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Item 2. Management’s Discussion and Analysis

2024-07-30 compared with 2024-04-30 · 145 added, 98 removed, 145 unchanged (63% of the section changed)

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Forward-looking statements involve risks and uncertainties that may cause our business, strategy, or actual results to differ materially from the forward-looking statements.

The forward-looking statements in this report include statements about anticipated effects of adopting certain accounting standards;

The forward-looking statements in this report include, without limitation, statements about anticipated effects of adopting certain accounting standards;

estimated future annual amortization expense;

potential changes to estimates made in connection with revenue recognition;

estimates made in connection with revenue recognition;

the expected outcome of legal proceedings;

the expected outcome of government and regulatory proceedings;

industry conditions;

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our confidence in the Company’s long-term growth strategy;

our ability to capitalize on supplier-led price increases and our value-added services;

our areas of focus and management initiatives;

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our ability to generate profits and cash from sales of specialty products;

our ability to effectively manage inventory;

our ability to manage our lease commitments;

our ability to negotiate collective bargaining agreements;

our multi-year capital allocation plans;

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The following initiatives represent key areas of our management team’s focus:

Foster a performance-driven culture committed to profitable growth.

This includes enhancing the customer experience;

Migrate sales mix toward higher-margin specialty product categories.

The Company is pursuing a revenue mix increasingly weighted toward higher-margin, specialty product categories such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products.

Additionally, the Company is expanding its value-added service offerings designed to simplify complex customer sourcing requirements, together with marketing, inventory and pricing services afforded by the Company’s national platform.

Foster a performance-driven culture committed to business excellence and profitable growth to be the provider of choice for suppliers and customers.

This includes enhancing the customer experience through technology

accelerating organic growth within specific product and solutions offerings where the Company is uniquely advantaged;

enhancing our performance by leveraging our scale and footprint together with pricing, operational and procurement capabilities;

and deploying capital to drive sustained margin expansion, grow cash flow and maintain continued profitable growth.

Migrate sales mix toward higher-margin specialty product categories.

The Company is pursuing a revenue mix increasingly weighted toward higher-margin, specialty product categories such as engineered wood, siding, moulding and millwork, outdoor living, specialty lumber and panels, and industrial products.

Additionally, the Company is expanding its value-added service offerings designed to simplify complex customer sourcing requirements and provide enhanced service capabilities afforded by the Company’s national platform.

Maintain a disciplined capital structure and pursue high-return investments that increase the value of the Company.

The Company is maintaining a disciplined capital structure while at the same time investing in its business to modernize its distribution facilities, as well as its tractor and trailer fleet, and to improve operational performance.

The Company also continues to evaluate potential acquisition targets that complement its existing capabilities, grow its specialty products business, increase customer exposure, expand its geographic reach through potential greenfield expansions in new markets, or a combination thereof.

We invested $5.4 million cash in our business and entered into $8.2 million of finance leases during the first quarter of fiscal 2024 to improve operational performance and productivity.

Maintain a disciplined capital structure and pursue strategic investments that increase the value of the Company.

The Company continues to strategically target acquisition opportunities that grow its specialty products business, expand its geographic reach, or complement its existing capabilities.

The Company also continues to identify markets that are potential opportunities for new market development.

The Company further seeks to maintain a disciplined capital structure while at the same time investing in its business to modernize its distribution facilities, as well as its tractor and trailer fleet, and to improve operational performance.

During the first half of 2024, we engaged in the following transactions:

• Used cash of $11.9 million and entered into $11.2 million of finance leases to enhance our facilities and fleet.

• Returned capital of $15.0 million to our shareholders by using cash to purchase 152,403 shares of our common stock at an average price of $98.28.

Our culture is guided by an unwavering commitment to apply our values to every decision we make and every action we take:

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increases in fuel and other energy prices or availability of third-part freight providers;

changes in insurance-related deductible/retention reserves based on actual loss development experience;

changes in insurance-related deductible/retention liabilities based on actual loss development experience;

the possibility that the value of our deferred tax assets could become impaired;

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interest rate risk, which could cause our debt service obligations to increase;

and changes in, or

interpretation of, accounting principles.

in, or interpretation of, accounting principles.

