What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-10-28 compared with 2020-08-03 · 196 added, 176 removed, 416 unchanged (47% of the section changed)

4 unchanged sentences

(In thousands, except per share data)

Three Months Ended

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Three Months Ended Nine Months Ended

September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019

Net sales $ 871,063 $ 678,665 $ 2,231,909 $ 2,023,814

Cost of sales 711,603 584,952 1,878,420 1,749,889

Gross profit 159,460 93,713 353,489 273,925

Operating expenses:

7 unchanged sentences

Interest expense, net 10,776 13,409 36,691 40,527

Other (income) expense, net

Income (loss) before provision for (benefit from) income taxes

Provision for (benefit from) income taxes

Other income, net ( 238 ) ( 317 ) ( 58 ) ( 212 )

Income (loss) before provision for income taxes 70,918 ( 6,799 ) 75,238 ( 7,392 )

Provision for income taxes 15,802 244 14,214 69

Net income (loss) $ 55,116 $ ( 7,043 ) $ 61,024 $ ( 7,461 )

7 unchanged sentences

Pension curtailment, net of tax — — — ( 632 )

Other 7 ( 7 ) ( 10 ) 9

Total other comprehensive income (loss) 289 ( 1,850 ) 602 ( 2,028 )

4 unchanged sentences

(In thousands, except share data)

June 27, 2020

December 28, 2019

September 26, 2020 December 28, 2019

Current assets:

Cash $ 10,154 $ 11,643

Receivables, less allowances of $ 4,158 and $ 3,236 , respectively

308,584 192,872

Inventories, net 306,030 345,806

5 unchanged sentences

Operating lease right-of-use assets 53,124 54,408

Goodwill 47,772 47,772

Intangible assets, net 20,769 26,384

1 unchanged sentence

Other non-current assets 20,516 15,061

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Total assets $ 1,023,234 $ 971,425

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

9 unchanged sentences

Long-term debt, net of debt issuance costs of $ 9,930 and $ 12,481 , respectively

309,249 458,439

Finance lease liabilities - long-term 267,753 191,525

5 unchanged sentences

Commitments and Contingencies

STOCKHOLDERS’ DEFICIT:

STOCKHOLDERS’ EQUITY (DEFICIT):

Common Stock, $ 0.01 par value, 20,000,000 shares authorized,

9,461,412 and 9,365,768 outstanding on June 27, 2020 and December 28, 2019, respectively

9,461,540 and 9,365,768 outstanding on September 26, 2020 and December 28, 2019, respectively

Additional paid-in capital 263,643 260,974

1 unchanged sentence

Accumulated stockholders’ deficit ( 191,564 ) ( 252,588 )

Total stockholders’ deficit

Total liabilities and stockholders’ deficit

Total stockholders’ equity (deficit) 38,213 ( 26,083 )

Total liabilities and stockholders’ equity (deficit) $ 1,023,234 $ 971,425

See accompanying Notes.

2 unchanged sentences

(In thousands)

Six Months Ended

June 27, 2020

June 29, 2019

Nine Months Ended

September 26, 2020 September 28, 2019

Cash flows from operating activities:

1 unchanged sentence

Adjustments to reconcile net income (loss) to cash provided by (used in) operations:

Benefit from income taxes

Provision for income taxes 14,214 69

Depreciation and amortization 21,785 22,408

5 unchanged sentences

Accounts receivable ( 115,712 ) ( 35,471 )

Inventories 39,776 ( 20,538 )

Accounts payable 46,600 30,188

6 unchanged sentences

Property and equipment investments ( 1,943 ) ( 3,321 )

Net cash (used in) provided by investing activities

Net cash provided by investing activities 8,799 16,387

Cash flows from financing activities:

11 unchanged sentences

Supplemental Cash Flow Information

Net income tax (refunds) payments during the period

Net income tax payments during the period $ 610 $ 4,461

Interest paid during the period $ 33,716 $ 38,594

1 unchanged sentence

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

Paid-In Capital

Comprehensive Loss

Accumulated Deficit

Stockholders’ Deficit Total

Common Stock Additional

Paid-In Capital Accumulated

Comprehensive Loss Accumulated Deficit Stockholders’ Equity (Deficit) Total

Shares Amount

Balance, December 28, 2019 9,366 $ 94 $ 260,974 $ ( 34,563 ) $ ( 252,588 ) $ ( 26,083 )

Net loss — — — — ( 787 ) ( 787 )

Foreign currency translation, net of tax — — — 3 — 3

3 unchanged sentences

Repurchase of shares to satisfy employee tax withholdings ( 1 ) — ( 7 ) — — ( 7 )

Other — — 9 ( 19 ) — ( 10 )

Balance, March 28, 2020 9,367 94 261,980 ( 34,383 ) ( 253,375 ) ( 25,684 )

Net income — — — — 6,695 6,695

Foreign currency translation, net of tax — — — 17 — 17

3 unchanged sentences

Repurchase of shares to satisfy employee tax withholdings ( 28 ) — ( 247 ) — — ( 247 )

Other — — — 2 — 2

Balance, June 27, 2020 9,461 95 262,587 ( 34,250 ) ( 246,680 ) ( 18,248 )

Paid-In Capital

Comprehensive Loss

Accumulated Deficit

Stockholders’ Deficit Total

Net income — — — — 55,116 55,116

Foreign currency translation, net of tax — — — ( 12 ) — ( 12 )

Unrealized gain from pension plan, net of tax — — — 294 — 294

Vesting of restricted stock units 1 — — — — —

Compensation related to share-based grants — — 1,057 — — 1,057

Repurchase of shares to satisfy employee tax withholdings — — ( 1 ) — — ( 1 )

Other — — — 7 — 7

Balance, September 26, 2020 9,462 $ 95 $ 263,643 $ ( 33,961 ) $ ( 191,564 ) $ 38,213

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(In thousands)

Common Stock Additional

Paid-In Capital Accumulated

Comprehensive Loss Accumulated Deficit Stockholders’ Deficit Total

Shares Amount

Balance, December 29, 2018 9,294 $ 92 $ 258,596 $ ( 37,129 ) $ ( 236,222 ) $ ( 14,663 )

Net loss — — — — ( 6,719 ) ( 6,719 )

Adoption of ASC 842, net of tax — — — — 1,291 1,291

3 unchanged sentences

Compensation related to share-based grants — — 706 — — 706

Other — — — 15 — 15

Balance, March 30, 2019 9,343 93 259,302 ( 36,030 ) ( 241,650 ) ( 18,285 )

Foreign currency translation, net of tax

Net income — — — — 6,301 6,301

Unrealized loss from pension plan, net of tax — — — ( 1,278 ) — ( 1,278 )

2 unchanged sentences

Repurchase of shares to satisfy employee tax withholdings ( 10 ) — ( 208 ) — — ( 208 )

Other — — ( 2 ) 1 — ( 1 )

Balance, June 29, 2019 9,365 94 259,727 $ ( 37,307 ) $ ( 235,349 ) $ ( 12,835 )

Net loss — — — — ( 7,043 ) ( 7,043 )

Foreign currency translation, net of tax — — — ( 9 ) — ( 9 )

Unrealized loss from pension plan, net of tax — — — ( 1,834 ) — ( 1,834 )

Compensation related to share-based grants — — 1,156 — — 1,156

Other — — — ( 7 ) 1 ( 6 )

Balance, September 28, 2019 9,365 $ 94 $ 260,883 $ ( 39,157 ) $ ( 242,391 ) $ ( 20,571 )

See accompanying Notes.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 27, 2020

September 26, 2020

Basis of Presentation and Summary of Significant Accounting Policies

2 unchanged sentences

and its wholly owned subsidiaries (“the Company”).

Our independent registered public accounting firm has not audited the accompanying interim financial statements.

We derived the condensed consolidated balance sheet at June 27, 2020 , from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2019 (the “Fiscal 2019 Form 10-K”), as filed with the Securities and Exchange Commission on March 11, 2020 .

In the opinion of our management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of our statements of operations and comprehensive loss for the three and six months ended June 27, 2020 , and June 29, 2019 , our balance sheets at June 27, 2020 , and December 28, 2019 , our statements of cash flows for the six months ended June 27, 2020 , and June 29, 2019 , and our statements of stockholders’ deficit for the three and six months ended June 27, 2020 , and June 29, 2019 .

We derived the condensed consolidated balance sheet at September 26, 2020, from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2019 (the “Fiscal 2019 Form 10-K”), as filed with the Securities and Exchange Commission on March 11, 2020.

In the opinion of our management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of our statements of operations and comprehensive income (loss) for the three and nine months ended September 26, 2020, and September 28, 2019, our balance sheets at September 26, 2020, and December 28, 2019, our statements of cash flows for the nine months ended September 26, 2020, and September 28, 2019, and our statements of stockholders’ equity (deficit) for the three and nine months ended September 26, 2020, and September 28, 2019.

We have condensed or omitted certain notes and other information from the interim condensed consolidated financial statements presented in this report.

2 unchanged sentences

These reclassifications did not materially impact operating income or consolidated net income (loss).

The results for the three and six months ended June 27, 2020 , are not necessarily indicative of results that may be expected for the full year ending January 2, 2021 , or any other interim period.

The results for the three and nine months ended September 26, 2020, are not necessarily indicative of results that may be expected for the full year ending January 2, 2021, or any other interim period.

We operate on a 5-4-4 fiscal calendar.

13 unchanged sentences

Reclassification of Prior Period Presentation

An adjustment has been made to the Condensed Consolidated Statements of Cash Flows for the six months ended June 27, 2020 , and June 29, 2019 , to include outstanding payments as part of the change in accounts payable within cash flows from operating activities.

An adjustment has been made to the Condensed Consolidated Statements of Cash Flows for the nine months ended September 28, 2019, to include outstanding payments as part of the change in accounts payable within cash flows from operating activities.

In previous periods, this change was included within cash flows from financing activities.

We have reclassified certain costs within the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months and six months ended June 27, 2020 , and June 29, 2019 , from selling, general and administrative to other operating expenses.

We have reclassified certain costs within the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the nine months ended September 26, 2020, and the three and nine months ended September 28, 2019, from selling, general and administrative to other operating expenses.

These costs primarily relate to the integration of the acquisition of Cedar Creek.

1 unchanged sentence

In 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02, “Leases (Topic 842).” Topic 842 establishes a new lease accounting model.

The most significant changes include the clarification of the definition of a lease, the requirement for lessees to recognize for all leases a right-of-use asset and a

corresponding lease liability in the consolidated balance sheet, and additional quantitative and qualitative disclosures which are designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases.

Expenses are recognized in the consolidated statement of income in a manner similar to prior accounting guidance.

Lessor accounting under the new standard is substantially unchanged.

We adopted this standard, and all related amendments thereto, effective December 30, 2018, the first day of our 2019 fiscal year, using a modified retrospective approach, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented.

We have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carry forward the historical accounting relating to lease identification and classification for existing leases upon adoption.

2016-02, “Leases (Topic 842).” Topic 842 established a new lease accounting model.

The most significant changes included the clarification of the definition of a lease, the requirement for lessees to recognize for all leases a right-of-use asset and a corresponding lease liability in the consolidated balance sheet, and additional quantitative and qualitative disclosures which were designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases.

Expenses were recognized in the consolidated statement of income in a manner similar to prior accounting guidance.

Lessor accounting under the new standard was substantially unchanged.

We adopted this standard, and all related amendments thereto, effective December 30, 2018, the first day of our 2019 fiscal year, using a modified retrospective approach, which applied the provisions of the new guidance at the effective date without adjusting the comparative periods presented.

We have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical accounting relating to lease identification and classification for existing leases upon adoption.

We have made an accounting policy election to keep leases with an initial term of 12 months or less off of the consolidated balance sheet.

25 unchanged sentences

In connection with the acquisition of Cedar Creek, we acquired certain intangible assets.

As of June 27, 2020 , our intangible assets consist of goodwill and other intangible assets including customer relationships, noncompete agreements, and trade names.

As of September 26, 2020, our intangible assets consist of goodwill and other intangible assets including customer relationships, noncompete agreements, and trade names.

Goodwill is the excess of the cost of an acquired entity over the fair value of tangible and intangible assets (including customer relationships, noncompete agreements, and trade names) acquired, and liabilities assumed, under acquisition accounting for business combinations.

As of June 27, 2020 , goodwill was $ 47.8 million .

As of September 26, 2020, goodwill was $ 47.8 million.

Goodwill is not subject to amortization but must be tested for impairment at least annually.

3 unchanged sentences

Such events and indicators may include, without limitation, significant declines in the industries in which our products are used, significant changes in capital market conditions, and significant changes in our market capitalization.

Our one reporting unit has a fair value that exceeds its book value, but a negative carrying amount of net assets, as of June 27, 2020 .

Our one reporting unit has a fair value that exceeds its book value as of September 26, 2020.

Definite-Lived Intangible Assets

On June 27, 2020 , the gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets were as follows:

Gross carrying amounts

On September 26, 2020, the gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets were as follows:

Gross carrying amounts Accumulated

Amortization (1)

Net carrying amounts

2 unchanged sentences

Noncompete agreements 8,254 ( 5,079 ) 3,175

Trade names 6,826 ( 5,601 ) 1,225

Total $ 40,580 $ ( 19,811 ) $ 20,769

(1) Intangible assets, except customer relationships, are amortized on a straight-line basis.

2 unchanged sentences

The weighted average estimated useful life remaining for customer relationships, noncompete agreements, and trade names is approximately 10 years, 2 years, and 1 year, respectively.

Amortization expense for the definite-lived intangible assets was $ 1.8 million and $ 3.8 million for the three - and six -month periods ended June 27, 2020 , respectively.

For the three - and six -month periods ended June 30, 2019 , amortization expense was $ 2.0 million and $ 4.1 million , respectively.

Estimated amortization expense for definite-lived intangible assets for the remaining portion of 2020 and the next four fiscal years is as follows:

Amortization expense for the definite-lived intangible assets was $ 1.8 million and $ 5.6 million for the three- and nine-month periods ended September 26, 2020, respectively.

For the three- and nine-month periods ended September 28, 2019, amortization expense was $ 2.0 million and $ 6.1 million, respectively.

Estimated amortization expense for definite-lived intangible assets for the remaining portion of 2020 and the next five fiscal years is as follows:

Estimated Amortization

3 unchanged sentences

Contracts with our customers are generally in the form of standard terms and conditions of sale.

From time to time, we may enter into specific contracts with some of our larger customers, which may affect delivery terms.

From time to time, we may enter into specific contracts, which may affect delivery terms.

Performance obligations in our contracts generally consist solely of delivery of goods.

16 unchanged sentences

Sales and usage-based taxes are excluded from revenues.

Three Months Ended

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

(In thousands)

Three Months Ended Nine Months Ended

September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019

(In thousands) (In thousands)

Structural products $ 375,072 $ 225,689 $ 865,302 $ 646,646

7 unchanged sentences

Sales and usage-based taxes are excluded from revenues.

Three Months Ended

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

(In thousands)

Three Months Ended Nine Months Ended

September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019

(In thousands) (In thousands)

Warehouse and reload $ 745,185 $ 589,550 $ 1,901,285 $ 1,706,800

Direct 138,750 102,480 363,250 347,692

Customer discounts and rebates ( 12,872 ) ( 13,365 ) ( 32,626 ) ( 30,678 )

5 unchanged sentences

Assets Held for Sale

Three of our non-operating properties were designated as held for sale as of June 27, 2020 .

These properties consisted of three former distribution facilities located in the Midwest and Southeast.

We vacated these properties and designated them as held for sale during fiscal 2019 due to their proximity to other locations after the Cedar Creek acquisition.

As of June 27, 2020 , and December 28, 2019 , the net book value of total assets held for sale was $ 1.1 million and was included in “Other current assets” in our Condensed Consolidated Balance Sheets.

Two of our non-operating properties were designated as held for sale as of September 26, 2020.

These properties consisted of two former distribution facilities located in the Midwest and Southeast.

We vacated these properties and designated them as

held for sale during fiscal 2019 due to their proximity to other locations after the Cedar Creek acquisition.

During the three-month period ended September 26, 2020, one property identified as held for sale during fiscal 2019 was returned to operations as we decided to restart operations at our owned Grand Rapids facility.

As of September 26, 2020, and December 28, 2019, the net book value of total assets held for sale was $ 0.7 million and $ 1.1 million, respectively, and was included in “Other current assets” in our Condensed Consolidated Balance Sheets.

We continue to actively market all properties that are designated as held for sale, and we plan to sell these properties within the next 12 months.

Long-Term Debt

As of June 27, 2020, and December 28, 2019, long-term debt consisted of the following:

June 27, 2020

December 28, 2019

As of September 26, 2020, and December 28, 2019, long-term debt consisted of the following:

September 26, 2020 December 28, 2019

(In thousands)

Revolving Credit Facility (1)

$ 262,975 $ 326,496

Term Loan Facility (2)

57,813 146,674

Finance lease obligations (3)

273,222 198,011

594,010 671,181

Unamortized debt issuance costs ( 10,004 ) ( 12,555 )

584,006 658,626

current maturities of long-term debt 7,004 8,662

Long-term debt, net of current maturities $ 577,002 $ 649,964

(1) The weighted average interest rate was 2.6 percent and 3.9 percent as of June 27, 2020 and December 28, 2019, respectively.

(2) The weighted average interest rate was 8.0 percent and 8.7 percent as of June 27, 2020 and December 28, 2019, respectively.

(1) The weighted average interest rate was 2.5 percent and 3.9 percent as of September 26, 2020 and December 28, 2019, respectively.

(2) The weighted average interest rate was 8.0 percent and 8.7 percent as of September 26, 2020 and December 28, 2019, respectively.

(3) Refer to Note 8, Leases , for interest rates associated with finance lease obligations.

6 unchanged sentences

The adjustment to the Seasonal Period better aligns advance rates under the Revolving Credit Facility with the seasonality in our business and provided us with an enhanced borrowing base and greater liquidity through July 15, 2020.

As of June 27, 2020 , we had outstanding borrowings of $ 322.2 million , excess availability of $ 138.1 million , and a weighted average interest rate of 2.6 percent .

As of September 26, 2020, we had outstanding borrowings of $ 263.0 million , excess availability of $ 202.1 million, and a weighted average interest rate of 2.5 percent.

As of December 28, 2019, our principal balance was $ 326.5 million , excess availability was $ 80.0 million, and our weighted average interest rate was 3.9 percent.

The Revolving Credit Facility contains certain financial and other covenants, and our right to borrow under the Revolving Credit Facility is conditioned upon, among other things, our compliance with these covenants.

We were in compliance with all covenants under the Revolving Credit Facility as of June 27, 2020 .

We were in compliance with all covenants under the Revolving Credit Facility as of September 26, 2020.

Term Loan Facility

We have a term loan facility that we entered into in April 2018 with HPS Investments Partners, LLC, as administrative and collateral agent, and certain other financial institutions party thereto (the “Term Loan Facility”), with a maturity date of

October 13, 2023 .

The Term Loan Facility provides for a senior secured first lien loan facility in an initial aggregate principal amount of $ 180 million and is secured by a security interest in substantially all of our assets.

1 unchanged sentence

The Term Loan Facility also requires certain mandatory prepayments of outstanding loans, subject to certain exceptions.

The Term Loan Facility requires maintenance of a total net leverage ratio of 8.75 to 1.00 for the quarter ending June 27, 2020 and the third quarter of 2020, and 5.25 to 1.00 for the fourth quarter of 2020;

ratio levels generally reduce over the remaining term of the Term Loan Facility.

We were in compliance with all covenants under the Term Loan Facility as of June 27, 2020 .

The Term Loan Facility required maintenance of a total net leverage ratio of 8.75 to 1.00 for the quarter ending September 26, 2020.

We were in compliance with all covenants under the Term Loan Facility as of September 26, 2020.

Borrowings under the Term Loan Facility may be made as Base Rate Loans or Eurodollar Rate Loans.

9 unchanged sentences

All other total net leverage ratio covenant levels for prior and future quarters were unchanged.

As of June 27, 2020 , we had outstanding borrowings of $ 68.8 million under the Term Loan Facility and an interest rate of 8.0 percent per annum.

As of September 26, 2020, we had outstanding borrowings of $ 57.8 million under the Term Loan Facility and an interest rate of 8.0 percent per annum.

As of December 28, 2019, our principal balance was $ 146.7 million with an interest rate of 8.7 percent per annum.

The decrease in the outstanding borrowings was due to net proceeds of the real estate financing transactions described in Note 8 being applied to the Term Loan Facility.

The decrease in the outstanding borrowings was due to the principal payments described above and the net proceeds of the real estate financing transactions described in Note 8 being applied to the Term Loan Facility.

On October 2, 2020, we reduced the principal balance of the Term Loan Facility to $ 44.4 million, and as a result we are no longer subject to the Facility’s total net leverage ratio covenant beginning with our 2020 fourth quarter.

Finance Lease Obligations

3 unchanged sentences

The following table shows the components of our net periodic pension (benefit) cost:

Three Months Ended

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

(In thousands)

Three Months Ended Nine Months Ended

September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019

(In thousands) (In thousands)

Service cost $ — $ 29 $ — $ 190

Interest cost on projected benefit obligation 723 881 2,169 2,899

4 unchanged sentences

Stock Compensation Expense

During the three months ended June 27, 2020 , and June 29, 2019 , we incurred stock compensation expense of $ 0.9 million and $ 0.6 million , respectively.

During the six months ended June 27, 2020 , and June 29, 2019 , we incurred stock compensation

expense of $ 1.9 million and $ 1.3 million , respectively.

The increase in our stock compensation expense for the three- and six-month periods is attributable to having more outstanding equity-based awards during these periods than in the prior year and the vesting of awards in connection with the departure of certain employees.

During the three months ended September 26, 2020, and September 28, 2019, we incurred stock compensation expense of $ 1.1 million and $ 1.2 million, respectively.

During the nine months ended September 26, 2020, and September 28, 2019, we incurred stock compensation expense of $ 2.9 million and $ 2.5 million, respectively.

The increase in our stock compensation expense for the nine-month period is attributable to having more outstanding equity-based awards during these periods than in the prior year and the vesting of awards in connection with the departure of certain employees.

We have operating and finance leases for certain of our distribution facilities, office space, land, mobile fleet, and equipment.

Many of our leases are non-cancelable and typically have a defined initial lease term, and some provide options at our election to renew for specified periods of time.

Many of our leases are non-cancelable and typically have a defined initial lease term, and some provide options to renew at our election for specified periods of time.

The majority of our leases have remaining lease terms of 1 year to 15 years, some of which include one or more options to extend the leases for 5 years.

19 unchanged sentences

We have recorded these transactions as finance lease liabilities on our balance sheet.

As of June 27, 2020 and December 28, 2019, total unrecognized deferred gains related to these transactions were $ 84.0 and $ 85.8 million , respectively.

As of September 26, 2020, and December 28, 2019, total unrecognized deferred gains related to these transactions were $ 83.0 million and $ 85.8 million , respectively.

On May 19, 2019, we completed a real estate financing transaction on a warehouse facility in University Park, IL for net proceeds of $ 21.8 million.

2 unchanged sentences

Gross proceeds of these transactions were $ 45.0 million.

During the first quarter of fiscal 2020, we completed several real estate financing transactions.

On December 31, 2019, we completed real estate financing transactions on warehouse facilities in Madison, TN;

12 unchanged sentences

Gross proceeds of these transactions were $ 78.3 million.

We determined that the transactions in fiscal 2019 and in the current fiscal year did not qualify as sales in accordance with ASC 842.

We determined that the transactions in fiscal 2019 and in the first quarter of the current fiscal year did not qualify as sales in accordance with ASC 842.

Therefore, for accounting purposes, the transactions were not accounted for as sale-leaseback transactions, and no gain or loss was recorded.

1 unchanged sentence

The net book value of the assets related to these transactions remains on our books as property and equipment and we continue to depreciate the assets over their remaining useful lives.

On August 14, 2020, we entered into a sale-leaseback arrangement on our warehouse facility in Denver, CO.

We determined that this transaction qualified as a sale in accordance with ASC 842 and the lease qualified for operating lease treatment.

Gross proceeds of this transaction were $ 11.0 million and we recognized a related gain of $ 8.7 million.

Upon completion of the transaction, we entered into a long-term lease on the property for an initial term of five years with multiple 5 -year renewal options.

