What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-03 compared with 2024-02-28 · 155 added, 117 removed, 203 unchanged (57% of the section changed)

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We do not intend our use or display of other companies’ trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.

1 Average price paid per share of common shares repurchased excludes excise tax.

As of January 1, 2024, the Company's share repurchases are subjected to a 1.0% excise tax enacted by the Inflation Reduction Act of 2022.

The amount of excise tax incurred is included in the Company's Consolidated Statement of Stockholders' Equity for the year ended December 31, 2024.

2 Pursuant to the $100.0 million repurchase authorization from the Board of Directors on October 19, 2023, and which expired on December 31,

See "Note 5 — Stockholder's Equity".

We design, manufacture and sell building construction products that are of high quality and performance, easy to use and cost-effective for customers.

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North America, Europe and Asia/Pacific.

In 2021, we shared our strategy for continuing to achieve above market revenue growth through a combination of organic and inorganic opportunities.

Our organic opportunities focused on expanding our product line with our current customers while also identifying new opportunities within our core competencies of wood and concrete products.

These new growth opportunities focused on gaining share with OEM customers, DIY and construction contractors, and providing more solutions for mass timber, concrete and structural steel construction.

In order to grow in these markets, we aspire to be among the leaders in engineered load-rated construction building products and systems and digital product offerings while leveraging our engineering expertise, deep-rooted relationships with top builders, engineers, contractors, code officials and distributors, along with our ongoing commitment to testing, research and innovation.

Importantly, we currently have existing products, testing results, distribution and manufacturing capabilities to support our growth ambitions.

This will ultimately be a function of expanding our sales and/or marketing functions to promote our products to different end users and distribution channels, expanding our customer base, and potentially introducing new products in the future.

Our commitment to continuous improvement has fostered our core Company ambitions, which we continue to pursue including:

Within the North America segment, our sales efforts are aligned to customer market teams dedicated to serving the following markets:

• Residential;

• Commercial;

• Original Equipment Manufacturers ("OEM");

• National Retail;

• Component Manufacturers

Our organic growth opportunities are focused on expanding our product lines with our current customers while also identifying new market share gain opportunities within our core product and market competencies.

In order to grow in these markets, we aspire to be among the leaders in engineered load-rated construction building products and systems and digital product offerings.

We also aspire to leverage our engineering expertise, deep-rooted relationships with top builders, engineers, contractors, code officials and distributors, along with our ongoing commitment to testing, research and innovation.

Importantly, we currently have existing products, testing results, distribution and manufacturing capabilities to support our ambitions.

Our commitment to continuous improvement has fostered our core Company ambitions, which we will pursue including:

• Strengthen our values-based culture;

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• Be an innovative leader in the markets we operate;

• Above market growth relative to the United States housing starts;

• An operating income margin within the top quartile of our proxy peers;

• Remain within the top quartile of our proxy peers for operating income margin;

• Integrate ETANCO and restoring our return on invested capital to be within the top quartile of our proxy peers.

We have made progress towards our key growth initiatives since they were first announced in 2021.

A few recent examples include:

• The acquisition and integration of ETANCO which has resulted in additional scale for our legacy European operations, as well as the opportunity to realize synergies in those operations;

• Converted component manufacturers to using our truss software and purchasing our truss plate and connectors solution sets, including a major component manufacturer;

• Our announced alliance with Structural Technologies drove record revenue of our concrete strengthening solutions, while our field support and strong industry relationships continued to drive specifications of our anchors, fasteners, cold-formed steel, and structural steel products on commercial projects;

• Expansion of our Outdoor Accents® decorative hardware, fasteners and anchors product lines, which contributed to our growth in the DIY or construction contractor segments of our national retail market;

• Designed, manufactured, and installed many critical connections in the construction of a 112-foot wood building that was used for the world’s tallest shake table test;

• Completed strategic asset acquisitions to accelerate the expansion of our product line to meet our customer needs;

• Made strategic investments in software development critical to the component manufacturing market segment as well as other digital product offerings to support customers in our residential and national retail markets;

• Achieved an industry-leading product fulfillment rate and increased our same day delivery service in North America;

• Completed our path-to-market shift away from two-step distribution in North America, enabling us to sell our complete product line and drive additional market share gains;

• Continued growing United States sales volumes above United States housing starts growth;

• Rolled out over 50 new products during 2023 (a Company record);

• Re-aligned our North America sales team to be customer market focused with the five groups:

residential, commercial, OEM, national retail and component manufacturers;

• Invested in venture capital funds and other companies focused on the home building industry and related new technologies.

We believe this progress is the result of our high service levels, increasingly diverse portfolio of products and software as well as our commitment to innovation and developing complete solutions for the markets we serve.

As we continue to make progress on our growth initiatives, we believe we can continue to achieve above market growth in the United States relative to United States housing starts for fiscal 2024 and beyond.

• Above market growth relative to the U.S.

housing starts (exceeding our historical average volume performance in North America of approximately 250 basis points above the housing starts market);

• An operating income margin at or above 20%;

• Earnings per share growth exceeding net revenue growth.

Since announced in 2021, we made great progress on our key growth initiatives.

Examples include:

• Added approximately $1.0 billion in revenue and $200.0 million in operating profit.

• Realigned our sales team by end market, significantly reduced two-step distribution, and made significant investments in our field sales and engineering teams.

• Made significant footprint investments in both production and warehouses.

Our investment in our new Gallatin Tennessee facility enables us to onshore additional fastener and anchor production, and the operation will in-source key manufacturing processes such as heat treating and coating of fasteners.

Additional warehouse capabilities will also enhance next day delivery for our North American customers.

• Invested significantly in digital solutions, combined with the other initiatives strengthened our business model, which drove hardware sales, created value for our customers and made us a partner of choice.

• Strengthened our senior leadership team through a combination of internal development and external experts.

As a result, we are now in an even stronger market position in connectors with significant gains in both fasteners and anchors.

In addition, due to our high service levels, increasingly diverse portfolio of products and software as well as our commitment to innovation and developing complete solutions for the markets we serve, we believe we can continue to achieve above market growth in the North America relative to U.S.

housing starts for fiscal 2025 and beyond.

These examples further emulate our Founder, Barclay Simpson’s, nine principles of doing business, and more specifically the focus and obsession on customers and users.

Non-GAAP Financial Measures

In addition to financial information prepared in accordance with GAAP, we use Adjusted EBITDA as a non-GAAP financial measure in evaluating the ongoing operating performance of our business.

The Company defines adjusted EBITDA as net income (loss) before income taxes, adjusted to exclude depreciation and amortization, integration, acquisition and restructuring costs, non-qualified deferred compensation adjustments, goodwill impairment, gain on bargain purchase, net loss or gain on disposal of assets, interest income or expense, and foreign exchange and other expense (income).

We use adjusted EBITDA to

provide additional insight into the Company’s operating performance in light of the significant levels of growth investment we have made in our operations, the effect depreciation as well as acquisition and integration costs will have on our operating results.

We believe this will also provide a better approximation of our cash flows compared to operating income.

Factors Affecting Our Results of Operations

The Company’s business, financial condition and results of operations depends in large part on the level of United States housing starts and residential construction activity.

Both single-family and multi-family housing starts decreased during 2023 compared to the prior two years, primarily due to interest rate increases and inflation.

Lower housing starts could result in lower demand, which would affect the Company's sales and possibly operating profit,

Unlike lumber or other products that have a more direct correlation to United States housing starts, our products are used to a greater extent in areas that are subject to natural forces, such as seismic or wind events.

The Company’s business, financial condition, and results of operations depend in large part on the level of U.S.

housing starts and residential construction activity.

Overall housing starts decreased 3.9% over the trailing twelve months ending December 31, 2024 compared to the trailing twelve months ending December 31, 2023.

Lower housing starts in the U.S.

could result in lower demand, which would affect the Company's sales and possibly operating profit.

Unlike lumber or other products that have a more direct correlation to U.S.

housing starts, our products are used to a greater extent in areas that are subject to natural forces, such as seismic or wind events.

Our products are generally used in a sequential progression that follows the construction process.

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Our sales and income have historically been lower in the first and fourth quarters than in the second and third quarters of a fiscal year.

Due to efforts in diversifying our global footprint with the acquisition of ETANCO and changing our path to market in the United States, sales from our product line, customer base and customer purchases are becoming less seasonal.

Political and economic events such as rising energy costs, volatility in the steel market, stressed product transportation systems and increasing interest rates can also have an effect on our gross and operating profits as well.

Increasing interest rates, tariffs, political uncertainty due to rising energy costs, volatility in the steel market and stressed product transportation systems, can also have an effect on our gross and operating profits as well.

Due to efforts in diversifying our geographic footprint, product offerings, and changing our path to market in the U.S., sales from our product lines, customer base and customer purchases are becoming less seasonal.

Changes in raw material cost could impact the amount of inventory on-hand, and negatively affect our gross profit and operating margins depending on the timing of raw material purchases or how much sales prices can be increased to offset any increases in raw material costs.

Changes in labor, freight and warehousing costs, could also negatively impact gross profit depending on timing and amount of sales price can be increased to offset the higher costs.

Our operations also expose us to risks associated with pandemics, epidemics or other public health crises.

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Historically, our North America segment has generated more revenues from wood construction products compared to concrete construction products.

North America sales increased 0.9% for the year ended December 31, 2023 compared to December 31, 2022.

