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, as supplemented in Part II, Item 1A, “Risk Factors,” in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2025, and those risks and uncertainties 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. 22 Table of Contents 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 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 nine fiscal months ended September 27, 2025, we: • Used cash of $21.5 million and entered into $41.3 million of finance leases to enhance our facilities and fleet. • Returned capital of $37.7 million to our shareholders by using cash to purchase 503,556 shares of our common stock at an average price of $74.94, excluding broker commissions and excise tax. Our culture is guided by our values: • 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; acquisitions and the integration and completion of such acquisitions; the ability to attract, train, and retain highly qualified associates and other key personnel while controlling related labor costs; 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 23 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, as supplemented in Part II, Item 1A, “Risk Factors,” in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2025. 24 Table of Contents Results of Operations Our results of operations for the three fiscal months ended September 27, 2025 (“third quarter of fiscal 2025”) and for the three fiscal months ended September 28, 2024 (“third quarter of fiscal 2024”) were as follows: Three Fiscal Months Ended September 27, 2025 % of Net Sales Three Fiscal Months Ended September 28, 2024 % of Net Sales ($ amounts in thousands) Net sales $ 748,870 $ 747,288 Gross profit 108,187 14.4% 125,669 16.8% Less: Selling, general, and administrative 89,281 11.9% 92,210 12.3% Depreciation and amortization 9,742 1.3% 9,530 1.3% Amortization of deferred gains on real estate (984) (0.1)% (984) (0.1)% Other operating, net 182 0.0% 888 0.1% Operating income 9,966 1.3% 24,025 3.2% Interest expense, net 8,603 1.1% 4,619 0.6% Settlement of defined benefit pension plan — —% (2,226) (0.3)% Income before provision for income taxes 1,363 0.2% 21,632 2.9% (Benefit) provision for income taxes (292) 0.0% 5,616 0.8% Net income $ 1,655 0.2% $ 16,016 2.1% 25 Table of Contents Our results of operations for the nine fiscal months ended September 27, 2025 (“first nine months of fiscal 2025”) and for the nine fiscal months ended September 28, 2024 (“first nine months of fiscal 2024”) were as follows: Nine Fiscal Months Ended September 27, 2025 % of Net Sales Nine Fiscal Months Ended September 28, 2024 % of Net Sales ($ amounts in thousands) Net sales $ 2,238,203 $ 2,241,895 Gross profit 339,005 15.1% 375,794 16.8% Less: Selling, general, and administrative 278,639 12.4% 272,913 12.2% Depreciation and amortization 29,086 1.3% 29,083 1.3% Amortization of deferred gains on real estate (2,951) (0.1)% (2,952) (0.1)% Other operating, net (1,494) (0.1)% 1,210 0.1% Operating income 35,725 1.6% 75,540 3.4% Interest expense, net 23,640 1.1% 14,044 0.6% Settlement of defined benefit pension plan — —% (2,226) (0.1)% Income before provision for income taxes 12,085 0.5% 63,722 2.8% Provision for income taxes 3,315 0.1% 15,878 0.7% Net income $ 8,770 0.4% $ 47,844 2.1% The following table sets forth net sales by product category and percentage of total net sales by product category: Three Fiscal Months Ended Nine Fiscal Months Ended September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024 Net sales by product category: ($ amounts in thousands) Specialty products $ 525,455 70 % $ 519,000 69 % $ 1,548,301 69 % $ 1,562,300 70 % Structural products 223,415 30 % 228,288 31 % 689,902 31 % 679,595 30 % Total net sales $ 748,870 100 % $ 747,288 100 % $ 2,238,203 100 % $ 2,241,895 100 % The following table sets forth gross profit, the percentage of total gross profit earned by product category, and gross margin percentages by product category: Three Fiscal Months Ended Nine Fiscal Months Ended September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024 Gross profit by product category: ($ amounts in thousands) Specialty products $ 87,350 81 % $ 100,479 80 % $ 277,410 82 % $ 308,878 82 % Structural products 20,837 19 % 25,190 20 % 61,595 18 % 66,916 18 % Total gross profit $ 108,187 100 % $ 125,669 100 % $ 339,005 100 % $ 375,794 100 % Gross margin % by product category: Specialty products 16.6% 19.4% 17.9% 19.8% Structural products 9.3% 11.0% 8.9% 9.8% Company gross margin % 14.4% 16.8% 15.1% 16.8% 26 Table of Contents Third Quarter of Fiscal 2025 Compared to Third Quarter of Fiscal 2024 For the third quarter of fiscal 2025, the Company’s net sales were $748.9 million, an increase of $1.6 million, or 0.2%, compared to the third quarter of fiscal 2024. • The overall $1.6 million increase in the Company’s net sales in the current fiscal quarter was attributable to specialty products, partially offset by lower net sales for structural products. • Approximately 70% and 69% of the Company’s net sales in the third quarters of fiscal 2025 and the third quarter of fiscal 2024, respectively, were generated by specialty products. The Company’s gross profit for the third quarter of fiscal 2025 decreased by $17.5 million, or 13.9%, to $108.2 million from $125.7 million in the third quarter of fiscal 2024. • The decrease in the Company’s gross profit in the current fiscal quarter was attributable to both specialty products and structural products. • Approximately 81% of the Company’s gross profit was generated by specialty products in the third quarter of fiscal 2025, compared to 80% in the third quarter of fiscal 2024. • Gross margin percentage for the Company decreased from 16.8% to 14.4% in the current fiscal quarter. The decrease was attributable to both specialty products and structural products. • Cost of products sold for the third quarter of fiscal 2025 included an additional $2.2 million of cost related to retroactive adjustments associated with antidumping/countervailing (“AD/CV”) duties for certain imported specialty products. For the third quarter of fiscal 2024, retroactive import duty-related items resulted in a net benefit to Cost of products sold of $3.5 million. These items impacted the results of operations for specialty products. See Note 2, Inventory, and Note 8, Commitments and Contingencies , to the accompanying unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. • The Company’s gross profit and gross margin percentage for the third quarter of fiscal 2024 were positively impacted by $2.4 million for a LCNRV provision for certain structural products that occurred in the second quarter of fiscal 2024. This provision in the second quarter of fiscal 2024 lowered Cost of products sold in the subsequent third quarter of fiscal 2024 since substantially all of the inventory associated with the LCNRV write-down was sold during the third quarter of fiscal 2024. Such adjustments were not material to the third quarter of fiscal 2025. See Note 2, Inventory , to the accompanying unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. • The LCNRV impact and the retroactive adjustments associated with import duty-related items discussed in the two preceding bullet points caused the Company’s gross margin percentage to decrease from 14.7% to 14.4% for the third quarter of fiscal 2025, and to increase from 16.0% to 16.8% for the third quarter of 2024. Specialty products - Net sales of specialty products, which include product types such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products, increased by $6.5 million, or 1.2%, to $525.5 million in the third quarter of fiscal 2025. • The increase in net sales for specialty products in the current fiscal quarter was due primarily to higher volume for engineered wood and higher pricing for most product categories, partially offset by lower pricing for engineered wood. • Specialty products’ gross profit decreased by $13.1 million, or 13.1%, to $87.4 million in the current fiscal quarter due primarily to a competitive pricing environment, particularly for engineered wood. • Specialty products’ gross margin percentage decreased by 280 basis points to 16.6% compared to 19.4% in the third quarter of fiscal 2024 due primarily to a competitive pricing environment, especially for engineered wood. • For specialty products’ gross margin percentage, the aforementioned adjustments for import duty-related items reduced the percentage from 17.0% to 16.6% for the third quarter of fiscal 2025, and increased it from 18.7% to 19.4% for the third quarter of fiscal 2024. Structural products - Net sales of structural products, which include product types such as lumber, panels (including plywood and oriented strand board), rebar, and remesh, decreased by $4.9 million, or 2.1%, to $223.4 million in the third quarter of fiscal 2025 compared to $228.3 million in the third quarter of fiscal 2024. • This overall decrease in net sales for structural products in the current fiscal quarter was due primarily to lower volume for lumber and panels and lower pricing for panels, partially offset by higher pricing for lumber. Lumber and panel pricing were driven by external market factors. • Compared to the third quarter of 2024, average commodity prices in U.S. markets during the third quarter of 2025 for lumber were up 6.5% and down 14.1% for panels. • Structural products’ gross profit decreased overall by $4.4 million, or 17.3%, to $20.8 million in the third quarter of fiscal 2025 from $25.2 million in the third quarter of fiscal 2024. Lower volume was partially offset by overall higher pricing. 27 Table of Contents • Structural products’ gross margin percentage for the third quarter of fiscal 2025 was 9.3% compared to 11.0% in the third quarter of fiscal 2024. • The aforementioned LCNRV adjustment increased the gross margin percentage for structural products by 1.0% in the third quarter of fiscal 2024. LCNRV impacts were not material for the third quarter of fiscal 2025. Our selling, general, and administrative (“SG&A”) expenses decreased by $2.9 million, or 3.2%, compared to the third quarter of fiscal 2024. This overall decrease was due primarily to lower incentive compensation expense in the current period, partially offset by increased sales and logistics expenses driven by our strategy to grow sales in the multi-family channel, expenses associated with our digital transformation initiative, and merit salary increases in early fiscal 2025. Interest expense, net, which includes gross interest expense less interest income, was $8.6 million and $4.6 million in the third quarter of fiscal 2025 and third quarter of fiscal 2024, respectively, resulting in an increase in net interest expense of $4.0 million in the current fiscal quarter. • Gross interest expense was $12.5 million and $11.7 million in the third quarter of fiscal 2025 and third quarter of fiscal 2024, respectively. The additional interest expense in the current fiscal quarter was due primarily to additional net finance leases added subsequent to the third quarter of fiscal 2024. • Interest income was $3.9 million and $7.0 million in the third quarter of fiscal 2025 and third quarter of fiscal 2024, respectively. This 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 rates paid on those deposits in the current fiscal quarter. Additionally, interest income for the third quarter of fiscal 2024 included $0.7 million on refunds from U.S. Customs for AD/CV import duties. For fiscal 2025, we currently estimate our annual effective income tax rate will be approximately 29% . Our effective income tax rates were (21.4)% and 26.0% for the third quarters of fiscal 2025 and fiscal 2024, respectively. Our effective income tax rate for the third quarter of fiscal 2025 was increased by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, and the anticipated return-to-provision adjustments for the 2024 federal income tax return. These increases were offset by a benefit from settlements of stock-based compensation grants, resulting in a net income tax benefit for the fiscal period. Our effective income tax rate for the third quarter of fiscal 2024 was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, partially offset by a partial release of a valuation allowance for deferred income tax assets, and the vesting of restricted stock units. On July 4, 2025, the law formally titled “An Act to Provide for the Reconciliation Pursuant to Title II of H. Con. Res. 14” (commonly referred to as the “One Big Beautiful Bill” or “OBBB”) was signed into law. At this time, we do not believe the provisions of the OBBB will have a material effect on our effective income tax rates for fiscal 2025 or future years. However, the bonus depreciation provisions of the OBBB are estimated to reduce our cash payments for income taxes by approximately $3.4 million for fiscal 2025, based on actual and forecasted additions of qualifying assets in fiscal 2025. Our net income for the third quarter of fiscal 2025 was $1.7 million, or $0.20 per diluted share, versus $16.0 million, or $1.87 per diluted share, in the third quarter of fiscal 2024. Decreases in our net income and earnings per diluted share were due primarily to the factors that were previously discussed in this Item 2. The third quarter of fiscal 2024 also included a benefit of $2.2 million related to an adjustment of the settlement charge incurred in the fourth quarter of 2023 to settle our defined benefit pension plan. First Nine Months of Fiscal 2025 Compared to First Nine Months of Fiscal 2024 For the first nine months of fiscal 2025, the Company’s net sales were $2.238 billion, a decrease of $3.7 million, or 0.2%, compared to net sales of $2.242 billion in the first nine months of fiscal 2024. • The overall decrease in net sales in the current fiscal period was attributable to specialty products, partially offset by an increase for structural products. Higher overall volume was offset by overall lower pricing driven by external market factors. • Approximately 69% of the Company’s net sales in the first nine months of fiscal 2025 were generated by specialty products, compared to approximately 70% in the first nine months of fiscal 2024. The Company’s gross profit for the first nine months of fiscal 2025 decreased by $36.8 million, or 9.8%, to $339.0 million from $375.8 million in the prior year fiscal period. • This decline in the Company’s gross profit in the first nine months of fiscal 2025 was attributable to both specialty products and structural products. 28 Table of Contents • Approximately 82% of the Company’s gross profit was generated by specialty products in both year-to-date fiscal periods. • The Company’s gross margin percentage was 15.1% for the first nine months of fiscal 2025, a decrease from the 16.8% for the first nine months of fiscal 2024. • We benefited in the first nine months of fiscal 2024 by $20.7 million (excluding interest) for changes in retroactive rates for certain AD/CV import duties, and this reduced the Company’s Cost of products sold for the 2024 fiscal period (see Note 2, Inventory , to the accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q). This $20.7 million credit to Cost of products sold was partially offset by $8.0 million (excluding interest) of estimated expenses related to import duties in prior periods arising from certain classification discrepancies for products imported into the United States as separately entered shipments (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). These import duty items resulted in a net benefit of $12.7 million (excluding interest) to the Company’s Cost of products sold in the first nine months of fiscal 2024, and increased the Company’s gross margin percentage from 16.2% to 16.8% for the fiscal period. These duty-related items benefited the operating results for specialty products for the first nine months of fiscal 2024. The net impact of import duty-related adjustments was not material for the first nine months of fiscal 2025. Specialty products - Net sales of specialty products, which include product types such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products, decreased by $14.0 million, or 0.9%, to $1.55 billion in the first nine months of fiscal 2025. • The overall decline in net sales for specialty products in the current fiscal period was due to lower pricing primarily for engineered wood, millwork, and specialty lumber and panels, and by lower volume for industrial products and siding. These declines were partially offset by higher volume for engineered wood products and specialty lumber and panels. • Specialty products’ gross profit decreased by $31.5 million, or 10.2%, to $277.4 million, due primarily to a competitive pricing environment. • Specialty products’ gross margin percentage decreased 190 basis points to 17.9% for the first nine months of fiscal 2025 compared to 19.8% in the first nine months of fiscal 2024, due primarily to a competitive pricing environment. • The net impacts of the aforementioned adjustments related to import duty matters increased specialty products gross profit for the first nine months of fiscal 2024 by $12.7 million and increased specialty products gross margin percentage by 0.8% for the fiscal period. The net impact of import duty-related adjustments was not material for the first nine months of fiscal 2025. Structural products - Net sales of structural products, which include product types such as lumber, plywood, oriented strand board, rebar, and remesh, increased by $10.3 million to $689.9 million in the first nine months of fiscal 2025. • This overall increase in net sales for structural products was due primarily to volume increases for panels and pricing increases for lumber, partially offset by pricing declines for panels due to external market factors. • Compared to the first nine months of fiscal 2024, average commodity prices in U.S. markets during the first nine months of fiscal 2025 for lumber were up 12.4% and down 15.3% for panels. • Gross profit for structural products decreased by $5.3 million, or 8.0%, to $61.6 million from $66.9 million in the first nine months of fiscal 2024. Higher net sales in the current year fiscal period were offset by margin compression due primarily to external market factors. • Structural products’ gross margin percentage for the first nine months of fiscal 2025 was 8.9%, a decline from 9.8% in the first nine months of fiscal 2024, due primarily to margin compression mainly from external market factors. Our SG&A expenses in the first nine months of fiscal 2025 increased by $5.7 million, or 2.1%, compared to the first nine months of fiscal 2024. This overall increase was due primarily to increased logistics expenses driven by our strategy to grow sales in the multi-family channel, expenses associated with our digital transformation, and merit salary increases in early fiscal 2025, partially offset by lower incentive compensation expense in the current period. Other operating, net improved by $2.7 million compared to the first nine months of fiscal 2024. During the first quarter of fiscal 2025, we settled certain of the initial insurance claims related to property and equipment that were 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 operating, net on our unaudited condensed consolidated statement of operations for the first nine months of fiscal 2025. Interest expense, net, which includes gross interest expense less interest income, increased by $9.6 million compared to the first nine months of fiscal 2024. 29 Table of Contents • Gross interest expense was $37.2 million and $36.0 million in the first nine months of fiscal 2025 and first nine months of fiscal 2024, respectively. Gross interest expense in the first nine months of fiscal 2025 and the first nine months of fiscal 2024 included $0.6 million and $1.2 million, respectively, related to the aforementioned estimate for an accrual initially made and disclosed in the first quarter of 2024 related to amounts the Company believes it may owe for discrepancies in duties paid in prior years for certain imported goods (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 these amounts, gross interest expense in the first nine months of fiscal 2025 and the first nine months of fiscal 2024 would have been $36.6 million and $34.7 million, respectively, an increase in the current fiscal period of $1.8 million compared to the prior year fiscal period. This $1.8 million increase in the current fiscal period was due to additional net finance leases added subsequent to the third quarter of fiscal 2024. • Interest income was $13.6 million and $21.9 million in the first nine months of fiscal 2025 and first nine months of fiscal 2024, respectively. Interest income in the current fiscal period and the prior year fiscal period included $0.5 million and $2.7 million, respectively, received with the aforementioned duty refunds related to changes in retroactive rates for certain AD/CV 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 in the current fiscal period and prior year fiscal period would have been $13.1 million and $19.2 million, respectively, a decrease of $6.1 million in the current fiscal period. This $6.1 million decrease in the current fiscal period was due to lower average balances for interest-bearing deposits of cash/cash equivalents and due to lower interest rates paid on those deposits in the current fiscal period. For fiscal 2025, we currently estimate our annual effective income tax rate to be approximately 29%. Our effective income tax rates were 27.4% and 24.9% for the first nine months of fiscal 2025 and the first nine months of fiscal 2024, respectively. Our effective income tax rates for both year-to-date fiscal periods were impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, and adjustments to deferred income tax assets related to stock-based compensation. Our effective income tax rate for the first nine months of fiscal 2024 also benefited from the partial release of a state income tax valuation allowance for deferred income tax assets. As noted above in the discussion and analysis for the quarterly fiscal periods, we are evaluating the potential impacts of the OBBB, but at this time, we do not expect the provisions of the OBBB to have a material impact on our effective income tax rate for fiscal 2025 or future years. However, the bonus depreciation provisions of the OBBB are estimated to reduce our cash payments for income taxes by approximately $3.4 million for fiscal 2025, based on actual and forecasted additions of qualifying assets in fiscal 2025. Our net income for the first nine months of fiscal 2025 was $8.8 million, or $1.08 per diluted share, versus $47.8 million, or $5.53 per diluted share, in the first nine months of fiscal 2024. Our net income for the first nine months of fiscal 2025 decreased due primarily to the factors that were previously discussed in this Item 2. The first nine months of fiscal 2024 also included a benefit of $2.2 million related to an adjustment of the settlement charge incurred in the fourth quarter of 2023 to settle our defined benefit pension plan. 30 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 September 27, 2025, we had $429 million of cash and cash equivalents plus $347.3 million of availability on our new 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 September 27, 2025, we were in compliance with these covenants. Revolving Credit Facility As disclosed in Note 5, Debt and Finance Lease Obligations , to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q), in August 2025 we completed a replacement of our prior revolving credit facility for a new revolving facility that has a maturity date of August 27, 2030 with Bank of America, NA as administrative agent (the “Revolving Credit Facility”). Currently, the maximum borrowing capacity under the Revolving Credit Facility remains at $350 million and it also includes a $35 million swing line subfacility and letters of credit in an aggregate amount of up to $30 million. Subject to certain conditions and consents, we have the option to increase the facility by an aggregate additional principal amount of up to $300 million which could in the future allow total borrowings of up to $650 million. Similar to the prior revolving credit facility, the Revolving Credit Facility is a senior secured loan and letter of credit facility that is secured by a security interest in substantially all of our assets (other than real property), including inventories, accounts receivable, and proceeds from those items. As of September 27, 2025 and December 28, 2024, we had zero outstanding borrowings under our revolving credit facilities. Available borrowing capacity, reduced for undrawn letters of credit, under the revolving credit facilities was $347.3 million and $346.2 million as of September 27, 2025 and December 28, 2024, respectively. Excess availability, which includes availability under the revolving credit facilities plus cash and cash equivalents in qualified deposit accounts, was $776.6 million as of September 27, 2025. See Note 13, Subsequent Event , to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. If borrowings are outstanding under our Revolving Credit Facility, interest charges accrue at a rate per annum equal to (i) the then-current Secured Overnight Financing Rate (“SOFR”) plus a margin ranging from 1.25% to 1.75%, with the amount of such margin determined based upon the average of our excess availability (as defined) for the immediately preceding fiscal quarter as calculated by the administrative agent, for loans based on SOFR, or (ii) the administrative agent’s base rate plus a margin ranging from 0.25% to 0.75%, with the amount of such margin determined based upon the average of our excess availability (as defined) for the immediately preceding fiscal quarter as calculated by the administrative agent, for loans based on the base rate. Finance Lease Obligations Our finance lease obligations consist of leases for real estate, equipment, and vehicles totaling $321.8 million and $292.5 million as of September 27, 2025 and December 28, 2024, respectively. Of the $321.8 million as of September 27, 2025, $241.5 million related to real estate and $80.3 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 nine months of fiscal 2025 was $2.1 million compared to net cash provided of $66.4 million in the first nine months of fiscal 2024. The $68.5 million decrease in cash generated from operating activities during the first nine months of fiscal 2025 was primarily a result of a $39.1 million decrease in net income for the current fiscal 31 Table of Contents period and $31.0 million of net changes in operating assets and liabilities. The bonus depreciation provisions of the OBBB are estimated to reduce our cash payments for income taxes by approximately $3.4 million for fiscal 2025, based on actual and forecasted additions of qualifying assets in fiscal 2025. Investing Activities Net cash used in investing activities for the first nine months of fiscal 2025 was $18.9 million compared to net cash used of $19.0 million in the first nine months of fiscal 2024. During the first nine months of fiscal 2025 and first nine months of fiscal 2024, we used cash of $21.5 million and $19.8 million, respectively, to acquire property and equipment. In fiscal 2025, we received initial insurance proceeds of $2.4 million related to property and equipment that were damaged or destroyed due to Hurricane Helene at our Erwin, Tennessee owned facility in September 2024. Financing Activities Net cash used in financing activities totaled $55.4 million for the first nine months of fiscal 2025 compared to net cash used of $42.9 million for the first nine months of fiscal 2024. During the first nine months of fiscal 2025, we used cash of $38.1 million to repurchase shares of our common stock, compared to $30.0 million for the first nine months of fiscal 2024. Cash payments on finance lease obligations were higher by $2.5 million in the current fiscal period due to new finance leases added subsequent to September 28, 2024. Common Stock Repurchases During the first nine months of fiscal 2025, we repurchased 503,556 shares of our common stock at an average price of $74.97 for a total of $37.7 million, under our 2023 share repurchase authorization. During the first nine months of fiscal 2024, we repurchased 297,951 shares of our common stock at an average price of $100.63 for a total of $30.0 million under this same authorization. These dollar amounts include broker commissions paid but exclude any excise tax that was paid or may be due on the share repurchases under The Inflation Reduction Act of 2022. As of September 27, 2025, there remained $8.7 million repurchase capacity under the 2023 authorization. Between September 27, 2025 and October 31, 2025, we did not repurchase any additional shares of our common stock. 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. On July 28, 2025, our board of directors authorized a new share repurchase program for $50 million. The 2025 authorization may be used after exhaustion of the 2023 authorization. Under our share repurchase programs, 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. 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 receivable 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 $446.0 million as of September 27, 2025, compared to $411.5 million as of December 28, 2024, increased on a net basis by approximately $34.4 million, as shown below: 32 Table of Contents As of September 27, 2025 December 28, 2024 September 28, 2024 (In thousands) Receivables, less allowance for doubtful accounts $ 268,652 $ 225,837 $ 278,049 Inventories, net 345,879 355,909 340,541 614,531 581,746 618,590 Accounts payable 168,551 170,202 186,319 Net working capital $ 445,980 $ 411,544 $ 432,271 Investments in Property and Equipment Our investments in capital assets consist of purchases of 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. For the first nine months of fiscal 2025, we invested $22.7 million in long-lived assets primarily related to investments in our fleet, facility enhancements, and ongoing digital transformation. We also added $41.3 million of property and equipment under finance leases during the first nine months of fiscal 2025, primarily for new tractors and forklifts to enhance our logistics network. For the first nine months of fiscal 2024, we invested $19.8 million in long-lived assets primarily related to investments in our distribution facilities and to a lesser extent, upgrading our fleet. We also added $16.7 million in new finance leases during the 2024 fiscal quarter for new tractors and 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.