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Item 2. Management’s Discussion and Analysis

2025-07-29 compared with 2025-04-29 · 178 added, 91 removed, 165 unchanged (62% 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 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, as supplemented in Part II, Item 1A, “Risk Factors,” in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2025, and those risks and uncertainties 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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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.

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.

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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:

During the six fiscal months ended June 28, 2025, we engaged in the following transactions:

• Used cash of $15.5 million and entered into $32.9 million of finance leases to enhance our facilities and fleet.

• Returned capital of $35 million to our shareholders by using cash to purchase 469,129 shares of our common stock at an average price of $74.61, 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:

Our culture is guided by our values:

• Customer Centric - We put our customers first, so we are customer centric in all that we do.

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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 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, as supplemented in Part II, Item 1A, “Risk Factors,” in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2025.

Results of Operations

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

Our results of operations for the three fiscal months ended June 28, 2025 (“second quarter of fiscal 2025”) and for the three fiscal months ended June 29, 2024 (“second quarter of fiscal 2024”) were as follows:

Three Fiscal Months Ended June 28, 2025 % of

Sales Three Fiscal Months Ended June 29, 2024 % of

($ amounts in thousands)

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Amortization of deferred gains on real estate (983) (0.1)% (984) (0.1)%

Other, net (2,258) (0.3)% 314 —%

Other operating, net 582 0.1% 8 —%

Operating income 15,035 1.9% 23,847 3.1%

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Net income $ 4,310 0.6% $ 14,336 1.9%

Our results of operations for the six fiscal months ended June 28, 2025 (“first six months of fiscal 2025”) and for the six fiscal months ended June 29, 2024 (“first six months of fiscal 2024”) were as follows:

Six Fiscal Months Ended June 28, 2025 % of

Sales Six Fiscal Months Ended June 29, 2024 % of

($ amounts in thousands)

Net sales $ 1,489,333 $ 1,494,607

Gross profit 230,818 15.5% 250,125 16.7%

Selling, general, and administrative 189,358 12.7% 180,703 12.1%

Depreciation and amortization 19,344 1.3% 19,553 1.3%

Amortization of deferred gains on real estate (1,967) (0.1)% (1,968) (0.1)%

Other operating, net (1,676) (0.1)% 322 —%

Operating income 25,759 1.7% 51,515 3.4%

Interest expense, net 15,037 1.0% 9,425 0.6%

Income before provision for income taxes 10,722 0.7% 42,090 2.8%

Provision for income taxes 3,607 0.2% 10,262 0.7%

Net income $ 7,115 0.5% $ 31,828 2.1%

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)

Three Fiscal Months Ended Six Fiscal Months Ended

June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024

Net sales by product category:

($ amounts in thousands)

Specialty products $ 543,459 70 % $ 539,466 70 % $ 1,022,846 69 % $ 1,043,300 70 %

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Total net sales $ 780,107 100 % $ 768,363 100 % $ 1,489,333 100 % $ 1,494,607 100 %

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

Three Fiscal Months Ended

March 29, 2025 March 30, 2024

The following table sets forth gross profit, the percentage of total gross profit earned by product category, and gross margin percentages by product category:

Three Fiscal Months Ended Six Fiscal Months Ended

June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024

Gross profit by product category:

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Company gross margin % 15.3% 15.9% 15.5% 16.7%

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.

Second Quarter of Fiscal 2025 Compared to Second Quarter of Fiscal 2024

For the second quarter of fiscal 2025, the Company’s net sales were $780.1 million, an increase of $11.7 million, or 1.5%, compared to the second quarter of fiscal 2024.

• The increase in the Company’s net sales in the current fiscal quarter was attributable to both specialty products and structural products.

Higher overall volume was partially offset by overall lower pricing driven by external market factors.

• Approximately 70% of the Company’s net sales in the second quarter of fiscal 2025 and the second quarter of fiscal 2024 were generated by specialty products.

The Company’s gross profit for the second quarter of fiscal 2025 decreased by $2.8 million, or 2.3%, to $119.7 million from $122.4 million in the prior year quarter.

• This overall decrease in the Company’s gross profit in the current fiscal quarter was attributable to specialty products, partially offset by higher gross profit for structural products.

• 84% of the Company’s gross profit was generated by specialty products in the second quarter of fiscal 2025, compared to 85% in the second quarter of fiscal 2024.

• Gross margin percentage for the Company decreased from 15.9% to 15.3% in the current fiscal quarter.

This overall decrease in the Company’s gross margin percentage was attributable to specialty products, partially offset by higher gross margin percentage for structural products.

• The Company benefited in the second quarter of fiscal 2024 by a $2.7 million change in an estimate for an accrual initially made and disclosed in the first quarter of fiscal 2024 related to amounts we believe we may owe for discrepancies in duties paid in prior years for certain imported goods (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).

This amount is reported within Cost of products sold on our unaudited condensed consolidated statement of operations for the second quarter of fiscal 2024.

As subsequently discussed, this item benefited the operating results for specialty products in the second quarter of fiscal 2024.

• The Company was negatively impacted in the second quarter of fiscal 2024 by a $2.4 million interim LCNRV provision to adjust the carrying values of certain structural lumber and structural panel inventory items to their net realizable value as of June 29, 2024.

This amount is reported within Cost of products sold on our unaudited condensed consolidated statement of operations for the second quarter of fiscal 2024.

As subsequently discussed, this item negatively impacted the operating results for structural products in the second quarter of fiscal 2024.

Such adjustments were not material for the second quarter of fiscal 2025.

Specialty products - Net sales of specialty products, which include product types such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products, increased by $4.0 million, or 0.7%, to $543.5 million in the second quarter of fiscal 2025.

• This overall increase in net sales for specialty products in the current fiscal quarter was due to higher volume for engineered wood, millwork, and specialty lumber and panels, partially offset by lower pricing mainly on those same product types.

• Specialty products gross profit decreased by $4.1 million, or 3.9%, to $100.3 million in the current fiscal quarter due primarily to a competitive pricing environment.

• Specialty products gross margin percentage decreased by 80 basis points to 18.5% compared to 19.3% in the second quarter of fiscal 2024 due primarily to a competitive pricing environment.

• The $2.7 million adjustment related to duty and import matters discussed above at the Company level benefited the operating results for specialty products in the second quarter of fiscal 2024.

Excluding this benefit, specialty products gross margin percentage for second quarter of fiscal 2024 would have been 18.9% compared to 18.5% for the second quarter of fiscal 2025, a decrease of 40 basis points for the current quarter.

Structural products - Net sales of structural products, which include product types such as lumber, panels (including plywood and oriented strand board), rebar, and remesh, increased by $7.8 million, or 3.4%, to $236.6 million in the second quarter of fiscal 2025 compared to $228.9 million in the second quarter of fiscal 2024.

• This overall increase in net sales for structural products in the current fiscal quarter was due to higher volume on panels and lumber and higher pricing on lumber, partially offset by lower pricing on panels that was driven by external market factors.

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

markets during the second quarter of 2025 for lumber were up 17.6% and down 18.7% for panels.

Higher lumber prices were driven by tightening U.S.

sawmill output and dwindling import volumes.

• Structural products gross profit increased overall by $1.3 million, or 7.3%, to $19.4 million from $18.1 million in the prior year fiscal quarter.

Higher net sales in the current quarter were partially offset by margin compression due to

external market factors.

• Structural products gross margin percentage for the second quarter of fiscal 2025 was 8.2% compared to 7.9% in the second quarter of fiscal 2024.

The interim $2.4 million LCNRV provision discussed above at the Company level negatively impacted the operating results for structural products for the second quarter of fiscal 2024.

Such amounts were not material for the second quarter of fiscal 2025.

Our selling, general, and administrative (“SG&A”) expenses increased by $5.8 million, or 6.5%, compared to the second quarter of fiscal 2024.

This overall increase was due primarily to increased sales and logistics expenses driven by higher sales volumes, our strategy to grow sales in the multi-family channel, as well as expenses associated with our digital transformation.

Depreciation and amortization expense decreased $0.3 million compared to the second quarter of fiscal 2024.

We continue to focus on strategic capital investment.

Interest expense, net, which includes gross interest expense less interest income, was $8.5 million and $4.8 million in the second quarter of fiscal 2025 and second quarter of fiscal 2024, respectively, resulting in an increase in net interest expense of $3.7 million in the current fiscal quarter.

• Gross interest expense was $12.6 million and $11.2 million in the second quarter of fiscal 2025 and second quarter of fiscal 2024, respectively.

Gross interest expense in the second quarter of fiscal 2025 included additional expense of $0.5 million while interest expense for the second quarter of fiscal 2024 included a benefit of $0.4 million, both related to the aforementioned estimate for an accrual initially made and disclosed in the first quarter of 2024 related to amounts the Company believes it may owe for discrepancies in duties paid in prior years for certain imported goods (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 these amounts, gross interest expense in the second quarter of fiscal 2025 and second quarter of fiscal 2024 would have been $12.2 million and $11.6 million, respectively, an increase in the current fiscal quarter of $0.6 million compared to the second quarter of fiscal 2024.

This $0.6 million of additional interest expense in the current fiscal quarter was due to additional net finance leases added subsequent to the second quarter of fiscal 2024.

• Interest income was $4.2 million and $6.4 million in the second quarter of fiscal 2025 and second quarter of fiscal 2024, respectively.

This 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 rates paid on those deposits in the current fiscal quarter.

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.

Our effective income tax rates were 34.5% and 24.7% for the second quarters of fiscal 2025 and fiscal 2024, respectively.

Our effective income tax rates for the second quarters of fiscal 2025 and 2024 were both impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation for the quarterly periods.

The effective income tax rate for the second quarter of 2025 was also increased by adjustments to deferred income tax assets related to stock-based compensation.

Our effective income tax rate for the second quarter of fiscal 2024 was slightly offset by a benefit from the vesting of restricted stock units.

On July 4, 2025, the law formally titled “An Act to Provide for the Reconciliation Pursuant to Title II of H.

14” (commonly referred to as the “One Big Beautiful Bill” or “OBBB”) was signed into law.

We are evaluating the potential impacts that the OBBB may have on our income tax expense and deferred income tax assets and liabilities, including new provisions for bonus depreciation on certain types of assets.

However, at this time, we do not believe the OBBB will have a material impact on our annual effective income tax rate for fiscal 2025.

Our net income for the second quarter of fiscal 2025 was $4.3 million, or $0.54 per diluted share, versus $14.3 million, or $1.65 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.

First Six Months of Fiscal 2025 Compared to First Six Months of Fiscal 2024

For the first six months of fiscal 2025, the Company’s net sales were $1.49 billion, a decrease of $5 million, or 0.4%, compared to the first six months of fiscal 2024.

• The overall decrease in net sales in the current fiscal period was attributable to specialty products, partially offset by an increase for structural products.

Higher overall volume was offset by overall lower pricing driven by external market factors.

• Approximately 69% of the Company’s net sales in the first six months of fiscal 2025 were generated by specialty products, compared to approximately 70% in the first six months of fiscal 2024.

The Company’s gross profit for the first six months of fiscal 2025 decreased by $19.3 million, or 7.7%, to $230.8 million from $250.1 million in the prior year fiscal period.

• This decline in the Company’s gross profit in the 2025 fiscal period was attributable to both specialty products and structural products.

• 82% of the Company’s gross profit in the first six months of fiscal 2025 was generated by specialty products, compared to 83% for the first six months of fiscal 2024.

• The Company’s gross margin percentage was 15.5% for the 2025 fiscal period, a decrease from the 16.7% for the 2024 fiscal period.

• The Company benefited in the 2025 fiscal period and the 2024 fiscal period by $2.4 million and $16.9 million (excluding interest), respectively, for changes in retroactive rates for certain anti-dumping duties, and these amounts are reflected as reductions to the Company’s Cost of products sold in the respective fiscal periods (see Note 2, Inventory , to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q).

In the prior year fiscal period, the aforementioned $16.9 million credit to Cost of products sold was partially offset by $7.7 million (excluding interest) of expenses related to classification adjustments for certain imported goods (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).

These import duty items resulted in a net benefit of $9.1 million (excluding interest) to the Company’s Cost of products sold in the prior year fiscal period.

Excluding these net benefits for import duty items from the 2025 fiscal period and the 2024 fiscal period, the Company’s gross margin percentage would have been 15.3% and 16.1%, respectively.

As subsequently discussed, these items benefited the operating results for specialty products for the 2025 fiscal period and the 2024 fiscal period.

• The Company was negatively impacted by an interim $2.4 million LCNRV provision in the 2024 fiscal period to adjust the carrying values of certain structural lumber and structural panel inventory items to their net realizable values as of June 29, 2024.

As subsequently discussed, this item impacted the operating results for structural products in the 2024 fiscal period.

Such amounts were not material for the 2025 fiscal period.

Specialty products - Net sales of specialty products, which include product types such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products, decreased by $20.5 million, or 2.0%, to $1.02 billion in the first six months of fiscal 2025.

• The overall decline in net sales for specialty products in the current fiscal period was due to lower pricing for engineered wood, millwork, and specialty lumber and panels, partially offset by higher volume mainly for those same product types.

• Specialty products gross profit decreased by $18.3 million, or 8.8%, to $190.1 million, due primarily to a competitive pricing environment.

• Specialty products gross margin percentage decreased 140 basis points to 18.6% for the first six months of fiscal 2025 compared to 20.0% in the first six months of fiscal 2024, due primarily to a competitive pricing environment.

• The net impacts of the adjustments related to duty and import matters discussed above at the Company level increased specialty products gross profit for the 2025 fiscal period and the 2024 fiscal period by $2.4 million and $9.1 million net, respectively, and increased specialty products gross margin percentage by 0.3% and 0.9% net, respectively.

Structural products - Net sales of structural products, which include product types such as lumber, plywood, oriented strand board, rebar, and remesh, increased by $15.2 million to $466.5 million in the first six months of fiscal 2025.

• This overall increase in net sales for structural products was due primarily to volume increases for panels and lumber and pricing increases for lumber, partially offset by pricing declines for panels due to external market factors.

• Compared to the first six months of fiscal 2024, average commodity prices in U.S.

markets during the first six months of fiscal 2025 for lumber were up 15.3% and down 15.9% for panels.

Higher lumber prices were driven by tightening U.S.

sawmill output and dwindling import volumes.

• Gross profit for structural products decreased by $1.0 million, or 2.3%, to $40.8 million from $41.7 million in the prior-year fiscal period.

Higher net sales in the current year period were offset by margin compression due primarily to external market factors.

• Structural products gross margin percentage for the first six months of fiscal 2025 was 8.7%, a decline from 9.2% in the prior-year fiscal period.

Higher net sales in the 2025 fiscal period were offset by margin compression due primarily to external market factors.

• The interim $2.4 million LCNRV provision discussed above at the Company level negatively impacted the operating results for structural products for the 2024 fiscal period.

Such amounts were not material for the 2025 fiscal period.

Our SG&A expenses in the first six months of fiscal 2025 increased $8.7 million, or 4.8%, compared to the first six months of fiscal 2024.

This overall increase was due primarily to increased logistics expenses driven by higher sales volumes, our strategy to grow sales in the multi-family channel, as well as expenses associated with our digital transformation.

Depreciation and amortization expense decreased $0.2 million compared to the first six months of fiscal 2024.

We continue to focus on strategic capital investment.

Other operating, net improved by $2.0 million compared to the first six months of fiscal 2024.

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 operating, net on our unaudited condensed consolidated statement of operations for the first six months of fiscal 2024.

Interest expense, net, which includes gross interest expense less interest income, increased by $5.6 million compared to the first six months of fiscal 2024.

• Gross interest expense was $24.7 million and $24.3 million in the first six months of fiscal 2025 and first six months of fiscal 2024, respectively.

Gross interest expense in the first six months of fiscal 2025 and the first six months of fiscal 2024 included $0.5 million and $1.2 million, respectively, related to the aforementioned estimate for an accrual initially made and disclosed in the first quarter of 2024 related to amounts the Company believes it may owe for discrepancies in duties paid in prior years for certain imported goods (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 these amounts, gross interest expense in the first six months of fiscal 2025 and the first six months of fiscal 2024 would have been $24.2 million and $23.1 million, respectively, an increase in the current fiscal period of $1.1 million compared to the prior year fiscal period.

This $1.1 million increase in the current fiscal period was due to additional net finance leases added subsequent to the second quarter of fiscal 2024.

• Interest income was $9.7 million and $14.9 million in the first six months of fiscal 2025 and first six months of fiscal 2024, respectively.

Interest income in the current fiscal period and the prior year fiscal period included $0.5 million and $2.0 million, respectively, received with the aforementioned duty refunds related to changes in retroactive rates for certain 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 in the current fiscal period and prior year fiscal period would have been $9.2 million and $12.9 million, respectively, a decrease of $3.7 million in the current fiscal period.

This $3.7 million decrease in the current fiscal period was due to lower average balances for interest-bearing deposits of cash/cash equivalents and due to lower interest rates paid on those deposits in the current fiscal quarter.

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

Our effective income tax rates were 33.6% and 24.4% for the first six months of fiscal 2025 and the first six months of fiscal 2024, respectively.

Our effective income tax rates for both periods were impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation for the fiscal periods.

Our effective income tax rate for the first six months of fiscal 2025 was also impacted by adjustments to deferred income tax assets related to stock-based compensation which increased the effective income tax rate.

Our effective income tax rate for the first six months of fiscal 2024 benefited from the partial release of a state income tax valuation allowance for deferred income tax assets, which impacted only the first quarter of fiscal 2024.

As noted above in the discussion and analysis for the quarterly fiscal periods, we are evaluating the potential impacts of the OBBB, but at this time, we do not expect the provisions of the OBBB to have a material impact on our effective income tax rate for fiscal 2025.

Our net income for the first six months of fiscal 2025 was $7.1 million, or $0.87 per diluted share, versus $31.8 million, or $3.66 per diluted share, in the prior-year fiscal period.

Our net income for the first six months of fiscal 2025 decreased due primarily to the factors discussed above.

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

As of June 28, 2025, we had $387 million of cash and cash equivalents plus $343.5 million of availability on our revolving credit facility.

Senior Secured Notes

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

As of June 28, 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 March 29, 2025, we were in compliance with such covenants.

As of June 28, 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%.

As of June 28, 2025, this variable interest rate for the Revolving Credit Facility was 5.32%.

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 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.

As of June 28, 2025 and December 28, 2024, we had zero outstanding borrowings under our Revolving Credit Facility and available borrowing capacity was $343.5 million and $346.2 million, respectively, 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 $730.3 million as of June 28, 2025.

Our Revolving Credit Facility is scheduled to terminate on August 2, 2026, and we intend to renew it before that date.

Finance Lease Obligations

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.

Our finance lease obligations consist of leases for real estate, equipment, and vehicles totaling $317.6 million and $292.5 million as of June 28, 2025 and December 28, 2024, respectively.

Of the $317.6 million as of June 28, 2025, $242.0 million related to real estate and $75.6 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 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.

Net cash used in operating activities for the first six months of fiscal 2025 was $60.7 million compared to net cash provided of $4.7 million in the first six months of fiscal 2024.

The $65.3 million decrease in cash generated from operating activities during the first six months of fiscal 2025 was primarily a result of a $24.7 million decrease in net income for the current fiscal period and $37.9 million of net changes in operating assets and liabilities.

Investing Activities

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.

Net cash used in investing activities for the first six months of fiscal 2025 was $12.9 million compared to net cash used of $11.6 million in the first six months of fiscal 2024.

During the first six months of fiscal 2025 and first six months of fiscal 2024, we used cash of $15.5 million and $11.9 million, respectively, to acquire property and equipment.

In the current fiscal period, we received initial insurance proceeds of $2.4 million related to property and equipment that was damaged or destroyed due to Hurricane Helene at our Erwin, Tennessee owned facility in late third quarter of fiscal 2024.

Financing Activities

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.

Net cash used in financing activities totaled $45.3 million for the first six months of fiscal 2025 compared to net cash used of $23.4 million for the first six months of fiscal 2024.

During the first six months of fiscal 2025, we used cash of $35.4 million to repurchase shares of our common stock, compared to $14.5 million for the first six months of fiscal 2024.

Cash payments on finance lease obligations were higher by $1.7 million in the current fiscal period due to new finance leases added subsequent to June 29, 2024.

Common Stock Repurchases

During the first six months of fiscal 2025, we repurchased 469,129 shares of our common stock at an average price of $74.64 for a total of $35.0 million, under our 2023 stock repurchased authorization.

During the first six months of fiscal 2024, we repurchased 152,403 shares of our common stock at an average price of $98.28 for a total of $15.0 million under this same authorization.

These dollar amounts include broker commissions paid but exclude any excise tax that was paid or may be due on the repurchases under The Inflation Reduction Act of 2022.

As of June 28, 2025, there remained $11.5 million repurchase capacity under the 2023 authorization.

Between June 28, 2025 and July 25, 2025, we did not repurchase any additional shares of our common stock.

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.

On July 28, 2025, our board of directors authorized a new share repurchase program for $50 million.

The 2025 authorization may be used after exhaustion of the 2023 authorization.

Under our share repurchase program,s 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.

Net Working Capital

Net working capital is an important measurement we use to determine the efficiencies of our operations and our ability to readily convert assets into cash.

Net working capital is defined as the sum of accounts receivables and inventory, less accounts payable, each determined in accordance with GAAP and included in our consolidated balance sheets.

Net working capital is defined as the sum of accounts receivable and inventory, less accounts payable, each determined in accordance with GAAP and included in our consolidated balance sheets.

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 $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

Net working capital of $492.2 million as of June 28, 2025, compared to $411.5 million as of December 28, 2024, increased on a net basis by approximately $80.7 million, as shown below:

June 28, 2025 December 28, 2024 June 29, 2024

(In thousands)

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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.

Our investments in capital assets consist of purchases of 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 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.

For the first six months of fiscal 2025, we invested $16.4 million in long-lived assets primarily related to investments in our fleet, facility enhancements, and ongoing digital transformation.

We also added $32.9 million of property and equipment under finance leases during the first six months of fiscal 2025, primarily for new tractors and forklifts to enhance our logistics network.

For the first six months of fiscal 2024, we invested $11.9 million in long-lived assets primarily related to investments in our distribution facilities and upgrading our fleet.

We also added $11.2 million in new finance leases during the 2024 fiscal quarter for new forklifts to enhance our logistics network.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis