What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-03-03 compared with 2020-03-11 · 576 added, 497 removed, 510 unchanged (68% of the section changed)

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Report of Independent Registered Public Accounting Firm

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Cash Flows

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

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We have audited the accompanying consolidated balance sheets of BlueLinx Holdings Inc.

and subsidiaries (the “Company”) as of December 28, 2019 and December 29, 2018, the related consolidated statements of operations and comprehensive loss, cash flows, and stockholders’ deficit for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 28, 2019 and December 29, 2018, and the results of their operations and their cash flows for the years then ended , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 28, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 11, 2020 expressed an unqualified opinion thereon.

and subsidiaries (the “Company”) as of January 2, 2021 and December 28, 2019, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity (deficit), and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 2, 2021 and December 28, 2019, and the results of its operations and its cash flows for the years then ended , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of January 2, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 3, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of the Realizability of Deferred Tax Assets

As described in Note 5 to the consolidated financial statements, the Company has recognized net deferred tax assets of $62.9 million as of January 2, 2021.

The Company evaluates its ability to realize the tax benefits associated with deferred tax assets by analyzing the forecasted future taxable income using both historical and projected future operating results, the reversal of existing taxable temporary differences, taxable income from prior carryback years and the availability of tax planning strategies.

A valuation allowance to reduce the deferred tax balance is required to be established unless management determines it is more likely than not that the tax benefit associated with the deferred tax asset will be realized.

Realization is dependent upon the existence of sufficient future taxable income of an appropriate character within the carryforward periods.

The Company's forecasted future taxable income requires significant management judgment.

We identified the assessment of the realizability of deferred tax assets as a critical audit matter.

The development of management’s forecasted future taxable income involves significant judgment and assumptions, including the complexities related to the assessment of weighting relevant positive and negative evidence.

Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the need for specialized knowledge and skill in assessing these elements.

The primary procedures we performed to address this critical audit matter included:

• Evaluating the reasonableness of the assumptions and evidence to support the assumptions used by the Company to develop projections of forecasted future taxable income considering:

(i) the current and past performance of the Company;

(ii) the consistency with external market and industry data, and

(iii) the consistency of the assumptions with evidence obtained in other areas of the audit.

• Utilizing personnel with specialized knowledge and skill to assist in evaluating the Company’s application of the relevant tax regulations to the assumptions used in the determination of forecasted future taxable income.

/s/ BDO USA, LLP

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BLUELINX HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

Fiscal Year Ended January 2, 2021 Fiscal Year Ended December 28, 2019

(In thousands, except per share data)

Net sales $ 3,097,328 $ 2,637,268

Cost of sales 2,619,594 2,280,353

Gross profit 477,734 356,915

Operating expenses:

Selling, general, and administrative 314,228 291,526

Depreciation and amortization 28,901 30,232

Amortization of deferred gains on real estate ( 4,008 ) ( 3,960 )

Gains from sales of property ( 10,529 ) ( 13,082 )

Other operating expenses 6,901 17,045

Total operating expenses 335,493 321,761

Operating income 142,241 35,154

Non-operating expenses (income):

Interest expense, net 47,414 54,218

Other (income) expense, net ( 254 ) 2,544

Income (loss) before provision for (benefit from) income taxes 95,081 ( 21,608 )

Provision for (benefit from) income taxes 14,199 ( 3,952 )

Net income (loss) $ 80,882 $ ( 17,656 )

Basic income (loss) per share $ 8.58 $ ( 1.89 )

Diluted income (loss) per share $ 8.55 $ ( 1.89 )

Comprehensive income (loss):

Net income (loss) $ 80,882 $ ( 17,656 )

Other comprehensive (loss) income:

Actuarial loss on defined benefit plan, net of tax ( 2,202 ) ( 372 )

Amortization of unrecognized pension gain, net of tax 788 2,932

Other ( 15 ) 6

Total other comprehensive (loss) income ( 1,429 ) 2,566

Comprehensive income (loss) $ 79,453 $ ( 15,090 )

See the accompanying Notes to the consolidated financial statements.

BLUELINX HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

January 2, 2021 December 28, 2019

(In thousands, except share data)

Current assets:

Cash $ 82 $ 11,643

Receivables, less allowances of $ 4,123 and $ 3,236 , respectively

293,643 192,872

Inventories, net 342,108 345,806

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Total current assets 668,414 578,039

Property and equipment:

Land and land improvements

Machinery and equipment

Construction in progress

Property and equipment, at cost

Accumulated depreciation

Property and equipment, net 178,712 195,768

Operating lease right-of-use assets 51,142 54,408

Goodwill 47,772 47,772

Intangible assets, net 18,889 26,384

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Other non-current assets 20,302 15,061

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Total assets $ 1,048,130 $ 971,425

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

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Accrued compensation 24,751 7,639

Current maturities of long-term debt, net of discount and debt issuance

costs of $74 and $64, respectively

Finance leases - short-term

Real estate deferred gains - short-term

Current maturities of long-term debt, net of debt issuance costs of $ 74 and $ 74 , respectively

Finance lease liabilities - short-term 5,675 6,486

Operating lease liabilities - short-term 6,076 7,317

Real estate deferred gains - short-term 4,040 3,935

Other current liabilities 22,156 11,222

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Non-current liabilities:

Long-term debt, net of discount and debt issuance costs

of $12,481 and $12,665, respectively

Finance leases - long-term

Real estate financing obligation

Real estate deferred gains - long-term

Long-term debt, net of debt issuance costs of $ 8,936 and $ 12,481 , respectively

321,270 458,439

Finance lease liabilities - long-term 267,443 191,525

Operating lease liabilities - long-term 44,965 47,091

Real estate deferred gains - long-term 78,009 81,886

Pension benefit obligation 22,684 23,420

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Total liabilities 989,038 997,508

Commitments and contingencies - Note 14

STOCKHOLDERS’ DEFICIT

Common Stock, $0.01 par value, Authorized - 20,000,000 shares,

Issued and Outstanding - 9,365,768 and 9,293,794, respectively

Commitments and contingencies

STOCKHOLDERS’ EQUITY (DEFICIT)

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

9,462,774 and 9,365,768 outstanding on January 2, 2021 and December 28, 2019, respectively

Additional paid-in capital 266,695 260,974

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Accumulated stockholders’ deficit ( 171,706 ) ( 252,588 )

Total stockholders’ deficit

Total liabilities and stockholders’ deficit

Total stockholders’ equity (deficit) 59,092 ( 26,083 )

Total liabilities and stockholders’ equity (deficit) $ 1,048,130 $ 971,425

See the accompanying Notes to the consolidated financial statements.

BLUELINX HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS

Ended December 28,

Ended December 29,

(In thousands, except per share data)

Cost of sales

Operating expenses:

Selling, general, and administrative

Gains from sales of property

Depreciation and amortization

Total operating expenses

Operating income (loss)

Non-operating expenses (income):

Interest expense

Other expense (income), net

Loss before benefit from income taxes

Benefit from income taxes

Basic loss per share

Diluted loss per share

Comprehensive loss:

Other comprehensive income (loss):

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock Additional

Paid-In Capital Accumulated

Comprehensive Loss Accumulated Deficit Stockholders’ Equity (Deficit) Total

Shares Amount

(In thousands)

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

Net loss — — — — ( 17,656 ) ( 17,656 )

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

Foreign currency translation, net of tax — — — 6 — 6

Amortization of unrecognized pension gain (loss), net of tax

Total other comprehensive income (loss)

Comprehensive loss

Impact of defined pension plan, net of tax — — — 2,560 — 2,560

Vesting of restricted stock units 82 2 — — — 2

Compensation related to share-based grants — — 2,592 — — 2,592

Repurchase of shares to satisfy employee tax withholdings ( 10 ) — ( 211 ) — — ( 211 )

Other — — ( 3 ) — ( 1 ) ( 4 )

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

Net income — — — — 80,882 80,882

Foreign currency translation, net of tax — — — ( 6 ) — ( 6 )

Impact of defined pension plan, net of tax — — — ( 1,414 ) — ( 1,414 )

Vesting of restricted stock units 127 1 — — — 1

Compensation related to share-based grants — — 5,992 — — 5,992

Repurchase of shares to satisfy employee tax withholdings ( 30 ) — ( 271 ) — — ( 271 )

Other — — — ( 9 ) — ( 9 )

Balance, January 2, 2021 9,463 $ 95 $ 266,695 $ ( 35,992 ) $ ( 171,706 ) $ 59,092

See the accompanying Notes to the consolidated financial statements.

BLUELINX HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Ended December 28,

Ended December 29,

Fiscal Year Ended January 2, 2021 Fiscal Year Ended December 28, 2019

(In thousands)

Cash flows from operating activities:

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

Benefit from income taxes

Net income (loss) $ 80,882 $ ( 17,656 )

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

Provision for (benefit from) income taxes 14,199 ( 3,952 )

Depreciation and amortization 28,901 30,232

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Share-based compensation 5,992 2,592

Amortization of deferred gain

Amortization of deferred gain from real estate ( 4,008 ) ( 3,960 )

Changes in operating assets and liabilities:

Accounts receivable ( 100,771 ) 15,562

Inventories 3,698 ( 3,955 )

Accounts payable 32,815 ( 16,840 )

Prepaid assets

Quarterly pension contributions

Prepaid and other current assets ( 9,546 ) 6,282

Pension contributions ( 755 ) ( 1,791 )

Other assets and liabilities 9,364 ( 10,070 )

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities 55,019 ( 10,304 )

Cash flows from investing activities:

Acquisition of business, net of cash acquired — 6,009

Proceeds from sale of assets 12,849 19,931

Property and equipment investments ( 3,689 ) ( 4,791 )

Proceeds from disposition of assets

Net cash provided by (used in) investing activities

Net cash provided by investing activities 9,160 21,149

Cash flows from financing activities:

Repurchase of shares to satisfy employee tax withholdings

Borrowings on revolving credit facilities 843,905 649,788

Repayments on revolving credit facilities ( 882,155 ) ( 656,596 )

Borrowings from revolving credit facilities

Repayments on term loan ( 103,470 ) ( 32,426 )

Borrowings on term loan

Principal payments on mortgage

Proceeds from real estate financing transactions 78,263 44,914

Payments on finance lease obligations (principal)

Change in outstanding payments

Debt financing costs ( 3,350 ) ( 3,618 )

Net cash (used in) provided by financing activities

Increase in cash

Cash, beginning of period

Cash, end of period

Repurchase of shares to satisfy employee tax withholdings ( 271 ) ( 211 )

Principal payments on finance lease liabilities ( 8,662 ) ( 9,992 )

Net cash used in financing activities ( 75,740 ) ( 8,141 )

Net change in cash ( 11,561 ) 2,704

Cash at beginning of period 11,643 8,939

Cash at end of period $ 82 $ 11,643

Supplemental Cash Flow Information

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Noncash transactions:

Property and equipment under finance leases

BLUELINX HOLDINGS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Paid-In Capital

Comprehensive Loss

Accumulated Deficit

Stockholders’ Equity (Deficit) Total

(In thousands)

Balance, December 30, 2017

Foreign currency translation, net of tax

Unrealized loss from pension plan, net of tax

Vesting of restricted stock units

Compensation related to share-based grants

Repurchase of shares to satisfy employee tax withholdings

Balance, December 29, 2018

Adoption of ASC 842, net of tax

Foreign currency translation, net of tax

Unrealized gain from pension plan, net of tax

Vesting of restricted stock units

Compensation related to share-based grants

Repurchase of shares to satisfy employee tax withholdings

Balance, December 28, 2019

Additions of real property under finance leases $ 3,833 $ 15,041

See the accompanying Notes to the consolidated financial statements.

BLUELINX HOLDINGS INC.

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Basis of Presentation

BlueLinx is a wholesale distributor of building and industrial products in the U.S.

BlueLinx is a leading U.S.

wholesale distributor of residential and commercial building products with both branded and private-label SKUs across product categories such as lumber, panels, engineered wood, siding, millwork, metal building products, and other construction materials.

With a strong market position, broad geographic coverage footprint servicing 40 states, and the strength of a locally focused sales force, we distribute our comprehensive range of products to over 15,000 national, regional, and local dealers, specialty distributors, national home centers, and manufactured housing customers.

BlueLinx is able to provide a wide range of value added services and solutions to our customers and suppliers.

Our Consolidated Financial Statements include the accounts of BlueLinx Holdings Inc.

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All significant intercompany accounts and transactions have been eliminated.

Fiscal years 2019 and 2018 were each comprised of 52 weeks.

On April 13, 2018, we completed the acquisition of Cedar Creek Holdings, Inc.

(“Cedar Creek”).

Results for Cedar Creek are included in the consolidated financial information presented herein.

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

Our fiscal year ends on the Saturday closest to December 31 of that fiscal year and may comprise 53 weeks in certain years.

Our 2020 fiscal year contained 53 weeks and ended on January 2, 2021.

Fiscal 2019 contained 52 weeks and ended on December 28, 2019.

Reclassification of Prior Period Presentation

We have reclassified certain costs within the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 28, 2019 from selling, general, and administrative to amortization of deferred gains on real estate and other operating expenses.

These costs primarily relate to the amortization of gains from prior real estate sales and the integration of the acquisition of Cedar Creek, respectively.

Additionally, an adjustment has been made to the Consolidated Statements of Cash Flows for the year ended December 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.

Use of Estimates

We are required to make estimates and assumptions when preparing our Consolidated Financial Statements in accordance with U.S.

These estimates and assumptions affect the amounts reported in our Consolidated Financial Statements and the accompanying notes.

Actual results could differ materially from those estimates.

Subsequent Events

We evaluated subsequent events through the date that our Consolidated Financial Statements were issued.

Except as described in Note 16, no matters were identified that required adjustment of the Consolidated Financial Statements or additional disclosure.

Our financial statements are prepared in conformity with U.S.

GAAP, which requires us to make estimates based on assumptions about current, and for some estimates, future economic and market conditions, which affect reported amounts and related disclosures in our financial statements.

Although our current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position.

Some of our estimates may be affected by the ongoing novel coronavirus (“COVID-19”) pandemic.

The severity, magnitude, and duration, as well as the economic consequences of the COVID-19 pandemic, are uncertain, rapidly changing, and difficult to predict.

As a result, our accounting estimates and assumptions may change over time in response to COVID-19.

Recent Accounting Standards - Recently Issued

Income Taxes .

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, “Income taxes (Topic 740):

Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) 740 and also clarifies and amends existing guidance to improve consistent application.

The amendments in this standard are effective for interim periods and fiscal years beginning after December 15, 2020.

Early adoption is permitted.

We have assessed the impact of the new guidance, and determined it will not have an impact on the Company’s consolidated financial position, results of operations, or cash flows.

Credit Impairment Losses .

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326).” This ASU sets forth a current expected credit loss (“CECL”) model which requires the measurement of all expected credit losses for financial instruments or other assets (e.g., trade receivables), held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

This replaces the existing incurred loss model, is applicable to the measurement of credit losses on financial assets measured at amortized cost, and applies to some off-balance sheet credit exposures.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).” This ASU sets forth a current expected credit loss (“CECL”) model which requires the measurement of all expected credit losses for financial instruments or other assets (e.g., trade receivables), held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

This replaces the existing incurred loss model, is

applicable to the measurement of credit losses on financial assets measured at amortized cost, and applies to some off-balance sheet credit exposures.

The standard also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity's portfolio.

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We have not completed our assessment of the standard, but we do not expect adoption of the standard to have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

Recent Accounting Standards - Recently Adopted

Defined Benefit Pension Plan .

In August 2018, the FASB issued ASU No.

2018-14, “Compensation-Retirement-Benefits-Defined Benefit Plans-General (Subtopic 715-20).” The amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing six previously required disclosures and adding two.

The ASU eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year.

The ASU also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care benefits.

We adopted this standard effective for fiscal year 2020.

The adoption of the standard did not have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

Fair Value Measurement.

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All other amendments should be applied retrospectively to all periods presented.

The amendments in this standard are effective for fiscal years beginning after December 15, 2019.

Early adoption is permitted, and an entity may early adopt the removed or modified disclosures and delay the adoption of new disclosures until the effective date.

Defined Benefit Pension Plan .

In August 2018, the FASB issued ASU No.

2018-14, “Compensation-Retirement-Benefits-Defined Benefit Plans-General (Subtopic 715-20).” The amendments in this update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing six previously required disclosures and adding two.

The amendments also clarify certain disclosure requirements.

The amendments in this standard are effective for fiscal years ending after December 15, 2020.

Early adoption is permitted.

Income Taxes .

In December 2019, the FASB issued ASU No.2019-12, “Income taxes (Topic 740):

Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application.

The amendments in this standard are effective for interim periods and fiscal years beginning after December 15, 2020.

Early adoption is permitted.

We are currently assessing the impact of the new guidance, but do not expect it to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

Recent Accounting Standards - Recently Adopted

We adopted this standard effective December 29, 2019, the first day of our 2020 fiscal year.

The adoption of this standard did not have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

In January 2017, the FASB issued ASU No.

2017-04, “Intangibles-Goodwill and Other (Topic 350).” This standard is intended to simplify the test for goodwill impairments by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation.

Under the new ASU, a goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

We elected to early adopt this standard effective the first day of the fourth quarter of 2019, which corresponds with the date of our annual goodwill impairment testing date.

The adoption of the standard did not have a material impact on Company's consolidated financial position, results of operations, or cash flows.

In 2016, the FASB issued ASU No.

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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 current accounting guidance.

Expenses are recognized in the consolidated statement of income in a manner similar to previous 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 prospective transition approach, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented.

We adopted this standard, and all related amendments thereto, effective December 30, 2018, the first day of our 2019 fiscal year, using a prospective 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.

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.

The adoption of Topic 842 had a material impact on our consolidated balance sheets, but did not have a material impact on our consolidated statements of operations and comprehensive loss.

The adoption of Topic 842 had a material impact on our consolidated balance sheets, but did not have a material impact on our consolidated statements of operations and comprehensive income (loss).

There also was no impact to our debt covenant calculations.

The most significant impact was the recognition of right-of-use assets and corresponding lease liabilities of $ 57.5 million on the consolidated balance sheet.

Additionally, $ 1.7 million of deferred gains associated with sale-leaseback transactions was recorded as a cumulative-effect adjustment to accumulated deficit.

Additionally, $ 1.7 million of deferred gains associated with sale-leaseback transactions was recorded as a cumulative-effect

adjustment to accumulated deficit.

See Note 12, Lease Commitments , for additional disclosures regarding our lease commitments.

Comprehensive Income .

In February 2018, the FASB issued ASU No.

2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220).” This standard provides an option to reclassify stranded tax effects within accumulated other comprehensive income (loss) (“AOCI”) to retained earnings due to the U.S.

federal corporate income tax rate change in the Tax Cuts and Jobs Act of 2017.

We adopted this standard effective December 30, 2018, the first day of our 2019 fiscal year.

We did not exercise the option to make this reclassification.

In January 2017, the FASB issued ASU No.

Under the new ASU, a goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

We elected to early adopt this standard effective the first day of the fourth quarter of 2019, which corresponds with the date of our annual goodwill impairment testing date.

The adoption of the standard did not have a material impact on Company's consolidated financial position, results of operations, or cash flows.

Cloud Computing Arrangements.

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The adoption of the standard did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

Comprehensive Income .

In February 2018, the FASB issued ASU No.

federal corporate income tax rate change in the Tax Cuts and Jobs Act of 2017.

We adopted this standard effective December 30, 2018, the first day of our 2019 fiscal year.

We did not exercise the option to make this reclassification.

Revenue Recognition

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Trade allowances are based on the estimated obligations and historical experience.

Adjustments to earnings resulting from revisions to estimates on discounts and returns have been insignificant for each of the reported periods.

Adjustments to earnings resulting from revisions to estimates on discounts and returns have been immaterial for each of the reported periods.

In addition, we provide inventory to certain customers through pre-arranged agreements on a consignment basis.

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Financing ROU assets associated with finance leases are included in property and equipment.

Leases with a lease term of 12 months or less at inception are not recorded on our consolidated balance sheet and are expensed on a straight-line basis over the lease term in our consolidated statement of income.

We determine the lease term by assuming the exercise of renewal options that are reasonably certain.

As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

When our contracts contain lease and non-lease components, we account for both components as a single lease component.

See Note 13 for further discussion.

See Note 12, Lease Commitments, for further discussion.

Accounts Receivable

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We have included all material charges directly or indirectly incurred in bringing inventory to its existing condition and location.

We evaluate our inventory value at the end of each quarter to ensure that inventory, when viewed by category, is carried at the lower of cost and net realizable value, which also considers items that may be damaged, excess, and obsolete inventory.

We evaluate our inventory value at

the end of each quarter to ensure that inventory, when viewed by category, is carried at the lower of cost and net realizable value, which also considers items that may be damaged, excess, and obsolete inventory.

Consideration Received from Vendors and Paid to Customers

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Outbound shipping and handling costs included in “Selling, general, and administrative” expenses were $ 151.2 million and $ 150.4 million for fiscal 2020 and fiscal 2019, respectively.

Shipping and handling costs include amounts related to the administration of our logistical infrastructure, handling of material in our warehouses, and amounts pertaining to the delivery of products to our customers, such as fuel and maintenance costs for our mobile fleet, wages for our drivers, and third party freight charges.

Property and Equipment

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Lease obligations for which we assume or retain substantially all the property rights and risks of ownership are capitalized.

Amortization of assets recorded under capital leases is included in “Depreciation and amortization” expense.

Amortization of assets recorded under finance leases is included in “Depreciation and amortization” expense.

Replacements of major units of property are capitalized and the replaced properties are retired.

Replacements of minor components of property and repair and maintenance costs are charged to expense as incurred.

Depreciation is computed using the straight-line method over the estimated useful lives of the related assets.

Estimated useful lives for land improvements, buildings, and machinery and equipment range from 7 to 15 years , 15 to 33 years , and 3 to 7 years , respectively.

Depreciation is computed using the straight-line method over the estimated useful lives of the related assets included in the table below.

Upon retirement or disposition of assets, cost and accumulated depreciation are removed from the related accounts and any gain or loss is included in income.

Property and equipment consisted of the following asset classes with the following general range of estimated useful lives:

General Range of Estimated Useful Lives in Years January 2, 2021 December 28, 2019

(In thousands)

Land and land improvements 7 - 15 (1)

$ 18,808 $ 21,409

Buildings 15 - 33

165,541 167,249

Machinery and equipment 3 - 7

113,364 117,682

Construction in progress 2,222 1,727

299,935 308,067

Accumulated depreciation ( 121,223 ) ( 112,299 )

Property and equipment, net $ 178,712 $ 195,768

(1) The range of estimated useful lives for the “Land and land improvements” asset class applies only to land improvements.

We account for deferred income taxes using the liability method.

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These deposits are recorded in other current and non-current assets in our consolidated balance sheets.

On April 13, 2018, we completed the acquisition of Cedar Creek Holdings, Inc.

(“Cedar Creek”) for a purchase price of approximately $ 361.8 million .

The acquisition was completed pursuant to the terms of an Agreement and Plan of Merger (the "Merger Agreement"), dated as of March 9, 2018, by and among BlueLinx Corporation, one of our wholly owned subsidiaries, Panther Merger Sub, Inc., a wholly-owned subsidiary of BlueLinx Corporation ("Merger Sub"), Cedar Creek, and CharlesBank Equity Fund VII, Limited Partnership (“CharlesBank”).

Upon closing the transactions contemplated by the Merger Agreement, among other things, Merger Sub was merged with and into Cedar Creek, with Cedar Creek surviving the acquisition as one of our indirect wholly-owned subsidiaries.

As a result of the acquisition, we increased the number of our distribution facilities to approximately 70 facilities, and increased the number of our full-time employees to approximately 2,600 .

The merger allowed us to expand our product offerings while expanding our existing geographical footprint.

Cedar Creek was established in 1977 as a wholesale building materials distribution company that distributes wood products across the United States.

Its products include specialty lumber, oriented strand board, siding, cedar, spruce, engineered wood products, and other building products.

The acquisition was accounted for under the acquisition method of accounting.

The assets acquired, liabilities assumed and the results of operations of the acquired business are included in our consolidated results since April 13, 2018.

We estimate that the acquired business contributed net sales and a net loss of approximately $ 1.0 billion and approximately $ 2.5 million , respectively, to the Company for the period from April 13, 2018, to December 29, 2018.

The net income for the period from April 13, 2018, to December 29, 2018, included integration-related costs and the negative impact of selling a higher cost Cedar Creek inventory recorded at fair value.

The following unaudited consolidated pro forma information presents consolidated information as if the acquisition had occurred on January 1, 2017:

(In thousands, except per share data)

Loss per common share:

The pro forma amounts above have been calculated in accordance with U.S.

GAAP after applying the Company's accounting policies, which assigns certain acquisition costs to the reporting period prior to the acquisition.

As a result, an inventory step-up adjustment for $ 11.8 million and transaction costs for $ 44.3 million were attributed to the 2017 pro forma period.

Due to the pro forma net loss for fiscal year ended December 29, 2018 , incremental shares from share-based compensation arrangements of 38,137 were excluded from the computation of diluted weighted average shares outstanding, because their effect would be anti-dilutive.

The pro forma amounts do not include any potential synergies, cost savings, or other expected benefits of the acquisition, are presented for illustrative purposes only, and are not necessarily indicative of results that would have been achieved had the acquisition occurred as of January 1, 2017, or of future operating performance.

As part of the acquisition, a total of $ 7.1 million was withheld from the purchase price and placed in escrow with certain third parties to serve as a source of recovery for certain potential indemnification claims under the Merger Agreement.

As of the end of 2018, amounts held in escrow were $ 6.0 million .

The remaining amounts were distributed from escrow in January 2019 to the Company and former stockholders of Cedar Creek..

The purchase price of Cedar Creek consisted of the following items:

(In thousands)

Consideration paid to shareholders and amounts paid to creditors:

Payments to Cedar Creek shareholders (1)

Subordinated unsecured note (due to shareholder) (2)

Seller’s transaction costs paid by Company

pay off of Cedar Creek debt (3)

Total preliminary cash purchase price

(1) Payments to Cedar Creek’s shareholders include the purchase of common stock and certain escrow adjustments.

(2) The Cedar Creek note payable to a shareholder of $ 13.7 million was paid in full upon the acquisition of Cedar Creek and included $ 10 million in subordinated debt and $ 3.7 million in accrued interest.

(3) To finance the acquisition of Cedar Creek, the Company amended and restated its Revolving Credit Facility to increase the availability thereunder to $ 600.0 million and also entered into a new $ 180.0 million senior secured Term Loan Facility (See Note 9).

The excess of total purchase price, which includes the aggregate cash consideration paid in excess of the fair value of the tangible and intangible assets acquired, was recorded as goodwill.

The goodwill recognized is attributable to the expected operating synergies and growth potential that the Company expects to realize from the acquisition.

None of the goodwill generated from the acquisition is deductible for tax purposes.

When determining the fair values of assets acquired and liabilities assumed, management made significant estimates, judgments, and assumptions.

The following table summarizes the values of the assets acquired and liabilities assumed at the date of the acquisition:

Allocation as of December 29, 2018

(In thousands)

Cash and net working capital assets

(excluding inventory)

Property and equipment

Intangible assets and goodwill:

Customer relationships

Non-compete agreements

Favorable leasehold interests

Capital leases and other liabilities

Cash purchase price

Revenue Recognition

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For certain sales channels and/or products, our standard terms of payment may be as early as ten days.

In addition, we provide inventory to certain customers through pre-arranged agreements on a consignment basis.

Customer consigned inventory is maintained and stored by certain customers;

however, ownership and risk of loss remains with us.

All revenues recognized are net of trade allowances (i.e., rebates), cash discounts and sales returns.

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We believe that there will not be significant changes to our estimates of variable consideration.

In addition, we provide inventory to certain customers through pre-arranged agreements on a consignment basis.

Customer consigned inventory is maintained and stored by certain customers;

however, ownership and risk of loss remains with us.

In 2019, we changed our internal product hierarchy.

The following table presents our revenues disaggregated by revenue source.

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Fiscal Year Ended

December 28, 2019

December 29, 2018

January 2, 2021 December 28, 2019

(In thousands)

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Total net sales $ 3,097,328 $ 2,637,268

Also due to the acquisition and integration of Cedar Creek, our reload sales are less distinct from warehouse sales as they have been classified in prior periods.

The following table presents our revenues disaggregated by sales channel.

Prior year amounts have been reclassified to conform to the current year revenues disaggregated by sales channel.

Warehouse sales are delivered from our warehouses to our customers.

Reload sales are similar to warehouse sales but are shipped from third-party warehouses where we store owned products to enhance operating efficiencies.

This channel is employed primarily to service strategic customers that would be less economical to service from our warehouses, and to distribute large volumes of imported products from port

Direct sales are shipped from the manufacturer to the customer without our taking physical possession of the inventory and, as a result, typically generate lower margins than our warehouse and reload distribution channels.

This distribution channel requires the lowest amount of committed capital and fixed costs.

In addition, from time to time, we may also make changes to certain intercompany allocations amongst sales channels.

Sales and usage-based taxes are excluded from revenues.

Fiscal Year Ended

December 28, 2019

December 29, 2018

January 2, 2021 December 28, 2019

(In thousands)

Warehouse and reload $ 2,617,850 $ 2,206,260

Direct 525,650 470,786

Cash discounts and rebates ( 46,172 ) ( 39,778 )

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Goodwill and Other Intangible Assets

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

As of December 28, 2019 , our intangible assets consist of goodwill and other intangible assets including customer relationships, noncompete agreements, and trade names.

In connection with the acquisition of Cedar Creek in 2018, we acquired certain intangible assets.

As of January 2, 2021, 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.

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

As of September 29, 2019, the first day of our fourth quarter and our designated goodwill impairment testing date, we early adopted ASU 2017-04.

This standard is intended to simplify the test for goodwill impairments by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation.

Under the ASU, a goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

Our one reporting unit has a negative carrying amount of net assets, and based on management’s assessment, no impairment was indicated for fiscal 2019.

This test requires us to assign goodwill to a reporting unit and to determine if the fair value of the reporting unit’s goodwill is less than its carrying amount.

We evaluate goodwill for impairment as the first day of our fourth quarter, which was September 27, 2020 for fiscal 2020.

We performed a quantitative analysis of our goodwill using a combined discounted cash flow and guideline public company approach.

Based on management’s assessment, no impairment was indicated.

In addition, we will evaluate the carrying value of goodwill for impairment between annual impairment tests if an event occurs or circumstances change that would indicate the carrying amounts may be impaired.

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.

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.

No such indicators were present in fiscal 2020 and fiscal 2019.

Definite-Lived Intangible Assets

At December 28, 2019 , in connection with the acquisition of Cedar Creek, we had definite-lived intangible assets that related to customer relationships, noncompete agreements, and trade names.

At December 28, 2019 , the gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets were as follows:

Gross Carrying Amounts

Accumulated Amortization

At January 2, 2021, in connection with the acquisition of Cedar Creek, we had definite-lived intangible assets that related to customer relationships, noncompete agreements, and trade names.

The gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets at January 2, 2021 were as follows:

Weighted Average Remaining Useful Lives Gross Carrying Amounts Accumulated Amortization (1)

Net Carrying Amounts

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Noncompete agreements 1 8,254 ( 5,595 ) 2,659

Trade names 1 6,826 ( 6,170 ) 656

Total $ 40,580 $ ( 21,691 ) $ 18,889

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

Customer relationships are amortized on a double declining balance method.

The gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets at December 28, 2019 were as follows:

Weighted Average Remaining Useful Lives Gross Carrying Amounts Accumulated Amortization (1)

Net Carrying Amounts

(In thousands)

Customer relationships 10 $ 25,500 $ ( 6,770 ) $ 18,730

Noncompete agreements 2 8,254 ( 3,532 ) 4,722

Trade names 1 6,826 ( 3,894 ) 2,932

Total $ 40,580 $ ( 14,196 ) $ 26,384

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

Customer relationships are amortized on a double declining balance method.

Amortization Expense

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 $ 8.1 million and $ 6.2 million for the years ended December 28, 2019 , and December 29, 2018 , respectively.

Amortization expense for the definite-lived intangible assets was $ 7.5 million and $ 8.1 million for the years ended January 2, 2021, and December 28, 2019, respectively.

Estimated annual amortization expense for definite-lived intangible assets over the next five fiscal years is as follows:

Estimated Amortization

Fiscal Year Ended Estimated Amortization

(In thousands)

Assets Held for Sale and Net Gain on Disposition

In fiscal 2019 , we designated certain non-operating properties as held for sale.

At the time of designation, we ceased recognizing depreciation expense on these assets.

As of December 28, 2019 , three properties were designated as held for sale, and, as of December 29, 2018 , seven properties had been designated as held for sale.

As of December 28, 2019 , and December 29, 2018 , the net book value of total assets held for sale was $ 1.1 million and $ 3.1 million , respectively, and was included in “Other current assets” in our Consolidated Balance Sheets.

Properties held for sale as of December 28, 2019 , consisted of three former distribution facilities located in the Midwest and Southeast.

As of January 2, 2021, two properties were designated as “held for sale,” and, as of December 28, 2019, three properties had been designated as “held for sale.” As of January 2, 2021, and December 28, 2019, the net book value of total assets “held for sale” was $ 1.3 million and $ 1.1 million, respectively, and was included in “Other current assets” in our Consolidated Balance Sheets.

Properties held for sale as of January 2, 2021 consisted of two former distribution facilities located in Midfield, Alabama, and Houston, Texas.

We plan to sell these properties within the next 12 months.

We continue to actively market all properties that are designated as held for sale.

During the year ended December 28, 2019, we sold five non-operating distribution facilities previously designated as “held for sale,” as well as certain equipment.

We recognized a gain of $ 13.1 million in the Consolidated Statements of Operations as a result of these sales.

Our (benefit from) provision for income taxes consisted of the following:

Ended December 28,

Ended December 29,

At the time of designation, we ceased recognizing depreciation expense on these assets.

We continue to actively market all properties that are designated as “held for sale.” During the year ended January 2, 2021, we removed our Grand Rapids facility from “held for sale” as we decided to restart operations at this facility.

During the year ended January 2, 2021, we sold one non-operating distribution facility previously designated as “held for sale,” as well as certain equipment.

We recognized a gain of $ 1.3 million in the Consolidated Statements of Operations as a result of this sale.

In fiscal 2020, our total statutory rate was 25.8 percent which was comprised of the federal statutory income tax rate of 21.0 percent and our blended state statutory rate of 4.8 percent.

In fiscal 2019, our total statutory rate was 27.3 percent which was comprised of the federal statutory income tax rate of 21.0 percent and our blended state statutory rate of 6.3 percent.

Our blended state rate is impacted by our federal income taxes and, as a result, may differ from year to year based on our federal taxable income.

Our effective tax rate is impacted by the effects of permanent differences and discrete (one-time) items occurring throughout our fiscal year.

For fiscal 2020 and fiscal 2019, our effective tax was 14.9 percent and 18.3 percent, respectively.

Fiscal Year Ended January 2, 2021 Fiscal Year Ended December 28, 2019

(In thousands)

Income (loss) before provision for (benefit from) income taxes $ 95,081 $ ( 21,608 )

Federal income taxes:

Current $ 19,673 $ 35

Deferred ( 9,038 ) ( 3,202 )

State income taxes:

Benefit from income taxes

The federal statutory income tax rate was 21% .

