
		December 25,		December 26,
		2021		2020
Gross profit	$	1,406,967	$	800,296
Selling, general, and administrative expenses	$	682,253	$	444,596
SG&A as percentage of gross profit		48.5%		55.6%

OPERATING RESULTS BY SEGMENT

Our business segments consist of UFP Retail Solutions, UFP Industrial and UFP 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, 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 by segment for December 25, 2021 and December 26, 2020.


	Year Ended December 25, 2021

	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales	$	3,418,337	$	2,148,142	$	2,698,434	$	362,473	$	8,748	$	8,636,134
Cost of goods sold		3,120,634		1,683,466		2,167,405		237,696		19,966		7,229,167
Gross profit		297,703		464,676		531,029		124,777		(11,218)		1,406,967
Selling, general, administrative expenses		169,033		200,194		267,292		52,204		(6,470)		682,253
Other		(94)		(456)		(493)		(2,237)		(9,560)		(12,840)
Earnings from operations	$	128,764	$	264,938	$	264,230	$	74,810	$	4,812	$	737,554

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS


	Year Ended December 26, 2020

	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales	$	2,167,122	$	1,072,117	$	1,695,684	$	217,094	$	1,981	$	5,153,998
Cost of goods sold		1,874,114		895,466		1,433,469		147,117		3,536		4,353,702
Gross profit		293,008		176,651		262,215		69,977		(1,555)		800,296
Selling, general, administrative expenses		137,641		97,146		179,516		34,471		(4,178)		444,596
Other		56		(3,873)		13,690		775		(774)		9,874
Earnings from operations	$	155,311	$	83,378	$	69,009	$	34,731	$	3,397	$	345,826

The following tables present the components of our operating results as a percentage of net sales by segment for December 25, 2021 and December 26, 2020.



	Year Ended December 25, 2021

	Retail		Industrial		Construction		All Other		Corporate	Total
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	N/A	100.0	%
Cost of goods sold	91.3		78.4		80.3		65.6		—	83.7
Gross profit	8.7		21.6		19.7		34.4		—	16.3
Selling, general, administrative expenses	4.9		9.3		9.9		14.4		—	7.9
Other	(0.1)		—		—		(0.6)		—	(0.1)
Earnings from operations	3.8	%	12.3	%	9.8	%	20.6	%	—	8.5	%

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



	Year Ended December 26, 2020

	Retail		Industrial		Construction		All Other		Corporate	Total
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	N/A	100.0	%
Cost of goods sold	86.5		83.5		84.5		67.8		—	84.5
Gross profit	13.5		16.5		15.5		32.2		—	15.5
Selling, general, administrative expenses	6.4		9.1		10.6		15.9		—	8.6
Other	—		(0.4)		0.8		0.4		—	0.2
Earnings from operations	7.2	%	7.8	%	4.1	%	16.0	%	—	6.7	%

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

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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; roof trusses, structural lumber and panels, and other products for the manufactured housing industry; engineered wood components for residential and commercial construction, customized interior fixtures, millwork, and casework used in a variety of retail, commercial and other structures; and structural wood packaging, other packing materials, and OEM components 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
	in Sales		in Selling Prices		in Units		Acquisition Unit Change		Organic Unit Change
2021 versus 2020	67.6	%	39.6	%	28.0	%	24.0	%	4.0	%
2020 versus 2019	16.7	%	10.7	%	6.0	%	1.0	%	5.0	%

●

Diversifying our end market sales mix by increasing sales of specialty 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, increasing our market share with independent retailers, and increasing our sales of customized interior fixtures, casework and millwork used in a variety of commercial markets.

●

Expanding geographically in our core businesses, domestically and internationally.

●

Increasing our sales of "value-added" products and enhancing our product offering with new or improved products. Value-added products generally consist of fencing, decking, lattice, and other specialty products sold to the retail segment, structural wood packaging, engineered wood components, customized interior fixtures, manufactured and assembled concrete forms, and "wood alternative" products. Engineered wood components include roof trusses, wall panels, and floor systems. Wood alternative products consist of products manufactured with wood and non-wood composites, metals and plastics. Although we consider the treatment of dimensional lumber and panels with certain chemical preservatives a value-added process, treated lumber is not presently included in the value-added sales totals. Remanufactured lumber and panels that are components of finished goods are also generally categorized as “commodity-based” products.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table presents, for the periods indicated, our percentage of value-added and commodity-based sales to total sales by our segments (Retail, Industrial, Construction, and All Other and Corporate).


	Year Ended December 25, 2021				Year Ended December 26, 2020
	Value-Added		Commodity-Based		Value-Added		Commodity-Based
Retail	43.2	%	56.8	%	53.8	%	46.2	%
Industrial	67.7	%	32.3	%	64.7	%	35.3	%
Construction	73.0	%	27.0	%	76.3	%	23.7	%
All Other and Corporate	74.9	%	25.1	%	75.6	%	24.4	%
Total Sales	59.7	%	40.3	%	64.3	%	35.7	%

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 reflected in the table above is primarily due to the impact of higher average lumber prices in 2021 on sales of commodity-based products and the product mix of recently acquired businesses. Selling prices of commodity-based products are generally indexed to the current Lumber Market at the time they are shipped, and lumber costs comprise a higher percentage of the selling price than they do for value-added products. The acquisition of Sunbelt and Spartanburg also contributed to the increase in commodity-based sales of treated lumber in our retail segment, while PalletOne contributed to the increase in value-added sales in the industrial segment. Our overall unit sales of value-added products increased approximately 23% in 2021 compared to 2020, including a 16% contribution from acquisitions and 7% organic growth. Our unit sales of commodity-based products increased approximately 37%, due primarily from the acquisition of Sunbelt and Spartanburg.

●

Developing new products. We define new products as those that will generate sales of at least $1 million per year within 4 years of launch and are still growing and gaining market penetration. Our goal was to achieve annual new product sales of at least $575 million in 2021. New product sales and gross profits in 2021 were up 56% and 47%, respectively, from the prior year. Acquisitions contributed approximately $48 million to new product sales in 2021. Approximately $13 million of new product sales for 2020, while still sold, were sunset in 2021 and excluded from the table below because they no longer meet the definition above. The table below presents new product sales in thousands.


	New Product Sales by Segment
	Year Ended
	December 25,		December 26,		%
	2021		2020		Change
Retail	$	510,266	$	401,539	27.1	%
Industrial		177,214		72,574	144.2	%
Construction		135,644		54,060	150.9	%
All Other and Corporate		18,735		11,451	63.6	%
Total New Product Sales	$	841,859	$	539,624	56.0	%

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.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Retail Segment:

Net sales to the retail segment increased 58% in 2021 compared to 2020 due to a 27% increase in selling prices and a 35% increase in unit sales from acquired operations, offset by a 4% decrease in organic unit sales. Organic unit increases of 17% of UFP Edge, 9% of Deckorators, and 5% of Outdoor Essentials, were offset by organic unit declines of 15% of ProWood and 12% of Handprint. The organic increases mentioned above were primarily due to capacity expansion and initiatives to gain market share in these product categories, while the decline in unit sales of ProWood and Handprint are attributed to a shift in consumer spending as a result of the end of pandemic-related restrictions on certain activities. In addition, new product sales increased approximately 27.1% to $510 million in 2021 compared to 2020, and the transfer of approximately $48 million in sales to the retail segment from the construction segment contributed to unit growth in retail. Finally, our sales to big box customers increased 53%, and sales to other independent retailers increased 67%.

Gross profits increased 1.6% to $298 million in 2021 compared to 2020. Our change in gross profits was attributable to the following:

●

Our Retail Building Materials business unit contributed $23.2 million to the increase. The increase is primarily due to unit sales growth and rising lumber and panel prices combined with effective inventory positioning.

●

Acquisitions contributed $10.4 million to the increase.

●

Our UFP Edge business unit decreased by approximately $5.6 million.

●

Our Deckorators, Outdoor Essentials, Handprint, and E-Commerce business units were less significant, and collectively these units contributed $2.5 million of additional gross profit.

●

Our ProWood business unit decreased by $25.8 million, primarily due to the impact of falling lumber prices from June through October of 2021 on ProWood’s pressure-treated products that are sold at a variable price. Conversely, lumber prices rose during most of 2020 as a result of unexpectedly strong demand.

Selling, general and administrative (“SG&A”) expenses increased by approximately $31.4 million, or 22.8%, in 2021 compared to 2020. The SG&A of recently acquired businesses contributed approximately $19.2 million to this increase. Accrued bonus expense, which varies with our overall profitability and return on investment, decreased approximately $0.6 million and totaled approximately $34.7 million in 2021. The remaining increase was primarily due to increases in salaries and wages, sales compensation, and travel related expenses, which were partially offset by a decline in merchandising costs.

Earnings from operations of the Retail reportable segment decreased in 2021 compared to 2020 by $26.5 million, or 17.1%, as a result of the factors mentioned above.

Industrial Segment:

Net sales to the industrial segment increased 100% in 2021 compared to 2020 due to a 60% increase in selling prices attributable to the Lumber Market and favorable sales mix changes, a 5% increase in organic unit sales and a 35% increase in unit sales from recent acquisitions.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Gross profits increased by $288.0 million, or 163%, to $464.7 million in 2021 compared to 2020. Acquisitions contributed $81.0 million to the increase in gross profit. The remaining increase was primarily due to organic unit sales growth and leveraging fixed costs, value-based pricing initiatives resulting in an increase in our selling prices, and favorable changes in our sales mix of value-added products. Additionally, in 2021, strong demand and unusually high lumber market volatility has allowed us to re-price our products more frequently to protect margins.

Selling, general and administrative (“SG&A”) expenses increased by approximately $103.0 million, or 106.1%, in 2021 compared to 2020. Acquired operations in 2021 contributed approximately $23.0 million to total SG&A expenses. Accrued bonus expense increased approximately $52.3 million compared to last year and totaled approximately $71.1 million for 2021. The remaining increase was primarily due to increases in salaries and wages and sales incentive compensation.

Earnings from operations of the Industrial reportable segment in 2021 increased by $181.6 million, or 217.8%, compared to 2020 due to the factors discussed above.

Construction Segment:

Net sales to the construction segment increased 59% in 2021 compared to 2020 due to a 42% increase in selling prices, organic unit sales growth of 14%, and 3% growth from acquisitions. The organic unit increase was comprised of a 25% increase in factory-built housing, a 15% in site-built housing, and a 15% in commercial construction. These increases were offset by a unit decline of 30% in concrete forming. As discussed above, the transfer of $48 million in sales to the retail segment contributed to the unit decline in the concrete forming business unit.

Gross profits increased by $268.8 million, or 102.5% to $531.0 million in 2021 compared to 2020. The increase in our gross profit was comprised of the following factors:

●

Our site-built housing business unit increased by $157.4 million due to unit sales growth and leveraging fixed costs and higher selling prices. Additionally, in 2021, strong demand and unusually high lumber market volatility has allowed us to re-price our products more frequently to protect margins.

●

Our factory-built housing business unit increased by $79.8 million as a result of increased unit sales and leveraging fixed costs and favorable trends in lumber prices. Commodity-based and value-added products increased $34 million and $39 million, respectively.

●

Our commercial business unit increased $19.1 million as a result of an increase in unit sales, better productivity due to efforts to reduce our capacity to align with the current level of demand, increases in selling prices, and other operational improvements.

●

Acquired businesses contributed $6.3 million.

●

Our concrete forming business unit increased $6.2 million.

SG&A expenses increased by approximately $87.8 million, or 48.9%, in 2021 compared to 2020. Acquired operations in 2021 contributed approximately $5.8 million to total SG&A expenses. Accrued bonus expense increased approximately $52.2 million compared to last year and totaled approximately $70.8 million for 2021. The remaining increase was primarily due to the $11.5 million Goodwill impairment in the prior year and increases in salaries and wages, sales incentive compensation, and travel related expenses in the current year.

Earnings from operations of the Construction reportable segment increased in 2021 compared to 2020 by $195.2 million, or 282.9%, due to the factors mentioned above.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All Other Segment:

Our All Other reportable segment consists of our International and Ardellis (our insurance captive) segments that are not significant to our overall results.

Corporate:

The corporate segment primarily consists of net sales and gross profits on sales to external customers initiated by UFP Purchasing and UFP Transportation and over (under) allocated costs that are not significant

INTEREST EXPENSE

Interest expense increased in 2021 compared to 2020, due primarily to an increase in borrowings to fund current year acquisitions and increases in net working capital. See “Note C of Notes to the Consolidated Financial Statements”.

INCOME TAXES

Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for state and local income taxes, and permanent tax differences. Our effective tax rate was 23.9% in 2021 compared to 25.5% in 2020. The decrease was primarily due to a reduction in certain permanent tax differences compared to the prior year, none of which are individually significant, non-deductible goodwill impairment expense recorded in 2020, and a valuation allowance recorded in 2020 against deferred tax assets related to net operating loss carryforwards of foreign subsidiaries in our commercial business unit totaling approximately $3.6 million.

OFF-BALANCE SHEET COMMITMENTS AND CONTRACTUAL OBLIGATIONS

We have no significant off-balance sheet commitments. The following table summarizes our contractual obligations as of December 25, 2021 (in thousands).


	Payments Due by Period
	Less than		1 – 3		3 – 5		After
Contractual Obligation	1 Year		Years		Years		5 Years		Total
Long-term debt and finance lease obligations	$	42,649	$	49,048	$	285	$	228,268	$	320,250
Estimated interest on long-term debt and finance lease obligations		11,214		18,959		15,657		41,064		86,894
Operating leases		26,378		36,882		24,304		27,123		114,687
Capital project purchase obligations		78,234		—		—		—		78,234
Total	$	158,475	$	104,889	$	40,246	$	296,455	$	600,065

As of December 25, 2021, we also had $54.2 million in outstanding letters of credit issued during the normal course of business, as required by some vendor contracts.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

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


	December 25,		December 26,
	2021		2020
Cash from operating activities	$	512,477	$	336,477
Cash used in investing activities		(611,187)		(154,718)
Cash from (used in) financing activities		(45,006)		85,221
Effect of exchange rate changes on cash		(1,669)		962
Net change in cash and cash equivalents		(145,385)		267,942
Cash, cash equivalents, and restricted cash, beginning of year		436,608		168,666
Cash, cash equivalents, and restricted cash, end of year	$	291,223	$	436,608

In general, we fund our growth through a combination of operating cash flows, our revolving credit facility, industrial development bonds (when circumstances permit), and issuance of long-term notes payable at times when interest rates are favorable. We have not issued equity to finance growth except in the case of a large acquisition. We manage our capital structure by attempting to maintain a targeted ratio of debt to equity and debt to earnings before interest, taxes, depreciation and amortization. We believe these financial ratios are among many other 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 resulting in negative or modest cash flows from operations during those periods. Conversely, we experience a substantial decrease in working capital once we move beyond our peak selling season which typically results in significant cash flows from operations in our third and fourth quarters. As explained in more detail below, the unusually large increase in lumber prices this year, as well as the significant increase in sales, resulted in a more significant increase in net working capital this year relative to prior years.

Due to the seasonality of our business and the effects of the Lumber Market, we believe our cash cycle (days sales are outstanding plus days supply of inventory less days payables are outstanding) is a good indicator of our working capital management. As indicated in the table below, our cash cycle increased to 57 days in 2021 from 48 days in 2020.


	Twelve Months Ended
	December 25,		December 26,
	2021		2020
Days of sales outstanding		34		32
Days supply of inventory		43		36
Days payables outstanding		(20)		(20)
Days in cash cycle		57		48

The increase in our days of sales outstanding and days supply of inventory in 2021 was primarily due to PalletOne and other acquisitions. Lower retail demand than our customers anticipated from our inventory planning also contributed to our days supply of inventory.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our cash flows from operating activities in 2021 was $512.5 million, which was comprised of net earnings of $552.4 million and $114.8 million of non-cash expenses, offset by a $12.0 million gain on sale of assets and $142.7 million increase in working capital since the end of December 2020. The increase in our working capital was due to higher year over year lumber prices and increased demand in our industrial and construction segments. Comparatively, cash generated from operating activities was approximately $336.5 million in 2020, which was comprised of net earnings of $253.9 million, $85.3 million of non-cash expenses (including $11.5 million of goodwill impairment charges), and a $2.7 million increase in working capital since the end of December 2019.

Our cash used in investing activities during 2021 was $611.2 million, reflecting purchases of property, plant, and equipment totaling $151.2 million and business acquisitions totaling $476.0 million. See “Note C of Notes to the Consolidated Financial Statements”. Our outstanding purchase commitments on existing capital projects totaled approximately $52.7 million on December 25, 2021. Capital spending primarily consists of several projects to expand capacity to manufacture new and value-added products, achieve efficiencies through automation, make improvements to a number of facilities, and increase our transportation capacity (tractors, trailers) in order to meet higher volumes and replace old rolling stock. Notable areas of capital spending include projects to:

●

Increase the capacity and efficiency of our plants that produce our Deckorators mineral-based composite and wood-plastic composite decking,

●

Expand our capacity to produce UFP Edge siding, pattern and trim products, machine-built pallets, engineered wood and metal components for site-built construction, and

●

Invest in automation opportunities.

Finally, we sold property, plants, and equipment for proceeds of $30.0 million, consisting of $21 million from the sale of real estate and $9 million from the sale of equipment. The sale and purchase of investments totaling $14.9 million and $23.8 million, respectively, are due to investment activity in our captive insurance subsidiary.

Cash flows used in financing activities during 2021 primarily consisted of the payment of quarterly dividends totaling $40.2 million and distributions to noncontrolling interests of $6.8 million. Comparatively in 2020, cash flows from financing activities primarily consisted of proceeds of $150.0 million from the issuance of Senior E, F and G Notes in order to take advantage of lower interest rates, $30.7 million in dividend payments, and $29.2 million in share repurchases when our stock price declined as a result of the pandemic. The increase in our dividends is primarily due to an increase in the rates our board approved as a result of our growth in earnings and operating cash flow.

On November 1, 2018, we entered into a five-year, $375 million unsecured revolving credit facility with a syndicate of U.S. and Canadian banks led by JPMorgan Chase Bank, N.A., as administrative agent and Wells Fargo Bank, N.A., as syndication agent. The facilities include up to $40 million which may be advanced in the form of letters of credit, and up to $100 million (U.S. dollar equivalent) which may be advanced in Canadian dollars, Australian dollars, pounds Sterling, Euros and such other foreign currencies as may subsequently be agreed upon among the parties. On February 19, 2021, the credit agreement was amended to increase the availability from $375 million to $550 million by exercising the accordion feature in the original agreement.

On August 10, 2020, we entered into an unsecured Note Purchase Agreement (the "Agreement") under which we issued our 3.04% Series 2020 E Senior Notes, due August 10, 2032, in the aggregate principal amount of $50 million, our 3.08% Series 2020 F Senior Notes, due August 10, 2033, in the aggregate principal amount of $50 million, and our 3.15% Series 2020 G Senior Notes, due August 10, 2035, in the aggregate principal amount of $50 million. Proceeds from the sale of the Series E, F and G Senior Notes were used to fund the acquisition of PalletOne.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On December 25, 2021, we had $7.8 million outstanding on our $550 million revolving credit facility, and we had approximately $535.1 million in remaining availability after considering $7.1 million in outstanding letters of credit. Financial covenants on the unsecured revolving credit facility and unsecured notes include minimum interest tests and a maximum leverage ratio. The agreements also restrict the amount of additional indebtedness we may incur and the amount of assets which may be sold. We were in compliance with all our covenant requirements on December 25, 2021.

ENVIRONMENTAL CONSIDERATIONS AND REGULATIONS

See Notes to Consolidated Financial Statements, Note L, “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. Following is a summary of our more significant accounting policies that require the use of estimates and judgments in preparing the financial statements.

GOODWILL

We evaluate goodwill for indicators of impairment when events or circumstances indicate that this risk may be present. Our judgments regarding the existence of impairment are based on market conditions, operational performance and estimated future cash flows. Determining whether an impairment has occurred requires the valuation of the respective reporting unit, which we have consistently estimated using primarily a weighted average between income and market valuation approaches. We believe this approach is the most appropriate and accurate method to measure the fair value of our intangible assets. We use discounted cash flow analysis with the following assumption: a business is worth today what it can generate in future cash flows; cash received today is worth more than an equal amount of cash received in the future; and future cash flows can be reasonably estimated. The discounted cash flow analysis is based on the present value of projected cash flows and residual values.

If the carrying value of goodwill is considered impaired, an impairment charge is recorded to adjust it to its fair value. Changes in forecasted operations and changes in discount rates can materially affect these estimates. In addition, we test goodwill annually for impairment or more frequently if changes in circumstances or the occurrence of other events suggest impairments exist. The test for impairment requires us to make several estimates about fair value, most of which are based on projected future cash flows and market valuation multiples. Changes in these estimates may result in the recognition of an impairment loss.

On our annual testing date of September 25, 2021, the fair values exceed the carrying values for each of the Company’s reporting units. There were no indicators for impairment for any of the reporting units. We believe we have sufficient available information, both current and historical, to support our assumptions, judgments and estimates used in the goodwill impairment test.

In the prior year, we experienced significantly lower than expected operating results within our commercial reporting unit, which is within the Construction segment. It was determined that the carrying value of the reporting unit exceeded its fair value and we recorded a non-cash goodwill impairment charge of $11.5 million as of December 26, 2020, which represented the entire amount of the goodwill recorded within the reporting unit, as a result.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

REVENUE RECOGNITION

Revenue for product sales is recognized at the time the performance obligation is satisfied, which is primarily when the goods are delivered to the carrier, Free On Board (FOB) shipping point. Generally, title 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.

Performance on construction contracts is reflected in operations using over time accounting, under either the cost to cost or units of delivery methods, depending on the nature of the business at individual operations. Under over time accounting using the cost to cost method, revenues and related earnings on construction contracts are measured by the relationships of actual costs incurred related to the total estimated costs. Under over time accounting using the units of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual units produced related to the total number of units. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent.

Our construction contracts are generally entered into with a fixed price and completion of the projects can range from 6 to 18 months in duration. Therefore, our operating results are impacted by, among many other things, labor rates and commodity costs. During the year, we update our estimated costs to complete our projects using current labor and commodity costs and recognize losses to the extent that they exist.

FORWARD OUTLOOK

GOALS

Our long-term objectives include:

●

Growing our annual unit sales by 5 to 7 percent. We anticipate smaller tuck-in acquisitions will contribute toward this goal;

●

Achieving and sustaining a 10 percent EBITDA margin by continuing to enhance our capabilities and grow our portfolio of value-added products as well as growth of our portfolio of value-added products;

●

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

●

Maintaining a conservative capital structure.

RETAIL SEGMENT

The Home Improvement Research Institute (“HIRI”) anticipates growth in home improvement spending and has forecasted a 3.1% compounded annual growth rate through 2024. Most recently, large “big box” customers like The Home Depot and Lowes have cautioned that they cannot predict if pandemic driven demand trends will continue. The Home Depot has stated that if the demand environment during the last half of 2021 were to persist through the current year, it would imply slightly positive sales growth in 2022. Lowe’s has forecasted a decline of 1% to an increase of 1% in comparable sales in 2022. Sales of our Retail Solutions segment comprised approximately 39.6% of our annual sales in 2021.

We continue to compete for market share for certain retail customers and face intense pricing pressure from other suppliers to this market.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our long-term goal is to achieve sales growth by:

●

Increasing our market share of value-added products, including our Deckorators, Edge, Outdoor Essentials and Handprint product lines. Continued investment in capacity for Deckorators and Edge is expected to contribute to this increase.

●

Developing new products and increasing our emphasis on product innovation and product differentiation in order to counter commoditization trends and influences.

●

Acquiring businesses in core product categories when those opportunities exist.

●

Adding new products and customers through strategic business acquisitions or alliances.

INDUSTRIAL SEGMENT

Our goal is to increase our sales of wood, wood alternative, and protective packaging products to a wide variety of industrial customers and manufactured wood components for OEM users. We believe the vast amount of hardwood and softwood lumber consumed for industrial applications, combined with the highly fragmented nature of this market, provides us with market share growth opportunities as a result of our competitive advantages in manufacturing, purchasing, and material utilization. In addition, purchasers of packaging products with a wide geographic footprint increasingly desire to reduce the number of suppliers they buy from, which provides an opportunity to gain market share due to our international presence. We plan to continue to obtain market share by expanding our manufacturing capacity, enhancing our capabilities and product offerings to enhance the solutions we offer our customers, and improving our ability to serve large regional and international customers in targeted markets. We plan to continue to pursue acquisition opportunities that meet our strategic criteria and help us meet these objectives. As discussed previously, the recently implemented reorganization of our business is intended to promote revenue growth through the introduction of new products, including protective and other packaging materials, and enhanced expertise in this market as well as improved earnings through more efficient use of our people, resources and capital.

Market indicators that should be considered when evaluating future demand for our products in the industrial segment include industrial production and the Purchasing Managers Index. Industrial Production in the United States is estimated to stand at 0.9% in 2022. The Purchasing Managers Index is projected to trend around 56 points in 2023 and 52.4 points in 2024. Sales in this segment comprised approximately 24.9% of our annual sales in 2021.

CONSTRUCTION SEGMENT

The National Association of Home Builders forecasts a 3.0% increase in manufactured home shipments in 2022 followed by a 1.0% increase in 2023. We currently supply approximately 45.0% of the trusses used in manufactured housing and we will strive to maintain our market share of trusses produced for this market. Sales of our Factory Built business unit within our Construction segment comprised approximately 12.7% of our annual sales in 2021.

The Mortgage Bankers Association of America forecasts a 5.0% increase in national housing starts to an estimated 1.7 million starts in 2022. The National Association of Home Builders forecasts starts of $1.6 million, a 3.0% increase from 2021. We believe we are well-positioned to capture our share of any increase that may occur in housing starts in the regions we operate, which is primarily Texas, Colorado, the mid-Atlantic states, and the Northeast. However, due to our conservative approach to adding capacity to serve this market and focus on managing potential channel conflicts with certain customers, our growth may trail the market in future years. Sales of our Site Built business unit within our Construction segment comprised approximately 13.8% of our annual sales in 2021.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Non-residential construction spending is a market indicator that should be considered when evaluating future demand for our products in our Commercial and Concrete Forming business units within our Construction segment. Sales in these business units comprised approximately 3.0% and 1.7%, respectively, of our annual sales in 2021.

GROSS PROFIT

We believe the following factors may impact our gross profits and margins in the future:

●

End market demand and our ability to grow and leverage fixed costs and price our products based on the value we offer our customers.

●

The effective implementation of our strategy to focus and manage our operations around the markets we serve.

●

Our ability to maintain market share and gross margins on products sold to our largest customers. We believe our level of service, geographic diversity, and quality of products provides an added value to our customers. However, if our customers are unwilling to pay for these advantages, our sales and gross margins may be reduced.

●

Sales mix of value-added and commodity products.

●

Fluctuations in the relative level of the Lumber Market and trends in the market price of lumber. (See "Impact of the Lumber Market on our Operating Results.")

●

Fuel and transportation costs.

●

Rising labor and benefit costs.

●

Our ability to continue to achieve productivity improvements as our unit sales increase and planned cost reductions through continuous improvement activities, automation, and other initiatives.

●

Changes in corporate income tax rates and the cost of complying with new or increased government regulations.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

In recent years, selling, general and administrative (SG&A) expenses have increased due to acquisitions and added personnel hired to take advantage of growth opportunities and execute our initiatives intended to increase our sales of new products and improve our sales mix of value-added products. We anticipate our trend of increases in these costs will continue in 2022; however, our objective is to reduce these costs on a per unit basis and as a percentage of gross profits as we grow through the improved productivity of our people and as a result of fixed costs. In addition, bonus and other incentive expenses for all salaried and sales employees is based on our profitability and the effective management of our assets and will continue to fluctuate based on our results. See Note H — Common Stock for discussion of future compensation costs related to long-term share-based bonus awards.

On a long-term basis, we expect that our SG&A expenses will primarily be impacted by:

●

Our growth in sales to the industrial and the construction segments. Our sales to these segments require a higher ratio of SG&A costs due, in part, to product design and engineering requirements.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

●

Sales of new products and value-added, branded products to the retail segment, which generally require higher product development, marketing, advertising, and other selling costs.

●

Our incentive compensation programs which are tied to gross profits, pre-bonus earnings from operations and return on investment.

●

Our growth and success in achieving continuous improvement objectives designed to improve our productivity and leverage our fixed costs as we grow.

LIQUIDITY AND CAPITAL RESOURCES

Our cash cycle will continue to be impacted in the future by our mix of sales by market. Sales to our construction and industrial segments require a greater investment in working capital than sales to our retail segment. Additionally, our net investment in trade receivables, inventory, and accounts payable will continue to be impacted by the level of lumber prices.

Additionally, we expect to spend between $175 million to $225 million on capital expenditures, incur depreciation of approximately $98 million, and incur amortization and other non-cash expenses of approximately $20 million in 2022.

On December 25, 2021, we had outstanding purchase commitments on capital projects of approximately $52.7 million. We intend to fund capital expenditures and purchase commitments through our operating cash flows and availability under our revolving credit facility which is considered sufficient to meet these commitments and working capital needs.

Our dividend rates are reviewed and approved at each of our January, April, July, and October board meetings and payments are made in March, June, September, and December of each year. Our board considers our dividend yield, payout ratios relative to earnings and operating cash flow, and potential variability of future results, among other factors, as part of its decision-making process.

We have a share repurchase program approved by our Board of Directors, and as of February 15, 2022, we have remaining authorization to buy back approximately 2.6 million shares. In the past, we have repurchased shares in order to offset the effect of issuances resulting from our employee benefit plans and at opportune times when our stock price falls to predetermined levels.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of UFP Industries, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of UFP Industries, Inc. and subsidiaries (the “Company”) as of December 25, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 25, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 25, 2021, of the Company and our report dated February 23, 2022, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Grand Rapids, Michigan

February 23, 2022

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of UFP Industries, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of UFP Industries, Inc. and subsidiaries (the "Company") as of December 25, 2021 and December 26, 2020, the related consolidated statements of earnings and comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended December 25, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 25, 2021 and December 26, 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 25, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 25, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Purchase Accounting for the PalletOne, Inc. Acquisition – Refer to C to the financial statements

Critical Audit Matter Description

On December 28, 2020, the Company acquired PalletOne, Inc. for $259 million. The transaction was accounted for using the purchase price method of accounting. The purchase price, including capitalized acquisition-related costs, was allocated based on the relative fair value of the assets acquired and liabilities assumed, which were determined using valuation information obtained from published market data, an external valuation specialist for certain acquired assets, and the Company’s historical knowledge of acquiring comparable assets and liabilities.

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We identified the acquisition of PalletOne, Inc. as a critical audit matter because of the estimates management makes to determine the relative fair value of the assets acquired and liabilities assumed. This required auditor judgement and an increased extent of audit effort, including the use of our fair value specialists for the valuation of the real, tangible, and intangible assets.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the relative fair value of the assets acquired and liabilities assumed of PalletOne, Inc. included the following, among others:

●

We assessed the knowledge, skill, ability, and objectivity of management’s valuation group and evaluated the work performed.

●

With the assistance of our fair valuation specialists, we evaluated the reasonableness of the (1) valuation methodology for the real, personal, and intangible property and (2) discount rate of the intangible property by:

Testing the assumptions used considering the past performance of each acquired company and the Company’s strategic plan going forward.

Testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the calculation.

Developing a range of independent estimates of the discount rate and comparing to the discount rate utilized by management.

●

Evaluated management’s use of experts related to the valuation of certain acquired assets including qualifications and methodology.

/s/ Deloitte & Touche LLP

Grand Rapids, Michigan

February 23, 2022

We have served as the Company's auditor since 2014.

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UFP INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS


(in thousands, except share data)
	December 25,		December 26,
	2021		2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	286,662	$	436,507
Restricted cash		4,561		101
Investments		36,495		24,308
Accounts receivable, net		737,805		470,504
Inventories:
Raw materials		416,043		316,481
Finished goods		547,277		250,813
Total inventories		963,320		567,294
Refundable income taxes		4,806		5,836
Other current assets		39,827		33,812
TOTAL CURRENT ASSETS		2,073,476		1,538,362
DEFERRED INCOME TAXES		3,462		2,413
RESTRICTED INVESTMENTS		19,310		17,565
RIGHT OF USE ASSETS		96,703		77,245
OTHER ASSETS		31,876		20,298
GOODWILL		315,038		252,193
INDEFINITE-LIVED INTANGIBLE ASSETS		7,369		7,401
OTHER INTANGIBLE ASSETS, NET		109,017		72,252
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements		163,289		128,301
Building and improvements		329,698		272,864
Machinery and equipment		632,864		525,542
Furniture and fixtures		24,063		21,110
Construction in progress		62,199		26,680
PROPERTY, PLANT AND EQUIPMENT, GROSS		1,212,113		974,497
Less accumulated depreciation and amortization		(623,093)		(557,335)
PROPERTY, PLANT AND EQUIPMENT, NET		589,020		417,162
TOTAL ASSETS	$	3,245,271	$	2,404,891
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Cash overdraft	$	17,030	$	—
Accounts payable		319,125		211,518
Accrued liabilities:
Compensation and benefits		289,196		166,478
Other		84,853		69,104
Current portion of lease liability		23,155		16,549
Current portion of long-term debt		42,683		100
TOTAL CURRENT LIABILITIES		776,042		463,749
LONG-TERM DEBT		277,567		311,607
LEASE LIABILITY		76,632		61,509
DEFERRED INCOME TAXES		60,964		25,266
OTHER LIABILITIES		37,497		59,608
TOTAL LIABILITIES		1,228,702		921,739
SHAREHOLDERS’ EQUITY:
Controlling interest shareholders’ equity:
Preferred stock, no par value; shares authorized 1,000,000; issued and outstanding, none	$	—	$	—
Common stock, $1 par value; shares authorized 80,000,000; issued and outstanding, 61,901,851 and 61,205,780		61,902		61,206
Additional paid-in capital		243,995		218,224
Retained earnings		1,678,121		1,182,680
Accumulated other comprehensive loss		(5,405)		(1,794)
Total controlling interest shareholders’ equity		1,978,613		1,460,316
Noncontrolling interest		37,956		22,836
TOTAL SHAREHOLDERS’ EQUITY		2,016,569		1,483,152
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,245,271	$	2,404,891

See notes to consolidated financial statements.

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UFP INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME


(in thousands, except per share data)
	Year Ended
	December 25,		December 26,			December 28,
	2021		2020			2019
NET SALES	$	8,636,134	$	5,153,998		$	4,416,009
COST OF GOODS SOLD		7,229,167		4,353,702			3,730,491
GROSS PROFIT		1,406,967		800,296			685,518
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		682,253		444,596			439,047
OTHER (GAINS) LOSSES, NET		(12,840)		9,874			1,565
EARNINGS FROM OPERATIONS		737,554		345,826			244,906
INTEREST EXPENSE		13,814		9,311			8,700
INTEREST AND INVESTMENT INCOME		(6,498)		(4,468)			(4,468)
EQUITY IN EARNINGS OF INVESTEE		3,902		—			—
		11,218		4,843			4,232
EARNINGS BEFORE INCOME TAXES		726,336		340,983			240,674
INCOME TAXES		173,972		87,101	��		58,270
NET EARNINGS		552,364		253,882			182,404
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(16,724)		(7,104)			(2,754)
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST	$	535,640	$	246,778		$	179,650

EARNINGS PER SHARE – BASIC	$	8.61	$	4.00		$	2.91
EARNINGS PER SHARE – DILUTED	$	8.59	$	4.00		$	2.91

OTHER COMPREHENSIVE INCOME:
NET EARNINGS		552,364		253,882			182,404
OTHER COMPREHENSIVE GAIN (LOSS)		(5,296)		5,967			1,513
COMPREHENSIVE INCOME		547,068		259,849			183,917
LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		(15,039)		(9,976)			(3,218)
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST	$	532,029	$	249,873		$	180,699

See notes to consolidated financial statements.