These factors, and the related trends and uncertainties, have historically produced cyclicality in our results of operations, and we expect this cyclicality to continue in future periods.

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Results of Operations

Three Months Ended March 30, 2024 % of

Sales Three Months Ended April 1, 2023 % of

Our results of operations for the three months ended June 29, 2024 (“second quarter of fiscal 2024”) and for the three months ended July 1, 2023 (“second quarter of fiscal 2023”) were as follows:

Three Months Ended June 29, 2024 % of

Sales Three Months Ended July 1, 2023 % of

($ amounts in thousands)

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Net income $ 14,336 1.9% $ 24,466 3.0%

The following table sets forth net sales by product category:

Three Months Ended

March 30, 2024 April 1, 2023

Our results of operations for the six months ended June 29, 2024 (“first six months of fiscal 2024”) and for the six months ended July 1, 2023 (“first six months of fiscal 2023”) were as follows:

Six Months Ended June 29, 2024 % of

Sales Six Months Ended July 1, 2023 % of

($ amounts in thousands)

Net sales $ 1,494,607 $ 1,613,871

Gross profit 250,125 16.7% 269,342 16.7%

Selling, general, and administrative 180,703 12.1% 179,924 11.1%

Depreciation and amortization 19,553 1.3% 15,669 1.0%

Amortization of deferred gains on real estate (1,968) (0.1)% (1,968) (0.1)%

Other operating expenses 322 0.0% 4,109 0.3%

Operating income 51,515 3.4% 71,608 4.4%

Interest expense, net 9,425 0.6% 13,998 0.9%

Other expense, net — 0.0% 1,188 0.1%

Income before provision for income taxes 42,090 2.8% 56,422 3.5%

Provision for income taxes 10,262 0.7% 14,144 0.9%

Net income $ 31,828 2.1% $ 42,278 2.6%

The following table sets forth net sales by product category:

Three Months Ended Six Months Ended

June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Net sales by product category ($ amounts in thousands)

Specialty products $ 539,466 $ 570,990 $ 1,043,300 $ 1,138,828

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Total net sales $ 768,363 $ 815,967 $ 1,494,607 $ 1,613,871

Percentage of total net sales by product category

Specialty products 70.2 % 70.0 % 69.8 % 70.6 %

Structural products 29.8 % 30.0 % 30.2 % 29.4 %

Total net sales 100.0 % 100.0 % 100.0 % 100.0 %

The following table sets forth gross profit and gross margin percentages by product category:

Three Months Ended

March 30, 2024 April 1, 2023

Three Months Ended Six Months Ended

June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Gross profit by product category:

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Structural products 7.9 % 11.0 % 9.2 % 11.3 %

Consolidated gross margin % 17.6 % 16.7 %

First Quarter of Fiscal 2024 Compared to First Quarter of Fiscal 2023

For the first quarter of fiscal 2024, we generated consolidated net sales of $726.2 million, a decrease of $71.7 million when compared to the first quarter of fiscal 2023 and the consolidated gross margin percentage increased from 16.7 percent to 17.6 percent year over year.

The decrease in consolidated net sales in the current period was due to 11.3 percent and 3.3 percent declines in specialty products and structural products net sales, respectively.

For both product categories, volumes were adversely impacted by winter weather in January 2024 in several parts of the U.S., which resulted in the closure of about half of our branch locations for one to five days.

Volumes improved in February and March 2024.

Compared to first quarter 2023, industry-wide commodity pricing for framing lumber decreased 2.4% and increased 23.2% for structural panels.

The increase in consolidated gross margin percentage in the current period was due to a net benefit of $6.5 million for import duty items in the current period for our specialty products.

Company gross margin % 15.9 % 16.6 % 16.7 % 16.7 %

Second Quarter of Fiscal 2024 Compared to Second Quarter of Fiscal 2023

For the second quarter of fiscal 2024, the Company generated consolidated net sales of $768.4 million, a decrease of $47.6 million, or 5.8 percent, compared to the second quarter of fiscal 2023.

The decrease in net sales in the current quarter was attributable to both specialty products and structural products as sales were negatively impacted by demand challenges in the housing and building product sectors, by specialty products price deflation, and by declining lumber and panel prices.

The Company’s gross profit for the second quarter of fiscal 2024 decreased by $13.4 million to $122.4 million from $135.8 million in the prior year period and this decrease was attributable to both specialty products and structural products.

Gross margin percentage for the Company decreased from 16.6 percent to 15.9 percent in the current quarter, mainly attributable to structural products.

Net sales of specialty products, which includes products such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products, decreased by $31.5 million, or 5.5 percent, to $539.5 million in the second quarter of fiscal 2024.

This decrease in net sales was due to price deflation across all specialty product categories, partially offset by volume gains for millwork, engineered wood, and siding.

Specialty products gross profit decreased by $4.5 million to $104.4 million due primarily to lower sales volume, but specialty products gross margin percentage increased by 20 basis points to 19.3 percent compared to 19.1 percent in the second quarter of fiscal 2023.

Gross margin percentage and gross profit for specialty products benefited in the current quarter from a $2.7 million change in an estimate for an accrual initially made and disclosed in the first quarter of 2024 related to amounts the Company believes it may owe for discrepancies in duties paid in prior years for certain imported goods.

Not including this benefit, specialty products gross margin percentage would have been 18.9 percent in the current quarter.

Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, decreased by $16.1 million, or 6.6 percent, to $228.9 million in the second quarter of fiscal 2024 compared to the second quarter of 2023.

This decrease was primarily due to lower volumes and a decline in our lumber selling prices which generally correlated with a year-over-year decline in the average composite price of framing lumber.

Structural products gross profit decreased by $8.9 million to $18.1 million from $27.0 million in the prior year period.

Structural products gross margin percentage for the second quarter of fiscal 2024 was 7.9 percent compared to 11.0 percent in the prior-year period.

Gross profit and gross margin percentage for the second quarter of fiscal 2024 were negatively impacted by lower sales and by a $2.4 million provision to adjust the carrying values of certain lumber and panel inventory items to their net realizable values as of June 29, 2024.

During the second quarter of fiscal 2023, there was no such provision.

Our selling, general, and administrative (“SG&A”) expenses increased by $0.7 million, or 0.8 percent, compared to the second quarter of fiscal 2023.

In the current quarter, lower logistics expenses and share-based compensation expense were offset by higher technology expenses and by legal expenses associated with duty-related matters.

Depreciation and amortization expense increased 27.3 percent compared to the second quarter of fiscal 2023 due to a higher base of depreciable assets in the second quarter of fiscal 2024, resulting from our continued focused capital investment.

Interest expense, net, decreased by 23.9 percent, or $1.5 million, compared to the second quarter of fiscal 2023.

The decrease was due to the generation of additional interest income from larger balances of cash and cash equivalents and from higher interest rates on those balances in the current quarter compared to the prior year period.

Our effective income tax rates were 24.7 percent and 24.0 percent for the second quarters of fiscal 2024 and 2023, respectively.

Our effective income tax rates for both periods were impacted by state taxes as well as 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.

For fiscal 2024, we expect our annual effective income tax rate will be approximately 26 percent.

Our net income for the second quarter of fiscal 2024 was $14.3 million, or $1.65 per diluted share, versus $24.5 million, or $2.70 per diluted share, in the prior-year period.

Decreases in our net income and earnings per diluted share were due primarily to the factors discussed above.

First Six Months of Fiscal 2024 Compared to First Six Months of Fiscal 2023

For the first six months of fiscal 2024, the Company generated consolidated net sales of $1.5 billion, a decrease of $119 million, or 7.4 percent, compared to the first six months of fiscal 2023.

The decrease in net sales in the current period was attributable to both specialty products and structural products as sales were negatively impacted by challenges in the housing and building products sectors and by declining lumber and panel prices.

The Company’s gross profit for the first six months of fiscal 2024 decreased by $19.2 million to $250.1 million from $269.3 million in the prior year period and this decline was attributable to both specialty products and structural products.

The Company’s gross margin percentage was 16.7 percent for both periods.

Gross margin percentage and gross profit benefited in the current period by a net benefit in specialty products of $9.1 million for import duty items.

The import duty items were related to changes in retroactive rates for anti-dumping duties resulting in a credit to cost of products sold of $16.9 million, partially offset by classification adjustments for certain goods imported by the Company that resulted in an increase in Cost of products sold of $7.7 million.

The net benefit from import duties added 0.9% to the consolidated gross margin percentage for the current period.

Net sales of specialty products, which includes products such as engineered wood, siding, millwork and moulding, outdoor living, specialty lumber and panels, and industrial products, decreased $64.0 million, or 11.3 percent, to $503.8 million in the first quarter of fiscal 2024.

This decline in net sales for specialty products was due to deflationary impacts across several specialty categories.

Specialty products gross profit decreased $2.6 million, or 2.4 percent, to $104.0 million, with a year-over-year increase in gross margin percentage to 20.7 percent for the first quarter of fiscal 2024 from 18.8 percent in the first quarter of fiscal 2023.

The net benefit for import duty items of $6.5 million described above added 1.3% to the specialty products gross margin for the current quarter.

Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, decreased $7.7 million, or 3.3 percent, to $222.4 million in the first quarter of fiscal 2024.

Structural products gross margin percentage for the first quarter of fiscal 2024 was 10.6 percent, down from 11.7 percent in the prior-year period.

The decreases in structural products net sales and gross profit percentage were due primarily to lower framing lumber volumes when compared to the elevated levels in the prior year period.

Our selling, general, and administrative expenses (“SG&A”) were $91.3 million in the first quarter of 2024, comparable with the $91.2 million for the prior year period.

Depreciation and amortization expense increased 22.2 percent, compared to the first quarter of fiscal 2023.

The increase in depreciation and amortization is due to a higher base of amortizable and depreciable assets in the first quarter of fiscal 2024 when compared the prior-year period, resulting from our continued focus on capital investment.

Other operating expenses decreased $2.8 million compared to the first quarter of fiscal 2023;

the prior year period included $3.7 million for restructuring costs related to our leadership transition and costs related to settlement of our legacy defined benefit pension plan.

Interest expense, net, decreased by 39.8 percent, or $3.1 million, compared to the first quarter of fiscal 2023.

The decrease was primarily due to the generation of higher interest income on our cash and cash equivalents due to higher balances and interest rates in the current quarter.

Included in interest income for the three months ended March 30, 2024 is $2.0 million received for antidumping import duty refunds.

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

Our effective tax rates were 24.1 percent and 26.5 percent for the first quarter of fiscal 2024 and 2023, respectively.

Our effective tax rate for both periods was 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.

For the current quarter, the partial release of a valuation allowance for deferred income taxes lowered our effective income tax rate by 1.4 percent.

We anticipate that our annual effective income tax rate for fiscal 2024 will be approximately 26 percent.

Our net income for the first quarter of fiscal 2024 was $17.5 million, or $2.00 per diluted share, versus $17.8 million, or $1.94 per diluted share, in the prior-year period.

The change in net income was due to the matters previously discussed.

Despite lower net income in the current quarter, basic and diluted earnings per share were higher than the prior year period due to a lower average number of common shares outstanding during the current quarter;

this resulted from share repurchases that occurred in fiscal 2023 after the first quarter.

Not including this net benefit, the Company’s gross margin percentage would have been 16.1 percent in the current period.

Net sales of specialty products, which includes products such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products, decreased by $95.5 million, or 8 percent, to $1.0 billion in the first six months of fiscal 2024.

The decline in net sales was due to price deflation across all specialty product categories, partially offset by volume gains for millwork, engineered wood, and siding.

Specialty products gross profit decreased $7.1 million to $208.4 million due to lower net sales, while specialty products gross margin percentage increased 110 basis points to 20.0 percent for the first six months of fiscal 2024 compared to 18.9 percent in the first six months of fiscal 2023.

The net impact of the import duty items described above increased specialty products gross profit for the current period by $9.1 million and specialty products gross margin percentage by 0.9 percent.

Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, decreased $23.7 million to $451.3 million in the first six months of fiscal 2024 primarily due to volume and price declines for the lumber category, partially offset by price increases in the panels category.

Gross profit for structural products decreased by $12.1 million to $41.7 million from $53.9 million in the prior year period.

Structural products gross margin percentage for the first six months of fiscal 2024 was 9.2 percent, a decline from 11.3 percent in the prior-year period.

The declines in gross profit and gross margin percentage were attributable to the lower sales and by a $2.4 million provision to adjust the carrying values of certain lumber and panel inventory items to their net realizable values as of June 29, 2024.

We determined that a provision for lower of cost and net realizable value was not required for any inventory at the end of the first six months of fiscal 2023.

Our SG&A expenses in the first six months of fiscal 2024 increased $0.8 million compared to the first six months of fiscal 2023.

In the current period, lower logistics expenses and share-based compensation expenses were offset by higher technology expenses and by legal expenses associated with duty-related matters.

Depreciation and amortization expense increased 24.8 percent compared to the first six months of fiscal 2023 due to a higher base of depreciable assets throughout the first six months of fiscal 2024 when compared the prior-year period, resulting from our continued focus on capital investment.

Other operating expenses decreased $3.8 million compared to the first six months of fiscal 2023 primarily due to restructuring related expenses, including severance expenses, incurred in the 2023 period due to our leadership transition.

Interest expense, net, decreased by 32.7 percent, or $4.6 million, compared to the first six months of fiscal 2023.

The decrease is primarily due to the generation of higher interest income, given our year-over-year increase in cash that is generating interest at higher rates than last year.

Our effective income tax rates were 24.4 percent and 25.1 percent for the first six months of fiscal 2024 and 2023, respectively.

Our effective income tax rate for both periods was impacted by state taxes as well as the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, offset by a benefit from the vesting of restricted stock units.

For fiscal 2024, we expect our annual effective income tax rate will be approximately 26 percent.

Our net income for the first six months of fiscal 2024 was $31.8 million, or $3.66 per diluted share, versus $42.3 million, or $4.67 per diluted share, in the prior-year period.

Our net income for the first six months of fiscal 2024 decreased due primarily to the factors discussed above.

Liquidity and Capital Resources

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We expect that these sources will be sufficient to fund our ongoing cash requirements for at least the next 12 months and into the foreseeable future.

As of March 30, 2024, we had $481.3 million of cash and cash equivalents plus $346.5 million of availability on our revolving credit facility.

As of June 29, 2024, we had $491 million of cash and cash equivalents plus $346.5 million of availability on our revolving credit facility.

Senior Secured Notes

In October 2021, we completed a private offering of $300 million of our six percent senior secured notes due 2029 (the “2029 Notes”).

In October 2021, we completed the private offering of $300 million of our 6.0 percent senior secured notes due 2029 (the “2029 Notes”).

Interest is payable semi-annually.

Our 2029 Notes are scheduled to mature on November 15, 2029, and no principal is due until that time as long as we remain in compliance with the related covenants.

As of March 30, 2024, we were in compliance with these covenants.

As of June 29, 2024, we were in compliance with these covenants.

Revolving Credit Facility

Our amended revolving credit facility matures on August 2, 2026, provided we remain in compliance with the related covenants.

As of March 30, 2024, we were in compliance with these covenants.

Any outstanding borrowings under the revolving credit facility bear interest at a rate per annum equal to (i) Adjusted Term Secured Overnight Financing Rate (“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 (as that term is defined in the revolving credit agreement) 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).

Our existing revolving credit facility (“Revolving Credit Facility”) with Wells Fargo, National Association, as administrative agent (“Agent”), and certain other financial institutions, matures on August 2, 2026, provided we remain in compliance with the related covenants.

As of June 29, 2024, we were in compliance with such covenants.

Any outstanding borrowings under our Revolving Credit Facility bear interest at a rate per annum equal to (i) Adjusted Term Secured Overnight Financing Rate (“SOFR”) (calculated as SOFR plus 0.1 percent) 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 (as that term is defined in the agreement for the Revolving Credit Facility) 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 agreement for the Revolving Credit Facility).

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

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

Available borrowing capacity under our Revolving Credit Facility was $346.5 million as of March 30, 2024.

The available borrowing capacity reflects undrawn letters of credit.

Finance Lease Commitments

Our finance lease liabilities consist of leases related to equipment and vehicles, and to real estate, with the majority of those finance lease commitments relating to the real estate financing transactions that we completed in recent years.

Our total finance lease commitments totaled $292.1 million and $285.4 million as of March 30, 2024 and December 30, 2023, respectively.

Of the $292.1 million of finance lease commitments as of March 30, 2024, $243.6 million related to real estate and $48.4 million related to equipment.

Of the $285.4 million of finance lease commitments as of December 30, 2023, $243.2 million related to real estate and $42.3 million related to equipment.

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 June 29, 2024, we had zero outstanding borrowings under our Revolving Credit Facility and available borrowing capacity was $346.5 million, net of undrawn letters of credit.

Excess availability, which includes availability under our Revolving Credit Facility plus cash and cash equivalents in qualified accounts, was $837.9 million.

Finance Lease Obligations

Our finance lease obligations consist of leases for real estate, equipment, and vehicles totaling $291.3 million and $285.4 million as of June 29, 2024 and December 30, 2023, respectively.

Of the $291.3 million as of June 29, 2024, $243.4 million related to real estate and $48.0 million related to equipment.

Of the $285.4 million as of December 30, 2023, $243.2 million related to real estate and $42.3 million related to equipment.

Sources and Uses of Cash

Operating Activities

Net cash used in operating activities for the first three months of fiscal 2024 was $31.1 million, compared to net cash provided by operating activities of $89.0 million in the first three months of fiscal 2023.

This decrease of $120.1 million in cash generated from operating activities in the current year period compared to the prior year period was primarily a result of seasonal inventory purchases in the current year period.

The net source of cash generated in the prior year period was driven by significant inventory reduction efforts.

Net cash provided by operating activities for the first six months of fiscal 2024 was $4.7 million compared to net cash provided of $153.1 million in the first six months of fiscal 2023.

The decrease in cash provided by operating activities during the first six months of fiscal 2024 was primarily a result of a decrease in net income for the current year period plus higher cash generated in the prior year period from changes in working capital, primarily inventory.

Investing Activities

Net cash used in investing activities for the first quarter of fiscal 2024 was $5.3 million compared to net cash used in investing activities of $9.0 million in the first quarter of fiscal 2023.

The decrease in net cash used in investing activities was primarily due to lower purchases of property and equipment in the current year-period compared to the prior-year period.

However, during the

first quarter of fiscal 2024, we also invested in additional fleet upgrades by entering into $8.2 million of finance leases, which are non-cash activities at lease inception.

Net cash used in investing activities for the first six months of fiscal 2024 was $11.6 million compared to net cash used of $13.9 million in the first six months of fiscal 2023.

The change was primarily due to amounts invested in property and equipment.

During the first six months of fiscal 2024, we also acquired $11.2 million of property and equipment through finance leases, compared to $3.4 million for the first six months of fiscal 2023.

Financing Activities

Net cash used in financing activities totaled $4.0 million for the first three months of fiscal 2024, compared to net cash used in financing activities of $2.7 million for the first three months of fiscal 2023.

This change was due to higher payments on finance lease obligations in the current period.

Other than to satisfy payroll and withholding taxes for vesting grants of restricted stock units, we did not repurchase any shares of our common stock during either the first quarter of 2024 or the first quarter of 2023.

Share Repurchase Program

As of March 30, 2024, we have a remaining authorization amount of $91.4 million under our $100 million share repurchase program that was previously disclosed and authorized by our Board of Directors on October 31, 2023.

Under this 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.

Net cash used in financing activities totaled $23.4 million for the first six months of fiscal 2024 compared to net cash used of $19.8 million for the first six months of fiscal 2023.

The change in net cash used in financing activities was primarily due to an increase in cash used for repurchases of our common stock under our announced share repurchase programs.

During the first six months of fiscal 2024, we repurchased $14.5 million of our common stock compared to $11.6 million during the first six months of fiscal 2023.

Principal payments for finance leases were also higher in the current period.

Stock Repurchase Programs

During the first six months of fiscal 2024, we repurchased 152,403 shares of our common stock under our 2023 share repurchase program at an average price of $98.28, including broker commissions but excluding any excise tax that may be due on the repurchases, for a total of $15.0 million.

All of the share repurchase in fiscal 2024 occurred in the second quarter.

As of June 29, 2024, there remained $76.5 million repurchase capacity under this authorization.

Between June 29, 2024 and July 26, 2024, we purchased an additional 58,715 shares of our common stock for $6.0 million at an average price of $102.75 per share, including broker commissions but excluding any excise tax that may be due on the repurchases.

Under the 2023 share repurchase program, we may repurchase our common stock at any time or from time to time, without prior notice, subject to prevailing market conditions and other considerations.

Our 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 second quarter of fiscal 2023, we repurchased 141,705 shares of our common stock under the former 2021/2022 share repurchase program at an average price of $81.36 per share, including broker commissions but excluding any excise tax due on the repurchases.

No shares were repurchased during the first quarter of fiscal 2023.

The 2021/2022 share repurchase program was concluded during the fourth quarter of fiscal 2023.

Net Working Capital

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This metric differs from traditional working capital in that it excludes certain current assets and current liabilities that are reported in our consolidated balance sheets.

Management of net working capital helps us monitor our progress in meeting our goals to enhance working capital assets.

March 30, 2024 December 30, 2023 April 1, 2023

Net working capital of $451.7 million as of June 29, 2024, compared to $414.1 million as of December 30, 2023, increased on a net basis by approximately $37.6 million, as shown below:

June 29, 2024 December 30, 2023 July 1, 2023

(In thousands)

Current assets:

Accounts receivables, less allowance for doubtful accounts $ 288,244 $ 228,410 $ 298,888

Receivables, less allowance for doubtful accounts $ 273,537 $ 228,410 $ 294,341

Inventories, net 357,573 343,638 379,312

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Net working capital $ 451,735 $ 414,117 $ 483,523

Net working capital of $487.5 million as of March 30, 2024, compared to $414.1 million as of December 30, 2023, increased on a net basis by approximately $73.4 million.

The increase in net working capital was primarily driven by the increases in accounts receivable and inventory due to higher sales and seasonality.

This overall increase was partially offset by the increase in accounts payable due to seasonal inventory procurement activity.

Net working capital of $487.5 million as of March 30, 2024, compared to $531.2 million as of April 1, 2023, decreased on a net basis by approximately $43.8 million.

The decrease in net working capital was primarily driven by the decrease in inventory, which reflected our strategic inventory management efforts and a deflationary pricing environment.

Investments in Property and Equipment

Our investments in capital assets consist of cash paid for owned assets and the inception of financing lease arrangements for long-lived assets to support our distribution infrastructure.

The gross values of these assets are included in property and

equipment, at cost on our condensed consolidated balance sheet.

For the first quarter of 2024, we invested $5.4 million in property and equipment, including $3.9 million for our distribution facilities and $1.5 million in fleet upgrades.

Additionally, during the first quarter of 2024, we entered into finance leases of $8.2 million for fleet upgrades.

For the first quarter of 2023, we invested $9.0 million cash in long-lived assets primarily for our distribution facilities and to a lesser extent, upgrading our fleet.

Critical Accounting Policies and Estimates

The gross value of these assets is included in property and equipment, at cost on our unaudited condensed consolidated balance sheets.

For the first six months of fiscal 2024, we invested $11.9 million in long-lived assets primarily related to investments in our distribution facilities and to a lesser extent, upgrading our fleet.

We also added $11.2 million in new finance leases during the first six months of fiscal 2024 for new tractors and forklifts to enhance our logistical network.

For the first six months of fiscal 2023, we invested $14.0 million in cash investments in long-lived assets primarily related to investments in our distribution facilities and to a lesser extent, upgrading our fleet.

We also added $3.4 million in new finance leases during the second fiscal quarter of 2023 for new forklifts to enhance our logistical network.

Critical Accounting Policies

The preparation of our consolidated financial statements and related disclosures in conformity with GAAP requires our management to make judgments and estimates that affect the amounts reported in our condensed consolidated financial statements and accompanying notes.

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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 2. Management’s Discussion and Analysis