What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-03 compared with 2025-08-04 · 128 added, 133 removed, 200 unchanged (57% of the section changed)

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Executive Overview

We recorded income from operations of $80.5 million during the three months ended June 30, 2025, compared with income from operations of $147.0 million during the three months ended June 30, 2024.

In our Wood Products segment, income decreased $58.8 million to $14.0 million for the three months ended June 30, 2025, from $72.8 million for the three months ended June 30, 2024, due to lower EWP and plywood sales prices, as well as higher per-unit conversion costs primarily as a result of downtime to complete the modernization projects at our Oakdale, Louisiana veneer and plywood mill.

In addition, lower plywood sales volumes and an unfavorable profit in inventory adjustment contributed to the decrease in segment income.

These decreases in segment income were offset partially by a $3.9 million gain on the sale of a non-operating property.

In our BMD segment, income decreased $7.4 million to $78.0 million for the three months ended June 30, 2025, from $85.4 million for the three months ended June 30, 2024, driven by increased selling and distribution expenses and depreciation and amortization expense of $12.1 million and $2.1 million, respectively.

These decreases to segment income were offset partially by a gross margin increase of $3.4 million, resulting primarily from increased margins on general line products, which were offset partially by decreased margins on commodity and EWP products.

Segment income also benefited from a $3.8 million gain on the sale of a non-operating property.

We recorded income from operations of $32.3 million during the three months ended September 30, 2025, compared with income from operations of $117.4 million during the three months ended September 30, 2024.

For the three months ended September 30, 2025, Wood Products' segment loss was $12.1 million compared to segment income of $53.9 million for the three months ended September 30, 2024.

The decrease in income was due to lower EWP and plywood sales prices and sales volumes, as well as higher per-unit conversion costs.

In our BMD segment, income decreased $20.5 million to $54.3 million for the three months ended September 30, 2025, from $74.8 million for the three months ended September 30, 2024, driven by a gross margin decrease of $10.6 million, resulting primarily from decreased margins on commodity and EWP products, offset partially by increased margins on general line products.

In addition, selling and distribution expenses and depreciation and amortization expense increased $7.8 million and $2.6 million, respectively.

These changes are discussed further in "Our Operating Results" below.

We ended second quarter 2025 with $481.0 million of cash and cash equivalents and $395.2 million of undrawn committed bank line availability, for total available liquidity of $876.2 million.

We had $450.0 million of outstanding debt at June 30, 2025.

We used $232.2 million of cash during the six months ended June 30, 2025, to fund seasonal working capital increases, capital spending, treasury stock purchases, and dividends paid on our common stock.

A further description of our cash sources and uses for the six-month comparative periods are discussed in "Liquidity and Capital Resources" below.

We ended third quarter 2025 with $511.8 million of cash and cash equivalents and $395.2 million of undrawn committed bank line availability, for total available liquidity of $907.0 million.

We had $450.0 million of outstanding debt at September 30, 2025.

We used $201.5 million of cash during the nine months ended September 30, 2025, as cash provided by operations was offset by capital spending, treasury stock purchases, and dividends paid on our common stock.

A further description of our cash sources and uses for the nine-month comparative periods are discussed in "Liquidity and Capital Resources" below.

Demand for the products we manufacture, as well as the products we purchase and distribute, is closely tied to new residential construction, residential repair-and-remodeling activity, and light commercial construction.

Residential construction, particularly new single-family construction, remains a key driver of demand for the products we manufacture and distribute.

During the past quarter, the operating environment reflected adjustments by large public homebuilders, who moderated their building pace to align with a demand environment shaped by affordability considerations, cautious consumer sentiment, and broader economic conditions.

Evolving market conditions have led to reduced home turnover and households delaying big projects impacting repair-and-remodeling spending.

Near-term end market demand has eased and will continue to be influenced by factors such as mortgage rates, home affordability, home equity levels, home sizes, new and existing home inventory levels, unemployment rates, and consumer confidence.

However, long-term demand drivers for residential construction, including an undersupply of housing units, aging U.S.

housing stock, and elevated levels of homeowner equity, remain strong and continue to support the industry’s fundamentals.

During 2025, the housing market has been shaped by policy uncertainty, low consumer confidence, elevated interest rates, and affordability challenges for prospective homebuyers.

Early industry projections for 2026 are consistent with 2025 housing start levels.

Demand expectations are characterized by a cautious market in the first half of the year, with gradual improvement expected later in the year.

This improvement is expected to be driven by the continuation of interest rate cuts and normalized homebuilder inventory levels.

Near term demand will continue to be influenced by factors such as mortgage rates, home affordability, home equity levels, home sizes, new and existing home inventory levels, unemployment rates, and consumer confidence.

However, long-term demand drivers for residential construction, including generational tailwinds and an undersupply of housing units, remain strong, while elevated levels of homeowner equity and an aging U.S.

housing stock support robust repair-and-remodel spending and reinforce the industry’s solid fundamentals.

As a manufacturer of plywood, a commodity product, we remain subject to fluctuations in product pricing and input costs.

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Future product pricing, particularly for commodity products, is expected to remain dynamic, influenced by economic conditions, industry operating rates, supply disruptions, duties, tariffs, transportation constraints, inventory levels, and seasonal demand patterns.

For the balance of 2025, our rates of production and inventory stocking positions, will be influenced by end market demand signals and channel inventory decisions of our customer base.

With seasonally slower activity expected in the fourth quarter, we anticipate taking capital project and maintenance-related downtime at certain of our manufacturing facilities, and may also take periodic market-related downtime across our manufacturing system in order to align production rates and inventory stocking positions with end market demand signals.

Factors That Affect Our Operating Results and Trends

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Our Operating Results

The following tables set forth our operating results in dollars and as a percentage of sales for the three and six months ended June 30, 2025 and 2024:

The following tables set forth our operating results in dollars and as a percentage of sales for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2025 2024 2025 2024

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Set forth below are historical U.S.

housing starts data, segment sales volumes and average net selling prices for the principal products sold by our Wood Products segment, and sales mix and gross margin information for our BMD segment for the three and six months ended June 30, 2025 and 2024:

Three Months Ended

June 30 Six Months Ended

September 30 Nine Months Ended

2025 2024 2025 2024

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_______________________________________

(a) Actual U.S.

housing starts data as reported by the U.S.

housing starts for the three and nine months ended September 30, 2025 have yet to be published.

Therefore, the data presented is for the two and eight months ended August 31, 2025.

The three and nine months ended September 30, 2024 represent actual U.S.

housing starts as reported by the U.S.

Census Bureau.

For the two months ended August 31, 2024 single-family, multi-family, and total U.S.

housing starts (in thousands) were approximately 170.4, 66.7, and 237.1, respectively.

For the eight months ended August 31, 2024 single-family, multi-family, and total U.S.

housing starts (in thousands) were 692.6, 236.1, and 928.7, respectively.

(b) We define gross margin as "Sales" less "Materials, labor, and other operating expenses (excluding depreciation)." Substantially all costs included in "Materials, labor, and other operating expenses (excluding depreciation)" for our BMD segment are for inventory purchased for resale.

Gross margin percentage is gross margin as a percentage of segment sales.

For the three months ended June 30, 2025, total sales decreased $57.6 million, or 3%, to $1,740.1 million from $1,797.7 million during the three months ended June 30, 2024.

For the six months ended June 30, 2025, total sales decreased $166.5 million, or 5%, to $3,276.6 million from $3,443.1 million for the same period in the prior year.

For the three months ended September 30, 2025, total sales decreased $45.9 million, or 3%, to $1,667.8 million from $1,713.7 million during the three months ended September 30, 2024.

For the nine months ended September 30, 2025, total sales decreased $212.4 million, or 4%, to $4,944.4 million from $5,156.8 million for the same period in the prior year.

As described below, the decrease in sales in both periods was driven by the changes in sales prices and volumes for the products we manufacture and distribute, with single-family residential construction activity being the key demand driver of our sales.

In second quarter 2025, total U.S.

housing starts and single-family housing starts decreased 1% and 8%, respectively, compared with the same period in 2024.

On a year-to-date basis through June 2025, total and single-family housing starts decreased 1% and 7%, respectively, compared with the same period in 2024.

Average composite panel prices for the three and six months ended June 30, 2025 were 19% and 16% lower, respectively, than in the same periods in the prior year, as reflected by Random Lengths composite panel pricing.

Average composite lumber prices for the three and six months ended June 30, 2025 were 18% and 15% higher, respectively, than in the same periods in the prior year, as reflected by Random Lengths composite lumber pricing.

When comparing July 2025 and August 2025 housing starts to the same periods in 2024, total U.S.

housing starts increased 2%, while single-family housing starts decreased 3%.

On a year-to-date basis through August 2025, total U.S.

housing starts increased 1%, while single-family housing starts decreased 5%, compared to the same period in 2024.

Average composite panel prices for the three and nine months ended September 30, 2025 were 14% and 15% lower, respectively, than in the same periods in the prior year, as reflected by Random Lengths composite panel pricing.

Average composite lumber prices for the three and nine months ended September 30, 2025 were 7% and 13% higher, respectively, than in the same periods in the prior year, as reflected by Random Lengths composite lumber pricing.

Wood Products.

Sales, including sales to our BMD segment, decreased $42.6 million, or 9%, to $447.2 million for the three months ended June 30, 2025, from $489.8 million for the three months ended June 30, 2024.

Sales, including sales to our BMD segment, decreased $57.5 million, or 13%, to $396.4 million for the three months ended September 30, 2025, from $453.9 million for the three months ended September 30, 2024.

The decrease in sales was driven by lower sales prices for LVL and I-joists (collectively referred to as EWP) of 13% and 12%, respectively, resulting in decreased sales of $16.5 million and $12.6 million, respectively.

Plywood sales volumes and sales prices decreased 7% and 6%, respectively, resulting in decreased sales of $9.9 million and $7.1 million, respectively.

In addition, sales volumes for I-joists decreased 5%, resulting in decreased sales of $6.5 million.

These decreases were offset partially by increased sales volumes for LVL of 8%, resulting in increased sales of $10.8 million.

For the six months ended June 30, 2025, sales, including sales to our BMD segment, decreased $95.7 million, or 10%, to $863.1 million from $958.8 million for the same period in the prior year.

Additionally, sales volumes for I-joists and LVL decreased by 10% and 7%, respectively, resulting in decreased sales of $10.9 million and $9.4 million, respectively.

In addition, lower plywood sales prices and sales volumes contributed $4.5 million to the sales decrease during the period.

For the nine months ended September 30, 2025, sales, including sales to our BMD segment, decreased $153.2 million, or 11%, to $1,259.5 million from $1,412.6 million for the same period in the prior year.

The decrease in sales was driven by lower sales prices for LVL and I-joists of 11% and 10%, respectively, resulting in decreased sales of $44.5 million and $32.6 million, respectively.

Additionally, sales volumes for I-joists and LVL decreased 6% and 1%, respectively, resulting in decreased sales of $21.3 million and $3.3 million, respectively.

Plywood sales prices and sales volumes decreased 6% and 3%, respectively, resulting in decreased sales of $23.9 million and $14.3 million, respectively.

In addition, sales volumes for I-joists decreased 4%, resulting in decreased sales of $10.3 million.

These decreases were offset partially by increased sales volumes for LVL of 2%, resulting in increased sales of $6.3 million.

For both periods described above, I-joist sales volumes were influenced by multiple factors, including the level of housing starts, competition from other wood-based products, and concrete floor applications that limit wood floor opportunity.

LVL sales volumes expanded their presence in the marketplace through growth with dealers and homebuilders when compared to the same periods in 2024.

In addition, plywood sales volumes in both periods were impacted by planned downtime to complete projects at our Oakdale and Kettle Falls plywood mills.

Plywood sales volumes were impacted by planned downtime to complete projects at our Oakdale plywood mill.

For both periods described above, EWP sales volumes were influenced by multiple factors, including the level of housing starts, competition from other wood-based products, and concrete floor applications that limit wood floor opportunity for I-joists.

Building Materials Distribution.

Sales decreased $40.3 million, or 2%, to $1,614.9 million for the three months ended June 30, 2025, from $1,655.2 million for the three months ended June 30, 2024.

Sales decreased $11.3 million, or 1%, to $1,556.2 million for the three months ended September 30, 2025, from $1,567.5 million for the three months ended September 30, 2024.

Compared with the same quarter in the prior year, the overall decrease in sales was driven by a sales price decrease of 1%, as sales volumes were flat.

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and EWP sales (substantially all of which are sourced through our Wood Products segment) decreased 11%, or $36.8 million.

During the six months ended June 30, 2025, sales decreased $138.2 million, or 4%, to $3,022.0 million from $3,160.2 million for the same period in the prior year.

The overall decrease in sales was driven by decreases of 2% for both sales prices and sales volumes.

During the nine months ended September 30, 2025, sales decreased $149.5 million, or 3%, to $4,578.2 million from $4,727.7 million for the same period in the prior year.

The overall decrease in sales was driven by sales price and sales volume decreases of 2% and 1%, respectively.

By product line, commodity sales decreased 5%, or $79.3 million;

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Costs and Expenses

Materials, labor, and other operating expenses (excluding depreciation) increased $0.8 million, or less than 1%, to $1,441.5 million for the three months ended June 30, 2025, compared with $1,440.7 million during the same period in the prior year.

In our Wood Products segment, materials, labor, and other operating expenses increased due to purchases of externally produced veneer for our Alexandria EWP mill as a result of downtime to complete the modernization projects at our Oakdale veneer and plywood mill.

In addition, labor and other manufacturing costs increased, offset partially by decreased sales volumes for plywood compared with second quarter 2024.

Materials, labor, and other operating expenses as a percentage of sales (MLO rate) in our Wood Products segment increased by 1,170 basis points, primarily as the result of lower EWP and plywood sales prices, as well as lower sales volumes for I-joists and plywood which resulted in decreased leveraging of manufacturing costs.

In BMD, the decrease in materials, labor, and other operating expenses was driven by lower purchased materials costs as a result of a decline in sales, as well as increased vendor rebates and allowances, compared with second

quarter 2024.

The BMD segment MLO rate decreased 60 basis points, driven by higher margin percentages on general line products, offset partially by lower margins on commodity products.

For the six months ended June 30, 2025, materials, labor, and other operating expenses (excluding depreciation) decreased $30.5 million, or 1%, to $2,717.6 million, compared with $2,748.1 million in the same period in the prior year.

Lumber input costs for solid-sawn I-joist and laminated beam production also increased.

In addition, labor and other manufacturing costs increased, offset partially by decreased sales volumes for plywood and I-joists compared with the same period in the prior year.

The MLO rate in our Wood Products segment increased by 1,130 basis points, due primarily to lower sales prices for EWP and plywood, as well as lower sales volumes for I-joists and plywood, which resulted in decreased leveraging of manufacturing costs.

The BMD segment MLO rate decreased 20 basis points, primarily due to higher margin percentages on our general line sales, offset partially by lower margins on our commodity sales compared with the first six months of 2024.

Depreciation and amortization expense increased $3.0 million, or 9%, to $37.4 million for the three months ended June 30, 2025, compared with $34.4 million during the same period in the prior year.

For the six months ended June 30, 2025, these expenses increased $4.3 million, or 6%, to $74.5 million, compared with $70.2 million in the same period in the prior year.

The increase in both periods was primarily due to purchases of property and equipment.

For the six months ended June 30, 2025, the increase was offset partially by $2.2 million of accelerated depreciation recorded in first quarter 2024 for the indefinite curtailment of lumber production at our Chapman, Alabama facility.

Selling and distribution expenses increased $12.0 million, or 8%, to $161.8 million for the three months ended June 30, 2025, compared with $149.8 million during the same period in the prior year.

The increase was due primarily to higher employee-related expenses of $6.9 million, offset partially by lower incentive compensation expense of $1.3 million.

Additionally, costs related to shipping, handling, and professional fees increased by $2.5 million.

For the six months ended June 30, 2025, selling and distribution expenses increased $11.6 million, or 4%, to $305.5 million, compared with $293.9 million during the same period in 2024.

The increase was primarily a result of higher employee-related expenses of $10.0 million, offset partially by lower incentive compensation expense of $3.3 million.

In addition, costs related to professional fees increased $1.9 million.

General and administrative expenses increased $0.5 million, or 2%, to $26.5 million for the three months ended June 30, 2025, compared with $25.9 million for the same period in the prior year.

For the six months ended June 30, 2025, general and administrative expenses increased $0.4 million, or 1%, to $51.5 million, compared with $51.1 million during the same period in 2024.

The increase in both periods was due primarily to higher other employee-related expenses and professional fees, offset partially by lower incentive compensation expense.

For the three and six months ended June 30, 2025, other (income) expense, net was $7.6 million and $7.5 million of income, respectively.

For both periods, the income primarily relates to gains on the sale of non-operating properties in our Wood Products and BMD segments.

Materials, labor, and other operating expenses (excluding depreciation) increased $28.6 million, or 2%, to $1,404.3 million for the three months ended September 30, 2025, compared with $1,375.7 million during the same period in the prior year.

In our Wood Products segment, materials, labor, and other operating expenses increased due to higher labor and other manufacturing costs.

These increases were offset partially by decreased sales volumes for EWP, as well as lower costs of OSB

(used in the manufacture of I-joists) and decreased purchases of externally produced veneer compared with third quarter 2024.

Materials, labor, and other operating expenses as a percentage of sales (MLO rate) in our Wood Products segment increased by 1,330 basis points, primarily as the result of lower EWP sales prices and volumes, which resulted in decreased leveraging of manufacturing costs.

In BMD, the decrease in materials, labor, and other operating expenses was driven by lower purchased materials costs as a result of a decline in sales compared with third quarter 2024.

The BMD segment MLO rate increased 60 basis points, driven by lower margin percentages on commodity and EWP products.

For the nine months ended September 30, 2025, materials, labor, and other operating expenses (excluding depreciation) decreased $1.9 million, or less than 1%, to $4,122.0 million, compared with $4,123.8 million in the same period in the prior year.

In our Wood Products segment, materials, labor, and other operating expenses increased due to higher labor and other manufacturing costs, as well as increased purchases of externally produced veneer for our Alexandria EWP mill as a result of downtime during the first half of 2025 to complete the modernization projects at our Oakdale veneer and plywood mill.

These increases were offset partially by decreased sales volumes of I-joists and plywood, as well as lower costs of OSB compared with the same period in the prior year.

The MLO rate in our Wood Products segment increased by 1,190 basis points, due primarily to lower sales prices and sales volumes for both EWP and plywood, which resulted in decreased leveraging of manufacturing costs.

The BMD segment MLO rate increased 10 basis points, primarily due to lower margin percentages on our commodity sales, offset partially by higher margins on our general line sales compared with the first nine months of 2024.

Depreciation and amortization expense increased $5.5 million, or 15%, to $42.4 million for the three months ended September 30, 2025, compared with $36.9 million during the same period in the prior year.

For the nine months ended September 30, 2025, these expenses increased $9.8 million, or 9%, to $116.9 million, compared with $107.1 million in the same period in the prior year.

The increase in both periods was primarily due to purchases of property and equipment, including the recent investments at our Oakdale veneer and plywood mill.

For the nine months ended September 30, 2025, the increase was offset partially by $2.2 million of accelerated depreciation recorded in first quarter 2024 for the indefinite curtailment of lumber production at our Chapman, Alabama facility.

Selling and distribution expenses increased $7.6 million, or 5%, to $165.1 million for the three months ended September 30, 2025, compared with $157.5 million during the same period in the prior year.

The increase was due to higher occupancy costs, shipping and handling, professional fees and services, and information technology related costs of $6.0 million.

Additionally, employee-related expenses increased $3.6 million, offset partially by a decrease in incentive compensation expense of $3.0 million.

For the nine months ended September 30, 2025, selling and distribution expenses increased $19.1 million, or 4%, to $470.5 million, compared with $451.4 million during the same period in 2024.

The increase was primarily a result of higher professional fees and services, shipping and handling, occupancy costs, and information technology related costs of $9.2 million.

In addition, employee-related expenses increased $13.6 million, offset partially by lower incentive compensation expense of $6.3 million.

General and administrative expenses decreased $0.4 million, or 2%, to $25.8 million for the three months ended September 30, 2025, compared with $26.2 million for the same period in the prior year.

For both the nine months ended September 30, 2025 and 2024 general and administrative expenses were $77.2 million.

For both periods, lower incentive compensation expenses were offset partially by an increase in professional fees.

For the three months ended September 30, 2025, other (income) expense, net was $2.0 million of income, primarily resulting from a settlement gain associated with a fire at our BMD Phoenix location in second quarter 2021.

For the nine months ended September 30, 2025, other (income) expense, net was $9.6 million of income, primarily related to gains on the sale of non-operating properties in our Wood Products and BMD segments in second quarter 2025, as well as the settlement gain discussed above.

Income From Operations

Income from operations decreased $66.5 million to $80.5 million for the three months ended June 30, 2025, compared with $147.0 million for the three months ended June 30, 2024.

Income from operations decreased $144.9 million to $135.0 million for the six months ended June 30, 2025, compared with $280.0 million for the six months ended June 30, 2024.

Income from operations decreased $85.0 million to $32.3 million for the three months ended September 30, 2025, compared with $117.4 million for the three months ended September 30, 2024.

Income from operations decreased $229.9 million to $167.4 million for the nine months ended September 30, 2025, compared with $397.3 million for the nine months ended September 30, 2024.

Wood Products.

Segment income decreased $58.8 million to $14.0 million for the three months ended June 30, 2025, compared with $72.8 million for the three months ended June 30, 2024.

The decrease in segment income was due to lower EWP and plywood sales prices, as well as higher per-unit conversion costs primarily as a result of downtime to complete the modernization projects at our Oakdale, Louisiana veneer and plywood mill.

In addition, lower plywood sales volumes and an unfavorable profit in inventory adjustment contributed to the decrease in segment inco me.

These decreases in segment income were offset partially by a $3.9 million gain on the sale of a non-operating property.

For the six months ended June 30, 2025, segment income decreased $112.3 million to $31.7 million from $144.0 million for the six months ended June 30, 2024.

The decrease in segment income was due to lower EWP and plywood sales prices, as well as higher per-unit conversion costs primarily as a result of downtime to complete the modernization projects at

our Oakdale, Louisiana veneer and plywood mill.

In addition, higher lumber input costs for solid-sawn I-joist and laminated beam production, as well as lower plywood and EWP sales volumes, contributed to the decrease in segment income.

These decreases in segment income were offset partially by a $3.9 million gain on the sale of a non-operating property.

For the three months ended September 30, 2025, segment loss was $12.1 million, compared with segment income of $53.9 million for the three months ended September 30, 2024.

The decrease in segment income was due to lower EWP and plywood sales prices and sales volumes, as well as higher per-unit conversion costs.

For the nine months ended September 30, 2025, segment income decreased $178.2 million to $19.6 million from $197.9 million for the nine months ended September 30, 2024.

The decrease in segment income was due to lower EWP and plywood sales prices and sales volumes, as well as higher per-unit conversion costs.

These decreases in segment income were offset partially by a $3.9 million gain on the sale of a non-operating property in second quarter 2025.

Building Materials Distribution.

Segment income decreased $7.4 million to $78.0 million for the three months ended June 30, 2025, from $85.4 million for the three months ended June 30, 2024.

The decrease in segment income was driven by increased selling and distribution expenses and depreciation and amortization expense of $12.1 million and $2.1 million, respectively.

Additionally, segment income benefited from a $3.8 million gain on the sale of a non-operating property.

For the six months ended June 30, 2025, segment income decreased $31.4 million to $126.5 million from $157.9 million for the six months ended June 30, 2024.

The decrease in segment income was driven by a gross margin decrease of $17.0 million, resulting primarily from lower sales volumes and decreased margins on commodity and EWP products.

Segment income decreased $20.5 million to $54.3 million for the three months ended September 30, 2025, from $74.8 million for the three months ended September 30, 2024.