Our wood construction product sales decreased 0.9% for the year ended December 31, 2023 compared to December 31, 2022, primarily due to product price decreases implemented during the first quarter of 2023, partly offset by increased sales volumes.

Our concrete construction product sales increased 9.9% over the same periods due to product price increases to offset rising raw material costs and higher sales volumes.

Over the last several years, our historical average volume growth in North America has exceeded the housing starts market growth by approximately 250 basis points.

We believe 2024 North America sales volumes will continue to outpace the housing starts market with 2024 housing starts projected to grow in the low single digits relative to fiscal year 2023 housing starts.

During 2023, work continued on the Columbus facility expansion and work commenced on replacing our Gallatin facility.

We expect the expansion and replacement facility will improve our overall service, production efficiencies and safety in the workplace, as well as reduce our reliance on certain outsourced finished goods and component products and continue to ensure we have ample capacity to meet our customer needs.

North America net sales increased 1.1% for the year ended December 31, 2024 compared to December 31, 2023.

Our wood construction product net sales increased 0.5% for the year ended December 31, 2024 compared to December 31, 2023, primarily due to increased sales volumes, partly offset by product price decreases implemented during the first quarter of 2023.

Our concrete construction product sales increased 5.0% over the same periods.

For 2025, U.S.

housing starts could improve in the low-single digit range from 2024 levels, with growth weighted towards the second half of the year.

With the investments we have made, we believe we will be able to continue to grow net sales above the US housing starts market, one of our company ambitions.

Operating income decreased 7.1% to $439.6 million from $473.2 million on lower gross profits as well as increased personnel costs software and hardware costs and professional fees, party offset by lower incentive costs.

Fiscal year 2024 operating margins were also affected by recent acquisitions including acquisition and integration related costs.

For 2025, incremental investments in the current business will be limited until the U.S.

housing market shows long-term improvement.

During 2024, work continued on our Columbus, Ohio facility expansion as well as the construction of our new Gallatin, Tennessee facility.

We expect the expansion and operation of these facilities to be completed and commence in 2025.

The expanded and new facilities will improve our overall service, production efficiencies and safety in the workplace, as well as reduce our reliance on certain outsourced finished goods and component products and continue to ensure we have ample capacity to meet our customer needs.

These investments reinforce our core business model differentiators to remain the partner of choice as we continue to produce products locally and ensure superior levels of customer service.

Europe's operating results for the fiscal year ending December 31, 2023 includes twelve months of ETANCO operating results, while fiscal year ending December 31, 2022 includes the results of ETANCO as of the April 1, 2022 acquisition date.

Europe sales increased 20.1% for the year ended December 31, 2023 compared to December 31, 2022, primarily due to ETANCO as well as the positive effect of $12.7 million in foreign currency translation related mostly to Europe's currencies strengthening against the United States dollar.

Gross profit increased $51.4 million primarily due to the acquisition of ETANCO as well as due to lower material costs.

Cost of sales in the prior year period included a $13.6 million inventory fair-value adjustment as a result of purchase accounting with respect to the acquisition of ETANCO.

Operating income increased $34.9 million, primarily due to ETANCO.

Operating income in the prior period was negatively impacted by the $13.6 million in non-recurring fair-value adjustments noted above and $12.7 million in higher acquisition and integration costs.

Fiscal 2024 operating margins will include anticipated integration costs estimated to range between $4.0 million to $5.0 million.

Europe net sales decreased slightly for the fiscal year December 31, 2024 compared to December 31, 2023, due to lower sales volumes, offset by the positive effect of $3.7 million in foreign currency translation.

Both wood and concrete construction product sales decreased for the twelve months ended December 31, 2024 compared to the twelve months ended December 31, 2023.

Gross profit decreased $8.1 million primarily due to increased factory overhead, warehouse and freight costs, as a percentage of net sales.

Operating income decreased $12.2 million on lower gross profits and increased costs supporting the optimization of the European footprint, including the realization of defensive Etanco related synergies, which resulted in $5.7

million in restructuring and severance charges for fiscal year 2024.

As a result of these efforts and projected increased sales, we currently anticipate Europe's 2025 operating margin to improve compared to fiscal year 2024.

Our Asia/Pacific segment has generated revenues from both wood and concrete construction products.

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Based on business trends and conditions, the Company's outlook for the full fiscal year ending December 31, 2025 is as follows:

• Operating margin is estimated to be in the range of 20.0% to 21.5%, including $86.1 million in depreciation and amortization expense.

• Given the uncertainty regarding 2025 U.S.

housing starts compared to prior year housing starts, consolidated operating margin is estimated to be in the range of 18.5% to 20.5% with the low end of the range based on flat to declining 2025 housing starts compared to prior year.

The operating margin range includes a projected gain between $10.0 million to $12.0 million from the sale of the old Gallatin facility based on a $19.0 million contracted sale price.

