What changed in this filing

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Item 1. Financial Statements

2021-08-03 compared with 2021-05-04 · 173 added, 126 removed, 422 unchanged (41% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

COMPREHENSIVE INCOME

(In thousands, except per share data)

Three Months Ended

April 3, 2021 March 28, 2020

Three Months Ended Six Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Net sales $ 1,307,913 $ 698,776 $ 2,333,382 $ 1,360,846

1 unchanged sentence

Gross profit 251,172 100,820 431,564 194,029

Operating expenses:

Operating expenses (income):

Selling, general, and administrative 87,010 70,694 162,569 145,281

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Interest expense, net 9,143 11,535 25,377 25,915

Other income, net ( 314 ) ( 237 )

Income (loss) before provision for (benefit from) income taxes 83,606 ( 5,813 )

Other expense (income), net ( 314 ) 417 ( 628 ) 180

Income before provision for (benefit from) income taxes 148,366 10,133 231,972 4,320

Provision for (benefit from) income taxes 34,908 3,438 56,654 ( 1,588 )

Net income (loss) $ 61,860 $ ( 787 )

Basic income (loss) per share $ 6.53 $ ( 0.08 )

Diluted income (loss) per share $ 6.28 $ ( 0.08 )

Comprehensive income (loss):

Net income (loss) $ 61,860 $ ( 787 )

Other comprehensive income (loss):

Net income $ 113,458 $ 6,695 $ 175,318 $ 5,908

Basic income per share $ 11.88 $ 0.71 $ 18.44 $ 0.63

Diluted income per share $ 11.61 $ 0.71 $ 18.15 $ 0.63

Comprehensive income:

Net income $ 113,458 $ 6,695 $ 175,318 $ 5,908

Other comprehensive income:

Amortization of unrecognized pension gain, net of tax 246 114 485 310

1 unchanged sentence

Total other comprehensive income 252 133 502 313

Comprehensive income (loss) $ 62,110 $ ( 607 )

Comprehensive income $ 113,710 $ 6,828 $ 175,820 $ 6,221

See accompanying Notes.

2 unchanged sentences

(In thousands, except share data)

April 3, 2021 January 2, 2021

July 3, 2021 January 2, 2021

Current assets:

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

9,468,042 and 9,462,774 outstanding on April 3, 2021 and January 2, 2021, respectively

9,709,613 and 9,462,774 outstanding on July 3, 2021 and January 2, 2021, respectively

Additional paid-in capital 264,963 266,695

Accumulated other comprehensive loss ( 35,490 ) ( 35,992 )

Accumulated stockholders’ deficit ( 109,846 ) ( 171,706 )

Accumulated stockholders’ equity (deficit) 3,612 ( 171,706 )

Total stockholders’ equity 233,182 59,092

6 unchanged sentences

Paid-In Capital Accumulated

Comprehensive Loss Accumulated Deficit Stockholders’ Equity Total

Comprehensive Loss Accumulated Equity (Deficit) Stockholders’ Equity Total

Shares Amount

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

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

Net income — — — — 61,860 61,860

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Balance, April 3, 2021 9,468 95 268,006 ( 35,742 ) ( 109,846 ) 122,513

Net income — — — — 113,458 113,458

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

Impact of pension plan, net of tax — — — 246 — 246

Vesting of restricted stock units 355 2 — — — 2

Compensation related to share-based grants — — 1,992 — — 1,992

Repurchase of shares to satisfy employee tax withholdings ( 113 ) — ( 5,033 ) — — ( 5,033 )

Other — — ( 2 ) — — ( 2 )

Balance, July 3, 2021 9,710 $ 97 $ 264,963 $ ( 35,490 ) $ 3,612 $ 233,182

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

Common Stock Additional

2 unchanged sentences

Shares Amount

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

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

Net loss — — — — ( 787 ) ( 787 )

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

Net income — — — — 6,695 6,695

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

Impact of pension plan, net of tax — — — 114 — 114

Vesting of restricted stock units 122 1 — — — 1

Compensation related to share-based grants — — 854 — — 854

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

Other — — — 2 — 2

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

See accompanying Notes.

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(In thousands)

Three Months Ended

April 3, 2021 March 28, 2020

Six Months Ended

July 3, 2021 June 27, 2020

Cash flows from operating activities:

Net income (loss) $ 61,860 $ ( 787 )

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

Net income $ 175,318 $ 5,908

Adjustments to reconcile net income to cash provided by operations:

Provision for (benefit from) income taxes 56,654 ( 1,588 )

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Other assets and liabilities ( 61,135 ) 9,185

Net cash used in operating activities ( 24,608 ) ( 59,187 )

Net cash provided by operating activities 22,601 12,901

Cash flows from investing activities:

1 unchanged sentence

Property and equipment investments ( 2,900 ) ( 1,752 )

Net cash provided by (used in) investing activities 688 ( 1,201 )

Net cash used in investing activities ( 800 ) ( 1,650 )

Cash flows from financing activities:

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Principal payments on finance lease liabilities ( 4,671 ) ( 4,583 )

Net cash provided by financing activities 24,017 61,303

Net cash used in financing activities ( 21,704 ) ( 11,364 )

Net change in cash 97 ( 113 )

2 unchanged sentences

Supplemental Cash Flow Information

Net income tax refunds during the period $ — $ 352

Net income tax payment (refunds) during the period $ 52,615 $ ( 223 )

Interest paid during the period $ 18,744 $ 24,416

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

April 3, 2021

Basis of Presentation and Summary of Significant Accounting Policies

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

We derived the condensed consolidated balance sheet at April 3, 2021, from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2021 (the “Fiscal 2020 Form 10-K”), as filed with the Securities and Exchange Commission on March 3, 2021.

In the opinion of our management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of our statements of operations and comprehensive income (loss) for the three months ended April 3, 2021, and March 28, 2020, our balance sheets at April 3, 2021, and January 2, 2021, our statements of stockholders’ equity (deficit) for the three months ended April 3, 2021, and March 28, 2020, and our statements of cash flows for the three months ended April 3, 2021, and March 28, 2020.

We derived the condensed consolidated balance sheet at July 3, 2021, from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2021 (the “Fiscal 2020 Form 10-K”), as filed with the Securities and Exchange Commission on March 3, 2021.

In the opinion of our management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of our statements of operations and comprehensive income for the three- and six-months ended July 3, 2021, and June 27, 2020, our balance sheets at July 3, 2021, and January 2, 2021, our statements of stockholders’ equity (deficit) for the six months ended July 3, 2021, and June 27, 2020, and our statements of cash flows for the six months ended July 3, 2021, and June 27, 2020.

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

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In addition, certain prior period amounts have been reclassified to conform to the current period's presentation.

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

The results for the three months ended April 3, 2021, are not necessarily indicative of results that may be expected for the full year ending January 1, 2022, or any other interim period.

These reclassifications did not impact operating income or consolidated net income.

The results for the three- and six-months ended July 3, 2021 are not necessarily indicative of results that may be expected for the full year ending January 1, 2022, or any other interim period.

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

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Reclassification of Prior Period Presentation

We have reclassified certain costs within the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 28, 2020, 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.

We have reclassified certain costs within the Condensed Consolidated Statements of Operations and Comprehensive Income for the three- and six-months ended June 27, 2020, from selling, general and administrative to amortization of deferred gains on real estate.

These amounts relate to the amortization of deferred gains from real estate transactions in 2017 and 2018.

Refer to Note 9, Leases.

Additionally, we reclassified amounts in other comprehensive income from foreign currency translation, net of tax, to other, for the six-months ended July 3, 2021, and three- and six-months ended June 27, 2020.

We have reclassified certain payables within the Condensed Consolidated Balance Sheets for the year ended January 2, 2021, from other current liabilities to taxes payable.

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Recently Adopted Accounting Standards

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 adopted this standard for the first fiscal quarter of 2021.

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

Defined Benefit Pension Plan .

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

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 post-retirement plans by removing six previously required disclosures and adding two.

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 healthcare benefits.

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 healthcare benefits.

We adopted this standard effective for fiscal year 2020.

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Fair Value Measurement .

In August 2018, the FASB issued ASU No, 2018-13, “Fair Value (“FV”) Measurement (Topic 820).” In addition to making certain modifications, the standard removed the requirements to disclose:

In August 2018, the FASB issued ASU No.

2018-13, “Fair Value (“FV”) Measurement (Topic 820).” In addition to making certain modifications, the standard removed the requirements to disclose:

(i) the amount of and reasons for transfers between Level 1 and Level 2 of the FV hierarchy;

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and (iii) the valuation process for Level 3 FV measurements.

The standard will require public entities to disclose:

The standard requires public entities to disclose:

(a) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 FV measurements held at the end of the reporting period;

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For certain unobservable inputs, an entity may disclose other quantitative information in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 FV measurements.

The additional disclosure requirements should be applied prospectively for the most recent interim or annual period presented in the fiscal year of adoption.

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

The additional disclosure requirements are applied prospectively for the most recent interim or annual period presented in the fiscal year of adoption.

All other amendments are applied retrospectively to all periods presented.

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

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

Our inventories consist almost entirely of finished goods inventory, with an immaterial amount of work-in-process inventory.

The cost of all inventories is determined by the moving average cost method.

We have included all material charges directly 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 considered damaged, excess, and obsolete inventory.

For the three- and six-month periods ended July 3, 2021, we recorded a lower of cost or net realizable value reserve of $ 16.7 million resulting from the decrease in value of our structural lumber inventory related to the decline in wood-based commodity prices during the second quarter of 2021.

Goodwill and Other Intangible Assets

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

As of April 3, 2021, our intangible assets consist of goodwill and other intangible assets including customer relationships, noncompete agreements, and trade names.

As of July 3, 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.

As of April 3, 2021, goodwill was $ 47.8 million.

As of July 3, 2021, goodwill was $ 47.8 million.

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

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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 during the first quarter of fiscal 2021.

Our one reporting unit has a fair value that exceeds its carrying value as of April 3, 2021.

No such indicators were present during the second quarter of fiscal 2021.

Our one reporting unit has a fair value that exceeds its carrying value as of July 3, 2021.

Definite-Lived Intangible Assets

On April 3, 2021, the gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets were as follows:

Weighted Average Remaining Useful Lives Gross Carrying Amounts Accumulated

On July 3, 2021, the gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets were as follows:

Intangible Asset Weighted Average Remaining Useful Lives Gross Carrying Amounts Accumulated

Amortization (1)

Net Carrying Amounts

(In thousands)

(Years) (In thousands)

Customer relationships 9 $ 25,500 $ ( 11,297 ) $ 14,203

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Customer relationships are amortized on a double declining balance method.

During the second quarter of 2021, our trade names intangible asset became fully amortized.

Amortization Expense

Amortization expense for the definite-lived intangible assets was $ 1.8 million and $ 2.0 million for the three-month periods ended April 3, 2021, and March 28, 2020, respectively.

Amortization expense for our definite-lived intangible assets was $ 1.2 million and $ 3.1 million for the three- and six-month periods ended July 3, 2021, respectively.

For the three- and six-month periods ended June 27, 2020, amortization expense was $ 1.8 million and $ 3.8 million, respectively.

Estimated amortization expense for definite-lived intangible assets for the remaining portion of 2021 and the next five fiscal years is as follows:

Estimated Amortization

Fiscal year Estimated Amortization

(In thousands)

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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 insignificant for each of the reported periods.

Certain customers may receive cash-based incentives or credits, which are accounted for as variable consideration.

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Sales and usage-based taxes are excluded from revenues.

Three Months Ended

April 3, 2021 March 28, 2020

(In thousands)

Three Months Ended Six Months Ended

Product type July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

(In thousands) (In thousands)

Structural products $ 632,724 $ 249,542 $ 1,095,571 $ 490,310

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Sales and usage-based taxes are excluded from revenues.

Three Months Ended

April 3, 2021 March 28, 2020

(In thousands)

Three Months Ended Six Months Ended

Sales channel July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

(In thousands) (In thousands)

Warehouse and reload $ 1,062,149 $ 601,279 $ 1,911,569 $ 1,163,472

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Assets Held for Sale

During the quarter ended April 3, 2021, we sold the non-operating facility located in Birmingham, Alabama, previously identified as “held for sale.” We recognized a gain of $ 1.3 million in the Condensed Consolidated Statement of Operations as a result of this sale.

As of April 3, 2021, and January 2, 2021, the net book value of total assets held for sale was $ 0.9 million and $ 1.3 million, respectively, and was included in “Other current assets” in our Condensed Consolidated Balance Sheets.

Only one of our non-operating properties was designated as “held for sale” as of April 3, 2021.

As of July 3, 2021, and January 2, 2021, the net book value of total assets held for sale was $ 0.9 million and $ 1.3 million, respectively, and was included in “Other current assets” in our Condensed Consolidated Balance Sheets.

Only one of our non-operating properties was designated as “held for sale” as of July 3, 2021.

This property is a former distribution facility located in Houston, Texas.

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Long-Term Debt

As of April 3, 2021, and January 2, 2021, long-term debt consisted of the following:

April 3, 2021 January 2, 2021

As of July 3, 2021, and January 2, 2021, long-term debt consisted of the following:

Debt categories July 3, 2021 January 2, 2021

(In thousands)

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Long-term debt, net of current maturities $ 591,043 $ 588,713

(1) The average effective interest rate was 2.4 percent and 2.8 percent for the quarters ended April 3, 2021 and January 2, 2021, respectively.

(2) The average interest rate, exclusive of fees and prepayment premiums, was 8.0 percent for the quarters ended April 3, 2021, and January 2, 2021.

(1) The average effective interest rate was 2.5 percent and 2.8 percent for the quarters ended July 3, 2021 and January 2, 2021, respectively.

(2) The average interest rate, exclusive of fees and prepayment premiums, was 8.0 percent for the quarter ended January 2, 2021.

(3) Refer to Note 9, Leases , for interest rates associated with finance lease obligations.

Revolving Credit Facility

We have a revolving credit facility that we entered into in April 2018 with Wells Fargo Bank, National Association, as administrative agent, and certain other financial institutions party thereto (the “Revolving Credit Facility”), with a maturity date of October 10, 2022.

We have a revolving credit facility that we entered into in April 2018 with Wells Fargo Bank, National Association, as administrative agent (“the Agent”), and certain other financial institutions party thereto (the “Revolving Credit Facility”), with a maturity date of October 10, 2022.

The Revolving Credit facility includes a committed senior secured asset-based revolving loan and letter of credit facility of up to $ 600 million, and an uncommitted accordion feature that permits us to increase the facility by an aggregate additional principal amount of up to $ 150 million.

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Loans under the Revolving Credit Facility bear interest 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 our 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 our excess availability for the immediately preceding fiscal quarter as calculated by the administrative agent, for loans based on the base rate.

As of April 3, 2021, we had outstanding borrowings of $ 358.5 million and excess availability of $ 238.1 million under our Revolving Credit Facility.

As of July 3, 2021, we had outstanding borrowings of $ 320.4 million and excess availability of $ 276.2 million under our Revolving Credit Facility.

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.

Our average effective interest rate under the facility was 2.4 percent and 2.8 percent for the quarters ended April 3, 2021 and January 2, 2021, respectively.

For the quarter ended March 28, 2020, our average effective interest rate under the Revolving Credit Facility was 4.2 percent.

Our average effective interest rate under the facility was 2.5 percent and 2.8 percent for the quarters ended July 3, 2021 and January 2, 2021, respectively.

For the quarter ended June 27, 2020, our average effective interest rate under the Revolving Credit Facility was 3.1 percent.

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

We were in compliance with all covenants under the Revolving Credit Facility as of April 3, 2021.

We were in compliance with all covenants under the Revolving Credit Facility as of July 3, 2021.

On August 2, 2021, we entered into a Second Amendment (“the Amendment”) to the Revolving Credit Facility.

The Amendment amends the Revolving Credit Facility to, among other things, (i) extend the maturity date of the facility from October 10, 2022, to August 2, 2026, (ii) reduce the interest rate on borrowings under the facility, (iii) amend the borrowing base to include a certain portion of the assets of acquired companies prior to the conduct of a field exam or appraisals thereof by

Wells Fargo, (iv) modify certain definitions and various affirmative and negative covenants to provide additional flexibility for the Company, and (v) add customary LIBOR replacement language.

For more information on the Amendment, refer to Note 14, Subsequent Event .

Term Loan Facility

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As of January 2, 2021, we had outstanding borrowings of $ 43.2 million under the Term Loan Facility.

On April 2, 2021, we repaid the remaining outstanding principal balance of the Term Loan Facility, and, as a result, as of April 3, 2021, we had no outstanding borrowings under the Term Loan Facility, which has been extinguished.

In connection with our repayment of the outstanding principal balance in full on April 2, 2021, we expensed $ 5.8 million of debt issuance costs that we had been amortizing in connection with our former Term Loan Facility.

These costs are included within interest expense, net, on the

Condensed Consolidated Statements of Operations and reported separately as an adjustment to net income in our Condensed Consolidated Statements of Cash Flows.

Our average interest rate under the facility, exclusive of fees and prepayment premiums, was approximately 8.0 percent for the quarters ended April 3, 2021 and January 2, 2021.

For the quarter ended March 28, 2020, our average interest rate under the Term Loan Facility, exclusive of fees and prepayment premiums, was approximately 8.7 percent.

On April 2, 2021, we repaid the remaining outstanding principal balance of the Term Loan Facility, and, as a result, as of July 3, 2021, we had no outstanding borrowings under the Term Loan Facility, which has been extinguished.

In connection with our repayment of the outstanding principal balance in full on April 2, 2021, we expensed $ 5.8 million of debt issuance costs during the first quarter of 2021 that we had been amortizing in connection with our former Term Loan Facility.

These costs are included within interest expense, net, on the Condensed Consolidated Statements of Operations and reported separately as an adjustment to net income in our Condensed Consolidated Statements of Cash Flows.

Our average interest rate under the facility, exclusive of fees and prepayment premiums, was approximately 8.0 percent for the quarter ended January 2, 2021.

Finance Lease Obligations

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

Three Months Ended

April 3, 2021 March 28, 2020

(In thousands)

Three Months Ended Six Months Ended

Pension-related items July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

(In thousands) (In thousands)

Service cost (1)

$ — $ — $ — $ —

Interest cost on projected benefit obligation 505 723 1,010 1,446

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(1) Service cost is not a part of our net periodic pension benefit as our pension plan is frozen for all participants.

The net periodic pension benefit is included in other expense (income), net, in our Condensed Consolidated Statement of Operations and Comprehensive Income.

Stock Compensation

During the three months ended April 3, 2021, and March 28, 2020, we incurred stock compensation expense of $ 1.4 million and $ 1.0 million, respectively.

The increase in our stock compensation expense for the three-month period is attributable to having more outstanding equity-based awards during this period than in the prior year.

During the three- and six-month periods ended July 3, 2021, we incurred stock compensation expense of $ 2.0 million and $ 3.4 million, respectively.

For the three- and six-month periods ended June 27, 2020, we incurred stock compensation expense of $ 0.9 million and $ 1.9 million.

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

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

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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”).

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

As of April 3, 2021, and January 2, 2021, total unrecognized deferred gains related to these transactions were $ 81.1 million and $ 82.0 million, respectively.

As of July 3, 2021, and January 2, 2021, total unrecognized deferred gains related to these transactions were $ 80.1 million and $ 82.0 million, respectively.

During 2019, we entered into real estate financing transactions on two warehouse facilities.

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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.

During the first quarter of 2021, we recorded finance leases of $ 10.2 million related to new tractors put into service as part of our mobile fleet.

During the first and second quarters of 2021, we recorded finance leases of $ 10.2 million and $ 0.3 million, respectively, related to new tractors put into service as part of our mobile fleet.

These leases were entered into for a period of four years each.

The following table presents our assets and liabilities related to our leases as of April 3, 2021 and January 2, 2021:

April 3, 2021 January 2, 2021

Additionally, during the second quarter of 2021, we recorded operating leases totaling $ 5.0 million related to warehouse facilities in Milwaukee, WI, and Statesville, NC.

Each lease was entered into for an initial period of ten years , and has two five-year renewal options.

The following table presents our assets and liabilities related to our leases as of July 3, 2021 and January 2, 2021:

Lease assets and liabilities July 3, 2021 January 2, 2021

(In thousands)

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Total lease liabilities $ 329,029 $ 324,159

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $ 62.5 million and $ 58.6 million as of April 3, 2021 and January 2, 2021, respectively.

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $ 66.8 million and $ 58.6 million as of July 3, 2021 and January 2, 2021, respectively.

The components of lease expense were as follows:

Three Months Ended

April 3, 2021 March 28, 2020

(In thousands)

Three Months Ended Six Months Ended

Components of lease expense July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

(In thousands) (In thousands)

Operating lease cost:

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Supplemental cash flow information related to leases was as follows:

Three Months Ended

April 3, 2021 March 28, 2020

(In thousands)

Three Months Ended Six Months Ended

Cash flow information July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

(In thousands) (In thousands)

Cash paid for amounts included in the measurement of lease liabilities

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Supplemental balance sheet information related to leases was as follows:

April 3, 2021 January 2, 2021

Balance sheet information July 3, 2021 January 2, 2021

(In thousands)

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Finance leases 9.83 % 9.87 %

The major categories of our finance lease liabilities as of April 3, 2021 and January 2, 2021 are as follows:

April 3, 2021 January 2, 2021

The major categories of our finance lease liabilities as of July 3, 2021 and January 2, 2021 are as follows:

Category July 3, 2021 January 2, 2021

(In thousands)

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Total finance leases $ 279,196 $ 273,118

As of April 3, 2021, maturities of lease liabilities were as follows:

Operating leases Finance leases

As of July 3, 2021, maturities of lease liabilities were as follows:

Fiscal year Operating leases Finance leases

(In thousands)

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

Operating leases Finance leases

Fiscal year Operating leases Finance leases

(In thousands)

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Collective Bargaining Agreements

As of April 3, 2021, we employed approximately 2,100 employees and less than 1 percent of our employees are employed on a part-time basis.

Approximately 23 percent of our employees were represented by various local labor union Collective Bargaining Agreements (“CBAs”).

Five CBAs covering approximately five percent of our employees are up for renewal in fiscal 2021, with one having been successfully renegotiated earlier this year.

As of July 3, 2021, we employed approximately 2,100 employees and less than 1 percent of our employees are employed on a part-time basis.

Approximately 23 percent of our employees were represented by various local labor unions with terms and conditions of employment subject to Collective Bargaining Agreements (“CBAs”) negotiated between the Company and local labor unions.

Six CBAs covering approximately six percent of our employees are up for renewal in fiscal 2021, with two having been successfully renegotiated earlier this year.

We expect to renegotiate the remaining CBAs by the end of the year.

Accumulated Other Comprehensive Loss

Comprehensive income (loss) includes both net income (loss) and other comprehensive income (loss).

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

Comprehensive income includes both net income and other comprehensive income.

Other comprehensive income results from items deferred from recognition into our Condensed Consolidated Statements of Operations and Comprehensive Income.

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

The changes in balances for each component of accumulated other comprehensive loss for the three months ended April 3, 2021, were as follows:

The changes in balances for each component of accumulated other comprehensive loss for the six months ended July 3, 2021, were as follows:

Foreign currency, net

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

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

( 6 ) 239 17 250

April 3, 2021, ending balance, net of tax $ 654 $ ( 36,616 ) $ 220 $ ( 35,742 )

(1) For the three months ended April 3, 2021, the actuarial gain recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as a component of net periodic pension benefit was $ 0.3 million, net of tax of $ 0.1 million.

Other comprehensive income, net of tax (1)

July 3, 2021, ending balance, net of tax $ 660 $ ( 36,370 ) $ 220 $ ( 35,490 )

(1) For the six months ended July 3, 2021, the actuarial gain recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income as a component of net periodic pension benefit was $ 0.7 million, net of tax of $ 0.2 million.

Please see Note 7, Net Periodic Pension Benefit , for further information.

Effective Tax Rate

Our effective tax rate for the three months ended April 3, 2021, and March 28, 2020, was 26.0 percent and 86.5 percent, respectively.

Our effective tax rate for the three months ended April 3, 2021 was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, slightly offset by the partial release of the valuation allowance for state net operating loss carryforwards we anticipate being able to utilize based on our taxable income through the end of the first quarter of fiscal 2021, combined with a benefit from the vesting of restricted stock units, which occurred during the period.

Our effective tax rate for the three months ended March 28, 2020 was primarily impacted by a discrete tax benefit of $ 3.9 million resulting from the release of the valuation allowance associated with nondeductible interest expense under Section 163(j) of the Internal Revenue Code (“IRC”) as a result of changes allowed under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that was enacted on March 27, 2020 which raised the allowable percentage of deductible interest from 30 percent to 50 percent of adjusted taxable income.

Our effective tax rate for the three months ended March 28, 2020, was further impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, and the effect of the partial valuation allowance for separate company state income tax losses.

Our effective tax rate for the three months ended July 3, 2021, and June 27, 2020, was 23.5 percent and 33.9 percent, respectively.

Our effective tax rate for the six months ended July 3, 2021, and June 27, 2020, was 24.4 percent and ( 36.8 ) percent, respectively.

Our effective tax rate for the three- and six-months ended July 3, 2021 was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, slightly offset by the partial release of the valuation allowance for state net operating loss carryforwards we anticipate being able to utilize based on our taxable income through the end of the second quarter of fiscal 2021, combined with a benefit from the vesting of restricted stock units, which occurred during the period.

Our effective tax rate for the three- and six-months ended June 27, 2020 was primarily impacted by a discrete tax benefit of $ 3.9 million resulting from the release of the valuation allowance associated with nondeductible interest expense under Section 163(j) of the Internal Revenue Code (“IRC”) as a result of changes allowed under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that was enacted on March 27, 2020 which raised the allowable percentage of deductible interest from 30 percent to 50 percent of adjusted taxable income.

Our effective tax rate for the same periods was further impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, and the effect of the partial valuation allowance for separate company state income tax losses, combined with expense related to the vesting of restricted stock units.

Deferred Tax Assets

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In addition to the positive evidence discussed above, we considered as positive evidence forecasted 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.

As of April 3, 2021, in our evaluation of the weight of available evidence, we concluded that our deferred tax assets were not impaired.

Income (Loss) per Share

We calculate basic income (loss) per share by dividing net income (loss) by the weighted average number of common shares outstanding.

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 .

Due to the financial results for the three-month period ended March 28, 2020, 0.1 million of incremental shares were excluded from the computation of diluted weighted averages outstanding, because their effect would be anti-dilutive.

The reconciliation of basic net income (loss) and diluted net income (loss) per common share for the three-month periods ended April 3, 2021, and March 28, 2020, were as follows:

Three Months Ended

April 3, 2021 March 28, 2020

(In thousands, except per share data)

Net income (loss) $ 61,860 $ ( 787 )

As of July 3, 2021, in our evaluation of the weight of available evidence, we concluded that our net deferred tax assets were not impaired.

Income per Share

We calculate basic income per share by dividing net income by the weighted average number of common shares outstanding.

We calculate diluted income 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 units .

The reconciliation of basic net income and diluted net income per common share for the three- and six-month periods ended July 3, 2021, and June 27, 2020, were as follows:

Three Months Ended Six Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

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

Net income $ 113,458 $ 6,695 $ 175,318 $ 5,908

Weighted average shares outstanding - basic 9,549 9,395 9,507 9,381

Dilutive effect of share-based awards 226 7 150 2

Weighted-average shares outstanding - diluted 9,858 9,366

Basic income (loss) per share $ 6.53 $ ( 0.08 )

Diluted income (loss) per share $ 6.28 $ ( 0.08 )

Weighted average share outstanding - diluted 9,775 9,402 9,657 9,383

Basic income per share $ 11.88 $ 0.71 $ 18.44 $ 0.63

Diluted income per share $ 11.61 $ 0.71 $ 18.15 $ 0.63

Subsequent Event

On August 2, 2021, we amended the Revolving Credit Facility by entering into a Second Amendment (the “Amendment”) to the Amended and Restated Credit Agreement among the Company, certain of the Company’s subsidiaries, as borrowers (together with the Company, the “Borrowers”) or guarantors thereunder, Wells Fargo Bank, National Association, in its capacity as administrative agent (“Agent”), and certain other financial institutions party thereto (as amended, supplemented or modified from time to time, the “Credit Agreement”).

The Amendment amends the Credit Agreement to, among other things, (i) extend the maturity date of the Revolving Credit Facility from October 10, 2022, to August 2, 2026, (ii) amend the Borrowing Base (as such term is defined in the Credit Agreement) to include a certain portion of the assets of acquired companies prior to the conduct of a field exam or appraisals thereof by the Agent, (iii) modify certain definitions and various affirmative and negative covenants in the Credit Agreement to provide additional flexibility for the Company, and (iv) add customary LIBOR replacement language.

In addition, as amended, the Credit Agreement provides for interest on borrowings under the Revolving Credit Facility at a rate per annum equal to (i) LIBOR plus a margin ranging from 1.25 percent to 1.75 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 Agent, for loans based on LIBOR, or (ii) the base rate plus a margin ranging from 0.25 percent to 0.75 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 Agent, for loans based on the base rate, reflecting a decrease of 0.50 percent to the upper limit of each respective margin tier.

All other material terms of the Credit Agreement, as amended, remain unchanged.

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

What changed 10-Q

Item 1. Financial Statements