UFP Industries Announces Second Quarter Results

Business Wire
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Net sales exceed $2 billion, diluted EPS of $2.36

GRAND RAPIDS, Mich., August 02, 2023--(BUSINESS WIRE)--UFP Industries, Inc. (Nasdaq: UFPI) today announced second quarter 2023 results including net sales of $2.04 billion, net earnings attributable to controlling interest of $151 million, and earnings per diluted share of $2.36.

"I want to thank the hard-working employees of UFP Industries for delivering another strong quarter. Their focus on innovation, efficiencies, and value-added solutions has helped us improve our gross margins, even as lower pricing and volume resulted in decreases in our top- and bottom-line results," said Chairman and CEO Matt Missad. "The positive changes in our business mix and operating structure are producing better performance when compared to previous downward cycles in our business. Our strong cash-flow generation and balance sheet allow us to continue to invest in operational improvements and growing the business through new products and acquisitions, all while returning value to our shareholders. On July 26, 2023, the Board approved a 20 percent increase in the quarterly cash dividend to $0.30 per share and increased the share repurchase authorization to $200 million."

Second Quarter 2023 Highlights (comparisons on a year-over-year basis):

  • Net sales of $2.04 billion decreased 30 percent due to a 22 percent decrease in prices and an 8 percent decrease in organic unit sales.

  • New product sales of $184 million decreased 9 percent, largely due to lower lumber prices that the company passed on to customers. New product sales as a percent of total sales rose to 9 percent from 7 percent in 2022.

  • Diluted EPS of $2.36 represents a 27 percent decrease from last year.

  • Adjusted EBITDA of $234 million decreased 27 percent; adjusted EBITDA margin rose to 11.5 percent from 11 percent in 2022.

Capital Allocation

UFP Industries maintains a strong balance sheet, with $424.9 million in net surplus cash (surplus cash less interest-bearing debt and cash overdraft) on July 1, 2023, compared to $190.7 million in net debt at the end of the second quarter of 2022. The company had approximately $2 billion of liquidity as of July 1, 2023. The company’s return-focused approach to capital allocation includes the following:

  • Acquisitions. The company continues to seek acquisitions in core businesses that generate long-term growth and margin improvement, enhance its capabilities, and create incremental value for customers and shareholders.

  • Capital expenditures. The company lowered its target for capital investments to $175-200 million in 2023 due to longer lead times required for most equipment and rolling stock. The company plans to double the production capacity of the popular Deckorators mineral-based composite (MBC) decking by investing approximately $31 million in upgrades.

  • Dividend payments. On July 26, 2023, the Board of Directors for UFP Industries approved a quarterly dividend payment of $0.30 per share, a 20 percent increase over the dividend paid in the first quarter of 2023. The dividend is payable on September 15, 2023, to shareholders of record on September 1, 2023.

  • Share repurchases. The company repurchased 700,597 shares during the first half of 2023 at an average share price of $79.20 (a total of $55.5 million). At their July 26 meeting, the Board of Directors authorized up to $200 million for share repurchases through July 31, 2024.

By business segment, the company reported the following second-quarter 2023 results:

UFP Retail Solutions

Net sales of $920 million, down 18 percent compared to the second quarter of 2022, attributable to an 18 percent decline in selling prices due to the pricing decreases in the lumber market. While below our target level, gross profit of $121 million improved 65 percent compared to the second quarter of 2022 and gross profit margin improved to 13.2 percent from 6.5 percent, primarily due to increased sales of new Deckorators products and the impact of products sold with a variable price such as treated lumber. These variable-priced products benefited from a more stabilized lumber market compared to 2022, when a significant decrease in lumber prices during the second quarter adversely impacted gross profit.

UFP Packaging

Net sales of $488 million, down 28 percent compared to the second quarter of 2022, due to a 21 percent decrease in selling prices, a 9 percent decline in organic unit sales, and a 2 percent increase in sales from acquisitions. Gross profit was $118.2 million, down 27 percent, due to normalizing market pricing and a decline in volume that is in line with market conditions. Gross profit margin remained mostly unchanged at 24 percent due to the segment’s focus on value-added sales and new products. Value-added sales increased to 78 percent of total net sales compared to 71 percent for the second quarter of 2022. New product sales as a percent of total net sales increased to 14.9 percent from 10.6 percent during the same period of 2022.

UFP Construction

Net sales of $550 million, down 44 percent compared to the second quarter of 2022, due to a 26 percent decrease in selling prices and an 18 percent decrease in organic unit sales. Gross profit was $137.2 million, down 40 percent, largely due to normalizing market pricing and a decrease in volume as a result of a decline in housing starts and industry production of manufactured homes. Gross profit margin improved to 25 percent from 23 percent in 2022.

CONFERENCE CALL

UFP Industries will conduct a conference call to discuss its outlook and information included in this news release at 4:30 p.m. ET on Wednesday, August 2, 2023. The call will be hosted by Chairman and 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 www.ufpinvestor.com/news-filings-reports. A replay of the call will be available through the website.

UFP Industries, Inc.

UFP Industries is a holding company whose operating subsidiaries – UFP Packaging, 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 #403 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 uses Adjusted EBITDA, a non-GAAP financial measure, in order to evaluate historical and ongoing operations. Management believes that this non-GAAP financial measure is useful in order to enable investors to perform meaningful comparisons of historical and current performance. Adjusted EBITDA is intended to supplement and should be read together with the financial results. Adjusted EBITDA should not be considered an alternative or substitute for, and should not be considered superior to, the reported financial results. Accordingly, users of this financial information should not place undue reliance on the non-GAAP financial measure.

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 SIX MONTHS ENDED

JUNE 2023/2022

Quarter Period

Year to Date

(In thousands, except per share data)

2023

2022

2023

2022

NET SALES

$

2,043,918

100.0

%

$

2,900,874

100.0

%

$

3,866,394

100.0

%

$

5,390,187

100.0

%

COST OF GOODS SOLD

1,643,851

80.4

2,397,422

82.6

3,107,998

80.4

4,408,372

81.8

GROSS PROFIT

400,067

19.6

503,452

17.4

758,396

19.6

981,815

18.2

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

204,703

10.0

214,538

7.4

399,386

10.3

434,688

8.1

OTHER LOSSES (GAINS), NET

1,867

0.1

3,348

0.1

3,805

0.1

2,536

—

EARNINGS FROM OPERATIONS

193,497

9.5

285,566

9.8

355,205

9.2

544,591

10.1

INTEREST AND OTHER

(4,025

)

(0.2

)

8,566

0.3

(6,866

)

(0.2

)

13,476

0.3

EARNINGS BEFORE INCOME TAXES

197,522

9.7

277,000

9.5

362,071

9.4

531,115

9.9

INCOME TAXES

46,734

2.3

69,147

2.4

85,705

2.2

130,131

2.4

NET EARNINGS

150,788

7.4

207,853

7.2

276,366

7.1

400,984

7.4

LESS NET LOSS (EARNINGS) ATTRIBUTABLE TO NONCONTROLLING INTEREST

(27

)

—

(4,735

)

(0.2

)

464

—

(8,163

)

(0.2

)

NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST

$

150,761

7.4

$

203,118

7.0

$

276,830

7.2

$

392,821

7.3

EARNINGS PER SHARE - BASIC

$

2.40

$

3.24

$

4.41

$

6.25

EARNINGS PER SHARE - DILUTED

$

2.36

$

3.23

$

4.35

$

6.22

COMPREHENSIVE INCOME

$

155,266

$

203,470

$

287,096

$

399,785

LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST

(1,721

)

(4,640

)

(3,481

)

(9,017

)

COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST

$

153,545

$

198,830

$

283,615

$

390,768

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS BY SEGMENT (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED

JUNE 2023/2022

Quarter Period

2023

(In thousands)

Retail

Packaging

Construction

All Other

Corporate

Total

NET SALES

...

$

919,998

$

488,100

$

550,464

$

86,224

$

(868

)

$

2,043,918

COST OF GOODS SOLD

799,017

369,865

413,260

64,128

(2,419

)

1,643,851

GROSS PROFIT

120,981

118,235

137,204

22,096

1,551

400,067

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

60,855

61,377

74,083

13,943

(5,555

)

204,703

OTHER

(54

)

(6

)

1,162

1,336

(571

)

1,867

EARNINGS FROM OPERATIONS

$

60,180

$

56,864

$

61,959

$

6,817

$

7,677

$

193,497

Quarter Period

2022

(In thousands)

Retail

Packaging

Construction

All Other

Corporate

Total

NET SALES

$

1,121,440

$

676,333

$

975,376

$

124,416

$

3,309

$

2,900,874

COST OF GOODS SOLD

1,048,260

514,216

748,060

83,336

3,550

2,397,422

GROSS PROFIT

73,180

162,117

227,316

41,080

(241

)

503,452

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

48,387

67,235

94,638

16,356

(12,078

)

214,538

OTHER

266

672

(154

)

1,976

588

3,348

EARNINGS FROM OPERATIONS

$

24,527

$

94,210

$

132,832

$

22,748

$

11,249

$

285,566

Year to Date

2023

(In thousands)

Retail

Packaging

Construction

All Other

Corporate

Total

NET SALES

$

1,669,575

$

974,661

$

1,066,057

$

153,736

$

2,365

$

3,866,394

COST OF GOODS SOLD

1,454,156

735,528

807,194

112,004

(884

)

3,107,998

GROSS PROFIT

215,419

239,133

258,863

41,732

3,249

758,396

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

114,210

127,629

141,421

27,465

(11,339

)

399,386

OTHER

(27

)

(92

)

1,235

3,416

(727

)

3,805

EARNINGS FROM OPERATIONS

$

101,236

$

111,596

$

116,207

$

10,851

$

15,315

$

355,205

Year to Date

2022

(In thousands)

Retail

Packaging

Construction

All Other

Corporate

Total

NET SALES

$

2,114,672

$

1,287,702

$

1,761,847

$

219,983

$

5,983

$

5,390,187

COST OF GOODS SOLD

1,907,155

976,031

1,373,119

147,360

4,707

4,408,372

GROSS PROFIT

207,517

311,671

388,728

72,623

1,276

981,815

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

111,055

134,466

176,975

32,981

(20,789

)

434,688

OTHER

538

604

103

2,079

(788

)

2,536

EARNINGS FROM OPERATIONS

$

95,924

$

176,601

$

211,650

$

37,563

$

22,853

$

544,591

ADJUSTED EBITDA RECONCILIATION BY SEGMENT (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED

JUNE 2023/2022

Quarter Period

2023

(In thousands)

Retail

Packaging

Construction

All Other

Corporate

Total

Net earnings

$

45,924

$

43,090

$

47,300

$

6,932

$

7,542

$

150,788

Interest and other

23

419

(1

)

(2,263

)

(2,203

)

(4,025

)

Income taxes

14,233

13,355

14,660

2,148

2,338

46,734

Expenses associated with share-based compensation arrangements

1,315

1,703

1,686

225

3,309

8,238

Net (gain) loss on disposition and impairment of assets

(10

)

(7

)

16

70

(87

)

(18

)

Depreciation expense

6,029

7,995

4,634

929

7,425

27,012

Amortization of intangibles

1,277

2,236

702

751

396

5,362

Adjusted EBITDA

$

68,791

$

68,791

$

68,997

$

8,792

$

18,720

$

234,091

Adjusted EBITDA as a Percentage of Net Sales

7.5

%

14.1

%

12.5

%

10.2

%

(2156.7

)%

11.5

%

Quarter Period

2022

(In thousands)

Retail

Packaging

Construction

All Other

Corporate

Total

Net earnings

$

18,146

$

69,949

$

99,890

$

14,233

$

5,635

$

207,853

Interest and other

17

1,016

—

3,789

3,744

8,566

Income taxes

6,364

23,245

32,942

4,726

1,870

69,147

Expenses associated with share-based compensation arrangements

1,061

1,236

1,143

99

2,072

5,611

Net loss (gain) on disposition and impairment of assets

226

672

(13

)

(5

)

192

1,072

Depreciation expense

4,556

6,759

3,354

715

6,808

22,192

Amortization of intangibles

916

1,701

820

503

128

4,068

Adjusted EBITDA

$

31,286

$

104,578

$

138,136

$

24,060

$

20,449

$

318,509

Adjusted EBITDA as a Percentage of Net Sales

2.8

%

15.5

%

14.2

%

19.3

%

618.0

%

11.0

%

Year to Date

2023

(In thousands)

Retail

Packaging

Construction

All Other

Corporate

Total

Net earnings

$

77,240

$

84,415

$

88,704

$

11,620

$

14,387

$

276,366

Interest and other

44

1,002

(6

)

(4,372

)

(3,534

)

(6,866

)

Income taxes

23,952

26,179

27,509

3,603

4,462

85,705

Expenses associated with share-based compensation arrangements

2,930

3,799

3,807

503

6,836

17,875

Net loss (gain) on disposition and impairment of assets

26

(93

)

(31

)

60

(144

)

(182

)

Depreciation expense

11,647

15,677

9,262

1,544

14,656

52,786

Amortization of intangibles

2,332

4,482

1,499

1,283

775

10,371

Adjusted EBITDA

$

118,171

$

135,461

$

130,744

$

14,241

$

37,438

$

436,055

Adjusted EBITDA as a Percentage of Net Sales

7.1

%

13.9

%

12.3

%

9.3

%

1583.0

%

11.3

%

Year to Date

2022

(In thousands)

Retail

Packaging

Construction

All Other

Corporate

Total

Net earnings

$

72,392

$

132,177

$

159,793

$

24,844

$

11,778

$

400,984

Interest and other

40

1,528

—

4,643

7,265

13,476

Income taxes

23,492

42,896

51,857

8,076

3,810

130,131

Expenses associated with share-based compensation arrangements

2,282

2,644

2,607

323

4,686

12,542

Net loss (gain) on disposition and impairment of assets

531

607

(24

)

5

(353

)

766

Depreciation expense

8,992

13,566

6,788

1,287

13,401

44,034

Amortization of intangibles

1,799

3,416

1,684

1,585

256

8,740

Adjusted EBITDA

$

109,528

$

196,834

$

222,705

$

40,763

$

40,843

$

610,673

Adjusted EBITDA as a Percentage of Net Sales

5.2

%

15.3

%

12.6

%

18.5

%

682.7

%

11.3

%

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

JUNE 2023/2022

(In thousands)

ASSETS

2023

2022

LIABILITIES AND EQUITY

2023

2022

CURRENT ASSETS

CURRENT LIABILITIES

Cash and cash equivalents

$

702,148

$

138,071

Cash Overdraft

$

—

$

11,926

Restricted cash

761

729

Accounts payable

264,408

386,833

Investments

38,459

35,475

Accrued liabilities and other

289,211

384,738

Accounts receivable

802,300

1,046,543

Current portion of debt

2,385

40,496

Inventories

821,187

1,106,302

Other current assets

50,203

49,324

TOTAL CURRENT ASSETS

2,415,058

2,376,444

TOTAL CURRENT LIABILITIES

556,004

823,993

OTHER ASSETS

228,929

163,464

LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS

274,821

276,315

INTANGIBLE ASSETS, NET

481,942

445,751

OTHER LIABILITIES

171,349

185,447

TEMPORARY EQUITY

6,772

—

PROPERTY, PLANT AND EQUIPMENT, NET

718,014

625,164

SHAREHOLDERS' EQUITY

2,834,997

2,325,068

TOTAL ASSETS

$

3,843,943

$

3,610,823

TOTAL LIABILITIES AND EQUITY

$

3,843,943

$

3,610,823

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE SIX MONTHS ENDED

JUNE 2023/2022

(In thousands)

2023

2022

CASH FLOWS FROM OPERATING ACTIVITIES:

Net earnings

$

276,366

$

400,984

Adjustments to reconcile net earnings to net cash used in operating activities:

Depreciation

52,786

44,034

Amortization of intangibles

10,371

8,740

Expense associated with share-based and grant compensation arrangements

17,875

12,542

Deferred income taxes (credit)

(319

)

179

Unrealized (gain) loss on investment and other

(1,291

)

6,181

Equity in loss of investee

1,005

1,532

Net (gain) loss on sale and disposition of assets

(182

)

766

Changes in:

Accounts receivable

(183,717

)

(304,715

)

Inventories

154,413

(134,653

)

Accounts payable and cash overdraft

56,899

56,120

Accrued liabilities and other

(63,142

)

(1,313

)

NET CASH FROM OPERATING ACTIVITIES

321,064

90,397

CASH FLOWS USED IN INVESTING ACTIVITIES:

Purchases of property, plant, and equipment

(84,981

)

(71,675

)

Proceeds from sale of property, plant and equipment

789

2,029

Acquisitions, net of cash received and purchase of equity method investment

67

(39,343

)

Purchases of investments

(14,747

)

(15,166

)

Proceeds from sale of investments

11,486

8,221

Other

2,076

(2,829

)

NET CASH USED IN INVESTING ACTIVITIES

(85,310

)

(118,763

)

CASH FLOWS USED IN FINANCING ACTIVITIES:

Borrowings under revolving credit facilities

11,026

570,700

Repayments under revolving credit facilities

(11,869

)

(571,075

)

Repayments of debt

(29

)

(2,485

)

Contingent consideration payments and other

(6,179

)

(2,553

)

Proceeds from issuance of common stock

1,448

1,457

Dividends paid to shareholders

(31,149

)

(28,015

)

Distributions to noncontrolling interest

(4,859

)

(2,053

)

Repurchase of common stock

(55,484

)

(90,805

)

Other

48

(184

)

NET CASH USED IN FINANCING ACTIVITIES

(97,047

)

(125,013

)

Effect of exchange rate changes on cash

4,579

956

NET CHANGE IN CASH AND CASH EQUIVALENTS

143,286

(152,423

)

ALL CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

559,623

291,223

ALL CASH AND CASH EQUIVALENTS, END OF PERIOD

$

702,909

$

138,800

Reconciliation of cash and cash equivalents and restricted cash:

Cash and cash equivalents, beginning of period

$

559,397

$

286,662

Restricted cash, beginning of period

226

4,561

All cash and cash equivalents, beginning of period

$

559,623

$

291,223

Cash and cash equivalents, end of period

$

702,148

$

138,071

Restricted cash, end of period

761

729

All cash and cash equivalents, end of period

$

702,909

$

138,800

View source version on businesswire.com: https://www.businesswire.com/news/home/20230802267547/en/

Contacts

Dick Gauthier
VP of Investor Relations
(616) 365-1555

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