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Item 1. Financial Statements

2024-04-30 compared with 2023-10-31 · 279 added, 305 removed, 229 unchanged (72% of the section changed)

4 unchanged sentences

(In thousands, except per share data)

Three Months Ended Nine Months Ended

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

Three Months Ended

March 30, 2024 April 1, 2023

Net sales $ 726,244 $ 797,904

Cost of sales 670,735 871,385 2,015,264 2,920,610

Cost of products sold 598,563 664,365

Gross profit 127,681 133,539

3 unchanged sentences

Amortization of deferred gains on real estate ( 984 ) ( 984 )

Gains from sales of property — — — ( 144 )

Other operating expenses 314 3,116

20 unchanged sentences

(In thousands, except share data)

September 30, 2023 December 31, 2022

March 30, 2024 December 30, 2023

Current assets:

11 unchanged sentences

Intangible assets, net 29,768 30,792

Deferred tax assets 54,898 56,169

Deferred income tax asset, net 53,629 53,256

Other non-current assets 14,186 14,568

4 unchanged sentences

Accrued compensation 13,642 14,273

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

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

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

Pension benefit obligation 2,380 1,521

Finance lease liabilities - current 12,157 11,178

Operating lease liabilities - current 5,824 6,284

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

Other current liabilities 41,873 24,961

Total current liabilities 249,146 218,562

Non-current liabilities:

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

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

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

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

Long-term debt 294,073 293,743

Finance lease liabilities - noncurrent 279,910 274,248

Operating lease liabilities - noncurrent 30,248 32,519

Real estate deferred gains - noncurrent 65,648 66,599

Other non-current liabilities 19,399 17,644

2 unchanged sentences

Stockholders' Equity:

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

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

Preferred Stock, $ 0.01 par value, 30,000,000 shares authorized, none issued

Common Stock, $ 0.01 par value, 20,000,000 shares authorized, 8,661,738 and 8,650,046 outstanding, respectively

Additional paid-in capital 166,503 165,060

Accumulated other comprehensive loss ( 30,745 ) ( 31,412 )

Accumulated stockholders’ equity 487,263 420,603

Retained earnings 486,631 469,139

Total stockholders’ equity 653,221 634,286

5 unchanged sentences

Common Stock Additional

Paid-In Capital Accumulated

Comprehensive Loss Accumulated Equity Stockholders’ Equity

Paid-In Capital Retained Earnings Stockholders’ Equity Total

Shares Amount

1 unchanged sentence

Net income — — — 17,492 17,492

Impact of pension plan, net of tax — — — 239 — 239

Vesting of restricted stock units 67 1 ( 1 ) — — —

Compensation related to share-based grants — — 4,569 — — 4,569

Repurchase of shares to satisfy employee tax withholdings ( 8 ) — ( 570 ) — — ( 570 )

Obligation for repurchase of shares to satisfy employee tax withholdings ( 19 ) ( 1,319 ) — — ( 1,319 )

Other — — — ( 11 ) — ( 11 )

Balance, April 1, 2023 9,089 $ 91 $ 203,427 $ ( 31,184 ) $ 438,415 $ 610,749

Net income — — — — 24,466 24,466

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

Vesting of restricted stock units 95 — ( 1 ) — — ( 1 )

Compensation related to share-based grants — — 1,926 — — 1,926

Repurchase of shares to satisfy employee tax withholdings ( 24 ) — ( 2,071 ) — — ( 2,071 )

Obligation for repurchase of shares to satisfy employee tax withholdings ( 10 ) — ( 913 ) — — ( 913 )

Common stock repurchase and retirement ( 142 ) ( 1 ) ( 11,598 ) — — ( 11,599 )

Other — — — ( 11 ) — ( 11 )

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

Net income — — — — 24,382 24,382

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

Vesting of restricted stock units 7 — — — — —

Vesting of restricted stock units 19 (a) (a) — —

Compensation related to share-based grants — — 2,350 — 2,350

Repurchase of shares to satisfy employee tax withholdings ( 7 ) — ( 907 ) — ( 907 )

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

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

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

See accompanying Notes.

Balance, March 30, 2024 8,662 $ 87 $ 166,503 $ 486,631 $ 653,221

(a) Activity rounds to less than one thousand dollars .

Common Stock Additional

Paid-In Capital Accumulated

Comprehensive Loss Accumulated Equity Stockholders’ Equity

Comprehensive Loss Retained Earnings Stockholders’ Equity Total

Shares Amount

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

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

Net income — — — — 17,812 17,812

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

Other comprehensive income — — — 228 — 228

Vesting of restricted stock units 67 1 ( 1 ) — — —

1 unchanged sentence

Repurchase of shares to satisfy employee tax withholdings ( 8 ) — ( 570 ) — — ( 570 )

Common stock repurchase and retirement ( 81 ) ( 1 ) ( 6,426 ) — — ( 6,427 )

Other — — — 20 — 20

Obligation for repurchase of shares to satisfy employee tax withholdings ( 19 ) ( 1,319 ) — — ( 1,319 )

Balance, April 1, 2023 9,089 $ 91 $ 203,427 $ ( 31,184 ) $ 438,415 $ 610,749

Net income — — — — 71,272 71,272

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

Vesting of restricted stock units 181 2 — — — 2

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

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

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

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

Other — — 134 ( 20 ) — 114

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

Net income — — — — 59,509 59,509

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

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

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

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

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

Other — — ( 134 ) ( 24 ) — ( 158 )

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

There has been no activity for Preferred Stock .

See accompanying Notes.

2 unchanged sentences

(In thousands)

Nine Months Ended

September 30, 2023 October 1, 2022

Three Months Ended

March 30, 2024 April 1, 2023

Cash flows from operating activities:

Net income $ 17,492 $ 17,812

Adjustments to reconcile net income to cash provided by operations:

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

Depreciation and amortization 9,433 7,718

Amortization of debt discount and issuance costs 330 329

Gains from sales of property — ( 144 )

Deferred income tax 1,117 ( 939 )

Provision for deferred income taxes ( 373 ) 213

Amortization of deferred gains from real estate ( 984 ) ( 984 )

4 unchanged sentences

Accounts payable 13,784 25,420

Taxes payable — 612

Pension contributions — ( 677 )

Other current assets ( 5,557 ) 5,953

Other assets and liabilities 19,528 279

Net cash provided by operating activities 230,724 246,036

Net cash (used in) provided by operating activities ( 31,135 ) 88,965

Cash flows from investing activities:

3 unchanged sentences

Cash flows from financing activities:

Common stock repurchase and retirement ( 29,321 ) ( 66,427 )

Repurchase of shares to satisfy employee tax withholdings ( 907 ) ( 570 )

8 unchanged sentences

Non-cash transactions:

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

Obligation for shares repurchases not yet settled $ 843 $ —

Obligation for repurchase of shares to satisfy employee tax withholdings $ — $ 1,319

See accompanying Notes.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of BlueLinx Holdings Inc.

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

March 30, 2024

Basis of Presentation and Significant Accounting Policies

BlueLinx Holdings Inc., including consolidated 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 and purchases products from manufacturers and distributes 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, moulding and 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 unaudited condensed consolidated financial statements and accompanying notes have been prepared using generally accepted accounting principles in the United States (“GAAP”) and the interim reporting guidance of the U.S.

Securities and Exchange Commission (“SEC”).

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

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

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

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

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

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

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

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

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

The Company’s consolidated balance sheet as of December 30, 2023 contained herein was derived from the audited consolidated balance sheet included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023 (the “2023 Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”) on February 20, 2024.

In the opinion of the Company’s management, the unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the Company’s results of operations and comprehensive income for the three months ended March 30, 2024 and April 1, 2023, financial condition as of March 30, 2024 and December 30, 2023, changes in stockholders’ equity for the three months ended March 30, 2024 and April 1, 2023, and cash flows for the three months ended March 30, 2024 and April 1, 2023.

The Company has condensed or omitted certain notes and other information from the unaudited condensed consolidated financial statements presented in this report.

Therefore, these condensed financial statements and accompanying notes should be read in conjunction with the Company’s 2023 Form 10-K.

The results for the three months ended March 30, 2024 are not necessarily indicative of results that may be expected for the full fiscal year ending December 28, 2024, or any other interim period.

The Company operates on a 5-4-4 fiscal calendar and its fiscal year ends on the Saturday closest to December 31st of each fiscal year and may comprise 53 weeks in certain years.

Fiscal 2024 contains 52 weeks and will end on December 28, 2024.

Fiscal 2023 contained 52 weeks and ended on December 30, 2023.

Our financial statements are prepared in conformity with U.S.

generally accepted accounting principles (“U.S.

GAAP”), which requires us to make estimates based on assumptions about current and, for some estimates, future economic and market conditions, which affect reported amounts and related disclosures in our financial statements.

Although our current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position.

Reclassification of Prior Period Presentation

For the nine months ended October 1, 2022, we have reclassified certain items within the presentation of our statement of cash flows to align with our statement of cash flows presentation for the nine months ended September 30, 2023.

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

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

Recently Adopted Accounting Standards

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 condensed 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 6, Long-Term Debt , to these condensed consolidated financial statements, was amended on June 27, 2023, to replace references to LIBOR with Secured Overnight Financing Rate (“SOFR”) for determining interest payable on current and future borrowings.

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

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.

Business Combinations

On October 3, 2022, we acquired all the outstanding stock of Vandermeer Forest Products, Inc.

(“Vandermeer”), a premier wholesale distributor of building products, for preliminary total consideration of $ 69.3 million.

The acquisition has been accounted for as a business combination using the acquisition method.

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

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

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

The primary area of the preliminary acquisition accounting that is not yet finalized relates to the fair value of certain liabilities that are subject to seller reimbursement via a cash escrow bank account that was funded through the holdback of $ 6.3 million of the purchase price.

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

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

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

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.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company’s management 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 the Company’s financial statements.

Although current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from management’s expectations, which could materially affect the Company’s results of operations and financial position.

Significant Accounting Policies

The Company has made no material changes to its significant accounting policies described in the notes to its consolidated financial statement included in its 2023 Form 10-K.

The Company did not adopt any new accounting standards during the fiscal year ended December 30, 2023, or the three months ended March 30, 2024.

Recent Accounting Standards - Adoption Pending

Segment Reporting Improvements .

On November 27, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 period for 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 (“ASU 2023-09”), 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 Accounting Standards Codification (“ASC”) No.

740, Income Taxes (“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.

The Company’s inventories consist almost entirely of finished goods inventory, with a very limited amount of work-in-process inventory.

The cost of all inventories is determined by the moving average cost method.

We have included all material charges directly incurred in bringing inventory to its existing condition and location.

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

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

As of December 31, 2022, we recorded a lower of cost or net realizable value reserve of $ 2.6 million as a result of the decrease in the value of our structural lumber and panel inventory related to the decline in wood-based commodity prices as of the end of the period.

The Company included all material charges directly incurred in bringing inventory to its existing condition and location, including the cost of inbound freight, volume incentives, inventory adjustments, tariffs, duties and other import fees.

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

As of March 30, 2024, the Company assessed the carrying value of its inventory and determined it was presented at the lower of cost or net realizable value and that a reserve was not necessary.

As of December 30, 2023, the Company also had no such inventory reserve.

Substantially all of the amount reported in Cost of products sold on the Company’s consolidated statement of operations is composed of costs incurred to purchase inventory that is subsequently resold to customers, including costs related to import duties and tariffs.

Import duties and tariffs are not typically passed through to customers as separately billed charges.

Certain import duties are classified by the U.S.

Department of Commerce (the “Commerce Department”) as “antidumping or countervailing duties,” and these duties may be subject to periodic review and adjustments by the Commerce Department through a process known as a trade remedy administrative review, which can result in both retroactive and prospective adjustments to duty rates.

At the time of importation, the Company tenders antidumping duty and countervailing duty cash deposits (as use of that term has been defined by the Commerce Department) to the U.S.

Customs and Border Protection (“U.S.

Customs”) and accounts for duties and tariffs based on the then-current rates in effect, and records any retroactive adjustments in the period in which U.S.

Customs determines final duty rates at the time entries subject to antidumping and countervailing duties liquidate (as use of that term has been defined by the Commerce Department), typically through the resolution of a trade remedy administrative review proceeding.

During the three months ended March 30, 2024, the Company received refunds of $ 16.9 million, plus interest of $ 2.0 million, related to retroactive adjustments associated with certain antidumping duties for imported wood moulding and millwork products.

The antidumping duty cash deposits were originally paid and accounted for by the Company in prior reporting periods at the then-current rates.

Impacted inventories have since been sold.

These adjustment amounts are reflected in Costs of products sold and Interest expense, net, respectively, on the Company’s unaudited condensed consolidated statement of operations for the three months ended March 30, 2024.

See Note 9, Commitments and Contingencies , for disclosure concerning another matter related to import duties.

Goodwill and Other Intangible Assets

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

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

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

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

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

This test requires us to assign goodwill to a reporting unit and to determine if the fair value of the reporting unit’s goodwill is less than its carrying amount.

We evaluate goodwill for impairment during the fourth quarter of each fiscal year.

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

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

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

As a result of merger and acquisition activities, the Company’s consolidated balance sheet reflects goodwill along with other intangible assets for customer relationships, noncompete agreements, and trade names.

As of March 30, 2024, the only changes since December 30, 2023 were for amortization of intangible assets.

The Company does not amortize its goodwill but must assess its goodwill for impairment at least annually, either quantitatively or qualitatively.

Under GAAP, goodwill is assessed at the reporting unit level.

Since the Company is composed of one reporting unit, the Company’s goodwill is assessed at the enterprise level.

The most recent scheduled annual impairment assessment for goodwill was conducted quantitatively as of October 1, 2023.

Based on that assessment, the Company’s management, with the assistance of an independent expert, concluded that goodwill was not impaired, meaning the fair value of the enterprise exceeded the carrying value of the enterprise, including goodwill.

In addition to the annual impairment assessments described above, the Company will assess for impairment between the annual impairment assessments if events occur, or circumstances materially change, that indicate a potential goodwill impairment may exists.

During the three months ended March 30, 2024, the Company did not note any indicators of potential impairment for its goodwill.

As of March 30, 2024 and December 30, 2023, the carrying value of the Company’s goodwill was $ 55.4 million.

Definite-Lived Intangible Assets

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

The gross carrying amounts, accumulated amortization, and net carrying amounts of the Company definite-lived intangible assets at March 30, 2024 were as follows:

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

1 unchanged sentence

Net Carrying Amounts

(Dollar amounts in thousands)

($ in thousands)

Customer relationships 9 $ 48,500 $ ( 19,722 ) $ 28,778

2 unchanged sentences

Total $ 65,280 $ ( 35,512 ) $ 29,768

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

(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.

Amortization Expense

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

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

Amortization expense for definite-lived intangible assets was approximately $ 1.0 million and $ 1.1 million for the three-months ended March 30, 2024 and April 1, 2023, respectively.

Estimated amortization expense for definite-lived intangible assets for the remaining portion of 2024 and the next five fiscal years is as follows:

2 unchanged sentences

Revenue Recognition

We recognize 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) Transaction price has been allocated to the performance obligations;

and (5) When (or as) performance obligations are satisfied.

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

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

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

For all sales channel types, consisting of warehouse, direct, and reload sales, we typically satisfy our performance obligations upon shipment.

Our customer payment terms are typical for our industry, and may vary by the type and location of our customer and the products or services offered.

The term between invoicing and when payment is due is not deemed to be significant by us.

For certain sales channels and/or products, our standard terms of payment may be as early as ten days.

In addition, we provide 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 remain with us.

All revenues recognized are net of trade allowances (i.e., rebates), 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 have been insignificant for each of the reported periods.

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

We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized.

We believe that there will not be significant changes to our estimates of variable consideration.

The following table presents our revenues disaggregated by revenue source.

The following table presents the Company’s revenues disaggregated by product type.

Sales and usage-based taxes are excluded from revenues.

Three Months Ended Nine Months Ended

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

(In thousands) (In thousands)

Three Months Ended

Product type March 30, 2024 April 1, 2023

(In thousands)

Specialty products $ 503,834 $ 567,838

1 unchanged sentence

Total net sales $ 726,244 $ 797,904

The following table presents our revenues disaggregated by sales channel.

Warehouse sales are delivered from our warehouses.

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

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

Direct sales are shipped from the manufacturer to the customer without our taking physical possession of the inventory and, as a result, typically generate lower margins than our warehouse and reload distribution channels.

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

The following table presents the Company’s revenues disaggregated by sales channel.

Sales and usage-based taxes are excluded from revenues.

Three Months Ended Nine Months Ended

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

(In thousands) (In thousands)

Three Months Ended

Sales channel March 30, 2024 April 1, 2023

(In thousands)

Warehouse and reload $ 591,768 $ 686,632

2 unchanged sentences

Total net sales $ 726,244 $ 797,904

Long-Term Debt

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

September 30, 2023 December 31, 2022

Warehouse sales are delivered from Company warehouses.

Reload sales are similar to warehouse sales but are shipped from warehouses, most of which are operated by third parties, where the Company stores owned products to enhance operating efficiencies.

This channel is employed primarily to service strategic customers that would be 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 without the Company taking physical possession of the inventory and, as a result, typically generate lower margins than warehouse and reload distribution channels but require lower amount of committed capital and fixed costs.

Performance obligations in contracts with customers generally consist solely of delivery of goods.

Debt and Finance Leases

As of March 30, 2024 and December 30, 2023, outstanding debt and finance leases consisted of the following:

March 30, 2024 December 30, 2023

(In thousands)

8 unchanged sentences

586,140 579,169

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

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

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

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

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

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

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

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

current portions of finance lease obligations 12,157 11,178

Total debt and finance lease obligations, net of current portions $ 573,983 $ 567,991

(1) As of March 30, 2024 and December 30, 2023, long-term debt was comprised of $ 300.0 million of senior secured notes issued in October 2021.

These notes are presented under the long-term debt caption of our consolidated balance sheets at $ 294.1 million and $ 293.7 million as of March 30, 2024 and December 30, 2023, respectively.

This presentation is net of discount of $ 2.9 million and $ 3.0 million and the combined carrying value of debt issuance costs of $ 3.0 million and $ 3.2 million as of March 30, 2024 and December 30, 2023, 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 on this revolving credit facility during the three months ended March 30, 2024 or fiscal year 2023.

Available borrowing capacity under this revolving credit facility was $ 346.5 million as of March 30, 2024 and December 30, 2023.

The available borrowing capacity reflects undrawn letters of credit.

(3) Refer to Note 8, Lease Commitments , for interest rates associated with finance lease obligations.

Interest expense, net on the Company’s unaudited condensed consolidated statements of operations for the three months ended March 30, 2024 and April 1, 2023 consists of interest expense of $ 13.1 million and $ 11.3 million, respectively, and interest income of $ 8.5 million and $ 3.6 million, respectively.

Interest expense reflects amortization of debt issuance costs and bond discount costs of $ 0.3 million and $ 0.3 million for first quarter 2024 and first quarter 2023, respectively.

Included in interest income for the three months ended March 30, 2024 is $ 2.0 million received with refunds from U.S.

Customs for antidumping import duties (see Note 2, Inventories) .

Interest expense for the three months ended March 30, 2024 also includes $ 1.6 million of accrued estimated interest expense related to import duties that the Company believes it may owe (see Note 9, Commitments and Contingencies) .

Senior Secured Notes

In October 2021, we completed a private offering of $ 300 million of our 6 percent senior secured notes due 2029 (the “2029 Notes”), and in connection therewith we entered into an indenture (the “Indenture”) with the guarantors party thereto and Truist Bank, as trustee and collateral agent.

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

The majority of net proceeds from the offering of the 2029 Notes were used to repay borrowings under our Revolving Credit Facility, as defined below.

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

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

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 we 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 % 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 2029 Notes are scheduled to 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 $ 4.5 million for the three months ended March 30, 2024 and April 1, 2023.

As of March 30, 2024 and December 30, 2023, the fair value of the Company’s 2029 Notes was approximately $ 291.9 million and $ 273.2 million, respectively, which were estimated from inputs that are designated as Level 2 in the fair value hierarchy.

The Company’s valuation technique is based primarily on observable market prices in less active markets.

Revolving Credit Facility

Our revolving credit facility, entered into with Wells Fargo Bank, National Association, as administrative agent (the “Agent”), and certain other financial institutions party thereto, provides for a senior secured asset-based revolving loan and letter of credit facility of up to $ 350.0 million.

Our obligations under the Revolving Credit Facility (as defined below) are secured by a security interest in substantially all of our and our subsidiaries’ assets (other than real property), including inventories, accounts receivable, and proceeds from those items.

On June 27, 2023, we entered in to a third amendment to the credit facility to, among other things, replace the interest rate based on LIBOR applicable to borrowings under the Credit Agreement with an interest rate based on the SOFR and a customary spread adjustment (as amended, the “Revolving Credit Facility”).

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

Borrowings under our 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.

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

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

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

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

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.

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.

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 March 30, 2024, the Company had zero outstanding borrowings and excess availability, including cash in qualified accounts, of $ 827.8 million under our Revolving Credit Facility.

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.

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

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

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

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

Available borrowing capacity under our Revolving Credit Facility was $ 346.5 million on March 30, 2024 and $ 346.5 million December 30, 2023.

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 March 30, 2024 and 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.

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 9, Leases .

Net Periodic Pension Cost (Benefit)

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

Three Months Ended Nine Months Ended

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

(In thousands) (In thousands)

The Company’s 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 8, Lease Commitments .

Net Periodic Pension Cost

As previously disclosed, effective December 5, 2023, the Company settled its noncontributory defined benefit pension plan (the “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, were relieved of primary responsibility for the benefits obligations.

Prior to settlement, during the three months ended April 1, 2023 the Company incurred the following net periodic pension cost:

Three Months Ended

April 1, 2023

(In thousands)

Service cost (1)

$ — $ — $ — $ —

Interest cost on projected benefit obligation 1,104

1 unchanged sentence

Amortization of unrecognized gain 302

Net periodic pension cost (benefit) $ 594 $ ( 362 ) $ 1,782 $ ( 1,086 )

(1) Service cost is not a part of our net periodic pension benefit as our pension plan is frozen for all participants.

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

During the three and nine months ended September 30, 2023, we continued our previously announced plan to terminate the BlueLinx Corporation Hourly Retirement Plan (the “plan”) and transfer the management and delivery of continuing benefits associated with the plan to a highly rated and qualified insurance company with pension termination experience.

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

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

Stock Compensation

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

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

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

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

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

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

Our leases generally provide for fixed annual rentals.

Certain of our leases include provisions for escalating rent based on, among other things, contractually defined increases and/or changes in the Consumer Price Index (“CPI”).

Net periodic pension cost $ 594

(1) Service cost was not a part of net periodic pension benefit since the pension plan was frozen for all participants.

The net periodic pension cost is included in other expense, net in the Company’s unaudited condensed consolidated statement of operations and comprehensive income.

Share-Based Compensation

During the three months ended March 30, 2024 and April 1, 2023, the Company incurred stock compensation expense of $ 2.4 million and $ 4.6 million, respectively.

Stock compensation expense for the three months ended April 1, 2023 included the acceleration of unrecognized compensation cost in conjunction with announced leadership transitions that occurred in 2023.

As of April 1, 2023, $ 1.3 million was accrued for tax withholding obligations of the Company’s employees upon vesting of restricted stock unit awards.

This was presented as a non-cash transaction in the Company’s unaudited condensed consolidated statement of cash flows.

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 typically five years .

The Company’s 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 our vehicle lease cost is considered variable.

Some of our leases require us to pay taxes, insurance, and maintenance expenses associated with the leased assets.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

We determine 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 condensed consolidated balance sheets.

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

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

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

Finance Lease Liabilities

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

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

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

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

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 assesses 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 Company’s consolidated balance sheets.

Finance lease ROU assets are included in property and equipment and the finance lease obligations are presented separately in the Company’s 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 our 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 March 30, 2024 and December 30, 2023, the remaining unrecognized deferred gains related to these transactions were $ 69.6 million and $ 70.5 million, respectively, and these deferred gains are being recognized in earning on a straight-line basis.

During the first quarters of fiscal 2024 and 2023, the Company recognized $ 1.0 million of these deferred gains in each quarter.

The following table presents the assets and liabilities related to the Company’s leases as of March 30, 2024 and December 30, 2023:

Lease assets and liabilities March 30, 2024 December 30, 2023

(In thousands)

5 unchanged sentences

Current portion:

Operating lease liabilities Operating lease liabilities - short term $ 6,845 $ 7,432

Finance lease liabilities Finance lease liabilities - short term 9,813 7,089

Operating lease liabilities Operating lease liabilities - current $ 5,824 $ 6,284

Finance lease liabilities Finance lease liabilities - current 12,157 11,178

Non-current portion:

Operating lease liabilities Operating lease liabilities - long term 37,007 40,011

Finance lease liabilities Finance lease liabilities - long term 267,530 265,986

Operating lease liabilities Operating lease liabilities - noncurrent 30,248 32,519

Finance lease liabilities Finance lease liabilities - noncurrent 279,910 274,248

Total lease liabilities $ 328,139 $ 324,229

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

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $ 102.4 million and $ 102.9 million as of March 30, 2024 and December 30, 2023, respectively.

The components of lease expense were as follows:

Three Months Ended Nine Months Ended

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

(In thousands) (In thousands)

Three Months Ended

Components of lease expense March 30, 2024 April 1, 2023

(In thousands)

Operating lease cost:

7 unchanged sentences

Supplemental cash flow information related to leases was as follows:

Three Months Ended Nine Months Ended

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

(In thousands) (In thousands)

Three Months Ended

Cash flow information March 30, 2024 April 1, 2023

(In thousands)

Cash paid for amounts included in the measurement of lease liabilities:

3 unchanged sentences

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

Three Months Ended Nine Months Ended

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

(In thousands) (In thousands)

Three Months Ended

Non-cash information March 30, 2024 April 1, 2023

(In thousands)

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

2 unchanged sentences

Supplemental balance sheet information related to leases was as follows:

Balance sheet information September 30, 2023 December 31, 2022

Balance sheet information March 30, 2024 December 30, 2023

($ in thousands)

9 unchanged sentences

Finance leases 8.85 % 8.84 %

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

Category September 30, 2023 December 31, 2022

The major categories of the Company’s finance lease liabilities as of March 30, 2024 and December 30, 2023 are as follows:

Category March 30, 2024 December 30, 2023

(In thousands)

2 unchanged sentences

Total finance leases $ 292,067 $ 285,426

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

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

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

Below is a summary of undiscounted finance and operating lease liabilities that have initial terms in excess of one year as of March 30, 2024.

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

Fiscal year Operating leases Finance leases

10 unchanged sentences

Commitments and Contingencies

Environmental and Legal Matters

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

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

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

Regulatory Matters

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

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

The Company is currently evaluating this matter.

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

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

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

As previously disclosed, U.S.

Customs gathered initial information from the Company under routine audit procedures, and the information indicated that the Company potentially underpaid duties in prior periods arising from certain classification discrepancies for products imported into the United States as separately entered shipments.

In working with the U.S.

Customs, the Company has exercised reasonable care to address this matter in an equitable and expeditious manner through the filing of a prior disclosure submission with U.S.

Customs and now estimates that it will be required to pay approximately $ 10.4 million, excluding any interest.

The Company accrued this estimated amount in the first quarter of 2024 and it is reflected in Other current liabilities and in Costs of products sold on the Company’s unaudited condensed consolidated balance sheet and unaudited condensed consolidated statement of operations as of and for the three months ended March 30, 2024.

See Note 2, Inventories , for disclosure concerning another matter related to import duties.

Environmental Matters

From time to time, the Company is involved in various proceedings incidental to its business 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 September 30, 2023, we employed approximately 2,000 associates and less than one percent of our associates are employed on a part-time basis.

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

Two CBAs covering approximately five percent of our associates are up for renewal in the remainder of fiscal 2023, which we expect to renegotiate before their renewal dates.

As of March 30, 2024, approximately 20 % of the Company’s employees were represented by various local labor unions with terms and conditions of employment governed by Collective Bargaining Agreements (“CBAs”).

Three CBAs covering approximately 3.5 % of the Company’s employees are up for renewal in the remainder of fiscal 2024, of which one has already been renegotiated, one is currently under negotiations, and one is expected to be renegotiated before their renewal dates.

Accumulated Other Comprehensive Loss

Comprehensive income includes both net income and other comprehensive income.

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

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

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

As of March 30, 2024 and December 30, 2023, the Company had no accumulated other comprehensive income or loss.

As of April 1, 2023, the components of accumulated other comprehensive loss were as follows:

Benefit Pension

plan, net of tax Other,

net of tax Total Accumulated Other Comprehensive Loss

(In thousands)

December 31, 2022, beginning balance

$ ( 32,675 ) $ 1,263 $ ( 31,412 )

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

September 30, 2023, ending balance, net of tax

Plan, Net of Tax Other Total Accumulated Other Comprehensive Loss, Net of Tax

April 1, 2023 balance

$ ( 32,436 ) $ 1,252 $ ( 31,184 )

Effective Tax Rate

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

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

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

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

Effective Income Tax Rate

The Company’s effective tax rate for the three months ended March 30, 2024 and April 1, 2023 was 24.1 percent and 26.5 percent, respectively.

For the full fiscal year ending December 28, 2024, the Company estimates that its annual effective income tax rate will be approximately 26 % .

The Company’s effective tax rates for the three months ended March 30, 2024 and April 1, 2023 were impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, slightly offset by a benefit from the vesting of restricted stock units, which occurred during each period.

Additionally, the effective income tax rate for the three months ended March 30, 2024 was impacted by a partial release of the valuation allowance for deferred income tax assets due to a state income tax adjustment.

Earnings Per Share and Stockholders' Equity

Earnings Per Share

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

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

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

Three Months Ended Nine Months Ended

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

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

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 net earnings per common share for the three-month periods ended March 30, 2024 and April 1, 2023 were as follows:

Three Months Ended

March 30, 2024 April 1, 2023

(In thousands, except per share data)

Net income $ 17,492 $ 17,812

4 unchanged sentences

Diluted earnings per share $ 2.00 $ 1.94

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

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

Subsequent Event

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

Approximately 114,000 and 78,000 weighted-average share-based awards were excluded from the computation of earnings per share assuming dilution during the three months ended March 30, 2024 and April 1, 2023, respectively, as the awards would have been anti-dilutive for the periods presented.

Share Repurchases

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.

During the three months ended March 30, 2024, the Company did not repurchase any of its common shares.

As of March 30, 2024, there remained $ 91.4 million repurchase capacity under this authorization.

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.

On May 3, 2022, the Company’s board of directors increased the share repurchase authorization to $ 100 million.

During the three months ended April 1, 2023, the Company did not repurchase any shares of its common stock under the 2021/2022 authorization.

Between April 2023 and October 2023, the Company exhausted the remaining available capacity under the 2021/2022 authorization.

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

What changed 10-Q

Item 1. Financial Statements