The decrease in segment income was driven by a gross margin decrease of $10.6 million, resulting primarily from decreased margins on commodity and EWP products, offset partially by increased margins on general line products .

Additionally, selling and distribution expenses and depreciation and amortization expense increased $7.8 million and $2.6 million, respectively.

For the nine months ended September 30, 2025, segment income decreased $51.9 million to $180.7 million from $232.7 million for the nine months ended September 30, 2024.

The decrease in segment income was driven by a gross margin decrease of $27.6 million, resulting primarily from lower sales volumes and decreased margins on commodity and EWP products, offset partially by increased margins on general line products.

In addition, selling and distribution expenses and depreciation and amortization expense increased $19.5 million and $7.9 million, respectively.

These decreases to segment income were offset partially by increased margins on general line products.

Segment income also benefited from a $3.8 million gain on the sale of a non-operating property.

Unallocated corporate expenses increased $0.3 million to $11.5 million for the three months ended June 30, 2025, from $11.2 million for the same period in the prior year.

For the six months ended June 30, 2025, unallocated corporate expenses increased $1.2 million to $23.1 million from $21.9 million for the six months ended June 30, 2024.

The increase in both periods was due primarily to an increase in employee-related expenses and professional fees.

Segment income benefited from a $3.8 million gain on the sale of a non-operating property in second quarter 2025.

Unallocated corporate expenses decreased $1.4 million to $9.9 million for the three months ended September 30, 2025, from $11.3 million for the same period in the prior year.

For the nine months ended September 30, 2025, unallocated corporate expenses decreased $0.2 million to $33.0 million from $33.2 million for the nine months ended September 30, 2024.

The decrease in both periods was primarily due to a $1.9 million settlement gain and lower incentive compensation expense, offset partially by an increase in professional fees and employee-related expenses.

Interest Income.

Interest income decreased $5.9 million to $4.6 million for the three months ended June 30, 2025, from $10.5 million for the same period in the prior year.

For the six months ended June 30, 2025, interest income decreased $11.0 million to $10.1 million from $21.1 million for the six months ended June 30, 2024.

Interest income decreased $6.0 million to $4.2 million for the three months ended September 30, 2025, from $10.2 million for the same period in the prior year.

For the nine months ended September 30, 2025, interest income decreased $17.0 million to $14.3 million from $31.3 million for the nine months ended September 30, 2024.

The decrease in both periods was due primarily to lower average balances of cash equivalents, as well as lower interest rates.

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Income Tax Provision

For the three and six months ended June 30, 2025, we recorded $18.6 million and $32.5 million, respectively, of income tax expense and had an effective rate of 23.1% and 24.1%, respectively.

For the three and six months ended June 30, 2024, we recorded $38.5 million and $71.3 million, respectively, of income tax expense and had an effective rate of 25.5% and 24.8%, respectively.

For the three and nine months ended September 30, 2025, we recorded $9.1 million and $41.5 million, respectively, of income tax expense and had an effective rate of 29.5% and 25.1%, respectively.

For the three and nine months ended September 30, 2024, we recorded $29.8 million and $101.1 million, respectively, of income tax expense and had an effective rate of 24.7% and 24.8%, respectively.

For all periods, the primary reason for the difference between the federal statutory income tax rate of 21% and the effective tax rate was the effect of state taxes.

In addition, our effective tax rate during the three months ended September 30, 2025 was adversely impacted by the effect of permanent tax differences on decreased pre-tax book income for 2025.

Industry Mergers and Acquisitions

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In addition, AZEK produces products that compete with another significant supplier to us, Trex.

We have good relationships with both James Hardie and Trex, but it is uncertain what impact, if any, this transaction may have on distribution arrangements with both companies.

As such, we cannot assess the potential impact of this transaction to our future results of operations.

We have good relationships with both James Hardie and Trex and do not expect the transaction to have a material adverse impact on our distribution arrangements with either company or on our future results of operations.

Liquidity and Capital Resources

We ended second quarter 2025 with $481.0 million of cash and cash equivalents and $450.0 million of debt.

At June 30, 2025, we had $876.2 million of available liquidity (cash and cash equivalents and undrawn committed bank line availability).

Our cash and cash equivalents decreased by $232.2 million during the six months ended June 30, 2025, as we used cash to fund seasonal working capital increases, capital spending, treasury stock purchases, and dividends paid on our common stock.

Further descriptions of our cash sources and uses for the six-month comparative periods are noted below.

We ended third quarter 2025 with $511.8 million of cash and cash equivalents and $450.0 million of debt.

At September 30, 2025, we had $907.0 million of available liquidity (cash and cash equivalents and undrawn committed bank line

availability).

Our cash and cash equivalents decreased by $201.5 million during the nine months ended September 30, 2025, as cash provided by operations was offset by capital spending, treasury stock purchases, and dividends paid on our common stock.

Further descriptions of our cash sources and uses for the nine-month comparative periods are noted below.

We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to fund debt service requirements and provide cash, as required, to support our ongoing operations, capital expenditures, lease obligations, working capital, income tax payments, and to pay cash dividends to holders of our common stock over the next 12 months.

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Below is a discussion of our sources and uses of cash for operating activities, investing activities, and financing activities.

Six Months Ended

Nine Months Ended

Net cash provided by operations $ 123,132 $ 343,752

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Operating Activities

For the six months ended June 30, 2025, our operating activities generated $4.7 million of cash, compared with $169.2 million of cash generated in the same period in 2024.

For the nine months ended September 30, 2025, our operating activities generated $123.1 million of cash, compared with $343.8 million of cash generated in the same period in 2024.

The $220.6 million decrease in cash provided by operations was due primarily to a decrease in income from operations, as well as a greater year-over-year increase in working capital, offset partially by a $53.6 million decrease in cash paid for taxes, net of refunds, compared to the same period in 2024.

Working capital increased $170.3 million during the six months ended June 30, 2025, compared with a $131.6 million increase for the same period in the prior year.

Working capital increased $122.8 million during the nine months ended September 30, 2025, compared with a $94.1 million increase for the same period in the prior year.

See "Our Operating Results" in this Management's Discussion and Analysis of Financial Condition and Results of Operations for more information related to factors affecting our operating results.

The increase in working capital during both periods was primarily attributable to higher receivables and inventories, offset by an increase in accounts payable and accrued liabilities.

The increase in receivables in both periods primarily reflect increased sales of approximately 22% and 16%, comparing sales for the months of June 2025 and 2024 with sales for the months of December 2024 and 2023, respectively.

Inventories increased during the six months ended June 30, 2025 due to seasonally higher inventory purchases in our BMD segment for the summer building season, as well as participation in certain BMD vendors' early-buy programs.

In addition, inventories for both segments were impacted by a weaker demand environment.

Inventories increased during the six months ended June 30, 2024 due to seasonally higher inventory purchases in our BMD segment for the summer building season.

The increase in accounts payable and accrued liabilities in both periods was related to the increase in inventories and extended terms offered by certain BMD vendors, offset partially by employee incentive compensation payouts made during the periods.

The increase in receivables in both periods primarily reflect increased sales of approximately 15% and 9%, comparing sales for the months of September 2025 and 2024 with sales for the months of December 2024 and 2023, respectively.

Inventories increased during the nine months ended September 30, 2025 in preparation for the building season, as well as expansions at some of our BMD facilities.

In addition, inventory levels for both segments were impacted by a weaker demand environment.

Inventories increased during the nine months ended September 30, 2024 in preparation and response to the building season.

During the nine months ended September 30, 2025, the increase in accounts payable and accrued liabilities was primarily related to the increase in inventories and extended terms offered by certain BMD vendors, offset partially by lower accrued employee incentive compensation and employee incentive compensation payouts made during the period.

The increase in accounts payable and accrued liabilities during the nine months ended September 30, 2024 was primarily related to the increase in inventories, offset partially by employee incentive compensation payouts made during the period.

Investment Activities

During the six months ended June 30, 2025 and 2024, we used $132.3 million and $74.1 million, respectively, of cash for purchases of property and equipment, including business improvement and quality/efficiency projects, replacement and expansion projects, and ongoing environmental compliance.

During the six months ended June 30, 2025, we received proceeds of $10.2 million from the sale of assets.

During the six months ended June 30, 2024, we also used $3.4 million of cash for post-transaction closing adjustments related to the BROSCO acquisition.

During the nine months ended September 30, 2025 and 2024, we used $187.4 million and $135.8 million, respectively, of cash for purchases of property and equipment, including business improvement and quality/efficiency projects, replacement and expansion projects, and ongoing environmental compliance.

During the nine months ended September 30, 2025, we received proceeds of $11.1 million from the sale of assets.

During the nine months ended September 30, 2024, we also used $5.6 million of cash for acquisitions of businesses and facilities, which consisted of $3.4 million for post-transaction closing adjustments related to the BROSCO acquisition, as well as $2.2 million for acquired assets of a door and millwork operation in Boise, Idaho.

Excluding potential acquisitions, we expect capital expenditures in 2025 to total approximately $230 million to $250 million.

We expect our capital spending in 2025 will be for business improvement and quality/efficiency projects, replacement and expansion projects, and ongoing environmental compliance.

We expect our capital expenditures, excluding potential acquisitions, to be approximately $150 million to $170 million in 2026.

We expect our capital spending in 2025 and 2026 will be for business improvement and quality/efficiency projects, replacement and expansion projects, and ongoing environmental compliance.

Our 2025 capital expenditures range includes additional spending on the multi-year investments at our Thorsby EWP mill and Oakdale veneer and plywood mill, as well as our greenfield distribution center in Texas.

In addition, it includes the purchase of previously leased distribution centers in Chicago, Illinois and Minneapolis, Minnesota.

This level of capital expenditures could increase or decrease as a result of several factors, including acquisitions, efforts to further accelerate organic growth, exercise of lease purchase options, our financial

results, future economic conditions, availability of engineering and construction resources, and timing and availability of equipment purchases.

These levels of capital expenditures could increase or decrease as a result of several factors, including efforts to further accelerate organic growth, exercise of lease purchase options, our financial results, future economic conditions, availability of engineering and construction resources, and timing and availability of equipment purchases.

Financing Activities

During the six months ended June 30, 2025, our financing activities used $114.8 million of cash, including $86.0 million for the repurchase of 837,352 shares of our common stock, $18.4 million in common stock dividend payments, and $5.9 million of tax withholding payments on stock-based awards.

During the nine months ended September 30, 2025, our financing activities used $148.2 million of cash, including $111.0 million for the repurchase of 1,128,752 shares of our common stock, $26.6 million in common stock dividend payments, and $5.9 million of tax withholding payments on stock-based awards.

On April 14, 2025, we entered into a credit agreement for a $450.0 million revolving credit facility which matures on April 12, 2030.

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Proceeds from the facility were used to repay the $50.0 million term loan under the asset-based revolving credit facility.

At June 30, 2025, we had $50.0 million of borrowings outstanding under the revolving credit facility.

During the six months ended June 30, 2024, our financing activities used $120.0 million of cash, including $88.9 million for the repurchase of 677,845 shares of our common stock, $19.1 million in common stock dividend payments, and $11.1 million of tax withholding payments on stock-based awards.

During the six months ended June 30, 2024, we did not borrow under our asset-based revolving credit facility.

At September 30, 2025, we had $50.0 million of borrowings outstanding under the revolving credit facility.

During the nine months ended September 30, 2024, our financing activities used $391.6 million of cash, including $220.5 million in common stock dividend payments, $158.5 million for the repurchase of 1,232,345 shares of our common stock, and $11.1 million of tax withholding payments on stock-based awards.

During the nine months ended September 30, 2024, we did not borrow under our asset-based revolving credit facility.

For more information related to our debt transactions and structure, our dividend policy, and our stock repurchase program, see the discussion in Note 6, Debt, and Note 9, Stockholders' Equity, respectively, of the Condensed Notes to Unaudited Quarterly Consolidated Financial Statements in "Item 1.

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Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2024 Form 10-K.

As of June 30, 2025, there have been no material changes in other material cash requirements outside the ordinary course of business since December 31, 2024.

As of September 30, 2025, there have been no material changes in other material cash requirements outside the ordinary course of business since December 31, 2024.

Note 8, Debt, and Note 16, Commitments, Legal Proceedings and Contingencies, and Guarantees, of the Notes to Consolidated Financial Statements in "Item 8.

Financial Statements and Supplementary Data" in our 2024 Form 10-K describe the nature of our guarantees, including the approximate terms of the guarantees, how the guarantees arose, the events or circumstances that would require us to perform under the guarantees, and the maximum potential undiscounted amounts of future payments we could be required to make.

As of June 30, 2025, there have been no material changes to the guarantees disclosed in our 2024 Form 10-K.

As of September 30, 2025, there have been no material changes to the guarantees disclosed in our 2024 Form 10-K.

Seasonal Influences

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Seasonally cold weather increases costs, especially energy consumption costs, at most of our manufacturing facilities.

As of July 20, 2025, we had approximately 7,710 employees.

As of October 26, 2025, we had approximately 7,640 employees.

Approximately 17% of these employees work pursuant to collective bargaining agreements.

As of July 20, 2025, we had ten collective bargaining agreements.

One agreement covering approximately 20 employees at our Billings BMD facility expired on March 31, 2025.

In late July, the union commenced a work stoppage;

however, the terms and conditions of this agreement generally remain in effect pending negotiation of a new agreement.

The company continues to engage in good faith efforts to reach an agreement on a new contract.

As of October 26, 2025, we had ten collective bargaining agreements.

Two agreements covering approximately 730 employees at our Oakdale and Florien plywood plants expired on July 15, 2025.

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In the normal course of business, we are exposed to financial risks such as changes in commodity prices, interest rates, and foreign currency exchange rates.

As of June 30, 2025, there have been no material changes to financial market risks disclosed in our 2024 Form 10-K.

As of September 30, 2025, there have been no material changes to financial market risks disclosed in our 2024 Form 10-K.

Environmental

As of June 30, 2025, there have been no material changes to environmental issues disclosed in our 2024 Form 10-K.

As of September 30, 2025, there have been no material changes to environmental issues disclosed in our 2024 Form 10-K.

For additional information, see Environmental in "Item 7.

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Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2024 Form 10-K.

At June 30, 2025, there have been no material changes to our critical accounting estimates from those disclosed in our 2024 Form 10-K.

At September 30, 2025, there have been no material changes to our critical accounting estimates from those disclosed in our 2024 Form 10-K.

New and Recently Adopted Accounting Standards

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis