Operating Margins Remain Historically Strong

UFP Industries, Inc. (NASDAQ:UFPI) today announced third quarter 2023 results including net sales of $1.8 billion, net earnings attributable to controlling interests of $134 million, and earnings per diluted share of $2.10.

"This quarter once again demonstrated that our balanced business model, management structure, and focus on value-added products have produced structural improvements in our operating margins that have normalized above pre-pandemic levels," said Chairman and CEO Matthew J. Missad. "We are well-positioned for success and will continue to invest our cash surplus and robust cash flow to grow our business and generate high returns on capital."

Missad added, "Our ability to generate cash allows us to maintain a balanced approach to capital allocation, as we invest in new products and drive operational improvements through technology and automation, while providing meaningful returns for shareholders. The UFP team has enhanced our strong culture of hard work and proven results by developing an impressive adaptability to internal change and an ability to manage through challenging markets."

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

Net sales of $1.83 billion decreased 21 percent due to a 12 percent decrease in prices and a 9 percent decrease in organic unit sales.
New product sales as a percent of total sales rose to 9.7 percent from 7.8 percent in 2022. The company evaluates new products annually and sunsets (but continues to sell) those that no longer meet the classification of "new"; its goal is to achieve a ratio of new product sales to total sales of 10 percent.
Diluted EPS of $2.10 represents a 21 percent decrease from last year's record quarter.
Adjusted EBITDA¹ of $208 million decreased 24 percent while adjusted EBITDA margin¹ declined 40 basis points to 11.4 percent, which exceeded the company's minimum EBITDA margin target.

Capital Allocation

UFP Industries maintains a strong balance sheet, with $682.4 million in net surplus cash (surplus cash less interest-bearing debt and cash overdraft) on September 30, 2023, compared to $128 million in net surplus cash at the end of the third quarter of 2022. The company had approximately $2.2 billion of liquidity as of September 30, 2023. The company's return-focused approach to capital allocation includes the following:

- Acquisitions. UFP Industries maintains a healthy pipeline of acquisition targets in core businesses that are intended to generate long-term growth and margin improvement, expand its breadth of products and international reach, and create incremental value for customers and shareholders. On September 20, 2023, the company acquired a controlling interest in Palets Suller, a leading manufacturer of machine-built pallets in Spain, providing a strong foundation to grow and expand its value-added business in one of the largest ceramic tile manufacturing export markets in the world.

- Capital expenditures. The company continues to target capital investments of $175-200 million in 2023 while focusing on expanding its capacity to produce new and value-added products, achieving efficiencies through automation and enhancing the work environment of its facilities for employees.

- Dividend payments. On October 24, 2023, the Board of Directors for UFP Industries approved a quarterly dividend payment of $0.30 per share. The dividend is payable on December 15, 2023, to shareholders of record on December 1, 2023.

- Share repurchases. At their July 26, 2023, meeting, the Board of Directors authorized up to $200 million for share repurchases through July 31, 2024. Since July 26, 2023, the company has repurchased 212,000 shares at an average price of $97.87 and has $179 million left remaining in its authorization. The company repurchased 766,812 shares from January 1, 2023, through September 30, 2023, at an average share price of $80.95 (a total of $62.1 million).

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

UFP Retail Solutions

Net sales of $711 million, down 16 percent compared to the third quarter of 2022, attributable to a 9 percent decline in selling prices and a 7 percent decline in organic unit sales. Adjusted EBITDA of $53.8 million improved 50 percent compared to the third quarter of 2022, and adjusted EBITDA profit margin improved to 7.6 percent from 4.2 percent during the third quarter of 2022. This improvement is primarily due to variable-priced products such as ProWood treated lumber, which benefited from a more stable lumber market than in 2022, when margins were adversely impacted by a significant decrease in lumber prices in the third quarter of 2022.

UFP Packaging

Net sales of $450 million, down 23 percent compared to the third quarter of 2022, due to a 16 percent decrease in selling prices, a 9 percent decline in organic unit sales, and a 2 percent increase in sales from acquisitions. Adjusted EBITDA was $53.7 million, down 40 percent, due to normalizing market pricing and a decline in volume that is in line with market conditions. Adjusted EBITDA margin decreased to 11.9 percent from 15.4 percent due to competitive price pressure and lower volume. Value-added sales increased to 76 percent of total net sales compared to 74 percent for the third quarter of 2022. New product sales as a percent of total net sales increased to 16.1 percent from 11.5 percent during the same period of 2022.

UFP Construction

Net sales of $584 million, down 25 percent compared to the third quarter of 2022, due to a 12 percent decrease in selling prices and a 13 percent decrease in organic unit sales. Adjusted EBITDA was $76.9 million, down 34 percent, largely due to more normalized market pricing and to a decrease in volume attributable to the decline in housing starts and in the production of manufactured homes. Adjusted EBITDA margin declined to 13.2 percent from 14.9 percent during the same period of 2022.

CONFERENCE CALL

UFP Industries will conduct a conference call to discuss its outlook and information included in this news release at 9 a.m. ET on Tuesday, October 31, 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, Inc. 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.

¹ Represents a non-GAAP measurement; see the reconciliation of non-GAAP financial measures and related explanations below.


CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 2023/2022

	Quarter Period										Year to Date
(In thousands, except per share data)	2023					2022					2023					2022
NET SALES	$	1,827,637		100.0	%	$	2,322,855		100.0	%	$	5,694,031		100.0	%	$	7,713,042		100.0	%

COST OF GOODS SOLD		1,463,237		80.1			1,872,679		80.6			4,571,235		80.3			6,281,051		81.4

GROSS PROFIT		364,400		19.9			450,176		19.4			1,122,796		19.7			1,431,991		18.6

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		195,649		10.7			214,327		9.2			595,035		10.5			649,015		8.4
OTHER LOSSES (GAINS), NET		1,419		0.1			(1,195	)	(0.1	)		5,224		0.1			1,341		—

EARNINGS FROM OPERATIONS		167,332		9.2			237,044		10.2			522,537		9.2			781,635		10.1

INTEREST AND OTHER		(6,177	)	(0.3	)		6,382		0.3			(13,043	)	(0.2	)		19,858		0.3

EARNINGS BEFORE INCOME TAXES		173,509		9.5			230,662		9.9			535,580		9.4			761,777		9.9

INCOME TAXES		39,326		2.2			58,561		2.5			125,031		2.2			188,692		2.4

NET EARNINGS		134,183		7.3			172,101		7.4			410,549		7.2			573,085		7.4

LESS NET LOSS (EARNINGS) ATTRIBUTABLE TO NONCONTROLLING INTEREST		(148	)	—			(4,860	)	(0.2	)		316		—			(13,023	)	(0.2	)

NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST	$	134,035		7.3		$	167,241		7.2		$	410,865		7.2		$	560,062		7.3

EARNINGS PER SHARE - BASIC	$	2.14				$	2.68				$	6.55				$	8.93

EARNINGS PER SHARE - DILUTED	$	2.10				$	2.66				$	6.45				$	8.89

COMPREHENSIVE INCOME	$	130,422				$	167,624				$	417,518				$	567,409

LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		820					(4,273	)				(2,661	)				(13,290	)

COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST	$	131,242				$	163,351				$	414,857				$	554,119


CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS BY SEGMENT (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 2023/2022

	Quarter Period
	2023
(In thousands)	Retail		Packaging		Construction			All Other		Corporate			Total
NET SALES	$	711,381	$	449,885	$	583,960		$	81,426	$	985		$	1,827,637
COST OF GOODS SOLD		610,000		355,924		439,152			58,814		(653	)		1,463,237
GROSS PROFIT		101,381		93,961		144,808			22,612		1,638			364,400
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		56,001		52,524		75,293			14,937		(3,106	)		195,649
OTHER		31		8		(45	)		1,007		418			1,419
EARNINGS FROM OPERATIONS	$	45,349	$	41,429	$	69,560		$	6,668	$	4,326		$	167,332


	Quarter Period
	2022
(In thousands)	Retail		Packaging		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


	Year to Date
	2023
(In thousands)	Retail		Packaging		Construction		All Other		Corporate		Total
NET SALES	$	2,380,956	$	1,424,546	$	1,650,017	$	235,162	$	3,350	$	5,694,031
COST OF GOODS SOLD		2,064,156		1,091,452		1,246,346		170,818		(1,537)		4,571,235
GROSS PROFIT		316,800		333,094		403,671		64,344		4,887		1,122,796
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		170,211		180,153		216,714		42,402		(14,445)		595,035
OTHER		4		(84)		1,190		4,423		(309)		5,224
EARNINGS FROM OPERATIONS	$	146,585	$	153,025	$	185,767	$	17,519	$	19,641	$	522,537


	Year to Date
	2022
(In thousands)	Retail		Packaging		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


ADJUSTED EBITDA RECONCILIATION BY SEGMENT (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 2023/2022

	Quarter Period
	2023
(In thousands)	Retail			Packaging			Construction			All Other			Corporate			Total
Net earnings	$	35,046		$	32,031		$	53,795		$	5,237		$	8,074		$	134,183
Interest and other		32			10			(1	)		(104	)		(6,114	)		(6,177	)
Income taxes		10,271			9,388			15,766			1,535			2,366			39,326
Expenses associated with share-based compensation arrangements		1,314			1,686			1,685			184			3,324			8,193
Net loss (gain) on disposition and impairment of assets		35			8			(14	)		(200	)		(112	)		(283	)
Depreciation expense		5,943			8,361			4,930			930			7,482			27,646
Amortization of intangibles		1,133			2,175			703			563			380			4,954
Adjusted EBITDA	$	53,774		$	53,659		$	76,864		$	8,145		$	15,400		$	207,842

Adjusted EBITDA as a Percentage of Net Sales		7.6	%		11.9	%		13.2	%		10.0	%		1563.5	%		11.4	%

	Quarter Period
	2022
(In thousands)	Retail			Packaging			Construction			All Other			Corporate			Total
Net earnings	$	21,496		$	56,777		$	82,477		$	9,292		$	2,059		$	172,101
Interest and other		16			1,202			(4	)		1,212			3,956			6,382
Income taxes		7,420			19,319			27,911			3,201			710			58,561
Expenses associated with share-based compensation arrangements		1,041			1,198			1,090			143			3,965			7,437
Net loss (gain) on disposition and impairment of assets		86			13			86			—			(599	)		(414	)
Depreciation expense		4,821			8,931			3,313			741			7,041			24,847
Amortization of intangibles		943			2,357			797			482			129			4,708
Adjusted EBITDA	$	35,823		$	89,797		$	115,670		$	15,071		$	17,261		$	273,622

Adjusted EBITDA as a Percentage of Net Sales		4.2	%		15.4	%		14.9	%		13.4	%		505.6	%		11.8	%


	Year to Date
	2023
(In thousands)	Retail			Packaging			Construction			All Other			Corporate			Total
Net earnings	$	112,286		$	116,446		$	142,499		$	16,857		$	22,461		$	410,549
Interest and other		76			1,012			(7	)		(4,476	)		(9,648	)		(13,043	)
Income taxes		34,223			35,567			43,275			5,138			6,828			125,031
Expenses associated with share-based compensation arrangements		4,244			5,485			5,492			687			10,160			26,068
Net loss (gain) on disposition and impairment of assets		61			(85	)		(45	)		(140	)		(256	)		(465	)
Depreciation expense		17,590			24,038			14,192			2,474			22,138			80,432
Amortization of intangibles		3,465			6,657			2,202			1,846			1,155			15,325
Adjusted EBITDA	$	171,945		$	189,120		$	207,608		$	22,386		$	52,838		$	643,897

Adjusted EBITDA as a Percentage of Net Sales		7.2	%		13.3	%		12.6	%		9.5	%		1577.3	%		11.3	%

	Year to Date
	2022
(In thousands)	Retail			Packaging			Construction			All Other			Corporate			Total
Net earnings	$	93,888		$	188,954		$	242,270		$	34,136		$	13,837		$	573,085
Interest and other		56			2,730			(4	)		5,855			11,221			19,858
Income taxes		30,912			62,215			79,768			11,277			4,520			188,692
Expenses associated with share-based compensation arrangements		3,323			3,842			3,697			466			8,651			19,979
Net loss (gain) on disposition and impairment of assets		617			620			62			5			(952	)		352
Depreciation expense		13,813			22,497			10,101			2,028			20,442			68,881
Amortization of intangibles		2,742			5,773			2,481			2,067			385			13,448
Adjusted EBITDA	$	145,351		$	286,631		$	338,375		$	55,834		$	58,104		$	884,295

Adjusted EBITDA as a Percentage of Net Sales		4.9	%		15.3	%		13.3	%		16.8	%		618.3	%		11.5	%


CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) SEPTEMBER 2023/2022

(In thousands)
ASSETS		2023		2022	LIABILITIES AND EQUITY		2023		2022

CURRENT ASSETS					CURRENT LIABILITIES
Cash and cash equivalents	$	957,197	$	449,135	Cash Overdraft	$	—	$	4,174
Restricted cash		3,761		729	Accounts payable		254,689		323,404
Investments		37,062		33,113	Accrued liabilities and other		347,499		433,747
Accounts receivable		712,329		877,776	Current portion of debt		1,539		41,536
Inventories		747,474		1,006,883
Other current assets		64,906		68,727

TOTAL CURRENT ASSETS		2,522,729		2,436,363	TOTAL CURRENT LIABILITIES		603,727		802,861

OTHER ASSETS		230,387		217,782	LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS		273,308		275,417
INTANGIBLE ASSETS, NET		521,412		440,395	OTHER LIABILITIES		174,143		183,967

					TEMPORARY EQUITY		20,191		7,563

PROPERTY, PLANT AND EQUIPMENT, NET		745,604		644,007	SHAREHOLDERS' EQUITY		2,948,763		2,468,739


TOTAL ASSETS	$	4,020,132	$	3,738,547	TOTAL LIABILITIES AND EQUITY	$	4,020,132	$	3,738,547


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 2023/2022

(In thousands)		2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	410,549		$	573,085
Adjustments to reconcile net earnings to net cash used in operating activities:

Depreciation		80,432			68,881
Amortization of intangibles		15,325			13,448
Expense associated with share-based and grant compensation arrangements		26,068			19,979
Deferred income taxes (credit)		113			(269	)
Unrealized loss on investment and other		362			8,453
Equity in loss of investee		1,013			2,740
Net (gain) loss on sale and disposition of assets		(465	)		352
Changes in:
Accounts receivable		(82,883	)		(137,607	)
Inventories		230,559			(36,259	)
Accounts payable and cash overdraft		49,093			(11,247	)
Accrued liabilities and other		(18,363	)		31,490
NET CASH FROM OPERATING ACTIVITIES		711,803			533,046

CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property, plant, and equipment		(130,947	)		(113,725	)
Proceeds from sale of property, plant and equipment		2,211			2,303
Acquisitions, net of cash received and purchase of equity method investment		(52,383	)		(105,212	)
Purchases of investments		(26,333	)		(16,925	)
Proceeds from sale of investments		22,101			10,036
Other		(2,092	)		911
NET CASH USED IN INVESTING ACTIVITIES		(187,443	)		(222,612	)

CASH FLOWS USED IN FINANCING ACTIVITIES:
Borrowings under revolving credit facilities		18,915			570,700
Repayments under revolving credit facilities		(21,929	)		(571,075	)
Repayments of debt		(29	)		(1,957	)
Contingent consideration payments and other		(6,179	)		(2,564	)
Proceeds from issuance of common stock		2,087			2,110
Dividends paid to shareholders		(49,723	)		(43,420	)
Distributions to noncontrolling interest		(7,355	)		(12,023	)
Repurchase of common stock		(62,076	)		(93,215	)
Other		65			(210	)
NET CASH USED IN FINANCING ACTIVITIES		(126,224	)		(151,654	)

Effect of exchange rate changes on cash		3,199			(139	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		401,335			158,641

ALL CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		559,623			291,223

ALL CASH AND CASH EQUIVALENTS, END OF PERIOD	$	960,958		$	449,864

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	$	957,197		$	449,135
Restricted cash, end of period		3,761			729
All cash and cash equivalents, end of period	$	960,958		$	449,864

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UFP Industries Announces Third Quarter Results