What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-29 compared with 2024-10-29 · 110 added, 161 removed, 146 unchanged (65% of the section changed)

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and whether or not the Company will continue any share repurchases.

These risks and uncertainties also include those discussed under the heading “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 30, 2023, those discussed elsewhere in this Form 10-Q, and in future reports that we file with the SEC.

These risks and uncertainties also include those discussed under the heading “Risk Factors” in Part II, Item 1A of this Form 10-Q, under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 28, 2024, those discussed elsewhere in this Form 10-Q, and in future reports that we file with the SEC.

We operate in a changing environment in which new risks can emerge from time to time.

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In addition to historical information, the following discussion and other parts of this Form 10-Q contain forward-looking information that involves risks and uncertainties.

Our actual results could differ materially from those anticipated by this forward-looking information due to the factors discussed under Item 1A “Risk Factors” in our Form 10-K for fiscal 2023 and under “Cautionary Statement Concerning Forward-Looking Statements” in Item 2 of this Form 10-Q.

Our Culture, Values and Management Focus

Our actual results could differ materially from those anticipated by this forward-looking information due to the factors discussed under Part II, Item 1A “Risk Factors” in this Form 10-Q, under Part I, Item 1A “Risk Factors” in our Form 10-K for fiscal 2024, and under “Cautionary Statement Concerning Forward-Looking Statements” in Item 2 of this Form 10-Q.

We remain committed to driving a culture of profitable growth within new and existing product lines and geographies, while positioning the Company for long-term value creation.

The following initiatives represent key areas of our management team’s focus:

Migrate sales mix toward higher-margin specialty product categories.

The Company is pursuing a revenue mix increasingly weighted toward higher-margin, specialty product categories such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products.

Additionally, the Company is expanding its value-added service offerings designed to simplify complex customer sourcing requirements, together with marketing, inventory and pricing services afforded by the Company’s national platform.

Foster a performance-driven culture committed to business excellence and profitable growth to be the provider of choice for suppliers and customers.

This includes enhancing the customer experience through technology

accelerating organic growth within specific product and solutions offerings where the Company is uniquely advantaged;

enhancing our performance by leveraging our scale and footprint together with pricing, operational and procurement capabilities;

and deploying capital to drive sustained margin expansion, grow cash flow and maintain continued profitable growth.

Grow our higher-margin specialty product categories.

We continue to pursue a revenue mix weighted toward higher-margin, specialty product categories such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products.

Additionally, we are expanding our value-added service offerings designed to simplify complex customer sourcing requirements.

Increase share gain in local and national markets .

We continue to pursue multi-family project growth, expand our product lines with key national accounts, expand branded product lines into new geographic markets, and launch new

product lines.

With our expanded product categories, and our strategic vendor relationships, we seek to be an extension of our customers’ business in a scalable way.

Foster a performance-driven culture committed to business excellence and profitable growth to be the provider of choice for both suppliers and customers.

We seek to improve the customer experience through enhanced tools, value-added services, and technology enablement, accelerating organic growth within specific product and solutions offerings where we are uniquely advantaged, increase our performance by leveraging our scale and national footprint together with pricing, operational and procurement capabilities, and deploy capital to drive sustained margin expansion, grow cash flow and maintain continued profitable growth.

Maintain a disciplined capital structure and pursue strategic investments that increase the value of the Company.

The Company continues to strategically target acquisition opportunities that grow its specialty products business, expand its geographic reach, or complement its existing capabilities.

The Company also continues to identify markets that are potential opportunities for new market development.

The Company further seeks to maintain a disciplined capital structure while at the same time investing in its business to modernize its distribution facilities, as well as its tractor and trailer fleet, and to improve operational performance.

During the nine months ended September 28, 2024, we engaged in the following transactions:

We continue to strategically target acquisition opportunities that grow our higher-margin specialty products business, expand our geographic reach, or complement our existing capabilities.

We also continue to evaluate and identify additional markets that are potential opportunities for new market development.

We further seek to maintain a disciplined capital structure while at the same time investing in our business to modernize our distribution facilities, as well as our tractor and trailer fleet, and to improve operational performance.

During the three fiscal months ended March 29, 2025, we engaged in the following transactions:

• Used cash of $5.9 million and entered into $28.1 million of finance leases to enhance our facilities and fleet.

• Returned capital of $30.0 million to our shareholders by using cash to purchase 297,951 shares of our common stock at an average price of $100.63.

• Returned capital of $15.0 million to our shareholders by using cash to purchase 186,048 shares of our common stock at an average price of $80.62, excluding broker commissions and excise tax.

Our culture is guided by an unwavering commitment to apply our values to every decision we make and every action we take:

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• Collaboration - We collaborate with each other and our customers to build great teams and construct innovative solutions.

Looking ahead, we plan to continue pursuing a three-pronged growth strategy focusing on specialty products sales growth, opportunistic mergers and acquisitions (“M&A”), and potential greenfield expansion in new geographic markets.

Within specialty products, we will continue our focus on the five key areas of engineered wood, siding, moulding and millwork, outdoor living, and industrial products, which we believe are all favorable for two-step distributors and have attractive long-term prospects.

Factors That Affect Our Operating Results and Trends

Our results of operations and financial performance are influenced by a variety of factors, including the following:

housing market conditions;

adverse housing market conditions;

consolidation among competitors, suppliers, and customers;

escalating changes in retaliatory trade policies of the United States and other countries;

our dependence on international suppliers and manufacturers for certain products and related exposure to risks of new or increased tariffs and other risks that could affect our financial condition;

pricing and product cost variability;

disintermediation risk;

volumes of product sold;

the cyclical nature of the industry in which we operate;

consolidation among competitors, suppliers, and customers;

disintermediation risk;

loss of products or key suppliers and manufacturers;

our dependence on international suppliers and manufacturers for certain products;

effective inventory management relative to our sales volume or the prices of the products we produce;

business disruptions;

potential acquisitions and the integration and completion of such acquisitions;

information technology security risks and business interruption risks;

effective inventory management relative to our sales volume or the prices of the products we produce;

the ability to attract, train, and retain highly qualified associates and other key personnel while controlling related labor costs;

potential acquisitions and the integration and completion of such acquisitions;

business disruptions;

exposure to product liability and other claims and legal proceedings related to our business and the products we distribute;

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These factors, and the related trends and uncertainties, have historically produced cyclicality in our results of operations, and we expect this cyclicality to continue in future periods.

For more information on the risk factors impacting our business, refer to Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year 2023.

For more information on the risk factors impacting our business, refer to Part II, Item 1A, Risk Factors , in this Form 10-Q and to Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year 2024.

Results of Operations

Our results of operations for the three months ended September 28, 2024 (“third quarter of fiscal 2024”) and for the three months ended September 30, 2023 (“third quarter of fiscal 2023”) were as follows:

Three Months Ended September 28, 2024 % of

Sales Three Months Ended September 30, 2023 % of

($ amounts in thousands)

Net sales $ 747,288 $ 809,981

Gross profit 125,669 16.8% 139,246 17.2%

Selling, general, and administrative 92,210 12.3% 91,354 11.3%

Depreciation and amortization 9,530 1.3% 8,089 1.0%

Amortization of deferred gains on real estate (984) (0.1)% (984) (0.1)%

Other operating expenses, net 888 0.1% 1,131 0.1%

Operating income 24,025 3.2% 39,656 4.9%

Interest expense, net 4,619 0.6% 5,577 0.7%

Settlement of defined benefit pension plan (2,226) (0.3)% — —%

Other expense, net — —% 594 0.1%

Income before provision for income taxes 21,632 2.9% 33,485 4.1%

Provision for income taxes 5,616 0.8% 9,103 1.1%

Net income $ 16,016 2.1% $ 24,382 3.0%

Our results of operations for the nine months ended September 28, 2024 (“first nine months of fiscal 2024”) and for the nine months ended September 30, 2023 (“first nine months of fiscal 2023”) were as follows:

Nine Months Ended September 28, 2024 % of

Sales Nine Months Ended September 30, 2023 % of

Our results of operations for the three fiscal months ended March 29, 2025 (“first quarter of fiscal 2025”) and for the three fiscal months ended March 30, 2024 (“first quarter of fiscal 2024”) were as follows:

Three Fiscal Months Ended March 29, 2025 % of

Sales Three Fiscal Months Ended March 30, 2024 % of

($ amounts in thousands)

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Amortization of deferred gains on real estate (984) (0.1)% (984) (0.1)%

Other operating expenses, net 1,210 0.1% 5,240 0.2%

Other, net (2,258) (0.3)% 314 —%

Operating income 10,724 1.5% 27,668 3.8%

Interest expense, net 6,580 0.9% 4,624 0.6%

Settlement of defined benefit pension plan (2,226) (0.1)% — —%

Other expense, net — —% 1,782 0.1%

Income before provision for income taxes 4,144 0.6% 23,044 3.2%

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Net income $ 2,805 0.4% $ 17,492 2.4%

The following table sets forth net sales by product category:

Three Months Ended Nine Months Ended

September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023

The following table sets forth net sales by product category and percentage of total net sales by product category:

Three Fiscal Months Ended

March 29, 2025 March 30, 2024

Net sales by product category ($ amounts in thousands)

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Total net sales $ 709,226 100% $ 726,244 100%

Percentage of total net sales by product category

Specialty products 69.5 % 69.0 % 69.7 % 70.0 %

Structural products 30.5 % 31.0 % 30.3 % 30.0 %

Total net sales 100.0 % 100.0 % 100.0 % 100.0 %

The following table sets forth gross profit and gross margin percentages by product category:

Three Months Ended Nine Months Ended

September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023

Three Fiscal Months Ended

March 29, 2025 March 30, 2024

Gross profit by product category:

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Company gross margin % 15.7 % 17.6 %

Third Quarter of Fiscal 2024 Compared to Third Quarter of Fiscal 2023

For the third quarter of fiscal 2024, the Company generated consolidated net sales of $747.3 million, a decrease of $62.7 million, or 7.7 percent, compared to the third quarter of fiscal 2023.

