What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-21 compared with 2022-02-22 · 422 added, 358 removed, 751 unchanged (51% of the section changed)

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

42 ) (PCAOB ID:

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Statements of Operations and Comprehensive Income

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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.

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

(the Company) as of December 31, 2022 and January 1, 2022, the related consolidated statements of operations and comprehensive income, stockholders’ equity (deficit) and cash flows for each of the two fiscal years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and January 1, 2022, and the results of its operations and its cash flows for each of the two fiscal years in the period ended December 31, 2022 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.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 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 21, 2023 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.

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

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.

We conducted our audits 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.

Our audits 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.

Our audits 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 audits provide a reasonable basis for our opinion.

Critical Audit Matter

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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.

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

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.

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Opinion on the Consolidated Financial Statements

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”).

We have audited the accompanying consolidated statement of stockholders’ equity (deficit) of BlueLinx Holdings, Inc.

(the “Company”) as of January 2, 2021, the related consolidated statements of operations and comprehensive income and cash flows for the year ended January 2, 2021 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.

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These consolidated financial statements are the responsibility of the Company’s management.

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

Our responsibility is to express an opinion on the Company’s consolidated 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.

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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 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.

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

Assessment of the Realizability of Deferred Tax Assets

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We believe that our audit provides a reasonable basis for our opinion.

/s/ BDO USA, LLP

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COMPREHENSIVE INCOME

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

Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands, except per share data)

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Interest expense, net 42,272 45,507 47,414

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

Other expense (income), net 2,054 ( 1,306 ) ( 254 )

Income before provision for income taxes 394,761 393,876 95,081

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CONSOLIDATED BALANCE SHEETS

January 1, 2022 January 2, 2021

December 31, 2022 January 1, 2022

(In thousands, except share data)

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Taxes payable — 6,138

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

Finance lease liabilities - short-term 7,089 7,864

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Real estate deferred gains - short-term 3,935 3,934

Pension benefit obligation - short-term 1,521 —

Other current liabilities 16,518 18,347

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Real estate deferred gains - long-term 70,403 74,206

Pension benefit obligation 11,605 22,684

Pension benefit obligation - long-term — 11,605

Other non-current liabilities 20,512 21,953

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

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

9,048,603 and 9,725,760 outstanding on December 31, 2022 and January 1, 2022, respectively

Additional paid-in capital 200,748 268,085

Accumulated other comprehensive loss ( 31,412 ) ( 29,360 )

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

Accumulated stockholders’ equity 420,603 124,427

Total stockholders’ equity 590,029 363,249

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Paid-In Capital Accumulated

Comprehensive Loss Accumulated Deficit Stockholders’ Equity (Deficit) Total

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

Shares Amount

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Net income — — — — 80,882 80,882

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

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

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Net income — — — — 296,133 296,133

Foreign currency translation, net of tax — — — 5 — 5

Impact of defined pension plan, net of tax — — — 6,610 — 6,610

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Balance, January 1, 2022 9,726 $ 97 $ 268,085 $ ( 29,360 ) $ 124,427 $ 363,249

Net income — — — — 296,176 296,176

Impact of defined pension plan, net of tax — — — ( 2,430 ) — ( 2,430 )

Vesting of restricted stock units 337 3 ( 3 ) — — —

Compensation related to share-based grants — — 9,617 — — 9,617

Repurchase of shares to satisfy employee tax withholdings ( 132 ) ( 1 ) ( 10,533 ) — — ( 10,534 )

Common stock repurchase and retirement ( 882 ) ( 9 ) ( 66,418 ) — — ( 66,427 )

Other — — — 378 — 378

Balance, December 31, 2022 9,049 $ 90 $ 200,748 $ ( 31,412 ) $ 420,603 $ 590,029

See the accompanying notes to the consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

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

Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands)

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Net income $ 296,176 $ 296,133 $ 80,882

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 27,613 28,192 28,901

Amortization of debt issuance costs 1,411 3,881

Amortization of debt discount and issuance costs 1,153 1,411 3,881

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

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Accounts payable ( 31,808 ) 14,837 32,815

Other current assets 712 ( 9,546 )

Taxes payable ( 6,138 ) ( 1,709 ) 10,156

Pension contributions ( 11,876 ) ( 1,100 ) ( 1,493 )

Other current assets ( 11,635 ) 712 ( 9,546 )

Other assets and liabilities 3,959 ( 3,087 ) 23,461

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Cash flows from investing activities:

Acquisition of business, net of cash acquired ( 63,767 ) — —

Proceeds from sale of assets 964 10,327 12,849

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Proceeds from real estate financing transactions — — 78,263

Common stock repurchase and retirement ( 66,427 ) — —

Debt financing costs — ( 5,459 ) ( 3,350 )

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specialty products and structural products.

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

Specialty products include items such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products.

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

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

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

Our 2022 fiscal year contained 52 weeks and ended on December 31, 2022.

Fiscal 2021 contained 52 weeks and ended on January 1, 2022.

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

Reclassification of Prior Period Presentation

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.

For the years ended January 1, 2022 and 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 December 31, 2022.

Our reclassifications are limited to the operating activities section and include presenting pension contributions, which were previously presented within the change of other assets and liabilities, as an individual item within changes in operating assets and liabilities.

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

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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, including the effects of the novel coronavirus (“COVID-19”), 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, 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.

The global impact of the COVID-19 pandemic may also affect our accounting estimates, which may materially change from period to period due to changing market factors.

We regularly evaluate these significant factors and make adjustments where facts and circumstances dictate.

Revenue Recognition

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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.

Outbound shipping and handling costs included in “Selling, general, and administrative” expenses were $ 160.3 million, $ 149.2 million, and $ 151.2 million for fiscal 2022, 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.

Cash equivalents consist of short-term investments that have an original maturity of three months or less at the date of purchase.

At December 31, 2022 and January 1, 2022, the majority of our cash and cash equivalents were comprised of money market funds that are broadly diversified and invested in high-quality, short-duration securities, including U.S.

government agency securities, and similar instruments.

We have significant amounts of cash and cash equivalents that are in excess of federally insured limits.

Though we have not experienced any losses on our cash and cash equivalents to date and we do not anticipate incurring any losses, we cannot be assured that we will not experience losses on our cash and 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 or net realizable value, which also considers items that may be considered damaged, excess, and obsolete inventory.

As of December 31, 2022, we recorded a lower of cost or net realizable value reserve of $ 2.6 million and no reserve as of January 1, 2022.

Consideration Received from Vendors and Paid to Customers

Each year, we enter into agreements with many of our vendors providing for inventory purchase rebates, generally based on achievement of specified volume purchasing levels.

Each fiscal year, we enter into agreements with many of our vendors providing for inventory purchase rebates, generally based on achievement of specified volume purchasing levels.

We also receive rebates related to price protection and various marketing allowances that are common industry practice.

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

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

Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from seven to 15 years for land improvements, 15 to 33 years for buildings, and three to seven years for machinery and equipment.

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

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

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

(In thousands)

Land and land improvements 7 - 15 (1)

$ 19,679 $ 18,808

Buildings 15 - 33

169,730 165,541

Machinery and equipment 3 - 7

120,091 113,364

Construction in progress 8,753 2,222

318,253 299,935

Accumulated depreciation ( 137,099 ) ( 121,223 )

Property and equipment, net $ 181,154 $ 178,712

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

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.

We assess long-lived assets other than goodwill for impairment whenever facts and circumstances indicate that the carrying amount may not be fully recoverable.

If it is determined that the carrying amount of an asset is not recoverable, we compare the carrying amount of the asset to its fair value as estimated using discounted expected future cash flows, market values or replacement values for similar assets.

The amount by which the carrying amount exceeds the fair value of the asset, if any, is recognized as an impairment loss.

Assets Held for Sale

Certain assets and liabilities met the held for sale classification criteria as of January 1, 2022.

Assets and liabilities held for sale are recorded at the lower of their carrying value or fair value less estimated cost to sell and are classified within other current assets and other current liabilities, respectively, in the consolidated balance sheets.

Depreciation is suspended on assets upon classification as held for sale.

As of December 31, 2022, we had no assets or liabilities classified as held for sale.

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

For fiscal 2021 and 2020, the Company was insured for its non-union and certain unionized employee health benefits.

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

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

Self-Insurance

The Company is self-insured for its non-union and certain unionized employee health benefits.

We have purchased stop-loss insurance in order to establish certain limits to our exposure on a per claim basis, both individually and in the aggregate.

Health benefits for some unionized employees for fiscal 2022 and 2021 were paid directly to a union trust, depending upon the union-negotiated benefit arrangement.

For fiscal 2021 and 2020, the Company was self-insured, up to certain limits, for workers’ compensation losses, general liability, and automotive liability losses, all subject to varying “per occurrence” retentions or deductible limits.

The Company is also self-insured, up to certain limits, for workers’ compensation losses, general liability, and automotive liability losses, all subject to varying “per occurrence” retentions or deductible limits.

The Company provides for estimated costs to settle both known claims and claims incurred but not yet reported by making periodic prepayments, considering our retention and stop loss limits.

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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.

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.

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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;

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.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Authoritative guidance for fair value measurements establishes a three-level hierarchy that prioritizes the inputs to valuation models based upon the degree to which they are observable.

The three levels of the fair value measurement hierarchy are as follows:

• Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date

• Level 2 - Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

• Level 3 - Inputs are unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions

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").

The carrying value of the Company’s cash, cash equivalents, trade receivables, and trade payables approximate their fair values because of their short-term nature.

See Note 10, Fair Value Measurements , for additional information with respect to the Company’s fair value measurements.

Business Combinations

We account for business combinations by recognizing the assets acquired and liabilities assumed at the acquisition date fair value.

In valuing certain acquired assets and liabilities, fair value estimates use Level 3 inputs, including future expected cash flows and discount rates.

Goodwill is measured as the excess of consideration transferred over the fair values of the assets acquired and the liabilities assumed.

While we use our best estimates and assumptions to value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement.

As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

Upon the conclusion of the measurement period, any subsequent adjustments arising from new facts and circumstances are recorded to the consolidated statements of operations.

The results of operations of acquisitions are reflected in our consolidated financial statements from the date of acquisition.

Recent Accounting Standards - Adopted

Credit Impairment Losses .

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.

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.

We adopted this standard in the first quarter of 2022 and the implementation did not have a material impact to our consolidated financial statements.

Reference Rate Reform .

In March 2020, the FASB issued ASU No.

2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The standard provides temporary guidance to ease the potential burden in accounting for reference rate reform primarily resulting from the discontinuation of the publication of certain tenors of the London Inter-bank Offered Rate (“LIBOR”) on December 31, 2021, with complete elimination of the publication of the LIBOR by June 30, 2023.

The amendments in this ASU are elective and apply to all entities that have contracts referencing the LIBOR.

Our revolving credit agreement, as further discussed in Note 9, Long-Term Debt , to these consolidated financial statements, currently references the LIBOR for determining interest payable on current and future borrowings and includes provisions for the use of alternative rates if the LIBOR is unavailable.

The guidance in this ASU provides a practical expedient which simplifies accounting analyses under current U.S.

GAAP for contract modifications if the change is directly related to a change

from the LIBOR to a new interest rate index.

We adopted this standard prospectively in the first quarter of 2022.

The implementation did not have a material impact to our consolidated financial statements or to any key terms of our revolving credit agreement other than the discontinuation of the LIBOR.

Income Taxes.

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

In December 2019, the FASB issued ASU No.

2019-12, “Income Taxes (Topic 740):

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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.

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.

Recent Accounting Standards - Not Yet Adopted

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.

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.

The adoption of the standard did not have a material impact on our consolidated financial statements.

Business Combination

On October 3, 2022, we acquired all the outstanding stock of Vandermeer Forest Products (“Vandermeer”), a premier wholesale distributor of building products, for preliminary total consideration of $ 69.3 million.

