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UFP Industries(UFPI) - 2021 Q4 - Annual Report

PART I Item 1. Business UFP Industries, Inc. is a holding company that supplies wood, wood composite, and other material products to the retail, industrial, and construction markets across North America, Europe, Asia, and Australia - UFP Industries operates as a holding company with subsidiaries supplying wood and composite products to three main markets: retail, industrial, and construction14 - The company's business segments are UFP Retail Solutions, UFP Industrial, and UFP Construction, which align with the markets served. International operations and the insurance captive (Ardellis) are categorized under "All Other"17 Key Customer Sales Concentration (as % of Total Net Sales) | Customer | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | The Home Depot | 16% | 24% | 19% | | Lowe's | 10% | 4% | 4% | 2021 Lumber Purchases | Metric | Value/Percentage | | :--- | :--- | | Total Annual Purchases | Approx. $3.0 billion | | Southern Yellow Pine | 57% | | Spruce-Pine-Fir | 22% | | Douglas Fir | 4% | | Other Species | 17% | | Plywood Purchases | Approx. $1.0 billion | Order Backlog (in millions) | Business Area | Dec 25, 2021 | Dec 26, 2020 | | :--- | :--- | :--- | | Customized Interior Fixtures | $84.6 | $65.2 | | Site-Built Construction | $113.5 | $106.0 | - As of December 25, 2021, the company had approximately 15,000 employees35 Item 1A. Risk Factors The company identifies several key risks, including significant fluctuations in lumber prices, customer concentration, dependency on cyclical markets, supply chain challenges, and potential impacts from tariffs and public health crises Lumber Costs as a Percentage of Net Sales | Year | Percentage | | :--- | :--- | | 2021 | 47.7% | | 2020 | 51.0% | | 2019 | 43.4% | Transportation Costs as a Percentage of Net Sales | Year | Percentage | | :--- | :--- | | 2021 | 7.3% | | 2020 | 9.2% | | 2019 | 9.5% | 2021 International Trade Figures | Category | Value (in millions) | | :--- | :--- | | Import Purchases | $806.8 | | Export Sales | $181.3 | - The company's growth strategy relies on successful business acquisitions, which carry inherent risks related to assimilation and management45 - Bad debt expense has remained low, averaging 0.04% of sales from 2019-2021, compared to an average of 0.25% during the Great Recession (2008-2010)53 Item 1B. Unresolved Staff Comments The company reports that there are no unresolved staff comments - Not applicable54 Item 2. Properties UFP Industries operates approximately 216 facilities globally, primarily owned, with corporate headquarters in Grand Rapids, Michigan, deemed adequate for existing markets - The company has approximately 216 facilities located throughout the United States, Canada, Mexico, Europe, Asia, and Australia55 Number of Properties by Primary Segment | Segment | Number of Properties | | :--- | :--- | | Retail | 48 | | Industrial | 77 | | Construction | 65 | | All Other | 24 | | Corporate | 2 | | Total | 216 | - The company owns most of its properties, with approximately 105 facilities being leased61 Item 3. Legal Proceedings Information regarding the company's legal proceedings is incorporated by reference from Note L of the Consolidated Financial Statements under Item 8 - Details on legal proceedings are incorporated by reference from Note L of the Consolidated Financial Statements under Item 863 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable64 Additional Item: Executive Officers of the Registrant This section lists the executive officers of UFP Industries as of February 1, 2022, including CEO Matthew J. Missad, President and COO Patrick M. Webster, and CFO Michael R. Cole Executive Officers (as of Feb 1, 2022) | Name | Age | Position | | :--- | :--- | :--- | | Matthew J. Missad | 61 | Chief Executive Officer | | Patrick M. Webster | 62 | President and Chief Operating Officer | | Michael R. Cole | 55 | Chief Financial Officer and Treasurer | | Allen T. Peters | 54 | President and COO of UFP Retail Solutions, LLC | | Patrick M. Benton | 52 | President of UFP Construction, LLC | | Scott A. Worthington | 51 | President of UFP Industrial, LLC | | Scott T. Bravata | 57 | Vice President of Accounting and Administration | | David A. Tutas | 52 | General Counsel, Chief Compliance Officer and Secretary | PART II Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities This section incorporates information about the company's common stock market, holders, and dividends by reference, noting an additional 1.5 million shares authorized for repurchase - Effective February 15, 2022, the Board authorized an additional 1.5 million shares for repurchase, with a total of approximately 2.6 million shares remaining available for repurchase under the program through February 3, 202375 Item 6. Selected Financial Data The required information for this item is incorporated by reference from the "Selected Financial Data" section of the company's 2021 Annual Report - Selected Financial Data is incorporated by reference from the 2021 Annual Report76 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The Management's Discussion and Analysis (MD&A) is incorporated by reference from the corresponding section in the company's 2021 Annual Report - Management's Discussion and Analysis is incorporated by reference from the 2021 Annual Report76 Item 7A. Quantitative and Qualitative Disclosures about Market Risk The company is exposed to interest rate risk on its variable rate debt, with an estimated fair value of $329.7 million as of December 25, 2021, and does not use derivatives to mitigate this risk - The company is exposed to interest rate risk on its variable rate debt. The estimated fair value of its long-term debt was $329.7 million as of December 25, 20217780 Expected Cash Flows for Debt Instruments (in thousands) | Year | Fixed Rate ($US) | Variable Rate ($US) | | :--- | :--- | :--- | | 2022 | $35,028 | $7,655 | | 2023 | $1,044 | $7,819 | | 2024 | $40,214 | $— | | 2025 | $— | $— | | 2026 | $302 | $— | | Thereafter | $225,000 | $3,300 | | Total | $301,588 | $18,774 | Item 8. Financial Statements and Supplementary Data This section incorporates by reference the company's audited consolidated financial statements and the report of the independent registered public accounting firm from the 2021 Annual Report - The Consolidated Financial Statements and related reports are incorporated by reference from the 2021 Annual Report82 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None83 Item 9A. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of December 25, 2021, with the independent auditor concurring - Based on an evaluation, management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report84 - Management assessed internal control over financial reporting as effective as of December 25, 2021, a conclusion supported by the independent registered public accounting firm, Deloitte & Touche LLP8687 Item 9B. Other Information This item is not applicable - Not applicable89 PART III Item 10. Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance matters is incorporated by reference from the company's 2022 Proxy Statement - Information related to directors and corporate governance is incorporated by reference from the 2022 Proxy Statement91 Item 11. Executive Compensation Details concerning director and executive compensation are incorporated by reference from the "Executive Compensation" section of the 2022 Proxy Statement - Information on executive compensation is incorporated by reference from the 2022 Proxy Statement92 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Information on security ownership is incorporated by reference from the 2022 Proxy Statement, with 1,474,858 shares remaining available for future issuance under equity compensation plans Equity Compensation Plan Information (as of Dec 25, 2021) | Plan Category | Number of shares to be issued upon exercise of outstanding options | Weighted average exercise price of outstanding options | Number of shares remaining available for future issuance | | :--- | :--- | :--- | :--- | | Approved by security holders | — | $ — | 1,474,858 | | Not approved by security holders | none | | | Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding related party transactions and director independence is incorporated by reference from the company's 2022 Proxy Statement - Information on related transactions and director independence is incorporated by reference from the 2022 Proxy Statement95 Item 14. Principal Accountant Fees and Services Details about the fees paid to the independent registered public accounting firm for services rendered are incorporated by reference from the 2022 Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the 2022 Proxy Statement95 PART IV Item 15. Exhibits, Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K, with financial statements incorporated by reference from the 2021 Annual Report - The company's financial statements are incorporated by reference from the 2021 Annual Report under Item 897 - All required financial statement schedules were omitted because they were inapplicable or otherwise not required97 - A list of exhibits filed with the Form 10-K is provided in the Exhibit Index98