The decrease in net sales in the current quarter was attributable to continuing pricing pressures in both specialty products and structural products, with commodity prices in U.S.

markets for lumber and panels being down 12 percent and 19 percent, respectively, compared to the prior year period.

However, pricing declines were partially offset by volume growth for both specialty and structural products.

The Company’s gross profit for the third quarter of fiscal 2024 decreased by $13.6 million to $125.7 million from $139.2 million in the prior year period and this decrease was attributable to both specialty and structural products.

Gross margin percentage for the Company decreased from 17.2 percent to 16.8 percent in the current quarter, also attributable to both structural products and specialty products.

The import-duty and LCNRV matters discussed in the sections below for specialty products and structural products contributed $5.9 million to the current quarter’s gross profit.

Excluding these items, gross margin percentage was 16.0 percent for the current quarter.

Net sales of specialty products, which includes products such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products, decreased by $39.9 million, or 7.1 percent, to $519.0 million in the third quarter of fiscal 2024.

This decrease in net sales was due to price deflation across all specialty product categories, partially offset by volume gains for millwork, engineered wood, and specialty lumber and panels.

Specialty products gross profit decreased by $10.4 million to $100.5 million due primarily to the decrease in sales.

Specialty products gross margin percentage decreased by 40 basis points to 19.4 percent compared to 19.8 percent in the third quarter of fiscal 2023 due primarily to decreases in pricing.

The current period included a net benefit of $3.5 million for import duty-related items from prior periods.

Excluding this benefit, specialty products gross margin percentage was 18.7 percent.

The duty items were related to changes in retroactive rates for anti-dumping duties and to classification adjustments for certain goods imported by the Company.

Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, decreased by $22.8 million, or 9.1 percent, to $228.3 million in the third quarter of fiscal 2024 compared to the third quarter of

This decrease was primarily due to price deflation across all structural product types, partially offset by volume gains for all structural product types.

Structural products gross profit decreased by $3.2 million to $25.2 million from $28.3 million in the prior year period due primarily to decreases in pricing.

Structural products gross margin percentage for the third quarter of fiscal 2024 was 11.0 percent compared to 11.3 percent in the prior-year period.

Gross profit and gross margin percentage for the third quarter of fiscal 2024 were positively impacted by a $2.4 million LCNRV inventory write-down for certain structural products at the end of the second quarter of fiscal 2024 that resulted in lower Costs of products sold in the third quarter of fiscal 2024 since substantially all of the inventory associated with the LCNRV write-down was sold during third quarter of fiscal 2024.

This adjustment increased the current quarter’s gross margin percentage for structural products by 1.0 percent.

The third quarter of fiscal 2023 was negatively impacted by a $0.6 million interim period LCNRV write-down for certain inventory related to our structural products.

Our selling, general, and administrative (“SG&A”) expenses increased by $0.9 million, or 0.9 percent, compared to the third quarter of fiscal 2023.

In the current quarter, higher technology expenses associated with our digital transformation were partially offset by lower fleet-related logistics costs.

Depreciation and amortization expense increased 17.8 percent compared to the third quarter of fiscal 2023 due to a higher base of depreciable assets in the third quarter of fiscal 2024, resulting from our continued focus on strategic capital investment.

Interest expense, net, decreased by 17.2 percent, or $1.0 million, compared to the third quarter of fiscal 2023.

The decrease was due to the generation of additional interest income from larger balances of cash and cash equivalents and from higher interest rates on those balances in the current quarter compared to the prior year period.

Additionally, interest income for the third quarter of fiscal 2024 includes $0.7 million related to antidumping import duty refunds recognized in the quarter.

(see Note 2, Inventories ).

Our effective income tax rates were 26.0 percent and 27.2 percent for the third quarters of fiscal 2024 and 2023, respectively.

Our effective income tax rates for both periods were impacted by state taxes as well as the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, slightly offset by a benefit from the vesting of restricted stock units.

For fiscal 2024, we expect our annual effective income tax rate will be approximately 26 percent.

Our net income for the third quarter of fiscal 2024 was $16.0 million, or $1.87 per diluted share, versus $24.4 million, or $2.71 per diluted share, in the prior-year period.

First Quarter of Fiscal 2025 Compared to First Quarter of Fiscal 2024

For the first quarter of fiscal 2025, the Company’s consolidated net sales were $709.2 million, a decrease of $17.0 million, or 2.3%, compared to the first quarter of fiscal 2024.

• The decrease in net sales in the current fiscal quarter was attributable to overall lower volume and pricing for specialty products, partially offset by overall higher volume and pricing for structural products.

• In both quarterly periods, we believe that inclement weather in certain regions of the U.S.

negatively impacted volumes.

• Compared to the first quarter of 2024, average commodity prices in U.S.

markets during the first quarter of 2025 for lumber were up 13% and down 13% for panels.

The Company’s gross profit for the first quarter of fiscal 2025 decreased by $16.6 million to $111.1 million from $127.7 million in the prior year quarter.

• This decrease in gross profit in the current fiscal quarter was attributable to both specialty and structural products.

• Gross margin percentage for the Company decreased from 17.6% to 15.7% in the current fiscal quarter, also attributable to both structural products and specialty products.

• The Company’s gross profit and gross margin percentage in the first quarter of fiscal 2025 and the first quarter of fiscal 2024 benefited from gross refunds of $2.4 million and $16.9 million (excluding interest), respectively, for changes in retroactive rates for anti-dumping duties (see Note 2, Inventory , to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q).

Additionally, our gross profit in the first quarter of fiscal 2024 was negatively impacted by $10.4 million (excluding interest) of expense for classification adjustments related to certain goods imported by the Company (see Note 8, Commitments and Contingencies , to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q).

Excluding these items, which are reflected in Costs of products sold on our unaudited condensed consolidated statements of operations, our gross profit for the first quarter of fiscal 2025 and first quarter of fiscal 2024 would have been $108.7 million and $121.2 million, respectively, and gross margin percentage would have been 15.3% and 16.7%, respectively.

Net sales of specialty products, which include products such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products, decreased by $24.4 million, or 4.9%, to $479.4 million in the first quarter of fiscal 2025.

• This decrease in net sales for specialty products in the current fiscal quarter was due to price deflation driven by external market conditions, as well as lower volumes for most categories of specialty products.

• Specialty products gross profit decreased by $14.3 million to $89.8 million in the current fiscal quarter due to the decrease in sales as well as margin compression.

• Specialty products gross margin percentage decreased by 200 basis points to 18.7% compared to 20.7% in the first quarter of fiscal 2024 due to overall decreases in volume and pricing.

• The adjustments related to duty and import matters discussed above at the Company level are all reflected in the operating results for specialty products.

First quarter fiscal 2025 results for specialty products include a net benefit of $2.4 million (excluding interest) for refunds due to changes in retroactive rates for anti-dumping duties.

The first quarter of fiscal 2024 included a net benefit of $6.5 million (excluding interest), composed of a $16.9 million benefit for refunds due to changes in retroactive rates for anti-dumping duties, partially offset by expenses of $10.4 million for classification adjustments related to certain goods imported by the Company.

Excluding these net benefits for both quarterly fiscal periods, specialty products gross margin percentage for first quarter of fiscal 2025 and first quarter of fiscal 2024 would have been 18.2% and 19.4%, respectively, a decrease of 120 basis points.

Net sales of structural products, which includes products such as lumber, panels (including plywood and oriented strand board), rebar, and remesh, increased by $7.4 million, or 3.3%, to $229.8 million in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024.

• This increase in net sales for structural products in the current fiscal quarter was due to overall increases in lumber pricing, and increased lumber and panel volumes, partially offset by price declines in panels.

• Structural products gross profit decreased by $2.3 million to $21.4 million from $23.6 million in the prior year fiscal quarter.

Increased pricing in the current fiscal quarter, was offset by higher Costs of product sold in the current fiscal quarter.

• Structural products gross margin percentage for the first quarter of fiscal 2025 was 9.3% compared to 10.6% in the prior-year fiscal quarter.

Costs of products sold increased more than the increase in net sales in the current fiscal quarter.

Our selling, general, and administrative (“SG&A”) expenses increased by $2.8 million, or 3.1%, compared to the first quarter of fiscal 2024.

This overall increase was due primarily to continuing technology initiatives associated with our digital transformation and also to higher logistics costs.

Depreciation and amortization expense increased 1.3% compared to the first quarter of fiscal 2024 due to a higher base of depreciable assets in the first quarter of fiscal 2025, resulting from our continued focus on strategic capital investment.

Interest expense, net, which includes gross interest expense less interest income, was $6.6 million and $4.6 million in the first quarter of fiscal 2025 and first quarter of fiscal 2024, respectively, resulting in an increase in net interest expense of $2.0 million, or 42.3% in the current fiscal quarter.

• Gross interest expense was $12.1 million and $13.1 million in the first quarter of fiscal 2025 and first quarter of fiscal 2024, respectively.

Gross interest expense in the first quarter of fiscal 2024 included $1.6 million of accrued interest expense related to the potential underpayment of duties arising from certain classification discrepancies for products imported into the United States as separately entered shipments (see Note 8, Commitments and Contingencies , to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q).

Excluding this $1.6 million of interest expense, gross interest expense in the first quarter of fiscal 2024 would have been $11.5 million compared to $12.1 million in the first quarter of fiscal 2025, an increase in the current fiscal quarter of $0.5 million, or 4.7%, compared to the first quarter of fiscal 2024.

This $0.5 million increase in the current fiscal quarter was due to additional net finance leases added subsequent to the first quarter of fiscal 2024.

• Interest income was $5.5 million and $8.5 million in the first quarter of fiscal 2025 and first quarter of fiscal 2024, respectively.

Interest income in the first quarter of fiscal 2025 and first quarter of fiscal 2024 included $0.5 million and $2.0 million, respectively, related to refunds received due to changes in retroactive rates for anti-dumping duties (see Note 2, Inventory , to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q).

Excluding these amounts, interest income for the first quarter of fiscal 2025 and first quarter of fiscal 2024 would have been $5.0 million and $6.5 million, respectively, a decrease of $1.5 million in the current fiscal quarter.

This $1.5 million decrease in the current fiscal quarter was due to lower average balances for interest-bearing deposits of cash/cash equivalents and due to lower interest rate paid on those deposits in the current fiscal quarter.

During the first quarter of fiscal 2025, we settled certain of the initial insurance claims related to property and equipment that was damaged or destroyed at our Erwin, Tennessee owned facility in late third quarter of fiscal 2024 due to Hurricane Helene.

We received insurance proceeds that exceeded the carrying values of the damaged or destroyed assets by $2.4 million and this amount is included in Other, net on our unaudited condensed consolidated statement of operations for the first quarter of fiscal 2025.

Our effective income tax rates were 32.3% and 24.1% for the first quarters of fiscal 2025 and fiscal 2024, respectively.

Our effective income tax rates for the first quarters of fiscal 2025 and 2024 were impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation for the quarterly periods, as well as adjustments to deferred income tax assets related to stock-based compensation .

Our effective income tax rate for the first quarter of fiscal 2024 was also impacted by an adjustment to deferred income tax assets related to the partial release of a state income tax valuation allowance.

For fiscal 2025, we currently estimate our annual effective income tax rate will be approximately 27% .

Our net income for the first quarter of fiscal 2025 was $2.8 million, or $0.33 per diluted share, versus $17.5 million, or $2.00 per diluted share, in the prior-year fiscal quarter.

Decreases in our net income and earnings per diluted share were due primarily to the factors discussed above.

The 2024 period also reflects a pre-tax benefit of $2.2 million related to an adjustment of the settlement charge recorded in the fourth quarter of 2023 to settle our defined benefit pension plan.

This benefit was partially offset by $1.2 million of estimated net losses related to Hurricane Helene in September 2024, which is reported within Other operating expenses, net on our unaudited condensed consolidated statements of operations.

First Nine Months of Fiscal 2024 Compared to First Nine Months of Fiscal 2023

For the first nine months of fiscal 2024, the Company generated consolidated net sales of $2.24 billion, a decrease of $182 million, or 7.5 percent, compared to the first nine months of fiscal 2023.

The decrease in net sales in the current period was attributable to both specialty products and structural products and reflected continuing pricing pressures, partially offset by volume gains .

The Company’s gross profit for the first nine months of fiscal 2024 decreased by $32.8 million to $375.8 million from $408.6 million in the prior year period.

This decline in net sales was attributable to both specialty products and structural products.

The Company’s gross margin percentage was 16.8 percent for the 2024 period, a decrease from the 16.9 percent for the 2023 period.

Gross profit and gross margin percentage benefited in the current period by a net benefit in specialty products of $12.7 million for import duty items.

The import duty items were related to changes in retroactive rates for anti-dumping duties resulting in a credit to cost of products sold of $20.7 million, partially offset by classification adjustments for certain goods imported by the Company that resulted in a net increase in Cost of products sold of $8.0 million for the current period.

Not including this net benefit, the Company’s gross margin percentage would have been 16.2 percent in the current period.

Net sales of specialty products, which includes products such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products, decreased by $135.4 million, or 8 percent, to $1.56 billion in the first nine months of fiscal 2024.

The decline in net sales was due to price deflation across all specialty product types, partially offset by volume gains for millwork, engineered wood, siding, and specialty lumber and panels.

Specialty products gross profit decreased $17.5 million to $308.9 million due to lower net sales, while specialty products gross margin percentage decreased 60 basis points to 19.8 percent for the first nine months of fiscal 2024 compared to 19.2 percent in the first nine months of fiscal 2023.

The net impact of the import duty items described above increased specialty products gross profit for the current period by $12.7 million and specialty products gross margin percentage by 0.8 percent.

Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, decreased $46.6 million to $679.6 million in the first nine months of fiscal 2024 primarily due to volume and price declines for the lumber category, partially offset by price and volume increases in the panels category.

Gross profit for structural products decreased by $15.3 million to $66.9 million from $82.2 million in the prior year period due to lower sales in the current period.

Structural products gross margin percentage for the first nine months of fiscal 2024 was 9.8 percent, a decline from 11.3 percent in the prior-year period due primarily to price deflation for the lumber category.

Gross profit and gross margin percentage for structural products benefited in the prior year period by lower cost of products sold attributable to a $2.6 million LCNRV write-down of certain inventory at the end of fiscal 2022, partially offset by an interim $0.6 million LCNRV write-down of certain inventory during the 2023 period.

During the first nine months of fiscal 2024, such interim period LCNRV inventory write-downs and reversals netted to zero.

Our SG&A expenses in the first nine months of fiscal 2024 increased $1.6 million compared to the first nine months of fiscal 2023.

In the current period, higher technology expenses associated with our digital transformation and legal expenses associated with duty-related matters were partially offset by lower sales-based incentive expenses and lower share-based compensation expense.

Depreciation and amortization expense increased 22.4 percent compared to the first nine months of fiscal 2023 due to a higher base of depreciable assets throughout the first nine months of fiscal 2024 when compared the prior-year period, resulting from our continued focus on strategic capital investment.

Other operating expenses, net decreased $4.0 million compared to the first nine months of fiscal 2023 primarily due to restructuring related expenses, including severance expenses, incurred in the 2023 period due to our leadership transition.

Interest expense, net, decreased by 28.3 percent, or $5.5 million, compared to the first nine months of fiscal 2023.

The decrease was primarily due to the generation of higher interest income, given our year-over-year increase in cash that is generating interest at higher rates than last year.

Included in interest income for the nine months ended September 28, 2024 is $2.7 million of interest income related to the antidumping import duty refunds (see Note 2, Inventories ).

Interest expense, net for the nine months ended September 28, 2024 also includes $1.2 million of estimated accrued interest expense related to estimated import duties owed by the Company (see Note 9, Commitments and Contingencies ).

Our effective income tax rates were 24.9 percent and 25.9 percent for the first nine months of fiscal 2024 and 2023, respectively.

Our effective income tax rate for both periods was impacted by state taxes as well as the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, partially offset by a benefit from the vesting of restricted stock units, and in the 2024 period, a partial release of a valuation allowance for deferred income tax assets.

For fiscal 2024, we expect our annual effective income tax rate will be approximately 26 percent.

Our net income for the first nine months of fiscal 2024 was $47.8 million, or $5.53 per diluted share, versus $66.7 million, or $7.38 per diluted share, in the prior-year period.

Our net income for the first nine months of fiscal 2024 decreased due primarily to the factors discussed above.

The 2024 period also reflects a pre-tax benefit of $2.2 million related to an adjustment of the settlement charge recorded in the fourth quarter of 2023 to settle our defined benefit pension plan.

Liquidity and Capital Resources

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We expect that these sources will be sufficient to fund our ongoing cash requirements for at least the next 12 months and into the foreseeable future.

As of September 28, 2024, we had $526 million of cash and cash equivalents plus $346.5 million of availability on our revolving credit facility.

As of March 29, 2025, we had $449 million of cash and cash equivalents plus $346.2 million of availability on our revolving credit facility.

Senior Secured Notes

In October 2021, we completed the private offering of $300 million of our 6.0 percent senior secured notes due 2029 (the “2029 Notes”).

In October 2021, we completed the private offering of $300 million of our 6.0% senior secured notes due 2029 (the “2029 Notes”).

Interest is payable semi-annually.

Our 2029 Notes are scheduled to mature on November 15, 2029, and no principal is due until that time as long as we remain in compliance with the related covenants.

As of September 28, 2024, we were in compliance with these covenants.

As of March 29, 2025, we were in compliance with these covenants.

Revolving Credit Facility

Our existing revolving credit facility (“Revolving Credit Facility”) with Wells Fargo Bank, National Association, as administrative agent (“Agent”), and certain other financial institutions, matures on August 2, 2026, provided we remain in compliance with the related covenants.

As of September 28, 2024, we were in compliance with such covenants.

Any outstanding borrowings under our Revolving Credit Facility bear interest at a rate per annum equal to (i) Adjusted Term Secured Overnight Financing Rate (“SOFR”) (calculated as SOFR plus 0.1 percent) plus a margin ranging from 1.25 percent to 1.75 percent, with the margin determined based upon average excess availability for the immediately preceding fiscal quarter for loans based on SOFR, or (ii) the Agent’s base rate (as that term is defined in the agreement for the Revolving Credit Facility) plus a margin ranging from 0.25 percent to 0.75 percent, with the margin based upon average excess availability for the immediately preceding fiscal quarter for loans based on the base rate.

As of March 29, 2025, we were in compliance with such covenants.

Any outstanding borrowings under our Revolving Credit Facility bear interest at a rate per annum equal to (i) Adjusted Term Secured Overnight Financing Rate (“SOFR”) (calculated as SOFR plus 0.1%) plus a margin ranging from 1.25% to 1.75%, with the margin determined based upon average excess availability for the immediately preceding fiscal quarter for loans based on SOFR, or (ii) the Agent’s base rate (as that term is defined in the agreement for the Revolving Credit Facility) plus a margin ranging from 0.25% to 0.75%, with the margin based upon average excess availability for the immediately preceding fiscal quarter for loans based on the base rate.

As of March 29, 2025, this variable interest rate for the Revolving Credit Facility was 5.535%.

Borrowings under our Revolving Credit Facility are subject to availability under the Borrowing Base (as that term is defined in the agreement for the Revolving Credit Facility).

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Our Revolving Credit Facility may be prepaid in whole or in part from time to time without penalty or premium but including all breakage costs incurred by any lender thereunder.

As of September 28, 2024 and December 30, 2023, we had zero outstanding borrowings under our Revolving Credit Facility and available borrowing capacity was $346.5 million, net of undrawn letters of credit.

Excess availability, which includes availability under our Revolving Credit Facility plus cash and cash equivalents in qualified accounts, was $872.8 million as of September 28, 2024.

As of March 29, 2025 and December 28, 2024, we had zero outstanding borrowings under our Revolving Credit Facility and available borrowing capacity was $346.2 million, net of undrawn letters of credit.

Excess availability, which includes availability under our Revolving Credit Facility plus cash and cash equivalents in qualified accounts, was $795.2 million as of March 29, 2025.

Finance Lease Obligations

Our finance lease obligations consist of leases for real estate, equipment, and vehicles totaling $293.8 million and $285.4 million as of September 28, 2024 and December 30, 2023, respectively.

Of the $293.8 million as of September 28, 2024, $243.1 million related to real estate and $50.8 million related to equipment.

Our finance lease obligations consist of leases for real estate, equipment, and vehicles totaling $316.8 million and $292.5 million as of March 29, 2025 and December 28, 2024, respectively.

Of the $316.8 million as of March 29, 2025, $242.4 million related to real estate and $74.4 million related to equipment.

Of the $292.5 million as of December 28, 2024, $242.8 million related to real estate and $49.8 million related to equipment.

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Operating Activities

Net cash provided by operating activities for the first nine months of fiscal 2024 was $66.4 million compared to net cash provided of $230.7 million in the first nine months of fiscal 2023.

The decrease in cash provided by operating activities during the first nine months of fiscal 2024 was primarily a result of a $18.8 million decrease in net income for the current year period and a $146.9 million net decrease in operating assets and liabilities in the current year period, primarily inventory.

Net cash used in operating activities for the first three months of fiscal 2025 was $33.9 million compared to net cash used of $31.1 million in the first three months of fiscal 2024.

The decrease in cash generated from activities during the first three months of fiscal 2025 was primarily a result of a $14.7 million decrease in net income for the current fiscal quarter, partially offset by a $14.1 million net increase in operating assets and liabilities in the current fiscal quarter.

Investing Activities

Net cash used in investing activities for the first nine months of fiscal 2024 was $19.0 million compared to net cash used of $18.7 million in the first nine months of fiscal 2023.

In the current period, higher spending for property and equipment was

partially offset by proceeds from sales of assets.

During the first nine months of fiscal 2024, we also acquired $16.7 million of property and equipment through finance leases, compared to $11.3 million for the first nine months of fiscal 2023.

Net cash used in investing activities for the first three months of fiscal 2025 was $3.4 million compared to net cash used of $5.3 million in the first three months of fiscal 2024.

In the current quarter, we received initial insurance proceeds of $2.4 million

related to property and equipment that was damaged or destroyed by Hurricane Helene at our Erwin, Tennessee owned facility back in late third quarter of fiscal 2024.

During the first three months of fiscal 2025, we also acquired $28.1 million of property and equipment through finance leases, compared to $8.2 million for the first three months of fiscal 2024.

Financing Activities

Net cash used in financing activities totaled $42.9 million for the first nine months of fiscal 2024 compared to net cash used of $41.1 million for the first nine months of fiscal 2023.

The change in net cash used in financing activities was primarily due to an increase in cash used for payments for finance lease liabilities, offset by a decrease in cash used to repurchase shares to satisfy employee tax withholdings for vestings of restricted stock units.

During the first nine months of fiscal 2024, we repurchased $30.0 million of our common stock compared to $29.3 million during the first nine months of fiscal 2023.

Stock Repurchase Programs

During the first nine months of fiscal 2024, we repurchased 297,951 shares of our common stock under our 2023 share repurchase program at an average price of $100.63, including broker commissions but excluding federal excise tax due on the repurchases, for a total of $30.0 million.

All of the share repurchase in fiscal 2024 occurred in the second and third fiscal quarters.

As of September 28, 2024, there remained $61.5 million repurchase capacity under this authorization.

Between September 28, 2024 and October 25, 2024, we purchased an additional 43,240 shares of our common stock for $4.6 million at an average price of $106.34 per share, including broker commissions but excluding federal excise tax due on the repurchases.

Net cash used in financing activities totaled $19.3 million for the first three months of fiscal 2025 compared to net cash used of $4.0 million for the first three months of fiscal 2024.

The change in net cash used in financing activities was primarily due to the $15.0 million used to repurchase our common stock during the current fiscal quarter.

We had no repurchases of our common stock during the first quarter of fiscal 2024.

Stock Repurchase Program

During the first three months of fiscal 2025, we repurchased 186,048 shares of our common stock under our 2023 share repurchase program at an average price of $80.65, including broker commissions but excluding federal excise tax due on the repurchases, for a total of $15.0 million.

As of March 29, 2025, there remained $31.5 million repurchase capacity under this authorization.

Between March 29, 2025 and April 25, 2025, we purchased an additional 142,500 shares of our common stock for $10.3 million at an average price of $72.18 per share, including broker commissions but excluding federal excise tax due on the repurchases.

Under the 2023 share repurchase program, we may repurchase our common stock at any time or from time to time, without prior notice, subject to prevailing market conditions and other considerations.

Our repurchases may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, accelerated share repurchase programs, tender offers or pursuant to a trading plan that may be adopted in accordance with the Securities and Exchange Commission Rule 10b5-1.

During the first nine months of fiscal 2023, we repurchased 358,212 shares of our common stock under the former 2021/2022 share repurchase program at an average price of $83.52 per share, including broker commissions but excluding federal excise tax due on the repurchases.

The 2021/2022 share repurchase program was concluded during the fourth quarter of fiscal 2023.

The repurchase dollar amounts noted above are based on trade date activity, while the amounts reported on our consolidated statements of cash flows for share repurchases are based on settlement date activity.

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This metric differs from traditional working capital in that it excludes certain current assets and current liabilities that are reported in our consolidated balance sheets.

Net working capital of $432.3 million as of September 28, 2024, compared to $414.1 million as of December 30, 2023, increased on a net basis by approximately $18.2 million, as shown below:

September 28, 2024 December 30, 2023 September 30, 2023

Net working capital of $462.0 million as of March 29, 2025, compared to $411.5 million as of December 28, 2024, increased on a net basis by approximately $50.5 million, as shown below:

March 29, 2025 December 28, 2024 March 30, 2024

(In thousands)

Current assets:

Receivables, less allowance for doubtful accounts $ 275,574 $ 225,837 $ 288,244

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675,129 581,746 659,186

Current liabilities:

Accounts payable 213,111 170,202 171,715

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Investments in Property and Equipment

Our investments in capital assets consist of cash paid for owned assets and the inception of financing lease arrangements for long-lived assets to support our distribution infrastructure.

Our investments in capital assets consist of cash paid for owned assets and the inception of financing lease arrangements for long-lived assets.

The gross value of these assets is included in property and equipment, at cost on our unaudited condensed consolidated balance sheets.

For the first nine months of fiscal 2024, we invested $19.8 million in long-lived assets primarily related to investments in our distribution facilities and to a lesser extent, upgrading our fleet.

We also added $16.7 million in new finance leases during the first nine months of fiscal 2024 for new tractors and forklifts to enhance our logistics network.

For the first nine months of fiscal 2023, we invested $18.9 million in cash investments in long-lived assets primarily related to investments in our distribution facilities and to a lesser extent, upgrading our fleet.

We also added $11.3 million in new finance leases during the 2023 period for new forklifts to enhance our logistics network.

For the first three months of fiscal 2025, we invested $6.4 million in long-lived assets primarily related to investments in our fleet and digital transformation and to a lesser extent, facility enhancements.

We also added $28.1 million of property and equipment under finance leases during the first three months of fiscal 2025, primarily for new tractors and forklifts to enhance our logistics network.

For the first three months of fiscal 2024, we invested $5.4 million in long-lived assets primarily related to investments in our distribution facilities and upgrading our fleet.

We also added $8.2 million in new finance leases during the 2024 fiscal quarter for new forklifts to enhance our logistics network.

Critical Accounting Policies

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What changed 10-Q

Item 2. Management’s Discussion and Analysis