UFP Industries Reports Record Third Quarter Results

Rhea-AI Summary

UFP Industries (UFPI) reported a 37% increase in earnings per share, reaching $2.66 for Q3 2022. The company achieved record net sales of $2.3 billion, an 11% year-over-year increase, driven by a 6% rise in prices and a 5% increase in unit sales. Earnings from operations rose by 41% to $237 million. New product sales grew by 38%, and adjusted EBITDA increased 46% to $274 million. The company maintains a robust balance sheet with $1.5 billion in liquidity and announced a 67% higher dividend of $0.25 per share for December.

Positive

• Earnings per share increased 37% to $2.66.
• Net sales reached a record $2.3 billion, up 11%.
• Earnings from operations rose 41% to $237 million.
• New product sales increased 38% to $178 million.
• Adjusted EBITDA grew 46% to $274 million.

Negative

• SG&A expenses increased by $45 million or 26%.
• Organic unit sales declined by 2% in UFP Industrial.

Earnings per share increase 37 percent; Unit sales increase 5 percent

GRAND RAPIDS, Mich., Oct. 20, 2022 (GLOBE NEWSWIRE) -- UFP Industries, Inc. (Nasdaq: UFPI) today announced record net sales of $2.3 billion and net earnings attributable to controlling interests of $167 million for the third quarter of 2022. The company also reported record earnings per diluted share of $2.66, a 37 percent increase over the third quarter of 2021.

“UFP’s ability to deliver record-setting performance in a challenging economic environment is a direct result of the efforts of our hard-working teammates and a balanced business model that minimizes risk by operating in diverse but complementary markets,” said CEO Matthew J. Missad. “Our market-focused organizational structure helps us to better address customer needs, and our increased commitment to innovation and new, value-added products continues to improve our operating results and set us apart from competitors.”

Third Quarter 2022 Highlights (comparisons on a year-over-year basis):

• Net sales of $2.3 billion increased 11 percent due to a 6 percent increase in prices and a 5 percent increase in unit sales, including a 2 percent increase in unit sales from acquisitions.
• Earnings from operations of $237 million increased 41 percent. In the third quarter of 2021, the company recognized a gain on the sale of real estate of $9 million.
• SG&A increased $45 million or 26 percent. SG&A as a percentage of gross profit fell from 52 percent to 48 percent.
• New product sales of $178 million increased 38 percent. This excludes new products that were sunset at the end of 2021. New product sales leaders included Deckorators mineral-based composite decking and Strip Pak mixed-material packaging solutions.
• The percentage of total sales that are value-added increased to 66 percent from 64 percent.
• Adjusted EBITDA of $274 million increased 46 percent, and adjusted EBITDA margin improved by 280 basis points to 11.8 percent. Acquisitions completed during 2022 contributed $7.3 million to adjusted EBITDA.

By business segment, the company reported the following third quarter 2022 results (all quarterly numbers):

UFP Retail Solutions

$845 million in net sales, up 21 percent over the third quarter of 2021 due to a 15 percent increase in selling prices and a 6 percent increase in unit sales, including a 3 percent increase in unit sales from acquisitions. Unit growth was driven by increases in the company’s pressure-treating operations (Sunbelt Forest Products and ProWood), Deckorators and UFP-Edge. Unit sales growth for the company’s pressure-treating operations benefited from favorable year-over-year comparisons, as orders slowed in the third quarter of 2021 when retailers focused on reducing inventory.

Gross profit for UFP Retail Solutions rose to $77 million, a 615 percent increase over the third quarter of 2021, when rapidly falling lumber prices reduced margins for variable-priced products such as pressure-treated wood. Gross profit margin rose to 9.2 percent in 2022 from 1.6 percent in 2021.

Retail sales accounted for 38 percent of the company’s sales year to date. When evaluating future demand for the segment, the company analyzes data such as the same-store sales growth of national home improvement retailers and forecasts of remodeling activity.

UFP Industrial

$585 million in net sales, up 2 percent from the third quarter of 2021 due to a 3 percent increase in unit sales from acquisitions, a 1 percent increase in selling prices, and a 2 percent decline in organic unit growth. The organic unit sales decline is attributable to an intentional change in product mix, as the segment focuses more on higher-margin products and being selective in taking on new business. New product sales increased 52 percent to $64 million, and the segment’s percentage of value-added sales increased to 74 percent from 69 percent in 2021.

Gross profit rose 14 percent to $144 million, and gross profit margin rose 250 basis points, reflecting the company’s ability to pass on the impact of higher operating costs, as well as the successful implementation of value-based selling initiatives.

UFP Industrial sales accounted for 24 percent of the company’s sales year to date. When evaluating future demand, the company considers a number of metrics, including the Purchasing Managers Index (PMI), durable goods manufacturing, and U.S. real GDP.

UFP Construction

$777 million in net sales, up 8 percent over the third quarter of 2021, due to an 8 percent increase in organic unit sales growth. Unit sales growth was driven by the Factory Built, Commercial and Concrete Forming Services business units. Gross profit increased $46 million or 30 percent to $200 million in the third quarter, led by Site Built and Commercial.

The company’s site-built residential customers have accounted for approximately 14 percent of total company sales year to date. Approximately one-third of site-built customers are multifamily builders. More than 75 percent of the company’s site-built residential housing sales are in areas such as Texas and the Mid-Atlantic, Southeast and Mountain West regions, which have experienced significant population growth through migration from other states and are forecasted to continue to grow in the long term. The company’s factory-built customers have accounted for 13 percent of total company sales year to date. This business, along with the company’s multifamily business, could benefit from higher interest rates as buyers seek more affordable housing alternatives. As a result of these factors, we believe these customers are better insulated from downturns in the housing market.

UFP Industries maintains a strong balance sheet with nearly $1.5 billion of liquidity as of September 24, 2022, consisting of $456 million of surplus cash, plus availability under its revolving credit facility and shelf agreements with lenders. The company’s diversified and return-focused approach to capital allocation includes the following:

• The company has targeted $175-225 million for capital expenditures in 2022, an increase over the $151 million spent in 2021. The company’s capital expenditures during the first nine months of 2022 totaled $115 million. Longer lead times required for most equipment and rolling stock may cause the company to fall short of its 2022 expenditures target.
• In February 2022, our Board of Directors authorized an increase in the company’s share repurchase program of up to 2.6 million shares. Through September 24, 2022, the company has purchased approximately 1.2 million shares at an average price of $77.06. The company has issued 911,000 shares in 2022 for share-based compensation programs at an average issue price of $82.69 per share.
• On October 19, 2022, the Board approved a quarterly dividend payment of $0.25 per share, payable on December 15, 2022, to shareholders of record on December 1, 2022. This dividend is 67 percent higher than the dividend of $0.15 per share paid on December 15, 2021.
• The company continues to seek opportunities to acquire companies that represent a strong strategic fit and allow it to drive new growth and margin improvements, enhance its capabilities, and create more incremental value for its customers and shareholders.

OUTLOOK

The following outlook remains largely unchanged from the guidance provided in the second quarter 2022 earnings release.

We expect our balanced business model and operational improvements will continue to help us navigate new external challenges, including rising interest rates and historically high inflation. In the near term, we continue to expect more normalized demand in our largest segment, UFP Retail Solutions. For UFP Industrial, we continue to monitor business activity and the key economic indicators that drive this segment with many of those metrics remaining mixed. Pricing remains healthy as we pass through inflationary costs and benefit from our focus on value-added products. For UFP Construction, we see continued activity in commercial and infrastructure end markets and expect our exposure to a projected softening in the housing market to be somewhat offset by favorable demographic trends in the markets we serve and our participation in more affordable housing and the multifamily market. Our diversified business and strong track record of executing our strategy gives us confidence that we can continue to successfully navigate various market environments while delivering returns to shareholders.

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 Thursday, October 20, 2022. The call will be hosted by CEO Matthew J. Missad and CFO Michael Cole, and 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 the website.

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. UFP Industries is ranked #401 on the Fortune 500 and #149 on Industry Week’s list of America’s Largest Manufacturers. 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.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 2022/2021

		Quarter Period														Year to Date
(In thousands, except per share data)		2022							2021							2022							2021
NET SALES		$	2,322,855			100.0		%	$	2,093,784			100.0		%	$	7,713,042			100.0		%	$	6,619,329			100.0		%
COST OF GOODS SOLD			1,872,679			80.6				1,766,229			84.4				6,281,051			81.4				5,583,926			84.4
GROSS PROFIT			450,176			19.4				327,555			15.6				1,431,991			18.6				1,035,403			15.6
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			214,327			9.2				169,467			8.1				649,015			8.4				504,104			7.6
OTHER (GAINS) LOSSES, NET			(1,195	)		(0.1	)			(10,037	)		(0.5	)			1,341			—				(11,248	)		(0.2	)
EARNINGS FROM OPERATIONS			237,044			10.2				168,125			8.0				781,635			10.1				542,547			8.2
INTEREST AND OTHER EXPENSE, NET			6,382			0.3				4,750			0.2				19,858			0.3				9,280			0.1
EARNINGS BEFORE INCOME TAXES			230,662			9.9				163,375			7.8				761,777			9.9				533,267			8.1
INCOME TAXES			58,561			2.5				37,628			1.8				188,692			2.4				127,909			1.9
NET EARNINGS			172,101			7.4				125,747			6.0				573,085			7.4				405,358			6.1
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST			(4,860	)		(0.2	)			(4,706	)		(0.2	)			(13,023	)		(0.2	)			(7,624	)		(0.1	)
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST		$	167,241			7.2			$	121,041			5.8			$	560,062			7.3			$	397,734			6.0
EARNINGS PER SHARE - BASIC		$	2.68						$	1.94						$	8.93						$	6.40
EARNINGS PER SHARE - DILUTED		$	2.66						$	1.94						$	8.89						$	6.38
COMPREHENSIVE INCOME		$	167,624						$	123,723						$	567,409						$	403,858
LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST			(4,273	)						(4,496	)						(13,290	)						(7,608	)
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST		$	163,351						$	119,227						$	554,119						$	396,250

SUPPLEMENTAL DATA
(In thousands)			Quarter Period																	Year to Date
Segment Classification			2022									2021				% change				2022									2021				% change
Retail			$	845,304								$	696,201			21.4	%			$	2,959,976								$	2,714,440			9.0	%
Industrial				584,808									573,234			2.0	%				1,872,510									1,633,289			14.6	%
Construction				777,126									722,872			7.5	%				2,538,973									2,021,106			25.6	%
All Other				115,617									101,477			13.9	%				341,583									250,494			36.4	%
Total Net Sales			$	2,322,855								$	2,093,784			10.9	%			$	7,713,042								$	6,619,329			16.5	%
			2022				% of Sales					2021				% of Sales				2022				% of Sales					2021				% of Sales
SG&A			$	214,327			9.2			%		$	169,467			8.1	%			$	649,015			8.4			%		$	504,104			7.6	%
SG&A as a Percentage of Gross Profit				47.6	%								51.7	%							45.3	%								48.7	%

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS BY SEGMENT (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 2022/2021

		Quarter Period
		2022
(In thousands)		Retail			Industrial			Construction				All Other				Corporate				Total
NET SALES		$	845,304		$	584,808		$	777,126			$	112,203			$	3,414			$	2,322,855
COST OF GOODS SOLD			767,841			440,975			577,552				82,740				3,571				1,872,679
GROSS PROFIT			77,463			143,833			199,574				29,463				(157	)			450,176
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			48,435			66,521			89,455				16,752				(6,836	)			214,327
OTHER			96			14			(265	)			(994	)			(46	)			(1,195	)
EARNINGS FROM OPERATIONS		$	28,932		$	77,298		$	110,384			$	13,705			$	6,725			$	237,044

		Quarter Period
		2021
(In thousands)		Retail				Industrial			Construction				All Other				Corporate				Total
NET SALES		$	696,201			$	573,234		$	722,872			$	98,689			$	2,788			$	2,093,784
COST OF GOODS SOLD			685,369				446,822			568,809				63,082				2,147				1,766,229
GROSS PROFIT			10,832				126,412			154,063				35,607				641				327,555
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			36,899				55,723			70,663				15,996				(9,814	)			169,467
OTHER			86				281			(805	)			(672	)			(8,927	)			(10,037	)
EARNINGS FROM OPERATIONS		$	(26,153	)		$	70,408		$	84,205			$	20,283			$	19,382			$	168,125

		Year to Date
		2022
(In thousands)		Retail			Industrial			Construction				All Other			Corporate				Total
NET SALES		$	2,959,976		$	1,872,510		$	2,538,973			$	332,186		$	9,397			$	7,713,042
COST OF GOODS SOLD			2,674,996			1,417,006			1,950,671				230,100			8,278				6,281,051
GROSS PROFIT			284,980			455,504			588,302				102,086			1,119				1,431,991
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			159,490			200,987			266,430				49,733			(27,625	)			649,015
OTHER			634			618			(162	)			1,085			(834	)			1,341
EARNINGS FROM OPERATIONS		$	124,856		$	253,899		$	322,034			$	51,268		$	29,578			$	781,635

		Year to Date
		2021
(In thousands)		Retail				Industrial			Construction				All Other				Corporate				Total
NET SALES		$	2,714,440			$	1,633,289		$	2,021,106			$	243,736			$	6,758			$	6,619,329
COST OF GOODS SOLD			2,480,804				1,292,102			1,644,069				160,853				6,098				5,583,926
GROSS PROFIT			233,636				341,187			377,037				82,883				660				1,035,403
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			144,375				150,739			193,144				40,021				(24,175	)			504,104
OTHER			(182	)			104			(437	)			(1,703	)			(9,030	)			(11,248	)
EARNINGS FROM OPERATIONS		$	89,443			$	190,344		$	184,330			$	44,565			$	33,865			$	542,547

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 2022/2021

(In thousands)
ASSETS			2022			2021		LIABILITIES AND EQUITY			2022			2021
CURRENT ASSETS								CURRENT LIABILITIES
Cash and cash equivalents		$	455,743		$	138,637		Cash Overdraft		$	4,174		$	10,812
Restricted cash			729			17,592		Accounts payable			327,459			292,933
Investments			33,113			33,723		Accrued liabilities and other			434,045			361,832
Accounts receivable			880,581			783,959		Current portion of debt			41,536			93
Inventories			1,009,358			900,665
Other current assets			71,420			48,174
TOTAL CURRENT ASSETS			2,450,944			1,922,750		TOTAL CURRENT LIABILITIES			807,214			665,670
OTHER ASSETS			150,826			144,904		LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS			275,417			310,119
INTANGIBLE ASSETS, NET			502,311			393,682		OTHER LIABILITIES			183,967			160,984
								TEMPORARY EQUITY			72,454			—
PROPERTY, PLANT AND EQUIPMENT, NET			703,161			552,911		SHAREHOLDERS' EQUITY			2,468,190			1,877,474
TOTAL ASSETS		$	3,807,242		$	3,014,247		TOTAL LIABILITIES AND EQUITY		$	3,807,242		$	3,014,247

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 2022/2021

(In thousands)			2022					2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings		$	573,085				$	405,358
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation			68,881					61,741
Amortization of intangibles			13,448					9,369
Expense associated with share-based and grant compensation arrangements			19,979					8,444
Deferred income taxes (credit)			(269	)				(594	)
Unrealized loss (gain) on investment and other			8,453					(1,756	)
Equity in earnings of investee			2,740					2,411
Net loss (gain) on sale and disposition of assets			352					(10,482	)
Changes in:
Accounts receivable			(138,200	)				(141,088	)
Inventories			(35,956	)				(204,144	)
Accounts payable and cash overdraft			(11,239	)				53,437
Accrued liabilities and other			33,871					99,067
NET CASH FROM OPERATING ACTIVITIES			535,145					281,763
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property, plant, and equipment			(114,497	)				(110,092	)
Proceeds from sale of property, plant and equipment			2,303					26,597
Acquisitions and purchase of noncontrolling interest, net of cash received			(101,030	)				(433,275	)
Purchases of investments			(16,925	)				(17,866	)
Proceeds from sale of investments			10,036					9,857
Other			2,010					(3,478	)
NET CASH USED IN INVESTING ACTIVITIES			(218,103	)				(528,257	)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Borrowings under revolving credit facilities			570,700					886,966
Repayments under revolving credit facilities			(571,075	)				(888,335	)
Repayments of debt			(1,957	)				—
Contingent consideration payments and other			(2,564	)				(2,664	)
Proceeds from issuance of common stock			2,110					1,519
Dividends paid to shareholders			(43,420	)				(27,831	)
Distributions to noncontrolling interest			(12,024	)				(2,914	)
Repurchase of common stock			(93,215	)				—
Other			(209	)				(334	)
NET CASH USED IN FINANCING ACTIVITIES			(151,654	)				(33,593	)
Effect of exchange rate changes on cash			(139	)				(292	)
NET CHANGE IN CASH AND CASH EQUIVALENTS			165,249					(280,379	)
ALL CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			291,223					436,608
ALL CASH AND CASH EQUIVALENTS, END OF PERIOD		$	456,472				$	156,229
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents, beginning of period		$	286,662				$	436,507
Restricted cash, beginning of period			4,561					101
All cash and cash equivalents, beginning of period		$	291,223				$	436,608
Cash and cash equivalents, end of period		$	455,743				$	138,637
Restricted cash, end of period			729					17,592
All cash and cash equivalents, end of period		$	456,472				$	156,229

ADJUSTED EBITDA RECONCILIATION (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 2022/2021

		Quarter Period							Year to Date
(In thousands)		2022				2021			2022				2021
Net earnings		$	172,101			$	125,747		$	573,085			$	405,358
Interest expense			3,516				3,433			10,213				10,483
Interest and investment income			(614	)			(658	)		(1,548	)			(1,859	)
Income taxes			58,561				37,628			188,692				127,909
Expenses associated with share-based compensation arrangements			7,437				2,702			19,979				8,444
Net (gain) loss on disposition and impairment of assets			(414	)			(8,905	)		352				(10,482	)
Equity in earnings of investee			1,208				946			2,740				2,411
Unrealized loss (gain) on investments			2,272				1,028			8,453				(1,756	)
Depreciation expense			24,847				23,399			68,881				61,741
Amortization of intangibles			4,708				2,176			13,448				9,369
Adjusted EBITDA		$	273,622			$	187,496		$	884,295			$	611,618
Adjusted EBITDA as a Percentage of Net Sales			11.8	%			9.0	%		11.5	%			9.2	%

FAQ

What were UFP Industries' earnings per share for Q3 2022?

UFP Industries reported earnings per share of $2.66 for Q3 2022.

How much did UFP Industries earn in net sales for Q3 2022?

The company achieved record net sales of $2.3 billion in Q3 2022.

What is the dividend amount announced by UFP Industries?

UFP Industries announced a quarterly dividend of $0.25 per share, a 67% increase from the previous year.

What were the key financial highlights for UFP Industries in Q3 2022?

Key highlights include a 37% increase in earnings per share, 11% growth in net sales, and a 46% rise in adjusted EBITDA.

What challenges does UFP Industries foresee in the coming quarters?

UFP Industries expects new external challenges from rising interest rates and high inflation but remains confident in its diversified approach.