UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~October~~July 2, ~~2021~~2022


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

Commission file number: 001-32383


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


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


1950 Spectrum Circle, Suite 300
Marietta	GA	30067
(Address of principal executive ~~offices, including zip code)~~offices)		(Zip Code)

(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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically (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 ☑ No ☐

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 Filer

☑

Non-accelerated Filer

☐

Smaller Reporting Company

☑☐

Emerging Growth Company

☐

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 ☐ No ☑

As of ~~October~~July 29, ~~2021,~~2022, there were ~~9,706,685~~9,282,200 shares of BlueLinx Holdings Inc. common stock, par value $0.01, outstanding.

BLUELINX HOLDINGS INC.

Form 10-Q

For the Quarterly Period Ended ~~October~~July 2, ~~2021~~2022

INDEX


			PAGE
PART 1.I. FINANCIAL INFORMATION
Item 1. Financial Statements — BlueLinx Holdings Inc. (Unaudited)			1
Condensed Consolidated Statements of Operations and Comprehensive Income			1
Condensed Consolidated Balance Sheets			2
Condensed Consolidated Statements of Stockholders' Equity ~~(Deficit)~~			3
Condensed Consolidated Statements of Cash Flows			54
Notes to Condensed Consolidated Financial Statements			65
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			1716
Item 3. Quantitative and Qualitative Disclosures About Market Risk			3230
Item 4. Controls and Procedures			32
~~Forward-Looking Statements~~			2930

PART II. OTHER INFORMATION
Item 1. Legal Proceedings			3331
Item 1A. Risk Factors			3331
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3432
Item 3. Defaults Upon Senior Securities			3432
Item 4. Mine Safety Disclosures			3432
Item 5. Other Information			3432
Item 6. Exhibits			3533

Signature			3634

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

(In thousands, except per share data)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020			July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Net sales	Net sales	$	970,842	$	871,063	$	3,304,224	$	2,231,909	Net sales	$	1,239,379	$	1,307,913	$	2,541,684	$	2,333,382
Cost of sales	Cost of sales	817,515		711,603		2,719,333		1,878,420		Cost of sales	1,037,971		1,056,741		2,049,225		1,901,818
Gross profit	Gross profit	153,327		159,460		584,891		353,489		Gross profit	201,408		251,172		492,459		431,564
Operating expenses (income):	Operating expenses (income):									Operating expenses (income):
Selling, general, and administrative	Selling, general, and administrative	76,176		79,976		238,746		225,258		Selling, general, and administrative	91,338		87,010		182,627		162,569
Depreciation and amortization	Depreciation and amortization	6,884		7,087		21,429		21,785		Depreciation and amortization	6,518		7,080		13,264		14,545
Amortization of deferred gains on real estate	Amortization of deferred gains on real estate	(984)		(984)		(2,951)		(2,952)		Amortization of deferred gains on real estate	(984)		(984)		(1,968)		(1,967)
Gains from sales of property	Gains from sales of property	—		(8,684)		(1,287)		(9,209)		Gains from sales of property	(144)		—		(144)		(1,287)
Other operating expenses	Other operating expenses	212		609		1,197		6,736		Other operating expenses	626		871		1,464		983
Total operating expenses	Total operating expenses	82,288		78,004		257,134		241,618		Total operating expenses	97,354		93,977		195,243		174,843
Operating income	Operating income	71,039		81,456		327,757		111,871		Operating income	104,054		157,195		297,216		256,721
Non-operating expenses (income):	Non-operating expenses (income):									Non-operating expenses (income):
Interest expense, net	Interest expense, net	8,313		10,776		33,690		36,691		Interest expense, net	11,255		9,143		22,548		25,377
Other income, net		(704)		(238)		(1,335)		(58)
Other expense (income), net										Other expense (income), net	139		(314)		1,277		(628)
Income before provision for income taxes	Income before provision for income taxes	63,430		70,918		295,402		75,238		Income before provision for income taxes	92,660		148,366		273,391		231,972
Provision for income taxes	Provision for income taxes	16,232		15,802		72,886		14,214		Provision for income taxes	21,388		34,908		68,710		56,654
Net income	Net income	$	47,198	$	55,116	$	222,516	$	61,024	Net income	$	71,272	$	113,458	$	204,681	$	175,318

Basic income per share	Basic income per share	$	4.85	$	5.83	$	23.23	$	6.49	Basic income per share	$	7.64	$	11.88	$	21.49	$	18.44
Diluted income per share	Diluted income per share	$	4.74	$	5.72	$	22.91	$	6.48	Diluted income per share	$	7.48	$	11.61	$	21.07	$	18.15

Comprehensive income:	Comprehensive income:									Comprehensive income:
Net income	Net income	$	47,198	$	55,116	$	222,516	$	61,024	Net income	$	71,272	$	113,458	$	204,681	$	175,318
Other comprehensive income:	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		Amortization of unrecognized pension gain, net of tax	156		246		312		485
Other	Other	7		(5)		24		(2)		Other	(20)		6		—		17
Total other comprehensive income	Total other comprehensive income	245		289		747		602		Total other comprehensive income	136		252		312		502
Comprehensive income	Comprehensive income	$	47,443	$	55,405	$	223,263	$	61,626	Comprehensive income	$	71,408	$	113,710	$	204,993	$	175,820

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


		October 2, 2021		January 2, 2021			July 2, 2022		January 1, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash		$	186	$	82
Receivables, less allowances of $4,471 and $4,123, respectively		344,974		293,643
Cash and cash equivalents						Cash and cash equivalents	$	104,952	$	85,203
Receivables, less allowances of $4,419 and $4,024, respectively						Receivables, less allowances of $4,419 and $4,024, respectively	422,659		339,637
Inventories, net	Inventories, net	436,438		342,108		Inventories, net	577,648		488,458
Other current assets	Other current assets	38,828		32,581		Other current assets	35,268		31,869
Total current assets	Total current assets	820,426		668,414		Total current assets	1,140,527		945,167
Property and equipment, at cost	Property and equipment, at cost	309,108		299,935		Property and equipment, at cost	324,786		318,253
Accumulated depreciation	Accumulated depreciation	(131,587)		(121,223)		Accumulated depreciation	(146,170)		(137,099)
Property and equipment, net	Property and equipment, net	177,521		178,712		Property and equipment, net	178,616		181,154
Operating lease right-of-use assets	Operating lease right-of-use assets	51,178		51,142		Operating lease right-of-use assets	48,210		49,568
Goodwill	Goodwill	47,772		47,772		Goodwill	47,772		47,772
Intangible assets, net	Intangible assets, net	14,699		18,889		Intangible assets, net	11,911		13,603
Deferred tax assets	Deferred tax assets	70,683		62,899		Deferred tax assets	63,037		60,285
Other non-current assets	Other non-current assets	20,052		20,302		Other non-current assets	19,673		19,905
Total assets	Total assets	$	1,202,331	$	1,048,130	Total assets	$	1,509,746	$	1,317,454
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	210,386	$	165,163	Accounts payable	$	239,515	$	180,000
Accrued compensation	Accrued compensation	18,330		24,751		Accrued compensation	15,895		22,363
Taxes payable	Taxes payable	6,488		7,847		Taxes payable	16,600		6,138
Current maturities of long-term debt, net of debt issuance costs of $0 and $74, respectively		—		1,171

Finance lease liabilities - short-term	Finance lease liabilities - short-term	5,606		5,675		Finance lease liabilities - short-term	8,036		7,864
Operating lease liabilities - short-term	Operating lease liabilities - short-term	4,881		6,076		Operating lease liabilities - short-term	6,185		5,145
Real estate deferred gains - short-term	Real estate deferred gains - short-term	4,040		4,040		Real estate deferred gains - short-term	3,935		3,934
Other current liabilities	Other current liabilities	13,527		14,309		Other current liabilities	15,764		18,347
Total current liabilities	Total current liabilities	263,258		229,032		Total current liabilities	305,930		243,791
Non-current liabilities:	Non-current liabilities:					Non-current liabilities:
Long-term debt, net of debt issuance costs of $3,608 and $8,936, respectively		219,541		321,270
Long-term debt, net of debt issuance costs of $4,462 and $4,701, respectively						Long-term debt, net of debt issuance costs of $4,462 and $4,701, respectively	291,764		291,271
Finance lease liabilities - long-term	Finance lease liabilities - long-term	271,314		267,443		Finance lease liabilities - long-term	263,389		266,853
Operating lease liabilities - long-term	Operating lease liabilities - long-term	46,412		44,965		Operating lease liabilities - long-term	42,104		44,526
Real estate deferred gains - long-term	Real estate deferred gains - long-term	75,157		78,009		Real estate deferred gains - long-term	72,304		74,206
Pension benefit obligation	Pension benefit obligation	19,926		22,684		Pension benefit obligation	9,982		11,605
Other non-current liabilities	Other non-current liabilities	24,497		25,635		Other non-current liabilities	24,556		21,953
Total liabilities	Total liabilities	920,105		989,038		Total liabilities	1,010,029		954,205
Commitments and Contingencies	Commitments and Contingencies	0		0		Commitments and Contingencies	0		0
STOCKHOLDERS’ EQUITY:	STOCKHOLDERS’ EQUITY:					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
Common Stock, $0.01 par value, 20,000,000 shares authorized, 9,211,626 and 9,725,760 outstanding on July 2, 2022 and January 1, 2022, respectively						Common Stock, $0.01 par value, 20,000,000 shares authorized, 9,211,626 and 9,725,760 outstanding on July 2, 2022 and January 1, 2022, respectively	92		97
Additional paid-in capital	Additional paid-in capital	266,564		266,695		Additional paid-in capital	199,565		268,085

Accumulated other comprehensive loss	Accumulated other comprehensive loss	(35,245)		(35,992)		Accumulated other comprehensive loss	(29,048)		(29,360)
Accumulated stockholders’ equity (deficit)		50,810		(171,706)
Retained earnings						Retained earnings	329,108		124,427
Total stockholders’ equity	Total stockholders’ equity	282,226		59,092		Total stockholders’ equity	499,717		363,249
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,202,331	$	1,048,130	Total liabilities and stockholders’ equity	$	1,509,746	$	1,317,454

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.~~


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Stockholders’ Equity Total
	Shares	Amount
Balance, January 1, 2022	9,726	$	97	$	268,085	$	(29,360)	$	124,427	$	363,249
Net income	—	—		—		—		133,409		133,409
Impact of pension plan, net of tax	—	—		—		156		—		156
Vesting of restricted stock units	11	—		—		—		—		—
Compensation related to share-based grants	—	—		2,162		—		—		2,162
Repurchase of shares to satisfy employee tax withholdings	(5)	—		(393)		—		—		(393)
Common stock repurchase and retirement	(81)	(1)		(6,426)		—		—		(6,427)
Other	—	—		—		20		—		20
Balance, April 2, 2022	9,651	96		263,428		(29,184)		257,836		492,176
Net income	—	—		—		—		71,272		71,272
Impact of pension plan, net of tax	—	—		—		156		—		156
Vesting of restricted stock units	181	2		—		—		—		2
Compensation related to share-based grants	—	—		1,775		—		—		1,775
Repurchase of shares to satisfy employee tax withholdings	(66)	(1)		(5,777)		—		—		(5,778)
Common stock repurchase and retirement	(554)	(5)		(38,995)		—		—		(39,000)
Forward contract for accelerated share repurchase agreement	—	—		(21,000)		—		—		(21,000)
Other	—	—		134		(20)		—		114
Balance, July 2, 2022	9,212	$	92	$	199,565	$	(29,048)	$	329,108	$	499,717

~~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				Common Stock					Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings (Accumulated Deficit)			Stockholders’ Equity Total
		Shares	Amount								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
Balance, January 2, 2021																			Balance, January 2, 2021	9,463			$	95		$	266,695		$	(35,992)		$	(171,706)		$	59,092
Net income																			Net income	—			—		—			—			61,860			61,860
Impact of pension plan, net of tax	Impact of pension plan, net of tax	—	—		—				196			—				196			Impact of pension plan, net of tax	—			—		—			239			—			239
Vesting of restricted stock units	Vesting of restricted stock units	2	—		—				—			—				—			Vesting of restricted stock units	8			—		—			—			—			—
Compensation related to share-based grants	Compensation related to share-based grants	—	—		1,004				—			—				1,004			Compensation related to share-based grants	—			—		1,410			—			—			1,410
Repurchase of shares to satisfy employee tax withholdings	Repurchase of shares to satisfy employee tax withholdings	(1)	—		(7)				—			—				(7)			Repurchase of shares to satisfy employee tax withholdings	(3)			—		(99)			—			—			(99)
Other	Other	—	—		9				(19)			—				(10)			Other	—			—		—			11			—			11
Balance, March 28, 2020		9,367	94		261,980				(34,383)			(253,375)				(25,684)
Balance, April 3, 2021																			Balance, April 3, 2021	9,468			95		268,006			(35,742)			(109,846)			122,513
Net income	Net income	—	—		—				—			6,695				6,695			Net income	—			—		—			—			113,458			113,458
Foreign currency translation, net of tax		—	—		—				17			—				17
Impact of pension plan, net of tax	Impact of pension plan, net of tax	—	—		—				114			—				114			Impact of pension plan, net of tax	—			—		—			246			—			246
Vesting of restricted stock units	Vesting of restricted stock units	122	1		—				—			—				1			Vesting of restricted stock units	355			2		—			—			—			2
Compensation related to share-based grants	Compensation related to share-based grants	—	—		854				—			—				854			Compensation related to share-based grants	—			—		1,992			—			—			1,992
Repurchase of shares to satisfy employee tax withholdings	Repurchase of shares to satisfy employee tax withholdings	(28)	—		(247)				—			—				(247)			Repurchase of shares to satisfy employee tax withholdings	(113)			—		(5,033)			—			—			(5,033)
Other	Other	—	—		—				2			—				2			Other	—			—		(2)			6			—			4
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
Balance, July 3, 2021																			Balance, July 3, 2021	9,710			$	97	$	264,963		$	(35,490)		$	3,612		$	233,182

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Nine Months Ended					Six Months Ended
		October 2, 2021		September 26, 2020			July 2, 2022		July 3, 2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	222,516	$	61,024	Net income	$	204,681	$	175,318
Adjustments to reconcile net income to cash provided by operations:	Adjustments to reconcile net income to cash provided by operations:					Adjustments to reconcile net income to cash provided by operations:
Provision for income taxes		72,886		14,214
Depreciation and amortization	Depreciation and amortization	21,429		21,785		Depreciation and amortization	13,264		14,545
Amortization of debt issuance costs		1,560		2,888
Amortization of debt discount and issuance costs						Amortization of debt discount and issuance costs	493		1,032
Adjustments to debt issuance costs associated with term loan	Adjustments to debt issuance costs associated with term loan	5,791		—		Adjustments to debt issuance costs associated with term loan	—		5,791
Gains from sales of property	Gains from sales of property	(1,287)		(9,209)		Gains from sales of property	(144)		(1,287)
Deferred income tax						Deferred income tax	(2,752)		(5,844)
Amortization of deferred gains from real estate	Amortization of deferred gains from real estate	(2,951)		(2,951)		Amortization of deferred gains from real estate	(1,968)		(1,967)
Share-based compensation	Share-based compensation	5,010		2,915		Share-based compensation	3,937		3,402
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(51,331)		(115,712)		Accounts receivable	(83,022)		(143,574)
Inventories	Inventories	(94,330)		39,776		Inventories	(89,190)		(83,606)
Accounts payable	Accounts payable	45,223		46,600		Accounts payable	59,515		61,937
Taxes payable						Taxes payable	10,462		10,094
Other current assets	Other current assets	(7,083)		(1,380)		Other current assets	(3,399)		(3,699)
Pension contributions		(325)		(142)
Other assets and liabilities	Other assets and liabilities	(90,249)		14,588		Other assets and liabilities	(8,447)		(9,541)
Net cash provided by operating activities	Net cash provided by operating activities	126,859		74,396		Net cash provided by operating activities	103,430		22,601

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Proceeds from sale of assets		2,652		10,742
Proceeds from sale of assets, net						Proceeds from sale of assets, net	531		2,100
Property and equipment investments	Property and equipment investments	(5,424)		(1,943)		Property and equipment investments	(6,882)		(2,900)
Net cash provided by (used in) investing activities		(2,772)		8,799
Net cash used in investing activities						Net cash used in investing activities	(6,351)		(800)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Borrowings on revolving credit facilities	Borrowings on revolving credit facilities	900,006		541,700		Borrowings on revolving credit facilities	—		638,183
Repayments on revolving credit facilities	Repayments on revolving credit facilities	(965,142)		(605,221)		Repayments on revolving credit facilities	—		(606,019)
Repayments on term loan	Repayments on term loan	(43,204)		(88,861)		Repayments on term loan	—		(43,204)
Proceeds from real estate financing transactions		—		78,263
Common stock repurchase and retirement						Common stock repurchase and retirement	(66,427)		—
Debt financing costs	Debt financing costs	(2,811)		(2,983)		Debt financing costs	—		(861)
Repurchase of shares to satisfy employee tax withholdings	Repurchase of shares to satisfy employee tax withholdings	(5,135)		(255)		Repurchase of shares to satisfy employee tax withholdings	(6,170)		(5,132)
Principal payments on finance lease liabilities	Principal payments on finance lease liabilities	(7,697)		(7,327)		Principal payments on finance lease liabilities	(4,733)		(4,671)
Net cash used in financing activities	Net cash used in financing activities	(123,983)		(84,684)		Net cash used in financing activities	(77,330)		(21,704)

Net change in cash		104		(1,489)
Cash at beginning of period		82		11,643
Cash at end of period		$	186	$	10,154
Net change in cash and cash equivalents						Net change in cash and cash equivalents	19,749		97
Cash and cash equivalents at beginning of period						Cash and cash equivalents at beginning of period	85,203		82
Cash and cash equivalents at end of period						Cash and cash equivalents at end of period	$	104,952	$	179

Supplemental Cash Flow Information
Net income tax payment during the period		$	82,596	$	610
Supplemental cash flow information:						Supplemental cash flow information:

Interest paid during the period	Interest paid during the period	$	26,382	$	33,716	Interest paid during the period	22,707		18,744
Taxes paid during the period						Taxes paid during the period	61,176		52,615

Non-cash transactions:						Non-cash transactions:
Property and equipment acquired under finance leases						Property and equipment acquired under finance leases	2,313		10,549

See accompanying Notes.

BLUELINX HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~October~~July 2, ~~2021~~2022

(Unaudited)

1. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements include the accounts of BlueLinx Holdings Inc. and its wholly owned subsidiaries (the “Company”). We derived the condensed consolidated balance sheet at ~~October~~July 2, ~~2021,~~2022 from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January ~~2, 2021~~1, 2022 (the “Fiscal ~~2020~~2021 Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”) on ~~March 3, 2021.~~February 22, 2022. 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~~six months ended ~~October~~July 2, ~~2021,~~2022 and ~~September 26, 2020,~~July 3, 2021, our balance sheets at ~~October~~July 2, ~~2021,~~2022 and January ~~2, 2021,~~1, 2022, our statements of stockholders’ equity ~~(deficit)~~ for the ~~nine~~six months ended ~~October~~July 2, ~~2021,~~2022 and ~~September 26, 2020,~~July 3, 2021, and our statements of cash flows for the ~~nine~~six months ended ~~October~~July 2, ~~2021,~~2022 and ~~September 26, 2020.~~July 3, 2021.

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~~2021 Form 10-K. The results for the three and ~~nine~~six months ended ~~October~~July 2, ~~2021~~2022 are not necessarily indicative of results that may be expected for the full year ending ~~January 1,~~December 31, 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~~2022 fiscal year contains 52 weeks and ends on ~~January 1,~~December 31, 2022. Fiscal ~~2020~~2021 contained 5352 weeks and ended on January ~~2, 2021.~~1, 2022.

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

WeFor the six months ended July 3, 2021, we have reclassified certain ~~costs~~items within the ~~Condensed Consolidated Statements~~presentation of ~~Operations and Comprehensive Income~~our statement of cash flows to align with our statement of cash flows presentation for the ~~three and nine~~six months ended ~~September 26, 2020, from selling, general~~July 2, 2022. Our reclassifications are limited to the operating activities section and ~~administrative to amortization~~include presenting only the impact of deferred ~~gains on real estate.~~income taxes, instead of our full provision for income taxes, as a reconciling item for net income to cash provided by operating activities. We have also reclassified certain items previously presented individually, such as pension expense and pension contributions, to be included in the change of other assets and liabilities. In addition, we are presenting the change in taxes payable, previously included in other assets and liabilities, as a distinct line item in our reconciliation of net income to cash provided by operating activities. These ~~amounts relate~~reclassifications, we believe, provide an enhanced level of transparency with regards to the ~~amortization~~presentation 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~~our statement 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.cash flows.

Recently Adopted Accounting Standards

~~Income Taxes~~Credit Impairment Losses. . In ~~December 2019,~~June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) 740 and also clarifies and amends existing guidance to improve consistent application. The amendments in this standard 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 disclose: (a) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 FV measurements held at the end of the reporting period; and (b) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to 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 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 financial instruments or other assets (e.g., trade receivables), held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the 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. The Company adopted this

standard in the first quarter of 2022 and the implementation did not have a material impact to the Company’s condensed consolidated financial statements.

Reference Rate Reform. In March 2020, the FASB issued ASU ~~2019-10 extended~~No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The standard provides temporary guidance to ease the potential burden in accounting for reference rate reform primarily resulting from the discontinuation of the publication of certain tenors of the London Inter-bank Offered Rate (“LIBOR”) on December 31, 2021, with complete elimination of the publication of the LIBOR by June 30, 2023. The amendments in this ASU are elective and apply to all entities that have contracts referencing the LIBOR.

The Company’s revolving credit agreement, as further discussed in Note 6 to these condensed consolidated financial statements, currently references the LIBOR for determining interest payable on current and future borrowings and includes provisions for the use of alternative rates if the LIBOR is unavailable. The guidance in this ASU provides a practical expedient which simplifies accounting analyses under current U.S. GAAP for contract modifications if the change is directly related to a change from the LIBOR to a new interest rate index. The Company adopted this standard prospectively in the first quarter of 2022. The implementation did not have a material impact to the Company’s condensed consolidated financial statements or to any key terms of our revolving credit agreement other than the discontinuation of the LIBOR.

Income Taxes. In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) 740 and also clarifies and amends existing guidance to improve consistent application. The amendments in this standard are effective ~~date of ASU 2016-13 to~~for interim periods and ~~annual periods~~fiscal years beginning after December 15, ~~2022,~~2020. We adopted this standard effective for ~~certain public business entities, including smaller reporting companies. We have not completed our assessment~~fiscal year 2021. The adoption of the standard ~~but we do~~did not ~~expect the adoption to~~ have a material impact on the Company's condensed consolidated financial ~~position, results of operations, or cash flows.~~

statements.

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 inventory value at the end of each quarter to ensure that inventory, when viewed by category, is carried at the lower of cost ~~and~~or net realizable value, which also considers items that may be considered damaged, excess, and obsolete inventory. ~~For~~During the ~~three month periods ended October 2,~~second quarter of fiscal 2021, we ~~released~~recorded a lower of cost or net realizable value reserve of $16.7 million resulting from the decrease in the value of our structural lumber inventory related to the decline in wood-based commodity prices ~~accrued~~as of the end of the period. In addition, during the second quarter of fiscal ~~2021, as the inventory impacted by the reserve was sold to customers. The~~2022, we recorded a lower of cost ofor net realizable value reserve of ~~$16.7~~$9.8 million ~~had no net impact on~~as of the ~~nine month~~end of the period, ~~ended October 2, 2021.~~also resulting from the decline in wood-based commodity prices.

3. Goodwill and Other Intangible Assets

In connection with ~~the~~our past merger and acquisition ~~of Cedar Creek on April 13, 2018,~~activity, we acquired certain intangible assets. As of ~~October~~July 2, ~~2021,~~2022, our intangible assets consist of goodwill and other intangible assets including customer relationships, noncompete agreements, and trade names.

Goodwill

Goodwill is the excess of the cost of an acquired entity over the fair value of tangible and intangible assets (including customer relationships, noncompete agreements, and trade names) acquired, and liabilities assumed, under acquisition accounting for business combinations. As of ~~October~~July 2, ~~2021,~~2022, 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 will evaluate the carrying value for impairment between annual impairment tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Such events and indicators may include, without limitation, significant declines in the industries in which our products are used, significant changes in capital market conditions, and significant changes in our market capitalization. No such indicators were present during the ~~third~~second quarter of fiscal ~~2021.~~2022. Our 1 reporting unit has a fair value that exceeds its carrying value as of ~~October~~July 2, ~~2021.~~2022.

Definite-Lived Intangible Assets

On ~~October~~July 2, ~~2021,~~2022, the gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets were as follows:


Intangible Asset	Intangible Asset	Weighted Average Remaining Useful Lives	Gross Carrying Amounts		Accumulated Amortization (1)		Net Carrying Amounts		Intangible Asset	Weighted Average Remaining Useful Lives (Years)	Gross Carrying Amounts		Accumulated Amortization(1)		Net Carrying Amounts
		(Years)	(In thousands)								(In thousands)
Customer relationships	Customer relationships	9	$	25,500	$	(11,912)	$	13,588	Customer relationships	8	$	25,500	$	(13,589)	$	11,911
Noncompete agreements	Noncompete agreements	1	8,254		(7,143)		1,111		Noncompete agreements	—	8,254		(8,254)		—
Trade names	Trade names	0	6,826		(6,826)		—		Trade names	—	6,826		(6,826)		—
Total	Total		$	40,580	$	(25,881)	$	14,699	Total		$	40,580	$	(28,669)	$	11,911

(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~~$0.6 million and ~~$4.2~~$1.7 million for the three and ~~nine~~six month periods ended ~~October~~July 2, ~~2021,~~2022, respectively. For the three and ~~nine~~six month periods ended ~~September 26, 2020,~~July 3, 2021, amortization expense was ~~$1.8~~$1.2 million and ~~$5.6~~$3.1 million, respectively.

Estimated amortization expense for definite-lived intangible assets for the remaining portion of ~~2021~~2022 and the next five fiscal years is as follows:


Fiscal year		Estimated Amortization
Fiscal Year				Fiscal Year	Estimated Amortization
		(In thousands)			(In thousands)
2021		$	1,131
2022	2022	2,763		2022	$	1,025
2023	2023	1,807		2023	1,807
2024	2024	1,505		2024	1,505
2025	2025	1,423		2025	1,423
2026	2026	1,423		2026	1,423
2027				2027	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 accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized. We believe that there will not be significant changes to our estimates of variable consideration.

The following table presents our revenues disaggregated by revenue source. ~~Certain prior year amounts have been reclassified to conform to the current year product mix of structural and specialty products.~~ Sales and usage-based taxes are excluded from revenues.


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
Product type	Product type	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020		Product type	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
		(In thousands)				(In thousands)					(In thousands)				(In thousands)
Specialty products										Specialty products	$	787,860	$	675,189	$	1,555,767	$	1,237,811
Structural products	Structural products	$	329,818	$	375,072	$	1,425,389	$	865,302	Structural products	451,519		632,724		985,917		1,095,571
Specialty products		641,024		495,991		1,878,835		1,366,607
Total net sales	Total net sales	$	970,842	$	871,063	$	3,304,224	$	2,231,909	Total net sales	$	1,239,379	$	1,307,913	$	2,541,684	$	2,333,382

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					Three Months Ended				Six Months Ended
Sales channel	Sales channel	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020		Sales channel	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
		(In thousands)				(In thousands)					(In thousands)				(In thousands)
Warehouse and reload	Warehouse and reload	$	783,758	$	745,185	$	2,695,326	$	1,901,285	Warehouse and reload	$	1,020,341	$	1,062,149	$	2,098,287	$	1,911,569
Direct	Direct	204,524		138,750		660,934		363,250		Direct	240,235		265,280		486,887		456,409
Customer discounts and rebates	Customer discounts and rebates	(17,440)		(12,872)		(52,036)		(32,626)		Customer discounts and rebates	(21,197)		(19,516)		(43,490)		(34,596)
Total net sales	Total net sales	$	970,842	$	871,063	$	3,304,224	$	2,231,909	Total net sales	$	1,239,379	$	1,307,913	$	2,541,684	$	2,333,382

5. Assets Held for Sale

As of ~~October~~July 2, ~~2021, and~~2022, we had no assets or liabilities classified as “held for sale”. As of January ~~2, 2021,~~1, 2022, the net book value of total assets ~~held~~classified as “held for ~~sale~~sale” was ~~$0.9~~$2.6 million ~~and $1.3 million, respectively,~~ and was included in ~~“Other~~other current ~~assets”~~assets in our ~~Condensed Consolidated Balance Sheets. Only~~condensed consolidated balance sheet. As of January 1, 2022, the book value of total liabilities classified as “held for sale” was $1.9 million and was included in other current liabilities in our ~~non-~~

9condensed consolidated balance sheet.

~~operating properties was designated~~Assets classified as “held for sale” as of ~~October 2, 2021. This property is a former distribution facility located~~January 1, 2022, consisted of fixed assets, at net book value, and current assets, including raw material and work in ~~Houston, Texas. We vacated this property and designated it~~process inventory, affiliated with one of our business locations in the Midwest. Liabilities classified as “held for sale” as of January 1, 2022 included current liabilities, such as accounts payable, directly associated with those assets held for sale ~~during fiscal 2020. We continue to actively market this property, and~~that will be transferred with the assets held for sale. As of January 1, 2022, we ~~plan~~planned to sell ~~this property~~these assets and transfer these liabilities within the next 12 months. During the second quarter of 2022, we completed the sale of assets and liabilities previously classified as held for sale.

6. Long-Term Debt

As of ~~October~~July 2, ~~2021,~~2022 and January ~~2, 2021,~~1, 2022, long-term debt consisted of the following:


Debt categories		October 2, 2021		January 2, 2021
		(In thousands)					July 2, 2022		January 1, 2022
Revolving Credit Facility (1)		$	223,149	$	288,247
Term Loan Facility (2)		—		43,204
							(In thousands)
							$	300,000	$	300,000
Revolving credit facility (2)						Revolving credit facility (2)	—		—
Finance lease obligations (3)	Finance lease obligations (3)	276,920		273,118		Finance lease obligations (3)	271,425		274,717
		500,069		604,569			571,425		574,717
Unamortized debt issuance costs	Unamortized debt issuance costs	(3,608)		(9,010)		Unamortized debt issuance costs	(4,462)		(4,701)
Unamortized bond discount costs						Unamortized bond discount costs	(3,774)		(4,028)
		496,461		595,559			563,189		565,988
Less: current maturities of long-term debt	Less: current maturities of long-term debt	5,606		6,846		Less: current maturities of long-term debt	8,036		7,864
Long-term debt, net of current maturities	Long-term debt, net of current maturities	$	490,855	$	588,713	Long-term debt, net of current maturities	$	555,153	$	558,124

(1)As of July 2, 2022 and January 1, 2022, our long-term debt was comprised of $300.0 million of senior secured notes issued in October 2021. These notes are presented under the “Long-term debt” caption of our condensed consolidated balance sheets at $291.8 million and $291.3 million at July 2, 2022 and January 1, 2022, respectively. This presentation is net of their discount of $3.8 million and $4.0 million and the combined carrying value of our debt issuance costs of $4.5 million and $4.7 million at July 2, 2022 and January 1, 2022, respectively. Our senior secured notes are presented in this table at their face value.

(2) The average effective interest rate was ~~2.0~~zero percent and ~~2.8~~2.5 percent for the quarters ended ~~October~~July 2, ~~2021~~2022 and ~~January 2,~~July 3, 2021, respectively.

~~(2)~~ ~~The average interest rate, exclusive of 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.

Senior Secured Notes

In October 2021, we entered into an indenture (the “Indenture”) with the guarantors party thereto and Truist Bank, as trustee and collateral agent, in connection with a private offering of $300 million of our 6 percent senior secured notes due 2029 (the “2029 Notes”). The 2029 Notes were issued to investors at 98.625 percent of their principal amount and will mature on November 15, 2029. The majority of net proceeds from the offering of the 2029 Notes were used to repay borrowings under our revolving credit facility, as defined below.

Revolving Credit Facility

~~We have~~In April 2018, we entered into a revolving credit facility ~~that we entered into in April 2018~~ with Wells Fargo Bank, National Association, as administrative agent (“the Agent”), and certain other financial institutions party thereto. OnIn August 2, 2021, we entered into a second amendment to ~~the~~our revolving credit facility to, among other things, extend the maturity date of the facility to August 2, 2026, and reduce the interest rate on borrowings under the facility (as amended, the “Revolving Credit Facility”).

~~The~~ As amended, the Revolving Credit Facility ~~includes~~provides for a ~~committed~~ senior secured asset-based 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~~$350 million.~~Our~~ The Borrowers’ obligations under the Revolving Credit Facility are secured by a security interest in substantially all of our and our subsidiaries’ assets ~~other~~(other than real ~~property.~~property), including inventories, accounts receivable, and proceeds from those items.

~~Loans~~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 ~~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~~Agent’s base rate plus a margin ranging from 0.25 percent to 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.

Borrowings under the Revolving Credit Facility are subject to availability under the Borrowing Base (as that term is defined in the revolving credit agreement). The Borrowers are required to repay revolving loans thereunder to the extent that such revolving loans exceed the Borrowing Base then in effect. The Revolving Credit Facility may be prepaid in whole or in part from time to time without penalty or premium, but including all breakage costs incurred by any lender thereunder.

As of ~~October~~July 2, ~~2021,~~2022, we had zero outstanding borrowings ~~of $223.1 million~~ and excess availability, including cash in qualified accounts, of ~~$351.9~~$451.4 million under our Revolving Credit Facility. As of January ~~2, 2021,~~1, 2022, we had zero outstanding borrowings ~~of $288.2 million~~ and excess availability, including cash in qualified accounts, of ~~$184.3~~$431.7 million under our Revolving Credit Facility. Our average effective

interest rate under the facility was ~~2.0~~zero percent and ~~2.8~~2.5 percent for the quarters ended ~~October~~July 2, ~~2021~~2022 and ~~January 2,~~July 3, 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~~July 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.2022.

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,~~term loan facility, and, as a result, as of ~~October~~January 1, 2022 and July 2, ~~2021,~~2022, we had nozero outstanding borrowings under the ~~Term Loan Facility,~~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~~were amortizing in connection with our former ~~Term Loan Facility.~~term loan facility. These costs are included within interest expense, net on the ~~Condensed Consolidated Statements~~condensed consolidated statements of ~~Operations~~operations and reported separately as an adjustment to net income in our ~~Condensed Consolidated Statements~~condensed consolidated statements of ~~Cash Flows. Our~~cash flows.

As the facility was paid in full as of April 2, 2021, our average effective interest rate under the facility, exclusive of fees and prepayment premiums, was ~~approximately 8.0~~zero percent for the ~~quarter~~quarters ended ~~January~~July 2, ~~2021.~~2022 and July 3, 2021, respectively.

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					Three Months Ended				Six Months Ended
Pension-related items	Pension-related items	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020		Pension-related items	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
		(In thousands)				(In thousands)					(In thousands)				(In thousands)
Service cost (1)	Service cost (1)	$	—	$	—	$	—	$	—	Service cost (1)	$	—	$	—	$	—	$	—
Interest cost on projected benefit obligation	Interest cost on projected benefit obligation	505		723		1,515		2,169		Interest cost on projected benefit obligation	606		505		1,212		1,010
Expected return on plan assets	Expected return on plan assets	(1,140)		(1,210)		(3,420)		(3,630)		Expected return on plan assets	(1,177)		(1,140)		(2,354)		(2,280)
Amortization of unrecognized gain	Amortization of unrecognized gain	321		263		963		789		Amortization of unrecognized gain	209		321		418		642
Net periodic pension benefit	Net periodic pension benefit	$	(314)	$	(224)	$	(942)	$	(672)	Net periodic pension benefit	$	(362)	$	(314)	$	(724)	$	(628)

(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~~condensed consolidated statement of ~~Operations~~operations and ~~Comprehensive Income.~~comprehensive income.

8. Stock Compensation

During the three and ~~nine~~six month periods ended ~~October~~July 2, 2022, we incurred stock compensation expense of $1.8 million and $3.9 million, respectively. For the three and six month periods ended July 3, 2021, we incurred stock compensation expense of ~~$1.6~~$2.0 million and ~~$5.0~~$3.4 million, respectively. ~~For the three and nine month periods ended September 26, 2020, we incurred~~The decrease in our stock compensation expense for the three month period endedJuly 2, 2022 compared to the prior-year period is primarily attributable to the timing of ~~$1.1 million~~award vesting and ~~$2.9 million.~~associated expense recognition. The increase in our stock compensation expense for the ~~three and nine~~ sixmonth ~~periods~~period ended ~~2021 are~~July 2, 2022 compared to the prior-year period is primarily attributable to ~~having more outstanding equity-based awards during this period than~~an increase in the ~~prior year and the vesting~~number of awards granted, as well as the increase in ~~connection with~~ the ~~departure of certain employees. In addition,~~grant-date fair value, or the Company’s stock price, ~~has increased during fiscal year 2021~~of awards currently vesting compared to ~~2020.~~the prior year.

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~~one to 15 years, some of which include 1 or more options to extend the leases for 5five 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.~~sheets. When a lease does not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. 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~~July 2, ~~2021~~2022 and January ~~2, 2021:~~1, 2022:


Lease assets and liabilities	Lease assets and liabilities		October 2, 2021		January 2, 2021		Lease assets and liabilities		July 2, 2022		January 1, 2022
			(In thousands)						(In thousands)
Assets	Assets	Classification					Assets	Classification
Operating lease right-of-use assets	Operating lease right-of-use assets		$	51,178	$	51,142	Operating lease right-of-use assets		$	48,210	$	49,568
Finance lease right-of-use assets (1)	Finance lease right-of-use assets (1)	Property and equipment, net	148,426		148,561		Finance lease right-of-use assets (1)	Property and equipment, net	136,574		143,851
Total lease right-of-use assets	Total lease right-of-use assets		$	199,604	$	199,703	Total lease right-of-use assets		$	184,784	$	193,419

Liabilities	Liabilities						Liabilities
Current portion	Current portion						Current portion
Operating lease liabilities	Operating lease liabilities	Operating lease liabilities - short term	$	4,881	$	6,076	Operating lease liabilities	Operating lease liabilities - short term	$	6,185	$	5,145
Finance lease liabilities	Finance lease liabilities	Finance lease liabilities - short term	5,606		5,675		Finance lease liabilities	Finance lease liabilities - short term	8,036		7,864
Non-current portion	Non-current portion						Non-current portion
Operating lease liabilities	Operating lease liabilities	Operating lease liabilities - long term	46,412		44,965		Operating lease liabilities	Operating lease liabilities - long term	42,104		44,526
Finance lease liabilities	Finance lease liabilities	Finance lease liabilities - long term	271,314		267,443		Finance lease liabilities	Finance lease liabilities - long term	263,389		266,853
Total lease liabilities	Total lease liabilities		$	328,213	$	324,159	Total lease liabilities		$	319,714	$	324,388

(1) Finance lease right-of-use assets are presented net of accumulated amortization of ~~$70.8~~$82.3 million and ~~$58.6~~$73.7 million as of ~~October~~July 2, ~~2021~~2022 and January ~~2, 2021,~~1, 2022, respectively.

The components of lease expense were as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
Components of lease expense	Components of lease expense	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020		Components of lease expense	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
		(In thousands)				(In thousands)					(In thousands)				(In thousands)
Operating lease cost:	Operating lease cost:	$	2,959	$	3,108	$	8,942	$	9,206	Operating lease cost:	$	2,578	$	2,934	$	5,095	$	5,984
Finance lease cost:	Finance lease cost:									Finance lease cost:
Amortization of right-of-use assets	Amortization of right-of-use assets	$	4,012	$	4,648	$	12,209	$	11,526	Amortization of right-of-use assets	$	4,890	$	4,210	$	8,600	$	8,197
Interest on lease liabilities	Interest on lease liabilities	6,244		4,949		18,659		17,670		Interest on lease liabilities	6,120		6,241		12,280		12,399
Total finance lease costs	Total finance lease costs	$	10,256	$	9,597	$	30,868	$	29,196	Total finance lease costs	$	11,010	$	10,451	$	20,880	$	20,596

12Cash flow information related to leases was as follows:


	Three Months Ended				Six Months Ended
Cash flow information	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
	(In thousands)				(In thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,623	$	2,807	$	5,151	$	5,372
Operating cash flows from finance leases	6,120		6,241		12,280		12,399
Financing cash flows from finance leases	$	1,011	$	2,542	$	4,733	$	4,671

~~Supplemental~~Non-cash 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


	Three Months Ended				Six Months Ended
Non-cash information	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
	(In thousands)				(In thousands)
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	591	$	5,106	$	1,127	$	5,106
Finance leases	$	2,313	$	338	$	2,313	$	10,549

Supplemental balance sheet information related to leases was as follows:


Balance sheet information	Balance sheet information	October 2, 2021			January 2, 2021			Balance sheet information	July 2, 2022			January 1, 2022
		(In thousands)							(In thousands)
Finance leases	Finance leases							Finance leases
Property and equipment	Property and equipment	$	219,192		$	207,147		Property and equipment	$	218,914		$	217,592
Accumulated depreciation	Accumulated depreciation	(70,766)			(58,586)			Accumulated depreciation	(82,340)			(73,741)
Property and equipment, net	Property and equipment, net	$	148,426		$	148,561		Property and equipment, net	$	136,574		$	143,851
Weighted Average Remaining Lease Term (in years)	Weighted Average Remaining Lease Term (in years)							Weighted Average Remaining Lease Term (in years)
Operating leases	Operating leases	10.86			11.14			Operating leases	10.17			10.75
Finance leases	Finance leases	16.05			16.08			Finance leases	15.02			15.06
Weighted Average Discount Rate	Weighted Average Discount Rate							Weighted Average Discount Rate
Operating leases	Operating leases	9.00		%	9.28		%	Operating leases	8.82		%	9.01		%
Finance leases	Finance leases	9.94		%	9.87		%	Finance leases	9.47		%	10.00		%

The major categories of our finance lease liabilities as of ~~October~~July 2, ~~2021~~2022 and January ~~2, 2021~~1, 2022 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


Category	July 2, 2022		January 1, 2022
	(In thousands)
Equipment and vehicles	$	27,577	$	30,710
Real estate	243,848		244,007
Total finance leases	$	271,425	$	274,717

As of ~~October~~July 2, ~~2021,~~2022, maturities of lease liabilities were as follows:


Fiscal year	Fiscal year	Operating leases		Finance leases		Fiscal year	Operating leases		Finance leases
		(In thousands)					(In thousands)
2021		$	10,134	$	8,238
2022	2022	9,402		32,495		2022	$	5,507	$	15,745
2023	2023	7,943		32,191		2023	9,701		32,430
2024	2024	8,207		31,575		2024	8,939		31,835
2025	2025	7,322		27,850		2025	8,534		28,292
2026						2026	6,090		31,779
Thereafter	Thereafter	42,310		379,747		Thereafter	39,565		349,937
Total lease payments	Total lease payments	$	85,318	$	512,096	Total lease payments	$	78,336	$	490,018
Less: imputed interest	Less: imputed interest	(34,025)		(235,176)		Less: imputed interest	(30,047)		(218,593)
Total	Total	$	51,293	$	276,920	Total	$	48,289	$	271,425

On January ~~2, 2021,~~1, 2022, maturities of lease liabilities were as follows:


Fiscal year	Fiscal year	Operating leases		Finance leases		Fiscal year	Operating leases		Finance leases
		(In thousands)					(In thousands)
2021		$	11,215	$	30,159
2022	2022	9,161		29,453		2022	$	9,376	$	32,495
2023	2023	8,400		29,189		2023	9,134		32,115
2024	2024	7,283		28,649		2024	8,329		31,521
2025	2025	7,392		28,102		2025	8,329		27,994
2026						2026	6,050		31,439
Thereafter	Thereafter	44,092		380,511		Thereafter	40,711		348,149
Total lease payments	Total lease payments	$	87,543	$	526,063	Total lease payments	$	81,929	$	503,713
Less: imputed interest	Less: imputed interest	(36,502)		(252,945)		Less: imputed interest	(32,258)		(228,996)
Total	Total	$	51,041	$	273,118	Total	$	49,671	$	274,717

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

Collective Bargaining Agreements

As of ~~October~~July 2, ~~2021,~~2022, we employed approximately ~~2,100 employees~~2,053 associates and less than 1 percent of our ~~employees~~associates are employed on a part-time basis. Approximately 2319 percent of our ~~employees were~~associates are represented by various local labor unions with terms and

conditions of employment ~~subject to~~governed by Collective Bargaining Agreements (“CBAs”) ~~negotiated between the Company and local labor unions.~~. NaN CBAs covering approximately 63 percent of our ~~employees~~associates are up for renewal in fiscal ~~2021, with 3 having been successfully renegotiated earlier this year. We~~2022, both of which 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~~condensed consolidated statements of ~~Operations~~operations and ~~Comprehensive Income.~~comprehensive income. Accumulated other comprehensive loss is separately presented on our ~~Condensed Consolidated Balance Sheets~~condensed consolidated balance sheets as part of stockholders’ equity.

The changes in balances for each component of accumulated other comprehensive loss for the ~~nine~~six months ended ~~October~~July 2, ~~2021,~~2022 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.~~


	Defined benefit pension plan, net of tax		Other, net of tax		Total Accumulated Other Comprehensive Loss

January 1, 2022, beginning balance, net of tax	$	(30,245)	$	885	$	(29,360)
Other comprehensive income, net of tax	312		—		312
July 2, 2022, ending balance, net of tax	$	(29,933)	$	885	$	(29,048)

12. Income Taxes

Effective Tax Rate

Our effective tax rate for the three months ended ~~October~~July 2, 2022 and July 3, 2021 ~~and September 26, 2020,~~ was ~~25.6~~23.1 percent and ~~22.3~~23.5 percent, respectively. Our effective tax rate for the ~~nine~~six months ended ~~October~~July 2, 2022 and July 3, 2021 ~~and September 26, 2020,~~ was ~~24.7~~25.1 percent and ~~18.9~~24.4 percent, respectively.

Our effective tax rate for the three and ~~nine~~six months ended ~~October~~July 2, 2022 and July 3, 2021 ~~was~~were impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive ~~compensation, slightly offset by~~compensation. Each period also includes a benefit from the vesting of restricted stock units, which had a greater impact on the three months ended July 2, 2022 and July 3, 2021 due to the timing of the vesting of our restricted stock awards. Our effective tax rate for the three and six months ended July 3, 2021 also benefited from the partial release of ~~the~~our valuation allowance for state net operating loss carryforwards we ~~anticipate~~anticipated being able to utilize based on our taxable income through the end of the ~~third quarter~~first and second quarters 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 2021 and 2020 and the reported losses for 2019, ~~and 2018,~~ which resulted in a ~~three year~~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~~July 2, ~~2021,~~2022, in our evaluation of the weight of available evidence, we concluded that our net deferred tax assets were not impaired.

1514

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.

On May 3, 2022, we announced that our Board of Directors increased our share repurchase authorization to $100.0 million, up $75.0 million from the previous program, and that we entered into an Accelerated Share Repurchase Agreement (“ASR Agreement”) with Jefferies LLC (“Jefferies”) to repurchase $60.0 million of our common stock. Under the ASR Agreement, we received initial delivery of 553,584 shares of common stock on May 3, 2022 (the “Transaction Date”) representing approximately 65 percent of the total number of shares of common stock initially underlying the ASR Agreement based on our closing stock price of $70.45 on May 2, 2022. The initial delivery of 553,584 shares reduced the number of common shares outstanding on the Transaction Date and, as a result, reduced the weighted average number of common shares outstanding used to calculate basic income per share and diluted income per share for the three and six month periods ended July 2, 2022.

The total number of shares repurchased under the ASR Agreement is based on the average of the daily volume-weighted average price of our common stock during the repurchase period under the ASR Agreement, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreement. At settlement, under certain circumstances, Jefferies may be required to deliver additional shares of common stock to us, or, under certain circumstances, we may be required to make a cash payment or to deliver shares of our common stock to Jefferies. Final settlement of the shares of common stock repurchased under the ASR Agreement could occur as early as the third quarter of 2022.

Management has performed an analysis of the average of the daily volume-weighted average price of our common stock since the Transaction Date and has determined, as of July 2, 2022, that the final settlement of shares of common stock under the ASR Agreement is not anticipated to have a dilutive impact upon final settlement.

The reconciliation of basic net income and diluted net income per common share for the three and ~~nine~~six month periods ended ~~October~~July 2, ~~2021,~~2022 and ~~September 26, 2020,~~July 3, 2021 were as follows:


											Three Months Ended				Six Months Ended
		Three Months Ended				Nine Months Ended					July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
		October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020			(In thousands, except per share data)				(In thousands, except per share data)
		(In thousands, except per share data)				(In thousands, except per share data)
Net income	Net income	$	47,198	$	55,116	$	222,516	$	61,024	Net income	$	71,272	$	113,458	$	204,681	$	175,318

Weighted average shares outstanding - basic		9,721		9,461		9,579		9,408
Weighted-average shares outstanding - basic										Weighted-average shares outstanding - basic	9,324		9,549		9,522		9,507
Dilutive effect of share-based awards	Dilutive effect of share-based awards	232		170		135		11		Dilutive effect of share-based awards	196		226		188		150
Weighted average share outstanding - diluted		9,953		9,631		9,714		9,419
Weighted-average shares outstanding - diluted										Weighted-average shares outstanding - diluted	9,520		9,775		9,710		9,657

Basic income per share	Basic income per share	$	4.85	$	5.83	$	23.23	$	6.49	Basic income per share	$	7.64	$	11.88	$	21.49	$	18.44
Diluted income per share	Diluted income per share	$	4.74	$	5.72	$	22.91	$	6.48	Diluted income per share	$	7.48	$	11.61	$	21.07	$	18.15

~~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,Approximately 21,000 and ~~to non-U.S. persons outside the United States under Regulation S under the Securities Act. The 2029 Notes~~55,000 weighted-average share-based awards 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 proceedsexcluded from the ~~offering~~computation of earnings per share assuming dilution during the ~~senior secured notes~~three months ended July 2, 2022 and July 3, 2021, respectively, as the awards would have been anti-dilutive for the periods presented.

Approximately 13,000 and 27,000 weighted-average share-based awards were ~~used to repay borrowings under our Revolving Credit Facility. In conjunction with~~excluded from the ~~closing~~computation of earnings per share assuming dilution during the ~~senior secured notes offering, we reduced~~six months ended July 2, 2022 and July 3, 2021, respectively, as the ~~limit under our Revolving Credit Facility from $600 million to $350 million.~~

awards would have been anti-dilutive for the periods presented.

1615

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

About Our Business

~~We are BlueLinx:~~BlueLinx is 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, siding, millwork, outdoor living, specialty lumber and industrial ~~products, cedar, moulding, siding, metal products, and insulation.~~products. 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, a broad geographic coverage footprint servicing 40over 45 states, ~~and~~where our locations are in approximately 75 percent of the highest growth metropolitan statistical areas, combined with the strength of a locally focused sales force, ~~as a two-step wholesale distributor,~~ we distribute ~~our~~a comprehensive range of products from over 750 suppliers. Our suppliers ~~including~~include some of the leading manufacturers in the industry, such as ~~Ply Gem,~~Allura, Arauco, Fiberon, Georgia-Pacific, Huber Engineered Woods, ~~Georgia-Pacific,~~ James Hardie, ~~Fiberon,~~Louisiana-Pacific, Oldcastle APG, Ply Gem, Roseburg, Royal and ~~Weyerhaeuser, and~~Weyerhaeuser. We supply products to a broad base of over 15,000 total customers including national home centers, pro dealers, cooperatives, specialty distributors, regional and local dealers ~~specialty distributors, national home centers,~~ and ~~manufactured housing customers.~~industrial manufacturers. Many of our customers ~~then~~ serve residential and commercial builders, contractors and ~~contractors~~remodelers 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 the 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~~a 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~~repair and remodel and residential ~~repair and remodel,~~new construction, 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 approximately 15 percent of end market mix is accounted for by commercial construction. We

Certain recent changes in macro-economic factors, such as escalating home prices, may put pressure on the overall housing market, including the residential repair and remodel and residential new construction end markets. Given these developments, we anticipate a slowdown of the housing industry over the coming quarters. However, we believe that ~~there are favorable underlying fundamental~~several factors, ~~that~~including the current high levels of home equity, recent work from home trends, the undersupply of housing in the United States, and the strength of housing starts compared to pre-COVID levels, among others, will continue to support demand for our products and drive long-term growth across the end markets in which we operate.

Residential Repair and Remodel

new construction, particularly for exterior products that are exposed to the elements and where maintenance is less likely to be deferred for long periods of time. We expect that current 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.

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 142 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.

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.

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 a portion of our business is correlated, is driven by demographic and population shifts, mortgage interest rates (which ~~remain at historic lows)~~are low compared to the 40-year average), 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~~We believe our large footprint, strong customer relationships, and comprehensive offering of leading products and brands ~~positions~~position 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~~June 2022 single family housing starts in the United States were approximately ~~1 million, an increase~~two percent lower compared to that of 12May 2022, but approximately 28 percent ~~above 2019 housing starts. We believe there is significant pent-up demand for housing and~~higher than that of February 2020, prior to the ~~market will see continued growth.~~COVID-19 pandemic. The monthly single family residential home supply ~~continues to remain~~is in line with the ~~20-year~~25-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.

~~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~~industry, such as weather conditions and ~~fourth fiscal~~other seasonal factors. As a result, our quarterly sales volumes may trend higher in quarters when weather conditions and other seasonal factors are ~~typically our lower volume quarters, due to the impact of less~~more favorable, ~~weather on the construction market. Our second and third fiscal quarters are typically our higher volume quarters,~~ reflecting an increase in activity in the residential repair and remodel and residential new home construction ~~due to more~~markets. Conversely, when weather conditions and other seasonal factors are less favorable, ~~weather conditions. Depending on the nature and circumstances of our business in any given year,~~ we may ~~increase our inventory~~experience declines 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.~~sales volumes.

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~~two years 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~~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~~ This includes enhancing the customer experience; accelerating organic growth within specific product and solutions offerings where ~~we are~~

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

2.Migrate ~~revenue~~sales mix toward higher-margin specialty product categories. ~~We intend~~The Company intends to pursue a revenue mix increasingly weighted toward higher-margin, ~~in-demand~~ specialty product ~~categories. Management also~~categories such as engineered wood, siding, millwork, outdoor living, specialty lumber and industrial products. Additionally, the Company intends to expand onits value-added service offerings designed to simplify complex customer sourcing requirements, together with marketing, inventory and pricing services afforded by ~~our~~the Company’s national platform.

3.Maintain a disciplined capital structure and pursue high-return investments that ~~support growth.~~increase the value of the Company. OnThe Company intends to maintain a ~~trailing twelve-month basis, we have significantly transformed our balance sheet, underscored by a material reduction~~disciplined capital structure while at the same time investing in ~~net leverage~~its business to modernize its tractor fleet and ~~improved access to liquidity. Given this, we intend to accelerate capital investments designed~~distribution facilities and to improve ~~the efficiency~~operational performance. The Company also continues to evaluate potential acquisition targets that complement its existing capabilities, grow its specialty products business, increase customer exposure, expand its geographic reach, or a combination thereof. We invested $4.4 million and ~~reliability of existing assets, including distribution centers and fleet assets. In the fourth quarter 2021, we intend to invest up to $10~~$6.9 million in capital for our ~~fleet~~business during the three and ~~facilities~~six month periods ending July 2, 2022, respectively, 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; competition; 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; potential acquisitions and the integration and completion of such acquisitions; business disruptions; effective inventory management relative to our sales volume or the prices of the products we produce; information technology security risks and business interruption risks; the ability to attract, train, and retain highly qualified associates and other key personnel while controlling related labor costs; exposure to product liability and other claims and legal proceedings related to our business and the products we distribute; natural disasters, catastrophes, fire, wars 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; the COVID-19 pandemic and other contagious illness outbreaks and their potential effects on our industry; regulations concerning mandatory COVID-19 vaccines; fluctuations in our operating results; 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~~the business; variable interest rate risk under certain indebtedness; the fact that we have consummated certain sale leaseback transactions with resulting long-term non-cancelable leases, many of which are or will be finance leases; 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; inability to raise funds necessary to finance a required repurchase of our senior secured notes; inability to successfully execute the ASR; a lowering or withdrawal of debt ratings; changes in our product mix; increases in petroleum prices; shareholder activism; ~~potential acquisitions and the integration and completion of such acquisitions;~~changes in insurance-related deductible/retention reserves based on actual loss experience; the possibility that the value of our deferred tax assets could become impaired; changes in our expected annual effective tax rate could be volatile; changes in actuarial assumptions for our pension plan; the costs and liabilities related to our

participation in multi-employer pension plans could increase; the risk that our cash flows and capital resources may be insufficient to service our existing or future indebtedness; the possibility that we could be the subject of securities class action litigation due to stock price volatility; activities of activist shareholders; indebtedness terms that limit our ability to pay dividends on common stock; and changes in, or interpretation of, accounting principles.

2019

Results of Operations

The following table sets forth our results of operations for the ~~third~~second quarter of fiscal ~~2021~~2022 and fiscal ~~2020:~~2021:


		Third Quarter of Fiscal 2021		% of Net Sales	Third Quarter of Fiscal 2020		% of Net Sales		Second Quarter of Fiscal 2022		% of Net Sales	Second Quarter of Fiscal 2021		% of Net Sales
		(In thousands)			(In thousands)				(In thousands)			(In thousands)
Net sales	Net sales	$	970,842	100.0%	$	871,063	100.0%	Net sales	$	1,239,379	100.0%	$	1,307,913	100.0%

Gross profit	Gross profit	153,327		15.8%	159,460		18.3%	Gross profit	201,408		16.3%	251,172		19.2%
Selling, general, and administrative	Selling, general, and administrative	76,176		7.8%	79,976		9.2%	Selling, general, and administrative	91,338		7.4%	87,010		6.7%
Depreciation and amortization	Depreciation and amortization	6,884		0.7%	7,087		0.8%	Depreciation and amortization	6,518		0.5%	7,080		0.5%
Amortization of deferred gains on real estate	Amortization of deferred gains on real estate	(984)		(0.1)%	(984)		(0.1)%	Amortization of deferred gains on real estate	(984)		(0.1)%	(984)		(0.1)%
Gains from sales of property	Gains from sales of property	—		—%	(8,684)		(1.0)%	Gains from sales of property	(144)		0.0%	—		0.0%
Other operating expenses	Other operating expenses	212		0.0%	609		0.1%	Other operating expenses	626		0.1%	871		0.1%
Operating income	Operating income	71,039		7.3%	81,456		9.4%	Operating income	104,054		8.4%	157,195		12.0%
Interest expense, net	Interest expense, net	8,313		0.9%	10,776		1.2%	Interest expense, net	11,255		0.9%	9,143		0.7%
Other income, net		(704)		(0.1)%	(238)		(0.0)%
Other expense (income), net								Other expense (income), net	139		0.0%	(314)		(0.0)%
Income before provision for income taxes	Income before provision for income taxes	63,430		6.5%	70,918		8.1%	Income before provision for income taxes	92,660		7.5%	148,366		11.3%
Provision for income taxes	Provision for income taxes	16,232		1.7%	15,802		1.8%	Provision for income taxes	21,388		1.7%	34,908		2.7%
Net income	Net income	$	47,198	4.9%	$	55,116	6.3%	Net income	$	71,272	5.8%	$	113,458	8.7%

The following table sets forth our results of operations for the first ~~nine~~six month periods of fiscal ~~2021~~2022 and fiscal ~~2020:~~2021:


		First Nine Months of Fiscal 2021		% of Net Sales	First Nine Months of Fiscal 2020		% of Net Sales		First Six Months of Fiscal 2022		% of Net Sales	First Six Months of Fiscal 2021		% of Net Sales
		(In thousands)			(In thousands)				(In thousands)			(In thousands)
Net sales	Net sales	$	3,304,224	100.0%	$	2,231,909	100.0%	Net sales	$	2,541,684	100.0%	$	2,333,382	100.0%

Gross profit	Gross profit	584,891		17.7%	353,489		15.8%	Gross profit	492,459		19.4%	431,564		18.5%
Selling, general, and administrative	Selling, general, and administrative	238,746		7.2%	225,258		10.1%	Selling, general, and administrative	182,627		7.2%	162,569		7.0%
Depreciation and amortization	Depreciation and amortization	21,429		0.6%	21,785		1.0%	Depreciation and amortization	13,264		0.5%	14,545		0.6%
Amortization of deferred gains on real estate	Amortization of deferred gains on real estate	(2,951)		(0.1)%	(2,952)		(0.1)%	Amortization of deferred gains on real estate	(1,968)		(0.1)%	(1,967)		(0.1)%
Gains from sales of property	Gains from sales of property	(1,287)		0.0%	(9,209)		(0.4)%	Gains from sales of property	(144)		0.0%	(1,287)		(0.1)%
Other operating expenses	Other operating expenses	1,197		0.0%	6,736		0.3%	Other operating expenses	1,464		0.1%	983		0.0%
Operating income	Operating income	327,757		9.9%	111,871		5.0%	Operating income	297,216		11.7%	256,721		11.0%
Interest expense, net	Interest expense, net	33,690		1.0%	36,691		1.6%	Interest expense, net	22,548		0.9%	25,377		1.1%
Other income, net		(1,335)		0.0%	(58)		0.0%
Other expense (income), net								Other expense (income), net	1,277		0.1%	(628)		(0.0)%
Income before provision for income taxes	Income before provision for income taxes	295,402		8.9%	75,238		3.4%	Income before provision for income taxes	273,391		10.8%	231,972		9.9%
Provision for income taxes	Provision for income taxes	72,886		2.2%	14,214		0.6%	Provision for income taxes	68,710		2.7%	56,654		2.4%
Net income	Net income	$	222,516	6.7%	$	61,024	2.7%	Net income	$	204,681	8.1%	$	175,318	7.5%

2120

The following table sets forth net sales by product category for the three and ~~nine~~six month periods ending ~~October~~July 2, ~~2021,~~2022 and ~~September 26, 2020:~~July 3, 2021:


		Three Months Ended						Nine Months Ended							Three Months Ended						Six Months Ended
		October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020				July 2, 2022			July 3, 2021			July 2, 2022			July 3, 2021
Net sales by category		($ in thousands)						($ in thousands)
Net sales by product category														Net sales by product category	(In thousands)						(In thousands)
Specialty products														Specialty products	$	787,860		$	675,189		$	1,555,767		$	1,237,811
Structural products	Structural products	$	329,818		$	375,072		$	1,425,389		$	865,302		Structural products	451,519			632,724			985,917			1,095,571
Total net sales														Total net sales	$	1,239,379		$	1,307,913		$	2,541,684		$	2,333,382

Percentage of total net sales by product category														Percentage of total net sales by product category
Specialty products	Specialty products	641,024			495,991			1,878,835			1,366,607			Specialty products	63.6		%	51.6		%	61.2		%	53.0		%
Net sales		$	970,842		$	871,063		$	3,304,224		$	2,231,909
Percentage of total net sales by category
Structural products	Structural products	34		%	43		%	43		%	39		%	Structural products	36.4		%	48.4		%	38.8		%	47.0		%
Specialty products		66		%	57		%	57		%	61		%
Total		100		%	100		%	100		%	100		%
Total net sales														Total net sales	100.0		%	100.0		%	100.0		%	100.0		%

The following table sets forth gross profit and gross margin percentages by product category for the three and ~~nine~~six month periods ~~of fiscal 2021~~ending July 2, 2022 and ~~2020:~~July 3, 2021:


		Three Months Ended						Nine Months Ended							Three Months Ended						Six Months Ended
		October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020				July 2, 2022			July 3, 2021			July 2, 2022			July 3, 2021
Gross profit $ by category		($ in thousands)						($ in thousands)
Gross profit by product category														Gross profit by product category	(In thousands)						(In thousands)
Specialty products														Specialty products	$	180,254		$	164,995		$	364,353		$	273,530
Structural products	Structural products	$	5,634		$	73,370		$	163,668		$	120,673		Structural products	21,154			86,177			128,106			158,034
Total gross profit														Total gross profit	$	201,408		$	251,172		$	492,459		$	431,564

Gross margin % by product category														Gross margin % by product category
Specialty products	Specialty products	147,693			86,090			421,223			232,816			Specialty products	22.9		%	24.4		%	23.4		%	22.1		%
Gross profit		$	153,327		$	159,460		$	584,891		$	353,489
Gross margin percentage by category
Structural products	Structural products	1.7		%	19.6		%	11.5		%	13.9		%	Structural products	4.7		%	13.6		%	13.0		%	14.4		%
Specialty products		23.0		%	17.4		%	22.4		%	17.0		%
Total gross margin %	Total gross margin %	15.8		%	18.3		%	17.7		%	15.8		%	Total gross margin %	16.3		%	19.2		%	19.4		%	18.5		%

The following table sets forth our structural product gross profit and gross margin percentage, excluding the impact of our lower of cost or net realizable value reserve, for the three and six month periods ending July 2, 2022 and July 3, 2021:


	Three Months Ended						Six Months Ended
Structural products	July 2, 2022			July 3, 2021			July 2, 2022			July 3, 2021
	(In thousands)						(In thousands)
Net sales	$	451,519		$	632,724		$	985,917		$	1,095,571
Gross profit, as reported	21,154			86,177			128,106			158,034
Add: lower of cost or net realizable value reserve	9,776			16,693			9,776			16,693
Gross profit, excluding reserve	$	30,930		$	102,870		$	137,882		$	174,727
Gross margin %, excluding reserve	6.9		%	16.3		%	14.0		%	15.9		%

~~Third~~Second Quarter of Fiscal ~~2021~~2022 Compared to ~~Third~~Second Quarter of Fiscal ~~2020~~2021

For the ~~third~~second quarter of fiscal ~~2021,~~2022, we generated net sales of ~~$970.8 million, an increase~~$1.2 billion, a decrease of ~~$99.8~~$68.5 million when compared to the ~~third~~second quarter of fiscal ~~2020~~2021 and overall gross margin percentage decreased from ~~18.3~~19.2 percent to ~~15.8~~16.3 percent year over year. Our ~~third~~second quarter net income was ~~$47.2~~$71.3 million, or ~~$4.74~~$7.48 per diluted share, versus ~~$55.1~~$113.5 million, or ~~$5.72~~$11.61 per diluted share, in the prior-year period. The significant ~~decline~~decrease in ~~the market value of higher-cost~~wood-based commodity ~~wood product inventory sold during the third quarter was~~prices is the primary contributor to the decline in our overall ~~gross profit~~sales and ~~gross margin percentage decline and year-over-year decrease~~profitability year over year, partially offset by improvements in ~~profitability.~~pricing of our specialty products.

Net sales of specialty products, which includes products such as engineered wood, siding, millwork, outdoor living, specialty lumber and industrial products, ~~cedar, moulding, siding, metal products and insulation,~~ increased ~~$145.0~~$112.7 million to ~~$641.0~~$787.9 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~~second quarter of fiscal ~~2021, resulting~~2022 compared to the second quarter of fiscal 2021. Strategic pricing of our specialty products throughout the second quarter of fiscal 2022 resulted in improved revenue ~~growth. Specialty sales volumes declined~~and gross profit growth, partially offset by ~~lower-double digits percentages overall versus~~slightly lower volume when compared to 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,~~where we ~~did see increases in sales volume among certain products within our specialty products category, such as in our moulding, siding, and industrial products.~~

saw historically strong demand. Specialty products gross profit increased ~~$61.6~~$15.3 million to ~~$147.7~~$180.3 million, with a year-over-year ~~improvement~~decline of ~~approximately 560~~150 basis points in specialty gross margin to ~~23.0~~22.9 percent for the ~~third~~second quarter of fiscal 2022 compared to 24.4 percent in the second quarter of fiscal 2021. The decrease in specialty gross margin percentage over the prior-year period is primarily attributable to some price volatility during the second quarter of fiscal 2022 related to certain of our specialty products, such as treated lumber and panels.

Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, decreased $181.2 million to $451.5 million in the second quarter of fiscal 2022. The significant decrease in wood-based commodity prices of our structural products resulted in the decrease of revenue and gross profit for the second quarter of fiscal 2022. Our structural gross margin percentage for the second quarter of fiscal 2022 was 4.7 percent, down from 13.6 percent in the prior-year period, also primarily attributable to the significant decrease in wood-based commodity prices. Our structural gross margin percentage includes a lower of cost or net realizable value reserve of $9.8 million recorded as of the end of the second quarter of fiscal 2022 compared to $16.7 million recorded as of the end of the second quarter of fiscal 2021, both of which were recorded in response to the decline in wood-based commodity prices as of the end of each fiscal quarter. Excluding the impact of the lower of cost or net realizable value reserve, our structural gross margin percentage for the second quarter of fiscal 2022 and 2021 would have been 6.9 percent and 16.3 percent, respectively.

Our selling, general, and administrative expenses increased 5.0 percent, or $4.3 million, compared to ~~17.4~~the second quarter of fiscal 2021. The increase in selling, general, and administrative expenses is due primarily to increases in logistical expenses of $5.3 million related to inflation in our delivery costs, including third-party delivery services and fuel costs, along with net increases of $3.2 million related to higher payroll costs and other strategic investments in our workforce and business. These net increases were partially offset by reduced variable incentive compensation, which includes sales commissions and stock compensation, of $4.2 million. Depreciation and amortization expense decreased 7.9 percent, compared to the second quarter of fiscal 2021. The decrease in depreciation and amortization is due to a lower base of amortizable and depreciable assets throughout the second quarter of fiscal 2022 when compared to the prior-year period. The increase in gains from sales of property in the amount of $0.1 million is due to the sale of assets previously classified as held for sale during the second quarter of fiscal 2022 compared to no sale of property during the second quarter of fiscal 2021. Other operating expenses decreased $0.2 million compared to the second quarter of fiscal 2021 primarily due to lower other operating expenses incurred in the second quarter of fiscal 2022.

Interest expense, net, increased by 23.1 percent, or $2.1 million, compared to the second quarter of fiscal 2021. The increase is primarily due to capital structure mix changes, as our senior secured notes carry a higher interest rate than our former revolving credit facility.

Our effective tax rate was 23.1 percent and 23.5 percent for the second quarter of fiscal 2022 and 2021, 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. Each period also includes a benefit from the vesting of restricted stock units, which had a greater impact on the three months ended July 2, 2022 and July 3, 2021 due to the timing of the vesting of our restricted stock awards. Our effective tax rate for the three months ended July 3, 2021 also benefited from the partial release of our valuation allowance for state net operating loss carryforwards we anticipated being able to utilize based on our taxable income through the end of the second quarter of fiscal 2021.

For the second quarter of fiscal 2022, our net income decreased by $42.2 million from the prior-year period due primarily to a decrease in gross profit driven by a significant decrease in wood-based commodity prices, in conjunction with some increases in our operating expenses along with higher interest expense. This was partially offset by a decrease in our income tax expense.

First Six Months of Fiscal 2022 Compared to First Six Months of Fiscal 2021

For the first six months of fiscal 2022, we generated net sales of $2.5 billion, an increase of $208.3 million when compared to the first six months of fiscal 2021, and overall gross margin percentage increased from 18.5 percent to 19.4 percent year over year. Our net income for the first six months of fiscal 2022 was $204.7 million, or $21.07 per diluted share, versus $175.3 million, or $18.15 per diluted share, in the prior-year period. Strategic pricing of our specialty products is the primary contributor to the increase in our overall sales and profitability year over year, partially offset by a decline in wood-based commodity prices impacting our structural products.

Net sales of specialty products, which includes products such as engineered wood, siding, millwork, outdoor living, specialty lumber and industrial products, increased $318.0 million to $1.6 billion in the first six months of fiscal 2022. Strategic pricing of our specialty products during the first six months of fiscal 2022 resulted in improved revenue and gross profit growth compared to the prior-year period. Specialty products gross profit increased $90.8 million to $364.4 million, with a year-over-year improvement of 130 basis points in specialty gross margin to 23.4 percent for the first six months of fiscal 2022 compared to 22.1 percent in the ~~third quarter~~first six months of fiscal ~~2020.~~2021. The increase in specialty gross margin percentage ~~of 5.6 percent~~ over the ~~prior year~~prior-year period is primarily attributable to ~~substantial increases in~~benefits from strategic 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~~decreased $109.7 million to ~~$329.8~~$985.9 million in the ~~third quarter~~first six months of fiscal ~~2021 due to price deflation for~~2022. The decrease in wood-based 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~~prices of our structural ~~products. Commodity wood market pricing began~~products is the primary contributor to ~~decline in May~~the decrease of revenue 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.gross profit for the first six months of fiscal 2022. Our structural gross margin percentage for the ~~third quarter~~first six months of fiscal 2022 was 13.0 percent, down from 14.4 percent in the prior-year period, also primarily attributable to the decrease in wood-based commodity prices impacting our structural products. Our structural gross margin percentage for the first six months of fiscal 2022 and the first six months 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~~also impacted by ~~the release of~~ a lower of cost or net realizable value reserve of $9.8 million and $16.7 million, ~~which we accrued for in~~respectively, recorded as of the end of the second quarter of ~~fiscal 2021 as~~both comparable periods in response to the decline in wood-based commodity ~~prices began a sustained decline. The inventory impacted by this~~prices. Excluding the impact of the lower of cost or net realizable value reserve, ~~was sold to customers during~~our structural gross margin percentage for the ~~third quarter~~first six months of fiscal ~~2021.~~2022 and 2021 would have been 14.0 percent and 15.9 percent, respectively.

Our selling, general, and administrative expenses ~~decreased 4.8~~increased 12.3 percent, or ~~$3.8~~$20.1 million, compared to the ~~third quarter~~first six months of fiscal ~~2020.~~2021. The ~~decrease~~increase in sales, general, and administrative expenses is due primarily to ~~decreases~~increases in logistical expenses of $10.6 million related to inflation in our delivery costs, including third-party delivery services and fuel costs, along with net increases of $5.7 million related to higher payroll costs and other strategic investments in our workforce and business, combined with increases in variable incentive compensation, which includes sales commissions and ~~incentive programs~~stock compensation, 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$3.8 million. Depreciation and amortization expense decreased ~~2.9~~8.8 percent, compared to the ~~third quarter~~first six months of fiscal ~~2020. Our~~2021. The decrease in depreciation and amortization is due to a lower base of amortizable and depreciable assets throughout the ~~third quarter~~first six months of fiscal ~~2021~~2022 when compared to the ~~prior year~~prior-year period. The decrease in gains from sales of property in the amount of ~~$8.7~~$1.1 million is due to the ~~sale-leaseback of one~~sale of our ~~properties located in Denver, Colorado during the third quarter fiscal 2020 compared to no sale of~~Birmingham property during the ~~third quarter~~first six months of fiscal ~~2021.~~2021, which resulted in a larger gain as compared to the sale of assets previously held for sale during the same period in 2022. Other operating expenses ~~decreased 65.2 percent, or $0.4~~increased $0.5 million compared to the ~~third quarter~~first six months of fiscal ~~2020~~2021 primarily due to ~~a decrease in integration and~~ restructuring related costs, ~~reported~~including severance, incurred in the ~~third quarter~~first six months of fiscal ~~2020.~~2022.

Interest expense, net, decreased by ~~22.9~~11.1 percent, or ~~$2.5~~$2.8 million, compared to the ~~third quarter~~first six months of fiscal ~~2020.~~2021. The decrease is primarily due to $5.8 million in debt issuance costs expensed in the ~~reduction~~first six months of ~~debt, including~~fiscal 2021 related to the ~~repayment in full~~extinguishment of our former ~~Term Loan Facility at the end of the first quarter of fiscal 2021, under which borrowings bore~~term loan facility, partially offset by an increase due to capital structure mix changes, as our senior secured notes carry 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.~~former revolving credit facility. Other expense (income), net, ~~decreased $0.5~~increased $1.9 million compared to the ~~third quarter~~first six months of fiscal ~~2020~~2021 primarily due to ~~a benefit of $0.4 million resulting from the re-negotiation of one of our multi-employer pension plan liabilities which resulted~~an increase in ~~a lower liability estimated over the life of our agreement with the pension plan.~~other non-operating expenses.

Our effective tax rate was ~~25.6~~25.1 percent and ~~22.3~~24.4 percent for the ~~third quarter~~first six months of fiscal ~~2021~~2022 and ~~2020,~~2021, 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,~~compensation. Each period also includes a benefit from the vesting of restricted stock units, which had a greater impact on the three months ended July 2, 2022 and July 3, 2021 due to the ~~effect~~timing of the ~~release~~vesting of our ~~partial valuation allowance for separate company state income tax losses.~~restricted stock awards. Our effective tax rate for the ~~third quarter of fiscal 2020 was additionally impacted by a discrete tax benefit resulting~~six months ended July 3, 2021 also benefited from ~~the effect of~~ the partial release of our valuation allowance for ~~previously nondeductible interest resulting from changes allowed under Section 163(j)~~state net operating loss carryforwards we anticipated being able to utilize based on our taxable income through the end 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~~six 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~~six 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 in2022, 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~~by $29.4 million from the ~~prior year~~prior-year period due primarily ~~due~~ to ~~the~~an increase in gross profit ~~resulting from substantial price increases impacting~~driven by strategic pricing of our specialty products, ~~combined~~in conjunction with ~~benefits from commodity price inflation during the nine month period when compared to prior year. Increases in gross profit were~~lower interest expense. This was partially 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~~increases in our operating expenses and income tax ~~expense, resulting from our higher effective tax rate.~~expense.

2423

Liquidity and Capital Resources

We expect our primary sources of liquidity to be cash flows from sales and operating activities in the normal course of our operations and ~~borrowings under~~availability of our ~~Revolving Credit Facility, among other sources.~~revolving credit facility, as needed. We expect that these sources will be sufficient to fund our ongoing cash requirements for the foreseeable future. On

Senior Secured Notes

In October ~~25,~~ 2021, we ~~consummated a $300 million private offering of Senior Secured Notes. We used~~entered into an indenture (the “Indenture”) with 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~~guarantors party thereto and Truist Bank, as trustee and collateral agent, in connection with a private offering of $300 million ~~at 6.0%~~of our six percent 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”~~due 2029 (the “2029 Notes”)~~, 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%~~98.625 percent 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~~2029 Notes were used to repay borrowings under our revolving credit ~~facility.~~facility, as defined below.

Revolving Credit Facility

In April 2018, we ~~amended and restated our Revolving Credit Facility~~entered into a revolving credit facility with Wells Fargo Bank, National Association, as administrative agent (“the Agent”), and incertain other financial institutions party thereto. In August 2021, we ~~amended the~~entered into a second amendment to our revolving credit facility to, among other things, extend the maturity date of the facility to August 2, 2026, and reduce the interest rate on ~~borrowing~~borrowings under the facility (as amended, the “Revolving Credit Facility”). ~~The~~As amended, the Revolving Credit Facility provides for a senior secured asset-based 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~~$350 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~~The Borrowers’ obligations under the Revolving Credit Facility are ~~subject to availability under the Borrowing Base (as that term is defined~~secured by a security interest in ~~the Revolving Credit Facility). Letters~~substantially all 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.~~ our and our subsidiaries’ assets (other than real property), including inventories, accounts receivable, and proceeds from those items.

Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to (i) ~~LIBOR~~London Inter-bank Offered Rate (“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~~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) $50.0 million and (ii) 10 percent of the lesser of (a) the borrowing base and (b) the maximum permitted credit at such time,~~Borrowings under the Revolving Credit Facility ~~requires maintenance of a fixed charge coverage ratio of 1.0~~are subject to ~~1.0 until excess~~ availability ~~has been at least~~under the ~~greater of (i) $50.0 million and (ii) 10 percent of~~Borrowing Base (as that term is defined in the ~~lesser of (a)~~revolving credit agreement). The Borrowers are required to repay revolving loans thereunder to the ~~borrowing base and (b)~~extent that such revolving loans exceed the ~~maximum permitted credit at such~~Borrowing Base then in effect. The Revolving Credit Facility may be prepaid in whole or in part from time ~~for a period of 30 consecutive days.~~to time without penalty or premium, but including all breakage costs incurred by any lender thereunder.

As of ~~October~~July 2, ~~2021,~~2022, we had zero outstanding borrowings ~~of $223.1 million~~ and excess availability, including cash in qualified accounts, of ~~$351.9~~$451.4 million under our Revolving Credit Facility. As of January ~~2, 2021,~~1, 2022, we had zero outstanding borrowings ~~of $288.2 million~~ and excess availability, including cash in qualified accounts, of ~~$184.3~~$431.7 million under ~~out~~our Revolving Credit Facility. Our average effective interest rate under the facility was ~~2.0~~zero percent and ~~2.8~~2.5 percent for the quarters ended ~~October~~July 2, ~~2021~~2022 and ~~January 2,~~July 3, 2021, respectively. ~~For~~

The Revolving Credit Facility contains certain financial and other covenants, and our right to borrow under the ~~quarter ended September 26, 2020,~~Revolving Credit Facility is conditioned upon, among other things, our ~~average effective interest rate was 2.7 percent.~~

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

2022.

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~~term loan facility, and, ~~extinguished the debt. As~~as a result, as of ~~October~~January 1, 2022 and July 2, ~~2021,~~2022, we had nozero outstanding borrowings under the ~~Term Loan Facility,~~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~~were amortizing in connection with our former ~~Term Loan Facility.~~term loan facility. These costs are included within interest expense, net on the ~~Condensed Consolidated Statements~~condensed consolidated statements of ~~Operations~~operations and reported separately as an adjustment to net income in our ~~Condensed Consolidated Statements~~condensed consolidated statements of ~~Cash Flows.~~cash flows.

There were no prepayment premiums associated with the repayment of indebtedness for the three and six month period ended July 2, 2022. 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 26, 2020, prepayment premiums were $0.3 million.~~July 3, 2021. Prepayment premiums were $0.9 million ~~and $2.6 million~~ for the ~~nine~~six month ~~periods~~period ended ~~October 2, 2021 and September 26, 2020, respectively.~~July 3, 2021.

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~~$271.4 million as of ~~October~~July 2, ~~2021.~~2022. Of the ~~$276.9~~$271.4 million of finance lease commitments as of ~~October~~July 2, ~~2021, $243.2~~2022, $243.8 million related to real estate and ~~$33.7~~$27.6 million related to equipment. For the three and six months ended July 2, 2022, we recognized $2.3 million in new finance leases for tractors acquired as a component of our fleet investment plan. For the three and six months ended July 3, 2021, we recognized $0.3 million and $10.5 million, respectively, in new finance leases for tractors acquired to support our fleet investment plan in fiscal 2021.

~~LIBOR~~ Interest Rates

Our Revolving Credit Facility includes available interest rate options based on ~~the London Inter-bank Offered Rate (“LIBOR”).~~LIBOR. Certain LIBOR rates ~~will be~~were 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 provided by operating activities for the first ~~nine~~six months of fiscal ~~2021~~2022 was ~~$126.9~~$103.4 million, compared to net cash provided by operating activities of ~~$74.4~~$22.6 million in the first ~~nine~~six months of fiscal ~~2020.~~2021. The increase in cash provided by operating activities during the first ~~nine~~six months of fiscal ~~2021~~2022 was primarily a result of working capital changes, including the reduction of accounts receivable, which resulted in $60.6 million more cash provided by operating activities in the current-year period compared to the prior-year period, and the $29.4 million increase in net income ~~and our accounts payable balance~~for the current-year period compared to the ~~prior year period, partially offset by increases in our accounts receivable and inventory balances compared to the prior year~~prior-year period. The first nine months of fiscal 2021 also included approximately $82.6 million in cash income tax obligations payments when compared to the prior year period, which benefited from our remaining federal net operating loss carry-forward of $80.6 million which were used in fiscal 2020.

Investing Activities

Net cash used in investing activities for the first ~~nine~~six months of fiscal ~~2021~~2022 was ~~$2.8~~$6.4 million, compared to net cash used in investing activities of ~~$8.8~~$0.8 million in the first ~~nine~~six months of fiscal ~~2020.~~2021. The ~~decrease~~increase in net cash used byin 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~~higher capital investments during the first ~~quarter~~six months of fiscal ~~2021, both of~~

~~which were partially offset by $3.5 million increase in investments in property and equipment, specifically investments in both our fleet and facilities.~~2022.

Financing Activities

Net cash used in financing activities totaled ~~$124.0~~$77.3 million for the first ~~nine~~six months of fiscal ~~2021,~~2022, compared to net cash used in financing activities of ~~$84.7~~$21.7 million for the first ~~nine~~six months of fiscal ~~2020.~~2021. The increase in net cash used in financing activities is primarily due to ~~an increase~~the $66.4 million spent repurchasing our common stock under our announced repurchase program, including the ASR Agreement, as defined below, during the first six months of ~~$314.3~~fiscal 2022, with no such transactions completed in the first six months of fiscal 2021. Additionally, we made $649.2 million in repayments on our ~~Revolving Credit Facility~~revolving credit facility and ~~Term Loan Facility,~~term loan facility, including the repayment of the remaining outstanding balance on our ~~Term Loan Facility,~~term loan facility, partially offset by ~~an increase in~~ borrowings of ~~$358.3~~$638.2 million from our ~~Revolving Credit Facility, and $78.3 million in proceeds from real estate financing transactions completed~~revolving credit facility, in the first ~~nine~~six months of fiscal ~~2020,~~2021, with no such transactions completed in the first ~~nine~~six months of fiscal ~~2021.~~2022.

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. On May 3, 2022, we announced that our Board of Directors increased our share repurchase authorization to $100.0 million, up $75.0 million from the previous program, and that we entered into an Accelerated Share Repurchase Agreement (“ASR Agreement”) with Jefferies LLC (“Jefferies”) to repurchase $60.0 million of our common stock.

Under the ASR Agreement, we received initial delivery of 553,584 shares of common stock on May 3, 2022 representing approximately 65 percent of the total number of shares of common stock initially underlying the ASR Agreement, based on our closing stock price of $70.45 on May 2, 2022. The total number of shares repurchased under the ASR Agreement is based on the average of the daily volume-weighted average price of our common stock during the repurchase period under the ASR Agreement, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreement. At settlement, under certain circumstances, Jefferies may be required to deliver additional shares of common stock to us, or, under certain circumstances, we may be required to make a cash payment or to deliver shares of our common stock to Jefferies. Final settlement of the shares of common stock repurchased under the ASR Agreement could occur as early as the third quarter of fiscal 2022.

With the remaining availability 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 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, accelerated share repurchase programs, tender offers or pursuant to a trading plan that may be adopted in accordance with the Securities and Exchange Commission Rule 10b5-1.

As of ~~the date of this filing,~~July 2, 2022, we have ~~made no repurchases of our common stock~~repurchased 634,915 shares for $66.4 million under this ~~program.~~program, including shares purchased through the ASR Agreement, and we have a remaining authorization amount of $33.6 million.

Operating Working Capital

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 the sum of cash, receivables, and inventory, less accounts payable. Management of working capital helps us monitor our progress in meeting our goals to enhance working capital assets.


Selected financial information	Selected financial information							Selected financial information
		October 2, 2021		January 2, 2021		September 26, 2020			July 2, 2022		January 1, 2022		July 3, 2021
		(In thousands)							(In thousands)
Current assets:	Current assets:							Current assets:
Cash		$	186	$	82	$	10,154
Cash and cash equivalents								Cash and cash equivalents	$	104,952	$	85,203	$	179
Receivables, less allowance for doubtful accounts	Receivables, less allowance for doubtful accounts	344,974		293,643		308,584		Receivables, less allowance for doubtful accounts	422,659		339,637		437,217
Inventories, net	Inventories, net	436,438		342,108		306,030		Inventories, net	577,648		488,458		425,714
		$	781,598	$	635,833	$	624,768		$	1,105,259	$	913,298	$	863,110

Current liabilities:	Current liabilities:							Current liabilities:
Accounts payable	Accounts payable	$	210,386	$	165,163	$	178,948	Accounts payable	$	239,515	$	180,000	$	227,100
		$	210,386	$	165,163	$	178,948		$	239,515	$	180,000	$	227,100

Operating working capital	Operating working capital	$	571,212	$	470,670	$	445,820	Operating working capital	$	865,744	$	733,298	$	636,010

Operating working capital of ~~$571.2~~$865.7 million as of ~~October~~July 2, ~~2021,~~2022, compared to ~~$470.7~~$733.3 million as of January 1, 2022, increased on a net basis by approximately $132.4 million. The increase in operating working capital is primarily driven by an increase in inventory, which continues to be affected by the inflationary environment for building materials, along with an increase in accounts receivable from our continued increase in net sales. The net increase in current assets was offset by an increase in accounts payable, also affected by the inflationary environment for building products.

Operating working capital of $865.7 million as of July 2, 2022, compared to $636.0 million as of July 3, 2021, increased on a net basis by ~~approximately $100.5~~$229.7 million. The increase in operating working capital ~~was~~is primarily driven by ~~increases~~an increase in inventory, which continues to be affected by the inflationary environment for building products, along with an increase in cash due to our improved operating performance, including increased net income, as well as a decrease in accounts receivable ~~and specialty products inventory, both of which were higher due to the inflationary environment impacting both~~from our improved collection efforts. The 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~~current assets was ~~primarily driven by increases in accounts receivable and inventory,~~ offset by an increase in accounts payable, ~~all largely due to~~also affected by the inflationary environment ~~impacting our net sales and product costs.~~for building products.

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Investments in Property and Equipment

Our investments in capital assets consist of cash paid for owned assets and the inception of financing lease arrangements for long-lived assets to support our distribution infrastructure. The gross value of these assets are included in ~~“Property~~property and equipment, at ~~cost”~~cost on our condensed consolidated balance sheet. ~~During~~For the ~~third quarter~~first six months of fiscal ~~2021,~~2022, we invested ~~$2.5~~$9.2 million in long-lived assets primarily related to investments in our distribution branches and to a lesser extent, upgrading our fleet, which includes $6.9 million in cash in investments ~~in long-lived assets. For the first nine months of fiscal 2021, we invested $5.4~~and $2.3 million in ~~cash and entered into~~new finance leases ~~totaling $10.5 million,~~recognized for tractors acquired as a ~~total investment~~component of ~~$15.9 million. In the fourth quarter 2021, we intend to invest up to $10 million in~~ our fleet ~~and facilities to improve operational performance and productivity.~~investment plan.

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 January ~~2, 2021.~~1, 2022.

Forward-Looking Statements

~~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,~~1, 2022, 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~~our 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;~~we are subject to disintermediation risk;

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

•we may incur business disruptions resulting from a variety of possible causes;

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

•we are subject to information technology security risks and business interruption risks and may incur increasing costs in an effort to minimize and/or respond to those risks;

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

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

•~~that fact that~~ our operating results depend on the successful implementation of our strategy and we may not be able to implement our strategic initiatives successfully, on a timely basis, or at all;

•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;

•the ongoing effect of the COVID-19 pandemic and other widespread public health crises may adversely affect our business and results from operations;

•our vaccination policies and governmental regulations concerning mandatory COVID-19 vaccination of employees could have a material adverse impact on our business and results of operations;

•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 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~~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;

•despite our current levels of debt, we may still incur more debt, which ~~could~~would increase the risks described in these risk factors relating to indebtedness;

•~~the fact that~~ we have sold and leased back certain of our distribution centers under long-term non-cancelable leases, and we may enter into similar transactions in the ~~future;~~future. All of these leases are (or will be) finance leases, and our debt and interest expense may increase as a result;

•~~the fact that~~ many of our distribution centers are leased, and if we close a leased distribution center before expiration of the lease, we will still be obligated under the applicable ~~lease;~~lease, and we may be unable to renew the leases at the end of their terms;

•~~changes~~we may not have or be able to raise the funds necessary to finance a required repurchase of our senior secured notes;

•constraints, volatility or disruptions in the capital markets or other factors affecting the amount and timing of share repurchases;

•our ability to successfully execute the ASR;

•the number of shares that will be delivered to the Company under the ASR;

•whether or not the Company will continue, and the timing of, any open market repurchases;

•a lowering or withdrawal of the ratings assigned to our debt securities by rating agencies may increase our future borrowing costs and reduce our access to capital;

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

•~~the risk~~if petroleum or energy prices increase, our results of ~~adjustments in the future based on actual development experience because~~ operations could be adversely affected;

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

•~~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~~Federal government;

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

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

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

•the terms of our revolving credit facility and senior secured notes place restrictions on our ability to pay dividends on our common stock, so any returns to stockholders may be limited to the value of their stock;

•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.

3029

~~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

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.

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

3230

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During the ~~third~~second quarter of fiscal ~~2021,~~2022, there were no material changes to our legal proceedings as disclosed in our Annual Report on Form 10-K for the year ended January ~~2, 2021.~~1, 2022. 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

There have been no material changes to the risk factors disclosed in Part I, "Item 1A.Risk Factors" in the Company’s Annual Report on Form 10-K for the year ended January ~~2, 2021.~~

1, 2022.

3331

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

The following table ~~summarizes the Company’s common stock~~presents our share repurchase activity for each month of the quarter ended ~~October~~July 2, ~~2021:~~2022:

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


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
April 3 - May 7	556,791	70.44	553,584	33,572,690
May 8 - June 4	201	89.16	—	33,572,690
June 5 - July 2	63,173	87.71	—	33,572,690
Total	620,165		553,584

(1) ~~The Company did not repurchase any of its equity securities during the period covered~~Includes shares withheld 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~~us in connection with tax withholding obligations of ~~the Company’s~~our employees upon ~~the~~ vesting of such employees’ restricted stock unit awards.

(2) 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. On May 3, 2022, we announced that our Board of Directors increased our share repurchase authorization to $100.0 million, up $75.0 million from the previous program, and that we entered into an Accelerated Share Repurchase Agreement (“ASR Agreement”) with Jefferies LLC (“Jefferies”) to repurchase $60.0 million of our common stock. Under the ASR Agreement, we received initial delivery of 553,584 shares of common stock on May 3, 2022 representing approximately 65 percent of the total number of shares of common stock initially underlying the ASR Agreement, based on our closing stock price of $70.45 on May 2, 2022. The total number of shares repurchased under the ASR Agreement is based on the average of the daily volume-weighted average price of our common stock during the repurchase period under the ASR Agreement, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreement. At settlement, under certain circumstances, Jefferies may be required to deliver additional shares of common stock to us, or, under certain circumstances, we may be required to make a cash payment or to deliver shares of our common stock to Jefferies. Final settlement of the shares of common stock repurchased under the ASR Agreement could occur as early as the third quarter of fiscal 2022. With the remaining availability under the stock repurchase program, we may repurchase our common stock at any time or from time to time, without prior notice, subject to prevailing market conditions and other considerations. Our repurchases may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, accelerated share repurchase programs, tender offers or pursuant to a trading plan that may be adopted in accordance with the Securities and Exchange Commission Rule 10b5-1.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

3432

ITEM 6. EXHIBITS


Exhibit Number		Description
10.1	*	~~Second Amendment to~~Form of 2022 Time-Based Restricted Stock Unit Award Agreement under the BlueLinx Holdings Inc. 2021 Amended and Restated Credit Agreement among BlueLinx Holdings Inc., certain subsidiaries of BlueLinx Holdings Inc. as borrowers or guarantors thereunder, Wells Fargo Bank, National Association, as administrative agent, and certain 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 August 3, 2021). ±Long-Term Incentive Plan
10.2	*	Form of 2022 Performance-Based Restricted Stock Unit Award Agreement under the BlueLinx Holdings Inc. 2021 Amended and Restated Long-Term Incentive Plan
31.1	*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	**	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	**	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.Def		Definition Linkbase Document.
101.Pre		Presentation Linkbase Document.
101.Lab		Labels Linkbase Document.
101.Cal		Calculation Linkbase Document.
101.Sch		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~~July 2, ~~2021,~~2022, 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~~

3533

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~~August 2, ~~2021~~2022	By:	/s/ Kelly C. Janzen
		Kelly C. Janzen
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

Date: August 2, 2022	By:	/s/ Adam K. Bowen
		Adam K. Bowen
		Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

3634


	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)