UFP INDUSTRIES INC

Previous wording

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the markets we serve, the economy and the Company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” “likely,” “plans,” “projects,” “should,” variations of such words, and similar expressions identify such forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. We do not undertake to update forward-looking statements to reflect facts, circumstances, events, or assumptions that occur after the date the forward-looking statements are made. Actual results could differ materially from those included in such forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty. Among the factors that could cause actual results to differ materially from forward-looking statements are the following: fluctuations in currency and inflation; fluctuations in the price of lumber; adverse economic conditions in the markets we serve; changes in tariffs, import/export regulations, and other trade policies; concentration of sales to customers; the success of vertical integration strategies; excess capacity or supply chain challenges; our ability to make successful business acquisitions; government regulations, particularly involving environmental and safety regulations; adverse or unusual weather conditions; inbound and outbound transportation costs; alternatives to replace treated wood products; cybersecurity breaches; artificial intelligence; and potential pandemics. Certain of these risk factors as well as other risk factors and additional information are included in our reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission.

Current wording

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the markets we serve, the economy and the Company itself. Words like “anticipates,” “believes,” “confident,” “estimates,” “expects,” “forecasts,” “likely,” “plans,” “projects,” “should,” variations of such words, and similar expressions identify such forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. We do not undertake to update forward-looking statements to reflect facts, circumstances, events, or assumptions that occur after the date the forward-looking statements are made. Actual results could differ materially from those included in such forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty. Among the factors that could cause actual results to differ materially from forward-looking statements are the following: fluctuations in currency and inflation; fluctuations in the price of lumber; adverse or unusual weather conditions; adverse economic conditions in the markets we serve; changes in tariffs, import/export regulations, and other trade policies, including the timing and amount of tariff refunds; concentration of sales to customers; the success of vertical integration strategies; excess capacity or supply chain challenges; inbound and outbound transportation costs and our ability to pass those costs through to customers; alternatives to replace treated wood products; government regulations, particularly involving environmental and safety regulations; our ability to make successful business acquisitions; cybersecurity breaches; artificial intelligence; and potential pandemics. Certain of these risk factors as well as other risk factors and additional information are included in our reports on Form 10-K and 10-Q on file with the Securities and Exchange Commission.

Previous wording

Our results for the second quarter of 2026 include the following highlights:

Current wording

Our results for the third quarter of 2026 include the following highlights:

Previous wording

In addition, a Southern Yellow Pine (“SYP”) composite price, which we prepare and use, is presented below. Our purchases of this species comprise approximately 76% of our total lumber purchases.

Current wording

In addition, a Southern Yellow Pine (“SYP”) composite price, which we prepare and use, is presented below. Our purchases of this species comprise approximately 75% of our total lumber purchases.

Previous wording

Lumber prices increased during the second quarter of 2026, after declining during the first quarter. Commodity lumber costs increased due to mill curtailments and higher duties on Canadian lumber, partially offset by weak overall demand resulting from lower consumer sentiment and greater economic uncertainty.

Current wording

Lumber prices increased during the third quarter of 2026 due to mill curtailments and higher duties on Canadian lumber, partially offset by weak overall demand resulting from lower consumer sentiment and greater economic uncertainty.

Previous wording

We generally price our products to pass lumber costs through to our customers so that our profitability is based on the value-added manufacturing, distribution, engineering, and other services we provide. As a result, our dollar sales levels (and working capital requirements) are impacted by the lumber costs of our products. Lumber costs were 43.7% and 42.9% of our total net sales in the first six months of 2026 and 2025, respectively.

Current wording

We generally price our products to pass lumber costs through to our customers so that our profitability is based on the value-added manufacturing, distribution, engineering, and other services we provide. As a result, our dollar sales levels (and working capital requirements) are impacted by the lumber costs of our products. Lumber costs were 43.8% and 41.4% of our total net sales in the first nine months of 2026 and 2025, respectively.

Previous wording

The trade landscape continues to evolve. Since we do not own any foreign sawmills and have excellent relationships with our mill partners, we believe we are currently in a strong position to adapt quickly to tariffs without material adverse financial impact after a short adjustment period. We will continue to monitor the market and intend to make decisions quickly to minimize disruption. As of June 27, 2026, 84% of our lumber purchases were from domestic suppliers, 9% were imported from Canada, and 7% were imported from other international suppliers.

Current wording

The trade landscape continues to evolve. Since we do not own any foreign sawmills and have excellent relationships with our mill partners, we believe we are currently in a strong position to adapt quickly to tariffs without material adverse financial impact after a short adjustment period. We will continue to monitor the market and intend to make decisions quickly to minimize disruption. As of September 26, 2026, 84% of our lumber purchases were from domestic suppliers, 10% were imported from Canada, and 6% were imported from other international suppliers.

Previous wording

In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (“IEEPA”), which the U.S. administration relied on to impose certain tariffs, does not authorize the administration to impose tariffs. As a result of this ruling, the U.S. Court of International Trade (“CIT”) issued an order directing the U.S. Customs and Border Protection (“CBP”) agency to begin formalizing a process for refunds. As of June 27, 2026, we have received $3 million in tariff refunds and recorded a receivable of $20 million related to the expected refund of tariffs previously paid under the IEEPA, including applicable interest, with the corresponding offsets of $20 million to Cost of goods sold, $1 million to interest income, and $2 million as a reduction to the carrying value of inventory on hand. We have certain contractual obligations that will require us to refund customers certain of the tariff refunds we receive. If we collect the entire $23 million of tariffs paid pursuant to the IEEPA, we will be required to refund approximately $11 million to customers. As a result, we recorded $11 million as a liability as of June 27, 2026, with a corresponding reduction to Net sales. Of the $9 million net increase in Earnings from operations relating to these tariff refunds, $6 million related to products sold in the current quarter and $3 million related to products sold in prior quarters. Subsequent to June 27, 2026, we received approximately $18 million of the tariff refund receivable, including related interest.

Current wording

In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (“IEEPA”), which the U.S. administration relied on to impose certain tariffs, does not authorize the administration to impose tariffs. As a result of this ruling, the U.S. Court of International Trade (“CIT”) issued an order directing the U.S. Customs and Border Protection (“CBP”) agency to begin formalizing a process for refunds. As of September 26, 2026, we have received $22 million in tariff refunds and have an additional $1 million recorded as a receivable related to the expected refund of tariffs previously paid under the IEEPA, including applicable interest. Of this amount, $9 million was recorded as a reduction to cost of goods sold, $1 million was recorded as interest income, $2 million was recorded as a reduction to inventory, and $11 million will be refunded to customers and was recorded as a liability. During the third quarter, we collected $22 million in tariff refunds, paid $3 million in refunds to customers, and recorded the $2 million inventory reduction as a decrease in our cost of goods sold. In September, we recorded an additional $0.3 million in tariff refunds receivable which was recorded as a reduction to cost of goods sold.

Previous wording

A combination of macroeconomic and geopolitical events and capacity constraints in the flatbed carrier market have contributed to an increase in our input costs across the enterprise, primarily related to fuel and transportation. In the second quarter of 2026, we estimate that we incurred an additional $31 million of these costs which adversely impacted our profitability reflecting increased fuel costs and flatbed carrier rates as a result of many small carriers exiting the market. This has increased our cost in the “spot” market with market rates up over 30% excluding fuel. These market conditions have resulted in $6 million in additional fuel costs and $25 million in higher flatbed carrier costs. Our efforts to pass through these higher costs to our customers have been concentrated on fuel and through surcharges and increased product pricing, which resulted in an offset totaling approximately $4 million for the quarter. We plan to negotiate with our customers to pass through the remaining increase in our transportation costs, however, there are factors beyond our control, including contract terms and market conditions, that may impact our ability to be successful in these efforts. Please see “Risk Factors” below for more information.

Current wording

A combination of macroeconomic and geopolitical events and capacity constraints in the flatbed carrier market have contributed to an increase in our input costs across the enterprise, primarily related to fuel and transportation. We estimate that we incurred an additional $22 million and $56 million of these costs for the three and nine months ended September 26, 2026, respectively, which adversely impacted our profitability, reflecting an increase in fuel costs and flatbed carrier rates as a result of many small carriers exiting the market. This has increased our cost in the “spot” market with market rates up 30% for the three and nine months ended September 26, 2026, respectively, excluding fuel. These market conditions have resulted in $6 million and $15 million in additional fuel costs and $16 million and $41 million in higher flatbed carrier costs for the three and nine months ended September 26, 2026, respectively. Our efforts to pass through these higher costs to our customers have been primarily concentrated on fuel through surcharges and increased product pricing, which resulted in an offset totaling approximately $3 million and $7 million for the three and nine months ended September 26, 2026, respectively. We plan to negotiate with our customers to pass through the remaining increase in our transportation costs, however, there are factors beyond our control, including contract terms and market conditions, that may impact our ability to be successful in these efforts. Please see “Risk Factors” below for more information.

Previous wording

We completed three business combinations in the second quarter of 2026 and two in fiscal 2025. The annual historical sales attributable to these acquisitions are approximately $183 million in aggregate. These business combinations are not significant to our quarterly results and thus proforma results for 2026 and 2025 are not presented. See Notes to the Unaudited Interim Condensed Consolidated Financial Statements, Note F, “Business Combinations” for additional information.

Current wording

We completed three acquisitions in the first nine months of 2026 and completed two in fiscal 2025. The annual historical sales attributable to these acquisitions are approximately $183 million in aggregate. These business combinations are not significant to our quarterly results and thus proforma results for 2026 and 2025 are not presented. See Notes to the Unaudited Interim Condensed Consolidated Financial Statements, Note F, “Business Combinations” for additional information.

Previous wording

The following table presents, for the periods indicated, our selling, general, and administrative (SG&A) costs as a percentage of gross profit. Over time, we believe this ratio provides an enhanced view of our effectiveness in managing these costs given our strategies to enhance our capabilities and improve our value-added product offering and recognizing the higher relative level of SG&A these strategies require. This ratio also mitigates the impact of changing lumber prices. The increase in the ratio of SG&A as a percentage of gross profit from the prior year is primarily due to the impact of weak consumer demand reflecting lower selling prices as well as higher transportation costs, which have reduced our gross profit.

Current wording

The following table presents, for the periods indicated, our selling, general, and administrative (SG&A) costs as a percentage of gross profit. Over time, we believe this ratio provides an enhanced view of our effectiveness in managing these costs given our strategies to enhance our capabilities and improve our value-added product offering and recognizing the higher relative level of SG&A these strategies require. This ratio also mitigates the impact of changing lumber prices. The increase in the ratio of SG&A as a percentage of gross profit from the prior year is primarily due to the impact of higher transportation costs, which have reduced our gross profit.

Previous wording

Our business segments consist of Retail, Packaging and Construction, and align with the end markets we serve. Among other advantages, this structure allows for a specialized and consistent sales approach, more efficient use of resources and capital, and quicker introduction of new products and services. We manage the operations of our individual locations primarily through a market-centered reporting structure under which each location is included in a business unit, and business units are included in our Retail, Packaging, and Construction segments. The exception to this market-centered reporting and management structure is our International segment, which comprises our packaging operations in Mexico, Canada, Spain, India, and Australia and sales and buying offices in other parts of the world. Our International segment and Ardellis (our insurance captive) are included in “All Other” in the table below. The “Corporate” segment includes purchasing, transportation, corporate ventures, and administrative functions that serve our operating segments. Operating results of Corporate primarily consists of over (under) allocated costs and net sales to external customers initiated by UFP Purchasing, which manages supplier relationships and purchases lumber and other materials, UFP Transportation, which owns, leases and operates transportation equipment, and UFP Real Estate, which owns and leases real estate. Inter-company lease and service charges are assessed to our operating segments for the use of these assets and services at fair market value rates.

Current wording

Our business segments consist of Retail, Packaging and Construction, which align with the end markets we serve. Among other advantages, this structure allows for a specialized and consistent sales approach, more efficient use of resources and capital, and quicker introduction of new products and services. We manage the operations of our individual locations primarily through a market-centered reporting structure under which each location is included in a business unit, and business units are included in our Retail, Packaging, and Construction segments. The exception to this market-centered reporting and management structure is our International segment, which comprises our packaging operations in Mexico, Canada, Spain, India, and Australia and sales and buying offices in other parts of the world. Our International segment and Ardellis (our insurance captive) are included in “All Other” in the table below. The “Corporate” segment includes purchasing, transportation, corporate ventures, and administrative functions that serve our operating segments. Operating results of Corporate primarily consist of over (under) allocated costs and net sales to external customers initiated by UFP Purchasing, which manages supplier relationships and purchases lumber and other materials, UFP Transportation, which owns, leases and operates transportation equipment, and UFP Real Estate, which owns and leases real estate. Inter-company lease and service charges are assessed to our operating segments for the use of these assets and services at fair market value rates.

Previous wording

Our overall unit sales of value-added products were up 4% in the second quarter and down 1% in the first six months of 2026 compared to the prior year. Our overall unit sales of commodity-based products were flat in the second quarter and down 3% in the first six months of 2026 compared to the prior year.

Current wording

Our overall unit sales of value-added products were up 11% in the third quarter and up 3% in the first nine months of 2026 compared to the prior year. Our overall unit sales of commodity-based products were down 5% third quarter and down 5% in the first nine months of 2026 compared to the prior year.

Previous wording

Net sales in the second quarter of 2026 increased by 4% compared to the same period of 2025 due to a 3% increase in selling prices and a 2% increase due to acquisitions, partially offset by a 1% decrease in organic unit sales. Organic unit changes within this segment consisted of a 17% decrease in Edge and a 1% decrease in ProWood, partially offset by a 9% increase in Deckorators. Of the 25% year over year increase in net sales for our Deckorators business unit, wood-plastic composite decking and mineral-based-composite decking (sold under our new Surestone tradename) increased 85% and 37%, respectively. An acquired business contributed 13% in sales growth to Deckorators and 51% in sales growth to wood-plastic composite decking sales. These increases were partially offset by railings which declined 17%. Our unit sales to big box customers, which we believe are more closely correlated with repair and remodel activity, increased approximately 2%, while unit sales to independent retailers, which we believe are more closely correlated to new housing starts, decreased approximately 2%. The decline in ProWood volume is primarily due to weaker consumer sentiment and economic uncertainty resulting in a softening of demand to complete repair and remodel projects.

Current wording

Net sales in the third quarter of 2026 increased by 7% compared to the same period of 2025 due to a 6% increase in selling prices and a 1% increase due to acquisitions. Organic unit changes within this segment consisted of a 21% increase in Deckorators primarily due to market share gains, offset by a 4% decrease in ProWood. The decline in ProWood volume is primarily due to weaker consumer sentiment and economic uncertainty resulting in softening demand to complete repair and remodel projects.

Previous wording

SG&A increased by $4 million, or 7%, in the second quarter of 2026 compared to the same period of 2025. The increase was caused by a $1 million increase due to acquired operations, a $1 million increase in professional fees, and a $2 million increase in expenses across several other categories. Accrued bonus expense, which varies with overall profitability and return on investment of the segment remained flat from the second quarter of 2025 and totaled $15 million for the quarter.

Current wording

SG&A increased by $3 million, or 7%, in the third quarter of 2026 compared to the same period of 2025. The increase is the result of a $1 million increase from acquired operations and a $2 million increase in expenses across several other categories. Accrued bonus totaled $9 million for the quarter.

Previous wording

Net sales in the first six months of 2026 decreased by 3% compared to the same period of 2025, due to a 6% decrease in organic units, partially offset by a 2% increase in selling prices and a 1% increase due to acquisitions. Organic unit changes within this segment consisted of decreases of 18% in Edge and 7% in ProWood, partially offset by a 5% increase in Deckorators. Within our Deckorators business unit, our mineral-based-composite decking sales increased by 33% as consumers continue to see the benefits of its superior product attributes, and wood-plastic composite decking increased by 51%. An acquired business contributed an additional 9% in sales growth to Deckorators and 30% in sales growth to wood-plastic composite decking sales. These increases were partially offset by a 13% decrease in railing sales. Unit sales to big box customers decreased approximately 5%, while unit sales to independent retailers decreased approximately 4%.

Current wording

Within Deckorators, our mineral-based-composite decking sales increased by 45% as consumers continue to see the benefits of its superior product attributes, and wood-plastic composite decking increased by 57%. An acquired business contributed an additional 8% in sales growth to Deckorators and 34% in sales growth to wood-plastic composite decking. These increases were partially offset by an 8% decrease in railing sales. Unit sales to big box customers decreased approximately 6%, while unit sales to independent retailers remained flat.

Previous wording

Net sales in the second quarter of 2026 increased 7% compared to the same period of 2025, due to a 4% increase in organic unit sales and a 4% contribution from business acquisitions. These increases were partially offset by a 1% decrease in selling prices. Organic unit changes consist of a 15% increase in Protective Packaging and an 8% increase in Structural Packaging, partially offset by a 3% decrease in PalletOne. Acquisitions contributed an additional 12% in unit sales growth to PalletOne.

Current wording

Net sales in the third quarter of 2026 increased 18% compared to the same period of 2025, due to a 9% increase in organic unit sales, a 6% contribution from business acquisitions, and a 3% increase in selling prices. Organic unit changes consist of increases of 14% in Structural Packaging, 5% in Protective Packaging, and 1% in PalletOne. Acquisitions contributed an additional 18% in unit sales to PalletOne.

Previous wording

SG&A increased by approximately $2 million, or 6%, in the second quarter of 2026 compared to the same period of 2025. The increase is attributable to a one-time write-off on an earnout liability in 2025 for $2 million, a $1 million increase due to acquired operations, and a $1 million increase in expenses across several other categories. The increases were offset by accrued bonus expense, which decreased approximately $2 million relative to the same period of 2025 and totaled $6 million for the quarter.

Current wording

SG&A remained flat in the third quarter of 2026 compared to the same period of 2025. Accrued bonus expense decreased approximately $2 million relative to the same period of 2025 and totaled $7 million for the quarter. The decrease was offset by a $1 million increase due to acquired operations and a $1 million increase in expenses across several other categories.

Previous wording

Net sales in the first six months of 2026 increased 2% compared to the same period of 2025, due to acquired businesses which contributed 3% to unit growth, partially offset by a 1% decrease in selling prices. Organic unit changes consist of a 10% increase in Protective Packaging and a 4% increase in Structural Packaging, offset by a 7% decrease in PalletOne. Acquisitions contributed an additional 7% in unit sales growth to PalletOne.

Current wording

Net sales in the first nine months of 2026 increased 7% compared to the same period of 2025, due to organic unit growth of 4% and acquired businesses which contributed 3% to unit growth. Organic unit changes consist of an 8% increase in Protective Packaging and a 7% increase in Structural Packaging, partially offset by a 3% decrease in PalletOne. Acquisitions contributed an additional 10% in unit sales growth to PalletOne.

Previous wording

SG&A remained flat for first six months of 2026 compared to the same period of 2025. Accrued bonus expense decreased $4 million, and totaled $12 million for the six months of 2026. The decrease was offset by a one-time write off on an earnout liability in 2025 for $2 million, a $1 million increase due to acquired businesses, and a $1 million increase in bad debt expense.

Current wording

SG&A remained flat for first nine months of 2026 compared to the same period of 2025. Accrued bonus expense decreased $6 million and totaled $19 million for the nine months of 2026. The decrease was offset by a one-time write off on an earnout liability in 2025 for $2 million, a $2 million increase due to acquired businesses, and a $2 million increase in expenses across several other categories.

Previous wording

Earnings from operations decreased in the first six months of 2026 compared to the same period 2025 by $18 million, or 38%, due to the factors discussed above, partially offset by a decrease in the net loss on disposition and impairment of assets, which primarily related to a $1 million lease impairment in 2025.

Current wording

Earnings from operations decreased in the first nine months of 2026 compared to the same period 2025 by $33 million, or 43%, due to the factors discussed above, as well as a $5 million decrease in the net gain on disposition and impairment of assets, which was comprised of a gain on the sale of machinery and equipment totaling $5 million in 2025.

Previous wording

Gross profit remained flat for the first six months of 2026 compared to the same period in 2025. The components of gross profit were as follows:

Current wording

Gross profit remained flat in the third quarter of 2026 compared to the same period of 2025. The components of gross profit were as follows:

Previous wording

Net sales in the first six months of 2026 decreased 7% compared to the same period of 2025 and consisted of a 4% decrease in selling prices and a 4% decrease in unit organic sales, partially offset by a 1% contribution from acquisitions. Organic unit changes within this segment consist of decreases of 7% in Factory Built and 8% in Site Built, partially offset by increases of 13% in Commercial and 10% in Concrete Forming.

Current wording

Net sales in the first nine months of 2026 decreased 1% compared to the same period of 2025 and consisted of a 1% decrease in unit organic sales. Organic unit changes within this segment consisted of decreases of 7% in Factory Built and 2% in Site Built, partially offset by increases of 15% in Commercial and 8% in Concrete Forming.

Previous wording

Gross profit decreased by $23 million, or 12%, for the first six months of 2026 compared to the same period of 2025. The change in our gross profit was attributable to the following:

Current wording

Gross profit decreased by $23 million, or 8%, for the first nine months of 2026 compared to the same period of 2025. The change in our gross profit was attributable to the following:

Previous wording

SG&A remained flat in the second quarter of 2026 compared to the same period of 2025. Accrued bonus expense decreased by $2 million and totaled $9 million for the quarter. The decrease in accrued bonus expense was offset by increases of $1 million in wages and benefits and $1 million in travel expenses.

Current wording

SG&A increased by approximately $4 million, or 2%, in the first nine months of 2026 compared to the same period of 2025. The increase was due to increases in salaries, wages, and benefits of $6 million, $1 million in professional fees, $1 million in travel expenses, and $2 million of increases across several other categories. The increase in SG&A was partially offset by a $6 million decrease in accrued bonus expense, which totaled $25 million for the first nine months of 2026.

Previous wording

The corporate segment consists of over (under) allocated costs that are not significant and net sales to external customers initiated by UFP Purchasing, UFP Transportation, and UFP Real Estate. In 2026 we modified our cost allocation methods to more closely approximate actual.

Current wording

The corporate segment consists of over (under) allocated costs that are not significant and net sales to external customers initiated by UFP Purchasing, UFP Transportation, and UFP Real Estate. In 2026 we modified our cost allocation methods to more closely approximate actual costs incurred.

Previous wording

Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for foreign, state and local income taxes and permanent tax differences. Our effective tax rate was 26.3% in the second quarter of 2026 compared to 23.6% in the same period of 2025 and was 25.3% in the first six months of 2026 compared to 22.5% for the same period in 2025. The increase in our effective tax rate for the second quarter and for the first six months of 2026 was primarily due to $3 million of state income tax benefits recorded as discrete items in the second quarter of 2025 resulting from an approved reduction in our tax rate in Texas and job credits in South Carolina, and a decrease in our tax deduction from stock-based compensation accounted for as a permanent difference.

Current wording

Effective tax rates differ from statutory federal income tax rates, primarily due to provisions for foreign, state and local income taxes and permanent tax differences. Our effective tax rate was 23.7% in the third quarter of 2026 compared to 23.8% in the same period of 2025 and was 24.8% in the first nine months of 2026 compared to 22.9% for the same period in 2025. The slight decrease in our effective tax rate for the third quarter was primarily due to an increase in the benefit we recognized for tax credits, partially offset by a decrease in our tax deduction from stock-based compensation accounted for as a permanent difference. The increase in our effective tax rate for the first nine months of 2026 was primarily due to a decrease in our tax deduction from stock-based compensation accounted for as a permanent difference.

Previous wording

Due to the seasonality of our business and the effects of the Lumber Market, we believe our cash cycle (days of sales outstanding plus days supply of inventory less days of payables outstanding) is a good indicator of our working capital management. As indicated in the table below, our cash cycle remained at 59 days during the second quarter of 2026 and increased to 63 days from 60 days during the first six months of 2026 compared to the same periods of the prior year.

Current wording

Due to the seasonality of our business and the effects of the Lumber Market, we believe our cash cycle (days of sales outstanding plus days supply of inventory less days of payables outstanding) is a good indicator of our working capital management. As indicated in the table below, our cash cycle decreased to 63 days from 64 days during the third quarter of 2026 and increased to 62 days from 61 days during the first nine months of 2026 compared to the same periods of the prior year.

Previous wording

The increase in our days supply of inventory for the first six months of 2026 is due to slower inventory turns in our Retail segment as a result of an increase in safety stock and weaker than anticipated demand in the first quarter. We continue to focus on past due account balances with customers, and the percentage of our accounts receivable that are current was 94% at the end of the second quarter of 2026 and 2025.

Current wording

The increase in our days supply of inventory for the first nine months of 2026 is due to slower inventory turns in our Retail segment as a result of an increase in safety stock and weaker than anticipated demand in the first quarter. Days supply of inventory normalized during the second and third quarters. We continue to focus on past due account balances with customers, and the percentage of our accounts receivable that are current was 94% at the end of the third quarter of 2026 and 2025.

Previous wording

In the first six months of 2026, our cash flows from operations were $61 million which consisted of net earnings of $134 million and $95 million of non-cash expenses, partially offset by a $169 million increase in working capital since the end of December 2025 due to seasonal demand. Our cash flows from operations decreased by $52 million compared to the same period of 2025 primarily due to the decline in our net earnings as well as the increase in our investment in net working capital since year end, which was $2 million higher in the first six months of 2026 compared to the first six months of 2025. We anticipate the seasonal increase in net working capital in 2026 will be converted to cash by early in the fourth quarter.

Current wording

In the first nine months of 2026, our cash flows from operations were $235 million which consisted of net earnings of $193 million and $142 million of non-cash expenses, partially offset by a $100 million increase in working capital since the end of December 2025 due to seasonal demand. Our cash flows from operations decreased by $165 million compared to the same period of 2025 primarily due to the decline in our net earnings as well as the increase in our investment in net working capital since year end, which was $95 million higher in the first nine months of 2026 compared to the first nine months of 2025. We anticipate the seasonal increase in net working capital in 2026 will be converted to cash early in the fourth quarter.

Previous wording

Purchases of property, plant, and equipment comprised $87 million of our cash used in investing activities during the first six months of 2026. Outstanding purchase commitments on existing capital projects totaled approximately $108 million on June 27, 2026. Capital spending primarily consists of several projects to expand capacity to manufacture new and value-added products, primarily in our Packaging segment and Deckorators business units, to achieve efficiencies through automation in all segments, and make improvements to a number of facilities. We intend to fund capital expenditures and purchase commitments through our operating cash flows for the balance of the year. Cash used for acquisitions during the first six months of 2026 totaled $122 million (refer to Note F to our unaudited interim condensed consolidated financial statements).

