UFP Industries
Annual Report 2020

Plain-text annual report

Report to Shareholders 2020 Dear Shareholders: When something is leashed, its power is restrained so it is easier to manage. Unleashing that power brings risk – but also the possibility of unprecedented capability, intensity, and opportunity. And in 2020, UFP Industries took that risk. After years of planning, we unleashed the potential and might of our people and resources. It is paying off and wins are accumulating. After 65 years as Universal Forest Products, we changed our name to UFP Industries to reflect our expansive growth and opportunity outside of wood products. At the same time, we created a new business model that we believed could bring new value-added products to market faster and use capital more efficiently, while supporting rapid growth at a lower incremental cost. The model is working and has sparked a surge of opportunity and enthusiasm for our people and increased value for our shareholders. Today, we are structured around our business markets, instead of geographic territory, to lever our scale and scope and to better serve our customers. Our new structure is allowing our leadership teams to focus more specifically on their business unit or segment. Thanks to experienced, hard-working teammates, we turned in the best results in the history of our company: Net sales of $5.15 billion, surpassing $5 billion for the first time, were up 17 percent over the previous year; net earnings from controlling interest of $247 million in 2020 represented an increase of 37 percent over 2019, and adjusted EBITDA of $431.4 million was up 36 percent, dramatically exceeding the company’s unit sales increase of 6 percent. In addition, new product sales were $539 million, more than 10% of total sales. The people of UFP Industries accomplished this during a pandemic that crimped supply chains and labor markets, which caused the most volatile lumber market in recent memory. We couldn’t be prouder of our 15,000+ team members who drove these results by managing inventory wisely and adjusting quickly to shifting customer demands. Thanks to them, we were able to reward our hourly employees – whose perseverance and hard work are the backbone of our company – with $25 million in bonuses and additional benefits in 2020. This is one of the benefits of being in these roles at a company like ours – we have the great honor of rewarding performers and helping them bring opportunity to their careers and prosperity to their families. We are pleased to provide you these 2020 highlights: ACQUISITIONS Two thousand twenty was one of the busiest acquisition years in our history. From PalletOne, our largest acquisition ever, to the smaller but equally impressive Fire Retardant Chemical Technologies, we added broad capability and scale in all three of our business segments Twenty twenty-one is off to a quick start for acquisitions with the already closed PalletOne acquisition, the recently closed Gilmores acquisition in Australia and the announced Spartanburg Forest Products asset purchase. MARKETS We saw net sales increase in two of our three business segments: UFP Retail Solutions: $2.17 billion in net sales, up 45 percent over 2019, due to a 25 percent increase in unit sales and a 20 percent increase in selling prices. All business units experienced double-digit unit sales increases. Our Deckorators brand continues to grow in popularity and use. Its unique, patented mineral composite decking product is a contractor favorite. Although a smaller proportion of total sales, e-commerce unit sales that are not included in other business units increased 93 percent. Total e- commerce sales for the year, including sales in other business units, were $129 million, up 96 percent over 2019. In 2020 UFP Retail Solutions acquired Fire Retardant Chemical Technologies, LLC, now known as Performance Formulation Solutions (PFS). PFS’s business includes a laboratory that specializes in developing and testing high-performance chemicals, including fire retardants and water repellants. UFP Industrial: $1.07 billion in net sales, down 1 percent from the previous year. Unit sales fell 6 percent due to pandemic-related shutdowns, while selling prices increased 5 percent. UFP Industrial’s sales improved throughout the year as pandemic-related restrictions eased and the fourth quarter saw a sales record for the segment. We continue to rationalize our product offering by focusing more on designed, engineered and manufactured sales, while de-emphasizing commodity sales. UFP Industrial strengthened its position in agricultural products in 2020 with the acquisition of T&R Lumber Company and its affiliates Sullivan & Mann and Kelmar Creations. T&R manufactures and distributes a wide range of nursery supplies, such as tree boxes and growing containers. As 2020 ended UFP Industrial executed the largest acquisition in our history by acquiring PalletOne, Inc., moving us closer to our goal of becoming the preferred global packaging solutions provider. PalletOne is the leading manufacturer of new pallets in the U.S., with 17 manufacturing facilities and 1,500 employees. Its Sunbelt Forest Products subsidiary, which will be part of UFP Retail Solutions, operates five facilities in the Southeastern U.S. and enhances our position as the nation’s leading wood preserver. UFP Construction: $1.70 billion in net sales, up 4 percent over the previous year due to a 10 percent increase in selling prices offset by a 6 percent decrease in unit sales. Unit sales to manufactured housing ii customers rose 2 percent for the year and fell 2 percent and 23 percent, respectively, to site built and commercial customers. UFP Construction was especially hard-hit by the volatility of the lumber market. The backlog of business in single and multifamily projects remained strong, as did demand for factory- built housing with the focus on affordable housing in communities across the United States, which we expect to continue to drive business. Our concrete forming business saw increased demand for its rental programs, and its designed, engineered, and manufactured formwork solutions. In 2020 UFP Construction acquired Quest Design and Fabrication and Quest Architectural Millwork, collectively known as Quest. Quest specializes in designing, fabricating, and installing premium millwork and case goods for a variety of commercial uses, including builders’ sales centers, design studios, hospitality, corporate offices and healthcare. UFP Construction also added Atlantic Prefab, Inc., Exterior Designs, LLC, and Patriot Building Systems, LLC to the UFP family of companies. These three firms serve the commercial and multi-family construction markets in the Northeast with prefabricated steel wall panels, light gauge metal trusses, exterior cladding, exterior insulation and finish systems, and commercial and multi-family framing services. Our UFP International business unit continued its expansion efforts by forming Enwrap Logistic & Packaging S.r.l. Headquartered in Milan, Italy, Enwrap provides high-value, mixed material industrial packaging and logistics services through eight locations in Italy, allowing UFP to establish its presence in the region and to serve customers in Central and Southern Europe. As the nation’s leading manufacturer and distributor of wood products we take pride in the fact our primary product, wood, is the most sustainable building product on earth. Wood is renewable, biodegradable, and recyclable, and takes much less energy to produce and distribute than competitive products. Our role as the world’s largest wood preserver extends the useful life of well over 2 billion board feet of lumber each year, further reducing environmental impact. Our record as a good corporate citizen speaks for itself, as demonstrated in our continued attention to the well-being and success of all UFP stakeholders. We tend to let our actions speak louder than words and recognize that we need to inform those who are not familiar with our efforts in this area. We started the UFP Business school in 2016 to help bring more educational opportunities to employees and outsiders who couldn’t afford traditional college. In 2020, we expanded it by offering an additional five scholarships for minority and low-income students. We have a long history of helping talented and hard-working newcomers go from factory floor to management roles, and our practice of helping each team member achieve their desired level of success remains. As we look to the future, our focus remains on creating opportunities for our teammates so they can build wealth for themselves and their families. We have high expectations of our workforce and are committed to giving each employee the training and tools needed to meet demanding goals. We treat employees equally and support fairness throughout our organization. All are welcome in the UFP family and we continue to enhance our recruiting efforts to cast a wider net among low income and minority communities. In hiring and employee development we do not use quotas to determine results, rather, we provide equal opportunities and rely on each employee to select their desired path. With control over their own progress, those with a commitment to improvement, strong work ethic, motivation to excel, and superior performance are rewarded, regardless of superficial traits or social category. iii We are grateful for those who laid the foundation for our success, especially our former CEO and Chairman, Peter F. Secchia. Peter, or PFS as he was affectionately known, passed away on October 21, 2020. He built the early success of our company and created programs and practices that continue to drive our success. Peter would say he lived an incredible life, and we agree wholeheartedly. He drove success not just at UFP, but in the community he loved, Grand Rapids, Michigan; in Italy, where he served as U.S. Ambassador; and through his numerous philanthropic ventures. He lived his mantra – life is not a spectator sport! We loved him, we miss him, and we are grateful for his deeds and his lessons. Our success in 2020 is dedicated to his memory, and the acknowledgement that he and other UFP leaders before him paved the path to our future success. Thanks to them, and our current crew of outstanding teammates, We. Will. Win. Thank you for your investment in us and best wishes for a safe and prosperous 2021. Cordially, Matthew J. Missad Chief Executive Officer William G. Currie Chairman of the Board iv UFP INDUSTRIES, INC. FINANCIAL INFORMATION Table of Contents Exhibit 13 Selected Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 26, 2020 and December 28, 2019 Consolidated Statements of Earnings and Comprehensive Income for the Years Ended December 26, 2020, December 28, 2019, and December 29, 2018 Consolidated Statements of Shareholders’ Equity for the Years Ended December 26, 2020, December 28, 2019, and December 29, 2018 Consolidated Statements of Cash Flows for the Years Ended December 26, 2020, December 28, 2019, and December 29, 2018 Notes to Consolidated Financial Statements Market Information for our Common Stock Stock Performance Graph Directors and Executive Officers Shareholder Information 2 3 25 26 27 28 29 30 31 56 56 57 58 SELECTED FINANCIAL DATA (In thousands, except per share and statistics data) 2020 2019 2018 2017 2016 Consolidated Statement of Earnings Data Net sales Gross profit Earnings before income taxes Net earnings attributable to controlling interest Diluted earnings per share Dividends per share Consolidated Balance Sheet Data Working capital(1) Total assets Total debt Shareholders’ equity Statistics Gross profit as a percentage of net sales Net earnings attributable to controlling interest as a percentage of net sales Return on beginning equity(2) Current ratio(4) Debt to equity ratio(5) Book value per common share(3) $ 5,153,998 800,296 340,983 $ 246,778 4.00 $ 0.50 $ $ 1,074,613 2,404,891 311,707 1,483,152 $ 4,416,009 685,518 240,674 $ 4,489,180 592,894 197,853 $ 3,941,182 542,826 176,007 $ 3,240,493 474,590 160,671 $ 179,650 2.91 $ 0.40 $ $ 148,598 2.40 $ 0.36 $ $ $ $ 119,512 1.94 0.32 $ $ $ 101,179 1.65 0.29 $ 739,030 1,889,477 163,683 1,257,733 $ 685,108 1,647,548 202,278 1,088,684 $ 560,241 1,464,677 146,003 974,023 484,661 $ 1,292,058 111,693 860,466 15.5 % 15.5 % 13.2 % 13.8 % 14.6 % 4.8 % 19.6 % 3.32 0.21 24.23 $ 4.1 % 16.5 % 3.09 0.13 20.48 $ 3.3 % 15.3 % 3.21 0.19 17.88 $ 3.0 % 13.9 % 2.85 0.15 15.92 $ 3.1 % 13.2 % 2.78 0.13 14.10 $ (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 2016 to 2020. 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 26, 2020. 2 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS UFP Industries, Inc. is a holding company with subsidiaries throughout North America, Europe, Asia, and Australia that supply manufactured 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 2020. Our results for 2020 were impacted by the following: OVERVIEW  Our net sales increased almost 17% in 2020 due to an 11% increase in our overall selling prices (see “Historical Lumber Prices”) and a 6% increase in our unit sales. The unit sales of our retail segment increased 25% due to an increase in consumer demand and home improvement activities. We believe that this increase is largely attributable to the impact of the pandemic on consumer behavior. This increase was offset by our industrial and construction segments, which both declined 6% as our customers in these segments were adversely impacted by the government-imposed shutdowns resulting from the pandemic. As of the end of the year, each of our industrial and construction segments (except for the commercial business unit within our construction segment) have experienced recent positive trends as the U.S. economy has recovered from the initial shutdowns due to the pandemic.  Earnings from operations increased 41% to $345.8 million. The improvement in our profitability was driven by a number of factors, including strong organic growth in our retail segment while effectively leveraging fixed costs, and the favorable impact of rising lumber prices on the selling prices of commodity-based products such as our ProWood pressure-treated products which are sold on a variable price formula tied to the Lumber Market. See Historical Lumber Prices and Impact of the Lumber Market on Our Operating Results below.  Our cash flow from operating activities decreased by $13 million and was attributable to an $80 million increase in our net earnings and non-cash expenses, offset by a $93 million increase in our investment in net working capital (see “Liquidity and Capital Resources”). The increase in net working capital was a result of unusually high lumber prices and retail market demand, which drove increases in our accounts receivable and inventory.  We invested $89.2 million in capital expenditures to support and grow our business and invested $65.3 million in acquired businesses. 3 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  We returned $30.7 million to our shareholders through dividends and $29.2 million through share repurchases.  Our cash surplus exceeded our debt by approximately $125 million.  Our available borrowing capacity under revolving credit facilities and cash surplus resulted in total liquidity of approximately $800 million at the end of December 2020. In August of 2020 we issued $150 million of long- term debt to finance our future growth. The notes have an average maturity of 13 years and have an average fixed rate of interest of 3.09%. The following table presents the Random Lengths framing lumber composite price. HISTORICAL LUMBER PRICES January February March April May June July August September October November December Annual average Annual percentage change Random Lengths Composite Average $/MBF 2020 2019 $ $ 377 402 420 358 394 455 530 716 934 826 571 643 $ 552 55.5 % $ 331 370 365 354 346 329 356 346 364 360 373 371 355 (23.2)% 4 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 62% and 58% of total lumber purchases, excluding plywood, for 2020 and 2019, respectively. January February March April May June July August September October November December Annual average Annual percentage change $ Random Lengths SYP Average $/MBF 2020 2019 346 $ 345 360 333 412 494 552 729 886 711 508 565 370 403 408 401 383 344 359 348 355 345 344 335 $ 520 $ 42.1 % 366 (20.3)% 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, were 51.0% and 43.4% of our net sales in 2020 and 2019, 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 products. 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 generally allow us to eventually re-price our products for changes in lumber prices from our suppliers. 5 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. Lumber cost Conversion cost = Product cost Adder = Sell price Gross margin Period 1 $ $ $ 300 50 350 50 400 $ 12.5 % Period 2 400 50 450 50 500 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. Units sold Gross profit Selling, general, and administrative expenses Earnings from operations 6 Annual Percentage Change      From 2019 to 2020      From 2018 to 2019 6.3 % 15.6 11.9 18.2 6.0 % 16.7 1.3 41.2 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 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. In 2020, we increased the amount of planned long-term share-based bonus awards that will be used to settle bonus obligations instead of cash, which resulted in a decrease in expense. This change was made to encourage employee retention and align their interests with shareholders. See discussion of share-based bonus awards in Note H — Common Stock. BUSINESS COMBINATIONS AND ASSET PURCHASES We completed five business acquisitions during 2020 and three during 2019. The annual historical sales attributable to acquisitions in 2020 and 2019 were approximately $101 million and $37 million, respectively. These business combinations were not significant to our operating results individually or in aggregate, and thus pro forma results for 2020 and 2019 are not presented. On December 28, 2020, we closed on an agreement to purchase 100 percent of the equity of PalletOne, Inc., for approximately $232 million plus $21 million for certain investments in capital projects and $6 million for a purchase price adjustment based on the actual amount of net working capital at close compared to a pre-determined target. 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 subsidiary operates five pressure-treating facilities in the Southeastern U.S. On February 28, 2021, we closed on an agreement to purchase 100 percent of the equity of J.C. Gilmore Pty Ltd located in Australia for approximately $2.4 million. This transaction adds a wide portfolio of consumable packaging to certain industrial packaging products and expands the companies’ customer base throughout Australia. See Notes to Consolidated Financial Statements, Note C, "Business Combinations" and Note O, “Subsequent Events” for additional information. 7 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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”. Due to the segment change as of January 1, 2020, 2018 and 2019 amounts have been retroactively adjusted and as such, we have included 2018 results by segment and the discussion of our 2019 results by segment compared to 2018. Please see our 2019 10-K for discussion of our 2019 consolidated results of operations compared to 2018. Net sales Cost of goods sold Gross profit Selling, general, and administrative expenses Asset impairment charges and other costs, net Earnings from operations Other expense, net Earnings before income taxes Income taxes Net earnings Less net earnings attributable to noncontrolling interest Net earnings attributable to controlling interest Year Ended December 26, December 28, 2020 100.0 % 84.5 15.5 8.6 0.2 6.7 0.1 6.6 1.7 4.9 (0.1) 4.8 % 2019 100.0 % 84.5 15.5 9.9 — 5.5 0.1 5.5 1.3 4.1 (0.1) 4.1 % Note: Actual percentages are calculated and may not sum to total due to rounding. 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. Gross profit Selling, general, and administrative expenses SG&A as percentage of gross profit SG&A as a Percentage of Gross Profit Year Ended December 26, 2020 December 28, 2019 $ $ 800,296 444,596 $ $ 55.6% 685,518 439,047 64.0% In 2020, we increased the amount of planned long-term share-based bonus awards that will be used to settle bonus obligations instead of cash, which resulted in a decrease in expense. This change was made to encourage employee retention and align their interests with shareholders. See discussion of share-based bonus awards in Note H — Common Stock. 8 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATING RESULTS BY SEGMENT Effective January 1, 2020, we re-organized around the markets we serve rather than geography and the historical segment information has been recast for all periods presented. Our new business segments align with the following markets: UFP Retail Solutions, UFP Construction and UFP Industrial. Among other things, this change 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, and Australia operations and sales and buying offices in other parts of the world. Our International segment and Ardellis (our insurance captive) have been included in the “All Other” column of the table below. The “Corporate” column includes purchasing, transportation and administrative functions that serve our operating segments. Operating results of Corporate primarily consists of over (under) allocated costs. The operating results of UFP Real Estate, Inc., which owns and leases real estate, and UFP Transportation Ltd., which owns and leases transportation equipment, are also included in the Corporate column. An inter- company lease charge is assessed to our operating segments for the use of these assets at fair market value rates. The following tables present our operating results by segment for December 26, 2020, December 28, 2019 and December 29, 2018. (in thousands) Net sales Cost of goods sold Gross profit Selling, general, administrative expenses Asset impairment charges and other costs, net Earnings from operations (in thousands) Net sales Cost of goods sold Gross profit Selling, general, administrative expenses Asset impairment charges and other costs, net Earnings from operations Retail Industrial $ 2,167,122 $ 1,072,117 895,466 176,651 1,874,114 293,008 Year Ended December 26, 2020 Construction $ 1,695,684 1,433,469 262,215 All Other Corporate Total $ $ 217,094 147,117 69,977 1,981 $ 5,153,998 4,353,702 3,536 800,296 (1,555) 137,641 97,146 179,516 34,471 (4,178) 444,596 56 (3,873) 13,690 775 (774) 9,874 155,311 $ 83,378 $ 69,009 $ 34,731 $ 3,397 $ 345,826 $ Retail Industrial $ 1,498,710 $ 1,085,635 906,025 179,610 1,324,339 174,371 Year Ended December 28, 2019 Construction $ 1,637,156 1,365,394 271,762 All Other Corporate Total $ $ 193,785 141,916 51,869 723 $ 4,416,009 3,730,491 685,518 (7,183) 7,906 112,422 96,157 188,339 33,173 8,956 439,047 269 482 1,037 159 (382) 1,565 61,680 $ 82,971 $ 82,386 $ 18,537 $ (668) $ 244,906 $ Note: Allocations of corporate expenses in 2019 were modified to align with the methodology used to allocate corporate expenses in the current year. 9     UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (in thousands) Net sales Cost of goods sold Gross profit Selling, general, administrative expenses Asset impairment charges and other costs, net Earnings from operations $ Retail Industrial $ 1,512,477 $ 1,050,945 916,512 134,433 1,363,118 149,359 Year Ended December 29, 2018 Construction $ 1,705,016 1,451,460 253,556 All Other Corporate Total $ $ 219,920 170,913 49,007 822 $ 4,489,180 3,896,286 592,894 (5,717) 6,539 97,260 74,830 181,459 29,967 8,719 392,235 (59) 85 720 1 (7,351) (6,604) 52,158 $ 59,518 $ 71,377 $ 19,039 $ 5,171 $ 207,263 Note: Allocations of corporate expenses in 2018 were modified to align with the methodology used to allocate corporate expenses in the current year. The following tables present the components of our operating results as a percentage of net sales by segment for December 26, 2020, December 28, 2019 and December 29, 2018. Year Ended December 26, 2020 Note: Actual percentages are calculated and may not sum to total due to rounding. Year Ended December 28, 2019 Net sales Cost of goods sold Gross profit Selling, general, administrative expenses Asset impairment charges and other costs, net Earnings from operations Net sales Cost of goods sold Gross profit Selling, general, administrative expenses Asset impairment charges and other costs, net Earnings from operations Retail Industrial 100.0 % 86.5 13.5 100.0 % 83.5 16.5 Construction 100.0 % 84.5 15.5 100.0 % 67.8 32.2 All Other Corporate Total 6.4 — 7.2 % 9.1 10.6 15.9 (0.4) 7.8 % 0.8 4.1 % 0.4 16.0 % Retail Industrial 100.0 % 88.4 11.6 100.0 % 83.5 16.5 Construction 100.0 % 83.4 16.6 100.0 % 73.2 26.8 All Other Corporate Total 7.5 — 4.1 % 8.9 — 7.6 % 11.5 17.1 0.1 5.0 % 0.1 9.6 % N/A — — — — — 100.0 % 84.5 15.5 8.6 0.2 6.7 % N/A — — — — — 100.0 % 84.5 15.5 9.9 0.0 5.5 % Note: Actual percentages are calculated and may not sum to total due to rounding. 10       UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Year Ended December 29, 2018 Net sales Cost of goods sold Gross profit Selling, general, administrative expenses Asset impairment charges and other costs, net Earnings from operations Retail Industrial 100.0 % 90.1 9.9 100.0 % 87.2 12.8 Construction 100.0 % 85.1 14.9 100.0 % 77.7 22.3 All Other Corporate Total 6.4 — 3.4 % 7.1 — 5.7 % 10.6 13.6 — 4.2 % 0.0 8.7 % N/A — — — — — 100.0 % 86.8 13.2 8.7 (0.1) 4.6 % Note: Actual percentages are calculated and may not sum to total due to rounding. NET SALES We primarily design, manufacture and market wood and wood-alternative products for national home centers and other retailers, structural lumber and other products for the manufactured housing industry, engineered wood components for residential and commercial construction, customized interior fixtures used in a variety of retail stores, commercial and other structures, and specialty wood packaging, components and other packing materials for various industries. Our strategic long-term sales objectives include:  Maximizing unit sales growth while achieving return on investment goals. The following table presents estimates, for the periods indicated, of our percentage change in net sales which were attributable to changes in overall selling prices versus changes in units shipped. % Change 2020 versus 2019 2019 versus 2018 in Sales in Selling Prices in Units 6.0 % 6.3 % 16.7 % (1.6)% 10.7 % (7.9)% Acquisition Unit Change 1.0 % 1.5 % Organic Unit Change 5.0 % 4.8 %  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, specialty wood packaging, engineered wood components, customized interior fixtures, 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. 11   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). Value-added products are typically sold at fixed selling prices for a pre-determined time period and carry higher gross margins than our commodity-based products. The increase in our ratio of commodity-based product sales to total sales reflected in the tables below is primarily due to the impact of dramatically higher lumber prices in 2020 as the selling prices of these products are generally indexed to the current Lumber Market at the time they are shipped. For example, a majority of our commodity-based sales are sold through our ProWood business unit and selling prices were up 30% in 2020 compared to 2019. Also, our Industrial and Construction segments primarily sell value-added products and their unit sales were both down 6% compared to last year. Year Ended December 26, 2020 Year Ended December 28, 2019 Year Ended December 29, 2018 Retail Industrial Construction All Other and Corporate Total Sales       Value-Added      Commodity-Based     Value-Added     Commodity-Based     Value-Added     Commodity-Based 46.0 % 39.5 % 23.5 % 53.8 % 64.7 % 76.3 % 54.0 % 60.5 % 76.5 % 46.2 % 35.3 % 23.7 % 57.8 % 66.2 % 81.4 % 42.2 % 33.8 % 18.6 % 75.6 % 64.3 % 24.4 % 35.7 % 75.8 % 69.3 % 24.2 % 30.7 % 65.9 % 64.6 % 34.1 % 35.4 %  Developing new products. We define new products as those that will generate sales of at least a $1 million per year within 4 years of launch and are still growing and gaining market penetration. New product sales and gross profits in 2020 were up 26% and 36%, respectively, from the prior year. Approximately $126 million of new product sales for 2019, while still sold, were sunset in 2020 and excluded from the table below because they no longer meet the definition above. New Product Sales by Segment Year Ended (in thousands) Retail Industrial Construction All Other and Corporate Total New Product Sales December 26, December 28, $ $ 2020 394,838 78,142 54,307 11,397 538,684 2019 284,182 68,672 60,177 13,016 426,047 %  Change 38.9 % $ 13.8 % (9.8)% (12.4)% 26.4 % December 29, 2018 316,017 88,063 75,174 n/a 479,254 %  Change (10.1)% (22.0)% (19.9)% n/a (11.1)% 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. 12       UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Retail Segment: 2020 versus 2019 Net sales to the retail segment increased 45% in 2020 compared to 2019 due to a 25% increase in unit sales and a 20% increase in selling prices. Our unit growth was primarily driven by a 49% increase in our Dimensions Home & Décor products including project panels and short lumber, a 28% increase in Outdoor Essentials Fence, Lawn & Garden products, a 25% increase in our ProWood pressure-treated products, and a 20% increase in our Deckorators composite decking and railing. Acquisitions contributed 1% to the overall growth in unit sales, primarily in our UFP Edge siding and trim products. Our new product sales contributed to these increases and were up 39% for the year. Finally, our sales to big box customers increased 48%, and sales to other independent retailers increased 38%. Our unit sales increases were primarily due to an increase in demand as consumers invested in home improvement activities over other spending alternatives. We believe that the pandemic and related disruptions in the lives of consumers contributed to this increase in demand. Gross profits increased by $118.6 million, or 68% to $293 million in 2020 compared to 2019, comparing favorably with our 25% increase in unit sales. Our increase in gross profits was due to the following factors:  Increased unit sales of value-added products within our Deckorators, Outdoor Essentials, and Dimensions business units contributed $53.1 million to the increase.  Our ProWood business unit, which produces and sells pressure treated lumber, contributed $48.9 million to the increase attributable to unit sales growth and the favorable trend of rising lumber prices as the selling prices of these products are primarily determined on a variable price formula.  The remaining $16.6 million increase is attributed to favorable cost variances as a result of operating leverage combined with strong organic unit growth. Selling, general and administrative (“SG&A”) expenses increased by approximately $25.2 million, or 22.4%, in 2020 compared to 2019, lower than our 25% increase in unit sales. Acquired operations in 2020 contributed approximately $2.2 million to this increase. Accrued bonus expense increased approximately $18.7 million and totaled approximately $35.3 million for 2020. The remaining increase was due to increases in salaries and wages ($5.2 million), sales compensation ($1.4 million), and in-store merchandising costs ($1.6 million), offset by a decline in advertising ($2.5 million) and travel and related costs ($1.2 million). Earnings from operations of the Retail reportable segment increased in 2020 compared to 2019 by $93.6 million, or 151.8%, well in excess of our 25% increase in unit sales as a result of the factors mentioned above. 2019 versus 2018 Net sales to the retail segment decreased 1% in 2019 compared to 2018 due to an 11% decrease in selling prices which was mostly offset by a 10% increase in unit sales. The decrease in selling prices was as a result of the decline in lumber prices in 2019. Our organic unit growth was primarily driven by a 40% increase in Deckorators composite decking and railing, an 18% increase in our UFP Edge siding and trim products. and a 6% increase in our ProWood pressure-treated products. Within this segment, sales to our big box customers increased 5% while our sales to other retailers decreased 10%. 13 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Gross profits increased $25 million, or 17% to $174 million in 2019 compared to 2018 comparing favorably with our 10% increase in units sold due to strong organic sales growth and leveraging of fixed costs, lower lumber costs on sales of fixed price products, value-added sales mix improvements and a favorable lumber market trend in 2019 which resulted in an improvement in gross profit per unit on sales of variable priced products. Increased unit sales of value-added products within Deckorators, Outdoor Essentials, and UFP Edge contributed $20.8 million to the increase in gross profit. ProWood contributed $7.6 million to the increase and the remaining $3.4 million is due to unfavorable cost variances. SG&A expenses increased $15.2 million, or 16%, in 2019 compared to 2018, while we reported a 10% increase in unit sales. Acquired operations in 2019 contributed approximately $1.2 million to the increase. Accrued bonus increased approximately $4 million and totaled approximately $16.6 million in 2019. The remaining increase was due to increases of $4.0 million in compensation and sales incentives, $3.1 million in advertising, and other insignificant increases spread over several accounts. Earnings from operations increased $9.5 million, or 18%, due to the factors mentioned above, which was well in excess of our 10% increase in unit sales. Industrial Segment: 2020 versus 2019 Net sales to the industrial segment decreased 1% in 2020 compared to 2019 due to a 5% increase in selling prices attributable to the Lumber Market, offset by a 6% decrease in unit sales due to the impact of the pandemic and government imposed shutdowns on certain of our customers. Gross profits decreased by 1.6% to $176.7 million in 2020 compared to 2019, comparing favorably with our 6% decrease in our unit sales. We believe we achieved these results by continuing to make favorable changes in our sales mix of value- added products and effectively passing along increases in commodity lumber costs to our customers. SG&A expenses increased by approximately $1.0 million, or 1.0%, in 2020 compared to 2019. Acquired operations in 2020 contributed approximately $3.0 million to total SG&A expenses. Accrued bonus expense decreased $5.0 million compared to last year and totaled approximately $18.8 million for 2020. The remaining increase was primarily due to compensation and sales incentives. Certain contingent liabilities related to earnout incentives associated with business acquisitions by our industrial segment were reduced in 2020 and the impact to earnings was an increase of $4.1 million. Earnings from operations of the Industrial reportable segment in 2020 increased $0.4 million, or 0.5%, compared to 2019 due to the factors discussed above. 2019 versus 2018 Net sales to the industrial segment increased 3% in 2019 compared to 2018, resulting from a 4% increase in overall unit sales and a 1% decrease in selling prices. Businesses we acquired contributed 6% to our growth in unit sales. Gross profits increased $45.2 million, or 34%, in the industrial segment, primarily driven by favorable changes in product mix and lower lumber costs in 2019 as most products sold to this market have fixed selling prices for a period of time. 14 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SG&A expenses increased by approximately $21.3 million, or 29%, in 2020 compared to 2019. Acquired operations in 2019 contributed approximately $6.3 million to total SG&A expenses. Accrued bonus expense increased approximately $9.5 million and totaled approximately $23.7 million in 2019. The remaining increases were due to a $3.5 million increase in salaries and wages, a $1.1 million increase in sales compensation, and a $0.8 million increase in bad debt expense. Earnings from operations for the Industrial reportable segment increased in 2019 compared to 2018 by $23.5 million, or 39%, which was well in excess of our 4% increase in unit sales, due to the factors above. Construction Segment: 2020 versus 2019 Net sales to the construction segment increased 4% in 2020 compared to 2019 due to a 10% increase in selling prices, offset by a 6% decrease in unit sales due to the impact of the pandemic and government-imposed shutdowns on customer demand. Unit sales changes of our business units that comprise this segment consisted of declines of 2% in site-built construction, 8% in concrete forming, and 23% in commercial construction, offset by a 2% increase in factory-built housing. Gross profits decreased by $9.5 million, or 3.5% to $262.2 million in 2020 compared to 2019 comparing favorably with our 6% decrease in unit sales. The decrease in our gross profit was comprised of the following factors:  Gross profits in our site-built construction business unit decreased by $15.2 million due to a combination of lower unit sales and higher commodity lumber costs, which adversely impacted our profit per unit of products we sell on a fixed price to our customers for a period of time.  A decline in unit sales in our commercial business unit, which has a more significant fixed cost structure, caused a decrease in gross profit of $27.4 million.  The impact of rising lumber prices on variable priced products contributed $11.7 million in gross profit in our factory-built housing and concrete forming business units.  Favorable cost variances contributed $14.7 million in gross profit.  Acquired businesses contributed $6.7 million. SG&A expenses decreased by approximately $8.8 million, or 4.7%, in 2020 compared to 2019 due to decreases in salaries and wages of $2.2 million, travel expenses of $3.8 million and medical expenses of $2.1 million, primarily due to reductions in headcount in our commercial business unit as a result of efforts to re-align our capacity with lower customer demand. These decreases were offset by the SG&A expenses of acquired operations in 2020 which contributed approximately $4.6 million of additional SG&A expenses in 2020. Accrued bonus expense decreased $5.0 million compared to 2019 and totaled approximately $18.6 million for 2020. Due to the underperformance of our commercial business unit, we recorded a charge against earnings of $11.5 million to impair the goodwill associated with that business unit. In addition, certain leases of our commercial business unit were impaired with a charge against earnings of $1.6 million as a result of our efforts to re-align our capacity with lower customer demand. Earnings from operations of the Construction reportable segment decreased in 2020 compared to 2019 by $13.4 million, or 16.2%, due to the factors mentioned above. 15 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2019 versus 2018 Net sales to the construction segment decreased 4% in 2019 compared to 2018, due to a 6% increase in unit sales offset by a decrease of 10% in selling prices. Unit changes within this segment consisted of increases of 14% in commercial construction, 10% in concrete forming, and 2% in site-built construction, offset by a 2% decrease in factory-built housing. Gross profits increased by $18.2 million, or 7.2% to $271.8 million in 2019 compared to 2018 , comparing favorably with our 6% increase in unit sales. SG&A expenses increased by approximately $6.9 million, or 4%, in 2019 compared to 2020 and was primarily due to an increase in accrued bonus expense of $6.4 million. Earnings from operations for the Construction reportable segment increased in 2019 compared to 2018 by $11.0 million, or 15%, due to the factors mentioned above. All Other Segment: Our All Other reportable segment consists of our International and Ardellis (our insurance captive) segments that are overall not significant. Earnings from operations increased in 2020 compared to 2019 by $16.2 million, or 87.4%, primarily driven by increases in gross profit of our Mexican affiliate as well as our import/export trading business. Gross profit increases at our Mexican affiliate were driven by unit increases of approximately 15% as well as selling price increases due to the rising lumber market. Earnings from operations decreased in 2019 compared to 2018 by $.5 million, or 2.6%. Corporate: The corporate segment consists of over (under) allocated costs that are not significant. INTEREST EXPENSE Interest expense increased in 2020 compared to 2019, due to the issuance of $150 million of long-term debt in August of 2020 to provide capital to support our future growth. See “Note E 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 25.5% in 2020 compared to 24.2% in 2019. The increase was primarily due to recording non-deductible goodwill impairment expense in 2020, along with a valuation allowance against deferred tax assets associated with net operating loss carryforwards of foreign subsidiaries in our commercial business unit totaling approximately $3.6 million. 16 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 26, 2020 (in thousands). Contractual Obligation Long-term debt and finance lease obligations Estimated interest on long-term debt and finance lease obligations Operating leases Capital project purchase obligations Total Payments Due by Period Less than 1 Year 100 $ 1 – 3 Years $ 43,384 3 – 5 Years After 5 Years $ 39,971 $ 228,252 Total $ 311,707 10,873 18,671 22,761 $ 52,405 20,352 27,345 — $ 91,081 17,260 17,696 — 48,949 25,961 — $ 74,927 $ 303,162 97,434 89,673 22,761 $ 521,575 As of December 26, 2020, we also had $41.0 million in outstanding letters of credit issued during the normal course of business, as required by some vendor contracts. The table below presents, for the periods indicated, a summary of our cash flow statement (in thousands): LIQUIDITY AND CAPITAL RESOURCES December 26, December 28, Cash from operating activities Cash used in investing activities Cash from (used in) financing activities Effect of exchange rate changes on cash Net change in cash and cash equivalents Cash, cash equivalents, and restricted cash, beginning of year Cash, cash equivalents, and restricted cash, end of year 2020 336,477 (154,718) 85,221 962 267,942 168,666 2019 349,291 (142,037) (67,268) 482 140,468 28,198 $ 436,608 $ 168,666 In general, we financed our growth in the past 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 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 August. 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. 17 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 decreased to 48 days in 2020 from 56 days in 2019. Days of sales outstanding Days supply of inventory Days payables outstanding Days in cash cycle Year Ended December 26, 2020 December 28, 2019 32 36 (20) 48 33 44 (21) 56 The decrease in our days supply of inventory in 2020 was primarily due to opportunistic buying when lumber prices were low in early 2019 to improve gross profits and higher levels of “safety stock” we carried to address transportation challenges and ensure timely deliveries to our customers. We did not engage in this level of opportunistic buying in late 2019 and early 2020. Additionally, strong demand in our retail segment and shortages of supply contributed to higher inventory turns in 2020. Our cash flows from operating activities in 2020 was $336.5 million, 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. Comparatively, cash generated from operating activities was approximately $349.3 million in 2019, which was comprised of net earnings of $182.4 million, $77 million of non-cash expenses, and a $89.9 million decrease in working capital since the end of 2018. Our net working capital increased during 2020 due to unusually high lumber prices as well as strong sales growth and demand in our retail segment, which resulted in an increase in our accounts receivable and inventory. Our cash used in investing activities during 2020 was $154.7 million, which was comprised primarily of purchases of property, plant, and equipment totaling $89.2 million and business acquisitions totaling $65.3 million. Our outstanding purchase commitments on existing capital projects totaled approximately $22.8 million on December 26, 2020. Our capital expenditures primarily consist of “maintenance” capital expenditures totaling approximately $55 million, as well as “expansionary and efficiency” capital expenditures. Notable areas of capital spending include projects to expand capacity and enhance the productivity of our Deckorators product line, several projects to expand manufacturing capacity to serve industrial customers and achieve efficiencies through automation, improvements to a number of facilities, and an increase of our transportation capacity (tractors, trailers) in order to meet higher volumes and replace old rolling stock. The sale and purchase of investments totaling $24.8 million and $28.1 million, respectively, are due to investment activity in our captive insurance subsidiary. In 2019, investments in business acquisitions and purchases of property, plant, and equipment were $39.1 million and $84.9 million, respectively. Outstanding purchase commitments on existing capital projects totaled approximately $33.8 million on December 28, 2019. Investments in life insurance contracts and net investment activity used an additional $15.2 million and $3.5 million of cash. Cash flows from financing activities during 2020 primarily consisted of proceeds of $150.0 million from the issuance of Senior E, F and G Notes and $6.9 million of borrowings under the revolving credit facilities (See Notes to Consolidated Financial Statements “Debt”); offset by repayments under these facilities of approximately $6.5 million, $30.7 million in dividend payments, and $29.2 million in stock repurchases at an average price of $38.62. We paid quarterly dividends in March, June, September and December of 2020 at a quarterly rate of $0.125 per share. Comparatively in 2019, cash flows from financing activities primarily consisted of $422.1 million in borrowings under the revolving credit facilities, repayments under these facilities of $460.5 million, and $24.5 million in dividend payments at a semi-annual rate of $0.20 per share. 18 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. This facility replaced our $295 million unsecured revolving credit facility. 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 have been used to fund working capital needs and the PalletOne, Inc. acquisition. Refer to Note O, “Subsequent Events” for additional information. On December 26, 2020, we had $4.7 million outstanding on our $375 million revolving credit facility. The revolving credit facility also supports letters of credit totaling approximately $7.1 million on December 26, 2020. As a result, we have approximately $363 million in remaining availability on our revolver. 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 26, 2020. 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. 19 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 26, 2020, we experienced significantly lower than expected operating results within our commercial reporting unit, which is within the Construction segment. In conjunction with completing our annual planning activities, we noted an expectation for significantly lower customer demand for the foreseeable future. As a result, we revised our future cash flow projections for this reporting unit and performed the goodwill impairment test by calculating the fair value of the reporting unit based on its discounted estimated future cash flows. 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, which represents the entire amount of the goodwill recorded within the reporting unit, as a result. All other reporting units had a fair value that was substantially in excess of the carrying value. We believe we have sufficient available information, both current and historical, to support our assumptions, judgments and estimates used in the goodwill impairment test. 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. GOALS FORWARD OUTLOOK Our goal is to achieve long-term unit sales growth that exceeds positive U.S. GDP growth by 4 percent to 6 percent, including business acquisitions. 20 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our general long-term objectives also include:  Achieving sales growth primarily through new product introduction, international business expansion, and gaining additional market share, particularly in our core retail, industrial and construction segments;   Identifying new growth opportunities in businesses with adjacencies to our core businesses, primarily through strategic business acquisitions; Increasing our profitability through cost reductions, productivity improvements as volume improves and through investments in automation, and a more favorable mix of value-added products resulting in growth in earnings from operations in excess of our unit sales growth; and  Earning a return on invested capital in excess of our weighted average cost of capital. RETAIL SEGMENT The Home Improvement Research Institute (“HIRI”) anticipates growth in home improvement spending and has forecasted a 4.3% 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 from 2020 will continue into 2021. The Home Depot has stated that if the demand environment during the last half of 2020 were to persist through the current year, it would imply flat to slightly positive comparable sales growth in 2021. Lowe’s has forecasted a 5% to 7% decline in demand in 2021. Sales of our Retail Solutions segment comprised approximately 42% of our annual sales in 2020 and 34% of our annual sales in 2019 and 2018. We continue to compete for market share for certain retail customers and face intense pricing pressure from other suppliers to this market. Our long-term goal is to achieve sales growth by:  Increasing our market share of value-added products, including our Deckorators product line.  Developing new products.  Acquiring competitors in core product categories when those opportunities exist.  Adding new products and customers through strategic business acquisitions or alliances.  Increasing our emphasis on product innovation and product differentiation in order to counter commoditization trends and influences. 21 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 national 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 national 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 above, the recently implemented reorganization of our business is intended to promote revenue growth through the introduction of new products and services 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 .90% in 2021. The Purchasing Managers Index is projected to trend around 53.4 points in 2022 and 52.4 points in 2023. Sales in this segment comprised approximately 21% of our annual sales in 2020. CONSTRUCTION SEGMENT The National Association of Home Builders forecasts a 21% increase in manufactured home shipments in 2021 followed by a 5% increase in 2022. We currently supply approximately 40% 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% of our annual sales in 2020. The Mortgage Bankers Association of America forecasts a 10% increase in national housing starts to an estimated 1.5 million starts in 2021. The National Association of Home Builders forecasts starts of 1.2 million, a 4% increase from 2020. 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 14% of our annual sales in 2020. 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 7% of our annual sales in 2020. 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.  The effective implementation of our strategy to focus and manage our operations around the markets we serve. 22 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  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 as we have added personnel needed 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 2021; 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.  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. 23 UFP INDUSTRIES, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Additionally, we expect to spend approximately $115.5 million on capital expenditures, incur depreciation of approximately $71 million, and incur amortization and other non-cash expenses of approximately $19 million in 2021. On December 26, 2020, we had outstanding purchase commitments on capital projects of approximately $22.8 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. In 2020, the frequency of our dividend payments increased from semi-annually to quarterly and the pro-rata rate increased by 25%. 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. We have a share repurchase program approved by our Board of Directors, and as of December 26, 2020, we have remaining authorization to buy back approximately 1.1 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. 24 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of UFP Industries, Inc. (formerly Universal Forest Products, 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 26, 2020, 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, because of the effect of the material weakness identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 26, 2020, 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 26, 2020, of the Company and our report dated March 3, 2021, 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. 25 Material Weakness A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management's assessment: Management identified a material weakness in the design and operation of their controls regarding the accounting for the Company’s share-based bonus awards. The controls were not adequately designed to review the appropriate accounting conclusions with enough precision related to the determination of the appropriate period over which to recognize the expense associated with share-based bonus awards. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 26, 2020, of the Company, and this report does not affect our report on such financial statements. /s/ Deloitte & Touche LLP Grand Rapids, Michigan March 3, 2021 26 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of UFP Industries, Inc. (formerly Universal Forest Products, Inc.) Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of UFP Industries, Inc. (formerly Universal Forest Products, Inc.) and subsidiaries (the "Company") as of December 26, 2020 and December 28, 2019, 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 26, 2020, 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 26, 2020 and December 28, 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 26, 2020, 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 26, 2020, 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 March 3, 2021, expressed an adverse opinion on the Company's internal control over financial reporting because of a material weakness. 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 Matters 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. Share-Based Bonus Expense – Refer to Notes A and H to the financial statements Critical Audit Matter Description The Company recognizes share-based bonus expense over the associated service and vesting period of the awards in accordance with ASC Topic 718, Compensation - Stock Compensation. 27 We identified share-based bonus expense as a critical audit matter because of the material weakness identified by the Company related to the design and operation of the Company’s control regarding the accounting for their share-based bonus awards. This made auditing share-based bonus expense more challenging and required an increased extent of audit effort, including the need to involve professionals in our firm having expertise in share-based compensation accounting and to modify the nature and extent of our audit procedures. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to share-based bonus expense included the following, among others: • We read the applicable agreements, recalculated the share-based bonus expense calculations and compared the key terms from the agreements to management’s analysis. • We assessed the appropriateness of judgments made by management in determining key assumptions related to the awards, such as service inception date. • We tested the accuracy and completeness of the data used in measuring the share-based bonus awards by agreeing the underlying inputs, such as grant date and vesting terms, among others, back to source documents, such as compensation committee meeting minutes or share-based bonus award letters. With the assistance of professionals in our firm having expertise in accounting for share-based bonus awards, we evaluated the Company’s conclusions regarding the accounting model to record share-based bonus expense over the requisite service and vesting period of the awards in accordance with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Grand Rapids, Michigan March 3, 2021 We have served as the Company's auditor since 2014. 28 UFP INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) ASSETS CURRENT ASSETS: Cash and cash equivalents Restricted cash Investments Accounts receivable, net Inventories: Raw materials Finished goods Total inventories Refundable income taxes Other current assets TOTAL CURRENT ASSETS DEFERRED INCOME TAXES RESTRICTED INVESTMENTS RIGHT OF USE ASSETS OTHER ASSETS GOODWILL INDEFINITE-LIVED INTANGIBLE ASSETS OTHER INTANGIBLE ASSETS, NET PROPERTY, PLANT AND EQUIPMENT: Land and improvements Building and improvements Machinery and equipment Furniture and fixtures Construction in progress PROPERTY, PLANT AND EQUIPMENT, GROSS Less accumulated depreciation and amortization PROPERTY, PLANT AND EQUIPMENT, NET TOTAL ASSETS LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable Accrued liabilities: Compensation and benefits Other Current portion of lease liability Current portion of long-term debt TOTAL CURRENT LIABILITIES LONG-TERM DEBT LEASE LIABILITY DEFERRED INCOME TAXES OTHER LIABILITIES TOTAL LIABILITIES 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, 61,205,780 and 61,408,589 Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total controlling interest shareholders’ equity Noncontrolling interest TOTAL SHAREHOLDERS’ EQUITY TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY See notes to consolidated financial statements. 29 December 26, 2020 December 28, 2019 $ 436,507 $ 101 24,308 470,504 168,336 330 18,527 364,027 236,283 250,591 486,874 13,272 41,706 1,093,072 2,763 16,214 80,167 24,884 229,536 7,354 48,313 125,097 253,589 467,963 16,972 21,342 884,963 (497,789) 387,174 1,889,477 316,481 250,813 567,294 5,836 33,812 1,538,362 2,413 17,565 77,245 20,298 252,193 7,401 72,252 128,301 272,864 525,542 21,110 26,680 974,497 (557,335) 417,162 2,404,891 $ 211,518 $ 142,479 166,478 69,104 16,549 100 463,749 311,607 61,509 25,266 59,608 921,739 141,892 51,572 15,283 2,816 354,042 160,867 64,884 22,880 29,071 631,744 — $ — 61,206 218,224 1,182,680 (1,794) 1,460,316 22,836 1,483,152 2,404,891 $ 61,409 192,173 995,022 (4,889) 1,243,715 14,018 1,257,733 1,889,477 $ $ $ $ UFP INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (in thousands, except per share data) December 26, 2020 Year Ended December 28, 2019 December 29, 2018 $ 5,153,998 $ 4,416,009 $ 4,489,180 3,896,286 592,894 392,235 (6,604) 207,263 8,893 (1,371) 1,888 9,410 197,853 45,441 152,412 3,730,491 685,518 439,047 1,565 244,906 8,700 (1,945) (2,523) 4,232 240,674 58,270 182,404 4,353,702 800,296 444,596 9,874 345,826 9,311 (2,392) (2,076) 4,843 340,983 87,101 253,882 (7,104) 246,778 $ (2,754) 179,650 $ (3,814) 148,598 4.00 $ 4.00 $ 2.91 $ 2.91 $ 2.41 2.40 $ $ $ 253,882 5,967 259,849 182,404 1,513 183,917 152,412 (5,076) 147,336 (9,976) (3,218) (3,873) $ 249,873 $ 180,699 $ 143,463 NET SALES COST OF GOODS SOLD GROSS PROFIT SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ASSET IMPAIRMENT CHARGES AND OTHER COSTS, NET EARNINGS FROM OPERATIONS INTEREST EXPENSE INTEREST INCOME UNREALIZED (GAIN) LOSS ON INVESTMENTS AND OTHER EARNINGS BEFORE INCOME TAXES INCOME TAXES NET EARNINGS LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST EARNINGS PER SHARE – BASIC EARNINGS PER SHARE – DILUTED OTHER COMPREHENSIVE INCOME: NET EARNINGS OTHER COMPREHENSIVE GAIN (LOSS) COMPREHENSIVE INCOME LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST See notes to consolidated financial statements. 30 UFP INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (in thousands, except share and per share data) Controlling Interest Shareholders’ Equity Additional Accumulated Other Paid-In Retained Comprehensive Noncontrolling Common Stock $ 61,192 Capital Earnings $ 161,928 $ 736,212 $ 148,598 Balance at December 30, 2017 Net earnings Foreign currency translation adjustment Unrealized gain (loss) on investment & foreign currency Distributions to noncontrolling interest Cash dividends - $0.180 per share – semiannually Issuance of 37,794 shares under employee stock plans Issuance of 348,208 shares under stock grant programs Issuance of 166,528 shares under deferred compensation plans Repurchase of 860,669 shares Expense associated with share-based compensation arrangements Accrued expense under deferred compensation plans Balance at December 29, 2018 Net earnings Foreign currency translation adjustment Unrealized gain on debt securities Distributions to noncontrolling interest Additional purchase of noncontrolling interest Cash dividends - $0.200 per share – semiannually Issuance of 33,647 shares under employee stock plans Issuance of 309,628 shares under stock grant programs Issuance of 181,565 shares under deferred compensation plans Expense associated with share-based compensation arrangements Accrued expense under deferred compensation plans Balance at December 28, 2019 Net earnings Foreign currency translation adjustment Unrealized gain on investments and other Distributions to noncontrolling interest Additional purchase of noncontrolling interest Cash dividends - $0.125 per share – quarterly Issuance of 35,133 shares under employee stock plans Issuance of 390,720 shares under stock grant programs Issuance of 127,735 shares under deferred compensation plans Repurchase of 756,397 shares Expense associated with share-based compensation arrangements Accrued expense under deferred compensation plans Balance at December 26, 2020 Earnings Interest 144 $ (4,973) (1,109) 14,547 $ 3,814 59 (3,139) Total 974,023 152,412 (4,914) (162) (3,139) (22,072) 1,026 5,175 — (24,629) 2,754 464 3,379 7,585 15,281 $ 1,088,684 182,404 1,032 481 (2,143) (7,075) (24,549) 1,093 (2,143) (2,338) 5,968 — 7,104 2,872 3,843 7,995 14,018 $ 1,257,733 253,882 4,245 1,722 (933) (95) (30,669) 1,395 (933) (225) 12,535 — (29,212) 3,905 8,644 $ 1,483,152 $ 60,884 $ 178,540 $ 839,917 179,650 $ (5,938) $ 568 481 $ 61,409 $ 192,173 $ 995,022 246,778 $ (4,889) $ 1,373 1,722 947 (22,072) (23,768) 38 348 167 (861) 988 4,827 (167) 3,379 7,585 (24,549) 4 34 310 181 (4,737) 1,059 5,654 (181) 3,843 7,995 35 390 128 (756) (30,669) 5 (28,456) 130 1,360 12,140 (128) 3,905 8,644 $ 218,224 31 $ 61,206 $ 1,182,680 $ (1,794) $ 22,836 See notes to consolidated financial statements UFP INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings Adjustments to reconcile net earnings to net cash from operating activities: Depreciation Amortization of intangibles Expense associated with share-based and grant compensation arrangements Deferred income taxes Unrealized (gain) loss on investments and other Net loss (gain) on disposition of assets and impairment of assets Goodwill impairment Gain from reduction of estimated earnout liability Changes in: Accounts receivable Inventories Accounts payable and cash overdraft Accrued liabilities and other NET CASH FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment Proceeds from sale of property, plant and equipment Acquisitions and purchases of non-controlling interest, net of cash received Investment in life insurance contracts Purchases of investments Proceeds from sale of investments Other NET CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under revolving credit facilities Repayments under revolving credit facilities Borrowings of debt Contingent consideration payment and other Issuance of long-term debt Proceeds from issuance of common stock Dividends paid to shareholders Distributions to noncontrolling interest Repurchase of common stock Other NET CASH FROM (USED IN) FINANCING ACTIVITIES Effect of exchange rate changes on cash NET CHANGE IN CASH AND CASH EQUIVALENTS CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH: Cash and cash equivalents, beginning of period Restricted cash, beginning of period Cash, cash equivalents, and restricted cash, beginning of period Cash and cash equivalents, end of period Restricted cash, end of period Cash, cash equivalents, and restricted cash, end of period SUPPLEMENTAL INFORMATION: Interest paid Income taxes paid NON-CASH FINANCING ACTIVITIES: Common stock issued under deferred compensation plans See notes to consolidated financial statements 32 Year Ended December 26, December 28, December 29, 2020 2019 2018 $ 253,882 $ 182,404 $ 152,412 63,964 8,716 4,034 1,857 (2,076) 1,470 11,485 (4,134) (87,552) (76,022) 62,405 98,448 336,477 (89,182) 2,922 (65,255) — (28,054) 24,805 46 (154,718) 6,862 (6,498) — (5,787) 150,000 1,395 (30,669) (932) (29,212) 62 85,221 962 267,942 168,666 436,608 168,336 330 168,666 436,507 101 436,608 7,204 77,964 $ $ $ $ $ $ 60,494 6,325 4,007 7,176 (2,523) 1,565 — — (16,872) 73,120 (24,132) 57,727 349,291 (84,933) 1,777 (39,122) (15,253) (13,352) 9,828 (982) (142,037) 422,057 (460,537) — (3,136) — 1,093 (24,549) (2,216) — 20 (67,268) 482 140,468 28,198 168,666 27,316 882 28,198 168,336 330 168,666 8,763 50,224 6,870 $ 6,229 $ $ $ $ $ $ $ 54,949 6,393 3,574 857 1,888 (6,604) — — (8,512) (84,304) (5,213) 1,245 116,685 (95,862) 38,373 (54,017) — (13,338) 3,678 (66) (121,232) 732,370 (748,496) 927 (5,540) 75,000 1,026 (22,072) (3,139) (24,629) (1,054) 4,393 (464) (618) 28,816 28,198 28,339 477 28,816 27,316 882 28,198 8,860 51,578 5,837 $ $ $ $ $ $ $ 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 three markets: retail, construction and industrial. Founded in 1955, we are headquartered in Grand Rapids, Michigan, with affiliates throughout North America, Europe, Asia and Australia. On April 22, 2020, the shareholders approved changing the name of the Company from Universal Forest Products, Inc., to UFP Industries, Inc. 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 2020, 2019, and 2018 relate to the fiscal years ended December 26, 2020, December 28, 2019, and December 29, 2018, respectively. Fiscal years 2020, 2019, and 2018 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 $17.6 million of restricted investments recorded as of December 26, 2020. 33 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 Costs and Expenses Beginning Balance Deductions* Year Ended December 26, 2020: Allowance for possible losses on accounts receivable Year Ended December 28, 2019: Allowance for possible losses on accounts receivable Year Ended December 29, 2018: Allowance for possible losses on accounts receivable $ $ $ 4,440 $ 48,954 $ (48,765) 2,601 $ 39,481 $ (37,642) 2,424 $ 38,963 $ (38,786) * Includes accounts charged off, discounts given to customers and actual customer returns and allowances. Ending Balance $ $ $ 4,629 4,440 2,601 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 $8.7 million and $7.4 million as of December 26, 2020 and December 28, 2019, respectively. All amounts are expected to be collected within 18 months. Concentration of accounts receivable related to our largest customer totaled $77.5 million and $42.8 million as of December 26, 2020 and December 28, 2019, 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 our fiscal year and have concluded the standard does not have a material impact on our consolidated financial statements and disclosures, accounting processes, and internal controls. 34 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 $20.8 million as of December 26, 2020 and $20.2 million as of December 28, 2019. 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 Buildings and improvements Machinery, equipment and office furniture 5 to 15 years 10 to 32 years 2 to 20 years Software costs are included in machinery and equipment on the balance sheet with gross amounts and accumulated amortization totaling $5.5 million and $4.9 million as of December 26, 2020, and $6.1 million and $5.2 million as of December 28, 2019, 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. 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. Refer to Note D, Goodwill and Other Intangible Assets, in the notes to the consolidated financial statements for additional information related to the impairment of this goodwill. As of the date of the most recent goodwill impairment test, which utilized data and assumptions as of September 26, 2020, all other reporting units had a fair value that was substantially in excess of the carrying value. 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 ensure that a mid-year impairment analysis is not required. 35 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. 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 26, 2020 and December 28, 2019. 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 26, 2020, Ardellis had 45 such contracts in place. Reserves associated with these contracts were $4.5 million at December 26, 2020 and $5.7 million at December 28, 2019 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 three primary segments (Retail, Industrial, and Construction) that the Company operates, there are a variety of written agreements governing the sale of our products and services. The transaction price is stated at the purchase order level, which includes shipping and/or freight costs and any applicable governmental authority taxes. The majority of our contracts have a single performance obligation concentrated around the delivery of goods to the carrier, Free On Board (FOB) shipping point. Therefore, revenue is recognized when this performance obligation is satisfied. Generally, title and control passes at the time of shipment. In certain circumstances, the customer takes title when the shipment arrives at the destination. However, our shipping process is typically completed the same day. Certain customer products that we provide require installation by the Company or a 3rd party. Installation revenue is recognized upon completion. If we use a 3rd 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. 36 We utilize rebates, credits, discounts and/or cash-based incentives with certain customers which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized. We believe that there will not be significant changes to our estimates of variable consideration. The allocation of these costs are applied at the invoice level and recognized in conjunction with revenue. Additionally, returns and refunds are estimated on a historical and expected basis which is a reduction of revenue recognized. Earnings on construction contracts are reflected in operations using over time accounting, under either cost to cost or units of delivery methods, depending on the nature of the business at individual operations, which is in accordance with ASC 606 as revenue is recognized when certain performance obligations are performed. Under over time accounting using the cost to cost method, revenues and related earnings on construction contracts are measured by the relationships of actual costs incurred related to the total estimated costs. Under over time accounting using the units of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual units produced related to the total number of units. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent. Our construction contracts are generally entered into with a fixed price and completion of the projects can range from 6 to 18 months in duration. Therefore, our operating results are impacted by, among many other things, labor rates and commodity costs. During the year, we update our estimated costs to complete our projects using current labor and commodity costs and recognize losses to the extent that they exist. The following table presents our net sales disaggregated by revenue source: (in thousands) FOB Shipping Point Revenue Construction Contract Revenue Total Net Sales December 26, 2020 December 28, 2019 % Change $ $ 5,025,895 128,103 5,153,998 $ $ 4,272,583 143,426 4,416,009 17.6% (10.7)% 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 26, 2020 and December 28, 2019 which are included in “Other current assets” and “Accrued liabilities: Other”, respectively (in thousands): Cost and Earnings in Excess of Billings Billings in Excess of Cost and Earnings SHIPPING AND HANDLING OF PRODUCT December 26, 2020 December 28, 2019 $ 4,169 $ 11,530 4,690 6,622 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. 37 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): Numerator: Net earnings attributable to controlling interest Adjustment for earnings allocated to non-vested restricted common stock Net earnings for calculating EPS $ $ 246,778 $ 179,650 $ 148,598 (3,396) (4,496) 239,875 $ 175,154 $ 145,202 (6,903) December 26, December 28, December 29, 2020 2019 2018 Denominator: Weighted average shares outstanding Adjustment for non-vested restricted common stock Shares for calculating basic EPS Effect of dilutive restricted common stock Shares for calculating diluted EPS Net earnings per share: Basic Diluted 61,632 (1,724) 59,908 20 59,928 61,649 (1,543) 60,106 24 60,130 61,762 (1,411) 60,351 82 60,433 $ $ 4.00 $ 4.00 $ 2.91 $ 2.91 $ 2.41 2.40 No options were excluded from the computation of diluted EPS for 2020, 2019, or 2018. 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. 38                   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 26, 2020 Prices with Observable Unobservable Prices with Other Quoted Prices in Active Markets (Level 1) (Level 2) 19 $ 4,643 $ Inputs 246 12,602 16,224 — December 28, 2019 Prices with Other Prices with Observable Unobservable Quoted Prices in Active Markets (Level 1) Inputs (Level 3) — $ — — Total 4,662 $ 162,626 $ 16,470 12,602 234 9,734 Inputs (Level 2) 562 $ 15,495 — Inputs (Level 3) Total — $ 163,188 15,729 — 9,734 — — — 2,040 2,040 — — 1,941 1,941 (in thousands) Money market funds $ Fixed income funds Equity securities Alternative investments Mutual funds: Domestic stock funds International stock funds Target funds Bond funds Alternative funds Total mutual funds Total Assets at fair value 8,088 1,440 114 147 482 10,271 — — — — — — $ 23,138 $ 20,867 $ $ 23,138 $ 20,867 $ — 8,088 3,308 — — — — — 2,040 2,040 1,440 114 147 482 10,271 $ 46,045 $ 46,045 1,741 281 850 1,747 7,927 $ 180,521 $ 180,521 — — — — — — $ 16,057 $ $ 16,057 $ — 3,308 — — — — — 1,941 1,941 1,741 281 850 1,747 7,927 $ 198,519 $ 198,519 From the assets measured at fair value as of December 26, 2020, listed in the table above, less than $0.1 million of money market funds are held in Cash and Cash Equivalents, $24.2 million of mutual funds, equity securities, and alternative investments are held in Investments, $0.6 million of money market and mutual funds are held in Other Assets for our deferred compensation plan, and $16.5 million of fixed income funds and $4.6 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 $40.8 million as of December 26, 2020, consisting of domestic and international stocks, alternative investments, and fixed income bonds. 39 Ardellis’ available for sale investment portfolio, including funds held with the State of Michigan, consists of the following (in thousands): Fixed Income Equity Mutual Funds Alternative Investments Total $ 15,325 $ 9,787 8,235 1,904 $ 35,251 $ 1,145 $ 16,470 12,602 2,815 9,665 1,430 2,040 136 5,526 $ 40,777 December 26, 2020 Unrealized Gain/(Loss) Fair Value Cost Cost December 28, 2019 Unrealized Gain/(Loss) Fair Value 353 $ 15,729 9,734 6,852 1,941 2,543 $ 34,256 1,776 284 130 $ 15,376 $ 7,958 6,568 1,811 $ 31,713 $ 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 $5.5 million for the year ended December 26, 2020. Carrying amounts above are recorded in the investments and restricted investments line items within the balance sheet as of December 26, 2020 and December 28, 2019. C. BUSINESS COMBINATIONS We completed the following business combinations in fiscal 2020 and 2019, which were accounted for using the purchase method (in thousands). Company Name Acquisition Date November 10, 2020 Purchase Price $27,274 cash paid for 100% asset purchase and estimated contingent consideration Intangible Assets Net Tangible Assets Operating Segment $ 17,894 $ 9,380 Construction Atlantic Prefab, Inc.; Exterior Designs, LLC; and Patriot Building Systems, LLC (these are affiliated companies through common former ownership) 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. $7,936 cash paid for 100% asset purchase and estimated contingent consideration October 1, 2020 7,222 $ Retail 714 $ Fire Retardant Chemical Technologies, LLC (FRCT) Founded in 2014 and based in Matthews, North Carolina, FRCT’s business includes a research and development laboratory specializing in developing and testing a wide range of high- performance chemicals, including fire retardants and water repellants. The company had annual sales of approximately $6.4 million. September 30, 2020 $4,465 cash paid for 100% asset purchase and estimated contingent consideration $ 4,607 $ (142) Other Enwrap Logistic & Packaging S.r.l. (Enwrap) Enwrap is a newly formed company dedicated to the logistics and packaging business of its predecessor, Job Service S.p.A. Headquartered in Milan, Italy, Enwrap provides high-value, mixed material industrial packaging and logistics services through eight locations in Italy. These locations generated annual sales of approximately $14 million. 40 July 14, 2020 $19,136 cash paid for 100% asset purchase and estimated contingent consideration $ 13,098 $ 6,038 Industrial T&R Lumber Company ("T&R") A manufacturer and distributor of a range of products used primarily by nurseries, including plastic growing containers, pots and trays; wooden stakes; trellises; tree boxes; shipping racks; and other nursery supplies based in Rancho Cucamonga, California. T&R had annual sales of approximately $31 million. The acquisition of T&R will allow us to leverage their expertise using our national manufacturing capacity to grow our agricultural product offerings and customer base across the country. March 13, 2020 $21,787 cash paid for 100% asset purchase and estimated contingent consideration $ 19,098 $ 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 September 16, 2019 $12,422 cash paid for 100% asset purchase $ 7,464 $ 4,958 Industrial Pallet USA, LLC ("Pallet USA") A manufacturer and recycler of wood pallet and crating products in the Midwest. Pallet USA had annual sales of approximately $18 million. The acquisition of Pallet USA allows us to expand our capacity to manufacture wood-based industrial packaging products and offer new services to customers in the Midwest. August 12, 2019 $17,809 cash paid for 100% asset purchase and estimated contingent consideration $ 8,089 $ 9,720 Retail Northwest Painting, Inc. ("Northwest") A supplier of pre-painted building materials, including composite lap siding, soffit, panels and trim to the Western U.S. Northwest had annual sales of approximately $14 million. The acquisition of Northwest will expand our capacity to produce coated siding and trim for customers in the Northwest and Mountain West regions. May 1, 2019 $7,168 cash paid for 100% asset purchase and estimated contingent consideration $ 6,180 $ 988 Industrial Wolverine Wood Products, Inc. ("Wolverine") A manufacturer of wood panel components for furniture, store fixtures and case goods manufacturers. Wolverine had annual sales of approximately $5 million. The acquisition of Wolverine allows us to expand capacity to produce value-added wood components for customers in the Midwest. The intangible assets for each acquisition were finalized and allocated to their respective identifiable intangible asset and goodwill accounts during 2020, except for our 2020 acquisitions. In aggregate, acquisitions made during 2020, not consolidated with other operations, contributed approximately $37.0 million in net sales and $2.4 million in operating profit during 2020. 41 At December 26, 2020, the amounts assigned to major intangible classes for the business combinations mentioned above are as follows (in thousands): Non- Compete Customer Intangibles - Tax Atlantic Prefab Exterior Designs Patriot Building Systems FRCT Enwrap T&R Quest Pallet USA Northwest Wolverine *(estimate) Agreements Relationships Tradename Goodwill Deductible 5,368 $ 8,588 3,939 7,222 8,023 13,098 19,098 7,464 8,290 6,180 — *$ 2,684 * $ — * 4,294 * — * 1,971 * — * 3,643 * — * 4,441 * — * 6,549 * — * 9,953 * 2,684 * $ 4,294 * 1,968 * 3,579 * 3,582 * 6,549 * 9,145 * 1,409 4,500 3,209 — $ — — — — — — — — — 1,909 4,146 1,000 2,790 865 2,106 The business combinations mentioned above were not significant to our operating results individually or in aggregate, and thus pro forma results for 2020 and 2019 are not presented. D. GOODWILL AND OTHER INTANGIBLE ASSETS As described in Note M — Segment Reporting, we re-organized around the markets we serve rather than geography and therefore changed our segment structure effective January 1, 2020. As a result, we allocated goodwill to the new segments using a relative fair value approach. In addition, we completed an assessment of any potential goodwill impairment for all reporting units immediately prior to the reallocation and determined that no impairment existed. Further, we have recast the goodwill and indefinite-lived intangible asset tables for the new segment structure. The changes in the net carrying amount of goodwill by reporting segment for the years ended December 26, 2020 and December 28, 2019, are as follows (in thousands): Balance as of December 29, 2018 2019 Acquisitions 2019 Purchase Accounting Adjustments Foreign Exchange, Net Balance as of December 28, 2019 2020 Acquisitions 2020 Purchase Accounting Adjustments 2020 Impairments Foreign Exchange, Net Balance as of December 26, 2020 Retail $ 55,509 2,589 Industrial Construction All Other Corporate Total $ 82,728 $ 7,234 $ $ 78,646 6,250 (3,620) 58,098 3,643 202 — — $ 61,943 81,276 6,549 2 — — $ 87,827 183 82,911 18,902 — (11,485) 401 $ 90,729 17 7,251 4,441 — — 2 $ 11,694 $ — $ 224,117 8,839 — (3,620) — 200 — 229,536 33,535 — 204 — (11,485) — 403 — — $ 252,193 In the fourth quarter of 2020, we experienced significantly lower than expected operating results within the commercial reporting unit of our construction segment. In conjunction with our planning process we also noted expectations for lower customer demand for the foreseeable future. As a result, we revised our future cash flow projections for this reporting unit and performed the goodwill impairment test by calculating the fair value of the reporting unit based on its discounted estimated future cash flows. It was determined that the carrying value of the reporting unit exceeded its fair value. Consequently, we recorded a goodwill impairment charge of $11.5 million, which represents the entire amount of the goodwill in the reporting unit. As of the date of the most recent goodwill impairment test, which utilized data and assumptions as of September 26, 2020, all other reporting units had fair values that were substantially in excess of their carrying values. 42 Indefinite-lived intangible assets totaled $7.4 million as of December 26, 2020 and December 28, 2019 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 26, 2020 and December 28, 2019 (in thousands): Non-compete agreements Customer relationships Licensing agreements Patents Tradename Software Total 2020 Accumulated Assets $ 4,847 80,343 4,589 965 8,019 505 $ 99,268 Amortization Net Value (2,728) $ 2,119 $ 63,322 (17,021) — (4,589) 456 (509) 5,896 (2,123) 459 (46) $ (27,016) $ 72,252 Assets 2019 Accumulated Amortization Net Value (2,262) $ 2,830 38,005 221 493 6,764 — $ 66,645 $ (18,332) $ 48,313 $ 5,092 $ 48,084 4,589 914 7,966 — (10,079) (4,368) (421) (1,202) — Amortization is computed principally by the straight-line method over the estimated useful lives of the intangible assets as follows: Intangible Asset Type Non-compete agreements Customer relationship Licensing agreements Tradename (amortizable) Software Weighted Average Estimated Useful Life Amortization Period 10.1 years 6.3 years 10 years 11.5 years 3.7 years 3 to 15 years 5 to 15 years 10 years 3 to 15 years 3 to 5 years Amortization expense of intangibles totaled $8.7 million, $6.3 million and $6.4 million in 2020, 2019 and 2018, respectively. The estimated amortization expense for intangibles for each of the five succeeding fiscal years is as follows (in thousands): 2021 2022 2023 2024 2025 Thereafter Total E. DEBT $ $ 12,074 11,759 11,018 10,795 7,900 18,706 72,252 On June 14, 2018, we entered into an unsecured Note Purchase Agreement under which we issued our 4.20% Series 2018 C Senior Notes, due June 14, 2028, in the aggregate principal amount of $40 million and our 4.27% Series 2018 D Senior Notes, due June 14, 2030, in the aggregate principal amount of $35 million. Proceeds from the sale of the Series C Senior Notes and Series D Senior Notes were used to pay down our revolving credit facility. 43 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. This facility replaced our $295 million unsecured revolving credit facility. 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 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 have been used to fund working capital needs and the PalletOne, Inc. acquisition. Refer to Note O, “Subsequent Events” for additional information. Outstanding letters of credit extended on our behalf on December 26, 2020 and December 28, 2019 aggregated $41.0 million and $37.3 million; respectively, which includes approximately $7.1 million and $9.8 million, respectively, related to industrial development revenue bonds. We had an outstanding balance of $4.7 million and $4.0 million, which includes foreign subsidiary borrowings, on the revolver at December 26, 2020, and December 28, 2019, respectively. After considering letters of credit, we had $363.2 million and $361.2 million in remaining availability on the revolver on December 26, 2020, and December 28, 2019, 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. 44 Long-term debt obligations are summarized as follows on December 26, 2020 and December 28, 2019 (amounts in thousands): Series 2020 Senior Notes E, due on August 10, 2032, interest payable semi-annually at 3.04% Series 2020 Senior Notes F, due on August 10, 2033, interest payable semi-annually at 3.08% Series 2020 Senior Notes G, due on August 10, 2035, interest payable semi-annually at 3.15% Series 2018 Senior Notes C, due on June 14, 2028, interest payable semi-annually at 4.20% Series 2018 Senior Notes D, due on June 14, 2030, interest payable semi-annually at 4.27% Series 2012 Senior Notes Tranche A, due on December 17, 2022, interest payable semi- annually at 3.89% Series 2012 Senior Notes Tranche B, due on December 17, 2024, interest payable semi- annually at 3.98% Revolving credit facility totaling $375 million due on November 1, 2023, interest payable monthly at a floating rate (2.54% on December 28, 2019) Foreign subsidiary borrowings under revolving credit facility, due on November 1, 2023, interest payable monthly at a floating rate (1.125% on December 26, 2020 and 1.88% on December 28, 2019) Series 1999 Industrial Development Revenue Bonds, due on August 1, 2029, interest payable monthly at a floating rate (0.20% on December 26, 2020 and 1.14% on December 28, 2019) Series 2000 Industrial Development Revenue Bonds, due on October 1, 2020, interest payable monthly at a floating rate (1.57% on December 28, 2019) Series 2002 Industrial Development Revenue Bonds, due on December 1, 2022, interest payable monthly at a floating rate (0.22% on December 26, 2020 and 1.79% on December 28, 2019) Finance leases and foreign affiliate debt Less current portion Less debt issuance costs Long-term portion 2020 2019 $ 50,000 $ 50,000 50,000 40,000 35,000 — — — 40,000 35,000 35,000 35,000 40,000 40,000 — — 4,715 3,976 3,300 — 3,300 2,700 3,700 138 311,853 (100) (146) $ 311,607 3,700 174 163,850 (2,816) (167) $ 160,867 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 26, 2020 and December 28, 2019. On December 26, 2020, the principal maturities of long-term debt and finance lease obligations are as follows (in thousands): 2021 2022 2023 2024 2025 Thereafter Total $ $ 100 38,738 4,715 40,000 — 228,300 311,853 45 On December 26, 2020, the estimated fair value of our long-term debt, including the current portion, was $341.4 million, which was $29.5 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. 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 income statement as of December 26, 2020. As of December 26, 2020, 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 26, 2020. 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 26, 2020 and December 28, 2019 are as follows (in thousands): Operating lease cost Short-term lease cost Variable lease cost Sublease income Total lease cost 2020 2019 $ 21,594 $ 20,771 110 1,484 (676) $ 27,429 $ 21,689 2,863 3,985 (1,013) The amounts paid for operating leases, included in the measurement of lease liabilities, were $20 million for both years ended December 26, 2020 and December 28, 2019. In addition, right-of-use assets obtained in exchange for new operating lease liabilities were approximately $12.8 million and $33.4 million, respectively, for the years ended December 26, 2020 and December 29, 2019. 46 Future minimum payments under non-cancelable operating leases on December 26, 2020 are as follows (in thousands): 2021 2022 2023 2024 2025 Thereafter Total minimum lease payments Less present value discount Total lease liability Operating Leases $ $ $ 18,671 15,219 12,126 9,594 8,102 25,961 89,673 (11,615) 78,058 Rent expense was approximately $28.4 million, $29.9 million, and $28.1 million in 2020, 2019, and 2018, respectively. During the first quarter of 2018, we completed a sale and leaseback transaction related to one facility in Medley, Florida. The sale price for the property was approximately $36 million and created a $7 million pre-tax gain, which was entirely recognized in 2018. We leased back the facility for two years as it executes its long-term plan for Florida and the Southeast region. As of December 26, 2020 and December 28, 2019, the weighted average lease term for operating leases was 6.84 years and 7.29 years, respectively. Similarly, the weighted average discount rate for operating leases was 3.12% and 3.10%, 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 will commence upon their retirement. 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. In the event cash values are not sufficient to fund such obligations, the program allows us to reduce benefit payments to such amounts as may be funded by accumulated cash values. Premiums payments, deferred compensation obligations, and accrued interest payments were funded through policy and premium loans provided by the insurer. During 2019, we settled with the program participants and paid out the remaining cash value due to them, with the exception of two participants who chose to take the settlement payment over a five-year period. The deferred compensation liability related to the remaining participant payouts on the balance sheet as of December 26, 2020 and December 28, 2019, was $0.2 million and $0.3 million, respectively. The investment in life insurance contracts as of December 26, 2020 and December 28, 2019, was $13.3 million and $16.6 million, respectively. 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 $0.6 million and $1.1 million on December 26, 2020 and December 28, 2019, respectively, and are included in "Other Assets." Related liabilities totaled $36.6 million and $33.1 million on December 26, 2020 and December 28, 2019, 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 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. 47 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 $1.8 million in 2020, $1.8 million in 2019, and $1.7 million in 2018. 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. There is no unrecognized compensation expense remaining for stock options in 2020, 2019, and 2018. Below is a summary of common stock issuances for 2020 and 2019: (in thousands, except per share data) Share Issuance Activity Shares issued under the employee stock purchase plan Shares issued under the employee stock gift program Shares issued under the director retainer stock program Shares issued under the bonus plan Shares issued under the executive stock match grants plan Forfeitures Total shares issued under stock grant programs Shares issued under the deferred compensation plans December 26, 2020 Common Stock 35 $ Average Share Price 46.71 3 46 271 79 (9) 390 128 48.10 25.31 47.52 47.60 44.96 53.79 $ $ 48 (in thousands, except per share data) Share Issuance Activity Shares issued under the employee stock purchase plan Shares issued under the employee stock gift program Shares issued under the director retainer stock program Shares issued under the bonus plan Shares issued under the executive stock match grants plan Forfeitures Total shares issued under stock grant programs Shares issued under the deferred compensation plans December 28, 2019 Common Stock 34 $ Average Share Price 32.47 4 5 211 109 (19) 310 181 35.68 38.44 30.83 31.57 31.25 34.31 $ $ A summary of the nonvested restricted stock awards granted under the LTSIP is as follows: Nonvested at December 30, 2017 Granted Vested Forfeited Nonvested at December 29, 2018 Granted Vested Forfeited Nonvested at December 28, 2019 Granted Vested Forfeited Nonvested at December 26, 2020 Restricted Awards 1,033,626 247,068 (107,865) (12,750) 1,160,079 318,496 (224,894) (50,786) 1,202,895 348,016 (177,790) (9,327) 1,363,794 Weighted- Average Grant Date Fair Value 24.24 36.52 18.11 24.19 23.32 32.60 23.42 24.18 29.68 47.60 22.69 33.46 35.14 $ $ Weighted- Unrecognized Average Compensation Period to Recognize Expense 1.31 years Expense (in millions) 7.1 7.6 1.12 years 7.9 0.86 years 6.3 0.62 years Under the Stock Purchase Plan and LTSIP, we recognized share-based compensation expense of $4.0 million, $4.0 million, and $3.6 million and the related total income tax benefits of $1.0 million, $0.8 million, and $0.7 million in 2020, 2019 and 2018, respectively. For the year-ended December 26, 2020, we determined that $25 million of share-based bonus awards, representing 465,830 shares, will be awarded to qualified employees as it relates to the company’s 2020 performance and granted in 2021. In addition to the share-based bonus awards, certain employees are eligible to receive performance share units equivalent to $1 million, or 22,567 shares of stock, if certain performance metrics are achieved after three years. These awards fully vest three years from the grant date. As of December 26, 2020, we recognized approximately $4 million of compensation expense related to these awards. Awards granted prior to 2020, generally vest after a period of three or five years from the grant date. In 2020, 2019 and 2018, cash received from share issuances under our plans was $1.4 million, $1.1 million and $1.0 million, respectively. 49 On November 14, 2001, the Board of Directors approved a share repurchase program (which succeeded a previous program) allowing us to repurchase up to 2.5 million shares of our common stock. On October 14, 2010, our Board authorized an additional 2 million shares to be repurchased under our existing share repurchase program. We repurchased 756,397 shares in 2020 and no shares under this program in 2019. As of December 26, 2020, the cumulative total authorized shares available for repurchase is approximately 1.1 million shares. 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 2020, 2019, and 2018, on a discretionary basis, totaling $7.2 million, $6.5 million, and $3.4 million respectively. Included within the total employee matched contribution was an additional matched contribution for hourly employees of $2.9 million and $2.6 million for 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, excluding our CEO, (who has 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, benefits totaling 150% of the officer’s highest base salary in the three years immediately preceding separation from service plus health care benefits for a specified period of time if certain eligibility requirements are met. Approximately $11.8 million and $10.6 million are accrued in “Other Liabilities” for this plan at December 26, 2020 and December 28, 2019, respectively. J. INCOME TAXES Income tax provisions for the years ended December 26, 2020, December 28, 2019, and December 29, 2018 are summarized as follows (in thousands): Currently Payable: Federal State and local Foreign Net Deferred: Federal State and local Foreign Total income tax expense The components of earnings before income taxes consist of the following: U.S. Foreign Total 2020 2019 2018 $ 59,055 $ 35,267 10,071 5,834 51,172 16,709 8,601 84,365 $ 31,492 7,544 5,527 44,563 2,292 (1,518) 1,962 2,736 6,895 805 (602) 7,098 $ 87,101 $ 58,270 2,965 (522) (1,565) 878 $ 45,441 2020 2019 $ 308,167 $ 220,532 20,142 $ 340,983 $ 240,674 32,816 2018 $ 180,261 17,592 $ 197,853 50 The effective income tax rates are different from the statutory federal income tax rates for the following reasons: Statutory federal income tax rate State and local taxes (net of federal benefits) Effect of noncontrolling owned interest in earnings of partnerships Tax credits, including foreign tax credit Change in uncertain tax positions reserve Other permanent differences Other, net Impact of Tax Act and reduction of corporate tax rate Effective income tax rate 2020 21.0 % 3.4 n/a (0.9) (0.1) 0.6 1.5 n/a 25.5 % 2019 21.0 % 3.9 (0.1) (1.3) (0.1) 0.5 0.3 n/a 24.2 % 2018 21.0 % 3.8 (0.1) (1.6) 0.1 0.6 (0.7) (0.1) 23.0 % Temporary differences which give rise to deferred income tax assets and (liabilities) on December 26, 2020 and December 28, 2019 are as follows (in thousands): Employee benefits Lease liability Net operating loss carryforwards Foreign subsidiary capital loss carryforward Other tax credits Inventory Reserves on receivables Accrued expenses Other, net Gross deferred income tax assets Valuation allowance Deferred income tax assets Depreciation Intangibles Right of use assets Deferred income tax liabilities Net deferred income tax liability 2020 $ 23,236 19,376 6,463 527 391 1,633 1,630 3,071 8,483 64,810 (4,044) 60,766 (41,403) (22,840) (19,376) (83,619) 2019 $ 22,420 20,255 6,411 519 620 993 1,266 2,318 3,159 57,961 (2,447) 55,514 (34,001) (21,375) (20,255) (75,631) $ (22,853) $ (20,117) As of December 26, 2020, we had federal, state and foreign net operating loss carryforwards of $6.5 million and state tax credit carryforwards of $0.4 million, which will expire at various dates. The NOL and credit carryforwards expire as follows: Net Operating Losses Tax Credits 2021 - 2025 2026 - 2030 2031 - 2035 2036 - 2040 Thereafter Total U.S. State 86 454 961 1,048 $ — $ — — 1,405 — $ 1,405 — $ 2,549 Foreign U.S. $ 1,271 79 92 532 State 535 $ — $ 391 — — — — — — — — $ 2,509 $ — $ 391 As of December 26, 2020, 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 $3.5 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 51 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): Gross unrecognized tax benefits beginning of year Increase in tax positions for prior years Increase in tax positions for current year Lapse in statute of limitations Gross unrecognized tax benefits end of year 2020 2019 $ 4,166 $ 4,378 (129) 768 (851) $ 3,892 $ 4,166 (82) 730 (922) 2018 $ 4,000 (366) 1,326 (582) $ 4,378 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 26, 2020, December 28, 2019, and December 29, 2018. 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, and the expiration of various statutes of limitation, and new positions that may be taken, it is reasonably possible that the amounts of unrecognized tax benefits could change in the next twelve months is $1.3 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. We own and operate a number of facilities throughout the United States that chemically treat lumber products. In connection with the ownership and operation of these and other real properties, and the disposal or treatment of hazardous or toxic substances, we may, under various federal, state, and local environmental laws, ordinances, and regulations, be potentially liable for removal and remediation costs, as well as other potential costs, damages, and expenses. Environmental reserves, calculated with no discount rate, have been established to cover remediation activities at wood preservation facilities in Stockertown, PA; Elizabeth City, NC; and Auburndale, FL. In addition, a reserve was established for our facility in Thornton, CA to remove certain lead containing materials which existed on the property at the time of purchase. On a consolidated basis, we have reserved approximately $1.9 million and $2.0 million on December 26, 2020 and December 28, 2019, respectively, representing the estimated costs to complete future remediation efforts. These amounts have not been reduced by an insurance receivable. In addition, on December 26, 2020, 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. 52 On December 26, 2020, we had outstanding purchase commitments on commenced capital projects of approximately $22.8 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 26, 2020, we had approximately $15.4 million in outstanding payment and performance bonds for open projects. We had approximately $5.2 million in payment and performance bonds outstanding for completed projects which are still under warranty. On December 26, 2020, we had outstanding letters of credit totaling $41.0 million, primarily related to certain insurance contracts and industrial development revenue bonds described further below. In lieu of cash deposits, we provide irrevocable letters of credit in favor of our insurers to guarantee our performance under certain insurance contracts. We currently have irrevocable letters of credit outstanding totaling approximately $33.9 million for these types of insurance arrangements. We have reserves recorded on our balance sheet, in accrued liabilities, that reflect our expected future liabilities under these insurance arrangements. We are required to provide irrevocable letters of credit in favor of the bond trustees for all industrial development revenue bonds that have been issued. These letters of credit guarantee principal and interest payments to the bondholders. We currently have irrevocable letters of credit outstanding totaling approximately $7.1 million related to our outstanding industrial development revenue bonds. These letters of credit have varying terms but may be renewed at the option of the issuing banks. Certain wholly owned domestic subsidiaries have guaranteed the indebtedness of UFP Industries, Inc. in certain debt agreements, including the Series 2012, 2018 and 2020 Senior Notes and our revolving credit facility. The maximum exposure of these guarantees is limited to the indebtedness outstanding under these debt arrangements and this exposure will expire concurrent with the expiration of the debt agreements. We did not enter into any new guarantee arrangements during 2020 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. We operate manufacturing, treating and distribution facilities internationally, but primarily in the United States. Effective January 1, 2020, we re-organized around the markets we serve rather than geography. The prior periods have been recast to reflect the new segment structure. The business segments align with the following markets: UFP Retail Solutions, UFP Construction and UFP Industrial. This change 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. One customer, The Home Depot, accounted for approximately 24% of our total net sales in fiscal 2020 and 19% in 2019 and 2018. 53 The exception to this market-centered reporting and management structure is our International segment, which comprises our Mexico, Canada, Europe, and Australia operations and sales and buying offices in other parts of the world and our Ardellis segment, which represents our wholly owned fully licensed captive insurance company based in Bermuda. Our International and Ardellis segments do not meet the quantitative thresholds in order to be separately reported and accordingly, the International and Ardellis segments have been aggregated in the “All Other” segment for reporting purposes. “Corporate” includes purchasing, transportation and administrative functions that serve our operating segments. Operating results of Corporate primarily consists of over (under) allocated costs. The operating results of UFP Real Estate, Inc., which owns and leases real estate, and UFP Transportation Ltd., which owns and leases transportation equipment, are also included in the Corporate column. An inter-company lease charge is assessed to our operating segments for the use of these assets at fair market value rates. Total assets of the Corporate column include unallocated cash and cash equivalents, certain prepaid assets, certain property, equipment and other assets pertaining to the centralized activities of Corporate, UFP Real Estate, Inc., and UFP Transportation Ltd. Net sales to outside customers Intersegment net sales Interest expense (income) Amortization expense Depreciation expense Segment earnings before income taxes Segment assets Capital expenditures Net sales to outside customers Intersegment net sales Interest expense Amortization expense Depreciation expense Segment earnings before income taxes Segment assets Capital expenditures Retail $ 2,167,122 142,839 2 1,482 11,675 Industrial $ 1,072,117 45,217 22 4,159 15,163 2020 All Construction Other Corporate Total $ 1,695,684 68,294 — 2,152 12,123 $ 217,094 $ 283,689 90 877 1,619 1,981 $ 5,153,998 — 9,311 8,716 63,964 (540,039) 9,197 46 23,384 155,364 510,464 16,277 83,430 416,487 21,141 69,092 510,972 16,902 38,333 196,856 2,258 (5,236) 770,112 32,604 340,983 2,404,891 89,182 Retail $ 1,498,710 135,705 — 1,380 11,041 Industrial $ 1,085,635 45,010 108 3,034 14,340 2019 All Construction Other Corporate Total $ 1,637,156 56,116 16 1,164 11,465 $ 193,785 $ 200,426 97 747 1,532 723 $ 4,416,009 — 8,700 6,325 60,494 (437,257) 8,479 — 22,116 61,708 402,221 15,502 82,913 377,329 20,134 82,407 522,638 16,097 22,025 136,990 2,150 (8,379) 450,299 31,050 240,674 1,889,477 84,933 Note: Allocations of corporate expenses in 2019 were modified to align with the methodology used to allocate corporate expenses in the current year. Net sales to outside customers Intersegment net sales Interest expense Amortization expense Depreciation expense Segment earnings before income taxes Segment assets Capital expenditures Retail $ 1,512,477 125,310 1 1,038 10,029 Industrial $ 1,050,945 39,806 191 3,055 13,026 2018 All Construction Other Corporate Total $ 1,705,016 50,465 202 1,443 10,414 $ 219,920 $ 226,053 225 857 1,391 822 $ 4,489,180 — 8,893 6,393 54,949 (441,634) 8,274 — 20,089 52,211 401,012 17,497 59,403 370,386 22,724 71,234 512,670 18,168 18,031 143,614 2,427 (3,026) 219,866 35,046 197,853 1,647,548 95,862 54 Note: Allocations of corporate expenses in 2018 were modified to align with the methodology used to allocate corporate expenses in the current Information regarding principal geographic areas was as follows (in thousands): 2020 2019 2018 Long-Lived Tangible Assets Net Sales $ 469,605 $ 4,382,356 106,824 $ 506,483 $ 4,489,180 36,878 Long-Lived Tangible Assets $ 342,326 34,312 $ 376,638 United States Foreign Total Net Sales $ 5,022,014 131,984 $ 5,153,998 Long-Lived Tangible Assets $ 478,325 36,380 $ 514,705 Net Sales $ 4,308,618 107,391 $ 4,416,009 55 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 26, December 28, December 29, 2019 2018 2020 Retail Deckorators Prowood Outdoor Essentials UFP Edge Dimensions E-Commerce Other Total Retail Industrial North Industrial Southeast Industrial Southwest Industrial West Industrial Protective Packaging Total Industrial Construction Factory Built Site Built Commercial Concrete Forming Total Construction All Other Corporate Total Net Sales Value-Added Retail Industrial Construction All Other and Corporate Total Commodity-Based Retail Industrial Construction All Other and Corporate Total $ 219,930 $ 185,221 $ 136,517 845,994 227,799 85,176 57,403 1,210 158,378 $ 2,167,122 $ 1,498,710 $ 1,512,477 1,215,201 299,684 114,987 88,351 3,716 225,253 786,720 227,767 95,608 52,553 1,688 149,153 $ 385,132 $ 376,515 $ 351,345 238,667 237,671 209,049 14,213 $ 1,072,117 $ 1,085,635 $ 1,050,945 255,419 241,774 197,686 14,241 229,316 238,643 206,022 13,004 $ 597,017 $ 479,927 $ 561,137 713,729 269,706 160,444 $ 1,695,684 $ 1,637,156 $ 1,705,016 708,767 290,785 157,677 725,899 221,988 150,780 $ 217,094 $ 193,785 $ 219,920 $ 1,981 $ 723 $ 822 $ 5,153,998 $ 4,416,009 $ 4,489,180 53.8% 64.7% 76.3% 75.6% 64.3% 46.2% 35.3% 23.7% 24.4% 35.7% 57.8% 66.2% 81.4% 75.8% 69.3% 42.2% 33.8% 18.6% 24.2% 30.7% 54.0% 60.5% 76.5% 65.9% 64.6% 46.0% 39.5% 23.5% 34.1% 35.4% 56 Net sales Gross profit Net earnings Net earnings attributable to controlling interest Basic earnings per share Diluted earnings per share 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 26, 2020 and December 28, 2019, respectively, (in thousands, except per share data): First Second Third Fourth 2020 2019 2020 $ 1,032,062 $ 1,015,125 $ 1,242,001 204,931 69,694 154,267 36,002 167,236 40,570 2019 $ 1,239,817 186,726 55,145 2020 $ 1,486,227 241,074 78,861 2019 2020 $ 1,163,026 $ 1,393,708 187,055 64,757 187,270 52,581 2019 $ 998,041 157,255 38,676 40,159 35,540 66,463 54,515 77,204 51,859 62,952 37,736 0.65 0.58 1.08 0.65 0.58 1.08 0.88 0.88 1.25 1.25 0.84 1.02 0.61 0.84 1.02 0.61 O. SUBSEQUENT EVENTS On December 28, 2020, we closed on an agreement to purchase 100 percent of the equity of PalletOne, Inc., for approximately $232 million plus $21 million for certain investments in capital projects. The agreement also incorporates a purchase price adjustment based on the actual amount of net working capital at close compared to a pre-determined target. 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 subsidiary operates five pressure- treating facilities in the Southeastern U.S. At this time the net tangible assets and intangible assets acquired cannot be disclosed as these are pending final valuations. Additionally, initial estimates have been made for PalletOne's identifiable intangible and goodwill allocations and deferred tax, however finalization will be completed in 2021. On February 18, 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 February 28, 2021, we closed on an agreement to purchase 100 percent of the equity of J.C. Gilmore Pty Ltd located in Australia for approximately $2.4 million. This transaction adds a wide portfolio of consumable packaging to certain industrial packaging products and expands the companies’ customer base throughout Australia. At this time the net tangible assets and intangible assets acquired cannot be disclosed as these are pending final valuations. Additionally, initial estimates have been made for J.C. Gilmore Pty Ltd 's identifiable intangible and goodwill allocations and deferred tax, however finalization will be completed in 2021. 57 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 graph depicts the cumulative total return on our common stock compared to the cumulative total return on the indices for The Nasdaq Stock Market (all U.S. companies) and an industry peer group we selected. The graph assumes an investment of $100 on December 26, 2015, and reinvestment of dividends in all cases. Comparison of 5 Year Cumulative Total Return Assumes Initial Investment of $100 December 2020 300.00 250.00 200.00 150.00 100.00 50.00 0.00 12/26/2015 12/31/2016 12/30/2017 12/29/2018 12/28/2019 12/26/2020 UFP Industries, Inc. NASDAQ Stock Market (US Companies) Peer Group The companies included in our self-determined industry peer group are as follows: American Woodmark Corporation Greif, Inc. BlueLinx Holdings, Inc. BMC Stock Holdings, Inc. Boise Cascade Company Builders FirstSource, Inc. Cornerstone Building Brands, Inc. Gibraltar Industries, Inc. Louisiana-Pacific Corporation Masco Corporation Simpson Manufacturing Company, Inc. Sonoco Products Company Trex Company, Inc. WestRock Company 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. 58 BOARD OF DIRECTORS SECTION 16 OFFICERS Directors and Executive Officers William G. Currie Chairman of the Board UFP Industries, Inc. Matthew J. Missad Chief Executive Officer UFP Industries, Inc. Thomas W. Rhodes President and Chief Executive Officer TWR Enterprises, Inc. Matthew J. Missad Chief Executive Officer Patrick M. Webster President and Chief Operating Officer 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 Brian C. Walker Partner-Strategic Leadership Huron Capital Michael G. Wooldridge Partner Varnum, LLP Joan A. Budden Former President Priority Health Benjamin J. McLean Chief Executive Officer Ruan Transportation Management Systems, Inc. Patrick Benton President UFP Construction, LLC Scott A. Worthington President UFP Industrial, LLC Scott T. Bravata Vice President of Accounting David A. Tutas Chief Compliance Officer General Counsel 59 ANNUAL MEETING Shareholder Information The 2021 Annual Shareholder’s Meeting of UFP Industries, Inc. will be held virtually at 8:30 a.m. on April 21, 2021. 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 60 LIST OF REGISTRANT'S SUBSIDIARIES AND AFFILIATES EXHIBIT 21 UFP Gear, LLC UFP Global Holdings Limited UFP Gordon, LLC UFP Grand Rapids, LLC UFP Grandview, LLC UFP Granger, LLC UFP Great Lakes, LLC UFP Gulf, LLC UFP Haleyville, LLC UFP Hamilton, LLC UFP Harrisonville, LLC UFP Hartford, LLC UFP Hillsboro, LLC UFP Industrial, LLC UFP Industries, Inc. UFP International Employment Services, LLC UFP International, LLC UFP Lansing, LLC UFP Londonderry, LLC Delaware Delaware Delaware Delaware Michigan Florida Bermuda Michigan Michigan Italy Michigan Illinois Mexico Indiana Idaho China India Netherlands UFP Janesville, LLC Hong Kong UFP Kyle, LLC Hong Kong UFP Lafayette, LLC Delaware Delaware England/WalesUFP Magna, LLC Delaware Delaware Delaware Delaware Delaware Mexico China Australia Australia Texas Michigan Michigan Mexico Texas Mexico Mexico Chile Puerto Rico UFP Orlando, LLC Michigan Michigan Delaware Australia 11032 Tidewater Trail, LLC 234 Springs Rd., LLC 2875 Needmore Rd. LLC 621 Hall St., LLC Aljoma Holding Company, LLC Aljoma Lumber, Inc. Ardellis Insurance Ltd. Caliper Building Systems, LLC Deckorators, Inc. Enwrap Logistic and Packaging S.r.l. Eovations, LLC Fire Retardant Chemical Technologies, LLC Forestal Universal SA de CV Horizon Terra, Incorporated Idaho Western, Inc. idX (China) Display System Co., Ltd. idX (India) Display Private Ltd. idX Amsterdam B.V. idX Asia Fixtures Limited idX Asia Trading Limited idX Chicago, LLC idX Corporation idX Corporation London Limited idX Dallas, LLC idX Dayton, LLC idX Holdings, Inc. idX Impressions, LLC idX Los Angeles, LLC idX Mexico, S. de R.L. de C.V. idX Shanghai Trading Company Ltd. Integra International Pty Ltd Integra Packaging Pty Ltd Landura, LLC Metaworld Technologies, LLC North Atlantic Framing, LLC Norpal S. de R.L. de C.V. Pinelli Lumber, Inc. Pinelli Universal TKT, S de R.L. de C.V. Pinelli Universal, S de R.L. de C.V. Pinelli Universal Chile S.A. PR Distribution, LLC Shawnlee Construction, LLC Shepardville Construction, LLC Store Fixtures Canada Holdings, Inc. The UBEECO Group Pty Ltd Tibasa Universal Forest Products S. de R.L. de C.V.Mexico Tresstar, LLC Triangle Systems, Inc. U.F.P. Mexico Holdings, S. de R.L.de CV UFP Ashburn, LLC UFP Atlantic Division, LLC UFP Atlantic, LLC UFP Auburndale, LLC UFP Aurora, LLC UFP Australia Pty Ltd UFP Australia Real Estate Pty Ltd UFP Barnesville, LLC UFP Belchertown, LLC UFP Berlin, LLC UFP Biscoe, LLC Michigan Delaware Mexico Michigan Michigan Michigan Michigan Michigan Australia Australia Michigan Michigan Michigan Michigan UFP Packaging, LLC UFP Palm Beach, LLC UFP Parker, LLC UFP Purchasing, Inc. UFP Ranson, LLC UFP Real Estate, LLC UFP Retail, LLC UFP Riverside, LLC UFP RMS, LLC UFP Rockingham, LLC UFP Rockwell, LLC UFP Saginaw, LLC UFP Salisbury, LLC UFP San Antonio, LLC UFP Sauk Rapids, LLC UFP Schertz, LLC UFP Shawnee, LLC UFP Site Built, LLC UFP Southeast, LLC UFP McMinnville, LLC UFP Mexico Embalaje y Distribution, S. de R.L. de C. V.Mexico UFP Mexico Investment, LLC UFP Mid-Atlantic, LLC UFP Milwaukee, LLC UFP Minneota, LLC UFP Morristown, LLC UFP Moultrie, LLC UFP Mountain West, LLC UFP NAC, LLC UFP Nappanee, LLC UFP New London, LLC UFP New Waverly, LLC UFP New Windsor, LLC UFP New York, LLC UFP North Atlantic, LLC UFP Northeast, LLC Michigan England/Wales Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Wisconsin Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan UFP Blanchester, LLC UFP Bonner, LLC UFP Caldwell, LLC UFP Cameron, LLC UFP Canada, Inc. UFP Central Plains, LLC UFP Chandler, LLC UFP Chicago, LLC UFP Concrete Forming Solutions, Inc. UFP Construction, LLC UFP Dallas, LLC UFP Distribution, LLC UFP Eagan, LLC UFP East Central, LLC UFP Eastern Division, Inc. UFP Eatonton, LLC UFP Elizabeth City, LLC UFP Elkwood, LLC UFP Far West, LLC UFP Financial Services, Inc. UFP Folkston, LLC UFP Franklinton, LLC UFP Gainesville, LLC Michigan Michigan Michigan Michigan Canada Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan UFP Southwest, LLC UFP Stafford, LLC UFP Stockertown, LLC UFP Tampa, LLC UFP Thomaston, LLC UFP Thornton, LLC UFP Transportation, Inc. UFP Union City, LLC UFP Ventures II, Inc. UFP Ventures, Inc. UFP Warranty Corporation UFP Warrens, LLC UFP Washington, LLC UFP Western Division, Inc. UFP White Bear Lake, LLC UFP Windsor, LLC UFP Woodburn, LLC United Lumber & Reman, LLC Universal Forest Products Texas, LLC Universal Showcase ULC Upshur Forest Products, LLC Yard & Home, LLC Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Michigan Alabama Michigan Alberta Michigan Michigan Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in Registration Statement Nos. 33-81128, 333-60630, 333-150345, 333- 156596, and 33-84632 on Form S-8 of our reports dated March 3, 2021, relating to the consolidated financial statements of UFP Industries Inc, (formerly Universal Forest Products, Inc.) and subsidiaries (the “Company”), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 26, 2020. Exhibit 23 /s/ Deloitte & Touche LLP Grand Rapids, Michigan March 3, 2021 Exhibit 31(a) UFP Industries, Inc. Certification I, Matthew J. Missad, certify that: 1. I have reviewed this report on Form 10-K of UFP Industries, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to designed under our supervision, 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; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the Audit Committee of registrant's Board of Directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 3, 2021 /s/ Matthew J. Missad Matthew J. Missad Chief Executive Officer and Principal Executive Officer Exhibit 31(b) UFP Industries, Inc. Certification I, Michael R. Cole, certify that: 1. I have reviewed this report on Form 10-K of UFP Industries, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to designed under our supervision, 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; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the Audit Committee of registrant's Board of Directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 3, 2021 /s/ Michael R. Cole Michael R. Cole Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER OF UFP INDUSTRIES, INC. Exhibit 32(a) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350): I, Matthew J. Missad, Chief Executive Officer of UFP Industries, Inc., certify, to the best of my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) that: (1) The report on Form 10-K for the year ended December 26, 2020, which this statement accompanies, fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in this report on Form 10-K for the period ended December 26, 2020 fairly presents, in all material respects, the financial condition and results of operations of Universal Forest Products, Inc. Date: March 3, 2021 UFP INDUSTRIES, INC. By: /s/ Matthew J. Missad Matthew J. Missad Its: Chief Executive Officer and Principal Executive Officer The signed original of this written statement required by Section 906, or any other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to UFP Industries, Inc. and will be retained by UFP Industries, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. CERTIFICATE OF THE CHIEF FINANCIAL OFFICER OF UFP INDUSTRIES, INC. Exhibit 32(b) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350): I, Michael R. Cole, Chief Financial Officer of UFP Industries, Inc., certify, to the best of my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) that: (1) The report on Form 10-K for the period ended December 26, 2020, which this statement accompanies, fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in this report on Form 10-K for the period ended December 26, 2020 fairly presents, in all material respects, the financial condition and results of operations of UFP Industries, Inc. Date: March 3, 2021 UFP INDUSTRIES, INC. By: /s/ Michael R. Cole Michael R. Cole Its: Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer The signed original of this written statement required by Section 906, or any other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to UFP Industries, Inc. and will be retained by UFP Industries, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934 Exhibit 4(b) The following is a brief description of the common stock of UFP Industries, Inc. (the “Company”). This summary does not purport to be complete in all respects and is subject to and qualified in its entirety by reference to the Company’s Restated and Amended Articles of Incorporation (the "Articles of Incorporation") and Amended Bylaws (the "Bylaws"), each of which are filed as exhibits to the Annual Report on Form 10-K of which this Exhibit 4(b) is a part. Authorized Capital Stock The Company’s authorized capital stock consists of 80,000,000 shares of common stock and 1,000,000 shares of preferred stock. As of December 26, 2020, there were no shares of preferred stock outstanding. Dividend and Liquidation Rights Subject to the prior rights of the holders of shares of preferred stock that may be issued and outstanding, if any, the holders of common stock are entitled to receive:   dividends when, as, and if declared by the Company’s Board of Directors out of funds legally available for the payment of dividends; and in the event of dissolution of the Company, to share ratably in all assets remaining after payment of liabilities and satisfaction of the liquidation preferences, if any, of then outstanding shares of preferred stock, as provided in the Articles of Incorporation. Voting Rights Each holder of common stock is entitled to one vote for each share held of record on all matters presented to a vote at a shareholders meeting, including the election of directors. Holders of common stock have no cumulative voting rights. The Company’s Articles of Incorporation provide that the Company’s Board of Directors be divided into three classes of nearly equal size, with the classes to hold office for staggered terms of three years each. The vote required for the election of a director shall, except in a contested election, be the affirmative vote of a majority of the votes cast in the election of a nominee. For this purpose, a “majority of the votes cast” means that the number of votes cast “for” a director’s election exceeds the number of votes cast “against” that director’s election. Abstentions and broker non-votes are not counted as votes cast either “for” or “against” a director’s election. In a contested election, directors are elected by a plurality of the votes cast at the meeting of shareholders. An election is considered contested if there are more nominees for election than positions on the Board of Directors to be filled by election at that meeting. Listing The Company’s common stock is currently traded on the Nasdaq Global Select Market under the symbol “ufpi.” Applicable Anti-Takeover Provisions The Company's Articles of Incorporation and Bylaws contain provisions that could also have an anti-takeover effect. Some of the provisions also may make it difficult for shareholders to replace incumbent directors with new directors who may be willing to entertain changes that shareholders may believe will lead to improvements in the combined company’s business. Other All of the outstanding shares of the Company’s common stock are fully paid and non-assessable. Holders of common stock have no preemptive rights to purchase or subscribe for any additional shares of common stock or other securities, and there are no conversion rights or redemption or sinking fund provisions with respect to the Company’s common stock. The transfer agent for the Company’s common stock is American Stock Transfer & Trust Co., 6201 15th Avenue, Brooklyn, NY 11219. 

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