Our benefit from income taxes is reconciled to the federal statutory amount as follows:

Ended December 28,

Ended December 29,

Current 2,946 ( 403 )

Deferred 618 ( 382 )

Provision for (benefit from) income taxes $ 14,199 $ ( 3,952 )

Effective tax rate 14.9 % 18.3 %

Our provision for (benefit from) income taxes is reconciled to the federal statutory amount as follows:

Fiscal Year Ended January 2, 2021 Fiscal Year Ended December 28, 2019

(In thousands)

Benefit from income taxes computed at the federal statutory tax rate

Benefit from state income taxes, net of federal benefit

Valuation allowance change

Transaction costs

Nondeductible executive compensation

Share-based compensation - excess tax benefit

Other nondeductible items

Prior period true-up

Federal income taxes (benefit) computed at the federal statutory tax rate $ 19,967 $ ( 4,538 )

State income taxes (benefit), net of federal benefit 4,636 ( 1,752 )

Valuation allowance change arising from state net operating losses ( 4,101 ) ( 550 )

Valuation allowance change arising from interest deduction limitation ( 4,806 ) 4,806

Uncertain tax positions ( 1,879 ) ( 1,514 )

Tax rate change used to measure deferred taxes

Benefit from income taxes

The change in valuation allowance noted above is exclusive of items that do not impact income from continuing operations, but are reflected in the change in deferred income tax assets and liabilities in the Consolidated Balance Sheets as disclosed in the components of net deferred income tax assets table below.

Permanent differences arising from compensation 500 67

Other ( 118 ) ( 471 )

Provision for (benefit from) income taxes $ 14,199 $ ( 3,952 )

In accordance with the intraperiod tax allocation provisions of U.S.

GAAP, we are required to consider all items (including items recorded in other comprehensive income) in determining the amount of tax expense or benefit that should be allocated between continuing operations and other comprehensive income.

In fiscal year 2020, there is tax expense allocated to the income from continuing operations and tax benefit allocated to the income from other comprehensive income.

In fiscal year 2019, there is a tax benefit allocated to the loss from continuing operations and tax expense allocated to the income from other comprehensive income.

For fiscal 2018, there was no intraperiod tax allocation since there was a loss in continuing operations along with a loss in other comprehensive income.

While the income tax provision from continuing operations is reported in our Consolidated Statements of Operations and Comprehensive Loss, the income tax expense on other comprehensive income is recorded directly to accumulated other comprehensive loss, which is a component of stockholders’ deficit.

While the income tax provision from continuing operations is reported in our Consolidated Statements of Operations and Comprehensive Income (Loss), the income tax (benefit) or expense on other comprehensive income or (loss) is recorded directly to accumulated other comprehensive loss, which is a component of stockholders’ equity (deficit).

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.

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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 under tax law.

In our evaluation of the weight of available evidence at the end of fiscal 2019, we considered the recent reported loss generated in the current year and prior year (adjusted for unusual one-time items) and income generated in 2017, including the prior year income from Cedar Creek, which resulted in a three-year cumulative income situation as positive evidence which carried substantial weight.

While this was substantial, it was not the only evidence we evaluated.

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:

future reversals of existing taxable temporary differences;

future taxable income exclusive of reversing temporary differences and carryforwards;

taxable income in prior carryback years, if carryback is permitted under the tax law;

tax planning strategies.

At the end of fiscal 2019 and 2018, 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 positive 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.

For fiscal 2019, we have, however, recorded valuation allowances for the amount of disallowed interest calculated pursuant to the changes made by the Tax Cuts and Jobs Act of 2017 (“The Tax Act”) in the amount of $ 4.8 million .

The remaining valuation allowance of $ 11.4 million was primarily related to separate company state net operating loss carryforwards.

For fiscal 2018, the valuation allowance of $ 12.3 million was primarily related to separate company state net operating loss carryforwards.

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 Internal Revenue Code 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 as management has been effectively implementing a real estate strategy involving the sale and leaseback of real estate that is further supported by the transactions involving four warehouses in January 2018 and two warehouses during 2019.

Subsequent to December 28, 2019, the Company executed three more transactions, involving a total of 14 more locations (See Notes 13 and 16 for more detail).

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

The components of our net deferred income tax assets are as follows:

For fiscal 2020 and fiscal 2019, the components of our net deferred income tax assets are as follows:

January 2, 2021 December 28, 2019

(In thousands)

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Compensation-related accruals 6,524 3,523

Accruals and reserves

Accounts receivable 704 628

2 unchanged sentences

Operating lease liability 13,266 13,820

Pension 7,374 7,594

Benefit from NOL carryovers 8,010 25,731

Other 585 689

Total gross deferred income tax assets 89,476 91,357

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Operating lease asset ( 12,848 ) ( 13,820 )

Other ( 754 ) ( 243 )

Total deferred income tax liabilities ( 19,290 ) ( 21,170 )

Deferred income tax asset, net $ 62,899 $ 53,993

Our federal NOL carryovers are $ 61.8 million , and will expire in 11 to 16 years .

Our state NOL carryovers are $ 241.3 million , and will expire in 1 to 20 years .

Activity in our deferred tax asset valuation allowance for fiscal 2020 and 2019 was as follows:

Ended December 28,

Ended December 29,

January 2, 2021 December 28, 2019

(In thousands)

Balance as of beginning of the year

Balance as of beginning of the fiscal year $ 16,194 $ 12,348

Valuation allowance provided for taxes related to:

Loss before income taxes

Balance as of end of the year

State net operating loss carryforwards ( 4,101 ) ( 960 )

Disallowed interest limitation under the Tax Act and CARES

( 4,806 ) 4,806

Balance as of end of the fiscal year $ 7,287 $ 16,194

We have recorded income tax and related interest liabilities where we believe certain of our tax positions are not more likely than not to be sustained if challenged.

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The following table summarizes the activity related to our gross unrecognized tax benefits:

January 2, 2021 December 28, 2019

($ in thousands)

Balance at beginning of fiscal year

Additions for tax positions in prior years

Balance at beginning of the fiscal year $ 4,245 $ 5,843

Reductions due to lapse of applicable statute of limitations ( 1,983 ) ( 1,598 )

Balance at end of fiscal year

Included in the unrecognized tax benefits as of December 28, 2019 , and December 29, 2018 , were $ 4.0 million and $ 5.5 million , respectively, of tax benefits that, if recognized, would reduce our annual effective tax rate for fiscal 2018.

For fiscal 2019, we accrued interest related to these unrecognized tax benefits of $ 0.2 million , all of which is reported in “Interest expense” in our Consolidated Statements of Operations and Comprehensive Loss.

For fiscal 2018, we also accrued interest related to these unrecognized tax benefits of $ 0.9 million , of which $ 0.3 million of this amount is reported in “Interest expense” in our Consolidated Statement of Operations and Comprehensive Loss.

The remaining $ 0.6 million of interest, as well as the gross addition for tax positions in prior years of $ 6.7 million disclosed above in the tabular reconciliation, were recorded through goodwill as part of the purchase accounting for the acquisition of Cedar Creek.

No penalties were accrued for either fiscal 2019 or 2018.

We believe that it is reasonably possible that approximately $ 0.9 million of our remaining unrecognized tax benefit may be recognized by the end of fiscal 2020 as a result of a lapse of statute of limitations.

Balance at end of the fiscal year $ 2,262 $ 4,245

Included in the unrecognized tax benefits as of January 2, 2021 and December 28, 2019, were $ 2.1 million and $ 4.0 million, respectively of tax benefits that, if recognized, would reduce our annual effective tax rate for fiscal 2020 and 2019.

No penalties were accrued for either 2020 or 2019.

We believe that it is reasonably possible that approximately $ 0.7 million of our remaining unrecognized tax benefit may be recognized by the end of fiscal 2021 as a result of a lapse of statute of limitations related to our uncertain tax positions.

Impacts of the Tax Act and CARES

In December of 2017, the U.S.

enacted comprehensive tax legislation under the Tax Cuts and Jobs Act, (“The Tax Act”), which made broad and complex changes to the tax code.

During fiscal 2019, we recorded a valuation allowance of $ 4.8 million primarily related to interest disallowed for deduction related to changes included in the Tax Act.

In March of 2020, the U.S.

enacted the Coronavirus Aid, Relief, and Economic Security (“CARES” Act).

CARES included a provision which raised the level of deductibility for previously disallowed interest which had been enacted under the Tax Act.

During fiscal 2020, because of the provision included in CARES, we benefited from the release of the $ 4.8 million in valuation allowance which we had recorded in during fiscal 2019 under the provisions of the Tax Act.

Net Operating Losses

At the end of fiscal 2019, our federal net operating losses were $ 80.6 million.

Based on our taxable income for fiscal 2020, we have fully utilized all our previously remaining federal net operating losses and have none remaining.

At the end of fiscal 2020, our gross state net operating loss carryovers are $ 162.6 million and our net state NOL carryovers are $ 8.0 million, of which $ 7.3 million is subject to a valuation allowance and could be limited under Internal Revenue Code (“IRC”) Section 382.

Our state net operating loss carryovers will expire in 1 to 20 years.

For fiscal 2020, we reversed $ 4.1 million in valuation allowance against our state net operating losses.

Based on our taxable income for 2020 in the states where we have net operating loss carryforwards, we believe we will be able to utilize the state net operating losses that were previously reserved by this valuation allowance.

We file U.S., state, and foreign income tax returns in jurisdictions with varying statutes of limitations.

The 2017 through 2020 tax years generally remain subject to examination by federal and most state and foreign tax authorities.

Although we believe our estimates are reasonable in the carrying value of our valuation allowances against our deferred tax items, the ultimate determination of the appropriate amounts of valuation allowance involves significant judgement.

Assessing our Deferred Tax Assets

Quarterly, we assess the carrying value of our deferred tax assets for impairment by evaluating the weight of available evidence at the end of each fiscal quarter.

In our evaluation of the weight of available evidence at the end of fiscal 2020, we considered the recent reported income in the current year, as well as the reported losses for 2019 and 2018, which resulted in a three-year cumulative income situation as positive evidence which carried substantial weight.

While this was substantial, it was not the only evidence we evaluated.

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:

• future reversals of existing taxable temporary differences;

• future taxable income exclusive of reversing temporary differences and carryforwards;

• taxable income in prior carryback years, if carryback is permitted under the tax law;

• tax planning strategies.

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

At the end of fiscal 2020 and 2019, in our evaluation of the weight of available evidence, we concluded that our deferred tax assets were not impaired.

Long-Term Debt

As of December 28, 2019 , and December 29, 2018 , long-term debt consisted of the following:

Maturity Date

As of January 2, 2021, and December 28, 2019, long-term debt consisted of the following:

January 2, 2021 December 28, 2019

(In thousands)

Revolving Credit Facility (net of discounts and debt issuance costs of $4.5 million and $6.0 million at December 28, 2019 and December 29, 2018, respectively)

October 10, 2022

Term Loan Facility (net of discounts and debt issuance costs of $8.1 million and $6.7 million at December 28, 2019 and December 29, 2018, respectively)

October 13, 2023

current portion of long-term debt

Long-term debt, net

Revolving Credit Facility (1)

$ 288,247 $ 326,496

Term Loan Facility (2)

43,204 146,674

Finance lease obligations (3)

273,118 198,011

604,569 671,181

Unamortized debt issuance costs ( 9,010 ) ( 12,555 )

595,559 658,626

current maturities of long-term debt 6,846 8,662

Long-term debt, net of current maturities $ 588,713 $ 649,964

(1) The average effective interest rate was 3.3 percent and 4.8 percent for the years ended January 2, 2021 and December 28, 2019, respectively.

(2) The average interest rate, exclusive of fees and prepayment penalties, was 8.2 percent and 9.3 percent for the years ended January 2, 2021 and December 28, 2019, respectively.

(3) Refer to Note 12, Lease Commitments , for interest rates associated with finance lease obligations.

Revolving Credit Facility

In April 2018, we entered into an Amended and Restated Credit Agreement, with certain of our subsidiaries as borrowers (together with us, the “Borrowers”) or guarantors thereunder, Wells Fargo Bank, National Association, in its capacity as administrative agent (“Wells Fargo”), and certain other financial institutions party thereto.

The Amended and Restated Credit Agreement was further amended in January 2020, as described in Note 16 (as amended, the “Revolving Credit Agreement”).

The Amended and Restated Credit Agreement was further amended in January 2020 to provide that (i) the “Seasonal Period” run from November 15, 2019, through July 15, 2020, for the calendar year 2019, and from December 15 of each calendar year through April 15 of each immediately succeeding calendar year for the calendar year 2020 and thereafter, and (ii) the measurement period in the definition of “Cash Dominion Event” will be five consecutive business days instead of three consecutive business days (as amended, the “Revolving Credit Agreement”).

The Revolving Credit Agreement provides for a senior secured asset-based revolving loan and letter of credit facility (the “Revolving Credit Facility”) of up to $ 600 million and an uncommitted accordion feature that permits the Borrowers, with consent of the lenders, to increase the facility by an aggregate additional principal amount of up to $ 150 million, which will allow borrowings of up to $ 750 million under the Revolving Credit Facility.

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The Revolving Credit Facility may be prepaid in whole or in part from time to time without penalty or premium, but including all breakage costs incurred by any lender thereunder.

The Revolving Credit Agreement provides for interest on the loans at a rate per annum equal to (i) LIBOR plus a margin ranging from 1.75 percent to 2.25 percent , with the amount of such margin determined based upon the average of the Borrowers’ excess availability for the immediately preceding fiscal quarter as calculated by the administrative agent, for loans based on LIBOR, or (ii) the administrative agent’s base rate plus a margin ranging from 0.75 percent to 1.25 percent , with the amount of such margin determined based upon the average of the Borrowers’ excess availability for the immediately preceding fiscal quarter as calculated by the administrative agent, for loans based on the base rate.

In the event excess availability falls below the greater of (i) $ 50 million and (ii) 10 percent of the lesser of (a) the Borrowing Base and (b) the maximum permitted credit at such time, the Revolving Credit Agreement requires maintenance of a fixed charge coverage ratio of 1.0 to 1.0 until such time as the Borrowers’ excess availability has been at least the greater of (i) $ 50 million and (ii) 10 percent of the lesser of (a) the Borrowing Base and (b) the maximum permitted credit at such time for a period of 30 consecutive days.

The Revolving Credit Agreement provides for interest on the loans at a rate per annum equal to (i) the London Inter-bank Offered Rate (“LIBOR”) plus a margin ranging from 1.75 percent to 2.25 percent, with the amount of such margin determined based upon the average of the Borrowers’ excess availability for the immediately preceding fiscal quarter as calculated by the administrative agent, for loans based on LIBOR, or (ii) the administrative agent’s base rate plus a margin ranging from 0.75 percent to 1.25 percent, with the amount of such margin determined based upon the average of the Borrowers’ excess availability for the immediately preceding fiscal quarter as calculated by the administrative agent, for loans based on the base rate.

$ 50 million and (ii) 10 percent of the lesser of (a) the Borrowing Base and (b) the maximum permitted credit at such time for a period of 30 consecutive days.

The Revolving Credit Agreement also contains representations and warranties and affirmative and negative covenants customary for financings of this type as well as customary events of default.

As of December 28, 2019, we had outstanding borrowings of $ 326.5 million , excess availability of $ 80.0 million , and a weighted average interest rate of 3.9 % under our Revolving Credit Facility.

As of December 29, 2018 , we had outstanding borrowings of $ 333.3 million , excess availability of $ 91.7 million , and a weighted average interest rate of 4.6 % .

We were in compliance with all covenants under the Revolving Credit Agreement as of December 28, 2019 .

As of January 2, 2021, we had outstanding borrowings of $ 288.2 million and excess availability of $ 184.3 million under our Revolving Credit Facility.

As of December 28, 2019, we had outstanding borrowings of $ 326.5 million and excess availability of $ 80.0 million under our Revolving Credit Facility.

Our average effective interest rate under the facility was approximately 3.3 percent and 4.8 percent for the years ended January 2, 2021 and December 28, 2019, respectively.

We were in compliance with all covenants under the Revolving Credit Agreement as of January 2, 2021.

Term Loan Facility

In April 2018, in connection with the acquisition of Cedar Creek, we entered into a Credit and Guaranty Agreement by and among the Company, as borrower, certain of our subsidiaries, as guarantors, HPS Investment Partners, LLC, as administrative agent and collateral agent (“HPS”) and certain other financial institutions as parties thereto.

In October 2019, the Credit and Guaranty Agreement was amended to, among other things, permit real estate sale leaseback transactions and modify the “Total Net Leverage Ratio” beginning in the third quarter of 2019.

The Credit and Guaranty Agreement was further amended in January 2020, and February 2020, as described in Note 16 (as amended, the “Term Loan Agreement”).

In October 2019, the Credit and Guaranty Agreement was amended to, among other things, permit real estate sale leaseback transactions.

The Credit and Guaranty Agreement was further amended in fiscal January 2020, and February 2020 (as amended, the “Term Loan Agreement”).

The Term Loan Agreement provides for a senior secured term loan facility in an aggregate principal amount of $ 180 million (the “Term Loan Facility”).

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The proceeds from the Term Loan Facility were used to fund a portion of the cash consideration payable in connection with the acquisition of Cedar Creek and to fund transaction costs in connection with the acquisition and the Term Loan Facility.

The January 2020 amendment extended the period for satisfying the designated outstanding principal balance level required to maintain the modified “Total Net Leverage Ratio” covenant levels for the 2019 fourth and subsequent quarters under the Term Loan Facility.

The principal balance level was satisfied on January 31, 2020, through repayments from the real estate financing transactions described in Note 12, Lease Commitments .

On February 28, 2020, we further amended our Term Loan Facility to provide that we will not be subject to the facility’s quarterly “Total Net Leverage Ratio” covenant from and after the time, and then for so long as, the principal balance level under the facility is less than $ 45 million.

The Term Loan Facility balance fell below $ 45 million during October 2020 and remained below that amount for the remainder of fiscal 2020;

we were no longer subject to the quarterly “Total Net Leverage Ratio” covenant starting for the fourth quarter of 2020.

In connection with the Term Loan Agreement, the Company and certain of our subsidiaries also entered into a Pledge and Security Agreement with HPS (the “Term Loan Security Agreement”).

Pursuant to the Term Loan Security Agreement and other “Collateral Documents” (as such term is defined in the Term Loan Agreement), the obligations under the Term Loan

Agreement are secured by a security interest in substantially all of our and our subsidiaries’ assets, including inventories, accounts receivable, real property, and proceeds from those items.

Pursuant to the Term Loan Security Agreement and other “Collateral Documents” (as such term is defined in the Term Loan Agreement), the obligations under the Term Loan Agreement are secured by a security interest in substantially all of our and our subsidiaries’ assets, including inventories, accounts receivable, real property, and proceeds from those items.

The Term Loan Agreement requires monthly interest payments, and quarterly principal payments of $ 311,190 , in arrears.

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The Term Loan Agreement also contains representations, warranties, and affirmative and negative covenants customary for financing transactions of this type, and customary events of default.

The Term Loan Facility requires maintenance of a total net leverage ratio of 6.25 to 1.00 for the quarter ending December 28, 2019 , and such required covenant level generally reduces over the term of the Term Loan Facility as set forth in the Term Loan Agreement.

As of December 28, 2019 , we had outstanding borrowings of $ 146.7 million under our Term Loan Facility and a stated interest rate of 8.7 percent per annum.

We were in compliance with all covenants under the Term Loan Facility as of December 28, 2019 .

Our remaining scheduled principal payments of the Term Loan through 2023 as of December 28, 2019, is as follows:

We had outstanding borrowings of $ 43.2 million and $ 146.7 million under our Term Loan Facility as of January 2, 2021 and December 28, 2019, respectively.

Our average interest under the facility, exclusive of fees and prepayment premiums, was approximately 8.2 percent and 9.3 percent for the years ended January 2, 2021 and December 28, 2019, respectively.

We were in compliance with all covenants under the Term Loan Facility as of January 2, 2021.

Our remaining scheduled principal payments of the Term Loan through 2023 as of January 2, 2021, is as follows:

Fiscal Year Ended Remaining principal payments

($ in thousands)

Subsequent to the end of fiscal 2019, we used proceeds from our real estate financing transactions to reduce the remaining scheduled principal payments by $ 68.7 million .

As a result, required principal payments after 2022 were reduced to approximately $ 72.0 million .

2006 Commercial Mortgage-Backed Securities (“CMBS”) Mortgage Loan

Our 2006 CMBS mortgage loan, which was paid in full in January 2018, was secured by substantially all of the Company’s owned distribution facilities and a first priority pledge of the equity in the Company’s subsidiaries which held the real property that secured the mortgage loan.

Finance Lease Obligations

Our finance lease liabilities consist of leases related to equipment and vehicles, and real estate, with the majority of those finance leases related to real estate.

For more information on our finance lease obligations, refer to Note 12, Lease Commitments .

Fair Value Measurements

We determine a fair value measurement based on the assumptions a market participant would use in pricing an asset or liability, in accordance with Accounting Standards Codification (“ASC”) 820 - Fair Value Measurement (“ASC 820”).

We determine a fair value measurement based on the assumptions a market participant would use in pricing an asset or liability, in accordance with ASC 820 - Fair Value Measurement.

The fair value measurement guidance established a three level hierarchy making a distinction between market participant assumptions based on (i) unadjusted quoted prices for identical assets or liabilities in an active market (Level 1), (ii) quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability (Level 2), and (iii) prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (Level 3).

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The fair value hierarchy discussed above not only is applicable to assets and liabilities that are included in our consolidated balance sheets, but also is applied to certain other assets that indirectly impact our consolidated financial statements.

For example, we sponsor and contribute to a single-employer defined benefit pension plan (see Note 9).

For example, we sponsor and contribute to a single-employer defined benefit pension plan (see Note 8, Employee Benefits ).

Assets contributed by us become the property of the pension plan.

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We believe the pension plan asset fair value valuation to comprise Level 2 in the fair value hierarchy.

Level 2 assets held in the pension plan under GAAP consist of collective investment trust assets.

Level 2 assets held in the pension plan under U.S.

GAAP consist of collective investment trust assets.

Fair value measurements for financial instruments

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The following tables set forth the change in projected benefit obligation and the change in plan assets for the pension plan:

January 2, 2021 December 28, 2019

(In thousands)

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Projected benefit obligation at beginning of period $ 107,026 $ 107,909

Service cost — 190

Interest cost 2,892 3,730

Actuarial loss (gain)

Actuarial loss 9,813 11,156

Curtailment gain — ( 349 )

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Fair value of assets at beginning of period $ 83,606 $ 81,241

Actual return (loss) on plan assets

Actual return on plan assets 11,948 15,464

Employer contributions 1,493 2,511

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Net unfunded status of plan $ ( 22,684 ) $ ( 23,420 )

The accumulated benefit obligation for the pension plan was $ 113.8 million and $ 107.0 million at January 2, 2021, and December 28, 2019, respectively.

We recognize the unfunded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of our pension plan in our Consolidated Balance Sheets, with a corresponding adjustment to AOCI, net of tax.

December 28, 2019 , we measured the fair value of our plan assets and benefit obligations.

As of December 28, 2019 , and December 29, 2018 , the net unfunded status of our benefit plan was $ 23.4 million and $ 26.7 million , respectively.

Lump sum payout.

During 2019, we amended the BlueLinx Corporation Hourly Retirement Plan in order to offer a lump sum payout option to certain terminated vested participants in the plan whose present value of benefit payments exceeded $ 5,000 .

This option was available to these participants from September 1, 2019, through October 25, 2019, with a payment date of November 1, 2019.

Total lump sum payments under this option were $ 9.7 million , and were funded with existing plan assets.

The lump sum payments decreased our projected benefit obligation by approximately $ 12.2 million .

Because the amount that was settled was greater than the sum of the service cost and interest cost, we incurred settlement expense of $ 2.8 million .

On January 2, 2021, we measured the fair value of our plan assets and benefit obligations.

As of January 2, 2021, and December 28, 2019, the net unfunded status of our benefit plan was $ 22.7 million and $ 23.4 million, respectively.

Starting in 2018, we have elected to utilize a full yield curve approach in the estimation service and interest cost components for pension (income)/expense recognized during the fiscal year by applying the specific spot rates along the yield curve used in determination of the benefit obligation to the relevant projected cash flows.

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Actuarial gains and losses occur when actual experience differs from the estimates used to determine the components of net periodic pension cost, and when certain assumptions used to determine the fair value of the plan assets or projected benefit obligation are updated, including but not limited to, changes in the discount rate, plan amendments, differences between actual and expected returns on plan assets, mortality assumptions, and plan re-measurement.

We amortize a portion of unrecognized actuarial gains and losses for the pension plan into our Consolidated Statements of Operations and Comprehensive Loss.

We amortize a portion of unrecognized actuarial gains and losses for the pension plan into our Consolidated Statements of Operations and Comprehensive Income (Loss).

The amount recognized in the current year’s operations is based on amortizing the unrecognized gains or losses for the pension plan that exceed the larger of 10% of the projected benefit obligation or the fair value of plan assets, also known as the corridor.

In the current fiscal year, the amount representing the unrecognized gain or loss that exceeds the corridor is amortized over the estimated average remaining life expectancy of participants, as almost all the participants in the plan are inactive.

The net adjustment to other comprehensive income (loss) for fiscal 2019 and fiscal 2018 , was a $ 2.6 million gain and a $ 0.6 million loss, respectively, primarily from the net actuarial gain (loss) for those fiscal periods.

The decrease in the unfunded obligation for the fiscal year was approximately $ 3.3 million and was primarily comprised of $ 11.2 million of actuarial losses, $ 15.5 million of investment gains, $ 2.5 million of pension contributions, and a charge of $ 3.9 million due to current year service and interest cost.

The net periodic pension credit was $ 0.1 million in fiscal 2019, from a cost of $ 0.2 million in fiscal 2018, driven primarily by a reduction in investment returns associated with the matching duration of return seeking assets.

The net adjustment to other comprehensive income (loss) for fiscal 2020 and fiscal 2019, was a $ 1.4 million loss and a $ 2.6 million gain, respectively.

The adjustments are primarily due to the actuarial loss in fiscal 2020 and the amortization of the unrecognized pension gain in 2019.

The decrease in the unfunded obligation for the fiscal year was approximately $ 0.7 million and was primarily comprised of $ 9.8 million of actuarial losses, $ 11.9 million of investment gains, $ 1.5 million of pension contributions (comprised of cash contributions and lease payments for the properties contributed to the pension plan in 2013), and a charge of $ 2.9 million due to current year interest cost.

The net periodic pension credit was $ 0.9 million in fiscal 2020 compared to $ 0.1 million in fiscal 2019, driven primarily by a reduction in the interest cost on the projected benefit obligation.

The most significant change in the obligation was due to the decline in benefits paid from 2019 to 2020 resulting from the lump sum payout made to qualifying participants during 2019.

The unfunded status recorded as Pension Benefit Obligation on our Consolidated Balance Sheets for the pension plan is set forth in the following table, along with the unrecognized actuarial loss, which is presented as part of Accumulated Other Comprehensive Loss:

January 2, 2021 December 28, 2019

(In thousands)

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Net amount recognized $ 10,237 $ 7,801

The portion of estimated net loss for the pension plan that is expected to be amortized from accumulated other comprehensive loss into net periodic cost over the next fiscal year is approximately $ 1.0 million .

The accumulated benefit obligation for the pension plan was $ 107.0 million and $ 107.4 million at December 28, 2019 , and December 29, 2018 , respectively.

Net periodic pension cost (credit) for the pension plan included the following:

Fiscal Year Ended

The net periodic pension credit for the pension plan included the following:

Fiscal Year Ended January 2, 2021 Fiscal Year Ended December 28, 2019

(In thousands)

Service cost $ — $ 190

Interest cost on projected benefit obligation 2,892 3,730

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Amortization of unrecognized loss 1,052 1,158

Net periodic pension cost (credit)

Net periodic pension credit for the pension plan $ ( 896 ) $ ( 84 )

The following assumptions were used to determine the projected benefit obligation at the measurement date and the net periodic pension cost:

December 28, 2019

December 29, 2018

January 2, 2021 December 28, 2019

Projected benefit obligation:

Discount rate 2.51 % 3.21 %

Average rate of increase in future compensation levels

Graded 5.5-2.5%

Net periodic pension cost:

Average rate of increase in future compensation levels N/A N/A

Net periodic pension:

Discount rate 2.79 % 3.20 %

Average rate of increase in future compensation levels

Graded 5.5-2.5%

Average rate of increase in future compensation levels N/A Graded 5.5 - 2.5 %

Expected long-term rate of return on plan assets 6.00 % 6.00 %

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The discount rate.

We utilize a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve used in determination of the benefit obligation to the relevant projected cash flows.

We utilize a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve of high-quality corporate bonds used in determination of the benefit obligation to the relevant

projected cash flows.

We have made this change to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates.

Mortality rates.

The valuations and assumptions reflect adoption of the Society of Actuaries updated RP-2014 mortality tables, with a “blue collar employee” adjustment for non-annuitants and a BlueLinx custom adjustment for annuitants.

Additionally, we use the most current generational projection scales, which were MP-2019 as of December 28, 2019, and MP-2018 as of December 29, 2018.

Additionally, we use the most current generational projection scales, which were MP-2020 as of January 2, 2021, and MP-2019 as of December 28, 2019.

Plan Assets and Long-Term Rate of Return

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Our net benefit cost increases as the expected return on plan assets decreases.

We believe that our actual long-term asset allocations on

average will approximate our targeted allocation.

We believe that our actual long-term asset allocations on average will approximate our targeted allocation.

Our targeted allocation is driven by our investment strategy to earn a reasonable rate of return while maintaining risk at acceptable levels through the diversification of investments across and within various asset categories.

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We employ a designated fiduciary to manage the day to day investment responsibilities for pension plan assets and relationships with certain agents, advisors, and other fiduciaries.

The current targets, adjusted to exclude non-GAAP BlueLinx real-estate holdings, and actual investment allocation, by asset category as of December 28, 2019, consisted of the following:

Current Target Allocation

Actual Allocation, December 29, 2019

The current targets, adjusted to exclude non-GAAP BlueLinx real-estate holdings, and actual investment allocation, by asset category as of January 2, 2021, consisted of the following:

Type Current Target Allocation Actual Allocation, January 2, 2021

Return-seeking securities 70 % 71 %

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Cash and cash equivalents 2 % 3 %

The following table sets forth by level, within the fair value hierarchy (as defined in Note 8), pension plan assets at their fair values as of December 28, 2019:

Quoted prices in active markets of identical assets

Significant other observable inputs

Significant other unobservable inputs

Total 100 % 100 %

The following table sets forth by level, within the fair value hierarchy (as defined in Note 7, Fair Value Measurements ), pension plan assets at their fair values as of January 2, 2021:

Type Quoted prices in active markets of identical assets

(Level 1) Significant other observable inputs

(Level 2) Significant other unobservable inputs

(Level 3) Total

(In thousands)

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Collective investment trust (1)

Liability-matching securities

Collective investment trusts (2)

$ — $ 64,870 $ — $ 64,870

Liabilities-matching securities:

Collective investment trust (2)

— 23,905 — 23,905

Cash and cash equivalents 2,371 — — 2,371

Total $ 2,371 $ 88,775 $ — $ 91,146

(1) This category is comprised of a collective investment trust of equity funds that track the MCSI World Index, and a collective investment trust that holds publicly traded listed infrastructure securities.

(2) This category is consists of a collective investment trust investing in Treasury STRIPS.

(2) This category consists of a collective investment trust investing in Treasury STRIPS.

The fair value of the Level 1 assets was based on quoted prices in active markets for the identical assets.

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• Achieving a target investment return

We believe that there are no significant concentrations of risk within our plan assets as of December 28, 2019.

We believe that there are no significant concentrations of risk within our plan assets as of January 2, 2021.

We comply with the rules and regulations promulgated under the Employee Retirement Income Security Act of 1974 (“ERISA”) and we prohibit investments and investment strategies not allowed by ERISA.

The following table sets forth by level, within the fair value hierarchy, pension plan assets at their fair values as of December 28, 2019:

Quoted prices in active markets of identical assets

Significant other observable inputs

Significant other unobservable inputs

Type Quoted prices in active markets of identical assets

(Level 1) Significant other observable inputs

(Level 2) Significant other unobservable inputs

(Level 3) Total

(In thousands)

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Collective investment trust (1)

Liability-matching securities

Collective investment trusts (2)

$ — $ 57,966 $ — $ 57,966

Liabilities-matching securities:

Collective investment trust (2)

— 24,801 — 24,801

Cash and cash equivalents 888 — — 888

$ 888 $ 82,767 $ — $ 83,655

(2) This category is consists of a collective investment trust investing in Treasury STRIPS.

(2) This category consists of a collective investment trust investing in Treasury STRIPS.

Pension Plan Cash Flows

Our estimated normal future benefit payments to pension plan participants are as follows:

Fiscal Year Ending

(In thousands)

We fund the pension plan liability in accordance with the limits imposed by ERISA, federal income tax laws, and the funding requirements of the Pension Protection Act of 2006.

We are required to make four quarterly cash contributions to the pension plan totaling approximately $ 2.0 million for fiscal funding year 2020.

Fiscal Year Ended (In thousands)

Thereafter 32,135

We fund the pension plan liability in accordance with the limits imposed by ERISA, federal income tax laws, and the funding requirements of the Pension Protection Act of 2006 (“Pension Act”).

We are required to make cash contributions to the pension plan totaling approximately $ 0.3 million for fiscal funding year 2021.

Multiemployer Pension Plans

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Our contributions to a particular MEPP are established by the applicable CBAs;

however, our required contributions may increase based on the funded status of an MEPP and legal requirements such as those of the Pension Protection Act of 2006 (“Pension Act”), which requires substantially underfunded MEPPs to implement a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) to improve their funded status.

however, our required contributions may increase based on the funded status of an MEPP and legal requirements such as those of the Pension Act, which requires substantially underfunded MEPPs to implement a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) to improve their funded status.

Factors that could impact funded status of an MEPP include, without limitation, investment performance, changes in the participant demographics, decline in the number of contributing employers, changes in actuarial assumptions, and the utilization of extended amortization provisions.

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an increase in our contribution rate to the applicable CBA, a reallocation of the contributions already being made by participating employers for various benefits to individuals participating in the MEPP, and/or a reduction in the benefits to be paid to future and/or current retirees.

We could also be obligated to make future payments to MEPPs if we either cease to have an obligation to contribute to the MEPP or significantly reduce our contributions to the MEPP because we reduce our number of employees who are covered by the relevant MEPP for various reasons, including, but not limited to, layoffs or closures, assuming the MEPP has unfunded

vested benefits.

The amount of such payments (known as a complete or partial withdrawal liability) generally would equal our proportionate share of the plan’s unfunded vested benefits.

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Pension Fund:

EIN/Pension Plan Number

Pension Act Zone Status

FIP/RP Status

Central States, Southeast and Southwest Areas Pension Fund (1)

Critical and Declining

(January 1, 2019)

(1) Our contributions to this plan are approximately 0.10 % of total contributions, which is less than the required disclosure threshold of 5 % of total plan contributions.

EIN/Pension Plan Number Pension Act Zone Status FIP/RP Status Surcharge 2020 2019

Central States, Southeast and Southwest Areas Pension Fund 366044243 Critical and Declining

(January 1, 2020) RP No $ 0.3 $ 0.3

Total $ 0.3 $ 0.3

Our contributions to this plan are approximately 0.10 percent of total contributions, which is less than the required disclosure threshold of 5 percent of total plan contributions.

However, this plan is deemed significant for disclosure as it is severely underfunded.

Additionally, we increased our estimated partial withdrawal liability related to the closure of certain facilities to $ 8.1 million in fiscal 2019, from $ 7.1 million in fiscal 2018.

We may, in the future, record an additional liability if required by an event of our withdrawal from the plan or a mass withdrawal.

Our most recent contingent withdrawal liability was estimated at approximately $ 51.1 million , for a complete withdrawal occurring in fiscal 2020.

In the case of a complete withdrawal or a mass withdrawal, our payments to the Central States Plan would include yearly payments of approximately $ 1.0 million , which do not include payments for the partial withdrawal of approximately $ 0.6 million annually.

In a complete withdrawal, the current payments would not amortize the liability fully;

Our current CBA that requires contributions to the plan expires on December 31, 2022.

In May 2020, we received a demand letter for payment resulting from our partial withdrawal in 2018 from the Central States Plan and started making payments in June 2020.

These payments are payable monthly for a period of 20 years.

Our liability for the remainder of these payments was $ 8.0 million as of January 2, 2021.

We may, in the future, record an additional liability if required by an event of our complete withdrawal from the plan or a mass withdrawal.

Our most recent contingent withdrawal liability was estimated at approximately $ 60.7 million, for a complete withdrawal occurring in 2021.

In the case of a complete withdrawal or a mass withdrawal, the Central States Plan could demand yearly payments of approximately $ 1.0 million, which do not include payments for the partial withdrawal of approximately $ 0.6 million annually.

In a complete withdrawal, the payments would not amortize the liability fully;

however, payments for a complete withdrawal are limited to a 20 -year period.

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Discretionary contributions to the plans are based on employee contributions and compensation, and, in certain cases, participants in the hourly savings plan also receive employer contributions based on union negotiated match amounts.

Employer contributions to the hourly savings plan for fiscal 2019 and fiscal 2018 were $ 0.7 million and $ 0.6 million , respectively.

Employer contributions to the hourly savings plan for both fiscal 2019 and 2020 were $ 0.7 million.

Employer contributions totaling $ 1.8 million for the salaried savings plan for fiscal 2020 have been deferred until the first quarter of 2021.

Employer contributions to the salaried savings plan for fiscal 2018 of $ 1.8 million were deferred and paid in the first quarter of fiscal 2019.

Employer contributions to the salaried savings plan for fiscal 2019 of $ 1.7 million were deferred and paid in the third quarter of fiscal 2020.

Share-Based Compensation

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The 2004 and 2006 Plans have no shares remaining for issuance.

Remaining 2004 Plan shares are outstanding only for the exercise of currently outstanding options and 2006 Plan shares are outstanding only for the vesting of outstanding equity awards and the exercise of currently outstanding options.

Remaining 2006 Plan shares are outstanding only for the vesting of outstanding equity awards.

The 2016 Plan permits the grant of nonqualified stock options, incentive stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance shares, performance units, cash-based awards, and other share-based awards to participants of the 2016 Plan selected by our Board of Directors or a committee of the Board that administers the 2016 Plan.

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The terms and conditions of awards under the 2016 Plan are determined by the Compensation Committee.

Some of the awards issued under both the 2006 and 2016 Plans

are subject to accelerated vesting in the event of a change in control as such an event is defined in the respective Plan documents.

Some of the awards issued under both the 2006 and 2016 Plans are subject to accelerated vesting in the event of a change in control as such an event is defined in the respective Plan documents.

For all awards designated as equity awards, we recognize compensation expense equal to the grant-date fair value for all share-based payment awards that are expected to vest, as described further below, in “Compensation Expense.” This expense is recorded on a straight-line basis over the requisite service period of the entire award, unless the awards are subject to market or performance conditions, in which case we recognize compensation expense over the requisite service period of each separate vesting tranche, to the extent the occurrence of such conditions are probable.

All compensation expense related to our share-based payment awards is recorded in “Selling, general, and administrative” expense in the Consolidated Statements of Operations and Comprehensive Loss.

Cash-Settled SARs

During fiscal 2016, we granted certain executives and employees cash-settled SARs.

The cash-settled SARs vested on July 16, 2018.

On the vesting date, half of the vested value of the cash-settled SARs became payable within thirty days of the vesting date, and the remainder payable no later than August 15, 2019.

The exercise price for the cash-settled SARs was amended so that it was based on a 20 -day trading average of the Company’s common stock through the vesting date, in excess of the $ 7.00 grant date valuation.

There was no remaining liability at the end of 2019.

During fiscal 2017, certain individuals were no longer employed with the Company, and their cash-settled SAR agreements allowed for a partial accelerated vesting (of 27,385 cash-settled SARs) and a partial forfeiture (of 20,615 cash-settled SARs), pro-rated based on employment dates.

At that time, half of the accelerated vested value of the cash-settled SARs, as valued at the closing stock price on the deemed exercise date, was paid to those participants, with the remaining half payable on July 16, 2019.

These payments, and the accrued liability for the remaining half payable in fiscal 2019, were immaterial.

At December 28, 2019 , there were no cash-settled SARs issued and outstanding, and we recognized expense of approximately $ 0.0 million and $ 13.2 million in fiscal 2019 and 2018 , respectively, related to these awards.

Restricted Stock Units

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Certain of the restricted stock units granted in fiscal 2019 and 2020 vest in equal annual increments over the three years after the date of grant.

The remaining restricted stock units granted in fiscal 2018 vest on the third anniversary of the date of grant if certain performance conditions are met prior to the vesting date, and the remaining restricted stock units granted in fiscal 2019 vest at the end of the Company’s second fiscal quarter in 2022 if certain performance conditions are met as of the vesting date.

As of December 28, 2019 , there was approximately $ 7.5 million of total unrecognized compensation expense related to restricted stock units.

Of the remaining restricted stock units granted in fiscal 2019 certain of the awards vest on the third anniversary of the date of grant if certain performance conditions are met prior to the vesting date, and the remaining restricted stock units granted in fiscal 2019 vest at the end of the Company’s second fiscal quarter in 2022 if certain performance conditions are met as of the vesting date.

As of January 2, 2021, there was approximately $ 6.2 million of total unrecognized compensation expense related to restricted stock units.

The unrecognized compensation expense is expected to be recognized over a weighted average term of 1.9 years.

As of December 28, 2019 , the weighted average remaining contractual term for our restricted stock units was 2.2 years , and the maximum contractual term was 3.0 years .

As of January 2, 2021, the weighted average remaining contractual term for our restricted stock units was 1.9 years, and the maximum contractual term was 3.0 years.

The following table summarizes activity for our restricted stock units during fiscal 2020:

Restricted Stock Units

Outstanding as of December 29, 2018

Awards Weighted

Outstanding as of December 28, 2019 492,167 $ 24.45

Granted 415,133 8.52

( 125,723 ) 8.15

Forfeited ( 56,094 ) 21.04

Outstanding as of January 2, 2021 725,483 $ 15.61

(1) The total fair value of restricted stock units vested in fiscal 2020 and 2019 was $ 1.0 million and $ 1.9 million, respectively.

For fiscal 2019, the weighted average grant date fair value of restricted stock units granted was $ 19.96 .

Compensation Expense

Total share-based compensation expense from our share-based awards was as follows:

December 28, 2019

December 29, 2018

January 2, 2021 December 28, 2019

(In thousands)

Restricted Stock and Restricted Stock Units

Performance Shares

Cash-settled Stock Appreciation Rights

Restricted Stock Units $ 5,992 $ 2,592

Total $ 5,992 $ 2,592

We do not estimate forfeitures, but adjust for them as they occur.

We recognized related income tax benefits in fiscal years 2020 and 2019 of $ 1.5 million and $ 0.7 million, respectively, which were fully realized in fiscal 2020 and 2019.

We present the benefits of tax deductions in excess of recognized compensation expense as a net operating cash outflow in our Consolidated Statements of Cash Flows when present.

There was no excess tax benefit in fiscal 2019 , and an excess tax benefit of $ 1.5 million in fiscal 2018.

Loss per Common Share

We calculate basic earnings per share by dividing net income by the weighted average number of common shares outstanding, excluding unvested restricted shares.

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

The following table shows the computation of basic and diluted loss per share:

We include the benefits of tax deductions in excess of recognized compensation expense as a net operating cash outflow in our Consolidated Statements of Cash Flows when present.

There were no excess tax benefits in fiscal 2020 or fiscal 2019.

Income (loss) per Common Share

We calculate basic income (loss) per share by dividing net income (loss) by the weighted average number of common shares outstanding, excluding unvested restricted stock units.

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.

The following table shows the computation of basic and diluted income (loss) per share:

Fiscal Year Ended

December 28, 2019 (1)

December 29, 2018 (1)

January 2, 2021 December 28, 2019 (1)

($ in thousands, except per share data)

Basic weighted average shares outstanding

Net income (loss) $ 80,882 $ ( 17,656 )

Weighted average shares outstanding - basic 9,422 9,355

Dilutive effect of share-based awards 41 —

Diluted weighted average shares outstanding

Basic loss per share

Diluted loss per share

(1) Basic and diluted loss per share are equivalent for fiscal 2019 and 2018 , due to net losses for the periods, and all outstanding share-based awards would be antidilutive.

For fiscal years 2019 and 2018 , we excluded 490,149 and 194,222 unvested (or unexercised, in the case of options) share-based awards, respectively, from the diluted earnings per share calculation because they were either anti-dilutive or “out of the money.” Outstanding share based awards not included in diluted loss per share consisted of the following securities:

Fiscal Year Ended

December 28, 2019

December 29, 2018

Performance shares

Restricted stock units

Total excluded from diluted earnings per share

Weighted average shares outstanding - diluted 9,463 9,355

Basic income (loss) per share $ 8.58 $ ( 1.89 )

Diluted income (loss) per share $ 8.55 $ ( 1.89 )

(1) Basic and diluted loss per share are equivalent for fiscal 2019 due to a net loss for the period, and all outstanding share-based awards would be anti-dilutive.

For fiscal years 2020 and 2019, we excluded 725,483 and 490,194 unvested share-based awards, respectively, from the diluted income per share calculation because they were either anti-dilutive or “out of the money.” Outstanding share based awards not included in diluted loss per share consisted of restricted stock units.

Related Party Transactions

Wayne Trousdale, the Company’s former Vice Chairman, Operating Companies, who served until April 2019, owns approximately 33.33 % of a limited liability company that owns and leases six facilities to us.

Wayne Trousdale, the Company’s former Vice Chairman, Operating Companies, who served until April 2019, and which we now have an active consulting agreement with, owns approximately 33.33 % of a limited liability company that owns and leases six facilities to us.

During fiscal 2019 and 2020, approximately $ 2.1 million and $ 1.9 million, respectively, in aggregate rent and related amounts was paid to the limited liability company for these properties.

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Lease Commitments

Effective December 30, 2018, we adopted ASU No.

2016-02, “Leases (Topic 842)” using the modified retrospective method, 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.

This election allowed us to carry forward our historical lease classification.

The adoption of this standard resulted in the recording of operating lease right-of-use (“ROU”) assets and corresponding operating lease liabilities of $ 57.5 million on the consolidated balance sheet as of December 30, 2018 (adoption date), the first day of fiscal 2019, which amortizes over the lease term.

We determine if an arrangement is a lease at inception and assess lease classification as either operating or finance at lease inception or upon modification.

Our operating and finance (formerly capital) lease portfolio includes leases for real estate, certain logistics equipment, and vehicles.

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

Operating lease ROU assets and corresponding liabilities are presented separately on the consolidated balance sheets.

Finance lease assets are included in property and equipment, and the finance lease obligations are presented separately in the consolidated balance sheet.

We have also made the accounting policy election to not separate lease components from non lease components related to leases of several trucks during the second and third quarters of 2019.

When a lease does not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

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

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 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.

Our leases generally provide for fixed annual rentals.

Certain of our leases include provisions for escalating rent based on, among other things, contractually defined increases and/or changes in the Consumer Price Index (“CPI”).

The known changes to lease payments are included in the lease liability at lease commencement.

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

Some of our leases require us to pay taxes, insurance, and maintenance expenses associated with the leased assets.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

We determine if an arrangement is a lease at inception and assess lease classification as either operating or finance at lease inception or modification.

Operating lease right-of use (“ROU”) assets and liabilities are presented separately on the consolidated balance sheets.

Finance lease ROU assets are included in property and equipment and the finance lease obligations are presented separately in the consolidated balance sheet.

We have also made the accounting policy election to not separate lease components from non-lease components related to our mobile fleet asset class.

Finance Lease Liabilities

Our finance lease liabilities consist of leases related to equipment and vehicles, and real estate.

As noted in the table below, a majority of our finance leases, formally known as capital leases, relate to real estate.

During 2017 and 2018, we entered into real estate financing transactions on warehouse facilities in Tampa, FL;

Bellingham, PA;

Frederick, MD;

Lawrenceville, GA;

and Raleigh, NC.

These transactions were completed pursuant to sale-leaseback arrangements, and upon their completion, we entered into long-term leases on the properties for initial terms of 15 years with multiple 5 -year renewal options, with one having a single 10 -year renewal option.

We accounted for these transactions in accordance with the FASB ASC Topic 840, which was the lease accounting standard in effect at the inception of these arrangements.

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

As of January 2, 2021, and December 28, 2019, total unrecognized deferred gains related to these transactions were $ 82.0 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.

On June 20, 2019, we completed a real estate financing transaction on a warehouse facility in Yulee, FL for net proceeds of $ 13.3 million.

These two transactions were completed pursuant to sale-leaseback arrangements, and upon their completion, we entered into long-term leases on the properties for initial terms of 15 years with multiple 5 -year renewal options.

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;

Kansas City, MO;

Richmond, VA;

and Bridgeton, MO for aggregate net proceeds of $ 27.2 million.

On January 31, 2020, we completed real estate financing transactions on warehouse facilities in Charlotte, NC;

Independence, KY;

San Antonio, TX;

Portland, ME;

Denville, NJ;

Pensacola, FL;

and Tallmadge, OH for aggregate net proceeds of $ 34.1 million.

On February 28, 2020, we completed a real estate financing transaction on a warehouse facility in Elkhart, IN for net proceeds of $ 7.5 million.

These transactions were completed pursuant to sale-leaseback arrangements, and upon their completion, we entered into long-term leases on the properties for initial terms from 15 years to 18 years with multiple 5 -year renewal options.

Gross proceeds of these transactions were $ 78.3 million.

We determined that the transactions in fiscal 2019 and in the first quarter of the fiscal 2020 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.

We determined that these leases qualified for finance lease treatment and recorded them accordingly.

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.

The following table presents our assets and liabilities related to our leases as of January 2, 2021 and December 28, 2019:

January 2, 2021 December 28, 2019

(In thousands)

Assets Classification

Operating lease right-of-use assets Operating lease right-of-use assets $ 51,142 $ 54,408

Finance lease right-of-use assets (1)

Property and equipment, net 148,561 141,922

Total lease right-of-use assets $ 199,703 $ 196,330

Current portion

Operating lease liabilities Operating lease liabilities - short term $ 6,076 $ 7,317

Finance lease liabilities Finance lease liabilities - short term 5,675 6,486

Non-current portion

Operating lease liabilities Operating lease liabilities - long term 44,965 47,091

Finance lease liabilities Finance lease liabilities - long term 267,443 191,525

Total lease liabilities $ 324,159 $ 252,419

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $ 58.6 million and $ 30.8 million as of January 2, 2021 and December 28, 2019, respectively.

The components of lease expense were as follows:

Fiscal Year Ended December 28, 2019

Fiscal Year Ended January 2, 2021 Fiscal Year Ended December 28, 2019

(In thousands)

Operating lease cost:

$ 12,634 $ 12,115

Finance lease cost:

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Total finance lease costs $ 38,002 $ 27,239

Supplemental cash flow information related to leases for fiscal 2019 was as follows:

Fiscal Year Ended December 28, 2019

Supplemental cash flow information related to leases was as follows:

Fiscal Year Ended January 2, 2021 Fiscal Year Ended December 28, 2019

(In thousands)

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Finance leases $ 3,833 $ 15,041

Supplemental balance sheet information for right-of-use assets related to leases for fiscal 2019 was as follows:

December 28, 2019

Supplemental balance sheet information for right-of-use assets related to leases was as follows:

January 2, 2021 December 28, 2019

(In thousands)

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Finance leases 9.87 % 10.11 %

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

December 28, 2019

The major categories of our finance lease liabilities as of January 2, 2021 and December 28, 2019 are as follows:

January 2, 2021 December 28, 2019

(In thousands)

Equipment and vehicles $ 29,434 $ 32,471

Real estate 243,684 165,540

Total finance leases $ 273,118 $ 198,011

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

Operating leases

Finance leases

As of January 2, 2021, maturities of lease liabilities were as follows:

Operating leases Finance leases

(In thousands)

2021 $ 11,215 $ 30,159

2022 9,161 29,453

2023 8,400 29,189

2024 7,283 28,649

2025 7,392 28,102

Thereafter 44,092 380,511

Total lease payments $ 87,543 $ 526,063

imputed interest ( 36,502 ) ( 252,945 )

Real Estate Transactions

During fiscal 2018, we completed sale-leaseback transactions on distribution centers located in Bellingham, Massachusetts;

Raleigh, North Carolina;

Frederick, Maryland;

and Lawrenceville, Georgia.

As a result of these transactions, we recognized a capital lease asset and obligation totaling $ 95.1 million .

We recorded deferred gains of $ 83.9 million on the sale-leaseback properties in fiscal 2018.

During fiscal 2019 , we completed real estate financing transactions on distribution centers located in Yulee, Florida;

and University Park, Illinois.

The aggregate gross proceeds for these real estate transactions were $ 45 million .

We determined that the transactions did not qualify as sales in accordance with ASC Topic 842 and, for accounting purposes, the transactions were not accounted for as sale-leaseback transactions.

When this occurs, the real estate transaction is accounted for as a financing transaction, whereby the cash received is recorded as a financing obligation in our consolidated balance sheets in other current liabilities and in noncurrent liabilities as real estate financing obligations.

The assets related to these transactions remain on our books and we continue to depreciate them.

At December 28, 2019 , our future minimum payments related to the financing obligations under these real estate financing transactions were as follows:

Total $ 51,041 $ 273,118

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

Operating leases Finance leases

(In thousands)

In the first quarter of 2020, we completed real estate financing transactions on fourteen of our distribution facilities for aggregate gross proceeds of $ 78.3 million .

The transactions are described in further detail in Note 16.

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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From time to time, we are involved in various proceedings incidental to our businesses, and we are subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which we operate.

Although the ultimate outcome of these proceedings cannot be determined with certainty, based on presently available information, management believes that adequate reserves have been established for probable losses with respect thereto.

Management further believes that the ultimate outcome of these matters could be material to operating results in any given quarter, but will not have a materially adverse effect on our long-term financial condition, our results of operations, or our cash flows.

Collective Bargaining Agreements (“CBAs”)

As of December 28, 2019 , we employed approximately 2,200 persons on a full-time basis.

Approximately 20 % of our employees were covered by CBAs negotiated between the company and various local unions.

Three of those CBAs covering approximately 30 employees are up for renewal in fiscal 2020, or are currently expired and under negotiations.

Accumulated Other Comprehensive Loss

Comprehensive income (loss) is a measure of income which includes both net loss and other comprehensive income (loss).

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

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

Management further believes that, while the ultimate outcome of these matters could be material to operating results in any given quarter, they will not have a materially adverse effect on our long-term financial condition, our results of operations, or our cash flows.

Collective Bargaining Agreements

As of January 2, 2021, we employed approximately 2,100 employees and less than one percent of our employees are employed on a part-time basis.

Approximately 22 percent of our employees were represented by various local labor unions with terms and conditions of employment governed by CBAs.

Six CBAs covering approximately six percent of our employees are up for renewal in fiscal 2021.

Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) is a measure of income which includes both net income (loss) and other comprehensive income (loss).

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

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

Other comprehensive income (loss) was $( 1.4 ) million and $ 2.6 million for fiscal 2020 and fiscal 2019, respectively.

The changes in accumulated balances for each component of other comprehensive loss for fiscal 2018 and 2019 were as follows:

The changes in accumulated balances for each component of other comprehensive income (loss) for fiscal 2019 and 2020 were as follows:

currency translation, net

Amortization of unrecognized pension gain (loss), net of tax

Other, net of tax

Impact of defined benefit pension, net of tax Other, net of tax Total

(In thousands)

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Other comprehensive income (loss), net of tax (1)

6 2,560 — 2,566

December 28, 2019, ending balance, net of tax $ 666 $ ( 35,441 ) $ 212 $ ( 34,563 )

Other comprehensive income (loss), net of tax (2)

December 28, 2019, ending balance, net of tax

(1) For fiscal 2018 , there was $ 0.8 million of unrecognized actuarial loss based on updated actuarial assumptions, net of taxes of $ 0.2 million .

There was no intraperiod income tax allocation since there was a loss in continuing operations along with a loss in other comprehensive income.

(2) For fiscal 2019 , there was $ 3.5 million of unrecognized actuarial gain based on updated actuarial assumptions, net of taxes of $ 0.9 million .

( 6 ) ( 1,414 ) ( 9 ) ( 1,429 )

January 2, 2021, ending balance, net of tax $ 660 $ ( 36,855 ) $ 203 $ ( 35,992 )

(1) For fiscal 2019, there was $ 3.5 million of impact related to our defined pension for related actuarial adjustments and amortization of unrecognized amounts from the prior year, net of taxes of $ 0.9 million.

There was a tax benefit of $ 0.7 million allocated to the loss from continuing operations and tax expense allocated to the income from other comprehensive income.

Subsequent Events

Real Estate Transactions

On December 31, 2019, we completed real estate financing transactions with respect to four warehouse facilities for aggregate net proceeds of approximately $ 27.2 million ;

on January 31, 2020, we completed real estate financing transactions with respect to nine warehouse facilities for aggregate net proceeds of $ 34.1 million ;

and on February 28, 2020, we completed a real estate financing transaction with respect to a warehouse facility for net proceeds of approximately $ 7.5 million .

The real estate financing transactions were completed through sale-leaseback arrangements.

All net proceeds from these transactions were used to repay indebtedness under the Term Loan Facility, and following these repayments, the principal balance of the Term Loan Facility was approximately $ 77.4 million .

Upon completion of these transactions, we entered into long-term leases on the properties for initial terms from fifteen to eighteen years with multiple five -year renewal options.

Amendments to the Term Loan Facility

On December 31, 2019, we amended our Term Loan Facility to extend the period for satisfying the designated outstanding principal balance level required to maintain the modified “Total Net Leverage Ratio” covenant levels for the 2019 fourth and subsequent quarters under the Term Loan Facility.

The principal balance level was satisfied on January 31, 2020, through repayments from the sale-leaseback transactions described in this Note under the heading “Real Estate Transactions” above.

Amendment to the Revolving Credit Facility

On January 31, 2020, we amended our Revolving Credit Facility to provide that (i) the “Seasonal Period” run from November 15, 2019, through July 15, 2020, for the calendar year 2019, and from December 15 of each calendar year through April 15 of each immediately succeeding calendar year for the calendar year 2020 and thereafter, and (ii) the measurement period in the definition of “Cash Dominion Event” will be five consecutive business days instead of three consecutive business days.

(2) For fiscal 2020, there was $ 1.7 million of impact related to our defined pension for related actuarial adjustments and amortization of unrecognized amounts from the prior year, net of taxes of $ 0.3 million.

There was a tax expense of $ 0.4 million allocated to the income from continuing operations and tax benefit allocated to the loss from other comprehensive income.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data