Current wording

Purchases of property, plant, and equipment comprised $123 million of our cash used in investing activities during the first nine months of 2026. Outstanding purchase commitments on existing capital projects totaled approximately $159 million on September 26, 2026. Capital spending primarily consists of several projects to expand capacity to manufacture new and value-added products, primarily in our Packaging segment and Deckorators business units, to achieve efficiencies through automation in all segments, and make improvements to a number of facilities. We intend to fund capital expenditures and purchase commitments through our operating cash flows for the balance of the year. Cash used for acquisitions during the first nine months of 2026 totaled $123 million (refer to Note F to our unaudited interim condensed consolidated financial statements).

Previous wording

Cash flows used in financing activities during the first six months of 2026 primarily consisted of the following:

Current wording

Cash flows used in financing activities during the first nine months of 2026 primarily consisted of the following:

Previous wording

On June 27, 2026, we had no amount outstanding on our $750 million revolving credit facility, and we had approximately $708 million in remaining availability after considering $42 million in outstanding letters of credit under the revolving credit facility. Financial covenants on the unsecured revolving credit facility and unsecured notes include minimum interest tests and a maximum leverage ratio. The agreements also restrict the amount of additional indebtedness we may incur and the amount of assets that may be sold. We were in compliance with all of our covenant requirements as of June 27, 2026.

Current wording

On September 26, 2026, we had no amount outstanding on our $750 million revolving credit facility, and we had approximately $708 million in remaining availability after considering $42 million in outstanding letters of credit under the revolving credit facility. Financial covenants on the unsecured revolving credit facility and unsecured notes include minimum interest tests and a maximum leverage ratio. The agreements also restrict the amount of additional indebtedness we may incur and the amount of assets that may be sold. We were in compliance with all of our covenant requirements as of September 26, 2026. In October 2026, we extended the maturity of our revolving credit facility for an additional five-year term (see Note K, “Subsequent Events”).

Previous wording

At the end of the second quarter of 2026, we had approximately $1.9 billion in total liquidity, consisting of our cash, remaining availability under our revolving credit facility, and a shelf agreement with certain lenders providing up to $575 million in remaining borrowing capacity.

Current wording

At the end of the third quarter of 2026, we had approximately $2.0 billion in total liquidity, consisting of our cash, remaining availability under our revolving credit facility, and a shelf agreement with certain lenders providing up to $575 million in remaining borrowing capacity.

Previous wording

We believe improvements in demand in the end markets we serve and effectively executing our strategies will allow us to achieve our long-term goals. However, in the short-term, demand in our markets has contracted due to a variety of macro-economic and geopolitical factors, which will continue to impact our results and vary depending on the severity and duration of this cycle. As a result of these more challenging conditions, we have developed and are executing plans to reduce or eliminate capacity at locations that are not meeting our profitability targets and reduce our SG&A costs. At the beginning of 2025, we announced that our goal through these actions was to improve our operating profits by $60 million by the end of 2026. We are on track to deliver the remaining $25 million or more from this cost out program by year end, with most to be realized in the third and fourth quarters. Additionally, we anticipate:

Current wording

We believe improvements in demand in the end markets we serve and effectively executing our strategies will allow us to achieve our long-term goals. However, in the short-term, demand in our markets has contracted due to a variety of macro-economic and geopolitical factors, which will continue to impact our results and vary depending on the severity and duration of this cycle. As a result of these more challenging conditions, we have developed and are executing plans to reduce or eliminate capacity at locations that are not meeting our profitability targets and reduce our SG&A costs. At the beginning of 2025, we announced that our goal through these actions was to improve our operating profits by $60 million by the end of 2026. We are on track to meet or exceed this goal by year end. Additionally, we anticipate: