What changed in this filing

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Item 1. Financial Statements

2023-10-31 compared with 2023-08-01 · 133 added, 116 removed, 401 unchanged (38% of the section changed)

4 unchanged sentences

(In thousands, except per share data)

Three Months Ended Six Months Ended

July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Three Months Ended Nine Months Ended

September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

Net sales $ 809,981 $ 1,060,761 $ 2,423,852 $ 3,602,445

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Net income $ 24,382 $ 59,509 $ 66,660 $ 264,190

Basic income per share $ 2.70 $ 7.64 $ 4.67 $ 21.49

Diluted income per share $ 2.70 $ 7.48 $ 4.67 $ 21.07

Basic earnings per share $ 2.72 $ 6.44 $ 7.39 $ 28.03

Diluted earnings per share $ 2.71 $ 6.38 $ 7.38 $ 27.82

Comprehensive income:

9 unchanged sentences

(In thousands, except share data)

July 1, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Current assets:

18 unchanged sentences

Accrued compensation 18,624 22,556

Finance lease liabilities - short-term 8,238 7,089

Operating lease liabilities - short-term 7,085 7,432

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

Pension benefit obligation - short-term 2,087 1,521

Finance lease liabilities - current portion 9,813 7,089

Operating lease liabilities - current portion 6,845 7,432

Real estate deferred gains - current portion 3,935 3,935

Pension benefit obligation 2,380 1,521

Other current liabilities 24,045 16,518

1 unchanged sentence

Non-current liabilities:

Long-term debt, net of debt issuance costs of $ 3,651 and $ 4,057 , respectively

293,083 292,424

Finance lease liabilities - long-term 262,950 265,986

Operating lease liabilities - long-term 37,853 40,011

Real estate deferred gains - long-term 68,501 70,403

Long-term debt, net of debt issuance costs and discount 293,413 292,424

Finance lease liabilities, less current portion 267,530 265,986

Operating lease liabilities, less current portion 37,007 40,011

Real estate deferred gains, less current portion 67,550 70,403

Other non-current liabilities 20,549 20,512

3 unchanged sentences

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

9,008,476 and 9,048,603 outstanding on July 1, 2023 and December 31, 2022, respectively

8,795,908 and 9,048,603 outstanding on September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 174,906 200,748

9 unchanged sentences

Paid-In Capital Accumulated

Comprehensive Loss Accumulated Equity Stockholders’ Equity Total

Comprehensive Loss Accumulated Equity Stockholders’ Equity

Shares Amount

17 unchanged sentences

Balance, July 1, 2023 9,008 $ 90 $ 190,770 $ ( 30,970 ) $ 462,881 $ 622,771

Net income — — — — 24,382 24,382

Impact of pension plan, net of tax — — — 225 — 225

Vesting of restricted stock units 7 — — — — —

Compensation related to share-based grants — — 2,980 — — 2,980

Repurchase of shares to satisfy employee tax withholdings ( 3 ) — ( 281 ) — — ( 281 )

Obligation for shares repurchases not yet settled ( 10 ) — ( 843 ) — — ( 843 )

Common stock repurchase and retirement ( 206 ) ( 2 ) ( 17,720 ) — — ( 17,722 )

Balance, September 30, 2023 8,796 $ 88 $ 174,906 $ ( 30,745 ) $ 487,263 $ 631,512

See accompanying Notes.

Common Stock Additional

Paid-In Capital Accumulated

Comprehensive Loss Accumulated Equity Stockholders’ Equity Total

Comprehensive Loss Accumulated Equity Stockholders’ Equity

Shares Amount

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

Net income — — — — 59,509 59,509

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

Vesting of restricted stock units 121 1 ( 1 ) — — —

Compensation related to share-based grants — — 2,092 — — 2,092

Repurchase of shares to satisfy employee tax withholdings ( 51 ) ( 1 ) ( 3,618 ) — — ( 3,619 )

Common stock repurchase and retirement ( 247 ) ( 2 ) 2 — — —

Other — — ( 134 ) ( 24 ) — ( 158 )

Balance, October 1, 2022 9,035 $ 90 $ 197,906 $ ( 28,916 ) $ 388,617 $ 557,697

See accompanying Notes.

