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~~April 1, ~~2022~~2023


☐			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)		(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~~April 28, ~~2022,~~2023, there were ~~9,035,469~~9,088,972 shares of BlueLinx Holdings Inc. common stock, par value $0.01, outstanding.

BLUELINX HOLDINGS INC.

Form 10-Q

For the Quarterly Period Ended ~~October~~April 1, ~~2022~~2023

INDEX


			PAGE
PART 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			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			1816
Item 3. Quantitative and Qualitative Disclosures About Market Risk			3227
Item 4. Controls and Procedures			3227

PART II. OTHER INFORMATION
Item 1. Legal Proceedings			3328
Item 1A. Risk Factors			3328
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3429
Item 3. Defaults Upon Senior Securities			3429
Item 4. Mine Safety Disclosures			3429
Item 5. Other Information			3429
Item 6. Exhibits			3530

Signature			3631

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
		October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021			April 1, 2023		April 2, 2022
Net sales	Net sales	$	1,060,761	$	970,842	$	3,602,445	$	3,304,224	Net sales	$	797,904	$	1,302,305
Cost of sales	Cost of sales	871,385		817,515		2,920,610		2,719,333		Cost of sales	664,365		1,011,254
Gross profit	Gross profit	189,376		153,327		681,835		584,891		Gross profit	133,539		291,051
Operating expenses (income):	Operating expenses (income):									Operating expenses (income):
Selling, general, and administrative	Selling, general, and administrative	91,678		76,176		274,305		238,746		Selling, general, and administrative	91,174		91,289
Depreciation and amortization	Depreciation and amortization	6,688		6,884		19,952		21,429		Depreciation and amortization	7,718		6,746
Amortization of deferred gains on real estate	Amortization of deferred gains on real estate	(983)		(984)		(2,951)		(2,951)		Amortization of deferred gains on real estate	(984)		(984)
Gains from sales of property		—		—		(144)		(1,287)

Other operating expenses	Other operating expenses	1,267		212		2,731		1,197		Other operating expenses	3,116		838
Total operating expenses	Total operating expenses	98,650		82,288		293,893		257,134		Total operating expenses	101,024		97,889
Operating income	Operating income	90,726		71,039		387,942		327,757		Operating income	32,515		193,162
Non-operating expenses (income):
Non-operating expenses:										Non-operating expenses:
Interest expense, net	Interest expense, net	10,444		8,313		32,992		33,690		Interest expense, net	7,687		11,293
Other expense (income), net		(361)		(704)		916		(1,335)
Other expense, net										Other expense, net	594		1,138
Income before provision for income taxes	Income before provision for income taxes	80,643		63,430		354,034		295,402		Income before provision for income taxes	24,234		180,731
Provision for income taxes	Provision for income taxes	21,134		16,232		89,844		72,886		Provision for income taxes	6,422		47,322
Net income	Net income	$	59,509	$	47,198	$	264,190	$	222,516	Net income	$	17,812	$	133,409

Basic income per share	Basic income per share	$	6.44	$	4.85	$	28.03	$	23.23	Basic income per share	$	1.96	$	13.72
Diluted income per share	Diluted income per share	$	6.38	$	4.74	$	27.82	$	22.91	Diluted income per share	$	1.94	$	13.19

Comprehensive income:	Comprehensive income:									Comprehensive income:
Net income	Net income	$	59,509	$	47,198	$	264,190	$	222,516	Net income	$	17,812	$	133,409
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	156		238		468		723		Amortization of unrecognized pension gain, net of tax	239		156
Other	Other	(24)		7		(24)		24		Other	(11)		20
Total other comprehensive income	Total other comprehensive income	132		245		444		747		Total other comprehensive income	228		176
Comprehensive income	Comprehensive income	$	59,641	$	47,443	$	264,634	$	223,263	Comprehensive income	$	18,040	$	133,585

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


		October 1, 2022		January 1, 2022			April 1, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	229,364	$	85,203	Cash and cash equivalents	$	376,234	$	298,943
Receivables, less allowances of $4,365 and $4,024, respectively		360,535		339,637
Receivables, less allowances of $3,733 and $3,449, respectively						Receivables, less allowances of $3,733 and $3,449, respectively	298,888		251,555
Inventories, net	Inventories, net	535,979		488,458		Inventories, net	409,324		484,313
Other current assets	Other current assets	32,309		31,869		Other current assets	29,295		42,121
Total current assets	Total current assets	1,158,187		945,167		Total current assets	1,113,741		1,076,932
Property and equipment, at cost	Property and equipment, at cost	339,914		318,253		Property and equipment, at cost	365,667		360,869
Accumulated depreciation	Accumulated depreciation	(151,358)		(137,099)		Accumulated depreciation	(157,807)		(155,260)
Property and equipment, net	Property and equipment, net	188,556		181,154		Property and equipment, net	207,860		205,609
Operating lease right-of-use assets	Operating lease right-of-use assets	50,311		49,568		Operating lease right-of-use assets	43,548		45,717
Goodwill	Goodwill	47,772		47,772		Goodwill	55,372		55,372
Intangible assets, net	Intangible assets, net	11,399		13,603		Intangible assets, net	33,879		34,989
Deferred tax assets	Deferred tax assets	61,224		60,285		Deferred tax assets	55,956		56,169
Other non-current assets	Other non-current assets	16,127		19,905		Other non-current assets	15,374		15,254
Total assets	Total assets	$	1,533,576	$	1,317,454	Total assets	$	1,525,730	$	1,490,042
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	208,197	$	180,000	Accounts payable	$	177,046	$	151,626
Accrued compensation	Accrued compensation	18,345		22,363		Accrued compensation	13,115		22,556
Taxes payable		6,750		6,138

Finance lease liabilities - short-term	Finance lease liabilities - short-term	8,732		7,864		Finance lease liabilities - short-term	5,087		7,089
Operating lease liabilities - short-term	Operating lease liabilities - short-term	7,028		5,145		Operating lease liabilities - short-term	6,756		7,432
Real estate deferred gains - short-term	Real estate deferred gains - short-term	3,935		3,934		Real estate deferred gains - short-term	3,935		3,935
Pension benefit obligation - short-term						Pension benefit obligation - short-term	1,795		1,521
Other current liabilities	Other current liabilities	20,191		18,347		Other current liabilities	20,619		16,518
Total current liabilities	Total current liabilities	273,178		243,791		Total current liabilities	228,353		210,677
Non-current liabilities:	Non-current liabilities:					Non-current liabilities:
Long-term debt, net of debt issuance costs of $4,259 and $4,701, respectively		292,094		291,271
Long-term debt, net of debt issuance costs of $3,854 and $4,057, respectively						Long-term debt, net of debt issuance costs of $3,854 and $4,057, respectively	292,753		292,424
Finance lease liabilities - long-term	Finance lease liabilities - long-term	264,004		266,853		Finance lease liabilities - long-term	265,677		265,986
Operating lease liabilities - long-term	Operating lease liabilities - long-term	43,492		44,526		Operating lease liabilities - long-term	38,142		40,011
Real estate deferred gains - long-term	Real estate deferred gains - long-term	71,353		74,206		Real estate deferred gains - long-term	69,452		70,403
Pension benefit obligation		9,216		11,605

Other non-current liabilities	Other non-current liabilities	22,542		21,953		Other non-current liabilities	20,604		20,512
Total liabilities	Total liabilities	975,879		954,205		Total liabilities	914,981		900,013
Commitments and Contingencies	Commitments and Contingencies					Commitments and Contingencies
STOCKHOLDERS’ EQUITY:	STOCKHOLDERS’ EQUITY:					STOCKHOLDERS’ EQUITY:
Common Stock, $0.01 par value, 20,000,000 shares authorized, 9,035,469 and 9,725,760 outstanding on October 1, 2022 and January 1, 2022, respectively		90		97
Common Stock, $0.01 par value, 20,000,000 shares authorized, 9,088,972 and 9,048,603 outstanding on April 1, 2023 and December 31, 2022, respectively						Common Stock, $0.01 par value, 20,000,000 shares authorized, 9,088,972 and 9,048,603 outstanding on April 1, 2023 and December 31, 2022, respectively	91		90
Additional paid-in capital	Additional paid-in capital	197,906		268,085		Additional paid-in capital	203,427		200,748

Accumulated other comprehensive loss	Accumulated other comprehensive loss	(28,916)		(29,360)		Accumulated other comprehensive loss	(31,184)		(31,412)
Retained earnings		388,617		124,427
Accumulated stockholders’ equity						Accumulated stockholders’ equity	438,415		420,603
Total stockholders’ equity	Total stockholders’ equity	557,697		363,249		Total stockholders’ equity	610,749		590,029
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,533,576	$	1,317,454	Total liabilities and stockholders’ equity	$	1,525,730	$	1,490,042

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			Retained Earnings				Stockholders’ Equity Total				Common Stock					Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Equity			Stockholders’ Equity Total
		Shares	Amount								Shares								Amount
Balance, January 1, 2022		9,726	$	97			$	268,085						$	(29,360)			$	124,427		$	363,249
Balance, December 31, 2022																			Balance, December 31, 2022	9,049			$	90		$	200,748		$	(31,412)		$	420,603		$	590,029
Net income	Net income	—	—		—				—			133,409				133,409			Net income	—			—		—			—			17,812			17,812
Impact of pension plan, net of tax	Impact of pension plan, net of tax	—	—		—				156			—				156			Impact of pension plan, net of tax	—			—		—			239			—			239
Vesting of restricted stock units	Vesting of restricted stock units	11	—		—				—			—				—			Vesting of restricted stock units	67			1		(1)			—			—			—
Compensation related to share-based grants	Compensation related to share-based grants	—	—		2,162				—			—				2,162			Compensation related to share-based grants	—			—		4,569			—			—			4,569
Repurchase of shares to satisfy employee tax withholdings	Repurchase of shares to satisfy employee tax withholdings	(5)	—		(393)				—			—				(393)			Repurchase of shares to satisfy employee tax withholdings	(8)			—		(570)			—			—			(570)
Common stock repurchase and retirement		(81)	(1)		(6,426)				—			—				(6,427)
Other		—	—		—				20			—				20
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
Net income		—	—		—				—			59,509				59,509
Impact of pension plan, net of tax		—	—		—				156			—				156
Vesting of restricted stock units		121	1		(1)				—			—				—
Compensation related to share-based grants		—	—		2,092				—			—				2,092
Repurchase of shares to satisfy employee tax withholdings		(51)	(1)		(3,618)				—			—				(3,619)
Common stock repurchase and retirement		(247)	(2)		2				—			—				—
Obligation for repurchase of shares to satisfy employee tax withholdings																			Obligation for repurchase of shares to satisfy employee tax withholdings	(19)					(1,319)			—			—			(1,319)

Other	Other	—	—		(134)				(24)			—				(158)			Other	—			—		—			(11)			—			(11)
Balance, October 1, 2022		9,035	$	90	$	197,906			$	(28,916)		$	388,617			$	557,697
Balance, April 1, 2023																			Balance, April 1, 2023	9,089			$	91	$	203,427		$	(31,184)		$	438,415		$	610,749


		Common Stock			Additional Paid-In Capital				Accumulated Other Comprehensive Loss			Retained Earnings (Accumulated Deficit)				Stockholders’ Equity Total				Common Stock					Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Equity			Stockholders’ Equity Total
		Shares	Amount								Shares								Amount
Balance, January 2, 2021		9,463	$	95			$	266,695						$	(35,992)			$	(171,706)		$	59,092
Balance, January 1, 2022																			Balance, January 1, 2022	9,726			$	97		$	268,085		$	(29,360)		$	124,427		$	363,249
Net income	Net income	—	—		—				—			61,860				61,860			Net income	—			—		—			—			133,409			133,409
Impact of pension plan, net of tax	Impact of pension plan, net of tax	—	—		—				239			—				239			Impact of pension plan, net of tax	—			—		—			156			—			156
Vesting of restricted stock units	Vesting of restricted stock units	8	—		—				—			—				—			Vesting of restricted stock units	11			—		—			—			—			—
Compensation related to share-based grants	Compensation related to share-based grants	—	—		1,410				—			—				1,410			Compensation related to share-based grants	—			—		2,162			—			—			2,162
Repurchase of shares to satisfy employee tax withholdings	Repurchase of shares to satisfy employee tax withholdings	(3)	—		(99)				—			—				(99)			Repurchase of shares to satisfy employee tax withholdings	(5)			—		(393)			—			—			(393)
Common stock repurchase and retirement																			Common stock repurchase and retirement	(81)			(1)		(6,426)			—			—			(6,427)
Other	Other	—	—		—				11			—				11			Other	—			—		—			20			—			20
Balance, April 3, 2021		9,468	95		268,006				(35,742)			(109,846)				122,513
Net income		—	—		—				—			113,458				113,458
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)				6			—				4
Balance, July 3, 2021		9,710	97		264,963				(35,490)			3,612				233,182
Net income		—	—		—				—			47,198				47,198
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)				7			—				3
Balance, October 2, 2021		9,724	$	97	$	266,564			$	(35,245)		$	50,810			$	282,226
Balance, April 2, 2022																			Balance, April 2, 2022	9,651			$	96	$	263,428		$	(29,184)		$	257,836		$	492,176

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Nine Months Ended					Three Months Ended
		October 1, 2022		October 2, 2021			April 1, 2023		April 2, 2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	264,190	$	222,516	Net income	$	17,812	$	133,409
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:
Depreciation and amortization	Depreciation and amortization	19,952		21,429		Depreciation and amortization	7,718		6,746
Amortization of debt discount and issuance costs	Amortization of debt discount and issuance costs	823		1,560		Amortization of debt discount and issuance costs	329		263
Adjustments to debt issuance costs associated with term loan		—		5,791
Gains from sales of property		(144)		(1,287)

Deferred income tax	Deferred income tax	(939)		(7,784)		Deferred income tax	213		(1,994)
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	(984)		(984)
Share-based compensation	Share-based compensation	6,029		5,010		Share-based compensation	4,569		2,162
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(20,898)		(51,331)		Accounts receivable	(47,333)		(157,419)
Inventories	Inventories	(47,521)		(94,330)		Inventories	74,989		(74,097)
Accounts payable	Accounts payable	28,197		45,223		Accounts payable	25,420		50,072
Taxes payable	Taxes payable	612		(1,359)		Taxes payable	—		47,057
Pension contributions						Pension contributions	—		(221)
Other current assets	Other current assets	(440)		(6,247)		Other current assets	5,953		(601)
Other assets and liabilities	Other assets and liabilities	(874)		(9,381)		Other assets and liabilities	279		(2,156)
Net cash provided by operating activities	Net cash provided by operating activities	246,036		126,859		Net cash provided by operating activities	88,965		2,237

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Proceeds from sale of assets, net		648		2,652
Proceeds from sale of assets						Proceeds from sale of assets	37		49
Property and equipment investments	Property and equipment investments	(19,079)		(5,424)		Property and equipment investments	(9,008)		(2,509)
Net cash used in investing activities	Net cash used in investing activities	(18,431)		(2,772)		Net cash used in investing activities	(8,971)		(2,460)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Borrowings on revolving credit facilities		—		900,006
Repayments on revolving credit facilities		—		(965,142)
Repayments on term loan		—		(43,204)

Common stock repurchase and retirement	Common stock repurchase and retirement	(66,427)		—		Common stock repurchase and retirement	—		(6,427)
Debt financing costs		—		(2,811)

Repurchase of shares to satisfy employee tax withholdings	Repurchase of shares to satisfy employee tax withholdings	(9,788)		(5,135)		Repurchase of shares to satisfy employee tax withholdings	(570)		(393)
Principal payments on finance lease liabilities	Principal payments on finance lease liabilities	(7,229)		(7,697)		Principal payments on finance lease liabilities	(2,133)		(3,722)
Net cash used in financing activities	Net cash used in financing activities	(83,444)		(123,983)		Net cash used in financing activities	(2,703)		(10,542)

Net change in cash and cash equivalents	Net change in cash and cash equivalents	144,161		104		Net change in cash and cash equivalents	77,291		(10,765)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	85,203		82		Cash and cash equivalents at beginning of period	298,943		85,203
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	229,364	$	186	Cash and cash equivalents at end of period	$	376,234	$	74,438

Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:

Interest paid during the period	Interest paid during the period	24,824		26,382		Interest paid during the period	$	6,190	$	6,387
Taxes paid during the period	Taxes paid during the period	90,626		82,596		Taxes paid during the period	$	—	$	2,350

Non-cash transactions:	Non-cash transactions:					Non-cash transactions:
Property and equipment acquired under finance leases		5,995		10,549

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

See accompanying Notes.

BLUELINX HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~October~~April 1, ~~2022~~2023

(Unaudited)

1. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of BlueLinx Holdings Inc. and its wholly owned subsidiaries (the “Company”). We derived the condensed consolidated balance sheet at ~~October~~April 1, ~~2022~~2023, from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended ~~January 1,~~December 31, 2022 (the “Fiscal ~~2021~~2022 Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”) on February ~~22, 2022.~~21, 2023. In the opinion of our management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of our statements of operations and comprehensive income for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021,~~2022, our balance sheets at ~~October~~April 1, ~~2022~~2023 and ~~January 1,~~December 31, 2022, our statements of stockholders’ equity for the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021,~~2022, and our statements of cash flows for the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021.~~2022.

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 ~~2021~~2022 Form 10-K. The results for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022~~2023 are not necessarily indicative of results that may be expected for the full year ending December ~~31, 2022,~~30, 2023, or any other interim period.

We operate on a 5-4-4 fiscal calendar. Our fiscal year ends on the Saturday closest to December 31 of that fiscal year and may comprise 53 weeks in certain years. Our ~~2022~~2023 fiscal year contains 52 weeks and ends on December ~~31, 2022.~~30, 2023. Fiscal ~~2021~~2022 contained 52 weeks and ended on ~~January 1,~~December 31, 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.

Reclassification of Prior Period Presentation

For the ~~nine months~~quarter ended ~~October~~April 2, ~~2021,~~2022, we have reclassified certain items within the presentation of our statement of cash flows to align with our statement of cash flows presentation for the ~~nine months~~quarter ended ~~October~~April 1, ~~2022.~~2023. Our reclassifications are limited to the operating activities section and include presenting only the impact of deferred 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 itemspension contributions, which were previously presented ~~individually, such as pension expense and pension contributions, to be included in~~within the change of other assets and ~~liabilities. In addition, we are presenting the change~~liabilities, as an individual item within changes in ~~taxes payable, previously included in other~~operating assets and ~~liabilities, as a distinct line item in our reconciliation of net income to cash provided by operating activities.~~liabilities. These reclassifications, we believe, provide an enhanced level of transparency with regards to the presentation of our statement of cash flows.

Recently Adopted Accounting Standards

Credit Impairment Losses. In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses (Topic 326).” This ASU sets forth a current expected credit loss (“CECL”) model which requires the measurement of all expected credit losses for financial instruments or other assets (e.g., trade receivables), held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the 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 on a modified retrospective basis in the first quarter of 2022 and the implementation did not have a material impact to the Company’s condensed consolidated financial statements.

Reference Rate Reform. In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The standard provides temporary guidance to ease the potential burden in accounting for reference rate reform primarily resulting from the discontinuation of the publication of

certain tenors of the London Inter-bank Offered Rate (“LIBOR”) on December 31, 2021, with complete elimination of the publication of the LIBOR by June 30, 2023. The amendments in this ASU are elective and apply to all entities that have contracts referencing the LIBOR.

The Company’s revolving credit agreement, as further discussed in Note 6,Long-Term Debt, to these condensed consolidated financial statements, 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 for interim periods and fiscal years beginning after December 15, 2020. We adopted this standard effective for fiscal year 2021. The adoption of the standard did not have a material impact on the Company's condensed consolidated financial statements.

2. Business Combinations

On October 3, 2022, we acquired all the outstanding stock of Vandermeer Forest Products, Inc. (“Vandermeer”), a premier wholesale distributor of building products, for preliminary total consideration of $69.3 million. The acquisition has been accounted for as a business combination using the acquisition method. The assets acquired and liabilities assumed were recognized at their acquisition date fair values. The acquisition accounting, including fair value estimations, is subject to change as we finalize all assessments of the assets and liabilities that were acquired on the acquisition date. The primary area of the preliminary acquisition accounting that is not yet finalized relates to settlement of the holdback liability.

As of the date of the acquisition, the holdback liability was $6.3 million. During the quarter-ended April 1, 2023, $0.3 million of the holdback liability was returned to the Company for adjustments related to final cash and working capital balances, reducing preliminary total consideration from $69.3 million to $69.0 million. The remaining holdback liability of $6.0 million is scheduled to be settled approximately 18 months after the acquisition date.

3. 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 or net realizable value, which also considers items that may be considered damaged, excess, and obsolete inventory.

~~During~~As of April 1, 2023, we assessed the ~~second quarter~~carrying value of ~~fiscal~~our inventory and determined it was presented at the lower of cost or net realizable value and that a reserve was not necessary.

As of December 31, 2022, we recorded a lower of cost or net realizable value reserve of ~~$9.8~~$2.6 million as a result of the decrease in the value of our structural lumber and panel inventory related to the decline in wood-based commodity prices as of the end of the period. In addition, volatility during the third quarter of fiscal 2022 also resulted in a decline in wood-based commodity prices as of the end of the period such that a lower of cost or net realizable value reserve of $4.1 million was required, resulting in a partial release of our reserve resulting in a net beneficial impact of $5.7 million for the third quarter of fiscal 2022. For the first nine months of fiscal 2022, the net impact of our lower of cost or net realizable value reserve on cost of sales was $4.1 million.

During the second quarter of fiscal 2021, we recorded a lower of cost or net realizable value reserve of $16.7 million as a result of the decrease in the value of our structural lumber and panel inventory related to the decline in wood-based commodity prices as of the end of the period. During the third quarter of fiscal 2021, we released a lower of cost or net realizable value reserve of $16.7 million, as the inventory impacted by the reserve recorded in the second quarter of fiscal 2021 was sold to customers. For the first nine months of fiscal 2021, the net impact of our lower of cost or net realizable value reserve on cost of sales was zero.

3.4. Goodwill and Other Intangible Assets

In connection with our past merger and acquisition activity, we acquired certain intangible assets. As of ~~October~~April 1, ~~2022,~~2023, 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~~April 1, ~~2022,~~2023, goodwill was ~~$47.8~~$55.4 million.

Goodwill is not subject to amortization but must be tested for impairment at least annually. This test requires us to assign goodwill to a reporting unit and to determine if the fair value of the reporting unit’s goodwill is less than its carrying amount. We evaluate goodwill for impairment during the fourth quarter of each fiscal year. In addition, we will evaluate the carrying value for impairment between annual impairment tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Such events and indicators may include, without limitation, significant declines in the industries in which our products are used, significant changes in capital market conditions, and significant changes in our

market capitalization. No such indicators were present during the ~~third~~first quarter of fiscal ~~2022.~~2023. Our one reporting unit has a fair value that exceeds its carrying value as of ~~October~~April 1, ~~2022.~~2023.

The following table provides information related to the carrying amount of our goodwill:


	Total Carrying Amount
	(In thousands)
Balance at December 31, 2022	$	55,372
Acquisitions	—
Balance at April 1, 2023	$	55,372

Definite-Lived Intangible Assets

~~On October 1, 2022, the~~The gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets at April 1, 2023 were as follows:


Intangible Asset	Intangible Asset	Weighted Average Remaining Useful Lives (Years)	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
			(In thousands)								(In thousands)
Customer relationships	Customer relationships	8	$	25,500	$	(14,101)	$	11,399	Customer relationships	10	$	48,500	$	(16,084)	$	32,416
Noncompete agreements	Noncompete agreements	—	8,254		(8,254)		—		Noncompete agreements	5	8,954		(8,324)		630
Trade names	Trade names	—	6,826		(6,826)		—		Trade names	3	7,826		(6,993)		833
Total	Total		$	40,580	$	(29,181)	$	11,399	Total		$	65,280	$	(31,401)	$	33,879

(1) Intangible assets except customer relationships are amortized on ~~a straight-line~~straight line basis. ~~Customer~~Certain of our customer relationships are amortized on a double declining balance ~~method.~~method and certain others are amortized on a straight line basis.

Amortization Expense

Amortization expense for our definite-lived intangible assets was ~~$0.5~~$1.1 million and ~~$2.2~~$1.1 million for the ~~three and nine month~~three-month periods ended ~~October~~April 1, ~~2022, respectively. For the three~~2023 and ~~nine month periods ended October~~April 2, ~~2021, amortization expense was $1.1 million and $4.2 million,~~2022, respectively.

Estimated amortization expense for definite-lived intangible assets for the remaining portion of ~~2022~~2023 and the next five fiscal years is as follows:


Fiscal Year	Fiscal Year	Estimated Amortization		Fiscal Year	Estimated Amortization
		(In thousands)			(In thousands)
2022		$	512
2023	2023	1,807		2023	$	3,113
2024	2024	1,505		2024	3,930
2025	2025	1,423		2025	3,765
2026	2026	1,423		2026	3,471
2027	2027	1,423		2027	3,340
2028				2028	3,340

4.5. Revenue Recognition

We recognize revenue when the following criteria are met: (1) Contract with the customer has been identified; (2) Performance obligations in the contract have been identified; (3) Transaction price has been determined; (4) Transaction price has been allocated to the performance obligations; and (5) When (or as) performance obligations are satisfied.

Contracts with our customers are generally in the form of standard terms and conditions of sale. From time to time, we may enter into specific contracts, which may affect delivery terms. Performance obligations in our contracts generally consist solely of delivery of goods. For all sales channel types, consisting of warehouse, direct, and reload sales, we typically satisfy our performance obligations upon shipment. Our customer payment terms are typical for our industry, and may vary by the type

and location of our customer and the products or services offered. The term between invoicing and when payment is due is not deemed to be significant by us. For certain sales channels and/or products, our standard terms of payment may be as early as ten days.

In addition, we provide inventory to certain customers through pre-arranged agreements on a consignment basis. Customer consigned inventory is maintained and stored by certain customers; however, ownership and risk of loss remain with us.

All revenues recognized are net of trade allowances (i.e., rebates), cash discounts, and sales returns. Cash discounts and sales returns are estimated using historical experience. Trade allowances are based on the estimated obligations and historical experience. Adjustments to earnings resulting from revisions to estimates on discounts and returns have been insignificant for each of the reported periods. Certain customers may receive cash-based incentives or credits, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized. We believe that there will not be significant changes to our estimates of variable consideration.

The following table presents our revenues disaggregated by revenue source. Sales and usage-based taxes are excluded from revenues.


		Three Months Ended				Nine Months Ended					Three Months Ended
Product type	Product type	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021		Product type	April 1, 2023		April 2, 2022
		(In thousands)				(In thousands)					(In thousands)
Specialty products	Specialty products	$	724,323	$	641,024	$	2,280,090	$	1,878,835	Specialty products	$	567,838	$	767,907
Structural products	Structural products	336,438		329,818		1,322,355		1,425,389		Structural products	230,066		534,398
Total net sales	Total net sales	$	1,060,761	$	970,842	$	3,602,445	$	3,304,224	Total net sales	$	797,904	$	1,302,305

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
Sales channel	Sales channel	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021		Sales channel	April 1, 2023		April 2, 2022
		(In thousands)				(In thousands)					(In thousands)
Warehouse and reload	Warehouse and reload	$	889,349	$	783,758	$	2,987,636	$	2,695,326	Warehouse and reload	$	686,632	$	1,077,946
Direct	Direct	193,446		204,524		680,333		660,934		Direct	127,095		246,652
Customer discounts and rebates	Customer discounts and rebates	(22,034)		(17,440)		(65,524)		(52,036)		Customer discounts and rebates	(15,823)		(22,293)
Total net sales	Total net sales	$	1,060,761	$	970,842	$	3,602,445	$	3,304,224	Total net sales	$	797,904	$	1,302,305

~~5. Assets Held for Sale~~

As of October 1, 2022, we had no assets or liabilities classified as “held for sale”. As of January 1, 2022, the net book value of total assets classified as “held for sale” was $2.6 million and was included in other current assets in our 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 condensed consolidated balance sheet.

Assets classified as “held for sale” as of January 1, 2022, consisted of fixed assets, at net book value, and current assets, including raw material and work in 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 that will be transferred with the assets held for sale. As of January 1, 2022, we planned to sell 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~~April 1, ~~2022~~2023 and ~~January 1,~~December 31, 2022, long-term debt consisted of the following:


		October 1, 2022		January 1, 2022			April 1, 2023		December 31, 2022
		(In thousands)					(In thousands)
Senior secured notes (1)	Senior secured notes (1)	$	300,000	$	300,000	Senior secured notes (1)	$	300,000	$	300,000
Revolving credit facility (2)	Revolving credit facility (2)	—		—		Revolving credit facility (2)	—		—

Finance lease obligations (3)	Finance lease obligations (3)	272,736		274,717		Finance lease obligations (3)	270,764		273,075
		572,736		574,717			570,764		573,075
Unamortized debt issuance costs	Unamortized debt issuance costs	(4,259)		(4,701)		Unamortized debt issuance costs	(3,854)		(4,057)
Unamortized bond discount costs	Unamortized bond discount costs	(3,647)		(4,028)		Unamortized bond discount costs	(3,393)		(3,519)
		564,830		565,988			563,517		565,499
Less: current maturities of long-term debt	Less: current maturities of long-term debt	8,732		7,864		Less: current maturities of long-term debt	5,087		7,089
Long-term debt, net of current maturities	Long-term debt, net of current maturities	$	556,098	$	558,124	Long-term debt, net of current maturities	$	558,430	$	558,410

(1)As of ~~October~~April 1, ~~2022~~2023 and ~~January 1,~~December 31, 2022, our long-term debt was comprised of $300.0 million of senior secured notes issued in October 2021. These notes are presented under the ~~“Long-term debt”~~long-term debt caption of our condensed consolidated balance sheets at ~~$292.1~~$292.8 million and ~~$291.3~~$292.4 million at ~~October~~April 1, ~~2022~~2023 and ~~January 1,~~December 31, 2022, respectively. This presentation is net of their discount of ~~$3.6~~$3.4 million and ~~$4.0~~$3.5 million and the combined carrying value of our debt issuance costs of ~~$4.3~~$3.9 million and ~~$4.7~~$4.1 million at ~~October~~April 1, ~~2022~~2023 and ~~January 1,~~December 31, 2022, respectively. Our senior secured notes are presented in this table at their face value.

(2) The average effective interest rate for our revolving credit facility was zero ~~percent and 2.6~~ percent for the quarters ended ~~October~~April 1, ~~2022~~2023 and ~~January 1, 2022, respectively.~~April 2, 2022.

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

Senior Secured Notes

In October 2021, we completed a private offering of ~~$300~~$300.0 million of our six percent senior secured notes due 2029 (the “2029 Notes”), and in connection therewith we entered into an indenture (the “Indenture”) with the guarantors party thereto and Truist Bank, as trustee and collateral agent. The 2029 Notes were issued to investors at 98.625 percent of their principal amount and will mature on November 15, 2029. The majority of net proceeds from the offering of the 2029 Notes were used to repay borrowings under our revolving credit facility, as defined below.

As of April 1, 2023 and December 31, 2022, the fair value of our 2029 Notes was approximately $276.8 million and $283.6 million, respectively, which are designated as Level 2 in the fair value hierarchy. Our valuation technique is based primarily on observable market prices in less active markets.

Revolving Credit Facility

~~In April 2018, we~~Our Revolving Credit Facility, entered into ~~a revolving credit facility~~ with Wells Fargo Bank, National Association, as administrative agent (“the Agent”), and certain other financial institutions party thereto. In August 2021, we 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 borrowings under the facility (as amended, the “Revolving Credit Facility”). As amended, the Revolving Credit Facilitythereto, provides for a senior secured asset-based revolving loan and letter of credit facility of up to ~~$350~~$350.0 million. ~~The Borrowers’~~Our obligations under the Revolving Credit Facility are secured by a security interest in substantially all of our and our subsidiaries’ assets (other than real property), including inventories, accounts receivable, and proceeds from those items.

Borrowings under ~~the~~our Revolving Credit Facility bear interest at a rate per annum equal to (i) LIBOR plus a margin ranging from 1.25 percent to 1.75 percent, with the margin determined based upon average excess availability for the immediately preceding fiscal quarter for loans based on LIBOR, or (ii) the 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.

Our Revolving Credit Facility includes available interest rate options based on LIBOR, which will be discontinued as an available rate option after June 30, 2023. Under the terms of the facility, LIBOR will be replaced with the Secured Overnight Financing Rate (“SOFR”) with respect to the applicable variable rate interest options thereunder, with effect on or before June 30, 2023.

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

As of ~~October~~April 1, 2023, we had zero outstanding borrowings and excess availability, including cash in qualified accounts, of $722.7 million under our Revolving Credit Facility. As of December 31, 2022, we had zero outstanding borrowings and excess availability, including cash in qualified accounts, of ~~$575.8~~$645.4 million under our Revolving Credit Facility. ~~As of January 1, 2022, we had zero outstanding borrowings and excess availability, including cash in qualified accounts, of $431.7 million~~Available borrowing capacity under our Revolving Credit ~~Facility.~~Facility was $346.5 million on April 1, 2023 and December 31, 2022. Our average effective interest rate under the facility was zero percent ~~and 2.6 percent~~for the quarters ended ~~October~~April 1, ~~2022~~2023 and ~~January 1, 2022, respectively.~~April 2, 2022.

~~The~~Our Revolving Credit Facility contains certain financial and other covenants, and our right to borrow under the Revolving Credit Facility is conditioned upon, among other things, our compliance with these covenants. We were in compliance with all covenants under ~~the~~our Revolving Credit Facility as of ~~October~~April 1, ~~2022.~~

~~Term Loan Facility~~

On April 2, 2021, we repaid the remaining outstanding principal balance of our former term loan facility, and, as a result, as of January 1, 2022 and October 1, 2022, we had zero outstanding borrowings under the term loan facility, which has been extinguished. In connection with our repayment of the outstanding principal balance in full on April 2, 2021, we expensed $5.8 million of debt issuance costs that we were amortizing in connection with our former term loan facility. These costs are included within interest expense, net on the condensed consolidated statements of operations and reported separately as an adjustment to net income in our condensed consolidated statements of cash flows.

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 zero percent for the quarters ended October 1, 2022 and January 1, 2022.2023.

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~~Cost (Benefit)

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


		Three Months Ended				Nine Months Ended					Three Months Ended
Pension-related items	Pension-related items	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021		Pension-related items	April 1, 2023		April 2, 2022
		(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	606		505		1,818		1,515		Interest cost on projected benefit obligation	1,104		606
Expected return on plan assets	Expected return on plan assets	(1,177)		(1,140)		(3,531)		(3,420)		Expected return on plan assets	(812)		(1,177)
Amortization of unrecognized gain	Amortization of unrecognized gain	209		321		627		963		Amortization of unrecognized gain	302		209
Net periodic pension benefit		$	(362)	$	(314)	$	(1,086)	$	(942)
Net periodic pension cost (benefit)										Net periodic pension cost (benefit)	$	594	$	(362)

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

During the three months ended April 1, 2023, we continued our previously announced plan to terminate the BlueLinx Corporation Hourly Retirement Plan (the “plan”) and transfer the management and delivery of continuing benefits associated with the plan to a highly rated and qualified insurance company with pension termination experience. The process for terminating a pension plan involves several regulatory steps and approvals, and typically takes 12 to 18 months to complete. We estimate the plan termination will be completed during fiscal 2023.

8. Stock Compensation

During the three months ended April 1, 2023 and ~~nine month periods ended October 1,~~April 2, 2022, we incurred stock compensation expense of ~~$2.1~~$4.6 million and ~~$6.0 million, respectively. For the three and nine month periods ended October 2, 2021, we incurred stock compensation expense of $1.6 million and $5.0~~$2.2 million, respectively. The increase in our stock compensation expense for the ~~three month period endedOctober 1, 2022 compared to the prior-year~~three-month period is primarily attributable to the ~~timing~~acceleration of ~~award vesting and associated expense recognition. The increase~~unrecognized compensation cost in conjunction with our ~~stock compensation expense for the ninemonth period ended October 1, 2022 compared to the prior-year period is primarily attributable to~~announced leadership transition. Additionally, there was an increase in the number of awards granted, as well as the increase in the grant-date fair value, or the Company’s stock price, of awards currently vesting compared to the prior year.

As of April 1, 2023, we have accrued $1.3 million for tax withholding obligations of our employees upon vesting of restricted stock unit awards. This has been presented as a non-cash transaction in our condensed consolidated statement of cash flows.

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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 one to 15 years, some of which include one or more options to extend the leases for five years. Our leases generally provide for fixed annual rentals. Certain of our leases include provisions for escalating rent based on, among other things, contractually defined increases and/or changes in the Consumer Price Index (“CPI”). The known changes to lease payments are included in the lease liability at lease commencement. Unknown changes related to CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. In addition, a subset of our vehicle lease cost is considered variable. Some of our leases require us to pay taxes, insurance, and maintenance expenses associated with the leased assets. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

We determine if an arrangement is a lease at inception and assess lease classification as either operating or finance at lease inception or modification. Operating lease right-of use (“ROU”) assets and liabilities are presented separately on the condensed consolidated balance sheets. Finance lease ROU assets are included in property and equipment and the finance lease obligations are presented separately in the condensed consolidated balance sheets. When a lease does not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. 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.

The following table presents our assets and liabilities related to our leases as of ~~October~~April 1, ~~2022~~2023 and ~~January 1,~~December 31, 2022:


Lease assets and liabilities	Lease assets and liabilities		October 1, 2022		January 1, 2022		Lease assets and liabilities		April 1, 2023		December 31, 2022
			(In thousands)						(In thousands)
Assets	Assets	Classification					Assets	Classification
Operating lease right-of-use assets	Operating lease right-of-use assets		$	50,311	$	49,568	Operating lease right-of-use assets		$	43,548	$	45,717
Finance lease right-of-use assets (1)	Finance lease right-of-use assets (1)	Property and equipment, net	136,203		143,851		Finance lease right-of-use assets (1)	Property and equipment, net	130,659		132,748
Total lease right-of-use assets	Total lease right-of-use assets		$	186,514	$	193,419	Total lease right-of-use assets		$	174,207	$	178,465

Liabilities	Liabilities						Liabilities
Current portion	Current portion						Current portion
Operating lease liabilities	Operating lease liabilities	Operating lease liabilities - short term	$	7,028	$	5,145	Operating lease liabilities	Operating lease liabilities - short term	$	6,756	$	7,432
Finance lease liabilities	Finance lease liabilities	Finance lease liabilities - short term	8,732		7,864		Finance lease liabilities	Finance lease liabilities - short term	5,087		7,089
Non-current portion	Non-current portion						Non-current portion
Operating lease liabilities	Operating lease liabilities	Operating lease liabilities - long term	43,492		44,526		Operating lease liabilities	Operating lease liabilities - long term	38,142		40,011
Finance lease liabilities	Finance lease liabilities	Finance lease liabilities - long term	264,004		266,853		Finance lease liabilities	Finance lease liabilities - long term	265,677		265,986
Total lease liabilities	Total lease liabilities		$	323,256	$	324,388	Total lease liabilities		$	315,662	$	320,518

(1) Finance lease right-of-use assets are presented net of accumulated amortization of ~~$87.4~~$88.9 million and ~~$73.7~~$90.1 million as of ~~October~~April 1, ~~2022~~2023 and ~~January 1,~~December 31, 2022, respectively.

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The components of lease expense were as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended
Components of lease expense	Components of lease expense	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021		Components of lease expense	April 1, 2023		April 2, 2022
		(In thousands)				(In thousands)					(In thousands)
Operating lease cost:	Operating lease cost:	$	2,529	$	2,959	$	7,625	$	8,942	Operating lease cost:
Operating lease cost										Operating lease cost	$	2,918	$	2,517
Sublease income										Sublease income	(578)		(652)
Total operating lease costs										Total operating lease costs	$	2,340	$	1,865

Finance lease cost:	Finance lease cost:									Finance lease cost:
Amortization of right-of-use assets	Amortization of right-of-use assets	$	5,098	$	4,012	$	13,698	$	12,209	Amortization of right-of-use assets	$	2,089	$	3,710
Interest on lease liabilities	Interest on lease liabilities	6,104		6,244		18,384		18,659		Interest on lease liabilities	6,044		6,160
Total finance lease costs	Total finance lease costs	$	11,202	$	10,256	$	32,082	$	30,868	Total finance lease costs	$	8,133	$	9,870

~~Cash~~Supplemental cash flow information related to leases was as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended
Cash flow information	Cash flow information	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021		Cash flow information	April 1, 2023		April 2, 2022
		(In thousands)				(In thousands)					(In thousands)
Cash paid for amounts included in the measurement of lease liabilities	Cash paid for amounts included in the measurement of lease liabilities									Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	Operating cash flows from operating leases	$	2,562	$	2,822	$	7,713	$	8,193	Operating cash flows from operating leases	$	3,458	$	2,528
Operating cash flows from finance leases	Operating cash flows from finance leases	6,104		6,244		18,384		18,659		Operating cash flows from finance leases	6,044		6,160
Financing cash flows from finance leases	Financing cash flows from finance leases	$	2,496	$	3,026	$	7,229	$	7,697	Financing cash flows from finance leases	$	2,133	$	3,722

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

Three Months Ended Nine Months Ended
Non-cash information October 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021
(In thousands) (In thousands)
Right-of-use assets obtained in exchange for lease obligations
Operating leases $ 3,604 $ 217 $ 4,731 $ 5,508
Finance leases $ 3,279 $ — $ 5,995 $ 10,549

Three Months Ended

Non-cash information

April 1, 2023

April 2, 2022

(In thousands)

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

Operating leases

—

Finance leases

—

Supplemental balance sheet information related to leases was as follows:

Balance sheet information October 1, 2022 January 1, 2022
(In thousands)
Finance leases
   Property and equipment $ 223,642 $ 217,592
   Accumulated depreciation (87,439) (73,741)
Property and equipment, net $ 136,203 $ 143,851
Weighted Average Remaining Lease Term (in years)
   Operating leases 10.09 10.75
   Finance leases 14.25 15.06
Weighted Average Discount Rate
   Operating leases 8.85 % 9.01 %
   Finance leases 8.94 % 10.00 %


Balance sheet information	April 1, 2023			December 31, 2022
	(In thousands)
Finance leases
Property and equipment	$	219,572		$	222,839
Accumulated depreciation	(88,913)			(90,091)
Property and equipment, net	$	130,659		$	132,748
Weighted Average Remaining Lease Term (in years)
Operating leases	9.28			9.21
Finance leases	13.78			13.97
Weighted Average Discount Rate
Operating leases	8.61		%	8.54		%
Finance leases	8.89		%	8.87		%

The major categories of our finance lease liabilities as of ~~October~~April 1, ~~2022~~2023 and ~~January 1,~~December 31, 2022 are as follows:


Category	Category	October 1, 2022		January 1, 2022		Category	April 1, 2023		December 31, 2022
		(In thousands)					(In thousands)
Equipment and vehicles	Equipment and vehicles	$	28,842	$	30,710	Equipment and vehicles	$	27,162	$	29,300
Real estate	Real estate	243,894		244,007		Real estate	243,602		243,775
Total finance leases	Total finance leases	$	272,736	$	274,717	Total finance leases	$	270,764	$	273,075

AsUnder the short-term lease exception provided within ASC 842, we do not record a lease liability or right-of-use asset for any leases that have a lease term of ~~October 1, 2022, maturities~~12 months or less at commencement. Below is a summary of undiscounted finance and operating lease liabilities ~~were~~that have initial terms in excess of one year as ~~follows:~~

Fiscal year Operating leases Finance leases
(In thousands)
2022 $ 3,214 $ 6,558
2023 11,039 32,943
2024 10,310 32,329
2025 9,323 28,709
2026 6,114 32,189
Thereafter 38,745 351,962
Total lease payments $ 78,745 $ 484,690
Less: imputed interest (28,225) (211,954)
Total $ 50,520 $ 272,736

~~On January~~of April 1, ~~2022, maturities~~2023. The table also includes a reconciliation of the future undiscounted cash flows to the present value of the finance and operating lease liabilities ~~were as follows:~~included in the condensed consolidated balance sheets, including options to extend lease terms that are reasonably certain of being exercised.


Fiscal year	Fiscal year	Operating leases		Finance leases		Fiscal year	Operating leases		Finance leases
		(In thousands)					(In thousands)
2022		$	9,376	$	32,495
2023	2023	9,134		32,115		2023	$	7,724	$	21,147
2024	2024	8,329		31,521		2024	10,072		31,836
2025	2025	8,329		27,994		2025	8,756		28,988
2026	2026	6,050		31,439		2026	5,460		32,553
2027						2027	4,217		26,970
Thereafter	Thereafter	40,711		348,149		Thereafter	31,519		524,869
Total lease payments	Total lease payments	$	81,929	$	503,713	Total lease payments	$	67,748	$	666,363
Less: imputed interest	Less: imputed interest	(32,258)		(228,996)		Less: imputed interest	(22,850)		(395,599)
Total	Total	$	49,671	$	274,717	Total	$	44,898	$	270,764

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~~April 1, ~~2022,~~2023, we employed approximately ~~2,411~~2,100 associates and less than one percent of our associates are employed on a part-time basis. Approximately 16 percent of our associates are represented by various local labor unions with terms and conditions of employment governed by Collective Bargaining Agreements (“CBAs”). Four CBAs covering approximately ~~six~~four percent of our associates are up for renewal in the remainder of fiscal 2023, which we expect to renegotiate by the end of fiscal 2023.

11. Accumulated Other Comprehensive Loss

Comprehensive income includes both net income and other comprehensive income. Other comprehensive income results from items deferred from recognition into our condensed consolidated statements of operations and comprehensive income. Accumulated other comprehensive loss is separately presented on our condensed consolidated balance sheets as part of stockholders’ equity.

The changes in balances for each component of accumulated other comprehensive loss for the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023, were as follows:

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 468 (24) 444
October 1, 2022, ending balance, net of tax $ (29,777) $ 861 $ (28,916)


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

December 31, 2022, beginning balance	$	(32,675)	$	1,263	$	(31,412)
Other comprehensive income, net of tax	239		(11)		228
April 1, 2023, ending balance, net of tax	$	(32,436)	$	1,252	$	(31,184)

12. Income Taxes

Effective Tax Rate

Our effective tax rate for the three months ended ~~October~~April 1, 2023 and April 2, 2022 ~~and October 2, 2021~~ was ~~26.2~~26.5 percent and ~~25.6 percent, respectively. Our effective tax rate for the nine months ended October 1, 2022 and October 2, 2021 was 25.4 percent and 24.7~~26.2 percent, respectively.

Our effective tax ~~rate~~rates for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~2022 were impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive ~~compensation. Each nine-month period also includes~~compensation, slightly offset by a benefit from the vesting of restricted stock ~~units. Our effective tax rate~~units, which occurred during each period. For additional information about our income taxes, see Note 8 of our Annual Report on Form 10-K for the ~~three and nine months~~fiscal year ended October 2, 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 first nine months of fiscal 2021.

~~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, which resulted in a three-year cumulative income situation as positive evidence which carried substantial weight. While this was substantial, it was not the only evidence we evaluated. We also considered evidence related to the four sources of taxable income to determine whether such positive evidence outweighed the negative evidence. The evidence considered included:

•~~future reversals of existing taxable temporary differences;~~

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

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

•~~tax planning strategies.~~

In addition to the positive evidence discussed above, we considered as positive evidence forecasted taxable income, the detail scheduling of timing of the reversal of our deferred tax assets and liabilities, and the evidence from business and tax planning

~~strategies. As of October 1, 2022, in our evaluation of the weight of available evidence, we concluded that our net deferred tax assets were not impaired.~~December 31, 2022.

13. Income ~~per~~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 August 23, 2021, our Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $25.0 million of our common stock. During the first quarter of fiscal 2022, we repurchased 81,331 shares of our common stock under this program at an average price of $79.03 per share.

On May 3, 2022, our Board of Directors increased our share repurchase authorization to $100.0 million and we entered into an Accelerated Share Repurchase Agreement (“ASR Agreement”) with Jefferies LLC 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 nine month period ended October 1, 2022.

Final settlement of the shares of common stock repurchased under the ASR Agreement occurred on September 15, 2022 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 other adjustments pursuant to the terms and conditions of the ASR Agreement. At settlement, we received an additional 247,431 shares of common stock, which 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 nine month periods ended October 1, 2022. Under our ASR Agreement, we repurchased a total of 801,015 shares of our common stock at an average price of $74.90 per share.

The reconciliation of basic net income and diluted net income per common share for the ~~three and nine month~~three-month periods ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021~~2022 were as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021			April 1, 2023		April 2, 2022
		(In thousands, except per share data)				(In thousands, except per share data)					(In thousands, except per share data)

Net income	Net income	$	59,509	$	47,198	$	264,190	$	222,516	Net income	$	17,812	$	133,409

Weighted-average shares outstanding - basic	Weighted-average shares outstanding - basic	9,230		9,721		9,425		9,579		Weighted-average shares outstanding - basic	9,059		9,720
Dilutive effect of share-based awards	Dilutive effect of share-based awards	98		232		72		135		Dilutive effect of share-based awards	98		393
Weighted-average shares outstanding - diluted	Weighted-average shares outstanding - diluted	9,328		9,953		9,497		9,714		Weighted-average shares outstanding - diluted	9,157		10,113

Basic income per share	Basic income per share	$	6.44	$	4.85	$	28.03	$	23.23	Basic income per share	$	1.96	$	13.72
Diluted income per share	Diluted income per share	$	6.38	$	4.74	$	27.82	$	22.91	Diluted income per share	$	1.94	$	13.19

Approximately ~~77,000~~78,000 and ~~2,000~~3,000 weighted-average share-based awards were excluded from the computation of earnings per share assuming dilution during the three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021, respectively, as the awards would have been anti-dilutive for the periods presented.~~

~~Approximately 58,000 and 119,000 weighted-average share-based awards were excluded from the computation of earnings per share assuming dilution during the nine months ended October 1,~~ 2022, ~~and October 2, 2021,~~ respectively, as the awards would have been anti-dilutive for the periods presented.

1615

~~14. Subsequent Event~~

On October 3, 2022, we announced that we entered into and closed on a Stock Purchase Agreement (the “Purchase Agreement”) with Vandermeer Forest Products, Inc., a Washington corporation (“Vandermeer”), and the sole shareholder of Vandermeer. Vandermeer is a premier wholesale distributor of building products, serving over 250 customers across the Pacific Northwest, Alaska, Hawaii, British Columbia, and Alberta. The acquisition of Vandermeer adds three distribution branches in Washington state and provides direct access to Seattle and Portland, two of the top 15 metropolitan statistical areas in the United States. Additionally, we now have coast-to-coast reach and serve all 50 states.

Under the Purchase Agreement, we acquired all of the outstanding capital stock of Vandermeer for an aggregate purchase price of approximately $63.4 million, on a debt-free, cash-free basis, subject to customary post-closing adjustments in respect of net working capital, cash, transaction expenses and indebtedness. In addition, we acquired Vandermeer’s Spokane, Washington distribution facility and related real estate from the sole shareholder of Vandermeer for approximately $3.6 million, resulting in an aggregate purchase price of $67.0 million for the business and real property, which we funded with cash on hand. We are currently in the process of finalizing the accounting for this transaction and expect to complete our preliminary allocation of the purchase consideration by the end of fiscal 2022.

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

About Our Business

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 panels, and industrial 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~~We have a strong market position and a broad geographic coverage footprint servicing all 50 states, where ~~our~~we maintain locations ~~are in approximately~~that serve 75 percent of the highest growth metropolitan statistical areas ~~combined with~~as it relates to forecasted housing starts and repair and remodel spend. With the strength of a locally focused sales force, we distribute a comprehensive range of products from over 750 suppliers. Our suppliers include some of the leading manufacturers in the industry, such as Allura, Arauco, Fiberon, Georgia-Pacific, Huber Engineered Woods, ~~James Hardie,~~ Louisiana-Pacific, Oldcastle APG, Ply Gem, Roseburg, Royal and Weyerhaeuser. We supply products to a broad base of ~~over 15,000~~ customers including national home centers, pro dealers, cooperatives, specialty distributors, regional and local dealers and industrial manufacturers. Many of our customers serve residential and commercial builders, contractors and remodelers in their respective geographic areas and local markets.

As a 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 these 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 a value proposition of rapid delivery on an as-needed basis to our customers from our network of warehouse facilities.

On October 3, 2022, we announced and closed on our acquisition of Vandermeer Forest Products, Inc. (“Vandermeer”). Vandermeer is a premier wholesale distributor of building products. Vandermeer was founded in 1972 and serves more than 250 customers across the Pacific Northwest, Alaska, Hawaii, British Columbia and Alberta from distribution facilities in Kent, Spokane, and Marysville, Washington. The acquisition of Vandermeer adds three distribution branches in Washington state and provides direct access to Seattle and Portland, two of the top 15 metropolitan statistical areas in the United States. Additionally, we now have coast-to-coast reach and serve all 50 states. Vandermeer’s product offering and sales mix is similar to ours, with specialty products contributing to the majority of its revenue and gross profit. We believe this acquisition aligns to our specialty products strategy, establishes a meaningful growth platform in the Pacific Northwest, increases our market penetration in key specialty product categories, such as siding and engineered wood, and strengthens strategic supplier relationships.

Industry Overview

Our products are available across large and attractive end markets, including residential repair and remodel and residential 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.

Certain developments have led to a more challenging macro-economic environment, such as broad-based inflation, the rapid rise in mortgage rates, and home price appreciation. These developments have impacted the U.S. housing market, including the residential repair and remodel and residential new construction end ~~markets. Such developments~~markets, and have ~~caused~~contributed to a recent slowdown in the U.S. housing industry. However, we believe that several factors, including the current high levels of home equity, the fundamental undersupply of housing in the U.S., repair and remodel activity, and demographic shifts, among others, will support demand for our products.

Residential Repair and Remodel

We estimate that demand from the residential repair and remodel ~~spending~~market (“R&R”) 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~~annual sales. Historically, R&R demand has tended to be less cyclical ~~than~~when compared to the residential new construction

market, 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 believe R&R demand is driven by a myriad of factors including, but not limited to: home prices and affordability; raw materials prices; the pace of new household formation; savings rates; employment conditions; and emerging trends, such as the increased popularity of home-based remote working environments. With mortgage rates having risen to multi-year highs, we believe many homeowners who secured a lower interest mortgage will be inclined to stay longer in existing homes, which could benefit R&R demand over the near-to-medium term.

According to the Joint Center For Housing Studies’ LIRA Index, R&R demand is expected to return to more normalized levels, following several consecutive years of elevated R&R activity fueled by pandemic-induced changes in housing and lifestyle decisions. However, the total market size of the U.S. R&R market remains significant, with total U.S. homeowner improvements and repairs spending expected to be approximately $484.0 billion by the end of 2023, up from $363.0 billion at the end of 2020.

Further, as the median age of U.S. housing stock increases over time, we anticipate U.S. R&R spending will also increase. According to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, the median age of a home ~~age~~ in the U.S. increased from 23 years in 1985 to 39 years in ~~2019 and~~2019. Moreover, approximately 80 percent of the current housing stock was built prior to 1999. We believe the increasing average age of the nation’s approximate 142 million existing homes will continue to drive demand for repair and remodel projects. The October 20, 2022 Leading Indicator of Remodeling Activity, published by the Joint Center for Housing Studies, projects year-over-year increases in spending on home improvement projects will shrink from 16.1 percent in 2022 to 6.5 percent by the third quarter of 2023.

Home improvement spending has also benefited from the increase in remote working environments, 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.

~~We expect that current factors, including the overall age of the U.S. housing stock and rising home prices supporting increased home equity values, will drive repair and remodel spending.~~

Residential New Construction

We estimate that demand from the residential new ~~home~~ construction ~~(including~~market, including single-family and multi-family ~~homes)~~units, accounts for approximately 40 percent of ~~the end market mix~~our annual sales.

We believe demand 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,~~residential new construction is driven by ~~demographic and population shifts,~~a myriad of factors including, but not limited to: mortgage ~~interest~~ rates, which ~~is approaching~~recently reached multi-year highs; lending standards; home affordability; employment conditions; savings rates; the ~~40-year average,~~rate of population growth and new household formation; builder activity levels; the ~~ability~~level of ~~builders to obtain skilled labor,~~existing home inventory on the market; and ~~builders’ economic outlook.~~

consumer sentiment.

According to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, during the ~~third~~first quarter of fiscal ~~2022,~~2023, single family housing starts in the United States, seasonally adjusted, were approximately 2029 percent lower compared to the ~~second~~first quarter of fiscal 2022 and approximately 13 percent ~~higher~~lower than that of the first quarter of fiscal 2020, prior to the COVID-19 pandemic, indicating a market slow down following two years of favorable market conditions. As of the end of the ~~third~~first quarter of fiscal ~~2022,~~2023, the month’s supply of inventory of new homes was eight months, above the 20-year average of six months. For most of the last decade, housing production has lagged population growth and household formation.

We believe our scale, national footprint, strategic supplier relationships, key national customer relationships, and breadth of market leading products and brands position us to serve the residential new construction end market and navigate the ~~changes~~challenges in the macro-economic environment.

Seasonality

We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors common in the building products distribution industry, such as weather conditions and other seasonal factors. ~~As a result,~~The first and fourth quarters have historically been our ~~quarterly sales volumes may trend higher in~~lower volume quarters ~~when~~due to the impact of unfavorable weather ~~conditions and other seasonal factors are more favorable, reflecting an increase in activity in~~on the residential repair and remodel and residential new home construction ~~markets. Conversely, when~~markets, among other factors. Our second and third quarters have historically been higher volume quarters compared to the first and fourth quarters, reflecting an increase in repair and remodel and residential new home construction activities due to more favorable seasonal conditions.

Our historical patterns of seasonality were impacted by the COVID-19 pandemic which caused supply and demand imbalances impacting our sales volumes. During the first quarter of 2023, we experienced some seasonal impacts to our sales volumes from weather ~~conditions~~conditions. While there is continued uncertainty surrounding certain macro-economic environment developments that may impact our seasonality trends, we expect to return to more normalized seasonality trends in the near term given recent easing supply constraints and ~~other seasonal factors are less favorable, we may experience declines in sales volumes.~~increased manufacturing output.

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. See Note 23, Inventories, to the condensed consolidated financial statements and Results of Operations below for discussion of the impact of fluctuations in commodity markets on results for the periods presented.

Supply Constraints

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

Our Culture and Management Focus

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

1.Foster a performance-driven culture committed to profitable growth. This includes enhancing the customer experience; accelerating organic growth within specific product and solutions offerings where the Company is uniquely advantaged; and deploying capital to drive sustained margin expansion, grow cash flow and maintain continued profitable growth.

2.Migrate sales mix toward higher-margin specialty product categories. The Company ~~intends to pursue~~is pursuing a revenue mix increasingly weighted toward higher-margin, specialty product categories such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products. Additionally, the Company ~~intends to expand~~is expanding its value-added service offerings designed to simplify complex customer sourcing requirements ~~together with marketing, inventory~~ and ~~pricing services~~provide enhanced service capabilities afforded by the Company’s national platform.

3.Maintain a disciplined capital structure and pursue high-return investments that increase the value of the Company. The Company ~~intends to maintain~~is maintaining a disciplined capital structure while at the same time investing in its business to modernize its ~~tractor fleet and~~ distribution facilities, as well as its tractor and trailer fleet, and to improve operational performance. The Company also continues to evaluate potential acquisition targets that complement its existing capabilities, grow its specialty products business, increase customer exposure, expand its geographic reach, or a combination thereof. ~~Through October 3, 2022, we have taken~~We invested $9.0 million in our business during the ~~following capital allocation actions, all~~first quarter of ~~which were funded with cash on hand:~~

•~~During the three and nine month periods ending October 1, 2022, we invested $12.2 million and $19.1 million, respectively, in capital for our business~~fiscal 2023 to improve operational performance and productivity.

•During the first nine months of fiscal 2022, we repurchased 882,346 shares of our common stock for $66.4 million under our share repurchase program, including shares purchased through the ASR Agreement, as defined below, at an average price of $75.28 per share.

•On October 3, 2022, we announced and closed on the acquisition of Vandermeer for $67.0 million, which aligns to our specialty products strategy, establishes a meaningful growth platform in a new geographic area, the Pacific Northwest, increases market penetration in key specialty product categories, and strengthens strategic supplier relationships.

Factors That Affect 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 supply and/or demand for products that we distribute; the cyclical nature of the industry in which we operate; housing market conditions; 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~~global pandemics, such as COVID-19, ~~pandemic~~ and other ~~contagious illness outbreaks~~widespread public health crises and their potential effects on our ~~industry;~~business; fluctuations in our operating results; our level of indebtedness and our ability to incur additional debt to fund future needs; the covenants of the instruments governing our indebtedness limiting the discretion of our management in operating the business; ~~variable interest rate risk under certain indebtedness;~~the potential to incur more debt; 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; a lowering or withdrawal of debt ratings; changes in our product mix; increases in petroleum prices; ~~shareholder activism;~~ 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; variable interest rate risk under certain indebtedness; changes in, or interpretation of, accounting principles; significant stock price fluctuation; the possibility that we could be the subject of securities class action litigation due to stock price volatility; unfavorable securities or industry analyst publications; activities of activist shareholders; and indebtedness terms that limit our ability to pay dividends on common ~~stock; and changes in, or interpretation of, accounting principles.~~stock.

2119

Results of Operations

The following table sets forth our results of operations for the ~~third~~first quarter of fiscal ~~2022~~2023 and fiscal ~~2021:~~2022:

Third Quarter of Fiscal 2022 % of
Net
Sales Third Quarter of Fiscal 2021 % of
Net
Sales
(In thousands) (In thousands)
Net sales $ 1,060,761 100.0% $ 970,842 100.0%
Gross profit 189,376 17.9% 153,327 15.8%
Selling, general, and administrative 91,678 8.6% 76,176 7.8%
Depreciation and amortization 6,688 0.6% 6,884 0.7%
Amortization of deferred gains on real estate (983) (0.1)% (984) (0.1)%
Gains from sales of property — 0.0% — 0.0%
Other operating expenses 1,267 0.1% 212 0.0%
Operating income 90,726 8.6% 71,039 7.3%
Interest expense, net 10,444 1.0% 8,313 0.9%
Other expense (income), net (361) (0.0)% (704) (0.1)%
Income before provision for income taxes 80,643 7.6% 63,430 6.5%
Provision for income taxes 21,134 2.0% 16,232 1.7%
Net income $ 59,509 5.6% $ 47,198 4.9%

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

First Nine Months of Fiscal 2022 % of
Net
Sales First Nine Months of Fiscal 2021 % of
Net
Sales
(In thousands) (In thousands)
Net sales $ 3,602,445 100.0% $ 3,304,224 100.0%
Gross profit 681,835 18.9% 584,891 17.7%
Selling, general, and administrative 274,305 7.6% 238,746 7.2%
Depreciation and amortization 19,952 0.6% 21,429 0.6%
Amortization of deferred gains on real estate (2,951) (0.1)% (2,951) (0.1)%
Gains from sales of property (144) 0.0% (1,287) (0.0)%
Other operating expenses 2,731 0.1% 1,197 0.0%
Operating income 387,942 10.8% 327,757 9.9%
Interest expense, net 32,992 0.9% 33,690 1.0%
Other expense (income), net 916 0.0% (1,335) (0.0)%
Income before provision for income taxes 354,034 9.8% 295,402 8.9%
Provision for income taxes 89,844 2.5% 72,886 2.2%
Net income $ 264,190 7.3% $ 222,516 6.7%


	First Quarter of Fiscal 2023		% of Net Sales	First Quarter of Fiscal 2022		% of Net Sales
	(In thousands)			(In thousands)
Net sales	$	797,904	100.0%	$	1,302,305	100.0%

Gross profit	133,539		16.7%	291,051		22.3%
Selling, general, and administrative	91,174		11.4%	91,289		7.0%
Depreciation and amortization	7,718		1.0%	6,746		0.5%
Amortization of deferred gains on real estate	(984)		(0.1)%	(984)		(0.1)%

Other operating expenses	3,116		0.4%	838		0.1%
Operating income	32,515		4.1%	193,162		14.8%
Interest expense, net	7,687		1.0%	11,293		0.9%
Other expense, net	594		0.1%	1,138		0.1%
Income before provision for income taxes	24,234		3.0%	180,731		13.9%
Provision for income taxes	6,422		0.8%	47,322		3.6%
Net income	$	17,812	2.2%	$	133,409	10.2%

The following table sets forth net sales by product category for the ~~three and nine month~~three-month periods ending ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021:~~2022:


		Three Months Ended						Nine Months Ended							Three Months Ended
		October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021				April 1, 2023				April 2, 2022
Net sales by product category	Net sales by product category	(In thousands)						(In thousands)						Net sales by product category	($ in thousands)
Specialty products	Specialty products	$	724,323		$	641,024		$	2,280,090		$	1,878,835		Specialty products	$	567,838	71	%	$	767,907	59	%
Structural products	Structural products	336,438			329,818			1,322,355			1,425,389			Structural products	230,066		29	%	534,398		41	%
Total net sales	Total net sales	$	1,060,761		$	970,842		$	3,602,445		$	3,304,224		Total net sales	$	797,904	100	%	$	1,302,305	100	%

Percentage of total net sales by product category
Specialty products		68.3		%	66.0		%	63.3		%	56.9		%
Structural products		31.7		%	34.0		%	36.7		%	43.1		%
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~~three-month periods of fiscal 2023 and ~~nine month periods ending October 1, 2022 and October 2, 2021:~~2022:

Three Months Ended Nine Months Ended
October 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021
Gross profit by product category (In thousands) (In thousands)
Specialty products $ 151,428 $ 147,693 $ 515,781 $ 421,223
Structural products 37,948 5,634 166,054 163,668
Total gross profit $ 189,376 $ 153,327 $ 681,835 $ 584,891
Gross margin % by product category
Specialty products 20.9 % 23.0 % 22.6 % 22.4 %
Structural products 11.3 % 1.7 % 12.6 % 11.5 %
Total gross margin % 17.9 % 15.8 % 18.9 % 17.7 %

~~Non-GAAP Financial Measures~~

To provide investors with additional information regarding our financial results, we prepare certain financial measures that are not calculated in accordance with generally accepted accounting principles in the United States (“GAAP”). We use these supplemental non-GAAP measures to evaluate financial performance and analyze the underlying trends in our business. We believe these non-GAAP measures are useful because they permit investors to better understand changes over comparative periods by providing financial results that are unaffected by certain items that may not be indicative of ongoing operating performance. While we believe that these non-GAAP measures are useful to investors when evaluating our business, they are not prepared and presented in accordance with GAAP, and therefore should be considered supplemental in nature. These non-GAAP measures should not be considered in isolation or as a substitute for other financial performance measures presented in accordance with GAAP.


	Three Months Ended
	April 1, 2023			April 2, 2022
Gross profit by product category	($ in thousands)
Specialty products	$	106,627		$	184,099
Structural products	26,912			106,952
Total gross profit	$	133,539		$	291,051
Gross margin % by product category
Specialty products	18.8		%	24.0		%
Structural products	11.7		%	20.0		%
Total gross margin %	16.7		%	22.3		%

The following table presents a reconciliation of gross profit, the most directly comparable financial measure as measured in accordance with GAAP, to gross profit, excluding the impact of our lower of cost or net realizable value reserve for the three and nine month periods ending October 1, 2022 and October 2, 2021:

2320

Three Months Ended Nine Months Ended
Structural products October 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021
(In thousands) (In thousands)
Net sales $ 336,438 $ 329,818 $ 1,322,355 $ 1,425,389
Gross profit, as reported 37,948 5,634 166,054 163,668
Add: lower of cost or net realizable value reserve 4,087 — 4,087 —
Less: release of lower of cost or net realizable value reserve $ (9,776) $ (16,693) $ — $ —
Gross profit, excluding reserve $ 32,259 $ (11,059) $ 170,141 $ 163,668
Gross margin %, excluding reserve 9.6 % (3.4) % 12.9 % 11.5 %

~~Third~~First Quarter of Fiscal ~~2022~~2023 Compared to ~~Third~~First Quarter of Fiscal ~~2021~~2022

For the ~~third~~first quarter of fiscal ~~2022,~~2023, we generated net sales of ~~$1.1 billion, an increase~~$797.9 million, a decrease of ~~$89.9~~$504.4 million when compared to the ~~third~~first quarter of fiscal ~~2021~~2022 and the overall gross margin percentage ~~increased~~decreased from ~~15.8~~22.3 percent to ~~17.9~~16.7 percent year over year. ~~Our third quarter net income~~The decline in overall profitability compared to the prior year was ~~$59.5 million, or $6.38 per diluted share, versus $47.2 million, or $4.74 per diluted share,~~primarily due to lower sales volume for our specialty products, particularly our engineered wood products, and year-over-year declines in the ~~prior-year period. Improvements in pricing~~average composite prices of our ~~specialty and~~ structural ~~products was the primary contributor to the increase in our overall sales and profitability year over year.~~products.

Net sales of specialty products, which includes products such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products, ~~increased $83.3~~decreased $200.1 million to ~~$724.3~~$567.8 million in the ~~third~~first quarter of fiscal ~~2022 compared~~2023. The decline was due to ~~the third quarter of fiscal 2021. Strategic pricing of our specialty products throughout the third quarter of fiscal 2022 resulted in improved revenue and gross profit growth, with~~lower sales volume, ~~relatively flat, when compared~~primarily related to ~~the prior-year period.~~engineered wood products. Specialty products gross profit ~~increased $3.7~~decreased $77.5 million to ~~$151.4~~$106.6 million, with a year-over-year decline of ~~210~~520 basis points in specialty gross margin to ~~20.9~~18.8 percent for the ~~third~~first quarter of fiscal ~~2022~~2023, compared to ~~23.0~~24.0 percent in the ~~third~~first quarter of fiscal ~~2021.~~2022. The decrease in specialty gross margin percentage over the prior-year period is ~~primarily~~ attributable to ~~price volatility during the third quarter of fiscal 2022~~lower sales volume, primarily related to ~~easing supply constraints across certain of~~engineered wood products, as well as modest declines in pricing for our specialty products ~~particularly millwork.~~given the change in market conditions.

Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, ~~increased $6.6~~decreased $304.3 million to ~~$336.4~~$230.1 million in the ~~third~~first quarter of fiscal ~~2022. The increase~~2023 due to the decline in the average composite price of framing lumber ~~commodity price of our~~and structural ~~products resulted in the increase of revenue and gross profit for the third quarter of fiscal 2022, with volume relatively flat compared to the prior-year period.~~panels, as well as lower structural panels volume. Our structural gross margin percentage for the ~~third~~first quarter of fiscal ~~2022~~2023 was ~~11.3~~11.7 percent, updown from ~~1.7~~20.0 percent in the prior-year period, ~~also~~ primarily attributable to ~~the increase~~year-over-year declines in the average composite price of framing lumber ~~commodity price of our~~and structural products, as well as our continued improvement in managing structural inventory. Our structural gross margin percentage for the third quarter of fiscal 2022 includes the $5.7 million favorable impact of the partial release of our reserve recorded in the second quarter of fiscal 2022. Our structural gross margin percentage for the third quarter of fiscal 2021 includes the $16.7 million favorable impact of the full release of our reserve recorded in the second quarter of fiscal 2021. Excluding the net impact of the lower of cost or net realizable value reserve, our structural gross margin percentage for the third quarter of fiscal 2022 and 2021 would have been 9.6 percent and (3.4) percent, respectively.panels.

Our selling, general, and administrative expenses, ~~increased 20.4 percent, or $15.5~~which includes approximately $2.0 million of incremental operating expenses related to our Vandermeer acquisition, remained relatively flat overall compared to the ~~third~~first quarter of fiscal 2021. The increase in selling, general, and administrative expenses is due primarily to an increase of $8.8 million related to key growth and productivity initiatives, an increase in logistical expenses of $5.1 million related to inflation in our delivery costs, including third-party delivery services and fuel costs, and $1.6 million related to higher variable incentive compensation, such as sales commissions and stock compensation.2022. Depreciation and amortization expense ~~decreased $0.2 million~~increased 14.4 percent, compared to the ~~third~~first quarter of fiscal ~~2021.~~2022. The ~~decrease~~increase in depreciation and amortization is due to a ~~lower~~higher base of amortizable and depreciable assets throughout the ~~third~~first quarter of fiscal ~~2022~~2023 when compared to the prior-year ~~period.~~period, resulting from our continued focus on capital investment and increased intangible assets related to our Vandermeer acquisition. Other operating expenses increased ~~$1.1~~$2.3 million compared to the ~~third~~first quarter of fiscal ~~2021~~2022 primarily due to restructuring related costs, including severance, incurred in the ~~third~~first quarter of fiscal ~~2022.~~2023 due to our leadership transition.

Interest expense, net, ~~increased~~decreased by ~~25.6~~31.9 percent, or ~~$2.1~~$3.6 million, compared to the ~~third~~first quarter of fiscal ~~2021.~~2022. The ~~increase~~decrease is primarily due to ~~capital structure mix changes, as our senior secured notes carry a~~the generation of higher interest ~~rate than~~income on our ~~former revolving credit facility.~~

cash on hand.

Our effective tax ~~rate was 26.2~~rates were 26.5 percent and ~~25.6~~26.2 percent for the ~~third~~first quarter of fiscal ~~2022~~2023 and ~~2021,~~2022, 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. Our effective tax rate for the third quarter of fiscal 2021 also benefited from the partial release of our valuation allowance for state net operating loss carryforwards.~~

For the third quarter of fiscal 2022, our net income increased by 26.1 percent, or $12.3 million, compared to the prior-year period due primarily to an increase in gross profit driven by improvements primarily related to price. This was partiallycompensation, slightly offset by ~~some increases in our operating expenses along with higher interest expense and higher income tax expense.~~

~~First Nine Months of Fiscal 2022 Compared to First Nine Months of Fiscal 2021~~

For the first nine months of fiscal 2022, we generated net sales of $3.6 billion, an increase of $298.2 million when compared to the first nine months of fiscal 2021, and overall gross margin percentage increased from 17.7 percent to 18.9 percent year over year. Our net income for the first nine months of fiscal 2022 was $264.2 million, or $27.82 per diluted share, versus $222.5 million, or $22.91 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.

Net sales of specialty products, which includes products such as engineered wood, siding, millwork, outdoor living, specialty lumber and industrial products, increased $401.3 million to $2.3 billion in the first nine months of fiscal 2022. Strategic pricing of our specialty products during the first nine months of fiscal 2022 resulted in improved revenue and gross profit growth, partially offset by slightly lower volume when compared to the prior-year period, where we saw historically strong demand. Specialty products gross profit increased $94.6 million to $515.8 million, with a year-over-year improvement of 20 basis points in specialty gross margin to 22.6 percent for the first nine months of fiscal 2022 compared to 22.4 percent in the first nine months of fiscal 2021. The increase in specialty gross margin percentage over the prior-year period is primarily attributable to 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, decreased $103.0 million to $1.3 billion in the first nine months of fiscal 2022. The decrease in wood-based commodity prices of our structural products and slightly lower volume are the primary contributors to the decrease in net sales for the first nine months of fiscal 2022. While our structural gross profit was generally consistent, our structural gross margin percentage for the first nine months of fiscal 2022 increased to 12.6 percent from 11.5 percent in the prior-year period, primarily attributable to strategic structural product management. Our structural gross margin percentage for the first nine months of fiscal 2022 was also impacted by a lower of cost or net realizable value reserve of $4.1 million, net recorded during the nine-month period in response to the decline in wood-based commodity prices. Excluding the impact of the lower of cost or net realizable value reserve, our structural gross margin percentage for the first nine months of fiscal 2022 would have been 12.9 percent, which is an improvement of 140 basis points compared to the prior-year period.

Our selling, general, and administrative expenses increased 14.9 percent, or $35.6 million, compared to the first nine months of fiscal 2021. The increase in sales, general, and administrative expenses is due primarily to increases in logistical expenses of $15.6 million related to inflation in our delivery costs, including third-party delivery services and fuel costs, $14.6 million related to key growth and productivity initiatives, and $5.4 million related to higher variable incentive compensation, such as sales commissions and stock compensation. Depreciation and amortization expense decreased $1.5 million compared to the first nine months of fiscal 2021. The decrease in depreciation and amortization is due to a lower base of amortizable and depreciable assets throughout the first nine months of fiscal 2022 when compared to the prior-year period. The decrease in gains from sales of property in the amount of $1.1 million is due to the sale of our Birmingham property during the first nine months of fiscal 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 increased $1.5 million compared to the first nine months of fiscal 2021 primarily due to restructuring related costs, including severance, incurred in the first nine months of fiscal 2022.

Interest expense, net, decreased by 2.1 percent, or $0.7 million, compared to the first nine months of fiscal 2021. The decrease is primarily due to $5.8 million in debt issuance costs expensed in the first nine months of fiscal 2021 related to the extinguishment of our former term loan facility, offset by an increase due to capital structure mix changes, as our senior secured notes carry a higher interest rate than our former revolving credit facility. Other expense (income), net, increased $2.3 million compared to the first nine months of fiscal 2021 primarily due to an increase in other non-operating expenses.

Our effective tax rate was 25.4 percent and 24.7 percent for the first nine months 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 occurred during the first nine months of fiscal 2022 and 2021. Our effective tax rate for the nine months ended October 2, 2021 also benefited from the partial release of our valuation allowance for state net operating loss carryforwards.each period.

~~For~~Our net income for the first ~~nine months~~quarter of fiscal ~~2022, our net income increased by 18.7 percent,~~2023 was $17.8 million, or ~~$41.7~~$1.94 per diluted share, versus $133.4 million, ~~compared to~~or $13.19 per diluted share, in the prior-year period due primarily to ~~an increase~~a decrease in gross profit driven by ~~strategic~~lower specialty sales volume, particularly for our engineered wood products, and declines in pricing related to our specialty and structural products, in conjunction with higher operating expenses. This was offset by lower interest ~~expense. This was partially offset by increases in our operating expenses~~expense and income tax expense.

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 availability offrom our revolving credit facility, as needed. We expect that these sources will be sufficient to fund our ongoing cash requirements for at least the next 12 months and into the foreseeable future.

Senior Secured Notes

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

As of April 1, 2023 and December 31, 2022, the fair value of our 2029 Notes was approximately $276.8 million and $283.6 million, respectively, which are designated as ~~defined below.~~Level 2 in the fair value hierarchy. Our valuation technique is based primarily on observable market prices in less active markets.

Revolving Credit Facility

Borrowings under ~~the~~our Revolving Credit Facility bear interest at a rate per annum equal to (i) ~~London Inter-bank Offered Rate (“LIBOR”)~~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 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.

As of ~~October~~April 1, 2023, we had zero outstanding borrowings and excess availability, including cash in qualified accounts, of $722.7 million under our Revolving Credit Facility. As of December 31, 2022, we had zero outstanding borrowings and excess availability, including cash in qualified accounts, ~~was $575.8~~of $645.4 million under our Revolving Credit Facility. ~~As of January 1, 2022, we had zero outstanding borrowings and excess availability, including cash in qualified accounts, was $431.7 million~~Available borrowing capacity under our Revolving Credit ~~Facility.~~Facility was $346.5 million on April 1, 2023 and December 31, 2022. Our average effective interest rate under the facility was zero percent ~~and 2.6 percent~~ for the quarters ended ~~October~~April 1, ~~2022~~2023 and ~~January 1, 2022, respectively.~~April 2, 2022.

~~The~~

Our Revolving Credit Facility contains certain financial and other covenants, and our right to borrow under the Revolving Credit Facility is conditioned upon, among other things, our compliance with these covenants. We were in compliance with all covenants under ~~the~~our Revolving Credit Facility as of ~~October~~April 1, ~~2022.~~

~~Term Loan Facility~~

On April 2, 2021, we repaid the remaining outstanding principal balance of our former term loan facility, and, as a result, as of January 1, 2022 and October 1, 2022, we had zero outstanding borrowings under the term loan facility, which has been extinguished. In connection with our repayment of the outstanding principal balance in full on April 2, 2021, we expensed $5.8 million of debt issuance costs in the first quarter of fiscal 2021 that we were amortizing in connection with our former term loan

facility. These costs are included within interest expense, net on the condensed consolidated statements of operations and reported separately as an adjustment to net income in our condensed consolidated statements of cash flows.

There were no prepayment premiums associated with the repayment of indebtedness for the three month period ended October 2, 2021. Prepayment premiums were $0.9 million for the nine month period ended October 2, 2021.2023.

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. Our total finance lease commitments totaled ~~$272.7~~$270.8 million and $273.1 million as of ~~October~~April 1, ~~2022.~~2023 and December 31, 2022, respectively. Of the ~~$272.7~~$270.8 million of finance lease commitments as of ~~October~~April 1, ~~2022, $243.9~~2023, $243.6 million related to real estate and ~~$28.8~~$27.2 million related to equipment. ~~For~~Of the ~~three~~$273.1 million of finance lease commitments as of December 31, 2022, $243.8 million related to real estate and ~~nine months ended October 1, 2022, we recognized $3.3~~$29.3 million and $6.0 million, respectively, in new finance leases for tractors acquired as a component of our fleet investment plan. For the three and nine months ended October 2, 2021, we recognized zero and $10.5 million, respectively, in new finance leases for tractors acquiredrelated to ~~support our fleet investment plan in fiscal 2021.~~equipment.

Interest Rates

Our Revolving Credit Facility includes available interest rate options based on ~~LIBOR. Certain~~ LIBOR, ~~rates were discontinued after 2021, while other rates~~which will be discontinued inas an available rate option after June 30, 2023. ~~The U.S. and other countries are currently working to replace~~Under the terms of our Revolving Credit Facility, LIBOR will be replaced with ~~alternative reference rates. The consequences of these developments~~SOFR with respect to the applicable variable rate interest options thereunder, with effect on or before June 30, 2023. There can be no assurances as to whether SOFR will be a more or less favorable reference rate than LIBOR, and the consequences of replacing LIBOR with SOFR cannot be entirely ~~predicted; however,~~predicted. However, at this time, we do not believe that the ~~discontinuation~~replacement of LIBOR by SOFR as a reference rate in our ~~loan agreement~~revolving credit facility 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~~three months of fiscal ~~2022~~2023 was ~~$246.0~~$89.0 million, compared to net cash provided by operating activities of ~~$126.9~~$2.2 million in the first ~~nine~~three months of fiscal ~~2021.~~2022. The increase in cash provided by operating activities during the first ~~nine~~three months of fiscal ~~2022~~2023 was primarily a result of higher cash generated from changes in working capital ~~changes,~~components, including the ~~reduction of~~decrease in inventory and increase in accounts payable, offset by the increase in accounts receivable ~~which resulted in $46.8 million and $30.4 million, respectively, more cash provided by operating activities~~ in the current-year ~~period compared to the prior-year period, and the $41.7 million increase~~period. This was partially offset by a decrease in net income for the current-year period compared to the prior-year period.

Investing Activities

Net cash used in investing activities for the first ~~nine~~three months of fiscal ~~2022~~2023 was ~~$18.4~~$9.0 million compared to net cash used in investing activities of ~~$2.8~~$2.5 million in the first ~~nine~~three months of fiscal ~~2021.~~2022. The increase in net cash used in investing activities was primarily due to higher ~~capital investments during~~spend on property and equipment in the ~~first nine months of fiscal 2022.~~current year-period compared to the prior-year period.

Financing Activities

Net cash used in financing activities totaled ~~$83.4~~$2.7 million for the first ~~nine~~three months of fiscal ~~2022,~~2023, compared to net cash used in financing activities of ~~$124.0~~$10.5 million for the first ~~nine~~three months of fiscal ~~2021.~~2022. The decrease in net cash used in financing activities is primarily due to the net repayment of $65.1 million on our revolving credit facility and the $43.2 million repayment of the remaining outstanding balance on our term loan facility during the first nine months of fiscal 2021, with no such transactions completed in the first nine months of fiscal 2022. This is partially offset by $66.4 million spent repurchasingrepurchase our common stock under our announced share repurchase program ~~including the ASR Agreement, as defined below,~~ during the first ~~nine~~three months of fiscal 2022, with no such transactions completed in the first ~~nine~~three months of fiscal ~~2021.~~2023.

Stock Repurchase Program

On August 23, 2021, our Board of Directors approved a stock repurchase program pursuant to which we were authorized to repurchase up to $25.0 million of our common stock. During the first quarter of fiscal 2022, we repurchased 81,331 shares of our common stock under this program at an average price of $79.03 per share.

On May 3, 2022, our Board of Directors increased our share repurchase authorization to $100.0 million and we entered into an Accelerated Share Repurchase Agreement (“ASR Agreement”) with Jefferies LLC 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. Final settlement of the shares of common stock repurchased under the ASR Agreement occurred on September 15, 2022 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 other adjustments pursuant to the terms and conditions of the ASR Agreement. At settlement, we received an additional 247,431 shares of common stock. Under our ASR Agreement, we repurchased a total of 801,015 shares of our common stock at an average price of $74.90 per share.

As of ~~October~~April 1, 2022, we have repurchased a total of 882,346 shares for $66.4 million under our share repurchase program, including shares purchased through the ASR Agreement, at an average price of $75.28 per share and2023, we have a remaining authorization amount of $33.6 ~~million.~~million under our $100.0 million share repurchase program.

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.

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 1, 2022		January 1, 2022		October 2, 2021			April 1, 2023		December 31, 2022		April 2, 2022
		(In thousands)							(In thousands)
Current assets:	Current assets:							Current assets:
Cash and cash equivalents		$	229,364	$	85,203	$	186
Receivables, less allowance for doubtful accounts	Receivables, less allowance for doubtful accounts	360,535		339,637		344,974		Receivables, less allowance for doubtful accounts	$	298,888	$	251,555	$	497,056
Inventories, net	Inventories, net	535,979		488,458		436,438		Inventories, net	409,324		484,313		562,555
		$	1,125,878	$	913,298	$	781,598		$	708,212	$	735,868	$	1,059,611

Current liabilities:	Current liabilities:							Current liabilities:
Accounts payable	Accounts payable	$	208,197	$	180,000	$	210,386	Accounts payable	$	177,046	$	151,626	$	230,072
		$	208,197	$	180,000	$	210,386		$	177,046	$	151,626	$	230,072

Operating working capital	Operating working capital	$	917,681	$	733,298	$	571,212	Operating working capital	$	531,166	$	584,242	$	829,539

Operating working capital of ~~$917.7~~$531.2 million as of ~~October~~April 1, ~~2022,~~2023, compared to ~~$733.3~~$584.2 million as of ~~January 1,~~December 31, 2022, ~~increased~~decreased on a net basis by approximately ~~$184.4~~$53.1 million. The ~~increase~~decrease in operating working capital is primarily driven by ~~an increase in cash due to our improved operating performance, including increased net income, as well as an increase~~the decrease in inventory, which ~~continues~~reflects our strategic inventory management efforts, and the increase in accounts payable due to ~~be affected~~timing of cash disbursements. This was partially offset by the ~~inflationary environment for building products, and an~~ increase in accounts receivable from ~~our continued increase in~~ net sales. ~~The net increase in current assets was partially offset by an increase in accounts payable, also affected by the inflationary environment for building products.~~

Operating working capital of ~~$917.7~~$531.2 million as of ~~October~~April 1, ~~2022,~~2023, compared to ~~$571.2~~$829.5 million as of ~~October~~April 2, ~~2021, increased~~2022, decreased on a net basis by ~~$346.5~~approximately $298.4 million. The ~~increase~~decrease in operating working capital is primarily driven by ~~an increase~~the decrease in ~~cash~~accounts receivable due to ~~our~~the decrease in net sales and improved ~~operating performance, including increased net income,~~collection efforts, as well as ~~an increase~~the decrease in inventory, which ~~continues to be affected~~reflects our strategic inventory management efforts and a deflationary pricing environment. This was partially offset by the ~~inflationary environment for building products, and an increase~~decrease in accounts ~~receivable from our continued increase~~payable due to the decrease in ~~net sales. Additionally, lower accounts payable contributed to higher operating working capital due to~~inventory and the timing of cash disbursements.

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 and equipment, at cost on our condensed consolidated balance sheet. For the first ~~nine months of fiscal 2022,~~quarter ended April 1, 2023, we invested ~~$25.1~~$9.0 million in cash investments in long-lived assets primarily related to investments in our distribution ~~branches~~facilities and to a lesser extent, upgrading our ~~fleet, which includes $19.1 million in cash investments and $6.0 million in new finance leases recognized for tractors acquired as a component of our fleet investment plan.~~fleet.

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 1,~~December 31, 2022.

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,” “could,” “expect,” “estimate,” “intend,” “may,” “project,” “plan,” “should,” “will,” “will be,” “will likely continue,” “will likely ~~result”~~result,” “would” 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; 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 1,~~December 31, 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:

•we may experience pricing and product cost variability;

•our earnings are highly dependent on volumes;

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

•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 our net income;

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

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

•we are subject to disintermediation risk;

•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;~~condition and expose us to certain additional risks;

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

•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 prices of 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;

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

•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;

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

•we are subject to 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~~global pandemics, such as COVID-19, ~~pandemic~~ and other widespread public health crises and governmental rules and regulations and our policies related to such may adversely affect our business and results from 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;

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

•~~borrowings under our revolving credit facility bear interest at a variable rate, which subjects us to interest rate risk, which could cause our debt service obligations to increase significantly;~~

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

•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. All of these leases are (or will be) finance leases, and our debt and interest expense may increase as a result;

•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, and we may be unable to renew the leases at the end of their terms;

•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;~~

•~~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;

•if ~~petroleum~~the cost of fuel, third-party freight or other energy prices increase or availability of third-party freight providers is reduced, our results of operations could be adversely affected;

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

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

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

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

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

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

•borrowings under our revolving credit facility bears interest at a variable rate, which subjects us to interest rate risk, which could cause our debt service obligations to increase significantly;

•changes in, or interpretation of, accounting principles could result in unfavorable accounting changes;

•our stock price may fluctuate significantly;

•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;

•if securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline;

•the 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;~~stock.

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

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.

3126

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Not applicable.~~We are exposed to certain market risks as part of our on-going business operations. Our exposure includes commodity price risk and interest rate risk.

Commodity Price Risk

Many of the building products that we distribute, including oriented strand board (“OSB”), plywood, lumber, and rebar, are commodities whose price is determined by the market’s supply and demand for such products. Prices of commodity products can also change as a result of national and international economic conditions, labor and freight costs, competition, market speculation, government regulation, and trade policies, as well as from periodic delays in the delivery of products. Short-term increases in the cost of these materials, some of which are subject to significant fluctuations, are sometimes passed on to our customers, but our pricing quotation periods and pricing pressure from our competitors may limit our ability to pass on such price changes. We may also be limited in our ability to pass on increases in freight costs on our products. We may enter into derivative financial instruments to mitigate the potential impact of commodity price fluctuations on our results of operations or cash flows. As of April 1, 2023, we had no such derivative financial instruments in place.

Interest Rate Risk

We may experience changes in interest expense if changes in our debt occur. Changes in market interest rates could also affect our interest expense. We are exposed to interest rate risk arising from fluctuations in variable-rate LIBOR or other applicable benchmark rate, such as SOFR, when we have loan amounts outstanding on our revolving credit facility. We do not believe that a one percent increase in interest rates, for example, would have a material effect on our results of operations or cash flows. As of April 1, 2023, we had no outstanding borrowings on our revolving credit facility. Our senior secured notes bear interest at a fixed rate, therefore, our interest expense related to these notes would not be affected by an increase in market interest rates. We may enter into derivative financial instruments to mitigate the potential impact of interest rate risk on our results of operations or cash flows. As of April 1, 2023, we had no such derivative financial instruments in place.

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.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During the ~~third~~first quarter of fiscal ~~2022,~~2023, there were no material changes to our legal proceedings as disclosed in our Annual Report on Form 10-K for the year ended ~~January 1,~~December 31, 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 1,~~December 31, 2022.

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

The following table presents our share repurchase activity for each month of the quarter ended ~~October~~April 1, ~~2022:~~2023:

Period
Total Number of Shares Purchased (1)
Average Price Paid per Share (2)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3)
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (4)
July 3 - August 6 50,539 71.08 — 33,572,690
August 7 - September 3 278 77.12 — 33,572,690
September 4 - October 1 247,431 74.90 247,431 33,572,690
Total 298,248 247,431


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
January 1 - February 4	6,102	$	79.12	—	$	33,572,690
February 5 - March 4	—	$	—	—	$	33,572,690
March 5 - April 1	20,824	$	68.49	—	$	33,572,690
Total	26,926			—

(1) ~~Shares repurchased during the first two months of the quarter ended October 1, 2022 represents~~Includes shares withheld by us in connection with tax withholding obligations of our employees upon vesting of such employees’ restricted stock unit awards.

(2) The average price paid for shares purchased in connection with the final settlement of the ASR Agreement, as defined below, is based on the average of the daily volume-weighted average price of our common stock during the repurchase period, less a discount and other adjustments pursuant to the ASR Agreement.

~~(3)~~ On May 3, 2022, we entered into an Accelerated Share Repurchase Agreement (“ASR Agreement”) with Jefferies LLC to repurchase $60.0 million of our common stock. The ASR Agreement settled on September 15, 2022, and at settlement, we received an additional 247,431 shares of common stock.

~~(4)~~ On May 3, 2022, our Board of Directors increased our share repurchase authorization to $100.0 ~~million.~~million, and as of April 1, 2023, we had a remaining authorization amount of $33.6 million under the program. With the remaining availability under ~~this authorization,~~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.

3429

ITEM 6. EXHIBITS


Exhibit Number		Description
10.1		Separation and Release Agreement, dated March 21, 2023, between BlueLinx Corporation and Dwight Gibson (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on March 21, 2023) ±.
10.2		Employment Agreement, dated March 21, 2023, between the Company, BlueLinx Corporation and Shyam Reddy (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the Securities and Exchange Commission on March 21, 2023) ±.
10.3	*	Offer Letter dated February 9, 2022, between BlueLinx Corporation and Kevin Henry ±.
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~~April 1, ~~2022,~~2023, 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.

3530

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 1, 2022~~May 2, 2023	By:	/s/ Kelly C. Janzen
		Kelly C. Janzen
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

Date: ~~November 1, 2022~~May 2, 2023	By:	/s/ Adam K. Bowen
		Adam K. Bowen
		Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

3631


	Third Quarter of Fiscal 2022		% of Net Sales	Third Quarter of Fiscal 2021		% of Net Sales
	(In thousands)			(In thousands)
Net sales	$	1,060,761	100.0%	$	970,842	100.0%

Gross profit	189,376		17.9%	153,327		15.8%
Selling, general, and administrative	91,678		8.6%	76,176		7.8%
Depreciation and amortization	6,688		0.6%	6,884		0.7%
Amortization of deferred gains on real estate	(983)		(0.1)%	(984)		(0.1)%
Gains from sales of property	—		0.0%	—		0.0%
Other operating expenses	1,267		0.1%	212		0.0%
Operating income	90,726		8.6%	71,039		7.3%
Interest expense, net	10,444		1.0%	8,313		0.9%
Other expense (income), net	(361)		(0.0)%	(704)		(0.1)%
Income before provision for income taxes	80,643		7.6%	63,430		6.5%
Provision for income taxes	21,134		2.0%	16,232		1.7%
Net income	$	59,509	5.6%	$	47,198	4.9%


	First Nine Months of Fiscal 2022		% of Net Sales	First Nine Months of Fiscal 2021		% of Net Sales
	(In thousands)			(In thousands)
Net sales	$	3,602,445	100.0%	$	3,304,224	100.0%

Gross profit	681,835		18.9%	584,891		17.7%
Selling, general, and administrative	274,305		7.6%	238,746		7.2%
Depreciation and amortization	19,952		0.6%	21,429		0.6%
Amortization of deferred gains on real estate	(2,951)		(0.1)%	(2,951)		(0.1)%
Gains from sales of property	(144)		0.0%	(1,287)		(0.0)%
Other operating expenses	2,731		0.1%	1,197		0.0%
Operating income	387,942		10.8%	327,757		9.9%
Interest expense, net	32,992		0.9%	33,690		1.0%
Other expense (income), net	916		0.0%	(1,335)		(0.0)%
Income before provision for income taxes	354,034		9.8%	295,402		8.9%
Provision for income taxes	89,844		2.5%	72,886		2.2%
Net income	$	264,190	7.3%	$	222,516	6.7%


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share (2)	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3)	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (4)
July 3 - August 6	50,539	71.08	—	33,572,690
August 7 - September 3	278	77.12	—	33,572,690
September 4 - October 1	247,431	74.90	247,431	33,572,690
Total	298,248		247,431