Preliminary total consideration includes a purchase price of $ 67.0 million plus a preliminary estimate for cash acquired and net adjustments for working capital related to the transaction.

The purchase price of $ 67.0 million includes $ 63.4 million for the business and $ 3.6 million for a distribution facility and real estate located in Spokane, Washington, which was acquired in transaction.

The acquisition was funded with cash on hand.

Vandermeer was founded in 1972 and serves more than 250 customers across the Pacific Northwest, Alaska, Hawaii, British Columbia and Alberta from distribution facilities in Kent, Spokane, and Marysville, Washington.

The acquisition of Vandermeer provides us with direct access to customers within Seattle and Portland, two of the top 15 highest growth repair and remodel and new construction markets in the United States.

Additionally, with our acquisition of Vandermeer, we now have coast-to-coast reach and serve all 50 states.

The Vandermeer acquisition has been accounted for as a business combination using the acquisition method, and the Vandermeer results of operations are included in our results of operations from the October 3, 2022 acquisition date through the end of fiscal 2022.

Vandermeer contributed revenues of $ 25.5 million from October 3, 2022 through the end of fiscal 2022.

The assets acquired and liabilities assumed were recognized at their acquisition date fair values.

The acquisition accounting, including fair value estimations, is subject to change as we finalize all assessments over the assets and liabilities that were acquired on the acquisition date.

The primary area of the preliminary acquisition accounting that is not yet finalized relates to settlement of the holdback liability, specifically as it relates to adjustments for final working capital balances.

The following table summarizes the components of the preliminary consideration:

Preliminary Consideration Transferred

(In thousands)

Cash consideration paid to and on behalf of shareholder $ 62,929

Holdback liability (1)

Total preliminary consideration transferred 69,273

(1) Included in the total preliminary consideration as of December 31, 2022 is a $ 6.3 million holdback liability held in escrow for general representations and warranties of the seller that is scheduled to be settled approximately 18 months after the acquisition date.

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

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

Goodwill also includes certain other intangible assets that do not qualify for separate recognition, such as an assembled workforce.

We intend to make a 338(h)(10) tax election which will allow us to deduct goodwill generated from the acquisition for tax purposes.

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

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

Preliminary Allocation as of Acquisition Date

(In thousands)

Estimated fair value of identifiable assets acquired and liabilities assumed

Accounts receivable 13,180

Inventory 16,538

Property, plant and equipment 3,955

Operating lease right-of-use assets 714

Prepaid expenses and other assets 701

Intangible assets and goodwill:

Customer relationships 23,000

Trade names 1,000

Non-compete agreements 700

Goodwill 7,600

Accounts payable ( 1,738 )

Accrued compensation ( 994 )

Operating lease liability ( 714 )

Other current liabilities ( 175 )

Total estimated fair value of net assets acquired $ 69,273

The estimated useful life for the customer relationships, trade names, and non-compete agreements is 12 years, three years , and five years , respectively.

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

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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.

As of the end of fiscal 2022, we recorded a lower of cost or net realizable value reserve of $ 2.6 million as a result of the decrease in the value of our structural lumber and panel inventory related to the decline in wood-based commodity prices as of the end of the period.

As of 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 a reserve was not necessary.

Revenue Recognition

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Contracts with our customers are generally in the form of standard terms and conditions of sale.

From time to time, we may enter into specific contracts with some of our larger customers, which may affect delivery terms.

From time to time, we may enter into specific contracts, which may affect delivery terms.

Performance obligations in our contracts generally consist solely of delivery of goods.

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Fiscal Year Ended

January 1, 2022 January 2, 2021

December 31, 2022 January 1, 2022 January 2, 2021

(In thousands)

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The following table presents our revenues disaggregated by sales channel.

Warehouse sales are delivered from our warehouses to our customers.

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

Warehouse sales are delivered from our warehouses.

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

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

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

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

Sales and usage-based taxes are excluded from revenues.

Fiscal Year Ended

January 1, 2022 January 2, 2021

December 31, 2022 January 1, 2022 January 2, 2021

(In thousands)

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Goodwill and Other 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.

As of December 31, 2022 and 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.

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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 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 our assessment, no impairment was indicated.

We evaluate goodwill for impairment as of the first day of our fourth quarter, which was October 2, 2022 for fiscal 2022.

completed our annual assessment of goodwill in the fourth quarter of fiscal 2022 using a qualitative approach.

The qualitative goodwill impairment assessment requires us to evaluate factors, based on the weight of evidence, to determine whether our single reporting unit's carrying value would more likely than not exceed its fair value.

As part of our goodwill qualitative testing process for our reporting unit, we evaluate various factors that are specific to the reporting unit, as well as industry and macroeconomic factors, in order to determine whether they are reasonably likely to have a material impact on the fair value of our reporting unit.

Based on the qualitative analysis performed in fiscal 2022, we concluded that there were no changes that were reasonably likely to cause the fair value of our reporting unit to be less than its carrying value and determined that there was no impairment of our goodwill.

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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No such indicators were present in fiscal 2022 and fiscal 2021.

The following table provides information related to the carrying amount of our goodwill:

Total Carrying Amount

(In thousands)

Balance at January 2, 2021 $ 47,772

Acquisitions —

Balance at January 1, 2022 $ 47,772

Acquisitions 7,600

Balance at December 31, 2022 $ 55,372

Definite-Lived Intangible Assets

The gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets at January 1, 2022 were as follows:

The gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets at December 31, 2022 were as follows:

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

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Customer relationships 10 $ 48,500 $ ( 15,093 ) $ 33,407

Noncompete agreements 1 8,254 ( 7,659 ) 595

Non-compete agreements 5 8,954 ( 8,289 ) 665

Trade names 3 7,826 ( 6,909 ) 917

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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

Certain of our customer relationships are amortized on a double declining balance method and certain others are amortized on a straight line basis.

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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Customer relationships 8 $ 25,500 $ ( 12,492 ) $ 13,008

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

Non-compete agreements 1 8,254 ( 7,659 ) 595

Trade names — 6,826 ( 6,826 ) —

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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

Customer relationships are amortized on a double declining balance method.

Amortization Expense

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.

Amortization expense for the definite-lived intangible assets was $ 3.4 million, $ 5.3 million, and $ 7.5 million for the years ended December 31, 2022, 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)

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.

Property, Plant and Equipment

Property, plant and equipment as of December 31, 2022 and January 1, 2022, consisted of the following:

December 31, 2022 January 1, 2022

(In thousands)

Land and land improvements $ 24,829 $ 19,679

Buildings 179,936 169,730

Machinery and equipment 138,351 120,091

Construction in progress 17,753 8,753

360,869 318,253

Accumulated depreciation ( 155,260 ) ( 137,099 )

Property and equipment, net $ 205,609 $ 181,154

Depreciation expense was $ 24.2 million, $ 22.8 million, and $ 21.3 million for the years ended December 31, 2022, January 1, 2022, and January 2, 2021, respectively.

Assets Held for Sale

As of December 31, 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 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 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 were to 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.

In fiscal 2022, our statutory rate was 25.4 percent and it was comprised of the federal statutory income tax rate of 21.0 percent and our blended state statutory rate of 4.4 percent.

In fiscal 2021, our statutory rate was 25.8 percent and it 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 and it 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 1, 2022 Fiscal Year Ended January 2, 2021

For fiscal 2022, fiscal 2021, and fiscal 2020, our effective tax was 25.0 percent, 24.8 percent, and 14.9 percent, respectively.

Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands)

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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

Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands)

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Provision for income taxes $ 98,585 $ 97,743 $ 14,199

At December 31, 2022, we recorded an income tax receivable of $ 9.9 million and is included within other current assets on our consolidated balance sheets.

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.

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For fiscal 2022 and fiscal 2021, the components of our net deferred income tax assets are as follows:

January 1, 2022 January 2, 2021

December 31, 2022 January 1, 2022

(In thousands)

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Activity in our deferred tax asset valuation allowance for fiscal 2022 and 2021 was as follows:

January 1, 2022 January 2, 2021

December 31, 2022 January 1, 2022

(In thousands)

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State net operating loss carryforwards ( 193 ) ( 3,018 )

Disallowed interest limitation under the Tax Act and CARES

Balance as of end of the fiscal year $ 4,076 $ 4,269

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

January 1, 2022 January 2, 2021

December 31, 2022 January 1, 2022

($ in thousands)

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Balance at end of the fiscal year $ 1,872 $ 2,205

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.

Included in the unrecognized tax benefits as of December 31, 2022 and January 1, 2022, were approximately $ 1.9 million and $ 2.2 million, respectively of tax benefits that, if recognized, would reduce our annual effective tax rate for fiscal 2022 and 2021.

No penalties were accrued for either 2022 or 2021.

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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.

We had no impact to our income tax provision in fiscal 2021 or 2022 from either The Tax Act nor CARES.

Net Operating Losses

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.

At the end of fiscal 2021, our gross state net operating loss carryovers were $ 98.6 million and our tax-effected state net operating loss carryovers were $ 5.4 million, of which $ 4.3 million was subject to a valuation allowance arising from expiration date when considered in conjunction with state limitations related to Internal Revenue Code (“IRC”) Section 382.

At the end of fiscal 2022, our gross state net operating loss carryovers were $ 92.2 million and our tax-effected state net operating loss carryovers were $ 5.0 million, of which $ 4.1 million was 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.

During fiscal 2021, we reversed $ 3.0 million in valuation allowance against our state net operating losses.

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.

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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 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.

In our evaluation of the weight of available evidence at the end of fiscal 2022, we considered the recent reported income in the current year, as well as the reported income for 2021 and 2020, 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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Long-Term Debt

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

January 1, 2022 January 2, 2021

As of December 31, 2022, and January 1, 2022, long-term debt consisted of the following:

December 31, 2022 January 1, 2022

(In thousands)

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Revolving credit facility (2)

Term loan facility (3)

Finance lease obligations (3)

6 unchanged sentences

Long-term debt, net of current maturities $ 558,410 $ 558,124

(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.

(1) As of December 31, 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 balance sheet at $ 292.4 million and $ 291.3 million at December 31, 2022 and January 1, 2022, respectively.

This presentation is net of their discount of $ 3.5 million and $ 4.0 million and the combined carrying value of our debt issuance costs of $ 4.1 million and $ 4.7 million at December 31, 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 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.

(2) The average effective interest rate was zero percent and 2.5 percent for the years ended December 31, 2022 and January 1, 2022, respectively.

(3) Refer to Note 14, 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 (“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 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.

Borrowings under the revolving credit agreement are subject to availability under the Borrowing Base (as that term is defined in the Revolving Credit Agreement).

The Borrowers are required to repay revolving loans thereunder to the extent that such revolving loans exceed the Borrowing Base then in effect.

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 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.

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”).

In October 2021, we completed a private offering of $ 300.0 million of our six percent senior secured notes due 2029 (the “2029 Notes”), and in connection therewith we entered into an indenture (the “Indenture”) with the guarantors party thereto and Truist Bank, as trustee and collateral agent.

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 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

In April 2018, we entered into a revolving credit facility with Wells Fargo Bank, National Association, as administrative agent (“the Agent”), and certain other financial institutions party thereto.

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

In October 2021, in conjunction with the offering of our 2029 Notes, we reduced the credit limit of the Revolving Credit Facility from $ 600.0 million to $ 350.0 million.

In conjunction with the reduction in 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.

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.

The Revolving Credit Facility provides for a senior secured asset-based revolving loan and letter of credit facility of up to $ 350.0 million.

The Borrowers’ obligations under the Revolving Credit Facility 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.

Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to (i) LIBOR plus a margin ranging from 1.25 percent to 1.75 percent, with the margin determined based upon average excess availability for the immediately preceding fiscal quarter for loans based on LIBOR, or (ii) the Agent’s base rate plus a margin ranging from 0.25 percent to 0.75 percent, with the margin based upon average excess availability for the immediately preceding fiscal quarter for loans based on the base rate.

Our Revolving Credit Facility includes available interest rate options based on LIBOR, which will be discontinued as an available rate option after June 30, 2023.

Under the terms of the facility, LIBOR will be replaced with the Secured Overnight

Financing Rate (“SOFR”) with respect to the applicable variable rate interest options thereunder, with effect on or before June 30, 2023.

Borrowings under the Revolving Credit Facility are subject to availability under the Borrowing Base (as that term is defined in the revolving credit agreement).

The Borrowers are required to repay revolving loans thereunder to the extent that such revolving loans exceed the Borrowing Base then in effect.

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 December 31, 2022, we had zero outstanding borrowings and excess availability, including cash in qualified accounts, of $ 645.4 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.

Available borrowing capacity under our Revolving Credit Facility was $ 346.5 million on December 31, 2022 and January 1, 2022, respectively.

Our average effective interest rate under the facility was zero percent and 2.5 percent for the years ended December 31, 2022 and January 1, 2022, 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 December 31, 2022.

Term Loan Facility

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

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

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 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.

On April 2, 2021, we repaid the remaining outstanding principal balance of our former term loan facility, and, as a result, as of January 1, 2022 and December 31, 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 consolidated statements of operations and reported separately as an adjustment to net income in our consolidated statements of cash flows.

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.

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 and 8.0 percent for the years ended December 31, 2022 and January 1, 2022, respectively.

Finance Lease Obligations

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.

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

For more information on our finance lease obligations, refer to Note 14, Lease Commitments .

Fair Value Measurements

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

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

Fair value measurements for defined benefit pension plan

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

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Disclosures are required for certain assets and liabilities that are measured at fair value on a nonrecurring basis in periods after initial recognition.

Such measurements of fair value relate primarily to assets and liabilities measured at fair value in connection with business combinations and asset impairments.

For more information on business combinations, see Note 2, Business Combination .

There were no material long-lived asset impairments during the fiscal years 2022, 2021, and 2020.

Fair Value of Debt

The estimated fair value of the Company’s 2029 Notes, as defined above, was determined based on Level 2 input using observable market prices in less active markets.

The carrying amount of the Company’s Revolving Credit Facility approximates its fair value as the interest rate is variable and reflective of market rates.

The following table presents the carrying value and fair value of the Company’s 2029 Notes:

December 31, 2022 January 1, 2022

Carrying Value Fair Value Carrying Value Fair Value

(In thousands)

2029 Notes $ 300,000 $ 283,558 $ 300,000 $ 367,569

Fair Value of Defined Benefit Pension Plan

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

For example, we sponsor and contribute to a single-employer defined benefit pension plan (see Note 11, Employee Benefits ).

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Single-Employer Defined Benefit Pension Plan

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

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

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

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

In October 2022, we notified participants of the plan that, after careful consideration, we intended to terminate the plan and transfer the management and delivery of continuing benefits associated with the plan to a highly rated and qualified insurance company with pension termination experience.

The process for terminating a pension plan involves several regulatory steps and approvals, and typically takes 12 to 18 months to complete.

During fiscal 2013, and as previously disclosed, we contributed two properties to the plan in lieu of a cash contribution and entered into a lease for each of these properties.

As a component of our plan to terminate the plan, we repurchased these two real estate properties that were held by the plan for $ 11.1 million, which terminated the associated leases.

The repurchase in 2022 included certain land and buildings, located in Charleston, S.C.

and Buffalo, N.Y., valued at approximately $ 11.1 million by independent appraisals prior to the purchase.

At the time of repurchase, we were leasing the contributed properties from the plan for an initial term of 20 years with two five-year extension options and had continued to use the properties in our distribution operations since their contribution in fiscal 2013.

Each lease provided us a right of first refusal on any subsequent sale by the plan and a repurchase option.

At the time of our initial contribution of the properties, the plan engaged an independent fiduciary who managed the properties on behalf of the plan.

The plan’s independent fiduciary evaluated the property purchase on behalf of the plan and negotiated the terms of the sale.

The repurchase amount is included in pension contributions within the operating activities section of our consolidated statements of cash flow for the year ended December 31, 2022.

Our actuarial assumptions for the plan as of fiscal year ended December 31, 2022 include considerations for termination of the plan.

We estimate our plan termination will be completed during fiscal 2023, at which time we expect to record a non-cash, pre-tax pension settlement charge equal to the balance of our accumulated other comprehensive loss, which is $ 27.4 million as of December 31, 2022.

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

January 1, 2022 January 2, 2021

December 31, 2022 January 1, 2022

(In thousands)

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Interest cost 2,424 2,019

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

Actuarial gain ( 19,687 ) ( 4,106 )

Benefits paid ( 5,859 ) ( 5,866 )

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Net unfunded status of plan $ ( 1,521 ) $ ( 11,605 )

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

The accumulated benefit obligation for the pension plan was $82.7 million and $ 105.9 million at December 31, 2022 and January 1, 2022, 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 accumulated other comprehensive income (loss), net of tax.

As of December 31, 2022 and January 1, 2022, the net unfunded status of our benefit plan was $ 1.5 million and $ 11.6 million, respectively.

As discussed above, we estimate our plan termination will be completed during fiscal 2023.

Accordingly, we have recognized the net unfunded status of our benefit plan as of December 31, 2022 as a current liability in our consolidated balance sheet.

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.

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

We amortize a portion of unrecognized actuarial gains and losses for the pension plan into our consolidated statements of operations and comprehensive income (loss).

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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 2021 and fiscal 2020, was a $ 6.6 million net of tax gain and a $ 1.4 million net of tax loss, respectively.

The net adjustment to other comprehensive income (loss) for fiscal 2022 and fiscal 2021 was a $ 2.4 million net of tax loss and a $ 6.6 million net of tax gain, 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 decrease in the unfunded obligation for the fiscal year was approximately $ 10.1 million and was primarily comprised of $ 19.7 million of actuarial gain, $ 19.1 million of negative investment returns, $ 11.9 million of pension contributions (comprised of our re-purchase of properties previously contributed to the plan in 2013 and their respective annual lease payments), and a charge of $ 2.4 million due to current year interest cost.

The net periodic pension credit was $ 1.4 million in fiscal 2022 compared to $ 1.3 million in fiscal 2021, driven primarily by a reduction in the interest cost on the projected benefit obligation.

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 1, 2022 January 2, 2021

The unfunded status recorded as pension benefit obligation on our consolidated balance sheets for the plan is set forth in the following table, along with the unrecognized actuarial loss, which is presented as part of accumulated other comprehensive loss:

December 31, 2022 January 1, 2022

(In thousands)

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Net amount recognized $ 25,917 $ 12,595

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

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

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

Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022

(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 1, 2022 January 2, 2021

December 31, 2022 January 1, 2022

Projected benefit obligation:

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These assumptions include, but are not limited to, the discount rate, projected return on plan assets, and mortality rates.

The rate of increase in future compensation levels has a minimal effect on both the projected benefit obligation and net periodic pension cost, as almost all the participants in the plan are inactive, the majority of the remaining active participants are no longer accruing benefits, and the plan is closed to new entrants.

The rate of increase in future compensation levels has no effect on both the projected benefit obligation and net periodic pension cost, as almost all the participants in the plan are inactive, the remaining active participants are no longer accruing benefits, and the plan is closed to new entrants.

Assumptions for plan termination settlement liability estimate.

Plan liabilities will be settled through a lump sum offer to certain participants followed by an annuity buyout for remaining participants.

The cost of this settlement is developed relative to the plan-based accounting obligations, segmented by participant status and other demographic subgroups where appropriate.

The primary drivers of cost are lump sum election rates, the cost of lump sums relative to accounting obligations, and the cost to purchase annuities for participants not electing lump sums.

Projected return on plan assets.

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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.

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Mortality rates.

The valuations and assumptions reflect adoption of the Society of Actuaries updated RP-2014 mortality tables, with a “blue collar employee” adjustment for non-annuitants and a BlueLinx custom adjustment projected from 2015 for annuitants.

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.

For fiscal year ended December 31, 2022, in conjunction with our decision to terminate the plan, the valuations and assumptions reflect adoption of the Society of Actuaries RP-2018 mortality tables with generational mortality improvement and adjustments to reflect the characteristics of the plan in conjunction actuarial assumptions customary in the insurance industry.

For fiscal year ended January 1, 2022, 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 mortality improvement projection scales, which was MP-2021 as of January 1, 2022.

Plan Assets and Long-Term Rate of Return

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

The current targets, adjusted to exclude non-GAAP BlueLinx real-estate holdings, and actual investment allocation, by asset category as of January 1, 2022, consisted of the following:

Type Current Target Allocation Actual Allocation, January 1, 2022

In conjunction with the decision to terminate the plan, the target allocation of plan assets was adjusted to mitigate funded status risk and support full settlement of assets and liabilities during fiscal 2023.

The current targets and actual investment allocation by asset category as of December 31, 2022, consisted of the following:

Type Current Target Allocation Actual Allocation, December 31, 2022

Global equity 4.0 % 2.8 %

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Total 100 % 100 %

The following table sets forth by level, within the fair value hierarchy (as defined in Note 7, Fair Value Measurements ), pension plan assets at their fair values as of January 1, 2022:

The following table sets forth by level, within the fair value hierarchy, as defined in Note 1, Summary of Significant Accounting Policies , and further discussed in Note 10, Fair Value Measurements , pension plan assets at their fair values as of December 31, 2022:

Type Quoted prices in active markets of identical assets

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Total $ 15,253 $ — $ — $ 65,978 $ 81,231

(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.

(1) This category is comprised of a collective investment trust of equity funds that track the MSCI All Country World global equity 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.

government bond indexes, and pooled investment funds.

(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.

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• Achieving a target investment return

We believe that there are no significant concentrations of risk within our plan assets as of January 1, 2022.

We believe that there are no significant concentrations of risk within our plan assets as of December 31, 2022.

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 January 2, 2021:

We base the asset return assumption on current and expected asset allocations, as well as historical and expected returns on the plan asset categories.

The allocation of the plan’s assets impacts our expected return on plan assets.

The expected return on plan assets is based on a targeted allocation consisting of return-seeking securities (including public equity, real assets, and diversified credit investment strategies), liability-matching securities (fixed income), and cash and cash equivalents.

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

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

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

For fiscal 2021, we used a 5.20 % expected rate of return on plan assets.

The investment policy for the pension plan, in general, is to achieve a reasonable long-term rate of return on plan assets with an acceptable level of risk in order to maintain adequate funding levels.

The pension plan’s Investment Committee establishes risk mitigation policies and regularly monitors investment performance and investment allocation policies, with a third-party investment advisor executing on these strategies.

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

The current targets, adjusted to exclude non-GAAP BlueLinx real-estate holdings, and actual investment allocation, by asset category as of January 1, 2022, consisted of the following:

Type Current Target Allocation Actual Allocation, January 1, 2022

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 %

Type Quoted prices in active markets of identical assets

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(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.

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

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:

• Matching plan liability performance

• Diversifying risk

• Achieving a target investment return

We believe that there are no significant concentrations of risk within our plan assets as of January 1, 2022.

Pension Plan Cash Flows

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

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

Fiscal Year Ended (In thousands)

Thereafter 31,723

2023 $ 82,752

We expect all of the plan’s assets to be distributed in fiscal 2023 in connection with our plan to terminate the plan.

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”).

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

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

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

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

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

Our liability for the remainder of these

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

Our liability for the remainder of these payments was $ 7.0 million as of December 31, 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.

Our most recent contingent withdrawal liability was estimated at approximately $ 60.4 million for a complete withdrawal occurring in 2023.

In the case of a complete withdrawal or a mass withdrawal, the Central States Plan could demand yearly payments of approximately $ 1.1 million, which do not include payments for the partial withdrawal of approximately $ 0.6 million annually.

In the case of a complete withdrawal or a mass withdrawal, the Central States Plan could demand yearly payments of approximately $ 1.1 million, which do not include

payments for the partial withdrawal of approximately $ 0.6 million annually.

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

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Employer contributions to the hourly savings plan for fiscal years 2022 and 2021 were approximately $ 0.8 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.

Employer contributions to the salaried savings plan for fiscal 2022 were approximately $ 4.0 million, of which $ 2.1 million was for fiscal 2021.

Share-Based Compensation

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.

The plans provide a means whereby the participants develop a further sense of proprietorship and personal involvement in our development and financial success, thereby advancing the interests of the Company and its stockholders.

Although we do not have a formal policy on the matter, we issue new shares of our common stock to participants upon the exercise of options or upon the vesting of restricted stock, restricted stock units, or performance shares, out of the total amount of common shares applicable for issuance or vesting under the aforementioned plans.

Shares are available for new issuance only under the 2021 Plan.

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

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.

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We reserved 750,000 shares of our common stock for issuance under the 2021 Plan.

The terms and conditions of awards under the 2021 Plan are determined by the Compensation Committee.

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

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.

The terms and conditions of awards under the 2021 Plan are determined by the Human Capital and Compensation Committee.

Some of the awards issued under the 2021 Plan are subject to accelerated vesting in the event of a change in control as such an event is defined in the respective Plan documents.

Shares are available for new issuance only under the 2021 Plan.

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

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

The 2021 Plan is designed to motivate and retain individuals who are responsible for the attainment of our primary long-term performance goals.

The 2021 Plan provides a means whereby the participants develop a further sense of proprietorship and personal involvement in our development and financial success, thereby advancing the interests of the Company and its stockholders.

Although we do not have a formal policy on the matter, we issue new shares of our common stock to participants upon the exercise of options or upon the vesting of restricted stock, restricted stock units, or performance shares, out of the total amount of common shares available for issuance or vesting under the aforementioned plan.

Restricted Stock Units

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.

During fiscal 2022 and fiscal 2021, the directors on our Board of Directors were granted restricted stock units with a one-year vesting period.

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.

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.

The unrecognized compensation expense is expected to be recognized over a weighted average term of 1.3 years.

As of January 1, 2022, the weighted average remaining contractual term for our restricted stock units was 1.3 years, and the maximum contractual term was 3.0 years.

The grants will settle after one year, although a pro-rated portion of the award may vest and settle 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, 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.

The fiscal 2020 grants settle at the earlier of ten years from the vesting date or retirement from the Board of Directors, whichever comes first.

During fiscal 2022, 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 2022 vest in equal annual increments over the three years after the date of grant and certain others vest on the third anniversary of the date of grant if certain performance conditions are met as of the vesting date.

During fiscal 2021 and fiscal 2020, 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 2021 and fiscal 2020 vest in equal annual increments over the three years after the date of grant.

The following table summarizes activity for our restricted stock units during fiscal 2022:

Restricted Stock Units

Awards Weighted

Awards Weighted Average Grant-Date Fair

Outstanding as of January 1, 2022 488,614 $ 26.13

214,040 42.25

Granted 228,274 $ 69.86

( 338,145 ) $ 26.33

Forfeited ( 53,334 ) $ 22.00

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.

For fiscal 2020, the weighted average grant date fair value of restricted stock units granted was $ 8.52 .

Outstanding as of December 31, 2022 325,409 $ 57.27

(1) The total fair value of restricted stock units vested in fiscal 2022, fiscal 2021, and fiscal 2020 was $ 26.8 million, $ 6.4 million and $ 1.0 million, respectively.

Compensation Expense

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

January 1, 2022 January 2, 2021

We recognize compensation expense equal to the grant-date fair value, which is generally based on the fair market value of our common stock on the date of grant, for all share-based payment awards that are expected to vest.

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.

We account for share-based payment award forfeitures as they occur, rather than making estimates of future forfeitures.

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.

Total share-based compensation expense, net of forfeitures, from our share-based awards was as follows:

Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands)

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Total $ 9,617 $ 6,590 $ 5,992

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

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 recognized related income tax benefits in fiscal years 2022, 2021, and 2020 of $ 3.8 million, $ 1.7 million, and $ 1.5 million, respectively, which were fully realized in fiscal years 2022, 2021, and 2020 .

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.

There were $ 2.1 million and $ 0.9 million of excess tax benefits in fiscal 2022 and fiscal 2021 and no excess tax benefits in fiscal 2020 .

As of December 31, 2022, there was approximately $ 13.4 million of total unrecognized compensation expense related to restricted stock units.

The unrecognized compensation expense is expected to be recognized over a weighted average term of 2.2 years.

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

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

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

On August 23, 2021, our Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $ 25.0 million of our common stock.

During the first quarter of fiscal 2022, we repurchased 81,331 shares of our common stock under this program at an average price of $ 79.03 per share.

On May 3, 2022, our Board of Directors increased our share repurchase authorization to $ 100.0 million and we entered into an Accelerated Share Repurchase Agreement (“ASR Agreement”) with Jefferies LLC 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 fiscal 2022.

Final settlement of the shares of common stock repurchased under the ASR Agreement occurred on September 15, 2022 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 other adjustments pursuant to the terms and conditions of the ASR Agreement.

At settlement, we received an additional 247,431 shares of common stock, which further reduced the weighted average number of common shares outstanding used to calculate basic income per share and diluted income per share for fiscal 2022.

Under our ASR Agreement, we repurchased a total of 801,015 shares of our common stock at an average price of $ 74.90 per share.

The reconciliation of basic net income and diluted net income per common share for fiscal 2022, fiscal 2021, and fiscal 2020 were as follows:

Fiscal Year Ended

January 1, 2022 January 2, 2021

December 31, 2022 January 1, 2022 January 2, 2021

($ in thousands, except per share data)

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Diluted income per share $ 31.51 $ 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.

Approximately 100,000 , 128,000 , and 725,000 weighted-average share-based awards were excluded from the computation of income per share assuming dilution for fiscal years 2022, 2021, and 2020, respectively, as the awards would have been anti-dilutive for the periods presented.

Lease Commitments

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Many of our leases are non-cancelable and typically have a defined initial lease term, and some provide options to renew at our election for specified periods of time.

The majority of our leases have remaining lease terms of 1 year to 15 years, some of which include one or more options to extend the leases for 5 years.

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

Our leases generally provide for fixed annual rentals.

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

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

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

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

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

During the first quarter of fiscal 2020, we completed several real estate financing transactions.

On December 31, 2019, we completed real estate financing transactions on warehouse facilities in Madison, TN;

Kansas City, MO;

Richmond, VA;

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

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

Independence, KY;

San Antonio, TX;

Portland, ME;

Denville, NJ;

Pensacola, FL;

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

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

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

Gross proceeds of these transactions were $ 78.3 million.

We determined that the transactions in 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.

book value of the assets related to these transactions remains on our books as property and equipment and we continue to depreciate the assets over their remaining useful lives.

On August 14, 2020, we entered into a sale-leaseback arrangement on our warehouse facility in Denver, CO.

We determined that this transaction qualified as a sale in accordance with ASC 842 and the lease qualified for operating lease treatment.

Gross proceeds of this transaction were $ 11.0 million and we recognized a related gain of $ 8.7 million.

Upon completion of the transaction, we entered into a long-term lease on the property for an initial term of five years with multiple 5 -year renewal options.

Net proceeds of the transaction were $ 10.6 million, which were used to pay down our term loan facility.

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

The following table presents our assets and liabilities related to our leases as of December 31, 2022 and January 1, 2022:

Lease assets and liabilities December 31, 2022 January 1, 2022

(In thousands)

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Total lease liabilities $ 320,518 $ 324,388

(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.

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $ 90.1 million and $ 73.7 million as of December 31, 2022 and January 1, 2022, respectively.

The components of lease expense were as follows:

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

Components of lease expense Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands)

Operating lease cost:

$ 11,626 $ 12,634

Operating lease cost $ 11,963 $ 11,626 $ 12,634

Sublease income ( 2,704 ) ( 2,555 ) ( 2,466 )

Total operating lease costs $ 9,259 $ 9,071 $ 10,168

Finance lease cost:

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Total finance lease costs $ 40,819 $ 40,030 $ 38,002

Supplemental cash flow information related to leases was as follows:

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

Cash flow information related to leases was as follows:

Cash flow information Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands)

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Financing cash flows from finance leases $ 10,907 $ 11,175 $ 8,662

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

Non-cash information Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 Fiscal Year Ended January 2, 2021

(In thousands)

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

Operating leases (1)

$ 7,968 $ 5,663 $ 4,442

Finance leases 9,092 10,549 3,833

(1) Includes operating lease right-of-use assets obtained in acquisition in fiscal 2022.

See Note 2, Business Combination , for further information.

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

January 1, 2022 January 2, 2021

Balance sheet information December 31, 2022 January 1, 2022

(In thousands)

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Finance leases 8.87 % 10.00 %

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

The major categories of our finance lease liabilities as of December 31, 2022 and January 1, 2022 are as follows:

Category December 31, 2022 January 1, 2022

(In thousands)

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Total finance leases $ 273,075 $ 274,717

As of January 1, 2022, maturities of lease liabilities were as follows:

Operating leases Finance leases

(In thousands)

2022 $ 9,376 $ 32,495

2023 9,134 32,115

2024 8,329 31,521

2025 8,329 27,994

2026 6,050 31,439

Thereafter 40,711 348,149

Total lease payments $ 81,929 $ 503,713

imputed interest ( 32,258 ) ( 228,996 )

Total $ 49,671 $ 274,717

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

Under the short-term lease exception provided within ASC 842, we do not record a lease liability or right-of-use asset for any leases that have a lease term of 12 months or less at commencement.

Below is a summary of undiscounted finance and operating lease liabilities that have initial terms in excess of one year as of December 31, 2022.

The table also includes a reconciliation of the future undiscounted cash flows to the present value of the finance and operating lease liabilities included in the consolidated balance sheets, including options to extend lease terms that are reasonably certain of being exercised.

Operating leases Finance leases

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Collective Bargaining Agreements

As of January 1, 2022, we employed approximately 2,055 employees and less than one percent of our employees are employed on a part-time basis.

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 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.

As of December 31, 2022, we employed approximately 2,100 associates and less than one percent of our associates are employed on a part-time basis.

Approximately 16 percent of our associates are represented by various local labor unions with terms and conditions of employment governed by Collective Bargaining Agreements (“CBAs”).

Five CBAs covering approximately five percent of our associates are up for renewal in fiscal 2023, which we expect to renegotiate by the end of fiscal 2023.

Accumulated Other Comprehensive Income (Loss)

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Accumulated other comprehensive income (loss) is separately presented on our consolidated balance sheets as part of common stockholders’ equity (deficit).

Other comprehensive income (loss) was $ 6.6 million and $( 1.4 ) million for fiscal 2021 and fiscal 2020, respectively.

The changes in accumulated balances for each component of other comprehensive income (loss) for fiscal 2020 and 2021 were as follows:

currency translation, net

The changes in accumulated balances for each component of other comprehensive income (loss) for fiscal 2022, fiscal 2021, and fiscal 2020 were as follows:

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

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December 28, 2019, ending balance, net of tax $ ( 35,441 ) $ 878 $ ( 34,563 )

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

Other comprehensive loss, net of tax (1)

( 1,414 ) ( 15 ) ( 1,429 )

January 2, 2021, ending balance, net of tax $ ( 36,855 ) $ 863 $ ( 35,992 )

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

Other comprehensive income, net of tax (2)

6,610 22 6,632

January 1, 2022, ending balance, net of tax $ ( 30,245 ) $ 885 $ ( 29,360 )

Other comprehensive income (loss), net of tax (3)

( 2,430 ) 378 ( 2,052 )

December 31, 2022, ending balance, net of tax $ ( 32,675 ) $ 1,263 $ ( 31,412 )

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

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(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.

(3) For fiscal 2022, there was $ 2.4 million of impact related to our defined pension for related actuarial adjustments and amortization of unrecognized amounts from the prior year, net of taxes of $ 0.8 million.

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