2 unchanged sentences

(In thousands)

Six Months Ended

July 1, 2023 July 2, 2022

Nine Months Ended

September 30, 2023 October 1, 2022

Cash flows from operating activities:

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Property and equipment acquired under finance leases $ 11,277 $ 5,995

Obligation for repurchase of shares to satisfy employee tax withholdings $ 913 $ —

Obligation for shares repurchases not yet settled $ 843 $ —

See accompanying Notes.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

Basis of Presentation and Summary of Significant Accounting Policies

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

We derived the condensed consolidated balance sheet at July 1, 2023, from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “Fiscal 2022 Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”) on February 21, 2023.

In the opinion of our management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of our statements of operations and comprehensive income for the three and six months ended July 1, 2023 and July 2, 2022, our balance sheets at July 1, 2023 and December 31, 2022, our statements of stockholders’ equity for the six months ended July 1, 2023 and July 2, 2022, and our statements of cash flows for the six months ended July 1, 2023 and July 2, 2022.

The Company is composed of a single reportable segment for financial reporting purposes.

We derived the condensed consolidated balance sheet as of December 31, 2022 from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “Fiscal 2022 Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”) on February 21, 2023.

In the opinion of our management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of our statements of operations and comprehensive income for the three and nine months ended September 30, 2023 and October 1, 2022, our balance sheets as of September 30, 2023 and December 31, 2022, our statements of stockholders’ equity for the nine months ended September 30, 2023 and October 1, 2022, and our statements of cash flows for the nine months ended September 30, 2023 and October 1, 2022.

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

Therefore, these condensed consolidated interim financial statements should be read in conjunction with the Fiscal 2022 Form 10-K.

The results for the three and six months ended July 1, 2023 are not necessarily indicative of results that may be expected for the full year ending December 30, 2023, or any other interim period.

Therefore, these interim condensed consolidated financial statements should be read in conjunction with the Fiscal 2022 Form 10-K.

The results for the three and nine months ended September 30, 2023 are not necessarily indicative of results that may be expected for the full fiscal year ending December 30, 2023, or any other interim period.

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

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

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

Our 2023 fiscal year contains 52 weeks and ends on December 30, 2023.

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Reclassification of Prior Period Presentation

For the six months ended July 2, 2022, we have reclassified certain items within the presentation of our statement of cash flows to align with our statement of cash flows presentation for the six months ended July 1, 2023.

For the nine months ended October 1, 2022, 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 nine months ended September 30, 2023.

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.

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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.

This replaces the former incurred loss model 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.

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

The Company adopted this standard on a

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

Reference Rate Reform.

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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.

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.

The Company’s revolving credit agreement, as further discussed in Note 6, Long-Term Debt , to these condensed consolidated financial statements, was amended on June 27, 2023, to replace references to LIBOR to Secured Overnight Financing Rate (“SOFR”) for determining interest payable on current and future borrowings.

The Company’s revolving credit agreement, as further discussed in Note 6, Long-Term Debt , to these condensed consolidated financial statements, was amended on June 27, 2023, to replace references to LIBOR with Secured Overnight Financing Rate (“SOFR”) for determining interest payable on current and future borrowings.

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

1 unchanged sentence

The Company adopted this standard prospectively in the first quarter of 2022.

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

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

Business Combinations

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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 of 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.

As of the date of the acquisition, the holdback liability was $ 6.3 million.

During the first fiscal quarter of 2023, $ 0.3 million of the holdback liability was returned to the Company for adjustments related to final cash and working capital balances, reducing preliminary total consideration from $ 69.3 million to $ 69.0 million.

The remaining holdback liability of $ 6.0 million is scheduled to be settled approximately 18 months after the acquisition date.

During the first fiscal quarter of 2023, $ 0.3 million was returned to the Company for adjustments related to final cash and working capital balances, reducing preliminary total consideration from $ 69.3 million to $ 69.0 million.

The acquisition accounting, including fair value estimations, is subject to change as we finalize assessments of 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 the fair value of certain liabilities that are subject to seller reimbursement via a cash escrow bank account that was funded through the holdback of $ 6.3 million of the purchase price.

During the third quarter of fiscal 2023, $ 1.6 million of this escrow amount was returned to the seller under the terms of the stock purchase agreement and the escrow arrangement that provide for scheduled return of the unused balance in the escrow account.

As of September 30, 2023, the remaining balance in the escrow account is $ 4.8 million and any unused amounts are scheduled to be returned to the seller within approximately 18 months after the acquisition date.

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

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

As of July 1, 2023, 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.

As of September 30, 2023, we recorded a lower of cost or net realizable value reserve of $ 0.6 million as a result of the decrease in the value of our structural lumber inventory related to the decline in wood-based commodity prices as of the end of the period.

As of December 31, 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.

1 unchanged sentence

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

As of July 1, 2023, our intangible assets consist of goodwill and other intangible assets including customer relationships, noncompete agreements, and trade names.

As of September 30, 2023, our intangible assets consist of goodwill and other intangible assets including customer relationships, noncompete agreements, and trade names.

Goodwill is the excess of the cost of an acquired entity over the fair value of tangible and intangible assets (including customer relationships, noncompete agreements, and trade names) acquired, and liabilities assumed, under acquisition accounting for business combinations.

As of July 1, 2023, goodwill was $ 55.4 million.

As of September 30, 2023, goodwill was $ 55.4 million.

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

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In addition, we will evaluate the carrying value for impairment between annual impairment tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired.

Such events and indicators may include, without limitation, significant declines in the

industries in which our products are used, significant changes in capital market conditions, and significant changes in our market capitalization.

No such indicators were present during the second quarter of fiscal 2023.

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

Total Carrying Amount

(In thousands)

Balance at December 31, 2022 $ 55,372

Acquisitions —

Balance at April 1, 2023 $ 55,372

Acquisitions —

Balance at July 1, 2023 $ 55,372

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

No such indicators were noted during the first nine months of fiscal 2023.

Definite-Lived Intangible Assets

The gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets at July 1, 2023 were as follows:

The gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets as of September 30, 2023 were as follows:

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

1 unchanged sentence

Net Carrying Amounts

(In thousands)

(Dollar amounts in thousands)

Customer relationships 10 $ 48,500 $ ( 17,909 ) $ 30,591

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Total $ 65,280 $ ( 33,463 ) $ 31,817

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

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

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

Amortization Expense

Amortization expense for our definite-lived intangible assets was $ 1.0 million and $ 2.1 million for the three and six month periods ended July 1, 2023, respectively.

For the three and six month periods ended July 2, 2022, amortization expense was $ 0.6 million and $ 1.7 million, respectively.

Amortization expense for our definite-lived intangible assets was $ 1.0 million and $ 3.2 million for the three and nine month periods ended September 30, 2023, respectively.

For the three and nine month periods ended October 1, 2022, amortization expense was $ 0.5 million and $ 2.2 million, respectively.

Estimated amortization expense for definite-lived intangible assets for the remaining portion of 2023 and the next five fiscal years is as follows:

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Sales and usage-based taxes are excluded from revenues.

Three Months Ended Six Months Ended

Product type July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Three Months Ended Nine Months Ended

Product type September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

(In thousands) (In thousands)

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Sales and usage-based taxes are excluded from revenues.

Three Months Ended Six Months Ended

Sales channel July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Three Months Ended Nine Months Ended

Sales channel September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

(In thousands) (In thousands)

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Long-Term Debt

As of July 1, 2023, and December 31, 2022, long-term debt consisted of the following:

July 1, 2023 December 31, 2022

As of September 30, 2023, and December 31, 2022, long-term debt consisted of the following:

September 30, 2023 December 31, 2022

(In thousands)

8 unchanged sentences

570,756 565,499

current maturities of long-term debt 8,238 7,089

Long-term debt, net of current maturities $ 556,034 $ 558,410

(1) As of July 1, 2023 and December 31, 2022, our long-term debt was comprised of $ 300.0 million of senior secured notes issued in October 2021.

These notes are presented under the long-term debt caption of our condensed consolidated balance sheets at $ 293.1 million and $ 292.4 million at July 1, 2023 and December 31, 2022, respectively.

This presentation is net of their discount of $ 3.3 million and $ 3.5 million and the combined carrying value of our debt issuance costs of $ 3.7 million and $ 4.1 million at July 1, 2023 and December 31, 2022, respectively.

current portion of finance lease obligations 9,813 7,089

Long-term debt, net of current portion $ 560,943 $ 558,410

(1) As of September 30, 2023 and December 31, 2022, our long-term debt was comprised of $ 300.0 million of senior secured notes issued in October 2021.

These notes are presented under the long-term debt caption of our condensed consolidated balance sheets at $ 293.4 million and $ 292.4 million as of September 30, 2023 and December 31, 2022, respectively.

This presentation is net of their discount of $ 3.1 million and $ 3.5 million and the combined carrying value of our debt issuance costs of $ 3.4 million and $ 4.1 million as of September 30, 2023 and December 31, 2022, respectively.

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

(2) The average effective interest rate for our revolving credit facility was zero percent for the quarters ended July 1, 2023 and July 2, 2022.

(2) The average effective interest rate for our revolving credit facility was zero percent for the fiscal quarters ended September 30, 2023 and October 1, 2022 since no borrowings were outstanding during those periods.

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

Senior Secured 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.

In October 2021, we completed a private offering of $ 300 million of our 6 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, as defined below.

As of July 1, 2023 and December 31, 2022, the fair value of our 2029 Notes was approximately $ 274.0 million and $ 283.6 million, respectively, which are designated as Level 2 in the fair value hierarchy.

As of September 30, 2023 and December 31, 2022, the fair value of our 2029 Notes was approximately $ 271.5 million and $ 283.6 million, respectively, which are designated as Level 2 in the fair value hierarchy.

Our valuation technique is based primarily on observable market prices in less active markets.

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Our 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 July 1, 2023, we had zero outstanding borrowings and excess availability, including cash in qualified accounts, of $ 764.8 million under our Revolving Credit Facility.

As of September 30, 2023, we had zero outstanding borrowings and excess availability, including cash in qualified accounts, of $ 816.3 million under our Revolving Credit Facility.

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.

Available borrowing capacity under our Revolving Credit Facility was $ 346.5 million on July 1, 2023 and December 31, 2022.

Our average effective interest rate under the Revolving Credit Facility was zero percent for the quarters ended July 1, 2023 and July 2, 2022.

Available borrowing capacity under our Revolving Credit Facility was $ 346.5 million as of September 30, 2023 and December 31, 2022.

Our average effective interest rate under the Revolving Credit Facility was zero percent for the fiscal quarters ended September 30, 2023 and October 1, 2022 since no borrowings were outstanding during those periods.

Our 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 our Revolving Credit Facility as of July 1, 2023.

We were in compliance with all covenants under our Revolving Credit Facility as of September 30, 2023.

Finance Lease Obligations

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

Three Months Ended Six Months Ended

Pension-related items July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Three Months Ended Nine Months Ended

Pension-related items September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

(In thousands) (In thousands)

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The net periodic pension cost (benefit) is included in other expense, net in our condensed consolidated statement of operations and comprehensive income.

During the three and six months ended July 1, 2023, we continued our previously announced plan to terminate the BlueLinx Corporation Hourly Retirement Plan (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.

During the three and nine months ended September 30, 2023, we continued our previously announced plan to terminate the BlueLinx Corporation Hourly Retirement Plan (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.

We estimate the plan termination will be completed during fiscal 2023.

We estimate the plan termination will be completed during fiscal 2023 or early fiscal 2024.

Stock Compensation

During the three and six months ended July 1, 2023, we incurred stock compensation expense of $ 1.9 million and $ 6.5 million, respectively.

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

The increase in our stock compensation expense for the six-month period ended July 1, 2023 is primarily attributable to the acceleration of unrecognized compensation cost in conjunction with our announced leadership transition.

As of July 1, 2023, we have accrued $ 0.9 million for tax withholding obligations of our employees upon vesting of restricted stock unit awards.

This has been presented as a non-cash transaction in our condensed consolidated statement of cash flows.

During the three and nine months ended September 30, 2023, we incurred stock compensation expense of $ 3.0 million and $ 9.5 million, respectively.

For the three and nine months ended October 1, 2022, we incurred stock compensation expense of $ 2.1 million and $ 6.0 million, respectively.

The increase in our stock compensation expense for the nine-month period ended September 30, 2023 is primarily attributable to the acceleration of unrecognized compensation cost in conjunction with our leadership transition.

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

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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.

We have also made the accounting policy election to not separate lease components from non-lease components related to our mobile fleet asset class.

Our accounting policy is to not separate lease components from non-lease components related to our mobile fleet asset class.

Finance Lease Liabilities

1 unchanged sentence

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

The following table presents our assets and liabilities related to our leases as of July 1, 2023 and December 31, 2022:

Lease assets and liabilities July 1, 2023 December 31, 2022

The following table presents our assets and liabilities related to our leases as of September 30, 2023 and December 31, 2022:

Lease assets and liabilities September 30, 2023 December 31, 2022

(In thousands)

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Total lease liabilities $ 321,195 $ 320,518

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $ 94.3 million and $ 90.1 million as of July 1, 2023 and December 31, 2022, respectively.

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $ 98.5 million and $ 90.1 million as of September 30, 2023 and December 31, 2022, respectively.

The components of lease expense were as follows:

Three Months Ended Six Months Ended

Components of lease expense July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Three Months Ended Nine Months Ended

Components of lease expense September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

(In thousands) (In thousands)

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Supplemental cash flow information related to leases was as follows:

Three Months Ended Six Months Ended

Cash flow information July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Three Months Ended Nine Months Ended

Cash flow information September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

(In thousands) (In thousands)

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

Three Months Ended Six Months Ended

Non-cash information July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Three Months Ended Nine Months Ended

Non-cash information September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

(In thousands) (In thousands)

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Supplemental balance sheet information related to leases was as follows:

Balance sheet information July 1, 2023 December 31, 2022

Balance sheet information September 30, 2023 December 31, 2022

(In thousands)

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Finance leases 8.88 % 8.87 %

The major categories of our finance lease liabilities as of July 1, 2023 and December 31, 2022 were as follows:

Category July 1, 2023 December 31, 2022

The major categories of our finance lease liabilities as of September 30, 2023 and December 31, 2022 were as follows:

Category September 30, 2023 December 31, 2022

(In thousands)

3 unchanged sentences

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 July 1, 2023.

Below is a summary of undiscounted finance and operating lease liabilities that have initial terms in excess of one year as of September 30, 2023.

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 condensed consolidated balance sheets, including options to extend lease terms that are reasonably certain of being exercised.

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From time to time, we are involved in various proceedings incidental to our businesses, and we are subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which we operate.

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

recorded for expected receipts from settlements.

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

Regulatory Matters

Government and regulatory agencies may have the ability to conduct periodic examinations of, and administrative proceedings regarding, the Company’s business operations.

The United States Customs and Border Protection has gathered initial information from the Company under routine audit procedures, and the initial information gathered suggests that the Company potentially may have underpaid and/or overpaid duties arising from certain classification discrepancies for products imported into the United States as separately entered shipments.

The Company is currently evaluating this matter.

At this time the Company is not in a position to estimate amounts that it may be required to pay.

The Company intends to exercise reasonable care to address the matter in an equitable manner.

Collective Bargaining Agreements

As of July 1, 2023, we employed approximately 2,000 associates and less than one percent of our associates are employed on a part-time basis.

As of September 30, 2023, we employed approximately 2,000 associates and less than one percent of our associates are employed on a part-time basis.

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

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Comprehensive income includes both net income and other comprehensive income.

Other comprehensive income results from items deferred from recognition into our condensed consolidated statements of operations and comprehensive income.

Other comprehensive income results from items deferred from recognition in net income on our condensed consolidated statements of operations and comprehensive income.

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

The changes in balances for each component of accumulated other comprehensive loss for the six months ended July 1, 2023, were as follows:

The changes in balances for each component of accumulated other comprehensive loss for the nine months ended September 30, 2023, were as follows:

benefit pension

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net of tax Total Accumulated Other Comprehensive Loss

(In thousands)

December 31, 2022, beginning balance

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Other comprehensive income, net of tax 689 ( 22 ) 667

July 1, 2023, ending balance, net of tax

September 30, 2023, ending balance, net of tax

$ ( 31,986 ) $ 1,241 $ ( 30,745 )

Effective Tax Rate

Our effective tax rate for the three months ended July 1, 2023 and July 2, 2022 were 24.0 percent and 23.1 percent, respectively.

Our effective tax rate for the six months ended July 1, 2023 and July 2, 2022 were 25.1 percent and 25.1 percent, respectively.

Our effective tax rates for the three and six months ended July 1, 2023 and July 2, 2022 were impacted by state taxes as well as the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, offset by a benefit from the vesting of restricted stock units, which occurred during each period.

Our effective tax rates for the three months ended September 30, 2023 and October 1, 2022 were 27.2 percent and 26.2 percent, respectively.

Our effective tax rates for the nine months ended September 30, 2023 and October 1, 2022 were 25.9 percent and 25.4 percent, respectively.

Our effective tax rates for the three and nine months ended September 30, 2023 and October 1, 2022 were impacted by state taxes as well as the permanent addback of certain nondeductible expenses, including executive compensation, offset by a benefit from the vesting of restricted stock units, which occurred during each period.

For additional information about our income taxes, see Note 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Income Per Share

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

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

The reconciliation of basic net income and diluted net income per common share for the three and six month periods ended July 1, 2023 and July 2, 2022 were as follows:

Three Months Ended Six Months Ended

July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Earnings Per Share

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

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

The reconciliation of basic net income and diluted earnings per common share for the three and nine month periods ended September 30, 2023 and October 1, 2022 were as follows:

Three Months Ended Nine Months Ended

September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

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

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Weighted-average shares outstanding - diluted 8,970 9,328 9,028 9,497

Basic income per share $ 2.70 $ 7.64 $ 4.67 $ 21.49

Diluted income per share $ 2.70 $ 7.48 $ 4.67 $ 21.07

Approximately 49,000 and 21,000 weighted-average share-based awards were excluded from the computation of earnings per share assuming dilution during the three months ended July 1, 2023 and July 2, 2022, respectively, as the awards would have been anti-dilutive for the periods presented.

Approximately 40,000 and 13,000 weighted-average share-based awards were excluded from the computation of earnings per share assuming dilution during the six months ended July 1, 2023 and July 2, 2022, respectively, as the awards would have been anti-dilutive for the periods presented.

Basic earnings per share $ 2.72 $ 6.44 $ 7.39 $ 28.03

Diluted earnings per share $ 2.71 $ 6.38 $ 7.38 $ 27.82

Approximately 96,000 and 77,000 weighted-average shares underlying share-based awards were excluded from the computation of diluted earnings per share for the fiscal quarterly periods ended September 30, 2023 and October 1, 2022, respectively, because their inclusion would have been anti-dilutive.

Approximately 91,000 and 58,000 weighted-average shares underlying share-based awards were excluded from the computation of diluted earnings per share for the nine-month fiscal periods ended September 30, 2023 and October 1, 2022, respectively, because their inclusion would have been anti-dilutive.

Subsequent Event

On October 31, 2023, the Company’s Board of Directors authorized a new share repurchase program for $ 100 million, which follows the Company’s previous $ 100 million share repurchase program under which all remaining repurchase authority was utilized during early fiscal October 2023.

Under the new share repurchase program, the Company may repurchase its common stock from time to time, without prior notice, subject to prevailing market conditions and other considerations.

Repurchases may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, accelerated share repurchase programs, tender offers or pursuant to a trading plan that may be adopted in accordance with the Securities and Exchange Commission Rule 10b5-1.

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

What changed 10-Q

Item 1. Financial Statements