10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 26, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-22684

UFP INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Michigan	38-1465835
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification Number)
organization)
2801 East Beltline NE, Grand Rapids, Michigan	49525
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (616) 364-6161

NONE

(Former name or former address, if changed since last report.)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ⌧	Accelerated Filer ◻	Non-Accelerated Filer ◻	Smaller Reporting Company ☐
			Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with a new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐   No ⌧

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Outstanding as of September 26, 2020
Common stock, $1 par value	61,186,636

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol	Name of Each Exchange On Which Registered
Common Stock, no par value	UFPI	The Nasdaq Stock Market, LLC

UFP INDUSTRIES, INC.

TABLE OF CONTENTS

PART I.		FINANCIAL INFORMATION.	Page No.
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets at September 26, 2020, December 28, 2019 and September 28, 2019	3
		Condensed Consolidated Statements of Earnings and Comprehensive Income for the Three and Nine Months Ended September 26, 2020 and September 28, 2019	4
		Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 26, 2020 and September 28, 2019	5
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 26, 2020 and September 28, 2019	7
		Notes to Unaudited Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34
	Item 4.	Controls and Procedures	35
PART II.		OTHER INFORMATION
	Item 1.	Legal Proceedings – NONE
	Item 1A.	Risk Factors	36
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
	Item 3.	Defaults upon Senior Securities – NONE
	Item 4.	Mine Safety Disclosures – NONE
	Item 5.	Other Information – NONE	36
	Item 6.	Exhibits	37

2

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share data)
	September 26,		December 28,		September 28,
	2020		2019		2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	346,154	$	168,336	$	64,498
Restricted cash		724		330		729
Investments		20,530		18,527		17,028
Accounts receivable, net		583,079		364,027		474,648
Inventories:
Raw materials		286,418		236,283		239,585
Finished goods		242,316		250,591		239,771
Total inventories		528,734		486,874		479,356
Refundable income taxes		—		13,272		1,550
Other current assets		32,888		41,706		54,295
TOTAL CURRENT ASSETS		1,512,109		1,093,072		1,092,104
DEFERRED INCOME TAXES		2,070		2,763		2,284
RESTRICTED INVESTMENTS		17,327		16,214		16,082
RIGHT OF USE ASSETS		77,412		80,167		75,436
OTHER ASSETS		24,216		24,884		23,085
GOODWILL		245,925		229,536		232,411
INDEFINITE-LIVED INTANGIBLE ASSETS		7,361		7,354		7,339
OTHER INTANGIBLE ASSETS, NET		58,205		48,313		46,877
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment		935,639		884,963		880,274
Less accumulated depreciation and amortization		(529,644)		(497,789)		(495,267)
PROPERTY, PLANT AND EQUIPMENT, NET		405,995		387,174		385,007
TOTAL ASSETS		2,350,620		1,889,477		1,880,625
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	231,111	$	142,479	$	180,767
Accrued liabilities:
Compensation and benefits		171,472		141,892		127,500
Income taxes		3,024		—		—
Other		69,888		51,572		61,463
Current portion of lease liability		15,349		15,283		15,566
Current portion of long-term debt		2,760		2,816		152
TOTAL CURRENT LIABILITIES		493,604		354,042		385,448
LONG-TERM DEBT		311,267		160,867		162,853
LEASE LIABILITY		62,100		64,884		59,870
DEFERRED INCOME TAXES		22,478		22,880		14,897
OTHER LIABILITIES		47,367		29,071		28,454
TOTAL LIABILITIES		936,816		631,744		651,522
SHAREHOLDERS’ EQUITY:
Controlling interest shareholders’ equity:
Preferred stock, no par value; shares authorized 1,000,000; issued and outstanding, none	$	—	$	—	$	—
Common stock, $1 par value; shares authorized 80,000,000; issued and outstanding, 61,186,636, 61,408,589 and 61,390,216		61,187		61,409		61,390
Additional paid-in capital		216,002		192,173		189,820
Retained earnings		1,127,375		995,022		969,564
Accumulated other comprehensive income		(6,974)		(4,889)		(5,315)
Total controlling interest shareholders’ equity		1,397,590		1,243,715		1,215,459
Noncontrolling interest		16,214		14,018		13,644
TOTAL SHAREHOLDERS’ EQUITY		1,413,804		1,257,733		1,229,103
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,350,620	$	1,889,477	$	1,880,625

See notes to consolidated condensed financial statements.

3

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME

(Unaudited)

(in thousands, except per share data)
	Three Months Ended				Nine Months Ended
	September 26,		September 28,		September 26,		September 28,
	2020		2019		2020		2019
NET SALES	$	1,486,227	$	1,163,026	$	3,760,290	$	3,417,969
COST OF GOODS SOLD		1,245,153		975,756		3,147,049		2,889,706
GROSS PROFIT		241,074		187,270		613,241		528,263
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		134,649		115,958		357,770		334,165
OTHER		(176)		845		(2,120)		948
EARNINGS FROM OPERATIONS		106,601		70,467		257,591		193,150
INTEREST EXPENSE		2,486		1,900		6,291		6,767
INTEREST INCOME		(1,011)		(317)		(1,541)		(1,074)
UNREALIZED GAIN ON INVESTMENTS AND OTHER		(554)		(93)		(82)		(1,611)
		921		1,490		4,668		4,082
EARNINGS BEFORE INCOME TAXES		105,680		68,977		252,923		189,068
INCOME TAXES		26,819		16,396		63,798		45,340
NET EARNINGS		78,861		52,581		189,125		143,728
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(1,657)		(722)		(5,299)		(1,814)
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST	$	77,204	$	51,859	$	183,826	$	141,914
EARNINGS PER SHARE - BASIC	$	1.25	$	0.84	$	2.98	$	2.30
EARNINGS PER SHARE - DILUTED	$	1.25	$	0.84	$	2.98	$	2.30
OTHER COMPREHENSIVE INCOME:
NET EARNINGS		78,861		52,581		189,125		143,728
OTHER COMPREHENSIVE GAIN (LOSS)		1,687		(1,200)		(4,030)		644
COMPREHENSIVE INCOME		80,548		51,381		185,095		144,372
LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		(1,922)		(358)		(3,354)		(1,835)
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST	$	78,626	$	51,023	$	181,741	$	142,537

See notes to consolidated condensed financial statements.

4

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

(in thousands, except share and per share data)
	Controlling Interest Shareholders’ Equity
							Accumulated
			Additional				Other
	Common		Paid-In		Retained		Comprehensive		Noncontrolling
	Stock		Capital		Earnings		Earnings		Interest		Total
Balance at December 28, 2019	$	61,409	$	192,173	$	995,022	$	(4,889)	$	14,018	$	1,257,733
Net earnings						40,159				411		40,570
Foreign currency translation adjustment								(5,951)		(2,335)		(8,286)
Unrealized loss on debt securities								(270)				(270)
Distributions to noncontrolling interest										(299)		(299)
Additional purchase of noncontrolling interest				130						(225)		(95)
Cash dividends - $0.125 per share - quarterly						(7,730)						(7,730)
Issuance of 10,549 shares under employee stock plans		10		309								319
Net issuance of 350,124 shares under stock grant programs		350		12,454		1						12,805
Issuance of 89,616 shares under deferred compensation plans		89		(89)								—
Repurchase of 756,397 shares		(756)				(28,456)						(29,212)
Expense associated with share-based compensation arrangements				1,404								1,404
Accrued expense under deferred compensation plans				5,343								5,343
Balance at March 28, 2020	$	61,102	$	211,724	$	998,996	$	(11,110)	$	11,570	$	1,272,282
Net earnings						66,463				3,231		69,694
Foreign currency translation adjustment								2,026		125		2,151
Unrealized loss on debt securities								688				688
Cash dividends - $0.125 per share - quarterly						(7,644)						(7,644)
Issuance of 9,714 shares under employee stock plans		10		367								377
Net issuance of 42,880 shares under stock grant programs		43		(174)		2						(129)
Issuance of 14,106 shares under deferred compensation plans		14		(14)								—
Expense associated with share-based compensation arrangements				824								824
Accrued expense under deferred compensation plans				1,082								1,082
Balance at June 27, 2020	$	61,169	$	213,809	$	1,057,817	$	(8,396)	$	14,926	$	1,339,325
Net earnings						77,204				1,657		78,861
Foreign currency translation adjustment								1,319		265		1,584
Unrealized loss on debt securities								103				103
Distributions to noncontrolling interest										(634)		(634)
Cash dividends - $0.125 per share - quarterly						(7,646)						(7,646)
Issuance of 7,511 shares under employee stock plans		7		338								345
Net forfeiture of 1,382 shares under stock grant programs		(1)		(56)								(57)
Issuance of 11,326 shares under deferred compensation plans		12		(12)								—
Expense associated with share-based compensation arrangements				826								826
Accrued expense under deferred compensation plans				1,097								1,097
Balance at September 26, 2020	$	61,187	$	216,002	$	1,127,375	$	(6,974)	$	16,214	$	1,413,804

See notes to condensed consolidated financial statements.

5

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY, CONTINUED

(Unaudited)

(in thousands, except share and per share data)
	Controlling Interest Shareholders’ Equity
							Accumulated
			Additional				Other
	Common		Paid-In		Retained		Comprehensive		Noncontrolling
	Stock		Capital		Earnings		Earnings		Interest		Total
Balance at December 29, 2018	$	60,884	$	178,540	$	839,917	$	(5,938)	$	15,281	$	1,088,684
Net earnings						35,540				462		36,002
Foreign currency translation adjustment								982		224		1,206
Unrealized gain (loss) on investment & foreign currency								167				167
Distributions to noncontrolling interest										(500)		(500)
Issuance of 10,259 shares under employee stock plans		10		251								261
Net issuance of 320,069 shares under stock grant programs		320		6,101								6,421
Issuance of 138,295 shares under deferred compensation plans		138		(138)								—
Expense associated with share-based compensation arrangements				1,226								1,226
Accrued expense under deferred compensation plans				4,899								4,899
Balance at March 30, 2019	$	61,352	$	190,879	$	875,457	$	(4,789)	$	15,467	$	1,138,366
Net earnings						54,515				630		55,145
Foreign currency translation adjustment								151		161		312
Unrealized gain (loss) on investment & foreign currency								159				159
Distributions to noncontrolling interest										(400)		(400)
Cash dividends - $0.200 per share - semiannually						(12,271)						(12,271)
Issuance of 8,694 shares under employee stock plans		9		272								281
Net forfeiture of 10,819 shares under stock grant programs		(11)		(262)		3						(270)
Issuance of 16,433 shares under deferred compensation plans		17		(17)								—
Expense associated with share-based compensation arrangements				885								885
Accrued expense under deferred compensation plans				1,026								1,026
Balance at June 29, 2019	$	61,367	$	192,783	$	917,704	$	(4,479)	$	15,858	$	1,183,233
Net earnings						51,859				722		52,581
Foreign currency translation adjustment								(963)		(364)		(1,327)
Unrealized gain (loss) on investment & foreign currency								127				127
Distributions to noncontrolling interest										(734)		(734)
Additional purchase of noncontrolling interest				(5,015)						(1,838)		(6,853)
Cash dividends - $0.200 per share - semiannually						1						1
Issuance of 7,916 shares under employee stock plans		8		262								270
Net issuance of 1,070 shares under stock grant programs		1		(73)								(72)
Issuance of 14,550 shares under deferred compensation plans		14		(14)								—
Expense associated with share-based compensation arrangements				857								857
Accrued expense under deferred compensation plans				1,020								1,020
Balance at September 28, 2019	$	61,390	$	189,820	$	969,564	$	(5,315)	$	13,644	$	1,229,103

See notes to consolidated condensed financial statements.

6

UFP INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)	Nine Months Ended
	September 26,		September 28,
	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	189,125	$	143,728
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation		47,226		44,652
Amortization of intangibles		5,863		4,690
Expense associated with share-based and grant compensation arrangements		3,152		3,105
Deferred income taxes (credit)		110		(367)
Unrealized loss (gain) on investments		(81)		(1,611)
Net (gain) loss on disposition of assets and impairment of assets		(662)		830
Changes in:
Accounts receivable		(211,238)		(127,841)
Inventories		(39,167)		80,178
Accounts payable and cash overdraft		85,354		14,293
Accrued liabilities and other		105,401		36,423
NET CASH FROM OPERATING ACTIVITIES		185,083		198,080
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(67,024)		(66,338)
Proceeds from sale of property, plant and equipment		2,588		1,180
Acquisitions and purchases of non-controlling interest, net of cash received		(34,820)		(38,710)
Purchases of investments		(24,266)		(6,475)
Proceeds from sale of investments		22,281		4,159
Other		314		199
NET CASH USED IN INVESTING ACTIVITIES		(100,927)		(105,985)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities		6,862		421,464
Repayments under revolving credit facilities		(6,498)		(460,537)
Contingent consideration payment and other		(3,087)		(3,099)
Issuance of long-term debt		150,000		—
Proceeds from issuance of common stock		1,042		812
Dividends paid to shareholders		(23,020)		(12,270)
Distributions to noncontrolling interest		(932)		(1,634)
Repurchase of common stock		(29,212)		—
Other		23		41
NET CASH FROM (USED IN) FINANCING ACTIVITIES		95,178		(55,223)
Effect of exchange rate changes on cash		(1,122)		157
NET CHANGE IN CASH AND CASH EQUIVALENTS		178,212		37,029
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR		168,666		28,198
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	346,878	$	65,227
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents, beginning of period	$	168,336	$	27,316
Restricted cash, beginning of period		330		882
Cash, cash equivalents, and restricted cash, beginning of period	$	168,666	$	28,198
Cash and cash equivalents, end of period	$	346,154	$	64,498
Restricted cash, end of period		724		729
Cash, cash equivalents, and restricted cash, end of period	$	346,878	$	65,227
SUPPLEMENTAL INFORMATION:
Interest paid	$	4,112	$	5,287
Income taxes paid		47,301		33,106
NON-CASH FINANCING ACTIVITIES:
Common stock issued under deferred compensation plans		6,195		5,620

See notes to consolidated condensed financial statements.

7

UFP INDUSTRIES, INC.

NOTES TO UNAUDITED

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A.       BASIS OF PRESENTATION

The accompanying unaudited interim consolidated condensed financial statements (the “Financial Statements”) include our accounts and those of our wholly-owned and majority-owned subsidiaries and partnerships, and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, the Financial Statements do not include all the information and footnotes normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States. All intercompany transactions and balances have been eliminated.

In our opinion, the Financial Statements contain all material adjustments necessary to present fairly our consolidated financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. These Financial Statements should be read in conjunction with the annual consolidated financial statements, and footnotes thereto, included in our Annual Report to Shareholders on Form 10-K for the fiscal year ended December 28, 2019.

On April 22, 2020, our shareholders approved changing the name of the Company from Universal Forest Products, Inc., to UFP Industries, Inc.

Seasonality has a significant impact on our working capital from March to August, which historically results in negative or modest cash flows from operations in our first and second quarters. Conversely, we experience a substantial decrease in working capital from September to February which typically results in significant cash flow from operations in our third and fourth quarters. For comparative purposes, we have included the September 28, 2019 balances in the accompanying unaudited condensed consolidated balance sheets.

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. We cannot reasonably estimate the length or severity of this pandemic and government restrictions on business activity, or the extent to which these restrictions may materially impact our consolidated financial position, consolidated results of operations, and consolidated cash flows in fiscal 2020.

8

UFP INDUSTRIES, INC.

B.       FAIR VALUE

We apply the provisions of ASC 820, Fair Value Measurements and Disclosures, to assets and liabilities measured at fair value. Assets measured at fair value are as follows:

	September 26, 2020								September 28, 2019
	Quoted		Prices with						Quoted		Prices with
	Prices in		Other			Prices with			Prices in		Other			Prices with
	Active		Observable			Unobservable			Active		Observable			Unobservable
	Markets		Inputs			Inputs			Markets		Inputs			Inputs
(in thousands)	(Level 1)		(Level 2)			(Level 3)	Total		(Level 1)		(Level 2)			(Level 3)	Total
Money market funds	$	64	$	3,133	$	—	$	3,197	$	56,781	$	843	$	—	$	57,624
Fixed income funds		248		16,522		—		16,770		733		14,566		—		15,299
Equity securities		10,524		—		—		10,524		8,840		—		—		8,840
Alternative investments		—		—		1,926		1,926		—		—		1,895		1,895
Mutual funds:
Domestic stock funds		6,826		—		—		6,826		2,630		—		—		2,630
International stock funds		1,243		—		—		1,243		2,054		—		—		2,054
Target funds		260		—		—		260		268		—		—		268
Bond funds		208		—		—		208		825		—		—		825
Alternative funds		433		—		—		433		1,531		—		—		1,531
Total mutual funds		8,970		—		—		8,970		7,308		—		—		7,308
Total	$	19,806	$	19,655	$	1,926	$	41,387	$	73,662	$	15,409	$	1,895	$	90,966
Assets at fair value	$	19,806	$	19,655	$	1,926	$	41,387	$	73,662	$	15,409	$	1,895	$	90,966

From the assets measured at fair value as of September 26, 2020, listed in the table above, $20.5 million of mutual funds, equity securities, and alternative investments are held in Investments, $0.9 million of money market and mutual funds are held in Other Assets for our deferred compensation plan, and $16.8 million of fixed income funds and $3.2 million of money markets funds are held in Restricted Investments.

We maintain money market, mutual funds, bonds, and/or stocks in our non-qualified deferred compensation plan, our wholly owned licensed captive insurance company, and assets held in financial institutions. These funds are valued at prices quoted in an active exchange market and are included in “Cash and Cash Equivalents”, “Investments”, “Other Assets”, and “Restricted Investments”. We have elected not to apply the fair value option under ASC 825, Financial Instruments, to any of our financial instruments except for those expressly required by U.S. GAAP.

In accordance with our investment policy, our wholly-owned captive, Ardellis Insurance Ltd. (“Ardellis”), maintains an investment portfolio, totaling $37.3 million as of September 26, 2020, which has been included in the aforementioned table of total investments. This portfolio consists of domestic and international stocks, alternative investments, and fixed income bonds.

9

UFP INDUSTRIES, INC.

Ardellis’ available for sale investment portfolio, including funds held with the State of Michigan, consists of the following (in thousands):

	September 26, 2020						September 28, 2019
			Unrealized						Unrealized
	Cost		Gain/(Loss)		Fair Value		Cost		Gain/(Loss)		Fair Value
Fixed Income	$	15,750	$	1,020	$	16,770	$	14,969	$	330	$	15,299
Equity		9,121		1,403		10,524		7,584		1,256		8,840
Mutual Funds		7,228		852		8,080		6,391		(98)		6,293
Alternative Investments		1,881		45		1,926		1,790		105		1,895
Total	$	33,980	$	3,320	$	37,300	$	30,734	$	1,593	$	32,327

Our fixed income investments consist of a blend of US Government and Agency bonds and investment grade corporate bonds with varying maturities. Our equity investments consist of small, mid, and large cap growth and value funds, as well as international equity. Our mutual fund investments consist of domestic and international stock. Our alternative investments consist of the private real estate income trust which is valued as a Level 3 asset. The net unrealized gain was $3.3 million. Carrying amounts above are recorded in the investments and restricted investments line items within the balance sheet as of September 26, 2020 and September 28, 2019.

C.       REVENUE RECOGNITION

Within the three primary segments (Retail, Industrial, and Construction) that the Company operates, there are a variety of written agreements governing the sale of our products and services. The transaction price is stated at the purchase order level, which includes shipping and/or freight costs and any applicable governmental authority taxes. The majority of our contracts have a single performance obligation concentrated around the delivery of goods to the carrier, Free On Board (FOB) shipping point. Therefore, revenue is recognized when this performance obligation is satisfied. Generally, title and control passes at the time of shipment. In certain circumstances, the customer takes title when the shipment arrives at the destination. However, our shipping process is typically completed the same day.

Certain customer products that we provide require installation by the Company or a 3^rd party. Installation revenue is recognized upon completion. If the Company uses a 3^rd party for installation, the party will act as an agent to the Company until completion of the installation. Installation revenue represents an immaterial share of the Company’s total sales.

The Company utilizes rebates, credits, discounts and/or cash-based incentives with certain customers which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized. We believe that there will not be significant changes to our estimates of variable consideration. The allocation of these costs are applied at the invoice level and recognized in conjunction with revenue. Additionally, returns and refunds are estimated on a historical and expected basis which is a reduction of revenue recognized.

Earnings on construction contracts are reflected in operations using over time accounting, under either cost to cost or units of delivery methods, depending on the nature of the business at individual operations, which is in accordance with ASC 606 as revenue is recognized when certain performance obligations are performed. Under over time accounting using the cost to cost method, revenues and related earnings on construction contracts are measured by the relationships of actual costs incurred related to the total estimated costs. Under over time accounting using the units of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual units produced related to the total number of units. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent.

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UFP INDUSTRIES, INC.

Our construction contracts are generally entered into with a fixed price and completion of the projects can range from 6 to 18 months in duration. Therefore, our operating results are impacted by, among many other things, labor rates and commodity costs. During the year, we update our estimated costs to complete our projects using current labor and commodity costs and recognize losses to the extent that they exist.

The following table presents our gross revenues disaggregated by revenue source:

	Three Months Ended					Nine Months Ended
(in thousands)	September 26,		September 28,			September 26,		September 28,
Market Classification	2020		2019		% Change	2020		2019		% Change
FOB Shipping Point Revenue	$	1,490,050	$	1,140,853	30.6%	$	3,749,122	$	3,358,520	11.6%
Construction Contract Revenue		32,007		43,177	-25.9%		97,150		121,622	-20.1%
Total Gross Sales		1,522,057		1,184,030	28.5%		3,846,272		3,480,142	10.5%
Sales Allowances		(35,830)		(21,004)	70.6%		(85,982)		(62,173)	38.3%
Total Net Sales	$	1,486,227	$	1,163,026	27.8%	$	3,760,290	$	3,417,969	10.0%

The Construction segment comprises the construction contract revenue shown above. Construction contract revenue is primarily made up of site-built and framing customers.

The following table presents the balances of over time accounting accounts which are included in “Other current assets” and “Accrued liabilities: Other”, respectively (in thousands):

	September 26,		December 28,		September 28,
	2020		2019		2019
Cost and Earnings in Excess of Billings	$	4,130	$	4,690	$	6,815
Billings in Excess of Cost and Earnings		11,264		6,622		6,666

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UFP INDUSTRIES, INC.

D.       EARNINGS PER SHARE

The computation of earnings per share (“EPS”) is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 26,		September 28,		September 26,		September 28,
	2020		2019		2020		2019
Numerator:
Net earnings attributable to controlling interest	$	77,204	$	51,859	$	183,826	$	141,914
Adjustment for earnings allocated to non-vested restricted common stock		(2,195)		(1,299)		(5,110)		(3,547)
Net earnings for calculating EPS	$	75,009	$	50,560	$	178,716	$	138,367
Denominator:
Weighted average shares outstanding		61,548		61,717		61,642		61,609
Adjustment for non-vested restricted common stock		(1,750)		(1,546)		(1,713)		(1,540)
Shares for calculating basic EPS		59,798		60,171		59,929		60,069
Effect of dilutive restricted common stock		20		24		19		22
Shares for calculating diluted EPS		59,818		60,195		59,948		60,091
Net earnings per share:
Basic	$	1.25	$	0.84	$	2.98	$	2.30
Diluted	$	1.25	$	0.84	$	2.98	$	2.30

E.       COMMITMENTS, CONTINGENCIES, AND GUARANTEES

We are self-insured for environmental impairment liability, including certain liabilities which are insured through a wholly owned subsidiary, Ardellis Insurance Ltd., a licensed captive insurance company.

We own and operate a number of facilities throughout the United States that chemically treat lumber products. In connection with the ownership and operation of these and other real properties, and the disposal or treatment of hazardous or toxic substances, we may, under various federal, state, and local environmental laws, ordinances, and regulations, be potentially liable for removal and remediation costs, as well as other potential costs, damages, and expenses. Environmental reserves, calculated with no discount rate, have been established to cover remediation activities at wood preservation facilities in Stockertown, PA; Elizabeth City, NC; and Auburndale, FL. In addition, a reserve was established for our facility in Thornton, CA to remove certain lead containing materials which existed on the property at the time of purchase.

On a consolidated basis, we have reserved approximately $1.9 million on September 26, 2020 and $2.0 million on September 28, 2019, respectively, representing the estimated costs to complete future remediation efforts. These amounts have not been reduced by an insurance receivable.

In addition, on September 26, 2020, we were parties either as plaintiff or defendant to a number of lawsuits and claims arising through the normal course of our business. In the opinion of management, our consolidated financial statements will not be materially affected by the outcome of these contingencies and claims.

On September 26, 2020, we had outstanding purchase commitments on commenced capital projects of approximately $21.3 million.

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UFP INDUSTRIES, INC.

We provide a variety of warranties for products we manufacture. Historically, warranty claims have not been material. We also distribute products manufactured by other companies, some of which are no longer in business. While we do not warrant these products, we have received claims as a distributor of these products when the manufacturer no longer exists or has the ability to pay. Historically, these costs have not had a material effect on our consolidated financial statements.

As part of our operations, we supply building materials and labor to site-built construction projects or we jointly bid on contracts with framing companies for such projects. In some instances, we are required to post payment and performance bonds to ensure the products and installation services are completed in accordance with our contractual obligations. We have agreed to indemnify the surety for claims properly made against these bonds. As of September 26, 2020, we had approximately $7.0 million outstanding payment and performance bonds for open projects. We had approximately $7.6 million in payment and performance bonds outstanding for completed projects which are still under warranty.

On September 26, 2020, we had outstanding letters of credit totaling $43.8 million, primarily related to certain insurance contracts and industrial development revenue bonds described further below.

In lieu of cash deposits, we provide irrevocable letters of credit in favor of our insurers to guarantee our performance under certain insurance contracts. As of September 26, 2020, we have irrevocable letters of credit outstanding totaling approximately $33.8 million for these types of insurance arrangements. We have reserves recorded on our balance sheet, in accrued liabilities, that reflect our expected future liabilities under these insurance arrangements.

We are required to provide irrevocable letters of credit in favor of the bond trustees for all industrial development revenue bonds that have been issued. These letters of credit guarantee principal and interest payments to the bondholders. We currently have irrevocable letters of credit outstanding totaling approximately $9.8 million related to our outstanding industrial development revenue bonds. These letters of credit have varying terms but may be renewed at the option of the issuing banks.

Certain wholly owned domestic subsidiaries have guaranteed the indebtedness of UFP Industries, Inc. in certain debt agreements, including the Series 2012, 2018 and 2020 Senior Notes and our revolving credit facility. The maximum exposure of these guarantees is limited to the indebtedness outstanding under these debt arrangements and this exposure will expire concurrent with the expiration of the debt agreements.

We did not enter into any new guarantee arrangements during the third quarter of 2020 which would require us to recognize a liability on our balance sheet.

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UFP INDUSTRIES, INC.

F.       BUSINESS COMBINATIONS

We completed the following acquisitions in 2020 and since the end of September 2019, which were accounted for using the purchase method in thousands unless otherwise noted:

					Net
Company	Acquisition		Intangible		Tangible		Operating
Name	Date	Purchase Price	Assets		Assets		Segment
	July 14, 2020	$19,173 cash paid for 100% asset purchase and estimated contingent consideration	$	13,098	$	6,075	Industrial
T&R Lumber Company ("T&R")	A manufacturer and distributor of a range of products used primarily by nurseries, including plastic growing containers, pots and trays; wooden stakes; trellises; tree boxes; shipping racks; and other nursery supplies based in Rancho Cucamonga, California. T&R had annual sales of approximately $31 million. The acquisition of T&R will allow us to leverage their expertise using our national manufacturing capacity to grow our agricultural product offerings and customer base across the country.
	March 13, 2020	$21,787 cash paid for 100% asset purchase and estimated contingent consideration	$	19,098	$	2,689	Construction
Quest Design & Fabrication and Quest Architectural Millwork ("Quest")	A designer, fabricator, and installer of premium millwork and case goods for a variety of commercial uses. Quest had annual sales of approximately $22 million. The acquisition of Quest expands our architectural millwork capabilities and expertise in our commercial construction business unit, and will allow us to use our national manufacturing capacity to grow and diversify our sales to this end market

The intangible assets for the T&R and Quest acquisitions have not been finalized and allocated to their respective identifiable asset and goodwill accounts. In aggregate, acquisitions completed since the end of September 2019 and not consolidated with other operations contributed approximately $10.8 million in net sales and $0.2 million in operating profits during the third quarter of 2020 and $17.8 million in net sales and $1.5 million in operating profits in the first nine months of 2020.

G.       SEGMENT REPORTING

The Company operates manufacturing, treating and distribution facilities internationally, but primarily in the United States. Effective January 1, 2020, the Company re-organized around the markets it serves rather than geography. The prior periods have been recast to reflect the new segment structure. The business segments align with the following markets: UFP Retail Solutions, UFP Construction and UFP Industrial. This change allows for a more specialized and consistent sales approach among Company operations, more efficient use of resources and capital, and quicker introduction of new products and services. The Company manages the operations of its individual locations primarily through a market-centered reporting structure under which each location is included in a business unit and business units are included in our Retail, Industrial, and Construction segments. The exception to this market-centered reporting and management structure is the Company’s International segment, which comprises our Mexico, Canada, and Australia operations and sales and buying offices in other parts of the world.

Our International segment and Ardellis (our insurance captive) have been included in the “All Other” column of the table below.

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UFP INDUSTRIES, INC.

The “Corporate” column includes purchasing, transportation and administrative functions that serve our operating segments. Operating results of Corporate primarily consists of over (under) allocated costs. The operating results of UFP Real Estate, Inc., which owns and leases real estate, and UFP Transportation Ltd., which owns and leases transportation equipment, are also included in the Corporate column. An inter-company lease charge is assessed to our operating segments for the use of these assets at fair market value rates. Total assets of the Corporate column include unallocated cash and cash equivalents, certain prepaid assets, certain property, equipment and other assets pertaining to the centralized activities of Corporate, UFP Real Estate, Inc., and UFP Transportation Ltd.

	Three Months Ended September 26, 2020
(in thousands)	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	700,522	$	282,124	$	447,103	$	56,700	$	(222)	$	1,486,227
Intersegment net sales		45,416		11,773		17,909		76,029		(151,127)		—
Segment operating profit		62,181		22,037		16,513		7,449		(1,579)		106,601

	Three Months Ended September 28, 2019
(in thousands)	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	397,140	$	271,667	$	445,505	$	48,066	$	648	$	1,163,026
Intersegment net sales		32,400		9,748		16,057		45,918		(104,123)		—
Segment operating profit		14,297		20,768		21,406		3,561		10,435		70,467

	Nine Months Ended September 26, 2020
	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	1,661,873	$	763,046	$	1,187,429	$	148,503	$	(561)	$	3,760,290
Intersegment net sales		109,378		32,788		49,685		196,908		(388,759)		—
Segment operating profit		122,082		53,837		50,544		20,573		10,555		257,591

	Nine Months Ended September 28, 2019
	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	1,212,330	$	837,671	$	1,225,467	$	142,845	$	(344)	$	3,417,969
Intersegment net sales		101,203		34,406		42,393		155,637		(333,639)		—
Segment operating profit		47,597		60,208		56,263		9,490		19,592		193,150

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UFP INDUSTRIES, INC.

Identifiable intangibles have been transferred and goodwill was re-allocated, based on their relative fair values, to our new segments and reporting units. The following table presents goodwill by segment as of September 26, 2020, and December 28, 2019 (in thousands):

	Retail		Industrial		Construction		All Other		Corporate		Total
Balance as of December 28, 2019	$	58,098	$	81,276	$	82,911	$	7,251	$	—	$	229,536
2020 Acquisitions		—		6,549		9,953		—		—		16,502
2020 Purchase Accounting Adjustments		202		2		—		—		—		204
Foreign Exchange, Net		—		—		229		(546)		—		(317)
Balance as of September 26, 2020	$	58,300	$	87,827	$	93,093	$	6,705	$	—	$	245,925

The following table presents total assets by segment as of September 26, 2020, and December 28, 2019.

	Total Assets by Segment
(in thousands)	September 26,		December 28,
Segment Classification	2020		2019		% Change
Retail	$	631,238	$	402,221	56.9	%
Industrial		389,806		377,329	3.3
Construction		525,596		522,638	0.6
All Other		161,945		136,990	18.2
Corporate		642,035		450,299	42.6
Total Assets	$	2,350,620	$	1,889,477	24.4	%

Note:  During 2020, certain assets were reclassified to a different segment. Prior year information in this table has been restated to reflect these changes

H.       INCOME TAXES

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 25.4% in the third quarter of 2020 compared to 23.8% for same period in 2019 and was 25.2% in the first nine months of 2020 compared to 24.0% for the same period in 2019. The increase was primarily due to the foreign tax rate differential on foreign income as well as a variety of other discrete tax items none of which are individually significant.

I.       COMMON STOCK

Below is a summary of common stock issuances for the first nine months of 2020 and 2019 (in thousands, except average share price):

	September 26, 2020
Share Issuance Activity	Common Stock		Average Share Price
Shares issued under the employee stock purchase plan	28	$	44.14
Shares issued under the employee stock gift program	2		45.93
Shares issued under the director retainer stock program	46		24.80
Shares issued under the long-term stock incentive plan	271		47.51
Shares issued under the executive stock match grants	79		47.60
Forfeitures	(7)
Total shares issued under stock grant programs	391	$	44.92
Shares issued under the deferred compensation plans	115	$	53.85

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UFP INDUSTRIES, INC.

During the first nine months of 2020, we repurchased approximately 756,000 shares of our common stock at an average share price of $38.62.

	September 28, 2019
Share Issuance Activity	Common Stock		Average Share Price
Shares issued under the employee stock purchase plan	27	$	35.52
Shares issued under the employee stock gift program	3		33.91
Shares issued under the director retainer stock program	4		35.44
Shares issued under the long-term stock incentive plan	211		30.83
Shares issued under the executive stock match grants	109		31.57
Forfeitures	(17)
Total shares issued under stock grant programs	310	$	31.17
Shares issued under the deferred compensation plans	169	$	33.20

During the first nine months of 2019, we did not repurchase any of our common stock.

J.       SUBSEQUENT EVENTS

On September 30, 2020, we entered into a joint venture with Atlante S.p.A. to create Enwrap Logistic & Packaging S.r.l. (Enwrap) and acquired a 50% ownership interest in Enwrap for $5.3 million. Enwrap is headquartered in Milan, Italy and is an industrial packaging business, which provides high-value, mixed material industrial packaging and logistics services through 14 facilities in Italy.

On October 1, 2020, we acquired the equity of Fire Retardant Chemical Technologies, LLC (FRCT), for $5.9 million. Founded in 2014 and based in Matthews, North Carolina, FRCT’s business includes a research and development laboratory specializing in developing and testing a wide range of high-performance chemicals, including fire retardants and water repellants.

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UFP INDUSTRIES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

UFP Industries, Inc. (formerly Universal Forest Products, Inc.) is a holding company with subsidiaries throughout North America, Europe, Asia, and Australia that supply wood, wood composite and other products to three markets: retail, industrial, and construction. The Company is headquartered in Grand Rapids, Mich. For more information about UFP Industries, Inc., or its affiliated operations, go to www.ufpi.com.

On April 22, 2020, our shareholders approved changing the name of the Company from Universal Forest Products, Inc., to UFP Industries, Inc.

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. 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, government imposed “stay at home” orders and directives to cease or curtail operations; 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. We are pleased to present this overview of the third quarter of 2020.

OVERVIEW

Our results for the third quarter of 2020 include the following highlights:

● Our net sales were up 28% compared to the third quarter of 2019, which was comprised of a 20% increase in selling prices primarily due to the commodity lumber market (see Historical Lumber Prices below) and an 8% increase in unit sales. The unit sales of our retail segment increased 34% due to an increase in consumer demand and home improvement activities. We believe that this increase is largely attributable to the impact of the pandemic on consumer behavior. This increase was offset by our industrial and construction segments, which declined 2% and 9%, respectively, as our customers in these segments continue to recover from the government-imposed shutdowns resulting from the pandemic.

● Our operating profits increased 51% compared to the third quarter of 2019. The improvement in our profitability was driven by a number of factors, including strong organic growth in our retail segment and effectively leveraging fixed costs and the impact of rising lumber prices on the selling prices of commodity-based products such as our ProWood pressure-treated products. These products are sold on a variable price formula tied to the Lumber Market. See Historical Lumber Prices and Impact of the Lumber Market on Our Operating Results below.

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UFP INDUSTRIES, INC.

● Our cash flow from operations for the first nine months of 2020 decreased to $185 million from $198 million last year as our net working capital increased by $60 million since the end of 2019. Conversely, our net working capital decreased by $3 million by the end of the first nine months last year. The increase in net working capital at the end of the third quarter of 2020 was due to unusually high lumber prices and retail market demand, which continued to be strong through the end of the quarter and drove an increase in our accounts receivable.

● As a result of our strong operating cash flow, our cash surplus exceeded our debt by approximately $32 million at the end of the September 2020.

● Our available borrowing capacity under revolving credit facilities and cash surplus resulted in total liquidity of approximately $700 million at the end of September 2020. In August of 2020 we issued $150 million of long-term debt to finance our future growth. The average maturity of the notes is 13 years and have an average fixed rate of interest at 3.09%.

HISTORICAL LUMBER PRICES

We experience significant fluctuations in the cost of commodity lumber products from primary producers (“Lumber Market”). The following table presents the Random Lengths framing lumber composite price:

	Random Lengths Composite
	Average $/MBF
	2020			2019
January	$	377		$	331
February		402			370
March		420			365
April		358			354
May		394			346
June		455			329
July		530			356
August		716			346
September		934			364
Third quarter average	$	727		$	355
Year-to-date average	$	510		$	351
Third quarter percentage change		104.8	%
Year-to-date percentage change		45.3	%

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UFP INDUSTRIES, INC.

In addition, a Southern Yellow Pine (“SYP”) composite price, which we prepare and use, is presented below. Our purchases of this species comprise almost two-thirds of our total lumber purchases.

	Random Lengths SYP
	Average $/MBF
	2020			2019
January	$	346		$	370
February		345			403
March		360			408
April		333			401
May		412			383
June		494			344
July		552			359
August		729			348
September		886			355
Third quarter average	$	722		$	354
Year-to-date average	$	495		$	375
Third quarter percentage change		104.0	%
Year-to-date percentage change		32.0	%

The sequential increase in lumber prices above is due to a combination of mill production curtailments and demand for lumber much higher than expectations. We anticipate lumber prices will normalize to lower levels during the fourth quarter, which will impact our profitability of products sold with fixed and variable prices as discussed below.

IMPACT OF THE LUMBER MARKET ON OUR OPERATING RESULTS

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 sales levels (and working capital requirements) are impacted by the lumber costs of our products. Lumber costs were 48.7% and 42.6% of our sales in the first nine months of 2020 and 2019, respectively.

Our gross margins are impacted by (1) the relative level of the Lumber Market (i.e. whether prices are higher or lower from comparative periods), and (2) the trend in the market price of lumber (i.e. whether the price of lumber is increasing or decreasing within a period or from period to period). Moreover, as explained below, our products are priced differently. Some of our products have fixed selling prices, while the selling prices of other products are indexed to the reported Lumber Market with a fixed dollar adder to cover conversion costs and profits. Consequently, the level and trend of the Lumber Market impact our products differently.

Below is a general description of the primary ways in which our products are priced.

● Products with fixed selling prices. These products include value-added products, such as manufactured items, sold within all segments. Prices for these products are generally fixed at the time of the sales quotation for a specified period of time. In order to reduce any exposure to adverse trends in the price of component lumber products, we attempt to lock in costs with our suppliers or purchase necessary inventory for these sales commitments. The time period limitation eventually allows us to periodically re-price our products for changes in lumber costs from our suppliers. We believe our percentage of sales of fixed price items is greatest in our third and fourth quarters.

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UFP INDUSTRIES, INC.

● Products with selling prices indexed to the reported Lumber Market with a fixed dollar “adder” to cover conversion costs and profit. These products primarily include treated lumber, panel goods, other commodity-type items, and trusses sold to the manufactured housing industry. For these products, we estimate the customers’ needs and we carry anticipated levels of inventory. Because lumber costs are incurred in advance of final sale prices, subsequent increases or decreases in the market price of lumber impact our gross margins. We believe our sales of these products are at their highest relative level in our second quarter, primarily due to pressure-treated lumber sold to the retail market.

For each of the product pricing categories above, our margins are exposed to changes in the trend of lumber prices.

The greatest risk associated with changes in the trend of lumber prices is on the following products:

● Products with significant inventory levels with low turnover rates, whose selling prices are indexed to the Lumber Market. In other words, the longer the period of time these products remain in inventory, the greater the exposure to changes in the price of lumber. This would include treated lumber, which comprises approximately 21% of our total sales. This exposure is less significant with remanufactured lumber, panel goods, other commodity-type items, and trusses sold to the manufactured housing market due to the higher rate of inventory turnover. We attempt to mitigate the risk associated with treated lumber through inventory consignment programs with our vendors. (Please refer to the “Risk Factors” section of our annual report on form 10-K, filed with the United States Securities and Exchange Commission.)

● Products with fixed selling prices sold under long-term supply arrangements, particularly those involving multi-family construction projects. We attempt to mitigate this risk through our purchasing practices and longer vendor commitments.

In addition to the impact of the Lumber Market trends on gross margins, changes in the level of the market cause fluctuations in gross margins when comparing operating results from period to period. This is explained in the following example, which assumes the price of lumber has increased from period one to period two, with no changes in the trend within each period.

	Period 1			Period 2
Lumber cost	$	300		$	400
Conversion cost		50			50
= Product cost		350			450
Adder		50			50
= Sell price	$	400		$	500
Gross margin		12.5	%		10.0	%

As is apparent from the preceding example, the level of lumber prices does not impact our overall profits, but does impact our margins. Gross margins are negatively impacted during periods of high lumber prices; conversely, we experience margin improvement when lumber prices are relatively low. In order to more effectively evaluate our profitability in such periods, we believe it is useful to compare our change in units shipped with our changes in costs and profits.

BUSINESS COMBINATIONS

We completed two business acquisitions during the first nine months of 2020 and three during all of 2019. The annual historical sales attributable to acquisitions completed in the first nine months of 2020 and all of 2019 were approximately $38 million and $37 million, respectively. These business combinations were not significant to our quarterly results individually or in aggregate and thus pro forma results for 2020 and 2019 are not presented.

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UFP INDUSTRIES, INC.

See Notes to the Unaudited Condensed Consolidated Financial Statements, Note F, “Business Combinations” for additional information.

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, the components of our Unaudited Condensed Consolidated Statements of Earnings as a percentage of net sales.

	Three Months Ended				Nine Months Ended
	September 26,		September 28,		September 26,		September 28,
	2020		2019		2020		2019
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	83.8		83.9		83.7		84.5
Gross profit	16.2		16.1		16.3		15.5
Selling, general, and administrative expenses	9.1		9.9		9.5		9.8
Other	—		0.1		(0.1)		—
Earnings from operations	7.2		6.1		6.9		5.7
Other expense, net	0.1		0.1		0.1		0.1
Earnings before income taxes	7.1		5.9		6.7		5.5
Income taxes	1.8		1.4		1.7		1.3
Net earnings	5.3		4.5		5.0		4.2
Less net earnings attributable to noncontrolling interest	(0.1)		(0.1)		(0.1)		(0.1)
Net earnings attributable to controlling interest	5.2	%	4.5	%	4.9	%	4.2	%

Note: Actual percentages are calculated and may not sum to total due to rounding.

The following table presents, for the periods indicated, the components of our Consolidated Statements of Earnings as a percentage of net sales, adjusted to restate 2020 net sales and cost of goods sold at prior year lumber prices. The restated net sales amounts were calculated by adjusting 2020 sales for the change in our selling prices resulting primarily from underlying movements in commodity lumber prices in 2020 from 2019. By eliminating the “pass-through” impact of higher or lower lumber prices on net sales and cost of goods sold from year to year, we believe this provides an enhanced view of our change in profitability and costs as a percentage of sales. The amount of the adjustment to 2020 net sales was also applied to cost of goods sold so that gross profit remains unchanged.

	Adjusted for Lumber Market Change
	Three Months Ended		Nine Months Ended
	September 26,		September 26,
	2020		2020
Net sales	100.0	%	100.0	%
Cost of goods sold	80.8		82.6
Gross profit	19.2		17.4
Selling, general, and administrative expenses	10.7		10.2
Other	—		(0.1)
Earnings from operations	8.5		7.3
Other expense, net	0.1		0.1
Earnings before income taxes	8.4		7.2
Income taxes	2.1		1.8
Net earnings	6.3		5.4
Less net earnings attributable to noncontrolling interest	(0.1)		(0.2)
Net earnings attributable to controlling interest	6.2	%	5.2	%

Note: Actual percentages are calculated and may not sum to total due to rounding.

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UFP INDUSTRIES, INC.

Operating Results by Segment:

Effective January 1, 2020, the Company re-organized around the markets it serves rather than geography. Our new business segments align with the following markets: UFP Retail Solutions, UFP Construction and UFP Industrial. Among other things, this change allows for a more specialized and consistent sales approach among Company operations, more efficient use of resources and capital, and quicker introduction of new products and services. The Company manages the operations of its individual locations primarily through a market-centered reporting structure under which each location is included in a business unit and business units are included in our Retail, Industrial, and Construction segments. The exception to this market-centered reporting and management structure is the Company’s International segment, which comprises our Mexico, Canada, and Australia operations and sales and buying offices in other parts of the world. Our International segment and Ardellis (our insurance captive) have been included in the “All Other” column of the table below. The “Corporate” column includes purchasing, transportation and administrative functions that serve our operating segments. Operating results of Corporate primarily consists of over (under) allocated costs. The operating results of UFP Real Estate, Inc., which owns and leases real estate, and UFP Transportation Ltd., which owns and leases transportation equipment, are also included in the Corporate column. An inter-company lease charge is assessed to our operating segments for the use of these assets at fair market value rates.

The following tables present our operating results, for the periods indicated, by segment.

	Three Months Ended September 26, 2020
(in thousands)	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales	$	700,522	$	282,124	$	447,103	$	56,700	$	(222)	$	1,486,227
Cost of goods sold		594,896		233,971		385,028		38,543		(7,285)		1,245,153
Gross profit		105,626		48,153		62,075		18,157		7,063		241,074
Selling, general, administrative expenses		43,515		26,080		45,411		10,499		9,144		134,649
Other		(70)		36		151		209		(502)		(176)
Earnings from operations	$	62,181	$	22,037	$	16,513	$	7,449	$	(1,579)	$	106,601

	Three Months Ended September 28, 2019
(in thousands)	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales	$	397,140	$	271,667	$	445,505	$	48,066	$	648	$	1,163,026
Cost of goods sold		353,291		224,363		373,181		35,532		(10,611)		975,756
Gross profit		43,849		47,304		72,324		12,534		11,259		187,270
Selling, general, administrative expenses		29,534		26,522		49,897		9,359		646		115,958
Other		18		14		1,021		(386)		178		845
Earnings from operations	$	14,297	$	20,768	$	21,406	$	3,561	$	10,435	$	70,467

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UFP INDUSTRIES, INC.

	Nine Months Ended September 26, 2020
(in thousands)	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales	$	1,661,873	$	763,046	$	1,187,429	$	148,503	$	(561)	$	3,760,290
Cost of goods sold		1,429,229		635,424		1,002,932		101,240		(21,776)		3,147,049
Gross profit		232,644		127,622		184,497		47,263		21,215		613,241
Selling, general, administrative expenses		110,596		73,662		134,098		28,228		11,186		357,770
Other		(34)		123		(145)		(1,538)		(526)		(2,120)
Earnings from operations	$	122,082	$	53,837	$	50,544	$	20,573	$	10,555	$	257,591

	Nine Months Ended September 28, 2019
(in thousands)	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales	$	1,212,330	$	837,671	$	1,225,467	$	142,845	$	(344)	$	3,417,969
Cost of goods sold		1,076,672		702,390		1,024,647		107,101		(21,104)		2,889,706
Gross profit		135,658		135,281		200,820		35,744		20,760		528,263
Selling, general, administrative expenses		88,123		75,083		143,497		26,259		1,203		334,165
Other		(62)		(10)		1,060		(5)		(35)		948
Earnings from operations	$	47,597	$	60,208	$	56,263	$	9,490	$	19,592	$	193,150

The following tables present the components of our operating results, for the periods indicated, as a percentage of net sales by segment.

	Three Months Ended September 26, 2020
(in thousands)	Retail		Industrial		Construction		All Other		Corporate	Total
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	N/A	100.0	%
Cost of goods sold	84.9		82.9		86.1		68.0		—	83.8
Gross profit	15.1		17.1		13.9		32.0		—	16.2
Selling, general, administrative expenses	6.2		9.2		10.2		18.5		—	9.1
Other	—		—		—		0.4		—	—
Earnings from operations	8.9	%	7.8	%	3.7	%	13.1	%	—	7.2	%

Note: Actual percentages are calculated and may not sum to total due to rounding.

	Three Months Ended September 28, 2019
(in thousands)	Retail		Industrial		Construction		All Other		Corporate	Total
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	N/A	100.0	%
Cost of goods sold	89.0		82.6		83.8		73.9		—	83.9
Gross profit	11.0		17.4		16.2		26.1		—	16.1
Selling, general, administrative expenses	7.4		9.8		11.2		19.5		—	9.9
Other	—		—		0.2		(0.8)		—	0.1
Earnings from operations	3.6	%	7.6	%	4.7	%	7.5	%	—	6.1	%

Note: Actual percentages are calculated and may not sum to total due to rounding.

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UFP INDUSTRIES, INC.

	Nine Months Ended September 26, 2020
(in thousands)	Retail		Industrial		Construction		All Other		Corporate	Total
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	N/A	100.0	%
Cost of goods sold	86.0		83.3		84.5		68.2		—	83.7
Gross profit	14.0		16.7		15.5		31.8		—	16.3
Selling, general, administrative expenses	6.7		9.7		11.3		19.0		—	9.5
Other	—		—		—		(1.0)		—	(0.1)
Earnings from operations	7.3	%	7.1	%	4.3	%	13.9	%	—	6.9	%

Note: Actual percentages are calculated and may not sum to total due to rounding.

	Nine Months Ended September 28, 2019
(in thousands)	Retail		Industrial		Construction		All Other		Corporate	Total
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	N/A	100.0	%
Cost of goods sold	88.8		83.9		83.6		75.0		—	84.5
Gross profit	11.2		16.1		16.4		25.0		—	15.5
Selling, general, administrative expenses	7.3		9.0		11.7		18.4		—	9.8
Other	—		—		0.1		—		—	—
Earnings from operations	3.9	%	7.1	%	4.6	%	6.6	%	—	5.7	%

Note: Actual percentages are calculated and may not sum to total due to rounding.

NET SALES

We design, manufacture and market wood and wood-alternative products for national home centers and other retailers, structural lumber and other products for the manufactured housing industry, engineered wood components for residential and commercial construction, customized interior fixtures used in a variety of retail and commercial applications, and specialty wood packaging, components and packaging materials for various industries. Our strategic long-term sales objectives generally include:

● Increasing our sales of "value-added" products and enhancing our product offering with new or improved products. Value-added products generally consist of fencing, decking, lattice, and other specialty products sold to the retail market, specialty wood packaging, engineered wood components, customized interior fixtures, and "wood alternative" products. Engineered wood components include roof trusses, wall panels, and floor systems. Wood alternative products consist primarily of composite wood and plastics. Although we consider the treatment of dimensional lumber and panels with certain chemical preservatives a value-added process, treated lumber is not presently included in the value-added sales totals. Remanufactured lumber and panels that are components of finished goods are also generally categorized as “commodity-based” products.

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UFP INDUSTRIES, INC.

The following table presents, for the periods indicated, our percentage of value-added and commodity-based sales to total net sales by our primary segments (Retail, Industrial, and Construction). Value-added products are typically sold at fixed selling prices for a pre-determined time period and carry higher gross margins than our commodity-based products. The increase in our ratio of commodity-based product sales to total sales reflected in the tables below is primarily due to the impact of dramatically higher lumber prices in the third quarter of 2020 as the selling prices of these products are generally indexed to the current Lumber Market at the time they are shipped. For example, a majority of our commodity-based sales are sold through our ProWood business unit and selling prices were up 66% compared to the third quarter of 2019. Also, our Industrial and Construction segments primarily sell value-added products and their unit sales were down 2% and 9% from last year, respectively.

	Three Months Ended September 26, 2020				Three Months Ended September 28, 2019
	Value-Added		Commodity-Based		Value-Added		Commodity-Based
Retail	49.6	%	50.4	%	57.5	%	42.5	%
Industrial	63.9	%	36.1	%	67.1	%	32.9	%
Construction	74.3	%	25.7	%	82.5	%	17.5	%
Total Sales	60.6	%	39.4	%	70.0	%	30.0	%
	Nine Months Ended September 26, 2020				Nine Months Ended September 28, 2019
	Value-Added		Commodity-Based		Value-Added		Commodity-Based
Retail	54.4	%	45.6	%	58.4	%	41.6	%
Industrial	65.7	%	34.3	%	66.4	%	33.6	%
Construction	77.3	%	22.7	%	81.1	%	18.9	%
Total Sales	64.6	%	35.4	%	69.1	%	30.9	%

● Developing new products. We define new products as those that will generate sales of at least a $1 million per year within 4 years of launch and are still growing and gaining market penetration. New product sales and gross profits in the third quarter were up 41% and 27%, respectively. Approximately $37 million and $103 million of new product sales for the first three and nine months of 2019, respectively, while still sold, were sunset in 2020 and excluded from the table below because they no longer meet the definition above. Our goal is to achieve annual new product sales of at least $475 million in 2020.

	New Product Sales by Segment						New Product Sales by Segment
	Three Months Ended						Nine Months Ended
	September 26,		September 28,		%		September 26,		September 28,		%
Segment Classification	2020		2019		Change		2020		2019		Change
Retail	$	115,321		72,411	59.3	%	$	297,363	$	229,642	29.5	%
Industrial		20,207		17,789	13.6	%		50,909		50,274	1.3	%
Construction		15,768		15,228	3.5	%		41,923		44,708	(6.2)	%
All Other		2,394		3,235	(26.0)	%		7,895		9,594	(17.7)	%
Total New Product Sales		153,690		108,663	41.4	%		398,090		334,218	19.1	%
Note: Certain prior year product reclassifications and the change in designation of certain products as "new" resulted in a change in prior year's sales.

● Selling to new customers and markets.

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UFP INDUSTRIES, INC.

Retail Segment

Net sales in the third quarter of 2020 increased approximately 76% compared to the same period of 2019, due to a 34% increase in organic unit sales and a 42% increase in selling prices. Our organic unit growth was primarily driven by a 57% increase in our Dimensions Home & Décor products including project panels and short lumber, a 50% increase in Deckorators composite decking and railing, a 30% increase in our ProWood pressure-treated products, and a 28% increase in Outdoor Essentials Fence, Lawn & Garden products. Our new product sales contributed to these increases and were up 59% for the quarter. Finally, our sales to big box customers increased 80%, and sales to other independent retailers increased 71%. Our unit sales increases were primarily due to an increase in demand as consumers invested in home improvement activities over other alternatives. We believe that the pandemic and related disruptions in the lives of consumers contributed to this increase in demand.

Gross profits increased by $61.8 million, or 140.9% to $105.6 million for the third quarter of 2020 compared to the same period last year as gross margins increased to 15.1% compared to 11.0% for the same period of 2019. We estimate the higher level of lumber prices (see “Impact of the Lumber Market on Our Operating Results”) reduced gross margin by 470 basis points. Our increase in gross profits was due to the following factors:

● Increased unit sales of value-added products within our Deckorators, Outdoor Essentials, and Dimensions business units contributed $25 million to the increase.

● Our ProWood business unit, which produces and sells pressure treated lumber, contributed $31.4 million to the increase attributable to unit sales growth and the impact of rising lumber prices as the selling prices of these products are primarily determined on a variable price formula.

● The remaining $5.4 million increase is attributed to favorable cost variances as a result of operating leverage and strong organic unit growth.

Selling, general and administrative (“SG&A”) expenses increased by approximately $14.0 million, or 47.3%, in the third quarter of 2020 compared to the same period of 2019, while we reported a 34% increase in unit sales. Accrued bonus expense, which varies with our overall profitability and return on investment, increased approximately $10.7 million and totaled approximately $15.0 million for the quarter. The remaining increase was primarily due to increases in salaries and wages which were partially offset by decreases in advertising and travel and related costs.

Earnings from operations for the Retail reportable segment increased in the third quarter of 2020 compared to 2019 by $47.9 million, or 335%, well in excess of our 34% increase in unit sales as a result of the factors above.

Net sales in the first nine months of 2020 increased 37% compared to the same period of 2019, due to a 22% increase in unit sales and a 15% increase in selling prices. Acquired operations contributed 1% to our unit sales growth, and organic unit sales growth was 21%. Our organic unit growth was primarily driven by a 53% increase in our Dimensions Home & Décor products including project panels and short lumber, a 25% increase in our ProWood pressure-treated products, a 21% increase in Outdoor Essentials Fence, Lawn & Garden products, and an 11% increase in Deckorators composite decking and railing. Our new product sales contributed to these increases and were up 29.5%. Sales to big box customers were up 42% and sales to other independent retailers increased 28%.

Gross profits in the first nine months of 2020 increased 71.5% to $232.6 million compared to the same period of 2019 as gross margins increased to 14.0% compared to 11.2% for the same period of 2019. The impact of higher lumber prices contributed to a 170 basis point decline in our gross margin. Improvements in our profitability were primarily due to:

● The impact of effective inventory positioning, resulting in lower lumber costs early in the year.

● Growth in our sales of value-added products.

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UFP INDUSTRIES, INC.

● Strong organic growth, which allowed us to leverage fixed costs.

● The sequential rise in lumber prices in the second and third quarters, which favorably impacted our gross profit per unit of products sold on a variable price such as ProWood pressure-treated lumber.

Selling, general and administrative (“SG&A”) expenses increased by approximately $22.5 million, or 25.5%, in the first nine months of 2020 compared to the same period of 2019, while we reported a 22% increase in unit sales. Acquired operations since the third quarter of 2019 contributed approximately $1.9 million to this increase. Accrued bonus expense increased approximately $14.9 million and totaled approximately $26.9 for the first nine months of 2020. The remaining increase was due to increases in salaries and wages and in-store merchandising costs, offset by a decline in advertising and travel and related costs.

Earnings from operations for the Retail reportable segment increased in the first nine months of 2020 compared to 2019 by $74.5 million, or 156.5%, well in excess of our 22% increase in unit sales as a result of the factors mentioned above.

Industrial Segment

Net sales in the third quarter of 2020 increased 4% compared to the same period of 2019, due to a 6% increase in selling prices attributable to the Lumber Market, offset by a 2% decrease in unit sales due to the impact of the pandemic and government imposed shutdowns.

Gross profits increased by 1.8% to $48.2 million for the third quarter of 2020 compared to the same period of 2019. We estimate the higher level of lumber prices (see “Impact of the Lumber Market on Our Operating Results”) caused a decline in margin of 100 basis points as our gross margins dropped to 17.1% from 17.4% last year. We experienced a 70 basis point improvement in our profitability due to the impact of favorable changes in product mix and effectively passing along increases in commodity lumber costs to our customers.

Selling, general and administrative (“SG&A”) expenses decreased by approximately $.4 million, or 1.7%, in the third quarter of 2020 compared to the same period of 2019. Acquired operations since the third quarter of 2019 contributed approximately $0.9 million to our costs. Accrued bonus expense, which varies with our pre-bonus operating profit and return on investment, decreased approximately $.9 million, and totaled $6.1 million for the quarter. The remaining decrease was due to a variety of factors.

Earnings from operations for the Industrial reportable segment increased in the third quarter of 2020 compared to 2019 by $1.3 million, or 6.1%, due to the factors discussed above.

Net sales in the first nine months of 2020 decreased 9% compared to the same period of 2019, due to a 10% decrease in unit sales, reflective of the impact of the pandemic on our Industrial business.

Gross profits in the first nine months of 2020 declined 5.7% to $127.6 million compared to the same period of 2019, while gross margins increased to 16.7% compared to 16.1% for the same period of 2019. We estimate the higher level of lumber prices caused a decline in margin of 20 basis points. The improvement in our gross margin was primarily due to the impact of effective inventory positioning resulting in lower lumber costs early in the year, favorable changes in product mix, and effectively passing along increases in commodity lumber costs to our customers.

Selling, general and administrative (“SG&A”) expenses decreased by approximately $1.4 million, or 1.9%, in the first nine months of 2020 compared to the same period of 2019. Acquired operations since the third quarter of 2019 contributed approximately $2.0 million to total SG&A expenses. Accrued bonus expense decreased approximately $4.2 million compared to the same period of 2019 and totaled approximately $12.5 for the first nine months of 2020. This reduction was partially offset by increases in salaries and wages, sales compensation, and amortization expense.

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UFP INDUSTRIES, INC.

Earnings from operations for the Industrial reportable segment decreased in the first nine months of 2020 compared to 2019 by $6.4 million, or 10.6%, due to the factors mentioned above.

Construction Segment

Net sales in the third quarter of 2020 were flat compared to the same period of 2019, due to a 9% increase in selling prices attributable to the Lumber Market, offset by a 9% decrease in unit sales due to the impact of the pandemic. Unit changes within this segment consisted of declines of 2% in concrete forming, 8% in site-built construction, and 37% in commercial construction, offset by a 7% increase in factory-built housing.

Gross profits decreased by $10.2 million, or 14.2% to $62.1 million for the third quarter of 2020 compared to the same period of 2019. Gross margin decreased to 13.9% from 16.2% for the same period last year. We estimate the higher level of the lumber prices (see “Impact of the Lumber Market on Our Operating Results”) caused a 140 basis point decrease in our gross margin. The decrease in our gross profit was comprised of the following factors:

● Gross profits in our site-built construction business unit decreased by $10.6 million due to a combination of lower unit sales and higher commodity lumber costs, which adversely impacted our profit per unit of products we sell on a fixed price to our customers for a period of time.

● A decline in unit sales in our commercial business unit, which has a more significant fixed cost structure, caused a decrease in gross profit of $6.8 million.

● The impact of rising lumber prices on variable priced products contributed $4.3 million in gross profit in our factory-built housing and concrete forming business units.

● Favorable cost variances contributed $1.2 million in gross profit.

● Acquired businesses contributed $1.7 million.

Selling, general and administrative (“SG&A”) expenses decreased by approximately $4.5 million, or 8.9%, in the third quarter of 2020 compared to the same period of 2019, while we reported a 9% decrease in unit sales. Acquired operations since the third quarter of 2019 contributed approximately $1.7 million to total SG&A expenses for the quarter. Accrued bonus expense, which varies with our overall profitability and return on investment, decreased approximately $2.2 million, and totaled $4.7 million for the quarter. Decreases in salaries and wages, sales compensation, and travel expenses also contributed to the overall decrease in SG&A.

Earnings from operations for the Construction reportable segment decreased in the third quarter of 2020 compared to 2019 by $4.9 million, or 22.9%, due to the factors mentioned above.

Net sales in the first nine months of 2020 decreased 3% compared to the same period of 2019, due to an 8% decrease in unit sales due to the impact of the pandemic, offset by a 5% increase in selling prices primarily due to the Lumber Market. Unit changes within this segment consisted of declines of 1% in factory-built housing, 8% in site-built construction, and 20% in commercial construction. These declines were offset by unit increases of 2% in concrete forming.

Gross profits in the first nine months of 2020 declined 8.1% to $184.5 million compared to the same period of 2019. Gross margins decreased to 15.5% from 16.4% for the same period of 2019. We estimate the higher level of lumber prices caused an 80 basis point decrease in our gross margin. The decrease in our gross profits was primarily due to the same factors discussed above.

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UFP INDUSTRIES, INC.

Selling, general and administrative (“SG&A”) expenses decreased by approximately $9.4 million, or 6.5%, in the first nine months of 2020 compared to the same period of 2019. Acquired operations since the third quarter of 2019 contributed approximately $2.7 million to total SG&A expenses. Accrued bonus expense decreased approximately $4.1 million compared to the same period of 2019 and totaled approximately $11.4 million for the first nine months of 2020. Decreases in salaries and wages, travel and medical expenses also contributed to the overall decrease in SG&A.

Earnings from operations for the Construction reportable segment decreased in the first nine months of 2020 compared to 2019 by $5.7 million, or 10.2%, due to the factors mentioned above.

All Other Segment

Our All Other reportable segment consists of our International and Ardellis (our insurance captive) segments that are not significant.

Corporate

The corporate segment consists of over (under) allocated costs that are not significant.

INCOME TAXES

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 25.4% in the third quarter of 2020 compared to 23.8% for same period in 2019 and was 25.2% in the first nine months of 2020 compared to 24.0% for the same period in 2019. The increase was primarily due to the foreign tax rate differential on foreign income as well as a variety of other discrete tax items none of which are individually significant.

OFF-BALANCE SHEET TRANSACTIONS

We have no significant off-balance sheet transactions.

LIQUIDITY AND CAPITAL RESOURCES

The table below presents, for the periods indicated, a summary of our cash flow statement (in thousands):

	Nine Months Ended
	September 26,		September 28,
	2020		2019
Cash provided by operating activities	$	185,083	$	198,080
Cash used in investing activities		(100,927)		(105,985)
Cash used in financing activities		95,178		(55,223)
Effect of exchange rate changes on cash		(1,122)		157
Net change in all cash and cash equivalents		178,212		37,029
Cash, cash equivalents, and restricted cash, beginning of period		168,666		28,198
Cash, cash equivalents, and restricted cash, end of period	$	346,878	$	65,227

In general, we funded our growth in the past through a combination of operating cash flows, our revolving credit facility, industrial development bonds (when circumstances permit), and issuance of long-term notes payable at times when interest rates are favorable. We have not issued equity to finance growth except in the case of a large acquisition. We manage our capital structure by attempting to maintain a targeted ratio of debt to equity and debt to earnings before interest, taxes, depreciation and amortization. We believe this is one of many important factors to maintaining a strong credit profile, which in turn helps ensure timely access to capital when needed.

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UFP INDUSTRIES, INC.

Seasonality has a significant impact on our working capital due to our primary selling season which occurs during the period from March to September. Consequently, our working capital increases during our first and second quarters which typically results in negative or modest cash flows from operations during those periods. Conversely, we typically experience a substantial decrease in working capital once we move beyond our peak selling season which typically results in significant cash flows from operations in our third and fourth quarters. As explained in more detail below, the unusually large increase in lumber prices this year, as well as the significant increase in sales attributable to our Retail segment, resulted in an increase in net working capital this year.

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 payables outstanding) is a good indicator of our working capital management. As indicated in the table below, our cash cycle improved to 43 days from 52 days during the third quarter and to 49 days from 56 days during the first nine months of 2020 compared to the prior periods.

	Three Months Ended				Nine Months Ended
	September 26,		September 28,		September 26,		September 28,
	2020		2019		2020		2019
Days of sales outstanding		31		33		32		33
Days supply of inventory		31		40		37		44
Days payables outstanding		(19)		(21)		(20)		(21)
Days in cash cycle		43		52		49		56

The decrease in our days supply of inventory for the first nine months of 2020 was primarily due to opportunistic buying when lumber prices were low during the fourth quarter of 2018 and early 2019 to improve gross profits and higher levels of “safety stock” we carried to address transportation challenges and ensure timely deliveries to our customers. We did not engage in this level of opportunistic buying in late 2019 and early 2020. Strong demand in our retail segment and shortages of supply contributed to higher inventory turns in the third quarter of 2020.

In the first nine months of 2020, our cash provided by operating activities was $185.1 million, which was comprised of net earnings of $189.1 million and $55.6 million of non-cash expenses, offset by a $59.7 million seasonal increase in working capital since the end of December 2019. Our operating cash flow this year declined by $13.0 million compared to the same period of last year primarily due to an increase in our net working capital since the end of 2019. Conversely, our net working capital at the end of the third quarter of 2019 decreased compared to the end of 2018. Our net working capital at the end of the third quarter of 2020 increased due to unusually high lumber prices as well the strong sales growth of our retail segment, which resulted in an increase in our accounts receivable.

Acquisitions and purchases of property, plant, and equipment comprised most of our cash used in investing activities during the first nine months of 2020 and totaled $34.8 million and $67.0 million, respectively. Outstanding purchase commitments on existing capital projects totaled approximately $21.3 million on September 26, 2020. Notable areas of capital spending include projects to expand capacity and enhance the productivity of our Deckorators product line, several projects to expand manufacturing capacity to serve industrial customers and achieve efficiencies through automation, improvements to a number of facilities, and an increase our transportation capacity (tractors, trailers) in order to meet higher volumes and replace old rolling stock. We intend to fund capital expenditures and purchase commitments through our operating cash flows or cash surplus for the balance of the year. The sales and purchases of investments totaling $22.3 million and $24.3 million, respectively, are due to investment activity in our captive insurance subsidiary.

Cash flows from financing activities primarily consisted of issuances of long-term debt of $150 million, net repayments of debt of approximately $3.1 million, the payment of quarterly dividends totaling $23.0 million, or $0.125 per share, and repurchases of approximately 756,000 shares of our common stock for $29.2 million resulting in an average price paid of $38.62.

31

UFP INDUSTRIES, INC.

On September 26, 2020, we had $4.4 million outstanding on our $375 million revolving credit facility, and we had approximately $360.6 million in remaining availability after considering $9.8 million in outstanding letters of credit. There is no availability remaining under an existing “shelf agreement” for long term debt, after a $150 million note was issued in August 2020. 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 26, 2020.

At the end of the third quarter of 2020 we have approximately $700 million in total liquidity, consisting of our cash surplus and remaining availability under our revolving credit facility. We plan to use a portion of this amount to fund our future growth.

ENVIRONMENTAL CONSIDERATIONS AND REGULATIONS

See Notes to Unaudited Consolidated Condensed Financial Statements, Note E, “Commitments, Contingencies, and Guarantees.”

CRITICAL ACCOUNTING POLICIES

In preparing our consolidated financial statements, we follow accounting principles generally accepted in the United States. These principles require us to make certain estimates and apply judgments that affect our financial position and results of operations. We continually review our accounting policies and financial information disclosures. There have been no material changes in our policies or estimates since December 28, 2019.

Under the recent re-organization of our reportable segments now centered on our primary markets (retail, industrial, and construction), there were no indicators of impairment for any of the new reporting units. We continue to monitor the results of our commercial business unit (a reporting unit under the Construction segment), which primarily includes idX, as it has performed below expectations through 2019. While idX has faced challenging end market conditions resulting in this under-performance, we believe our growth and operating improvement strategies and related long-term projections for idX are still reasonable and attainable. Consequently, while the risk of impairment exists, management does not believe an impairment is currently required. Should the Company’s future analysis indicate a significant change in any of the triggering events for this reporting unit, it could result in impairment of the carrying value of goodwill to its implied fair value. There can be no assurance that the Company’s future goodwill impairment testing will not result in a charge to earnings. The total value of goodwill and identifiable intangibles associated with the commercial reporting unit is $12.3 million and $4.5 million, respectively, at the end of September 2020.

FORWARD OUTLOOK

Most recently, the Company’s long-term goals have been to:

● Achieve long-term unit sales growth that exceeds positive U.S. GDP by 4 percent to 6 percent;

● Grow earnings from operations in excess of our unit sales growth; and

● Earn a return on invested capital in excess of our weighted average cost of capital.

While we believe the effective execution of our strategies will allow us to continue to achieve these long-term goals in the future, our ability to achieve them over the next year may be adversely impacted by a variety of external factors such as continuing developments in the COVID-19 pandemic, trends in commodity lumber prices, the availability and cost of labor and materials, and general election results in the U.S. The following variables should be considered when evaluating our performance over the next year.

32

UFP INDUSTRIES, INC.

● Earlier this year we experienced a decrease in customer demand and unit sales in our industrial and construction segments as a result of numerous stay at home orders issued by states in which we operate as some of our customers did not meet the requirements to be an “essential business” and were temporarily shut down. For those customers who remained operating, demand declined for the majority of them. As these orders were lifted and these customers resumed operations demand trends for our products improved significantly throughout the quarter. However, there can be no assurance that another “wave” of COVID-19 will not occur and result in additional “stay at home” and similar orders that would adversely impact the demand of our products. In addition, demand for our products in the retail segment has been exceptionally strong as consumers have increased their home improvement activities during the pandemic. There can be no assurance demand will continue at these levels in the future. Market indicators that should be considered when evaluating future demand for our products include:

- Same store sales growth of national home improvement retail customers, the leading indicator for remodeling activity and home improvement spending forecasts. Sales of our Retail Solutions segment comprises approximately 44% of our year-to-date total sales.

- Housing starts in the northeast and mid-Atlantic states, Colorado, and Texas. Sales of our Site Built business unit within our Construction segment comprises approximately 13% of our year-to-date total sales.

- Production of manufactured housing. Sales of our Factory Built business unit within our Construction segment comprises 11% of our year-to-date total sales.

- Non-residential construction spending. Sales of our Commercial and Concrete Forming business units within our Construction segment comprises approximately 8% of our year-to-date total sales.

- Industrial production, Purchasing Managers Index, and U.S. GDP. Sales of our Industrial segment comprises approximately 20% of our total year-to-date sales.

● We have over 150 geographically dispersed plant locations, many of which have the ability to serve multiple market segments. These capabilities enhance our ability to supply our customers from multiple locations in the event an operation is idled due to the pandemic. To date, one of our operations remains temporarily idled and one has been permanently idled. Depending on the length of any future “stay at home” orders and the severity of the impact on future customer demand, we could temporarily or permanently idle additional locations in the future. These actions could result in certain losses including asset impairment charges to property, plant and equipment, right of use leased assets, inventory, other long-lived assets, and certain exit costs.

● As a result of the pandemic and an anticipated reduction in demand, our suppliers significantly curtailed capacity through a variety of actions earlier this year. As the economy re-opened this summer, demand has recovered substantially and been much stronger than expected. Consequently, commodity lumber prices reached historically high levels by the end of the third quarter of 2020 (see Historical Lumber Prices). As our suppliers work through their backlog of orders and we reach the seasonally slower months of fall and winter in many areas of the country we anticipate commodity lumber prices will decrease to normalized levels. As lumber prices decline, we expect this may adversely impact our profit per unit of products we sell on a variable price formula. Conversely, this may benefit our profit per unit of products we sell at a fixed price for a period of time. See Impact of the Lumber Market on Our Operating Results. In addition, a decline in lumber prices will reduce our net investment in working capital and contribute to our cash flows from operations.

33

UFP INDUSTRIES, INC.

● On a consolidated basis, and based on our 2019 results of operations and business mix, we believe our decremental operating margin is in a range of 10% to 15% of net sales. In other words, we believe for every dollar decrease in sales, relative to the prior year, our earnings from operations may decline by 10 cents to 15 cents. As a point of reference, our peak to trough decremental operating margin during the Great Recession was approximately 13.5% (2006 peak to 2011 trough). In addition to the variables above, factors that may cause our actual results to vary significantly from this range include:

- Changes in our selling prices

- Changes in our sales mix by market segment and product

- The impact and level of the Lumber Market and trends in the commodity costs of our products

- Changes in labor rates

- Our ability to reduce variable manufacturing, freight, selling, general, and administrative costs, particularly certain personnel costs, in line with net sales

- The results of our salaried bonus plan, which is based on pre-bonus profits and achieving minimum levels of pre-bonus return on investment over a required hurdle rate

● As a result of our strong cash flow and liquidity position our capital expenditures budget is $100 million for 2020 as we plan to capitalize on opportunities to grow and achieve operational efficiencies through automation.

● The CARES act allows us to defer certain payroll taxes from the end of March through the end of our 2020 fiscal year, which we estimate will total approximately $20 million. This liability must be paid in equal annual installments on December 31, 2021 and December 31, 2022.

● We believe our cash cycle will remain consistent with historical trends and result in a reduction in working capital and increase in cash as sales decline.

● As a result of the diversification of our business and execution of our people we’ve achieved strong earnings and operating cash flows, which has contributed to a strong balance sheet in which our cash surplus of $346 million exceeds our debt of $314 million and our shareholders’ equity is over $1.4 billion at the end of the third quarter of 2020. Additionally, we currently have approximately $700 million of liquidity. Our historical methodology for capital allocation has been to follow a return-based, balanced approach in which we maintain or increase our dividends in line with our growth in earnings and operating cash flows, repurchase our common stock in an amount which offsets issuances under our share-based compensation plans and at times when we believe it is under-valued, and invest in capital expenditures and business acquisitions that allow us to achieve our strategic objectives. We currently anticipate investments in growing our business through capital expenditures and business acquisitions will comprise the highest use of our capital availability. Finally, we manage our capital structure conservatively by attempting to maintain targeted ratios of debt to equity and debt to earnings before interest, taxes, depreciation and amortization while reserving sufficient levels of liquidity for unanticipated opportunities and events.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We are exposed to market risks related to fluctuations in interest rates on our variable rate debt, which consists of a revolving credit facility and industrial development revenue bonds. We do not currently use interest rate swaps, futures contracts or options on futures, or other types of derivative financial instruments to mitigate this risk.

34

UFP INDUSTRIES, INC.

For fixed rate debt, changes in interest rates generally affect the fair market value, but not earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not influence fair market value, but do affect future earnings and cash flows. We do not have an obligation to prepay fixed rate debt prior to maturity, and as a result, interest rate risk and changes in fair market value should not have a significant impact on such debt until we would be required to refinance it.

We are subject to fluctuations in the price of lumber. We experience significant fluctuations in the cost of commodity lumber products from primary producers (the “Lumber Market”). A variety of factors over which we have no control, including government regulations, transportation, environmental regulations, weather conditions, economic conditions, and natural disasters, impact the cost of lumber products and our selling prices. While we attempt to minimize our risk from severe price fluctuations, substantial, prolonged trends in lumber prices can affect our sales volume, our gross margins, and our profitability. We anticipate that these fluctuations will continue in the future. (See “Impact of the Lumber Market on Our Operating Results.”)

Our international operations have exposure to foreign currency rate risks, primarily due to fluctuations in their local currency, which is their functional currency, compared to the U.S. Dollar. Additionally, certain of our operations enter into transactions that will be settled in a currency other than the U.S. Dollar. We entered into forward foreign exchange rate contracts in 2018, which have since expired, and may enter into further forward contracts in the future associated with mitigating the foreign currency exchange risk. Historically, our hedge contracts are deemed immaterial to the financial statements, however any material hedge contract in the future will be disclosed.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. With the participation of management, our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15e and 15d – 15e) as of the quarter ended September 26, 2020 (the “Evaluation Date”), have concluded that, as of such date, our disclosure controls and procedures were effective.

(b) Changes in Internal Controls. During the quarter ended September 26, 2020, there were no changes in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

35

UFP INDUSTRIES, INC.

PART II. OTHER INFORMATION

Item 1A. Risk Factors.

We may be adversely affected by the impact of COVID-19 (Coronavirus) pandemic. Disease outbreaks, such as the COVID-19 pandemic, could have an adverse impact on the Company's operations and financial results. These outbreaks may adversely impact our business, consolidated results of operations and financial condition, such as the current COVID-19 pandemic. COVID-19, as well as measures taken by governmental authorities and businesses to limit the spread of this virus, may result in an adverse change in customer demand and our sales, interfere with the ability of our employees and suppliers to perform and function in a manner consistent with targeted objectives and otherwise adversely impact the efficiency of our operations. This has caused, and may continue to cause, us to materially curtail certain segments, and could have a material adverse effect on the results of our operations and cash flow.

Adverse economic conditions and our customers’ ability to operate may impact their ability to pay. This may result in higher write-offs of receivables than we normally experience. We continue to monitor our customers’ business activities, payment patterns, and credit profiles carefully and make changes in our terms when necessary in response to this risk. As a result, our accounts receivable aging at the end of September was approximately 95% current. Most recently our bad debt expense as a percentage of sales was 0.09%, 0.03%, and 0.03%, in 2019, 2018, and 2017, respectively. During the most difficult collection period of the Great Recession, from 2008 through 2010, our bad debt expense as a percentage of sales averaged 0.25%.

There could be limited future availability of materials from our suppliers. Many of our suppliers reduced their manufacturing capacity in response to the anticipated reduction in demand from the pandemic, which in turn impacted our ability to fulfill all of our customers’ orders. Our suppliers are currently taking actions to increase capacity to meet expectations of future demand.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) None.

(b) None.

(c) Issuer purchases of equity securities.

Fiscal Month	(a)	(b)	(c)	(d)
June 28 – August 1, 2020	—	—	—	1,103,957
August 2 – 29, 2020	—	—	—	1,103,957
August 30 – September 26, 2020	—	—	—	1,103,957

(a) Total number of shares purchased.

(b) Average price paid per share.

(c) Total number of shares purchased as part of publicly announced plans or programs.

(d) Maximum number of shares that may yet be purchased under the plans or programs.

On November 14, 2001, the Board of Directors approved a share repurchase program (which succeeded a previous program) allowing us to repurchase up to 2.5 million shares of our common stock. On October 14, 2010, our Board authorized an additional 2 million shares to be repurchased under our share repurchase program. The total number of remaining shares that may be repurchased under the program is approximately 1.1 million.

Item 5. Other Information.

None.

36

UFP INDUSTRIES, INC.

PART II. OTHER INFORMATION

Item 6. Exhibits.

The following exhibits (listed by number corresponding to the Exhibit Table as Item 601 in Regulation S-K) are filed with this report:

31	Certifications.
	(a)	Certificate of the Chief Executive Officer of UFP Industries, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
	(b)	Certificate of the Chief Financial Officer of UFP Industries, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32	Certifications.
	(a)	Certificate of the Chief Executive Officer of UFP Industries, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
	(b)	Certificate of the Chief Financial Officer of UFP Industries, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
101	Interactive Data File formatted in iXBRL (Inline eXtensible Business Reporting Language).
	(INS)	iXBRL Instance Document.
	(SCH)	iXBRL Schema Document.
	(CAL)	iXBRL Taxonomy Extension Calculation Linkbase Document.
	(LAB)	iXBRL Taxonomy Extension Label Linkbase Document.
	(PRE)	iXBRL Taxonomy Extension Presentation Linkbase Document.
	(DEF)	iXBRL Taxonomy Extension Definition Linkbase Document.
104	Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document).

37

UFP INDUSTRIES, INC.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	UFP INDUSTRIES, INC.
Date: October 28, 2020	By:	/s/ Matthew J. Missad
	Matthew J. Missad,
	Chief Executive Officer and Principal Executive Officer
Date: October 28, 2020	By:	/s/ Michael R. Cole
	Michael R. Cole,
	Chief Financial Officer,
	Principal Financial Officer and
	Principal Accounting Officer

38

EX-31.(A)

Exhibit 31(a)

UFP Industries, Inc.

Certification

I, Matthew J. Missad, certify that:

1. I have reviewed this report on Form 10-Q of UFP Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 28, 2020	/s/ Matthew J. Missad
	Matthew J. Missad,
	Chief Executive Officer and Principal Executive Officer

EX-31.(B)

Exhibit 31(b)

UFP Industries, Inc.

Certification

I, Michael R. Cole, certify that:

1. I have reviewed this report on Form 10-Q of UFP Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 28, 2020	/s/ Michael R. Cole
	Michael R. Cole
	Chief Financial Officer and Principal Accounting Officer

EX-32.(A)

Exhibit 32(a)

CERTIFICATE OF THE

CHIEF EXECUTIVE OFFICER OF

UFP INDUSTRIES, INC.

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350):

I, Matthew J. Missad, Chief Executive Officer of UFP Industries, Inc., certify, to the best of my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) that:

(1) The quarterly report on Form 10-Q for the quarterly period ended September 26, 2020, which this statement accompanies, fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in this quarterly report on Form 10-Q for the quarterly period ended September 26, 2020, fairly presents, in all material respects, the financial condition and results of operations of UFP Industries, Inc.

	UFP INDUSTRIES, INC.
Date: October 28, 2020	By: /s/ Matthew J. Missad
	Matthew J. Missad,
	Chief Executive Officer and Principal Executive Officer

The signed original of this written statement required by Section 906, or any other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to UFP Industries, Inc. and will be retained by UFP Industries, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.(B)

Exhibit 32(b)

CERTIFICATE OF THE

CHIEF FINANCIAL OFFICER OF

UFP INDUSTRIES, INC.

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350):

I, Michael R. Cole, Chief Financial Officer of UFP Industries, Inc., certify, to the best of my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) that:

(1) The quarterly report on Form 10-Q for the quarterly period ended September 26, 2020, which this statement accompanies, fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in this quarterly report on Form 10-Q for the quarterly period ended September 26, 2020, fairly presents, in all material respects, the financial condition and results of operations of UFP Industries, Inc.

	UFP INDUSTRIES, INC.
Date: October 28, 2020	By: /s/ Michael R. Cole
	Michael R. Cole,
	Chief Financial Officer and Principal Financial Officer

The signed original of this written statement required by Section 906, or any other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to UFP Industries, Inc. and will be retained by UFP Industries, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information	9 Months Ended
	Sep. 26, 2020 shares
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 26, 2020
Entity File Number	0-22684
Entity Registrant Name	UFP INDUSTRIES, INC.
Entity Incorporation, State or Country Code	MI
Entity Tax Identification Number	38-1465835
Entity Address, Address Line One	2801 East Beltline NE
Entity Address, City or Town	Grand Rapids
Entity Address, State or Province	MI
Entity Address, Postal Zip Code	49525
City Area Code	616
Local Phone Number	364-6161
Title of 12(b) Security	Common Stock
Trading Symbol	UFPI
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)	61,186,636
Current Fiscal Year End Date	--12-26
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Entity Central Index Key	0000912767
Amendment Flag	false

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 26, 2020	Dec. 28, 2019	Sep. 28, 2019
CURRENT ASSETS:
Cash and cash equivalents	$ 346,154	$ 168,336	$ 64,498
Restricted cash	724	330	729
Investments	20,530	18,527	17,028
Accounts receivable, net	583,079	364,027	474,648
Inventories:
Raw materials	286,418	236,283	239,585
Finished goods	242,316	250,591	239,771
Total inventories	528,734	486,874	479,356
Refundable income taxes		13,272	1,550
Other current assets	32,888	41,706	54,295
TOTAL CURRENT ASSETS	1,512,109	1,093,072	1,092,104
DEFERRED INCOME TAXES	2,070	2,763	2,284
RESTRICTED INVESTMENTS	17,327	16,214	16,082
RIGHT OF USE ASSETS	77,412	80,167	75,436
OTHER ASSETS	24,216	24,884	23,085
GOODWILL	245,925	229,536	232,411
INDEFINITE-LIVED INTANGIBLE ASSETS	7,361	7,354	7,339
OTHER INTANGIBLE ASSETS, NET	58,205	48,313	46,877
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment	935,639	884,963	880,274
Less accumulated depreciation and amortization	(529,644)	(497,789)	(495,267)
PROPERTY, PLANT AND EQUIPMENT, NET	405,995	387,174	385,007
TOTAL ASSETS	2,350,620	1,889,477	1,880,625
CURRENT LIABILITIES:
Accounts payable	231,111	142,479	180,767
Accrued liabilities:
Compensation and benefits	171,472	141,892	127,500
Income taxes	3,024
Other	69,888	51,572	61,463
Current portion of lease liability	15,349	15,283	15,566
Current portion of long-term debt	2,760	2,816	152
TOTAL CURRENT LIABILITIES	493,604	354,042	385,448
LONG-TERM DEBT	311,267	160,867	162,853
LEASE LIABILITY	62,100	64,884	59,870
DEFERRED INCOME TAXES	22,478	22,880	14,897
OTHER LIABILITIES	47,367	29,071	28,454
TOTAL LIABILITIES	936,816	631,744	651,522
Controlling interest shareholders' equity:
Preferred stock, no par value; shares authorized 1,000,000; issued and outstanding, none
Common stock, $1 par value; shares authorized 80,000,000; issued and outstanding, 61,186,636, 61,408,589 and 61,390,216	61,187	61,409	61,390
Additional paid-in capital	216,002	192,173	189,820
Retained earnings	1,127,375	995,022	969,564
Accumulated other comprehensive income	(6,974)	(4,889)	(5,315)
Total controlling interest shareholders' equity	1,397,590	1,243,715	1,215,459
Noncontrolling interest	16,214	14,018	13,644
TOTAL SHAREHOLDERS' EQUITY	1,413,804	1,257,733	1,229,103
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 2,350,620	$ 1,889,477	$ 1,880,625

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 26, 2020	Dec. 28, 2019	Sep. 28, 2019
SHAREHOLDERS' EQUITY:
Preferred stock, no par value (in dollars per share)	$ 0	$ 0	$ 0
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0	0
Preferred stock, shares outstanding (in shares)	0	0	0
Common Stock, Par or Stated Value Per Share	$ 1	$ 1	$ 1
Common stock, shares authorized (in shares)	80,000,000	80,000,000	80,000,000
Common stock, shares issued (in shares)	61,186,636	61,408,589	61,390,216
Common stock, shares outstanding (in shares)	61,186,636	61,408,589	61,390,216

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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2020	Sep. 28, 2019	Sep. 26, 2020	Sep. 28, 2019
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
NET SALES	$ 1,486,227	$ 1,163,026	$ 3,760,290	$ 3,417,969
COST OF GOODS SOLD	1,245,153	975,756	3,147,049	2,889,706
GROSS PROFIT	241,074	187,270	613,241	528,263
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES	134,649	115,958	357,770	334,165
OTHER	(176)	845	(2,120)	948
EARNINGS FROM OPERATIONS	106,601	70,467	257,591	193,150
INTEREST EXPENSE	2,486	1,900	6,291	6,767
INTEREST INCOME	(1,011)	(317)	(1,541)	(1,074)
UNREALIZED GAIN ON INVESTMENTS AND OTHER	(554)	(93)	(82)	(1,611)
NET INTEREST EXPENSE	921	1,490	4,668	4,082
EARNINGS BEFORE INCOME TAXES	105,680	68,977	252,923	189,068
INCOME TAXES	26,819	16,396	63,798	45,340
NET EARNINGS	78,861	52,581	189,125	143,728
LESS NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTEREST	(1,657)	(722)	(5,299)	(1,814)
NET EARNINGS ATTRIBUTABLE TO CONTROLLING INTEREST	$ 77,204	$ 51,859	$ 183,826	$ 141,914
EARNINGS PER SHARE - BASIC (USD per share)	$ 1.25	$ 0.84	$ 2.98	$ 2.30
EARNINGS PER SHARE - DILUTED (USD per share)	$ 1.25	$ 0.84	$ 2.98	$ 2.30
OTHER COMPREHENSIVE INCOME:
NET EARNINGS	$ 78,861	$ 52,581	$ 189,125	$ 143,728
OTHER COMPREHENSIVE GAIN (LOSS)	1,687	(1,200)	(4,030)	644
COMPREHENSIVE INCOME	80,548	51,381	185,095	144,372
LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST	(1,922)	(358)	(3,354)	(1,835)
COMPREHENSIVE INCOME ATTRIBUTABLE TO CONTROLLING INTEREST	$ 78,626	$ 51,023	$ 181,741	$ 142,537

