Report to Shareholders
2021
Dear Shareholders:
When we reviewed our plan for 2021, we knew we faced an equal measure of challenge and
opportunity. From Covid-19 to product shortages and transportation challenges, 2020 had given us
significant obstacles to overcome if we were to continue our positive momentum in 2021. Relying
on our experienced leadership team, strong relationships with customers and vendors, and
channeling the can-do attitude of the UFP family, we pledged that, in 2021, as stated in our internal
yearly theme, We.Will.Win.
We not only won – well beyond our expectations – but we achieved the best financial performance
in our 67-year history: Net sales of $8.6 billion, up 67.6 percent over the previous year; net earnings
from controlling interest of $536 million in 2021 representing an increase of 117 percent over 2020,
and adjusted EBITDA of $835 million, a rise of 94 percent, dramatically exceeding the company’s
unit sales increase of 28 percent. In addition, new product sales were $842 million.
The people of UFP Industries accomplished this despite dubious policy decisions around the
pandemic and other issues that restricted labor availability, increased fuel and energy costs, over-
burdened supply chains and continued unprecedented lumber market swings.
We couldn’t be more proud of our 15,000+ team members who drove these results by managing
inventory wisely and adjusting quickly to supply constraints and 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 over $50 million in bonuses and additional benefits in 2021.
This is one of the benefits of being in these roles at a company like ours – we have the great honor
of rewarding skill and hard work by providing opportunity to careers and prosperity to families.
In 2021 we saw net sales and EBITDA increase in all three of our business segments. We are
pleased to provide these highlights:
UFP RETAIL SOLUTIONS: $3.4 billion in net sales, up 58 percent over 2020, due to a 35 percent
increase in unit sales, a 27 percent increase in selling prices and a 4 percent decline in organic unit
sales. Gross profit for the retail segment rose 1.6 percent to $298 million. Gross profit margin fell
from 13.5 percent to 8.7 percent mostly due to falling lumber prices in the third quarter and a
change in product mix resulting from acquisitions whose product mix is more heavily weighted
toward treated lumber. All business units experienced unit sales increases except for ProWood
which faced extremely strong comp sales from 2020’s pandemic DIY decking sales surge. 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 89 percent. Total E-commerce
sales for the year, including sales in other business units, were $159 million, up 25 percent over
2020.
ACQUISITIONS: The addition of Sunbelt Forest Products (part of PalletOne) and Spartanburg
Forest Products made UFP the number one supplier of residential pressure-treated lumber in the
world. UFP Retail Solutions also acquired Walnut Hollow Farm, Inc. As part of the Handprint
Business Unit, Walnut Hollow designs, manufactures and distributes wood products, tools, and
accessories for the craft and hobby, personalized home décor, and hardware categories, bringing
UFP strong relationships with hobby and craft retailers.
UFP INDUSTRIAL: $2.1 billion in net sales, up 100 percent from the previous year. Unit sales rose
35 percent from recent acquisitions, while selling prices increased 60 percent and organic unit sales
increased 5 percent. Gross profit rose 163 percent to $465 million, exceeding unit sales growth of
40 percent, due to value-based pricing discipline and leveraging fixed costs, as well as a greater
proportion of value-added products.
ACQUISITIONS: In 2021 we closed our largest acquisition ever, PalletOne, the nation’s leader in
machine-made pallets and related industrial packaging. We also extended and expanded our
international consumable packaging reach with Gilmores and Boxpack in Australia, and Ficus Pax
in India. These companies specialize in corrugate containers and other protective packaging,
serving their own quickly growing domestic and export markets. UFP Industrial also broadened its
packaging capabilities with the acquisition of Advantage Label & Packaging, Inc. Advantage
provides blank and customized labels, printers, label applicators and other packaging supplies for
ii
key industries including food production and processing; greenhouse and nursery; hobby and craft;
manufacturing; and automotive.
UFP CONSTRUCTION: $2.7 billion in net sales, up 59 percent over the previous year due to a 42
percent increase in selling price, a 14 percent increase in organic unit sales and a 3 percent
increase in unit sales from acquisitions. Unit sales increased to these markets: manufactured
housing (up 25 percent), residential (up 21 percent), and commercial (up 16 percent). For the year,
gross profit increased 103 percent to $531 million, exceeding unit sales growth of 17 percent, due
to better pricing discipline and the company’s ability to better leverage fixed costs. 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.
ACQUISITIONS: The addition of Shelter Products brings distribution of lumber, plywood, and other
building products to our Factory-Built customers, while Endurable Building Products adds
customized structural aluminum systems and other exterior value-add offerings to new and existing
Construction segment customers.
UFP INTERNATIONAL business unit continued to expand with the aforementioned additions of
Gilmores, Boxpack and Ficus Pax, serving our objective to be the global packaging solution
provider. Our trading group provided our domestic operations offshore wood fiber options to help
mitigate supply, price and transportation issues facing our North American customer base, while
adding further global connectivity for our domestic and international operations.
Finally, we would like to update you on the UFP Business School which continues to add students.
Founded in 2016 with 10 students it has grown into a nationally recognized program that helps
employees and non-employees who do not have a college degree receive the equivalent of a four-
year degree in business administration in as little as two years. In 2020, we expanded it by offering
an additional five scholarships for minority and low-income students. In 2021 the majority of the 41
enrolled students were either low-income, people of color or women.
* * * * * * * * *
Our business philosophy is unchanged in 67 years: Take care of your customers and employees
and profits will follow. Share your success with your communities and the causes you believe in, to
iii
strengthen the areas in which you live and work. We have lived this approach for decades but have
not heavily publicized it. This attitude, which guides and controls the manner in which we operate,
reflects not only the right thing to do, but also the results that have benefited all of our stakeholders.
Now there are requests for more disclosure around these and other related topics, and
consequently we published our first comprehensive disclosure on these items in 2021.
Our internal yearly theme for 2022 is “INNOV8.” The 8 is on its side, doubling as the sign for Infinity,
which reminds our teammates of our unlimited possibilities as we continue to improve and achieve
our objectives.
Thank you for your investment in us and best wishes for a safe and prosperous 2022.
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 – Opinion on Internal Control over Financial
Reporting (PCAOB ID 34)
Report of Independent Registered Public Accounting Firm – Opinion on the Financial Statements (PCAOB
ID 34)
Consolidated Balance Sheets as of December 25, 2021 and December 26, 2020
Consolidated Statements of Earnings and Comprehensive Income for the Years Ended December 25, 2021,
December 26, 2020, and December 28, 2019
Consolidated Statements of Shareholders’ Equity for the Years Ended December 25, 2021, December 26,
2020, and December 28, 2019
Consolidated Statements of Cash Flows for the Years Ended December 25, 2021, December 26, 2020, and
December 28, 2019
Notes to Consolidated Financial Statements
Market Information for our Common Stock
Stock Performance Graph
Directors and Executive Officers
Shareholder Information
2
1
17
19
21
22
23
24
25
51
51
52
53
SELECTED FINANCIAL DATA
(In thousands, except per share and statistics data)
2021
2020
2019
2018
2017
Consolidated Statement of Earnings
Data
Net sales
Gross profit
Earnings from operations
Earnings before income taxes
Net earnings attributable to controlling
interest
Diluted earnings per share
Dividends per share
Consolidated Balance Sheet Data
Working capital(1)
Cash and cash equivalents
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)
$ 8,636,134
1,406,967
737,554
726,336
$ 535,640
8.59
$
0.65
$
$ 1,297,434
286,662
3,245,271
320,250
2,016,569
$ 5,153,998
800,296
345,826
340,983
$ 4,416,009
685,518
244,906
240,674
$ 4,489,180
592,894
207,263
197,853
$ 3,941,182
542,826
181,469
176,007
$ 246,778
4.00
$
0.50
$
$ 179,650
2.91
$
0.40
$
$ 148,598
2.40
$
0.36
$
$ 119,512
1.94
$
0.32
$
$ 1,074,613
436,507
2,404,891
311,707
1,483,152
$ 739,030
168,336
1,889,477
163,683
1,257,733
$ 685,108
27,316
1,647,548
202,278
1,088,684
$ 560,241
28,339
1,464,677
146,003
974,023
16.3 %
15.5 %
15.5 %
13.2 %
13.8 %
6.2 %
36.1 %
2.67
0.16
32.58
$
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
$
(1) Current assets less current liabilities.
(2) Net earnings attributable to controlling interest divided by beginning shareholders’ equity.
(3) Shareholders’ equity divided by common stock outstanding.
(4) Current assets divided by current liabilities.
(5) Total debt divided by shareholders’ equity.
Acquisition growth is one of the primary contributing factors to material increases over the period from 2017 to 2021.
Refer to Note C under the “Notes to the Consolidated Financial Statements” for further discussion on our business
combinations and impact on our financial statements for the three years ended December 25, 2021.
2
UFP Industries, Inc. is a holding company with subsidiaries throughout North America, Europe, Asia, and Australia
that design, manufacture, and supply products made from wood, wood and non-wood composites, and other materials
to three markets: retail, industrial, and construction. We are headquartered in Grand Rapids, Mich. For more
information about UFP Industries, Inc., or its affiliated operations, go to www.ufpi.com.
This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act,
as amended, that are based on management’s beliefs, assumptions, current expectations, estimates and projections
about the markets we serve, the economy and the Company itself. Words like “anticipates,” “believes,” “confident,”
“estimates,” “expects,” “forecasts,” “likely,” “plans,” “projects,” “should,” variations of such words, and similar
expressions identify such forward-looking statements. These statements do not guarantee future performance and
involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood
and degree of occurrence. We do not undertake to update forward-looking statements to reflect facts, circumstances,
events, or assumptions that occur after the date the forward-looking statements are made. Actual results could differ
materially from those included in such forward-looking statements. Investors are cautioned that all forward-looking
statements involve risks and uncertainty. Among the factors that could cause actual results to differ materially from
forward-looking statements are the following: fluctuations in the price of lumber; adverse or unusual weather
conditions; adverse economic conditions in the markets we serve; government regulations, particularly involving
environmental and safety regulations, the COVID-19 pandemic (“pandemic”); and our ability to make successful
business acquisitions. Certain of these risk factors as well as other risk factors and additional information are included
in our reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission. We are pleased to present
this overview of 2021.
Our results for 2021 were impacted by the following:
OVERVIEW
Our net sales increased 68% in 2021 due to a 40% increase in our overall selling prices (see “Historical
Lumber Prices”), a 24% increase in unit sales due to acquired businesses, and a 4% increase in organic unit
sales. Organic unit growth of 14% and 5% in our construction and industrial segments, respectively, was
offset by an organic unit decline of 4% in our retail segment.
Earnings from operations increased 113.3% to $737.6 million. This increase resulted from a variety of factors
including strong demand in our industrial and construction segments and leveraging our fixed costs, increased
sales of value-added and new products that have higher margins, and increased selling prices as we improve
our ability to execute value-based pricing initiatives. Acquisitions contributed approximately $50.5 million
to our increase in operating profits. Excluding the impact of acquisitions, we estimate that value-added
products contributed $367.1 million to the increase in gross profits and commodity-based products
contributed $139.2 million.
Our cash flows provided by operations in 2021 was $512.5 million compared to $336.5 million in 2020. This
increase is due primarily to an increase in our net earnings and non-cash expenses of $316.0 million, offset
by an increase in our investment in net working capital of $140.0 million compared to the prior period. The
increase in net working capital was due to higher year over year lumber prices, as noted in the tables below,
as well as increased demand in our industrial and construction segments. PalletOne and other acquisitions
also contributed to the increase in our net working capital.
We invested $151.2 million in capital expenditures to support and grow our business and invested $476.0
million in acquired businesses.
We returned $40.2 million to our shareholders through dividends.
Our net debt (debt and cash overdraft less cash) at the end of 2021 was $50.6 million compared to net cash
of $124.8 million at the end of 2020.
Our available borrowing capacity under revolving credit facilities and cash surplus resulted in total liquidity
of approximately $805 million at the end of December 2021.
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
Year-to-date average
Year-to-date percentage change
Random Lengths Composite
Average $/MBF
2021
2020
$
$
890
954
1,035
1,080
1,428
1,344
690
443
412
520
585
746
377
402
420
358
394
455
530
716
934
826
571
643
$
844
$
52.9 %
552
55.5 %
In addition, a Southern Yellow Pine (“SYP”) composite price, which we prepare and use, is presented below. Our
purchases of this species comprise approximately 57% and 62% of total lumber purchases, excluding plywood and
other panel products, for 2021 and 2020, respectively.
January
February
March
April
May
June
July
August
September
October
November
December
Year-to-date average
Year-to-date percentage change
$
Southern Yellow Pine
Average $/MBF
2021
2020
858 $
903
938
922
1,150
1,052
564
448
438
512
599
675
346
345
360
333
412
494
552
729
886
711
508
565
$
755 $
45.2 %
520
42.1 %
IMPACT OF THE LUMBER MARKET ON OUR OPERATING RESULTS
We experience significant fluctuations in the cost of commodity lumber products from primary producers ("Lumber
Market"). We generally price our products to pass lumber costs through to our customers so that our profitability is
based on the value-added manufacturing, distribution, engineering, and other services we provide. As a result, our
2
sales levels (and working capital requirements) are impacted by the lumber costs of our products. Lumber costs,
including plywood and other panel products, were 47.7% and 51.0% of our net sales in 2021 and 2020, respectively.
Our gross margins are impacted by (1) the relative level of the Lumber Market (i.e. whether prices are higher or lower
from comparative periods), and (2) the trend in the market price of lumber (i.e. whether the price of lumber is
increasing or decreasing within a period or from period to period). Moreover, as explained below, our products are
priced differently. Some of our products have fixed selling prices, while the selling prices of other products are indexed
to the reported Lumber Market with a fixed dollar adder to cover conversion costs and profits. Consequently, the level
and trend of the Lumber Market impact our products differently.
Below is a general description of the primary ways in which our products are priced.
Products with fixed selling prices. These products include value-added products such as decking and fencing
sold to retail building materials customers, as well as trusses, wall panels and other components sold to the
residential construction market, and most industrial packaging and other manufactured products for industrial
users. Prices for these products are generally fixed at the time of the sales quotation for a specified period of
time or are based upon a specific quantity. In order to maintain margins and reduce any exposure to adverse
trends in the price of component lumber products, we attempt to lock in costs with our suppliers for these
sales commitments. Also, the time period and quantity limitations allow us to eventually re-price our products
for changes in lumber prices from our suppliers. In 2021, strong demand and unusually high lumber market
volatility has allowed us to re-price these products more frequently to protect margins.
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
3
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
$
Period 2
$
300
50
350
50
400
$
12.5 %
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.
Year Ended
Units sold
Gross profit
Selling, general, and administrative expenses
Earnings from operations
It is our goal to increase our gross profits and earnings from operations at a rate of growth that exceeds our unit sales
growth, or in other words, increasing our profitability per unit sold. We also have a long-term goal of improving our
efficiencies and leveraging the fixed costs in our selling, general, and administrative expenses as we grow, which will
result in a rate of growth of these expenses which is less than our unit sales growth and a lower cost per unit.
16.7
1.3
41.2
6.0 %
2021
28.0 %
75.8
53.5
113.3
December 25,
December 26,
2020
BUSINESS COMBINATIONS AND ASSET PURCHASES
We completed nine business acquisitions during 2021 and five during 2020. The annual historical sales attributable to
acquisitions in 2021 and 2020 were approximately $1.3 billion and $101 million, respectively. These business
combinations were not significant to our operating results individually or in aggregate; consequently pro forma results
for 2021 and 2020 are not presented.
On December 27, 2021, we closed on an agreement to purchase 100 percent of the equity of Ultra Aluminum
Manufacturing, Inc. (Ultra) located in Howell, Michigan for approximately $26.8 million. Ultra designs and produces
an extensive selection of ornamental aluminum fence and railing products for contractors, landscapers, fence dealers
and wholesalers.
See Notes to Consolidated Financial Statements, Note C, "Business Combinations" and Note O, “Subsequent Events”
for additional information.
4
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”.
Net sales
Cost of goods sold
Gross profit
Selling, general, and administrative expenses
Other (gains) losses, 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
Note: Actual percentages are calculated and may not sum to total due to rounding.
Year Ended
December 25
,
2021
December 26
,
2020
100.0 %
83.7
16.3
7.9
(0.1)
8.5
0.1
8.4
2.0
6.4
(0.2)
%
100.0
84.5
15.5
8.6
0.2
6.7
0.1
6.6
1.7
4.9
(0.1)
6.2 %
4.8
%
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
OPERATING RESULTS BY SEGMENT
Year Ended
December 25,
2021
1,406,967
682,253
48.5%
$
$
December 26,
2020
800,296
444,596
55.6%
$
$
Our business segments consist of UFP Retail Solutions, UFP Industrial and UFP Construction, and align with the end
markets we serve. Among other things, this structure allows for a more specialized and consistent sales approach
among Company operations, more efficient use of resources and capital, and quicker introduction of new products
and services. We manage the operations of our individual locations primarily through a market-centered reporting
structure under which each location is included in a business unit and business units are included in our Retail,
Industrial, and Construction segments. The exception to this market-centered reporting and management structure is
our International segment, which comprises our Mexico, Canada, Europe, Asia, and Australia operations and sales
and buying offices in other parts of the world. Our International segment and Ardellis (our insurance captive) are
included in the “All Other” column of the table below. The “Corporate” column includes purchasing, transportation
and administrative functions that serve our operating segments. Operating results of Corporate primarily consists of
over (under) allocated costs. The operating results of UFP Real Estate, Inc., which owns and leases real estate, and
UFP Transportation Ltd., which owns, leases, and operates transportation equipment, are also included in the
Corporate column. Inter-company lease and services charges are assessed to our operating segments for the use of
these assets and services at fair market value rates.
The following tables present our operating results by segment for December 25, 2021 and December 26, 2020.
5
Year Ended December 25, 2021
Net sales
Cost of goods sold
Gross profit
Selling, general,
administrative expenses
Other
Earnings from
operations
$
Retail
Industrial
$ 3,418,337 $ 2,148,142 $ 2,698,434 $
1,683,466
464,676
3,120,634
297,703
2,167,405
531,029
Construction
All Other
362,473 $
237,696
124,777
Corporate
Total
8,748 $ 8,636,134
7,229,167
1,406,967
19,966
(11,218)
169,033
(94)
200,194
(456)
267,292
(493)
52,204
(2,237)
(6,470)
(9,560)
682,253
(12,840)
128,764 $
264,938 $
264,230 $
74,810 $
4,812 $
737,554
Year Ended December 26, 2020
Net sales
Cost of goods sold
Gross profit
Selling, general,
administrative expenses
Other
Earnings from
operations
Retail
Industrial
$ 2,167,122 $ 1,072,117 $ 1,695,684 $
895,466
176,651
1,874,114
293,008
1,433,469
262,215
Construction
All Other
217,094 $
147,117
69,977
Corporate
Total
1,981 $ 5,153,998
4,353,702
3,536
800,296
(1,555)
137,641
56
97,146
(3,873)
179,516
13,690
34,471
775
(4,178)
(774)
444,596
9,874
155,311 $
83,378 $
69,009 $
34,731 $
3,397 $
345,826
$
The following tables present the components of our operating results as a percentage of net sales by segment for
December 25, 2021 and December 26, 2020.
Year Ended December 25, 2021
Net sales
Cost of goods sold
Gross profit
Selling, general,
administrative expenses
Other
Earnings from operations
Retail
Industrial
Construction
All Other
Corporate
Total
100.0 %
91.3
8.7
4.9
(0.1)
3.8 %
100.0 %
78.4
21.6
9.3
—
12.3 %
100.0 %
80.3
19.7
9.9
—
9.8 %
100.0 %
65.6
34.4
14.4
(0.6)
20.6 %
N/A
—
—
—
—
—
100.0 %
83.7
16.3
7.9
(0.1)
8.5 %
Note: Actual percentages are calculated and may not sum to total due to rounding.
Year Ended December 26, 2020
Net sales
Cost of goods sold
Gross profit
Selling, general,
administrative expenses
Other
Earnings from operations
Retail
Industrial
Construction
All Other
Corporate
Total
100.0 %
86.5
13.5
6.4
—
7.2 %
100.0 %
83.5
16.5
9.1
(0.4)
7.8 %
100.0 %
84.5
15.5
10.6
0.8
4.1 %
100.0 %
67.8
32.2
15.9
0.4
16.0 %
N/A
—
—
—
—
—
100.0 %
84.5
15.5
8.6
0.2
6.7 %
Note: Actual percentages are calculated and may not sum to total due to rounding.
6
NET SALES
We design, manufacture and market wood and wood-alternative products, primarily used to enhance outdoor living
environments, for national home centers and other retailers; roof trusses, structural lumber and panels, and other
products for the manufactured housing industry; engineered wood components for residential and commercial
construction, customized interior fixtures, millwork, and casework used in a variety of retail, commercial and other
structures; and structural wood packaging, other packing materials, and OEM components for various industries. Our
strategic long-term sales objectives include:
Maximizing unit sales growth while achieving return on investment goals. The following table presents
estimates, for the periods indicated, of our percentage change in net sales which were attributable to changes
in overall selling prices versus changes in units shipped.
% Change
2021 versus 2020
2020 versus 2019
in Sales
67.6 %
16.7 %
in Selling
Prices
in Units
39.6 % 28.0 %
6.0 %
10.7 %
Acquisition
Unit
Change
24.0 %
1.0 %
Organic
Unit
Change
4.0 %
5.0 %
Diversifying our end market sales mix by increasing sales of specialty wood and protective packaging to
industrial users, increasing our penetration of the concrete forming market, increasing our sales of engineered
wood components for custom home, multi-family, military and light commercial construction, increasing our
market share with independent retailers, and increasing our sales of customized interior fixtures, casework
and millwork used in a variety of commercial markets.
Expanding geographically in our core businesses, domestically and internationally.
Increasing our sales of "value-added" products and enhancing our product offering with new or improved
products. Value-added products generally consist of fencing, decking, lattice, and other specialty products
sold to the retail segment, structural wood packaging, engineered wood components, customized interior
fixtures, manufactured and assembled concrete forms, and "wood alternative" products. Engineered wood
components include roof trusses, wall panels, and floor systems. Wood alternative products consist of
products manufactured with wood and non-wood composites, metals and plastics. Although we consider the
treatment of dimensional lumber and panels with certain chemical preservatives a value-added process,
treated lumber is not presently included in the value-added sales totals. Remanufactured lumber and panels
that are components of finished goods are also generally categorized as “commodity-based” products.
The following table presents, for the periods indicated, our percentage of value-added and commodity-based
sales to total sales by our segments (Retail, Industrial, Construction, and All Other and Corporate).
Year Ended December 25, 2021 Year Ended December 26, 2020
Retail
Industrial
Construction
All Other and Corporate
Total Sales
Value-Added
43.2 %
67.7 %
73.0 %
74.9 %
59.7 %
Commodity-
Based
Value-Added
53.8 %
64.7 %
76.3 %
75.6 %
64.3 %
56.8 %
32.3 %
27.0 %
25.1 %
40.3 %
Commodity-
Based
46.2 %
35.3 %
23.7 %
24.4 %
35.7 %
Note: Certain prior year product reclassifications and the change in designation of certain products as "value-added" resulted in a change in prior
year's sales.
The increase in our ratio of commodity-based product sales to total sales reflected in the table above is
primarily due to the impact of higher average lumber prices in 2021 on sales of commodity-based products
and the product mix of recently acquired businesses. Selling prices of commodity-based products are
7
generally indexed to the current Lumber Market at the time they are shipped, and lumber costs comprise a
higher percentage of the selling price than they do for value-added products. The acquisition of Sunbelt and
Spartanburg also contributed to the increase in commodity-based sales of treated lumber in our retail segment,
while PalletOne contributed to the increase in value-added sales in the industrial segment. Our overall unit
sales of value-added products increased approximately 23% in 2021 compared to 2020, including a 16%
contribution from acquisitions and 7% organic growth. Our unit sales of commodity-based products increased
approximately 37%, due primarily from the acquisition of Sunbelt and Spartanburg.
Developing new products. We define new products as those that will generate sales of at least $1 million per
year within 4 years of launch and are still growing and gaining market penetration. Our goal was to achieve
annual new product sales of at least $575 million in 2021. New product sales and gross profits in 2021 were
up 56% and 47%, respectively, from the prior year. Acquisitions contributed approximately $48 million to
new product sales in 2021. Approximately $13 million of new product sales for 2020, while still sold, were
sunset in 2021 and excluded from the table below because they no longer meet the definition above. The
table below presents new product sales in thousands.
Retail
Industrial
Construction
All Other and Corporate
Total New Product Sales
New Product Sales by Segment
Year Ended
December 25,
2021
December 26,
2020
510,266
177,214
135,644
18,735
841,859
$
$
401,539
72,574
54,060
11,451
539,624
$
$
%
Change
27.1 %
144.2 %
150.9 %
63.6 %
56.0 %
Note: Certain prior year product reclassifications and the change in designation of certain products as "new" resulted in a change in prior year's
sales.
Retail Segment:
Net sales to the retail segment increased 58% in 2021 compared to 2020 due to a 27% increase in selling prices and a
35% increase in unit sales from acquired operations, offset by a 4% decrease in organic unit sales. Organic unit
increases of 17% of UFP Edge, 9% of Deckorators, and 5% of Outdoor Essentials, were offset by organic unit declines
of 15% of ProWood and 12% of Handprint. The organic increases mentioned above were primarily due to capacity
expansion and initiatives to gain market share in these product categories, while the decline in unit sales of ProWood
and Handprint are attributed to a shift in consumer spending as a result of the end of pandemic-related restrictions on
certain activities. In addition, new product sales increased approximately 27.1% to $510 million in 2021 compared to
2020, and the transfer of approximately $48 million in sales to the retail segment from the construction segment
contributed to unit growth in retail. Finally, our sales to big box customers increased 53%, and sales to other
independent retailers increased 67%.
Gross profits increased 1.6% to $298 million in 2021 compared to 2020. Our change in gross profits was attributable
to the following:
Our Retail Building Materials business unit contributed $23.2 million to the increase. The increase is
primarily due to unit sales growth and rising lumber and panel prices combined with effective inventory
positioning.
Acquisitions contributed $10.4 million to the increase.
Our UFP Edge business unit decreased by approximately $5.6 million.
Our Deckorators, Outdoor Essentials, Handprint, and E-Commerce business units were less significant, and
collectively these units contributed $2.5 million of additional gross profit.
8
Our ProWood business unit decreased by $25.8 million, primarily due to the impact of falling lumber prices
from June through October of 2021 on ProWood’s pressure-treated products that are sold at a variable price.
Conversely, lumber prices rose during most of 2020 as a result of unexpectedly strong demand.
Selling, general and administrative (“SG&A”) expenses increased by approximately $31.4 million, or 22.8%, in 2021
compared to 2020. The SG&A of recently acquired businesses contributed approximately $19.2 million to this
increase. Accrued bonus expense, which varies with our overall profitability and return on investment, decreased
approximately $0.6 million and totaled approximately $34.7 million in 2021. The remaining increase was primarily
due to increases in salaries and wages, sales compensation, and travel related expenses, which were partially offset by
a decline in merchandising costs.
Earnings from operations of the Retail reportable segment decreased in 2021 compared to 2020 by $26.5 million, or
17.1%, as a result of the factors mentioned above.
Industrial Segment:
Net sales to the industrial segment increased 100% in 2021 compared to 2020 due to a 60% increase in selling prices
attributable to the Lumber Market and favorable sales mix changes, a 5% increase in organic unit sales and a 35%
increase in unit sales from recent acquisitions.
Gross profits increased by $288.0 million, or 163%, to $464.7 million in 2021 compared to 2020. Acquisitions
contributed $81.0 million to the increase in gross profit. The remaining increase was primarily due to organic unit
sales growth and leveraging fixed costs, value-based pricing initiatives resulting in an increase in our selling prices,
and favorable changes in our sales mix of value-added products. Additionally, in 2021, strong demand and unusually
high lumber market volatility has allowed us to re-price our products more frequently to protect margins.
Selling, general and administrative (“SG&A”) expenses increased by approximately $103.0 million, or 106.1%, in
2021 compared to 2020. Acquired operations in 2021 contributed approximately $23.0 million to total SG&A
expenses. Accrued bonus expense increased approximately $52.3 million compared to last year and totaled
approximately $71.1 million for 2021. The remaining increase was primarily due to increases in salaries and wages
and sales incentive compensation.
Earnings from operations of the Industrial reportable segment in 2021 increased by $181.6 million, or 217.8%,
compared to 2020 due to the factors discussed above.
Construction Segment:
Net sales to the construction segment increased 59% in 2021 compared to 2020 due to a 42% increase in selling prices,
organic unit sales growth of 14%, and 3% growth from acquisitions. The organic unit increase was comprised of a
25% increase in factory-built housing, a 15% in site-built housing, and a 15% in commercial construction. These
increases were offset by a unit decline of 30% in concrete forming. As discussed above, the transfer of $48 million in
sales to the retail segment contributed to the unit decline in the concrete forming business unit.
Gross profits increased by $268.8 million, or 102.5% to $531.0 million in 2021 compared to 2020. The increase in
our gross profit was comprised of the following factors:
Our site-built housing business unit increased by $157.4 million due to unit sales growth and leveraging fixed
costs and higher selling prices. Additionally, in 2021, strong demand and unusually high lumber market
volatility has allowed us to re-price our products more frequently to protect margins.
Our factory-built housing business unit increased by $79.8 million as a result of increased unit sales and
leveraging fixed costs and favorable trends in lumber prices. Commodity-based and value-added products
increased $34 million and $39 million, respectively.
9
Our commercial business unit increased $19.1 million as a result of an increase in unit sales, better
productivity due to efforts to reduce our capacity to align with the current level of demand, increases in
selling prices, and other operational improvements.
Acquired businesses contributed $6.3 million.
Our concrete forming business unit increased $6.2 million.
SG&A expenses increased by approximately $87.8 million, or 48.9%, in 2021 compared to 2020. Acquired operations
in 2021 contributed approximately $5.8 million to total SG&A expenses. Accrued bonus expense increased
approximately $52.2 million compared to last year and totaled approximately $70.8 million for 2021. The remaining
increase was primarily due to the $11.5 million Goodwill impairment in the prior year and increases in salaries and
wages, sales incentive compensation, and travel related expenses in the current year.
Earnings from operations of the Construction reportable segment increased in 2021 compared to 2020 by $195.2
million, or 282.9%, due to the factors mentioned above.
All Other Segment:
Our All Other reportable segment consists of our International and Ardellis (our insurance captive) segments that are
not significant to our overall results.
Corporate:
The corporate segment primarily consists of net sales and gross profits on sales to external customers initiated by UFP
Purchasing and UFP Transportation and over (under) allocated costs that are not significant
INTEREST EXPENSE
Interest expense increased in 2021 compared to 2020, due primarily to an increase in borrowings to fund current year
acquisitions and increases in net working capital. See “Note C of Notes to the Consolidated Financial Statements”.
INCOME TAXES
Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for state and local income
taxes, and permanent tax differences. Our effective tax rate was 23.9% in 2021 compared to 25.5% in 2020. The
decrease was primarily due to a reduction in certain permanent tax differences compared to the prior year, none of
which are individually significant, non-deductible goodwill impairment expense recorded in 2020, and a valuation
allowance recorded in 2020 against deferred tax assets related to net operating loss carryforwards of foreign
subsidiaries in our commercial business unit totaling approximately $3.6 million.
10
OFF-BALANCE SHEET COMMITMENTS AND CONTRACTUAL OBLIGATIONS
We have no significant off-balance sheet commitments. The following table summarizes our contractual obligations
as of December 25, 2021 (in thousands).
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
Less than
1 Year
Payments Due by Period
3 – 5
Years
After
5 Years
1 – 3
Years
Total
$ 42,649 $ 49,048 $
285 $ 228,268 $ 320,250
11,214
26,378
78,234
86,894
114,687
78,234
$ 158,475 $ 104,889 $ 40,246 $ 296,455 $ 600,065
41,064
27,123
—
15,657
24,304
—
18,959
36,882
—
As of December 25, 2021, we also had $54.2 million in outstanding letters of credit issued during the normal course
of business, as required by some vendor contracts.
LIQUIDITY AND CAPITAL RESOURCES
The table below presents, for the periods indicated, a summary of our cash flow statement (in thousands):
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
December 25, December 26,
2021
2020
$ 512,477 $ 336,477
(611,187) (154,718)
85,221
962
267,942
168,666
$ 291,223 $ 436,608
(45,006)
(1,669)
(145,385)
436,608
In general, we fund our growth through a combination of operating cash flows, our revolving credit facility, industrial
development bonds (when circumstances permit), and issuance of long-term notes payable at times when interest rates
are favorable. We have not issued equity to finance growth except in the case of a large acquisition. We manage our
capital structure by attempting to maintain a targeted ratio of debt to equity and debt to earnings before interest, taxes,
depreciation and amortization. We believe these financial ratios are among many other important factors to
maintaining a strong credit profile, which in turn helps ensure timely access to capital when needed.
Seasonality has a significant impact on our working capital due to our primary selling season which occurs during the
period from March to September. Consequently, our working capital increases during our first and second quarters
resulting in negative or modest cash flows from operations during those periods. Conversely, we experience a
substantial decrease in working capital once we move beyond our peak selling season which typically results in
significant cash flows from operations in our third and fourth quarters. As explained in more detail below, the
unusually large increase in lumber prices this year, as well as the significant increase in sales, resulted in a more
significant increase in net working capital this year relative to prior years.
Due to the seasonality of our business and the effects of the Lumber Market, we believe our cash cycle (days sales are
outstanding plus days supply of inventory less days payables are outstanding) is a good indicator of our working
11
capital management. As indicated in the table below, our cash cycle increased to 57 days in 2021 from 48 days in
2020.
Days of sales outstanding
Days supply of inventory
Days payables outstanding
Days in cash cycle
Twelve Months Ended
December 25, December 26,
2021
2020
34
43
(20)
57
32
36
(20)
48
The increase in our days of sales outstanding and days supply of inventory in 2021 was primarily due to PalletOne
and other acquisitions. Lower retail demand than our customers anticipated from our inventory planning also
contributed to our days supply of inventory.
Our cash flows from operating activities in 2021 was $512.5 million, which was comprised of net earnings of $552.4
million and $114.8 million of non-cash expenses, offset by a $12.0 million gain on sale of assets and $142.7 million
increase in working capital since the end of December 2020. The increase in our working capital was due to higher
year over year lumber prices and increased demand in our industrial and construction segments. Comparatively, cash
generated from operating activities was approximately $336.5 million in 2020, which was comprised of net earnings
of $253.9 million, $85.3 million of non-cash expenses (including $11.5 million of goodwill impairment charges), and
a $2.7 million increase in working capital since the end of December 2019.
Our cash used in investing activities during 2021 was $611.2 million, reflecting purchases of property, plant, and
equipment totaling $151.2 million and business acquisitions totaling $476.0 million. See “Note C of Notes to the
Consolidated Financial Statements”. Our outstanding purchase commitments on existing capital projects totaled
approximately $52.7 million on December 25, 2021. Capital spending primarily consists of several projects to expand
capacity to manufacture new and value-added products, achieve efficiencies through automation, make improvements
to a number of facilities, and increase our transportation capacity (tractors, trailers) in order to meet higher volumes
and replace old rolling stock. Notable areas of capital spending include projects to:
Increase the capacity and efficiency of our plants that produce our Deckorators mineral-based composite and
wood-plastic composite decking,
Expand our capacity to produce UFP Edge siding, pattern and trim products, machine-built pallets,
engineered wood and metal components for site-built construction, and
Invest in automation opportunities.
Finally, we sold property, plants, and equipment for proceeds of $30.0 million, consisting of $21 million from the sale
of real estate and $9 million from the sale of equipment. The sale and purchase of investments totaling $14.9 million
and $23.8 million, respectively, are due to investment activity in our captive insurance subsidiary.
Cash flows used in financing activities during 2021 primarily consisted of the payment of quarterly dividends totaling
$40.2 million and distributions to noncontrolling interests of $6.8 million. Comparatively in 2020, cash flows from
financing activities primarily consisted of proceeds of $150.0 million from the issuance of Senior E, F and G Notes in
order to take advantage of lower interest rates, $30.7 million in dividend payments, and $29.2 million in share
repurchases when our stock price declined as a result of the pandemic. The increase in our dividends is primarily due
to an increase in the rates our board approved as a result of our growth in earnings and operating cash flow.
12
On November 1, 2018, we entered into a five-year, $375 million unsecured revolving credit facility with a syndicate
of U.S. and Canadian banks led by JPMorgan Chase Bank, N.A., as administrative agent and Wells Fargo Bank, N.A.,
as syndication agent. The facilities include up to $40 million which may be advanced in the form of letters of credit,
and up to $100 million (U.S. dollar equivalent) which may be advanced in Canadian dollars, Australian dollars, pounds
Sterling, Euros and such other foreign currencies as may subsequently be agreed upon among the parties. On February
19, 2021, the credit agreement was amended to increase the availability from $375 million to $550 million by
exercising the accordion feature in the original agreement.
On August 10, 2020, we entered into an unsecured Note Purchase Agreement (the "Agreement") under which we
issued our 3.04% Series 2020 E Senior Notes, due August 10, 2032, in the aggregate principal amount of $50 million,
our 3.08% Series 2020 F Senior Notes, due August 10, 2033, in the aggregate principal amount of $50 million, and
our 3.15% Series 2020 G Senior Notes, due August 10, 2035, in the aggregate principal amount of $50 million.
Proceeds from the sale of the Series E, F and G Senior Notes were used to fund the acquisition of PalletOne.
On December 25, 2021, we had $7.8 million outstanding on our $550 million revolving credit facility, and we had
approximately $535.1 million in remaining availability after considering $7.1 million in outstanding letters of credit.
Financial covenants on the unsecured revolving credit facility and unsecured notes include minimum interest tests and
a maximum leverage ratio. The agreements also restrict the amount of additional indebtedness we may incur and the
amount of assets which may be sold. We were in compliance with all our covenant requirements on December 25,
2021.
ENVIRONMENTAL CONSIDERATIONS AND REGULATIONS
See Notes to Consolidated Financial Statements, Note L, “Commitments, Contingencies, and Guarantees”.
CRITICAL ACCOUNTING POLICIES
In preparing our consolidated financial statements, we follow accounting principles generally accepted in the United
States. These principles require us to make certain estimates and apply judgments that affect our financial position
and results of operations. We continually review our accounting policies and financial information disclosures.
Following is a summary of our more significant accounting policies that require the use of estimates and judgments
in preparing the financial statements.
GOODWILL
We evaluate goodwill for indicators of impairment when events or circumstances indicate that this risk may be present.
Our judgments regarding the existence of impairment are based on market conditions, operational performance and
estimated future cash flows. Determining whether an impairment has occurred requires the valuation of the respective
reporting unit, which we have consistently estimated using primarily a weighted average between income and market
valuation approaches. We believe this approach is the most appropriate and accurate method to measure the fair value
of our intangible assets. We use discounted cash flow analysis with the following assumption: a business is worth
today what it can generate in future cash flows; cash received today is worth more than an equal amount of cash
received in the future; and future cash flows can be reasonably estimated. The discounted cash flow analysis is based
on the present value of projected cash flows and residual values.
If the carrying value of goodwill is considered impaired, an impairment charge is recorded to adjust it to its fair value.
Changes in forecasted operations and changes in discount rates can materially affect these estimates. In addition, we
test goodwill annually for impairment or more frequently if changes in circumstances or the occurrence of other events
suggest impairments exist. The test for impairment requires us to make several estimates about fair value, most of
which are based on projected future cash flows and market valuation multiples. Changes in these estimates may result
in the recognition of an impairment loss.
13
On our annual testing date of September 25, 2021, the fair values exceed the carrying values for each of the Company’s
reporting units. There were no indicators for impairment for any of the reporting units. We believe we have sufficient
available information, both current and historical, to support our assumptions, judgments and estimates used in the
goodwill impairment test.
In the prior year, we experienced significantly lower than expected operating results within our commercial reporting
unit, which is within the Construction segment. It was determined that the carrying value of the reporting unit
exceeded its fair value and we recorded a non-cash goodwill impairment charge of $11.5 million as of December 26,
2020, which represented the entire amount of the goodwill recorded within the reporting unit, as a result.
REVENUE RECOGNITION
Revenue for product sales is recognized at the time the performance obligation is satisfied, which is primarily when
the goods are delivered to the carrier, Free On Board (FOB) shipping point. Generally, title passes at the time of
shipment. In certain circumstances, the customer takes title when the shipment arrives at the destination. However,
our shipping process is typically completed the same day.
Performance on construction contracts is reflected in operations using over time accounting, under either the cost to
cost or units of delivery methods, depending on the nature of the business at individual operations. Under over time
accounting using the cost to cost method, revenues and related earnings on construction contracts are measured by the
relationships of actual costs incurred related to the total estimated costs. Under over time accounting using the units
of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual
units produced related to the total number of units. Revisions in earnings estimates on the construction contracts are
recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual
contracts are charged to operations in their entirety when such losses become apparent.
Our construction contracts are generally entered into with a fixed price and completion of the projects can range from
6 to 18 months in duration. Therefore, our operating results are impacted by, among many other things, labor rates
and commodity costs. During the year, we update our estimated costs to complete our projects using current labor and
commodity costs and recognize losses to the extent that they exist.
FORWARD OUTLOOK
GOALS
Our long-term objectives include:
Growing our annual unit sales by 5 to 7 percent. We anticipate smaller tuck-in acquisitions will contribute
toward this goal;
Achieving and sustaining a 10 percent EBITDA margin by continuing to enhance our capabilities and grow
our portfolio of value-added products as well as growth of our portfolio of value-added products;
Earning an incremental return on new investment over our cost of capital, and;
Maintaining a conservative capital structure.
14
RETAIL SEGMENT
The Home Improvement Research Institute (“HIRI”) anticipates growth in home improvement spending and has
forecasted a 3.1% compounded annual growth rate through 2024. Most recently, large “big box” customers like The
Home Depot and Lowes have cautioned that they cannot predict if pandemic driven demand trends will continue. The
Home Depot has stated that if the demand environment during the last half of 2021 were to persist through the current
year, it would imply slightly positive sales growth in 2022. Lowe’s has forecasted a decline of 1% to an increase of
1% in comparable sales in 2022. Sales of our Retail Solutions segment comprised approximately 39.6% of our annual
sales in 2021.
We continue to compete for market share for certain retail customers and face intense pricing pressure from other
suppliers to this market.
Our long-term goal is to achieve sales growth by:
Increasing our market share of value-added products, including our Deckorators, Edge, Outdoor Essentials
and Handprint product lines. Continued investment in capacity for Deckorators and Edge is expected to
contribute to this increase.
Developing new products and increasing our emphasis on product innovation and product differentiation in
order to counter commoditization trends and influences.
Acquiring businesses in core product categories when those opportunities exist.
Adding new products and customers through strategic business acquisitions or alliances.
INDUSTRIAL SEGMENT
Our goal is to increase our sales of wood, wood alternative, and protective packaging products to a wide variety of
industrial customers and manufactured wood components for OEM users. We believe the vast amount of hardwood
and softwood lumber consumed for industrial applications, combined with the highly fragmented nature of this market,
provides us with market share growth opportunities as a result of our competitive advantages in manufacturing,
purchasing, and material utilization. In addition, purchasers of packaging products with a wide geographic footprint
increasingly desire to reduce the number of suppliers they buy from, which provides an opportunity to gain market
share due to our international presence. We plan to continue to obtain market share by expanding our manufacturing
capacity, enhancing our capabilities and product offerings to enhance the solutions we offer our customers, and
improving our ability to serve large regional and international customers in targeted markets. We plan to continue to
pursue acquisition opportunities that meet our strategic criteria and help us meet these objectives. As discussed
previously, the recently implemented reorganization of our business is intended to promote revenue growth through
the introduction of new products, including protective and other packaging materials, and enhanced expertise in this
market as well as improved earnings through more efficient use of our people, resources and capital.
Market indicators that should be considered when evaluating future demand for our products in the industrial segment
include industrial production and the Purchasing Managers Index. Industrial Production in the United States is
estimated to stand at 0.9% in 2022. The Purchasing Managers Index is projected to trend around 56 points in 2023
and 52.4 points in 2024. Sales in this segment comprised approximately 24.9% of our annual sales in 2021.
CONSTRUCTION SEGMENT
The National Association of Home Builders forecasts a 3.0% increase in manufactured home shipments in 2022
followed by a 1.0% increase in 2023. We currently supply approximately 45.0% of the trusses used in manufactured
housing and we will strive to maintain our market share of trusses produced for this market. Sales of our Factory Built
business unit within our Construction segment comprised approximately 12.7% of our annual sales in 2021.
15
The Mortgage Bankers Association of America forecasts a 5.0% increase in national housing starts to an estimated
1.7 million starts in 2022. The National Association of Home Builders forecasts starts of $1.6 million, a 3.0% increase
from 2021. We believe we are well-positioned to capture our share of any increase that may occur in housing starts in
the regions we operate, which is primarily Texas, Colorado, the mid-Atlantic states, and the Northeast. However, due
to our conservative approach to adding capacity to serve this market and focus on managing potential channel conflicts
with certain customers, our growth may trail the market in future years. Sales of our Site Built business unit within
our Construction segment comprised approximately 13.8% of our annual sales in 2021.
Non-residential construction spending is a market indicator that should be considered when evaluating future demand
for our products in our Commercial and Concrete Forming business units within our Construction segment. Sales in
these business units comprised approximately 3.0% and 1.7%, respectively, of our annual sales in 2021.
GROSS PROFIT
We believe the following factors may impact our gross profits and margins in the future:
End market demand and our ability to grow and leverage fixed costs and price our products based on the
value we offer our customers.
The effective implementation of our strategy to focus and manage our operations around the markets we
serve.
Our ability to maintain market share and gross margins on products sold to our largest customers. We believe
our level of service, geographic diversity, and quality of products provides an added value to our customers.
However, if our customers are unwilling to pay for these advantages, our sales and gross margins may be
reduced.
Sales mix of value-added and commodity products.
Fluctuations in the relative level of the Lumber Market and trends in the market price of lumber. (See "Impact
of the Lumber Market on our Operating Results.")
Fuel and transportation costs.
Rising labor and benefit costs.
Our ability to continue to achieve productivity improvements as our unit sales increase and planned cost
reductions through continuous improvement activities, automation, and other initiatives.
Changes in corporate income tax rates and the cost of complying with new or increased government
regulations.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
In recent years, selling, general and administrative (SG&A) expenses have increased due to acquisitions and added
personnel hired to take advantage of growth opportunities and execute our initiatives intended to increase our sales of
new products and improve our sales mix of value-added products. We anticipate our trend of increases in these costs
will continue in 2022; however, our objective is to reduce these costs on a per unit basis and as a percentage of gross
profits as we grow through the improved productivity of our people and as a result of fixed costs. In addition, bonus
and other incentive expenses for all salaried and sales employees is based on our profitability and the effective
management of our assets and will continue to fluctuate based on our results. See Note H — Common Stock for
discussion of future compensation costs related to long-term share-based bonus awards.
16
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.
Additionally, we expect to spend between $175 million to $225 million on capital expenditures, incur depreciation of
approximately $98 million, and incur amortization and other non-cash expenses of approximately $20 million in 2022.
On December 25, 2021, we had outstanding purchase commitments on capital projects of approximately $52.7 million.
We intend to fund capital expenditures and purchase commitments through our operating cash flows and availability
under our revolving credit facility which is considered sufficient to meet these commitments and working capital
needs.
Our dividend rates are reviewed and approved at each of our January, April, July, and October board meetings and
payments are made in March, June, September, and December of each year. Our board considers our dividend yield,
payout ratios relative to earnings and operating cash flow, and potential variability of future results, among other
factors, as part of its decision-making process.
We have a share repurchase program approved by our Board of Directors, and as of February 15, 2022, we have
remaining authorization to buy back approximately 2.6 million shares. In the past, we have repurchased shares in order
to offset the effect of issuances resulting from our employee benefit plans and at opportune times when our stock price
falls to predetermined levels.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of UFP Industries, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of UFP Industries, Inc. and subsidiaries (the “Company”)
as of December 25, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 25, 2021, based
on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements as of and for the year ended December 25, 2021, of the
Company and our report dated February 23, 2022, expressed an unqualified opinion on those financial statements.
17
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ Deloitte & Touche LLP
Grand Rapids, Michigan
February 23, 2022
18
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of UFP Industries, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of UFP Industries, Inc. and subsidiaries (the
"Company") as of December 25, 2021 and December 26, 2020, the related consolidated statements of earnings and
comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended December
25, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 25, 2021 and
December 26, 2020, and the results of its operations and its cash flows for each of the three years in the period ended
December 25, 2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 25, 2021, based on criteria
established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission and our report dated February 23, 2022, expressed an unqualified opinion on the
Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Purchase Accounting for the PalletOne, Inc. Acquisition – Refer to C to the financial statements
Critical Audit Matter Description
On December 28, 2020, the Company acquired PalletOne, Inc. for $259 million. The transaction was accounted for
using the purchase price method of accounting. The purchase price, including capitalized acquisition-related costs,
was allocated based on the relative fair value of the assets acquired and liabilities assumed, which were determined
using valuation information obtained from published market data, an external valuation specialist for certain acquired
assets, and the Company’s historical knowledge of acquiring comparable assets and liabilities.
We identified the acquisition of PalletOne, Inc. as a critical audit matter because of the estimates management makes
to determine the relative fair value of the assets acquired and liabilities assumed. This required auditor judgement and
an increased extent of audit effort, including the use of our fair value specialists for the valuation of the real, tangible,
and intangible assets.
19
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the relative fair value of the assets acquired and liabilities assumed of PalletOne, Inc.
included the following, among others:
We assessed the knowledge, skill, ability, and objectivity of management’s valuation group and evaluated
the work performed.
With the assistance of our fair valuation specialists, we evaluated the reasonableness of the (1) valuation
methodology for the real, personal, and intangible property and (2) discount rate of the intangible property
by:
- Testing the assumptions used considering the past performance of each acquired company and the
Company’s strategic plan going forward.
- Testing the source information underlying the determination of the discount rate and testing the
mathematical accuracy of the calculation.
- Developing a range of independent estimates of the discount rate and comparing to the discount rate
utilized by management.
Evaluated management’s use of experts related to the valuation of certain acquired assets including
qualifications and methodology.
/s/ Deloitte & Touche LLP
Grand Rapids, Michigan
February 23, 2022
We have served as the Company's auditor since 2014.
20
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:
Cash overdraft
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,
61,901,851 and 61,205,780
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total controlling interest shareholders’ equity
Noncontrolling interest
TOTAL SHAREHOLDERS’ EQUITY
December 25,
2021
December 26,
2020
$
286,662 $
4,561
36,495
737,805
416,043
547,277
963,320
4,806
39,827
2,073,476
3,462
19,310
96,703
31,876
315,038
7,369
109,017
163,289
329,698
632,864
24,063
62,199
1,212,113
(623,093)
589,020
3,245,271
$
17,030 $
319,125
289,196
84,853
23,155
42,683
776,042
277,567
76,632
60,964
37,497
1,228,702
$
$
436,507
101
24,308
470,504
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
166,478
69,104
16,549
100
463,749
311,607
61,509
25,266
59,608
921,739
$
— $
—
61,902
243,995
1,678,121
(5,405)
1,978,613
37,956
2,016,569
3,245,271 $
61,206
218,224
1,182,680
(1,794)
1,460,316
22,836
1,483,152
2,404,891
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
See notes to consolidated financial statements.
21
UFP INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(in thousands, except per share data)
NET SALES
COST OF GOODS SOLD
GROSS PROFIT
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
OTHER (GAINS) LOSSES, NET
EARNINGS FROM OPERATIONS
INTEREST EXPENSE
INTEREST AND INVESTMENT INCOME
EQUITY IN EARNINGS OF INVESTEE
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
Year Ended
December 25, December 26, December 28,
2021
2020
2019
$ 8,636,134 $ 5,153,998 $ 4,416,009
7,229,167 4,353,702 3,730,491
685,518
1,406,967
439,047
682,253
1,565
(12,840)
244,906
737,554
8,700
13,814
(4,468)
(6,498)
—
3,902
4,232
11,218
240,674
726,336
58,270
173,972
182,404
552,364
800,296
444,596
9,874
345,826
9,311
(4,468)
—
4,843
340,983
87,101
253,882
(16,724)
535,640 $
(7,104)
246,778 $
(2,754)
179,650
8.61 $
8.59 $
4.00 $
4.00 $
2.91
2.91
$
$
$
OTHER COMPREHENSIVE INCOME:
NET EARNINGS
OTHER COMPREHENSIVE GAIN (LOSS)
COMPREHENSIVE INCOME
LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO
NONCONTROLLING INTEREST
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING
INTEREST
552,364
(5,296)
547,068
253,882
5,967
259,849
182,404
1,513
183,917
(15,039)
(9,976)
(3,218)
$
532,029 $
249,873 $
180,699
See notes to consolidated financial statements.
22
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
$ 60,884 $ 178,540 $ 839,917 $
Capital Earnings
Balance on December 29, 2018
Net earnings
Foreign currency translation adjustment
Unrealized gain (loss) on investment & foreign
currency
Distributions to noncontrolling interest
Additional purchase of noncontrolling interest
Cash dividends - $0.40 per share
Issuance of 33,647 shares under employee stock
purchase plan
Issuance of 309,628 shares under stock grant
programs
Issuance of 181,565 shares under deferred
compensation plan
Expense associated with share-based compensation
arrangements
Accrued expense under deferred compensation
plans
Balance on December 28, 2019
Net earnings
Foreign currency translation adjustment
Unrealized gain on debt securities
Distributions to noncontrolling interest
Noncontrolling interest related to business
combinations
Cash dividends - $0.50 per share
Issuance of 35,133 shares under employee stock
purchase plan
Issuance of 390,720 shares under stock grant
programs
Issuance of 127,735 shares under deferred
compensation plan
Repurchase of 756,397 shares
Expense associated with share-based compensation
arrangements
Accrued expense under deferred compensation
plans
Balance on December 26, 2020
Net earnings
Foreign currency translation adjustment
Unrealized gain on investments and other
Distributions to noncontrolling interest
Noncontrolling interest related to business
combinations
Cash dividends - $0.65 per share
Issuance of 33,104 shares under employee stock
purchase plan
Issuance of 546,235 shares under stock grant
programs
Issuance of 116,732 shares under deferred
compensation plan
Expense associated with share-based compensation
arrangements
Accrued expense under deferred compensation
plans
Balance on December 25, 2021
179,650
(4,737)
(24,549)
34
1,059
310
5,654
4
181
(181)
3,843
7,995
$ 61,409 $ 192,173 $ 995,022 $
246,778
Earnings
Interest
Total
(5,938) $
568
481
15,281 $ 1,088,684
182,404
2,754
1,032
464
(2,143)
(2,338)
481
(2,143)
(7,075)
(24,549)
1,093
5,968
—
3,843
(4,889) $
1,373
1,722
7,995
14,018 $ 1,257,733
253,882
7,104
4,245
2,872
1,722
(933)
(933)
130
(30,669)
(225)
35
1,360
390
12,140
5
128
(756)
(128)
(28,456)
3,905
(95)
(30,669)
1,395
12,535
—
(29,212)
3,905
8,644
$ 61,206 $ 218,224 $ 1,182,680 $
535,640
(40,209)
10
33
2,083
546
117
3,506
(117)
11,071
9,228
$ 61,902 $ 243,995 $ 1,678,121 $
(1,794) $
(2,584)
(1,027)
8,644
22,836 $ 1,483,152
552,364
16,724
(4,269)
(1,685)
(1,027)
(6,750)
(6,750)
6,831
6,831
(40,209)
2,116
4,062
—
11,071
(5,405) $
9,228
37,956 $ 2,016,569
See notes to consolidated financial statements
23
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 on investments and other
Equity in earnings of investee
Net gain on sale and disposition 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 PROVIDED BY 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
Contingent consideration payments 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 (USED IN) PROVIDED BY 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 INVESTING ACTIVITIES
Capital expenditures included in accounts payable
NON-CASH FINANCING ACTIVITIES:
December 25
,
Year Ended
December 26
,
December 28
,
2021
2020
2019
$
552,364
$
253,882
$
182,404
84,184
13,948
11,224
5,653
(4,118)
3,902
(11,992)
—
—
(85,439)
(260,301)
78,060
124,992
512,477
(151,166)
29,973
(475,960)
—
(23,797)
14,882
(5,119)
(611,187)
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)
892,072
(888,695)
(3,176)
—
2,116
(40,209)
(6,750)
—
(364)
(45,006)
(1,669)
(145,385)
436,608
291,223 $
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 $
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
436,507 $
101
436,608 $
168,336 $
330
168,666 $
27,316
882
28,198
286,662 $
4,561
291,223 $
436,507 $
101
436,608 $
168,336
330
168,666
$
$
$
$
$
$
14,077 $
167,043
7,204 $
77,964
8,763
50,224
3,256
—
—
Common stock issued under deferred compensation plans
$
7,487 $
6,870 $
6,229
24
See notes to consolidated financial statements
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.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned
subsidiaries and partnerships. In addition, we consolidate any entity which we own 50% or more and exercise control.
Intercompany transactions and balances have been eliminated.
NONCONTROLLING INTEREST IN SUBSIDIARIES
Noncontrolling interest in results of operations of consolidated subsidiaries represents the noncontrolling
shareholders’ share of the income or loss of various consolidated subsidiaries. The noncontrolling interest reflects the
original investment by these noncontrolling shareholders combined with their proportional share of the earnings or
losses of these subsidiaries, net of distributions paid.
FISCAL YEAR
Our fiscal year is a 52 or 53 week period, ending on the last Saturday of December. Unless otherwise stated, references
to 2021, 2020, and 2019 relate to the fiscal years ended December 25, 2021, December 26, 2020, and December 28,
2019, respectively. Fiscal years 2021, 2020, and 2019 were comprised of 52 weeks.
FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
We follow ASC Topic 820, Fair Value Measurements and Disclosures, which provides a consistent definition of fair
value, focuses on exit price, prioritizes the use of market-based inputs over entity-specific inputs for measuring fair
value and establishes a three-tier hierarchy for fair value measurements. This topic requires fair value measurements
to be classified and disclosed in one of the following three categories:
Level 1 — Financial instruments with unadjusted, quoted prices listed on active market exchanges.
Level 2 — Financial instruments lacking unadjusted, quoted prices from active market exchanges, including
over-the-counter traded financial instruments. Financial instrument values are determined using prices for
recently traded financial instruments with similar underlying terms and direct or indirect observational inputs,
such as interest rates and yield curves at commonly quoted intervals.
Level 3 — Financial instruments not actively traded on a market exchange and there is little, if any, market
activity. Values are determined using significant unobservable inputs or valuation techniques.
Our investment portfolio includes restricted investments within our wholly-owned subsidiary, Ardellis
Insurance Ltd. There are $19.3 million of restricted investments recorded as of December 25, 2021.
25
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 Deductions*
Beginning
Balance
Ending
Balance
Year Ended December 25, 2021:
Allowance for possible losses on accounts receivable
$
4,629 $ 66,883 $ (66,427) $
5,085
Year Ended December 26, 2020:
Allowance for possible losses on accounts receivable
$
4,440 $ 48,954 $ (48,765) $
4,629
Year Ended December 28, 2019:
Allowance for possible losses on accounts receivable
$
2,601 $ 39,481 $ (37,642) $
4,440
*
Includes accounts charged off, discounts given to customers and actual customer returns and allowances.
We record estimated sales returns, discounts, and other applicable adjustments as a reduction of net sales in the same
period revenue is recognized.
Accounts receivable retainage amounts related to long term construction contracts totaled $7.8 million and $8.7
million as of December 25, 2021 and December 26, 2020, respectively. All amounts are expected to be collected
within 18 months. Concentration of accounts receivable related to our two largest customers totaled $87.6 million and
$97.9 million as of December 25, 2021 and December 26, 2020, respectively.
In June 2016, the FASB issued ASU 2016-13, Financial Instrument-Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments (ASU 2016-13), which changes the current incurred loss model to a forward looking
expected credit loss model for most financial assets, such as trade and other receivables, loans and other instruments.
The ASU is effective for fiscal years beginning after December 15, 2019. Entities are required to apply the provisions
of the standard through a cumulative-effect adjustment to retained earnings as of effective date. We have adopted the
new standard as of the beginning of fiscal year 2020 and have concluded the standard does not have a material impact
on our consolidated financial statements and disclosures, accounting processes, and internal controls.
26
INVENTORIES
Inventories are stated at the lower of cost or market. The cost of inventories includes raw materials, direct labor, and
manufacturing overhead. Cost is determined on a weighted average basis. Raw materials consist primarily of
unfinished wood products and other materials expected to be manufactured or treated prior to sale, while finished
goods represent various manufactured and treated wood products ready for sale. We have inventory on consignment
at customer locations valued at $37.8 million as of December 25, 2021 and $20.8 million as of December 26, 2020.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Expenditures for renewals and betterments are capitalized, and
maintenance and repairs are expensed as incurred. Amortization of assets held under finance leases is included in
depreciation and amortized over the shorter of the estimated useful life of the asset or the lease term. Depreciation is
computed principally by the straight-line method over the estimated useful lives of the assets as follows:
Land improvements
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 $6.0 million and $5.3 million as of December 25, 2021, and $5.5 million and $4.9
million as of December 26, 2020, respectively.
LONG-LIVED ASSETS
In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), when an indicator of potential impairment
exists, we evaluate the recoverability of our long-lived assets by determining whether unamortized balances could be
recovered through undiscounted future operating cash flows over the remaining lives of the assets. If the sum of the
expected future cash flows was less than the carrying value of the assets, an impairment loss would be recognized for
the excess of the carrying value over the fair value.
GOODWILL
Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible
assets of acquired businesses. Goodwill and intangible assets deemed to have indefinite lives are not amortized and
are subject to impairment tests at least annually in accordance with ASC 350, Intangibles-Goodwill and Other. We
review the carrying amounts of goodwill and other non-amortizable intangibles by reporting unit to determine if such
assets may be impaired. As of the date of the most recent goodwill impairment test, which utilized data and
assumptions as of September 25, 2021, all other reporting units had a fair value that was substantially in excess of the
carrying value. In the fourth quarter of 2020, we recorded a non-cash goodwill impairment charge of $11.5 million
related to the commercial reporting unit within our construction segment. We believe we have sufficient available
information, both current and historical, to support our assumptions, judgments and estimates used in the goodwill
impairment test.
Our annual testing date for evaluating goodwill and indefinite-lived intangible asset impairment is the first day of our
fourth fiscal quarter for all reporting units. Additionally, we review various triggering events throughout the year to
determine whether a mid-year impairment analysis is required.
FOREIGN CURRENCY
Our foreign operations use the local currency as their functional currency. Accordingly, assets and liabilities are
translated at exchange rates as of the balance sheet date and revenues and expenses are translated using weighted
average rates, with translation adjustments included as a separate component of shareholders’ equity. Gains and losses
arising from re-measuring foreign currency transactions are included in earnings.
27
INSURANCE RESERVES
Our wholly-owned insurance company, Ardellis Insurance Ltd.(“Ardellis”), was incorporated on April 21, 2001 under
the laws of Bermuda and is licensed as a Class 3A insurer under the Insurance Act 1978 of Bermuda. On April 14,
2017 the U.S. Branch of Ardellis Insurance Ltd. was granted its Certificate of Authority to transact property and
casualty insurance lines as an admitted carrier in the State of Michigan.
We are primarily self-insured for certain employee health benefits, and have self-funded retentions for general liability,
automobile liability, property and workers’ compensation. We are fully self-insured for environmental liabilities. The
general liability, automobile liability, property, workers’ compensation, and certain environmental liabilities are
managed through Ardellis; the related assets and liabilities of which are included in the consolidated financial
statements as of December 25, 2021 and December 26, 2020. Our policy is to accrue amounts equal to actuarially
determined or internally computed liabilities. The actuarial and internal valuations are based on historical information
along with certain assumptions about future events. Changes in assumptions for such matters as legal actions, medical
cost trends, and changes in claims experience could cause these estimates to change in the future.
In addition to providing coverage for the Company, Ardellis provides Excess Loss Insurance (primarily medical and
prescription drug) to certain third parties. As of December 25, 2021, Ardellis had 43 such contracts in place. Reserves
associated with these contracts were $7.1 million at December 25, 2021, and $4.5 million at December 26, 2020, and
are accrued based on third party actuarial valuations of the expected future liabilities.
INCOME TAXES
Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis
of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax asset
and liability computations are based on enacted tax laws and rates. Valuation allowances are established when
necessary to reduce deferred income tax assets to the amounts expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change during the period in deferred income tax assets and
liabilities.
REVENUE RECOGNITION
Within the 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 third party. Installation
revenue is recognized upon completion. If we use a third party for installation, the party will act as an agent to us until
completion of the installation. Installation revenue represents an immaterial share of our total net sales.
We utilize rebates, credits, discounts and/or cash-based incentives with certain customers which are accounted
for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers
and reduce revenues recognized. We believe that there will not be significant changes to our estimates of variable
consideration. The allocation of these costs are applied at the invoice level and recognized in conjunction with revenue.
Additionally, returns and refunds are estimated on a historical and expected basis which is a reduction of revenue
recognized.
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
28
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):
December 25,
December 26,
Year Ended
December 28,
FOB Shipping Point Revenue
Construction Contract Revenue
Total Net Sales
$
$
2021
8,512,012 $
124,122
8,636,134 $
2020
2019
2021 vs. 2020
% Change
2020 vs. 2019
% Change
5,025,895 $
128,103
5,153,998 $
4,272,583
143,426
4,416,009
69.4%
(3.1)%
67.6%
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 25, 2021 and December 26,
2020 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 25, December 26,
$
2021
5,602 $
10,744
2020
4,169
11,530
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.
29
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
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
USE OF ACCOUNTING ESTIMATES
December 25, December 26, December 28,
2021
2020
2019
$ 535,640 $ 246,778 $ 179,650
(17,342)
(4,496)
$ 518,298 $ 239,875 $ 175,154
(6,903)
62,209
(2,014)
60,195
159
60,354
61,632
(1,724)
59,908
20
59,928
61,649
(1,543)
60,106
24
60,130
$
$
8.61 $
8.59 $
4.00 $
4.00 $
2.91
2.91
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.
30
B.
FAIR VALUE
We apply the provisions of ASC 820, Fair Value Measurements and Disclosures, to assets and liabilities measured at
fair value. Assets and liabilities measured at fair value are as follows:
December 25, 2021
December 26, 2020
Quoted Prices with
Prices in
Active
Markets
(Level 1) (Level 2)
Inputs
Other
Prices with
Observable Unobservable
Quoted Prices with
Prices in
Active
Prices with
Observable Unobservable
Other
Inputs
(Level 3)
Markets
(Level 1) (Level 2)
Inputs
Inputs
(Level 3)
Total
Total
Money market
funds
Fixed income
funds
Treasury
securities
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
$
19 $ 9,392 $
— $ 9,411 $
19 $ 4,643 $
— $ 4,662
1,668
16,910
— 18,578
246
16,224
— 16,470
342
20,163
—
10,910
1,687
23
146
483
13,249
—
—
—
—
—
—
—
—
—
—
342
— 20,163
—
12,602
3,785
3,785
—
— 10,910
8,088
—
—
—
1,687
23
146
1,440
114
147
—
483
482
— 13,249
10,271
—
—
—
—
—
—
—
—
—
$ 35,441 $ 26,302 $
3,785 $ 65,528 $ 23,138 $ 20,867 $
—
—
— 12,602
2,040
2,040
—
8,088
—
—
—
1,440
114
147
—
482
— 10,271
2,040 $ 46,045
$ 35,441 $ 26,302 $
3,785 $ 65,528 $ 23,138 $ 20,867 $
2,040 $ 46,045
From the assets measured at fair value as of December 25, 2021, listed in the table above, $9.0 million of money
market funds are held in Cash and Cash Equivalents, $36.5 million of mutual funds, equity securities, and alternative
investments are held in Investments, $0.7 million of money market and mutual funds are held in Other Assets for our
deferred compensation plan, and $18.9 million of fixed income funds and $0.4 million of money market funds are
held in Restricted Investments.
We maintain money market, mutual funds, bonds, and/or stocks in our non-qualified deferred compensation plan and
our wholly owned licensed captive insurance company, and assets held in financial institutions. These funds are valued
at prices quoted in an active exchange market and are included in "Cash and Cash Equivalents", "Investments", "Other
Assets", and “Restricted Investments.” We have elected not to apply the fair value option under ASC 825, Financial
Instruments, to any of our financial instruments except for those expressly required by U.S. GAAP.
During 2018, we purchased a private real estate income trust which is valued as a Level 3 asset and is categorized as
an “Alternative Investment.”
In accordance with our investment policy, our wholly-owned company, Ardellis Insurance Ltd. ("Ardellis"), maintains
an investment portfolio, totaling $55.4 million as of December 25, 2021, consisting of domestic and international
stocks, alternative investments, and fixed income bonds.
31
Ardellis’ available for sale investment portfolio, including funds held with the State of Michigan, consists of the
following (in thousands):
December 25, 2021
December 26, 2020
Fixed Income
Treasury Securities
Equity
Mutual Funds
Alternative Investments
Total
Unrealized
Gain
Unrealized
Gain
Fair Value Cost
Cost
$ 18,169 $
Fair Value
409 $ 18,578 $ 15,325 $ 1,145 $ 16,470
—
—
2,815 12,602
9,787
9,665
8,235
2,040
1,904
$ 45,932 $ 9,483 $ 55,415 $ 35,251 $ 5,526 $ 40,777
342
4,967 20,163
3,325 12,547
3,785
342
15,196
9,222
3,003
1,430
136
782
—
—
Our fixed income investments consist of a blend of US Government and Agency bonds and investment grade corporate
bonds with varying maturities. Our equity investments consist of small, mid, and large cap growth and value funds,
as well as international equity. Our alternative investments consist of the private real estate income trust which is
valued as a Level 3 asset. The net pre-tax unrealized gain was $9.5 million for the year ended December 25, 2021.
Carrying amounts above are recorded in the investments and restricted investments line items within the balance sheet
as of December 25, 2021 and December 26, 2020.
32
C.
BUSINESS COMBINATIONS
We completed the following business combinations in fiscal 2021 and 2020, which were accounted for using the
purchase method (in thousands).
Company
Name
Acquisition
Date
December 20, 2021
Purchase Price
$20,854
cash paid for 100%
stock purchase
Intangible
Assets
Net
Tangible
Assets
Operating
Segment
$
11,481 $
9,373
Industrial
Advantage Labels & Packaging,
Inc. (Advantage)
Based in Grand Rapids, Michigan, Advantage provides blank and customized labels,
printers, label applicators and other packaging supplies. Key industries served by the
company include beer and beverage; body armor; food production and processing;
greenhouse and nursery; hobby and craft; manufacturing; and automotive. The company had
trailing 12-month sales through November 2021 of approximately $19.8 million.
November 22, 2021
$11,155
$
cash paid for 70% stock
purchase
9,106 $
2,049
Other
Ficus Pax Private Limited (Ficus) Headquartered in Bangalore, India, Ficus manufactures mixed-material cases and crates,
nail-less plywood boxes, wooden pallets and other packaging products through 10 facilities
located in major industrial markets throughout southern India. Ficus also owns a majority
stake in Wadpack, a manufacturer of corrugated fiber board containers, corrugated pallets
and display solutions. The company had trailing 12-month sales through August 2021 of
approximately $39 million USD.
November 1, 2021
$5,984
cash paid for 100% asset
$
purchase and estimated
contingent consideration
5,681 $
303
Other
Boxpack Packaging (Boxpack) Based near Melbourne, Australia, Boxpack specializes in flexographic and lithographic
cardboard packaging, using the latest CAD design and finishing techniques. Boxpack serves
multiple industries, including food and beverage, confectionary, pharmaceutical, industrial
and agricultural. The company had trailing 12-month sales through June 30, 2021, of $8.2
million AUD.
September 27, 2021
$6,443
cash paid for 100% asset
$
purchase and estimated
contingent consideration
4,039 $
2,404 Construction
Shelter Products, Inc. (Shelter) Based in Haleyville, Alabama, Shelter operates its distribution and logistics business from an
Endurable Building Products, LLC
(Endurable)
87,800 sq.-ft. warehouse that specializes in manufactured housing industry customers.
Shelter’s facility is adjacent to a UFP manufacturing facility that supplies trusses to
manufactured housing builders, and the proximity will enable additional operational
synergies. The Company had sales of approximately $11.4 million in 2020.
April 29, 2021
$10,129
$
cash paid for 100% asset
purchase
7,099 $
3,030 Construction
Based near Minneapolis, Minnesota, Endurable is a leading manufacturer of customized
structural aluminum systems and products for exterior purposes, such as deck framing,
balconies, sunshades, railings and stairs. The company’s trademarked alumiLAST aluminum
deck and balcony systems are known for their low-maintenance design and ease of
installation. Endurable serves general contractors in the multifamily market throughout the
U.S. and had sales of approximately $15 million in 2020.
April 19, 2021
$8,549
$
cash paid for 100% asset
purchase
1,526 $
7,023
Retail
Walnut Hollow Farm, Inc. Walnut Hollow Farm, located in Wisconsin, is engaged in the business of designing,
manufacturing, selling, and distributing wood products, tools, and accessories for the craft
and hobby, outdoor sportsman art, personalized home décor, and hardware categories, with
sales of approximately $11.6 million in 2020.
33
Company
Name
Acquisition
Date
April 12, 2021
Purchase Price
$153,462
$
cash paid for 100% asset
purchase
Intangible
Assets
Net
Tangible
Assets
Operating
Segment
— $
153,462
Retail
Spartanburg Forest Products, Inc. Headquartered in Greer, South Carolina, Spartanburg Forest Products and its affiliates are a
premier wood treating operation in the U.S., with approximately 150 employees and
operations in five states. Its affiliates include Appalachian Forest Products, Innovative
Design Industries, Blue Ridge Wood Preserving, Blue Ridge Wood Products, and Tidewater
Wood Products and had combined sales of approximately $543.0 million in 2020.
March 1, 2021
$4,724
cash paid for 100% asset
$
purchase and estimated
contingent consideration
4,264 $
460
Other
J.C. Gilmore Pty Ltd (Gilmores) Founded in 1988 and operating from its distribution facility in Port Melbourne, Australia,
Gilmores is a leading distributor in the industrial and construction industries of packaging
tapes, stretch films, packaging equipment, strapping, construction protection products and
other items, with 2020 sales of $15 million AUD ($10 million USD).
PalletOne, Inc. (PalletOne)
December 28, 2020
$259,011
cash paid for 100%
stock purchase
$
79,917 $
179,094 Retail/Industrial
Based in Bartow, Florida, PalletOne is a leading manufacturer of new pallets in the U.S.,
with 17 pallet manufacturing facilities in the southern and eastern regions of the country. The
company also supplies other specialized industrial packaging, including custom bins and
crates, and its Sunbelt Forest Products (Sunbelt) subsidiary operates five pressure-treating
facilities in the Southeastern U.S. PalletOne and its affiliates had 2020 sales of $698 million.
November 10, 2020
$21,268
$
cash paid for 100% asset
purchase
11,923 $
9,345 Construction
Atlantic Prefab, Inc.; Exterior
Designs, LLC; and Patriot Building
Systems, LLC
Based in Wilton, New Hampshire, Atlantic Prefab produces prefabricated steel wall panels
and light gauge metal trusses. The company’s steel component and prefinished wall panel
lines are new, value-added product additions for UFP Construction that help shorten project
timelines. Exterior Designs is a leading installer of siding and exterior cladding such as fiber
cement, ACM (aluminum composite material) panels, phenolic panels, and EIFS (exterior
insulation and finish systems). The company is based in Londonderry, New Hampshire, and
serves commercial and multi-family clients throughout the Northeast. Also based in
Londonderry, Patriot Building Systems provides commercial and multi-family framing
services in the Northeast and will focus on markets not currently served by companies of
UFP Industries. The companies had combined annual sales of approximately $28 million.
October 1, 2020
$5,936
cash paid for 100%
stock purchase
$
5,222 $
714
Retail
Fire Retardant Chemical
Technologies, LLC (FRCT)
Founded in 2014 and based in Matthews, North Carolina, FRCT’s business includes a
research and development laboratory specializing in developing and testing a wide range of
high-performance chemicals, including fire retardants and water repellants. The company
had annual sales of approximately $6.4 million.
34
Company
Name
Acquisition
Date
September 30, 2020
Purchase Price
$3,475
cash paid for 50% stock
$
purchase and estimated
contingent consideration
Intangible
Assets
Net
Tangible
Assets
Operating
Segment
7,267 $
(1,369)
Other
Enwrap Logistic & Packaging S.r.l.
(Enwrap)
Enwrap is a newly formed company dedicated to the logistics and packaging business of its
predecessor, Job Service S.p.A. Headquartered in Milan, Italy, Enwrap provides high-value,
mixed material industrial packaging and logistics services through eight locations in Italy.
These locations generated annual sales of approximately $14 million.
July 14, 2020
$18,496
cash paid for 100% asset
$
purchase and estimated
contingent consideration
12,458 $
6,038
Industrial
T&R Lumber Company (T&R) A manufacturer and distributor of a range of products used primarily by nurseries, including
plastic growing containers, pots and trays; wooden stakes; trellises; tree boxes; shipping
racks; and other nursery supplies based in Rancho Cucamonga, California. T&R had annual
sales of approximately $31 million. The acquisition of T&R will allow us to leverage their
expertise using our national manufacturing capacity to grow our agricultural product
offerings and customer base across the country.
March 13, 2020
$22,951
cash paid for 100% asset
$
purchase and estimated
contingent consideration
20,262 $
2,689 Construction
Quest Design & Fabrication and
Quest Architectural Millwork
(Quest)
A designer, fabricator, and installer of premium millwork and case goods for a variety of
commercial uses. Quest had annual sales of approximately $22 million. The acquisition of
Quest expands our architectural millwork capabilities and expertise in our commercial
construction business unit, and will allow us to use our national manufacturing capacity to
grow and diversify our sales to this end market
The intangible assets for each acquisition were finalized and allocated to their respective identifiable intangible asset
and goodwill accounts during 2021, except for our 2021 acquisitions. In aggregate, acquisitions made during 2021
and 2020, contributed approximately $1.2 billion in net sales and $50.5 million in operating profit during 2021.
At December 25, 2021, the amounts assigned to major intangible classes for the business combinations mentioned
above are as follows (in thousands):
Advantage
Ficus
Boxpack
Shelter
Endurable
Walnut Hollow
Gilmores
PalletOne
Atlantic Prefab
Exterior Designs
Patriot Building Systems
FRCT
Enwrap
T&R
Quest
*(estimate)
Non-
Intangibles -
Tax
Customer
— $
—
—
—
—
—
—
—
417
667
306
1,090
Compete
Agreements Patents Relationships Tradename Goodwill Deductible
— $ 11,481 * $ 11,481
— $
$
8,889
—
—
4,672
—
2,694 *
4,039
—
2,019 *
7,099
—
4,617 *
1,526
—
1,263 *
3,876
—
1,938 *
79,917
3,543
5,740
2,640
5,222
6,820
12,458
20,262
8,889 *
1,978 *
2,020 *
2,482 *
263 *
1,938 *
18,089 17,450 44,378
1,356
2,241
1,036
1,962
3,705
4,258
8,041
— $
—
—
—
—
—
—
—
—
—
—
—
790 1,293
—
600
—
—
1,620
2,592
1,188
1,960
558
5,000
10,318
150
240
110
210
474
2,600
1,903
35
The business combinations mentioned above were not significant to our operating results individually or in aggregate,
and thus pro forma results for 2021 and 2020 are not presented.
D.
GOODWILL AND OTHER INTANGIBLE ASSETS
As described in Note M — Segment Reporting, our segment structure is based upon the markets we serve and goodwill
has been allocated to the segments using a relative fair value approach. The changes in the net carrying amount of
goodwill by reporting segment for the years ended December 25, 2021 and December 26, 2020, are as follows (in
thousands):
Retail
Industrial
Constructio
n
All Other
Corporat
e
Total
Balance as of December 28, 2019
2020 Acquisitions
2020 Purchase Accounting Adjustments
2020 Impairments
Foreign Exchange, Net
$ 58,098 $ 81,276 $ 82,911 $ 7,251 $
3,643
202
—
—
6,549
2
—
—
18,902
—
(11,485)
401
4,441
—
—
2
— $
—
—
—
—
229,536
33,535
204
(11,485)
403
Balance as of December 26, 2020
$ 61,943 $ 87,827 $ 90,729 $
11,694 $
— $
252,193
2021 Acquisitions
2021 Purchase Accounting Adjustments
Foreign Exchange, Net
13,115
(1,682)
—
43,006
(2,292)
—
4,502
(6,228)
(3)
13,880
(478)
(975)
—
—
—
74,503
(10,680)
(978)
Balance as of December 25, 2021
$ 73,376 $
128,541 $ 89,000 $
24,121 $
— $
315,038
As of the date of the most recent goodwill impairment test, which utilized data and assumptions as of September 25,
2021, all reporting units had fair values that were substantially in excess of their carrying values. In the prior year, we
experienced significantly lower than expected operating results within our commercial reporting unit, which is within
the Construction segment. It was determined that the carrying value of the reporting unit exceeded its fair value and
we recorded a non-cash goodwill impairment charge of $11.5 million as of December 26, 2020, which represented
the entire amount of the goodwill recorded within the reporting unit, as a result.
Indefinite-lived intangible assets totaled $7.4 million as of December 25, 2021 and December 26, 2020 related to the
commercial unit within the construction segment, the international unit within the all other segment, and the
Deckorators unit within the retail segment.
The following amounts were included in other amortizable intangible assets, net as of December 25, 2021 and
December 26, 2020 (in thousands):
Non-compete agreements
Customer relationships and other
Licensing agreements
Patents
Tradename
Software
Total
$
Assets
(4,160) $
Assets
8,490 $
2021
Accumulated
Amortization Net Value
2020
Accumulated
Amortization Net Value
(2,728) $ 2,119
63,322
76,146
—
—
456
2,084
5,896
25,793
459
664
$ 148,809 $ (39,792) $ 109,017 $ 99,268 $ (27,016) $ 72,252
101,158
4,589
3,221
30,392
959
(25,012)
(4,589)
(1,137)
(4,599)
(295)
(17,021)
(4,589)
(509)
(2,123)
(46)
80,343
4,589
965
8,019
505
4,330 $ 4,847 $
36
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
Patents
Tradename (amortizable)
Software
Estimated Useful Lif
e
3 to 15 years
5 to 15 years
10 years
10 years
5 to 15 years
3 to 5 years
Weighted Average
Amortization Perio
d
7.8 years
9.7 years
10 years
10 years
11 years
3.5 years
Amortization expense of intangibles totaled $13.9 million, $8.7 million and $6.3 million in 2021, 2020 and 2019,
respectively. The estimated amortization expense for intangibles for each of the five succeeding fiscal years is as
follows (in thousands):
2022
2023
2024
2025
2026
Thereafter
Total
E.
DEBT
$
13,734
12,878
12,409
11,901
10,944
47,151
$ 109,017
On November 1, 2018, we entered into a five-year, $375 million unsecured revolving credit facility with a syndicate
of U.S. banks led by JPMorgan Chase Bank, N.A., as administrative agent and Wells Fargo Bank, N.A., as syndication
agent. The facilities include up to $40 million which may be advanced in the form of letters of credit, and up to $100
million (U.S. dollar equivalent) which may be advanced in Canadian dollars, Australian dollars, pounds Sterling,
Euros and such other foreign currencies as may subsequently be agreed upon among the parties. Cash borrowings are
charged interest based upon an index selected by the Company, plus a margin that is determined based upon the index
selected and upon the financial performance of the Company and certain of its subsidiaries. We are charged a facility
fee on the entire amount of the lending commitment, at a per annum rate ranging from 12.5 to 30.0 basis points, also
determined based upon our performance. The facility fee is payable quarterly in arrears. On February 28, 2021, our
credit agreement was amended to increase the availability from $375 million to $550 million by exercising the
accordion feature in the original agreement.
On August 10, 2020, we entered into an unsecured Note Purchase Agreement under which we issued our 3.04% Series
2020 E Senior Notes, due August 10, 2032, in the aggregate principal amount of $50 million, our 3.08% Series 2020
F Senior Notes, due August 10, 2033, in the aggregate principal amount of $50 million, and our 3.15% Series 2020 G
Senior Notes, due August 10, 2035, in the aggregate principal amount of $50 million. Proceeds from the sale of the
Series E, F and G Senior Notes were used to fund the acquisition of PalletOne in January 2021.
Outstanding letters of credit extended on our behalf on December 25, 2021 and December 26, 2020 aggregated $54.2
million and $41.0 million; respectively, which includes approximately $7.1 million related to industrial development
revenue bonds. We had an outstanding balance of $7.8 million and $4.7 million, which includes foreign subsidiary
borrowings, on the revolver at December 25, 2021, and December 26, 2020, respectively. After considering letters of
credit, we had $535.1 million and $363.2 million in remaining availability on the revolver on December 25, 2021, and
December 26, 2020, respectively. Letters of credit have one-year terms, include an automatic renewal clause, and are
charged an annual interest rate of 112.5 basis points, based upon our financial performance.
37
Long-term debt obligations are summarized as follows on December 25, 2021 and December 26, 2020 (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%
Foreign subsidiary borrowings under revolving credit facility, due on November 1, 2023,
interest payable monthly at a floating rate (1.06% on December 25, 2021 and 1.125% on
December 26, 2020)
Series 1999 Industrial Development Revenue Bonds, due on August 1, 2029, interest
payable monthly at a floating rate (0.14% on December 25, 2021 and 0.20% on
December 26, 2020)
Series 2002 Industrial Development Revenue Bonds, due on December 1, 2022, interest
payable monthly at a floating rate (0.18% on December 25, 2021 and 0.22% on
December 26, 2020)
Finance leases and foreign affiliate debt
Less current portion
Less debt issuance costs
Long-term portion
2021
2020
$ 50,000 $ 50,000
50,000
50,000
50,000
50,000
40,000
40,000
35,000
35,000
35,000
35,000
40,000
40,000
7,818
4,715
3,300
3,300
3,700
5,544
3,700
138
320,362
(42,683)
(112)
311,853
(100)
(146)
$
277,567 $
311,607
Financial covenants on the unsecured revolving credit facility and unsecured notes include minimum interest coverage
tests and a maximum leverage ratio. The agreements also restrict the amount of additional indebtedness we may incur
and the amount of assets which may be sold among other industry standard covenants. We were within all of our
lending requirements on December 25, 2021 and December 26, 2020.
On December 25, 2021, the principal maturities of long-term debt and finance lease obligations are as follows (in
thousands):
2022
2023
2024
2025
2026
Thereafter
Total
$
42,683
8,863
40,214
—
302
228,300
$ 320,362
38
On December 25, 2021, the estimated fair value of our long-term debt, including the current portion, was $334.6
million, which was $14.3 million more than the carrying value. The estimated fair value is based on rates anticipated
to be available to us for debt with similar terms and maturities. We consider the valuations of our long-term debt,
including the current portion, to be Level 2 liabilities which rely on quoted prices in markets that are not active or
observable inputs over the full term of the liability.
F.
LEASES
We determine if an arrangement is a lease at inception. We lease certain real estate under non-cancelable
operating lease agreements with typical original terms ranging from one to ten years. We are required to pay real estate
taxes and other occupancy costs under certain leases, which are variable in nature and not included in the right of use
asset or lease liability. Certain leases carry renewal options of five to fifteen years. We believe that future leases will
likely have similar terms. We also lease motor vehicles, equipment, and an aircraft under operating lease agreements
for periods of one to ten years. We do not typically enter into leases with residual value guarantees. There were no
restrictions or covenants imposed by any lease agreements.
We believe finance leases have no significant impact to our consolidated balance sheet and statement of
earnings as of December 25, 2021.
As of December 25, 2021, we have no leases that have not yet commenced that would significantly impact the
rights, obligations, and our financial position.
There were no lease transactions between related parties as of December 25, 2021.
The rates implicit in our leases are primarily not readily available. To determine the discount rate used to present
value the lease payments, we utilize the 7-year treasury note rate plus a blend of rate spreads associated with our
revolver and 10-12-year senior notes along with estimated spreads based on current market conditions. We feel the
determined rate is a reasonable representation of our lease population.
Lease costs under non-cancelable operating leases on December 25, 2021 and December 26, 2020 are as follows
(in thousands):
Operating lease cost
Short-term lease cost
Variable lease cost
Sublease income
Total lease cost
2021
2020
$ 30,054 $ 21,594
2,863
3,985
(1,013)
$ 36,970 $ 27,429
5,264
4,761
(3,109)
The amounts paid for operating leases, included in the measurement of lease liabilities, were $27.4 million in
the year ended December 25, 2021 and $20.0 million in the year ended December 26, 2020. In addition, right-of-use
assets obtained in exchange for new operating lease liabilities were approximately $46.7 million and $12.8 million,
respectively, for the years ended December 25, 2021 and December 29, 2019.
39
Future minimum payments under non-cancelable operating leases on December 25, 2021 are as follows (in
thousands):
Operating
2022
2023
2024
2025
2026
Thereafter
Total minimum lease payments
Less present value discount
Total lease liability
$
Leases
26,378
21,040
15,842
13,164
11,140
27,123
$ 114,687
(14,900)
99,787
$
Rent expense was approximately $40.1 million, $28.4 million, and $29.9 million in 2021, 2020, and 2019,
respectively.
As of December 25, 2021 and December 26, 2020, the weighted average lease term for operating leases was
7.33 years and 6.84 years, respectively. Similarly, the weighted average discount rate for operating leases was 2.87%
and 3.12%, respectively.
G.
DEFERRED COMPENSATION
We have a program whereby certain executives irrevocably elected to defer receipt of certain compensation in 1985
through 1988. Deferred compensation payments to these executives commenced upon their retirement. The remaining
deferred compensation liability on December 25, 2021 and December 26, 2020 was $0.2 million. We purchased life
insurance on these executives, payable to us in amounts which, if assumptions made as to mortality experience, policy
dividends, and other factors are realized, will accumulate cash values adequate to reimburse us for all payments for
insurance and deferred compensation obligations. The investment in life insurance contracts as of December 25, 2021
and December 26, 2020, was $12.7 million and $13.3 million, respectively, and is recorded in “Other Assets” on the
Consolidated Balance Sheet.
We also maintain a non-qualified deferred compensation plan (the "Plan") for the benefit of senior management
employees who may elect to defer a portion of their annual bonus payments and salaries. The Plan provides investment
options similar to our 401(k) plan, including our stock. The investment in our stock is funded by the issuance of shares
to a Rabbi trust, and may only be distributed in kind. Assets held by the Plan totaled approximately $0.7 million and
$0.6 million on December 25, 2021 and December 26, 2020, respectively, and are included in "Other Assets." Related
liabilities totaled $42.1 million and $36.6 million on December 25, 2021 and December 26, 2020, respectively, and
are included in "Other Liabilities" and "Shareholders’ Equity." Assets associated with the Plan are recorded at fair
market value. The related liabilities are also recorded at fair market value, with the exception of obligations associated
with investments in our stock which are recorded at the market value on the date of deferral.
H.
COMMON STOCK
We maintain and administer our shareholder approved Employee Stock Purchase Plan ("Stock Purchase Plan"). The
Stock Purchase Plan allows eligible employees to purchase shares of our stock at a share price equal to 85% of fair
market value on the purchase date. We have expensed the fair value of the compensation associated with these awards,
which approximates the discount. The amount of expense is nominal.
We maintain and administer our shareholder approved Directors’ Retainer Stock Plan ("Stock Retainer Plan"). The
Stock Retainer Plan allows eligible members of the Board of Directors to defer the cash portion of their retainer and
committee fees and receive shares of our stock at the time of or following their retirement, disability or death. The
number of shares to be received is equal to the amount of the cash portion of their retainer and committee fees deferred
multiplied by 110%, divided by the fair market value of a share of our stock at the time of deferral. The number of
40
units is increased by the amount of dividends paid on our common stock. The units are immediately vested as of the
grant date, since they are considered payment for services rendered quarterly. We recognized expense for this plan of
$1.7 million in 2021, and $1.8 million in both 2020 and 2019. Effective January 1, 2017, this plan was amended to
allow directors to defer payment of the annual retainer paid in the form of our common stock. The number of shares
to be received for their portion of the retainer that is deferred is equal to the amount of shares plus the number of
shares attributable to cash dividends payable on those deferred shares.
Finally, we maintain and administer our shareholder approved Long Term Stock Incentive Plan (the "LTSIP”). The
LTSIP provides for the grant of stock options, stock appreciation rights, restricted stock, performance shares and other
stock-based awards.
Executive Stock Match awards are granted in the year following the requisite service period, which begins at the
beginning of each fiscal year, and fully vest on the fifth anniversary of the grant date.
There is no unrecognized compensation expense remaining for stock options in 2021, 2020, and 2019.
Below is a summary of common stock issuances for 2021 and 2020:
December 25, 2021
Shares issued under the deferred compensation plans
117
$
64.14
December 26, 2020
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 plan
Forfeitures
Total shares issued under stock grant programs
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 grants plan
Forfeitures
Total shares issued under stock grant programs
Common
Stock
33
$
$
59.84
Average
Share
Price
75.18
78.37
72.66
59.56
60.24
Average
Share
Price
46.71
48.10
25.31
47.52
47.60
$
44.96
2
5
487
77
(24)
547
3
46
271
79
(9)
390
Common
Stock
35
$
Shares issued under the deferred compensation plans
128
$
53.79
41
A summary of the nonvested restricted stock awards granted under the LTSIP is as follows:
Nonvested at December 29, 2018
Granted
Vested
Forfeited
Nonvested at December 28, 2019
Granted
Vested
Forfeited
Nonvested at December 26, 2020
Granted
Vested
Forfeited
Nonvested at December 25, 2021
Weighted-
Average Grant
Date Fair Value
Weighted-
Unrecognized Average
Compensation Period to
Recognize
Expense
7.6 1.12 years
Expense
(in millions)
Restricted
Awards
1,160,079 $
318,496
(224,894)
(50,786)
1,202,895 $
348,016
(177,790)
(9,327)
1,363,794 $
560,516
(274,271)
(23,007)
1,627,032 $
23.32 $
32.60
23.42
24.18
29.68 $
47.60
22.69
33.46
35.14 $
60.24
26.50
39.68
45.23 $
7.9 0.86 years
6.3 0.62 years
6.6 0.43 years
Under the Stock Purchase Plan and LTSIP, we recognized share-based compensation expense of $11.2 million, $4.0
million, and $4.0 million and the related total income tax benefits of $2.7 million, $1.0 million, and $0.8 million in
2021, 2020 and 2019, respectively.
For the year-ended December 25, 2021, we determined that $60 million of share-based bonus awards, representing
751,978 shares, will be awarded to qualified employees as it relates to the company’s 2021 performance and granted
in 2022. Awards granted generally vest after a period of three, five or eight years from the grant date. In addition to
the share-based bonus awards, certain employees are eligible to receive performance units equivalent to $2.3 million,
or 28,866 shares of stock, if certain performance metrics are achieved after three years. As of December 25, 2021 and
December 26, 2020, we recognized approximately $11.5 million and $4 million, respectively, of compensation
expense related to share-based bonus awards.
In 2021, 2020 and 2019, cash received from share issuances under our plans was $2.1 million, $1.4 million and $1.1
million, respectively.
Effective February 15, 2022, our Board authorized an additional 1.5 million shares to be repurchased under our
existing share repurchase program. We repurchased no shares in 2021 and 756,397 shares in 2020 under this program.
Following the most recent authorization, the cumulative total authorized shares available for repurchase is
approximately 2.6 million shares through the period ending February 3, 2023.
I.
RETIREMENT PLANS
We have a profit sharing and 401(k) plan for the benefit of substantially all of our employees, excluding the employees
of certain wholly-owned subsidiaries. Amounts contributed to the plan are made at the discretion of the Board of
Directors. We matched 25% of employee contributions in 2021, 2020, and 2019, on a discretionary basis, totaling
$9.2 million, $7.2 million, and $6.5 million respectively. Included within the total employee matched contribution
was an additional matched contribution for hourly employees of $3.7 million, $2.9 million and $2.6 million for 2021,
2020 and 2019, respectively, based on meeting certain performance goals during those years. The basis for matching
contributions may not exceed the lesser of 6% of the employee’s annual compensation or the IRS limitation.
We maintain a retirement plan for certain officers of the Company (who have at least 20 years of service with the
Company and at least 10 years of service as an officer) whereby we will pay, upon retirement, certain benefits
including health care benefits, for a specified period of time if certain eligibility requirements are met. Approximately
$13.1 million and $11.8 million are accrued in “Other Liabilities” for this plan on December 25, 2021 and December
26, 2020, respectively.
42
J.
INCOME TAXES
Income tax provisions for the years ended December 25, 2021, December 26, 2020, and December 28, 2019 are
summarized as follows (in thousands):
2021
2020
2019
Currently Payable:
Federal
State and local
Foreign
Net Deferred:
Federal
State and local
Foreign
Total income tax expense
$ 115,077 $ 59,055 $ 35,267
10,071
5,834
51,172
30,441
21,095
166,613
16,709
8,601
84,365
6,242
118
999
7,359
6,895
805
(602)
7,098
$ 173,972 $ 87,101 $ 58,270
2,292
(1,518)
1,962
2,736
The components of earnings before income taxes consist of the following:
2021
2020
2019
U.S.
Foreign
Total
$ 645,316 $ 308,167 $ 220,532
20,142
$ 726,336 $ 340,983 $ 240,674
32,816
81,020
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
Effective income tax rate
2021
21.0 %
3.3
n/a
(0.6)
(0.1)
(0.4)
0.7
23.9 %
2020
21.0 %
3.4
n/a
(0.9)
(0.1)
0.6
1.5
25.5 %
2019
21.0 %
3.9
(0.1)
(1.3)
(0.1)
0.5
0.3
24.2 %
43
Temporary differences which give rise to deferred income tax assets and (liabilities) on December 25, 2021 and
December 26, 2020 are as follows (in thousands):
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
$
2021
27,543 $ 23,236
19,376
24,627
6,463
5,502
527
527
391
450
1,633
2,007
1,630
1,446
3,071
5,735
5,233
8,483
64,810
73,070
(3,952)
(4,044)
60,766
69,118
(41,403)
(64,387)
(22,840)
(38,367)
(19,376)
(23,866)
(83,619)
(126,620)
$ (57,502) $ (22,853)
As of December 25, 2021, we had federal, state and foreign net operating loss carryforwards of $5.5 million and state
tax credit carryforwards of $0.5 million, which will expire at various dates.
The NOL and credit carryforwards expire as follows:
Net Operating Losses
Tax Credits
2022 - 2026
2027 - 2031
2032 - 2036
2037 - 2041
Thereafter
Total
State
Foreign U.S.
U.S.
$
— $ 536 $
— $
—
—
790
—
436
670
808
438
$ 790 $ 2,352 $ 2,360 $
1,424
106
—
294
State
—
— $
—
—
450
—
—
—
—
—
— $ 450
As of December 25, 2021, we believe that it is more likely than not that the benefit from certain state and
foreign NOL carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance
of $3.4 million against the various NOLs. Furthermore, there is a valuation allowance of $0.5 million against a capital
loss carryforward we have for a wholly-owned subsidiary, UFP Canada, Inc. Based upon the business activity and the
nature of the assets of this subsidiary, our ability to realize a future benefit from this carryforward is doubtful. The
capital loss has an unlimited carryforward and therefore will not expire unless there is a change in control of the
subsidiary.
K.
ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES
ASC 740, Income Taxes (“ASC 740”) clarifies the accounting for income taxes by prescribing the minimum
recognition threshold a tax position is required to meet before being recognized in the financial statements. ASC 740
also provides guidance on derecognition, measurement, classification, interest and penalties, and disclosure
requirements.
44
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
2021
2020
2019
Gross unrecognized tax benefits beginning of year
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
$ 3,892 $ 4,166 $ 4,378
(129)
768
(851)
$ 3,603 $ 3,892 $ 4,166
437
839
(1,565)
(82)
730
(922)
Our effective tax rate would have been affected by the unrecognized tax benefits had this amount been recognized as
a reduction to income tax expense.
We recognized interest and penalties for unrecognized tax benefits in our provision for income taxes. The liability for
unrecognized tax benefits included accrued interest and penalties of $0.5 million for each of the years December 25,
2021, December 26, 2020, and December 28, 2019.
We file income tax returns in the United States and in various state, local and foreign jurisdictions. The federal and a
majority of state and foreign jurisdictions are no longer subject to income tax examinations for years before 2017. A
number of routine state and local examinations are currently ongoing. Due to the potential for resolution of state
examinations, the expiration of various statutes of limitation, and new positions that may be taken, it is reasonably
possible that the amount of unrecognized tax benefits in the next twelve months $1.1 million.
L.
COMMITMENTS, CONTINGENCIES, AND GUARANTEES
We are self-insured for environmental impairment liability, including certain liabilities which are insured through a
wholly owned subsidiary, Ardellis Insurance Ltd., a licensed captive insurance company.
In addition, on December 25, 2021, we were parties either as plaintiff or defendant to a number of lawsuits and claims
arising through the normal course of our business. In the opinion of management, our consolidated financial statements
will not be materially affected by the outcome of these contingencies and claims.
On December 25, 2021, we had outstanding purchase commitments on commenced capital projects of approximately
$52.7 million.
We provide a variety of warranties for products we manufacture. Historically, warranty claims have not been material.
We distribute products manufactured by other companies, some of which are no longer in business. While we do not
warrant these products, we have received claims as a distributor of these products when the manufacturer no longer
exists or has the ability to pay. Historically, these costs have not had a material effect on our consolidated financial
statements.
As part of our operations, we supply building materials and labor to site-built construction projects or we jointly bid
on contracts with framing companies for such projects. In some instances we are required to post payment and
performance bonds to insure the project owner that the products and installation services are completed in accordance
with our contractual obligations. We have agreed to indemnify the surety for claims made against the bonds. As of
December 25, 2021, we had approximately $31.5 million in outstanding payment and performance bonds for open
projects. We had approximately $10.7 million in payment and performance bonds outstanding for completed projects
which are still under warranty.
On December 25, 2021, we had outstanding letters of credit totaling $54.2 million, primarily related to certain
insurance contracts and industrial development revenue bonds described further below.
In lieu of cash deposits, we provide irrevocable letters of credit in favor of our insurers and other lenders to guarantee
our performance under certain contracts. We currently have irrevocable letters of credit outstanding totaling
approximately $47.1 million for these types of arrangements. We have reserves recorded on our balance sheet, in
accrued liabilities, that reflect our expected future liabilities under these arrangements.
45
We are required to provide irrevocable letters of credit in favor of the bond trustees for all industrial development
revenue bonds that have been issued. These letters of credit guarantee principal and interest payments to the
bondholders. We currently have irrevocable letters of credit outstanding totaling approximately $7.1 million related
to our outstanding industrial development revenue bonds. These letters of credit have varying terms but may be
renewed at the option of the issuing banks.
Certain wholly owned domestic subsidiaries have guaranteed the indebtedness of UFP Industries, Inc. in certain debt
agreements, including the Series 2012, 2018 and 2020 Senior Notes and our revolving credit facility. The maximum
exposure of these guarantees is limited to the indebtedness outstanding under these debt arrangements and this
exposure will expire concurrent with the expiration of the debt agreements.
We did not enter into any new guarantee arrangements during 2021 which would require us to recognize a liability on
our balance sheet.
M.
SEGMENT REPORTING
ASC 280, Segment Reporting (“ASC 280”), defines operating segments as components of an enterprise about which
separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
We operate manufacturing, treating and distribution facilities internationally, but primarily in the United States. Our
business segments consist of UFP Retail Solutions, UFP Industrial and UFP Construction and align with the end
markets we serve. This segment structure allows for a specialized and consistent sales approach among Company
operations, efficient use of resources and capital, and quicker introduction of new products and services. We manage
the operations of our individual locations primarily through a market-centered reporting structure under which each
location is included in a business unit and business units are included in our Retail, Industrial, and Construction
segments. Two customers, The Home Depot and Lowes, accounted for approximately 16% and 10%, respectively, of
our total net sales in fiscal 2021. These customers accounted for approximately 24% and 4%, respectively, of our total
net sales in fiscal 2020 and 19% and 4%, respectively, in 2019.
The exception to this market-centered reporting and management structure is our International segment, which
comprises our Mexico, Canada, Europe, India, and Australia operations and sales and buying offices in other parts of
the world and our Ardellis segment, which represents our wholly owned fully licensed captive insurance company
based in Bermuda. Our International and Ardellis segments do not meet the quantitative thresholds in order to be
separately reported and accordingly, the International and Ardellis segments have been aggregated in the “All Other”
segment for reporting purposes.
46
“Corporate” includes purchasing, transportation and administrative functions that serve our operating segments.
Operating results of Corporate primarily consist net sales to external customers initiated by UFP Purchasing and UFP
Transportation and over (under) allocated costs. The operating results of UFP Real Estate, Inc., which owns and leases
real estate, and UFP Transportation Ltd., which owns, leases and operates transportation equipment, are also included
in the Corporate column. Inter-company lease and service charges are assessed to our operating segments for the use
of these assets and services at fair market value rates. Total assets in the Corporate column include unallocated cash
and cash equivalents, certain prepaid assets, certain property, equipment and other assets pertaining to the centralized
activities of Corporate, UFP Real Estate, Inc., UFP Transportation Ltd, and UFP Purchasing.
Retail
Industrial
Construction Other
Corporate
Total
2021
All
Net sales to outside customers $ 3,418,337 $ 2,148,142 $ 2,698,434 $ 362,473 $
Intersegment net sales
Interest expense
Amortization expense
Depreciation expense
Segment earnings before
income taxes
Segment assets
Capital expenditures
455,874
184
1,336
2,094
214,400
98
2,780
16,955
85,954
12
6,093
26,219
82,026
1
3,525
13,151
80,905
343,363
5,140
264,958
741,672
42,652
264,238
736,157
22,344
124,790
844,189
40,408
8,748 $ 8,636,134
—
13,814
13,948
84,184
(838,254)
13,519
214
25,765
(8,555)
579,890
40,622
726,336
3,245,271
151,166
Retail
Industrial
Construction Other
Corporate
Total
2020
All
Net sales to outside customers $ 2,167,122 $ 1,072,117 $ 1,695,684 $ 217,094 $
Intersegment net sales
Interest expense
Amortization expense
Depreciation expense
Segment earnings before
income taxes
Segment assets
Capital expenditures
283,689
90
877
1,619
142,839
2
1,482
11,675
45,217
22
4,159
15,163
68,294
—
2,152
12,123
38,333
196,856
2,258
155,364
510,464
16,277
83,430
416,487
21,141
69,092
510,972
16,902
1,981 $ 5,153,998
—
9,311
8,716
63,964
(540,039)
9,197
46
23,384
(5,236)
770,112
32,604
340,983
2,404,891
89,182
Retail
Industrial
Construction Other
Corporate
Total
2019
All
Net sales to outside customers $ 1,498,710 $ 1,085,635 $ 1,637,156 $ 193,785 $
Intersegment net sales
Interest expense
Amortization expense
Depreciation expense
Segment earnings before
income taxes
Segment assets
Capital expenditures
200,426
97
747
1,532
135,705
—
1,380
11,041
45,010
108
3,034
14,340
56,116
16
1,164
11,465
22,025
136,990
2,150
61,708
402,221
15,502
82,913
377,329
20,134
82,407
522,638
16,097
723 $ 4,416,009
—
8,700
6,325
60,494
(437,257)
8,479
—
22,116
(8,379)
450,299
31,050
240,674
1,889,477
84,933
47
Information regarding principal geographic areas was as follows (in thousands):
2021
Long-Lived
Tangible
2020
Long-Lived
Tangible
2019
Long-Lived
Tangible
United States
Foreign
Total
Assets
Net Sales
Net Sales
$ 8,395,737 $ 679,757 $ 5,022,014 $ 478,325 $ 4,308,618 $ 469,605
36,878
$ 8,636,134 $ 734,630 $ 5,153,998 $ 514,705 $ 4,416,009 $ 506,483
Net Sales
131,984
107,391
240,397
36,380
54,873
Assets
Assets
48
The following table presents, for the periods indicated, our disaggregated net sales (in thousands) by business unit for
each segment and our percentage of value-added and commodity-based sales to total net sales by segment.
Year Ended
December 25, December 26, December 28,
2021
2020
2019
Retail
Deckorators
Prowood
Outdoor Essentials
Sunbelt
UFP Edge
Handprint
Retail Building Materials
Other
Total Retail
Industrial
North Industrial
Southeast Industrial
Southwest Industrial
West Industrial
PalletOne
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
$ 248,765 $ 219,930 $ 185,221
786,720
227,767
—
95,608
52,553
149,153
1,688
$ 3,418,337 $ 2,167,122 $ 1,498,710
1,215,201
299,684
—
114,987
88,351
225,253
3,716
1,349,901
392,826
773,909
148,927
101,090
395,894
7,025
$ 615,092 $ 385,132 $ 376,515
255,419
241,774
197,686
—
14,241
$ 2,148,142 $ 1,072,117 $ 1,085,635
229,316
238,643
206,022
—
13,004
395,069
400,515
363,300
355,347
18,819
$ 1,098,905 $ 597,017 $ 479,927
708,767
290,785
157,677
$ 2,698,434 $ 1,695,684 $ 1,637,156
1,190,393
259,360
149,776
725,899
221,988
150,780
$ 362,473 $ 217,094 $ 193,785
$
8,748 $
1,981 $
723
$ 8,636,134 $ 5,153,998 $ 4,416,009
43.2%
67.7%
73.0%
74.9%
59.7%
56.8%
32.3%
27.0%
25.1%
40.3%
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%
49
N.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth selected financial information for all of the quarters, consisting of 13 weeks during
the years ended December 25, 2021 and December 26, 2020, respectively, (in thousands, except per share data):
First
Second
Third
Fourth
2021
2020
2021
2020
2021
2020
2021
2020
1,825,004 $
1,032,062 $
2,700,541 $
1,242,001 $
2,093,784 $
1,486,227 $
2,016,805 $
1,393,708
286,554
167,236
421,294
204,931
327,555
241,074
371,564
187,055
104,251
40,570
175,360
69,694
125,747
78,861
147,006
64,757
103,311
40,159
173,382
66,463
121,041
77,204
137,906
62,952
1.67
0.65
2.79
1.08
1.94
1.25
2.21
1.02
1.67
0.65
2.78
1.08
1.94
1.25
2.21
1.02
$
Net sales
Gross
profit
Net
earnings
Net
earnings
attributabl
e to
controlling
interest
Basic
earnings
per share
Diluted
earnings
per share
O.
SUBSEQUENT EVENTS
On December 27, 2021, we closed on an agreement to purchase 100 percent of the equity of Ultra Aluminum
Manufacturing, Inc. (Ultra) located in Howell, Michigan for approximately $26.8 million. Ultra designs and produces
an extensive selection of ornamental aluminum fence and railing products for contractors, landscapers, fence dealers
and wholesalers. At this time the net tangible assets and intangible assets acquired cannot be disclosed as these are
pending final valuations. Initial estimates of Ultra‘s identifiable intangibles, goodwill, and deferred taxes have been
made, however, the amounts will be finalized in 2022.
Effective February 15, 2022, our Board authorized an additional 1.5 million shares to be repurchased under our
existing share repurchase program. Following the most recent authorization, the cumulative total authorized shares
available for repurchase is approximately 2.6 million shares through the period ending February 3, 2023.
50
MARKET INFORMATION FOR OUR COMMON STOCK
Our common stock trades on The Nasdaq Stock Market (“NASDAQ”) under the symbol UFPI.
STOCK PERFORMANCE GRAPH
The following stock price performance graph compares the annual percentage change in the cumulative total return
on our common stock with the cumulative total returns of companies comprising the NASDAQ US Benchmark TR
index and an industry peer group we selected. The NASDAQ US Benchmark TR index replaces the NASDAQ Stock
Market (US Companies) Index in this analysis and going forward, as the CRSP Index data is no longer accessible.
The CRSP indexes has been included with data through 2020. The graph assumes an investment of $100 on
December 31, 2016, and reinvestment of dividends in all cases.
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
December 2021
300.00
250.00
200.00
150.00
100.00
50.00
0.00
12/31/2016
12/30/2017
12/29/2018
12/28/2019
12/26/2020
12/25/2021
UFP Industries, Inc.
NASDAQ Stock Market (US Companies)
NASDAQ US Benchmark TR Index
Peer Group
The companies included in our self-determined industry peer group are as follows:
American Woodmark Corporation
Louisiana-Pacific Corporation
BlueLinx Holdings, Inc.
Boise Cascade Company
Builders FirstSource, Inc.
Cornerstone Building Brands, Inc.
Gibraltar Industries, Inc.
Greif, Inc.
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.
51
DIRECTORS AND EXECUTIVE OFFICERS
BOARD OF DIRECTORS
SECTION 16 OFFICERS
William G. Currie
Chairman of the Board
UFP Industries, Inc.
Matthew J. Missad
Chief Executive Officer
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
52
ANNUAL MEETING
SHAREHOLDER INFORMATION
The 2022 Annual Shareholder’s Meeting of UFP Industries, Inc. will be held at 8:30 a.m. on April 20, 2022, at 2880
East Beltline Lane NE, Grand Rapids, MI 49525.
SHAREHOLDER INFORMATION
Shares of our stock are traded under the symbol UFPI on the NASDAQ Stock Market. Our 10-K report, filed with the
Securities and Exchange Commission, will be provided free of charge to any shareholder upon written request. For
more information contact:
Investor Relations Department
UFP Industries, Inc.
2801 East Beltline NE
Grand Rapids, MI 49525
Telephone: (616) 364-6161
Web: www.ufpi.com
SECURITIES COUNSEL
Varnum, LLP
Grand Rapids, MI
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Grand Rapids, MI
TRANSFER AGENT/SHAREHOLDER INQUIRIES
American Stock Transfer & Trust Company serves as the transfer agent for the Corporation. Inquiries relating to stock
transfers, changes of ownership, lost or stolen stock certificates, changes of address, and dividend payments should
be addressed to:
American Stock Transfer & Trust Co.
6201 15th Ave
Brooklyn, NY 11219
Telephone: (800) 937-5449
UFP INDUSTRIES®, INC., CORPORATE HEADQUARTERS
2801 East Beltline NE
Grand Rapids, MI 49525
Telephone: (616) 364-6161
Facsimile: (616) 364-5558
53
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