BlueLinx Holdings Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statement Concerning Forward-Looking Statements This Quarterly Report on Form 10-Q (“Quarterly Report” or “Form 10-Q”) contains forward-looking statements. Forward-looking statements include, without limitation, any statements that predict, forecast, indicate or imply future results, performance, liquidity levels or achievements, and may contain the words “believe,” “anticipate,” “could,” “expect,” “estimate,” “intend,” “may,” “project,” “plan,” “should,” “will,” “will be,” “will likely continue,” “will likely result” “would,” or words or phrases of similar meaning. Forward-looking statements are based on estimates and assumptions made by our management that, although believed by us to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties that may cause our business, strategy, or actual results to differ materially from the forward-looking statements. The forward-looking statements in this report include, without limitation, statements about anticipated effects of adopting certain accounting standards; estimated future annual amortization expense; estimates made in connection with revenue recognition; the expected outcome of legal proceedings; the expected outcome of government and regulatory proceedings; industry conditions; seasonality; liquidity and capital resources; our confidence in the Company’s long-term growth strategy; our areas of focus and management initiatives; the demand outlook for construction materials and expectations regarding new home construction, repair and remodel activity and continued investment in existing and new homes; our positioning for long-term value creation; our efforts and ability to generate profitable growth; our ability to increase net sales in specialty product categories; our ability to generate profits and cash from sales of specialty products; our ability to effectively manage inventory; our ability to manage our lease commitments; our ability to negotiate collective bargaining agreements; our multi-year capital allocation plans; our ability to manage volatility in wood-based commodities; our improvement in execution and productivity; our efforts and ability to maintain a disciplined capital structure and capital allocation strategy; our ability to maintain a strong balance sheet; our ability to focus on operating improvement initiatives and commercial excellence; and whether or not the Company will continue any share repurchases. These risks and uncertainties also include those discussed under the heading “Risk Factors” in Part II, Item 1A of this Form 10-Q, under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 28, 2024, those discussed elsewhere in this Form 10-Q, and in future reports that we file with the SEC. We operate in a changing environment in which new risks can emerge from time to time. It is not possible for management to predict all of these risks, nor can it assess the extent to which any factor, or a combination of factors, may cause our business, strategy, or actual results to differ materially from those contained in forward-looking statements. Given these risks and uncertainties, we caution you not to place undue reliance on forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law. The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information included in this Form 10-Q and in our Annual Report on Form 10-K for fiscal year 2024 . In addition to historical information, the following discussion and other parts of this Form 10-Q contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by this forward-looking information due to the factors discussed under Part II, Item 1A “Risk Factors” in this Form 10-Q, under Part I, Item 1A “Risk Factors” in our Form 10-K for fiscal 2024, and under “Cautionary Statement Concerning Forward-Looking Statements” in Item 2 of this Form 10-Q. Our Strategy We remain committed to driving a culture of profitable growth within new and existing product lines and geographies, while positioning the Company for long-term value creation. The following initiatives represent key areas of our management team’s focus: 1. Grow our higher-margin specialty product categories. We continue to pursue a revenue mix weighted toward higher-margin, specialty product categories such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products. Additionally, we are expanding our value-added service offerings designed to simplify complex customer sourcing requirements. 2. Increase share gain in local and national markets . We continue to pursue multi-family project growth, expand our product lines with key national accounts, expand branded product lines into new geographic markets, and launch new 17 Table of Contents product lines. With our expanded product categories, and our strategic vendor relationships, we seek to be an extension of our customers’ business in a scalable way. 3. Foster a performance-driven culture committed to business excellence and profitable growth to be the provider of choice for both suppliers and customers. We seek to improve the customer experience through enhanced tools, value-added services, and technology enablement, accelerating organic growth within specific product and solutions offerings where we are uniquely advantaged, increase our performance by leveraging our scale and national footprint together with pricing, operational and procurement capabilities, and deploy capital to drive sustained margin expansion, grow cash flow and maintain continued profitable growth. 4. Maintain a disciplined capital structure and pursue strategic investments that increase the value of the Company. We continue to strategically target acquisition opportunities that grow our higher-margin specialty products business, expand our geographic reach, or complement our existing capabilities. We also continue to evaluate and identify additional markets that are potential opportunities for new market development. We further seek to maintain a disciplined capital structure while at the same time investing in our business to modernize our distribution facilities, as well as our tractor and trailer fleet, and to improve operational performance. During the three fiscal months ended March 29, 2025, we engaged in the following transactions: • Used cash of $5.9 million and entered into $28.1 million of finance leases to enhance our facilities and fleet. • Returned capital of $15.0 million to our shareholders by using cash to purchase 186,048 shares of our common stock at an average price of $80.62, excluding broker commissions and excise tax. Our culture is guided by an unwavering commitment to apply our values to every decision we make and every action we take: • Customer Centric - We put our customers first, so we are customer centric in all that we do. • Integrity - We act with integrity, because doing the right thing is critical to our success. • Respect - We treat everyone with dignity and respect. • Grit - We show grit in the face of changing landscapes. • Collaboration - We collaborate with each other and our customers to build great teams and construct innovative solutions. Factors That Affect Our Operating Results and Trends Our results of operations and financial performance are influenced by a variety of factors, including the following: adverse housing market conditions; consolidation among competitors, suppliers, and customers; escalating changes in retaliatory trade policies of the United States and other countries; our dependence on international suppliers and manufacturers for certain products and related exposure to risks of new or increased tariffs and other risks that could affect our financial condition; pricing and product cost variability; disintermediation risk; volumes of product sold; competition; the cyclical nature of the industry in which we operate; loss of products or key suppliers and manufacturers; information technology security risks and business interruption risks; effective inventory management relative to our sales volume or the prices of the products we produce; the ability to attract, train, and retain highly qualified associates and other key personnel while controlling related labor costs; potential acquisitions and the integration and completion of such acquisitions; business disruptions; exposure to product liability and other claims and legal proceedings related to our business and the products we distribute; natural disasters, catastrophes, fire, wars or other unexpected events; the impacts of climate change; successful implementation of our strategy; wage increases or work stoppages by our union employees; costs imposed by federal, state, local, and other regulations; compliance costs associated with federal, state, and local environmental protection laws; the effects of epidemics, global pandemics or other widespread public health crises and governmental rules and regulations; fluctuations in our operating results; our level of indebtedness and our ability to incur additional debt to fund future needs; the covenants of the instruments governing our indebtedness limiting the discretion of our management in operating the business; the potential to incur more debt; the fact that we have consummated certain sale leaseback transactions with resulting long-term non-cancelable leases, many of which are or will be finance leases; the fact that we lease many of our distribution centers, and we would still be obligated under these leases even if we close a leased distribution center; inability to raise funds necessary to finance a required repurchase of our senior secured notes; a lowering or withdrawal of debt ratings; changes in our product mix; increases in fuel and other energy prices or availability of third-part freight providers; changes in insurance-related deductible/retention liabilities based on actual loss development experience; the possibility that the value of our deferred tax assets could become impaired; changes in our expected annual effective tax rate could be volatile; the costs and liabilities related to our participation in multi-employer pension plans could increase; the risk that our cash flows and capital resources may be insufficient to service our existing or future indebtedness; interest rate risk, which could cause our debt service obligations to increase; and changes 18 Table of Contents in, or interpretation of, accounting principles. These factors, and the related trends and uncertainties, have historically produced cyclicality in our results of operations, and we expect this cyclicality to continue in future periods. For more information on the risk factors impacting our business, refer to Part II, Item 1A, Risk Factors , in this Form 10-Q and to Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year 2024. 