UFP INDUSTRIES INC

Previous wording

This report 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. We do 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 currency and inflation; fluctuations in the price of lumber; adverse economic conditions in the markets we serve; concentration of sales to customers; vertical integration strategies; excess capacity or supply chain challenges; our ability to make successful business acquisitions; government regulations, particularly involving environmental and safety regulations; adverse or unusual weather conditions; inbound and outbound transportation costs; alternatives to replace treated wood products; cybersecurity breaches; tariffs on import and export sales; and potential pandemics. Certain of these risk factors as well as other risk factors and additional information are included in our reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission.

Current wording

This report 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. We do 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 currency and inflation; fluctuations in the price of lumber; adverse economic conditions in the markets we serve; changes in tariffs, import/export regulations, and other trade policies; concentration of sales to customers; the success of vertical integration strategies; excess capacity or supply chain challenges; our ability to make successful business acquisitions; government regulations, particularly involving environmental and safety regulations; adverse or unusual weather conditions; inbound and outbound transportation costs; alternatives to replace treated wood products; cybersecurity breaches; and potential pandemics. Certain of these risk factors as well as other risk factors and additional information are included in our reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission.

Previous wording

Our results for the third quarter of 2024 include the following highlights:

Current wording

Our results for the first quarter of 2025 include the following highlights:

Previous wording

Lower overall lumber prices in 2024 compared to 2023 is primarily due to increased supply of SYP lumber in the U.S. while end market demand has remained soft. A change in lumber prices impacts profitability of products sold with fixed and variable prices, as discussed below.

Current wording

Higher overall lumber prices in 2025 compared to 2024 is primarily due to increased end market demand in the U.S. as well as various supply constraints. A change in lumber prices impacts profitability of products sold with fixed and variable prices, as discussed below. If recently proposed tariffs are enforced, which have been paused in Mexico and Canada, the demand for domestic product is expected to increase, which will likely increase costs as capacity gets challenged. Although the trade landscape continues to evolve, since we do not own any foreign sawmills and have excellent relationships with our mill partners, we believe we are currently in a strong position to adapt quickly to tariffs without material adverse financial impact after a short adjustment period. We will continue to monitor the market and make decisions quickly to minimize disruption. As of March 29, 2025, 84% of our lumber purchases are from domestic suppliers and 15% are imported from Canada and other international suppliers.

Previous wording

We generally price our products to pass lumber costs through to our customers so that our profitability is based on the value-added manufacturing, distribution, engineering, and other services we provide. As a result, our dollar sales levels (and working capital requirements) are impacted by the lumber costs of our products. Lumber costs were 38.6% and 38.9% of our sales in the first nine months of 2024 and 2023, respectively.

Current wording

We generally price our products to pass lumber costs through to our customers so that our profitability is based on the value-added manufacturing, distribution, engineering, and other services we provide. As a result, our dollar sales levels (and working capital requirements) are impacted by the lumber costs of our products. Lumber costs were 43.8% and 39.8% of our sales in the first three months of 2025 and 2024, respectively.

Previous wording

We completed one business acquisition in fiscal 2023. The annual historical sales attributable to this acquisition is approximately $38 million. This business combination was not significant to our quarterly results individually or in aggregate and thus pro forma results for 2024 and 2023 are not presented.

Current wording

We completed one business acquisition in fiscal 2024. The annual historical sales attributable to this acquisition are approximately $25 million. This business combination is not significant to our quarterly results and thus pro forma results for 2025 and 2024 are not presented.

Previous wording

The following table presents, for the periods indicated, our selling, general, and administrative (SG&A) costs as a percentage of gross profit. We believe this ratio provides an enhanced view of our effectiveness in managing these costs given our strategies to enhance our capabilities and improve our value-added product offering and recognizing the higher relative level of SG&A these strategies require. This ratio also mitigates the impact of changing lumber prices. The increase in the ratio of SG&A as a percentage of gross profit from the prior year is attributable to SG&A costs within our Packaging, Construction, and Corporate segments.

Current wording

The following table presents, for the periods indicated, our selling, general, and administrative (SG&A) costs as a percentage of gross profit. Over time, we believe this ratio provides an enhanced view of our effectiveness in managing these costs given our strategies to enhance our capabilities and improve our value-added product offering and recognizing the higher relative level of SG&A these strategies require. This ratio also mitigates the impact of changing lumber prices. The increase in the ratio of SG&A as a percentage of gross profit from the prior year is primarily due to the impact of competitive pricing and higher material costs, which has reduced our gross profits.

Previous wording

Our overall unit sales of value-added products were flat in the third quarter and up 1% in the first nine months of 2024 compared to the same periods last year. Our overall unit sales of commodity-based products decreased approximately 2% in the third quarter and approximately 4% in the first nine months of 2024 compared to the same periods last year.

Current wording

Our overall unit sales of value-added products were up 2% in the first quarter of 2025 compared to the same period last year. Our overall unit sales of commodity-based products decreased approximately 3% in the first quarter of 2025 compared to the same period last year.

Previous wording

Net sales in the third quarter of 2024 decreased by 13% compared to the same period of 2023 due to a 7% decline in selling prices, a 2% decrease due to the transfer of certain sales to the Construction and Packaging segments, and a 4% decline in units. Unit changes within this segment consisted of decreases of 3% in Deckorators, 4% in UFP Edge, and 5% in ProWood. Our selling prices of variable-priced products declined due to lower lumber prices. The selling prices of these products are indexed to the lumber market at the time they are shipped. Additionally, our unit sales to big box customers, which we believe are more closely correlated with repair and remodel activity, decreased approximately 3%, while unit sales to independent retailers, which we believe are more closely correlated to new housing starts, decreased approximately 8%. Within our Deckorators business unit, our sales of wood-plastic composite decking, mineral-based-composite decking (sold under our new Surestone tradename) and railing systems increased 4%.

Current wording

Net sales in the first quarter of 2025 decreased by 3% compared to the same period of 2024 due to a 1% increase in selling prices and a 4% decrease in units. Unit changes within this segment consisted of decreases of 11% in Deckorators and 3% in ProWood. Our unit sales to big box customers, which we believe are more closely correlated with repair and remodel activity, decreased approximately 3%, while unit sales to independent retailers, which we believe are more closely correlated to new housing starts, decreased approximately 7%. Within our Deckorators business unit, our sales of wood-plastic composite decking, mineral-based-composite decking (sold under our new Surestone tradename) and railing systems decreased 14%. We believe our unit decline is due to a recent change in customer mix in which we lost market share with one big box customer and gained market share with another. For the remainder of the year we believe we will benefit from a modest net gain in market share as we begin stocking approximately 1,500 stores and continue to add capacity to produce our mineral-based composite decking. We expect to realize the full benefit of our net market share gain in 2026. Our long-term goal is to double our market share over the next 5 years.

Previous wording

Earnings from operations for the Retail reportable segment decreased in the third quarter of 2024 compared to 2023 by $4.9 million, or 10.4%, as a result of the factors mentioned above.

Current wording

Earnings from operations for the Retail reportable segment decreased in the first quarter of 2025 compared to 2024 by $20 million, or 43%, as a result of the factors mentioned above.

Previous wording

Net sales in the third quarter of 2024 decreased 11% compared to the same period of 2023, due to an 8% decrease in selling prices and a 5% decrease in unit sales, partially offset by a 2% increase due to the transfer of sales from the Retail segment. Unit changes consist of a decrease of 10% in structural packaging, primarily due to a decline in demand, partially offset by unit growth of 2% in PalletOne and 4% in Protective Packaging due to market share gains. The decline in prices is due to competitive price pressure as well as lower lumber costs.

Current wording

Net sales in the first quarter of 2025 decreased 3% compared to the same period of 2024, due to a 1% decrease in selling prices and a 3% decrease in organic unit sales, partially offset by an acquired business which contributed to 1% unit growth. Organic unit changes consist of decreases of 1% in PalletOne and 5% in Structural Packaging, primarily due to a decline in demand, partially offset by growth of 13% in Protective Packaging due to market share gains. The decrease in selling prices is due to competitive price pressure primarily in our Structural Packaging business unit.

Previous wording

Earnings from operations for the Packaging reportable segment decreased in the third quarter of 2024 compared to 2023 by $19.6 million, or 47.2%, due to the factors discussed above.

Current wording

Earnings from operations for the Packaging reportable segment decreased in the first quarter of 2025 compared to 2024 by $10 million, or 30%, due to the factors discussed above.

Previous wording

Net sales in the third quarter of 2024 decreased 8% compared to the same period of 2023 and consists of a unit decrease of 1% and a 7% decrease in selling prices. We experienced unit declines of 6% in commercial construction, 7% in concrete forming, and 8% in site built, primarily due to softer demand. These declines were substantially offset by an 11% increase in factory-built, primarily due to an increase in industry production. As of September 28, 2024 and September 30, 2023, we estimate that our backlog of orders in our site-built construction business unit were $80 million and $91 million, respectively. The decline in pricing was primarily due to competitive price pressure.

Current wording

Net sales in the first quarter of 2025 remained flat compared to the same period of 2024 due to a 3% decrease in selling prices offset by a 3% organic unit increase. We experienced unit increases of 13% in factory-built, 4% in commercial construction, and 3% in concrete forming. Our growth in factory-built is primarily due to an increase in industry production. These increases were partially offset by a 5% decrease in site-built, primarily due to softer demand for housing. As of March 29, 2025 and March 30, 2024, we estimate that our backlog of orders in our site-built construction business unit were $65 million and $79 million, respectively. The decrease in pricing was primarily due to competitive price pressure in our site-built business unit.

Previous wording

Gross profits decreased by $33.1 million, or 22.9%, in the third quarter of 2024 compared to the same period of 2023. The decrease in our gross profit was comprised of the following:

Current wording

Gross profits decreased by $24 million, or 21%, in the first quarter of 2025 compared to the same period of 2024. The change in our gross profit was comprised of the following:

Previous wording

Earnings from operations for the Construction reportable segment decreased in the third quarter of 2024 compared to 2023 by $27.2 million, or 39.0%, due to the factors mentioned above.

Current wording

Earnings from operations for the Construction reportable segment decreased in the first quarter of 2025 compared to 2024 by $18 million, or 39%, due to the factors mentioned above.

Previous wording

Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for foreign, state and local income taxes and permanent tax differences. Our effective tax rate was 24.2% in the third quarter of 2024 compared to 22.7% in the same period of 2023 and was 22.3% in the first nine months of 2024 compared to 23.3% for the same period in 2023. The increase in our effective tax rate for the third quarter was primarily due to a decrease in the benefit we recognized for an R&D tax credit in the quarter. The decrease in our effective tax rate for the first nine months of 2024 was primarily due to an increase in our tax deduction from stock-based compensation accounted for as a permanent difference.

Current wording

Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for foreign, state and local income taxes and permanent tax differences. Our effective tax rate was 21.1% in the first quarter of 2025 compared to 17.4% in the same period of 2024. The increase in our effective tax rate for the first quarter was primarily due to a decrease in our tax deduction from stock-based compensation accounted for as a permanent difference.

Previous wording

Due to the seasonality of our business and the effects of the Lumber Market, we believe our cash cycle (days of sales outstanding plus days supply of inventory less days of payables outstanding) is a good indicator of our working capital management. As indicated in the table below, our cash cycle decreased to 59 days from 62 days during the third quarter of 2024 and decreased to 59 days from 65 days during the first nine months of 2024 compared to the prior year period.

Current wording

Due to the seasonality of our business and the effects of the Lumber Market, we believe our cash cycle (days of sales outstanding plus days supply of inventory less days of payables outstanding) is a good indicator of our working capital management. As indicated in the table below, our cash cycle was 62 days during the first quarter of 2025 and in the same period of the prior year.

Previous wording

The decrease in our days supply of inventory for the quarter and first nine months of 2024 is due to improvements in inventory turns in our Construction and Packaging segments. The decrease in our days of sales outstanding is primarily due to improvements in our Construction segment. We continue to focus on past due account balances with customers, and the percentage of our accounts receivable that are current was 93% and 94% at the end of the third quarter of 2024 and 2023, respectively.

Current wording

We continue to focus on past due account balances with customers, and the percentage of our accounts receivable that are current was 94% and 95% at the end of the first quarter of 2025 and 2024, respectively.

Previous wording

In the first nine months of 2024, our cash flows from operations were $498 million and were comprised of net earnings of $349 million, $134 million of non-cash expenses, and a $14 million increase in working capital since the end of December 2023. Our cash flows from operations decreased by $214 million compared to the same period of last year primarily due to the decrease in our investment in net working capital since year end, which was $164 million lower in 2024 compared to 2023. In 2023 our net working capital declined significantly as a result of demand normalizing from the peak of the pandemic period.

Current wording

In the first three months of 2025, our cash flows used in operations were $109 million and were comprised of net earnings of $79 million, $51 million of non-cash expenses, and a $239 million increase in working capital since the end of December 2024. Our cash flows used in operations increased by $92 million compared to the same period of last year primarily due to the increase in our investment in net working capital since year end, which was $55 million higher in 2025 compared to 2024.

Previous wording

Purchases of property, plant, and equipment of $165 million comprised most of our cash used in investing activities during the first nine months of 2024. Net purchases of investments totaled $34.3 million while total proceeds from the sale of investments totaled $13.8 million. Outstanding purchase commitments on existing capital projects totaled approximately $163 million on September 28, 2024. Capital spending primarily consists of several projects to expand capacity to manufacture new and value-added products, primarily in our Packaging segment and Site-Built, Deckorators and ProWood business units, achieve efficiencies through automation in all segments, and make improvements to a number of facilities. We intend to fund capital expenditures and purchase commitments through our operating cash flows for the balance of the year.

Current wording

Purchases of property, plant, and equipment of $67 million comprised most of our cash used in investing activities during the first three months of 2025. Outstanding purchase commitments on existing capital projects totaled approximately $153.4 million on March 29, 2025. Capital spending primarily consists of several projects to expand capacity to manufacture new and value-added products, primarily in our Packaging segment and our Site-Built and Deckorators business units, to achieve efficiencies through automation in all segments, and make improvements to a number of facilities. We intend to fund capital expenditures and purchase commitments through our operating cash flows for the balance of the year.

Previous wording

Cash flows used in financing activities during the first nine months of 2024 primarily consisted of the following:

Current wording

Cash flows used in financing activities during the first three months of 2025 primarily consisted of the following:

Previous wording

On September 28, 2024, we had $2.0 million outstanding on our $750 million revolving credit facility, and we had approximately $711 million in remaining availability after considering $37 million in outstanding letters of credit. Financial covenants on the unsecured revolving credit facility and unsecured notes include minimum interest tests and a maximum leverage ratio. The agreements also restrict the amount of additional indebtedness we may incur and the amount of assets which may be sold. We were in compliance with all our covenant requirements on September 28, 2024.

Current wording

On March 29, 2025, we had no amount outstanding on our $750 million revolving credit facility, and we had approximately $713 million in remaining availability after considering $37 million in outstanding letters of credit. Financial covenants on the unsecured revolving credit facility and unsecured notes include minimum interest tests and a maximum leverage ratio. The agreements also restrict the amount of additional indebtedness we may incur and the amount of assets which may be sold. We were in compliance with all our covenant requirements on March 29, 2025.

Previous wording

At the end of the third quarter of 2024, we had approximately $2.4 billion in total liquidity, consisting of our cash, remaining availability under our revolving credit facility, and a shelf agreement with certain lenders providing up to $535 million in remaining borrowing capacity.

Current wording

At the end of the first quarter of 2025, we had approximately $2.2 billion in total liquidity, consisting of our cash, remaining availability under our revolving credit facility, and a shelf agreement with certain lenders providing up to $575 million in remaining borrowing capacity.

Previous wording

We believe effectively executing our strategies will allow us to achieve long-term goals in the future. However, demand in the markets we serve has contracted, which will impact our results and vary depending on the severity and duration of this cycle. The following factors should be considered when evaluating our future prospects:

Current wording

The following factors should be considered when evaluating our future prospects: