What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-22 compared with 2021-03-03 · 384 added, 361 removed, 725 unchanged (51% of the section changed)

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Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Operations and Comprehensive Income (Loss)

Report of Independent Registered Public Accounting Firm s (PCAOB ID:

42 ) (PCAOB ID:

Consolidated Statements of Operations and Comprehensive Income

Consolidated Balance Sheets

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of BlueLinx Holdings Inc.

Opinion on the Financial Statements

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

(the Company) as of January 1, 2022, the related consolidated statements of operations and comprehensive income, stockholders’ equity (deficit) and cash flows for the fiscal year 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 1, 2022, and the results of its operations and its cash flows for the year then ended in conformity with U.S.

generally accepted accounting principles.

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 1, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 22, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides 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 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 a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of the Pension Benefit Obligation

Description of the Matter

As discussed in Note 8 of the consolidated financial statements, the Company’s pension benefit obligation was $105.9 million and exceeded the fair value of pension plan assets of $94.3 million, resulting in an unfunded obligation of $11.6 million.

The estimation of the pension benefit obligation is dependent on actuarial methods and the selection of assumptions, such as the applicable discount rate and mortality rates.

Auditing the valuation of the pension benefit obligation was complex due to the judgmental nature of the actuarial assumptions used in the valuation process.

These assumptions have a significant effect on the pension benefit obligation.

How We Addressed the Matter in Our Audit

We tested controls that address the risks of material misstatements related to the valuation of the pension benefit obligations.

For example, we tested controls over management’s review of the methodology used, significant actuarial assumptions, including management’s review of the selected discount and mortality rates with the Company’s external actuary, and the completeness and accuracy of the data inputs provided to the external actuary.

To test the pension benefit obligation, our audit procedures included, among others, evaluating the methodology used, the significant actuarial assumptions discussed above, and the underlying data used by the Company.

We compared the actuarial assumptions used by management to its historical accounting practices and evaluated the change in the pension benefit obligation from the prior year due to the change in interest cost, actuarial loss and benefits paid.

In addition, we involved an actuarial specialist to assist with our procedures.

For example, the discount rate reflects the rates at which benefits could effectively be settled and is based on current investment yields of high-quality corporate bonds.

The Company uses an actuarially-developed full yield curve approach in establishing its discount rate.

We evaluated management’s methodology for determining the discount rate that reflects the maturity and duration of the benefit payments.

As part of this assessment, we developed an upper and lower yield curve using high quality bonds with characteristics appropriate for testing the development of the Company’s yield curve to evaluate its reasonability.

To evaluate the mortality rate, we assessed whether the information was consistent with publicly available information, and whether any entity-specific adjustments were applied.

We also tested the completeness and accuracy of the underlying data, including the participant data provided to management’s actuarial specialists.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2021.

Atlanta, Georgia

February 22, 2022

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

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Opinion on the Consolidated Financial Statements

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

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.

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

and subsidiaries (the “Company”) as of January 2, 2021, the related consolidated statements of operations and comprehensive income, stockholders’ equity (deficit), and cash flows for the year 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 the results of its operations and its cash flows for the year then ended , in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

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

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provided 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:

The critical audit matter communicated below is a matter arising from the audit of the consolidated financial statements for the year ended January 2, 2021 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.

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/s/ BDO USA, LLP

We have served as the Company's auditor since 2015.

We served as the Company's auditor from 2015 until 2021.

Atlanta, Georgia

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CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

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

COMPREHENSIVE INCOME

Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands, except per share data)

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Other (income) expense, net ( 1,306 ) ( 254 )

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 )

Income before provision for income taxes 393,876 95,081

Provision for income taxes 97,743 14,199

Net income $ 296,133 $ 80,882

Basic income per share $ 30.80 $ 8.58

Diluted income per share $ 29.99 $ 8.55

Comprehensive income:

Net income $ 296,133 $ 80,882

Other comprehensive (loss) income:

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

Actuarial gain (loss) on defined benefit plan, net of tax 5,546 ( 2,202 )

Amortization of unrecognized pension gain, net of tax 1,064 788

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Total other comprehensive (loss) income 6,632 ( 1,429 )

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

Comprehensive income $ 302,765 $ 79,453

See the accompanying Notes to the consolidated financial statements.

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CONSOLIDATED BALANCE SHEETS

January 2, 2021 December 28, 2019

January 1, 2022 January 2, 2021

(In thousands, except share data)

Current assets:

Cash $ 82 $ 11,643

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

Cash and cash equivalents $ 85,203 $ 82

Accounts receivable, less allowances of $ 4,024 and $ 4,123 , respectively

339,637 293,643

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Total assets $ 1,317,454 $ 1,048,130

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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Accrued compensation 22,363 24,751

Taxes payable 6,138 7,847

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

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Commitments and contingencies

STOCKHOLDERS’ EQUITY (DEFICIT)

STOCKHOLDERS’ EQUITY

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

9,725,760 and 9,462,774 outstanding on January 1, 2022 and January 2, 2021, respectively

Additional paid-in capital 268,085 266,695

Accumulated other comprehensive loss ( 29,360 ) ( 35,992 )

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

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

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

Accumulated stockholders’ equity (deficit) 124,427 ( 171,706 )

Total stockholders’ equity 363,249 59,092

Total liabilities and stockholders’ equity $ 1,317,454 $ 1,048,130

See the accompanying Notes to the consolidated financial statements.

