Simpson Manufacturing Co., Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Each of the terms the “Company,” “we,” “our,” “us” and similar terms used herein refer collectively to Simpson Manufacturing Co., Inc., a Delaware corporation, and its wholly-owned subsidiaries, including Simpson Strong-Tie Company Inc., unless otherwise stated. The Company regularly uses its website to post information regarding its business and governance. The Company encourages investors to use http://www.simpsonmfg.com as a source of information about the Company. The information on our website is not incorporated by reference into this report or other material we file with or furnish to the Securities and Exchange Commission (the “SEC”), except as explicitly noted or as required by law. The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company’s consolidated financial condition and results of operations. This discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and notes thereto included in this report. “Strong-Tie” and our other trademarks appearing in this report are our property. This report contains additional trade names and trademarks of other companies. We do not intend our use or display of other companies' trade names or trademarks to imply endorsement or sponsorship of us by such companies, or any relationship with any of these companies. CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains statements concerning our expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements generally can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “target,” “continue,” “predict,” “project,” “change,” “result,” “future,” “will,” “could,” “can,” “may,” “likely,” “potentially,” or similar expressions. Forward-looking statements are all statements other than those of historical fact and include, but are not limited to, statements about future financial and operating results, our plans, objectives, business outlook, priorities, expectations and intentions, expectations for sales and market growth, comparable sales, earnings and performance, stockholder value, effective tax rates, capital expenditures, cash flows, the housing market, the home improvement industry, demand for services, share repurchases, our strategic initiatives, including the impact of these initiatives on our strategic and operational plans and financial results, and any statement of an assumption underlying any of the foregoing. Forward-looking statements are subject to inherent uncertainties, risks and other factors that are difficult to predict and could cause our actual results to vary in material respects from what we have expressed or implied by these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those expressed in or implied by our forward-looking statements include the cyclicality and impact of general economic conditions; the effect of tariffs and international trade policies on our business operations; the effects of inflation and labor and supply shortages on our operations and the operations of our customers, suppliers and business partners; volatile supply and demand conditions affecting prices and volumes in the markets for both our products and raw materials we purchase; the impact of foreign currency fluctuations; our ability to repurchase shares of our common stock and the amounts and timing of repurchases, if any; and those factors discussed under Item 1A. Risk Factors and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, subsequent Quarterly Reports on Form 10-Q and other reports we file with the SEC. We caution that you should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC that advise of the risks and factors that may affect our business, results of operations, and financial condition. Overview We design, manufacture, and sell building construction products that are of high quality and performance, easy to use, and cost-effective for customers. We operate in three business segments determined by geographic region: North America, Europe, and Asia/Pacific. Within the North America segment, our sales efforts are dedicated to serving customers across the following end-use markets: • Residential; 26 • Commercial; • Original Equipment Manufacturers (“OEM”); • National Retail; and • Component Manufacturers Our organic growth opportunities are focused on expanding product lines with our current customers while also identifying new market share gain opportunities within our core product and market competencies. To grow in these markets, we aspire to be among the leaders in engineered load-rated construction building products and systems as well as digital product offerings. We intend 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 have existing products, testing results, distribution and manufacturing capabilities to support our ambitions. Achieving this growth will depend on expanding our sales and marketing efforts to promote our products across end users and distribution channels, broadening our customer base, and introducing new products over time. Our commitment to continuous improvement has fostered our core Company ambitions, which we will pursue including: • Strengthen our values-based culture; • Be the business partner of choice; • Strive to be an innovative leader in the markets we operate; • Drive above market volume growth relative to U.S. housing starts; • Maintain an operating income margin at or above 20%; and • Deliver earnings per share growth ahead of net revenue growth. Since announced in 2021, we have made great progress on our key growth initiatives. Examples include: • Added approximately $1.0 billion in revenue, with sales growing $100.7 million or 4.5% from fiscal year 2024 compared to fiscal year 2025, and $200.0 million in operating profit. • Earnings per share grew $0.64 per share to $8.24 per share of 8.4% from fiscal year 2024 compared to fiscal year 2025 exceeding sales growth over the sale fiscal periods. • 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 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. • Expanded our equipment product line which helped drive increase sales in the component manufacturing market space. • Streamlined internal processes and focused development efforts on high-impact new products. • Promoted high-potential talent and external experts to senior leadership. As a result, we continue to make significant gains in both fasteners and anchors as well as realizing high single digit growth in the component manufacturing and OEM market. In addition, driven by our high service levels, increasingly diverse portfolio of products and software and commitment to innovation and delivering complete solutions to the markets we serve, we believe we can continue to achieve above market growth in the North America relative to U.S. housing starts in fiscal year 2026 and beyond. These actions reflect our Founder, Barclay Simpson’s, nine principles of doing business, particularly our relentless focus and commitment to customers and users. Tariff and trade policy actions have impacted our results of operations and are expected to continue to do so. We also experienced increased foreign currency exchange rate volatility, which we attribute, in part, to the rapidly changing global trade environment. We increased prices in the U.S. effective June 2, 2025 on certain wood connectors, fasteners and mechanical anchors, and again effective October 15, 2025 on certain fasteners and mechani cal anchors, in response to tariffs. As a result, North America net sales increased in recent quarters even as demand did not increase. However, increased selling prices were offset by higher non-material costs including labor, energy, transportation, and building and equipment depreciation (from recent footprint 27 investments, as noted above) incurred over the three years and potentially by future costs increases. In addition, the price increases are expected to partially offset increased costs related to the tariffs affecting a portion of our fastener and anchors sales, but do not offset tariffs announced after December 31, 2025. We also increased prices in Europe effective the second half of 2025 and during the first quarter of 2026, which have increased recent net sales. We believe Europe net sales could increase in future quarters even if demand does not increase. Similarly to North America, the price increases are expected to offset high costs incurred over recent years. Due to a declining housing starts market, we undertook proactive strategic cost savings initiatives during fiscal year 2025 to align our operations with evolving market demand to position the Company for long-term success. These actions included workforce reduction and portfolio management. As a result, we expect these initiatives will generate at least $30.0 million in annualized cost savings with approximately $20.0 million in reduced operating expense. Non-GAAP Financial Measures In addition to financial information prepared in accordance with GAAP, we use Adjusted EBITDA, a non-GAAP financial measure in evaluating our ongoing operating performance. We define Adjusted EBITDA as net income (loss), adjusted to exclude provision for income taxes, depreciation and amortization, acquisition integration and restructuring costs, non-qualified deferred compensation adjustments, lease termination costs, severance costs related to cost saving initiatives, net loss or gain on disposal of assets, interest income or expense and other financing costs, and foreign exchange and other expense (income). This provides 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 and acquisition as well as 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 Our business, financial condition, and results of operations depend in large part on the level of U.S. housing starts and residential construction activity. Overall U.S. housing starts have been decreasing year over year since 2021. Lower housing starts in the U.S. could result in lower demand, which would affect our sales and possibly operating profit. 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. 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. Residential and commercial construction begins with the foundation, followed by the wall and the roof systems, and then the installation of our products, which flow into a project or a house according to these schedules. We are closely monitoring the recent tariff and trade policy actions taken by the U.S. and foreign governments as well as the recent Middle East conflict. As the situation continues to remain fluid due to the rapidly changing global trade environment, we are still evaluating the potential implications of these events on our business. While we are largely domestically sourced, we continue to monitor macroeconomic trends from these events such as the impact of interest rates, disruptions to trade or transportation routes, cyberattack, changing foreign exchange rates, inflation, the effects of recently implemented tariffs, and the potential imposition of modified or additional tariffs in markets where we and our supplier operate. Additionally, economic pressures on our customers, including the potential of higher inflation, fluctuations in foreign currencies and consumer confidence, driven by economic concerns or price increases as a result of these events, such as those we previously announced, could reduce demand for our products and services negatively affecting our net sales and profitability in the future. As a result of the tariffs announced by the U.S. presidential administration during 2025 and 2026 potential tariff modifications or the imposition of tariffs or export controls by other countries there is significant economic uncertainty. The extent and duration of tariffs and the resulting impact on macroeconomic conditions and on our business are uncertain and may depend on various factors beyond our control. We are closely monitoring the potential for the imposition of new or additional U.S. tariffs on imports, as well as potential retaliatory tariffs or other measures other countries may impose on U.S. imports, that may adversely affect the global economy. We are currently uncertain as to the ultimate impact these measures may have given the rapidly changing environment surrounding tariffs and other related political topics; however, if enacted as currently proposed, we expect that the proposed tariffs would primarily impact our North America segment as we procure fasteners and a small number of other products from countries that will be subjected to the these tariffs. 28 In prior years, our sales were heavily seasonal with operating results varying from quarter to quarter depending on weather conditions that could delay construction starts. 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. Increased tariffs (as noted above), Middle East conflicts, political uncertainty, fluctuating foreign currency rates, mortgage interest rates, and rising costs 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 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. Business Segment Information Historically, our North America segment has generated more revenues from wood construction products compared to concrete construction products. North America net sales increased for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 due to price increases that took effect in June 2025 and October 2025, and an increase in sales volumes. Our wood construction product net sales increased 6.9% for the six months ended June 30, 2026 compared to June 30, 2025. Our concrete construction product net sales increased 13.2% over the same periods. Operating income increased 14.5% to $276.3 million. The increase was primarily due to the increases in net sales as well as lower operating expense including lower personnel costs, and travel and fuel costs . We completed the expansion of our Columbus, Ohio facility in the second quarter of 2025 and the construction of our new Gallatin, Tennessee facility in the fourth quarter of 2025. These facilities are expected to 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. These facilities will help 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. We believe sales volumes will likely be impacted by lower housing starts compared to prior year, which will impact net sales and margins. Rising steel costs in the second half of 2026 will also create margin pressure. Europe net sales increase d 7.0% for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, due to both increased unit sales volumes and price increases as well as the positive effect of approximately $17.8 million in foreign currency translation. Wood construction product net sales increase d 7.3% f or the six months ended June 30, 2026 compared to June 30, 2025 and concrete construction product net sales, which are mostly project based, increased 5.7% over the same periods. Gross profit increa sed $10.4 million and gross margins increased to 37.3% from 35.7% primarily driven by higher pricing and lower material costs, partly offset by higher factory and tooling costs, as a percentage of net sales. Operating income increased $1.8 million and operating margin remained flat at 10.1%. Operating expenses were negatively affected by approximately $2.2 million in foreign currency translation. In local currency, operating expenses increased by 5% partly due to one-time cost savings initiativ e costs. We currently anticipate Europe results for 2026 to benefit from recent price increases and recent cost savings initiatives, including on-going footprint optimization efforts. We be lieve in Europe's long-term potential given on-going housing shortage (with an increasing use of wood construction) and new environmental regulations for which we have products and solutions. Our Asia/Pacific segment has generated revenues from both wood and concrete construction products. We believe that the Asia/Pacific segment is not significant to our overall performance. Business Outlook Based on business trends and conditions, the Company's outlook for the full fiscal year ending December 31, 2026 is as follows: • Consolidated operating margin is estimated to be in the range of 19.7% to 20.5%. The operating margin range includes a projected gain of $10.0 million to $12.0 million on the sale of vacant land . • The effective tax rate is estimated to be in the range of 25.0% to 26.0% , incl uding 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 in the range of $80.0 million to $90.0 million . 29 Results of Operations for the Three Months Ended June 30, 2026, Compared with the Three Months Ended June 30, 2025 Unless otherwise stated, the 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 three months ended June 30, 2026, against the results of operations for the three months ended June 30, 2025. Unless otherwise stated, the results announced below, when referencing “both quarters,” refer to the three months ended June 30, 2025 and the three months ended June 30, 2026. Additionally, for the year ended December 31, 2025, the Company reclassified certain quality assurance costs from general and administrative expense to cost of sales. The financial results for the three months ended June 30, 2025 have been recast for comparison purposes and to conform to the current period classification, with $1.5 million of costs being reclassified from general and administrative expense to cost of sales. The reclassification did not have any impact on the total income from operations. Second Quarter 2026 Consolidated Financial Highlights The following table shows the change in the Company's results of operations from the three months ended June 30, 2025 to the three months ended June 30, 2026, and the increases or decreases for each category by segment: Three Months Ended Three Months Ended Increase (Decrease) in Operating Segment (in thousands) June 30, 2025 North America Europe Asia/ Pacific Admin & All Other June 30, 2026 Net sales $ 631,055 $ 29,603 $ 10,093 $ 325 $ — $ 671,076 Cost of sales 338,164 11,351 3,591 11 (234) 352,883 Gross profit 292,891 18,252 6,502 314 234 318,193 Research and development and other engineering expense 20,767 (2,798) 147 (116) — 18,000 Selling expense 56,443 (4,305) 530 180 — 52,848 General and administrative expense 75,629 3,706 1,645 164 2,428 83,572 Total operating expenses 152,839 (3,397) 2,322 228 2,428 154,420 Acquisition and integration related costs 13 2 148 — 23 186 Net gain on disposal of assets (205) 149 6 53 (5,546) (5,543) Income from operations 140,244 21,498 4,026 33 3,329 169,130 Interest income, net and other 895 47 748 — 2,506 4,196 Other & foreign exchange gain (loss), net (1,684) 84 (168) (170) (497) (2,435) Income before income taxes 139,455 21,629 4,606 (137) 5,338 170,891 Provision for income taxes 35,914 5,493 1,163 (49) 1,328 43,849 Net income $ 103,541 $ 16,136 $ 3,443 $ (88) $ 4,010 $ 127,042 Net sales increased 6.3% to $671.1 million from $631.1 million . Wood construction product sales, including sales of connectors, truss plates, fastening systems, fasteners and shearwalls, represented 84.7% and 84.9% of the Company's total sales in the second quarters of 2026 and 2025, respectively. Concrete construction product sales, including sales of adhesives, chemicals, mechanical anchors, powder actuated tools and reinforcing fiber materials, represented 15.1% and 15.0% of the Company's total sales in the second quarters of 2026 and 2025, respectively. Gross profit increased 8.6% to $318.2 million from $292.9 million primarily due to higher net sales while gross margins increased to 47.4% from 46.4%. From a product perspective, gross margin slightly increased to 47.3% from 47.0% for wood construction products and increased to 48.3% from 45.0% for concrete construction products, respectively. Selling expense decreased 6.4% to $52.8 million from $56.4 million, primarily due to decreases of $1.2 million in advertising and trade shows costs , $1.9 million in travel and fuel expenses, $0.8 million in payroll expenses, and $0.3 million in professional services and legal costs, which is offset by increases of $0.5 million in variable compensation. Approximately $0.7 million of patent-filing related costs were reclassified to general and administrative. General and administrative expense increased 10.5% to $83.6 million from $75.6 million, primarily due to increases of $4.6 million in variable compensation, $2.2 million in professional services and legal costs, $1.0 million in accrued product 30 repairment expenses, $0.7 million in severance costs, $0.7 million in patent-filing expenses reclassified from selling expense, $0.5 million in depreciation and amortization costs, and $0.4 million in leasing expenses, which is offset by decrease of $0.5 million in software related costs, net of amount capitalized, and $1.7 million in personnel costs. Income from operations increased 20.6% to $169.1 million from $140.2 million mostly due to higher gross profits. Our effective income tax rat e decreased to 25.7% from 25.8% . Consolidated net income was $127.0 million compared to $103.5 million. Diluted earnings per share was $3.09 compared to $2.47 . Adjusted EBITDA 1 of $196.1 million increased 22.6% compared to $159.9 million, primarily due to higher gross profits. Net sales The following table shows net sales by segment for the three months ended June 30, 2026 and 2025, respectively: (in thousands) North America Europe Asia/ Pacific Total Three months ended June 30, 2025 $ 492,687 $ 133,398 $ 4,970 $ 631,055 June 30, 2026 522,290 143,491 5,295 671,076 Increase $ 29,603 $ 10,093 $ 325 $ 40,021 Percentage increase 6.0 % 7.6 % 6.5 % 6.3 % The following table shows segment net sales as percentages of total net sales for the three months ended June 30, 2026 and 2025, respectively: North America Europe Asia/ Pacific Total Percentage of total 2025 net sales 78.1 % 21.1 % 0.8 % 100.0 % Percentage of total 2026 net sales 77.8 % 21.4 % 0.8 % 100.0 % Gross profit The following table shows gross profit (loss) by segment for the three months ended June 30, 2026 and 2025, respectively: (in thousands) North America Europe Asia/ Pacific Admin & All Other Total Three months ended June 30, 2025 $243,885 $48,275 $1,537 $(806) $292,891 June 30, 2026 262,137 54,777 1,851 (572) 318,193 Increase (decrease) $18,252 $6,502 $314 $234 $25,302 Percentage Increase 7.5 % 13.5 % * * 8.6 % * The statistic is not meaningful or material. The following table shows gross margin by segment for the three months ended June 30, 2026 and 2025, respectively: North America Europe Asia/ Pacific Admin & All Other Total 2025 gross margin percentage 49.5 % 36.2 % 30.9 % * 46.4 % 2026 gross margin percentage 50.2 % 38.2 % 35.0 % * 47.4 % * The statistic is not meaningful or material. 1 Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to U.S. generally accepted accounting principles (“GAAP”) net income see the schedule titled “Reconciliation of Non-GAAP Financial Measures.” 31 North America • Net sales increased 6.0%, primarily due to price increases that took effect in June 2025 and October 2025 partly offset by a slight decrease in unit sales volumes . • Gross margin increased to 50.2% from 49.5%, primarily due to lower material costs as a percentage of net sales and cost savings initiatives. • Selling expense decreased 10.0%, primarily due to decreases of $2.1 million in travel and fuel expenses, $1.0 million in advertising and trade show costs, and $1.0 million in personnel costs. • General and administrative expense increased 7.9% , primarily due to increases of $2.3 million in professional services and legal expenses, $1.0 million in accrued product repairment expenses, $0.7 million in variable compensations, $0.5 million in depreciation and amortization costs, $0.5 million in patent expenses, and $0.5 million in leasing expenses, which is offset by decrease of $1.2 in personnel costs, and $0.8 million in software related costs, net of amount capitalized. • Income from operations increased by $21.5 million, primarily due to the increases in net sales as well as lower operating expense including lower personnel costs, and software licensing fees as well as a reduction in travel and entertainment costs. Europe • Net sales increased 7.6% due to both increased unit sales volumes and price increases as well as the positive effect of approximately $3.7 million in foreign currency translation. • Gross margin increased to 38.2% from 36.2% , primarily driven by lower material costs, factory and tooling costs, and labor costs as a percentage of net sales. • Income from operations increased by $4.0 million to $19.7 million from $15.7 million primarily due to higher gross profits. Operating expenses were negatively affected by approximately $0.7 million in foreign currency translation. Asia/Pacific • For information about the Company's Asia/Pacific segment, please refer to the tables above setting forth changes in our operating results for the three months ended June 30, 2026 and 2025. Administrative and All Other • Loss from operations decreased to $8.5 million from $11.8 million primarily due to a $5.5 million gain from an eminent domain settlement, which is offset by increases of $2.4 million in general and administrative expenses. 32 Results of Operations for the Six Months Ended June 30, 2026, Compared with the Six Months Ended June 30, 2025 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 six months ended June 30, 2026, against the results of operations for the six months ended June 30, 2025. Unless otherwise stated, the results announced below, when referencing “both periods,” refer to the six months ended June 30, 2025 and the six months ended June 30, 2026. In the first quarter of 2026, the Company reclassified certain software amortization costs related to the Company's component manufacturing efforts from general and administrative expense to cost of sales . Additionally, for the year ended December 31, 2025, the Company reclassified certain quality assurance costs from general and administrative expense to cost of sales. The financial results for the six months ended June 30, 2025 have been recast for comparison purposes and to conform to the current period classification, with $3.0 million of costs being reclassified from general and administrative expense to cost of sales. The reclassification did not have any impact on the total income from operations. Year-to-Date (6-months) 2026 Consolidated Financial Highlights The following table illustrates the differences in our operating results for the six months ended June 30, 2026, from the six months ended June 30, 2025, and the increases or decreases for each category by segment: Six Months Ended Increase (Decrease) in Operating Segment Six Months Ended (in thousands) June 30, 2025 North America Europe Asia/ Pacific Admin & All Other June 30, 2026 Net sales $ 1,169,950 $ 70,829 $ 17,280 $ 981 $ — $ 1,259,040 Cost of sales 626,493 41,272 6,854 594 (257) 674,956 Gross profit 543,457 29,557 10,426 387 257 584,084 Research and development and other engineering expense 40,606 (4,394) 568 (149) — 36,631 Selling expense 110,607 (5,640) 1,996 348 — 107,311 General and administrative expense 149,821 4,478 5,309 261 1,265 161,134 Total operating expenses 301,034 (5,556) 7,873 460 1,265 305,076 Acquisition and integration related costs 140 2 569 — 40 751 Net gain on disposal of assets (280) 151 176 10 (5,547) (5,490) Income from operations 242,563 34,960 1,808 (83) 4,499 283,747 Interest income, net and other 1,998 (149) 635 1 6,144 8,629 Other & foreign exchange gain, net (626) (527) (1,379) (605) (2,050) (5,187) Income before income taxes 243,935 34,284 1,064 (687) 8,593 287,189 Provision for income taxes 62,510 7,865 (23) (157) 1,736 71,931 Net income $ 181,425 $ 26,419 $ 1,087 $ (530) $ 6,857 $ 215,258 Net sales increased 7.6% to $1,259.0 million from $1,170.0 million. Wood construction product sales represented 84.7% and 85.1% of the Company's total sales in the first six months of 2026 and 2025, respectively. Concrete construction product sales represented 15.1% and 14.7% of the Company's total sales in the first six months of 2026 and 2025, respectively. Gross profit increased 7.5% to $584.1 million from $543.5 million. Gross margins remained relatively flat, supported by pricing, favorable mix and operational efficiencies. Gross margins for wood construction products was 46.7% for both six months ended 2026 and 2025, and decreased to 44.5% from 47.0% for concrete construction products. Research and development and engineering expense decreased 9.8% to $36.6 million from $40.6 million, primarily due to decreases of $1.0 million in personnel costs, $1.0 million in patent expenses, $0.6 million in depreciation and amortization costs, $0.5 million in professional services and legal fees, $0.3 million in software related costs, net of amount capitalized, and $0.2 million in travel and fuel expenses. Selling expense decreased to $107.3 million from $110.6 million, primarily due to decreases of $2.2 million in travel and fuel expenses, $1.3 million in personnel costs, and $0.7 million in advertising and trade shows, which is partially offset by increases 33 of $0.6 million in variable compensations, and $0.2 million in leasing expenses. Approximately $0.7 million of patent-filing related costs were reclassified to general and administrative. General and administrative expense increased to $161.1 million from $149.8 million, primarily due to increases of $5.1 million in variable compensation, $2.1 million in software related costs, net of amount capitalized, $2.0 million in depreciation and amortization expenses, $1.2 million in professional services and legal expenses, $1.2 million in patent expenses, $1.0 million in accrued product repairment expenses, $0.9 million in leasing expenses, $0.8 million in severance costs, and $0.7 million of patent-filing related costs reclassified from selling expense, partially offset by a decrease of $2.9 million in personnel costs. Income from operations increased 17.0% to $283.7 million from $242.6 million primarily due to higher gross profits. Our effective income tax rate decreased to 25.0% from 25.6%. Consolidated net income was $215.3 million compared to $181.4 million. Diluted earnings per share was $5.22 compared to $4.33. Adjusted EBITDA 2 of $335.4 million increased 18.9% compared to $282.1 million primarily due to higher gross profits. Net sales The following table represents net sales by segment for the six-month periods ended June 30, 2025 and 2026: (in thousands) North America Europe Asia/ Pacific Total Six Months Ended June 30, 2025 $ 913,386 $ 247,258 $ 9,306 $ 1,169,950 June 30, 2026 984,215 264,538 10,287 1,259,040 Increase $ 70,829 $ 17,280 $ 981 $ 89,090 Percentage increase 7.8 % 7.0 % 10.5 % 7.6 % The following table represents segment sales as percentages of total net sales for the six-month periods ended June 30, 2025 and 2026, respectively: North America Europe Asia/ Pacific Total Percentage of total 2025 net sales 78.1 % 21.1 % 0.8 % 100.0 % Percentage of total 2026 net sales 78.2 % 21.0 % 0.8 % 100.0 % Gross profit The following table represents gross profit (loss) by segment for the six-month periods ended June 30, 2025 and 2026: (in thousands) North America Europe Asia/ Pacific Admin & All Other Total Six Months Ended June 30, 2025 $ 453,313 $ 88,297 $ 3,260 $ (1,413) $ 543,457 June 30, 2026 482,870 98,723 3,647 (1,156) 584,084 Increase (decrease) $ 29,557 $ 10,426 $ 387 $ 257 $ 40,627 Percentage increase 6.5 % 11.8 % * * 7.5 % * The statistic is not meaningful or material 2 Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to U.S. generally accepted accounting principles (“GAAP”) net income see the schedule titled “Reconciliation of Net Income to Adjusted EBITDA.” 34 The following table represents gross margins by segment for the six-month periods ended June 30, 2025 and 2026: North America Europe Asia/ Pacific Admin & All Other Total 2025 gross margin percentage 49.6 % 35.7 % 35.0 % * 46.5 % 2026 gross margin percentage 49.1 % 37.3 % 35.5 % * 46.4 % * The statistic is not meaningful or material. North America • Net sales increased 7.8%, primarily due to price increases that took effect in June 2025 and October 2025 and an increase in sales volumes, as well as the positive effect of approximately $1.4 million in foreign currency translation. • Gross margin decreased from 49.6% to 49.1%, reflecting primarily the impact from tariffs and higher labor and factory and overhead costs, as a percentage of net sales, partially offset by cost savings initiatives. • Selling expense decreased 6.7%, primarily due to decreases of $2.2 million in travel and fuel expenses, $2.0 million in personnel costs, $0.6 million in advertising and trade shows expenses, $0.5 million in professional services and legal expenses, and $0.2 million in software related costs, net of amount capitalized. • General and administrative expense increased 4.8%, primarily due to increases of $1.1 million in professional services and legal expenses, $1.3 million in depreciation and amortization expenses, $1.2 million in software related costs, net of amount capitalized, $1.0 million in leasing expenses, $1.0 million in accrued product repairment expenses, $1.1 million in patent expenses, and $0.4 million in variable compensation, which is partially offset by decreases of $2.9 million in personnel costs. • Income from operations increas ed $35.0 million , du e to higher gross profit and decreased operating expenses. Europe • Net sales increased 7.0%, due to both increased unit sales volumes and price increases as well as the positive effect of approximately $17.8 million in foreign currency translation. • Gross margin increased to 37.3% from 35.7%, primarily driven by higher pricing and lower material costs, factory and tooling costs, and labor costs as a percentage of net sales. • Income from operations increased $1.8 million, primarily due to higher gross margins on increased net sales, which is offset by the increase of operating expenses. Asia/Pacific • For information about the Company's Asia/Pacific segment, please refer to the tables above setting forth changes in our operating results for the six months ended June 30, 2026 and 2025. Administrative and All Other • Loss from operations decreased to $19.5 million from $24.0 million primarily due to a $5.5 million gain from eminent domain settlement, which is offset by an increase of $1.3 million general and administrative expenses. Effect of New Accounting Standards See “Note 1 Basis of Presentation — Accounting Standard Adopted ” and “Note 1 Basis of Presentation — Accounting Standards Not Yet Adopted ” to the accompanying unaudited interim Condensed Consolidated Financial Statements. 35 Liquidity and Capital Resources We have historically met our capital needs through a combination of cash flows from operating activities and, when necessary, borrowings under our credit facilities. Our principal uses of capital include the costs and expenses associated with our operations, including financing working capital requirements and continuing our capital allocation strategy, which includes supporting capital expenditures, paying cash dividends, repurchasing the Company's common stock, and financing other investment opportunities from time to time. On December 16, 2025, the Company entered into the Second Amended and Restated Credit Agreement (the “Second Amended and Restated Credit Agreement”), which amended and restated in its entirety the Amended and Restated Credit Agreement, dated as of March 30, 2022. The Second Amended and Restated Credit Agreement provides for a 5-year revolving credit facility of $600 million (the “revolving credit facility”), which includes a letter of credit sub-facility of up to $50 million, and for a 5-year term loan facility of $300 million (the “term loan facility”). The Company has the ability