UFP Industries Reports Record Earnings for Fourth Quarter and Year
GRAND RAPIDS, Mich., Wednesday, Feb. 24, 2021 – UFP Industries, Inc. (Nasdaq: UFPI) today announced record net sales and net earnings for the fourth quarter and fiscal year 2020. The company, while surpassing the $5 billion mark in annual net sales for the first time, also reported record EPS of $4.00 per diluted share for fiscal 2020, a 37 percent increase over the previous year. During the fourth quarter of fiscal 2020, net sales were $1.39 billion, a 40 percent increase over the fourth quarter of 2019, while EPS was $1.02 per diluted share, a 67 percent increase over the fourth quarter of 2019.
“Despite the disruptions that marked 2020, our reorganized structure allowed our employees to remain focused on bringing new value-added products to market faster and using capital more efficiently, while supporting more rapid growth at a lower incremental cost,” said CEO Matthew J. Missad. “I am most impressed by the perseverance of our hourly production employees who safely served our customers. Their commitment to our company enabled us to reward our hourly employees with more than $25 million in bonuses and additional benefits for 2020. I want to express my
deepest gratitude for their dedication.”
New product sales for the fourth quarter increased 46 percent over the same period of 2019, led by the company’s new Deckorators Voyage decking line and Dimensions project panels business. These improvements in sales mix contributed to an increase in the company’s gross profit per unit, as gross profit increased by 19 percent, exceeding the company’s 15 percent increase in unit sales growth. Additionally, the company’s SG&A expense as a percentage of gross profit improved to 46 percent compared to 67 percent in 2019, due to its continued efforts to focus on leveraging fixed costs and creating efficiencies as it grows organically and through acquisitions. Certain expenses, such as travel, decreased due to the impact of the pandemic and the company’s increased use of equity awards as part of its annual incentive compensation program.
“I’m pleased to see our strategies and execution are continuing to drive improvements in profit per unit, especially in a quarter like this when lumber market volatility was a formidable challenge,” said Missad. “As usual, our people were up to the challenge.”
Fourth Quarter 2020 Highlights (comparisons on a year-over-year basis):
- Net sales of $1.39 billion increased 40 percent due to a 15 percent increase in unit sales and 25 percent increase in lumber prices
- Earnings from operations of $88.2 million increased 70 percent despite $12 million in asset impairment charges and other costs taken during the quarter (detailed in the Business Segment section below). The company’s use of share grants as part of its annual incentive program resulted in a $20 million decrease in bonus expense in the fourth quarter of 2020 compared to 2019. Excluding impairment charges and the decrease in bonus expense, earnings from operations increased 55 percent.
- New product sales of $131.8 million increased 46 percent
Fiscal 2020 Highlights (comparisons on a year-over-year basis):
- Net sales of $5.15 billion increased 17 percent due to a unit sales increase of 6 percent and an increase in lumber prices of 11 percent
- Earnings from operations of $345.8 million increased 41 percent
- Adjusted EBITDA of $431.4 million increased 36 percent, exceeding the company’s unit sales increase of 6 percent
- New product sales were $539 million, up 26 percent
UFP Industries maintains a strong balance sheet and had liquidity of approximately $485 million at the end of January 2021. As previously announced, the company was able to utilize its strong cash position to complete the $259 million acquisition of PalletOne and its wholly owned subsidiary, Sunbelt Forest Products (Sunbelt), at the beginning of fiscal 2021. PalletOne operates 17 pallet manufacturing facilities in the U.S. and expands UFP’s geographic reach, capacity and ability to grow sales of machine-built pallets. Sunbelt operates five pressure-treating facilities in the Southeastern U.S. The companies had combined 2020 sales of $698 million. In addition, on February 22, 2021, UFP announced an agreement for Sunbelt to purchase Spartanburg Forest Products and its affiliates, further expanding its pressure-treating capacity. Also in February 2021, the company increased its revolving long-term credit facility by $175 million to $550 million.
As a result of the company’s strong balance sheet and confidence in future earnings and cash flow, on January 28, 2021, UFP’s Board of Directors voted to increase its quarterly dividend by 20 percent to 15 cents a share, payable on March 15, 2021, to shareholders of record on March 1, 2021.
By business segment, the Company reported the following 2020 results:
UFP Retail Solutions
• Fourth Quarter: $505.2 million in net sales, up 76 percent over the fourth quarter of 2019 due to a 38 percent increase in unit sales and a 38 percent increase in selling prices. All business units experienced double-digit unit sales increases: Deckorators (up 80 percent), Outdoor Essentials (up 64 percent), Home & Decor (up 38 percent), UFP Edge (up 27 percent), and ProWood (up 25 percent).
• Full Year: $2.17 billion in net sales, up 45 percent from 2019, due to a 25 percent increase in unit sales and a 20 percent increase in selling prices. All business units experienced double-digit unit sales increases: Home & Decor (up 49 percent), Outdoor Essentials (up 28 percent), ProWood (up 25 percent), Deckorators (up 20 percent) and UFP Edge (up 14 percent). Total E-Commerce sales for the year, including sales in other business units, were $129 million, up 96 percent over 2019.
• Fourth Quarter: $309.1 million in net sales, up 25 percent from the fourth quarter of 2019; unit sales increased 10 percent and selling prices increased 15 percent. Organic growth accounted for 6 percent of the unit sales growth; acquisitions accounted for 4 percent.
• Full Year: $1.07 billion in net sales, down 1 percent from the previous year. Unit sales fell 6 percent due to pandemic-related shutdowns, while selling prices increased 5 percent. UFP Industrial’s sales improved throughout the year as pandemic-related restrictions eased, and the fourth quarter was a sales record for the segment.
• Fourth Quarter: $508.3 million in net sales, up 24 percent over the fourth quarter of 2019, due entirely to an increase in selling prices. Unit sales to residential and manufactured housing customers rose 16 percent and 11 percent, respectively. Unit sales to commercial customers fell 30 percent, with an organic unit sales decrease of 35 percent offset by a 5 percent unit sales increase from acquisitions.
• Full Year: $1.70 billion in net sales, up 4 percent from the previous year due to a 10 percent increase in selling prices offset by a 6 percent decrease in unit sales. Unit sales to manufactured housing customers rose 2 percent for the year; unit sales to site built and commercial customers fell 2 percent and 23 percent, respectively.
• Annual net sales in the Commercial Construction business unit declined by approximately $70 million in 2020 from 2019, and the unit reported an annual operating loss, exclusive of impairment charges, totaling $25 million in 2020. As a result, the company is consolidating production, eliminating less profitable products and services, and executing a plan to drive more efficiencies in the business unit. These actions and lower future demand expectations resulted in an impairment in the value of certain leased assets and goodwill associated with the business unit of approximately $15 million, which was recorded in the fourth quarter.
“Our Commercial Construction business unit was one of the hardest hit by the lockdowns related to the pandemic,” said Missad. “While this unit reacted quickly to provide a variety of protective structures and signage for COVID-related needs, many core commercial construction markets, such as hospitality, financial services, and branded retail markets, slowed dramatically. Market conditions necessitated that we take significant actions to align capacity with current demand, and as a result of our actions, we believe the business unit will return to profitability in 2021.”