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

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

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

Net income — — — — 80,882 80,882

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

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Other — — — ( 9 ) — ( 9 )

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

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

Net income — — — — 296,133 296,133

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CONSOLIDATED STATEMENTS OF CASH FLOWS

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

Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands)

Cash flows from operating activities:

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 )

Net income $ 296,133 $ 80,882

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

Depreciation and amortization 28,192 28,901

Amortization of debt issuance costs 1,411 3,881

Adjustment to debt issuance cost associated with term loan/revolver 7,394 —

Gains from sales of property ( 8,427 ) ( 10,529 )

Pension expense 896 3,011

Deferred income tax 356 ( 8,420 )

Share-based compensation 6,590 5,992

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Accounts payable 14,837 32,815

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

Pension contributions ( 755 ) ( 1,791 )

Other current assets 712 ( 9,546 )

Taxes payable ( 1,709 ) 10,156

Other assets and liabilities ( 4,187 ) 21,968

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

Net cash provided by operating activities 145,023 55,019

Cash flows from investing activities:

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

Proceeds from sale of assets 10,327 12,849

Property and equipment investments ( 14,415 ) ( 3,689 )

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

Net cash provided by (used in) investing activities ( 4,088 ) 9,160

Cash flows from financing activities:

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Repayments on term loan ( 43,204 ) ( 103,470 )

Proceeds from senior secured notes 295,861 —

Proceeds from real estate financing transactions — 78,263

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Net cash used in financing activities ( 55,814 ) ( 75,740 )

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

Net change in cash and cash equivalents 85,121 ( 11,561 )

Cash and cash equivalents at beginning of period 82 11,643

Cash and cash equivalents at end of period $ 85,203 $ 82

Supplemental Cash Flow Information

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Noncash transactions:

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

Additions of fleet assets under finance leases $ 10,549 $ 3,833

See the accompanying Notes to the consolidated financial statements.

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Basis of Presentation

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.

BlueLinx is a leading wholesale distributor of residential and commercial building products in the United States.

We are a “two-step” distributor.

Two-step distributors purchase products from manufacturers and distribute those products to dealers and other suppliers in local markets, who then sell those products to end users.

We carry a broad portfolio of both branded and private-label stock keeping units (“SKUs”) across two principal product categories:

specialty products and structural products.

Specialty products include items such as engineered wood, industrial products, cedar, moulding, siding, metal products, and insulation.

Structural products include items such as lumber, plywood, oriented strand board, rebar, and remesh.

We also provide a wide range of value-added services and solutions aimed at relieving distribution and logistics challenges for our customers and suppliers, while enhancing their marketing and inventory management capabilities.

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

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All significant intercompany accounts and transactions have been eliminated.

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.

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Our 2021 fiscal year contained 52 weeks and ended on January 1, 2022.

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

Fiscal 2020 contained 53 weeks and ended on January 2, 2021.

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.

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

These payables relate to amounts due to various tax authorities.

For the year ended January 2, 2021, we have reclassified certain items within the presentation of our statement of cash flows to align with our statement of cash flows presentation for the year ended January 1, 2022.

Our reclassifications are limited to the operating activities section and include presenting only the impact of deferred income taxes, instead of our full provision for income taxes, as a reconciling item for net income to cash provided by operating activities.

We have also reclassified certain items previously presented individually, such as pension expense and pension contributions, to be included in the change of other assets and liabilities.

In addition, we are presenting the change in taxes payable, previously included in other assets and liabilities, as a distinct line item in our reconciliation of net income to cash provided by operating activities.

These reclassifications, we believe, provide an enhanced level of transparency with regards to the presentation of our statement of cash flows.

Use of Estimates

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.

GAAP, which requires us to make estimates based on assumptions about current, and for some estimates, future economic and market conditions, including the effects of the novel coronavirus (“COVID-19”), 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 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.

ASU 2019-10 extended the effective date to interim and annual periods beginning after December 15, 2022, for certain public business entities, including smaller reporting companies.

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.

In August 2018, the FASB issued ASU No.

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

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

(ii) the policy for timing transfers between levels;

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

The standard will require 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;

and (b) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

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.

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.

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

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 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 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 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.

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

Cloud Computing Arrangements.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles-Goodwill and Other-Internal Use-Software (Subtopic 350-40).” This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license).

We early adopted this standard effective December 30, 2018, the first day of our 2019 fiscal year and did so prospectively.

Costs that have been recorded have been classified as other current and other non-current assets.

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.

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.

Revenue Recognition

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however, ownership and risk of loss remains with us.

We are the lessee in a lease contract when we obtain the right to control an asset associated with a particular lease.

For operating leases, we record a right-of-use ("ROU") asset that represents our right to use an underlying asset for the lease term, and a corresponding lease liability that represents our obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.

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 operations.

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 lease payments.

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

See Note 12, Lease Commitments, for further discussion.

Shipping and Handling

Outbound shipping and handling costs included in “Selling, general, and administrative” expenses were $ 149.2 million and $ 151.2 million for fiscal 2021 and fiscal 2020, 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.

Cash and Cash Equivalents

We consider all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

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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Adjustments to earnings resulting from revisions to rebate estimates have been immaterial.

Shipping and Handling

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.

Property and Equipment

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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

General Range of Estimated Useful Lives in Years January 1, 2022 January 2, 2021

(In thousands)

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(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.

Accordingly, we recognize deferred tax assets and liabilities based on the tax effects of temporary differences between the financial statement and tax bases of assets and liabilities, as measured by current enacted tax rates.

All deferred tax assets and liabilities are classified as noncurrent in our consolidated balance sheet.

A valuation allowance is recorded to reduce deferred tax assets when necessary.

For additional information about our income taxes, see Note 5, Income Taxes .

As of January 1, 2022, and January 2, 2021, the net book value of total assets classified as “held for sale” was $ 2.6 million and $ 1.3 million, respectively, and was included in “Other current assets” in our Consolidated Balance Sheets.

The book value of total liabilities classified as “held for sale” as of January 1, 2022, and January 2, 2021, was $ 1.9 million and $ 0 million , respectively, and was included in “Other current liabilities” in our Consolidated Balance Sheets.

Assets held for sale as of January 1, 2022, consisted of fixed assets, at net book value, and current assets, including raw material and work in process inventory, affiliated with one of our business locations in the Midwest.

Liabilities classified as held for sale included current liabilities, such as accounts payable, directly associated with those assets held for sale that will be transferred with the assets held for sale.

We plan to sell these assets and transfer these liabilities within the next 12 months.

Assets held for sale as of January 2, 2021, consisted of two former distribution facilities located in Birmingham, Alabama, and Houston, Texas which were sold throughout 2021.

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

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

During the year ended January 2, 2021, we sold two non-operating facilities that were previously identified as “held for sale”.

We recognized a gain of $ 8.4 million in the Consolidated Statements of Operations as a result of these sales.

Insurance and Self-Insurance

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

We are the lessee in a lease contract when we obtain the right to control an asset associated with a particular lease.

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

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 lease payments.

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

See Note 11, Lease Commitments, for further discussion.

We account for deferred income taxes using the liability method.

All deferred tax assets and liabilities are classified as noncurrent in our consolidated balance sheet.

A valuation allowance is recorded to reduce deferred tax assets when necessary.

For additional information about our income taxes, see Note 5, Income Taxes .

We sponsor a noncontributory defined benefit pension plan administered solely by us (the “pension plan”).

Most of the participants in the plan are inactive, with all remaining active participants no longer accruing benefits, and the plan is closed to new entrants.

Our funding policy for the pension plan is based on actuarial calculations and the applicable requirements of federal law.

Benefits under the pension plan primarily are related to years of service.

We are involved in various multiemployer pension plans (“MEPPs”) that provide retirement benefits to certain union employees in accordance with certain collective bargaining agreements (“CBAs”).

As one of many participating employers in these MEPPs, we are generally responsible with the other participating employers for any plan underfunding.

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 Act, which requires substantially underfunded MEPPs to implement a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) to improve their funded status.

Recent Accounting Standards - Adopted

Income Taxes .

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

2019-12, “Income taxes (Topic 740):

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

We adopted this standard effective for fiscal year 2021.

The adoption of the 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 FASB issued ASU No.

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.

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.

In August 2018, the FASB issued ASU No.

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

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

(ii) the policy for timing transfers between levels;

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

The standard will require 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;

and (b) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value 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.

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.

Recent Accounting Standards - Not Yet Adopted

Credit Impairment Losses .

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.

ASU 2019-10 extended the effective date to interim and annual periods beginning after December 15, 2022, for certain public business entities, including smaller reporting companies.

We have completed our assessment of the standard and determined from our assessment that the adoption of this standard will not have a material impact on our 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 or net realizable value, which also considers items that may be considered damaged, excess, and obsolete inventory.

At the end of fiscal 2021, we assessed the carrying value of our inventory and determined it was presented at the lower of cost or net realizable value and that an additional reserve was not necessary.

Revenue Recognition

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The following table presents our revenues disaggregated by revenue source.

Prior year amounts have been reclassified to conform to the current year product mix of structural and specialty products.

Sales and usage-based taxes are excluded from revenues.

Fiscal Year Ended

January 2, 2021 December 28, 2019

January 1, 2022 January 2, 2021

(In thousands)

Structural products $ 1,232,203 $ 861,687

Specialty products $ 2,520,305 $ 1,865,125

Structural products 1,756,873 1,232,203

Total net sales $ 4,277,178 $ 3,097,328

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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

Reload sales are similar to warehouse sales but are delivered 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 facilities.

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.

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Fiscal Year Ended

January 2, 2021 December 28, 2019

January 1, 2022 January 2, 2021

(In thousands)

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These costs are recorded within selling, general, and administrative expense.

We have made an accounting policy election to treat outbound shipping and handling activities as an expense.

We have made an accounting policy election to treat outbound shipping and handling activities as a selling, general and administrative expense.

Goodwill and Other Intangible Assets

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

As of January 1, 2022, 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.

During the year ended December 29, 2018, we allocated the fair values of assets acquired and liabilities assumed in the acquisition of Cedar Creek, and recognized $ 47.8 million in goodwill.

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

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 evaluate goodwill for impairment as the first day of our fourth quarter, which was October 3, 2021 for fiscal 2021.

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.

Based on our 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.

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Definite-Lived Intangible Assets

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 1, 2022 were as follows:

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(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:

Customer relationships are amortized on a double declining balance

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)

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

Customer relationships are amortized on a double declining balance method.

Customer relationships are amortized on a double declining balance

Amortization Expense

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.

Amortization expense for the definite-lived intangible assets was $ 5.3 million and $ 7.5 million for the years ended January 1, 2022, and January 2, 2021, respectively.

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

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(In thousands)

Assets Held for Sale and Net Gain on Disposition

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.

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.

In fiscal 2021, our 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 2020, our 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.

Our blended state rate is impacted by the mix of our income earned in various states and our federal taxable income, both of which may differ from year to year.

Our effective tax rate is impacted by the effects of permanent differences occurring throughout our fiscal year.

For fiscal 2021 and fiscal 2020, our effective tax was 24.8 percent and 14.9 percent, respectively.

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

Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands)

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

Income before provision for income taxes $ 393,876 $ 95,081

Federal income taxes:

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Deferred 1,941 618

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

Provision for income taxes $ 97,743 $ 14,199

Effective tax rate 24.8 % 14.9 %

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

Our provision for income taxes is reconciled to the federal statutory amount as follows:

Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands)

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 )

Federal income taxes computed at the federal statutory tax rate $ 82,628 $ 19,967

State income taxes, net of federal benefit 18,970 4,636

Valuation allowance change arising from state net operating losses ( 3,018 ) ( 4,101 )

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Other ( 1,614 ) ( 118 )

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.

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.

Provision for income taxes $ 97,743 $ 14,199

Our financial statements contain certain deferred tax assets which primarily result from other temporary differences related to certain reserves, pension obligations, differences between book and tax depreciation and amortization, and state net operating losses.

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

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

For fiscal 2021 and fiscal 2020, the components of our net deferred income tax assets are as follows:

January 2, 2021 December 28, 2019

January 1, 2022 January 2, 2021

(In thousands)

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Accounts receivable 632 704

Interest expense limitation — 4,767

Property and equipment 47,857 50,117

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Pension 4,415 7,374

Benefit from NOL carryovers 8,010 25,731

Benefit from net operating loss carryovers

Other 251 585

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Deferred income tax asset, net $ 60,285 $ 62,899

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.

Activity in our deferred tax asset valuation allowance for fiscal 2021 and 2020 was as follows:

January 2, 2021 December 28, 2019

January 1, 2022 January 2, 2021

(In thousands)

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Disallowed interest limitation under the Tax Act and CARES

( 4,806 ) 4,806

Balance as of end of the fiscal year $ 4,269 $ 7,287

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

January 2, 2021 December 28, 2019

January 1, 2022 January 2, 2021

($ in thousands)

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Balance at end of the fiscal year $ 2,205 $ 2,262

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.

Included in the unrecognized tax benefits as of January 1, 2022 and January 2, 2021, were approximately $ 2.2 million and $ 2.1 million, respectively of tax benefits that, if recognized, would reduce our annual effective tax rate for fiscal 2021 and 2020.

No penalties were accrued for either 2021 or 2020.

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.

We have accrued interest associated with our unrecognized tax benefits which we release as those benefits are realized due to the lapse of applicable statute of limitations.

Interest expense associate with our unrecognized tax benefits is reported as interest expense, net in our Consolidated Statement of Operations and Comprehensive Income.

Impacts of the Tax Act and CARES

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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.

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 during fiscal 2019 under the provisions of the Tax Act.

We had no impact to our income tax provision in fiscal 2021 from either The Tax Act nor CARES.

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.

At the end of fiscal 2020, our gross state net operating loss carryovers are $ 162.6 million and our tax-effected state net operating loss carryovers are $ 8.0 million, of which $ 7.3 million was subject to a valuation allowance arising from expiration date when considered conjunction with state limitations related to Internal Revenue Code (“IRC”) Section 382.

At the end of fiscal 2021, our gross state net operating loss carryovers are $ 98.6 million and our tax-effected state net operating loss carryovers are $ 5.4 million, of which $ 4.3 million is subject to a valuation allowance arising from expiration dates when considered in conjunction with state limitation related to IRC Section 382.

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

For fiscal 2021, we reversed $ 3.0 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.

Based on our taxable income for 2021 in the states where we have net operating loss carryforwards, we believe we will be able to utilize this amount of state net operating losses that were previously reserved by this valuation allowance.

federal and state income tax returns in jurisdictions with varying statutes of limitations and may be subject to audit based on periods that are not limited by applicable statutes.

federal income tax returns for tax years 2018, 2019 and 2020 remain subject to audit under the federal statute of limitations.

Our auditable state income tax returns vary depending on the jurisdiction and its applicable statute of limitations.

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.

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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.

In our evaluation of the weight of available evidence at the end of fiscal 2021, we considered the recent reported income in the current year, as well as the reported income for 2020 and reported loss for 2019, 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.

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• 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.

In addition to the positive evidence discussed above, we considered as positive evidence forecasted future taxable income, the future 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 2021 and 2020, in our evaluation of the weight of available evidence, we concluded that our deferred tax assets were not impaired other than $ 4.3 million of the state net operating losses.

Long-Term Debt

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

January 2, 2021 December 28, 2019

As of January 1, 2022, and January 2, 2021, long-term debt consisted of the following:

January 1, 2022 January 2, 2021

(In thousands)

Revolving Credit Facility (1)

Senior secured notes (1)

$ 300,000 $ —

Revolving credit facility (2)

Term loan facility (3)

43,204 146,674

Finance lease obligations (4)

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Unamortized debt issuance costs ( 4,701 ) ( 9,010 )

Unamortized bond discount costs ( 4,028 ) —

565,988 595,559

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Long-term debt, net of current maturities $ 558,124 $ 588,713

(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.

(1) As of January 1, 2022, our long-term debt was comprised of $ 300 million of senior secured notes issued in October 2021.

These notes are presented under the long-term debt caption of our balance sheet at $ 291.3 million which is net of their discount of $ 4.0 million and the combined carrying value of our debt issuance costs of $ 4.7 million.

Our senior secured notes are presented in this table at their face value .

(2) The average effective interest rate was 2.5 percent and 3.3 percent for the years ended January 1, 2022 and January 2, 2021, respectively.

(3) The average interest rate, exclusive of fees and prepayment penalties, was 8.0 percent and 8.2 percent for the years ended January 1, 2022 and January 2, 2021, respectively.

(4) Refer to Note 11, 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 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.

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 (“Agent”), and certain other financial institutions party thereto.

The amended and restated credit agreement was 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.

The amended and restated credit agreement was further amended in August 2021 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 under the amended and restated 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 amended and restated credit agreement to provide additional flexibility for the Company, and (iv) add customary LIBOR replacement language (as amended, the “Revolving Credit Agreement”).

The revolving credit agreement provided 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.

Letters of credit in an aggregate amount of up to $ 30 million are also available under the revolving credit agreement, which would reduce the amount of the revolving loans available under the revolving credit facility.

The maturity date of the Revolving Credit Agreement is October 10, 2022.

The maturity date of the revolving credit agreement is August 2, 2026.

The Borrowers’ obligations under the revolving credit agreement are secured by a security interest in substantially all of our and our subsidiaries’ assets (other than real property), including inventories, accounts receivable, and proceeds from those items.

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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) 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.

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 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.

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

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.

In conjunction with our offering of senior secured notes, we amended the revolving credit facility to reduce the credit limit from $ 600 million to $ 350 million.

In conjunction with the reduction of the credit limit of our revolving credit facility, we expensed approximately $ 1.6 million of debt issuance costs during the fourth quarter of 2021.

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

As of January 1, 2022, we had zero outstanding borrowings on 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.

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.

For the years ended January 2, 2021 and January 1, 2022, our effective interest rate on our revolving credit facility was 3.3 percent and 2.5 percent, respectively.

We were in compliance with all covenants under the revolving credit agreement as of January 1, 2022.

Senior Secured Notes

In October 2021, we entered into an indenture (the “Indenture”) with the guarantors party thereto and Truist Bank, as trustee and collateral agent, in connection with a private offering of $ 300 million of our six percent senior secured notes due 2029 (the “2029 Notes”).

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

The majority of net proceeds from the offering of the 2029 Notes were used to repay borrowings under our revolving credit facility.

In conjunction with this offering, we also amended the revolving credit facility to reduce the credit limit from $ 600 million to $ 350 million.

In conjunction with the reduction of the credit limit of our revolving credit facility, we expensed approximately $ 1.6 million of debt issuance costs during the fourth quarter of 2021.

The Company’s obligations under the 2029 Notes are guaranteed by the Company’s domestic subsidiaries that are co-borrowers under or guarantee the Company’s revolving credit facility.

The 2029 Notes and the related guarantees are secured by a first-priority security interest in substantially all of the Company’s and each guarantor’s existing and future assets (other than receivables, inventory, deposit accounts, securities accounts, business interruption insurance and other related assets (the “ABL Collateral”)), subject to certain exceptions and customary permitted liens.

The 2029 Notes and the related guarantees are also secured on a second-priority basis by a lien on the ABL Collateral.

Interest on the 2029 Notes will be payable on May 15 and November 15 of each year, beginning on May 15, 2022.

The 2029 Notes will be redeemable, in whole or in part, at any time on or after November 15, 2024 at certain redemption prices.

The redemption price for the 2029 Notes if redeemed during the twelve months beginning (i) November 15, 2024 is 103.000 %, (ii) November 15, 2025 is 101.500 %, and (iii) November 15, 2026 and thereafter is 100.000 %.

The Company may also redeem some or all of the 2029 Notes before November 15, 2024 at a redemption price of 100.0 % of the principal amount, plus accrued and unpaid interest, if any, to, but not including, the redemption date, plus a “make-whole” premium.

In addition, the Company may redeem up to 40.0 % of the outstanding 2029 Notes before November 15, 2024 with the net cash proceeds from certain equity offerings at a price equal to 106.000 % of the principal amount of the notes, plus accrued but unpaid interest, if any, to, but not including, the redemption date.

Furthermore, the Company may redeem the 2029 Notes at any time and from time to time prior to November 15, 2024 during each of the three consecutive twelve month periods commencing on October 25, 2021 in an aggregate principal amount equal to up to 10.0 % of the original aggregate principal amount of the 2029 Notes at a redemption price of 103.0 %, plus accrued and unpaid interest, if any, to, but not including, the redemption date.

In addition, the Company may be required to make an offer to purchase the 2029 Notes upon the sale of certain assets or upon a change of control.

Term Loan Facility

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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”).

The maturity date of the Term Loan Agreement is October 13, 2023.

The Credit and Guaranty Agreement was amended in October 2019, January 2020, and February 2020 (as amended, the “Term Loan Agreement”).

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

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.

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

The Term Loan Agreement also requires certain mandatory prepayments of outstanding loans, subject to certain exceptions, including prepayments commencing with the fiscal year ending December 28, 2019, based on a percentage of excess cash flow (as defined in the Term Loan Agreement for such fiscal year).

The remaining balance is due on the loan maturity date of October 13, 2023.

The Term Loan Facility may be prepaid in whole or in part from time to time after the first anniversary thereof, subject to payment of the “Prepayment Premium” (as such term is defined in the Term Loan Agreement) if such voluntary prepayment does not otherwise constitute an exception to the Prepayment Premium under the Term Loan Agreement and is made prior to the fourth anniversary of the closing date of the Term Loan Agreement, and all breakage costs incurred by any lender thereunder.

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

The Base Rate Loans bear interest at the rate per annual equal to:

(i) the greatest of the (a) U.S.

prime lending rate published in The Wall Street Journal, (b) the Federal Funds Effective Rate plus 0.50 percent, and (c) the sum of the Adjusted Eurodollar Rate of one month plus 1.00 percent, provided that the Base Rate shall at no time be less than 2.00 percent per annum;

and (ii) plus the Applicable Margin, as described below.

Eurodollar Rate Loans bear interest at the rate per annum equal to:

(i) the ICE Benchmark Administration LIBOR Rate, provided that the Adjusted Eurodollar Rate shall at no time be less than 1.00 percent per annum;

plus (ii) the Applicable Margin.

The Applicable Margin is 6.00 percent with respect to Base Rate Loans and 7.00 percent with respect to Eurodollar Rate Loans.

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.

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)

The obligations under the Term Loan Agreement were 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.

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 under the term loan facility and the facility was terminated.

As a result, as of January 1, 2022, we had no outstanding borrowings under the term loan facility.

In connection with our repayment of the term loan facility, we expensed $ 5.8 million of debt issuance costs during the first quarter of fiscal 2021 that we had been amortizing in connection the term loan facility.

While the facility was paid in full as of April 2, 2021, our average interest rate under the facility, exclusive of fees and prepayment premiums, was 8.2 percent and 8.0 percent for the years ended January 2, 2021 and January 1, 2022, respectively.

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.

Our finance lease liabilities consist of leases related to equipment and vehicles, and to real estate, with the majority of those finance lease commitments relating to the real estate financing transactions that we completed in recent years.

During fiscal 2020, we completed real estate financing transactions on two warehouse facilities;

and during fiscal 2021, we completed real estate financing transactions on fourteen warehouse facilities.

We recognized financing lease assets and obligations as a result of each of these real estate transactions.

We also entered into new finance lease agreements for new tractors for our fleet totaling $ 3.8 million and $ 10.5 million during fiscal 2020 and 2021, respectively.

Our total finance lease commitments, including the properties associated with these transactions, totaled $ 274.7 million and $ 273.1 million as of January 1, 2022 and January 2, 2021, respectively.

Of the $ 274.7 million of finance lease commitments as of January 1, 2022, $ 244.0 million related to real estate and $ 30.7 million related to equipment.

Of the $ 273.1 million of finance lease commitments as of January 2, 2021, $ 243.7 million related to real estate and $ 29.4 million related to equipment.

For more information on our finance lease obligations, refer to Note 11, Lease Commitments .

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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).

The fair value measurement guidance also establishes, as a practical expedient, that certain investments are not to be classified in the fair value hierarchy when they are measured at fair value using net asset value ("NAV").

Fair value measurements for defined benefit pension plan

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The actual return on these assets impacts our future net periodic benefit cost, as well as amounts recognized in our consolidated balance sheets.

The Company uses the fair value hierarchy to measure the fair value of assets held by our pension plan.

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 U.S.

GAAP consist of collective investment trust assets.

Fair value measurements for financial instruments

Carrying amounts for our financial instruments are not significantly different from their fair value.

The Company uses the fair value hierarchy to measure the fair value of assets held by our pension plan where applicable.

Certain investments are measured using the net asset value ("NAV") per share as a practical expedient and have not been classified in the fair value hierarchy.

Employee Benefits

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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

January 1, 2022 January 2, 2021

(In thousands)

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Projected benefit obligation at beginning of period $ 113,827 $ 107,026

Service cost — 190

Interest cost 2,019 2,892

Actuarial loss 9,813 11,156

Curtailment gain — ( 349 )

Actuarial (gain) loss ( 4,106 ) 9,813

Benefits paid ( 5,866 ) ( 5,904 )

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Net unfunded status of plan $ ( 11,605 ) $ ( 22,684 )

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.

The accumulated benefit obligation for the pension plan was $ 105.9 million and $ 113.8 million at January 1, 2022, and January 2, 2021, 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.

On January 1, 2022, 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.

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.

This change does not affect the measurement of our total benefit obligations.

As of January 1, 2022, and January 2, 2021, the net unfunded status of our benefit plan was $ 11.6 million and $ 22.7 million, respectively.

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.

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.

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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 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 adjustment to other comprehensive income (loss) for fiscal 2021 and fiscal 2020, was a $ 6.6 million net of tax gain and a $ 1.4 million net of tax loss, respectively.

The adjustments in both fiscal years are primarily due to a combination of actuarial adjustments at year-end in addition to the amortization of unrealized gain and/or losses throughout the fiscal year.

The decrease in the unfunded obligation for the fiscal year was approximately $ 11.1 million and was primarily comprised of $ 7.4 million of actuarial gain, $ 4.6 million of investment gains, $ 1.1 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 $ 2.0 million due to

current year interest cost.

The net periodic pension credit was $ 1.3 million in fiscal 2021 compared to $ 0.9 million in fiscal 2020, 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

January 1, 2022 January 2, 2021

(In thousands)

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

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

Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands)

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

January 2, 2021 December 28, 2019

January 1, 2022 January 2, 2021

Projected benefit obligation:

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Discount rate 1.84 % 2.79 %

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

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

Expected long-term rate of return on plan assets 5.20 % 6.00 %

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The expected role of return-seeking investments is to achieve a reasonable long-term growth of pension assets with a prudent level of risk, while the role of liability-matching investments is to provide a partial hedge against liability performance associated with changes in interest rates.

The objective within return-seeking investments is to achieve asset diversity in order to balance return and volatility.

The objective

within return-seeking investments is to achieve asset diversity in order to balance return and volatility.

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 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 of high-quality corporate bonds used in determination of the benefit obligation to the relevant

projected cash flows.

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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 projected from 2015 for annuitants.

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.

Additionally, we use the most current generational projection scales, which were MP-2021 as of January 1, 2022, and MP-2020 as of January 2, 2021.

Plan Assets and Long-Term Rate of Return

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Type Current Target Allocation Actual Allocation, January 1, 2022

Return-seeking securities 70 % 71 %

Liability-matching securities 28 % 26 %

Cash and cash equivalents 2 % 3 %

Global equity 44.4 % 47.2 %

Diversified credit 16.7 % 16.5 %

Real assets 8.9 % 10.0 %

Liability-hedging 27.8 % 23.8 %

Cash 2.2 % 2.5 %

Total 100 % 100 %

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(Level 2) Significant other unobservable inputs

(Level 3) Total

(Level 3) Assets measured at net asset value (NAV) (3)

(In thousands)

Return-seeking securities

Collective investment trust (1)

Investments in trusts and funds (1)

$ — $ — $ — $ 69,397 $ 69,397

Liabilities-matching securities:

Collective investment trust (2)

Investments in trusts and funds (2)

— — — 22,473 22,473

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Total $ 2,399 $ — $ — $ 91,870 $ 94,269

(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 consists of a collective investment trust investing in Treasury STRIPS.

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

(2) This category consists of a collective investment trust investing in Treasury STRIPS, in addition to a collective investment fund that tracks to U.S.

government bond indexes, and a pooled investment fund.

(3) Investments that are measured at net asset value (“NAV”) (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy.

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

The fair value of the Level 2 assets was determined by management based on an assessment of valuations provided by asset management entities and was calculated by aggregating market prices for all underlying securities.

Certain investments are measured at fair value using the net asset value ("NAV") per share as a practical expedient and have not been classified in the fair value hierarchy.

Investment objectives for our pension plan assets are:

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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:

The following table sets forth by level, within the fair value hierarchy, pension plan assets at their fair values as of January 2, 2021:

Type Quoted prices in active markets of identical assets

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(Level 2) Significant other unobservable inputs

(Level 3) Total

(Level 3) Assets measured at net asset value (NAV) (3)

(In thousands)

Return-seeking securities

Collective investment trust (1)

Investments in trusts and funds (1)

$ — $ — $ — $ 64,870 $ 64,870

Liabilities-matching securities:

Collective investment trust (2)

Investments in trusts and funds (2)

— — — 23,905 23,905

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$ 2,371 $ — $ — $ 88,775 $ 91,146

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

(2) This category consists of a collective investment trust investing in Treasury STRIPS, in addition to a collective investment fund that tracks to U.S.

government bond indexes, and a pooled investment fund.

(3) Investments that are measured at net asset value (“NAV”) (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy.

our fiscal 2020 10-K, we presented investments measured at net asset value (NAV) as Level 2 investments in the fair value hierarchy.

The presentation has

been adjusted to show those investments measured at NAV in the table above.

Pension Plan Cash Flows

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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.

We are not required to make any cash contributions to the pension plan for fiscal funding year 2022.

Multiemployer Pension Plans

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Total $ 0.6 $ 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.

Our contributions to this plan are approximately 0.1 percent of total contributions, which is less than the required disclosure threshold of five percent of total plan contributions.

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

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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.

Our liability for the remainder of these

payments was $ 7.3 million as of January 1, 2022.

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.

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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 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 2019 of $ 1.7 million were deferred and paid in the third quarter of fiscal 2020.

Employer contributions to the hourly savings plan for fiscal years 2020 and 2021 were approximately $ 0.7 million and $ 0.7 million, respectively.

Employer contributions to the salaried savings plan for fiscal 2020 of approximately $ 1.8 million were deferred and paid in the first quarter of 2021.

Employer contributions to the salaried savings plan for fiscal 2021 of approximately $ 2.0 million were deferred and will be paid in the first quarter of 2022.

Share-Based Compensation

We have three stock-based compensation plans covering officers, directors, certain employees, and consultants:

the 2004 Equity Incentive Plan (the “2004 Plan”), the 2006 Long-Term Equity Incentive Plan (the “2006 Plan”), and the 2016 Amended and Restated Long-Term Incentive Plan (the “2016 Plan”).

We have four stock-based compensation plans covering officers, directors, certain employees, and consultants:

the 2004 Equity Incentive Plan (the “2004 Plan”), the 2006 Long-Term Equity Incentive Plan (the “2006 Plan”), the 2016 Amended and Restated Long-Term Incentive Plan (the “2016 Plan”) and the 2021 Long-Term Incentive Plan (the “2021 Plan”).

The plans are designed to motivate and retain individuals who are responsible for the attainment of our primary long-term performance goals.

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The 2004, 2006 and 2016 Plans have no shares remaining for issuance.

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

Remaining 2006 and 2016 Plan shares are outstanding only for the vesting of outstanding equity awards.

On May 20, 2021 at the Annual Meeting of Shareholders, our stockholders approved the BlueLinx Holding, Inc.

2021 Long-Term Incentive Plan (the “2021 Plan”), which the Board of Directors had previously approved.

The 2021 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 2021 Plan selected by our Board of Directors or a committee of the Board that administers the 2021 Plan.

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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 Income (Loss).

Restricted Stock Units

During fiscal 2020 and in prior years, the Board of Directors was granted restricted stock units with a one-year vesting period, although a pro-rated portion may vest prior to the one-year period, with the remainder forfeited, if a Director chooses not to stand for re-election before the one-year vesting period has elapsed.

All vested director grants settle at the earlier of ten years from the vesting date or retirement from the Board of Directors.

During fiscal 2021 and in prior years, the Board of Directors were granted restricted stock units with a one-year vesting period, although a pro-rated portion could vest prior to the one-year period, with the remainder forfeited, if a director chose not to stand for re-election before the one-year vesting period elapsed.

All vested director grants prior to May 20, 2021 settle at the earlier of ten years from the vesting date or retirement from the Board of Directors, whichever comes first.

These awards are time-based and are not based upon attainment of performance goals.

Grants to directors made after May 20, 2021 from the 2021 Plan share

pool will vest and settle after one year, although a pro-rated portion of the award may vest prior to the one year period, with the remainder forfeited if the director is not standing for re-election or upon retirement from the Board of Directors.

During fiscal 2020 and 2021, the Board of Directors granted restricted stock units to certain of our employees and executive officers.

Certain of the restricted stock units granted in fiscal 2020 and 2021 vest in equal annual increments over the three years after the date of grant.

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.

Certain restricted stock units granted in fiscal 2019 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 1, 2022, there was approximately $ 7.6 million of total unrecognized compensation expense related to restricted stock units.

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Awards Weighted

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

Granted 415,133 8.52

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

214,040 42.25

( 379,371 ) 16.87

Forfeited ( 71,546 ) 16.76

Outstanding as of January 1, 2022 488,606 $ 26.13

(1) Granted shares in fiscal 2021 include approximately 27,677 shares associated with grants issued in fiscal 2019 that include performance criteria granting additional shares for which we believe the performance criteria will be achieved.

(2) The total fair value of restricted stock units vested in fiscal 2021 and 2020 was $ 6.4 million and $ 1.0 million, respectively.

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

January 2, 2021 December 28, 2019

January 1, 2022 January 2, 2021

(In thousands)

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We recognized related income tax benefits in fiscal years 2021 and 2020 of $ 1.7 million and $ 1.5 million, respectively, which were fully realized in fiscal 2021 and 2020.

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:

We include the benefits of tax deductions in excess of recognized compensation expense as a component of our provision for income taxes in our Consolidated Statements of Operations and Comprehensive Income when present.

There were $ 0.9 million of excess tax benefits in fiscal 2021 and no excess tax benefits in fiscal 2020.

Income per Common Share

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

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

Fiscal Year Ended

January 2, 2021 December 28, 2019 (1)

January 1, 2022 January 2, 2021

($ in thousands, except per share data)

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

Net income $ 296,133 $ 80,882

Weighted average shares outstanding - basic 9,615 9,422

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Weighted average shares outstanding - diluted 9,876 9,463

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, 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.

Trousdale’s interest in these amounts for fiscal 2019 and 2020 was approximately $ 0.7 million and $ 0.6 million, respectively.

Basic income per share $ 30.80 $ 8.58

Diluted income per share $ 29.99 $ 8.55

For fiscal years 2021 and 2020, we excluded approximately 128,206 and 725,483 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.

Lease Commitments

17 unchanged sentences

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.

13 unchanged sentences

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.

We determined that the transactions in the first quarter of 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.

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.

3 unchanged sentences

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

During fiscal 2020 and fiscal 2021, we entered in to equipment finance leases totaling $ 3.8 million and $ 10.5 million, respectively, for tractors added to our delivery fleet.

The following table presents our assets and liabilities related to our leases as of January 1, 2022 and January 2, 2021:

January 1, 2022 January 2, 2021

(In thousands)

11 unchanged sentences

Total lease liabilities $ 324,388 $ 324,159

(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.

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $ 73.7 million and $ 58.6 million as of January 1, 2022 and January 2, 2021, respectively.

The components of lease expense were as follows:

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

Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands)

6 unchanged sentences

Supplemental cash flow information related to leases was as follows:

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

Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands)

7 unchanged sentences

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

January 2, 2021 December 28, 2019

January 1, 2022 January 2, 2021

(In thousands)

9 unchanged sentences

Finance leases 10.00 % 9.87 %

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

The major categories of our finance lease liabilities as of January 1, 2022 and January 2, 2021 are as follows:

January 1, 2022 January 2, 2021

(In thousands)

14 unchanged sentences

Total $ 49,671 $ 274,717

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

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

Operating leases Finance leases

17 unchanged sentences

Approximately 21 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.

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

Four of those CBAs were successfully renewed, and another is expected to be completed before the end of the first quarter 2022.

The remaining CBA was terminated as a result of the local union disclaiming interest in continuing to represent the employees at the particular location.

Two CBAs covering approximately four percent of our employees are up for renewal in fiscal 2022.

Accumulated Other Comprehensive Income (Loss)

10 unchanged sentences

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

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

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

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

4 unchanged sentences

(2) For fiscal 2021, there was $ 6.6 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 $ 2.1 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