to increase the principal amount of the Credit Facilities by an additional amount equal to the greater of $525 million and 100% of consolidated EBITDA for the most recently ended fiscal quarter, by obtaining additional commitments from existing lenders or new lenders and satisfying certain other customary conditions. As of June 30, 2026, the Company had borrowings of $44.2 million under the revolving credit facility and $292.5 million under the term loan facility, and has $555.8 million available to borrow under the revolving credit facility. As of June 30, 2026, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions, including $136.6 million that is held in the local currencies of our foreign operations and could be subject to additional taxation if repatriated to the U.S. The Company is maintaining a permanent reinvestment assertion on its foreign earnings relative to remaining cash held outside the United States. We believe the Company's balances of cash and cash equivalents, cash flows from operating activities, and access to borrowings under our credit facilities are sufficient to satisfy its liquidity requirements and capital needs over the next 12 months and beyond. The following table shows selected financial information as of June 30, 2026, December 31, 2025 and June 30, 2025, respectively: As of June 30, As of December 31, As of June 30, (in thousands) 2026 2025 2025 Cash and cash equivalents $ 450,526 $ 384,138 $ 190,400 Property, plant and equipment, net 614,989 627,854 597,536 Equity & other investments, goodwill and intangible assets 923,898 956,665 977,877 Non-cash net working capital 571,925 586,570 694,858 The following table presents the significant categories of cash flows used or provided during the six-month periods ended June 30, 2026 and 2025, respectively: Six Months Ended June 30, (in thousands) 2026 2025 Net cash provided by (used in): Operating activities $ 248,483 $ 132,778 Investing activities (26,329) (90,568) Financing activities (163,044) (95,617) Cash flow from operating activities result primarily from our earnings before non-cash items such as depreciation, amortization, and stock-based compensation, and are also 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 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 36 receivable are generally lowest at the end of the fourth quarter and increase during the first, second, and third quarters as construction activity ramps in markets we serve. During the six months ended June 30, 2026, operating activities provided $248.5 million in cash, as a result of $215.3 million from net income plus $75.7 million of non-cash expenses such as depreciation and amortization, stock-based compensation, and leases . This amount was partly offset by $42.5 million used for the net change in operating assets and liabilities. The net change in operating assets and liabilities included an increase of $138.4 million in trade accounts receivable which was partly offset by a decrease of $74.9 million in inventory and an increase of $42.7 million in trade accounts payable. Cash flow used in investing activities of $26.3 million during the six months ended June 30, 2026 consisted primarily of $33.0 million used for machinery and equipment purchases. Due to updated forecasts on the timing of the spend and subject to future events and circumstances, capital expenditures are estimated to be in the range of $80.0 million to $90.0 million. 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. Cash flow used in financing activities of $163.0 million during the six months ended June 30, 2026 consisted primarily of $98.7 million in stock repurchases, $37.5 million in loan principal payments, and $23.9 million used to pay dividends to our stockholders. On July 23, 2026, the Board declared a quarterly cash dividend of $0.30 per share, estimated to be $12.2 million in aggregate. The dividend will be payable on October 22, 2026, to the Company's stockholders of record on October 1, 2026. Since the beginning of 2023 through the period ended June 30, 2026, we have returned $531.9 million to stockholders, which represents 52.7% of our free cash flow from operations during the same period, and over the same period the Company has repurchased 2.1 million shares of the Company's common stock, which represents approximately 5.0% of the outstanding shares of the Company's common stock at the start of 2022. 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. Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net Income $ 127,042 $ 103,541 $ 215,258 $ 181,425 Provision for income taxes 43,849 35,914 71,931 62,510 Interest (income) expense, net and other financing costs (4,196) (895) (8,629) (1,998) Depreciation and amortization 25,437 20,995 50,948 40,517 Other* 3,951 338 5,936 (387) Adjusted EBITDA $ 196,083 $ 159,893 $ 335,444 $ 282,067 *Other: Includes acquisition integration and restructuring related expenses, non-qualified deferred compensation plan adjustments, other & foreign exchange loss net, and net loss or gain on disposal of assets. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of June 30, 2026.