BlueLinx Holdings Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index Page Report of Independent Registered Public Accounting Firms (PCAOB ID: 42 ) 39 Consolidated Statements of Operations and Comprehensive Income 41 Consolidated Balance Sheets 42 Consolidated Statements of Stockholders’ Equity 43 Consolidated Statements of Cash Flows 44 Notes to Consolidated Financial Statements Summary of Significant Accounting Policies 45 Business Combination 52 Inventories 53 Revenue Recognition 53 Goodwill and Other Intangible Assets 54 Property, Plant and Equipment 56 Income Taxes 56 Debt and Finance Leases 60 Fair Value 62 Employee Retirement Plans 62 Share-Based Compensation 69 Stockholders’ Equity, Earnings Per Share and Share Repurchases 70 Lease Commitments 72 Commitments and Contingencies 75 Accumulated Other Comprehensive Income (Loss) 76 38 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of BlueLinx Holdings Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of BlueLinx Holdings Inc. (the Company) as of December 30, 2023 and December 31, 2022, the related consolidated statements of operations and comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 30, 2023, 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 30, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2023 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 December 30, 2023, 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 20, 2024 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 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 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 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 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 The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Goodwill Description of the Matter As of December 30, 2023, the Company's goodwill balance was $55.4 million. As discussed in Note 5 to the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level on the first day of the fiscal fourth quarter or more frequently if events or change in circumstances indicate that it is more likely than not to be impaired. This requires management to estimate the fair value of the reporting unit based on a combination of the discounted cash flow method and guideline public company method. Auditing management's annual goodwill impairment test involved especially subjective judgments due to the significant estimation required in determining the fair value of the reporting unit. In particular, the estimates of the fair value for the reporting unit are sensitive to assumptions, such as the weighted average cost of capital, gross margin, and capital expenditures, which are affected by expectations about future market or economic conditions. 39 Table of Contents How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process. For example, we tested controls over the estimation of the fair value of the reporting unit, including the Company’s controls over the valuation model, the mathematical accuracy of the valuation model, the development of underlying assumptions used to estimate such fair values of the reporting unit. We also tested management’s review of the reconciliation of the estimated fair value of the reporting unit to the market capitalization of the Company. To test the estimated fair value of the Company’s reporting unit we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions and the underlying data used by the Company in its analysis. We compared the significant assumptions used by management to current industry and economic trends and evaluated whether changes to these factors would affect the significant assumptions. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions. We involved valuation specialists to assist in our evaluation of the valuation methodology and the significant assumptions, including the weighted average cost of capital used in determining the fair value of the reporting unit. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2021. Atlanta, Georgia February 20, 2024 40 Table of Contents BLUELINX HOLDINGS INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME Fiscal Year Ended December 30, 2023 Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 (In thousands, except per share amounts) Net sales $ 3,136,381 $ 4,450,214 $ 4,277,178 Cost of products sold 2,609,364 3,617,230 3,498,751 Gross profit 527,017 832,984 778,427 Operating expenses (income): Selling, general, and administrative 355,819 366,305 322,205 Depreciation and amortization 32,043 27,613 28,192 Amortization of deferred gains on real estate ( 3,934 ) ( 3,934 ) ( 3,935 ) Gain from sale of properties, net — ( 144 ) ( 8,427 ) Other operating expenses 4,640 4,057 2,315 Total operating expenses 388,568 393,897 340,350 Operating income 138,449 439,087 438,077 Non-operating expenses (income): Interest expense, net 23,746 42,272 45,507 Settlement of frozen defined benefit pension plan 30,440 — — Other expense (income), net 2,377 2,054 ( 1,306 ) Income before provision for income taxes 81,886 394,761 393,876 Provision for income taxes 33,350 98,585 97,743 Net income $ 48,536 $ 296,176 $ 296,133 Basic earnings per share $ 5.40 $ 31.75 $ 30.80 Diluted earnings per share $ 5.39 $ 31.51 $ 29.99 Comprehensive income: Net income $ 48,536 $ 296,176 $ 296,133 Other comprehensive income (loss): Actuarial (loss) gain on defined benefit plan, net of tax of $ 1,090 , $ 1,016 and $( 1,771 ), respectively ( 3,119 ) ( 3,057 ) 5,546 Amortization of unrecognized pension gain, net of tax of $( 325 ), $( 208 ) and $( 340 ), respectively 882 627 1,064 Settlement of frozen defined benefit pension plan, including tax of $ 4,472 34,912 — — Other ( 1,263 ) 378 22 Total other comprehensive income (loss) 31,412 ( 2,052 ) 6,632 Comprehensive income $ 79,948 $ 294,124 $ 302,765 See the accompanying notes to the consolidated financial statements. 41 Table of Contents BLUELINX HOLDINGS INC. CONSOLIDATED BALANCE SHEETS December 30, 2023 December 31, 2022 (In thousands, except share data) ASSETS Current assets: Cash and cash equivalents $ 521,743 $ 298,943 Accounts receivable, less allowances of $ 3,398 and $ 3,449 , respectively 228,410 251,555 Inventories, net 343,638 484,313 Other current assets 26,608 42,121 Total current assets 1,120,399 1,076,932 Property and equipment, net 225,987 205,609 Operating lease right-of-use assets 37,227 45,717 Goodwill 55,372 55,372 Intangible assets, net 30,792 34,989 Deferred income tax asset, net 53,256 56,169 Other non-current assets 14,568 15,254 Total assets $ 1,537,601 $ 1,490,042 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 157,931 $ 151,626 Accrued compensation 14,273 22,556 Taxes payable 9,584 — Finance lease liabilities - current 11,178 7,089 Operating lease liabilities - current 6,284 7,432 Real estate deferred gains - current 3,935 3,935 Other current liabilities 15,377 18,039 Total current liabilities 218,562 210,677 Non-current liabilities: Long-term debt, net of debt issuance costs of $ 3,246 and $ 4,057 , respectively 293,743 292,424 Finance lease liabilities - non-current 274,248 265,986 Operating lease liabilities - non-current 32,519 40,011 Real estate deferred gains - non-current 66,599 70,403 Other non-current liabilities 17,644 20,512 Total liabilities 903,315 900,013 Commitments and contingencies STOCKHOLDERS’ EQUITY Preferred Stock, $ 0.01 par value, 30,000,000 shares authorized, none issued — — Common Stock, $ 0.01 par value, 20,000,000 shares authorized, 8,650,046 and 9,048,603 outstanding on December 30, 2023 and December 31, 2022, respectively 87 90 Additional paid-in capital 165,060 200,748 Accumulated other comprehensive loss — ( 31,412 ) Retained earnings 469,139 420,603 Total stockholders’ equity 634,286 590,029 Total liabilities and stockholders’ equity $ 1,537,601 $ 1,490,042 See the accompanying notes to the consolidated financial statements. 42 Table of Contents BLUELINX HOLDINGS INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity Shares Amount (In thousands) Balance as of beginning of fiscal 2021 9,463 $ 95 $ 266,695 $ ( 35,992 ) $ ( 171,706 ) $ 59,092 Net income — — — — 296,133 296,133 Other comprehensive income — — — 6,632 — 6,632 Vesting of restricted stock units 379 2 ( 2 ) — — — Compensation related to share-based grants — — 6,590 — — 6,590 Repurchase of shares to satisfy employee tax withholdings ( 116 ) — ( 5,193 ) — — ( 5,193 ) Other — — ( 5 ) — — ( 5 ) Balance as of end of fiscal 2021 9,726 97 268,085 ( 29,360 ) 124,427 363,249 Net income — — — — 296,176 296,176 Other comprehensive loss — — — ( 2,052 ) — ( 2,052 ) 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 repurchases and retirements ( 882 ) ( 9 ) ( 66,418 ) — — ( 66,427 ) Balance as of end of fiscal 2022 9,049 90 200,748 ( 31,412 ) 420,603 590,029 Net income — — — — 48,536 48,536 Other comprehensive income — — — 31,412 — 31,412 Vesting of restricted stock units 170 2 ( 2 ) — — — Compensation related to share-based grants — — 12,055 — — 12,055 Repurchase of shares to satisfy employee tax withholdings ( 63 ) — ( 5,279 ) — — ( 5,279 ) Common stock repurchases and retirements ( 506 ) ( 5 ) ( 42,462 ) — — ( 42,467 ) Balance as of end of fiscal 2023 8,650 $ 87 $ 165,060 $ — $ 469,139 $ 634,286 There has been no activity for Preferred Stock. See the accompanying notes to the consolidated financial statements. 43 Table of Contents BLUELINX HOLDINGS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended December 30, 2023 Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 (In thousands) Cash flows from operating activities: Net income $ 48,536 $ 296,176 $ 296,133 Adjustments to reconcile net income to cash provided by operations: Depreciation and amortization 32,043 27,613 28,192 Settlement of frozen defined benefit pension plan 30,440 — — Amortization of debt discount and issuance costs 1,319 1,153 1,411 Adjustment to debt issuance cost associated with term loan/revolver — — 7,394 Gains from sales of property — ( 144 ) ( 8,427 ) Provision for deferred income taxes 7,756 5,289 356 Share-based compensation 12,055 9,617 6,590 Amortization of deferred gains from real estate ( 3,934 ) ( 3,934 ) ( 3,935 ) Other income statement items ( 909 ) — — Changes in operating assets and liabilities, net of business acquisition: Accounts receivable 23,145 101,266 ( 45,994 ) Inventories 140,875 20,759 ( 146,350 ) Accounts payable 5,973 ( 31,808 ) 14,837 Taxes payable 9,584 ( 6,138 ) ( 1,709 ) Employer contributions due to the single-employer defined benefit pension plan ( 6,900 ) ( 11,876 ) ( 1,100 ) Other current assets 15,513 ( 11,635 ) 712 Other assets and liabilities ( 9,211 ) 3,959 ( 3,087 ) Net cash provided by operating activities 306,285 400,297 145,023 Cash flows from investing activities: Acquisition of business, net of cash acquired 300 ( 63,767 ) — Proceeds from sales of assets and properties 357 964 10,327 Property and equipment investments ( 27,520 ) ( 35,886 ) ( 14,415 ) Net cash used in investing activities ( 26,863 ) ( 98,689 ) ( 4,088 ) Cash flows from financing activities: Borrowings on revolving credit facilities — — 949,080 Repayments on revolving credit facilities — — ( 1,235,724 ) Repayments on term loan — — ( 43,204 ) Proceeds from senior secured notes — — 295,861 Common stock repurchases ( 42,135 ) ( 66,427 ) — Debt financing costs — — ( 5,459 ) Repurchase of shares to satisfy employee tax withholdings ( 5,279 ) ( 10,534 ) ( 5,193 ) Principal payments on finance lease liabilities ( 9,208 ) ( 10,907 ) ( 11,175 ) Net cash used in financing activities ( 56,622 ) ( 87,868 ) ( 55,814 ) Net change in cash and cash equivalents 222,800 213,740 85,121 Cash and cash equivalents at beginning fiscal year 298,943 85,203 82 Cash and cash equivalents at end of fiscal year $ 521,743 $ 298,943 $ 85,203 Supplemental cash flow information: Net income tax payments during the fiscal year $ 19,239 $ 111,197 $ 98,855 Interest paid during the fiscal year $ 43,438 $ 44,054 $ 33,236 See the accompanying notes to the consolidated financial statements. 44 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Basis of Presentation BlueLinx Holdings Inc., including subsidiaries (collectively, the “Company”), is a leading wholesale distributor of residential and commercial building products in the United States. The Company is a “two-step” distributor. Two-step distributors purchase products from manufacturers and distribute those products to dealers and other suppliers in local markets, who then sell those products to end users. The Company carries a broad portfolio of both branded and private-label stock keeping units (“SKUs”) across two principal product categories: specialty products and structural products. Specialty products include items such as engineered wood, 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. The Company also provides a wide range of value-added services and solutions aimed at relieving distribution and logistics challenges for its customers and suppliers, while enhancing their marketing and inventory management capabilities. The Company’s consolidated financial statements include the accounts of BlueLinx Holdings Inc. and its wholly owned subsidiaries. These financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). All significant intercompany accounts and transactions have been eliminated. The Company operates on a 5-4-4 fiscal calendar. Its fiscal year ends on the Saturday closest to December 31 of that fiscal year and may comprise 53 weeks in certain years. The Company’s 2023 fiscal year contained 52 weeks and ended on December 30, 2023 (fiscal 2023”). Fiscal 2022 contained 52 weeks and ended on December 31, 2022 (“fiscal 2022”). Fiscal 2021 contained 53 weeks and ended on January 1, 2022 (“fiscal 2021”). Use of Estimates The Company’s financial statements are prepared in conformity with U.S. GAAP, which requires management and advisors of the Company 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 its financial statements. Although these current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from expectations, which could materially affect the Company’s financial position, results of operations and cash flows. The impacts of national and global events may also affect the Company’s accounting estimates, which may materially change from period to period due to such events. The Company’s management and its advisors regularly evaluate these significant factors and make adjustments where facts and circumstances dictate. Revenue Recognition and Cost of Products Sold The Company recognizes revenue when the following criteria are met: (1) contract with the customer has been identified; (2) performance obligations in the contract have been identified; (3) transaction price has been determined; (4) the transaction price has been allocated to the performance obligations; and (5) when (or as) performance obligations are satisfied. More specifically, revenue is recognized when control of the promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration the Company is entitled to receive in exchange for those goods or services. The timing of revenue recognition largely is dependent on shipping terms. Revenue is recorded at the time of shipment for terms designated free on board (“FOB”) shipping point, which is a point in time. For sales transactions designated FOB destination, revenue is recorded when the product is delivered to the customer’s delivery site. All revenues recognized are net of trade allowances, cash discounts, and sales returns. Cash discounts and sales returns are estimated using historical experience. Trade allowances are based on the estimated obligations and historical experience. Adjustments to earnings resulting from revisions to estimates on discounts and returns has not been material for each of the reported periods. Certain customers may receive cash-based incentives or credits, which are accounted for as variable consideration. The Company estimates these amounts based on the expected amount to be provided to customers and then reduces the amount of revenue recognized. The Company believes that there will not be significant changes to its estimates of variable consideration. Sales and usage-based taxes are excluded from revenues. 