UFP INDUSTRIES INC

Previous wording

Our results for the first quarter of 2025 include the following highlights:

Current wording

Our results for the second quarter of 2025 include the following highlights:

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 43.8% and 39.8% of our sales in the first three months of 2025 and 2024, 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 42.9% and 38.9% of our sales in the first six months of 2025 and 2024, respectively.

Previous wording

Higher overall lumber prices in 2025 compared to 2024 is primarily due to increased end market demand in the U.S. as well as various supply constraints. A change in lumber prices impacts profitability of products sold with fixed and variable prices, as discussed below. If recently proposed tariffs are enforced, which have been paused in Mexico and Canada, the demand for domestic product is expected to increase, which will likely increase costs as capacity gets challenged. Although 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 make decisions quickly to minimize disruption. As of March 29, 2025, 84% of our lumber purchases are from domestic suppliers and 15% are imported from Canada and other international suppliers.

Current wording

The proposed tariffs in Mexico and Canada continue to be paused. If they are activated, the demand for domestic lumber products is expected to increase, which will likely result in higher costs as capacity gets challenged. Although 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 28, 2025, 84% of our lumber purchases are from domestic suppliers and 16% are imported from Canada and other international suppliers.

Previous wording

We completed one business acquisition in fiscal 2024. The annual historical sales attributable to this acquisition are approximately $25 million. This business combination is not significant to our quarterly results and thus pro forma results for 2025 and 2024 are not presented.

Current wording

We completed one business acquisition in fiscal 2025 and one in fiscal 2024. The annual historical sales attributable to these acquisitions are approximately $32 million. These business combinations are not significant to our quarterly results and thus proforma results for 2025 and 2024 are not presented.

Previous wording

See Notes to the Unaudited Condensed Consolidated Financial Statements, Note F, “Business Combinations” for additional information.

Current wording

See Notes to the Unaudited Interim Condensed Consolidated Financial Statements, Note F, “Business Combinations” for additional information.

Previous wording

Our overall unit sales of value-added products were up 2% in the first quarter of 2025 compared to the same period last year. Our overall unit sales of commodity-based products decreased approximately 3% in the first quarter of 2025 compared to the same period last year.

Current wording

Our overall unit sales of value-added products were down 4% in the second quarter and 1% in the first six months of 2025 compared to the prior year. Our overall unit sales of commodity-based products decreased approximately 4% in the second quarter and 3% in the first six months of 2025 compared to the prior year.

Previous wording

Net sales in the first quarter of 2025 decreased by 3% compared to the same period of 2024 due to a 1% increase in selling prices and a 4% decrease in units. Unit changes within this segment consisted of decreases of 11% in Deckorators and 3% in ProWood. Our unit sales to big box customers, which we believe are more closely correlated with repair and remodel activity, decreased approximately 3%, while unit sales to independent retailers, which we believe are more closely correlated to new housing starts, decreased approximately 7%. Within our Deckorators business unit, our sales of wood-plastic composite decking, mineral-based-composite decking (sold under our new Surestone tradename) and railing systems decreased 14%. We believe our unit decline is due to a recent change in customer mix in which we lost market share with one big box customer and gained market share with another. For the remainder of the year we believe we will benefit from a modest net gain in market share as we begin stocking approximately 1,500 stores and continue to add capacity to produce our mineral-based composite decking. We expect to realize the full benefit of our net market share gain in 2026. Our long-term goal is to double our market share over the next 5 years.

Current wording

Net sales in the second quarter of 2025 decreased by 3% compared to the same period of 2024 due to a 7% decrease in units, partially offset by a 4% increase in selling prices. Unit changes within this segment consisted of decreases of 3% in Deckorators and 7% in ProWood. Our unit sales to big box customers, which we believe are more closely correlated with repair and remodel activity, decreased approximately 7%, while unit sales to independent retailers, which we believe are more closely correlated to new housing starts, decreased approximately 6%. Within our Deckorators business unit, our sales of railings declined 25%, wood-plastic composite decking was flat, and our mineral-based-composite decking (sold under our new Surestone tradename) increased 45%. The decline in our railing sales is due to lost market share with a big box customer which began impacting sales at the beginning of the year. Our sales or wood-plastic composite decking were also impacted by this loss of business. However, we gained market share with another big box customer which will begin to more favorably impact our sales beginning in July as initial stocking orders are received for one of our mineral-based composite decking products. Overall, for the remainder of this year, we believe we will benefit from a modest net gain in market share as we begin stocking approximately 1,500 stores and continue to add capacity to produce our mineral-based composite decking. We expect to realize the full benefit of our net market share gain in 2026. Our long-term goal is to double our market share of composite decking and railing over the next 5 years. The decline in ProWood volume is primarily due to soft demand due to higher interest rates and weaker consumer sentiment and ongoing efforts to discontinue sales of products that do not meet our profitability targets.

Previous wording

Gross profits decreased by $20 million, or 20% to $81 million for the first quarter of 2025 compared to the same period last year. The change in gross profit was attributable to the following:

Current wording

Gross profits decreased by $13 million, or 10% to $114 million for the second quarter of 2025 compared to the same period last year. The change in gross profit was attributable to the following:

Previous wording

SG&A remained flat in the first quarter of 2025 compared to the same period of 2024. Accrued bonus expense, which varies with the overall profitability and return on investment of the segment, decreased approximately $5 million from the first quarter of 2024 and totaled approximately $9 million for the quarter. This decrease, along with other smaller decreases in various accounts, was substantially offset by an increase in advertising of $5 million related to Deckorators.

Current wording

SG&A decreased by $7 million, or 10%, in the second quarter of 2025 compared to the same period of 2024. Accrued bonus expense, which varies with the overall profitability and return on investment of the segment, decreased $4 million from the second quarter of 2024 and totaled $15 million for the quarter. This decrease, along with other smaller decreases in several accounts totaling $9 million, was partially offset by an increase in advertising of $6 million related to our efforts to build brand awareness of our Deckorators SureStone decking.

Previous wording

Net sales in the first quarter of 2025 decreased 3% compared to the same period of 2024, due to a 1% decrease in selling prices and a 3% decrease in organic unit sales, partially offset by an acquired business which contributed to 1% unit growth. Organic unit changes consist of decreases of 1% in PalletOne and 5% in Structural Packaging, primarily due to a decline in demand, partially offset by growth of 13% in Protective Packaging due to market share gains. The decrease in selling prices is due to competitive price pressure primarily in our Structural Packaging business unit.

Current wording

Net sales in the second quarter of 2025 decreased 2% compared to the same period of 2024, due to a 4% decrease in selling prices, partially offset by an acquired business which contributed 2% to unit growth. Organic unit changes consist of decreases of 2% in Structural Packaging, primarily due to a decline in demand, offset by growth of 8% in Protective Packaging and 5% in PalletOne due to market share gains. The decrease in selling prices is due to competitive price pressure primarily in our PalletOne and Structural Packaging business units.

Previous wording

Gross profits decreased by $16 million, or 19%, for the first quarter of 2025 compared to the same period last year. The change in gross profit was attributable to the following:

Current wording

Gross profits decreased by $13 million, or 16%, for the second quarter of 2025 compared to the same period last year. The change in gross profit was attributable to the following:

Previous wording

SG&A decreased by approximately $6 million, or 11%, in the first quarter of 2025 compared to the same period of 2024. Accrued bonus expense, which varies with the overall profitability and return on investment of the segment, decreased approximately $2 million relative to the same period of 2024, and totaled $8 million for the quarter. The remaining decrease is attributable to other incentives which declined by $1 million for this quarter as well as many smaller decreases in several accounts.

Current wording

SG&A decreased by approximately $10 million, or 19%, in the second quarter of 2025 compared to the same period of 2024. Accrued bonus expense decreased approximately $3 million relative to the same period of 2024, and totaled $8 million for the quarter. The remaining decrease is attributable to an adjustment to reduce earnout expense by $1.5 million and many smaller decreases in several accounts.

Previous wording

Earnings from operations for the Packaging reportable segment decreased in the first quarter of 2025 compared to 2024 by $10 million, or 30%, due to the factors discussed above.

Current wording

Earnings from operations decreased in the second quarter of 2025 compared to 2024 by $3 million, or 11%, due to the factors discussed above.

Previous wording

Net sales in the first quarter of 2025 remained flat compared to the same period of 2024 due to a 3% decrease in selling prices offset by a 3% organic unit increase. We experienced unit increases of 13% in factory-built, 4% in commercial construction, and 3% in concrete forming. Our growth in factory-built is primarily due to an increase in industry production. These increases were partially offset by a 5% decrease in site-built, primarily due to softer demand for housing. As of March 29, 2025 and March 30, 2024, we estimate that our backlog of orders in our site-built construction business unit were $65 million and $79 million, respectively. The decrease in pricing was primarily due to competitive price pressure in our site-built business unit.

Current wording

Net sales in the second quarter of 2025 decreased 4% compared to the same period of 2024 due to a 6% decrease in selling prices offset by a 2% increase in unit sales. We experienced unit increases of 8% in factory-built, 6% in commercial construction, and 11% in concrete forming. Our growth in factory-built is primarily due to an increase in industry production. These increases were partially offset by a 7% decrease in site-built, primarily due to softer demand for housing. As of June 28, 2025 and June 29, 2024, we estimate that our backlog of orders in our site-built housing business unit were $59 million and $82 million, respectively. The decrease in pricing was primarily due to competitive price pressure in our site-built business unit.

Previous wording

Gross profits decreased by $24 million, or 21%, in the first quarter of 2025 compared to the same period of 2024. The change in our gross profit was comprised of the following:

Current wording

Gross profits decreased by $25 million, or 20%, in the second quarter of 2025 compared to the same period of 2024. The change in our gross profit was comprised of the following:

Previous wording

SG&A decreased by approximately $6 million, or 9%, in the first quarter of 2025 compared to the same period of 2024. Accrued bonus expense declined by $4 million and totaled $10 million for the quarter. The decline in SG&A was also attributable to other incentives and many smaller decreases in several accounts.

Current wording

SG&A decreased by approximately $10 million, or 13%, in the second quarter of 2025 compared to the same period of 2024. Accrued bonus expense declined by $6 million and totaled $10 million for the quarter. The decline in SG&A was also attributable to a decline in our sales incentive compensation totaling $2 million and many smaller decreases in several accounts.

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 21.1% in the first quarter of 2025 compared to 17.4% in the same period of 2024. The increase in our effective tax rate for the first quarter was primarily due to 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 23.6% in the second quarter of 2025 compared to 25.1% in the same period of 2024 and was 22.5% in the first six months of 2025 compared to 21.5% for the same period in 2024. The decrease in our effective tax rate for the second quarter was primarily due to one-time state income tax benefits recorded as discrete items in 2025. The increase in our effective tax rate for the first six months of 2025 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 was 62 days during the first quarter of 2025 and in the same period 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 increased to 59 days from 56 days during the second quarter of 2025 and increased to 60 days from 59 days during the first six months of 2025 compared to the same periods of the prior year.

Previous wording

We continue to focus on past due account balances with customers, and the percentage of our accounts receivable that are current was 94% and 95% at the end of the first quarter of 2025 and 2024, respectively.

Current wording

The increase in our days supply of inventory for the quarter and first six months of 2025 is due to slower inventory turns in our Retail and Packaging segments. The increase in our days of sales outstanding is primarily due to our Retail and Packaging segments. 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 2025 and 2024.

Previous wording

In the first three months of 2025, our cash flows used in operations were $109 million and were comprised of net earnings of $79 million, $51 million of non-cash expenses, and a $239 million increase in working capital since the end of December 2024. Our cash flows used in operations increased by $92 million compared to the same period of last year primarily due to the increase in our investment in net working capital since year end, which was $55 million higher in 2025 compared to 2024.

Current wording

In the first six months of 2025, our cash flows from operations were $113 million and were comprised of net earnings of $180 million, $99 million of non-cash expenses, offset by a $166 million increase in working capital since the end of December 2024 due to seasonal demand. Our cash flows from operations decreased by $126 million compared to the same period of last year primarily due to the increase in our investment in net working capital since year end, which was $67 million higher in 2025 compared to 2024. We anticipate the seasonal increase in net working capital in 2025 will be converted to cash by the end of the third quarter, as well as approximately $40 million of cash flow benefits from the OBBBA in the third and fourth quarter.

Previous wording

Purchases of property, plant, and equipment of $67 million comprised most of our cash used in investing activities during the first three months of 2025. Outstanding purchase commitments on existing capital projects totaled approximately $153.4 million on March 29, 2025. Capital spending primarily consists of several projects to expand capacity to manufacture new and value-added products, primarily in our Packaging segment and our Site-Built 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.

Current wording

Purchases of property, plant, and equipment of $130 million comprised most of our cash used in investing activities during the first six months of 2025. Outstanding purchase commitments on existing capital projects totaled approximately $133.4 million on June 28, 2025. Capital spending primarily consists of several projects to expand capacity to manufacture new and value-added products, primarily in our Packaging segment and our Site-Built 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.

Previous wording

Cash flows used in financing activities during the first three months of 2025 primarily consisted of the following:

Current wording

Cash flows used in financing activities during the first six months of 2025 primarily consisted of the following:

Previous wording

On March 29, 2025, we had no amount outstanding on our $750 million revolving credit facility, and we had approximately $713 million in remaining availability after considering $37 million in outstanding letters of credit. 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 which may be sold. We were in compliance with all our covenant requirements on March 29, 2025.

Current wording

On June 28, 2025, we had no amount outstanding on our $750 million revolving credit facility, and we had approximately $711 million in remaining availability after considering $39 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 which may be sold. We were in compliance with all our covenant requirements on June 28, 2025.

Previous wording

At the end of the first quarter of 2025, we had approximately $2.2 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 second quarter of 2025, we had approximately $2.1 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

Our long-term financial goals include:

Current wording

Ourlong-term financial goals include:

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 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 of locations that are not meeting our profitability targets, exit business that does not meet our profitability targets, and reduce our SG&A costs. Our goal through these actions is to lower our cost structure and improve our operating profits by $60 million by year-end 2026. We anticipate benefits of approximately $40 million by the end of 2025, including approximately $26 million from planned SG&A cost reductions and $14 million from planned capacity reductions. In 2025 we anticipate these planned decreases will be offset a $20 million increase in advertising costs in our Deckorators business unit to build our Surestone brand and other increases primarily to pursue greenfield growth opportunities, technology improvements, and product innovation.

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 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 for reducing costs, eliminating excess capacity, divesting under-performing assets, and exiting business that does not meet our profitability targets. Our goal through these actions is to lower our cost structure and improve our operating profits by $60 million by year-end 2026. We anticipate benefits of approximately $43 million by the end of 2025, including $13 million from planned capacity reductions and approximately $30 million from planned SG&A cost reductions. The planned decreases will be partially offset by an anticipated $20 million increase in advertising costs in our Deckorators business unit to build our Surestone brand.