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 successfully integrate the operations of Disdero; or 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 2025 Form 10-K, 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 2025 Form 10-K. 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 and under Part I, Item 1A, Risk Factors, in our 2025 Form 10-K. 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 towards higher-margin, specialty product categories such as engineered wood products, siding, millwork, outdoor living products, specialty lumber and panels, and industrial products. Additionally, we are expanding our value-added service offerings designed to simplify complex customer sourcing requirements. Our acquisition of Disdero in the fourth quarter of fiscal 2025 enhanced our revenue mix by adding a significant number of new lines of premium specialty building materials, including decking, trim, flooring, paneling, posts, timbers, siding, and stepping, to our product offerings. 16 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 a better 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 our 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 fiscal three months ended April 4, 2026, we: • Used cash of $2.6 million to enhance our facilities, fleet, and technology hardware. • Returned capital of $3.0 million to our shareholders by using cash to purchase 59,051 shares of our common stock at an average price of $50.83, excluding broker commissions and excise tax. Between April 4, 2026 and April 21, 2026, we repurchased an additional 36,749 shares of our common stock at an average price of $54.43 per share excluding broker commissions and excise tax, for a total of $2.0 million. 17 Table of Contents Business and Digital Transformation We have initiated a series of business and digital transformation actions focused on redesigning and optimizing key elements of our operating model to improve efficiency, execution, and operating leverage. These actions include business process‑driven initiatives and targeted digital investments intended to simplify operations, reduce complexity, and increase consistency across the enterprise. We have focused on improving organizational efficiency across corporate functions and field operations through process redesign, role clarity, increased standardization, and productivity improvements. In parallel, we are modernizing our logistics and commercial operating capabilities, including the implementation of an enterprise transportation management platform and the use of advanced analytics and artificial intelligence to enhance decision‑making, support optimization across pricing, procurement, and logistics, and improve inventory management and collections efficiency. Collectively, these actions are intended to improve execution consistency, enhance margin performance, strengthen operating leverage, and improve our ability to perform across cyclical market conditions. Our Culture and Values 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. Acquisition of Disdero During the fourth quarter of fiscal 2025, we acquired Disdero Lumber Co. LLC (“Disdero”), a value-added distributor focusing on premium specialty building materials, including decking, trim, flooring, paneling, posts, timbers, siding, and stepping. Disdero’s products are used primarily in the construction of high-end, custom homes and decks, as well as upscale multi-family residential and commercial projects. The acquisition of Disdero was funded with cash on hand. Disdero is based near Portland, Oregon and began operations in 1953. We expect the acquisition of Disdero to strengthen and expand our offerings for premium specialty products, which typically have higher profit margins, and increase our market penetration in the Pacific Northwest. We plan to operate Disdero under its established brand name for the foreseeable future. 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; disintermediation risk; 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; 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 18 Table of Contents and other energy prices, including as a result of disruptions in international shipping of oil and gas through the Strait of Hormuz and the ongoing conflicts in the Middle East and Ukraine, 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 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 2025 Form 10-K. 19 Table of Contents Results of Operations Our results of operations for the fiscal three months ended April 4, 2026 (“fiscal first quarter of 2026” or “current year period” or “current year quarter”) and for the fiscal three months ended March 29, 2025 (“fiscal first quarter of 2025” or “prior year period” or “prior year quarter”) were as follows: Fiscal Three Months Ended April 4, 2026 % of Net Sales Fiscal Three Months Ended March 29, 2025 % of Net Sales ($ amounts in thousands) Net sales $ 731,149 $ 709,226 Gross profit 116,397 15.9% 111,129 15.7% Less: Selling, general, and administrative 96,204 13.2% 94,093 13.3% Depreciation and amortization 11,974 1.6% 9,554 1.3% Realization of deferred gains on real estate (984) (0.1)% (984) (0.1)% Other operating, net 1,875 0.3% (2,258) (0.3)% Operating income 7,328 1.0% 10,724 1.5% Interest expense, net 9,147 1.3% 6,580 0.9% Income before provision for income taxes (1,819) (0.2)% 4,144 0.6% (Benefit) provision for income taxes (361) 0.0% 1,339 0.2% Net (loss) income $ (1,458) (0.2)% $ 2,805 0.4% The following table sets forth Net sales by product category and percentage of total Net sales by product category: Fiscal Three Months Ended April 4, 2026 March 29, 2025 Net sales: ($ amounts in thousands) Specialty products $ 511,806 70 % $ 479,387 68 % Structural products 219,343 30 % 229,839 32 % Total Net sales $ 731,149 100 % $ 709,226 100 % The following table sets forth Gross profit, the percentage of total Gross profit earned by product category, and gross margin percentages by product category: Fiscal Three Months Ended April 4, 2026 March 29, 2025 Gross profit: ($ amounts in thousands) Specialty products $ 92,567 80 % $ 89,778 81 % Structural products 23,830 20 % 21,351 19 % Total Gross profit $ 116,397 100 % $ 111,129 100 % Gross margin %: Specialty products 18.1% 18.7% Structural products 10.9% 9.3% Company gross margin % 15.9% 15.7% 20 Table of Contents Fiscal First Quarter of 2026 Compared to Fiscal First Quarter of 2025 For the fiscal first quarter of 2026, the Company’s Net sales were $731.1 million, an increase of $21.9 million, or 3.1%, compared to the fiscal first quarter of 2025. • The $21.9 million overall 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. Combined, overall strong volume gains offset decreases in pricing. • The current year period includes the Net sales for Disdero. We acquired Disdero in fiscal fourth quarter of 2025. • Approximately 70% and 68% of the Company’s Net sales in the fiscal first quarters of 2026 and 2025, respectively, were generated by specialty products. The Company’s Gross profit for the fiscal first quarter of 2026 increased by $5.3 million, or 4.7%, to $116.4 million from $111.1 million in the fiscal first quarter of 2025. • The increase in the Company’s Gross profit in the current fiscal quarter was attributable to both specialty products and structural products. • The current year period includes the results of Disdero, which contributed to Gross profit. • Approximately 80% of the Company’s Gross profit was generated by specialty products in the fiscal first quarter of 2026, compared to 81% in the fiscal first quarter of 2025. • The Company’s gross margin percentage increased from 15.7% to 15.9% in the current fiscal quarter. Disdero increased the Company’s gross margin percentage in the current period. The import duty-related item described below increased the Company’s gross margin percentage by 40 basis points for the prior year period. • Cost of products sold for the fiscal first quarter of 2025 included a benefit of $2.4 million related to retroactive adjustments associated with antidumping/countervailing (“AD/CV”) duties for certain imported specialty products. See Note 3, Inventory, to the accompanying unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. 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 $32.4 million, or 6.8%, to $511.8 million in the fiscal first quarter of 2026. • The increase in Net sales for specialty products in the current fiscal quarter was due to higher volumes for all product categories, partially offset by slightly lower pricing for most product categories due to a continuing competitive pricing environment. • The current year period also includes the Net sales for Disdero. • Specialty products’ Gross profit increased by $2.8 million, or 3.1%, to $92.6 million in the current fiscal quarter due to strong volume gains that exceeded the pricing decreases. The current year period includes the results for Disdero, which contributed to Gross profit. • Specialty products’ gross margin percentage decreased by 60 basis points to 18.1% compared to 18.7% in the fiscal first quarter of 2025. Disdero increased the gross margin percentage in the current quarter. The prior year period benefited from the $2.4 million duty-related refund described above, which increased the gross margin percentage for specialty products in the prior year period by 50 basis points. 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 $10.5 million, or 4.6%, to $219.3 million in the fiscal first quarter of 2026 compared to $229.8 million in the fiscal first quarter of 2025. • This overall decrease in Net sales for structural products in the current fiscal quarter was due to lower pricing for panels and lumber, partially offset by volume gains for lumber. • Compared to the first quarter of 2025, average commodity prices in U.S. markets during the first quarter of 2026 for lumber were down approximately 4% and down approximately 14% for panels. • Structural products’ Gross profit increased overall by $2.5 million, or 11.6%, to $23.8 million in the fiscal first quarter of 2026 from $21.4 million in the fiscal first quarter of 2025 due to margin expansion for both lumber and panels accompanied by higher Net sales for lumber. • Structural products’ gross margin percentage for the fiscal first quarter of 2026 was 10.9% compared to 9.3% in the fiscal first quarter of 2025. Our Selling, general, and administrative (“SG&A”) expenses increased by $2.1 million, or 2.2%, compared to the fiscal first quarter of 2025. This overall increase was due primarily to Disdero. The overall increase in the current quarter was partially offset by a benefit of $1.9 million for insurance proceeds received for business interruptions at our Erwin, Tennessee owned 21 Table of Contents facility that was damaged in the third quarter of 2024 by Hurricane Helene. Depreciation and amortization expense increased by $2.4 million, or 25.3%, compared to the fiscal first quarter of 2025 due to a higher base of depreciable assets, including the property, equipment, and finite-lived intangible assets from the Disdero acquisition. Other operating, net for the fiscal first quarter of 2026 was $1.9 million and composed mainly of severance expenses and professional services fees related to our business and digital transformation initiatives. For the fiscal first quarter of 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 2024 due to Hurricane Helene. We received insurance proceeds that exceeded the carrying values of the damaged or destroyed property and equipment by $2.4 million. Interest expense, net, which includes gross interest expense less gross interest income, was $9.1 million and $6.6 million in the fiscal first quarter of 2026 and fiscal first quarter of 2025, respectively, resulting in an increase in net interest expense of $2.6 million in the current fiscal quarter. • Gross interest expense was $12.2 million and $12.1 million in the fiscal first quarter of 2026 and fiscal first quarter of 2025, respectively. • Gross interest income was $3.1 million and $5.5 million in the fiscal first quarter of 2026 and fiscal first quarter of 2025, 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 fiscal first quarter of 2025 included $0.5 million on refunds from U.S. Customs for AD/CV import duties. For fiscal 2026, we currently estimate that our annual effective income tax rate will be approximately 47%, excluding discrete items. This estimate reflects nondeductible items and includes certain franchise taxes that are classified as income taxes under the provisions of ASC 740, Income Taxes . We recognized an income tax benefit of $0.4 million for the fiscal three months ended April 4, 2026, resulting in an income tax benefit rate of 20% that reflects discrete items. For the fiscal three months ended March 29, 2025, we recognized income tax expense of $1.3 million, resulting in an effective income tax rate of 32% for the period. The effective income tax rates for both quarterly fiscal periods were impacted by the permanent addback to taxable income of certain nondeductible expenses, including meals and entertainment and certain employee compensation, as well as excess tax benefits or expenses realized from settlements of share-based compensation grants. The Company’s effective income tax rates will differ from the statutory rates by such items. Our Net loss for the fiscal first quarter of 2026 was $1.5 million, or $0.18 loss per basic and diluted share, versus $2.8 million, or $0.33 per basic and diluted share, in the fiscal first quarter of 2025. These decreases in the current period were due primarily to the factors previously discussed in this Item 2. 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 April 4, 2026, we had $319 million of cash and cash equivalents plus $340.1 million of availability on our revolving credit facility. Senior Secured Notes We have $300 million of 6.0% senior secured notes due 2029 (the “2029 Notes”) outstanding. 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 April 4, 2026, we were in compliance with these covenants. Interest payments of $9.0 million for the 2029 Notes are due twice in each calendar year, in May and in November. Revolving Credit Facility Our revolving credit facility is scheduled to mature on August 27, 2030. Currently, the maximum borrowing capacity under the revolving credit facility is $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. As of April 4, 2026 and January 3, 2026, we had no outstanding borrowings under our revolving credit facility. Available borrowing capacity, reduced for undrawn letters of credit, under the revolving credit facility was $340.1 million and $340.1 million as of April 4, 2026 and January 3, 2026, respectively. Excess availability, which includes availability under the revolving credit facility plus cash and cash equivalents in qualified deposit accounts, was $659.2 million as of April 4, 2026. Had there been outstanding borrowings under our revolving credit facility as of April 4, 2026, the annualized interest rate, as described in Note 6, Debt and Finance Lease Obligations , to the accompanying unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report, would have been 4.65%. Finance Lease Obligations Our finance lease obligations consist of leases for real estate, equipment, and vehicles totaling $316.7 million and $321.3 million as of April 4, 2026 and January 3, 2026, respectively. Of the $316.7 million for finance lease obligations as of April 4, 2026, $240.0 million related to real estate and $76.7 million related to equipment. Of the $321.3 million for finance lease obligations as of January 3, 2026, $240.6 million related to real estate and $80.6 million related to equipment. During the fiscal first quarters of 2026 and 2025, we used cash of $4.6 million and $4.3 million, respectively, to repay principal portions of finance lease obligations, and also incurred interest expense of $6.9 million and $6.9 million, respectively, for our finance lease obligations. For additional information about our lease obligations and expected impacts on our liquidity, see Note 7, Leases , to the accompanying unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report. Sources and Uses of Cash Operating Activities Net cash used in operating activities for the first three months of fiscal 2026 was $57.2 million compared to net cash used of $33.9 million in the first three months of fiscal 2025. The $23.3 million decrease in cash generated from operating activities during the first three months of fiscal 2026 was primarily a result of $24.1 million of net changes in operating assets and operating liabilities. Investing Activities Net cash used in investing activities for the first three months of fiscal 2026 was $1.7 million compared to net cash used of $3.4 million in the first three months of fiscal 2025. During the first three months of fiscal 2026 and first three months of fiscal 2025, 23 Table of Contents we used cash of $2.6 million and $5.9 million, respectively, to acquire property and equipment. In the current quarter, we received a $0.9 million reduction in the consideration paid for our Disdero acquisition. In the prior year period, we received initial insurance proceeds of $2.4 million related to property and equipment that was 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 $7.8 million for the first three months of fiscal 2026 compared to net cash used of $19.3 million for the first three months of fiscal 2025. This change was primarily driven by the decrease for repurchases of our common stock in the current period. During the first three months of fiscal 2026, we used cash of $2.8 million to repurchase shares of our common stock, compared to $15.0 million for the first three months of fiscal 2025. Payments to reduce finance lease obligations also used cash of $4.6 million and $4.3 million for the fiscal first quarters of 2026 and 2025, respectively. Common Stock Repurchases During the first three months of fiscal 2026, we repurchased 59,051 shares of our common stock at an average price of $50.83 per share for a total of $3.0 million, under our 2023 share repurchase authorization. During the first three months of fiscal 2025, we repurchased 186,048 shares of our common stock at an average price of $80.65 for a total of $15.0 million under this same authorization. As of April 4, 2026, there remained $5.7 million of repurchase capacity under the 2023 authorization. Between April 4, 2026 and April 21, 2026, we repurchased an additional 36,749 shares of our common stock at an average price of $54.46 per share, for a total of $2.0 million. 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. 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 29, 2025, our Board of Directors authorized a new share repurchase program for $50.0 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 $473.1 million as of April 4, 2026, compared to $407.8 million as of January 3, 2026, increased on a net basis by approximately $65.4 million, as shown below: As of April 4, 2026 January 3, 2026 March 29, 2025 (In thousands) Receivables, less allowance for doubtful accounts $ 296,732 $ 218,161 $ 275,574 Inventories, net 371,676 325,998 399,555 668,408 544,159 675,129 Accounts payable 195,287 136,388 213,111 Net working capital $ 473,121 $ 407,771 $ 462,018 24 Table of Contents 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 consolidated balance sheets. For the first three months of fiscal 2026, we invested $2.6 million in long-lived assets primarily related to investments in our facility improvements, technology, and fleet. For the first three months of fiscal 2025, we invested $6.4 million in long-lived assets primarily related to investments in our distribution facilities and upgrading our fleet. We also added $28.1 million in new finance leases during the 2025 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 2025 Form 10-K. 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 2025 Form 10-K.