UFP Industries Reports Record Second Quarter Results
GlobeNewswire Inc | Jul 21, 2021 04:05PM EDT
July 21, 2021
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 industrys 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 companys 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.
-- $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 companys 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.
-- $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 companys ability to better leverage fixed costs and include the impact of higher lumber, labor, and transportation costs in its selling prices.
CONFERENCE CALLUFP 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
. 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 managements 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 InformationThis 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 GauthierVP, Business Outreach(616) 365-1555
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME(UNAUDITED)FOR THE THREE AND SIX MONTHS ENDEDJUNE 2021/2020 QuarterPeriod YeartoDate(Inthousands,exceptpersharedata) 2021 2020 2021 2020NET 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 184,539 6.8 113,781 9.2 334,637 7.4 223,121 9.8 EXPENSESOTHER 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 (1,978 ) (0.1 ) (3,231 ) (0.3 ) (2,918 ) (0.1 ) (3,642 ) (0.2 ) NONCONTROLLING INTEREST NET EARNINGS ATTRIBUTABLE TO CONTROLLING $ 173,382 6.4 $ 66,463 5.4 $ 276,693 6.1 $ 106,622 4.7 INTEREST 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 (2,698 ) (5,691 ) (3,112 ) (3,767 ) NONCONTROLLING INTEREST COMPREHENSIVE INCOME ATTRIBUTABLE TO $ 175,382 $ 75,398 $ 277,023 $ 109,336 CONTROLLING INTEREST
JUNE 2021/2020 (In thousands) Quarter Period Year to DateSegment 2021 2020 % 2021 2020 %ClassificationRetail $ 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 $ 2,700,541 $ 1,242,001 117.4 % $ 4,525,545 $ 2,274,063 99.0 %Sales 2021 % of 2020 % of 2021 % of 2020 % of Sales Sales Sales SalesSG&A $ 184,539 6.8 % $ 113,781 9.2 % $ 334,637 7.4 % $ 223,121 9.8 % SG&A as aPercentage of 43.8 % 55.5 % 47.3 % 60.0 % Gross Profit
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) JUNE 2021/2020 JUNE 2021/ 2020 (In thousands)ASSETS 2021 2020 LIABILITIES 2021 2020 AND EQUITY CURRENT CURRENT ASSETS LIABILITIESCash and Cashcash $ 44,286 $ 200,546 Overdraft $ 34,229 $ ? equivalentsRestricted 629 724 Accounts 359,484 199,338 cash payableInvestments 33,827 19,195 Accrued 337,507 233,088 liabilitiesAccounts Currentreceivable 980,571 522,930 portion of 97 2,786 debtInventories 1,026,488 459,424 Othercurrent 36,699 33,786 assets TOTAL TOTALCURRENT 2,122,500 1,236,605 CURRENT 731,317 435,212 ASSETS LIABILITIES OTHER 146,486 120,464 ASSETS LONG-TERMINTANGIBLE DEBT ANDASSETS, NET 424,110 299,963 FINANCE 571,856 161,057 LEASE OBLIGATIONS OTHER 163,547 123,014 LIABILITIESPROPERTY,PLANT AND 533,187 401,576 EQUITY 1,759,563 1,339,325 EQUIPMENT,NET TOTAL TOTALASSETS $ 3,226,283 $ 2,058,608 LIABILITIES $ 3,226,283 $ 2,058,608 AND EQUITY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 2021/2020 (Inthousands) 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 5,742 2,303 compensation arrangementsDeferred 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 6,673 644 equipmentAcquisitions and purchase of noncontrolling (433,239 ) (18,689 ) interest, net of cash receivedPurchases 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 436,608 168,666 PERIOD 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 $ 436,608 $ 168,666 period 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 ENDEDJUNE 2021/2020 Quarter Period Year to Date(In thousands) 2021 2020 2021 2020Net earnings $ 175,360 $ 69,694 $ 279,611 $ 110,264 Interest expense 3,899 1,898 7,050 3,805 Interest and investment (659 ) (189 ) (1,201 ) (530 )incomeIncome taxes 58,530 23,657 90,281 36,979 Expenses associated withshare-based compensation 2,761 859 5,742 2,303 arrangementsNet (gain) loss ondisposition and (1,045 ) 14 (1,577 ) (271 )impairment of assetsEquity in Earnings of 835 ? 1,465 ? InvesteeUnrealized (gain) loss on (1,030 ) (2,701 ) (2,784 ) 472 investmentsDepreciation expense 19,609 15,613 38,342 31,330 Amortization of 3,195 1,558 7,193 3,129 intangiblesAdjusted EBITDA $ 261,455 $ 110,403 $ 424,122 $ 187,481
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