45 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Contracts with customers are generally in the form of standard terms and conditions of sale. From time to time, the Company may enter into specific contracts, which may affect delivery terms. Performance obligations in contracts with customers generally consist solely of delivery of goods. For all sales channel types, consisting of warehouse, direct, and reload sales, the Company typically satisfies its performance obligations upon shipment. Customer payment terms are typical for the Company’s industry, and may vary by the type and location of customers and by the products or services offered. The time period between invoicing and when payment is due is not deemed to be significant. For certain sales channels and/or products, standard payment terms may be as early as ten days. In addition, the Company provides inventory to certain customers through pre-arranged agreements on a consignment basis. Customer consigned inventory is maintained and stored by certain customers; however, ownership and risk of loss remains with the Company. Costs to obtain customer contracts are generally expensed as incurred. The Company generally expenses sales commissions when incurred because the amortization period would typically be one year or less. These costs are recorded within selling, general, and administrative (“SG&A”)expense. The Company has made an accounting policy election to treat outbound shipping and handling activities as an SG&A expense. Shipping and handling costs include amounts related to the administration of the Company’s logistical infrastructure, handling of material in its warehouses, and amounts pertaining to the delivery of products to customers, such as fuel and maintenance costs for its mobile fleet, wages for its drivers, and third-party freight charges. Substantially all of the amount reported in Cost of products sold on the Company’s consolidated statement of operations is composed of cost to purchase inventory for resale to customers, including the cost of inbound freight, volume incentives, and inventory adjustments. During fiscal 2023, 2022 or 2021, no one supplier represented more than 10% of the Company’s consolidated Cost of products sold. Cash and Cash Equivalents As of December 30, 2023 and December 31, 2022, the majority of the Company’s cash and cash equivalents were comprised of short-term funds that the Company can liquidate on demand. These funds invest in instruments that have a weighted-average maturity of three months or less, including cash, U.S. Treasury bills, notes and other obligations issued or guaranteed as to principal and interest by the U.S. Government or its agencies, and repurchase agreements secured by such obligations or cash. The Company’s policy is to classify such short-term highly liquid investments as cash equivalents. Also, the Company has cash deposits with financial institutions that are typically in excess of federally insured limits. Though the Company has not experienced any losses on its cash deposits to date and does not currently anticipate incurring any such losses, there can be no assurance that the Company will not experience losses in the future. Based on the legal form and nature of any restrictions that may be placed by third parties on certain amounts of cash transferred by the Company to external entities, the Company’s accounting policy is to classify such unexpended amounts as either restricted cash, other current assets, or other assets in its consolidated balance sheet. As of December 30, 2023 and December 31, 2022, the Company had $ 10.5 million and $ 10.4 million, respectively, reported within Other non-current assets on its consolidated balance sheets for amounts transferred to a third party related to certain of the Company’s self-insured risks for events that have occurred but have not been settled by, or are not yet known to, the Company. See the subsequent section of this note under the heading, Self Insurance. The Company had no amounts reported as restricted cash on it consolidated balance sheets as of December 30, 2023 and December 31, 2022. Accounts Receivable and Allowance Accounts receivable are stated at net realizable value, do not bear interest, and consist of amounts owed for orders shipped to customers. The Company has established an overall credit policy for sales to customers. Under the provisions of ASC No. 323, Financial Instruments-Credit Losses , that apply to the Company’s trade accounts receivable, a current expected credit loss (“CECL”) model is required. The CECL impairment model requires an estimate of expected credit losses, measured over the contractual life of a trade receivable, that considers forecasts of future economic conditions in addition to information about past events and current conditions. The Company’s allowance for doubtful accounts is determined based on a number of factors including specific customer account reviews, historical loss experience, current economic trends, and the creditworthiness of significant customers based on ongoing credit evaluations. The Company believes that its accounts receivable are homogenous and concluded that they can be grouped into one pool when applying the CECL model. The Company determined that historical loss information is a reasonable basis on which to determine expected credit 46 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS losses for accounts receivable because the composition of the receivables at the most recent reporting date is consistent with that used in developing the historical credit-loss percentages. During fiscal year 2023 and 2022, the Company recorded provisions for doubtful accounts of $ 0.6 million and $ 0.7 million , respectively, and recorded charge offs net of recoveries of $ 0.6 million and $ 1.3 million, respectively, against the allowance for accounts receivable. Inventory Valuation The Company’s inventory is comprised of substantially finished goods that we purchase for resale to our customers. The cost of all inventories is determined by the moving average cost method. The Company includes all material charges directly or indirectly incurred in bringing inventory to its existing condition and location. Inventory carrying values are evaluated at the end of each fiscal 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 and December 30, 2023, the Company had a lower-of-cost-or-net-realizable-value inventory reserve of $ 2.6 million and zero , respectively. Consideration Received from Vendors and Paid to Customers Each fiscal year, the Company enters into agreements with certain vendors to provide inventory purchase rebates, generally based on achievement of specified volume purchasing levels. The Company also receives rebates related to price protection and various marketing allowances that are common industry practice. The Company accrues for the receipt of vendor rebates based on purchases, and also reduce the carrying value of the related inventory to reflect the net acquisition cost (purchase price less expected purchase rebates). In addition, the Company enters into agreements with many of its customers to offer customer rebates, generally based on achievement of specified sales levels and various marketing allowances that are common industry practice. The Company accrues for the payment of customer rebates based on sales to the customer, and also reduce its sales to report net sales (sales price less expected customer rebates). Adjustments to earnings resulting from revisions to rebate estimates have historically not been material. Property and Equipment Property and equipment are recorded at cost. Lease obligations for which the Company assumes or retain substantially all the property rights and risks of ownership are capitalized. Amortization of assets recorded under finance leases is included in “Depreciation and amortization” expense. Replacements of major units of property are capitalized and the replaced properties are retired. 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, 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. The Company assesses 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, the Company compares 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. 47 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Goodwill and Other Intangible Assets Goodwill Goodwill is not subject to amortization but must be assessed for impairment at least annually. Since the Company operates within one single reporting unit, goodwill is assessed at the enterprise level. The Company performs its annual assessment of goodwill as of the first day of its fourth fiscal quarter, which was October 1, 2023 for fiscal 2023. Since the Company operates within a single reporting unit, goodwill is evaluated at the enterprise level. The annual assessment for fiscal 2023 utilized a quantitative approach and was performed by the Company with the assistance of independent third-party experts. An assessment under the quantitative approach requires the Company to determine the enterprise’s fair value and then compare that fair value to the carrying value of the enterprise, including goodwill, in order to determine if goodwill is impaired. Based on this assessment, the estimated fair value of the enterprise exceeded its carrying value, including goodwill. Therefore, the Company concluded that goodwill was not impaired. For fiscal 2022, the Company conducted its annual impairment assessment for goodwill using a qualitative approach. A qualitative approach requires an assessment that evaluates various factors that are specific to the Company, as well as industry and macroeconomic factors, in order to determine whether impairment indicators are present. If impairment indicators are present, the Company must then determine if such indicators are more likely than not to cause the fair value of the enterprise to be less than its carrying amount. Based on the qualitative analysis performed in fiscal 2022, the Company concluded that no such impairment indicators were present, and therefore goodwill was not impaired. In addition, the Company will evaluate the carrying value of goodwill for impairment between annual impairment assessments if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Such events and indicators may include significant declines in the industries in which our products are used, significant changes in capital market conditions, or significant changes in our market capitalization. No such material indicators were noted during fiscal 2023 and fiscal 2022 between the annual impairment assessments. Other Intangible Assets For all reporting periods presented, the Company’s other intangible assets have estimated finite lives and are therefore subject to amortization. These assets are subject to impairment testing if events or circumstances occur that indicate the carrying amounts may be impaired. No such indicators were noted in fiscal 2023 or fiscal 2022, and therefore no impairments were recorded. Self-Insurance The Company is self-insured for its non-union and certain unionized employee health benefits. The Company purchases stop-loss insurance in order to establish certain limits to its exposure on a per claim basis, both individually and in the aggregate. Health benefits for some unionized employees for fiscal 2023, 2022 and 2021 were paid directly to a union trust, depending upon the union-negotiated benefit arrangement. 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. It is the Company’s policy to self-insure, up to certain limits, traditional risks including workers’ compensation, comprehensive general liability, and auto liability. The Company’s self-insured deductible for each claim involving workers’ compensation, comprehensive general liability (including product liability claims), and auto liability is limited to $ 0.8 million, $ 0.8 million, and $ 2.0 million, respectively. The Company is also self-insured up to certain limits for the majority of its medical benefit plans ($ 0.3 million per occurrence). A provision for claims under this self-insured program, based on our estimate of the aggregate liability for claims incurred, is revised and recorded annually. The estimate is derived from both internal and external sources including but not limited to actuarial estimates. The actuarial estimates are subject to uncertainty from various sources, including, among others, changes in claim reporting patterns, claim settlement patterns, judicial decisions, legislation, and economic conditions. Although the Company believes that the actuarial estimates are reasonable, significant differences related to the items noted above could materially affect the Company’s self-insurance obligations, future expense and cash flow. As of December 30, 2023 and December 31, 2022, the self-insurance liabilities totaled $ 13.8 million and $ 15.3 million, respectively. 