BlueLinx Holdings Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS BLUELINX HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (In thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Net sales $ 747,288 $ 809,981 $ 2,241,895 $ 2,423,852 Cost of products sold 621,619 670,735 1,866,101 2,015,264 Gross profit 125,669 139,246 375,794 408,588 Operating expenses (income): Selling, general, and administrative 92,210 91,354 272,913 271,278 Depreciation and amortization 9,530 8,089 29,083 23,758 Amortization of deferred gains on real estate ( 984 ) ( 984 ) ( 2,952 ) ( 2,952 ) Other operating expenses, net 888 1,131 1,210 5,240 Total operating expenses 101,644 99,590 300,254 297,324 Operating income 24,025 39,656 75,540 111,264 Non-operating expenses: Interest expense, net 4,619 5,577 14,044 19,575 Settlement of defined benefit pension plan ( 2,226 ) — ( 2,226 ) — Other expense, net — 594 — 1,782 Income before provision for income taxes 21,632 33,485 63,722 89,907 Provision for income taxes 5,616 9,103 15,878 23,247 Net income $ 16,016 $ 24,382 $ 47,844 $ 66,660 Basic earnings per share $ 1.88 $ 2.72 $ 5.54 $ 7.39 Diluted earnings per share $ 1.87 $ 2.71 $ 5.53 $ 7.38 Comprehensive income: Net income $ 16,016 $ 24,382 $ 47,844 $ 66,660 Other comprehensive income: Amortization of unrecognized pension gain, net of tax — 225 — 689 Other — — — ( 22 ) Total other comprehensive income — 225 — 667 Comprehensive income $ 16,016 $ 24,607 $ 47,844 $ 67,327 See accompanying Notes. 1 Table of Contents BLUELINX HOLDINGS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) September 28, 2024 December 30, 2023 ASSETS Current assets: Cash and cash equivalents $ 526,281 $ 521,743 Receivables, less allowances of $ 3,244 and $ 3,398 , respectively 278,049 228,410 Inventories, net 340,541 343,638 Other current assets 36,500 26,608 Total current assets 1,181,371 1,120,399 Property and equipment, at cost 423,842 396,321 Accumulated depreciation ( 187,992 ) ( 170,334 ) Property and equipment, net 235,850 225,987 Operating lease right-of-use assets 45,647 37,227 Goodwill 55,372 55,372 Intangible assets, net 27,834 30,792 Deferred income tax asset, net 51,306 53,256 Other non-current assets 13,699 14,568 Total assets $ 1,611,079 $ 1,537,601 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 186,319 $ 157,931 Accrued compensation 18,400 14,273 Finance lease liabilities - current 12,547 11,178 Operating lease liabilities - current 8,276 6,284 Real estate deferred gains - current 3,935 3,935 Other current liabilities 28,247 24,961 Total current liabilities 257,724 218,562 Long-term debt 294,733 293,743 Finance lease liabilities, less current portion 281,263 274,248 Operating lease liabilities, less current portion 38,752 32,519 Real estate deferred gains, less current portion 64,280 66,599 Other non-current liabilities 18,738 17,644 Total liabilities 955,490 903,315 Commitments and Contingencies STOCKHOLDERS’ EQUITY: Preferred Stock, $ 0.01 par value, 30,000,000 shares authorized, none outstanding — — Common Stock, $ 0.01 par value, 20,000,000 shares authorized, 8,423,383 and 8,650,046 outstanding, respectively 84 87 Additional paid-in capital 138,522 165,060 Retained earnings 516,983 469,139 Total stockholders’ equity 655,589 634,286 Total liabilities and stockholders’ equity $ 1,611,079 $ 1,537,601 See accompanying Notes. 2 Table of Contents BLUELINX HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) (Unaudited) Common Stock Additional Paid-In Capital Retained Earnings Stockholders’ Equity Total Shares Amount Balance, December 30, 2023 8,650 $ 87 $ 165,060 $ 469,139 $ 634,286 Net income — — — 17,492 17,492 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 ) Balance, March 30, 2024 8,662 87 166,503 486,631 653,221 Net income — — — 14,336 14,336 Vesting of restricted stock units 57 1 ( 1 ) — — Compensation related to share-based grants — — 1,405 — 1,405 Repurchase of shares to satisfy employee tax withholdings ( 16 ) (a) ( 1,545 ) — ( 1,545 ) Common stock repurchase and retirement ( 152 ) ( 2 ) ( 15,083 ) — ( 15,085 ) Balance, June 29, 2024 8,551 86 151,279 500,967 652,332 Net income — — — 16,016 16,016 Vesting of restricted stock units 26 (a) (a) — — Compensation related to share-based grants — — 3,186 — 3,186 Repurchase of shares to satisfy employee tax withholdings ( 8 ) (a) ( 816 ) — ( 816 ) Common stock repurchase and retirement ( 146 ) ( 2 ) ( 15,127 ) — ( 15,129 ) Balance, September 28, 2024 8,423 $ 84 $ 138,522 $ 516,983 $ 655,589 (a) Activity rounds to less than one thousand dollars See accompanying Notes. 3 Table of Contents Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Stockholders’ Equity Total Shares Amount Balance, December 31, 2022 9,049 $ 90 $ 200,748 $ ( 31,412 ) $ 420,603 $ 590,029 Net income — — — — 17,812 17,812 Other comprehensive income — — — 228 — 228 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 ) Balance, April 1, 2023 9,089 91 203,427 ( 31,184 ) 438,415 610,749 Net income — — — — 24,466 24,466 Other comprehensive income — — — 214 — 214 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 ) Balance, July 1, 2023 9,008 90 190,770 ( 30,970 ) 462,881 622,771 Net income — — — — 24,382 24,382 Other comprehensive income — — — 225 — 225 Vesting of restricted stock units 7 — — — — — Compensation related to share-based grants — — 2,980 — — 2,980 Repurchase of shares to satisfy employee tax withholdings ( 3 ) — ( 281 ) — — ( 281 ) Obligation for shares repurchases not yet settled ( 10 ) — ( 843 ) — — ( 843 ) Common stock repurchase and retirement ( 206 ) ( 2 ) ( 17,720 ) — — ( 17,722 ) Balance, September 30, 2023 8,796 $ 88 $ 174,906 $ ( 30,745 ) $ 487,263 $ 631,512 See accompanying Notes. 4 Table of Contents BLUELINX HOLDINGS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended September 28, 2024 September 30, 2023 Cash flows from operating activities: Net income $ 47,844 $ 66,660 Adjustments to reconcile net income to cash provided by operations: Depreciation and amortization 29,083 23,758 Amortization of debt discount and issuance costs 990 989 Settlement of frozen defined benefit pension plan ( 2,226 ) — Provision for deferred income taxes 1,950 1,117 Amortization of deferred gains from real estate ( 2,952 ) ( 2,952 ) Share-based compensation 6,941 9,475 Changes in operating assets and liabilities: Accounts receivable ( 47,413 ) ( 46,013 ) Inventories 3,097 120,151 Accounts payable 27,932 49,791 Other current assets ( 9,892 ) 2,621 Other assets and liabilities 11,080 5,127 Net cash provided by operating activities 66,434 230,724 Cash flows from investing activities: Proceeds from sale of assets 839 191 Property and equipment investments ( 19,830 ) ( 18,938 ) Net cash used in investing activities ( 18,991 ) ( 18,747 ) Cash flows from financing activities: Common stock repurchase and retirement ( 29,982 ) ( 29,321 ) Repurchase of shares to satisfy employee tax withholdings ( 3,257 ) ( 5,157 ) Principal payments on finance lease liabilities ( 9,666 ) ( 6,659 ) Net cash used in financing activities ( 42,905 ) ( 41,137 ) Net change in cash and cash equivalents 4,538 170,840 Cash and cash equivalents at beginning of period 521,743 298,943 Cash and cash equivalents at end of period $ 526,281 $ 469,783 Supplemental cash flow information: Interest paid during the period $ 29,147 $ 27,948 Taxes paid during the period $ 24,224 $ 17,682 Non-cash investing and financing activities: Property and equipment acquired under finance leases $ 16,710 $ 11,277 Liabilities for properties and equipment investments $ 1,013 $ — Obligation for shares repurchases not yet settled $ — $ 843 See accompanying Notes. 5 Table of Contents BLUELINX HOLDINGS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 28, 2024 (Unaudited) 1. Basis of Presentation 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. 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, financial position, and cash flows for the reporting periods presented. 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 and nine months ended September 28, 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 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. 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 during the nine months ended September 28, 2024. Recent Accounting Pronouncements - Not Yet Adopted 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) 6 Table of Contents 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. 2. Inventories 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. 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-and-net-realizable-value (“LCNRV”), which also considers items that may be considered damaged, excess, and obsolete inventory. During the second quarter of fiscal 2024, the Company recorded a write-down of $ 2.4 million to reflect the LCNRV for certain inventory related to its structural products. The $ 2.4 million write-down was due to declines in wood-based commodity prices. During the third quarter of fiscal 2024, substantially all of the inventory covered by this $ 2.4 million LCNRV write-down was sold, thereby resulting in lower Costs of products sold by that same amount in the third quarter of fiscal 2024. This adjustment increased gross margin percentage for structural products in the third quarter of fiscal 2024 by 1.0 percent. 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 and nine months ended September 28, 2024, the Company recognized refunds of $ 3.8 million and $ 20.7 million, respectively, plus interest of $ 0.7 million and $ 2.7 million, respectively, 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 Cost of products sold and Interest expense, net, respectively, on the Company’s unaudited condensed consolidated statements of operations for 7 Table of Contents the three and nine months ended September 28, 2024. See Note 9, Commitments and Contingencies , for disclosure concerning another matter related to import duties. 3. Goodwill and Intangible Assets, net During the fiscal quarter and year-to-date period ended September 28, 2024, the only change to the carrying values of Goodwill and Intangible assets, net, was the amortization of Intangible assets, all of which have definite lives. Amortization expense for intangible assets was $ 1.0 million and $ 3.0 million for the three and nine month periods ended September 28, 2024, respectively. For the three and nine month periods ended September 30, 2023, amortization expense was $ 1.0 million and $ 3.2 million, respectively. 4. Revenue Recognition The following table presents the Company’s revenues disaggregated by revenue source. Sales and usage-based taxes are excluded from revenues. Three Months Ended Nine Months Ended Product type September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 (In thousands) Specialty products $ 519,000 $ 558,851 $ 1,562,300 $ 1,697,679 Structural products 228,288 251,130 679,595 726,173 Total net sales $ 747,288 $ 809,981 $ 2,241,895 $ 2,423,852 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 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 (In thousands) Warehouse and reload $ 622,981 $ 683,072 $ 1,843,942 $ 2,065,212 Direct 140,505 143,026 445,606 405,335 Customer discounts and rebates ( 16,198 ) ( 16,117 ) ( 47,653 ) ( 46,695 ) Total net sales $ 747,288 $ 809,981 $ 2,241,895 $ 2,423,852 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. The reload 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. 8 Table of Contents 5. Debt and Finance Lease Obligations As of September 28, 2024 and December 30, 2023, debt and finance lease obligations consisted of the following: September 28, 2024 December 30, 2023 (In thousands) Senior Secured Notes (“2029 Notes”) (1) $ 300,000 $ 300,000 Revolving Credit Facility (2) — — Finance lease obligations (3) 293,810 285,426 593,810 585,426 Unamortized debt issuance costs ( 2,629 ) ( 3,246 ) Unamortized bond discount costs ( 2,638 ) ( 3,011 ) 588,543 579,169 Less: current portion of finance lease obligations 12,547 11,178 Total, net of current portion $ 575,996 $ 567,991 (1) As of September 28, 2024 and December 30, 2023, long-term debt was comprised of $ 300 million of Senior Secured Notes (“2029 Notes”) issued in October 2021. These notes are presented under the Long-term debt caption of the Company’s unaudited condensed consolidated balance sheets at $ 294.7 million and $ 293.7 million as of September 28, 2024 and December 30, 2023, respectively. This balance sheet presentation is net of unamortized discount of $ 2.6 million and $ 3.0 million, respectively, and unamortized debt issuance costs of $ 2.6 million and $ 3.2 million, respectively, as of September 28, 2024 and December 30, 2023. The Senior Secured Notes are presented in this table at their face value. (2) Available borrowing capacity under the Revolving Credit Facility was $ 346.5 million as of September 28, 2024 and December 30, 2023. The available borrowing capacity reflects undrawn letters of credit. (3) Refer to Note 8, Leases , for interest rates associated with finance lease obligations. Amounts on this line include $ 125.1 million and $ 125.0 million as of September 28, 2024 and December 30, 2023, respectively, for sale-leasebacks of real estate in fiscal 2019 and 2020 that did not qualify for sale treatment for accounting purposes. Interest expense, net on the Company’s unaudited condensed consolidated statements of operations consisted of the following components: Three Months Ended Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 (In thousands) Interest expense $ 11,668 $ 11,394 $ 35,958 33,977 Interest income 7,049 5,817 21,914 14,402 Interest expense, net $ 4,619 $ 5,577 $ 14,044 $ 19,575 Interest expense for the reporting periods presented in the above table primarily reflects interest expense for the 2029 Notes, interest expense on finance lease obligations, certain ongoing fees for the Revolving Credit Facility that are classified as interest expense, amortization of debt issuance costs for the 2029 Notes and Revolving Credit Facility, and amortization of original-issue bond discount on the 2029 Notes. Total amortization of debt issuance costs and bond discount costs was $ 0.3 million and $ 1.0 million for the three and nine months ended September 28, 2024, respectively, and $ 0.3 million and $ 1.0 million for the three and nine months ended September 30, 2023, respectively. Interest expense for the nine months ended September 28, 2024 also includes $ 1.2 million for estimated interest expense related to import duties that the Company believes it may owe (see Note 9, Commitments and Contingencies) . Interest income for the reporting periods presented in the above table primarily reflects interest earned on the Company’s cash and cash equivalents. Interest income for the three and nine months ended September 28, 2024 also includes $ 0.7 million and $ 2.7 million, respectively, on refunds approved in fiscal 2024 from U.S. Customs for anti-dumping import duties (see Note 2, Inventories) . 9 Table of Contents 2029 Notes Interest expense, excluding amortization of debt issuance costs and bond discount, for the 2029 Notes totaled $ 4.5 million and $ 13.5 million for the three and nine months ended September 28, 2024, respectively, and $ 4.5 million and $ 13.5 million for the three and nine months ended September 30, 2023, respectively. The 2029 Notes pay interest at a fixed annual rate of 6.0 percent through maturity. Revolving Credit Facility As of September 28, 2024 and December 30, 2023, the Company had zero outstanding borrowings under the Revolving Credit Facility. Available borrowing capacity, reduced for undrawn letters of credit, under the Revolving Credit Facility was $ 346.5 million as of September 28, 2024 and December 30, 2023. Excess availability, which includes availability under the Revolving Credit Facility plus cash and cash equivalents in qualified deposit accounts, was $ 872.8 million and $ 868.2 million as of September 28, 2024 and December 30, 2023, respectively. Debt Covenants The Revolving Credit Facility and the 2029 Notes contain various covenants and restrictions, including customary financial covenants. The Company was in compliance with all such covenants as of September 28, 2024 and December 30, 2023. The Company’s right to make draws on the Revolving Credit Facility may be conditioned upon, among other things, compliance with these covenants. 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 The Company’s finance lease liabilities consist of leases related to equipment, vehicles, and real estate, with the majority of those finance leases related to real estate. For more information on the Company’s finance lease obligations, refer to Note 8, Leases . 6. Net Periodic Pension Cost (Benefit) 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. The Company incurred the following net periodic pension (benefit) cost for the following periods: Three Months Ended Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 (In thousands) Service cost (1) $ — $ — $ — $ — Interest cost on projected benefit obligation — 1,105 — 3,314 Expected return on plan assets — ( 812 ) — ( 2,437 ) Amortization of unrecognized gain — 301 — 905 Settlement loss adjustment (2) ( 2,226 ) — ( 2,226 ) — Net periodic pension (benefit) cost $ ( 2,226 ) $ 594 $ ( 2,226 ) $ 1,782 (1) Service cost not a part of net periodic pension benefit as the pension plan was frozen for all participants. (2) Represents an adjustment for the settlement charge originally recognized during the fourth quarter of fiscal 2023 related to settlement of the Company’s frozen defined benefit pension plan. Net periodic pension cost is included in Other expense, net in the Company’s unaudited condensed consolidated statement of operations and comprehensive income. However, the settlement charge and related adjustments are reported on a separate line 10 Table of Contents under Non-operating expenses on the Company’s unaudited condensed consolidated statement of operations and comprehensive income. 7. Share-Based Compensation During the three and nine months ended September 28, 2024, the Company incurred stock compensation expense of $ 3.2 million and $ 6.9 million, respectively. Expense in the nine months ended September 28, 2024 included a credit of $ 1.7 million (recognized in fiscal second quarter 2024) related to cumulative adjustments for certain unvested restricted stock unit grants that were granted in June 2022 and are subject to vesting based, in part, on performance criteria that are not expected, as of September 28, 2024, to be fully achieved before the end of the vesting period on June 28, 2025. As of September 28, 2024, unearned compensation for share-based grants was $ 23.0 million, with $ 14.2 million of this amount associated with grants made in the first nine months of fiscal 2024. Under the Company’s 2021 BlueLinx Holdings, Inc. 2021 Long-Term Incentive Plan as of September 28, 2024, 506,044 shares of common stock remain available for future issuance pursuant to equity-based compensation awards. For the three and nine months ended September 30, 2023, the Company incurred stock compensation expense of $ 3.0 million and $ 9.5 million, respectively. This expense included expense for the acceleration of unrecognized compensation cost in conjunction with certain changes in the Company’s executive management. 8. Leases 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 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 to determine 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 the 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 September 28, 2024 and December 30, 2023, the remaining unrecognized deferred gains related to these transactions were $ 68.2 million and $ 70.5 million, respectively, and these deferred gains are being recognized in earning on a straight-line basis. During the three months ended September 28, 2024 and September 30, 2023, the Company recognized $ 1.0 million and $ 1.0 million, respectively, of these deferred gains in each quarter. In the nine months ended September 28, 2024 and September 30, 2023, the Company recognized $ 3.0 million and $ 3.0 million, respectively, of these deferred gains in each period. The following table presents the assets and liabilities related to the Company’s leases as of September 28, 2024 and December 30, 2023: 11 Table of Contents Lease Assets and Liabilities September 28, 2024 December 30, 2023 (In thousands) Assets Classification Operating lease right-of-use assets Operating lease right-of-use assets $ 45,647 $ 37,227 Finance lease right-of-use assets (1) Property and equipment, net 136,958 138,357 Total lease right-of-use assets $ 182,605 $ 175,584 Liabilities Current portion: Operating lease liabilities Operating lease liabilities - current $ 8,276 $ 6,284 Finance lease liabilities Finance lease liabilities - current 12,547 11,178 Non-current portion: Operating lease liabilities Operating lease liabilities - noncurrent 38,752 32,519 Finance lease liabilities Finance lease liabilities - noncurrent 281,263 274,248 Total lease liabilities $ 340,838 $ 324,229 (1 ) Finance lease right-of-use assets are presented net of accumulated amortization of $ 111.4 million and $ 102.9 million as of September 28, 2024 and December 30, 2023, respectively. The compon ents of lease expense were as follows: Three Months Ended Nine Months Ended Components of lease expense September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 (In thousands) Operating lease expense: Operating lease expense before sublease income $ 2,886 $ 2,755 $ 7,965 $ 8,789 Sublease income ( 900 ) ( 1,062 ) ( 2,648 ) ( 2,475 ) Operating lease expense $ 1,986 $ 1,693 $ 5,317 $ 6,314 Finance lease expense: Amortization of right-of-use assets $ 4,716 $ 5,408 $ 14,478 $ 12,190 Interest on lease liabilities 6,407 6,077 19,108 18,158 Total finance lease expense $ 11,123 $ 11,485 $ 33,586 $ 30,348 Supplemental cash flow information related to leases is as follows: Three Months Ended Nine Months Ended Cash flow information September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 (In thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows, operating leases $ 2,930 $ 2,367 $ 8,132 $ 8,958 Operating cash flows, finance leases $ 6,407 $ 6,077 $ 19,108 $ 18,158 Financing cash flows, finance leases $ 3,255 $ 2,393 $ 9,666 $ 6,659 12 Table of Contents Non-cash supplemental cash flow information related to leases is as follows: Three Months Ended Nine Months Ended Non-cash information September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 (In thousands) Right-of-use assets obtained in exchange for lease obligations Operating leases $ 3,183 $ — $ 14,515 $ — Finance leases $ 5,560 $ 7,877 $ 16,710 $ 11,277 Supplemental balance sheet information related to leases is as follows: Balance Sheet Information September 28, 2024 December 30, 2023 ($ in thousands) Finance leases Property and equipment $ 248,322 $ 241,276 Accumulated depreciation ( 111,364 ) ( 102,919 ) Property and equipment, net $ 136,958 $ 138,357 Weighted Average Remaining Lease Term (in years) Operating leases 8.44 8.88 Finance leases 17.87 19.94 Weighted Average Discount Rate Operating leases 8.18 % 8.74 % Finance leases 8.80 % 8.84 % The major categories of the Company’s obligations under finance leases as of September 28, 2024 and December 30, 2023 are as follows: Category September 28, 2024 December 30, 2023 (In thousands) Equipment and vehicles $ 50,752 $ 42,252 Real estate (1) 243,058 243,174 Total finance leases $ 293,810 $ 285,426 (1) Amounts include $ 125.1 million and $ 125.0 million as of September 28, 2024 and December 30, 2023, respectively, for sale-leasebacks of real estate in fiscal 2019 and 2020 that did not qualify for sale treatment for accounting purposes. Below is a summary of undiscounted finance and operating lease liabilities that have initial terms in excess of one year as of September 28, 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. 13 Table of Contents Fiscal Year: Operating Leases Finance Leases (In thousands) 2024 $ 2,932 $ 9,999 2025 11,074 37,057 2026 8,089 40,487 2027 7,138 34,900 2028 6,885 35,093 Thereafter 30,713 504,048 Total lease payments $ 66,831 $ 661,584 Less: imputed interest ( 19,803 ) ( 367,774 ) Total $ 47,028 $ 293,810 9. Commitments and Contingencies Regulatory Matters 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 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. As of September 28, 2024, the Company estimates that it will be required to pay approximately $ 8.0 million, excluding any interest. This amount is reflected in Other current liabilities on the Company’s unaudited condensed consolidated balance sheet as of September 28, 2024. On the Company’s unaudited condensed consolidated statements of operations, expense of $ 0.3 million and $ 8.0 million, excluding interest, was recognized for this matter in the three and nine months ended September 28, 2024, respectively, within Cost of products sold. 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 28, 2024, approximately 18.4 percent of the Company’s employees were represented by various local labor unions with terms and conditions of employment governed by collective bargaining agreements (“CBAs”). Two CBAs covering approximately 1.3 percent percent of the Company’s employees are up for renewal during the remainder of fiscal 2024 and are expected to be renegotiated before their renewal dates. 10. Accumulated Other Comprehensive Loss As of September 28, 2024 and December 30, 2023, the Company had no accumulated other comprehensive income or loss. For changes in accumulated other comprehensive loss during the three and nine months ended September 30, 2023, see the unaudited condensed consolidated statements of operations and comprehensive income included in this Form 10-Q. As of September 30, 2023, the components of accumulated other comprehensive loss were as follows: 14 Table of Contents Defined Benefit Pension Plan, net of tax Other, net of tax Total Accumulated Other Comprehensive Loss (In thousands) September 30, 2023 balances $ ( 31,986 ) $ 1,241 $ ( 30,745 ) 11. Income Taxes Effective Income Tax Rate The Company’s effective income tax rates for the three months ended September 28, 2024 and September 30, 2023 were 26.0 percent and 27.2 percent, respectively. The Company’s effective income tax rates for the nine months ended September 28, 2024 and September 30, 2023 were 24.9 percent and 25.9 percent, respectively. The Company’s effective income tax rates for the three and nine months ended September 28, 2024 and September 30, 2023 were impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, partially offset by a partial release of a valuation allowance for deferred income tax assets, the vesting of restricted stock units, and the return-to-provision adjustment associated with the most recently filed U.S. Federal income tax return. The Company’s effective income tax rates for the three and nine months ended September 30, 2023 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. For fiscal 2024, the Company expects its consolidated annual effective income tax rate will be approximately 26 percent. For additional information about the Company’s income taxes, see Note 7, Income Taxes , to the consolidated financial statements included in Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023. 12. Earnings Per Share and Stockholders' Equity The Company calculates basic earnings per share by dividing net income for the period by the weighted average number of shares of common stock outstanding for the period. For rounding purposes when calculating earnings per share, the Company’s policy is to round down to the whole cent. The Company calculates diluted earnings per share using the treasury stock method whereby net income for the period is divided by the weighted average number of shares of common stock outstanding for the period including the dilutive effect, if any, of shares of stock associated with unvested share-based grants. However, for share-based grants that vest in whole or in part based on performance metrics, their dilutive effect is included only after the performance metrics have been achieved. The reconciliations of basic net income and diluted earnings per common share for the three and nine month periods ended September 28, 2024 and September 30, 2023 are as follows: Three Months Ended Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Net income (in thousands) $ 16,016 $ 24,382 $ 47,844 $ 66,660 Weighted-average shares outstanding - Basic 8,496,383 8,935,851 8,622,616 9,009,812 Dilutive effect of share-based awards 31,927 34,343 24,015 17,646 Weighted-average shares outstanding - Diluted 8,528,310 8,970,194 8,646,631 9,027,458 Basic earnings per share $ 1.88 $ 2.72 $ 5.54 $ 7.39 Diluted earnings per share $ 1.87 $ 2.71 $ 5.53 $ 7.38 15 Table of Contents During the three and nine months ended September 28, 2024, unvested time-based restricted stock units totaling 6,299 and 1,644 , respectively, and unvested performance-based restricted stock units totaling 139,654 for both periods were outstanding but not included in the computation of diluted earnings per share for the respective periods. During the three and nine months ended September 30, 2023, unvested time-based restricted stock units totaling 103,152 and 161,572 , respectively, and unvested performance-based restricted stock units totaling 112,252 for both periods were outstanding but not included in the computation of diluted earnings per share for the respective periods. Each restricted stock unit is composed of one unvested share of the Company’s common stock. The unvested time-based restricted stock units were excluded because they were antidilutive based on their unearned compensation amounts and on the Company’s average stock price during the periods. The unvested performance-based restricted stock units were excluded because their performance metrics had not been achieved as of the end of the respective reporting period. Repurchases of Common Stock 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 and nine months ended September 28, 2024, the Company repurchased 145,548 shares and 297,951 shares, respectively, of its common stock at a weighted-average average price of $ 103.08 and $ 100.63 , respectively, including broker commissions but excluding federal excise tax on the repurchases, for a total of $ 15.0 million and $ 30.0 million, respectively. These amounts are based on trade date activity, while the amounts reported on the Company’s consolidated statements of cash flows for share repurchases are based on settlement date activity. As of September 28, 2024, there remained $ 61.5 million repurchase capacity under this authorization. Between September 28, 2024 and October 25, 2024, the Company purchased an additional 43,240 shares of its common stock for $ 4.6 million at a weighted-average share price of $ 106.34 per share, including broker commissions but excluding federal excise tax due on the repurchases. 2021/2022 Authorization On August 23, 2021, the Company’s board of directors approved a stock repurchase program that authorized the Company to repurchase up to $ 25.0 million of its common stock. On May 3, 2022, the Company’s board of directors increased the share repurchase authorization to $ 100 million. During the three and nine months ended September 30, 2023, the Company repurchased 216,507 shares and 358,212 shares, respectively, of its common stock under the 2021/2022 authorization at a weighted-average price of $ 84.93 , and $ 83.52 , respectively, including broker commissions but excluding federal excise tax on the repurchases, for total cash of $ 11.5 million and $ 29.9 million, respectively. These amounts are based on trade date activity, while the amounts reported on the Company’s consolidated statements of cash flows for share repurchases are based on settlement date activity. During fiscal October 2023, the Company exhausted the remaining available capacity of $ 3.7 million under the 2021/2022 authorization. 13. Fair Value Disclosures The Company has no assets or liabilities with carrying values that are remeasured and adjusted to fair value on a recurring basis for each reporting period. The Company has not elected the fair value option for any assets or liabilities. As of September 28, 2024 and December 30, 2023, the fair value of the 2029 Notes was approximately $ 290 million and $ 273 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. The fair value of cash, cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate the carrying values as of September 28, 2024 and December 30, 2023 because of the short-term nature of these instruments. 16 Table of Contents