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

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

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