48 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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. Liabilities of the Company associated with these claims are estimated, in part, by considering the frequency and severity of historical claims, both specific to the Company, as well as industry-wide loss experience and other actuarial assumptions. The Company determines its insurance obligations with the assistance of actuarial firms. Since there are many estimates and assumptions involved in recording insurance liabilities, and in the case of workers’ compensation, a significant period of time elapses before the ultimate resolution of claims, differences between actual future events, and prior estimates and assumptions could result in adjustments to these liabilities. The Company has deposits on hand with certain third-party insurance administrators and insurance carriers to cover its obligation for future payment of claims. These deposits are recorded in other current and non-current assets in the Company’s consolidated balance sheets. Leases The Company is the lessee in a lease contract when it obtains the right to control an asset associated with a particular lease. For operating leases, the Company records a right-of-use ("ROU") asset that represents its right to use an underlying asset for the lease term, and a corresponding lease liability that represents the Company’s obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Financing ROU assets associated with finance leases are included in property and equipment. Leases with a lease term of 12 months or less at inception are not recorded on the Company’s consolidated balance sheet and are expensed on a straight-line basis over the lease term in the consolidated statement of operations and comprehensive income. The Company determines the lease term by assuming the exercise of renewal options that are reasonably certain to occur. As most of the Company’s leases do not provide an implicit interest rate, the Company’s incremental borrowing rate, based on the information available at the commencement date, is used in determining the present value of future lease payments. When contracts contain lease and non-lease components, both components are accounted for as a single lease component. See Note 13, Lease Commitments, for additional information. Income Taxes The Company accounts for deferred income taxes using the liability method. Accordingly, deferred tax assets and liabilities are recognized based on the tax effects of temporary differences between the financial statement and tax bases of assets and liabilities, as measured by current enacted tax rates. All deferred tax assets and liabilities are classified as noncurrent in the Company’s consolidated balance sheet. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not (likelihood of more than 50%) that some portion or all the deferred tax asset will not be realized. For additional information, see Note 7, Income Taxes . Pension Plans Prior to December 5, 2023, the Company sponsored a noncontributory defined benefit pension plan (the “DB Pension Plan”). Most of the participants in the DB Pension Plan are inactive, with all remaining active participants no longer accruing benefits, and the plan is closed to new entrants. The funding policy for the DB Pension Plan is based on actuarial calculations and the applicable requirements of federal law. Benefits under the plan primarily are related to years of service. The Company’s accounting policy election is to measure plan assets and benefit obligations as of December 31, which is the month-end that is closest to the Company’s fiscal year-end. As further disclosed in Note 10, Employee Retirement Plans , the Company, as sponsor, settled the frozen DB Pension Plan in December 2023. The Company is involved in various multiemployer pension plans (“MEPPs”) that provide retirement benefits to certain union employees in accordance with certain collective bargaining agreements (“CBAs”). As one of many participating employers in these MEPPs, the Company is generally responsible with the other participating employers for any plan underfunding. The Company’s contributions to a particular MEPP are established by the applicable CBAs; however, the Company’s 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. The settlement of the DB Pension Plan did not result in any changes to the multi-employer pension plans in which some of the Company’s union employees participate. 49 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Fair Value 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 Assets acquired and liabilities assumed by the Company through a business combination are initially recorded at their acquisition-date fair values. For the Company’s frozen defined benefit pension plan that was settled on December 5, 2023, the funded position of this plan, which was reflected in the Company’s consolidated balance sheet prior to settlement, is determined in part by the fair value of the assets held by the pension plan at the end of each reporting period. As of December 31, 2022, the underfunded position was $ 1.5 million. As of December 30, 2023, this amount was zero due to the settlement. See Note 10, Employee Retirement Plans. The Company has no assets or liabilities for which their carrying values are remeasured to fair value at the end of each reporting period. However, the Company is required to disclose the fair values for certain assets and liabilities. See Note 9, Fair Value , for additional information. Business Combinations The Company accounts 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 the Company, sometimes with the assistance of third-party experts, uses its best estimates and assumptions to value assets acquired and liabilities assumed at the acquisition date, such estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which can last up to one year from the acquisition date, the Company 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 the Company’s consolidated financial statements from the date of acquisition. Share-Based Compensation Expense The Company recognizes compensation expense equal to the grant-date fair value, which is generally based on the fair market value of the Company’s common stock on the date of grant, for all share-based payment awards that are expected to vest. For service-based grants, expense is recorded on a straight-line basis over the requisite service period of the entire award. For performance-based awards, the Company recognizes compensation expense over each separate vesting tranche to the extent the achievement of the performance goal is deemed to be probable at the end of each reporting period. Forfeitures are accounted for as they actually occur, and compensation expense is adjusted accordingly so that it reflects cumulative expense only for the number of grants that actually vested prior to the forfeiture event. Compensation expense related to share-based payment awards is generally recorded in SG&A expense in the consolidated statements of operations. 50 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Repurchases of Common Stock The Company may make authorized repurchases of 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. Repurchased shares of the Company’s common stock are retired by the Company and are not reported as treasury stock. The portion of the cost to repurchase common stock that is in excess of par value is charged to additional paid-in capital within stockholders’ equity. Direct costs incurred by the Company to repurchase its common stock, such as broker commissions and excise taxes, are considered part of the cost to repurchase the common stock. Effective January 1, 2023, if the cost of net share repurchases made by publicly traded U.S. company exceeds $1 million annually, the cost of the repurchased shares is subject to a 1% excise tax as a result of the Inflation Reduction Act of 2022. For any reporting period, the costs of repurchased shares reported on the Company’s consolidated statement of stockholders’ equity may differ from the amount reported on the Company’s consolidated statement of cash flows due to the timing of remittances for excise taxes which are made in accordance with applicable law. Advertising Cost Advertising costs are expensed as incurred and totaled $ 2.1 million, $ 2.6 million, and $ 1.8 million for the fiscal years 2023, 2022 and 2021, respectively. Recent Accounting Standards - Adopted The Company did not adopt any new accounting standards during fiscal 2023. The following accounting standards were adopted during fiscal 2022 and fiscal 2021. 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 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 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. The Company’s revolving credit agreement, as further discussed in Note 8, Long-Term Debt , to these 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. GAAP for contract modifications if the change is directly related to a change from the LIBOR to a new interest rate index. The Company adopted this standard prospectively in the first quarter of 2022. 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. Income Taxes. In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) 740 and also clarifies and amends existing guidance to improve consistent application. The amendments in this standard were effective for interim periods and fiscal years beginning after December 15, 2020. The Company 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 statements. 51 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Recent Accounting Standards - Adoption Pending Segment Reporting Improvements . On November 27, 2023, the FASB issued ASU No. 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The FASB issued the new guidance primarily to provide financial statement users with more disaggregated expense information about a public business entity’s (“PBE”) reportable segment(s). This ASU will require PBEs to provide incremental disclosures related to the entity’s reportable segment(s), including disclosures for expenses that are both 1) significant to each reportable segment and are provided regularly to the Chief Operating Decision Maker (“CODM”) or easily computed from information regularly provided to the CODM and 2) included in the reported measure of segment profit or loss used by the CODM to assess performance and allocate resources. If a PBE does not disclose any significant segment expenses for a reportable segment, it is required to disclose narratively the nature of the expenses used by the CODM to manage each segment’s operations. Under the provisions of this ASU, all of the disclosures required in the segment guidance, including disclosing a measure of segment profit or loss used by the CODM and reporting significant segment expenses, applies to all PBEs, including those with a single operating or reportable segment. However, this ASU does not change the definition of a segment, the method for determining segments, or the criteria for aggregating operating segments into reportable segments. ASU 2023-07 will be effective for the Company’s annual reporting periods beginning in fiscal 2024 and all interim reporting periods beginning in fiscal 2025. At adoption, the disclosures are retrospectively presented for all comparative periods presented. Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material effects on its financial condition, results of operations or cash flows. The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-07. Income Tax Disclosure Improvement. On December 14, 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures , which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation. They must also further disaggregate income taxes paid. The ASU’s disclosure requirements apply to all entities subject to ASC 740. The overall objective of these disclosure requirements is for an entity, particularly an entity operating in multiple jurisdictions, to disclose sufficient information to enable users of financial statements to understand the nature and magnitude of factors contributing to the difference between the effective tax rate and the statutory tax rate. ASU 2023-09 will be effective for the Company for the fiscal 2025 annual reporting period. Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material effects on its financial condition, results of operations or cash flows. The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-09. 2. Business Combination As previously disclosed, on October 3, 2022 the Company acquired all the outstanding stock of Vandermeer Forest Products (“Vandermeer”), a wholesale distributor of building products, for preliminary consideration of $ 69.3 million, which included $ 5.5 million of cash acquired. The purchase price also included $ 3.6 million for a distribution facility and real estate located in Spokane, Washington, which were acquired in this transaction. During the first quarter of fiscal 2023, $ 0.3 million was received by the Company for adjustments to Vandermeer’s working capital balances, reducing total consideration from $ 69.3 million to $ 69.0 million. The measurement period is now closed. The acquisition of Vandermeer provides the Company with direct access to customers in the states of Oregon and Washington. With the acquisition of Vandermeer, the Company now serves all 50 states. Vandermeer’s results of operations are included in the Company’s results of operations beginning on the October 3, 2022 acquisition date. Vandermeer contributed revenues of $ 25.5 million from the October 3, 2022 acquisition date through the end of fiscal 2022. The acquisition was accounted for as a business combination using the acquisition method. The assets acquired and liabilities assumed were recognized at their acquisition date fair values. The following table summarizes the components of the consideration, as adjusted in the first quarter of 2023 for the working capital adjustment: 52 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands) Estimated fair value of identifiable assets acquired and liabilities assumed: Cash $ 5,506 Accounts receivable 13,180 Inventory 16,738 Property, plant and equipment 3,955 Operating lease right-of-use assets 714 Prepaid expenses and other assets 101 Intangible assets: Customer relationships 23,000 Trade names 1,000 Non-compete agreements 700 Accounts payable ( 1,738 ) Accrued compensation ( 994 ) Operating lease liability ( 714 ) Other current liabilities ( 75 ) Total identifiable net assets 61,373 Goodwill 7,600 Total consideration $ 68,973 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. The Company made a 338(h)(10) tax election to allow for the deductibility of goodwill recognized from the acquisition. At acquisition, $ 6.3 million of the cash consideration paid by the Company was placed into a bank escrow account for the purpose of paying third parties for obligations that were assumed by the seller. During the third quarter of fiscal 2023, $ 1.6 million of this escrow balance 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 December 30, 2023, the remaining balance in the escrow account is $ 4.8 million and any unused amount remaining in this escrow account will be released to the seller approximately 18 months after the acquisition date. The estimated useful life for the customer relationships, trade names, and non-compete agreements is 12 years, 3 years, and 5 years, respectively. 3 . Inventories The Company’s inventories as of the end of fiscal 2023 and fiscal 2022 consisted almost entirely of finished goods inventory, with an immaterial amount of work-in-process inventory. As of the end of fiscal 2022, the Company had a lower-of-cost-or-net-realizable-value inventory 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 December 30, 2023, the Company had no inventory reserve. 4. Revenue Recognition The following table presents the Company’s revenues disaggregated by revenue source. Sales and usage-based taxes are excluded from revenues. No single customer of the Company generated 10% or more of the Company’s total net sales during fiscal years 2023, 2022 or 2021. 53 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Fiscal Year Ended December 30, 2023 December 31, 2022 January 1, 2022 (In thousands) Specialty products $ 2,184,240 $ 2,871,628 $ 2,520,305 Structural products 952,141 1,578,586 1,756,873 Total net sales $ 3,136,381 $ 4,450,214 $ 4,277,178 The following table presents the Company’s revenues disaggregated by sales channel. Warehouse sales are delivered from the Company’s warehouses. Reload sales are similar to warehouse sales but are shipped from non-warehouse locations, most of which are operated by third parties, where the Company stores owned products to enhance operating efficiencies. The reload channel is employed primarily to service strategic customers that are less economical to service from Company warehouses, and to distribute large volumes of imported products from port facilities. Direct sales are shipped from the manufacturer to the customer and therefore the Company does not take taking physical possession of the inventory and, as a result, typically generate lower margins than the warehouse and reload distribution channels. The direct distribution channel requires the lowest amount of committed capital and fixed costs. Fiscal Year Ended December 30, 2023 December 31, 2022 January 1, 2022 (In thousands) Warehouse and reload $ 2,663,107 $ 3,714,898 $ 3,513,277 Direct 535,163 815,864 832,871 Cash discounts and rebates ( 61,889 ) ( 80,548 ) ( 68,970 ) Total net sales $ 3,136,381 $ 4,450,214 $ 4,277,178 The Company generally expenses sales commissions when incurred because the amortization period would typically be one year or less. These costs are recorded within SG&A expense. The Company has made an accounting policy election to treat outbound shipping and handling activities as an SG&A expense. Shipping and handling costs include amounts related to the administration of the Company’s logistical infrastructure, handling of material in its warehouses, and amounts pertaining to the delivery of products to customers, such as fuel and maintenance costs for mobile fleet, wages for drivers, and third party freight charges. These expenses were $ 152.3 million, $ 160.3 million, and $ 149.2 million for fiscal 2023, fiscal 2022, and fiscal 2021, respectively. 5. Goodwill and Other Intangible Assets As of December 30, 2023 and December 31, 2022, our intangible assets consist of goodwill and other intangible assets including customer relationships, noncompete agreements, and trade names. Goodwill 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 the acquisition method accounting for business combinations. The Company’s goodwill as of December 30, 2023 originated as follows: $ 47.8 million from the 2018 acquisition of Cedar Creek and $ 7.6 million from the 2022 acquisition of Vandermeer. Goodwill is not subject to amortization but must be tested for impairment at least annually at the reporting unit level. Since the Company operates within a single reporting unit, goodwill is evaluated at the enterprise level. The Company evaluates goodwill for impairment as of the first day of its fiscal fourth quarter, which was October 1, 2023 for fiscal 2023. The annual assessment for fiscal 2023 utilized a quantitative approach and was performed by the Company with the assistance of a independent third-party expert. Based on this assessment, the Company concluded that its goodwill was not impaired and therefore no impairment charge was needed. The Company completed its annual assessment of goodwill in the fourth quarter of fiscal 2022 using a qualitative approach. Based on the qualitative analysis performed in fiscal 2022, the Company noted no changes that were reasonably likely to cause the fair value of the enterprise to be less than its carrying value and therefore concluded that goodwill was not impaired. 54 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS In addition, the Company must evaluate the carrying value of goodwill for impairment between annual impairment tests if an event occurs or circumstances change that would indicate that the carrying amount of goodwill may be impaired. Such events and indicators may include significant declines in the industries in which the Company’s products are used, significant changes in capital market conditions, and significant changes in the Company’s market capitalization. No such indicators were identified in fiscal 2023 or fiscal 2022. The following table provides information related to the carrying amount of the Company’s goodwill: Total Carrying Amount (In thousands) Balance as of January 1, 2022 $ 47,772 Business combination 7,600 Balance as of December 31, 2022 $ 55,372 Balance as of December 30, 2023 $ 55,372 Definite-Lived Intangible Assets The gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets as of December 30, 2023 were as follows: Weighted Average Remaining Useful Lives Gross Carrying Amounts Accumulated Amortization (1) Net Carrying Amounts ($ amounts in thousands) Customer relationships 9 $ 48,500 $ ( 18,816 ) $ 29,684 Non-compete agreements 4 8,954 ( 8,429 ) 525 Trade names 2 7,826 ( 7,243 ) 583 Total $ 65,280 $ ( 34,488 ) $ 30,792 (1) Intangible assets except customer relationships are amortized on 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. The gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets as of December 31, 2022 were as follows: Weighted Average Remaining Useful Lives Gross Carrying Amounts Accumulated Amortization (1) Net Carrying Amounts ($ amounts in thousands) Customer relationships 10 $ 48,500 $ ( 15,093 ) $ 33,407 Non-compete agreements 5 8,954 ( 8,289 ) 665 Trade names 3 7,826 ( 6,909 ) 917 Total $ 65,280 $ ( 30,291 ) $ 34,989 (1) Intangible assets except customer relationships are amortized on straight line basis. Customer relationships are amortized on a double declining balance method. Definite-lived intangible assets are subject to impairment testing if events or circumstances occur that indicate the carrying amounts may be impaired. No such indicators were present in fiscal 2023 and fiscal 2022. Amortization Expense 55 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Amortization expense for the definite-lived intangible assets was $ 4.2 million, $ 3.4 million, and $ 5.3 million for the years ended December 30, 2023, December 31, 2022, and January 1, 2022, respectively. Estimated annual amortization expense for definite-lived intangible assets over the next five fiscal years is as follows: Fiscal Year Ended Estimated Amortization (In thousands) 2024 $ 3,930 2025 3,765 2026 3,471 2027 3,340 2028 3,340 6. Property and Equipment Property, plant and equipment as of December 30, 2023 and December 31, 2022, consisted of the following: December 30, 2023 December 31, 2022 (In thousands) Land and land improvements $ 29,071 $ 24,829 Buildings 201,799 179,936 Machinery and equipment 156,849 138,351 Construction in progress 8,602 17,753 396,321 360,869 Accumulated depreciation ( 170,334 ) ( 155,260 ) Property and equipment, net $ 225,987 $ 205,609 Depreciation expense for property, plant and equipment was $ 27.8 million, $ 24.2 million, and $ 22.8 million for the years ended December 30, 2023, December 31, 2022, and January 1, 2022, respectively. See Note 13 , Lease Commitments, for disclosure about the Company’s property and equipment that is held under finance lease obligations. 7. Income Taxes In fiscal 2023, the Company’s statutory income tax rate was 25.3 percent and it was comprised of the federal statutory income tax rate of 21.0 percent and the blended state statutory income tax rate of 4.3 percent. In fiscal 2022, the Company’s statutory income tax rate was 25.4 percent and it was comprised of the federal statutory income tax rate of 21.0 percent and the blended state statutory income tax rate of 4.4 percent. In fiscal 2021, the Company’s statutory income tax rate was 25.8 percent and it was comprised of the federal statutory income tax rate of 21.0 percent and the blended state statutory income rate of 4.8 percent. The Company’s blended state income tax rate is impacted by the mix of income earned in various states and by the Company’s federal taxable income, both of which may differ from year to year. The Company’s effective income tax rate is impacted by the effects of permanent differences occurring throughout the fiscal year. For fiscal 2023, fiscal 2022, and fiscal 2021, the Company’s effective income tax rate was 40.7 percent, 25.0 percent, and 24.8 percent, respectively. 56 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Fiscal Year Ended December 30, 2023 Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 ($ amounts in thousands) Income before provision for income taxes $ 81,886 $ 394,761 $ 393,876 Federal income taxes: Current $ 20,221 $ 75,617 $ 78,005 Deferred 7,993 3,184 ( 1,585 ) State income taxes: Current 5,373 17,679 19,382 Deferred ( 237 ) 2,105 1,941 Provision for income taxes $ 33,350 $ 98,585 $ 97,743 Effective tax rate 40.7 % 25.0 % 24.8 % The accounting for the one-time settlement for the single-employer defined benefit pension plan increased the effective income tax rate for fiscal 2023 by 14.8 %. The Company’s provisions for income taxes are reconciled to the federal statutory amounts as follows: Fiscal Year Ended December 30, 2023 Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 (In thousands) Federal income taxes computed at the federal statutory tax rate $ 17,196 $ 82,898 $ 82,628 State income taxes, net of federal benefit 4,609 16,171 18,970 Valuation allowance change arising from state net operating losses ( 621 ) ( 193 ) ( 3,018 ) Pension plan settlement (1) 12,150 — — Uncertain tax positions ( 356 ) ( 333 ) 91 Permanent differences arising from compensation 746 ( 71 ) 686 Other ( 374 ) 113 ( 1,614 ) Provision for income taxes $ 33,350 $ 98,585 $ 97,743 (1) $ 4.5 million was reclassified from accumulated other comprehensive income (loss) As of December 30, 2023, an income tax payable of $ 8.5 million is included on the Company’s consolidated balance sheet along with $ 1.1 million attributed to franchise taxes payable for a total of $ 9.6 million. As of December 31, 2022, a current income tax receivable of $ 9.9 million is included within Other current assets on the Company’s consolidated balance sheet. The Company’s financial statements contain certain deferred tax assets which primarily result from other temporary differences related to certain reserves, accrued liabilities, pension obligations, differences between book and tax depreciation and amortization, and state net operating losses. The Company records a valuation allowance against deferred tax assets when it is determined, based on the weight of available evidence, that it is more likely than not that some or all of the Company’s deferred tax assets will not be realized in the future. For fiscal 2023 and fiscal 2022, components of the Company’s deferred income tax assets and deferred income tax liabilities are as follows: 57 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December 30, 2023 December 31, 2022 (In thousands) Deferred income tax assets: Inventory reserves $ 3,965 $ 5,268 Compensation-related accruals 7,794 5,807 Accounts receivable 708 612 Property and equipment 41,308 44,870 Operating lease liability 10,086 13,134 Pension plans 2,832 2,885 Benefit from net operating loss carryovers 4,317 4,995 Other 220 397 Total gross deferred income tax assets 71,230 77,968 Less: valuation allowances ( 3,456 ) ( 4,076 ) Total net deferred income tax assets $ 67,774 $ 73,892 Deferred income tax liabilities: Intangible assets $ ( 4,335 ) $ ( 4,559 ) Operating lease asset ( 9,227 ) ( 12,250 ) Other ( 956 ) ( 914 ) Total deferred income tax liabilities ( 14,518 ) ( 17,723 ) Deferred income tax asset, net $ 53,256 $ 56,169 Activity in the Company’s deferred tax asset valuation allowance for fiscal 2023 and 2022 was as follows: December 30, 2023 December 31, 2022 (In thousands) Balance as of beginning of the fiscal year $ 4,076 $ 4,269 Valuation allowance increases (decreases) related to: State net operating loss carryforwards ( 620 ) ( 193 ) Balance as of end of the fiscal year $ 3,456 $ 4,076 The Company has recorded income tax and related interest liabilities where it believe certain tax positions are not more likely than not to be sustained if challenged. These balances are included in other noncurrent liabilities in the Company’s consolidated balance sheets. The following table summarizes the activity related to our gross unrecognized tax benefits: December 30, 2023 December 31, 2022 (In thousands) Balance at beginning of the fiscal year $ 1,872 $ 2,205 Additions for tax positions of current year 1,765 — Reductions due to lapse of applicable statute of limitations ( 356 ) ( 333 ) Balance at end of the fiscal year $ 3,281 $ 1,872 58 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Included in the unrecognized tax benefits as of December 30, 2023 and December 31, 2022, were approximately $ 1.5 million and $ 1.9 million, respectively of tax benefits that, if recognized, would reduce the Company’s annual effective tax rate for fiscal 2023 and 2022. No penalties were accrued for either 2023 or 2022. The Company has accrued interest associated with its unrecognized tax benefits which it releases as those benefits are realized due to the lapse of applicable statute of limitations. Interest expense associated with the Company’s unrecognized tax benefits is reported as interest expense, net in the Company’s consolidated statement of operations and comprehensive income. Such interest expense has not been material in any reporting period presented herein. Net Operating Losses At the end of fiscal 2023, the Company’s gross state net operating loss carryovers were $ 81.0 million and its tax-effected state net operating loss carryovers were $ 4.3 million, of which $ 3.5 million was subject to a valuation allowance arising from expiration dates when considered in conjunction with state limitations related to Internal Revenue Code (“IRC”) Section 382. At the end of fiscal 2022, the Company’s gross state net operating loss carryovers were $ 92.2 million and 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. The Company’s state net operating loss carryovers will expire in 1 to 20 years. Federal and State Tax Filings The Company files U.S. federal and state income tax returns in jurisdictions with varying statutes of limitations and may be subject to audit based on periods that are not limited by applicable statutes. The Company’s U.S. federal income tax returns for tax years 2020, 2021 and 2022 remain subject to audit under the federal statute of limitations. The Company’s auditable state income tax returns vary depending on the jurisdiction and its applicable statute of limitations. Assessing Deferred Tax Assets Quarterly, the Company assesses the carrying value of its deferred tax assets for impairment by evaluating the weight of available evidence at the end of each fiscal quarter. In the evaluation of the weight of available evidence at the end of fiscal 2023, the Company considered the recent reported income in the current year, as well as the reported income for 2022 and 2021, 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 evaluated. The Company also considered evidence related to the four sources of taxable income, to determine whether such positive evidence outweighed the negative evidence. The evidence considered included: • future reversals of existing taxable temporary differences; • future taxable income exclusive of reversing temporary differences and carryforwards; • taxable income in prior carryback years, if carryback is permitted under the tax law; and • tax planning strategies. In addition to the positive evidence discussed above, the Company considered as positive evidence forecasted future taxable income, the future timing of the reversal of its deferred tax assets and liabilities, and the evidence from business and tax planning strategies. At the end of fiscal 2023 and fiscal 2022, in the Company’s evaluation of the weight of available evidence, the Company concluded that its deferred tax assets were not impaired other than $ 3.5 million of the state net operating losses. Although the Company believes its estimates are reasonable in the carrying value of its valuation allowances against our deferred tax items, the ultimate determination of the appropriate amounts of valuation allowance involves significant judgement. 59 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 8. Debt and Finance Leases As of December 30, 2023, and December 31, 2022, outstanding debt and finance leases consisted of the following: December 30, 2023 December 31, 2022 (In thousands) Senior secured notes (1) $ 300,000 $ 300,000 Revolving credit facility (2) — — Finance lease obligations (3) 285,426 273,075 585,426 573,075 Unamortized debt issuance costs (4) ( 3,246 ) ( 4,057 ) Unamortized bond discount costs (4) ( 3,011 ) ( 3,519 ) 579,169 565,499 Less: current portions of finance leases 11,178 7,089 Total debt and finance leases, net of current portions $ 567,991 $ 558,410 (1) As of December 30, 2023 and December 31, 2022, long-term 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 the Company’s consolidated balance sheets at $ 293.7 million and $ 292.4 million as of December 30, 2023 and December 31, 2022, respectively. This presentation is net of discount of $ 3.0 million and $ 3.5 million and the combined carrying value of debt issuance costs of $ 3.2 million and $ 4.1 million as of December 30, 2023 and December 31, 2022, respectively. The senior secured notes are presented in the above table at face value and have an annual interest rate of 6.0 % through maturity. (2) No borrowings were outstanding during fiscal 2023 or fiscal 2022. Available borrowing capacity under this revolving credit facility was $ 346.5 million and $ 346.5 million on December 30, 2023 and December 31, 2022, respectively. The available borrowing capacity reflects undrawn letters of credit. (3) Refer to Note 13, Lease Commitments , for interest rates associated with finance lease obligations. (4) Interest expense, net on the Company’s consolidated statement of operations for fiscal 2023 and 2022 reflects amortization of debt issuance costs and bond discount costs of $ 1.3 million and $ 1.2 million, respectively. Senior Secured Notes In October, 2021, the Company and certain subsidiaries completed a private offering of $ 300.0 million of 6.0 % percent senior secured notes due 2029 (the “2029 Notes”), and in connection therewith entered into an indenture (the “Indenture”) with the subsidiary guarantors and Truist Bank, as trustee and collateral agent. The 2029 Notes were issued to investors at 98.625 percent of their principal amount. The 2029 Notes are secured by a first-priority security interest in substantially all of the Company’s assets, other than accounts receivables, inventory, deposit accounts, securities accounts, business interruption insurance and other related assets. The majority of net proceeds from the offering of the 2029 Notes were used to repay borrowings under the Company’s Revolving Credit Facility, as described below. The 2029 Notes will mature on November 15, 2029, however at the sole discretion of the Company, the notes may be redeemed, in whole or in part, prior to scheduled maturity. Early redemptions made by the Company prior to November 15, 2026 would require the Company to pay a redemption premium, as defined in the Indenture. Interest expense for the 2029 Notes totaled $ 18.0 million for fiscal 2023 and fiscal 2022. Revolving Credit Facility 60 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS In April 2018, the Company and certain subsidiaries entered into the Amended and Restated Credit Agreement for a revolving credit facility with Wells Fargo Bank, National Association, as administrative agent (“the Agent”), and certain other financial institutions. In August 2021, the Company entered into a second amendment to this 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, and in June 2023, the Company entered into a third amendment to this revolving credit facility to, among other things, replace the interest rate based on the London interbank offered rate (“LIBOR”) thereunder with an interest rate based on the secured overnight financing rate (“SOFR”) and a customary spread adjustment (as amended, the “Revolving Credit Facility”). In October 2021, in conjunction with the offering of the 2029 Notes, the Company 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 the Revolving Credit Facility, the Company expensed approximately $ 1.6 million of unamortized debt issuance costs during the fourth quarter of fiscal 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 the consolidated statements of cash flows. The Revolving Credit Facility provides for a senior secured asset-based revolving loan and letter of credit facility of up to $ 350.0 million, as amended. The obligations under the Revolving Credit Facility are secured by a security interest in substantially all of the Company’s and its subsidiaries’ assets (other than real property), including inventories, accounts receivable, and proceeds from those items, under the Amended and Restated Guaranty and Security Agreement. From and after June 30, 2023, borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to (i) Adjusted Term SOFR (calculated as SOFR plus 0.1 %) 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 SOFR, 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. Prior to June 30, 2023, borrowings under the Revolving Credit Facility bore 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. 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 Company would be required to repay the Revolving Credit Facility to the extent that such revolving borrowings 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 30, 2023, we had zero outstanding borrowings and excess availability, including cash in qualified accounts, of $ 868.2 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 and $ 346.5 million on December 30, 2023 and December 31, 2022, respectively. During fiscal 2023 and fiscal 2022, the Company incurred no interest expense for the Revolving Credit Facility since no borrowings were outstanding during either fiscal year. During fiscal 2023 and fiscal 2022, the Company incurred $ 1.0 million and $ 1.0 million, respectively, of fees associated with the Revolving Credit Facility, primarily unused line fees. These expenses are included in Interest expense, net on the Company‘s consolidated statement of operations. Debt Covenants The Revolving Credit Facility and the 2029 Notes contain various covenants and restrictions, including customary financial covenants. The Company’s right to make draws on the Revolving Credit Facility may be conditioned upon, among other things, compliance with these covenants. The Company was in compliance with all covenants as of December 30, 2023. These covenants also limit the Company’s ability to, among other things: incur additional debt; grant liens on assets; make investments; repurchase stock; pay dividends and make distributions; sell or acquire assets, including certain real estate assets, outside the ordinary course of business; engage in transactions with affiliates; and make fundamental business changes. Former Term Loan Facility On April 2, 2021, the Company repaid the remaining outstanding principal balance of its former term loan facility, the Credit and Guaranty Agreement, as amended . In connection with this repayment, the Company expensed $ 5.8 million of unamortized 61 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS debt issuance costs associated with the 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. Finance Lease Obligations Our finance lease liabilities consist of leases related to equipment and vehicles, and real estate, with the majority of those finance leases related to real estate. For more information on our finance lease obligations, refer to Note 13, Lease Commitments . 9. Fair Value Assets and Liabilities Measured at Fair Value on a Recurring Basis For the Company’s frozen defined benefit pension plan that was settled on December 5, 2023, the funded position of this plan, which was reflected in the Company’s consolidated balance sheet prior to settlement, is determined in part by the fair value of the assets held by the pension plan at the end of each reporting period. As of December 31, 2022, the underfunded position was $ 1.5 million. As of December 30, 2023, this amount was zero due to the settlement. See Note 10, Employee Retirement Plans . The Company has no other assets or liabilities for which the carrying value is remeasured to fair value at the end of each reporting period. The Company has not elected the fair value reporting option for any of its financial instruments. Fair Value Disclosures The fair value of cash, cash equivalents, accounts receivable, accounts payable and accrued liabilities, to the extent the underlying liability will be settled in cash, approximates the carrying values because of the short-term nature of these instruments. Debt The estimated fair value of the Company’s 2029 Notes was determined based on Level 2 input using observable market prices in less active markets and is presented below: December 30, 2023 December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value (In thousands) 2029 Notes $ 300,000 $ 273,182 $ 300,000 $ 283,558 The fair values of the 2029 Notes as of December 30, 2023 and December 31, 2022 were significantly influenced by the 6.0 % annual interest rate borne by the 2029 Notes, which was below market interest rates as of both dates. The carrying amount of the Company’s Revolving Credit Facility, which had no borrowings outstanding during fiscal 2023 or fiscal 2022, approximates its fair value as the interest rate is variable and reflective of market interest rates. 10. Employee Retirement Plans Multiemployer Pension Plans The Company is involved in various multiemployer pension plans (“MEPPs”) that provide retirement and certain disability benefits to certain union employees in accordance with certain collective bargaining agreements (“CBAs”). As one of many participating employers in these MEPPs, the Company is generally responsible with the other participating employers for any plan underfunding. The Company’s contributions to a particular MEPP are established by the applicable CBAs; however, 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. Factors that could impact funded status of an MEPP include, without limitation, investment performance, changes in the participant demographics, decline in the number of contributing employers, changes in actuarial assumptions, and the utilization of extended amortization provisions. A FIP or RP requires a particular MEPP to adopt measures to correct its underfunded status. These measures may include, but are not limited to: an increase in the Company’s contribution rate to the applicable CBA, a reallocation of the contributions already being made by participating employers for 62 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS various benefits to individuals participating in the MEPP, and/or a reduction in the benefits to be paid to future and/or current retirees. The Company could also be obligated to make future payments to MEPPs if it either ceases to have an obligation to contribute to the MEPP or significantly reduces its contributions to the MEPP because the Company reduced its number of employees who are covered by the relevant MEPP for various reasons, including, but not limited to, layoffs or closures, assuming the MEPP has unfunded vested benefits. The amount of such payments (known as a complete or partial withdrawal liability) generally would equal the Company’s proportionate share of the plan’s unfunded vested benefits. The following table lists the Company’s participation in its multiemployer plans which the Company deems significant. “Contributions” represent the amounts contributed to the plan during the fiscal years presented: Contributions (In millions) Pension Fund: EIN/Pension Plan Number Pension Act Zone Status FIP/RP Status (1) Surcharge 2023 2022 2021 Central States, Southeast and Southwest Areas Pension Fund 366044243 Critical and Declining (January 1, 2020) RP No $ 0.3 $ 0.4 $ 0.3 Total $ 0.3 $ 0.4 $ 0.3 (1) Funding Improvement Plan or Rehabilitation Plan, as defined by the Pension Protection Act of 2006 The Company’s contributions to this plan are approximately 0.1 % of total contributions, which is less than the required disclosure threshold of five percent of total plan contributions. However, this plan is deemed significant for disclosure as it is severely underfunded. The current CBA that requires contributions to the plan expires on December 31, 2025. In May 2020, the Company received a demand letter for payment resulting from its 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. The Company’s liability for the remainder of these payments was $ 6.8 million as of December 30, 2023. The Company may, in the future, record an additional liability if required by an event of our complete withdrawal from the plan or a mass withdrawal. The Company’s most recent contingent withdrawal liability was estimated at approximately $ 45.0 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 a complete withdrawal, the payments would not amortize the liability fully; however, payments for a complete withdrawal are limited to a 20 -year period. In the case of a mass withdrawal, the liability would not amortize fully under current government regulations, and payments would continue indefinitely. Defined Contribution Plans The Company’s employees also participate in two defined contribution plans: the BlueLinx Corporation Hourly Savings Plan covering hourly employees, and the BlueLinx Corporation Salaried Savings Plan covering salaried employees. Discretionary contributions to the plans are based on employee contributions and compensation, and, in certain cases, participants in the hourly savings plan also receive employer contributions based on union negotiated match amounts. Employer contributions to the hourly savings plan for fiscal years 2023 and 2022 were approximately $ 0.9 million and $ 0.8 million, respectively. Employer contributions to the salaried savings plan for fiscal 2023 were approximately $ 2.5 million, of which $ 0.0 million was for fiscal 2022. Employer contributions to the salaried savings plan for fiscal 2022 were approximately $ 4.0 million, of which $ 2.1 million were for fiscal 2021. 63 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Single-Employer Defined Benefit Pension Plan As previously disclosed, in October 2022, the Company, as sponsor, notified participants in its noncontributory defined benefit pension plan (the “DB Plan”) that the Company intended to transfer financial responsibility for the management and delivery of continuing benefits associated with the DB Plan to a highly rated insurance company with pension settlement experience. Most of the participants in the DB Plan are inactive, with all remaining active participants no longer accruing benefits, and the DB Plan is closed to new entrants. The DB Plan’s accumulated benefit obligation and its projected benefit obligation are the same amount (a “frozen” plan), and the Company has not incurred service cost under the plan since fiscal year 2019. Benefits under the plan were primarily related to years of service. The DB Plan’s assets were maintained in a separate trust entity prior to settlement, and then used to fund the settlement transaction as described below. Effective December 5, 2023, the Company settled the frozen DB Plan by purchasing an irrevocable nonparticipating annuity contract with an insurance company (the “buy-out contract”). The buyout contract met the requirements for a settlement, as that term is defined in ASC No. 715, Compensation-Retirement Benefits , and the DB Plan and Company, as sponsor, have been relieved of primary responsibility for the benefits obligations. Participants of the DB Plan who had a vested benefit of less than $ 5,000 were paid a one-time and final lump sum distribution, including the option to roll over their vested balance to an individual retirement account at a financial institution. Immediately before the settlement, benefit obligations and plan assets of the DB Plan were $ 78.7 million and $ 78.7 million, respectively. The plan assets included a final cash contribution of $ 6.9 million made by the Company, as sponsor, at the time the buy-out contract was purchased. Other than the aforementioned $ 6.9 million, the Company was not required to and did not make any contributions in fiscal 2023 or fiscal 2022 to the DB Plan. Substantially all of the plan assets were used to purchase the buyout contract from the insurance company on December 5, 2023. Just prior to settlement, the Company’s accumulated other comprehensive loss included unrecognized pension cost of $ 30.4 million plus unrecognized deferred taxes of $ 4.5 million, for a total of $ 34.9 million and these amounts were reclassified into earnings at settlement in fourth quarter of fiscal 2023. As previously disclosed, during fiscal 2013 the Company contributed two properties to the DB Plan in lieu of a cash contribution, and then entered into a lease for each of these properties and continued to use the properties in the Company’s distribution operations. The DB Plan engaged an independent fiduciary to manage the properties on behalf of the DB Plan. During fiscal 2022 and in anticipation of the settlement of the DB Plan, the Company repurchased these two real estate properties from the DB Plan for $ 11.1 million and 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. The repurchase amount is included in pension contributions within the operating activities section of the Company’s consolidated statements of cash flows for the fiscal year ended December 30, 2022. Actuarial assumptions for the plan during fiscal 2023 and as of December 31, 2022 included considerations for settlement of the DB Plan. The following tables set forth the change in projected benefit obligation and the change in plan assets for the DB Plan: 64 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December 30, 2023 December 31, 2022 (In thousands) Change in projected benefit obligation: Projected benefit obligation at beginning of period $ 82,752 $ 105,874 Interest cost 4,419 2,424 Actuarial gain ( 240 ) ( 19,687 ) Benefits paid ( 6,018 ) ( 5,859 ) Settlement ( 78,732 ) — Projected benefit obligation at end of period (1) $ 2,181 $ 82,752 Change in plan assets: Fair value of assets at beginning of period $ 81,231 $ 94,269 Actual return on plan assets ( 1,200 ) ( 19,055 ) Employer contributions 6,900 11,876 Benefits paid ( 6,018 ) ( 5,859 ) Settlement ( 78,732 ) — Fair value of assets at end of period (1) 2,181 81,231 Net (unfunded) status of plan (1) $ — $ ( 1,521 ) (1) As disclosed above, the DB Plan was settled during fourth quarter of fiscal 2023. The remaining residual balances in projected benefit obligations and fair value of assets as of December 30, 2023 of $ 2.2 million and $ 2.2 million, respectively, will be used to fund 1) $ 0.5 million for January 2024 benefit payments (annuity will then begin making all subsequent benefit payments), 2) $ 0.6 million for vested benefits and related assets that will be submitted to the Pension Benefit Guaranty Corporation (PBGC) for plan participants who cannot be located, and 3) $ 1.0 million to cover final estimated administrative expenses of the DB Plan. The Company expects the residual obligations and assets to be resolved in fiscal 2024 without material impact to the Company’s financial conditions, results of operations or cash flows . The change in the funded status for fiscal year 2023, from underfunded by $ 1.5 million at the end of fiscal 2022 to zero at the end of fiscal 2023, was due to the settlement of December 5, 2023 described above. The accumulated benefit obligation and the projected benefit obligation for the DB Pension Plan was $ 82.8 million as of December 31, 2022. The Company recognized the unfunded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of the DB Pension Plan in its consolidated balance sheets, with a corresponding adjustment to accumulated other comprehensive income (loss), net of tax. As of December 31, 2022, the net unfunded status of the DB Plan was $ 1.5 million. In anticipation of the plan settlement, the Company reported the net unfunded status of the DB Plan as of December 31, 2022 within Other current liabilities in its consolidated balance sheet. The Company elected to utilize a full yield curve approach in the estimation service and interest cost components for pension (income)/expense recognized by applying the specific spot rates along the yield curve used in determination of the benefit obligation to the relevant projected cash flows. Prior to settlement, actuarial gains and losses occurred when actual experience differed 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 were updated for plan re-measurement, including but not limited to, changes in the discount rate, plan amendments, mortality and other assumptions. Prior to settlement, the Company amortized a portion of unrecognized actuarial gains and losses for the DB Pension Plan into its consolidated statements of operations and comprehensive income (loss). The amount recognized in the current year’s operations was based on amortizing the unrecognized gains or losses for the DB Pension Plan that exceed the larger of 10% of the projected benefit obligation or the fair value of plan assets, also known as the corridor. The amount that represented the unrecognized gain or loss that exceeded the corridor was 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 2023 and fiscal 2022 was a $ 32.7 million pre-tax loss and a $ 2.4 million pre-tax gain, respectively. The amount for fiscal 2023 includes a $ 30.4 million settlement loss. The remainder of 65 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS the amount for fiscal 2023 and the amount for fiscal 2022 were 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 funded status recorded as pension benefit obligation on the Company’s consolidated balance sheets for the plan is set forth in the following table, along with the unrecognized actuarial loss, which was presented as part of accumulated other comprehensive loss: December 30, 2023 December 31, 2022 (In thousands) Unfunded status $ — $ ( 1,521 ) Unrecognized actuarial loss — 27,438 Net amount recognized $ — $ 25,917 Amounts recognized on the balance sheet consist of: Accrued pension liability $ — $ ( 1,521 ) Accumulated other comprehensive loss (pre-tax) — 27,438 Net amount recognized $ — $ 25,917 The net periodic pension cost (benefit) for the plan included the following: Fiscal Year Ended December 30, 2023 Fiscal Year Ended December 31, 2022 (In thousands) Service cost $ — $ — Interest cost on projected benefit obligation 4,419 2,424 Expected return on plan assets ( 3,249 ) ( 4,706 ) Amortization of unrecognized loss 1,207 835 Before settlement (1) 2,377 ( 1,447 ) Settlement loss (2) 30,440 — Net periodic pension cost (benefit) for the pension plan $ 32,817 $ ( 1,447 ) (1) On the Company’s consolidated statements of operations, reported within Other expenses (income), net (2) The DB Pension Plan was frozen and no service cost has been incurred for the plan since fiscal 2019. This one-time non-cash settlement loss is reported as a non-operating expense on the Company’s consolidated statement of operations. T he following assumptions were used to determine the projected benefit obligation at the measurement date and the net periodic pension cost (credit): December 30, 2023 December 31, 2022 Projected benefit obligation: Discount rate N/A 5.34 % Average rate of increase in future compensation levels N/A N/A Net periodic pension cost or benefit: Discount rate 5.34 % 2.38 % Average rate of increase in future compensation levels N/A N/A Expected long-term rate of return on plan assets 4.00 % 5.20 % As disclosed above, the DB Plan was settled effective December 5, 2023. The assumptions in the table above for the fiscal year ended December 30, 2023 were used to determine net periodic pension cost in fiscal 2023 prior to the settlement. The annuity purchase price was used to measure the projected benefit obligation on settlement date. 66 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Prior to settlement, estimates of the amount and timing of the Company’s future funding obligations for the DB Plan were based upon various assumptions specified above. 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 had no effect on both the projected benefit obligation and net periodic pension cost, as almost all the participants in the plan were inactive, the remaining active participants were no longer accruing benefits, and the plan was closed to new entrants. Assumptions for plan settlement liability estimate. As previously disclosed, plan liabilities were settled through a lump sum offer to certain participants followed by an annuity buyout for remaining participants. The cost of this settlement was developed relative to the plan-based accounting obligations, segmented by participant status and other demographic subgroups where appropriate. The primary drivers of cost were 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. Prior to settlement, pension plan assets were managed under a balanced portfolio allocation policy comprised of two major components: a return-seeking portion and a liability-matching portion. The expected role of return-seeking investments was designed to achieve a reasonable long-term growth of pension assets with a prudent level of risk, while the role of liability-matching investments was designed to provide a partial hedge against liability performance associated with changes in interest rates. The objective within return-seeking investments was to achieve asset diversity in order to balance return and volatility. A designated fiduciary is engaged to manage the day-to-day investment responsibilities for pension plan assets and relationships with certain agents, advisors, and other fiduciaries. The discount rate. Prior to settlement, a full yield curve approach was utilized in the estimation of components by applying the specific spot rates along the yield curve of high-quality corporate bonds used in determination of the benefit obligation to the relevant projected cash flows. Mortality rates. For fiscal years 2023 and 2022, in conjunction with the decision to settle the DB Plan, the valuations and assumptions reflected 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 2021, the valuations and assumptions reflected 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 used the most current generational mortality improvement projection scales. Plan Assets and Long-Term Rate of Return Fiscal 2023 Prior to settlement, asset return assumptions were based on current and expected asset allocations, as well as historical and expected returns on the plan asset categories. The allocation of the DB Plan’s assets impacted expected return on plan assets. The expected return on plan assets was 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. Net benefit cost increased as the expected return on plan assets decreased. Actual long-term asset allocations on average were designed to approximate targeted allocation. Targeted allocation was driven by 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 2023 and fiscal 2022, expected rates of return on plan assets of 4.00 % and 5.20 %, respectively, were used. Prior to settlement, the investment policy for the DB Pension Plan, in general, was 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 plan’s investment committee established risk mitigation policies and regularly monitored investment performance and investment allocation policies, with a third-party investment advisor executing on these strategies. A designated fiduciary was utilized to manage the day-to-day investment responsibilities for plan assets and relationships with certain agents, advisors, and other fiduciaries. As of December 30, 2023, the residual balance for plan assets had a fair value of $ 2.2 million and was primarily invested in cash. The fair value was determined based on inputs that are deemed to be Level 1 inputs on the fair value hierarchy. Fiscal 2022 The Company based 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 the expected return on plan assets. The expected return on plan assets was based on a targeted allocation consisting of return-seeking securities (including public equity, real 67 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS assets, and diversified credit investment strategies), liability-matching securities (fixed income), and cash and cash equivalents. Net periodic pension cost increases as the expected return on plan assets decreases. Actual long-term asset allocations on average approximated targeted allocation. Targeted allocation was driven by 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 2022, a 5.20 % expected rate of return on plan assets was used. The investment policy for the pension plan, in general, was 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 established risk mitigation policies and regularly monitored investment performance and investment allocation policies, with a third-party investment advisor executing on these strategies. A designated fiduciary was used to manage the day-to-day investment responsibilities for plan assets and relationships with certain agents, advisors, and other fiduciaries. Target allocation, adjusted to exclude non-GAAP BlueLinx real-estate holdings, and actual investment allocation, by asset category as of December 31, 2022, consisted of the following: Type Target Allocation Actual Allocation, December 31, 2022 Global equity 4.0 % 2.8 % Diversified credit 3.0 % 2.8 % Real assets 3.0 % 2.7 % Liability-hedging 87.0 % 73.0 % Cash and cash equivalents 3.0 % 18.8 % Total 100 % 100 % The following table sets forth by level, within the fair value hierarchy, as defined in Note 1, Summary of Significant Accounting Policies , the plan’s assets at their fair values as of December 31, 2022: Type Quoted prices in active markets of identical assets (Level 1) Significant other observable inputs (Level 2) Significant other unobservable inputs (Level 3) Assets measured at net asset value (NAV) (3) Total (In thousands) Return-seeking securities Investments in trusts and funds (1) $ — $ — $ — $ 6,683 $ 6,683 Liabilities-matching securities: Investments in trusts and funds (2) — — — 59,295 59,295 Cash and cash equivalents 15,253 — — — 15,253 Total: $ 15,253 $ — $ — $ 65,978 $ 81,231 (1) This category was comprised of a collective investment trust of equity funds that track the MCSI World Index, a collective investment trust that holds publicly traded listed infrastructure securities, and a pooled investment fund. (2) This category consisted of a collective investment trust investing in Treasury STRIPS, in addition to a collective investment fund that tracks to U.S. government bond indexes, and a pooled investment fund. (3) Investments that are measured at net asset value (“NAV”) (or its equivalent) as a practical expedient were not classified in the fair value hierarchy. The fair value of the Level 1 assets was based on quoted prices in active markets for the identical assets. 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 68 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS • Achieving a target investment return There were no significant concentrations of risk within the plan’s assets as of December 31, 2022. The DB Plan was in compliance with the rules and regulations promulgated under the Employee Retirement Income Security Act of 1974 (“ERISA”) and investments and investment strategies not allowed by ERISA were prohibited. . 11. Share-Based Compensation On May 20, 2021 at its annual meeting of stockholders, the Company’s stockholders approved the BlueLinx Holdings, Inc. 2021 Long-Term Incentive Plan (the “2021 Plan”), which had already been approved by the Company’s board of directors. The 2021 Plan permits the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares, performance units, cash-based awards, and other share-based awards to eligible employees and board members who are selected by the Company’s board of directors or a committee of the board of directors. The Company has reserved 750,000 shares of its common stock for issuance under the 2021 Plan. At any time, the number of remaining shares available for future grants against the 750,000 share authorization is determined by: subtracting the number of shares associated with grants that have been issued under the 750,000 share authorization, whether vested or unvested; adding the number of shares associated with those grants that have been either subsequently forfeited or cancelled; and adding the number of shares that were repurchased by the Company at vesting to satisfy employee payroll withholding taxes for grants that were issued against the 750,000 share authorization. Additionally, shares available for issuance under the 2021 Plan include certain shares associated with grants made under the Company’s prior equity compensation plans, as follows: forfeitures and cancellations of grants that occur after May 20, 2021, and shares repurchased by the Company to satisfy employee payroll withholding taxes for grants that vest after May 20, 2021. As of December 30, 2023, there were 609,503 shares of common stock available for issuance pursuant to future equity-based compensation awards under the 2021 Plan. The Company typically issues new shares of its common stock to participants upon the exercise or vesting of vested grants out of the total amount of common shares available for issuance under the aforementioned plan. The 2021 Plan does not permit the payment of dividends or dividend equivalents on unvested grants that include underlying shares of the Company’s common stock. During fiscal years 2023, 2022 and 2021, the Company issued service-based and performance-based RSU grants to eligible employees and members of the Company’s board of directors. Each RSU represents a contingent right to receive one share of our common stock at a future date. Service-Based Restricted Stock Units Service-based RSUs were issued to eligible employees and members of the Company’s board of directors during fiscal 2023, 2022 and 2021. Service-based RSUs issued to members of the Company’s board of directors typically vest over a one-year service vesting period, 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 Company’s board of directors. Service-based RSUs issued to employees of the Company typically vest ratably over a three-year service vesting period. 69 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes activity for service-based RSUs for fiscal year 2023: Number of Awards Weighted Average Grant-Date Fair Value Outstanding as of December 31, 2022 264,360 $ 55.07 Granted 158,276 $ 90.49 Vested ( 170,066 ) $ 50.30 Forfeited ( 50,264 ) $ 75.67 Outstanding as of December 30, 2023 202,306 $ 82.25 The total fair value of service-based RSUs that vested in fiscal 2023, fiscal 2022, and fiscal 2021 was $ 14.3 million, $ 26.8 million and $ 6.4 million, respectively. Performance-Based Restricted Stock Units Performance-based RSUs were issued to eligible employees during fiscal 2023 and 2022. Performance-based RSUs typically vest over a three-year period based on the achievement of performance goals based on three-year cumulative adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of the Company and three-year average return on working capital (“ROWC”) for the Company. The grant recipient must also complete a three-year service vesting period. As of December 30, 2023, the three-year vesting period and metrics have not been achieved for the performance-based RSUs granted in fiscal 2023 and 2022. The following table summarizes activity for performance-based RSUs for fiscal year 2023: Number of Awards Weighted Average Grant-Date Fair Value Outstanding as of December 31, 2022 61,049 $ 66.81 Granted 77,785 $ 92.44 Forfeited ( 23,436 ) $ 75.11 Outstanding as of December 30, 2023 115,398 $ 82.40 Compensation Expense During fiscal year 2023, 2022 and 2021, the Company recognized share-based compensation expense of $ 12.1 million, $ 9.6 million, and $ 6.6 million, respectively. The Company recognized related income tax benefits in fiscal year 2023, 2022 and 2021 of $ 2.6 million, $ 3.8 million, and $ 1.7 million, respectively. As of December 30, 2023, there was approximately $ 11.7 million and $ 6.2 million of total unrecognized compensation expense related to service-based RSUs and performance-based RSUs, respectively. The unrecognized compensation expense is expected to be recognized over a weighted average term of 2.2 years and 2.2 years for service-based RSUs and performance-based RSUs, respectively. 12. Stockholders' Equity, Earnings Per Share and Share Repurchases Stockholders’ Equity - Common Stock and Preferred Stock The Company has authorized 20 million shares of common stock with a par value of $ 0.01 per share. The Company has only one class of common stock authorized and issued. Holders of the Company’s common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders and there are no cumulative voting rights. The Company’s common stock has no preemptive, redemption, conversion or subscription rights. The Company has generally not paid cash dividends on its common stock. Any future dividend payments would be subject to the discretion of the Company’s board of directors and contractual restrictions under the Company’s revolving credit facility and senior secured notes. The BlueLinx Holdings Inc. 2021 Long-Term Incentive Plan does not permit the payment of dividends or dividend equivalents on unvested grants that include underlying shares of the Company’s common stock. 70 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The Company has authorized 30 million shares of preferred stock with a par value of $ 0.01 per share. The Company has never issued any shares of preferred stock. The Company’s board of directors is authorized to issue, at any time and from time to time, shares of preferred stock in one or more series. The shares of preferred stock in any series can have preferences with respect to the Company’s common stock and other series of preferred stock, and such other rights, restrictions or limitations with respect to voting, dividends, conversion, exchange, redemption and any other matters, as may be set forth by the Company’s board of directors. Earnings Per Share The Company calculates basic earnings per share by dividing net income for the period by the weighted average number of common shares outstanding for the period. For rounding purposes when calculating earnings per share, the Company’s policy is to round down to the whole cent. Diluted earnings per share are calculated using the treasury stock method whereby net income for the period is divided by the weighted average number of common shares outstanding for the period plus the dilutive effect, if any, of shares of stock associated with unvested share-based grants. However, for performance-based share-based grants, the dilutive effect is included only for grants where the performance goals have been actually achieved. The reconciliation of basic net income and diluted earnings per common share for fiscal 2023, fiscal 2022, and fiscal 2021 were as follows: Fiscal Year Ended December 30, 2023 December 31, 2022 January 1, 2022 ($ amounts in thousands, except per share amounts) Net income $ 48,536 $ 296,176 $ 296,133 Weighted average shares outstanding - Basic 8,987 9,328 9,615 Dilutive effect of share-based awards 7 70 261 Weighted average shares outstanding - Diluted 8,994 9,398 9,876 Basic earnings per share $ 5.40 $ 31.75 $ 30.80 Diluted earnings per share $ 5.39 $ 31.51 $ 29.99 Approximately 190,000 , 100,000 , and 128,000 weighted-average share-based awards were excluded from the computation of earnings per share assuming dilution for fiscal years 2023, 2022, and 2021, respectively, as the awards would have been anti-dilutive for the periods presented. Share Repurchases 2021/2022 Authorization On August 23, 2021, the Company’s board of directors approved a stock repurchase program that authorized the Company to repurchase up to $ 25.0 million of its common stock. During the first quarter of fiscal 2022, the Company repurchased 81,331 shares of its common stock under this program at an average price of $ 79.03 per share. On May 3, 2022, the Company’s board of directors increased the share repurchase authorization to $ 100 million and the Company entered into an accelerated share repurchase agreement (the “ASR Agreement”) to repurchase $ 60 million of its common stock. Under the ASR Agreement, the Company received delivery of 801,015 shares of its common stock in fiscal 2022 at an average price of $ 74.90 per share. During fiscal 2023, the Company exhausted the remaining available capacity under its stock repurchase program by completing the repurchases of 404,796 shares at an average price of $ 82.91 through October 2023. 2023 Authorization On October 31, 2023, the Company’s board of directors authorized a new share repurchase program for $ 100 million. 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. 71 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS During the fourth quarter of fiscal 2023, the Company repurchased 101,516 shares of its common stock at an average price of $ 84.43 . As of December 30, 2023, there remains $ 91.4 million repurchase capacity under this authorization. Common stock repurchases of $ 42.5 million for fiscal year 2023, as indicated on the Company’s consolidated statement of stockholders’ equity, includes $ 0.3 million of excise taxes that are included in the cost of the repurchased common stock but have not been remitted per applicable law as of December 30, 2023 and therefore are not included within the $ 42.1 million of cash used for common stock repurchases indicated on the Company’s consolidated statement of cash flows for fiscal year 2023. 13. Lease Commitments The Company has operating and finance leases for certain of its distribution facilities, office space, land, mobile fleet, and equipment. Many of these leases are non-cancelable and typically have a defined initial lease term, and some provide options to renew at the Company’s election for specified periods of time. The majority of these 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 . These leases generally provide for fixed annual rentals. Certain leases include provisions for escalating rent based on, among other things, contractually defined increases and/or changes in the Consumer Price Index (“CPI”). The known changes to lease payments are included in the lease liability at lease commencement. Unknown changes related to CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. In addition, a subset of vehicle lease cost is considered variable. Some leases require the Company to pay taxes, insurance, and maintenance expenses associated with the leased assets. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company determines if an arrangement is a lease at inception and assess lease classification as either operating or finance at lease inception or modification. 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 sheets. When a lease does not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The Company has also made the accounting policy election to not separate lease components from non-lease components related to its mobile fleet asset class. The Company’s finance lease liabilities consist of leases related to equipment and vehicles, and real estate. A majority of the Company’s finance leases relate to real estate. During fiscal 2017 and fiscal 2018, the Company entered into real estate financing transactions on certain of its warehouse facilities. These transactions were completed pursuant to sale-leaseback arrangements, and upon their completion, the Company entered into long-term leases on the properties having renewal options. The Company accounted for these transactions in accordance with the ASC 840, Leases , which was the lease accounting standard in effect for the Company at the inception of these arrangements. The Company recorded these transactions as finance lease liabilities on its consolidated balance sheet. Gains on these sale-leaseback transactions were deferred and are being recognized into the Company’s earnings. As of December 30, 2023 and December 31, 2022, the remaining unrecognized deferred gains related to these transactions were $ 70.5 million and $ 74.3 million, respectively, and these deferred gains are being recognized in earning on a straight-line basis. During fiscal 2023, 2022 and 2021, the Company recognized $ 3.9 million, $ 3.9 million, $ 3.9 million, respectively, of these deferred gains. The following table presents the assets and liabilities related to the Company’s finance and operating leases as of December 30, 72 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2023 and December 31, 2022: Lease assets and liabilities December 30, 2023 December 31, 2022 (In thousands) Assets Classification Operating lease right-of-use assets Operating lease right-of-use assets $ 37,227 $ 45,717 Finance lease right-of-use assets (1) (2) Property and equipment, net 138,357 132,748 Total lease right-of-use assets $ 175,584 $ 178,465 Liabilities Current portion Operating lease liabilities Operating lease liabilities - short term $ 6,284 $ 7,432 Finance lease liabilities Finance lease liabilities - short term 11,178 7,089 Non-current portion Operating lease liabilities Operating lease liabilities - long term 32,519 40,011 Finance lease liabilities Finance lease liabilities - long term 274,248 265,986 Total lease liabilities $ 324,229 $ 320,518 (1) Finance lease right-of-use assets are presented net of accumulated amortization of $ 102.9 million and $ 90.1 million as of December 30, 2023 and December 31, 2022, respectively. (2) During fiscal 2023, 2022 and 2021, the Company added fleet assets under finance leases of $ 19.9 million, $ 9.1 million and $ 10.5 million, respectively. These additions did not involve cash outlays and therefore are not included in “Property and equipment investments” within cash flows from investing activities on the Company’s consolidated statements of cash flows. The components of lease expense were as follows: Components of lease expense Fiscal Year Ended December 30, 2023 Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 (In thousands) Operating lease cost: Operating lease cost $ 11,485 $ 11,963 $ 11,626 Sublease income ( 3,334 ) ( 2,704 ) ( 2,555 ) Total operating lease costs $ 8,151 $ 9,259 $ 9,071 Finance lease cost: Amortization of right-of-use assets $ 16,493 $ 16,350 $ 15,183 Interest on lease liabilities 24,380 24,469 24,847 Total finance lease costs $ 40,873 $ 40,819 $ 40,030 73 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Cash flow information related to leases was as follows: Cash flow information Fiscal Year Ended December 30, 2023 Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 (In thousands) Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 11,671 $ 11,614 $ 10,782 Operating cash flows from finance leases 24,380 24,469 24,847 Financing cash flows from finance leases $ 9,208 $ 10,907 $ 11,175 Non-cash supplemental cash flow information related to leases was as follows: Non-cash information Fiscal Year Ended December 30, 2023 Fiscal Year Ended December 31, 2022 Fiscal Year Ended January 1, 2022 (In thousands) Right-of-use assets obtained in exchange for lease obligations Operating leases (1) $ 1,883 $ 7,968 $ 5,663 Finance leases 19,861 9,092 10,549 (1) Includes operating lease right-of-use assets obtained in acquisition for fiscal year ended December 31, 2022. See Note 2, Business Combination , for further information. Supplemental balance sheet information for right-of-use assets related to leases was as follows: Balance sheet information December 30, 2023 December 31, 2022 ($ amounts in thousands) Finance leases Property and equipment $ 241,276 $ 222,839 Accumulated depreciation ( 102,919 ) ( 90,091 ) Property and equipment, net $ 138,357 $ 132,748 Weighted Average Remaining Lease Term (in years) Operating leases 8.88 9.21 Finance leases 19.94 13.97 Weighted Average Discount Rate Operating leases 8.74 % 8.54 % Finance leases 8.84 % 8.87 % The major categories of the Company’s finance lease liabilities as of December 30, 2023 and December 31, 2022 are as follows: Category December 30, 2023 December 31, 2022 (In thousands) Equipment and vehicles $ 42,252 $ 29,300 Real estate 243,174 243,775 Total finance leases $ 285,426 $ 273,075 Under the short-term lease exception provided within ASC 842, the Company does not record a lease liability or right-of-use asset for any lease that has a lease term of 12 months or less at commencement. Below is a summary of undiscounted finance 74 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS and operating lease liabilities that have initial terms in excess of one year as of December 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 consolidated balance sheets, including options to extend lease terms that are reasonably certain of being exercised. Operating leases Finance leases (In thousands) 2024 $ 9,949 $ 36,077 2025 8,950 33,229 2026 5,527 36,794 2027 4,227 31,211 2028 4,005 29,521 Thereafter 24,975 501,292 Total lease payments $ 57,633 $ 668,124 Less: imputed interest ( 18,830 ) ( 382,698 ) Total $ 38,803 $ 285,426 14. Commitments and Contingencies 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 (“U.S. Customs”) 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 and is working with the U.S. Customs. The Company believes some loss related to underpaid duties is probable, but 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. Environmental Matters From time to time, the Company is involved in various proceedings incidental to its businesses and the Company is subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which it operates. Although the ultimate outcome of these proceedings cannot be determined with certainty, based on presently available information, the Company believes that adequate liabilities have been accrued for probable losses with respect thereto and receivables recorded for expected receipts from settlements. The Company further believes that, while the ultimate outcome of these matters could be material to the Company’s financial position, results of operations and cash flows in any given reporting period, they will not have a materially adverse effect on the Company’s long-term financial condition, results of operations, or cash flows. Collective Bargaining Agreements As of December 30, 2023, the Company employed approximately 2,000 associates and less than one percent of these associates are employed on a part-time basis. Approximately 28 % of these associates are represented by various local labor unions with terms and conditions of employment governed by Collective Bargaining Agreements (“CBAs”). Six CBAs covering approximately 9 % of our associates are up for renewal in fiscal year 2024, of which one has already been renegotiated, one is currently under negotiation, and we expect to renegotiate the remainder before their renewal dates. Commitments to Purchase Inventory The Company’s purchase orders are based on near-term needs and are typically fulfilled by vendors within short time horizons. The Company does not have significant agreements for the purchase of inventory specifying minimum quantities or set prices that exceed expected requirements or that cannot be canceled by the Company within 30 to 60 days. 75 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 15. Accumulated Other Comprehensive Income (Loss) Comprehensive income (loss) is a measure of income which includes both net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) results from items deferred from recognition in the Company’s consolidated statements of operations. Accumulated other comprehensive income (loss) is separately presented on the consolidated balance sheet as part of total stockholders’ equity. The changes in accumulated balances for each component of other comprehensive income (loss) for fiscal 2023, fiscal 2022, and fiscal 2021 were as follows: Impact of defined benefit pension plan, net of tax Other, net of tax Total (In thousands) Balance as of beginning of fiscal 2021, net of tax $ ( 36,855 ) $ 863 $ ( 35,992 ) Other comprehensive income, net of tax (1) 6,610 22 6,632 Balance as of end of fiscal 2021, net of tax $ ( 30,245 ) $ 885 $ ( 29,360 ) Other comprehensive (loss) income, net of tax (2) ( 2,430 ) 378 ( 2,052 ) Balance as of end of fiscal 2022, net of tax $ ( 32,675 ) $ 1,263 $ ( 31,412 ) Other comprehensive income (loss), including tax (3) 32,675 ( 1,263 ) 31,412 Balance as of end of fiscal 2023 (4) $ — $ — $ — ` (1) For fiscal 2021, included $ 6.6 million of net other comprehensive income, net of deferred taxes of $ 2.1 million, related to the defined benefit pension plan for actuarial adjustments and amortization of unrecognized amounts from prior years. (2) For fiscal 2022, included $ 2.4 million of net other comprehensive loss, net of deferred tax benefit of $ 0.8 million, related to the defined benefit pension plan for actuarial adjustments and amortization of unrecognized amounts from prior years. (3) For fiscal 2023, included $ 32.7 million related to the single-employer defined benefit pension plan, as follows: $( 3.1 ) million net of tax of $ 1.1 million for actuarial adjustments; $ 0.9 million net of tax of $( 0.3 ) million for amortization of unrecognized amounts from prior years; and $ 30.4 million plus tax of $ 4.5 million for the settlement of the plan and reclassification of these amounts to earnings. (4) As of the end of fiscal 2023, the Company no longer has any items recorded in accumulated other comprehensive income (loss). 76 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.