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, including our business and digital transformation initiatives, and the success thereof; our plans and ability to enhance our facilities, fleet, and technology hardware; our ability to manage increases in fuel and other energy prices; 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, including our ability to strengthen and expand our premium specialty product offerings; 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 I, Item 1A of our 2025 Form 10-K, as supplemented by the risk factors disclosed in Part II, Item1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the Quarterly Period ended April 4, 2026, 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 I, Item 1A, Risk Factors, in our 2025 Form 10-K, as supplemented by the factors discussed in Part II, Item 1A, Risk Factors, in our Form 10-Q for the Quarterly Period ended April 4, 2026. 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 17 Table of Contents 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. 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 six months ended July 4, 2026, we: • Added property & equipment consisting of purchased assets totaling $5.5 million plus assets obtained through finance leases totaling $4.6 million. In addition, we recognized right-of use assets totaling $6.4 million related to operating leases. These additions were used primarily to enhance our facilities, fleet, and technology hardware. • Returned capital of $5.0 million to our shareholders by using cash to purchase 95,800 shares of our common stock at an average price of $52.19, excluding broker commissions and excise tax. 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. 18 Table of Contents 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, including but not limited to housing starts, construction labor shortages, repair and remodel activity and commercial construction, foreclosure rates, interest rates, unemployment rates and job and wage growth rates, consumer debt levels, tightened availability or affordability of homeowner insurance coverage, and mortgage availability and pricing, as well as other consumer financing mechanisms, that ultimately affect demand for our products; 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 success of management initiatives, including our business and digital transformation initiatives; the ability to attract, train, and retain highly qualified associates and other key personnel while controlling related labor costs; artificial intelligence cost increases; home center distribution disruption; business disruptions; exposure to liability, including product liability and other claims and legal proceedings related to our business, employee injuries, workers compensation claims, 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; changes in governmental rules and regulations or interpretations thereof; 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, 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; geopolitical risks, such as acts of war or terrorism or political or civil unrest; 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; the effects of epidemic, global pandemics or otherwise widespread public health crises; 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 I, Item 1A, Risk Factors, in our 2025 Form 10-K, as supplemented by Part II, Item 1A, Risk Factors , in our Form 10-Q for the quarterly period ended April 4, 2026. 19 Table of Contents Results of Operations Our results of operations for the fiscal three months ended July 4, 2026 (“Q2 2026” or “current quarter”) and for the fiscal three months ended June 28, 2025 (“Q2 2025” or “prior quarter”) were as follows: Fiscal Three Months Ended July 4, 2026 % of Net Sales Fiscal Three Months Ended June 28, 2025 % of Net Sales ($ amounts in thousands) Net sales $ 814,077 $ 780,107 Gross profit 139,707 17.2% 119,689 15.3% Less: Selling, general, and administrative 107,371 13.2% 95,265 12.2% Depreciation and amortization 11,473 1.4% 9,790 1.3% Realization of deferred gains on real estate (983) (0.1)% (983) (0.1)% Other operating, net 1,243 0.2% 582 0.1% Operating income 20,603 2.5% 15,035 1.9% Interest expense, net 9,379 1.2% 8,457 1.1% Income before provision for income taxes 11,224 1.4% 6,578 0.8% Provision for income taxes 4,818 0.6% 2,268 0.3% Net income $ 6,406 0.8% $ 4,310 0.6% 20 Table of Contents Our results of operations for the fiscal six months ended July 4, 2026 (“YTD 2026 period” or “current YTD period”) and for the fiscal six months ended June 28, 2025 (“YTD 2025 period” or “prior YTD period”) were as follows: Fiscal Six Months Ended July 4, 2026 % of Net Sales Fiscal Six Months Ended June 28, 2025 % of Net Sales ($ amounts in thousands) Net sales $ 1,545,226 $ 1,489,333 Gross profit 256,104 16.6% 230,818 15.5% Less: Selling, general, and administrative 203,575 13.2% 189,358 12.7% Depreciation and amortization 23,447 1.5% 19,344 1.3% Realization of deferred gains on real estate (1,967) (0.1)% (1,967) (0.1)% Other operating, net 3,118 0.2% (1,676) (0.1)% Operating income 27,931 1.8% 25,759 1.7% Interest expense, net 18,526 1.2% 15,037 1.0% Income before provision for income taxes 9,405 0.6% 10,722 0.7% Provision for income taxes 4,457 0.3% 3,607 0.2% Net income $ 4,948 0.3% $ 7,115 0.5% The following table sets forth Net sales by product category and percentage of total Net sales by product category: Fiscal Three Months Ended Fiscal Six Months Ended July 4, 2026 June 28, 2025 July 4, 2026 June 28, 2025 Net sales: ($ amounts in thousands) Specialty products $ 564,140 69 % $ 543,459 70 % $ 1,075,946 70 % $ 1,022,846 69 % Structural products 249,937 31 % 236,648 30 % 469,280 30 % 466,487 31 % Total Net sales $ 814,077 100 % $ 780,107 100 % $ 1,545,226 100 % $ 1,489,333 100 % 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 Fiscal Six Months Ended July 4, 2026 June 28, 2025 July 4, 2026 June 28, 2025 Gross profit: ($ amounts in thousands) Specialty products $ 112,579 81 % $ 100,282 84 % $ 205,146 80 % $ 190,060 82 % Structural products 27,128 19 % 19,407 16 % 50,958 20 % 40,758 18 % Total Gross profit $ 139,707 100 % $ 119,689 100 % $ 256,104 100 % $ 230,818 100 % Gross margin %: Specialty products 20.0% 18.5% 19.1% 18.6% Structural products 10.9% 8.2% 10.9% 8.7% Company gross margin % 17.2% 15.3% 16.6% 15.5% 21 Table of Contents Fiscal Second Quarter of 2026 Compared to Fiscal Second Quarter of 2025 For Q2 2026, the Company’s Net sales were $814.1 million, an increase of $34.0 million, or 4.4%, compared to Q2 2025. • The $34.0 million increase was attributable to both specialty products and structural products. • Q2 2026 included the Net sales for Disdero. We acquired Disdero in fourth quarter of fiscal 2025. • Approximately 69% and 70% of the Company’s Net sales in Q2 2026 and Q2 2025, respectively, were generated by specialty products. The Company’s Gross profit for Q2 2026 increased by $20.0 million, or 16.7%, to $139.7 million from $119.7 million in Q2 2025. • The increase in the Company’s Gross profit was attributable to both specialty products and structural products. • Q2 2026 includes the results of Disdero, which contributed to Gross profit for the Company and specialty products. • Approximately 81% of the Company’s Gross profit was generated by specialty products in Q2 2026, compared to 84% in Q2 2025. • The Company’s Cost of products sold for Q2 2026 included a benefit of $7.2 million for IEEPA tariff refunds. See Note 9, Commitments and Contingencies, to the accompanying unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. • Gross profit and gross margin also benefited from our business and digital transformation efforts. • The Company’s gross margin increased 190 basis points from 15.3% to 17.2% in Q2 2026, with both specialty products and structural products contributing to the increase. Disdero also increased the Company’s gross margin in the current quarter. The import duty-related item described above increased the Company’s gross margin by 90 basis points for Q2 2026. 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 $20.7 million, or 3.8%, to $564.1 million in Q2 2026 compared to Q2 2025. • The overall increase in Net sales for specialty products in the current quarter was due primarily to higher pricing for most key product types and the positive impact of Disdero, partially offset by volume declines for most product types. The increase in pricing was in response to price increases from key vendors and inflationary impacts on the cost of operating our business. • Specialty products’ Gross profit increased by $12.3 million, or 12.3%, to $112.6 million in Q2 2026 compared to Q2 2025. This increase in Gross profit for specialty products was primarily due to Disdero and the aforementioned $7.2 million of IEEPA tariff refunds. • Specialty products’ gross margin increased by 150 basis points to 20.0% in Q2 2026 compared to 18.5% in Q2 2025. This increase was primarily due to Disdero and the aforementioned import duty-related item which increased the gross margin for specialty products by 130 basis points in Q2 2026. Structural products - Net sales of structural products, which include product types such as lumber, panels (including plywood and oriented strand board), rebar, and remesh, increased by $13.3 million, or 5.6%, to $249.9 million in Q2 2026 compared to $236.6 million in Q2 2025. • The overall increase in Net sales for structural products in the current quarter was due to increases in pricing and volumes for lumber, partially offset by volume declines in panels. • Compared to Q2 2025, average commodity prices in U.S. markets for Q2 2026 were up approximately 9% for lumber and flat for panels. • Structural products’ Gross profit increased overall by $7.7 million, or 39.8%, to $27.1 million in Q2 2026 from $19.4 million in Q2 2025 due to primarily to price and volume increases for lumber. • Structural products’ gross margin for Q2 2026 was 10.9% compared to 8.2% in Q2 2025 due to margin expansion for both lumber and panels. Our Selling, general, and administrative (“SG&A”) expenses increased by $12.1 million, or 12.7% in Q2 2026 compared to Q2 2025. This overall increase in the current quarter was due primarily to Disdero, fuel expenses, third-party freight expenses, and employee-related expenses. Depreciation and amortization expense increased by $1.7 million, or 17.2% in Q2 2026 compared to Q2 2025 due to a higher base of depreciable assets, including facility improvements, fleet enhancements, and technology upgrades, and finite-lived intangible assets from the Disdero acquisition. Our depreciation expense includes depreciation for owned assets and assets under finance leases. Other operating, net for Q2 2026 was a net expense of $1.2 million and was composed mainly of professional services fees 22 Table of Contents related to our business and digital transformation initiatives. Interest expense, net, which includes gross interest expense less gross interest income, was $9.4 million and $8.5 million in Q2 2026 and Q2 2025, respectively, resulting in an increase in net interest expense of $0.9 million in the current quarter. • Gross interest expense was $12.3 million and $12.6 million in Q2 2026 and Q2 2025, respectively. • Gross interest income was $2.9 million and $4.2 million for Q2 2026 and Q2 2025, respectively. This decrease in the current quarter was due primarily 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 quarter. For fiscal 2026, we currently estimate that our annual effective income tax rate will be approximately 35%, 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 provision of $4.8 million for Q2 2026, resulting in an effective income tax rate of 42.9% that reflects discrete items. For Q2 2025, we recognized income tax expense of $2.3 million, resulting in an effective income tax rate of 34.5% for the quarter. 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 income for Q2 2026 was $6.4 million, or $0.81 earnings per diluted share, versus $4.3 million, or $0.54 per diluted share, for Q2 2025. These increases in the current period were due primarily to the factors previously discussed in this comparison of Q2 2026 to Q2 2025. First Six Months of Fiscal 2026 Compared to First Six Months of Fiscal 2025 For the YTD 2026 period, the Company’s Net sales were $1.55 billion, an increase of $55.9 million, or 3.8%, compared to Net sales of $1.49 billion in the YTD 2025 period. • The increase in Net sales in the current YTD period was attributable to both specialty products and structural products. • The YTD 2026 period included Net sales for Disdero. We acquired Disdero in fourth quarter of fiscal 2025. • Approximately 70% of the Company’s Net sales in the YTD 2026 period were generated by specialty products, compared to approximately 69% in the YTD 2025 period. The Company’s Gross profit for the YTD 2026 period increased by $25.3 million, or 11.0%, to $256.1 million from $230.8 million in the YTD 2025 period. • This increase in the Company’s Gross profit in the YTD 2026 period was attributable to both specialty products and structural products. • The YTD 2026 period includes the results of Disdero, which contributed to Gross profit for the Company and specialty products. • Approximately 80% and 82% of the Company’s Gross profit was generated by specialty products in the YTD 2026 period and the YTD 2025 period, respectively. • The Company’s gross margin was 16.6% for the YTD 2026 period, an increase from the 15.5% for the YTD 2025 period. Both specialty products and structural products contributed to this increase. The import duty-related items noted below increased the Company’s gross margin by 50 basis points and 20 basis points for the YTD 2026 period and the YTD 2025 period, respectively. • Gross profit and gross margin also benefited from our business and digital transformation efforts. • We benefited in the YTD 2026 period and in the YTD 2025 period by $7.2 million and $2.4 million, respectively, for import duty-related items. These items reduced the Company’s Cost of products sold and benefited the results of specialty products for the respective periods. For the YTD 2026 period import duty-related item, see Note 9, Commitments and Contingencies , and for the YTD 2025 period import duty-related item, 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 $53.1 million, or 5.2%, to $1.08 billion in the YTD 2026 period. • The increase in Net sales for specialty products in the YTD 2026 period was due to overall higher pricing and the inclusion of the Net Sales of Disdero. The increase in pricing was in response to price increases from key vendors and the inflationary impacts on the cost of operating our business. 23 Table of Contents • Specialty products’ Gross profit increased by $15.1 million, or 7.9%, to $205.1 million in the YTD 2026 period compared to the YTD 2025 period due primarily to inclusion of Disdero’s results and the import duty-related items noted above. • Specialty products’ gross margin increased 50 basis points to 19.1% for the YTD 2026 period compared to 18.6% in the YTD 2025 period, due primarily to the import duty-related item noted above and the inclusion of Disdero’s results, partially offset by variability in customer discounts and vendor rebates. • The net impacts of the aforementioned import duty-related items increased specialty products gross margin by 70 basis points and 30 basis points for the YTD 2026 period and the YTD 2025 period, respectively. Structural products - Net sales of structural products, which include product types such as lumber, plywood, oriented strand board, rebar, and remesh, increased by $2.8 million to $469.3 million in the YTD 2026 period. • The overall increase in Net sales for structural products was due primarily to price and volume increases for lumber, partially offset by price and volume declines for panels. • Compared to the YTD 2025 period, average commodity prices in U.S. markets during the YTD 2026 period for lumber were up 3.0% and down 8.0% for panels. • Gross profit for structural products increased by $10.2 million, or 25.0%, to $51.0 million from $40.8 million in the YTD 2025 period due primarily to higher pricing and volume for lumber, partially offset by pricing and volume declines for panels. • Structural products’ gross margin for the YTD 2026 period was 10.9%, an increase from 8.7% in the YTD 2025 period due primarily due to margin expansion for lumber and panels. Our SG&A expenses in the YTD 2026 period increased by $14.2 million, or 7.5%, compared to the YTD 2025 period. This overall increase was due primarily to Disdero, third-party freight expenses, and employee-related expenses. Depreciation and amortization expense increased by $4.1 million, or 21.2% in the YTD 2026 period compared to the YTD 2025 period due to a higher base of depreciable assets, including facility improvements, fleet enhancements, and technology upgrades, and finite-lived intangible assets from the Disdero acquisition. Our depreciation expense includes depreciation for owned assets and assets under finance leases. Other operating, net declined by $4.8 million compared to the YTD 2025 period. For the YTD 2026 period, the net expense is composed mainly of professional services fees related to our business and digital transformation initiatives. For the YTD 2025 period, the net credit was primarily due to initial settlements of certain 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 property and equipment by $2.4 million. Interest expense, net, which includes gross interest expense less interest income, increased by $3.5 million in the YTD 2026 period compared to the YTD 2025 period. • Gross interest expense was $24.5 million and $24.7 million in the YTD 2026 period and the YTD 2025 period, respectively. • Gross interest income was $6.0 million and $9.7 million in the YTD 2026 period and the YTD 2025 period, respectively. This decrease in the YTD 2026 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 YTD period. For fiscal 2026, we currently estimate our annual effective income tax rate to be approximately 35%, excluding discrete items. Our effective income tax rates were 47.4% and 33.6% for the YTD 2026 period and the YTD 2025 period, respectively. Our effective income tax rates for both year-to-date periods were impacted by the permanent addback 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. Our net income for the YTD 2026 period was $4.9 million, or $0.62 per diluted share, versus $7.1 million, or $0.87 per diluted share, in the YTD 2025 period. Our net income for the YTD 2026 period decreased due primarily to the factors that were previously discussed in this comparison of the YTD 2026 period to the YTD 2025 period. 24 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 July 4, 2026, we had $318 million of cash and cash equivalents plus $336.8 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 July 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 July 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 $336.8 million and $340.1 million as of July 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 $655.0 million as of July 4, 2026. Had there been outstanding borrowings under our revolving credit facility as of July 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 4.63%. Finance Lease Obligations Our finance lease obligations consist of leases for real estate, equipment, and vehicles totaling $316.0 million and $321.3 million as of July 4, 2026 and January 3, 2026, respectively. Of the $316.0 million for finance lease obligations as of July 4, 2026, $239.4 million related to real estate and $76.6 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 YTD 2026 period and the YTD 2025 period, we used cash of $9.9 million and $8.1 million, respectively, to repay principal portions of finance lease obligations, and also incurred interest expense of $13.8 million and $13.9 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 YTD 2026 period was $46.1 million compared to net cash used of $60.7 million in the YTD 2025 period. The $14.6 million increase in cash from operating activities during the YTD 2026 period was primarily the result of higher net income and favorable net changes in operating assets and operating liabilities. Investing Activities Net cash used in investing activities for the YTD 2026 period was $4.0 million compared to net cash used of $12.9 million in the YTD 2025 period. During the YTD 2026 period and YTD 2025 period, we paid cash of $5.0 million and $15.5 million, respectively, to purchase property and equipment. In the YTD 2026 period, we received $0.9 million related to a reduction in 25 Table of Contents the consideration paid for our Disdero acquisition. In the YTD 2025 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 $17.6 million for the YTD 2026 period compared to net cash used of $45.3 million for the YTD 2025 period. This change was primarily driven by the decrease in repurchases of our common stock in the current YTD period. During the YTD 2026 period, we used cash of $5.3 million to repurchase shares of our common stock, compared to $35.4 million for the YTD 2025 period. Payments to reduce finance lease obligations also used cash of $9.9 million and $8.1 million for the YTD 2026 period and the YTD 2025 period, respectively. Common Stock Repurchases During the YTD 2026 period, we repurchased 95,800 shares of our common stock at an average price of $52.22 per share for a total of $5.0 million, under our 2023 share repurchase authorization. During the YTD 2025 period, we repurchased 469,129 shares of our common stock at an average price of $74.64 for a total of $35.0 million under this same authorization. As of July 4, 2026, there remained $3.7 million of repurchase capacity under the 2023 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. 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 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 $503.0 million as of July 4, 2026, compared to $407.8 million as of January 3, 2026, increased on a net basis by approximately $95.2 million, as shown below: As of July 4, 2026 January 3, 2026 June 28, 2025 (In thousands) Receivables, less allowances $ 315,939 $ 218,161 $ 278,737 Inventories, net 375,258 325,998 391,484 691,197 544,159 670,221 Accounts payable 188,187 136,388 177,990 Net working capital $ 503,010 $ 407,771 $ 492,231 26 Table of Contents Additions to Property and Equipment Property and equipment that are purchased or leased under finance lease arrangements are included in property and equipment, at cost on our consolidated balance sheets. Property and equipment under operating leases are included in Operating lease right-of-use assets on our consolidated balance sheets. Additions to property and equipment during the YTD 2026 period consisted of purchased assets of $5.5 million plus $4.6 million obtained through finance leases. In addition, we recognized right-of-use assets of $6.4 million related to operating leases. These purchased and leased additions were related to improvements to our facilities, technology, fleet and logistics network. Additions to property and equipment during the YTD 2025 period consisted of purchased assets of $16.4 million plus $32.9 million obtained through finance leases. In addition, we recognized right-of-use assets of $4.0 million related to operating leases. These purchased and leased additions were related to facility improvements, ongoing digital transformation, and 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.