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UFP INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


(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 29, 2018	$	60,884	$	178,540	$	839,917	$	(5,938)	$	15,281	$	1,088,684
Net earnings						179,650				2,754		182,404
Foreign currency translation adjustment								568		464		1,032
Unrealized gain (loss) on investment & foreign currency								481				481
Distributions to noncontrolling interest										(2,143)		(2,143)
Additional purchase of noncontrolling interest				(4,737)						(2,338)		(7,075)
Cash dividends - $0.40 per share						(24,549)						(24,549)
Issuance of 33,647 shares under employee stock purchase plan		34		1,059								1,093
Issuance of 309,628 shares under stock grant programs		310		5,654		4						5,968
Issuance of 181,565 shares under deferred compensation plan		181		(181)								—
Expense associated with share-based compensation arrangements				3,843								3,843
Accrued expense under deferred compensation plans				7,995								7,995
Balance on December 28, 2019	$	61,409	$	192,173	$	995,022	$	(4,889)	$	14,018	$	1,257,733
Net earnings						246,778				7,104		253,882
Foreign currency translation adjustment								1,373		2,872		4,245
Unrealized gain on debt securities								1,722				1,722
Distributions to noncontrolling interest										(933)		(933)
Noncontrolling interest related to business combinations				130						(225)		(95)
Cash dividends - $0.50 per share						(30,669)						(30,669)
Issuance of 35,133 shares under employee stock purchase plan		35		1,360								1,395
Issuance of 390,720 shares under stock grant programs		390		12,140		5						12,535
Issuance of 127,735 shares under deferred compensation plan		128		(128)								—
Repurchase of 756,397 shares		(756)				(28,456)						(29,212)
Expense associated with share-based compensation arrangements				3,905								3,905
Accrued expense under deferred compensation plans				8,644								8,644
Balance on December 26, 2020	$	61,206	$	218,224	$	1,182,680	$	(1,794)	$	22,836	$	1,483,152
Net earnings						535,640				16,724		552,364
Foreign currency translation adjustment								(2,584)		(1,685)		(4,269)
Unrealized gain on investments and other								(1,027)				(1,027)
Distributions to noncontrolling interest										(6,750)		(6,750)
Noncontrolling interest related to business combinations										6,831		6,831
Cash dividends - $0.65 per share						(40,209)						(40,209)
Issuance of 33,104 shares under employee stock purchase plan		33		2,083								2,116
Issuance of 546,235 shares under stock grant programs		546		3,506		10						4,062
Issuance of 116,732 shares under deferred compensation plan		117		(117)								—
Expense associated with share-based compensation arrangements				11,071								11,071
Accrued expense under deferred compensation plans				9,228								9,228
Balance on December 25, 2021	$	61,902	$	243,995	$	1,678,121	$	(5,405)	$	37,956	$	2,016,569

See notes to consolidated financial statements

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UFP INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


(in thousands)	Year Ended
	December 25,		December 26,		December 28,
	2021		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	552,364	$	253,882	$	182,404
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation		84,184		63,964		60,494
Amortization of intangibles		13,948		8,716		6,325
Expense associated with share-based and grant compensation arrangements		11,224		4,034		4,007
Deferred income taxes		5,653		1,857		7,176
Unrealized gain on investments and other		(4,118)		(2,076)		(2,523)
Equity in earnings of investee		3,902		—		—
Net gain on sale and disposition of assets		(11,992)		1,470		1,565
Goodwill impairment		—		11,485		—
Gain from reduction of estimated earnout liability		—		(4,134)		—
Changes in:
Accounts receivable		(85,439)		(87,552)		(16,872)
Inventories		(260,301)		(76,022)		73,120
Accounts payable and cash overdraft		78,060		62,405		(24,132)
Accrued liabilities and other		124,992		98,448		57,727
NET CASH PROVIDED BY OPERATING ACTIVITIES		512,477		336,477		349,291
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(151,166)		(89,182)		(84,933)
Proceeds from sale of property, plant and equipment		29,973		2,922		1,777
Acquisitions and purchases of non-controlling interest, net of cash received		(475,960)		(65,255)		(39,122)
Investment in life insurance contracts		—		—		(15,253)
Purchases of investments		(23,797)		(28,054)		(13,352)
Proceeds from sale of investments		14,882		24,805		9,828
Other		(5,119)		46		(982)
NET CASH USED IN INVESTING ACTIVITIES		(611,187)		(154,718)		(142,037)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities		892,072		6,862		422,057
Repayments under revolving credit facilities		(888,695)		(6,498)		(460,537)
Contingent consideration payments and other		(3,176)		(5,787)		(3,136)
Issuance of long-term debt		—		150,000		—
Proceeds from issuance of common stock		2,116		1,395		1,093
Dividends paid to shareholders		(40,209)		(30,669)		(24,549)
Distributions to noncontrolling interest		(6,750)		(932)		(2,216)
Repurchase of common stock		—		(29,212)		—
Other		(364)		62		20
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(45,006)		85,221		(67,268)
Effect of exchange rate changes on cash		(1,669)		962		482
NET CHANGE IN CASH AND CASH EQUIVALENTS		(145,385)		267,942		140,468
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR		436,608		168,666		28,198
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	291,223	$	436,608	$	168,666

RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents, beginning of period	$	436,507	$	168,336	$	27,316
Restricted cash, beginning of period		101		330		882
Cash, cash equivalents, and restricted cash, beginning of period	$	436,608	$	168,666	$	28,198

Cash and cash equivalents, end of period	$	286,662	$	436,507	$	168,336
Restricted cash, end of period		4,561		101		330
Cash, cash equivalents, and restricted cash, end of period	$	291,223	$	436,608	$	168,666

SUPPLEMENTAL INFORMATION:
Interest paid	$	14,077	$	7,204	$	8,763
Income taxes paid		167,043		77,964		50,224
NON-CASH INVESTING ACTIVITIES
Capital expenditures included in accounts payable		3,256		—		—
NON-CASH FINANCING ACTIVITIES:
Common stock issued under deferred compensation plans	$	7,487	$	6,870	$	6,229

See notes to consolidated financial statements

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UFP INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

OPERATIONS

We are a holding company whose subsidiaries supply wood, wood composite and other products to 3 markets: retail, construction and industrial. Founded in 1955, we are headquartered in Grand Rapids, Michigan, with affiliates throughout North America, Europe, Asia and Australia.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries and partnerships. In addition, we consolidate any entity which we own 50% or more and exercise control. Intercompany transactions and balances have been eliminated.

NONCONTROLLING INTEREST IN SUBSIDIARIES

Noncontrolling interest in results of operations of consolidated subsidiaries represents the noncontrolling shareholders’ share of the income or loss of various consolidated subsidiaries. The noncontrolling interest reflects the original investment by these noncontrolling shareholders combined with their proportional share of the earnings or losses of these subsidiaries, net of distributions paid.

FISCAL YEAR

Our fiscal year is a 52 or 53 week period, ending on the last Saturday of December. Unless otherwise stated, references to 2021, 2020, and 2019 relate to the fiscal years ended December 25, 2021, December 26, 2020, and December 28, 2019, respectively. Fiscal years 2021, 2020, and 2019 were comprised of 52 weeks.

FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS

We follow ASC Topic 820, Fair Value Measurements and Disclosures, which provides a consistent definition of fair value, focuses on exit price, prioritizes the use of market-based inputs over entity-specific inputs for measuring fair value and establishes a three-tier hierarchy for fair value measurements. This topic requires fair value measurements to be classified and disclosed in one of the following three categories:

●

Level 1 — Financial instruments with unadjusted, quoted prices listed on active market exchanges.

●

Level 2 — Financial instruments lacking unadjusted, quoted prices from active market exchanges, including over-the-counter traded financial instruments. Financial instrument values are determined using prices for recently traded financial instruments with similar underlying terms and direct or indirect observational inputs, such as interest rates and yield curves at commonly quoted intervals.

●

Level 3 — Financial instruments not actively traded on a market exchange and there is little, if any, market activity. Values are determined using significant unobservable inputs or valuation techniques.

Our investment portfolio includes restricted investments within our wholly-owned subsidiary, Ardellis Insurance Ltd. There are $19.3 million of restricted investments recorded as of December 25, 2021.

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CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and highly liquid investments purchased with an original maturity of three months or less.

INVESTMENTS

Investments are deemed to be "available for sale" and are, accordingly, carried at fair value being the quoted market value.

ACCOUNTS RECEIVABLE AND ALLOWANCES

We perform periodic credit evaluations of our customers and generally do not require collateral. Accounts receivable are due under a range of terms we offer to our customers. Discounts are offered, in most instances, as an incentive for early payment.

We base our allowances related to receivables on historical credit and collections experience, reasonable and supportable forecasts, and the specific identification of other potential problems, including the general economic climate. Actual collections can differ, requiring adjustments to the allowances. Individual accounts receivable balances are evaluated on a monthly basis, and those balances considered uncollectible are charged to the allowance.

The following table presents the activity in our accounts receivable allowances (in thousands):


			Additions
			Charged to
	Beginning		Costs and				Ending
	Balance		Expenses		Deductions*		Balance
Year Ended December 25, 2021:
Allowance for possible losses on accounts receivable	$	4,629	$	66,883	$	(66,427)	$	5,085
Year Ended December 26, 2020:
Allowance for possible losses on accounts receivable	$	4,440	$	48,954	$	(48,765)	$	4,629
Year Ended December 28, 2019:
Allowance for possible losses on accounts receivable	$	2,601	$	39,481	$	(37,642)	$	4,440

*	Includes accounts charged off, discounts given to customers and actual customer returns and allowances.

We record estimated sales returns, discounts, and other applicable adjustments as a reduction of net sales in the same period revenue is recognized.

Accounts receivable retainage amounts related to long term construction contracts totaled $7.8 million and $8.7 million as of December 25, 2021 and December 26, 2020, respectively. All amounts are expected to be collected within 18 months. Concentration of accounts receivable related to our 2 largest customers totaled $87.6 million and $97.9 million as of December 25, 2021 and December 26, 2020, respectively.

In June 2016, the FASB issued ASU 2016-13, Financial Instrument-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which changes the current incurred loss model to a forward looking expected credit loss model for most financial assets, such as trade and other receivables, loans and other instruments. The ASU is effective for fiscal years beginning after December 15, 2019. Entities are required to apply the provisions of the standard through a cumulative-effect adjustment to retained earnings as of effective date. We have adopted the new standard as of the beginning of fiscal year 2020 and have concluded the standard does not have a material impact on our consolidated financial statements and disclosures, accounting processes, and internal controls.

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INVENTORIES

Inventories are stated at the lower of cost or market. The cost of inventories includes raw materials, direct labor, and manufacturing overhead. Cost is determined on a weighted average basis. Raw materials consist primarily of unfinished wood products and other materials expected to be manufactured or treated prior to sale, while finished goods represent various manufactured and treated wood products ready for sale. We have inventory on consignment at customer locations valued at $37.8 million as of December 25, 2021 and $20.8 million as of December 26, 2020.

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment are stated at cost. Expenditures for renewals and betterments are capitalized, and maintenance and repairs are expensed as incurred. Amortization of assets held under finance leases is included in depreciation and amortized over the shorter of the estimated useful life of the asset or the lease term. Depreciation is computed principally by the straight-line method over the estimated useful lives of the assets as follows:


Land improvements		5 to 15 years
Buildings and improvements		10 to 32 years
Machinery, equipment and office furniture		2 to 20 years

Software costs are included in machinery and equipment on the balance sheet with gross amounts and accumulated amortization totaling $6.0 million and $5.3 million as of December 25, 2021, and $5.5 million and $4.9 million as of December 26, 2020, respectively.

LONG-LIVED ASSETS

In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), when an indicator of potential impairment exists, we evaluate the recoverability of our long-lived assets by determining whether unamortized balances could be recovered through undiscounted future operating cash flows over the remaining lives of the assets. If the sum of the expected future cash flows was less than the carrying value of the assets, an impairment loss would be recognized for the excess of the carrying value over the fair value.

GOODWILL

Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets of acquired businesses. Goodwill and intangible assets deemed to have indefinite lives are not amortized and are subject to impairment tests at least annually in accordance with ASC 350, Intangibles-Goodwill and Other. We review the carrying amounts of goodwill and other non-amortizable intangibles by reporting unit to determine if such assets may be impaired. As of the date of the most recent goodwill impairment test, which utilized data and assumptions as of September 25, 2021, all other reporting units had a fair value that was substantially in excess of the carrying value. In the fourth quarter of 2020, we recorded a non-cash goodwill impairment charge of $11.5 million related to the commercial reporting unit within our construction segment. We believe we have sufficient available information, both current and historical, to support our assumptions, judgments and estimates used in the goodwill impairment test.

Our annual testing date for evaluating goodwill and indefinite-lived intangible asset impairment is the first day of our fourth fiscal quarter for all reporting units. Additionally, we review various triggering events throughout the year to determine whether a mid-year impairment analysis is required.

FOREIGN CURRENCY

Our foreign operations use the local currency as their functional currency. Accordingly, assets and liabilities are translated at exchange rates as of the balance sheet date and revenues and expenses are translated using weighted average rates, with translation adjustments included as a separate component of shareholders’ equity. Gains and losses arising from re-measuring foreign currency transactions are included in earnings.

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INSURANCE RESERVES

Our wholly-owned insurance company, Ardellis Insurance Ltd.(“Ardellis”), was incorporated on April 21, 2001 under the laws of Bermuda and is licensed as a Class 3A insurer under the Insurance Act 1978 of Bermuda. On April 14, 2017 the U.S. Branch of Ardellis Insurance Ltd. was granted its Certificate of Authority to transact property and casualty insurance lines as an admitted carrier in the State of Michigan.

We are primarily self-insured for certain employee health benefits, and have self-funded retentions for general liability, automobile liability, property and workers’ compensation. We are fully self-insured for environmental liabilities. The general liability, automobile liability, property, workers’ compensation, and certain environmental liabilities are managed through Ardellis; the related assets and liabilities of which are included in the consolidated financial statements as of December 25, 2021 and December 26, 2020. Our policy is to accrue amounts equal to actuarially determined or internally computed liabilities. The actuarial and internal valuations are based on historical information along with certain assumptions about future events. Changes in assumptions for such matters as legal actions, medical cost trends, and changes in claims experience could cause these estimates to change in the future.

In addition to providing coverage for the Company, Ardellis provides Excess Loss Insurance (primarily medical and prescription drug) to certain third parties. As of December 25, 2021, Ardellis had 43 such contracts in place. Reserves associated with these contracts were $7.1 million at December 25, 2021, and $4.5 million at December 26, 2020, and are accrued based on third party actuarial valuations of the expected future liabilities.

INCOME TAXES

Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred income tax assets to the amounts expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred income tax assets and liabilities.

REVENUE RECOGNITION

Within the 3 primary segments (Retail, Industrial, and Construction) that the Company operates, there are a variety of written agreements governing the sale of our products and services. The transaction price is stated at the purchase order level, which includes shipping and/or freight costs and any applicable governmental authority taxes. The majority of our contracts have a single performance obligation concentrated around the delivery of goods to the carrier, Free On Board (FOB) shipping point. Therefore, revenue is recognized when this performance obligation is satisfied. Generally, title and control passes at the time of shipment. In certain circumstances, the customer takes title when the shipment arrives at the destination. However, our shipping process is typically completed the same day.

Certain customer products that we provide require installation by the Company or a 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.

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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Earnings on construction contracts are reflected in operations using over time accounting, under either cost to cost or units of delivery methods, depending on the nature of the business at individual operations, which is in accordance with ASC 606 as revenue is recognized when certain performance obligations are performed. Under over time accounting using the cost to cost method, revenues and related earnings on construction contracts are measured by the relationships of actual costs incurred related to the total estimated costs. Under over time accounting using the units of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual units produced related to the total number of units. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent.

The following table presents our net sales disaggregated by revenue source (in thousands):


	Year Ended
	December 25,		December 26,		December 28,		2021 vs. 2020	2020 vs. 2019
	2021		2020		2019		% Change	% Change
FOB Shipping Point Revenue	$	8,512,012	$	5,025,895	$	4,272,583	69.4%	17.6%
Construction Contract Revenue		124,122		128,103		143,426	(3.1)%	(10.7)%
Total Net Sales	$	8,636,134	$	5,153,998	$	4,416,009	67.6%	16.7%

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 on December 25, 2021 and December 26, 2020 which are included in “Other current assets” and “Accrued liabilities: Other”, respectively (in thousands):


	December 25,		December 26,
	2021		2020
Cost and Earnings in Excess of Billings	$	5,602	$	4,169
Billings in Excess of Cost and Earnings		10,744		11,530

SHIPPING AND HANDLING OF PRODUCT

Shipping and handling costs that are charged to and reimbursed by the customer are recognized as revenue. Costs incurred related to the shipment and handling of products are classified in cost of goods sold.

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SHARE-BASED COMPENSATION

We account for share-based awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”), which requires recognition of share-based compensation costs in financial statements based on fair value. Compensation cost is recognized over the period during which an employee is required to provide services in exchange for the award (the requisite service period). Forfeitures are recognized as they occur.

EARNINGS PER SHARE

Earnings per share (“EPS”) is computed using the two-class method. The two-class method determines EPS for each class of common stock and participating securities according to dividends and their respective participation rights in undistributed earnings. Participating securities include non-vested shares of restricted stock in which the participants have non-forfeitable rights to dividends during the performance period. EPS, basic and diluted, is calculated by dividing net earnings attributable to controlling interest, net of applicable taxes, by the weighted average number of shares of common stock outstanding for the period. The computation of EPS is as follows (in thousands):



	December 25,		December 26,		December 28,
	2021		2020		2019
Numerator:
Net earnings attributable to controlling interest	$	535,640	$	246,778	$	179,650
Adjustment for earnings allocated to non-vested restricted common stock		(17,342)		(6,903)		(4,496)
Net earnings for calculating EPS	$	518,298	$	239,875	$	175,154
Denominator:
Weighted average shares outstanding		62,209		61,632		61,649
Adjustment for non-vested restricted common stock		(2,014)		(1,724)		(1,543)
Shares for calculating basic EPS		60,195		59,908		60,106
Effect of dilutive restricted common stock		159		20		24
Shares for calculating diluted EPS		60,354		59,928		60,130
Net earnings per share:
Basic	$	8.61	$	4.00	$	2.91
Diluted	$	8.59	$	4.00	$	2.91

USE OF ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. We believe our estimates to be reasonable; however, actual results could differ from these estimates.

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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 and liabilities measured at fair value are as follows:


	December 25, 2021								December 26, 2020
	Quoted		Prices with						Quoted		Prices with
	Prices in		Other			Prices with			Prices in		Other			Prices with
	Active		Observable			Unobservable			Active		Observable			Unobservable
	Markets		Inputs			Inputs			Markets		Inputs			Inputs
	(Level 1)		(Level 2)			(Level 3)	Total		(Level 1)		(Level 2)			(Level 3)	Total
Money market funds	$	19	$	9,392	$	—	$	9,411	$	19	$	4,643	$	—	$	4,662
Fixed income funds		1,668		16,910		—		18,578		246		16,224		—		16,470
Treasury securities		342		—		—		342		—		—		—		—
Equity securities		20,163		—		—		20,163		12,602		—		—		12,602
Alternative investments		—		—		3,785		3,785		—		—		2,040		2,040
Mutual funds:
Domestic stock funds		10,910		—		—		10,910		8,088		—		—		8,088
International stock funds		1,687		—		—		1,687		1,440		—		—		1,440
Target funds		23		—		—		23		114		—		—		114
Bond funds		146		—		—		146		147		—		—		147
Alternative funds		483		—		—		483		482		—		—		482
Total mutual funds		13,249		—		—		13,249		10,271		—		—		10,271
Total	$	35,441	$	26,302	$	3,785	$	65,528	$	23,138	$	20,867	$	2,040	$	46,045
Assets at fair value	$	35,441	$	26,302	$	3,785	$	65,528	$	23,138	$	20,867	$	2,040	$	46,045

From the assets measured at fair value as of December 25, 2021, listed in the table above, $9.0 million of money market funds are held in Cash and Cash Equivalents, $36.5 million of mutual funds, equity securities, and alternative investments are held in Investments, $0.7 million of money market and mutual funds are held in Other Assets for our deferred compensation plan, and $18.9 million of fixed income funds and $0.4 million of money market funds are held in Restricted Investments.

We maintain money market, mutual funds, bonds, and/or stocks in our non-qualified deferred compensation plan and 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.

During 2018, we purchased a private real estate income trust which is valued as a Level 3 asset and is categorized as an “Alternative Investment.”

In accordance with our investment policy, our wholly-owned company, Ardellis Insurance Ltd. ("Ardellis"), maintains an investment portfolio, totaling $55.4 million as of December 25, 2021, consisting of domestic and international stocks, 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):


	December 25, 2021							December 26, 2020
				Unrealized						Unrealized
	Cost			Gain		Fair Value		Cost		Gain		Fair Value
Fixed Income	$	18,169		$	409	$	18,578	$	15,325	$	1,145	$	16,470
Treasury Securities		342			—		342		—		—		—
Equity		15,196			4,967		20,163		9,787		2,815		12,602
Mutual Funds		9,222	��		3,325		12,547		8,235		1,430		9,665
Alternative Investments		3,003			782		3,785		1,904		136		2,040
Total	$	45,932		$	9,483	$	55,415	$	35,251	$	5,526	$	40,777

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 alternative investments consist of the private real estate income trust which is valued as a Level 3 asset. The net pre-tax unrealized gain was $9.5 million for the year ended December 25, 2021. Carrying amounts above are recorded in the investments and restricted investments line items within the balance sheet as of December 25, 2021 and December 26, 2020.

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C.BUSINESS COMBINATIONS

We completed the following business combinations in fiscal 2021 and 2020, which were accounted for using the purchase method (in thousands).


					Net
Company	Acquisition		Intangible		Tangible		Operating
Name	Date	Purchase Price	Assets		Assets		Segment
	December 20, 2021	$20,854 cash paid for 100% stock purchase	$	11,481	$	9,373	Industrial
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.
	November 22, 2021	$11,155 cash paid for 70% stock purchase	$	9,106	$	2,049	Other
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.
	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.

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					Net
Company	Acquisition		Intangible		Tangible		Operating
Name	Date	Purchase Price	Assets		Assets		Segment
	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.
	March 1, 2021	$4,724 cash paid for 100% asset purchase and estimated contingent consideration	$	4,264	$	460	Other
J.C. Gilmore Pty Ltd (Gilmores)	Founded in 1988 and operating from its distribution facility in Port Melbourne, Australia, Gilmores is a leading distributor in the industrial and construction industries of packaging tapes, stretch films, packaging equipment, strapping, construction protection products and other items, with 2020 sales of $15 million AUD ($10 million USD).
	December 28, 2020	$259,011 cash paid for 100% stock purchase	$	79,917	$	179,094	Retail/Industrial
PalletOne, Inc. (PalletOne)	Based in Bartow, Florida, PalletOne is a leading manufacturer of new pallets in the U.S., with 17 pallet manufacturing facilities in the southern and eastern regions of the country. The company also supplies other specialized industrial packaging, including custom bins and crates, and its Sunbelt Forest Products (Sunbelt) subsidiary operates 5 pressure-treating facilities in the Southeastern U.S. PalletOne and its affiliates had 2020 sales of $698 million.
	November 10, 2020	$21,268 cash paid for 100% asset purchase	$	11,923	$	9,345	Construction
Atlantic Prefab, Inc.; Exterior Designs, LLC; and Patriot Building Systems, LLC	Based in Wilton, New Hampshire, Atlantic Prefab produces prefabricated steel wall panels and light gauge metal trusses. The company’s steel component and prefinished wall panel lines are new, value-added product additions for UFP Construction that help shorten project timelines. Exterior Designs is a leading installer of siding and exterior cladding such as fiber cement, ACM (aluminum composite material) panels, phenolic panels, and EIFS (exterior insulation and finish systems). The company is based in Londonderry, New Hampshire, and serves commercial and multi-family clients throughout the Northeast. Also based in Londonderry, Patriot Building Systems provides commercial and multi-family framing services in the Northeast and will focus on markets not currently served by companies of UFP Industries. The companies had combined annual sales of approximately $28 million.
	October 1, 2020	$5,936 cash paid for 100% stock purchase	$	5,222	$	714	Retail
Fire Retardant Chemical Technologies, LLC (FRCT)	Founded in 2014 and based in Matthews, North Carolina, FRCT’s business includes a research and development laboratory specializing in developing and testing a wide range of high-performance chemicals, including fire retardants and water repellants. The company had annual sales of approximately $6.4 million.

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					Net
Company	Acquisition		Intangible		Tangible		Operating
Name	Date	Purchase Price	Assets		Assets		Segment
	September 30, 2020	$3,475 cash paid for 50% stock purchase and estimated contingent consideration	$	7,267	$	(1,369)	Other
Enwrap Logistic & Packaging S.r.l. (Enwrap)	Enwrap is a newly formed company dedicated to the logistics and packaging business of its predecessor, Job Service S.p.A. Headquartered in Milan, Italy, Enwrap provides high-value, mixed material industrial packaging and logistics services through 8 locations in Italy. These locations generated annual sales of approximately $14 million.
	July 14, 2020	$18,496 cash paid for 100% asset purchase and estimated contingent consideration	$	12,458	$	6,038	Industrial
T&R Lumber Company (T&R)	A manufacturer and distributor of a range of products used primarily by nurseries, including plastic growing containers, pots and trays; wooden stakes; trellises; tree boxes; shipping racks; and other nursery supplies based in Rancho Cucamonga, California. T&R had annual sales of approximately $31 million. The acquisition of T&R will allow us to leverage their expertise using our national manufacturing capacity to grow our agricultural product offerings and customer base across the country.
	March 13, 2020	$22,951 cash paid for 100% asset purchase and estimated contingent consideration	$	20,262	$	2,689	Construction
Quest Design & Fabrication and Quest Architectural Millwork (Quest)	A designer, fabricator, and installer of premium millwork and case goods for a variety of commercial uses. Quest had annual sales of approximately $22 million. The acquisition of Quest expands our architectural millwork capabilities and expertise in our commercial construction business unit, and will allow us to use our national manufacturing capacity to grow and diversify our sales to this end market

The intangible assets for each acquisition were finalized and allocated to their respective identifiable intangible asset and goodwill accounts during 2021, except for our 2021 acquisitions. In aggregate, acquisitions made during 2021 and 2020, contributed approximately $1.2 billion in net sales and $50.5 million in operating profit during 2021.

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At December 25, 2021, the amounts assigned to major intangible classes for the business combinations mentioned above are as follows (in thousands):


	Non-												Intangibles -
	Compete				Customer								Tax
	Agreements		Patents		Relationships			Tradename		Goodwill			Deductible
Advantage	$	—	$	—	$	—		$	—	$	11,481	*	$	11,481
Ficus		—		—		—			—		8,889	*		8,889
Boxpack		—		—		2,694	*		—		1,978	*		4,672
Shelter		—		—		2,019	*		—		2,020	*		4,039
Endurable		—		—		4,617	*		—		2,482	*		7,099
Walnut Hollow		—		—		1,263	*		—		263	*		1,526
Gilmores		—		—		1,938	*		—		1,938	*		3,876
PalletOne		—		—		18,089			17,450		44,378			79,917
Atlantic Prefab		417		—		1,620			150		1,356			3,543
Exterior Designs		667		—		2,592			240		2,241			5,740
Patriot Building Systems		306		—		1,188			110		1,036			2,640
FRCT		1,090		—		1,960			210		1,962			5,222
Enwrap		790		1,293		558			474		3,705			6,820
T&R		600		—		5,000			2,600		4,258			12,458
Quest		—		—		10,318			1,903		8,041			20,262

*(estimate)

The business combinations mentioned above were not significant to our operating results individually or in aggregate, and thus pro forma results for 2021 and 2020 are not presented.

D.GOODWILL AND OTHER INTANGIBLE ASSETS

As described in Note M — Segment Reporting, our segment structure is based upon the markets we serve and goodwill has been allocated to the segments using a relative fair value approach. The changes in the net carrying amount of goodwill by reporting segment for the years ended December 25, 2021 and December 26, 2020, are as follows (in thousands):


	Retail		Industrial		Construction		All Other		Corporate		Total
Balance as of December 28, 2019	$	58,098	$	81,276	$	82,911	$	7,251	$	—	$	229,536
2020 Acquisitions		3,643		6,549		18,902		4,441		—		33,535
2020 Purchase Accounting Adjustments		202		2		—		—		—		204
2020 Impairments		—		—		(11,485)		—		—		(11,485)
Foreign Exchange, Net		—		—		401		2		—		403
Balance as of December 26, 2020	$	61,943	$	87,827	$	90,729	$	11,694	$	—	$	252,193
2021 Acquisitions		13,115		43,006		4,502		13,880		—		74,503
2021 Purchase Accounting Adjustments		(1,682)		(2,292)		(6,228)		(478)		—		(10,680)
Foreign Exchange, Net		—		—		(3)		(975)		—		(978)
Balance as of December 25, 2021	$	73,376	$	128,541	$	89,000	$	24,121	$	—	$	315,038

As of the date of the most recent goodwill impairment test, which utilized data and assumptions as of September 25, 2021, all reporting units had fair values that were substantially in excess of their carrying values. In the prior year, we experienced significantly lower than expected operating results within our commercial reporting unit, which is within the Construction segment. It was determined that the carrying value of the reporting unit exceeded its fair value and we recorded a non-cash goodwill impairment charge of $11.5 million as of December 26, 2020, which represented the entire amount of the goodwill recorded within the reporting unit, as a result.

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Indefinite-lived intangible assets totaled $7.4 million as of December 25, 2021 and December 26, 2020 related to the commercial unit within the construction segment, the international unit within the all other segment, and the Deckorators unit within the retail segment.

The following amounts were included in other amortizable intangible assets, net as of December 25, 2021 and December 26, 2020 (in thousands):


	2021						2020
			Accumulated						Accumulated
	Assets		Amortization		Net Value		Assets		Amortization		Net Value
Non-compete agreements	$	8,490	$	(4,160)	$	4,330	$	4,847	$	(2,728)	$	2,119
Customer relationships and other		101,158		(25,012)		76,146		80,343		(17,021)		63,322
Licensing agreements		4,589		(4,589)		—		4,589		(4,589)		—
Patents		3,221		(1,137)		2,084		965		(509)		456
Tradename		30,392		(4,599)		25,793		8,019		(2,123)		5,896
Software		959		(295)		664		505		(46)		459
Total	$	148,809	$	(39,792)	$	109,017	$	99,268	$	(27,016)	$	72,252

Amortization is computed principally by the straight-line method over the estimated useful lives of the intangible assets as follows:


		Weighted Average
Intangible Asset Type	Estimated Useful Life	Amortization Period
Non-compete agreements	3 to 15 years	7.8 years
Customer relationship	5 to 15 years	9.7 years
Licensing agreements	10 years	10 years
Patents	10 years	10 years
Tradename (amortizable)	5 to 15 years	11 years
Software	3 to 5 years	3.5 years

Amortization expense of intangibles totaled $13.9 million, $8.7 million and $6.3 million in 2021, 2020 and 2019, respectively. The estimated amortization expense for intangibles for each of the five succeeding fiscal years is as follows (in thousands):


2022	$	13,734
2023		12,878
2024		12,409
2025		11,901
2026		10,944
Thereafter		47,151
Total	$	109,017

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E.DEBT

On November 1, 2018, we entered into a five-year, $375 million unsecured revolving credit facility with a syndicate of U.S. banks led by JPMorgan Chase Bank, N.A., as administrative agent and Wells Fargo Bank, N.A., as syndication agent. The facilities include up to $40 million which may be advanced in the form of letters of credit, and up to $100 million (U.S. dollar equivalent) which may be advanced in Canadian dollars, Australian dollars, pounds Sterling, Euros and such other foreign currencies as may subsequently be agreed upon among the parties. Cash borrowings are charged interest based upon an index selected by the Company, plus a margin that is determined based upon the index selected and upon the financial performance of the Company and certain of its subsidiaries. We are charged a facility fee on the entire amount of the lending commitment, at a per annum rate ranging from 12.5 to 30.0 basis points, also determined based upon our performance. The facility fee is payable quarterly in arrears. On February 28, 2021, our credit agreement was amended to increase the availability from $375 million to $550 million by exercising the accordion feature in the original agreement.

On August 10, 2020, we entered into an unsecured Note Purchase Agreement under which we issued our 3.04% Series 2020 E Senior Notes, due August 10, 2032, in the aggregate principal amount of $50 million, our 3.08% Series 2020 F Senior Notes, due August 10, 2033, in the aggregate principal amount of $50 million, and our 3.15% Series 2020 G Senior Notes, due August 10, 2035, in the aggregate principal amount of $50 million. Proceeds from the sale of the Series E, F and G Senior Notes were used to fund the acquisition of PalletOne in January 2021.

Outstanding letters of credit extended on our behalf on December 25, 2021 and December 26, 2020 aggregated $54.2 million and $41.0 million; respectively, which includes approximately $7.1 million related to industrial development revenue bonds. We had an outstanding balance of $7.8 million and $4.7 million, which includes foreign subsidiary borrowings, on the revolver at December 25, 2021, and December 26, 2020, respectively. After considering letters of credit, we had $535.1 million and $363.2 million in remaining availability on the revolver on December 25, 2021, and December 26, 2020, respectively. Letters of credit have one-year terms, include an automatic renewal clause, and are charged an annual interest rate of 112.5 basis points, based upon our financial performance.

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Long-term debt obligations are summarized as follows on December 25, 2021 and December 26, 2020 (amounts in thousands):


	2021		2020
Series 2020 Senior Notes E, due on August 10, 2032, interest payable semi-annually at 3.04%	$	50,000	$	50,000
Series 2020 Senior Notes F, due on August 10, 2033, interest payable semi-annually at 3.08%		50,000		50,000
Series 2020 Senior Notes G, due on August 10, 2035, interest payable semi-annually at 3.15%		50,000		50,000
Series 2018 Senior Notes C, due on June 14, 2028, interest payable semi-annually at 4.20%		40,000		40,000
Series 2018 Senior Notes D, due on June 14, 2030, interest payable semi-annually at 4.27%		35,000		35,000
Series 2012 Senior Notes Tranche A, due on December 17, 2022, interest payable semi-annually at 3.89%		35,000		35,000
Series 2012 Senior Notes Tranche B, due on December 17, 2024, interest payable semi-annually at 3.98%		40,000		40,000
Foreign subsidiary borrowings under revolving credit facility, due on November 1, 2023, interest payable monthly at a floating rate (1.06% on December 25, 2021 and 1.125% on December 26, 2020)		7,818		4,715
Series 1999 Industrial Development Revenue Bonds, due on August 1, 2029, interest payable monthly at a floating rate (0.14% on December 25, 2021 and 0.20% on December 26, 2020)		3,300		3,300
Series 2002 Industrial Development Revenue Bonds, due on December 1, 2022, interest payable monthly at a floating rate (0.18% on December 25, 2021 and 0.22% on December 26, 2020)		3,700		3,700
Finance leases and foreign affiliate debt		5,544		138
		320,362		311,853
Less current portion		(42,683)		(100)
Less debt issuance costs		(112)		(146)
Long-term portion	$	277,567	$	311,607

Financial covenants on the unsecured revolving credit facility and unsecured notes include minimum interest coverage 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 among other industry standard covenants. We were within all of our lending requirements on December 25, 2021 and December 26, 2020.

On December 25, 2021, the principal maturities of long-term debt and finance lease obligations are as follows (in thousands):


2022	$	42,683
2023		8,863
2024		40,214
2025		—
2026		302
Thereafter		228,300
Total	$	320,362

On December 25, 2021, the estimated fair value of our long-term debt, including the current portion, was $334.6 million, which was $14.3 million more than the carrying value. The estimated fair value is based on rates anticipated to be available to us for debt with similar terms and maturities. We consider the valuations of our long-term debt, including the current portion, to be Level 2 liabilities which rely on quoted prices in markets that are not active or observable inputs over the full term of the liability.

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F.LEASES

We determine if an arrangement is a lease at inception. We lease certain real estate under non-cancelable operating lease agreements with typical original terms ranging from one to ten years. We are required to pay real estate taxes and other occupancy costs under certain leases, which are variable in nature and not included in the right of use asset or lease liability. Certain leases carry renewal options of five to fifteen years. We believe that future leases will likely have similar terms. We also lease motor vehicles, equipment, and an aircraft under operating lease agreements for periods of one to ten years. We do not typically enter into leases with residual value guarantees. There were no restrictions or covenants imposed by any lease agreements.

We believe finance leases have no significant impact to our consolidated balance sheet and statement of earnings as of December 25, 2021.

As of December 25, 2021, we have no leases that have not yet commenced that would significantly impact the rights, obligations, and our financial position.

There were no lease transactions between related parties as of December 25, 2021.

The rates implicit in our leases are primarily not readily available. To determine the discount rate used to present value the lease payments, we utilize the 7-year treasury note rate plus a blend of rate spreads associated with our revolver and 10-12-year senior notes along with estimated spreads based on current market conditions. We feel the determined rate is a reasonable representation of our lease population.

Lease costs under non-cancelable operating leases on December 25, 2021 and December 26, 2020 are as follows (in thousands):



		2021		2020
Operating lease cost	$	30,054	$	21,594
Short-term lease cost		5,264		2,863
Variable lease cost		4,761		3,985
Sublease income		(3,109)		(1,013)
Total lease cost	$	36,970	$	27,429

The amounts paid for operating leases, included in the measurement of lease liabilities, were $27.4 million in the year ended December 25, 2021 and $20.0 million in the year ended December 26, 2020. In addition, right-of-use assets obtained in exchange for new operating lease liabilities were approximately $46.7 million and $12.8 million, respectively, for the years ended December 25, 2021 and December 29, 2019.

Future minimum payments under non-cancelable operating leases on December 25, 2021 are as follows (in thousands):


	Operating
	Leases
2022	$	26,378
2023		21,040
2024		15,842
2025		13,164
2026		11,140
Thereafter		27,123
Total minimum lease payments	$	114,687
Less present value discount		(14,900)
Total lease liability	$	99,787

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Rent expense was approximately $40.1 million, $28.4 million, and $29.9 million in 2021, 2020, and 2019, respectively.

As of December 25, 2021 and December 26, 2020, the weighted average lease term for operating leases was 7.33 years and 6.84 years, respectively. Similarly, the weighted average discount rate for operating leases was 2.87% and 3.12%, respectively.

G.DEFERRED COMPENSATION

We have a program whereby certain executives irrevocably elected to defer receipt of certain compensation in 1985 through 1988. Deferred compensation payments to these executives commenced upon their retirement. The remaining deferred compensation liability on December 25, 2021 and December 26, 2020 was $0.2 million. We purchased life insurance on these executives, payable to us in amounts which, if assumptions made as to mortality experience, policy dividends, and other factors are realized, will accumulate cash values adequate to reimburse us for all payments for insurance and deferred compensation obligations. The investment in life insurance contracts as of December 25, 2021 and December 26, 2020, was $12.7 million and $13.3 million, respectively, and is recorded in “Other Assets” on the Consolidated Balance Sheet.

We also maintain a non-qualified deferred compensation plan (the "Plan") for the benefit of senior management employees who may elect to defer a portion of their annual bonus payments and salaries. The Plan provides investment options similar to our 401(k) plan, including our stock. The investment in our stock is funded by the issuance of shares to a Rabbi trust, and may only be distributed in kind. Assets held by the Plan totaled approximately $0.7 million and $0.6 million on December 25, 2021 and December 26, 2020, respectively, and are included in "Other Assets." Related liabilities totaled $42.1 million and $36.6 million on December 25, 2021 and December 26, 2020, respectively, and are included in "Other Liabilities" and "Shareholders’ Equity." Assets associated with the Plan are recorded at fair market value. The related liabilities are also recorded at fair market value, with the exception of obligations associated with investments in our stock which are recorded at the market value on the date of deferral.

H.COMMON STOCK

We maintain and administer our shareholder approved Employee Stock Purchase Plan ("Stock Purchase Plan"). The Stock Purchase Plan allows eligible employees to purchase shares of our stock at a share price equal to 85% of fair market value on the purchase date. We have expensed the fair value of the compensation associated with these awards, which approximates the discount. The amount of expense is nominal.

We maintain and administer our shareholder approved Directors’ Retainer Stock Plan ("Stock Retainer Plan"). The Stock Retainer Plan allows eligible members of the Board of Directors to defer the cash portion of their retainer and committee fees and receive shares of our stock at the time of or following their retirement, disability or death. The number of shares to be received is equal to the amount of the cash portion of their retainer and committee fees deferred multiplied by 110%, divided by the fair market value of a share of our stock at the time of deferral. The number of units is increased by the amount of dividends paid on our common stock. The units are immediately vested as of the grant date, since they are considered payment for services rendered quarterly. We recognized expense for this plan of $1.7 million in 2021, and $1.8 million in both 2020 and 2019. Effective January 1, 2017, this plan was amended to allow directors to defer payment of the annual retainer paid in the form of our common stock. The number of shares to be received for their portion of the retainer that is deferred is equal to the amount of shares plus the number of shares attributable to cash dividends payable on those deferred shares.

Finally, we maintain and administer our shareholder approved Long Term Stock Incentive Plan (the "LTSIP”). The LTSIP provides for the grant of stock options, stock appreciation rights, restricted stock, performance shares and other stock-based awards.

Executive Stock Match awards are granted in the year following the requisite service period, which begins at the beginning of each fiscal year, and fully vest on the fifth anniversary of the grant date.

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There is no unrecognized compensation expense remaining for stock options in 2021, 2020, and 2019.

Below is a summary of common stock issuances for 2021 and 2020:


	December 25, 2021
Share Issuance Activity	Common Stock		Average Share Price
Shares issued under the employee stock purchase plan	33	$	75.18

Shares issued under the employee stock gift program	2		78.37
Shares issued under the director retainer stock program	5		72.66
Shares issued under the bonus plan	487		59.56
Shares issued under the executive stock match plan	77		60.24
Forfeitures	(24)
Total shares issued under stock grant programs	547	$	59.84

Shares issued under the deferred compensation plans	117	$	64.14


	December 26, 2020
Share Issuance Activity	Common Stock		Average Share Price
Shares issued under the employee stock purchase plan	35	$	46.71

Shares issued under the employee stock gift program	3		48.10
Shares issued under the director retainer stock program	46		25.31
Shares issued under the bonus plan	271		47.52
Shares issued under the executive stock grants plan	79		47.60
Forfeitures	(9)
Total shares issued under stock grant programs	390	$	44.96

Shares issued under the deferred compensation plans	128	$	53.79

A summary of the nonvested restricted stock awards granted under the LTSIP is as follows:


						Weighted-
				Unrecognized		Average
		Weighted-		Compensation		Period to
	Restricted	Average Grant		Expense		Recognize
	Awards	Date Fair Value		(in millions)		Expense
Nonvested at December 29, 2018	1,160,079	$	23.32	$	7.6	1.12 years
Granted	318,496		32.60
Vested	(224,894)		23.42
Forfeited	(50,786)		24.18
Nonvested at December 28, 2019	1,202,895	$	29.68	$	7.9	0.86 years
Granted	348,016		47.60
Vested	(177,790)		22.69
Forfeited	(9,327)		33.46
Nonvested at December 26, 2020	1,363,794	$	35.14	$	6.3	0.62 years
Granted	560,516		60.24
Vested	(274,271)		26.50
Forfeited	(23,007)		39.68
Nonvested at December 25, 2021	1,627,032	$	45.23	$	6.6	0.43 years

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Under the Stock Purchase Plan and LTSIP, we recognized share-based compensation expense of $11.2 million, $4.0 million, and $4.0 million and the related total income tax benefits of $2.7 million, $1.0 million, and $0.8 million in 2021, 2020 and 2019, respectively.

For the year-ended December 25, 2021, we determined that $60 million of share-based bonus awards, representing 751,978 shares, will be awarded to qualified employees as it relates to the company’s 2021 performance and granted in 2022. Awards granted generally vest after a period of three, five or eight years from the grant date. In addition to the share-based bonus awards, certain employees are eligible to receive performance units equivalent to $2.3 million, or 28,866 shares of stock, if certain performance metrics are achieved after three years. As of December 25, 2021 and December 26, 2020, we recognized approximately $11.5 million and $4 million, respectively, of compensation expense related to share-based bonus awards.‬

In 2021, 2020 and 2019, cash received from share issuances under our plans was $2.1 million, $1.4 million and $1.1 million, respectively.

Effective February 15, 2022, our Board authorized an additional 1.5 million shares to be repurchased under our existing share repurchase program. We repurchased no shares in 2021 and 756,397 shares in 2020 under this program. Following the most recent authorization, the cumulative total authorized shares available for repurchase is approximately 2.6 million shares through the period ending February 3, 2023.

I.RETIREMENT PLANS

We have a profit sharing and 401(k) plan for the benefit of substantially all of our employees, excluding the employees of certain wholly-owned subsidiaries. Amounts contributed to the plan are made at the discretion of the Board of Directors. We matched 25%of employee contributions in 2021, 2020, and 2019, on a discretionary basis, totaling $9.2 million, $7.2 million, and $6.5 million respectively. Included within the total employee matched contribution was an additional matched contribution for hourly employees of $3.7 million, $2.9 million and $2.6 million for 2021, 2020 and 2019, respectively, based on meeting certain performance goals during those years. The basis for matching contributions may not exceed the lesser of 6% of the employee’s annual compensation or the IRS limitation.

We maintain a retirement plan for certain officers of the Company (who have at least 20 years of service with the Company and at least 10 years of service as an officer) whereby we will pay, upon retirement, certain benefits including health care benefits, for a specified period of time if certain eligibility requirements are met. Approximately $13.1 million and $11.8 million are accrued in “Other Liabilities” for this plan on December 25, 2021 and December 26, 2020, respectively.

J.INCOME TAXES

Income tax provisions for the years ended December 25, 2021, December 26, 2020, and December 28, 2019 are summarized as follows (in thousands):


	2021		2020		2019
Currently Payable:
Federal	$	115,077	$	59,055	$	35,267
State and local		30,441		16,709		10,071
Foreign		21,095		8,601		5,834
		166,613		84,365		51,172
Net Deferred:
Federal		6,242		2,292		6,895
State and local		118		(1,518)		805
Foreign		999		1,962		(602)
		7,359		2,736		7,098
Total income tax expense	$	173,972	$	87,101	$	58,270

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The components of earnings before income taxes consist of the following:


	2021		2020		2019
U.S.	$	645,316	$	308,167	$	220,532
Foreign		81,020		32,816		20,142
Total	$	726,336	$	340,983	$	240,674

The effective income tax rates are different from the statutory federal income tax rates for the following reasons:


	2021		2020		2019
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
State and local taxes (net of federal benefits)	3.3		3.4		3.9
Effect of noncontrolling owned interest in earnings of partnerships	n/a		n/a		(0.1)
Tax credits, including foreign tax credit	(0.6)		(0.9)		(1.3)
Change in uncertain tax positions reserve	(0.1)		(0.1)		(0.1)
Other permanent differences	(0.4)		0.6		0.5
Other, net	0.7		1.5		0.3
Effective income tax rate	23.9	%	25.5	%	24.2	%

Temporary differences which give rise to deferred income tax assets and (liabilities) on December 25, 2021 and December 26, 2020 are as follows (in thousands):


	2021		2020
Employee benefits	$	27,543	$	23,236
Lease liability		24,627		19,376
Net operating loss carryforwards		5,502		6,463
Foreign subsidiary capital loss carryforward		527		527
Other tax credits		450		391
Inventory		2,007		1,633
Reserves on receivables		1,446		1,630
Accrued expenses		5,735		3,071
Other, net		5,233		8,483
Gross deferred income tax assets		73,070		64,810
Valuation allowance		(3,952)		(4,044)
Deferred income tax assets		69,118		60,766
Depreciation		(64,387)		(41,403)
Intangibles		(38,367)		(22,840)
Right of use assets		(23,866)		(19,376)
Deferred income tax liabilities		(126,620)		(83,619)
Net deferred income tax liability	$	(57,502)	$	(22,853)

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As of December 25, 2021, we had federal, state and foreign net operating loss carryforwards of $5.5 million and state tax credit carryforwards of $0.5 million, which will expire at various dates.

The NOL and credit carryforwards expire as follows:


	Net Operating Losses						Tax Credits
	U.S.		State		Foreign		U.S.		State
2022 - 2026	$	—	$	—	$	536	$	—	$	—
2027 - 2031		—		436		1,424		—		—
2032 - 2036		—		670		106		—		450
2037 - 2041		790		808		—		—		—
Thereafter		—		438		294		—		—
Total	$	790	$	2,352	$	2,360	$	—	$	450

As of December 25, 2021, we believe that it is more likely than not that the benefit from certain state and foreign NOL carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $3.4 million against the various NOLs. Furthermore, there is a valuation allowance of $0.5 million against a capital loss carryforward we have for a wholly-owned subsidiary, UFP Canada, Inc. Based upon the business activity and the nature of the assets of this subsidiary, our ability to realize a future benefit from this carryforward is doubtful. The capital loss has an unlimited carryforward and therefore will not expire unless there is a change in control of the subsidiary.

K.ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES

ASC 740, Income Taxes (“ASC 740”) clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. ASC 740 also provides guidance on derecognition, measurement, classification, interest and penalties, and disclosure requirements.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):


	2021		2020		2019
Gross unrecognized tax benefits beginning of year	$	3,892	$	4,166	$	4,378
Increase in tax positions for prior years		437		(82)		(129)
Increase in tax positions for current year		839		730		768
Lapse in statute of limitations		(1,565)		(922)		(851)
Gross unrecognized tax benefits end of year	$	3,603	$	3,892	$	4,166

Our effective tax rate would have been affected by the unrecognized tax benefits had this amount been recognized as a reduction to income tax expense.

We recognized interest and penalties for unrecognized tax benefits in our provision for income taxes. The liability for unrecognized tax benefits included accrued interest and penalties of $0.5 million for each of the years December 25, 2021, December 26, 2020, and December 28, 2019.

We file income tax returns in the United States and in various state, local and foreign jurisdictions. The federal and a majority of state and foreign jurisdictions are no longer subject to income tax examinations for years before 2017. A number of routine state and local examinations are currently ongoing. Due to the potential for resolution of state examinations, the expiration of various statutes of limitation, and new positions that may be taken, it is reasonably possible that the amount of unrecognized tax benefits in the next twelve months $1.1 million.

L.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.

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In addition, on December 25, 2021, we were parties either as plaintiff or defendant to a number of lawsuits and claims arising through the normal course of our business. In the opinion of management, our consolidated financial statements will not be materially affected by the outcome of these contingencies and claims.

On December 25, 2021, we had outstanding purchase commitments on commenced capital projects of approximately $52.7 million.

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

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 insure the project owner that the products and installation services are completed in accordance with our contractual obligations. We have agreed to indemnify the surety for claims made against the bonds. As of December 25, 2021, we had approximately $31.5 million in outstanding payment and performance bonds for open projects. We had approximately $10.7 million in payment and performance bonds outstanding for completed projects which are still under warranty.

On December 25, 2021, we had outstanding letters of credit totaling $54.2 million, primarily related to certain insurance contracts and industrial development revenue bonds described further below.

In lieu of cash deposits, we provide irrevocable letters of credit in favor of our insurers and other lenders to guarantee our performance under certain contracts. We currently have irrevocable letters of credit outstanding totaling approximately $47.1 million for these types of arrangements. We have reserves recorded on our balance sheet, in accrued liabilities, that reflect our expected future liabilities under these arrangements.

We are required to provide irrevocable letters of credit in favor of the bond trustees for all industrial development revenue bonds that have been issued. These letters of credit guarantee principal and interest payments to the bondholders. We currently have irrevocable letters of credit outstanding totaling approximately $7.1 million related to our outstanding industrial development revenue bonds. These letters of credit have varying terms but may be renewed at the option of the issuing banks.

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

We did not enter into any new guarantee arrangements during 2021 which would require us to recognize a liability on our balance sheet.

M.SEGMENT REPORTING

ASC 280, Segment Reporting (“ASC 280”), defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

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We operate manufacturing, treating and distribution facilities internationally, but primarily in the United States. Our business segments consist of UFP Retail Solutions, 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, and Construction segments. NaN customers, The Home Depot and Lowes, accounted for approximately 16% and 10%, respectively, of our total net sales in fiscal 2021. These customers accounted for approximately 24% and 4%, respectively, of our total net sales in fiscal 2020 and 19% and 4%, respectively, in 2019.

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.

“Corporate” includes purchasing, transportation and administrative functions that serve our operating segments. Operating results of Corporate primarily consist 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 Ltd, and UFP Purchasing.


	2021
							All
	Retail		Industrial		Construction		Other		Corporate		Total
Net sales to outside customers	$	3,418,337	$	2,148,142	$	2,698,434	$	362,473	$	8,748	$	8,636,134
Intersegment net sales		214,400		85,954		82,026		455,874		(838,254)		—
Interest expense		98		12		1		184		13,519		13,814
Amortization expense		2,780		6,093		3,525		1,336		214		13,948
Depreciation expense		16,955		26,219		13,151		2,094		25,765		84,184
Segment earnings before income taxes		124,790		264,958		264,238		80,905		(8,555)		726,336
Segment assets		844,189		741,672		736,157		343,363		579,890		3,245,271
Capital expenditures		40,408		42,652		22,344		5,140		40,622		151,166

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	2020
							All
	Retail		Industrial		Construction		Other		Corporate		Total
Net sales to outside customers	$	2,167,122	$	1,072,117	$	1,695,684	$	217,094	$	1,981	$	5,153,998
Intersegment net sales		142,839		45,217		68,294		283,689		(540,039)		—
Interest expense		2		22		—		90		9,197		9,311
Amortization expense		1,482		4,159		2,152		877		46		8,716
Depreciation expense		11,675		15,163		12,123		1,619		23,384		63,964
Segment earnings before income taxes		155,364		83,430		69,092		38,333		(5,236)		340,983
Segment assets		510,464		416,487		510,972		196,856		770,112		2,404,891
Capital expenditures		16,277		21,141		16,902		2,258		32,604		89,182


	2019
							All
	Retail		Industrial		Construction		Other		Corporate		Total
Net sales to outside customers	$	1,498,710	$	1,085,635	$	1,637,156	$	193,785	$	723	$	4,416,009
Intersegment net sales		135,705		45,010		56,116		200,426		(437,257)		—
Interest expense		—		108		16		97		8,479		8,700
Amortization expense		1,380		3,034		1,164		747		—		6,325
Depreciation expense		11,041		14,340		11,465		1,532		22,116		60,494
Segment earnings before income taxes		61,708		82,913		82,407		22,025		(8,379)		240,674
Segment assets		402,221		377,329		522,638		136,990		450,299		1,889,477
Capital expenditures		15,502		20,134		16,097		2,150		31,050		84,933

Information regarding principal geographic areas was as follows (in thousands):


	2021				2020				2019
			Long-Lived				Long-Lived				Long-Lived
			Tangible				Tangible				Tangible
	Net Sales		Assets		Net Sales		Assets		Net Sales		Assets
United States	$	8,395,737	$	679,757	$	5,022,014	$	478,325	$	4,308,618	$	469,605
Foreign		240,397		54,873		131,984		36,380		107,391		36,878
Total	$	8,636,134	$	734,630	$	5,153,998	$	514,705	$	4,416,009	$	506,483

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The following table presents, for the periods indicated, our disaggregated net sales (in thousands) by business unit for each segment and our percentage of value-added and commodity-based sales to total net sales by segment.


	Year Ended
	December 25,		December 26,		December 28,
	2021		2020		2019
Retail
Deckorators	$	248,765	$	219,930	$	185,221
Prowood		1,349,901		1,215,201		786,720
Outdoor Essentials		392,826		299,684		227,767
Sunbelt		773,909		—		—
UFP Edge		148,927		114,987		95,608
Handprint		101,090		88,351		52,553
Retail Building Materials		395,894		225,253		149,153
Other		7,025		3,716		1,688
Total Retail	$	3,418,337	$	2,167,122	$	1,498,710

Industrial
North Industrial	$	615,092	$	385,132	$	376,515
Southeast Industrial		395,069		229,316		255,419
Southwest Industrial		400,515		238,643		241,774
West Industrial		363,300		206,022		197,686
PalletOne		355,347		—		—
Protective Packaging		18,819		13,004		14,241
Total Industrial	$	2,148,142	$	1,072,117	$	1,085,635

Construction
Factory Built	$	1,098,905	$	597,017	$	479,927
Site Built		1,190,393		725,899		708,767
Commercial		259,360		221,988		290,785
Concrete Forming		149,776		150,780		157,677
Total Construction	$	2,698,434	$	1,695,684	$	1,637,156

All Other	$	362,473	$	217,094	$	193,785

Corporate	$	8,748	$	1,981	$	723

Total Net Sales	$	8,636,134	$	5,153,998	$	4,416,009

Value-Added
Retail		43.2%		53.8%		57.8%
Industrial		67.7%		64.7%		66.2%
Construction		73.0%		76.3%		81.4%
All Other and Corporate		74.9%		75.6%		75.8%
Total		59.7%		64.3%		69.3%

Commodity-Based
Retail		56.8%		46.2%		42.2%
Industrial		32.3%		35.3%		33.8%
Construction		27.0%		23.7%		18.6%
All Other and Corporate		25.1%		24.4%		24.2%
Total		40.3%		35.7%		30.7%

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N.QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table sets forth selected financial information for all of the quarters, consisting of 13 weeks during the years ended December 25, 2021 and December 26, 2020, respectively, (in thousands, except per share data):


	First				Second				Third				Fourth
	2021		2020		2021		2020		2021		2020		2021		2020
Net sales	$	1,825,004	$	1,032,062	$	2,700,541	$	1,242,001	$	2,093,784	$	1,486,227	$	2,016,805	$	1,393,708
Gross profit		286,554		167,236		421,294		204,931		327,555		241,074		371,564		187,055
Net earnings		104,251		40,570		175,360		69,694		125,747		78,861		147,006		64,757
Net earnings attributable to controlling interest		103,311		40,159		173,382		66,463		121,041		77,204		137,906		62,952
Basic earnings per share		1.67		0.65		2.79		1.08		1.94		1.25		2.21		1.02
Diluted earnings per share		1.67		0.65		2.78		1.08		1.94		1.25		2.21		1.02

O.SUBSEQUENT EVENTS

On December 27, 2021, we closed on an agreement to purchase 100 percent of the equity of Ultra Aluminum Manufacturing, Inc. (Ultra) located in Howell, Michigan for approximately $26.8 million. Ultra designs and produces an extensive selection of ornamental aluminum fence and railing products for contractors, landscapers, fence dealers and wholesalers. At this time the net tangible assets and intangible assets acquired cannot be disclosed as these are pending final valuations. Initial estimates of Ultra‘s identifiable intangibles, goodwill, and deferred taxes have been made, however, the amounts will be finalized in 2022.

Effective February 15, 2022, our Board authorized an additional 1.5 million shares to be repurchased under our existing share repurchase program. Following the most recent authorization, the cumulative total authorized shares available for repurchase is approximately 2.6 million shares through the period ending February 3, 2023.

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MARKET INFORMATION FOR OUR COMMON STOCK

Our common stock trades on The Nasdaq Stock Market (“NASDAQ”) under the symbol UFPI.

STOCK PERFORMANCE GRAPH

The following stock price performance graph compares the annual percentage change in the cumulative total return on our common stock with the cumulative total returns of companies comprising the NASDAQ US Benchmark TR index and an industry peer group we selected. The NASDAQ US Benchmark TR index replaces the NASDAQ Stock Market (US Companies) Index in this analysis and going forward, as the CRSP Index data is no longer accessible. The CRSP indexes has been included with data through 2020. The graph assumes an investment of $100 on December 31, 2016, and reinvestment of dividends in all cases.

The companies included in our self-determined industry peer group are as follows:


American Woodmark Corporation	Louisiana-Pacific Corporation
BlueLinx Holdings, Inc.	Masco Corporation
Boise Cascade Company	Simpson Manufacturing Company, Inc.
Builders FirstSource, Inc.	Sonoco Products Company
Cornerstone Building Brands, Inc.	Trex Company, Inc.
Gibraltar Industries, Inc.	WestRock Company
Greif, Inc.

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The returns of each company included in the self-determined peer group are weighted according to each respective company’s stock market capitalization at the beginning of each period presented in the graph above. In determining the members of our peer group, we considered companies who selected UFPI as a member of their peer group, and looked for similarly sized companies or companies that are a good fit with the markets we serve.

DIRECTORS AND EXECUTIVE OFFICERS


BOARD OF DIRECTORS	SECTION 16 OFFICERS

William G. Currie Chairman of the Board UFP Industries, Inc.	Matthew J. Missad Chief Executive Officer

Matthew J. Missad Chief Executive Officer UFP Industries, Inc.	Patrick M. Webster President and Chief Operating Officer

Thomas W. Rhodes President and Chief Executive Officer TWR Enterprises, Inc.	Michael R. Cole Chief Financial Officer and Treasurer

Bruce A. Merino Former Senior Vice President of Merchandising The Home Depot	Allen T. Peters President and Chief Operating Officer UFP Retail Solutions, LLC

Mary Tuuk Kuras President and Chief Executive Officer Grand Rapids Symphony	Patrick Benton President UFP Construction, LLC

Brian C. Walker Partner-Strategic Leadership Huron Capital	Scott A. Worthington President UFP Industrial, LLC

Michael G. Wooldridge Partner Varnum, LLP	Scott T. Bravata Vice President of Accounting

Joan A. Budden Former President Priority Health	David A. Tutas Chief Compliance Officer General Counsel

Benjamin J. McLean Chief Executive Officer Ruan Transportation Management Systems, Inc.

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SHAREHOLDER INFORMATION

ANNUAL MEETING

The 2022 Annual Shareholder’s Meeting of UFP Industries, Inc. will be held at 8:30 a.m. on April 20, 2022, at 2880 East Beltline Lane NE, Grand Rapids, MI 49525.

SHAREHOLDER INFORMATION

Shares of our stock are traded under the symbol UFPI on the NASDAQ Stock Market. Our 10-K report, filed with the Securities and Exchange Commission, will be provided free of charge to any shareholder upon written request. For more information contact:

Investor Relations Department

UFP Industries, Inc.

2801 East Beltline NE

Grand Rapids, MI 49525

Telephone: (616) 364-6161

Web: www.ufpi.com

SECURITIES COUNSEL

Varnum, LLP

Grand Rapids, MI

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte & Touche LLP

Grand Rapids, MI

TRANSFER AGENT/SHAREHOLDER INQUIRIES

American Stock Transfer & Trust Company serves as the transfer agent for the Corporation. Inquiries relating to stock transfers, changes of ownership, lost or stolen stock certificates, changes of address, and dividend payments should be addressed to:

American Stock Transfer & Trust Co.

6201 15th Ave

Brooklyn, NY 11219

Telephone: (800) 937-5449

UFP INDUSTRIES®, INC., CORPORATE HEADQUARTERS

2801 East Beltline NE

Grand Rapids, MI 49525

Telephone: (616) 364-6161

Facsimile: (616) 364-5558

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Constraining
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Litigous
Readability	7th grade Good

UFP Industries (UFPI) 10-K2021 FY Annual report

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