Our internal-use software includes our Enterprise Resource Planning (“ERP”) system across all divisions, as well as our new website and integrated B2B online marketplace, which was placed into service at the beginning of fiscal 2027. The gross carrying amount of capitalized implementation costs related to our cloud computing hosting arrangements increased by $2.7 million during the first quarter of fiscal 2027, primarily due to the reclassification of costs associated with our new digital platform from implementation costs in process upon being placed into service. Based on the provisions of ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software, we capitalize implementation costs associated with hosting arrangements that are service contracts. These costs are recorded in “other noncurrent assets” in our condensed consolidated balance sheets. We amortize these costs on a straight-line basis over a 10-year term. The amortization expenses are recorded as a component of selling and administrative expenses in our condensed consolidated statements of operations.

No material implementation costs or interest expense were capitalized in fiscal 2027. Implementation costs and interest expenses of $287,000 and $551,000 were capitalized in fiscal 2026 second quarter and first half, respectively. Amortization expense was $555,000 in the second quarter of fiscal 2027 and $368,000 in the second quarter of fiscal 2026, and $1.1 million and $735,000 for the respective six-month periods. The capitalized implementation costs at August 2, 2026 and February 1, 2026 were as follows: