What changed in this filing

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Item 1. Financial Statements

2022-08-02 compared with 2022-05-03 · 124 added, 93 removed, 418 unchanged (34% of the section changed)

4 unchanged sentences

(In thousands, except per share data)

Three Months Ended

April 2, 2022 April 3, 2021

Three Months Ended Six Months Ended

July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

Net sales $ 1,239,379 $ 1,307,913 $ 2,541,684 $ 2,333,382

21 unchanged sentences

Amortization of unrecognized pension gain, net of tax 156 246 312 485

Other ( 20 ) 6 — 17

Total other comprehensive income 136 252 312 502

4 unchanged sentences

(In thousands, except share data)

April 2, 2022 January 1, 2022

July 2, 2022 January 1, 2022

Current assets:

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

9,651,000 and 9,725,760 outstanding on April 2, 2022, and January 1, 2022, respectively

9,211,626 and 9,725,760 outstanding on July 2, 2022 and January 1, 2022, respectively

Additional paid-in capital 199,565 268,085

Accumulated other comprehensive loss ( 29,048 ) ( 29,360 )

Accumulated stockholders’ equity 257,836 124,427

Retained earnings 329,108 124,427

Total stockholders’ equity 499,717 363,249

6 unchanged sentences

Paid-In Capital Accumulated

Comprehensive Loss Accumulated Equity Stockholders’ Equity Total

Comprehensive Loss Retained Earnings Stockholders’ Equity Total

Shares Amount

8 unchanged sentences

Balance, April 2, 2022 9,651 96 263,428 ( 29,184 ) 257,836 492,176

Net income — — — — 71,272 71,272

Impact of pension plan, net of tax — — — 156 — 156

Vesting of restricted stock units 181 2 — — — 2

Compensation related to share-based grants — — 1,775 — — 1,775

Repurchase of shares to satisfy employee tax withholdings ( 66 ) ( 1 ) ( 5,777 ) — — ( 5,778 )

Common stock repurchase and retirement ( 554 ) ( 5 ) ( 38,995 ) — — ( 39,000 )

Forward contract for accelerated share repurchase agreement — — ( 21,000 ) — — ( 21,000 )

Other — — 134 ( 20 ) — 114

Balance, July 2, 2022 9,212 $ 92 $ 199,565 $ ( 29,048 ) $ 329,108 $ 499,717

Common Stock Additional

Paid-In Capital Accumulated

Comprehensive Loss Accumulated Deficit Stockholders’ Equity Total

Comprehensive Loss Retained Earnings (Accumulated Deficit) Stockholders’ Equity Total

Shares Amount

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Repurchase of shares to satisfy employee tax withholdings ( 3 ) — ( 99 ) — — ( 99 )

Common stock repurchase and retirement — — — — — —

Other — — — 11 — 11

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

Net income — — — — 113,458 113,458

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

Vesting of restricted stock units 355 2 — — — 2

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

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

Other — — ( 2 ) 6 — 4

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

See accompanying Notes.

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(In thousands)

Three Months Ended

April 2, 2022 April 3, 2021

Six Months Ended

July 2, 2022 July 3, 2021

Cash flows from operating activities:

Net income $ 204,681 $ 175,318

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

Adjustments to reconcile net income to cash provided by operations:

Depreciation and amortization 13,264 14,545

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Other assets and liabilities ( 8,447 ) ( 9,541 )

Net cash provided by (used in) operating activities 2,237 ( 24,608 )

Net cash provided by operating activities 103,430 22,601

Cash flows from investing activities:

Proceeds from sale of assets 49 1,810

Proceeds from sale of assets, net 531 2,100

Property and equipment investments ( 6,882 ) ( 2,900 )

Net cash (used in) provided by investing activities ( 2,460 ) 688

Net cash used in investing activities ( 6,351 ) ( 800 )

Cash flows from financing activities:

6 unchanged sentences

Principal payments on finance lease liabilities ( 4,733 ) ( 4,671 )

Net cash (used in) provided by financing activities ( 10,542 ) 24,017

Net cash used in financing activities ( 77,330 ) ( 21,704 )

Net change in cash and cash equivalents 19,749 97

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

April 2, 2022

Basis of Presentation and Summary of Significant Accounting Policies

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

We derived the condensed consolidated balance sheet at April 2, 2022, from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2022 (the “Fiscal 2021 Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”) on February 22, 2022.

In the opinion of our management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of our statements of operations and comprehensive income for the three months ended April 2, 2022, and April 3, 2021, our balance sheets at April 2, 2022, and January 1, 2022, our statements of stockholders’ equity for the three months ended April 2, 2022, and April 3, 2021, and our statements of cash flows for the three months ended April 2, 2022, and April 3, 2021.

We derived the condensed consolidated balance sheet at July 2, 2022 from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2022 (the “Fiscal 2021 Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”) on February 22, 2022.

In the opinion of our management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of our statements of operations and comprehensive income for the three and six months ended July 2, 2022 and July 3, 2021, our balance sheets at July 2, 2022 and January 1, 2022, our statements of stockholders’ equity for the six months ended July 2, 2022 and July 3, 2021, and our statements of cash flows for the six months ended July 2, 2022 and July 3, 2021.

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

Therefore, these condensed consolidated interim financial statements should be read in conjunction with the Fiscal 2021 Form 10-K.

The results for the three months ended April 2, 2022, are not necessarily indicative of results that may be expected for the full year ending December 31, 2022, or any other interim period.

The results for the three and six months ended July 2, 2022 are not necessarily indicative of results that may be expected for the full year ending December 31, 2022, or any other interim period.

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

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Reclassification of Prior Period Presentation

For the quarter ended April 3, 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 quarter ended April 2, 2022.

For the six months ended July 3, 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 six months ended July 2, 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.

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

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

Recently Adopted Accounting Standards

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The Company adopted this

standard on a modified retrospective basis in the first quarter of 2022 and the implementation did not have a material impact to the Company’s condensed consolidated financial statements.

standard in the first quarter of 2022 and the implementation did not have a material impact to the Company’s condensed consolidated financial statements.

Reference Rate Reform.

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

During the second quarter of fiscal 2021, we recorded a lower of cost or net realizable value reserve of $ 16.7 million resulting from the decrease in the value of our structural lumber inventory related to the decline in wood-based commodity prices as of the end of the period.

In addition, during the second quarter of fiscal 2022, we recorded a lower of cost or net realizable value reserve of $ 9.8 million as of the end of the period, also resulting from the decline in wood-based commodity prices.

Goodwill and Other Intangible Assets

In connection with our past merger and acquisition activity, we acquired certain intangible assets.

As of April 2, 2022, our intangible assets consist of goodwill and other intangible assets including customer relationships, noncompete agreements, and trade names.

As of July 2, 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.

As of April 2, 2022, goodwill was $ 47.8 million.

As of July 2, 2022, goodwill was $ 47.8 million.

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

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

No such indicators were present during the first quarter of fiscal 2022.

Our one reporting unit has a fair value that exceeds its carrying value as of April 2, 2022.

No such indicators were present during the second quarter of fiscal 2022.

Our one reporting unit has a fair value that exceeds its carrying value as of July 2, 2022.

Definite-Lived Intangible Assets

On April 2, 2022, the gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets were as follows:

On July 2, 2022, the gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets were as follows:

Intangible Asset Weighted Average Remaining Useful Lives (Years) Gross Carrying Amounts Accumulated

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Amortization Expense

Amortization expense for our definite-lived intangible assets was $ 1.1 million and $ 1.8 million for the three-month periods ended April 2, 2022, and April 3, 2021, respectively.

Amortization expense for our definite-lived intangible assets was $ 0.6 million and $ 1.7 million for the three and six month periods ended July 2, 2022, respectively.

For the three and six month periods ended July 3, 2021, amortization expense was $ 1.2 million and $ 3.1 million, respectively.

Estimated amortization expense for definite-lived intangible assets for the remaining portion of 2022 and the next five fiscal years is as follows:

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Cash discounts and sales returns are estimated using historical experience.

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

Adjustments to earnings resulting from revisions to estimates on discounts and returns have been insignificant for

each of the reported periods.

Trade allowances are based on the estimated obligations and historical

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

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

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Sales and usage-based taxes are excluded from revenues.

Three Months Ended

Product type April 2, 2022 April 3, 2021

(In thousands)

Three Months Ended Six Months Ended

Product type July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

(In thousands) (In thousands)

Specialty products $ 787,860 $ 675,189 $ 1,555,767 $ 1,237,811

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Sales and usage-based taxes are excluded from revenues.

Three Months Ended

Sales channel April 2, 2022 April 3, 2021

(In thousands)

Three Months Ended Six Months Ended

Sales channel July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

(In thousands) (In thousands)

Warehouse and reload $ 1,020,341 $ 1,062,149 $ 2,098,287 $ 1,911,569

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Assets Held for Sale

As of April 2, 2022, and January 1, 2022, the net book value of total assets classified as “held for sale” was $ 3.0 million and $ 2.6 million, respectively, and was included in other current assets in our condensed consolidated balance sheets.

The book value of total liabilities classified as “held for sale” as of April 2, 2022, and January 1, 2022, was $ 2.1 million and $ 1.9 million, respectively, and was included in other current liabilities in our condensed consolidated balance sheets.

Assets classified as “held for sale” as of April 2, 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.

As of July 2, 2022, we had no assets or liabilities classified as “held for sale”.

As of January 1, 2022, the net book value of total assets classified as “held for sale” was $ 2.6 million and was included in other current assets in our condensed consolidated balance sheet.

As of January 1, 2022, the book value of total liabilities classified as “held for sale” was $ 1.9 million and was included in other current liabilities in our condensed consolidated balance sheet.

Assets classified as “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” as of January 1, 2022 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.

As of January 1, 2022, we planned to sell these assets and transfer these liabilities within the next 12 months.

During the second quarter of 2022, we completed the sale of assets and liabilities previously classified as held for sale.

Long-Term Debt

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

April 2, 2022 January 1, 2022

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

July 2, 2022 January 1, 2022

(In thousands)

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Revolving credit facility (2)

Term loan facility (3)

Finance lease obligations (3)

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Long-term debt, net of current maturities $ 555,153 $ 558,124

(1) As of April 2, 2022 and January 1, 2022, our long-term debt was comprised of $ 300.0 million of senior secured notes issued in October 2021.

These notes are presented under the “Long-term debt” caption of our condensed consolidated balance sheets at $ 291.5 million and $ 291.3 million at April 2, 2022, and January 1, 2022, respectively.

This presentation is net of their discount of 3.9 million and 4.0 million and the combined carrying value of our debt issuance costs of 4.6 million and 4.7 million at April 2, 2022, and January 1, 2022, respectively.

(1) As of July 2, 2022 and January 1, 2022, our long-term debt was comprised of $ 300.0 million of senior secured notes issued in October 2021.

These notes are presented under the “Long-term debt” caption of our condensed consolidated balance sheets at $ 291.8 million and $ 291.3 million at July 2, 2022 and January 1, 2022, respectively.

This presentation is net of their discount of $ 3.8 million and $ 4.0 million and the combined carrying value of our debt issuance costs of $ 4.5 million and $ 4.7 million at July 2, 2022 and January 1, 2022, respectively.

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

(2) The average effective interest rate was zero percent and 2.4 percent for the quarters ended April 2, 2022, and April 3, 2021, respectively.

(3) The average effective interest rate, exclusive of fees and prepayment premiums, was zero percent and 8.0 percent for the quarters ended April 2, 2022, and April 3, 2021, respectively.

(2) The average effective interest rate was zero percent and 2.5 percent for the quarters ended July 2, 2022 and July 3, 2021, respectively.

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

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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.

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

Revolving Credit Facility

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

As of April 2, 2022, we had zero outstanding borrowings and excess availability, including cash in qualified accounts, of $ 420.9 million under our revolving credit facility.

As of July 2, 2022, we had zero outstanding borrowings and excess availability, including cash in qualified accounts, of $ 451.4 million under our Revolving Credit Facility.

As of January 1, 2022, we had zero outstanding borrowings and excess availability, including cash in qualified accounts, of $ 431.7 million under our Revolving Credit Facility.

Our average effective interest rate under the facility was zero percent and 2.4 percent for the quarters ended April 2, 2022, and April 3, 2021, respectively.

Our average effective

interest rate under the facility was zero percent and 2.5 percent for the quarters ended July 2, 2022 and July 3, 2021, respectively.

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

We were in compliance with all covenants under the revolving credit facility as of April 2, 2022.

We were in compliance with all covenants under the Revolving Credit Facility as of July 2, 2022.

Term Loan Facility

On April 2, 2021, we repaid the remaining outstanding principal balance of the term loan facility, and, as a result, as of January 1, 2022 and April 2, 2022, we had zero outstanding borrowings under the term loan facility, which has been extinguished.

On April 2, 2021, we repaid the remaining outstanding principal balance of the term loan facility, and, as a result, as of January 1, 2022 and July 2, 2022, we had zero outstanding borrowings under the term loan facility, which has been extinguished.

In connection with our repayment of the outstanding principal balance in full on April 2, 2021, we expensed $ 5.8 million of debt issuance costs that we were amortizing in connection with our former term loan facility.

These costs are included within interest expense, net on the condensed consolidated statements of operations and reported separately as an adjustment to net income in our condensed consolidated statements of cash flows.

As the facility was paid in full as of April 2, 2021, our average effective interest rate under the facility, exclusive of fees and prepayment premiums, was zero percent for the quarter ended April 2, 2022.

For the quarter ended April 3, 2021, our average effective interest rate under the facility, exclusive of fees and prepayment premiums, was approximately 8.0 percent.

Finance Lease Obligations

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

Three Months Ended

Pension-related items April 2, 2022 April 3, 2021

(In thousands)

Three Months Ended Six Months Ended

Pension-related items July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

(In thousands) (In thousands)

Service cost (1)

$ — $ — $ — $ —

Interest cost on projected benefit obligation 606 505 1,212 1,010

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Stock Compensation

During the three months ended April 2, 2022, and April 3, 2021, we incurred stock compensation expense of $ 2.2 million and $ 1.4 million, respectively.

The increase in our stock compensation expense for the three-month period is primarily attributable to an increase in the number of awards granted, as well as the increase in the grant-date fair value, or the Company’s stock price, of awards currently vesting compared to the prior year.

During the three and six month periods ended July 2, 2022, we incurred stock compensation expense of $ 1.8 million and $ 3.9 million, respectively.

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

The decrease in our stock compensation expense for the three month period ended July 2, 2022 compared to the prior-year period is primarily attributable to the timing of award vesting and associated expense recognition.

The increase in our stock compensation expense for the six month period ended July 2, 2022 compared to the prior-year period is primarily attributable to an increase in the number of awards granted, as well as the increase in the grant-date fair value, or the Company’s stock price, of awards currently vesting compared to the prior year.

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

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

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

Lease assets and liabilities April 2, 2022 January 1, 2022

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

Lease assets and liabilities July 2, 2022 January 1, 2022

(In thousands)

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Total lease liabilities $ 319,714 $ 324,388

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $ 77.5 million and $ 73.7 million as of April 2, 2022, and January 1, 2022, respectively.

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $ 82.3 million and $ 73.7 million as of July 2, 2022 and January 1, 2022, respectively.

The components of lease expense were as follows:

Three Months Ended

Components of lease expense April 2, 2022 April 3, 2021

(In thousands)

Three Months Ended Six Months Ended

Components of lease expense July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

(In thousands) (In thousands)

Operating lease cost:

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Total finance lease costs $ 11,010 $ 10,451 $ 20,880 $ 20,596

Supplemental cash flow information related to leases was as follows:

Three Months Ended

Cash flow information April 2, 2022 April 3, 2021

(In thousands)

Cash flow information related to leases was as follows:

Three Months Ended Six Months Ended

Cash flow information July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

(In thousands) (In thousands)

Cash paid for amounts included in the measurement of lease liabilities

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Financing cash flows from finance leases $ 1,011 $ 2,542 $ 4,733 $ 4,671

Non-cash supplemental cash flow information related to leases was as follows:

Three Months Ended Six Months Ended

Non-cash information July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

(In thousands) (In thousands)

Right-of-use assets obtained in exchange for lease obligations

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Supplemental balance sheet information related to leases was as follows:

Balance sheet information April 2, 2022 January 1, 2022

Balance sheet information July 2, 2022 January 1, 2022

(In thousands)

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Finance leases 9.47 % 10.00 %

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

Category April 2, 2022 January 1, 2022

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

Category July 2, 2022 January 1, 2022

(In thousands)

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Total finance leases $ 271,425 $ 274,717

As of April 2, 2022, maturities of lease liabilities were as follows:

As of July 2, 2022, maturities of lease liabilities were as follows:

Fiscal year Operating leases Finance leases

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

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

Collective Bargaining Agreements

As of April 2, 2022, we employed approximately 2,078 associates and less than one percent of our associates are employed on a part-time basis.

Approximately 20 percent of our associates are represented by various local labor unions with terms and conditions of employment governed by Collective Bargaining Agreements (“CBAs”).

As of July 2, 2022, we employed approximately 2,053 associates and less than one percent of our associates are employed on a part-time basis.

Approximately 19 percent of our associates are represented by various local labor unions with terms and

conditions of employment governed by Collective Bargaining Agreements (“CBAs”).

Two CBAs covering approximately three percent of our associates are up for renewal in fiscal 2022, both of which we expect to renegotiate by the end of the year.

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Accumulated other comprehensive loss is separately presented on our condensed consolidated balance sheets as part of stockholders’ equity.

The changes in balances for each component of accumulated other comprehensive loss for the three months ended April 2, 2022, were as follows:

The changes in balances for each component of accumulated other comprehensive loss for the six months ended July 2, 2022 were as follows:

benefit pension

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Other comprehensive income, net of tax 312 — 312

April 2, 2022, ending balance, net of tax $ ( 30,089 ) $ 905 $ ( 29,184 )

July 2, 2022, ending balance, net of tax $ ( 29,933 ) $ 885 $ ( 29,048 )

Effective Tax Rate

Our effective tax rate for the three months ended April 2, 2022, and April 3, 2021, was 26.2 percent and 26.0 percent, respectively.

Our effective tax rate for the three months ended April 2, 2022 and April 3, 2021 were impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, slightly offset by a benefit from the vesting of restricted stock units, which occurred during each period.

Our effective tax rate for the three months ended April 3, 2021 also benefited from the partial release of our valuation allowance for state net operating loss carryforwards we anticipated being able to utilize based on our taxable income through the end of the first quarter of fiscal 2021.

Our effective tax rate for the three months ended July 2, 2022 and July 3, 2021 was 23.1 percent and 23.5 percent, respectively.

Our effective tax rate for the six months ended July 2, 2022 and July 3, 2021 was 25.1 percent and 24.4 percent, respectively.

Our effective tax rate for the three and six months ended July 2, 2022 and July 3, 2021 were impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation.

Each period also includes a benefit from the vesting of restricted stock units, which had a greater impact on the three months ended July 2, 2022 and July 3, 2021 due to the timing of the vesting of our restricted stock awards.

Our effective tax rate for the three and six months ended July 3, 2021 also benefited from the partial release of our valuation allowance for state net operating loss carryforwards we anticipated being able to utilize based on our taxable income through the end of the first and second quarters of fiscal 2021.

Deferred Tax Assets

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

As of April 2, 2022, in our evaluation of the weight of available evidence, we concluded that our net deferred tax assets were not impaired.

As of July 2, 2022, in our evaluation of the weight of available evidence, we concluded that our net deferred tax assets were not impaired.

Income per Share

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

The reconciliation of basic net income and diluted net income per common share for the three-month periods ended April 2, 2022, and April 3, 2021, were as follows:

Three Months Ended

April 2, 2022 April 3, 2021

(In thousands, except per share data)

On May 3, 2022, we announced that our Board of Directors increased our share repurchase authorization to $ 100.0 million, up $ 75.0 million from the previous program, and that we entered into an Accelerated Share Repurchase Agreement (“ASR Agreement”) with Jefferies LLC (“Jefferies”) to repurchase $ 60.0 million of our common stock.

Under the ASR Agreement, we received initial delivery of 553,584 shares of common stock on May 3, 2022 (the “Transaction Date”) representing approximately 65 percent of the total number of shares of common stock initially underlying the ASR Agreement based on our closing stock price of $ 70.45 on May 2, 2022.

The initial delivery of 553,584 shares reduced the number of common shares outstanding on the Transaction Date and, as a result, reduced the weighted average number of common shares outstanding used to calculate basic income per share and diluted income per share for the three and six month periods ended July 2, 2022.

The total number of shares repurchased under the ASR Agreement is based on the average of the daily volume-weighted average price of our common stock during the repurchase period under the ASR Agreement, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreement.

At settlement, under certain circumstances, Jefferies may be required to deliver additional shares of common stock to us, or, under certain circumstances, we may be required to make a cash payment or to deliver shares of our common stock to Jefferies.

Final settlement of the shares of common stock repurchased under the ASR Agreement could occur as early as the third quarter of 2022.

Management has performed an analysis of the average of the daily volume-weighted average price of our common stock since the Transaction Date and has determined, as of July 2, 2022, that the final settlement of shares of common stock under the ASR Agreement is not anticipated to have a dilutive impact upon final settlement.

The reconciliation of basic net income and diluted net income per common share for the three and six month periods ended July 2, 2022 and July 3, 2021 were as follows:

Three Months Ended Six Months Ended

July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

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

Net income $ 71,272 $ 113,458 $ 204,681 $ 175,318

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Diluted income per share $ 7.48 $ 11.61 $ 21.07 $ 18.15

Approximately 3,000 and 113,000 weighted-average share-based awards were excluded from the computation of earnings per share assuming dilution during the three months ended April 2, 2022, and April 3, 2021, respectively, as the awards would have been anti-dilutive for the periods presented.

Subsequent Event

On May 3, 2022, the Company announced that its Board of Directors has increased the Company’s share repurchase authorization to $ 100.0 million, up $ 75.0 million from the previous program, and that it has entered into an Accelerated Share Repurchase agreement (“ASR”) with Jeffries LLC to repurchase $ 60.0 million of the Company’s common stock.

The remaining $ 40.0 million of share repurchases are planned to be executed opportunistically in the open market with $ 6.4 million already completed in the current reporting period.

Approximately 21,000 and 55,000 weighted-average share-based awards were excluded from the computation of earnings per share assuming dilution during the three months ended July 2, 2022 and July 3, 2021, respectively, as the awards would have been anti-dilutive for the periods presented.

Approximately 13,000 and 27,000 weighted-average share-based awards were excluded from the computation of earnings per share assuming dilution during the six months ended July 2, 2022 and July 3, 2021, respectively, as the awards would have been anti-dilutive for the periods presented.

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

What changed 10-Q

Item 1. Financial Statements