19 Table of Contents Results of Operations Our results of operations for the three fiscal months ended March 29, 2025 (“first quarter of fiscal 2025”) and for the three fiscal months ended March 30, 2024 (“first quarter of fiscal 2024”) were as follows: Three Fiscal Months Ended March 29, 2025 % of Net Sales Three Fiscal Months Ended March 30, 2024 % of Net Sales ($ amounts in thousands) Net sales $ 709,226 $ 726,244 Gross profit 111,129 15.7% 127,681 17.6% Less: Selling, general, and administrative 94,093 13.3% 91,250 12.6% Depreciation and amortization 9,554 1.3% 9,433 1.3% Amortization of deferred gains on real estate (984) (0.1)% (984) (0.1)% Other, net (2,258) (0.3)% 314 —% Operating income 10,724 1.5% 27,668 3.8% Interest expense, net 6,580 0.9% 4,624 0.6% Income before provision for income taxes 4,144 0.6% 23,044 3.2% Provision for income taxes 1,339 0.2% 5,552 0.8% Net income $ 2,805 0.4% $ 17,492 2.4% The following table sets forth net sales by product category and percentage of total net sales by product category: Three Fiscal Months Ended March 29, 2025 March 30, 2024 Net sales by product category ($ amounts in thousands) Specialty products $ 479,387 68% $ 503,834 69% Structural products 229,839 32% 222,410 31% Total net sales $ 709,226 100% $ 726,244 100% The following table sets forth gross profit and gross margin percentages by product category: Three Fiscal Months Ended March 29, 2025 March 30, 2024 Gross profit by product category: ($ amounts in thousands) Specialty products $ 89,778 $ 104,049 Structural products 21,351 23,632 Total gross profit $ 111,129 $ 127,681 Gross margin % by product category: Specialty products 18.7 % 20.7 % Structural products 9.3 % 10.6 % Company gross margin % 15.7 % 17.6 % 20 Table of Contents First Quarter of Fiscal 2025 Compared to First Quarter of Fiscal 2024 For the first quarter of fiscal 2025, the Company’s consolidated net sales were $709.2 million, a decrease of $17.0 million, or 2.3%, compared to the first quarter of fiscal 2024. • The decrease in net sales in the current fiscal quarter was attributable to overall lower volume and pricing for specialty products, partially offset by overall higher volume and pricing for structural products. • In both quarterly periods, we believe that inclement weather in certain regions of the U.S. negatively impacted volumes. • Compared to the first quarter of 2024, average commodity prices in U.S. markets during the first quarter of 2025 for lumber were up 13% and down 13% for panels. The Company’s gross profit for the first quarter of fiscal 2025 decreased by $16.6 million to $111.1 million from $127.7 million in the prior year quarter. • This decrease in gross profit in the current fiscal quarter was attributable to both specialty and structural products. • Gross margin percentage for the Company decreased from 17.6% to 15.7% in the current fiscal quarter, also attributable to both structural products and specialty products. • The Company’s gross profit and gross margin percentage in the first quarter of fiscal 2025 and the first quarter of fiscal 2024 benefited from gross refunds of $2.4 million and $16.9 million (excluding interest), respectively, for changes in retroactive rates for anti-dumping duties (see Note 2, Inventory , to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q). Additionally, our gross profit in the first quarter of fiscal 2024 was negatively impacted by $10.4 million (excluding interest) of expense for classification adjustments related to certain goods imported by the Company (see Note 8, Commitments and Contingencies , to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q). Excluding these items, which are reflected in Costs of products sold on our unaudited condensed consolidated statements of operations, our gross profit for the first quarter of fiscal 2025 and first quarter of fiscal 2024 would have been $108.7 million and $121.2 million, respectively, and gross margin percentage would have been 15.3% and 16.7%, respectively. Net sales of specialty products, which include products such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products, decreased by $24.4 million, or 4.9%, to $479.4 million in the first quarter of fiscal 2025. • This decrease in net sales for specialty products in the current fiscal quarter was due to price deflation driven by external market conditions, as well as lower volumes for most categories of specialty products. • Specialty products gross profit decreased by $14.3 million to $89.8 million in the current fiscal quarter due to the decrease in sales as well as margin compression. • Specialty products gross margin percentage decreased by 200 basis points to 18.7% compared to 20.7% in the first quarter of fiscal 2024 due to overall decreases in volume and pricing. • The adjustments related to duty and import matters discussed above at the Company level are all reflected in the operating results for specialty products. First quarter fiscal 2025 results for specialty products include a net benefit of $2.4 million (excluding interest) for refunds due to changes in retroactive rates for anti-dumping duties. The first quarter of fiscal 2024 included a net benefit of $6.5 million (excluding interest), composed of a $16.9 million benefit for refunds due to changes in retroactive rates for anti-dumping duties, partially offset by expenses of $10.4 million for classification adjustments related to certain goods imported by the Company. Excluding these net benefits for both quarterly fiscal periods, specialty products gross margin percentage for first quarter of fiscal 2025 and first quarter of fiscal 2024 would have been 18.2% and 19.4%, respectively, a decrease of 120 basis points. Net sales of structural products, which includes products such as lumber, panels (including plywood and oriented strand board), rebar, and remesh, increased by $7.4 million, or 3.3%, to $229.8 million in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024. • This increase in net sales for structural products in the current fiscal quarter was due to overall increases in lumber pricing, and increased lumber and panel volumes, partially offset by price declines in panels. • Structural products gross profit decreased by $2.3 million to $21.4 million from $23.6 million in the prior year fiscal quarter. Increased pricing in the current fiscal quarter, was offset by higher Costs of product sold in the current fiscal quarter. • Structural products gross margin percentage for the first quarter of fiscal 2025 was 9.3% compared to 10.6% in the prior-year fiscal quarter. Costs of products sold increased more than the increase in net sales in the current fiscal quarter. 21 Table of Contents Our selling, general, and administrative (“SG&A”) expenses increased by $2.8 million, or 3.1%, compared to the first quarter of fiscal 2024. This overall increase was due primarily to continuing technology initiatives associated with our digital transformation and also to higher logistics costs. Depreciation and amortization expense increased 1.3% compared to the first quarter of fiscal 2024 due to a higher base of depreciable assets in the first quarter of fiscal 2025, resulting from our continued focus on strategic capital investment. Interest expense, net, which includes gross interest expense less interest income, was $6.6 million and $4.6 million in the first quarter of fiscal 2025 and first quarter of fiscal 2024, respectively, resulting in an increase in net interest expense of $2.0 million, or 42.3% in the current fiscal quarter. • Gross interest expense was $12.1 million and $13.1 million in the first quarter of fiscal 2025 and first quarter of fiscal 2024, respectively. Gross interest expense in the first quarter of fiscal 2024 included $1.6 million of accrued interest expense related to the potential underpayment of duties arising from certain classification discrepancies for products imported into the United States as separately entered shipments (see Note 8, Commitments and Contingencies , to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q). Excluding this $1.6 million of interest expense, gross interest expense in the first quarter of fiscal 2024 would have been $11.5 million compared to $12.1 million in the first quarter of fiscal 2025, an increase in the current fiscal quarter of $0.5 million, or 4.7%, compared to the first quarter of fiscal 2024. This $0.5 million increase in the current fiscal quarter was due to additional net finance leases added subsequent to the first quarter of fiscal 2024. • Interest income was $5.5 million and $8.5 million in the first quarter of fiscal 2025 and first quarter of fiscal 2024, respectively. Interest income in the first quarter of fiscal 2025 and first quarter of fiscal 2024 included $0.5 million and $2.0 million, respectively, related to refunds received due to changes in retroactive rates for anti-dumping duties (see Note 2, Inventory , to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q). Excluding these amounts, interest income for the first quarter of fiscal 2025 and first quarter of fiscal 2024 would have been $5.0 million and $6.5 million, respectively, a decrease of $1.5 million in the current fiscal quarter. This $1.5 million decrease in the current fiscal quarter was due to lower average balances for interest-bearing deposits of cash/cash equivalents and due to lower interest rate paid on those deposits in the current fiscal quarter. During the first quarter of fiscal 2025, we settled certain of the initial insurance claims related to property and equipment that was damaged or destroyed at our Erwin, Tennessee owned facility in late third quarter of fiscal 2024 due to Hurricane Helene. We received insurance proceeds that exceeded the carrying values of the damaged or destroyed assets by $2.4 million and this amount is included in Other, net on our unaudited condensed consolidated statement of operations for the first quarter of fiscal 2025. Our effective income tax rates were 32.3% and 24.1% for the first quarters of fiscal 2025 and fiscal 2024, respectively. Our effective income tax rates for the first quarters of fiscal 2025 and 2024 were impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation for the quarterly periods, as well as adjustments to deferred income tax assets related to stock-based compensation . Our effective income tax rate for the first quarter of fiscal 2024 was also impacted by an adjustment to deferred income tax assets related to the partial release of a state income tax valuation allowance. For fiscal 2025, we currently estimate our annual effective income tax rate will be approximately 27% . Our net income for the first quarter of fiscal 2025 was $2.8 million, or $0.33 per diluted share, versus $17.5 million, or $2.00 per diluted share, in the prior-year fiscal quarter. Decreases in our net income and earnings per diluted share were due primarily to the factors discussed above. 22 Table of Contents Liquidity and Capital Resources We expect our primary sources of liquidity to be cash flows from sales and operating activities in the normal course of our operations, cash and cash equivalents on hand, and availability from our revolving credit facility, as needed. We expect that these sources will be sufficient to fund our ongoing cash requirements for at least the next 12 months and into the foreseeable future. As of March 29, 2025, we had $449 million of cash and cash equivalents plus $346.2 million of availability on our revolving credit facility. Senior Secured Notes In October 2021, we completed the private offering of $300 million of our 6.0% senior secured notes due 2029 (the “2029 Notes”). Interest is payable semi-annually. Our 2029 Notes are scheduled to mature on November 15, 2029, and no principal is due until that time as long as we remain in compliance with the related covenants. As of March 29, 2025, we were in compliance with these covenants. Revolving Credit Facility Our existing revolving credit facility (“Revolving Credit Facility”) with Wells Fargo Bank, National Association, as administrative agent (“Agent”), and certain other financial institutions, matures on August 2, 2026, provided we remain in compliance with the related covenants. As of March 29, 2025, we were in compliance with such covenants. Any outstanding borrowings under our Revolving Credit Facility bear interest at a rate per annum equal to (i) Adjusted Term Secured Overnight Financing Rate (“SOFR”) (calculated as SOFR plus 0.1%) plus a margin ranging from 1.25% to 1.75%, with the margin determined based upon average excess availability for the immediately preceding fiscal quarter for loans based on SOFR, or (ii) the Agent’s base rate (as that term is defined in the agreement for the Revolving Credit Facility) plus a margin ranging from 0.25% to 0.75%, with the margin based upon average excess availability for the immediately preceding fiscal quarter for loans based on the base rate. As of March 29, 2025, this variable interest rate for the Revolving Credit Facility was 5.535%. Borrowings under our Revolving Credit Facility are subject to availability under the Borrowing Base (as that term is defined in the agreement for the Revolving Credit Facility). The Company is required to repay revolving loans thereunder to the extent that such revolving loans exceed the Borrowing Base then in effect. Our Revolving Credit Facility may be prepaid in whole or in part from time to time without penalty or premium but including all breakage costs incurred by any lender thereunder. As of March 29, 2025 and December 28, 2024, we had zero outstanding borrowings under our Revolving Credit Facility and available borrowing capacity was $346.2 million, net of undrawn letters of credit. Excess availability, which includes availability under our Revolving Credit Facility plus cash and cash equivalents in qualified accounts, was $795.2 million as of March 29, 2025. Finance Lease Obligations Our finance lease obligations consist of leases for real estate, equipment, and vehicles totaling $316.8 million and $292.5 million as of March 29, 2025 and December 28, 2024, respectively. Of the $316.8 million as of March 29, 2025, $242.4 million related to real estate and $74.4 million related to equipment. Of the $292.5 million as of December 28, 2024, $242.8 million related to real estate and $49.8 million related to equipment. Sources and Uses of Cash Operating Activities Net cash used in operating activities for the first three months of fiscal 2025 was $33.9 million compared to net cash used of $31.1 million in the first three months of fiscal 2024. The decrease in cash generated from activities during the first three months of fiscal 2025 was primarily a result of a $14.7 million decrease in net income for the current fiscal quarter, partially offset by a $14.1 million net increase in operating assets and liabilities in the current fiscal quarter. Investing Activities Net cash used in investing activities for the first three months of fiscal 2025 was $3.4 million compared to net cash used of $5.3 million in the first three months of fiscal 2024. In the current quarter, we received initial insurance proceeds of $2.4 million 23 Table of Contents related to property and equipment that was damaged or destroyed by Hurricane Helene at our Erwin, Tennessee owned facility back in late third quarter of fiscal 2024. During the first three months of fiscal 2025, we also acquired $28.1 million of property and equipment through finance leases, compared to $8.2 million for the first three months of fiscal 2024. Financing Activities Net cash used in financing activities totaled $19.3 million for the first three months of fiscal 2025 compared to net cash used of $4.0 million for the first three months of fiscal 2024. The change in net cash used in financing activities was primarily due to the $15.0 million used to repurchase our common stock during the current fiscal quarter. We had no repurchases of our common stock during the first quarter of fiscal 2024. Stock Repurchase Program During the first three months of fiscal 2025, we repurchased 186,048 shares of our common stock under our 2023 share repurchase program at an average price of $80.65, including broker commissions but excluding federal excise tax due on the repurchases, for a total of $15.0 million. As of March 29, 2025, there remained $31.5 million repurchase capacity under this authorization. Between March 29, 2025 and April 25, 2025, we purchased an additional 142,500 shares of our common stock for $10.3 million at an average price of $72.18 per share, including broker commissions but excluding federal excise tax due on the repurchases. Under the 2023 share repurchase program, we may repurchase our common stock at any time or from time to time, without prior notice, subject to prevailing market conditions and other considerations. Our repurchases may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, accelerated share repurchase programs, tender offers or pursuant to a trading plan that may be adopted in accordance with the Securities and Exchange Commission Rule 10b5-1. The repurchase dollar amounts noted above are based on trade date activity, while the amounts reported on our consolidated statements of cash flows for share repurchases are based on settlement date activity. Net Working Capital Net working capital is an important measurement we use to determine the efficiencies of our operations and our ability to readily convert assets into cash. Net working capital is defined as the sum of accounts receivables and inventory, less accounts payable, each determined in accordance with GAAP and included in our consolidated balance sheets. This metric differs from traditional working capital in that it excludes certain current assets and current liabilities that are reported in our consolidated balance sheets. Net working capital of $462.0 million as of March 29, 2025, compared to $411.5 million as of December 28, 2024, increased on a net basis by approximately $50.5 million, as shown below: As of March 29, 2025 December 28, 2024 March 30, 2024 (In thousands) Receivables, less allowance for doubtful accounts $ 275,574 $ 225,837 $ 288,244 Inventories, net 399,555 355,909 370,942 675,129 581,746 659,186 Accounts payable 213,111 170,202 171,715 Net working capital $ 462,018 $ 411,544 $ 487,471 Investments in Property and Equipment Our investments in capital assets consist of cash paid for owned assets and the inception of financing lease arrangements for long-lived assets. The gross value of these assets is included in property and equipment, at cost on our unaudited condensed consolidated balance sheets. 24 Table of Contents For the first three months of fiscal 2025, we invested $6.4 million in long-lived assets primarily related to investments in our fleet and digital transformation and to a lesser extent, facility enhancements. We also added $28.1 million of property and equipment under finance leases during the first three months of fiscal 2025, primarily for new tractors and forklifts to enhance our logistics network. For the first three months of fiscal 2024, we invested $5.4 million in long-lived assets primarily related to investments in our distribution facilities and upgrading our fleet. We also added $8.2 million in new finance leases during the 2024 fiscal quarter for new forklifts to enhance our logistics network. Critical Accounting Policies The preparation of our consolidated financial statements and related disclosures in conformity with GAAP requires our management to make judgments and estimates that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain market risks as part of our on-going business operations. Our exposure includes commodity price risk and interest rate risk. There have been no material changes to our exposure to market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 28, 2024.