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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Earnings	Noncontrolling Interest	Total
Beginning balance at Dec. 29, 2018	$ 60,884	$ 178,540	$ 839,917	$ (5,938)	$ 15,281	$ 1,088,684
Increase (Decrease) in Stockholders' Equity
Net earnings			35,540		462	36,002
Foreign currency translation adjustment				982	224	1,206
Unrealized gain (loss) on investment & foreign currency				167		167
Distributions to noncontrolling interest					(500)	(500)
Issuance of shares under employee stock purchase plans	10	251				261
Net issuance (forfeiture) of shares under stock grant programs	320	6,101				6,421
Issuance of shares under deferred compensation plans	138	(138)
Expense associated with share-based compensation arrangements		1,226				1,226
Accrued expense under deferred compensation plans		4,899				4,899
Ending balance at Mar. 30, 2019	61,352	190,879	875,457	(4,789)	15,467	1,138,366
Beginning balance at Dec. 29, 2018	60,884	178,540	839,917	(5,938)	15,281	1,088,684
Increase (Decrease) in Stockholders' Equity
Net earnings						143,728
Ending balance at Sep. 28, 2019	61,390	189,820	969,564	(5,315)	13,644	1,229,103
Beginning balance at Mar. 30, 2019	61,352	190,879	875,457	(4,789)	15,467	1,138,366
Increase (Decrease) in Stockholders' Equity
Net earnings			54,515		630	55,145
Foreign currency translation adjustment				151	161	312
Unrealized gain (loss) on investment & foreign currency				159		159
Distributions to noncontrolling interest					(400)	(400)
Cash dividends			(12,271)			(12,271)
Issuance of shares under employee stock purchase plans	9	272				281
Net issuance (forfeiture) of shares under stock grant programs	(11)	(262)	3			(270)
Issuance of shares under deferred compensation plans	17	(17)
Expense associated with share-based compensation arrangements		885				885
Accrued expense under deferred compensation plans		1,026				1,026
Ending balance at Jun. 29, 2019	61,367	192,783	917,704	(4,479)	15,858	1,183,233
Increase (Decrease) in Stockholders' Equity
Net earnings			51,859		722	52,581
Foreign currency translation adjustment				(963)	(364)	(1,327)
Unrealized gain (loss) on investment & foreign currency				127		127
Distributions to noncontrolling interest					(734)	(734)
Additional purchases of noncontrolling interest		(5,015)			(1,838)	(6,853)
Cash dividends			1			1
Issuance of shares under employee stock purchase plans	8	262				270
Net issuance (forfeiture) of shares under stock grant programs	1	(73)				(72)
Issuance of shares under deferred compensation plans	14	(14)
Expense associated with share-based compensation arrangements		857				857
Accrued expense under deferred compensation plans		1,020				1,020
Ending balance at Sep. 28, 2019	61,390	189,820	969,564	(5,315)	13,644	1,229,103
Beginning balance at Dec. 28, 2019	61,409	192,173	995,022	(4,889)	14,018	1,257,733
Increase (Decrease) in Stockholders' Equity
Net earnings			40,159		411	40,570
Foreign currency translation adjustment				(5,951)	(2,335)	(8,286)
Unrealized loss on debt securities				(270)		(270)
Distributions to noncontrolling interest					(299)	(299)
Additional purchases of noncontrolling interest		130			(225)	(95)
Cash dividends			(7,730)			(7,730)
Issuance of shares under employee stock purchase plans	10	309				319
Net issuance (forfeiture) of shares under stock grant programs	350	12,454	1			12,805
Issuance of shares under deferred compensation plans	89	(89)
Repurchase of shares	(756)		(28,456)			(29,212)
Expense associated with share-based compensation arrangements		1,404				1,404
Accrued expense under deferred compensation plans		5,343				5,343
Ending balance at Mar. 28, 2020	61,102	211,724	998,996	(11,110)	11,570	1,272,282
Beginning balance at Dec. 28, 2019	61,409	192,173	995,022	(4,889)	14,018	1,257,733
Increase (Decrease) in Stockholders' Equity
Net earnings						189,125
Ending balance at Sep. 26, 2020	61,187	216,002	1,127,375	(6,974)	16,214	1,413,804
Beginning balance at Mar. 28, 2020	61,102	211,724	998,996	(11,110)	11,570	1,272,282
Increase (Decrease) in Stockholders' Equity
Net earnings			66,463		3,231	69,694
Foreign currency translation adjustment				2,026	125	2,151
Unrealized loss on debt securities				688		688
Cash dividends			(7,644)			(7,644)
Issuance of shares under employee stock purchase plans	10	367				377
Net issuance (forfeiture) of shares under stock grant programs	43	(174)	2			(129)
Issuance of shares under deferred compensation plans	14	(14)
Expense associated with share-based compensation arrangements		824				824
Accrued expense under deferred compensation plans		1,082				1,082
Ending balance at Jun. 27, 2020	61,169	213,809	1,057,817	(8,396)	14,926	1,339,325
Increase (Decrease) in Stockholders' Equity
Net earnings			77,204		1,657	78,861
Foreign currency translation adjustment				1,319	265	1,584
Unrealized loss on debt securities				103		103
Distributions to noncontrolling interest					(634)	(634)
Cash dividends			(7,646)			(7,646)
Issuance of shares under employee stock purchase plans	7	338				345
Net issuance (forfeiture) of shares under stock grant programs	(1)	(56)				(57)
Issuance of shares under deferred compensation plans	12	(12)
Expense associated with share-based compensation arrangements		826				826
Accrued expense under deferred compensation plans		1,097				1,097
Ending balance at Sep. 26, 2020	$ 61,187	$ 216,002	$ 1,127,375	$ (6,974)	$ 16,214	$ 1,413,804

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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended
	Sep. 26, 2020	Jun. 27, 2020	Mar. 28, 2020	Sep. 28, 2019	Jun. 29, 2019	Mar. 30, 2019
Increase (Decrease) in Stockholders' Equity
Cash dividends per share (USD per share)	$ 0.125	$ 0.125	$ 0.125	$ 0.200	$ 0.200
Issuance of shares under employee stock plans (in shares)	7,511	9,714	10,549	7,916	8,694	10,259
Issuance of shares under stock grant programs (in shares)	1,382	42,880	350,124	1,070	10,819	320,069
Issuance of shares under deferred compensation plans (in shares)	11,326	14,106	89,616	14,550	16,433	138,295
Repurchase of shares (in shares)			756,397

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 26, 2020	Sep. 28, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$ 189,125	$ 143,728
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation	47,226	44,652
Amortization of intangibles	5,863	4,690
Expense associated with share-based and grant compensation arrangements	3,152	3,105
Deferred income taxes (credit)	110	(367)
Unrealized loss (gain) on investments	(81)	(1,611)
Net gain on disposition of assets and impairment of assets	(662)	830
Changes in:
Accounts receivable	(211,238)	(127,841)
Inventories	(39,167)	80,178
Accounts payable and cash overdraft	85,354	14,293
Accrued liabilities and other	105,401	36,423
NET CASH FROM OPERATING ACTIVITIES	185,083	198,080
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(67,024)	(66,338)
Proceeds from sale of property, plant and equipment	2,588	1,180
Acquisitions and purchases of non-controlling interest, net of cash received	(34,820)	(38,710)
Purchases of investments	(24,266)	(6,475)
Proceeds from sale of investments	22,281	4,159
Other	314	199
NET CASH USED IN INVESTING ACTIVITIES	(100,927)	(105,985)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities	6,862	421,464
Repayments under revolving credit facilities	(6,498)	(460,537)
Contingent consideration payment and other	(3,087)	(3,099)
Issuance of long-term debt	150,000
Proceeds from issuance of common stock	1,042	812
Dividends paid to shareholders	(23,020)	(12,270)
Distributions to noncontrolling interest	(932)	(1,634)
Repurchase of common stock	(29,212)
Other	23	41
NET CASH FROM (USED IN) FINANCING ACTIVITIES	95,178	(55,223)
Effect of exchange rate changes on cash	(1,122)	157
NET CHANGE IN CASH AND CASH EQUIVALENTS	178,212	37,029
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR	168,666	28,198
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$ 346,878	$ 65,227

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - SUPPLEMENTAL - USD ($) $ in Thousands	9 Months Ended
	Sep. 26, 2020	Sep. 28, 2019
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents, beginning of period	$ 168,336	$ 27,316
Restricted cash, beginning of period	330	882
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF YEAR	168,666	28,198
Cash and cash equivalents, end of period	346,154	64,498
Restricted cash, end of period	724	729
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	346,878	65,227
SUPPLEMENTAL INFORMATION:
Interest paid	4,112	5,287
Income taxes paid	47,301	33,106
NON-CASH FINANCING ACTIVITIES:
Common stock issued under deferred compensation plans	$ 6,195	$ 5,620

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BASIS OF PRESENTATION

9 Months Ended

Sep. 26, 2020

BASIS OF PRESENTATION

BASIS OF PRESENTATION

A.       BASIS OF PRESENTATION

The accompanying unaudited interim consolidated condensed financial statements (the “Financial Statements”) include our accounts and those of our wholly-owned and majority-owned subsidiaries and partnerships, and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, the Financial Statements do not include all the information and footnotes normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States. All intercompany transactions and balances have been eliminated.

In our opinion, the Financial Statements contain all material adjustments necessary to present fairly our consolidated financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. These Financial Statements should be read in conjunction with the annual consolidated financial statements, and footnotes thereto, included in our Annual Report to Shareholders on Form 10-K for the fiscal year ended December 28, 2019.

On April 22, 2020, our shareholders approved changing the name of the Company from Universal Forest Products, Inc., to UFP Industries, Inc.

Seasonality has a significant impact on our working capital from March to August, which historically results in negative or modest cash flows from operations in our first and second quarters. Conversely, we experience a substantial decrease in working capital from September to February which typically results in significant cash flow from operations in our third and fourth quarters. For comparative purposes, we have included the September 28, 2019 balances in the accompanying unaudited condensed consolidated balance sheets.

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. We cannot reasonably estimate the length or severity of this pandemic and government restrictions on business activity, or the extent to which these restrictions may materially impact our consolidated financial position, consolidated results of operations, and consolidated cash flows in fiscal 2020.

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FAIR VALUE

9 Months Ended

Sep. 26, 2020

FAIR VALUE

FAIR VALUE

B.       FAIR VALUE

We apply the provisions of ASC 820, Fair Value Measurements and Disclosures, to assets and liabilities measured at fair value. Assets measured at fair value are as follows:

	September 26, 2020								September 28, 2019
	Quoted		Prices with						Quoted		Prices with
	Prices in		Other			Prices with			Prices in		Other			Prices with
	Active		Observable			Unobservable			Active		Observable			Unobservable
	Markets		Inputs			Inputs			Markets		Inputs			Inputs
(in thousands)	(Level 1)		(Level 2)			(Level 3)	Total		(Level 1)		(Level 2)			(Level 3)	Total
Money market funds	$	64	$	3,133	$	—	$	3,197	$	56,781	$	843	$	—	$	57,624
Fixed income funds		248		16,522		—		16,770		733		14,566		—		15,299
Equity securities		10,524		—		—		10,524		8,840		—		—		8,840
Alternative investments		—		—		1,926		1,926		—		—		1,895		1,895
Mutual funds:
Domestic stock funds		6,826		—		—		6,826		2,630		—		—		2,630
International stock funds		1,243		—		—		1,243		2,054		—		—		2,054
Target funds		260		—		—		260		268		—		—		268
Bond funds		208		—		—		208		825		—		—		825
Alternative funds		433		—		—		433		1,531		—		—		1,531
Total mutual funds		8,970		—		—		8,970		7,308		—		—		7,308
Total	$	19,806	$	19,655	$	1,926	$	41,387	$	73,662	$	15,409	$	1,895	$	90,966
Assets at fair value	$	19,806	$	19,655	$	1,926	$	41,387	$	73,662	$	15,409	$	1,895	$	90,966

From the assets measured at fair value as of September 26, 2020, listed in the table above, $20.5 million of mutual funds, equity securities, and alternative investments are held in Investments, $0.9 million of money market and mutual funds are held in Other Assets for our deferred compensation plan, and $16.8 million of fixed income funds and $3.2 million of money markets funds are held in Restricted Investments.

We maintain money market, mutual funds, bonds, and/or stocks in our non-qualified deferred compensation plan, our wholly owned licensed captive insurance company, and assets held in financial institutions. These funds are valued at prices quoted in an active exchange market and are included in “Cash and Cash Equivalents”, “Investments”, “Other Assets”, and “Restricted Investments”. We have elected not to apply the fair value option under ASC 825, Financial Instruments, to any of our financial instruments except for those expressly required by U.S. GAAP.

In accordance with our investment policy, our wholly-owned captive, Ardellis Insurance Ltd. (“Ardellis”), maintains an investment portfolio, totaling $37.3 million as of September 26, 2020, which has been included in the aforementioned table of total investments. This portfolio consists of domestic and international stocks, alternative investments, and fixed income bonds.

Ardellis’ available for sale investment portfolio, including funds held with the State of Michigan, consists of the following (in thousands):

	September 26, 2020						September 28, 2019
			Unrealized						Unrealized
	Cost		Gain/(Loss)		Fair Value		Cost		Gain/(Loss)		Fair Value
Fixed Income	$	15,750	$	1,020	$	16,770	$	14,969	$	330	$	15,299
Equity		9,121		1,403		10,524		7,584		1,256		8,840
Mutual Funds		7,228		852		8,080		6,391		(98)		6,293
Alternative Investments		1,881		45		1,926		1,790		105		1,895
Total	$	33,980	$	3,320	$	37,300	$	30,734	$	1,593	$	32,327

Our fixed income investments consist of a blend of US Government and Agency bonds and investment grade corporate bonds with varying maturities. Our equity investments consist of small, mid, and large cap growth and value funds, as well as international equity. Our mutual fund investments consist of domestic and international stock. Our alternative investments consist of the private real estate income trust which is valued as a Level 3 asset. The net unrealized gain was $3.3 million. Carrying amounts above are recorded in the investments and restricted investments line items within the balance sheet as of September 26, 2020 and September 28, 2019.

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REVENUE RECOGNITION

9 Months Ended

Sep. 26, 2020

REVENUE RECOGNITION

REVENUE RECOGNITION

C.       REVENUE RECOGNITION

Within the three primary segments (Retail, Industrial, and Construction) that the Company operates, there are a variety of written agreements governing the sale of our products and services. The transaction price is stated at the purchase order level, which includes shipping and/or freight costs and any applicable governmental authority taxes. The majority of our contracts have a single performance obligation concentrated around the delivery of goods to the carrier, Free On Board (FOB) shipping point. Therefore, revenue is recognized when this performance obligation is satisfied. Generally, title and control passes at the time of shipment. In certain circumstances, the customer takes title when the shipment arrives at the destination. However, our shipping process is typically completed the same day.

Certain customer products that we provide require installation by the Company or a 3^rd party. Installation revenue is recognized upon completion. If the Company uses a 3^rd party for installation, the party will act as an agent to the Company until completion of the installation. Installation revenue represents an immaterial share of the Company’s total sales.

The Company utilizes rebates, credits, discounts and/or cash-based incentives with certain customers which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized. We believe that there will not be significant changes to our estimates of variable consideration. The allocation of these costs are applied at the invoice level and recognized in conjunction with revenue. Additionally, returns and refunds are estimated on a historical and expected basis which is a reduction of revenue recognized.

Earnings on construction contracts are reflected in operations using over time accounting, under either cost to cost or units of delivery methods, depending on the nature of the business at individual operations, which is in accordance with ASC 606 as revenue is recognized when certain performance obligations are performed. Under over time accounting using the cost to cost method, revenues and related earnings on construction contracts are measured by the relationships of actual costs incurred related to the total estimated costs. Under over time accounting using the units of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual units produced related to the total number of units. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent.

Our construction contracts are generally entered into with a fixed price and completion of the projects can range from 6 to 18 months in duration. Therefore, our operating results are impacted by, among many other things, labor rates and commodity costs. During the year, we update our estimated costs to complete our projects using current labor and commodity costs and recognize losses to the extent that they exist.

The following table presents our gross revenues disaggregated by revenue source:

	Three Months Ended					Nine Months Ended
(in thousands)	September 26,		September 28,			September 26,		September 28,
Market Classification	2020		2019		% Change	2020		2019		% Change
FOB Shipping Point Revenue	$	1,490,050	$	1,140,853	30.6%	$	3,749,122	$	3,358,520	11.6%
Construction Contract Revenue		32,007		43,177	-25.9%		97,150		121,622	-20.1%
Total Gross Sales		1,522,057		1,184,030	28.5%		3,846,272		3,480,142	10.5%
Sales Allowances		(35,830)		(21,004)	70.6%		(85,982)		(62,173)	38.3%
Total Net Sales	$	1,486,227	$	1,163,026	27.8%	$	3,760,290	$	3,417,969	10.0%

The Construction segment comprises the construction contract revenue shown above. Construction contract revenue is primarily made up of site-built and framing customers.

The following table presents the balances of over time accounting accounts which are included in “Other current assets” and “Accrued liabilities: Other”, respectively (in thousands):

	September 26,		December 28,		September 28,
	2020		2019		2019
Cost and Earnings in Excess of Billings	$	4,130	$	4,690	$	6,815
Billings in Excess of Cost and Earnings		11,264		6,622		6,666

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EARNINGS PER SHARE

9 Months Ended

Sep. 26, 2020

EARNINGS PER SHARE

EARNINGS PER SHARE

D.       EARNINGS PER SHARE

The computation of earnings per share (“EPS”) is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 26,		September 28,		September 26,		September 28,
	2020		2019		2020		2019
Numerator:
Net earnings attributable to controlling interest	$	77,204	$	51,859	$	183,826	$	141,914
Adjustment for earnings allocated to non-vested restricted common stock		(2,195)		(1,299)		(5,110)		(3,547)
Net earnings for calculating EPS	$	75,009	$	50,560	$	178,716	$	138,367
Denominator:
Weighted average shares outstanding		61,548		61,717		61,642		61,609
Adjustment for non-vested restricted common stock		(1,750)		(1,546)		(1,713)		(1,540)
Shares for calculating basic EPS		59,798		60,171		59,929		60,069
Effect of dilutive restricted common stock		20		24		19		22
Shares for calculating diluted EPS		59,818		60,195		59,948		60,091
Net earnings per share:
Basic	$	1.25	$	0.84	$	2.98	$	2.30
Diluted	$	1.25	$	0.84	$	2.98	$	2.30

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COMMITMENTS, CONTINGENCIES, AND GUARANTEES

9 Months Ended

Sep. 26, 2020

COMMITMENTS, CONTINGENCIES, AND GUARANTEES

COMMITMENTS, CONTINGENCIES, AND GUARANTEES

E.       COMMITMENTS, CONTINGENCIES, AND GUARANTEES

We are self-insured for environmental impairment liability, including certain liabilities which are insured through a wholly owned subsidiary, Ardellis Insurance Ltd., a licensed captive insurance company.

We own and operate a number of facilities throughout the United States that chemically treat lumber products. In connection with the ownership and operation of these and other real properties, and the disposal or treatment of hazardous or toxic substances, we may, under various federal, state, and local environmental laws, ordinances, and regulations, be potentially liable for removal and remediation costs, as well as other potential costs, damages, and expenses. Environmental reserves, calculated with no discount rate, have been established to cover remediation activities at wood preservation facilities in Stockertown, PA; Elizabeth City, NC; and Auburndale, FL. In addition, a reserve was established for our facility in Thornton, CA to remove certain lead containing materials which existed on the property at the time of purchase.

On a consolidated basis, we have reserved approximately $1.9 million on September 26, 2020 and $2.0 million on September 28, 2019, respectively, representing the estimated costs to complete future remediation efforts. These amounts have not been reduced by an insurance receivable.

In addition, on September 26, 2020, we were parties either as plaintiff or defendant to a number of lawsuits and claims arising through the normal course of our business. In the opinion of management, our consolidated financial statements will not be materially affected by the outcome of these contingencies and claims.

On September 26, 2020, we had outstanding purchase commitments on commenced capital projects of approximately $21.3 million.

We provide a variety of warranties for products we manufacture. Historically, warranty claims have not been material. We also distribute products manufactured by other companies, some of which are no longer in business. While we do not warrant these products, we have received claims as a distributor of these products when the manufacturer no longer exists or has the ability to pay. Historically, these costs have not had a material effect on our consolidated financial statements.

As part of our operations, we supply building materials and labor to site-built construction projects or we jointly bid on contracts with framing companies for such projects. In some instances, we are required to post payment and performance bonds to ensure the products and installation services are completed in accordance with our contractual obligations. We have agreed to indemnify the surety for claims properly made against these bonds. As of September 26, 2020, we had approximately $7.0 million outstanding payment and performance bonds for open projects. We had approximately $7.6 million in payment and performance bonds outstanding for completed projects which are still under warranty.

On September 26, 2020, we had outstanding letters of credit totaling $43.8 million, primarily related to certain insurance contracts and industrial development revenue bonds described further below.

In lieu of cash deposits, we provide irrevocable letters of credit in favor of our insurers to guarantee our performance under certain insurance contracts. As of September 26, 2020, we have irrevocable letters of credit outstanding totaling approximately $33.8 million for these types of insurance arrangements. We have reserves recorded on our balance sheet, in accrued liabilities, that reflect our expected future liabilities under these insurance arrangements.

We are required to provide irrevocable letters of credit in favor of the bond trustees for all industrial development revenue bonds that have been issued. These letters of credit guarantee principal and interest payments to the bondholders. We currently have irrevocable letters of credit outstanding totaling approximately $9.8 million related to our outstanding industrial development revenue bonds. These letters of credit have varying terms but may be renewed at the option of the issuing banks.

Certain wholly owned domestic subsidiaries have guaranteed the indebtedness of UFP Industries, Inc. in certain debt agreements, including the Series 2012, 2018 and 2020 Senior Notes and our revolving credit facility. The maximum exposure of these guarantees is limited to the indebtedness outstanding under these debt arrangements and this exposure will expire concurrent with the expiration of the debt agreements.

We did not enter into any new guarantee arrangements during the third quarter of 2020 which would require us to recognize a liability on our balance sheet.

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BUSINESS COMBINATIONS

9 Months Ended

Sep. 26, 2020

BUSINESS COMBINATIONS

BUSINESS COMBINATIONS

F.       BUSINESS COMBINATIONS

We completed the following acquisitions in 2020 and since the end of September 2019, which were accounted for using the purchase method in thousands unless otherwise noted:

					Net
Company	Acquisition		Intangible		Tangible		Operating
Name	Date	Purchase Price	Assets		Assets		Segment
	July 14, 2020	$19,173 cash paid for 100% asset purchase and estimated contingent consideration	$	13,098	$	6,075	Industrial
T&R Lumber Company ("T&R")	A manufacturer and distributor of a range of products used primarily by nurseries, including plastic growing containers, pots and trays; wooden stakes; trellises; tree boxes; shipping racks; and other nursery supplies based in Rancho Cucamonga, California. T&R had annual sales of approximately $31 million. The acquisition of T&R will allow us to leverage their expertise using our national manufacturing capacity to grow our agricultural product offerings and customer base across the country.
	March 13, 2020	$21,787 cash paid for 100% asset purchase and estimated contingent consideration	$	19,098	$	2,689	Construction
Quest Design & Fabrication and Quest Architectural Millwork ("Quest")	A designer, fabricator, and installer of premium millwork and case goods for a variety of commercial uses. Quest had annual sales of approximately $22 million. The acquisition of Quest expands our architectural millwork capabilities and expertise in our commercial construction business unit, and will allow us to use our national manufacturing capacity to grow and diversify our sales to this end market

The intangible assets for the T&R and Quest acquisitions have not been finalized and allocated to their respective identifiable asset and goodwill accounts. In aggregate, acquisitions completed since the end of September 2019 and not consolidated with other operations contributed approximately $10.8 million in net sales and $0.2 million in operating profits during the third quarter of 2020 and $17.8 million in net sales and $1.5 million in operating profits in the first nine months of 2020.

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SEGMENT REPORTING

9 Months Ended

Sep. 26, 2020

SEGMENT REPORTING

SEGMENT REPORTING

G.       SEGMENT REPORTING

The Company operates manufacturing, treating and distribution facilities internationally, but primarily in the United States. Effective January 1, 2020, the Company re-organized around the markets it serves rather than geography. The prior periods have been recast to reflect the new segment structure. The business segments align with the following markets: UFP Retail Solutions, UFP Construction and UFP Industrial. This change allows for a more specialized and consistent sales approach among Company operations, more efficient use of resources and capital, and quicker introduction of new products and services. The Company manages the operations of its individual locations primarily through a market-centered reporting structure under which each location is included in a business unit and business units are included in our Retail, Industrial, and Construction segments. The exception to this market-centered reporting and management structure is the Company’s International segment, which comprises our Mexico, Canada, and Australia operations and sales and buying offices in other parts of the world.

Our International segment and Ardellis (our insurance captive) have been included in the “All Other” column of the table below.

The “Corporate” column includes purchasing, transportation and administrative functions that serve our operating segments. Operating results of Corporate primarily consists of over (under) allocated costs. The operating results of UFP Real Estate, Inc., which owns and leases real estate, and UFP Transportation Ltd., which owns and leases transportation equipment, are also included in the Corporate column. An inter-company lease charge is assessed to our operating segments for the use of these assets at fair market value rates. Total assets of the Corporate column include unallocated cash and cash equivalents, certain prepaid assets, certain property, equipment and other assets pertaining to the centralized activities of Corporate, UFP Real Estate, Inc., and UFP Transportation Ltd.

	Three Months Ended September 26, 2020
(in thousands)	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	700,522	$	282,124	$	447,103	$	56,700	$	(222)	$	1,486,227
Intersegment net sales		45,416		11,773		17,909		76,029		(151,127)		—
Segment operating profit		62,181		22,037		16,513		7,449		(1,579)		106,601

	Three Months Ended September 28, 2019
(in thousands)	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	397,140	$	271,667	$	445,505	$	48,066	$	648	$	1,163,026
Intersegment net sales		32,400		9,748		16,057		45,918		(104,123)		—
Segment operating profit		14,297		20,768		21,406		3,561		10,435		70,467

	Nine Months Ended September 26, 2020
	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	1,661,873	$	763,046	$	1,187,429	$	148,503	$	(561)	$	3,760,290
Intersegment net sales		109,378		32,788		49,685		196,908		(388,759)		—
Segment operating profit		122,082		53,837		50,544		20,573		10,555		257,591

	Nine Months Ended September 28, 2019
	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	1,212,330	$	837,671	$	1,225,467	$	142,845	$	(344)	$	3,417,969
Intersegment net sales		101,203		34,406		42,393		155,637		(333,639)		—
Segment operating profit		47,597		60,208		56,263		9,490		19,592		193,150

Identifiable intangibles have been transferred and goodwill was re-allocated, based on their relative fair values, to our new segments and reporting units. The following table presents goodwill by segment as of September 26, 2020, and December 28, 2019 (in thousands):

	Retail		Industrial		Construction		All Other		Corporate		Total
Balance as of December 28, 2019	$	58,098	$	81,276	$	82,911	$	7,251	$	—	$	229,536
2020 Acquisitions		—		6,549		9,953		—		—		16,502
2020 Purchase Accounting Adjustments		202		2		—		—		—		204
Foreign Exchange, Net		—		—		229		(546)		—		(317)
Balance as of September 26, 2020	$	58,300	$	87,827	$	93,093	$	6,705	$	—	$	245,925

The following table presents total assets by segment as of September 26, 2020, and December 28, 2019.

	Total Assets by Segment
(in thousands)	September 26,		December 28,
Segment Classification	2020		2019		% Change
Retail	$	631,238	$	402,221	56.9	%
Industrial		389,806		377,329	3.3
Construction		525,596		522,638	0.6
All Other		161,945		136,990	18.2
Corporate		642,035		450,299	42.6
Total Assets	$	2,350,620	$	1,889,477	24.4	%

Note:  During 2020, certain assets were reclassified to a different segment. Prior year information in this table has been restated to reflect these changes

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INCOME TAXES

9 Months Ended

Sep. 26, 2020

INCOME TAXES

INCOME TAXES

H.       INCOME TAXES

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 25.4% in the third quarter of 2020 compared to 23.8% for same period in 2019 and was 25.2% in the first nine months of 2020 compared to 24.0% for the same period in 2019. The increase was primarily due to the foreign tax rate differential on foreign income as well as a variety of other discrete tax items none of which are individually significant.

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COMMON STOCK

9 Months Ended

Sep. 26, 2020

COMMON STOCK

COMMON STOCK

I.       COMMON STOCK

Below is a summary of common stock issuances for the first nine months of 2020 and 2019 (in thousands, except average share price):

	September 26, 2020
Share Issuance Activity	Common Stock		Average Share Price
Shares issued under the employee stock purchase plan	28	$	44.14
Shares issued under the employee stock gift program	2		45.93
Shares issued under the director retainer stock program	46		24.80
Shares issued under the long-term stock incentive plan	271		47.51
Shares issued under the executive stock match grants	79		47.60
Forfeitures	(7)
Total shares issued under stock grant programs	391	$	44.92
Shares issued under the deferred compensation plans	115	$	53.85

During the first nine months of 2020, we repurchased approximately 756,000 shares of our common stock at an average share price of $38.62.

	September 28, 2019
Share Issuance Activity	Common Stock		Average Share Price
Shares issued under the employee stock purchase plan	27	$	35.52
Shares issued under the employee stock gift program	3		33.91
Shares issued under the director retainer stock program	4		35.44
Shares issued under the long-term stock incentive plan	211		30.83
Shares issued under the executive stock match grants	109		31.57
Forfeitures	(17)
Total shares issued under stock grant programs	310	$	31.17
Shares issued under the deferred compensation plans	169	$	33.20

During the first nine months of 2019, we did not repurchase any of our common stock.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 26, 2020

SUBSEQUENT EVENTS

Subsequent Events

J.       SUBSEQUENT EVENTS

On September 30, 2020, we entered into a joint venture with Atlante S.p.A. to create Enwrap Logistic & Packaging S.r.l. (Enwrap) and acquired a 50% ownership interest in Enwrap for $5.3 million. Enwrap is headquartered in Milan, Italy and is an industrial packaging business, which provides high-value, mixed material industrial packaging and logistics services through 14 facilities in Italy.

On October 1, 2020, we acquired the equity of Fire Retardant Chemical Technologies, LLC (FRCT), for $5.9 million. Founded in 2014 and based in Matthews, North Carolina, FRCT’s business includes a research and development laboratory specializing in developing and testing a wide range of high-performance chemicals, including fire retardants and water repellants.

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BASIS OF PRESENTATION (Policies)

9 Months Ended

Sep. 26, 2020

BASIS OF PRESENTATION

Revenue Recognition

Within the three primary segments (Retail, Industrial, and Construction) that the Company operates, there are a variety of written agreements governing the sale of our products and services. The transaction price is stated at the purchase order level, which includes shipping and/or freight costs and any applicable governmental authority taxes. The majority of our contracts have a single performance obligation concentrated around the delivery of goods to the carrier, Free On Board (FOB) shipping point. Therefore, revenue is recognized when this performance obligation is satisfied. Generally, title and control passes at the time of shipment. In certain circumstances, the customer takes title when the shipment arrives at the destination. However, our shipping process is typically completed the same day.

Certain customer products that we provide require installation by the Company or a 3^rd party. Installation revenue is recognized upon completion. If the Company uses a 3^rd party for installation, the party will act as an agent to the Company until completion of the installation. Installation revenue represents an immaterial share of the Company’s total sales.

The Company utilizes rebates, credits, discounts and/or cash-based incentives with certain customers which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized. We believe that there will not be significant changes to our estimates of variable consideration. The allocation of these costs are applied at the invoice level and recognized in conjunction with revenue. Additionally, returns and refunds are estimated on a historical and expected basis which is a reduction of revenue recognized.

Earnings on construction contracts are reflected in operations using over time accounting, under either cost to cost or units of delivery methods, depending on the nature of the business at individual operations, which is in accordance with ASC 606 as revenue is recognized when certain performance obligations are performed. Under over time accounting using the cost to cost method, revenues and related earnings on construction contracts are measured by the relationships of actual costs incurred related to the total estimated costs. Under over time accounting using the units of delivery method, revenues and related earnings on construction contracts are measured by the relationships of actual units produced related to the total number of units. Revisions in earnings estimates on the construction contracts are recorded in the accounting period in which the basis for such revisions becomes known. Projected losses on individual contracts are charged to operations in their entirety when such losses become apparent.

Our construction contracts are generally entered into with a fixed price and completion of the projects can range from 6 to 18 months in duration. Therefore, our operating results are impacted by, among many other things, labor rates and commodity costs. During the year, we update our estimated costs to complete our projects using current labor and commodity costs and recognize losses to the extent that they exist.

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FAIR VALUE (Tables)

9 Months Ended

Sep. 26, 2020

FAIR VALUE

Assets measured at fair value

	September 26, 2020								September 28, 2019
	Quoted		Prices with						Quoted		Prices with
	Prices in		Other			Prices with			Prices in		Other			Prices with
	Active		Observable			Unobservable			Active		Observable			Unobservable
	Markets		Inputs			Inputs			Markets		Inputs			Inputs
(in thousands)	(Level 1)		(Level 2)			(Level 3)	Total		(Level 1)		(Level 2)			(Level 3)	Total
Money market funds	$	64	$	3,133	$	—	$	3,197	$	56,781	$	843	$	—	$	57,624
Fixed income funds		248		16,522		—		16,770		733		14,566		—		15,299
Equity securities		10,524		—		—		10,524		8,840		—		—		8,840
Alternative investments		—		—		1,926		1,926		—		—		1,895		1,895
Mutual funds:
Domestic stock funds		6,826		—		—		6,826		2,630		—		—		2,630
International stock funds		1,243		—		—		1,243		2,054		—		—		2,054
Target funds		260		—		—		260		268		—		—		268
Bond funds		208		—		—		208		825		—		—		825
Alternative funds		433		—		—		433		1,531		—		—		1,531
Total mutual funds		8,970		—		—		8,970		7,308		—		—		7,308
Total	$	19,806	$	19,655	$	1,926	$	41,387	$	73,662	$	15,409	$	1,895	$	90,966
Assets at fair value	$	19,806	$	19,655	$	1,926	$	41,387	$	73,662	$	15,409	$	1,895	$	90,966

Available for sale investment portfolio

Ardellis’ available for sale investment portfolio, including funds held with the State of Michigan, consists of the following (in thousands):

	September 26, 2020						September 28, 2019
			Unrealized						Unrealized
	Cost		Gain/(Loss)		Fair Value		Cost		Gain/(Loss)		Fair Value
Fixed Income	$	15,750	$	1,020	$	16,770	$	14,969	$	330	$	15,299
Equity		9,121		1,403		10,524		7,584		1,256		8,840
Mutual Funds		7,228		852		8,080		6,391		(98)		6,293
Alternative Investments		1,881		45		1,926		1,790		105		1,895
Total	$	33,980	$	3,320	$	37,300	$	30,734	$	1,593	$	32,327

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REVENUE RECOGNITION (Tables)

9 Months Ended

Sep. 26, 2020

REVENUE RECOGNITION

Schedule of Disaggregation of revenue

	Three Months Ended					Nine Months Ended
(in thousands)	September 26,		September 28,			September 26,		September 28,
Market Classification	2020		2019		% Change	2020		2019		% Change
FOB Shipping Point Revenue	$	1,490,050	$	1,140,853	30.6%	$	3,749,122	$	3,358,520	11.6%
Construction Contract Revenue		32,007		43,177	-25.9%		97,150		121,622	-20.1%
Total Gross Sales		1,522,057		1,184,030	28.5%		3,846,272		3,480,142	10.5%
Sales Allowances		(35,830)		(21,004)	70.6%		(85,982)		(62,173)	38.3%
Total Net Sales	$	1,486,227	$	1,163,026	27.8%	$	3,760,290	$	3,417,969	10.0%

Schedule of percentage-of-completion balances

The following table presents the balances of over time accounting accounts which are included in “Other current assets” and “Accrued liabilities: Other”, respectively (in thousands):

	September 26,		December 28,		September 28,
	2020		2019		2019
Cost and Earnings in Excess of Billings	$	4,130	$	4,690	$	6,815
Billings in Excess of Cost and Earnings		11,264		6,622		6,666

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 26, 2020

EARNINGS PER SHARE

Schedule of Computation of earnings per share

The computation of earnings per share (“EPS”) is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 26,		September 28,		September 26,		September 28,
	2020		2019		2020		2019
Numerator:
Net earnings attributable to controlling interest	$	77,204	$	51,859	$	183,826	$	141,914
Adjustment for earnings allocated to non-vested restricted common stock		(2,195)		(1,299)		(5,110)		(3,547)
Net earnings for calculating EPS	$	75,009	$	50,560	$	178,716	$	138,367
Denominator:
Weighted average shares outstanding		61,548		61,717		61,642		61,609
Adjustment for non-vested restricted common stock		(1,750)		(1,546)		(1,713)		(1,540)
Shares for calculating basic EPS		59,798		60,171		59,929		60,069
Effect of dilutive restricted common stock		20		24		19		22
Shares for calculating diluted EPS		59,818		60,195		59,948		60,091
Net earnings per share:
Basic	$	1.25	$	0.84	$	2.98	$	2.30
Diluted	$	1.25	$	0.84	$	2.98	$	2.30

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BUSINESS COMBINATIONS (Tables)

9 Months Ended

Sep. 26, 2020

BUSINESS COMBINATIONS

Business Acquisitions Accounted for Using Purchase Method

					Net
Company	Acquisition		Intangible		Tangible		Operating
Name	Date	Purchase Price	Assets		Assets		Segment
	July 14, 2020	$19,173 cash paid for 100% asset purchase and estimated contingent consideration	$	13,098	$	6,075	Industrial
T&R Lumber Company ("T&R")	A manufacturer and distributor of a range of products used primarily by nurseries, including plastic growing containers, pots and trays; wooden stakes; trellises; tree boxes; shipping racks; and other nursery supplies based in Rancho Cucamonga, California. T&R had annual sales of approximately $31 million. The acquisition of T&R will allow us to leverage their expertise using our national manufacturing capacity to grow our agricultural product offerings and customer base across the country.
	March 13, 2020	$21,787 cash paid for 100% asset purchase and estimated contingent consideration	$	19,098	$	2,689	Construction
Quest Design & Fabrication and Quest Architectural Millwork ("Quest")	A designer, fabricator, and installer of premium millwork and case goods for a variety of commercial uses. Quest had annual sales of approximately $22 million. The acquisition of Quest expands our architectural millwork capabilities and expertise in our commercial construction business unit, and will allow us to use our national manufacturing capacity to grow and diversify our sales to this end market

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SEGMENT REPORTING (Tables)

9 Months Ended

Sep. 26, 2020

SEGMENT REPORTING

Segment Reporting

	Three Months Ended September 26, 2020
(in thousands)	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	700,522	$	282,124	$	447,103	$	56,700	$	(222)	$	1,486,227
Intersegment net sales		45,416		11,773		17,909		76,029		(151,127)		—
Segment operating profit		62,181		22,037		16,513		7,449		(1,579)		106,601

	Three Months Ended September 28, 2019
(in thousands)	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	397,140	$	271,667	$	445,505	$	48,066	$	648	$	1,163,026
Intersegment net sales		32,400		9,748		16,057		45,918		(104,123)		—
Segment operating profit		14,297		20,768		21,406		3,561		10,435		70,467

	Nine Months Ended September 26, 2020
	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	1,661,873	$	763,046	$	1,187,429	$	148,503	$	(561)	$	3,760,290
Intersegment net sales		109,378		32,788		49,685		196,908		(388,759)		—
Segment operating profit		122,082		53,837		50,544		20,573		10,555		257,591

	Nine Months Ended September 28, 2019
	Retail		Industrial		Construction		All Other		Corporate		Total
Net sales to outside customers	$	1,212,330	$	837,671	$	1,225,467	$	142,845	$	(344)	$	3,417,969
Intersegment net sales		101,203		34,406		42,393		155,637		(333,639)		—
Segment operating profit		47,597		60,208		56,263		9,490		19,592		193,150

Schedule of Goodwill by Segment

The following table presents goodwill by segment as of September 26, 2020, and December 28, 2019 (in thousands):

	Retail		Industrial		Construction		All Other		Corporate		Total
Balance as of December 28, 2019	$	58,098	$	81,276	$	82,911	$	7,251	$	—	$	229,536
2020 Acquisitions		—		6,549		9,953		—		—		16,502
2020 Purchase Accounting Adjustments		202		2		—		—		—		204
Foreign Exchange, Net		—		—		229		(546)		—		(317)
Balance as of September 26, 2020	$	58,300	$	87,827	$	93,093	$	6,705	$	—	$	245,925

Schedule of assets by segment

	Total Assets by Segment
(in thousands)	September 26,		December 28,
Segment Classification	2020		2019		% Change
Retail	$	631,238	$	402,221	56.9	%
Industrial		389,806		377,329	3.3
Construction		525,596		522,638	0.6
All Other		161,945		136,990	18.2
Corporate		642,035		450,299	42.6
Total Assets	$	2,350,620	$	1,889,477	24.4	%

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COMMON STOCK (Tables)

9 Months Ended

Sep. 26, 2020

COMMON STOCK

Schedule of common stock issuances

Below is a summary of common stock issuances for the first nine months of 2020 and 2019 (in thousands, except average share price):

	September 26, 2020
Share Issuance Activity	Common Stock		Average Share Price
Shares issued under the employee stock purchase plan	28	$	44.14
Shares issued under the employee stock gift program	2		45.93
Shares issued under the director retainer stock program	46		24.80
Shares issued under the long-term stock incentive plan	271		47.51
Shares issued under the executive stock match grants	79		47.60
Forfeitures	(7)
Total shares issued under stock grant programs	391	$	44.92
Shares issued under the deferred compensation plans	115	$	53.85

	September 28, 2019
Share Issuance Activity	Common Stock		Average Share Price
Shares issued under the employee stock purchase plan	27	$	35.52
Shares issued under the employee stock gift program	3		33.91
Shares issued under the director retainer stock program	4		35.44
Shares issued under the long-term stock incentive plan	211		30.83
Shares issued under the executive stock match grants	109		31.57
Forfeitures	(17)
Total shares issued under stock grant programs	310	$	31.17
Shares issued under the deferred compensation plans	169	$	33.20

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FAIR VALUE - Asset Measured at Fair Value (Details) - USD ($) $ in Thousands	Sep. 26, 2020	Sep. 28, 2019
Money market funds | Restricted Investments
Fair Value
Investments at fair value	$ 3,200
Fixed Income | Restricted Investments
Fair Value
Investments at fair value	16,800
Mutual funds, equity and alternative investments | Investments
Fair Value
Investments at fair value	20,500
Money market and mutual funds | Other Assets
Fair Value
Investments at fair value	900
Ardellis Insurance Ltd.
Fair Value
Total Fair Value	37,300	$ 32,327
Estimate of Fair Value Measurement | Recurring
Fair Value
Investments at fair value	41,387	90,966
Assets at fair value	41,387	90,966
Estimate of Fair Value Measurement | Recurring | Money market funds
Fair Value
Investments at fair value	3,197	57,624
Estimate of Fair Value Measurement | Recurring | Fixed Income
Fair Value
Investments at fair value	16,770	15,299
Estimate of Fair Value Measurement | Recurring | Equity
Fair Value
Investments at fair value	10,524	8,840
Estimate of Fair Value Measurement | Recurring | Alternative Investments
Fair Value
Investments at fair value	1,926	1,895
Estimate of Fair Value Measurement | Recurring | Mutual Fund
Fair Value
Investments at fair value	8,970	7,308
Estimate of Fair Value Measurement | Recurring | Domestic stock funds
Fair Value
Investments at fair value	6,826	2,630
Estimate of Fair Value Measurement | Recurring | International stock funds
Fair Value
Investments at fair value	1,243	2,054
Estimate of Fair Value Measurement | Recurring | Target funds
Fair Value
Investments at fair value	260	268
Estimate of Fair Value Measurement | Recurring | Bond funds
Fair Value
Investments at fair value	208	825
Estimate of Fair Value Measurement | Recurring | Alternative funds
Fair Value
Investments at fair value	433	1,531
Estimate of Fair Value Measurement | Recurring | Quoted Prices in Active Markets (Level 1)
Fair Value
Investments at fair value	19,806	73,662
Assets at fair value	19,806	73,662
Estimate of Fair Value Measurement | Recurring | Quoted Prices in Active Markets (Level 1) | Money market funds
Fair Value
Investments at fair value	64	56,781
Estimate of Fair Value Measurement | Recurring | Quoted Prices in Active Markets (Level 1) | Fixed Income
Fair Value
Investments at fair value	248	733
Estimate of Fair Value Measurement | Recurring | Quoted Prices in Active Markets (Level 1) | Equity
Fair Value
Investments at fair value	10,524	8,840
Estimate of Fair Value Measurement | Recurring | Quoted Prices in Active Markets (Level 1) | Mutual Fund
Fair Value
Investments at fair value	8,970	7,308
Estimate of Fair Value Measurement | Recurring | Quoted Prices in Active Markets (Level 1) | Domestic stock funds
Fair Value
Investments at fair value	6,826	2,630
Estimate of Fair Value Measurement | Recurring | Quoted Prices in Active Markets (Level 1) | International stock funds
Fair Value
Investments at fair value	1,243	2,054
Estimate of Fair Value Measurement | Recurring | Quoted Prices in Active Markets (Level 1) | Target funds
Fair Value
Investments at fair value	260	268
Estimate of Fair Value Measurement | Recurring | Quoted Prices in Active Markets (Level 1) | Bond funds
Fair Value
Investments at fair value	208	825
Estimate of Fair Value Measurement | Recurring | Quoted Prices in Active Markets (Level 1) | Alternative funds
Fair Value
Investments at fair value	433	1,531
Estimate of Fair Value Measurement | Recurring | Prices with Other Observable Inputs (Level 2)
Fair Value
Investments at fair value	19,655	15,409
Assets at fair value	19,655	15,409
Estimate of Fair Value Measurement | Recurring | Prices with Other Observable Inputs (Level 2) | Money market funds
Fair Value
Investments at fair value	3,133	843
Estimate of Fair Value Measurement | Recurring | Prices with Other Observable Inputs (Level 2) | Fixed Income
Fair Value
Investments at fair value	16,522	14,566
Estimate of Fair Value Measurement | Recurring | Prices with Unobservable Inputs (Level 3)
Fair Value
Investments at fair value	1,926	1,895
Assets at fair value	1,926	1,895
Estimate of Fair Value Measurement | Recurring | Prices with Unobservable Inputs (Level 3) | Alternative Investments
Fair Value
Investments at fair value	$ 1,926	$ 1,895

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FAIR VALUE - Available for Sale Investment Portfolio (Details) - Ardellis Insurance Ltd. - USD ($) $ in Thousands	Sep. 26, 2020	Sep. 28, 2019
Available-for-sale securities
Total Securities Cost	$ 33,980	$ 30,734
Unrealized Gain (Loss)	3,320	1,593
Total Fair Value	37,300	32,327
Fixed Income
Available-for-sale securities
Debt Securities Cost	15,750	14,969
Debt Securities Unrealized Gain/(Loss)	1,020	330
Debt Securities Fair Value	16,770	15,299
Equity
Available-for-sale securities
Equity Securities Cost	9,121	7,584
Equity Securities Unrealized Gain/(Loss)	1,403	1,256
Equity Securities Fair Value	10,524	8,840
Mutual Fund
Available-for-sale securities
Debt Securities Cost	7,228	6,391
Debt Securities Unrealized Gain/(Loss)		(98)
Debt Securities Unrealized Gain/(Loss)	852
Debt Securities Fair Value	8,080	6,293
Alternative Investments
Available-for-sale securities
Debt Securities Cost	1,881	1,790
Debt Securities Unrealized Gain/(Loss)	45	105
Debt Securities Fair Value	$ 1,926	$ 1,895

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REVENUE RECOGNITION - Disaggregated revenue (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2020 USD ($) item	Sep. 28, 2019 USD ($)	Sep. 26, 2020 USD ($) item	Sep. 28, 2019 USD ($)	Dec. 28, 2019 USD ($)
Revenue Recognition
Retained earnings	$ 1,127,375	$ 969,564	$ 1,127,375	$ 969,564	$ 995,022
Number of markets in which the entity operates (in markets) | item	3		3
Total Gross Sales	$ 1,522,057	1,184,030	$ 3,846,272	3,480,142
Sales Allowances	(35,830)	(21,004)	(85,982)	(62,173)
Total Net Sales	$ 1,486,227	1,163,026	$ 3,760,290	3,417,969
Change %	28.50%		10.50%
Change % in sales allowances	70.60%		38.30%
Change % in net sales	27.80%		10.00%
FOB Shipping Point Revenue
Revenue Recognition
Total Gross Sales	$ 1,490,050	1,140,853	$ 3,749,122	3,358,520
Change %	30.60%		11.60%
Construction Contract Revenue
Revenue Recognition
Total Gross Sales	$ 32,007	$ 43,177	$ 97,150	$ 121,622
Change %	(25.90%)		(20.10%)
Minimum | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-09-27 | Construction Contract Revenue
Revenue Recognition
Number of months to complete contract projects	6 months		6 months
Maximum | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-09-27 | Construction Contract Revenue
Revenue Recognition
Number of months to complete contract projects	18 months		18 months

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REVENUE RECOGNITION - Percentage of completion (Details) - USD ($) $ in Thousands	Sep. 26, 2020	Dec. 28, 2019	Sep. 28, 2019
REVENUE RECOGNITION
Cost and Earnings in Excess of Billings	$ 4,130	$ 4,690	$ 6,815
Billings in Excess of Cost and Earnings	$ 11,264	$ 6,622	$ 6,666

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2020	Sep. 28, 2019	Sep. 26, 2020	Sep. 28, 2019
Numerator:
Net earnings attributable to controlling interest	$ 77,204	$ 51,859	$ 183,826	$ 141,914
Adjustment for earnings allocated to non-vested restricted common stock	(2,195)	(1,299)	(5,110)	(3,547)
Net earnings for calculating EPS	$ 75,009	$ 50,560	$ 178,716	$ 138,367
Denominator:
Weighted average shares outstanding (in shares)	61,548	61,717	61,642	61,609
Adjustment for non-vested restricted common stock (in shares)	(1,750)	(1,546)	(1,713)	(1,540)
Shares for calculating basic EPS (in shares)	59,798	60,171	59,929	60,069
Effect of dilutive restricted common stock (in shares)	20	24	19	22
Shares for calculating diluted EPS (in shares)	59,818	60,195	59,948	60,091
Net earnings per share
Basic (USD per share)	$ 1.25	$ 0.84	$ 2.98	$ 2.30
Diluted (USD per share)	$ 1.25	$ 0.84	$ 2.98	$ 2.30

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COMMITMENTS, CONTINGENCIES, AND GUARANTEES (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 26, 2020	Sep. 28, 2019
Long-term commitment
Outstanding purchase commitments on capital projects	$ 21.3
Surety Bonds and Letters of Credit
Outstanding letters of credit	$ 43.8
Remediation reserves
Environmental reserves, discount rate (as a percent)	0.00%
Estimated costs to complete future remediation efforts	$ 1.9	$ 2.0
Open Projects
Surety Bonds and Letters of Credit
Payment and performance bonds outstanding	7.0
Completed Projects
Surety Bonds and Letters of Credit
Payment and performance bonds outstanding	7.6
Insurance Contracts
Surety Bonds and Letters of Credit
Outstanding letters of credit	33.8
Revenue Bonds
Surety Bonds and Letters of Credit
Outstanding letters of credit	$ 9.8

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BUSINESS COMBINATIONS (Details) - USD ($) $ in Thousands			3 Months Ended	9 Months Ended
	Jul. 14, 2020	Mar. 13, 2020	Sep. 26, 2020	Sep. 26, 2020
Business Acquisition
Aggregate acquisitions' net sales			$ 10,800	$ 17,800
Aggregate acquisitions' operating profit			$ 200	$ 1,500
T&R Lumber Company | Industrial
Business Acquisition
Purchase Price	$ 19,173
Percentage of assets purchased (as a percent)	100.00%
Intangible Assets	$ 13,098
Net Tangible Assets	6,075
Acquired entity, prior year sales	$ 31,000
Quest Design | Construction
Business Acquisition
Purchase Price		$ 21,787
Percentage of assets purchased (as a percent)		100.00%
Intangible Assets		$ 19,098
Net Tangible Assets		2,689
Acquired entity, prior year sales		$ 22,000

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SEGMENT REPORTING (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 26, 2020	Sep. 28, 2019	Sep. 26, 2020	Sep. 28, 2019	Dec. 28, 2019
Segment Reporting
Net sales	$ 1,486,227	$ 1,163,026	$ 3,760,290	$ 3,417,969
Segment operating profit	106,601	70,467	257,591	193,150
Segment total assets	2,350,620	1,880,625	2,350,620	1,880,625	$ 1,889,477
Intersegment net sales
Segment Reporting
Net sales	(151,127)	(104,123)	(388,759)	(333,639)
Corporate
Segment Reporting
Net sales	(222)	648	(561)	(344)
Segment operating profit	(1,579)	10,435	10,555	19,592
Segment total assets	642,035		642,035		450,299
Retail
Segment Reporting
Net sales	700,522	397,140	1,661,873	1,212,330
Segment operating profit	62,181	14,297	122,082	47,597
Segment total assets	631,238		631,238		402,221
Retail | Intersegment net sales
Segment Reporting
Net sales	45,416	32,400	109,378	101,203
Industrial
Segment Reporting
Net sales	282,124	271,667	763,046	837,671
Segment operating profit	22,037	20,768	53,837	60,208
Segment total assets	389,806		389,806		377,329
Industrial | Intersegment net sales
Segment Reporting
Net sales	11,773	9,748	32,788	34,406
Construction
Segment Reporting
Net sales	447,103	445,505	1,187,429	1,225,467
Segment operating profit	16,513	21,406	50,544	56,263
Segment total assets	525,596		525,596		522,638
Construction | Intersegment net sales
Segment Reporting
Net sales	17,909	16,057	49,685	42,393
All Other
Segment Reporting
Net sales	56,700	48,066	148,503	142,845
Segment operating profit	7,449	3,561	20,573	9,490
Segment total assets	161,945		161,945		$ 136,990
All Other | Intersegment net sales
Segment Reporting
Net sales	$ 76,029	$ 45,918	$ 196,908	$ 155,637

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SEGMENT REPORTING - Goodwill (Details) $ in Thousands	9 Months Ended
	Sep. 26, 2020 USD ($)
Goodwill
Goodwill, Beginning Balance	$ 229,536
2020 Acquisitions	16,502
2020 Purchase Accounting Adjustments	204
Foreign Exchange, Net	(317)
Goodwill, Ending Balance	245,925
Retail
Goodwill
Goodwill, Beginning Balance	58,098
2020 Purchase Accounting Adjustments	202
Goodwill, Ending Balance	58,300
Industrial
Goodwill
Goodwill, Beginning Balance	81,276
2020 Acquisitions	6,549
2020 Purchase Accounting Adjustments	2
Goodwill, Ending Balance	87,827
Construction
Goodwill
Goodwill, Beginning Balance	82,911
2020 Acquisitions	9,953
Foreign Exchange, Net	229
Goodwill, Ending Balance	93,093
All Other
Goodwill
Goodwill, Beginning Balance	7,251
Foreign Exchange, Net	(546)
Goodwill, Ending Balance	$ 6,705

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SEGMENT REPORTING - Assets (Details) - USD ($) $ in Thousands	Sep. 26, 2020	Dec. 28, 2019	Sep. 28, 2019
Segment Reporting
Segment assets	$ 2,350,620	$ 1,889,477	$ 1,880,625
Change in assets (as a percent)	24.40%
Corporate
Segment Reporting
Segment assets	$ 642,035	450,299
Change in assets (as a percent)	42.60%
Retail
Segment Reporting
Segment assets	$ 631,238	402,221
Change in assets (as a percent)	56.90%
Industrial
Segment Reporting
Segment assets	$ 389,806	377,329
Change in assets (as a percent)	3.30%
Construction
Segment Reporting
Segment assets	$ 525,596	522,638
Change in assets (as a percent)	0.60%
All Other
Segment Reporting
Segment assets	$ 161,945	$ 136,990
Change in assets (as a percent)	18.20%

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INCOME TAXES (Details)	3 Months Ended		9 Months Ended
	Sep. 26, 2020	Sep. 28, 2019	Sep. 26, 2020	Sep. 28, 2019
INCOME TAXES
Effective income tax rate	25.40%	23.80%	25.20%	24.00%

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COMMON STOCK - Common Stock Issuances (Details) - $ / shares	3 Months Ended	9 Months Ended
	Mar. 28, 2020	Sep. 26, 2020	Sep. 28, 2019
Common Stock
Repurchase of common stock	756,397	756,000
Average Share Price
Repurchase of common stock (dollars per share)		$ 38.62
Stock Purchase Plan
Common Stock
Common stock issued		28,000	27,000
Average Share Price
Common stock issued (dollars per share)		$ 44.14	$ 35.52
Stock Gift Program
Common Stock
Common stock issued		2,000	3,000
Average Share Price
Common stock issued (dollars per share)		$ 45.93	$ 33.91
Stock Retainer Plan
Common Stock
Common stock issued		46,000	4,000
Average Share Price
Common stock issued (dollars per share)		$ 24.80	$ 35.44
LTSIP
Common Stock
Common stock issued		271,000	211,000
Average Share Price
Common stock issued (dollars per share)		$ 47.51	$ 30.83
Executive Stock Match Grants
Common Stock
Common stock issued		79,000	109,000
Average Share Price
Common stock issued (dollars per share)		$ 47.60	$ 31.57
Deferred Compensation Plans
Common Stock
Common stock issued		115,000	169,000
Average Share Price
Common stock issued (dollars per share)		$ 53.85	$ 33.20
Stock grant programs
Common Stock
Common stock issued		391,000	310,000
Forfeitures		(7,000)	(17,000)
Average Share Price
Common stock issued (dollars per share)		$ 44.92	$ 31.17

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SUBSEQUENT EVENTS (Details) - Subsequent Event $ in Millions	Oct. 01, 2020 USD ($)	Sep. 30, 2020 USD ($) facility
FRCT
Subsequent Event
Purchase Price	$ 5.9
Enwrap
Subsequent Event
Amount invested in joint venture		$ 5.3
Number of facilities | facility		14
Enwrap
Subsequent Event
Ownership interest		50.00%