What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-02 compared with 2021-08-03 · 118 added, 131 removed, 464 unchanged (35% of the section changed)

4 unchanged sentences

(In thousands, except per share data)

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Net sales $ 970,842 $ 871,063 $ 3,304,224 $ 2,231,909

11 unchanged sentences

Interest expense, net 8,313 10,776 33,690 36,691

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 )

Other income, net ( 704 ) ( 238 ) ( 1,335 ) ( 58 )

Income before provision for income taxes 63,430 70,918 295,402 75,238

Provision for income taxes 16,232 15,802 72,886 14,214

Net income $ 47,198 $ 55,116 $ 222,516 $ 61,024

12 unchanged sentences

(In thousands, except share data)

July 3, 2021 January 2, 2021

October 2, 2021 January 2, 2021

Current assets:

37 unchanged sentences

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

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

9,723,838 and 9,462,774 outstanding on October 2, 2021 and January 2, 2021, respectively

Additional paid-in capital 266,564 266,695

28 unchanged sentences

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

Net income — $ — $ — $ — $ 47,198 $ 47,198

Foreign currency translation, net of tax — — — 7 — 7

Impact of pension plan, net of tax — — — 238 — 238

Vesting of restricted stock units 14 — — — — —

Compensation related to share-based grants — — 1,608 — — 1,608

Repurchase of shares to satisfy employee tax withholdings — — ( 3 ) — — ( 3 )

Other — — ( 4 ) — — ( 4 )

Balance, October 2, 2021 9,724 $ 97 $ 266,564 $ ( 35,245 ) $ 50,810 $ 282,226

See accompanying Notes.

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

Net income — — — — 55,116 55,116

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

Impact of pension plan, net of tax — — — 294 — 294

Vesting of restricted stock units 1 — — — — —

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

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

Other — — — 7 — 7

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

See accompanying Notes.

2 unchanged sentences

(In thousands)

Six Months Ended

July 3, 2021 June 27, 2020

Nine Months Ended

October 2, 2021 September 26, 2020

Cash flows from operating activities:

1 unchanged sentence

Adjustments to reconcile net income to cash provided by operations:

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

Provision for income taxes 72,886 14,214

Depreciation and amortization 21,429 21,785

8 unchanged sentences

Accounts payable 45,223 46,600

Prepaid and other current assets ( 4,509 ) ( 3,200 )

Other current assets ( 7,083 ) ( 1,380 )

Pension contributions ( 325 ) ( 142 )

Other assets and liabilities ( 90,249 ) 14,588

3 unchanged sentences

Property and equipment investments ( 5,424 ) ( 1,943 )

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

Net cash provided by (used in) investing activities ( 2,772 ) 8,799

Cash flows from financing activities:

11 unchanged sentences

Supplemental Cash Flow Information

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

Net income tax payment during the period $ 82,596 $ 610

Interest paid during the period $ 26,382 $ 33,716

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

October 2, 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 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 derived the condensed consolidated balance sheet at October 2, 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 nine months ended October 2, 2021, and September 26, 2020, our balance sheets at October 2, 2021, and January 2, 2021, our statements of stockholders’ equity (deficit) for the nine months ended October 2, 2021, and September 26, 2020, and our statements of cash flows for the nine months ended October 2, 2021, and September 26, 2020.

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

Therefore, these condensed consolidated interim financial statements should be read in conjunction with the Fiscal 2020 Form 10-K.

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.

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.

The results for the three and nine months ended October 2, 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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As a result, our accounting estimates and assumptions may change over time in response to the continuing COVID-19 pandemic.

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.

Reclassification of Prior Period Presentation

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.

We have reclassified certain costs within the Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 26, 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.

Additionally, we reclassified amounts in other comprehensive income from foreign currency translation, net of tax, to other, for the nine months ended October 2, 2021, and three and nine months ended September 26, 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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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.

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.

Early adoption is

We adopted this standard for the first fiscal quarter of 2021.

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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.

For the three month periods ended October 2, 2021, we released 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, accrued during the second quarter of fiscal 2021, as the inventory impacted by the reserve was sold to customers.

The lower of cost of net realizable value reserve of $ 16.7 million had no net impact on the nine month period ended October 2, 2021.

Goodwill and Other Intangible Assets

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

As of July 3, 2021, 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 on April 13, 2018, we acquired certain intangible assets.

As of October 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.

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

As of October 2, 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 second quarter of fiscal 2021.

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

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

Our one reporting unit has a fair value that exceeds its carrying value as of October 2, 2021.

Definite-Lived Intangible Assets

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

On October 2, 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

5 unchanged sentences

Trade names 0

6,826 ( 6,826 ) —

Total $ 40,580 $ ( 25,881 ) $ 14,699

1 unchanged sentence

Customer relationships are amortized on a double declining balance method.

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

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

Amortization Expense

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.

Amortization expense for our definite-lived intangible assets was $ 1.1 million and $ 4.2 million for the three and nine month periods ended October 2, 2021, respectively.

For the three and nine month periods ended September 26, 2020, amortization expense was $ 1.8 million and $ 5.6 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:

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Sales and usage-based taxes are excluded from revenues.

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

Product type October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

(In thousands) (In thousands)

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Warehouse sales are delivered from our warehouses.

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

Reload sales are similar to warehouse sales but are shipped from warehouses, most of which are operated by third-parties, where we store owned products to enhance our 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 facilities.

1 unchanged sentence

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

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

Sales and usage-based taxes are excluded from revenues.

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

Sales channel October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

(In thousands) (In thousands)

4 unchanged sentences

Assets Held for Sale

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.

As of October 2, 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 October 2, 2021.

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

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Long-Term Debt

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

Debt categories July 3, 2021 January 2, 2021

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

Debt categories October 2, 2021 January 2, 2021

(In thousands)

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Long-term debt, net of current maturities $ 490,855 $ 588,713

(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.

(1) The average effective interest rate was 2.0 percent and 2.8 percent for the quarters ended October 2, 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.

1 unchanged sentence

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 (“the Agent”), and certain other financial institutions party thereto (the “Revolving Credit Facility”), with a maturity date of October 10, 2022.

On August 2, 2021, we entered into a second amendment to the facility to, among other things, extend the maturity date of the facility to August 2, 2026, and reduce the interest rate on borrowings under the facility (as amended, the “Revolving Credit Facility”) .

The Revolving Credit Facility includes a committed senior secured asset-based revolving loan and letter of credit facility of up to $ 600.0 million, and an uncommitted accordion feature that permits us to increase the facility by an aggregate additional principal amount of up to $ 150.0 million.

1 unchanged sentence

Loans under the Revolving Credit Facility bear interest 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 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 0.25 percent to 0.75 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 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 October 2, 2021, we had outstanding borrowings of $ 223.1 million and excess availability of $ 351.9 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 2.5 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.

Our average effective interest rate under the facility was 2.0 percent and 2.8 percent for the quarters ended October 2, 2021 and January 2, 2021, respectively.

For the quarter ended September 26, 2020, our average effective interest rate under the Revolving Credit Facility was 2.7 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 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 .

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

On October 25, 2021, we closed a private offering of $ 300.0 million at 6.0 % senior secured notes to persons reasonably believed to be “qualified institutional buyers,” as defined in Rule 144A under the Securities Act of 1933, as amended (“The Securities Act”), and to non-U.S.

persons outside the United States under Regulation S under the Securities Act.

The 2029 Notes were issued to investors at 98.625 % of their principal amount and will mature on November 15, 2029.

The majority of

net proceeds from the offering of the senior secured notes were used to repay borrowings under our Revolving Credit Facility.

In conjunction with this offering, we reduced the limit of the Revolving Credit Facility from $ 600.0 million to $ 350.0 million.

Term Loan Facility

We previously had a term loan facility that we entered into in April 2018 with HPS Investments Partners, LLC, as administrative and collateral agent, and certain other financial institutions party thereto (the “Term Loan Facility”), with a maturity date of October 13, 2023.

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

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 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.

As of January 2, 2021, we had outstanding borrowings of $ 43.2 million under our 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 October 2, 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 fiscal 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.

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

Pension-related items October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

(In thousands) (In thousands)

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Stock Compensation

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.

During the three and nine month periods ended October 2, 2021, we incurred stock compensation expense of $ 1.6 million and $ 5.0 million, respectively.

For the three and nine month periods ended September 26, 2020, we incurred stock compensation expense of $ 1.1 million and $ 2.9 million.

The increase in our stock compensation expense for the three and nine month periods ended 2021 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.

In addition, the stock price has increased during fiscal year 2021 compared to 2020.

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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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’s Accounting Standards Codification (“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 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.

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 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 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.

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.

During the first and second quarters of fiscal 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.

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.

Additionally, during the second quarter of fiscal 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

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

Lease assets and liabilities October 2, 2021 January 2, 2021

(In thousands)

11 unchanged sentences

Total lease liabilities $ 328,213 $ 324,159

(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.

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $ 70.8 million and $ 58.6 million as of October 2, 2021 and January 2, 2021, respectively.

The components of lease expense were as follows:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

Components of lease expense October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

(In thousands) (In thousands)

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Supplemental cash flow information related to leases was as follows:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

Cash flow information October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

(In thousands) (In thousands)

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Supplemental balance sheet information related to leases was as follows:

Balance sheet information July 3, 2021 January 2, 2021

Balance sheet information October 2, 2021 January 2, 2021

(In thousands)

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Finance leases 9.94 % 9.87 %

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

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

Category October 2, 2021 January 2, 2021

(In thousands)

2 unchanged sentences

Total finance leases $ 276,920 $ 273,118

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

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

Fiscal year Operating leases Finance leases

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Collective Bargaining Agreements

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.

As of October 2, 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.

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

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

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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 six months ended July 3, 2021, were as follows:

The changes in balances for each component of accumulated other comprehensive loss for the nine months ended October 2, 2021, were as follows:

Foreign currency, net

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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.

October 2, 2021, ending balance, net of tax $ 667 $ ( 36,132 ) $ 220 $ ( 35,245 )

(1) For the nine months ended October 2, 2021, the actuarial gain recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income as a component of net periodic pension benefit was $ 0.9 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 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 three months ended October 2, 2021, and September 26, 2020, was 25.6 percent and 22.3 percent, respectively.

Our effective tax rate for the nine months ended October 2, 2021, and September 26, 2020, was 24.7 percent and 18.9 percent, respectively.

Our effective tax rate for the three and nine months ended October 2, 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 third quarter of fiscal 2021.

Our effective tax rate for the three and nine months ended September 26, 2020 was primarily impacted by a discrete tax benefit 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.

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

As of October 2, 2021, in our evaluation of the weight of available evidence, we concluded that our net deferred tax assets were not impaired.

Income per Share

1 unchanged sentence

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

The reconciliation of basic net income and diluted net income per common share for the three and nine month periods ended October 2, 2021, and September 26, 2020, were as follows:

Three Months Ended Nine Months Ended

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

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

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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.

Closing of Senior Secured Notes of $300M at 6.0% Due 2029

On October 25, 2021, we closed a private offering of $ 300 million at 6.0 % senior secured notes to persons reasonably believed to be “qualified institutional buyers,” as defined in Rule 144A under The Securities Act of 1933, and to non-U.S.

persons outside the United States under Regulation S under the Securities Act.

The 2029 Notes were issued to investors at 98.625 % of their principal amount and will mature on November 15, 2029.

Our obligations under these senior secured notes are guaranteed by our domestic subsidiaries that are co-borrowers under or guarantee our Revolving Credit Facility.

The senior secured notes and the related guarantees are secured by a first-priority security interest in substantially all of our guarantor’s existing and future assets (other than receivables, inventory, deposit accounts, securities accounts, business interruption insurance and other related assets), subject to certain exceptions and customary permitted liens.

The senior secured notes and the related guarantees are also secured on a second-priority basis by a lien on our Revolving Credit Facility collateral.

The majority of net proceeds from the offering of the senior secured notes were used to repay borrowings under our Revolving Credit Facility.

In conjunction with the closing of the senior secured notes offering, we reduced the limit under our Revolving Credit Facility from $ 600 million to $ 350 million.

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