UFP Industries Reports Record Second Quarter Results

Rhea-AI Summary

UFP Industries reported record net sales of $2.7 billion for Q2 2021, a 117% increase year-over-year, with earnings rising 161% to $173 million. This growth was driven by a 70% increase in selling prices, with acquisitions contributing $455 million to sales. The EPS rose to $2.78 from $1.08. Despite challenges from lumber price fluctuations, effective inventory management and a diversified business model helped mitigate impacts. SG&A expenses grew by 62% largely due to acquisitions, but improved as a percentage of gross profit from 56% to 44%.

Positive

• Net sales of $2.7 billion increased by 117%, driven by a 70% rise in selling prices and acquisitions contributing $455 million.
• Earnings attributable to controlling interest rose 161% to $173 million.
• EPS increased to $2.78 from $1.08, reflecting strong operational performance.
• Adjusted EBITDA rose by 137% to $261.5 million, with an adjusted EBITDA margin of 9.7%.
• UFP Industries maintained a strong liquidity position of $288 million despite significant investments in working capital.

Negative

• SG&A expenses increased by nearly $71 million, or 62%, impacting profitability.
• A lower of cost or net realizable value reserve recorded reduced inventory value and gross profits by approximately $23 million.
• Net debt increased to $562 million from a net cash position of $37 million in the prior year due to acquisitions and high working capital needs.

– Net sales increase 117 percent, earnings increase 161 percent –

GRAND RAPIDS, Mich., July 21, 2021 (GLOBE NEWSWIRE) -- UFP Industries, Inc. (Nasdaq: UFPI) today announced record net sales of $2.7 billion for the second quarter of 2021, a 117 percent increase over the second quarter of 2020, and record net earnings attributable to controlling interest of $173 million, a 161 percent increase over the same period of 2020. The company also reported record EPS of $2.78 per diluted share compared to $1.08 in the second quarter of last year. Recent acquisitions contributed $455 million to net sales and $0.17 to EPS.

“In the last year and a half, UFP Industries has been tested by an unprecedented economic disruption and the most turbulent supply and pricing changes in our industry’s history. Despite those challenges, we have continued to improve our business and serve customers without disruption,” said CEO Matthew J. Missad. “We continue to break records with our financial performance, a feat I attribute to the hard work of our employees, our new market-focused organizational structure, and our balanced business model, which allows us to sell into a variety of diverse markets. Another key contributor to our success is our improved pricing model and managed inventory programs, which allow us to mitigate the impact of lumber market fluctuations like those we experienced during the second quarter.”  

Second Quarter 2021 Highlights (comparisons on a year-over-year basis):

• Net sales of $2.7 billion increased 117 percent due to a 70 percent increase in selling prices, a 36 percent unit increase from acquisitions, and an 11 percent increase in organic unit sales.
• Earnings from operations of $236.9 million increased 157 percent, including the impact of an inventory valuation reserve. Management evaluated the impact of falling lumber prices on its products sold with a variable price tied to the lumber market, primarily in its ProWood and Sunbelt wood pressure-treating operations. As a result of its evaluation, a lower of cost or net realizable value reserve was recorded, which reduced the value of inventory and gross profits by approximately $23 million. The company’s vendor-managed inventory programs and ability to shift lumber inventory to business units with high demand and volume requirements helped mitigate the impact of the decline in prices on variable-priced products, particularly in its ProWood business unit.
• An increase in SG&A of nearly $71 million, or 62 percent, is largely attributable to recent acquisitions ($15 million, including amortization expense of $1.5 million) and increases in bonus and sales compensation resulting from increased profitability (up $33 million and $9 million, respectively, over 2020). SG&A as a percentage of gross profit improved from 56 percent in 2020 to 44 percent in 2021, as the company continues to focus on leveraging its cost structure as it grows.
• New product sales of $232.1 million increased 61 percent.
• Adjusted EBITDA of $261.5 million increased 137 percent and the adjusted EBITDA margin expanded by 80 basis points to 9.7 percent.
  

UFP Industries maintains a strong balance sheet with liquidity of approximately $288 million at the end of the second quarter despite an increase in our seasonal investment in net working capital of $444 million, which resulted from unprecedentedly high lumber prices and market demand. Net debt increased to $562 million from a net cash position of $37 million at the end of the second quarter of 2020, primarily due to these factors and the acquisitions of PalletOne and Spartanburg Forest Products. Management anticipates that as lumber prices and seasonal demand normalize, the increase in net working capital will be converted to cash, providing significant capital available to pursue growth opportunities and returns to shareholders through its dividend and share repurchase activities.

“We remain optimistic about the rest of this year and our prospects in 2022,” said Missad. “We expect market conditions to normalize during the second half of 2021. While falling lumber prices and more normalized demand create challenging year-over-year profitability comparisons for our retail segment, the stabilized lumber market should benefit our industrial and construction segments. Furthermore, we expect all of our segments to benefit from more stable pricing in 2022. In addition, our industrial and retail segments should continue to benefit from the integration of our recent acquisitions of PalletOne and its subsidiary, Sunbelt Forest Products, as well as Spartanburg Forest Products.”

By business segment, the company reported the following second quarter 2021 results:

UFP Retail Solutions

• $1.26 billion in net sales, up 107 percent over the second quarter of 2020 due to a 59 percent increase in selling prices and a 48 percent unit increase due to the acquisitions of Sunbelt Forest Products and Spartanburg Forest Products. Organic unit sales fell 4 percent due to a 17 percent decline in the ProWood business unit. Organic growth was achieved by UFP-Edge (up 27 percent), Deckorators (up 11 percent), and Outdoor Essentials (up 6 percent), due in part to expanded operational capacity. Additional capacity for each of these product lines is expected to come online in 2022. New product sales grew 32 percent, driven by UFP-Edge shiplap and trim, ProWood Fire Retardant treated lumber, and Outdoor Essentials fencing and picnic tables.
• Gross profit dollars for the retail segment grew 47 percent. Acquisitions contributed approximately $3.5 million, or 4 percent, to the increase and were significantly impacted by the inventory valuation reserve.

UFP Industrial

• $611 million in net sales, up 172 percent from the second quarter of 2020, reflecting in part the benefits of reopening the U.S. economy after pandemic-related closures. Unit sales increased 73 percent and selling prices increased 99 percent. Organic growth accounted for 26 percent of the unit sales growth; the acquisitions of PalletOne and T&R Lumber accounted for 47 percent. New product sales grew 192 percent from the second quarter of 2020.
• Gross profit for the segment rose 262 percent, exceeding unit sales growth of 73 percent, due to the company’s focus on adding value-added products and the significant improvement in unit sales, which allows the company to better leverage fixed costs and include the impact of higher lumber, labor, and transportation costs in its selling prices. Acquisitions contributed over $23 million, or 62 percent, to the increase in gross profit.

UFP Construction

• $739 million in net sales, up 106 percent over the second quarter of 2020, due to a 29 percent increase in unit sales and a 77 percent increase in selling prices. Unit sales to factory-built and site-built housing customers rose 56 percent and 32 percent, respectively. Unit sales to commercial customers improved, rising 11 percent. New product sales increased 184 percent from the prior comparative quarterly period.
• Gross profit for the construction segment grew 118 percent over the second quarter of 2020, primarily as a result of significantly improved unit sales and the company’s ability to better leverage fixed costs and include the impact of higher lumber, labor, and transportation costs in its selling prices.

CONFERENCE CALL
UFP Industries will conduct a conference call to discuss information included in this news release and related matters at 4:30 p.m. ET on Wednesday, July 21, 2021. The call will be hosted by CEO Matthew J. Missad and CFO Michael Cole, and will be available for analysts and institutional investors domestically at 866-518-4547 and internationally at 213-660-0879. Use conference pass code 5780277. The conference call will be available simultaneously and in its entirety to all interested investors and news media through a webcast at http://www.ufpi.com. A replay of the call will be available through July 23, 2021, at 855-859-2056, 404-537-3406 or 800-585-8367.

UFP Industries, Inc.

UFP Industries is a holding company whose operating subsidiaries – UFP Industrial, UFP Construction and UFP Retail Solutions – manufacture, distribute and sell a wide variety of value-added products used in residential and commercial construction, packaging and other industrial applications worldwide. Founded in 1955, the company is headquartered in Grand Rapids, Mich., with affiliates in North America, Europe, Asia and Australia. For more about UFP Industries, go to www.ufpi.com.

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the markets we serve, the economy and the Company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” “likely,” “plans,” “projects,” “should,” variations of such words, and similar expressions identify such forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. The Company does not undertake to update forward-looking statements to reflect facts, circumstances, events, or assumptions that occur after the date the forward-looking statements are made. Actual results could differ materially from those included in such forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty. Among the factors that could cause actual results to differ materially from forward-looking statements are the following: fluctuations in the price of lumber; adverse or unusual weather conditions; adverse economic conditions in the markets we serve; government regulations, particularly involving environmental and safety regulations; and our ability to make successful business acquisitions. Certain of these risk factors as well as other risk factors and additional information are included in the Company's reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission.

Non-GAAP Financial Information
This release includes certain financial information not prepared in accordance with U.S. GAAP. Because not all companies calculate non-GAAP financial information identically (or at all), the presentations herein may not be comparable to other similarly titled measures used by other companies. Management considers Adjusted EBITDA, a non-GAAP measure, an alternative performance measure which may provide useful information to investors.

Net earnings
Net earnings refers to net earnings attributable to controlling interest unless specifically noted.

---------------AT THE COMPANY---------------

Dick Gauthier
VP, Business Outreach
(616) 365-1555

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED
JUNE 2021/2020
		Quarter Period														Year to Date
(In thousands, except per share data)		2021							2020							2021							2020
NET SALES		$	2,700,541			100.0	%		$	1,242,001			100.0	%		$	4,525,545			100.0	%		$	2,274,063			100.0	%
COST OF GOODS SOLD			2,279,247			84.4				1,037,070			83.5				3,817,697			84.4				1,901,896			83.6
GROSS PROFIT			421,294			15.6				204,931			16.5				707,848			15.6				372,167			16.4
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			184,539			6.8				113,781			9.2				334,637			7.4				223,121			9.8
OTHER GAINS, NET			(180	)		—				(1,209	)		(0.1	)			(1,211	)		—				(1,944	)		(0.1	)
EARNINGS FROM OPERATIONS			236,935			8.8				92,359			7.4				374,422			8.3				150,990			6.6
OTHER EXPENSE, NET			3,045			0.1				(992	)		(0.1	)			4,530			0.1				3,747			0.2
EARNINGS BEFORE INCOME TAXES			233,890			8.7				93,351			7.5				369,892			8.2				147,243			6.5
INCOME TAXES			58,530			2.2				23,657			1.9				90,281			2.0				36,979			1.6
NET EARNINGS			175,360			6.5				69,694			5.6				279,611			6.2				110,264			4.8
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST			(1,978	)		(0.1	)			(3,231	)		(0.3	)			(2,918	)		(0.1	)			(3,642	)		(0.2	)
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST		$	173,382			6.4			$	66,463			5.4			$	276,693			6.1			$	106,622			4.7
EARNINGS PER SHARE - BASIC		$	2.79						$	1.08						$	4.46						$	1.73
EARNINGS PER SHARE - DILUTED		$	2.78						$	1.08						$	4.45						$	1.73
COMPREHENSIVE INCOME			178,080							81,089							280,135							113,103
LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST			(2,698	)						(5,691	)						(3,112	)						(3,767	)
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST		$	175,382						$	75,398						$	277,023						$	109,336

JUNE 2021/2020
(In thousands)		Quarter Period															Year to Date
Segment Classification		2021								2020				%			2021								2020				%
Retail		$	1,259,218							$	609,190			106.7	%		$	2,018,239							$	961,351			109.9	%
Industrial			611,181								224,379			172.4	%			1,060,054								480,922			120.4	%
Construction			738,704								359,170			105.7	%			1,298,235								740,325			75.4	%
All Other			91,438								49,262			85.6	%			149,017								91,465			62.9	%
Total Net Sales		$	2,700,541							$	1,242,001			117.4	%		$	4,525,545							$	2,274,063			99.0	%
		2021				% of Sales				2020				% of Sales			2021				% of Sales				2020				% of Sales
SG&A		$	184,539			6.8		%		$	113,781			9.2	%		$	334,637			7.4		%		$	223,121			9.8	%
SG&A as a Percentage of Gross Profit			43.8	%							55.5	%						47.3	%							60.0	%

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
JUNE 2021/2020
JUNE 2021/2020
(In thousands)
ASSETS		2021			2020		LIABILITIES AND EQUITY			2021			2020
CURRENT ASSETS							CURRENT LIABILITIES
Cash and cash equivalents	$	44,286		$	200,546		Cash Overdraft		$	34,229		$	—
Restricted cash		629			724		Accounts payable			359,484			199,338
Investments		33,827			19,195		Accrued liabilities			337,507			233,088
Accounts receivable		980,571			522,930		Current portion of debt			97			2,786
Inventories		1,026,488			459,424
Other current assets		36,699			33,786
TOTAL CURRENT ASSETS		2,122,500			1,236,605		TOTAL CURRENT LIABILITIES			731,317			435,212
OTHER ASSETS		146,486			120,464
INTANGIBLE ASSETS, NET		424,110			299,963		LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS			571,856			161,057
							OTHER LIABILITIES			163,547			123,014
PROPERTY, PLANT AND EQUIPMENT, NET		533,187			401,576		EQUITY			1,759,563			1,339,325
TOTAL ASSETS	$	3,226,283		$	2,058,608		TOTAL LIABILITIES AND EQUITY		$	3,226,283		$	2,058,608

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED
JUNE 2021/2020
(In thousands)		2021				2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	279,611			$	110,264
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation		38,342				31,330
Amortization of intangibles		7,193				3,129
Expense associated with share-based and grant compensation arrangements		5,742				2,303
Deferred income taxes		177				290
Unrealized (gain) loss on investment and other		(2,784	)			473
Equity in earnings of investee		1,465				—
Net gain on sale and disposition of assets		(1,577	)			(271	)
Changes in:
Accounts receivable		(336,094	)			(155,554	)
Inventories		(329,577	)			25,983
Accounts payable and cash overdraft		143,018				57,017
Accrued liabilities and other		78,751				72,246
NET CASH (USED IN) FROM OPERATING ACTIVITIES		(115,733	)			147,210
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment		(79,028	)			(46,730	)
Proceeds from sale of property, plant and equipment		6,673				644
Acquisitions and purchase of noncontrolling interest, net of cash received		(433,239	)			(18,689	)
Purchases of investments		(14,581	)			(20,094	)
Proceeds from sale of investments		6,885				18,339
Other		(708	)			318
NET CASH USED IN INVESTING ACTIVITIES		(513,998	)			(66,212	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities		849,944				6,759
Repayments under revolving credit facilities		(589,695	)			(6,498	)
Contingent consideration payment and other		(1,464	)			(3,077	)
Proceeds from issuance of common stock		936				697
Dividends paid to shareholders		(18,550	)			(15,374	)
Distributions to noncontrolling interest		(2,914	)			(299	)
Repurchase of common stock		—				(29,212	)
Other		(331	)			32
NET CASH FROM (USED IN) FINANCING ACTIVITIES		237,926				(46,972	)
Effect of exchange rate changes on cash		112				(1,422	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		(391,693	)			32,604
ALL CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		436,608				168,666
ALL CASH AND CASH EQUIVALENTS, END OF PERIOD	$	44,915			$	201,270
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents, beginning of period	$	436,507			$	168,336
Restricted cash, beginning of period		101				330
All cash and cash equivalents, beginning of period	$	436,608			$	168,666
Cash and cash equivalents, end of period	$	44,286			$	200,546
Restricted cash, end of period		629				724
All cash and cash equivalents, end of period	$	44,915			$	201,270

ADJUSTED EBITDA RECONCILIATION (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED
JUNE 2021/2020
		Quarter Period							Year to Date
(In thousands)		2021				2020			2021				2020
Net earnings		$	175,360			$	69,694		$	279,611			$	110,264
Interest expense			3,899				1,898			7,050				3,805
Interest and investment income			(659	)			(189	)		(1,201	)			(530	)
Income taxes			58,530				23,657			90,281				36,979
Expenses associated with share-based compensation arrangements			2,761				859			5,742				2,303
Net (gain) loss on disposition and impairment of assets			(1,045	)			14			(1,577	)			(271	)
Equity in Earnings of Investee			835				—			1,465				—
Unrealized (gain) loss on investments			(1,030	)			(2,701	)		(2,784	)			472
Depreciation expense			19,609				15,613			38,342				31,330
Amortization of intangibles			3,195				1,558			7,193				3,129
Adjusted EBITDA		$	261,455			$	110,403		$	424,122			$	187,481

FAQ

What were UFP Industries' net sales for Q2 2021?

UFP Industries reported net sales of $2.7 billion for the second quarter of 2021.

How much did UFP Industries' earnings increase in Q2 2021?

Earnings attributable to controlling interest increased by 161% to $173 million in Q2 2021.

What contributed to the increase in UFP Industries' earnings per share?

The increase in earnings per share was due to higher net sales and operational efficiencies, with EPS rising to $2.78.

How did recent acquisitions impact UFP Industries' sales?

Recent acquisitions contributed approximately $455 million to net sales in Q2 2021.

What is the outlook for UFP Industries following Q2 2021 results?

Management remains optimistic about the remainder of 2021, anticipating normalization of market conditions and continued benefits from recent acquisitions.