Net proceeds of the transaction were $ 10.6 million, which were used to pay down our Term Loan Facility.

A portion of our real estate lease cost is generally subject to annual changes in the Consumer Price Index (“CPI”).

2 unchanged sentences

In addition, a subset of our vehicle lease cost is considered variable.

The following table presents our assets and liabilities related to our leases as of June 27, 2020 and December 28, 2019 :

June 27, 2020

December 28, 2019

The following table presents our assets and liabilities related to our leases as of September 26, 2020 and December 28, 2019:

September 26, 2020 December 28, 2019

(In thousands)

Classification

Operating lease right-of-use assets

Operating lease right of use assets

Assets Classification

Operating lease right-of-use assets Operating lease right-of-use assets $ 53,124 $ 54,408

Finance lease right-of-use assets (1)

2 unchanged sentences

Current portion

Operating lease liabilities

Operating lease liabilities - short term

Finance lease liabilities

Finance lease liabilities - short term

Operating lease liabilities Operating lease liabilities - short term $ 6,926 $ 7,317

Finance lease liabilities Finance lease liabilities - short term 5,469 6,486

Non-current portion

Operating lease liabilities

Operating lease liabilities - long term

Finance lease liabilities

Finance lease liabilities - long term

Operating lease liabilities Operating lease liabilities - long term 45,883 47,091

Finance lease liabilities Finance lease liabilities - long term 267,753 191,525

Total lease liabilities $ 326,031 $ 252,419

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $ 51.3 and $ 30.8 million as of June 27, 2020 and December 28, 2019, respectively.

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $ 55.9 million and $ 30.8 million as of September 26, 2020 and December 28, 2019, respectively.

The components of lease expense were as follows:

Three Months Ended

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

(In thousands)

Three Months Ended Nine Months Ended

September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019

(In thousands) (In thousands)

Operating lease cost:

$ 3,108 $ 2,911 $ 9,206 $ 9,047

Finance lease cost:

3 unchanged sentences

Supplemental cash flow information related to leases was as follows:

Three Months Ended

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Three Months Ended Nine Months Ended

September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019

( In thousands)

8 unchanged sentences

Supplemental balance sheet information related to leases was as follows:

June 27, 2020

December 28, 2019

September 26, 2020 December 28, 2019

(In thousands)

9 unchanged sentences

Finance leases 9.86 % 10.11 %

The major categories of our finance lease liabilities as of June 27, 2020 and December 28, 2019 are as follows:

June 27, 2020

December 28, 2019

The major categories of our finance lease liabilities as of September 26, 2020 and December 28, 2019 are as follows:

September 26, 2020 December 28, 2019

(In thousands)

Equipment and vehicles $ 29,451 $ 32,471

Real estate 243,771 165,540

Total finance leases $ 273,222 $ 198,011

As of June 27, 2020 , maturities of lease liabilities were as follows:

Operating leases

Finance leases

As of September 26, 2020, maturities of lease liabilities were as follows:

Operating leases Finance leases

(In thousands)

2020 $ 11,727 $ 6,729

2021 9,383 30,025

2022 8,641 29,325

2023 7,286 28,996

2024 7,590 28,376

Thereafter 45,803 408,808

Total lease payments $ 90,430 $ 532,259

imputed interest ( 37,621 ) ( 259,037 )

Total $ 52,809 $ 273,222

On December 28, 2019, maturities of lease liabilities were as follows:

Operating leases

Finance leases

Operating leases Finance leases

(In thousands)

2020 $ 11,348 $ 24,002

2021 10,111 23,052

2022 8,048 22,230

2023 7,330 21,854

2024 6,413 21,380

Thereafter 50,901 327,439

Total lease payments $ 94,151 $ 439,957

imputed interest ( 39,743 ) ( 241,946 )

Total $ 54,408 $ 198,011

Commitments and Contingencies

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Collective Bargaining Agreements

As of June 27, 2020 , we had 2,000 employees on a full-time basis, and approximately 21 percent of our employees were represented by various local labor union Collective Bargaining Agreements (“CBAs”).

As of September 26, 2020, we had 2,000 employees on a full-time basis, and approximately 22 percent of our employees were represented by various local labor union Collective Bargaining Agreements (“CBAs”).

Approximately 1 percent of our employees are covered by three CBAs that are up for renewal in fiscal 2020.

As of June 27, 2020 , one of these CBAs was renewed and the remaining two are expected to be renegotiated later this year.

As of September 26, 2020, one of these CBAs was renewed and the remaining two are expected to be renegotiated before the end of the year.

Accumulated Other Comprehensive Loss

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Other comprehensive income (loss) results from items deferred from recognition into our Condensed Consolidated Statements of Operations and Comprehensive Loss.

Accumulated other comprehensive loss is separately presented on our Condensed Consolidated Balance Sheets as part of stockholders’ deficit.

The changes in balances for each component of accumulated other comprehensive loss for the six months ended June 27, 2020 , were as follows:

Accumulated other comprehensive loss is separately presented on our Condensed Consolidated Balance Sheets as part of stockholders’ equity (deficit).

The changes in balances for each component of accumulated other comprehensive loss for the nine months ended September 26, 2020, were as follows:

Foreign currency, net

of tax Defined

benefit pension

plan, net of tax

Total Accumulated Other Comprehensive Loss

plan, net of tax Other,

net of tax Total Accumulated Other Comprehensive Loss

(In thousands)

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Other comprehensive income, net of tax (1)

June 27, 2020, ending balance, net of tax

(1) For the six months ended June 27, 2020 , the actuarial loss recognized in the Condensed Consolidated Statements of Operations and Comprehensive Loss as a component of net periodic pension cost was $ 0.5 million , net of tax of $ 0.2 million .

8 604 ( 10 ) 602

September 26, 2020, ending balance, net of tax $ 674 $ ( 34,837 ) $ 202 $ ( 33,961 )

(1) For the nine months ended September 26, 2020, the actuarial loss recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as a component of net periodic pension cost was $ 0.8 million , net of tax of $ 0.2 million.

Please see Note 6, Net Periodic Pension (Benefit) Cost , for further information.

Our effective tax rate for the three months ended June 27, 2020 , and June 29, 2019 , was 33.9 percent and 27.2 percent , respectively.

Our effective tax rate for the three months ended June 27, 2020 was impacted by (i) recording discrete tax expense of $ 0.4 million for a shortfall on the vesting of our restricted stock units, (ii) the permanent addback of certain nondeductible expenses, including meals and entertainment and officer’s compensation, and (iii) the effect of the partial valuation allowance for separate company state income tax losses and previously nondeductible interest under 163(j) of the Internal Revenue Code (“IRC”).

Our effective tax rate for the three months ended June 29, 2019 , was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, and the effect of the partial valuation allowance for separate company state income tax losses.

Our effective tax rate for the three months ended September 26, 2020, and September 28, 2019, was 22.3 percent and ( 3.6 ) percent, respectively.

Our effective tax rate for the three months ended September 26, 2020, was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and officer’s compensation, and the effect of the partial valuation allowance for separate company state income tax losses and previously nondeductible interest under 163(j) of the Internal Revenue Code (“IRC”).

Our effective tax rate for the three months ended September 28, 2019, was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, and the effect of the partial valuation allowance for separate company state income tax losses and consolidated interest expense limitation, including $ 0.6 million in discrete tax expense related to prior periods.

In addition, we recorded discrete tax expense of $ 0.2 million for a shortfall on the vesting of our restricted stock units, which was offset by a $ 0.2 million discrete tax benefit for claiming tax credits.

Our effective tax rate was ( 36.8 ) percent and 29.5 percent , for the first six months of fiscal 2020 and 2019, respectively.

Our effective tax rate for the six months ended June 27, 2020 was impacted by (i) the discrete tax benefit of $ 3.9 million resulting from the release of the valuation allowance associated with the nondeductible interest expense under Section 163(j) of the IRC as a result of changes under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was enacted on March 27, 2020, and contained, among other things, several tax-based measures meant to counteract the effects of the COVID-19 pandemic, to increase the allowable percentage from 30 percent of adjusted taxable income to 50 percent of adjusted taxable income, (ii) recording discrete tax expense of $ 0.4 million for a shortfall on the vesting of our restricted stock units, (iii) the permanent addback of certain nondeductible expenses, including meals and entertainment and nondeductible compensation, and (iv) the effect of the partial valuation allowance for separate company state income tax losses and previously nondeductible interest expense under Section 163(j) of the IRC.

Our effective tax rate for the six months ended June 29, 2019 , was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation and the effect of the valuation allowance for separate company state income tax losses.

In addition, during the first six months of fiscal 2019, we recorded discrete tax expense of $ 0.2 million for a shortfall on vesting of our restricted stock units, which was offset by a $ 0.2 million discrete tax benefit for claiming state tax credits.

Our financial statements contain certain deferred tax assets which primarily resulted from tax benefits associated with the loss before income taxes in prior years, as well as net deferred income tax assets resulting from other temporary differences related to certain reserves, pension obligations, and differences between book and tax depreciation and amortization.

Our effective tax rate was 18.9 percent and ( 0.9 ) percent, for the first nine months of fiscal 2020 and 2019, respectively.

Our effective tax rate for the nine months ended September 26, 2020, was impacted by (i) the discrete tax benefit of $ 3.9 million resulting from the release of the valuation allowance associated with the nondeductible interest expense under Section 163(j) of the IRC as a result of changes under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act (which was enacted on March 27, 2020, and contained, among other things, several tax-based measures meant to counteract the effects of the COVID-19 pandemic) to increase the allowable percentage from 30 percent of adjusted taxable income to 50 percent of adjusted taxable income, (ii) recording discrete tax expense of $ 0.4 million for a shortfall on the vesting of our restricted stock units, (iii) the permanent addback of certain nondeductible expenses, including meals and entertainment and nondeductible compensation, and (iv) the effect of the partial valuation allowance for separate company state income tax losses and previously nondeductible interest expense under Section 163(j) of the IRC.

Our effective tax rate for the nine months ended September 28, 2019, was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation and the effect of the valuation allowance for separate company state income tax losses and consolidated interest expense limitation, including $ 0.6 million in discrete tax expense related to prior periods.

In addition, during the first nine months of fiscal 2019, we recorded discrete tax expense of $ 0.2 million for a shortfall on vesting of our restricted stock units, which was offset by a $ 0.2 million discrete tax benefit for claiming state tax credits.

Our financial statements contain certain deferred tax assets which primarily resulted from tax benefits associated with temporary differences related to certain reserves, pension obligations, differences between book and tax depreciation and amortization, realized gains upon the sales of real estate, and both federal and state net operating losses.

Currently, we have a valuation allowance that covers (i) certain company state net operating loss carryforwards and (ii) disallowed interest calculated pursuant to the changes made by the Tax Cuts and Jobs Act of 2017, as adjusted by the CARES Act.

We record a valuation allowance against our net deferred tax assets when we determine that, based on the weight of available evidence, it is more likely than not that our net deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences can be carried forward under tax law.

Currently, we have a valuation allowance that covers (i) our separate company state net operating loss carryforwards and (ii) disallowed interest calculated pursuant to the changes made by the Tax Cuts and Jobs Act of 2017, as adjusted by the CARES Act.

At the end of each quarter, we evaluate the weight of available evidence (both positive and negative).

We considered the recent reported income generated in the current quarter and prior years (adjusted for unusual one-time items) and income generated in 2017, including the prior year income from Cedar Creek.

We also considered evidence related to the four sources of taxable income to determine whether such positive evidence outweighed the negative evidence.

We also considered evidence

related to the four sources of taxable income to determine whether such positive evidence outweighed the negative evidence.

The evidence considered included:

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• tax planning strategies.

At the end of the first two fiscal quarters of 2020 and 2019 , in our evaluation of the weight of available evidence, we concluded that the weight of the positive evidence outweighed the negative evidence.

At the end of the 2020 and 2019 fiscal third quarters, in our evaluation of the weight of available evidence, we concluded that the weight of the positive evidence outweighed the negative evidence.

In addition to the evidence discussed above, we considered as positive evidence forecasted future taxable income, the detail scheduling of the timing of the reversal of our deferred tax assets and liabilities, and the evidence from business and tax planning strategies described below.

Although we believe our estimates are reasonable, the ultimate determination of the appropriate amount of valuation allowance involves significant judgments.

We believe that the change in control under IRC Section 382 resulting from the completion of the secondary offering on October 23, 2017 , will not cause any of our federal net operating losses to expire unused because management has been effectively implementing a real estate strategy involving the sale and leaseback of real estate.

This strategy is further supported by the transactions involving four warehouses in January 2018 and two warehouses during 2019 .

In the first quarter of 2020 , the Company executed three more sale and leaseback transactions, involving a total of fourteen warehouse locations.

One of our long-standing deferred tax assets has been our net operating losses for federal income tax purposes.

With our real estate sales discussed in Note 8 and our net income during the first nine months of 2020, we believe we will fully utilize all of our remaining federal net operating losses upon filing of our 2020 federal income tax return in 2021.

In addition, we believe that the change in control under IRC Section 382 resulting from the completion of the secondary offering on October 23, 2017, will not cause any of our federal net operating losses to be limited as we have effectively implemented a real estate strategy involving the sale and leaseback of real estate.

Those sale and leaseback transactions involved four warehouses in January 2018, two warehouses during 2019, and fifteen warehouses in 2020.

Additionally, the acquisition of Cedar Creek did not generate any limitations under IRC Section 382 on Cedar Creek’s tax assets.

We will continue to monitor any changes to our results of operations that may affect our estimates, including any impact of COVID-19 if applicable.

Income (Loss) per Share

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We calculate diluted income (loss) per share using the treasury stock method, by dividing net income (loss) by the weighted average number of common shares outstanding plus the dilutive effect of outstanding share-based awards, including restricted stock units, and performance units .

Due to the financial results for the six month period ended June 27, 2019 , 0.1 million of incremental shares were excluded from the computation of diluted weighted averages outstanding, because their effect would be anti-dilutive.

The reconciliation of basic net income (loss) and diluted net income (loss) per common share for the three- and six-month periods ended June 27, 2020 , and June 29, 2019 , were as follows:

Three Months Ended

Six Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

(In thousands, except per share data)

Due to the financial results for the three- and nine-month periods ended September 28, 2019, 0.1 million and 0.0 million of incremental shares were excluded from the computation of diluted weighted averages outstanding, because their effect would be anti-dilutive.

The reconciliation of basic net income (loss) and diluted net income (loss) per common share for the three- and nine-month periods ended September 26, 2020, and September 28, 2019, were as follows:

Three Months Ended Nine Months Ended

September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019

(In thousands, except per share data) (In thousands, except per share data)

Net income (loss) $ 55,116 $ ( 7,043 ) $ 61,024 $ ( 7,461 )

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements