UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q ~~10-Q~~



þ☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~October 2, 2021



o☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-32383



			~~Commission file number: 1-32383~~

BlueLinx Holdings Inc.
			(Exact name of registrant as specified in its charter)



Delaware		77-0627356
(State of Incorporation)		(I.R.S. Employer Identification No.)

~~4300 Wildwood Parkway, Atlanta, Georgia~~	~~30339~~
1950 Spectrum Circle, Suite 300, Marietta, GA 30067
(Address of principal executive ~~offices)~~			~~(Zip Code)~~offices, including zip code)

(770~~770)~~) 953-7000

(Registrant’s telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

BXC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ☑ No o☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~(Section 232.405 of this chapter) every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ☑ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large ~~accelerated filer~~ Accelerated Filero

☐

Accelerated ~~filer~~ Filero

~~Non-accelerated filer~~ ☑o

~~Smaller reporting company~~ þ

Non-accelerated Filer

☐

~~(Do not check if a smaller reporting company)~~

Smaller Reporting Company

☑

Emerging ~~growth company~~ Growth Companyo

(If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No þ☑

As of ~~November 2, 2017~~October 29, 2021, there were ~~9,098,221~~ 9,706,685shares of BlueLinx Holdings Inc. common stock, par value $0.01, outstanding.

BLUELINX HOLDINGS INC.

Form 10-Q

For the Quarterly Period Ended ~~September 30, 2017~~October 2, 2021

INDEX



			PAGE
PART I.1. FINANCIAL INFORMATION
Item 1. Financial Statements — BlueLinx Holdings Inc. (Unaudited)			21
Condensed Consolidated Statements of ~~Income~~Operations and Comprehensive Income ~~(Loss)~~			21
Condensed Consolidated Balance Sheets			32
Condensed Consolidated Statements of Stockholders' Equity (Deficit)			3
Condensed Consolidated Statements of Cash Flows			45
Notes to Condensed Consolidated Financial Statements			56
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			817
Item 3. Quantitative and Qualitative Disclosures About Market Risk			1432
Item 4. Controls and Procedures			1432
Forward-Looking Statements			29

PART II. OTHER INFORMATION
Item 1. Legal Proceedings			1533
Item 1A. Risk Factors			1533
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			2634
Item 3. Defaults Upon Senior Securities			2634
Item 4. Mine Safety Disclosures			2634
Item 5. Other Information			2634
Item 6. Exhibits			2735

Signature			2836

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS AND

COMPREHENSIVE INCOME ~~(LOSS)~~

(In thousands, except per share data)

(Unaudited)


	Three Months Ended					Nine Months Ended							Three Months Ended				Nine Months Ended
	September 30, 2017		October 1, 2016			September 30, 2017			October 1, 2016				October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Net sales	$	479,318	$	476,049		$	1,381,927		$	1,459,386		Net sales	$	970,842	$	871,063	$	3,304,224	$	2,231,909
Cost of sales	418,773		415,999			1,206,402			1,284,354			Cost of sales	817,515		711,603		2,719,333		1,878,420
Gross profit	60,545		60,050			175,525			175,032			Gross profit	153,327		159,460		584,891		353,489
Operating expenses (income):												Operating expenses (income):
Selling, general, and administrative	46,817		49,152			148,742			157,006			Selling, general, and administrative	76,176		79,976		238,746		225,258
Depreciation and amortization												Depreciation and amortization	6,884		7,087		21,429		21,785
Amortization of deferred gains on real estate												Amortization of deferred gains on real estate	(984)		(984)		(2,951)		(2,952)
Gains from sales of property	—		(13,940		)	(6,700		)	(14,701		)	Gains from sales of property	—		(8,684)		(1,287)		(9,209)
Depreciation and amortization	2,249		2,220			6,865			7,091
Other operating expenses												Other operating expenses	212		609		1,197		6,736
Total operating expenses	49,066		37,432			148,907			149,396			Total operating expenses	82,288		78,004		257,134		241,618
Operating income	11,479		22,618			26,618			25,636			Operating income	71,039		81,456		327,757		111,871
Non-operating expenses (income):												Non-operating expenses (income):
Interest expense	5,670		6,105			16,280			19,562
Interest expense, net												Interest expense, net	8,313		10,776		33,690		36,691
Other income, net	—		(17		)	(2		)	(255		)	Other income, net	(704)		(238)		(1,335)		(58)
Income before provision for income taxes	5,809		16,530			10,340			6,329			Income before provision for income taxes	63,430		70,918		295,402		75,238
Provision for income taxes	123		1,522			832			609			Provision for income taxes	16,232		15,802		72,886		14,214
Net income	$	5,686	$	15,008		$	9,508		$	5,720		Net income	$	47,198	$	55,116	$	222,516	$	61,024

Basic earnings per share	$	0.63	$	1.69		$	1.05		$	0.64
Diluted earnings per share	$	0.62	$	1.68		$	1.04		$	0.64
Basic income per share												Basic income per share	$	4.85	$	5.83	$	23.23	$	6.49
Diluted income per share												Diluted income per share	$	4.74	$	5.72	$	22.91	$	6.48

Comprehensive income (loss):
Comprehensive income:												Comprehensive income:
Net income	$	5,686	$	15,008		$	9,508		$	5,720		Net income	$	47,198	$	55,116	$	222,516	$	61,024
Other comprehensive income (loss):
Foreign currency translation, net of tax	—		(29		)	14			277
Amortization of unrecognized pension loss, net of tax	260		340			796			787
Pension curtailment, net of tax	—		—			(592		)	(12,185		)
Total other comprehensive income (loss)	260		311			218			(11,121		)
Comprehensive income (loss)	$	5,946	$	15,319		$	9,726		$	(5,401	)
Other comprehensive income:												Other comprehensive income:
Amortization of unrecognized pension gain, net of tax												Amortization of unrecognized pension gain, net of tax	238		294		723		604
Other												Other	7		(5)		24		(2)
Total other comprehensive income												Total other comprehensive income	245		289		747		602
Comprehensive income												Comprehensive income	$	47,443	$	55,405	$	223,263	$	61,626

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


	October 2, 2021		January 2, 2021
ASSETS
Current assets:
Cash	$	186	$	82
Receivables, less allowances of $4,471 and $4,123, respectively	344,974		293,643
Inventories, net	436,438		342,108
Other current assets	38,828		32,581
Total current assets	820,426		668,414
Property and equipment, at cost	309,108		299,935
Accumulated depreciation	(131,587)		(121,223)
Property and equipment, net	177,521		178,712
Operating lease right-of-use assets	51,178		51,142
Goodwill	47,772		47,772
Intangible assets, net	14,699		18,889
Deferred tax assets	70,683		62,899
Other non-current assets	20,052		20,302
Total assets	$	1,202,331	$	1,048,130
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	210,386	$	165,163
Accrued compensation	18,330		24,751
Taxes payable	6,488		7,847
Current maturities of long-term debt, net of debt issuance costs of $0 and $74, respectively	—		1,171
Finance lease liabilities - short-term	5,606		5,675
Operating lease liabilities - short-term	4,881		6,076
Real estate deferred gains - short-term	4,040		4,040
Other current liabilities	13,527		14,309
Total current liabilities	263,258		229,032
Non-current liabilities:
Long-term debt, net of debt issuance costs of $3,608 and $8,936, respectively	219,541		321,270
Finance lease liabilities - long-term	271,314		267,443
Operating lease liabilities - long-term	46,412		44,965
Real estate deferred gains - long-term	75,157		78,009
Pension benefit obligation	19,926		22,684
Other non-current liabilities	24,497		25,635
Total liabilities	920,105		989,038
Commitments and Contingencies	0		0
STOCKHOLDERS’ EQUITY:
Common Stock, $0.01 par value, 20,000,000 shares authorized, 9,723,838 and 9,462,774 outstanding on October 2, 2021 and January 2, 2021, respectively	97		95
Additional paid-in capital	266,564		266,695
Accumulated other comprehensive loss	(35,245)		(35,992)
Accumulated stockholders’ equity (deficit)	50,810		(171,706)
Total stockholders’ equity	282,226		59,092
Total liabilities and stockholders’ equity	$	1,202,331	$	1,048,130

September 30, 2017 December 31, 2016
Assets:
Current assets:
Cash $ 5,590
$ 5,540
Receivables, less allowances of $2,738 and $2,733, respectively 173,748
125,857
Inventories, net 206,788
191,287
Other current assets 21,063
23,126
Total current assets 407,189
345,810
Property and equipment:

Land and land improvements 30,715
34,609
Buildings 84,772
80,131
Machinery and equipment 75,133
72,122
Construction in progress 428
3,104
Property and equipment, at cost 191,048
189,966
Accumulated depreciation (105,846 ) (101,644 )
Property and equipment, net 85,202
88,322
Other non-current assets 13,969
10,005
Total assets $ 506,360
$ 444,137
Liabilities:

Current liabilities:

Accounts payable $ 97,606
$ 82,735
Bank overdrafts 21,641
21,696
Accrued compensation 8,491
8,349
Current maturities of long-term debt, net of discount of $480 and $201, respectively 54,521
29,469
Other current liabilities 15,081
12,092
Total current liabilities 197,340
154,341
Non-current liabilities:

Long-term debt, net of discount of $1,766 and $2,544, respectively 258,789
270,792
Pension benefit obligation 31,452
34,349
Other non-current liabilities 37,922
14,496
Total liabilities 525,503
473,978
Stockholders’ deficit:

Common Stock, $0.01 par value, Authorized - 20,000,000 shares, Issued and Outstanding - 9,098,221 and 9,031,263, respectively 91
90
Additional paid-in capital 258,854
257,972
Accumulated other comprehensive loss (36,433 ) (36,651 )
Accumulated stockholders’ deficit (241,655 ) (251,252 )
Total stockholders’ deficit (19,143 ) (29,841 )
Total liabilities and stockholders’ deficit $ 506,360
$ 444,137

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Equity (Deficit)		Stockholders’ Equity Total
	Shares	Amount
Balance, January 2, 2021	9,463	$	95	$	266,695	$	(35,992)	$	(171,706)	$	59,092
Net income	—	—		—		—		61,860		61,860
Foreign currency translation, net of tax	—	—		—		(6)		—		(6)
Impact of pension plan, net of tax	—	—		—		239		—		239
Vesting of restricted stock units	8	—		—		—		—		—
Compensation related to share-based grants	—	—		1,410		—		—		1,410
Repurchase of shares to satisfy employee tax withholdings	(3)	—		(99)		—		—		(99)
Other	—	—		—		17		—		17
Balance, April 3, 2021	9,468	95		268,006		(35,742)		(109,846)		122,513
Net income	—	—		—		—		113,458		113,458
Foreign currency translation, net of tax	—	—		—		6		—		6
Impact of pension plan, net of tax	—	—		—		246		—		246
Vesting of restricted stock units	355	2		—		—		—		2
Compensation related to share-based grants	—	—		1,992		—		—		1,992
Repurchase of shares to satisfy employee tax withholdings	(113)	—		(5,033)		—		—		(5,033)
Other	—	—		(2)		—		—		(2)
Balance, July 3, 2021	9,710	97		264,963		(35,490)		3,612		233,182
Net income	—	$	—	$	—	$	—	$	47,198	$	47,198
Foreign currency translation, net of tax	—	—		—		7		—		7
Impact of pension plan, net of tax	—	—		—		238		—		238
Vesting of restricted stock units	14	—		—		—		—		—
Compensation related to share-based grants	—	—		1,608		—		—		1,608
Repurchase of shares to satisfy employee tax withholdings	—	—		(3)		—		—		(3)
Other	—	—		(4)		—		—		(4)
Balance, October 2, 2021	9,724	$	97	$	266,564	$	(35,245)	$	50,810	$	282,226

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Stockholders’ Deficit Total
	Shares	Amount
Balance, December 28, 2019	9,366	$	94	$	260,974	$	(34,563)	$	(252,588)	$	(26,083)
Net loss	—	—		—		—		(787)		(787)
Foreign currency translation, net of tax	—	—		—		3		—		3
Impact of pension plan, net of tax	—	—		—		196		—		196
Vesting of restricted stock units	2	—		—		—		—		—
Compensation related to share-based grants	—	—		1,004		—		—		1,004
Repurchase of shares to satisfy employee tax withholdings	(1)	—		(7)		—		—		(7)
Other	—	—		9		(19)		—		(10)
Balance, March 28, 2020	9,367	94		261,980		(34,383)		(253,375)		(25,684)
Net income	—	—		—		—		6,695		6,695
Foreign currency translation, net of tax	—	—		—		17		—		17
Impact of pension plan, net of tax	—	—		—		114		—		114
Vesting of restricted stock units	122	1		—		—		—		1
Compensation related to share-based grants	—	—		854		—		—		854
Repurchase of shares to satisfy employee tax withholdings	(28)	—		(247)		—		—		(247)
Other	—	—		—		2		—		2
Balance, June 27, 2020	9,461	$	95	$	262,587	$	(34,250)	$	(246,680)	$	(18,248)
Net income	—	—		—		—		55,116		55,116
Foreign currency translation, net of tax	—	—		—		(12)		—		(12)
Impact of pension plan, net of tax	—	—		—		294		—		294
Vesting of restricted stock units	1	—		—		—		—		—
Compensation related to share-based grants	—	—		1,057		—		—		1,057
Repurchase of shares to satisfy employee tax withholdings	—	—		(1)		—		—		(1)
Other	—	—		—		7		—		7
Balance, September 26, 2020	9,462	$	95	$	263,643	$	(33,961)	$	(191,564)	$	38,213

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended
	October 2, 2021		September 26, 2020
Cash flows from operating activities:
Net income	$	222,516	$	61,024
Adjustments to reconcile net income to cash provided by operations:
Provision for income taxes	72,886		14,214
Depreciation and amortization	21,429		21,785
Amortization of debt issuance costs	1,560		2,888
Adjustments to debt issuance costs associated with term loan	5,791		—
Gains from sales of property	(1,287)		(9,209)
Amortization of deferred gains from real estate	(2,951)		(2,951)
Share-based compensation	5,010		2,915
Changes in operating assets and liabilities:
Accounts receivable	(51,331)		(115,712)
Inventories	(94,330)		39,776
Accounts payable	45,223		46,600
Other current assets	(7,083)		(1,380)
Pension contributions	(325)		(142)
Other assets and liabilities	(90,249)		14,588
Net cash provided by operating activities	126,859		74,396

Cash flows from investing activities:
Proceeds from sale of assets	2,652		10,742
Property and equipment investments	(5,424)		(1,943)
Net cash provided by (used in) investing activities	(2,772)		8,799

Cash flows from financing activities:
Borrowings on revolving credit facilities	900,006		541,700
Repayments on revolving credit facilities	(965,142)		(605,221)
Repayments on term loan	(43,204)		(88,861)
Proceeds from real estate financing transactions	—		78,263
Debt financing costs	(2,811)		(2,983)
Repurchase of shares to satisfy employee tax withholdings	(5,135)		(255)
Principal payments on finance lease liabilities	(7,697)		(7,327)
Net cash used in financing activities	(123,983)		(84,684)

Net change in cash	104		(1,489)
Cash at beginning of period	82		11,643
Cash at end of period	$	186	$	10,154

Supplemental Cash Flow Information
Net income tax payment during the period	$	82,596	$	610
Interest paid during the period	$	26,382	$	33,716

Nine Months Ended
September 30, 2017 October 1, 2016
Net cash used in operating activities $ (38,278 ) $ (170 )

Cash flows from investing activities:
Property and equipment investments (241 ) (511 )
Proceeds from sale of assets 27,461
18,900
Net cash provided by investing activities 27,220
18,389

Cash flows from financing activities:

Repayments on revolving credit facilities (288,841 ) (399,283 )
Borrowings from revolving credit facilities 329,936
401,963
Principal payments on mortgage (28,976 ) (26,041 )
Decrease in bank overdrafts (55 ) (1,733 )
Increase in cash released from escrow related to the mortgage 1,490
9,118
Other, net (2,446 ) (2,347 )
Net cash provided by (used in) financing activities 11,108
(18,323 )

Increase (decrease) in cash 50
(104 )
Cash, beginning of period 5,540
4,808
Cash, end of period $ 5,590
$ 4,704

See accompanying Notes.

BLUELINX HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~October 2, 2021

(Unaudited)

1. 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”). ~~These~~We derived the condensed consolidated balance sheet at October 2, 2021, from the audited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted (“GAAP”) in the United States (“U.S.”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in ~~the Company’s~~our Annual Report on Form 10-K for the fiscal year ended January 2, 2021 (the ~~“Annual Report on~~“Fiscal 2020 Form 10-K”) ~~for the year ended December 31, 2016,~~, as filed with the Securities and Exchange Commission on March 3, 2021. 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 October 2, ~~2017.~~2021, and September 26, 2020, our balance sheets at October 2, 2021, and January 2, 2021, our statements of stockholders’ equity (deficit) for the nine months ended October 2, 2021, and September 26, 2020, and our statements of cash flows for the nine months ended October 2, 2021, and September 26, 2020.

~~New~~

We have condensed or omitted certain notes and other information from the interim condensed consolidated financial statements presented in this report. Therefore, these condensed consolidated interim financial statements should be read in conjunction with the Fiscal 2020 Form 10-K. The results for the three and nine months ended October 2, 2021 are not necessarily indicative of results that may be expected for the full year ending January 1, 2022, or any other interim period.

We operate on a 5-4-4 fiscal calendar. Our fiscal year ends on the Saturday closest to December 31 of that fiscal year and may comprise 53 weeks in certain years. Our 2021 fiscal year contains 52 weeks and ends on January 1, 2022. Fiscal 2020 contained 53 weeks and ended on January 2, 2021.

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. Some of our estimates may be affected by the ongoing novel coronavirus (“COVID-19”) pandemic. The severity, magnitude, and duration, as well as the economic consequences of the COVID-19 pandemic, are uncertain, rapidly changing, and difficult to predict. As a result, our accounting estimates and assumptions may change over time in response to the continuing COVID-19 pandemic.

Reclassification of Prior Period Presentation

We have reclassified certain costs within the Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 26, 2020, from selling, general and administrative to amortization of deferred gains on real estate. These amounts relate to the amortization of deferred gains from real estate transactions in 2017 and 2018. Refer to Note 9, Leases. Additionally, we reclassified amounts in other comprehensive income from foreign currency translation, net of tax, to other, for the nine months ended October 2, 2021, and three and nine months ended September 26, 2020.

We have reclassified certain payables within the Condensed Consolidated Balance Sheets for the year ended January 2, 2021, from other current liabilities to taxes payable. These payables relate to amounts due to various tax authorities.

Recently Adopted Accounting Standards

~~Revenue from Contracts with Customers.~~Income Taxes. In ~~May 2014,~~December 2019, the Financial Accounting Standards Board ~~(FASB)~~(the “FASB”) issued Accounting Standards Update (“ASU”) ~~2014-09, “Revenue from Contracts with Customers~~No. 2019-12, “Income taxes (Topic ~~606),~~740): Simplifying the Accounting for Income Taxes.” ~~which supersedes~~This ASU simplifies the ~~revenue recognition requirements~~accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) ~~605, Revenue Recognition.~~740 and also clarifies and amends existing guidance to improve consistent application. The ~~new revenue recognition~~amendments in this standard are effective for interim periods and fiscal years beginning after December 15, 2020. Early adoption is

permitted. We adopted this standard for the first fiscal quarter of 2021. The adoption of this standard did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

Defined Benefit Pension Plan. In August 2018, the FASB issued ASU No. 2018-14, “Compensation-Retirement-Benefits-Defined Benefit Plans-General (Subtopic 715-20).” The amendments in this update modify the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans by removing six previously required disclosures and adding two. The ASU also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost, and the benefit obligation for postretirement healthcare benefits. We adopted this standard effective for fiscal year 2020. The adoption of this standard did not have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

Fair Value Measurement. In August 2018, the FASB issued ASU No. 2018-13, “Fair Value (“FV”) Measurement (Topic 820).” In addition to making certain modifications, the standard removed the requirements to disclose: (i) the amount of and reasons for transfers between Level 1 and Level 2 of the FV hierarchy; (ii) the policy for timing transfers between levels; and (iii) the valuation process for Level 3 FV measurements. The standard requires public entities to ~~recognize revenue~~disclose: (a) the changes in ~~a way that depicts~~unrealized gains and losses for the ~~transfer~~period included in other comprehensive income for recurring Level 3 FV measurements held at the end of ~~promised goods or services~~the reporting period; and (b) the range and weighted average of significant unobservable inputs used to ~~customers~~develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information in ~~an amount that reflects~~lieu of the ~~consideration to which~~weighted average if the entity ~~expects~~determines that other quantitative information would be a more reasonable and rational method to ~~be entitled~~reflect the distribution of unobservable inputs used to develop Level 3 FV measurements. The additional disclosure requirements are applied prospectively for the most recent interim or annual period presented in ~~exchange~~the fiscal year of adoption. All other amendments are applied retrospectively to all periods presented. We adopted this standard effective December 29, 2019, the first day of our 2020 fiscal year. The adoption of this standard did not have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

Accounting Standards Effective in Future Periods

Credit Impairment Losses. In June 2016, the FASB issued ASU 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 ~~those goods~~financial instruments or ~~services.~~other assets (e.g., trade receivables), held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model, is applicable to the measurement of credit losses on financial assets measured at amortized cost, and applies to some off-balance sheet credit exposures. 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. ASU ~~2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is~~2019-10 extended the effective ~~on January 1, 2018.~~date of ASU 2016-13 to interim and annual periods beginning after December 15, 2022, for certain public business entities, including smaller reporting companies. We have ~~elected to adopt the revenue recognition standard in the first quarter of 2018 with a cumulative adjustment to retained earnings. We have substantially~~not completed our assessment of the ~~new revenue recognition guidance. Based upon current interpretations,~~standard, but we do not ~~anticipate~~expect the adoption ~~of this standard~~ to have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

2. Inventories

Our inventories consist almost entirely of finished goods inventory, with an immaterial 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 ~~financial statements; aside~~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, which also considers items that may be considered damaged, excess, and obsolete inventory. For the three month periods ended October 2, 2021, we released a lower of cost or net realizable value reserve of $16.7 million resulting from ~~adding expanded disclosures,~~the decrease in value of our structural lumber inventory related to the decline in wood-based commodity prices, accrued during the second quarter of fiscal 2021, as the inventory impacted by the reserve was sold to customers. The lower of cost of net realizable value reserve of $16.7 million had no net impact on the nine month period ended October 2, 2021.

3. Goodwill and Other Intangible Assets

In connection with the acquisition of Cedar Creek on April 13, 2018, we acquired certain intangible assets. As of October 2, 2021, our intangible assets consist of goodwill and other intangible assets including customer relationships, noncompete agreements, and trade names.

Goodwill

Goodwill is the excess of the cost of an acquired entity over the fair value of tangible and intangible assets (including customer relationships, noncompete agreements, and trade names) acquired, and liabilities assumed, under acquisition accounting for business combinations. As of October 2, 2021, goodwill was $47.8 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 willevaluate the carrying value for impairment between annual impairment tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Such events and indicators may include, without limitation, significant declines in the industries in which our products are used, significant changes in capital market conditions, and significant changes in our market capitalization. No such indicators were present during the third quarter of fiscal 2021. Our 1 reporting unit has a fair value that exceeds its carrying value as of October 2, 2021.

Definite-Lived Intangible Assets

On October 2, 2021, the gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets were as follows:


Intangible Asset	Weighted Average Remaining Useful Lives	Gross Carrying Amounts		Accumulated Amortization (1)		Net Carrying Amounts
	(Years)	(In thousands)
Customer relationships	9	$	25,500	$	(11,912)	$	13,588
Noncompete agreements	1	8,254		(7,143)		1,111
Trade names	0	6,826		(6,826)		—
Total		$	40,580	$	(25,881)	$	14,699

(1) Intangible assets, except customer relationships, are amortized on a straight-line basis. Customer relationships are amortized on a double declining balance method.

During the second quarter of fiscal 2021, our trade names intangible asset became fully amortized.

Amortization Expense

Amortization expense for our definite-lived intangible assets was $1.1 million and $4.2 million for the three and nine month periods ended October 2, 2021, respectively. For the three and nine month periods ended September 26, 2020, amortization expense was $1.8 million and $5.6 million, respectively.

Estimated amortization expense for definite-lived intangible assets for the remaining portion of 2021 and the next five fiscal years is as follows:


Fiscal year	Estimated Amortization
	(In thousands)
2021	$	1,131
2022	2,763
2023	1,807
2024	1,505
2025	1,423
2026	1,423

4. 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 10 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 ~~currently under consideration,~~accounted for as ~~are further considerations~~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 ~~potential additional or expanded internal controls over financial reporting.~~

~~2. Employee Benefits~~variable consideration.

The following table ~~shows~~presents our revenues disaggregated by revenue source. Certain prior year amounts have been reclassified to conform to the ~~components~~current year product mix of ~~net periodic pension cost (in thousands):~~structural and specialty products. Sales and usage-based taxes are excluded from revenues.


	Three Months Ended				Nine Months Ended
Product type	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
	(In thousands)				(In thousands)
Structural products	$	329,818	$	375,072	$	1,425,389	$	865,302
Specialty products	641,024		495,991		1,878,835		1,366,607
Total net sales	$	970,842	$	871,063	$	3,304,224	$	2,231,909

Three Months Ended Nine Months Ended
September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Service cost $ 133
$ 246
$ 499
$ 750
Interest cost on projected benefit obligation 1,153
1,179
3,509
3,721
Expected return on plan assets (1,684 ) (1,561 ) (4,852 ) (4,663 )
Amortization of unrecognized loss 260
340
796
787
Net periodic pension (credit) cost $ (138 ) $ 204
$ (48 ) $ 595

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. Sales and usage-based taxes are excluded from revenues.


	Three Months Ended				Nine Months Ended
Sales channel	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
	(In thousands)				(In thousands)
Warehouse and reload	$	783,758	$	745,185	$	2,695,326	$	1,901,285
Direct	204,524		138,750		660,934		363,250
Customer discounts and rebates	(17,440)		(12,872)		(52,036)		(32,626)
Total net sales	$	970,842	$	871,063	$	3,304,224	$	2,231,909

5. Assets Held for Sale ~~and Net Gain on Disposition~~

We currently have designated two unoccupied properties as held for sale, due to strategic initiatives. At the time that these properties were designated as “held for sale,” we ceased recognizing depreciation expense on these assets.

As of ~~September 30, 2017, two properties were designated as held for sale,~~October 2, 2021, and as of December 31, 2016, four properties had been designated as held for sale. During that nine months ended September 30, 2017, two properties were sold, as further described below. As of September 30, 2017, and December 31, 2016,January 2, 2021, the net book value of total assets held for sale was ~~$0.8~~$0.9 million and ~~$2.7~~$1.3 million, respectively, and was included in ~~“other~~“Other current assets” in our Condensed Consolidated Balance Sheets. ~~We are actively marketing the remaining two~~Only 1 of our non-

operating properties ~~that are designated as held for sale.~~

~~For the nine months ended September 30, 2017, we sold two non-operating distribution facilities previously~~was designated as “held for ~~sale,” and~~sale” as of October 2, 2021. This property is a ~~parcel of excess land (the “Property Sales”). We recognized a gain of $6.7 million in the Condensed Consolidated Statements of Income as a result of the Property Sales.~~

~~4. Fair Value Disclosure~~

To determine the fair value of our mortgage, we use a discounted cash flow model. We believe the mortgage fair value valuation to be Level 2 in the fair value hierarchy, as the valuation model has inputs that are observable for substantially the full

term of the liability. As of September 30, 2017, the carrying amount and fair value of our mortgage was $97.8 million and $100.4 million, respectively. The difference between the book value and the fair value is derived from the difference between the period-end market interest rate and the stated rate of our fixed-rate mortgage. The fair value of our debt is not indicative of the amounts at which we could settle our debt.

~~5. Other Non-Current Liabilities~~

~~The following table shows the components of other non-current liabilities (in thousands):~~

September 30, 2017 December 31, 2016
Capital leases - real estate $ 7,940
$ —
Deferred gain on sale-leaseback transactions 10,945
—
Capital leases - logistics equipment 6,930
8,559
Other 12,107
5,937
Total $ 37,922
$ 14,496

~~In the first quarter of 2017, we entered into three sale and leaseback transactions. Our capital lease - real estate obligations arose from sale-leaseback transactions on~~former distribution ~~centers~~facility located in ~~Tampa, Florida~~Houston, Texas. We vacated this property and Ft. Worth, Texas. As a result of these transactions, we recognized a capital lease asset and obligation originally totaling $8.0 million on these properties. The remaining sale-leaseback property located in Miami, Florida, was classifieddesignated it as an operating lease. We originally recognized a total deferred gain of $13.7 million on these three sale-leaseback transactions, which will be amortized over the life of the applicable lease in the case of the capital leases; or, in the case of the operating lease, will be amortized over the life of the applicable lease until our adoption of ASC 842, at which time the remaining deferred gain will be reclassified as a decrease to stockholders’ deficit.

~~The liability~~held for both the capital leases and deferred gain is located in “other current liabilities” (for the portion amortizing within the next twelve months) and “other non-current liabilities” (as presented in the table, above) on our Condensed Consolidated Balance Sheet.

~~6. Earnings per Share~~

We calculate basic earnings per share by dividing net income by the weighted average number of common shares outstanding, excluding unvested restricted shares. We calculate diluted earnings per share 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 awards, restricted stock units, performance shares, and stock options. Antidilutive or out-of-the-money common stock equivalents excluded from the diluted earnings per share calculation for the quarter and year-to-datesale during fiscal ~~2017 include all outstanding options and performance shares; and, additionally, for year-to-date only, an immaterial number of restricted stock units.~~

~~The following table shows the computation of basic and diluted earnings per share (in thousands, except per share data):~~

Three months ended Nine months ended
September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Net income $ 5,686
$ 15,008
$ 9,508
$ 5,720

Basic weighted shares outstanding 9,079
8,900
9,033
8,891
Dilutive effect of share-based awards 164
30
152
72
Diluted weighted average shares outstanding 9,243
8,930
9,185
8,963

Basic earnings per share $ 0.63
$ 1.69
$ 1.05
$ 0.64
Diluted earnings per share $ 0.62
$ 1.68
$ 1.04
$ 0.64

~~7. Accumulated Other Comprehensive Loss~~

Comprehensive income is a measure of income which includes both net income and other comprehensive income. Other comprehensive income results from items deferred from recognition into our Consolidated Statements of Income and

~~Comprehensive Income (Loss). Accumulated Other Comprehensive Loss is separately presented on our Consolidated Balance Sheets as part of common stockholders’ deficit.~~

~~The changes in balances for each component of Accumulated Other Comprehensive Loss for the nine months ended September 30, 2017, were as follows (in thousands):~~

Foreign currency, net
of tax

Defined
benefit pension
plan, net of tax

Other,
net of tax
Total Accumulated Other Comprehensive Loss
December 31, 2016, beginning balance $ 660
$ (37,523 ) $ 212
$ (36,651 )
Other comprehensive income, net of tax ⁽¹⁾
14
204
—
218
September 30, 2017, ending balance, net of tax $ 674
$ (37,319 ) $ 212
$ (36,433 )

⁽¹⁾

For the nine months ended September 30, 2017, the actuarial loss recognized in the Condensed Consolidated Statements of Income and Comprehensive Income (Loss) as a component of net periodic pension cost of $0.8 million (see Note 2), was partially offset by the effect of fiscal second quarter pension curtailment of $0.6 million. There was no intraperiod income tax allocation and the deferred tax benefit was fully offset by a valuation allowance.

~~8. Liquidity and ASU 2014-15~~

As of September 30, 2017, we had outstanding borrowings of $217.7 million and excess availability of $82.7 million under the terms of the prior revolving credit facility, including the Tranche A Loan (together, the “prior revolving credit facility”), based on qualifying inventory and accounts receivable. We replaced the prior revolving credit facility on October 10, 2017, as further described in Note 9.

A portion of our debt is classified as “Current maturities of long-term debt” on our Condensed Consolidated Balance Sheet as of September 30, 2017, since it is due within the next twelve months. This amount consists of a $55.0 million principal reduction of our mortgage, which is due by July 1, 2018. We are actively engaged in marketing certain of our real estate holdings in sale and leaseback transactions in order to meet the principal reduction date specified by our mortgage loan.

As stated in our Annual Report on Form 10-K, Note 1, the FASB previously issued ASU 2014-15, which is codified in ASC 205, “Presentation of Financial Statements,” which requires footnote disclosures concerning, among other matters, an entity’s ability to repay its obligations through normal operational or other sources over the twelve months following the date of financial statement issuance. We have adopted this accounting standard, as disclosed in our Annual Report on Form 10-K, Note 15. As stated above, our mortgage requires a principal payment of $55.0 million due no later than July 1, 2018.2020. We continue to ~~explore monetization opportunities associated with our real estate portfolio,~~actively market this property, and ~~currently~~we plan to ~~engage in sale leaseback transactions in order to meet~~sell this ~~obligation.~~

~~9. Subsequent Event~~

We entered into a Credit Agreement, dated as of October 10, 2017, by and among us, certain of our subsidiaries, as borrowers or guarantors; Wells Fargo Bank, National Association, in its capacity as administrative agent; and certain other financial institutions party thereto (the “Credit Agreement”). The Credit Agreement provides for a senior secured revolving loan and letter of credit facility of up to $335.0 million and an uncommitted accordion feature that permits us to increase the facility by an aggregate additional principal amount of up to $75.0 million, subject to certain conditions, including lender consent. The maturity date of the Credit Agreement is October 10, 2022. The Credit Agreement replaced our previous $335.0 million secured revolving credit facility, which consisted of a revolving loan facility of up to $335.0 million and a Tranche A revolving loan facility of up to $16.0 million. In connection with the execution and delivery of the Credit Agreement, certain of our subsidiaries also entered into a Guaranty and Security Agreement. In addition, we also entered into a Limited Guaranty, pursuant to which we agreed to guarantee obligations under the Credit Agreement and that we would not further pledge the equity interests in certain of our real estate subsidiaries, in each case for so long as any portion of our existing mortgage loan remains outstanding.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) has been derived from our historical financial statements and is intended to provide information to assist you in better understanding and evaluating our financial condition and results of operations. This MD&A section should be read in conjunction with our condensed consolidated financial statements and notes to those statements included in Item 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the U.S. Securities and Exchange Commission (the “SEC”). This MD&A section is not a comprehensive discussion and analysis of our financial condition and results of operations, but rather updates disclosures made in the aforementioned filing.

~~The discussion below contains forward-looking statements~~property within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance, liquidity levels or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “plan,” “will be,” “will likely continue,” “will likely result” or words or phrases of similar meaning. All of these forward-looking statements are based on estimates and assumptions made by our management that, although believed by us to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental, and technological factors outside of our control; that may cause our business, strategy, or actual results to differ materially from the forward-looking statements. These risks and uncertainties may include those discussed under the heading “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC, and other factors, some of which may not be known to us. We operate in a changing environment in which new risks can emerge from time to time. It is not possible for management to predict all of these risks, nor can it assess the extent to which any factor, or a combination of factors, may cause our business, strategy, or actual results to differ materially from those contained in forward-looking statements. Factors you should consider that could cause these differences include, among other things:

~~changes in the prices, supply and/or demand for products which we distribute;~~

~~inventory management and commodities pricing;~~

~~new housing starts and inventory levels of existing homes for sale;~~

~~general economic and business conditions in the U.S.;~~

~~acceptance by our customers of our privately branded products;~~

~~financial condition and creditworthiness of our customers;~~

~~supply from our key vendors;~~

~~reliability of the technologies we utilize;~~

~~activities of competitors;~~

~~changes in significant operating expenses;~~

~~fuel costs;~~

~~risk of losses associated with accidents;~~

~~exposure to product liability claims;~~

~~changes in the availability of capital and interest rates;~~

~~adverse weather patterns or conditions;~~

~~acts of cyber intrusion;~~

~~variations in the performance of the financial markets, including the credit markets; and~~

~~other factors described herein and in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC.~~

Given these risks and uncertainties, we caution you not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.

~~Executive Level Overview~~

~~Background~~

We are a leading distributor of building and industrial products in the U.S. The Company is headquartered in Atlanta, Georgia, with executive offices located at 4300 Wildwood Parkway, Atlanta, Georgia, and we operate our distribution business through a broad network of distribution centers. We serve many major metropolitan areas in the U.S., and deliver building and industrial products to a variety of wholesale and retail customers. We distribute products in two principal categories: structural products and specialty products. Structural products include plywood, oriented strand board, rebar and remesh, lumber and other wood products primarily used for structural support, walls, and flooring in construction projects. Structural products

represented approximately 46% of our year-to-date fiscal 2017 net sales. Specialty products include roofing, insulation, moulding, engineered wood, vinyl products (used primarily in siding), and metal products (excluding rebar and remesh). Specialty products accounted for approximately 54% of our year-to-date fiscal 2017 net sales.

~~Industry Conditions~~

Many of the factors that cause our operations to fluctuate are seasonal or cyclical in nature. Our operating results have historically been closely aligned with the level of single family residential housing starts in the U.S. At any time, the demand for new homes is dependent on a variety of factors, including job growth, changes in population and demographics, the availability and cost of mortgage financing, the supply of new and existing homes and, importantly, consumer confidence. While single-family housing starts remain below peak levels, the industry has seen improvement over the past several years. Our opinion is that this trend will continue in the long term, and that we are well-positioned to support our customers.

~~Results of Operations~~

~~The following table sets forth our results of operations for the third quarter of fiscal 2017 and fiscal 2016:~~

Third Quarter of Fiscal 2017 % of
Net
Sales Third Quarter of Fiscal 2016 % of
Net
Sales
(Dollars in thousands)
Net sales $ 479,318
100.0% $ 476,049
100.0%
Gross profit 60,545
12.6% 60,050
12.6%
Selling, general, and administrative 46,817
9.8% 49,152
10.3%
Gains from sales of property —
—% (13,940 ) (2.9)%
Depreciation and amortization 2,249
0.5% 2,220
0.5%
Operating income 11,479
2.4% 22,618
4.8%
Interest expense 5,670
1.2% 6,105
1.3%
Other income, net —
—% (17 ) —%
Income before provision for income taxes 5,809
1.2% 16,530
3.5%
Provision for income taxes 123
—% 1,522
0.3%
Net income $ 5,686
1.2% $ 15,008
3.2%

~~The following table sets forth our results of operations for the first nine months of fiscal 2017 and fiscal 2016:~~

First Nine Months of Fiscal 2017 % of
Net
Sales First Nine Months of Fiscal 2016 % of
Net
Sales
(Dollars in thousands)
Net sales $ 1,381,927
100.0% $ 1,459,386
100.0%
Gross profit 175,525
12.7% 175,032
12.0%
Selling, general, and administrative 148,742
10.8% 157,006
10.8%
Gains from sales of property (6,700 ) (0.5)% (14,701 ) (1.0)%
Depreciation and amortization 6,865
0.5% 7,091
0.5%
Operating income 26,618
1.9% 25,636
1.8%
Interest expense 16,280
1.2% 19,562
1.3%
Other income, net (2 ) —% (255 ) —%
Income before provision for income taxes 10,340
0.7% 6,329
0.4%
Provision for income taxes 832
0.1% 609
—%
Net income $ 9,508
0.7% $ 5,720
0.4%

~~The following table sets forth net sales by product category versus comparable prior periods:~~

Quarter Ended Nine Months Ended
September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Sales by category (In millions)
Structural products $ 228
$ 204
$ 633
$ 594
Specialty products 254
272
757
878
Other ⁽¹⁾
(3 ) —
(8 ) (13 )
Total net sales $ 479
$ 476
$ 1,382
$ 1,459


⁽¹⁾	~~“Other” includes unallocated allowances and discounts.~~

~~The following table sets forth gross profit and gross margin percentages by product category versus comparable prior periods:~~

Quarter Ended Nine Months Ended
September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Gross profit by category (Dollars in millions)
Structural products $ 21
$ 17
$ 59
$ 53
Specialty products 39
37
114
117
Other ⁽¹⁾
1
6
3
5
Total gross profit $ 61
$ 60
$ 176
$ 175
Gross margin % by category

Structural products 9.3 % 8.4 % 9.2 % 9.0 %
Specialty products 15.3 % 13.5 % 15.0 % 13.3 %
Total gross margin % 12.6 % 12.6 % 12.7 % 12.0 %


⁽¹⁾	~~“Other” includes unallocated allowances and discounts.~~

The following table sets forth a reconciliation of net sales and gross profit to the non-GAAP measures of adjusted same-center net sales and adjusted same-center gross profit versus comparable prior periods ⁽¹⁾:

Quarter Ended Nine Months Ended

September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
(Dollars in thousands)
Net sales $ 479,318
$ 476,049
$ 1,381,927
$ 1,459,386
Less: non-GAAP adjustments —
12,024
—
124,915
Adjusted same-center net sales $ 479,318
$ 464,025
$ 1,381,927
$ 1,334,471
Adjusted year-over-year percentage increase - sales 3.3 % 3.6 %

Gross profit $ 60,545
$ 60,050
$ 175,525
$ 175,032
Less: non-GAAP adjustments —
1,166
50
5,414
Adjusted same-center gross profit $ 60,545
$ 58,884
$ 175,475
$ 169,618

⁽¹⁾

The schedule presented above includes a reconciliation of net sales and gross profit excluding the effect of operational efficiency initiatives; specifically, facility closures and the SKU rationalization initiative. These operational efficiency initiatives were substantially complete as of December 31, 2016. The above schedule is not a presentation made in accordance with GAAP, and is not intended to present a superior measure of the financial condition from those determined under GAAP. Adjusted net sales and adjusted gross profit as used herein, are not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation.

We believe adjusted net sales and adjusted gross profit are helpful in presenting comparability across periods without the effect of our operational efficiency initiatives on the later periods. We also believe that these non-GAAP metrics are used by securities analysts, investors, and other interested parties in their evaluation of our company, to illustrate the effects of these initiatives. We compensate for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than using GAAP results alone.

~~Third Quarter of Fiscal 2017 Compared to Third Quarter of Fiscal 2016~~

~~Net sales.~~ For the third quarter of fiscal 2017, net sales were relatively flat, with an increase of 0.7%, or $3.3 million, compared to the third quarter of fiscal 2016. While overall sales were largely flat, adjusted same center sales increased by 3.3%, which was largely driven by seasonal trends in the building industry, as well as a benefit from commodity price increases on our structural products.

~~Gross profit and gross margin.~~ For the third quarter of fiscal 2017, gross profit dollars increased by $0.5 million, or 0.8%, compared to the third quarter of fiscal 2016. Gross profit increased in the third quarter of fiscal 2017 due to increased margin on both specialty and structural products. Gross margin percentage remained flat at 12.6%, primarily due to the sales mix of specialty and structural products.

~~Selling, general, and administrative expenses.~~ The decrease of 4.8%, or $2.3 million, for the third quarter of fiscal 2017, compared to the third quarter of fiscal 2016, is primarily related to decreases in maintenance expense, as well as decreased third party freight expense.

~~First Nine Months of Fiscal 2017 Compared to First Nine Months of Fiscal 2016~~

~~Net sales.~~ For the first nine months of fiscal 2017, net sales decreased by 5.3%, or $77.5 million, compared to the first nine months of fiscal 2016. The year-over-year nine month decrease in sales was primarily driven by planned closures of distribution centers in fiscal 2016, and SKU rationalization, as same center sales increased by $47.5 million for the comparable nine month period, an increase of 3.6%. Sales prices increased on both structural and specialty items.

~~Gross profit and gross margin.~~ For the first nine months of fiscal 2017, gross profit dollars were essentially flat. Total gross margin percentage increased 70 basis points over the comparable prior year period, which was driven largely by a 1.7% increase in specialty product gross margin, in addition to a 20 basis point increase in structural product margin.

~~Selling, general, and administrative expenses.~~ The decrease of $8.3 million for the nine months of fiscal 2017, compared to the first nine months of fiscal 2017, is primarily related to reductions in payroll and related costs, due to a reduction in force in the prior year in connection with distribution center closures, which also resulted in a decrease in general maintenance and repair costs. Additionally, we have decreased third party freight expense for the comparative period. These overall cost decreases were slightly offset by an increase in strategic costs, year-over-year, as during the first nine months of fiscal 2017, we incurred $5.5 million in pension expense as a result of our withdrawal from a multi-employer pension plan, compared to $3.3 million of refinancing related costs in fiscal 2016.

~~Seasonality~~

We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors common in the building products distribution industry. The first and fourth fiscal quarters are typically our slowest quarters, due to the impact of poor weather on the construction market. Our second and third fiscal quarters are typically our strongest quarters, reflecting a substantial increase in construction, due to more favorable weather conditions. Our working capital generally increases in the fiscal second and third quarters, reflecting increased seasonal demand.

~~Liquidity and Capital Resources~~

We expect our primary sources of liquidity to be cash flows from sales in the normal course of our operations and borrowings under our revolving credit facility. We expect that these sources will fund our ongoing cash requirements for the foreseeable future. We believe that sales in the normal course of our operations and amounts currently available from our revolving credit facility and other sources will be sufficient to fund our routine operations and working capital requirements for at least the next 12 months.

~~Mortgage~~

6. Long-Term Debt

As of ~~September 30, 2017, the balance on our mortgage loan was $97.8 million. The mortgage is secured by owned distribution facilities. Our mortgage lender has a first priority pledge~~October 2, 2021, and January 2, 2021, long-term debt consisted of the ~~equity in the Company’s subsidiaries which hold the real property that secures the mortgage loan.~~following:

~~As modified on March 24, 2016, our mortgage is due on July 1, 2019. We pre-paid in its entirety a $60.0 million principal reduction which was due no later than July 1, 2017.~~


Debt categories	October 2, 2021		January 2, 2021
	(In thousands)
Revolving Credit Facility (1)	$	223,149	$	288,247
Term Loan Facility (2)	—		43,204
Finance lease obligations (3)	276,920		273,118
	500,069		604,569
Unamortized debt issuance costs	(3,608)		(9,010)
	496,461		595,559
Less: current maturities of long-term debt	5,606		6,846
Long-term debt, net of current maturities	$	490,855	$	588,713

(1) The remaining principal reductions include a $55.0 million principal payment due no later than July 1, 2018, with the remaining balance due no later than July 1, 2019. We may perform sale and leaseback transactions on certain of our properties in order to meet the remaining scheduled principal payments, or we may consider other options to monetize our real estate holdings. The mortgage requires monthly interest-only payments, at an annualaverage effective interest rate was 2.0 percent and 2.8 percent for the quarters ended October 2, 2021 and January 2, 2021, respectively.

(2) The average interest rate, exclusive of ~~6.35%.~~fees and prepayment premiums, was 8.0 percent for the quarter ended January 2, 2021.

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

Revolving Credit Facility

~~As of September 30, 2017, we had outstanding borrowings of $217.7 million and excess availability of $82.7 million under the terms of our previous~~

We have a revolving credit facility ~~and Tranche A Loan.~~

Wethat we entered into ~~a Credit Agreement, dated as of October 10, 2017, by and among us, certain of our subsidiaries, as borrowers or guarantors;~~in April 2018 with Wells Fargo Bank, National Association, ~~in its capacity~~ as administrative ~~agent;~~agent (“the Agent”), and certain other financial institutions party ~~thereto (the “Credit Agreement”~~thereto. On August 2, 2021, we entered into a second amendment to the 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 (as amended, the “Revolving Credit Facility”).

The Revolving Credit ~~Agreement provides for~~Facility includes a committed senior secured asset-based revolving loan and letter of credit facility of up to ~~$335.0~~$600.0 million, ~~(the “Revolving Credit Facility”)~~ and an uncommitted accordion feature that permits us to increase the facility by an aggregate additional principal amount of up to ~~$75.0 million, subject to certain conditions, including lender consent. If we were to obtain the full amount of the additional increases in commitments,~~$150.0 million.Our obligations under the Revolving Credit Facility will allow borrowings of up to $410.0 million. The maturity date of the Credit Agreement is October 10, 2022. The Credit Agreement replaced our previous $335.0 million secured revolving credit facility, which consisted of a revolving loan facility of up to $335.0 million and a Tranche A revolving loan facility of up to $16.0 million, which had been made available pursuant to our prior credit agreement, dated August 4, 2006, as amended.

In connection with the execution and delivery of the Credit Agreement, certain of our subsidiaries also entered into a Guaranty and Security Agreement with Wells Fargo (the “Guaranty and Security Agreement”). Pursuant to the Guaranty and Security Agreement, our obligations under the Credit Agreement are secured by a ~~first priority~~ security interest in substantially all of our ~~operating subsidiaries’~~ assets ~~including inventories, accounts receivable,~~other than real ~~property, and proceeds from those items. Borrowings~~property.

Loans under the ~~Credit Agreement will be subject to availability under the Borrowing Base (as defined in the Credit Agreement). 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. The Credit Agreement provides for~~bear interest ~~on the loans~~ at a rate per annum equal to (i) LIBOR plus a margin ranging from ~~2.25%~~1.25 percent to ~~2.75%,~~1.75 percent, with the amount of such margin determined based upon the average of our excess availability for the immediately preceding fiscal quarter as calculated by the administrative agent, for loans based on LIBOR, or (ii) the administrative agent’s base rate plus a margin ranging from ~~0.75%~~0.25 percent to ~~1.25%,~~0.75 percent, with the amount of such margin determined based upon the average of our excess availability for the immediately preceding fiscal quarter as calculated by the administrative agent, for loans based on the base rate.

As of October 2, 2021, we had outstanding borrowings of $223.1 million and excess availability of $351.9 million under our Revolving Credit Facility. As of January 2, 2021, we had outstanding borrowings of $288.2 million and excess availability of $184.3 million under our Revolving Credit Facility. Our average effective interest rate under the facility was 2.0 percent and 2.8 percent for the quarters ended October 2, 2021 and January 2, 2021, respectively. For the quarter ended September 26, 2020, our average effective interest rate under the Revolving Credit Facility was 2.7 percent.

The 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 the Revolving Credit Facility as of October 2, 2021.

On October 25, 2021, we closed a private offering of $300.0 million at 6.0% senior secured notes to persons reasonably believed to be “qualified institutional buyers,” as defined in Rule 144A under the Securities Act of 1933, as amended (“The Securities Act”), and to non-U.S. persons outside the United States under Regulation S under the Securities Act. The 2029 Notes were issued to investors at 98.625% of their principal amount and will mature on November 15, 2029. The majority of

net proceeds from the offering of the senior secured notes were used to repay borrowings under our Revolving Credit Facility. In conjunction with this offering, we reduced the limit of the Revolving Credit Facility from $600.0 million to $350.0 million.

Term Loan Facility

As of January 2, 2021, we had outstanding borrowings of $43.2 million under our Term Loan Facility. On April 2, 2021, we repaid the remaining outstanding principal balance of the Term Loan Facility, and, as a result, as of October 2, 2021, we had no outstanding borrowings under the Term Loan Facility, which has been extinguished. In connection with our repayment of the outstanding principal balance in full on April 2, 2021, we expensed $5.8 million of debt issuance costs during the first quarter of fiscal 2021 that we had been amortizing in connection with our former Term Loan Facility. These costs are included within interest expense, net, on the Condensed Consolidated Statements of Operations and reported separately as an adjustment to net income in our Condensed Consolidated Statements of Cash Flows. Our average interest rate under the facility, exclusive of fees and prepayment premiums, was approximately 8.0 percent for the quarter ended January 2, 2021.

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.

7. Net Periodic Pension Benefit

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


	Three Months Ended				Nine Months Ended
Pension-related items	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
	(In thousands)				(In thousands)
Service cost (1)	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	505		723		1,515		2,169
Expected return on plan assets	(1,140)		(1,210)		(3,420)		(3,630)
Amortization of unrecognized gain	321		263		963		789
Net periodic pension benefit	$	(314)	$	(224)	$	(942)	$	(672)

(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 benefit is included in other expense (income), net, in our Condensed Consolidated Statement of Operations and Comprehensive Income.

8. Stock Compensation

During the three and nine month periods ended October 2, 2021, we incurred stock compensation expense of $1.6 million and $5.0 million, respectively. For the three and nine month periods ended September 26, 2020, we incurred stock compensation expense of $1.1 million and $2.9 million. The increase in our stock compensation expense for the three and nine month periods ended 2021 are attributable to having more outstanding equity-based awards during this period than in the prior year and the vesting of awards in connection with the departure of certain employees. In addition, the stock price has increased during fiscal year 2021 compared to 2020.

9. Leases

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 1 year to 15 years, some of which include 1 or more options to extend the leases for 5 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”). 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 sheet. When a lease does not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. We have also made the accounting policy election to not separate lease components from non-lease components related to our mobile fleet asset class.

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.

During the first and second quarters of fiscal 2021, we recorded finance leases of $10.2 million and $0.3 million, respectively, related to new tractors put into service as part of our mobile fleet. These leases were entered into for a period of four years each.

Additionally, during the second quarter of fiscal 2021, we recorded operating leases totaling $5.0 million related to warehouse facilities in Milwaukee, WI, and Statesville, NC. Each lease was entered into for an initial period of ten years, and has 2 five-year renewal options.

The following table presents our assets and liabilities related to our leases as of October 2, 2021 and January 2, 2021:


Lease assets and liabilities		October 2, 2021		January 2, 2021
		(In thousands)
Assets	Classification
Operating lease right-of-use assets	Operating lease right-of-use assets	$	51,178	$	51,142
Finance lease right-of-use assets (1)	Property and equipment, net	148,426		148,561
Total lease right-of-use assets		$	199,604	$	199,703

Liabilities
Current portion
Operating lease liabilities	Operating lease liabilities - short term	$	4,881	$	6,076
Finance lease liabilities	Finance lease liabilities - short term	5,606		5,675
Non-current portion
Operating lease liabilities	Operating lease liabilities - long term	46,412		44,965
Finance lease liabilities	Finance lease liabilities - long term	271,314		267,443
Total lease liabilities		$	328,213	$	324,159

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $70.8 million and $58.6 million as of October 2, 2021 and January 2, 2021, respectively.

The components of lease expense were as follows:


	Three Months Ended				Nine Months Ended
Components of lease expense	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
	(In thousands)				(In thousands)
Operating lease cost:	$	2,959	$	3,108	$	8,942	$	9,206
Finance lease cost:
Amortization of right-of-use assets	$	4,012	$	4,648	$	12,209	$	11,526
Interest on lease liabilities	6,244		4,949		18,659		17,670
Total finance lease costs	$	10,256	$	9,597	$	30,868	$	29,196

Supplemental cash flow information related to leases was as follows:


	Three Months Ended				Nine Months Ended
Cash flow information	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
	(In thousands)				(In thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,822	$	3,029	$	8,193	$	8,662
Operating cash flows from finance leases	6,244		4,949		18,659		17,670
Financing cash flows from finance leases	$	3,026	$	2,893	$	7,697	$	7,327
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	217	$	3,640	$	5,508	$	3,668
Finance leases	$	—	$	3,145	$	10,549	$	3,145

Supplemental balance sheet information related to leases was as follows:


Balance sheet information	October 2, 2021			January 2, 2021
	(In thousands)
Finance leases
Property and equipment	$	219,192		$	207,147
Accumulated depreciation	(70,766)			(58,586)
Property and equipment, net	$	148,426		$	148,561
Weighted Average Remaining Lease Term (in years)
Operating leases	10.86			11.14
Finance leases	16.05			16.08
Weighted Average Discount Rate
Operating leases	9.00		%	9.28		%
Finance leases	9.94		%	9.87		%

The major categories of our finance lease liabilities as of October 2, 2021 and January 2, 2021 are as follows:


Category	October 2, 2021		January 2, 2021
	(In thousands)
Equipment and vehicles	$	33,717	$	29,434
Real estate	243,203		243,684
Total finance leases	$	276,920	$	273,118

As of October 2, 2021, maturities of lease liabilities were as follows:


Fiscal year	Operating leases		Finance leases
	(In thousands)
2021	$	10,134	$	8,238
2022	9,402		32,495
2023	7,943		32,191
2024	8,207		31,575
2025	7,322		27,850
Thereafter	42,310		379,747
Total lease payments	$	85,318	$	512,096
Less: imputed interest	(34,025)		(235,176)
Total	$	51,293	$	276,920

On January 2, 2021, maturities of lease liabilities were as follows:


Fiscal year	Operating leases		Finance leases
	(In thousands)
2021	$	11,215	$	30,159
2022	9,161		29,453
2023	8,400		29,189
2024	7,283		28,649
2025	7,392		28,102
Thereafter	44,092		380,511
Total lease payments	$	87,543	$	526,063
Less: imputed interest	(36,502)		(252,945)
Total	$	51,041	$	273,118

10. 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 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.

Collective Bargaining Agreements

As of October 2, 2021, we employed approximately 2,100 employees and less than 1 percent of our employees are employed on a part-time basis. Approximately 23 percent of our employees were represented by various local labor unions with terms and conditions of employment subject to Collective Bargaining Agreements (“CBAs”) negotiated between the Company and local labor unions. NaN CBAs covering approximately 6 percent of our employees are up for renewal in fiscal 2021, with 3 having been successfully renegotiated earlier this year. We expect to renegotiate the remaining CBAs by the end of the year.

11. Accumulated Other Comprehensive Loss

Comprehensive income includes both net income and other comprehensive income. Other comprehensive income results from items deferred from recognition into our Condensed Consolidated Statements of Operations and Comprehensive Income. 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 October 2, 2021, were as follows:


	Foreign currency, net of tax		Defined benefit pension plan, net of tax		Other, net of tax		Total Accumulated Other Comprehensive Loss
	(In thousands)
January 2, 2021, beginning balance, net of tax	$	660	$	(36,855)	$	203	$	(35,992)
Other comprehensive income, net of tax (1)	7		723		17		747
October 2, 2021, ending balance, net of tax	$	667	$	(36,132)	$	220	$	(35,245)

(1) For the nine months ended October 2, 2021, the actuarial gain recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income as a component of net periodic pension benefit was $0.9 million, net of tax of $0.2 million. Please see Note 7, Net Periodic Pension Benefit, for further information.

12. Income Taxes

Effective Tax Rate

Our effective tax rate for the three months ended October 2, 2021, and September 26, 2020, was 25.6 percent and 22.3 percent, respectively. Our effective tax rate for the nine months ended October 2, 2021, and September 26, 2020, was 24.7 percent and 18.9 percent, respectively.

Our effective tax rate for the three and nine months ended October 2, 2021 was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, slightly offset by the partial release of the valuation allowance for state net operating loss carryforwards we anticipate being able to utilize based on our taxable income through the end of the third quarter of fiscal 2021.

Our effective tax rate for the three and nine months ended September 26, 2020 was primarily impacted by a discrete tax benefit resulting from the release of the valuation allowance associated with nondeductible interest expense under Section 163(j) of the Internal Revenue Code (“IRC”) as a result of changes allowed under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that was enacted on March 27, 2020 which raised the allowable percentage of deductible interest from 30 percent to 50 percent of adjusted taxable income. Our effective tax rate for the same periods was further impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, and the effect of the partial valuation allowance for separate company state income tax losses, combined with expense related to the vesting of restricted stock units.

Deferred Tax Assets

Quarterly, we assess the carrying value of our deferred tax assets for impairment by evaluating the weight of available evidence at the end of each fiscal quarter. In our evaluation of the weight of available evidence at the end of the current quarter, we considered the recent reported income in the current quarter, as well as the reported income for 2020 and the reported losses for 2019 and 2018, which resulted in a three year cumulative income situation as positive evidence which carried substantial weight. While this was substantial, it was not the only evidence we evaluated. We also considered evidence related to the four sources of taxable income to determine whether such positive evidence outweighed the negative evidence. The evidence considered included:

•future reversals of existing taxable temporary differences;

•future taxable income exclusive of reversing temporary differences and carryforwards;

•taxable income in prior carryback years, if carryback is permitted under the tax law; and

•tax planning strategies.

In addition to the positive evidence discussed above, we considered as positive evidence forecasted taxable income, the detail scheduling of timing of the reversal of our deferred tax assets and liabilities, and the evidence from business and tax planning strategies. As of October 2, 2021, in our evaluation of the weight of available evidence, we concluded that our net deferred tax assets were not impaired.

13. Income per Share

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

The reconciliation of basic net income and diluted net income per common share for the three and nine month periods ended October 2, 2021, and September 26, 2020, were as follows:


	Three Months Ended				Nine Months Ended
	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
	(In thousands, except per share data)				(In thousands, except per share data)
Net income	$	47,198	$	55,116	$	222,516	$	61,024

Weighted average shares outstanding - basic	9,721		9,461		9,579		9,408
Dilutive effect of share-based awards	232		170		135		11
Weighted average share outstanding - diluted	9,953		9,631		9,714		9,419

Basic income per share	$	4.85	$	5.83	$	23.23	$	6.49
Diluted income per share	$	4.74	$	5.72	$	22.91	$	6.48

14. Subsequent Event

Closing of Senior Secured Notes of $300M at 6.0% Due 2029

On October 25, 2021, we closed a private offering of $300 million at 6.0% senior secured notes to persons reasonably believed to be “qualified institutional buyers,” as defined in Rule 144A under The Securities Act of 1933, and to non-U.S. persons outside the United States under Regulation S under the Securities Act. The 2029 Notes were issued to investors at 98.625% of their principal amount and will mature on November 15, 2029. Our obligations under these senior secured notes are guaranteed by our domestic subsidiaries that are co-borrowers under or guarantee our Revolving Credit Facility. The senior secured notes and the related guarantees are secured by a first-priority security interest in substantially all of our guarantor’s existing and future assets (other than receivables, inventory, deposit accounts, securities accounts, business interruption insurance and other related assets), subject to certain exceptions and customary permitted liens. The senior secured notes and the related guarantees are also secured on a second-priority basis by a lien on our Revolving Credit Facility collateral. The majority of net proceeds from the offering of the senior secured notes were used to repay borrowings under our Revolving Credit Facility. In conjunction with the closing of the senior secured notes offering, we reduced the limit under our Revolving Credit Facility from $600 million to $350 million.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

About Our Business

We are BlueLinx: a leading wholesale distributor of residential and commercial building products in the United States. We are a “two-step” distributor. Two-step distributors purchase products from manufacturers and distribute those products to dealers and other suppliers in local markets, who then sell those products to end users. We carry 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, industrial products, cedar, moulding, siding, metal products, and insulation. Structural products include items such as lumber, plywood, oriented strand board, rebar, and remesh. We also provide a wide range of value-added services and solutions aimed at relieving distribution and logistics challenges for our customers and suppliers, while enhancing their marketing and inventory management capabilities.

We sell products through three main distribution channels, consisting of warehouse sales, reload sales, and direct sales. Warehouse sales, which generate the majority of our sales, are delivered from our warehouses to our customers. 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 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, however, requires the lowest amount of committed capital and fixed costs.

With a strong market position, broad geographic coverage footprint servicing 40 states, and the strength of a locally focused sales force, as a two-step wholesale distributor, we distribute our comprehensive range of products from over 750 suppliers, including some of the leading manufacturers in the industry, such as Ply Gem, Huber Engineered Woods, Georgia-Pacific, James Hardie, Fiberon, Oldcastle APG and Weyerhaeuser, and supply products to a broad base of over 15,000 national, regional, and local dealers, specialty distributors, national home centers, and manufactured housing customers. Many of our customers then serve residential and commercial builders and contractors in their respective geographic areas and local markets.

As a truly entrenched value-added partner in a complex and demanding building products supply chain, we play a critical role in enabling our customers to offer a broad range of products and brands, as most of our customers do not have the capability to purchase and warehouse products directly from manufacturers for such a large set of SKUs. The depth of our geographic footprint supports meaningful customer proximity across all markets in which we operate, enabling faster and more efficient service. Similarly, we provide value to our supplier partners by enabling access to the large and fragmented network of lumber yards and dealers that those suppliers could not adequately serve directly. Our position in this distribution model for building products provides easy access to the marketplace for our suppliers and the value proposition of rapid delivery on an as-needed basis to our customers from our network of warehouse facilities.

Industry Overview

Our products are available across large and attractive end markets, including residential new construction and residential repair and remodel, which together account for approximately 85 percent of the end market mix for our addressable building material market served via two-step distribution based on our estimates. We also estimate the remaining 15 percent is accounted for by commercial construction. We believe that there are favorable underlying fundamental factors that will drive long-term growth across the end markets in which we operate.

Residential New Construction

We estimate that residential new home construction (including single-family and multi-family homes) accounts for approximately 40 percent of the end market mix for our addressable building material market served via two-step distribution. The pace of housing starts, with which our business is correlated, is driven by demographic and population shifts, mortgage interest rates (which remain at historic lows), the ability of builders to obtain skilled labor, and builders’ economic outlook. U.S. single family housing starts peaked in 2005, before experiencing a downturn through 2011. Since 2011, we have experienced the continuing recovery of residential new construction, which has translated into increased demand for the products we sell. Our large footprint, strong customer relationships, and comprehensive offering of leading products and brands positions us to capitalize on continued growth in the new housing market.

According to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, 2020 single family housing starts in the United States were approximately 1 million, an increase of 12 percent above 2019 housing starts. We believe there is significant pent-up demand for housing and the market will see continued growth. The monthly single family residential home supply continues to remain in line with the 20-year average and significantly below the peak levels observed in 2008 and 2009. For most of the last decade, housing production has lagged population growth and household formation and Freddie Mac estimates that the housing supply at the end of 2020 was 3.8 million units short of the level needed to match long-term demand. Harvard University’s Joint Center for Housing Studies estimates total annual housing construction through 2028 should be on the order of 1.5 million units, or about 120,000 higher than in 2020. Based on these data points, we believe there are fundamental factors driving significant opportunity in the residential new home construction end-market for building products of which we are well positioned to serve.

Residential Repair and Remodel

We estimate that residential repair and remodel spending accounts for approximately 45 percent of the end market mix for our addressable building material market served via two-step distribution. Repair and remodel sales tend to be less cyclical than new construction, particularly for exterior products that are exposed to the elements and where maintenance is less likely to be deferred. We expect that factors including the total installed base of U.S. homes, overall age of the U.S. housing stock, rising home prices supporting increased underlying home equity and availability of consumer capital will drive continued growth in repair and remodel spending. The Leading Indicator of Remodeling Activity (LIRA) projects spending on home improvement projects to rise 9.2 percent year-over-year in 2021 and 12.3 percent year-over-year for the four quarters ending in the third quarter of fiscal 2022.

According to the U.S. Census Bureau and Department of Housing and Urban Development, the median home age in the U.S. increased from 23 years in 1985 to 39 years in 2019 and approximately 80 percent of the current housing stock was built prior to 1999. We believe the increasing average age of the nation’s 125 million existing homes will continue to drive demand for repair and remodel projects. The annual U.S. homes installed base is projected to continue to increase through 2025, which is positive for both residential repair and remodel spending as well as for residential construction. We are positioned to capitalize on this projected growth, as repair and remodel spending drives a significant portion of our sales.

Increased home improvement spending has also benefited from the COVID-19 pandemic, as homeowners are spending more time at home and are investing more in their homes as a result. Outdoor and exterior projects make heavy use of outdoor living products like composite decking and fencing, and other aesthetically focused exterior products like siding and trim, which are key and growing product categories for us.

Impact of the COVID-19 Pandemic on Our Industry and Our Business

Beginning in mid-March 2020, local, state, provincial and federal authorities began issuing stay-at-home orders in response to the spread of the coronavirus disease, or COVID-19, which quickly spread throughout the United States and worldwide. As COVID-19 began to have an effect in North America, the resulting stay-at-home orders significantly impacted new home starts, as builders responded to a sharp drop in buyer traffic and contracts for new homes. Housing starts dropped in March and April of 2020, typically months of robust homebuilding activity as the start of the construction season. Following a mid-2020 pause, new construction rebounded quickly.

Likewise, the National Association of Homebuilders’ Builder Confidence Index, recovered to pre-pandemic levels in 2020 and remains above the 20-year average. The COVID-19 pandemic has motivated many urban high-rise condominium and apartment dwellers to seek out single-family residences in suburban areas where they will have more space for working from home and outdoor spaces for leisure. This trend has generated additional demand for new single-family homes and spurred builders to increase the pace of new construction.

Like many other companies in the United States and globally, our results were impacted by the COVID-19 pandemic during the early spring of 2020. However, throughout the pandemic, our business was designated as “essential” and as the stay-at-home orders have eased and as residential construction has recovered, our performance has similarly improved. Since the onset of the COVID-19 pandemic, we have focused on protecting the health and safety of our team members while maintaining our operations and continuing to meet the needs of our customers. We undertook a number of precautionary measures during 2020 in order to ensure we maintained a strong liquidity position, including reducing operating expenses and management and board salaries, extending payment terms, furloughing a portion of our salaried workforce initially and ultimately eliminating several of those salaried employees by year end, and freezing most discretionary capital expenditures throughout the initial phases of the pandemic. In 2021, we benefited from a leaner cost structure, improved operational efficiency, lower working capital

requirements, pricing discipline and better inventory management. In addition, while some of our suppliers and other parts of the supply chain were disrupted by the lockdown measures, lumber and panel prices have returned to more normalized levels following a period of record prices and high volatility in the second half of 2020 and the first nine months of 2021 due to heightened overall demand for construction and labor pressures across the supply chain.

However, as a result of the rise of the COVID-19 variants in certain parts of the United States, some governmental authorities may reconsider the re-institution of various restrictive measures. The extent of the impact of the pandemic on our business and sales for the remaining three months of fiscal 2021 will depend on future developments, including, among others, the extent and scope of the rise of existing and additional COVID-19 variants, the success of vaccination efforts, the success of actions taken by governmental authorities to contain these variants, or future ones, and the pandemic and address their impact, the overall duration of the pandemic, the success of local return to work and business reopening plans, and the impact the COVID-19 pandemic has on demand in the markets we serve. The trajectory of the pandemic continues to evolve rapidly, and we cannot predict the extent to which our financial condition, results of operations, or cash flows will ultimately be impacted. We are closely monitoring the development and spread of COVID-19 variants, the impact of the pandemic on industry conditions, the progress of local return to office and reopening plans, and any pandemic-related restrictions. We are in the process of implementing return to work plans for our corporate headquarters and warehouse facilities, and we continue to practice safety and hygiene protocols consistent with the Center for Disease Control and Prevention (“CDC”) and local guidance.

Seasonality

We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors common in the building products distribution industry. The first and fourth fiscal quarters are typically our lower volume quarters, due to the impact of less favorable weather on the construction market. Our second and third fiscal quarters are typically our higher volume quarters, reflecting an increase in construction, due to more favorable weather conditions. Depending on the nature and circumstances of our business in any given year, we may increase our inventory in the fourth quarter in anticipation of higher demand in the first half of the coming year to meet expected customer demand for our products.

Commodity Markets

Our operating results are sensitive to fluctuations in commodity markets, specifically commodity markets for wood-based commodities that we classify as structural products. When prices fluctuate in the commodity markets which impact us, we may immediately adjust the end price of our products to compensate for the changes in market prices, which is common for businesses with inventories impacted by commodity price fluctuations. When we change our prices in response to market fluctuations, we will often see immediate impacts in our operating results. When market prices increase, this impact can be beneficial. Conversely, when market prices decrease, the impact can be negative because we are adjusting the selling prices for inventory often purchased at higher market prices. Fluctuations in the commodity markets during the last 18 months have had a significant impact on our operating results for the periods presented in this quarterly report, of which we discuss in more detail elsewhere in this report.

Supply Constraints

Our operating results are impacted by the availability of the products we sell in the markets in which we do business. When our inventory supply is constrained, our operating results may be impacted by lower sales volumes. While supply constraints may negatively impact our sales volumes, they may also have a positive impact on our net sales and overall profitability. This is because supply constraints can cause prices to increase. Under these circumstances, we may sell less product by volume but at a higher price which could have a positive impact on our levels of sales and profitability. Conversely, rapid changes in supply levels, such as the sudden increase in availability of a product where the supply was previously constrained, may have a negative impact on our operating results especially in situations where the demand does not also increase proportionally with supply increases.

Our Culture and Management Focus

We remain committed to driving a culture of profitable growth within new and existing product lines and geographies, while positioning the company for long-term value creation. The following initiatives represent key areas of our management team’s focus:

1.Foster a performance-driven culture committed to profitable growth. We are currently focused on enhancing the customer experience; accelerating organic growth within specific product and solutions offerings where we are

uniquely advantaged; and deploying capital to drive sustained margin expansion, grow free cash flow conversion and maintain continued profitable growth.

2.Migrate revenue mix toward higher-margin specialty product categories. We intend to pursue a revenue mix increasingly weighted toward higher-margin, in-demand specialty product categories. Management also intends to expand on value-added service offerings designed to simplify complex customer sourcing requirements, together with marketing, inventory and pricing services afforded by our national platform.

3.Maintain a disciplined capital structure and pursue high-return investments that support growth. On a trailing twelve-month basis, we have significantly transformed our balance sheet, underscored by a material reduction in net leverage and improved access to liquidity. Given this, we intend to accelerate capital investments designed to improve the efficiency and reliability of existing assets, including distribution centers and fleet assets. In the ~~event~~fourth quarter 2021, we intend to invest up to $10 million in our fleet and facilities to improve operational performance and productivity.

Factors That Affect Our Operating Results

Our results of operations and financial performance are influenced by a variety of factors, including the following: pricing and product cost variability; volumes of product sold; changes in the prices, supply, and/or demand for products that we distribute; the cyclical nature of the industry in which we operate; housing market conditions; the COVID-19 pandemic and other contagious illness outbreaks and their potential effects on our industry; effective inventory management relative to our sales volume or the prices of the products we produce; information technology security and business interruption risks; increases in petroleum prices; consolidation among competitors, suppliers, and customers; disintermediation risk; loss of products or key suppliers and manufacturers; our dependence on international suppliers and manufacturers for certain products; exposure to product liability and other claims and legal proceedings related to our business and the products we distribute; natural disasters, catastrophes, fire, or other unexpected events; successful implementation of our strategy; wage increases or work stoppages by our union employees; costs imposed by federal, state, local, and other regulations; compliance costs associated with federal, state, and local environmental protection laws; our level of indebtedness and our ability to incur additional debt to fund future needs; the risk that our cash flows and capital resources may be insufficient to service our existing or future indebtedness; the covenants of the instruments governing our indebtedness limiting the discretion of our management in operating our business; the fact that we lease many of our distribution centers, and we would still be obligated under these leases even if we close a leased distribution center; changes in our product mix; shareholder activism; potential acquisitions and the integration and completion of such acquisitions; the possibility that the value of our deferred tax assets could become impaired; changes in our expected annual effective tax rate could be volatile; the costs and liabilities related to our participation in multi-employer pension plans could increase; the possibility that we could be the subject of securities class action litigation due to stock price volatility; and changes in, or interpretation of, accounting principles.

Results of Operations

The following table sets forth our results of operations for the third quarter of fiscal 2021 and fiscal 2020:


	Third Quarter of Fiscal 2021		% of Net Sales	Third Quarter of Fiscal 2020		% of Net Sales
	(In thousands)			(In thousands)
Net sales	$	970,842	100.0%	$	871,063	100.0%
Gross profit	153,327		15.8%	159,460		18.3%
Selling, general, and administrative	76,176		7.8%	79,976		9.2%
Depreciation and amortization	6,884		0.7%	7,087		0.8%
Amortization of deferred gains on real estate	(984)		(0.1)%	(984)		(0.1)%
Gains from sales of property	—		—%	(8,684)		(1.0)%
Other operating expenses	212		0.0%	609		0.1%
Operating income	71,039		7.3%	81,456		9.4%
Interest expense, net	8,313		0.9%	10,776		1.2%
Other income, net	(704)		(0.1)%	(238)		(0.0)%
Income before provision for income taxes	63,430		6.5%	70,918		8.1%
Provision for income taxes	16,232		1.7%	15,802		1.8%
Net income	$	47,198	4.9%	$	55,116	6.3%

The following table sets forth our results of operations for the first nine month periods of fiscal 2021 and fiscal 2020:


	First Nine Months of Fiscal 2021		% of Net Sales	First Nine Months of Fiscal 2020		% of Net Sales
	(In thousands)			(In thousands)
Net sales	$	3,304,224	100.0%	$	2,231,909	100.0%
Gross profit	584,891		17.7%	353,489		15.8%
Selling, general, and administrative	238,746		7.2%	225,258		10.1%
Depreciation and amortization	21,429		0.6%	21,785		1.0%
Amortization of deferred gains on real estate	(2,951)		(0.1)%	(2,952)		(0.1)%
Gains from sales of property	(1,287)		0.0%	(9,209)		(0.4)%
Other operating expenses	1,197		0.0%	6,736		0.3%
Operating income	327,757		9.9%	111,871		5.0%
Interest expense, net	33,690		1.0%	36,691		1.6%
Other income, net	(1,335)		0.0%	(58)		0.0%
Income before provision for income taxes	295,402		8.9%	75,238		3.4%
Provision for income taxes	72,886		2.2%	14,214		0.6%
Net income	$	222,516	6.7%	$	61,024	2.7%

The following table sets forth net sales by product category for the three and nine month periods ending October 2, 2021, and September 26, 2020:


	Three Months Ended						Nine Months Ended
	October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020
Net sales by category	($ in thousands)						($ in thousands)
Structural products	$	329,818		$	375,072		$	1,425,389		$	865,302
Specialty products	641,024			495,991			1,878,835			1,366,607
Net sales	$	970,842		$	871,063		$	3,304,224		$	2,231,909
Percentage of total net sales by category
Structural products	34		%	43		%	43		%	39		%
Specialty products	66		%	57		%	57		%	61		%
Total	100		%	100		%	100		%	100		%

The following table sets forth gross profit and gross margin percentages by product category for the three and nine month periods of fiscal 2021 and 2020:


	Three Months Ended						Nine Months Ended
	October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020
Gross profit $ by category	($ in thousands)						($ in thousands)
Structural products	$	5,634		$	73,370		$	163,668		$	120,673
Specialty products	147,693			86,090			421,223			232,816
Gross profit	$	153,327		$	159,460		$	584,891		$	353,489
Gross margin percentage by category
Structural products	1.7		%	19.6		%	11.5		%	13.9		%
Specialty products	23.0		%	17.4		%	22.4		%	17.0		%
Total gross margin %	15.8		%	18.3		%	17.7		%	15.8		%

Third Quarter of Fiscal 2021 Compared to Third Quarter of Fiscal 2020

For the third quarter of fiscal 2021, we generated net sales of $970.8 million, an increase of $99.8 million when compared to the third quarter of fiscal 2020 and overall gross margin percentage decreased from 18.3 percent to 15.8 percent year over year. Our third quarter net income was $47.2 million, or $4.74 per diluted share, versus $55.1 million, or $5.72 per diluted share, in the prior-year period. The significant decline in the market value of higher-cost commodity wood product inventory sold during the third quarter was the primary contributor to our overall gross profit and gross margin percentage decline and year-over-year decrease in profitability.

Net sales of specialty products, which includes engineered wood, industrial products, cedar, moulding, siding, metal products and insulation, increased $145.0 million to $641.0 million in the third quarter. Elevated demand for construction materials, along with continued supply constraints, contributed to multiple supplier-led price increases throughout the third quarter of fiscal 2021, resulting in improved revenue growth. Specialty sales volumes declined by lower-double digits percentages overall versus the prior-year period primarily attributable to widespread supply constraints, which impacted many product categories, including engineered wood and specialty lumber and panels. In contrast, we did see increases in sales volume among certain products within our specialty products category, such as in our moulding, siding, and industrial products.

Specialty products gross profit increased $61.6 million to $147.7 million, with a year-over-year improvement of approximately 560 basis points in specialty gross margin to 23.0 percent for the third quarter of fiscal 2021, compared to 17.4 percent in the third quarter of fiscal 2020. The increase in specialty gross margin percentage of 5.6 percent over the prior year period is primarily attributable to substantial increases in pricing for our specialty products.

Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, declined $45.3 million to $329.8 million in the third quarter of fiscal 2021 due to price deflation for commodity wood products. Structural sales volumes declined overall versus the prior-year period as we implemented commodity risk mitigation actions in

response to historic fluctuations in the commodity markets impacting our structural products. Commodity wood market pricing began to decline in May and continued to drop through August before beginning to stabilize in September to levels more consistent with five-year historical averages. Through centralized purchasing and consignment, we were able to reduce wood-based commodity price deflation risk. Our structural gross margin percentage for the third quarter of fiscal 2021 was 1.7%, down from 19.6% in the prior year period primarily driven by commodity price deflation during the quarter, and was impacted by the release of a lower of cost or net realizable reserve of $16.7 million which we accrued for in the second quarter of fiscal 2021 as commodity prices began a sustained decline. The inventory impacted by this reserve was sold to customers during the third quarter of fiscal 2021.

Our selling, general, and administrative expenses decreased 4.8 percent, or $3.8 million, compared to the third quarter of fiscal 2020. The decrease in sales, general, and administrative expenses is due to decreases in our sales commissions and incentive programs of approximately $3.3 million related to a decrease in gross profit, decreases in our delivery and logistical costs of approximately $1.8 million, offset by an increase among remaining general and administrative costs categories, primarily insurance, of approximately $1.3 million. Depreciation and amortization expense decreased 2.9 percent, compared to the third quarter of fiscal 2020. Our decrease in depreciation and amortization is due to a lower base of amortizable and depreciable assets throughout the third quarter of fiscal 2021 when compared the prior year period. The decrease in gains from sales of property in the amount of $8.7 million is due to the sale-leaseback of one of our properties located in Denver, Colorado during the third quarter fiscal 2020 compared to no sale of property during the third quarter fiscal 2021. Other operating expenses decreased 65.2 percent, or $0.4 million, compared to the third quarter of fiscal 2020 primarily due to a decrease in integration and restructuring related costs reported in the third quarter of fiscal 2020.

Interest expense, net, decreased by 22.9 percent, or $2.5 million, compared to the third quarter of fiscal 2020. The decrease is primarily due to the reduction of debt, including the repayment in full of our former Term Loan Facility at the end of the first quarter of fiscal 2021, under which borrowings bore a higher interest rate than under our Revolving Credit Facility combined with lower interest costs resulting from the recent amendments to our Revolving Credit Facility. Other expense (income), net, decreased $0.5 million compared to the third quarter of fiscal 2020 due to a benefit of $0.4 million resulting from the re-negotiation of one of our multi-employer pension plan liabilities which resulted in a lower liability estimated over the life of our agreement with the pension plan.

Our effective tax rate was 25.6 percent and 22.3 percent for the third quarter of fiscal 2021 and 2020, 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, and the effect of the release of our partial valuation allowance for separate company state income tax losses. Our effective tax rate for the third quarter of fiscal 2020 was additionally impacted by a discrete tax benefit resulting from the effect of the partial release of our valuation allowance for previously nondeductible interest resulting from changes allowed under Section 163(j) of the Internal Revenue Code (“IRC”) as a result of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that was enacted on March 27, 2020 which raised the allowable percentage of deductible interest from 30 percent to 50 percent of adjusted taxable income.

For the third quarter of fiscal 2021,our net income decreased by $7.9 million from the prior year period due primarily to a decrease in gross profit driven by commodity price deflation earlier in the quarter, that had a direct impact on our structural product sales and gross profit, in conjunction with lower gains from sales of property and a higher income tax expense resulting from our higher effective tax rate. This decrease was offset by reductions in our selling, general, and administrative and interest expenses.

First Nine Months of Fiscal 2021 Compared to First Nine Months of Fiscal 2020

For the nine months ended October 2, 2021, we generated net sales of $3.3 billion, an increase of $1.1 billion when compared to the prior-year period. Our nine month 2021 net income was $222.5 million, or $22.91 per diluted share, versus $61.0 million, or $6.48 per diluted share, in the prior-year period. A rapid and significant increase in the market pricing for our commodity wood products in the first five months of fiscal 2021 drove dramatic improvement in gross profit margins for our structural products, when compared to the same prior year period. Substantial increases in our specialty products also drove increases in our profitability.

Net sales of specialty products, which includes engineered wood, industrial products, cedar, moulding, siding, metal products and insulation, increased $512.2 million to $1.9 billion in the first nine months of fiscal 2021. Elevated demand for construction materials, along with continued supply constraints, contributed to multiple supplier-led price increases throughout the first nine months of fiscal 2021, which we capitalized on, resulting in improved revenue growth and margin expansion among our specialty products. Specialty sales volumes were flat versus the prior-year period despite widespread supply constraints which impacted most products within our specialty category. Specialty products gross profit increased $188.4 million to $421.2

million, with a year-over-year improvement of approximately 540 basis points in specialty gross margin to 22.4 percent. The increase in our specialty products gross margin percentages during the first nine months of fiscal 2021 was the result of substantial increase in pricing driven by increased demand paired with the supply constrained environment.

Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, increased $560.1 million to $1.4 billion in the first nine months of fiscal 2021 due to significant price increases for commodity wood products occurring during in the first five months of fiscal 2021. This price inflation impacted the market value of our existing commodity wood product inventory on-hand through May after which prices declined through August 2021. Structural volumes decreased during the nine month period as we implemented commodity risk mitigation actions in response to historic fluctuations in the commodity markets impacting our structural products. Structural gross profit margins for the first nine months of fiscal 2021 were 11.5 percent compared to 13.9 percent in the prior year period, a decline of approximately 240 basis points, due to wood-based commodity market volatility.

For the first nine months of fiscal 2021, selling, general, and administrative expenses increased 6.0 percent, or $13.5 million, compared to the first nine months of fiscal 2020. The increase in sales, general, and administrative expenses is due to increases in our sales commissions and incentives of approximately $7.8 million, payroll and other related cost of $1.7 million, and general and administrative costs of approximately $4.0 million, which includes increases in cost categories such as insurance. Depreciation and amortization expense decreased 1.6 percent, or $0.4 million, compared to the first nine months of fiscal 2020. The decrease in depreciation and amortization expense is due to a lower base of amortizable and depreciable assets throughout the first nine months of fiscal 2021 when compared to the prior year period.

During the first nine months of fiscal 2020, we completed the sale leaseback of one of our Denver facilities which resulted in a gain from the sale of property of $8.7 million during the period. During the first quarter of fiscal 2021, we completed the sale of our Birmingham dark property which resulted in a gain from the sale of property of $1.3 million. We completed no additional property sales during the remainder of the first nine months of fiscal 2021 which is resulting in a decrease in gains from sales of property of $7.9 million when compared to the prior year period. Other operating expenses decreased 82.2 percent, or $5.5 million, compared to the first nine months of fiscal 2020 primarily due to a decrease in spending related to integration and restructuring related costs reported during the first nine months of fiscal 2020.

Our interest expense, net, for the first nine months of fiscal 2021, decreased by 8.2 percent, or $3.0 million, compared to the prior year period. The decrease is primarily due to reduction of interest expense of $8.8 million resulting from lower debt, including the repayment in full of our former Term Loan Facility at the end of the first quarter of fiscal 2021, under which borrowings bore a higher interest rate than under our Revolving Credit Facility. Interest savings resulting from the repayment of our term loan facility at the end of the first quarter of fiscal 2021 combined with lower interest costs resulting from the renegotiation of our revolving credit facility in the third quarter of fiscal 2021. This was offset by the $5.8 million in debt issuance costs expensed during the first quarter of fiscal 2021 related to the extinguishment of our former Term Loan Facility. Our other expense (income), net, also decreased by $1.3 million compared to the first nine months of fiscal 2020. The decrease in other expense (income), net is resulting from a benefit of $0.4M resulting from the re-negotiation of one of our multi-employer pension plan liabilities which resulted in a lower estimated liability over the life of our agreement with the pension plan combined with the reduction of other immaterial expenses incurred in the prior year period.

Our effective tax rate was 24.7 percent and 18.9 percent for the first nine months of fiscal 2021 and 2020, 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, and the effect of our partial release of our valuation allowance for separate company state income tax losses. Our effective tax rate for the first nine months of fiscal 2020 was additionally impacted by a discrete tax benefit resulting from the effect of the partial release of our valuation allowance for previously nondeductible interest resulting from changes allowed under Section 163(j) of the Internal Revenue Code (“IRC”) as a result of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that was enacted on March 27, 2020 which raised the allowable percentage of deductible interest from 30 percent to 50 percent of adjusted taxable income.

Our net income for the first nine months of fiscal 2021 increased $161.5 million from the prior year period primarily due to the increase in gross profit resulting from substantial price increases impacting our specialty products combined with benefits from commodity price inflation during the nine month period when compared to prior year. Increases in gross profit were offset by gains from the sales of property during the nine month period. Additionally, net income benefited from slightly lower interest expense offset by higher income tax expense, resulting from our higher effective tax rate.

Liquidity and Capital Resources

We expect our primary sources of liquidity to be cash flows from sales in the normal course of our operations and borrowings under our Revolving Credit Facility, among other sources. We expect that these sources will fund our ongoing cash requirements for the foreseeable future. On October 25, 2021, we consummated a $300 million private offering of Senior Secured Notes. We used the majority of net proceeds from the offering to repay borrowings under our ABL credit facility.

Closing of Senior Secured Notes of $300M at 6.0% Due 2029

On October 25, 2021, we closed a private offering of $300 million at 6.0% senior secured notes to persons reasonably believed to be “qualified institutional buyers,” as defined in Rule 144A under the Securities Act of 1933, as amended (“The Securities Act”), and to non-U.S. persons outside the United States under Regulation S under the Securities Act. The 2029 Notes were issued to investors at 98.625% of their principal amount and will mature on November 15, 2029. Our obligations under these senior secured notes will be guaranteed by our domestic subsidiaries that are co-borrowers under or guarantee our revolving credit facility. The senior secured notes and the related guarantees will be secured by a first-priority security interest in substantially all of our guarantor’s existing and future assets (other than receivables, inventory, deposit accounts, securities accounts, business interruption insurance and other related assets, subject to certain exceptions and customary permitted liens). The senior secured notes and the related guarantees will also be secured on a second-priority basis by a lien on our revolving credit facility collateral. The majority of net proceeds from the offering of the senior secured notes were used to repay borrowings under our revolving credit facility.

Revolving Credit Facility

In April 2018, we amended and restated our Revolving Credit Facility with Wells Fargo Bank, National Association, and in August 2021, we amended the facility to, among other things, extend the maturity date of the facility and reduce the interest rate on borrowing under the facility (as amended, the “Revolving Credit Facility”). The Revolving Credit Facility provides for senior secured revolving loan and letter of credit facility of up to $600.0 million and an uncommitted accordion feature that permits us to increase the facility by an aggregate additional principal amount of up to $150.0 million. If we obtain the full amount of the additional increases in commitments, the Revolving Credit Facility will allow borrowings of up to $750.0 million. Borrowings under the Revolving Credit Facility are subject to availability under the Borrowing Base (as that term is defined in the Revolving Credit Facility). Letters of credit in an aggregate amount of up to $30.0 million are also available under the Revolving Credit Facility, which would reduce the amount of the revolving loans available thereunder. Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to (i) LIBOR plus a margin ranging from 1.25 percent to 1.75 percent, with the margin determined based upon average excess availability for the immediately preceding fiscal quarter for loans based on LIBOR, or (ii) the administrative 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.

If excess availability falls below the greater of (i) ~~$35.0~~$50.0 million and (ii) ~~10%~~10 percent of the lesser of (a) the ~~Borrowing Base~~borrowing base and (b) the maximum permitted credit at such time, the Revolving Credit ~~Agreement~~Facility requires maintenance of a fixed charge coverage ratio of ~~1.1~~1.0 to 1.0 ~~(which, subject to satisfying certain conditions though the first fiscal quarter of 2018, may be reduced to 1.0 to 1.0)~~ until ~~such time as our~~ excess availability has been at least ~~$42.5~~the greater of (i) $50.0 million and (ii) 10 percent of the lesser of (a) the borrowing base and (b) the maximum permitted credit at such time for a period of 6030 consecutive days. ~~The~~

As of October 2, 2021, we had outstanding borrowings of $223.1 million and excess availability of $351.9 million under our Revolving Credit ~~Agreement also requires us to limit~~Facility. As of January 2, 2021, we had outstanding borrowings of $288.2 million and excess availability of $184.3 million under out Revolving Credit Facility. Our average effective interest rate was 2.0 percent and 2.8 percent for the quarters ended October 2, 2021 and January 2, 2021, respectively. For the quarter ended September 26, 2020, our capital expenditures to $30.0 million in the aggregate per fiscal year; provided that any unused portion of such amount up to $15.0 million in any fiscal year may be applied to capital expenditures in the next fiscal year.

~~The Credit Agreement also contains representations and warranties and affirmative and negative covenants customary for financings of this type as well as customary events of default.~~

In connection with the execution and delivery of the Credit Agreement, we also entered into a Limited Guaranty in favor of Wells Fargo (the “Limited Guaranty”), pursuant to which we agreed to guarantee our obligations under the Credit Agreement

for so long as our existing mortgage remained outstanding. We also agreed with Wells Fargo that we would not pledge the equity interests in certain of our subsidiaries that own real property. This guaranty can only be exercised if we breach our negative pledge obligations. The Limited Guaranty will terminate when we repay our existing mortgage loan in full.average effective interest rate was 2.7 percent.

We were in compliance with all covenants under the Revolving Credit ~~Agreement~~Facility as of October 2, 2021.

Term Loan Facility

As of January 2, 2021, we had outstanding borrowings of $43.2 million under our Term Loan Facility. On April 2, 2021, we repaid the remaining outstanding principal balance of the Term Loan Facility and extinguished the debt. As a result, as of October 2, 2021, we had no outstanding borrowings under the Term Loan Facility, which has been extinguished. In connection with our repayment of the outstanding principal balance in full on April 2, 2021, we expensed $5.8 million debt issuance costs during the first quarter of fiscal 2021 that we had been amortizing in connection with our former Term Loan Facility. These costs are included within interest expense, net, on the Condensed Consolidated Statements of Operations and reported separately as an adjustment to net income in our Condensed Consolidated Statements of Cash Flows.

There were no prepayment premiums associated with the repayment of indebtedness for the three month period ended October 2, 2021 and for the three month period ended September ~~30, 2017.~~26, 2020, prepayment premiums were $0.3 million. Prepayment premiums were $0.9 million and $2.6 million for the nine month periods ended October 2, 2021 and September 26, 2020, respectively.

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 have completed in recent years. During fiscal 2017 and 2018, we completed real estate financing transactions on six warehouse facilities; during fiscal 2019, we completed real estate financing transactions on two warehouse facilities; and, during fiscal 2020, we completed real estate financing transactions on fourteen warehouse facilities. We recognized finance lease assets and obligations as a result of each of these transactions. In addition, during the second quarter of fiscal 2021, we recorded finance leases of $0.3 million related to new tractors put into service as part of our mobile fleet. Our total finance lease commitments, including the properties associated with the aforementioned transactions, totaled $276.9 million as of October 2, 2021. Of the $276.9 million of finance lease commitments as of October 2, 2021, $243.2 million related to real estate and $33.7 million related to equipment.

LIBOR Interest Rates

Our Revolving Credit Facility includes available interest rate options based on the London Inter-bank Offered Rate (“LIBOR”). Certain LIBOR rates will be discontinued after 2021, while other rates will be discontinued in 2023. The U.S. and other countries are currently working to replace LIBOR with alternative reference rates. The consequences of these developments with respect to LIBOR cannot be entirely predicted; however, we do not believe that the discontinuation of LIBOR as a reference rate in our loan agreement will have a material adverse effect on our financial position or materially affect our interest expense.

Sources and Uses of Cash

Operating Activities

Net cash ~~used in~~provided by operating activities for the first nine months of fiscal ~~2017~~2021 was ~~$38.3~~$126.9 million, compared to net cash ~~used in~~provided by operating activities of ~~$0.2~~$74.4 million in the first nine months of fiscal ~~2016. Accounts receivable increased~~2020. The increase in cash provided by ~~$47.9 million~~operating activities during the first nine months of fiscal ~~2017,~~2021 was primarily a result of the increase in net income and our accounts payable balance compared to ~~an increase of $24.8 million in the first nine months of~~ the prior ~~fiscal~~ year ~~which increase~~period, partially offset by increases in our accounts receivable and inventory balances compared to the ~~2017 period was largely attributable to timing of sales within the quarter. Inventory increased by $15.5 million in the~~prior year period. The first nine months of fiscal ~~2017,~~2021 also included approximately $82.6 million in cash income tax obligations payments when compared to the prior year period, which ~~reflects the seasonality~~benefited from our remaining federal net operating loss carry-forward of ~~our business, as we are~~$80.6 million which were used in ~~our historical peak selling season.~~fiscal 2020.

Investing Activities

Net cash ~~provided by~~used in investing activities for the first nine months of fiscal ~~2017~~2021 was ~~$27.2~~$2.8 million compared to net cash ~~provided by~~used in investing activities of ~~$18.4~~$8.8 million in the first nine months of fiscal ~~2016. Our~~2020. The decrease in net cash ~~provided~~used by investing activities was primarily due to an increase in proceeds received from the sale of several assets during the second quarter of fiscal 2021, combined with the sale of our non-operating facility in Birmingham, Alabama during the first quarter of fiscal 2021, both of

which were partially offset by $3.5 million increase in investments in property and equipment, specifically investments in both ~~periods primarily was related to the sales of certain distribution facilities, including sale~~our fleet and ~~leaseback transactions.~~

~~In the future, we may perform further sale and lease back transactions of certain of our owned properties.~~facilities.

Financing Activities

Net cash ~~provided by~~used in financing activities ~~of $11.1~~totaled $124.0 million for the first nine months of fiscal ~~2017,~~2021, compared to net cash used in financing activities of $84.7 million for the first nine months of fiscal 2020. The increase in net cash used in financing activities is primarily ~~reflected seasonal net borrowings~~due to an increase of $314.3 million in repayments on our ~~prior revolving credit facility~~Revolving Credit Facility and Term Loan Facility, including the repayment of ~~$41.1 million,~~the remaining outstanding balance on our Term Loan Facility, partially offset by ~~principal payments on~~an increase in borrowings of $358.3 million from our ~~mortgage loan~~Revolving Credit Facility, and $78.3 million in proceeds from real estate financing transactions completed in the first nine months of ~~$29.0 million.~~fiscal 2020, with no such transactions completed in the first nine months of fiscal 2021.

~~We replaced~~Stock Repurchase Program

On August 23, 2021, we announced that our Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $25.0 million of our common stock. Under the stock repurchase program approved by our Board of Directors, we may repurchase our common stock at any time or from time to time, without prior ~~revolving credit facility, including~~notice, subject to prevailing market conditions and other considerations. Our repurchases, if any, may be made through a variety of methods, which may include open market purchases, privately negotiated transactions or pursuant to a trading plan that may be adopted in accordance with the ~~Tranche A Loan, on October 10, 2017. See “Revolving Credit Facility,” above, for additional information regarding~~Securities and Exchange Commission Rule 10b5-1. As of the date of this filing, we have made no repurchases of our ~~new credit facility.~~common stock under this program.

Operating Working Capital

Selected financial information (in thousands)
September 30, 2017 December 31, 2016 October 1, 2016
Current assets:
Cash $ 5,590
$ 5,540
$ 4,704
Receivables, less allowance for doubtful accounts 173,748
125,857
163,388
Inventories, net 206,788
191,287
207,909
Other current assets 21,063
23,126
25,176
Total current assets $ 407,189
$ 345,810
$ 401,177

Current liabilities:

Accounts payable $ 97,606
$ 82,735
$ 93,777
Bank overdrafts 21,641
21,696
15,554
Accrued compensation 8,491
8,349
7,581
Current maturities of long-term debt, net of discount 54,521
29,469
44,909
Other current liabilities 15,081
12,092
12,728
Total current liabilities $ 197,340
$ 154,341
$ 174,549

Operating working capital $ 264,370
$ 220,938
$ 271,537

Operating working capital is an important measurement we use to determine the efficiencies of our operations and our ability to readily convert assets into cash. Operating working capital is defined as ~~current assets~~the sum of cash, receivables, and inventory, less ~~current liabilities plus the current portion of long-term debt.~~accounts payable. Management of ~~operating~~ working capital helps us monitor our progress in meeting our goals to enhance ~~our return on~~ working capital assets.


Selected financial information
	October 2, 2021		January 2, 2021		September 26, 2020
	(In thousands)
Current assets:
Cash	$	186	$	82	$	10,154
Receivables, less allowance for doubtful accounts	344,974		293,643		308,584
Inventories, net	436,438		342,108		306,030
	$	781,598	$	635,833	$	624,768

Current liabilities:
Accounts payable	$	210,386	$	165,163	$	178,948
	$	210,386	$	165,163	$	178,948

Operating working capital	$	571,212	$	470,670	$	445,820

Operating working capital of ~~$264.4 million at September 30, 2017, compared to $220.9~~$571.2 million as of ~~December 31, 2016,~~October 2, 2021, compared to $470.7 million as of January 2, 2021, increased on a net basis ofby approximately ~~$43.4 million as a result of the seasonal nature of our business, which typically peaks~~$100.5 million. The increase in ~~the second and third fiscal quarters. This seasonality resulted in a $47.9 million increase~~operating working capital was primarily driven by increases in accounts receivable and anspecialty products inventory, both of which were higher due to the inflationary environment impacting both our net sales and product costs. Accounts payable, also increased due to the inflation of product costs.

Operating working capital of $571.2 million as of October 2, 2021, compared to $445.8 million as of September 26, 2020, increased by $125.4 million. The increase in operating working capital was primarily driven by increases in accounts receivable and inventory, ~~of $15.5 million,~~ offset by an increase in accounts payable, all largely due to the inflationary environment impacting our net sales and product costs.

Investments in Property and Equipment

Our investments in capital assets consist of ~~$14.9 million.~~

~~Operating working capital decreased from October 1, 2016,~~cash paid for owned assets and the inception of financing lease arrangements for long-lived assets to ~~September 30, 2017, by $7.2 million, primarily driven by increases~~support our distribution infrastructure. The gross value of these assets are included in ~~accounts payable~~“Property and ~~bank overdrafts comprising $9.9~~equipment, at cost” on our condensed consolidated balance sheet. During the third quarter of fiscal 2021, we invested $2.5 million in ~~total. Additionally, other current assets decreased by $4.1~~cash in investments in long-lived assets. For the first nine months of fiscal 2021, we invested $5.4 million ~~primarily reflecting the removal~~in cash and entered into finance leases totaling $10.5 million, for a total investment of ~~the net book value of “held for sale” properties, as most of our properties held for sale were sold during~~$15.9 million. In the fourth quarter ~~of 2016~~2021, we intend to invest up to $10 million in our fleet and first quarter of 2017. The last component of the decrease in operating capital included increases in all categories of current liabilities included in the operating working capital calculation, from October 1, 2016,facilities to ~~September 30, 2017.~~improve operational performance and productivity.

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. There have been no material changes to our critical accounting policies from the information provided in Item 7 of our Annual Report on Form 10-K for the fiscal year ended ~~December 31, 2016.~~January 2, 2021.

Forward-Looking Statements

This report contains forward-looking statements. Forward-looking statements include, without limitation, any statement that predicts, forecasts, indicates or implies future results, performance, liquidity levels or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “plan,” “will be,” “will likely continue,” “will likely result” or words or phrases of similar meaning. 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 the COVID-19 pandemic, its duration and effects, and its potential effects on our business and results of operations; anticipated effects of adopting certain accounting standards; estimated future annual amortization expense; potential changes to estimates made in connection with revenue recognition; the expected outcome of legal proceedings; industry conditions; seasonality; commodity markets; supple constraints and liquidity and capital resources.

Forward-looking statements are based on estimates and assumptions made by our management that, although believed by us to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties that may cause our business, strategy, or actual results to differ materially from the forward-looking statements. These risks and uncertainties include those discussed under the heading “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended January 2, 2021, and those discussed elsewhere in this report (including Item 1A of Part II of this report) and in future reports that we file with the SEC. We operate in a changing environment in which new risks can emerge from time to time. It is not possible for management to predict all of these risks, nor can it assess the extent to which any factor, or a combination of factors, may cause our business, strategy, or actual results to differ materially from those contained in forward-looking statements. Factors that may cause these differences include, among other things:

•the risk that we may experience pricing and product cost variability;

•the fact that our earnings are highly dependent on volumes;

•the fact that our industry is highly fragmented and competitive and, that if we are unable to compete effectively, our net sales and operating results may be reduced;

•the fact that our industry is highly cyclical, and prolonged periods of weak demand or excess supply may reduce our net sales and/or margins, which may cause us to incur losses or reduce out net income;

•the risk that adverse housing market conditions may negatively impact our business, liquidity, and results of operations, and increase the credit risk from our customers;

•the full effect of the COVID-19 pandemic on our business is unknown, and it may adversely affect our business and results from operations;

•our ability to effectively manage our inventory relative to our sales volume or as the prices of the products we distribute fluctuate, which could affect our business, financial condition, and operating results;

•information technology security risks and business interruption risks, which may cause us to incur increasing costs in an effort to minimize and/or respond to those risks;

•the risk of increases in petroleum prices, which could adversely affect our results of operations;

•consolidation among competitors, suppliers, and customers could negatively impact our business;

•the risk of disintermediation;

•the risk of loss of key products or key suppliers and manufacturers could affect our financial health;

•our dependence on international suppliers and manufacturers for certain products exposes us to risks that could affect our financial condition;

•business disruptions;

•the risk of exposure to product liability and other claims and legal proceedings related to our business and the products we distribute, which may exceed the coverage of our insurance;

•the risk that our business operations could suffer significant losses from natural disasters, catastrophes, fire, or other unexpected events;

•that fact that a significant percentage of our employees are unionized, and wage increases or work stoppages by our unionized employees may reduce our results of operations;

•the risk that federal, state, local, and other regulations could impose substantial costs and restrictions on our operations that would reduce our net income;

•the fact that we are subject to federal, state, and local environmental protection laws and may have to incur significant costs to comply with these laws and regulations in the future;

•our level of indebtedness could limit our financial and operating activities and adversely affect our ability to incur additional debt to fund future needs;

•our cash flows and capital resources may be insufficient to make required payments on our indebtedness or future indebtedness;

•the instruments, including the notes, governing our indebtedness contain various covenants limiting the discretion of our management in operating our business, including requiring us to maintain a minimum level of excess liquidity;

•borrowings under our Revolving Credit Facility bear interest at a variable rate, which subjects us to interest rate risk, which could cause our debt service obligations to increase significantly;

•we may still incur more debt, which could increase the risks relating to indebtedness;

•the fact that we have sold and leased back certain of our distribution centers under long-term non-cancelable leases, and may enter into similar transactions in the future;

•the fact that many of our distribution centers are leased, and if we close a leased distribution center, we will still be obligated under the applicable lease;

•changes in our product mix could adversely affect our results of operations;

•the risk of adjustments in the future based on actual development experience because we establish insurance-related deductible/retention reserves based on historical loss development factors;

•our strategy includes pursuing acquisitions, which we may be unsuccessful in making and integrating mergers, acquisitions, and investments, and completing divestitures;

•the risk that the activities of activist stockholders could have a negative impact on our business and results of operations;

•the risk that the value of our deferred tax assets could become impaired, which could materially and adversely affect our operating results;

•the risk that our expected annual effective tax rate could be volatile and materially change as a result of changes in mix of earnings and other factors;

•the risk that changes in actuarial assumptions for our pension plan could impact our financial results, and funding requirements are mandated by the federal government;

•the risk that costs and liabilities related to our participation in multi-employer pension plans could increase;

•the risk that we could be the subject of securities class action litigation due to stock price volatility, which could divert management’s attention and adversely affect our results of operations; and

•the risk that changes in, or interpretation of, accounting principles could result in unfavorable accounting changes.

•the notes will be structurally subordinated to all indebtedness of the issuer’s existing and future subsidiaries that are not and do not become guarantors of the notes;

•subsidiary guarantees of indebtedness under our secured Revolving Credit Facility may be released in a variety of circumstances, which will cause those guarantors to be released from their guarantees of the notes;

•the issuer may not be able to purchase the notes upon a Change of Control Triggering Event;

•investors may not be able to determine when a change of control has occurred following a sale of “substantially all” of our assets;

•there are significant restrictions on your ability to transfer or resell your notes;

•your ability to transfer the notes may be limited by the absence of an active trading market, and an active trading market may not develop for the notes;

•U.S. federal and state laws permit courts to void guarantees under certain circumstances;

•we are not providing all of the information that would be required if this offering were being registered with the SEC;

•redemption may adversely affect your return on the notes;

•the credit ratings assigned to the notes may not reflect all risks of an investment in the notes;

•changes in our credit ratings could adversely affect the market prices or liquidity of the notes; and

•other secured indebtedness, including indebtedness under our Revolving Credit Facility with respect to the Priority RCF Collateral, are senior to the notes to the extent of the value of the collateral securing such indebtedness on a first-priority basis;

•the value of the collateral securing the notes may not be sufficient to satisfy our obligations under the notes;

•sales of assets by the Company and guarantors could reduce the pool of assets that will secure the notes and the guarantees; and

•rights of holders of notes in the collateral may be adversely affected by bankruptcy proceedings.

Given these risks and uncertainties, we caution you not to place undue reliance on forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.

THIRD-PARTY INFORMATION

This report contains references to industry data and information from third parties including U.S. government sources and publicly available market research. While we believe the information is reliable, we have not independently verified it and cannot guarantee its accuracy or completeness.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As stated in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, disclosures for Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” are not required, as we are a Smaller Reporting Company.Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Our management performed an evaluation, as of the end of the period covered by this report on Form 10-Q, under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

~~There were~~

During the period covered by this report, other than described below, there have been no changes in our internal ~~controls~~control over financial reporting ~~during the period covered by this report~~ that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During the third quarter of fiscal ~~2017,~~2021, there were no material changes to our legal proceedings as disclosed in our Annual Report on Form 10-K for the year ended ~~December 31, 2016.~~January 2, 2021. Additionally, we are, and from time to time may be, a party to routine legal proceedings incidental to the operation of our business. The outcome of any pending or threatened proceedings is not expected to have a material adverse effect on our financial condition, operating results, or cash flows, based on our current understanding of the relevant facts. Legal expenses incurred related to these contingencies are generally expensed as incurred.

ITEM 1A. RISK FACTORS

~~Our industry is highly cyclical, and prolonged periods of weak demand or excess supply may reduce our net sales and/or margins, which may cause us~~There have been no material changes to ~~incur losses or reduce our net income~~.

~~The building products distribution industry is subject to cyclical market pressures. Prices of building products are determined by overall supply and demand~~the risk factors disclosed in Part I, "Item 1A.Risk Factors" in the market. Market prices of building products historically have been volatile and cyclical, and we have limited ability to control the timing and amount of pricing changes. Demand for building products is driven mainly by factors outside of our control, such as general economic and political conditions, interest rates, availability of mortgage financing, the construction, repair and remodeling markets, industrial markets, weather, and population growth. The supply of building products fluctuates basedCompany’s Annual Report on available manufacturing capacity, and excess capacity in the industry can result in significant declines in market prices for those products. To the extent that prices and volumes experience a sustained or sharp decline, our net sales and margins likely would decline as well. Because we have substantial fixed costs, a decrease in sales and margin generally may have a significant adverse impact on our financial condition, operating results, and cash flows.

~~Certain of our products are commodities and fluctuations in prices of these commodities could affect our operating results~~.

Many of the building products which we distribute, including OSB, plywood, lumber, and rebar, are commodities that are widely available from other distributors or manufacturers, with prices and volumes determined frequently in an auction market based on participants’ perceptions of short-term supply and demand factors. Prices of commodity products can also change as a result of national and international economic conditions, labor and freight costs, competition, market speculation, government regulation and trade policies, as well as from periodic delays in the delivery of products. Short-term increases in the cost of these materials, some of which are subject to significant fluctuations, are sometimes passed on to our customers, but our pricing quotation periods and pricing pressure from our competitors may limit our ability to pass on such price changes. We may also be limited in our ability to pass on increases in freight costs on our products due to the price of fuel.

At times, the purchase price for any one or more of the products we produce or distribute may fall below our purchase costs, requiring us to incur short-term losses on product sales. Therefore, our profitability with respect to these commodity products depends, in significant part, on managing our cost structure. Commodity product prices could be volatile in response to operating rates and inventory levels in various distribution channels. Commodity price volatility affects our distribution business, with falling price environments generally causing reduced revenues and margins, resulting in substantial declines in profitability and possible net losses.

The wood products industry supply is influenced primarily by price-induced changes in the operating rates of existing facilities, but is also influenced over time by the introduction of new product technologies, capacity additions and closures, restart of idled capacity, and log availability. The balance of wood products supply and demand in the United States is also heavily influenced by imported products.

We have very limited control of the foregoing, and as a result, our profitability and cash flow may fluctuate materially in response to changes in the supply and demand balance for our primary products.

~~Our cash flows and capital resources may be insufficient to make required payments on our substantial indebtedness, future indebtedness, or to maintain our required level of excess liquidity~~.

~~We have a substantial amount of debt which could have important consequences for us. For example, our substantial indebtedness could:~~

~~make it difficult for us to satisfy our debt obligations;~~

~~make us more vulnerable to general adverse economic and industry conditions;~~

~~limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, and other general corporate requirements;~~

~~expose us to interest rate fluctuations because the interest rate on the debt under our new revolving credit facility (the~~

~~“Credit Agreement”) is variable;~~

~~require us to dedicate a substantial portion of our cash flows to payments on our debt, thereby reducing the availability of our cash flows for operations and other purposes;~~

~~limit our flexibility in planning for, or reacting to, changes in our business, and the industry in which we operate; and~~

~~place us at a competitive disadvantage compared to competitors that may have proportionately less debt, and therefore may be in a better position to obtain favorable credit terms.~~

In addition, our ability to make scheduled payments or refinance our obligations depends on our successful financial and operating performance, cash flows, and capital resources, which in turn depend upon prevailing economic conditions and certain financial, business, and other factors, many of which are beyond our control. These factors include, among others:

~~economic and demand factors affecting the building products distribution industry;~~

~~external factors affecting availability of credit;~~

~~pricing pressures;~~

~~increased operating costs;~~

~~competitive conditions; and~~

~~other operating difficulties.~~

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell material assets or operations, obtain additional capital, or restructure our debt. There is no assurance that we could obtain additional capital or refinance our debt on terms acceptable to us, or at all. In the event that we are required to dispose of material assets or operations to meet our debt service and other obligations, the value realized on the disposition of such assets or operations will depend on market conditions and the availability of buyers. Accordingly, any such sale may not, among other things, be for a sufficient dollar amount to repay our indebtedness. We may incur substantial additional indebtedness in the future. Our incurring additional indebtedness would intensify the risks described above.

~~The instruments governing our indebtedness restrict our ability to dispose of assets and the use of proceeds from any such disposition~~.

Our obligations under the Credit Agreement are secured by a first priority security interest in all of our operating subsidiaries’ assets, including inventories, accounts receivable, real property, and proceeds from those items. Furthermore, the equity interest in all of our real estate subsidiaries which hold the real estate secured by our mortgage are subject to first priority interests in favor of our mortgage lenders. In addition, pursuant to a limited guaranty entered into in connection with the Credit Agreement, we agreed that we would not further pledge the equity interests in certain of our real estate subsidiaries for as long as any portion of our existing mortgage loan remains outstanding.

As of September 30, 2017, we had outstanding borrowings of $217.7 million and excess availability of $82.7 million, based on qualifying inventory and accounts receivable, under the terms of our prior revolving credit facility, including the Tranche A loan, which we replaced on October 10, 2017, with the Credit Agreement. In addition, our mortgage loan is secured by the majority of our real property. As amended on March 24, 2016, our mortgage loan requires us to make a $55.0 million principal payment due no later than July 1, 2018, with the remainder of the mortgage due on July 1, 2019. Pursuant to the mortgage loan, and except as expressly permitted thereunder, the net proceeds from any mortgaged properties sold by us must be used to pay down mortgage principal, and these net proceeds will be included in the aforementioned principal payments. We may incur substantial additional indebtedness in the future, and our incurring additional indebtedness would intensify the risks described above.

Accordingly, we may not be able to consummate any disposition of assets or obtain the net proceeds which we could realize from such disposition, and these proceeds may not be adequate to meet the debt service obligations then due. In the event of our breach of our new revolving credit facility or our mortgage loan, we may be required to repay any outstanding amounts earlier than anticipated, and the lenders may foreclose on their security interest in our assets or otherwise exercise their remedies with respect to such interests.

The instruments governing our indebtedness contain various covenants limiting the discretion of our management in operating our business, including requiring us to maintain a minimum level of excess liquidity.

Our new revolving credit facility and mortgage loan contain various restrictive covenants and restrictions, including financial covenants customary for asset-based loans that limit management’s discretion in operating our business. In particular, these instruments limit our ability to, among other things:

~~incur additional debt;~~

~~grant liens on assets;~~

~~make investments;~~

~~sell or acquire assets outside the ordinary course of business;~~

~~engage in transactions with affiliates; and~~

~~make fundamental business changes.~~

The Credit Agreement provides for a senior secured revolving loan and letter of credit facility of up to $335.0 million and an uncommitted accordion feature that permits us to increase the facility by an aggregate additional principal amount of up to $75.0 million, subject to certain conditions, including lender consent. The maturity date of the Credit Agreement is October 10, 2022.

Borrowings under the Credit Agreement will be subject to availability under the Borrowing Base (as defined in the Credit Agreement). We will be required to repay revolving loans thereunder to the extent that such revolving loans exceed the borrowing base then in effect. Furthermore, in the event excess availability falls below the greater of (i) $35.0 million and (ii) 10% of the lesser of (a) the Borrowing Base and (b) the maximum permitted credit at such time, the Credit Agreement requires maintenance of a fixed charge coverage ratio of 1.1 to 1.0 (which, subject to satisfying certain conditions though the first fiscal quarter of 2018, may be reduced to 1.0 to 1.0) until such time as our excess availability has been at least $42.5 million for a period of 60 days.

If we fail to comply with the restrictions in the Credit Agreement, the mortgage loan documents, or any other current or future financing agreements, a default may allow the creditors under the relevant instruments to accelerate the related debts and to exercise their remedies under these agreements, which typically will include the right to declare the principal amount of that debt, together with accrued and unpaid interest, and other related amounts, immediately due and payable, to exercise any remedies the creditors may have to foreclose on assets that are subject to liens securing that debt, and to terminate any commitments they had made to supply further funds.

~~We may not be able to monetize real estate assets if we experience adverse market conditions~~.

We sold substantial amounts of our real estate assets during 2016 and early 2017, and we have designated certain non-operating properties as held for sale, which we currently are actively marketing. In addition, we believe there will be future opportunities to monetize our real estate portfolio’s equity value for debt reduction and investment purposes via sale leaseback and other strategic real estate transactions. However, real estate investments are relatively illiquid. We may not be able to sell the properties we have targeted for disposition or that we may decide to monetize in the future, due to adverse market conditions. This may negatively affect, among other things, our ability to sell properties on favorable terms, execute our strategic initiatives and repay our mortgage loan, which has a $55.0 million principal payment due no later than July 1, 2018, with the remaining balance due no later than July 1, 2019.

~~Instruments governing our indebtedness limit transfers of our common stock~~.

Our new revolving credit facility that we closed and funded on October 10, 2017 (to replace our prior revolving credit facility, including Tranche A Loan) and our mortgage loan contain limitations on transfers of our common stock under various conditions described in the respective instruments. As of September 30, 2017, we had outstanding borrowings of $217.7 million under our new revolving credit facility, and a balance of $97.8 million under our mortgage loan. Sales by Cerberus ABP Investor LLC, an affiliate of Cerberus Capital Management, L.P. (“Cerberus”), outside of the public offering of shares of our common stock that closed on October 23, 2017 could under some circumstances violate transfer restrictions in our mortgage loan that would result in an event of default under such facility. Although Cerberus has indicated that it does not intend to cause transfers of its shares to be effected in a manner that would knowingly violate these restrictions, we may not be able to prevent Cerberus from doing so. In addition, if at any time any person or group of persons acquires 35% or more of our common stock, whether or not inadvertently, then a change of control would be triggered under our revolving credit facility that would result in an event of default under such facility. Our mortgage loan contains restrictions on transfers of our shares to certain transferees, including persons convicted of certain crimes or subject to certain insolvency related proceedings as defined in the mortgage loan, that are applicable under certain circumstances. A violation of any applicable restrictions could result in an event of default under the mortgage. In the event of any breach of our revolving credit facility or mortgage loan as a result of such transfers, we may be required to repay any outstanding amounts under such facilities earlier than anticipated, and the lenders may foreclose on their security interests in our assets or otherwise exercise their remedies with respect to such interests.

~~Adverse housing market conditions may negatively impact our business, liquidity and results of operations, as well as increase the credit risk from our customers~~.

Our business depends to a significant degree on the new residential construction market and, in particular, single family home construction. The homebuilding industry underwent a significant decline from its peak in 2005. Although the homebuilding industry has improved over the last few years, it is still far below its historical averages. According to the U.S. Census Bureau, actual single family housing starts in the United States during 2016 increased 9.4% from 2015 levels, but remain 54.4% below their peak in 2005. The multi-year downturn in the homebuilding industry resulted in a substantial reduction in demandForm 10-K for the products we provide. We cannot predict the duration of the current housing industry market conditions or the timing or strength of any continued recovery of housing activity in our markets. The homebuilding industry also may not recover to historical levels. Continued weakness in the new residential construction market would have a material adverse effect on our business, financial condition and operating results. Factors impacting the level of activity in the residential new construction markets include changes in interest rates, unemployment rates, high foreclosure rates and unsold/foreclosure inventory, availability of financing, labor costs, vacancy rates, local, state and federal government regulation, and shifts in populations away from the markets that we serve. In addition, the mortgage markets periodically experience disruption and reduced availability of mortgages for potential homebuyers due to more restrictive standards to qualify for mortgages, including with respect to new home construction loans. Because of these factors, there may be fluctuations in our operating results, and the results for any historical period may not be indicative of results for any future period.

We also rely on residential repair and remodel activity levels. Historically, residential repair and remodeling activity has decreased in slow economic periods. General economic weakness, elevated unemployment levels, mortgage delinquency and foreclosure rates, limitations in the availability of mortgage and home improvement financing, and lower housing turnover all limit consumers’ spending, particularly on discretionary items, and affect their confidence level leading to reduced spending on home improvement projects. Depressed activity levels in consumer spending for home improvement construction would adversely affect our business, liquidity, results of operations, and financial position. Furthermore, economic weakness causes unanticipated shifts in consumer preferences and purchasing practices and in the business models and strategies of our customers. Such shifts may alter the nature and prices of products demanded by the end consumer, and, in turn, our customers and could adversely affect our operating performance.

In addition, we extend credit to numerous customers who are generally susceptible to the same economic business risks as we are. Unfavorable housing market conditions could result in financial failures of one or more of our significant customers. Furthermore, we may not necessarily be aware of any deterioration in our customers’ financial position. If our larger customers’ financial positions become impaired, our ability to fully collect receivables from such customers could be impaired and negatively affect our operating results, cash flow and liquidity.year ended January 2, 2021.

~~We are exposed to product liability and other claims and legal proceedings related to our business and the products we distribute, which may exceed the coverage of our insurance~~.

The building products industry has been subject to personal injury and property damage claims arising from alleged exposure to raw materials contained in building products as well as claims for incidents of catastrophic loss, such as building fires. As a distributor of building materials, we face an inherent risk of exposure to product liability claims in the event that the use of the products we have distributed in the past or may in the future distribute is alleged to have resulted in economic loss, personal injury or property damage, or violated environmental, health or safety, or other laws. Such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, or a breach of warranties. We are also from time to time subject to casualty, contract, tort, and other claims relating to our business, the products we have distributed in the past or may in the future distribute and the services we have provided in the past or may in the future provide, either directly or through third parties. We rely on manufacturers and other suppliers to provide us with the products we sell or distribute. Since we do not have direct control over the quality of products that are manufactured or supplied to us by third parties, we are particularly vulnerable to risks relating to the quality of such products.

We cannot predict or, in some cases, control the costs to defend or resolve such claims. We cannot assure you that we will be able to maintain suitable and adequate insurance on acceptable terms or that such insurance will provide adequate protection against potential liabilities, and the cost of any product liability or other proceeding, even if resolved in our favor, could be substantial. Additionally, we do not carry insurance for all categories of risk that our business may encounter. Any significant uninsured liability may require us to pay substantial amounts. There can be no assurance that any current or future claims will not adversely affect our financial position, cash flows, or results of operations.

~~Product shortages, loss of key suppliers, our dependence on third-party suppliers and manufacturers and new tariffs could affect our financial health~~.

~~Our ability to offer a wide variety of products to our customers is dependent upon our ability to obtain adequate product supply~~

from domestic and international manufacturers and other suppliers. Generally, our products are obtainable from various sources and in sufficient quantities. However, the loss of, or a substantial decrease in the availability of, products from our suppliers or the loss of key supplier arrangements could adversely impact our financial condition, operating results, and cash flows. In addition, many of our suppliers are located outside of the United States. Thus, trade restrictions, including new or increased tariffs, quotas, embargoes, sanctions, safeguards and customs restrictions, as well as foreign labor strikes, work stoppages or boycotts, could increase the cost or reduce the supply of the products available to us.

Although in many instances we have agreements with our suppliers, these agreements are generally terminable by either party on limited notice. Failure by our suppliers to continue to supply us with products on commercially reasonable terms, or at all, could have a material adverse effect on our financial condition, operating results, and cash flows.

~~A change in our product mix could adversely affect our results of operations~~.

Our results may be affected by a change in our product mix. Our outlook, budgeting, and strategic planning assume a certain product mix of sales. If actual results vary from this projected product mix of sales, our financial results could be negatively impacted. Additionally, gross margins vary across our product lines. If the mix of products shifts from higher margin product categories to lower margin product categories, our overall gross margins and profitability may be adversely affected. Consequently, changes in our product mix could have a material adverse impact on our financial condition and operating results.

Relatedly, our product sales to a customer may be dependent on the supplier and the brands we distribute. If we are unable to supply certain brands to our customers, then our ability to sell existing customers and acquire new customers will be difficult to accomplish. As a result, our revenue, operating performance, cash flows, and net income may be adversely affected.

We may be unable to effectively manage our inventory as our sales volume increases or the prices of the products we distribute fluctuate, which could affect our business, financial condition, and operating results.

We purchase many of our products directly from manufacturers, which are then sold and distributed to customers. We must maintain, and have adequate working capital to purchase, sufficient inventory to meet customer demand. Due to the lead times required by our suppliers, we order products in advance of expected sales. As a result, we are required to forecast our sales and purchase accordingly. In periods characterized by significant changes in economic growth and activity in the residential and commercial building and home repair and remodel industries, it can be especially difficult to forecast our sales accurately. We must also manage our working capital to fund our inventory purchases. Such issues and risks can be magnified by the diversity of product mix our business units carry, with over 10,000 SKUs across multiple major product categories. Excessive increases in the market prices of certain building products can put negative pressure on our operating cash flows by requiring us to invest more in inventory. In the future, if we are unable to effectively manage our inventory as we attempt to expand our business, our cash flows may be negatively affected, which could have a material adverse effect on our business, financial condition, and operating results.

~~If petroleum prices increase, our results of operations could be adversely affected~~.

Petroleum prices have fluctuated significantly in recent years, including recent periods of historically low prices. Prices and availability of petroleum products are subject to political, economic, and market factors that are outside our control. Political events in petroleum-producing regions as well as hurricanes and other weather-related events may cause the price of fuel to increase. Within our business units, we deliver products to our customers primarily via our fleet of trucks. Our operating profit may be adversely affected if we are unable to obtain the fuel we require or to fully offset the anticipated impact of higher fuel prices through increased prices or fuel surcharges to our customers. Besides passing fuel costs on to customers, we have entered into forward purchase contracts that protect against fuel price increases. However, if fuel prices decrease, then such hedging arrangements would result in us spending more money on fuel. If shortages occur in the supply of necessary petroleum products and we are not able to pass along the full impact of increased petroleum prices to our customers or otherwise protect ourselves by entering into hedging arrangements, then our results of operations would be adversely affected.

~~We establish insurance-related deductible/retention reserves based on historical loss development factors, which could lead to adjustments in the future based on actual development experience.~~

We retain a significant portion of the accident risk under vehicle liability and workers’ compensation insurance programs. Our self-insurance accruals are based on actuarially estimated, undiscounted cost of claims, which includes claims incurred but not reported. While we believe that our estimation processes are well designed, every estimation process is inherently subject to limitations. Fluctuations in the frequency or severity of accidents make it difficult to precisely predict the ultimate cost of claims. The actual cost of claims can be different than the historical selected loss development factors because of safety performance, payment patterns, and settlement patterns.

~~Our business operations could suffer significant losses from natural disasters, catastrophes, fire, or other unexpected events~~.

While we operate our business out of 39 warehouse facilities and maintain insurance covering our facilities, including business interruption insurance, our warehouse facilities could be materially damaged by natural disasters, such as floods, tornadoes, hurricanes, and earthquakes, or by fire, adverse weather conditions, civil unrest, condemnation, or other unexpected events or disruptions to our facilities. We could incur uninsured losses and liabilities arising from such events, including damage to our reputation, and/or suffer material losses in operational capacity, which could have a material adverse impact on our business, financial condition, and results of operations.

~~We are subject to disintermediation risk.~~

As customers continue to consolidate or otherwise increase their purchasing power, they are better able to purchase products directly from the same suppliers that use us for distribution. In addition to the threat of losing business from a customer, disintermediation puts us at risk of losing entire product lines or categories from suppliers. It also adversely impacts our ability to obtain favorable pricing from suppliers and optimize margins and revenue with respect to our customers. As a result, continued disintermediation could have a negative impact on our financial condition and operating results.

~~We are subject to pricing pressures~~.

Large customers have historically been able to exert pressure on their outside suppliers and distributors to keep prices low in the highly fragmented building materials distribution industry. In addition, continued consolidation among our customers and their customers (i.e., homebuilders), and changes in their respective purchasing policies and payment practices could result in even further pricing pressure. A decline in the prices of the products we distribute could adversely impact our operating results. When the prices of the products we distribute decline, customer demand for lower prices could result in lower sales prices and, to the extent that our inventory at the time was purchased at higher costs, lower margins. Alternatively, in a rising price environment, our suppliers may increase prices or reduce discounts on the products we distribute and we may be unable to pass on any cost increase to our customers, thereby resulting in reduced margins and profits. Furthermore, continued consolidation among our suppliers makes it more difficult for us to negotiate favorable pricing, consignment arrangements, and discount programs with our suppliers, thereby resulting in reduced margins and profits. Overall, these pricing pressures may adversely affect our operating results and cash flows.

Customer consolidation could result in the loss of existing customers to our competitors. We typically do not enter into minimum purchase contracts with our customers. The loss of one or more of our significant customers, or their decision to purchase our products in significantly lower quantities than they have in the past could significantly affect our financial condition, operating results and cash flows.

~~Our industry is highly fragmented and competitive. If we are unable to compete effectively, our net sales and operating results may be reduced~~.

The building and industrial products distribution industry is highly fragmented and competitive, and the barriers to entry for local competitors are relatively low. Competitive factors in our industry include pricing, availability of product, service, delivery capabilities, customer relationships, geographic coverage, and breadth of product offerings. Also, financial stability is important to suppliers and customers in choosing distributors for their products, and affects the favorability of the terms on which we are able to obtain our products from our suppliers and sell our products to our customers.

Some of our competitors have less financial leverage or are part of larger companies, and therefore may have access to greater financial and other resources than those to which we have access. Finally, we may not be able to maintain our costs at a level sufficiently low for us to compete effectively. If we are unable to compete effectively, our net sales and net income may be reduced.

~~Our competitors continue to consolidate, which could cause markets to become more competitive and could negatively impact our business~~.

Our competitors continue to consolidate. This consolidation is being driven by customer needs and supplier capabilities, which could cause markets to become more competitive as greater economies of scale are achieved by distributors. Customers are increasingly aware of the total costs of fulfillment and of the need to have consistent sources of supply at multiple locations. We believe these customer needs could result in fewer distributors as the remaining distributors become larger and capable of being consistent sources of supply. There can be no assurance that we will be able to take advantage effectively of this trend toward consolidation. The trend in our industry toward consolidation could make it more difficult for us to maintain operating margins.

Our future operating results may fluctuate significantly and our current operating results may not be a good indication of our future performance. Fluctuations in our quarterly financial results could affect our stock price in the future.

Our revenues and operating results have historically varied from period-to-period and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control. If our quarterly financial results or our predictions of future financial results fail to meet the expectations of securities analysts and investors, our stock price could be negatively affected. Any volatility in our quarterly financial results may make it more difficult for us to raise capital in the future or pursue acquisitions that involve issuances of our stock. Our operating results for prior periods may not be effective predictors of future performance.

~~Factors associated with our industry, the operation of our business and the markets for our products may cause our quarterly financial results to fluctuate, including:~~

~~the commodity nature of our products and their price movements, which are driven largely by capacity utilization rates and industry cycles that affect supply and demand;~~

general economic conditions, including but not limited to housing starts, construction labor shortages, repair and remodel activity and commercial construction, inventory levels of new and existing homes for sale, foreclosure rates, interest rates, unemployment rates, and mortgage availability and pricing, as well as other consumer financing mechanisms, that ultimately affect demand for our products;

~~supply chain disruptions;~~

~~the highly competitive nature of our industry;~~

~~disintermediation;~~

~~the impact of actuarial assumptions and regulatory activity on pension costs and pension funding requirements;~~

~~the financial condition and creditworthiness of our customers;~~

our substantial indebtedness, including the possibility that we may not generate sufficient cash flows from operations or that future borrowings may not be available in amounts sufficient to fulfill our debt obligations and fund other liquidity needs;

~~cost of compliance with government regulations;~~

~~adverse customs and tariff rulings;~~

~~labor disruptions, shortages of skilled and technical labor, or increased labor costs;~~

~~increased healthcare costs;~~

~~the need to successfully implement succession plans for our senior managers;~~

~~our ability to successfully complete potential acquisitions or integrate efficiently acquired operations;~~

~~disruption in our information technology systems;~~

~~significant maintenance issues or failures with respect to our tractors, trailers, forklifts, and other major equipment;~~

~~severe weather phenomena such as drought, hurricanes, tornadoes, and fire;~~

~~condemnations of all or part of our real property; and~~

~~fluctuations in the market for our equity.~~

Any one of the factors above or the cumulative effect of some of the factors referred to above may result in significant fluctuations in our quarterly financial and other operating results, including fluctuations in our key metrics. The variability and unpredictability could result in our failing to meet our internal operating plan or the expectations of securities analysts or investors for any period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our shares could fall substantially and we could face costly lawsuits, including securities class action suits.

~~A significant percentage of our employees are unionized. Wage increases or work stoppages by our unionized employees may reduce our results of operations~~.

As of September 30, 2017, we employed approximately 1,500 persons. Approximately 35% of our employees were represented by various local labor union collective bargaining agreements (“CBAs”), with one CBA up for renewal before the end of fiscal 2017.

Although we have generally had good relations with our unionized employees, and expect to renew collective bargaining agreements as they expire, no assurances can be provided that we will be able to reach a timely agreement as to the renewal of the agreements, and their expiration or continued work under an expired agreement, as applicable, could result in a work stoppage. In addition, we may become subject to material cost increases, or additional work rules imposed by agreements with labor unions. The foregoing could increase our selling, general, and administrative expenses in absolute terms and/or as a percentage of net sales. In addition, work stoppages or other labor disturbances may occur in the future, which could adversely impact our net sales and/or selling, general, and administrative expenses. All of these factors could negatively impact our operating results and cash flows.

~~Our ability to utilize our net operating loss carryovers may be limited~~.

At September 30, 2017, we had net operating loss (“NOL”) carryforwards of approximately $163.7 million. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by “5-percent stockholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws.

Sales in the underwritten public offering of 4,443,428 shares of our common stock by Cerberus that closed on October 23, 2017 (the “Resale Offering”) caused an ownership change limitation to be triggered. That limitation could restrict our ability to use our NOL carryforwards if our anticipated real estate sales over the next five years are not realized for any reason. Limitations on our ability to use NOL carryforwards to offset future taxable income, including gains on sales of real estate, could require us to pay U.S. federal income taxes earlier than would be required if such limitations were not in effect. Similar rules and limitations may apply for state income tax purposes.

~~Changes in actuarial assumptions for our pension plan could impact our financial results, and funding requirements are mandated by the Federal government~~.

We sponsor a defined benefit pension plan. Most of the participants in our pension plan are inactive, with the majority of the remaining active participants no longer accruing benefits; and the pension plan is closed to new entrants. However, unfavorable changes in various assumptions underlying the pension benefit obligation could adversely impact our financial results. Significant assumptions include, but are not limited to, the discount rate, projected return on plan assets, and mortality rates. In addition, the amount and timing of our pension funding obligations are influenced by funding requirements that are established by the Employee Retirement Income and Security Act of 1974 (“ERISA”), the Pension Protection Act, Congressional Acts, or other governing bodies.

~~Costs and liabilities related to our participation in multi-employer pension plans could increase~~.

We participate in various multi-employer pension plans in the U.S. based on obligations arising under collective bargaining agreements. Some of these plans are significantly underfunded and may require increased contributions in the future. The amount of any increase or decrease in our required contributions to these multi-employer pension plans will depend upon the outcome of collective bargaining, actions taken by trustees who manage the plan, governmental regulations, the actual return on assets held in the plan, the continued viability and contributions of other employers which contribute to the plan, and the potential payment of a withdrawal liability, among other factors.

Under current law, an employer that withdraws or partially withdraws from a multi-employer pension plan may incur a withdrawal liability to the plan, which represents the portion of the plan’s underfunding that is allocable to the withdrawing employer under very complex actuarial and allocation rules. We have withdrawn from certain multi-employer plans in the past, including, most recently, in connection with a new collective bargaining agreement that we entered into with the Lumber Employees Local 786 union at our Chicago facility in the first quarter of 2017 (in which case we recorded a total estimated withdrawal liability of $4.5 million in the first quarter of 2017, and increased the estimated liability by $1.0 million in the second quarter of 2017). We may withdraw from other multi-employer plans in the future. If, in the future, we do choose to withdraw from any additional multi-employer plans or trigger a partial withdrawal, we likely would need to record a withdrawal liability, which may be material to our financial results. Additionally, a mass withdrawal would require us to record

~~a withdrawal liability, which may be material to our financial results, and would generally obligate us to make payments in perpetuity to the particular plan.~~

One of the plans to which we are obligated to contribute is the Central States, Southeast and Southwest Areas Pension Fund. As of March 30, 2016, the plan’s actuary certified that the plan was in critical and declining status, which, among other things, means the funded percentage of the plan was less than 65% and the plan is projected to become insolvent in 2025. It is unclear what will happen to this plan in the future. At a minimum, we expect that our required contributions to the plan may increase. In addition, if we experience a withdrawal from this plan, we may need to record a significant withdrawal liability. Our estimated withdrawal liability is $33.9 million if we experience a complete withdrawal from the plan during 2017. This number will likely increase if a withdrawal occurs in 2018 or later, and could be significantly higher if a mass withdrawal were to occur in the future.

~~We are subject to information technology security risks and business interruption risks, and may incur increasing costs in an effort to minimize those risks~~.

Our business employs information technology systems to secure confidential information, such as employee data. Security breaches could expose us to a risk of loss or misuse of this information, litigation, and potential liability. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber attacks. Any compromise of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of confidence in our security measures, which could harm our business. As cyber attacks become more sophisticated generally, we may be required to incur significant costs to strengthen our systems from outside intrusions, and/or obtain insurance coverage related to the threat of such attacks.

Additionally, our business is reliant upon information technology systems to, among other things, manage inventories and accounts receivable, make purchasing decisions, monitor our results of operations, and place orders with our vendors and process orders from our customers. Disruption in these systems could materially impact our ability to buy and sell our products.

~~Our success depends on our ability to attract, train, and retain highly qualified associates and other key personnel while controlling related labor costs~~.

To be successful, we must attract, train, and retain a large number of highly qualified associates while controlling related labor costs. In many of our markets, highly qualified associates are in high demand and we compete with other businesses for these associates and invest significant resources in training and incentivizing them. There can be no assurance that we will be able to attract or retain highly qualified associates in the future, including, in particular, those employed by companies we may acquire. Our ability to control labor costs is subject to numerous external factors, including prevailing wage rates and health and other insurance costs.

In addition, there is significant competition for qualified drivers in the transportation industry. Additionally, interventions and enforcement under the Federal Motor Carrier Safety Administration (“FMCSA”) Compliance, Safety, and Accountability program may shrink the industry’s pool of drivers as those drivers with unfavorable scores may no longer be eligible to drive for us. As a result of driver shortages, we could be required to increase driver compensation, let trucks sit idle, utilize lower quality drivers, or face difficulty meeting customer demands, all of which could adversely affect our growth and profitability.

Furthermore, our success is highly dependent on the continued services of our management team. The loss of services of one or more key members of our senior management team could have a material adverse effect on us.

~~Federal, state, local, and other regulations could impose substantial costs and restrictions on our operations that would reduce our net income~~.

We are subject to various federal, state, local, and other laws and regulations, including, among other things, transportation regulations promulgated by the U.S. Department of Transportation (the “DOT”), work safety regulations promulgated by the Occupational Safety and Health Administration, employment regulations promulgated by the U.S. Equal Employment Opportunity Commission, regulations of the U.S. Department of Labor, accounting standards issued by the Financial Accounting Standards Board (the “FASB”) or similar entities, and state and local zoning restrictions, building codes and contractors’ licensing regulations. More burdensome regulatory requirements in these or other areas may increase our general and administrative costs and adversely affect our financial condition, operating results and cash flows. Moreover, failure to comply with the regulatory requirements applicable to our business could expose us to litigation and substantial fines and penalties that could adversely affect our financial condition, operating results, and cash flows.

Our transportation operations, upon which we depend to distribute products from our distribution centers, are subject to the regulatory jurisdiction of the DOT and the FMCA, which have broad administrative powers with respect to our transportation

operations. Vehicle dimensions and driver hours of service also are subject to both federal and state regulation. More restrictive limitations on vehicle weight and size, trailer length and configuration, or driver hours of service would increase our costs, which, if we are unable to pass these cost increases on to our customers, may increase our selling, general and administrative expenses and adversely affect our financial condition, operating results and cash flows. If we fail to comply adequately with the DOT and FMCSA regulations or such regulations become more stringent, we could experience increased inspections, regulatory authorities could take remedial action, including imposing fines or shutting down our operations, or we could be subject to increased audit and compliance costs. If any of these events were to occur, our financial condition, operating results, and cash flows could be adversely affected.

In addition, the residential and commercial construction industries are subject to various local, state and federal statutes, ordinances, codes, rules and regulations concerning zoning, building design and safety, construction, contractor licensing, energy conservation and similar matters, including regulations that impose restrictive zoning and density requirements on the residential new construction industry or that limit the number of homes or other buildings that can be built within the boundaries of a particular area. Regulatory restrictions may increase our operating expenses and limit the availability of suitable building lots for our customers, any of which could negatively affect our business, financial condition and results of operations.

~~We are subject to continuing compliance monitoring by the New York Stock Exchange (the “NYSE”). If we do not continue to meet the NYSE continued listing standards, our common stock may be delisted~~.

Our common stock is currently listed for trading on the NYSE, and the continued listing of our common stock on the NYSE is subject to our compliance with the listing standards. We are currently in compliance with the continued listing standards of the NYSE; however, in 2015 and 2016 we were notified by the NYSE that we had failed to meet the NYSE’s minimum average share price requirement and the NYSE’s minimum average global market capitalization and stockholders’ equity requirement. We have since regained compliance with each of those requirements. If we are unable to maintain compliance with the NYSE criteria for continued listing, our common stock may be subject to delisting. Delisting may have an adverse effect on the liquidity of our common stock and, as a result, the market price for our common stock might decline.

~~We could be the subject of securities class action litigation due to future stock price volatility, which could divert management’s attention and adversely affect our results of operations~~.

The stock market in general, and market prices for the securities of companies like ours in particular, have from time to time experienced volatility that often has been unrelated to the operating performance of the underlying companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our operating performance. In certain situations in which the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a similar lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and attention of our management and harm our operating results.

~~Our operating results depend on the successful implementation of our strategy. We may not be able to implement our strategic initiatives successfully, on a timely basis, or at all~~.

We regularly evaluate the performance of our business and, as a result of such evaluations, we have in the past undertaken and may in the future undertake strategic initiatives within our businesses. Strategic initiatives that we may implement now or in the future may not result in improvements in future financial performance and could result in additional unanticipated costs. If we are unable to realize the benefits of our strategic initiatives, our business, financial condition, cash flows, or results of operations could be adversely affected.

~~We are subject to federal, state, and local environmental protection laws and may have to incur significant costs to comply with these laws and regulations in the future~~.

Environmental liabilities could arise on the land that we have owned, own or lease and have a material adverse effect on our financial condition and performance. Federal, state, and local laws and regulations relating to the protection of the environment may require a current or previous owner or operator of real estate to investigate and remediate hazardous materials, substances and waste releases at or from the property. They may also impose liability for property damage and personal injury stemming from the presence of, or exposure to, hazardous substances. In addition, we could incur costs to comply with such environmental laws and regulations, the violation of which could lead to substantial fines and penalties.

~~We do not expect to pay dividends on our common stock so any returns to stockholders will be limited to the value of their stock~~.

We have not declared or paid any cash dividends on our common stock since 2007, and we are restricted from doing so under the terms of our Credit Agreement. Regardless of the restrictions in our Credit Agreement or the terms of any potential future indebtedness, for the foreseeable future we anticipate that we will retain all available funds and earnings to support our operations and finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future, so any return to stockholders will be limited to the appreciation of their stock.

Although we no longer qualify as a “controlled company” within the meaning of the NYSE, we may continue to rely on exemptions from certain corporate governance requirements during a one-year transition period.

As a result of the Resale Offering, we are no longer a “controlled company” within the meaning of the NYSE rules. Prior to the Resale Offering, more than 50% of the voting power for the election of our directors was held by Cerberus, which allowed us to rely on exemptions from certain corporate governance requirements that would otherwise provide protection to stockholders of other companies. However, as a result of the Resale Offering, Cerberus no longer holds a majority of our common stock. Thus, we no longer qualify as a controlled company and have to comply with such NYSE requirements within certain transition periods. Prior to the Resale Offering, we relied on our status as a controlled company for exemptions from (i) the requirement that our board consist of a majority of independent directors and (ii) the requirement that our nominating and corporate governance committee consist entirely of independent directors. Although we have ceased to be a controlled company, we may continue to rely on these exemptions for a one-year transition period from the closing date of the Resale Offering, after which we will be required to have a board consisting of a majority of independent directors and a nominating and corporate governance committee consisting entirely of independent directors.

~~Changes in, or interpretation of, accounting principles could result in unfavorable accounting changes~~.

Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles and accompanying accounting pronouncements, implementation guidelines, and interpretations. These rules are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles. Changes in these rules or their interpretation could significantly change our reported results and may even retroactively affect previously reported transactions. Changes resulting from the adoption of new or revised accounting principles may result in materially different financial results and may require that we make changes to our systems, processes, and controls.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Our second amended and restated certificate of incorporation, as amended, provides that the Court of Chancery of the State of Delaware is the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our second amended and restated certificate of incorporation or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees. If a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business and financial condition.

Any issuance of preferred stock could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could adversely affect the price of our common stock.

Our board of directors has the authority to issue preferred stock and to determine the preferences, limitations, and relative rights of shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock could be issued with voting, liquidation, dividend, and other rights superior to the rights of our common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our common stock at a premium over the market price, and adversely affect the market price and the voting and other rights of the holders of our common stock.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~None.~~The following table summarizes the Company’s common stock repurchase activity for each month of the quarter ended October 2, 2021:


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share
July 4 - August 7, 2021	—	$	—
August 8 - September 4, 2021	59	$	58.27
September 5 - October 2, 2021	—	$	—
Total	59

(1) The Company did not repurchase any of its equity securities during the period covered by this report pursuant to any publicly announced plan or program. All purchases reflected in the table above pertain to purchases of common stock by the Company in connection with tax withholding obligations of the Company’s employees upon the vesting of such employees’ restricted stock unit awards.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS



Exhibit Number				Description
~~Exhibit~~ ~~Number~~ 10.1				~~Description~~

~~10.1~~		~~Fourteenth~~Second Amendment to ~~the~~ Amended and Restated ~~Loan and Security~~Credit Agreement ~~dated August 24, 2017, by and between the Company,~~among BlueLinx Holdings Inc., certain subsidiaries of ~~the Company’s subsidiaries,~~BlueLinx Holdings Inc. as borrowers or guarantors thereunder, Wells Fargo Bank, National Association, as administrative agent, and ~~the other lenders signatory thereto (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on August 28, 2017).~~

~~10.2~~		~~Credit Agreement, dated as of October 10, 2017, by and among the Company,~~ certain ~~of the Company’s subsidiaries, Wells Fargo Bank, National Association, and the~~ other financial institutions party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on ~~October 10, 2017)~~August 3, 2021). ±
31.1
~~10.3~~	*	Guaranty and Security Agreement, dated as of October 10, 2017, by and among BlueLinx Corporation, BlueLinx Florida LP, BlueLinx Florida Holding No. 1 Inc., BlueLinx Florida Holding No. 2 Inc., and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 10, 2017).

~~10.4~~		Limited Guaranty, dated as of October 10, 2017, by the Company in favor of Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 10, 2017).

~~31.1~~		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
~~31.2~~	*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
32.1*	**	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
32.2*	**	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.Def				Definition Linkbase Document.
~~101.Def~~101.Pre				~~Definition~~Presentation Linkbase ~~Document~~Document.
~~101.Pre~~101.Lab				~~Presentation~~Labels Linkbase ~~Document~~Document.
~~101.Lab~~101.Cal				~~Labels~~Calculation Linkbase ~~Document~~Document.
~~101.Cal~~101.Sch				~~Calculation Linkbase Document~~Schema Document.
~~101.Sch~~101.Ins				~~Schema Document~~
~~101.Ins~~		Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
104				The cover page from this Quarterly Report on Form 10-Q for the quarter ended October 2, 2021, formatted in Inline XBRL.
			*
			*	Filed herewith.
			**	Exhibit is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended.
			±	Management contract or compensatory plan or arrangement

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.




		BlueLinx Holdings Inc.
		(Registrant)

Date: November 2, ~~2017~~2021	By:	/s/ ~~Susan~~Kelly C. ~~O’Farrell~~Janzen
		~~Susan~~Kelly C. ~~O’Farrell~~Janzen
		Senior Vice President and Chief Financial Officer ~~Treasurer, and Principal Accounting Officer~~



	September 30, 2017			December 31, 2016
Assets:
Current assets:
Cash	$	5,590		$	5,540
Receivables, less allowances of $2,738 and $2,733, respectively	173,748			125,857
Inventories, net	206,788			191,287
Other current assets	21,063			23,126
Total current assets	407,189			345,810
Property and equipment:
Land and land improvements	30,715			34,609
Buildings	84,772			80,131
Machinery and equipment	75,133			72,122
Construction in progress	428			3,104
Property and equipment, at cost	191,048			189,966
Accumulated depreciation	(105,846		)	(101,644		)
Property and equipment, net	85,202			88,322
Other non-current assets	13,969			10,005
Total assets	$	506,360		$	444,137
Liabilities:
Current liabilities:
Accounts payable	$	97,606		$	82,735
Bank overdrafts	21,641			21,696
Accrued compensation	8,491			8,349
Current maturities of long-term debt, net of discount of $480 and $201, respectively	54,521			29,469
Other current liabilities	15,081			12,092
Total current liabilities	197,340			154,341
Non-current liabilities:
Long-term debt, net of discount of $1,766 and $2,544, respectively	258,789			270,792
Pension benefit obligation	31,452			34,349
Other non-current liabilities	37,922			14,496
Total liabilities	525,503			473,978
Stockholders’ deficit:
Common Stock, $0.01 par value, Authorized - 20,000,000 shares, Issued and Outstanding - 9,098,221 and 9,031,263, respectively	91			90
Additional paid-in capital	258,854			257,972
Accumulated other comprehensive loss	(36,433		)	(36,651		)
Accumulated stockholders’ deficit	(241,655		)	(251,252		)
Total stockholders’ deficit	(19,143		)	(29,841		)
Total liabilities and stockholders’ deficit	$	506,360		$	444,137



	September 30, 2017		December 31, 2016
Capital leases - real estate	$	7,940	$	—
Deferred gain on sale-leaseback transactions	10,945		—
Capital leases - logistics equipment	6,930		8,559
Other	12,107		5,937
Total	$	37,922	$	14,496



	Third Quarter of Fiscal 2017		% of Net Sales	Third Quarter of Fiscal 2016			% of Net Sales
	(Dollars in thousands)
Net sales	$	479,318	100.0%	$	476,049		100.0%
Gross profit	60,545		12.6%	60,050			12.6%
Selling, general, and administrative	46,817		9.8%	49,152			10.3%
Gains from sales of property	—		—%	(13,940		)	(2.9)%
Depreciation and amortization	2,249		0.5%	2,220			0.5%
Operating income	11,479		2.4%	22,618			4.8%
Interest expense	5,670		1.2%	6,105			1.3%
Other income, net	—		—%	(17		)	—%
Income before provision for income taxes	5,809		1.2%	16,530			3.5%
Provision for income taxes	123		—%	1,522			0.3%
Net income	$	5,686	1.2%	$	15,008		3.2%



	First Nine Months of Fiscal 2017			% of Net Sales	First Nine Months of Fiscal 2016			% of Net Sales
	(Dollars in thousands)
Net sales	$	1,381,927		100.0%	$	1,459,386		100.0%
Gross profit	175,525			12.7%	175,032			12.0%
Selling, general, and administrative	148,742			10.8%	157,006			10.8%
Gains from sales of property	(6,700		)	(0.5)%	(14,701		)	(1.0)%
Depreciation and amortization	6,865			0.5%	7,091			0.5%
Operating income	26,618			1.9%	25,636			1.8%
Interest expense	16,280			1.2%	19,562			1.3%
Other income, net	(2		)	—%	(255		)	—%
Income before provision for income taxes	10,340			0.7%	6,329			0.4%
Provision for income taxes	832			0.1%	609			—%
Net income	$	9,508		0.7%	$	5,720		0.4%



	Quarter Ended					Nine Months Ended
	September 30, 2017			October 1, 2016		September 30, 2017			October 1, 2016
Sales by category	(In millions)
Structural products	$	228		$	204	$	633		$	594
Specialty products	254			272		757			878
Other ⁽¹⁾	(3		)	—		(8		)	(13		)
Total net sales	$	479		$	476	$	1,382		$	1,459