• The effective tax rate is estimated to be in the range of 25.5% to 26.5%, including both federal and state income tax rates as well as international income tax rates, and assuming no tax law changes are enacted.

• Capital expenditures are estimated to be approximately $200.0 million, which includes $120.0 million for the Columbus, Ohio facility expansion and the new Gallatin, Tennessee fastener facility construction, some of which may carry over to fiscal year 2025.

• Capital expenditures are estimated to be approximately $150.0 million to $170.0 million, which includes $75.0 million for the Columbus, Ohio facility expansion and construction of the new Gallatin, Tennessee facility.

Results of Operations

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Research and development and other engineering expenses 4.2 % 4.2 % 3.2 %

4.2 % 3.2 % 3.8 %

Selling expense 9.8 % 9.2 % 8.0 %

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Income from operations 19.3 % 21.4 % 21.8 %

Interest expense, net and other 0.2 % (0.4) % (0.2) %

Interest income and other finance costs, net 0.2 % 0.2 % (0.4) %

Other and foreign exchange loss, net

(0.1) % (0.1) % (0.2) %

Income before taxes 19.4 % 21.5 % 21.2 %

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Comparison of the Years Ended December 31, 2024 and 2023

Unless otherwise stated, the results announced below results, when providing comparisons (which are generally indicated by words such as “increased,” “decreased,” “unchanged” or “compared to”), compare the results of operations for the year ended December 31, 2023, against the results of operations for the year ended December 31, 2022 and include the results of the acquisition of FIXCO Invest S.A.S ("ETANCO") on April 1, 2022.

2023 full year comparisons include twelve months of ETANCO operating results for the fiscal year ending December 31, 2023 compared to nine months for the fiscal year ending December 31, 2022.

Unless otherwise stated, the results announced below, when referencing “both years,” refer to the year ended December 31, 2022 and the year ended December 31, 2023.

Beginning in 2022, the Company changed its presentation for both the North America and the Administrative and all other segment's statement of operations to display allocated expenses and management fees as a separate item below income from operations.

During 2021, allocated expenses and management fees between the two segments were previously included in gross profit, operating expenses and in income from operations and have been adjusted herein to conform to the 2022 presentation.

Consolidated income from operations, income before tax and net income for all periods presented below are not affected by the change in presentation

Unless otherwise stated, the results announced below, when providing comparisons (which are generally indicated by words such as “increased,” “decreased,” “unchanged” or “compared to”), compare the results of operations for the year ended December 31, 2024, against the results of operations for the year ended December 31, 2023.

The following table shows the change in the Company’s operations from 2023 to 2024, and the increases or decreases from the prior year, for each category by segment:

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Operating expenses 564,250 21,755 5,047 971 (1,513) 590,510

Net gain (loss) on disposal of assets (1,317) 66 908 39 28 (276)

Net gain on disposal of assets

(276) (145) 26 (24) (28) (447)

Acquisition and integration related costs 4,632 — (947) — 2,128 5,813

Income from operations 475,149 (33,664) (12,192) (828) 1,510 429,975

Interest income (expense), net and other financing costs (7,594) (639) (3,354) 239 14,739 3,391

Other & foreign exchange gain (loss), net (3,408) 4,729 2,306 (98) (5,522) (1,993)

Income before taxes

Interest income and other financing costs, net

3,391 597 763 (578) 1,104 5,277

Other and foreign exchange loss, net

(1,993) (3,844) (3,397) 1,485 6,540 (1,209)

Income before taxes 476,547 (36,911) (14,826) 79 9,154 434,043

Provision for income taxes 122,560 (10,762) (2,103) (42) 2,166 111,819

Net income $ 353,987 $ (26,149) $ (12,723) $ 121 $ 6,988 $ 322,224

Net Sales increased 4.6% to $2,213.8 million from $2,116.1 million primarily due to the acquisition and integration of ETANCO as well as the positive effect of $12.7 million in foreign currency translation related mostly to Europe's currencies weakening against the United States dollar.

Net Sales increased approximately 0.8% to $2.2 billion from prior year, primarily due to higher sales volumes, incremental sales from the Company's 2024 acquisitions, and the positive effect of $3.7 million in foreign currency translation related mostly to Europe's currencies weakening against the United States dollar.

Wood construction product net sales, including sales of connectors, truss plates, fastening systems, fasteners and shearwalls, represented 85.1% and 85.4% of the Company’s total net sales for the years ended December 31, 2024 and 2023, respectively.

Concrete construction product net sales, including sales of adhesives, chemicals, mechanical anchors, powder actuated tools and reinforcing fiber materials, represented 14.8% and 14.5% of the Company’s total net sales for the years ended December 31, 2024 and 2023, respectively.

Gross profit increased to $1,043.8 million from $941.3 million, primarily due to the acquisition and integration of ETANCO.

Gross margins increased to 47.1% from 44.5%, primarily due to lower material costs.

Cost of sales in the prior year period included a $13.6 million inventory fair-value adjustment as a result of purchase accounting with respect to the acquisition of ETANCO.

Gross margins, including some inter-segment expenses, which were eliminated upon consolidation, and excluding certain expenses that are allocated according to product group, increased from 44.4% to 47.2% for wood construction products and increased from 43.9% to 46.0% for concrete construction products.

Research and development and other engineering expense increased 34.8% to $92.2 million from $68.4 million, primarily due increased personnel costs of $11.7 million and professional fees of $5.7 million associated with our strategic growth initiatives and to further our Building Technologies offering, $3.2 million in variable compensation, and $1.2 million in depreciation and amortization.

Selling expense increased 20.4% to $204.0 million from $169.4 million, primarily due to increases of $14.0 million in personnel costs, $7.3 million in sales commission expense, $2.8 million in travel-related expenses, $2.8 million in professional fees, and $2.5 million in other variable compensation.

General and administrative expense increased 17.3% to $268.1 million from $228.5 million, primarily due to increases of $12.5 million in personnel costs, $7.6 million in depreciation and amortization, $6.0 million in variable compensation, and $1.6 million in travel costs.

Gross profit decreased approximately 1.7% to $1.0 billion from prior year, primarily due to lower gross margins.

Gross margins decreased to 46.0% from 47.1%, primarily due to higher factory and overhead as well as warehouse and freight costs, partly offset by lower material costs, as a percentage of net sales.

Gross margins, including some inter-segment expenses, which were eliminated upon consolidation, and excluding certain expenses that are allocated according to product group, decreased from 47.2% to 45.6% for wood construction products and increased from 46.0% to 47.5% for concrete construction products.

Research and development and other engineering expens e increased 1.5% to $93.6 million from $92.2 million, primarily due increased personnel costs of $4.6 million partially offset by a decrease of $3.2 million in variable incentive compensation costs.

Selling expense increased 7.6% to $219.4 million from $204.0 million, primarily due to increases of $17.3 million in personnel costs and $4.0 million in advertising and trade shows, partially offset by a decrease of $7.9 million in variable compensation costs.

General and administrative expense increased 3.5% to $277.5 million from $268.1 million, primarily due to increases of $12.8 million in personnel costs, $7.1 million in professional fees, and $1.6 million in depreciation and amortization, partially offset by a decrease of $13.2 million in variable compensation costs.

Our effective income tax rate increased to 25.8% from 25.7%.

Net income was $354.0 million compared to $334.0 million.

Consolidated net income was $322.2 million compared to $354.0 million.

Diluted net income per share of common stock was $7.60 compared to $8.26.

Adjusted EBITDA 1 of $520.1 million decreased 6.2% compared to $554.2 million, primarily due to lower gross profits and higher operating expenses, as noted above.

The following table shows net sales by segment for the years ended December 31, 2024 and 2023, respectively:

(in thousands) North

(in thousands)

America Europe Asia/

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December 31, 2024 1,735,879 479,055 17,205 2,232,139

Increase $ 15,381 $ 80,453 $ 1,882 $ 97,716

Percentage increase 0.9 % 20.1 % 12.8 % 4.6 %

Increase (decrease)

$ 19,457 $ (1,701) $ 580 $ 18,336

Percentage increase (decrease)

1.1 % (0.4) % 3.5 % 0.8 %

The following table shows segment net sales as percentages of total net sales for the years ended December 31, 2024 and 2023, respectively:

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December 31, 2024 850,504 168,982 5,798 567 1,025,851

Increase $ 51,827 $ 51,432 $ 769 $ (1,566) $ 102,462

Percentage increase 6.4 % 40.9 % * * 10.9 %

Increase (decrease) (12,053) (8,066) 119 2,096 (17,904)

Percentage decrease

(1.4) % (4.6) % * * (1.7) %

* The statistic is not meaningful or material.

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North America

• Net sales increased 0.9% primarily due to higher sales volumes, partly offset by price decreases implemented during the first quarter of 2023.

• Gross margin increased to 50.3% from 47.7%, primarily due to lower raw material and labor costs as a percentage of net sales.

• Research and development and engineering expense increased $21.9 million, primarily due increased personnel costs of $7.0 million and professional fees of $5.8 million associated with our strategic growth initiatives and to further our Building Technologies offering, $3.1 million in variable compensation, and $1.0 million in depreciation and amortization.

• Selling expense increased $23.6 million, primarily due to increases of $10.5 million in personnel costs, $5.0 million in sales commission expense, $2.2 million in professional fees, $2.1 million in travel-related expenses, and $1.6 million in other variable compensation.

• General and administrative expense increased $18.9 million, primarily due to increases of $6.9 million in personnel costs, $4.3 million in computer software and hardware costs, $2.7 million in variable compensation, and $1.4 million in depreciation and amortization.

• Income from operations decreased $12.7 million , primarily due to higher operating expenses including personnel costs, professional fees, variable compensation, sales commission expense, and computer software and hardware costs.

• Net sales increased 20.1%, primarily due to the acquisition and integration of ETANCO as well as the positive effect of $12.7 million in foreign currency translation related mostly to Europe's currencies strengthening against the United States dollar.

• Gross margin increased to 36.8% from 31.4% resulting in an increase in gross profit of $51.4 million, primarily due to lower raw material costs as a percentage of net sales.

Cost of sales in the prior year included a $13.6 million non-recurring fair-value adjustment for inventory costs as a result of purchase accounting with respect to the acquisition of ETANCO.

• Income from operations increased $34.9 million , primarily due to higher gross profit and lower acquisition and integration costs.

Prior year costs included a $13.6 million non-recurring fair-value adjustment for inventory costs as a result of purchase accounting with respect to the acquisition of ETANCO.

• Net sales increased 1.1% primarily due to higher sales volumes and incremental sales from the Company's 2024 acquisitions.

• Gross margin decreased to 49.0% from 50.3%, primarily due to higher factory and overhead as well as warehouse costs, partially offset by lower material costs, as a percentage of net sales.

• Research and development and engineering expense decreased $0.3 million.

• Selling expense increased $14.3 million, primarily due to increases of $16.9 million in personnel costs, $2.9 million in advertising and trade shows, partially offset by a decrease of $7.7 million in variable compensation costs.

1 Adjusted EBITDA is a non-GAAP financial measure and it is defined in the Non-GAAP Financial Measures Item 7.

For a reconciliation of Adjusted EBITDA to U.S.

GAAP ("GAAP) net income see the schedule titled "Reconciliation of Non-GAAP Financial Measures."

• General and administrative expense increased $7.7 million, primarily due to increases of $7.3 million in personnel costs and $4.6 million in professional and legal fees, partially offset by a decrease of $5.7 million in variable compensation costs.

• Income from operations decreased $33.7 million, primarily due to lower gross profit as well as increases in operating expenses.

The operating expense increases were driven by higher personnel costs, professional fees, and travel-related expenses, which were partially offset by a decrease in variable compensation costs.

• Net sales de creased 0.4%, primarily due to lower sales volumes.

Net sales benefited from the positive effect of approximately $3.7 million in foreign currency translation.

• Gross margin decreased to 35.3% from 36.8% , p rimarily due to higher factory and overhead as well as warehouse and freight costs, partly offset by lower material costs, as a percentage of net sales.

• Income from operations decreased $12.2 million, primarily due to lower gross profit as well as $5.0 million in higher operating expenses including personnel costs.

• For information about the Company’s Asia/Pacific segment, please refer to the table above setting forth changes in our operating results for the years ended December 31, 2024 and 2023.

Administrative and All Other

• General and administrative expense increased $4.4 million, primarily due to increases of $1.2 million in variable compensation, $1.0 million in personnel costs, and $1.0 million professional and legal fees.

• General and administrative expense decreased $1.5 million, primarily due to a decrease of $6.1 million in variable compensation costs, partially offset by increases of $2.3 million in professional and legal fees and $1.9 million in personnel costs.

Critical Accounting Policies and Estimates

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Cost includes all costs incurred in bringing each product to its present location and condition, as follows:

• Raw materials and purchased finished goods — principally valued at cost determined on a weighted average basis;

• In-process products and finished goods — cost of direct materials and labor plus attributable overhead based on a normal level of activity.

• Raw materials and purchased finished goods — principally valued at a cost determined on a weighted average basis;

• In-process products and finished goods — the cost of direct materials and labor plus attributable overhead based on a normal level of activity.

The Company applies net realizable value and makes estimates for obsolescence to the gross value of inventory.

The Company estimates net realizable value based on estimated selling price less further costs through completion and disposal.

The Company estimates net realizable value is based on estimated selling price less further costs expected to be incurred t hrough completion and disposal.

The Company impairs slow-moving products by comparing inventories on hand to projected demand.

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For each of these reporting units, the Company aggregated the components because management concluded that they are economically similar, and that the goodwill is recoverable from these components working in concert.

We applied the ("Step 1") approach where the Company compares the fair value of the reporting unit to its carrying value during the annual impairment assessment performed in the fourth quarter of 2023.

For this qualitative assessment, we assessed various assumptions, events and circumstances that would have affected the estimated fair value of the reporting units as

compared to their quantitative fair value measurement determined in the fourth quarter of 2023.

The fair value calculation uses both the income approach (discounted cash flow method) and the market approach, equally weighted.

If the Company determines that the carrying value of the net assets assigned to the reporting unit, including goodwill, exceeds the fair value of the reporting unit, no further action is taken.

If the Company determines that the carrying value of a reporting unit’s goodwill exceeds its implied fair value, the Company will record an impairment charge equal to the difference between the implied fair value of the goodwill and the carrying value.

We completed our annual impairment assessment by performing a qualitative assessment during the annual impairment assessment performed in the fourth quarter of 2022.

For this qualitative assessment, we assessed various assumptions, events and circumstances that would have affected the estimated fair value of the reporting units.

We applied the ("Step 0") approach in the fourth quarter of 2024 to assess qualitative factors related to the goodwill of the reporting units to determine whether it is necessary to perform an impairment test.

For this qualitative assessment, we assessed various assumptions, events and circumstances that could have affected the estimated fair value of the reporting units.

Based on the qualitative assessment performed, the Company concluded that there was no evidence of events or circumstances that would indicate a material change from the Company’s prior year quantitative assessment by reporting unit and therefore, it was more likely than not that the estimated fair value of reporting units exceeded their respective carrying values.

The 2023 and 2022 annual testing of goodwill for impairment did not result in impairment charges.

The annual testing of goodwill for impairment did not result in impairment charges.

Revenue from Contracts with Customers

The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer at a point in time.

The Company's general shipping terms are Incoterm C.P.T.

Generally, the Company's revenue contract with a customer exists when (1) the goods are shipped, services are rendered, and the related invoice is generated, (2) the duration of the contract does not extend beyond the promised goods or services already transferred and (3) the transaction price of each distinct promised product or service specified in the invoice is based on its

relative stated standalone selling price.

The Company recognizes revenue when it satisfies a performance obligation by transferring control of a product to a customer at a point in time.

The Company's shipping terms provide the primary indicator of the transfer of control.

The general shipping terms are Incoterm C.P.T.

shipping point), where the title, and risk and rewards of ownership transfer at the point when the products are no longer on the Company's premises.

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The Amended and Restated Credit Agreement provides for a 5-year revolving credit facility of $450.0 million, which includes a letter of credit-sub-facility up to $50.0 million, and for a 5-year term loan facility of $450.0 million.

As of December 31, 2023, the Company had borrowings of $75.0 million under the revolving credit facility and $410.6 million under the term loan facility, and has $375.0 million available to borrow under the revolving credit facility.

As of December 31, 2024, the Company had no borrowings under the revolving credit facility and $388.1 million under the term loan facility, and has $450.0 million available to borrow under the revolving credit facility.

The Company has certain contractual obligations, primarily debt interest, operating leases, and purchase obligations, which include annual facility fees.

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Equity investment, goodwill and intangible assets 903,498 883,079 872,699

Net working capital

Non-cash net working capital

570,602 521,362 529,945

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Financing activities (261,464) (199,034) 465,526

Cash flows from operating activities result primarily from our earnings, and are also affected by changes in operating assets and liabilities which consist primarily of working capital balances.

Cash flows from operating activities result primarily from our earnings before non-cash items such as depreciation, amortization, and stock based compensation, and are affected by changes in operating assets and liabilities which consist primarily of working capital balances.

Our revenues are derived from manufacturing and sales of building construction materials.

Our operating cash flows are subject to seasonality and are cyclically associated with the volume and timing of construction project starts.

For example, trade accounts receivable is generally at its lowest at the end of the fourth quarter and increases during the first, second and third quarters.

In 2023, operating activities provided $427.0 million in cash and cash equivalents as a result of $354.0 million from net income and adding back $101.8 million for non-cash adjustments from net income which includes depreciation and amortization, stock-based compensation and non-cash lease expense, partially offset by a decrease of $28.8 million for the net change in operating assets and liabilities.

Cash used in investing activities of $103.3 million during the year ended December 31, 2023, was mostly for capital spending of $88.8 million, which was primarily used for machinery and equipment purchases and facility expansion projects including a land purchase.

Based on current information and subject to future events and circumstances, capital expenditures are estimated to be approximately $200.0 million for 2024 including the expected spend of $120.0 million on our previously announced Columbus, Ohio facility expansion and replacement of Gallatin, Tennessee facility, with some spend potentially may carrying over to 2025.

The remaining $80.0 million in capital expenditures will be primarily focused on purchases of new equipment to support increased productivity and efficiencies, enhancements to our existing facilities to expand our manufacturing footprint in-line with increasing customer needs, as well as investments for adjacencies and key growth initiatives.

Our operating cash flows are impacted by prevailing macro-economic conditions and subject to seasonality, which is cyclically associated with the volume and timing of construction project starts.

For example, as a result of seasonality, our trade accounts receivable is generally at its lowest at the end of the fourth quarter and increases during the first, second and third quarters as construction activity ramps up in markets we serve.

In 2024, cash provided by operating activities of $338.2 million in cash and cash equivalents as a result of $322.2 million from net income and adding back $113.4 million for non-cash adjustments from net income which includes depreciation and amortization, stock-based compensation and non-cash lease expense, partially offset by a decrease of $97.5 million for the net change in operating assets and liabilities.

The net change in operating assets and liabilities included increases of $50.4 million in inventory and $12.7 million in other current assets as well as a $17.0 million net change in other non-current assets and liabilities.

Cash used in investing activities of $259.3 million during the year ended December 31, 2024, was primarily for capital spending of $180.4 million for facility expansion projects, and machinery and equipment purchases as well as $79.2 million for the acquisitions of Calculated Structured Designs, Inc.;

Monet DeSauw, Inc.

and certain properties of Callaway Properties, LLC ("Monet");

and QuickFrames USA, LLC.

In which Monet was acquired for $48.7 million net of cash received.

Based on current forecasts, capital expenditures are estimated to range between $150.0 million to $170.0 million for 2025 including the expected spend of $75.0 million to complete the Columbus, Ohio facility expansion and replacement of Gallatin, Tennessee facility.

The remaining $75.0 million to $95.0 million in capital expenditures will be primarily focused on purchases of new equipment to support increased productivity and efficiencies, the timing of which is subject to future events and circumstances.

Cash used in financing activities of $261.5 million during the year ended December 31, 2024, consisted primarily of $100.8 million in loan principal payments, $100.0 million for the repurchase of the Company’s common stock and $46.5 million used to pay cash dividends.

During 2023, we purchased and received approximately 361 thousand shares of the Company’s common stock on the open market at an average price of $138.60 per share, for a total of $50.0 million under a previously announced $100.0 million share repurchase authorization (which expired at the end of 2023).

The Company purchased and received approximately 559 thousand shares of it’s common stock on the open market at an average price of $178.83 per share.

On October 23, 2024, the Company's Board of Directors (the "Board") authorized the Company to repurchase up to $100.0 million of the Company's common stock, effective January 1, 2025 through December 31, 2025.

From February 1, 2025 to February 28, 2025, the Company repurchased 146,640 shares of the Company’s common stock in the open market at an average price of $170.48 per share for a total of approximately $25.0 million.

Further, on January 31, 2025, the Board declared a quarterly cash dividend of $0.28 per share payable on April 23, 2025 to stockholders of record on April 3, 2025, and estimated to be $11.8 million in total.

For the fiscal year ended December 31, 2023, the Company returned $95.2 million to the Company's stockholders, which represents 28.1% of our free cash flow from operations during the same period.

Since the beginning of 2021 to the fiscal year ended December 31, 2023, we have returned $283.5 million to stockholders, which represents 36.2% of our free cash flow and

over the same period the Company has repurchased over $1.4 million shares of the Company's common stock, which represents approximately 3.2% of the outstanding shares of the Company's common stock.

For the fiscal year ended December 31, 2024, the Company returned $146.5 million to the Company's shareholders, which represents 92.8% of our free cash flow from operations during the same period.

Since the beginning of 2021 to the fiscal year ended December 31, 2024, the Company has returned $430.0 million to shareholders, which represents 45.7% of our free cash flow.

During the same period the Company has repurchased approximately 2.0 million shares of the Company's common stock, which represents approximately 4.5% of the outstanding shares of the Company's common stock.

Cash flows from operating activities years ended December 31, 2023 and 2022 are incorporated by reference to Form 10-K 2023 filing.

Reconciliation of Non-GAAP Financial Measures

(In thousands) (Unaudited)

A reconciliation of adjusted EBITDA to net income, the most directly comparable GAAP measure, is set forth below.

Twelve Months Ended December 31,

Net Income $ 322,224 $ 353,987

Provision for income taxes 111,819 122,560

Interest (income) expense, net and other financing costs (5,277) (3,391)

Depreciation and amortization 84,584 74,707

Other* 6,732 6,382

Adjusted EBITDA $ 520,082 $ 554,245

Includes acquisition, integration, restructuring related expenses, non-qualified deferred compensation plan adjustments, other & foreign exchange loss net, and net loss or gain on disposal of assets.

Contingencies

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Inflation and Raw Materials

Inflation rates increased during fiscal year 2023, which have negatively affected labor costs and other costs of doing business, and as such may adversely affect our operating profits if we cannot recover the higher costs through price increases.

Inflation rates continued to increase during fiscal year 2024, which negatively affected labor costs and other costs of doing business, and as such may adversely affect our operating profits if we cannot recover the higher costs through price increases.

Our main raw material is steel, and as such, increases in steel prices may adversely affect our gross margin if we cannot recover the higher costs through price increases.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis