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What changed in BlueLinx Holdings Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BlueLinx Holdings Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+355 added−316 removedSource: 10-K (2023-02-21) vs 10-K (2022-02-22)

Top changes in BlueLinx Holdings Inc.'s 2023 10-K

355 paragraphs added · 316 removed · 220 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

44 edited+35 added−21 removed17 unchanged
Biggest changeLocal and regional distributors tend to be closely held and often specialize in a limited number of product segments, in which they may offer a broader selection of products. Some of our national and multi-regional competitors are part of larger companies and, therefore, may have access to greater financial and other resources than those to which we have access.
Biggest changeCompetition The U.S. building products distribution market is a highly fragmented market, served by national and multi-regional distributors, regionally focused distributors, and independent local distributors. Local and regional distributors tend to be closely held and often specialize in a limited number of product segments, in which they may offer a broader selection of products.
We also administer post injury/accident corrective action supplemental training as needed and dictated by our investigations. To help prevent future occurrences, accidents and injuries are investigated with corrective actions implemented locally and communicated to key operations personnel across the enterprise.
We also 7 administer post injury/accident corrective action supplemental training as needed and dictated by our investigations. Accidents and injuries are investigated with corrective actions implemented locally and communicated to key operations personnel across the enterprise to help prevent future occurrences.
In addition, certain 7 of our operations require us to obtain, maintain compliance with, and periodically renew, environmental permits. We are proactively replacing our diesel underground storage tanks based on their age to prevent fuel releases to the environment.
In addition, certain of our operations require us to obtain, maintain compliance with, and periodically renew, environmental permits. We are proactively replacing our diesel underground storage tanks based on their age to prevent fuel releases to the environment.
During the ongoing novel coronavirus (“COVID-19”) pandemic, our typical patterns of seasonality changed, largely due to increased demand for our products. Milder weather in the latter part of 2021 also contributed to our traditional summer patterns continuing into the fourth quarter.
During the novel coronavirus (“COVID-19”) pandemic, our typical patterns of seasonality changed, largely due to increased demand for our products. Milder weather in the latter part of 2021 also contributed to our traditional summer patterns continuing into the fourth quarter.
In addition to prioritizing regular communications, we are conducting regular employee surveys to monitor our culture and employee engagement, while seeking feedback on what is going well and where we can focus our efforts to do more.
In addition to prioritizing regular communications, we are conducting quarterly employee surveys to monitor our culture and employee engagement, while seeking feedback on what is going well and where we can focus our efforts to do more.
In addition, our operations could in the future be subject to regulations related to climate change. To the extent that climate-related risks materialize, and if we are unprepared for them, we may incur unexpected costs, which could have a material effect on our financial results of operations. See Item 1A.
In addition, our operations could in the future be subject to regulations related to climate change. To the extent that climate-related risks materialize, and if we are unprepared for them, we may incur unexpected costs, which could have a material effect on our financial results of operations.
Safety We are committed to fostering a safe working environment for our associates. In addition to implementing COVID-19 protocols during the pandemic, we have established uniform safety and compliance procedures for our operations, and implemented measures designed to prevent workplace injuries. Our safety programs focus on job hazard identification and prevention, coupled with extensive on-going job-specific training.
Safety We are committed to providing a safe and healthy working environment for our associates. In addition to implementing COVID-19 protocols during the pandemic, we have established uniform safety and compliance procedures for our operations and implemented measures designed to prevent workplace injuries. Our proactive safety programs focus on job hazard identification and prevention, coupled with extensive on-going job-specific training.
The depth of our geographic footprint supports meaningful customer proximity across the markets in which we operate, enabling faster and more efficient service. Similarly, we provide value to our supplier partners by enabling access to the large and fragmented network of lumber yards and dealers that those suppliers could not adequately serve directly.
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.
For example, material handlers and Department of Transportation (“DOT”)-registered drivers follow a monthly individualized training curriculum, with knowledge testing, for injury and accident prevention. In addition, depending on the nature and requirements of their role, new hires and contract employees undergo safety training during their initial onboarding.
For example, material handlers and Department of Transportation (“DOT”)-registered drivers follow a monthly individualized training curriculum, including knowledge testing, for injury and accident prevention. In addition, depending on the nature and requirements of their role, new hires and contract employees undergo safety training along with specific hands-on training during their initial onboarding.
As a part of our investment in the company’s associates, in December 2021 and in recognition of our performance and the contribution of our associates, we announced that all eligible hourly and salaried employees would receive a discretionary year-end bonus consisting of a combination of cash and/or time-based restricted stock units with a one year vesting period.
As a part of our investment in the Company’s associates and for the second year in a row, in December 2022 and in recognition of our performance and the contribution of our associates, we announced that all eligible hourly and salaried employees would receive a discretionary year-end bonus consisting of time-based restricted stock units with a one-year vesting period.
We carry a broad portfolio of both branded and private-label stock keeping units (“SKUs”) across two principal product categories: specialty products and structural products. Specialty products include items such as engineered wood, industrial products, cedar, moulding, siding, metal products, and insulation. Structural products include items such as lumber, plywood, oriented strand board, rebar, and remesh.
We 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 are subject to safety requirements governing interstate operations prescribed by the DOT. We are also subject to the oversight of the Federal Motor Carrier Safety Administration (“FMCSA”). Additionally, among other things, vehicle dimensions and driver hours of service are subject to both federal and state regulation.
We are also subject to the oversight of the Federal Motor Carrier Safety Administration (“FMCSA”). Additionally, among other things, vehicle dimensions and driver hours of service are subject to both federal and state regulation.
Structural products, which represented approximately 41 percent and 40 percent of our fiscal 2021 and fiscal 2020 net sales, respectively, include plywood, oriented strand board, rebar and remesh, lumber, spruce and other wood products primarily used for structural support in construction projects. In some cases, these products are branded by us.
Structural products, which represented approximately 35 percent, 41 percent, and 40 percent of our fiscal 2022, fiscal 2021, and fiscal 2020 net sales, respectively, include lumber, plywood, oriented strand board, rebar, and remesh and other wood products primarily used for structural support in construction projects. Our structural products are commodity products.
Direct sales accounted for approximately 19 percent and 17 percent of our fiscal 2021 and 2020 gross sales, respectively. Human Capital Our Commitment to Diversity, Equity, and Inclusion We are committed to diversifying our workforce to ensure that our associates feel like they belong. We realize the value that diversity, equity and inclusion bring to our business.
Direct sales accounted for approximately 18 percent, 19 percent, and 17 percent of our fiscal 2022, fiscal 2021, and fiscal 2020 gross sales, respectively. 5 Human Capital Our Commitment to Diversity, Equity, and Inclusion We are committed to diversifying our workforce to ensure that our associates feel like they matter.
The company intends to pursue a revenue mix increasingly weighted toward higher-margin, specialty product categories such as engineered wood, moulding, millwork, decking and industrial products. Additionally, the company intends to expand its value-added service offerings designed to simplify complex customer sourcing requirements, together with marketing, inventory and pricing services afforded by the company’s national platform. 3.
The Company is pursuing a revenue mix increasingly weighted toward higher-margin, specialty product categories such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products. Additionally, the Company is expanding its value-added service offerings designed to simplify complex customer sourcing requirements, together with marketing, inventory and pricing services afforded by the Company’s national platform. 4 3.
Maintain a disciplined capital structure and pursue high-return investments that increase the value of the company. The company intends to maintain a disciplined capital structure while prudently investing in its business to modernize its trailer fleet and distribution facilities and to improve operational performance .
Maintain a disciplined capital structure and pursue high-return investments that increase the value of the Company. The Company is maintaining a disciplined capital structure while at the same time investing in its business to modernize its distribution facilities, as well as its tractor and trailer fleet, and to improve operational performance.
Our position in this distribution model for building products provides easy access to the marketplace for our suppliers and the value proposition of rapid delivery on an as-needed basis to our customers from our network of warehouse facilities.
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 completed the acquisition of Vandermeer Forest Products, Inc. (“Vandermeer”).
With a strong market position, broad geographic coverage footprint servicing over 40 states, and the strength of a locally focused sales force, we distribute a comprehensive range of products from over 750 suppliers, including some of the leading manufacturers in the industry, such as Ply Gem, Huber Engineered Woods, Georgia-Pacific, Allura, James Hardie, Fiberon, Royal, Oldcastle APG, Louisiana-Pacific, and Weyerhaeuser.
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.
To enhance the safety of our fleet, we are making a significant investment in “curtainside” trailers that cover and enclose the materials inside. Our newest tractors are equipped with collision avoidance systems, blind spot detection and lane departure warning technology, and our newest tractors and trailers are equipped with disc-type brakes to improve stopping distance and driver control.
During fiscal 2022, in order to enhance the safety of our fleet, we made a significant investment in curtainside trailers that cover and enclose the materials during transit. Our newest tractors are equipped with collision avoidance systems, dashboard cameras, speed monitoring, blind spot detection and 6 lane departure warning technology, and disc-type brakes to improve stopping distance and driver control.
The information on the Company’s website is not incorporated by reference in this Annual Report on Form 10-K. We make available on or through our website certain reports, and amendments to those reports, that we file with or furnish to the U.S. Securities and Exchange Commission (the “SEC”) in accordance with the Securities Exchange Act of 1934, as amended.
Securities Exchange Act Reports The Company maintains a website at www.BlueLinxCo.com. The information on the Company’s website is not incorporated by reference in this Annual Report on Form 10-K. We make available on or through our website certain reports, and amendments to those reports, that we file with or furnish to the U.S.
We supply products to a broad base of over 15,000 national, regional, and local dealers, specialty distributors, national home centers, and manufactured housing customers, many whom serve residential and commercial builders and contractors in their respective geographic areas and local markets.
We supply products to a broad base of 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.
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. To improve operational performance and productivity, we invested $14.4 million in cash during fiscal 2021.
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.
Our annual company survey had participation from approximately 72 percent of our associates in fiscal 2021, representing a wide cross section of our associate population. We also conduct periodic leadership town halls where associates are invited to engage with senior leadership. Our CEO and other executives engage directly with associates by visiting branches and participating in team and other meetings.
Our more extensive annual Company survey had participation from approximately 76 percent of our associates in fiscal 2022, representing a wide cross section of our associate population. Our CEO, along with other executives, conducts periodic leadership town halls where associates are invited to engage with senior leadership and also engages directly with associates through facility visits.
These include our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and proxy statements. Additionally, our code of ethical conduct, the board committee charter for each of our audit committee, compensation committee, and nominating and governance committee, and our corporate governance guidelines are available on our website.
Additionally, our code of ethical conduct, the board committee charter for each of our audit committee, human capital and compensation committee, and nominating and governance committee, and our corporate governance guidelines are available on our website.
For example, material handlers and DOT-registered drivers follow a monthly individualized training curriculum, with knowledge testing, for injury and accident prevention. In addition, new hires and contract employees undergo safety training during their initial onboarding. We also administer post injury/accident corrective action supplemental training as needed and dictated by our investigations.
Our safety programs focus on job hazard identification and prevention, coupled with extensive on-going job-specific training. For example, material handlers and DOT-registered drivers follow a monthly individualized training curriculum, with knowledge testing, for injury and accident prevention. In addition, new hires and contract employees undergo safety training during their initial onboarding.
We will continue to monitor and seek to increase our diversity. We also use our compensation review process, our compensation framework, and third-party compensation data in an effort to compensate associates in the same job, level and location fairly regardless of gender, race and ethnicity.
We also use our compensation review process, our compensation framework, and third-party compensation data in an effort to compensate associates in the same job, level and location fairly regardless of gender, race and ethnicity. If we identify discrepancies between actual compensation and our policies, we take action to make pay adjustments to close identified gaps.
Risk Factors for further discussion of the risks posed by climate change. Sustainability In addition to participating in the Forestry Stewardship Council, an organization promoting environmentally appropriate, socially beneficial, and economically viable management of the world’s forests, we are purchasing electric forklifts to use in certain locations.
Sustainability In addition to participating in the Forestry Stewardship Council, an organization promoting environmentally appropriate, socially beneficial, and economically viable management of the world’s forests, we plan to invest in electric forklifts during fiscal 2023 to use in certain locations and expect to purchase more in the future.
During fiscal 2021, we continued to invest in our people, and in programs and systems designed to meet the increased demand for talent in a dynamic marketplace. For instance, we are increasing our investments in our benefits programs, which included approving expanded medical coverage for infertility, and new adoption assistance and loan repayment assistance benefits for 2022.
During fiscal 2022, we continued to invest in our people, and in programs and systems designed to meet the increased demand for talent in a dynamic marketplace.
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.
Together, warehouse and reload sales accounted for approximately 82 percent, 81 percent, and 83 percent of our fiscal 2022, fiscal 2021 and fiscal 2020 gross sales, respectively. 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.
Distribution Channels We sell products through three main distribution channels: warehouse sales, reload sales, and direct sales. Warehouse sales are delivered from our warehouses to our customers. Reload sales are similar to warehouse sales, but are delivered from third-party warehouses where we store owned products to enhance operating efficiencies.
Distribution Channels 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.
We compete on the basis of breadth of product offering, consistent availability of product, product price and quality, reputation, service, and distribution facility location. Three of our largest competitors are Boise Cascade Company, Weyerhaeuser Company, and Specialty Building Products. Most major markets in which we operate are served by the distribution arm of at least one of these companies.
Three of our largest competitors are Boise Cascade Company, Weyerhaeuser Company, and Specialty Building Products. Most major markets in which we operate are served by the distribution arm of at least one of these companies. Governmental Regulations The Company is subject to various federal, state, provincial, and local laws, rules, and regulations.
Weather-related events, such as hurricanes, tornadoes or extreme temperature changes, can impact our operations and result in lost production, supply chain disruptions and increased 6 material costs. In addition, the availability and price of the products we buy and sell may fluctuate during prolonged periods of heavy rain or drought, fires or other unpredictable weather events.
In addition, the availability and price of the products we buy and sell may fluctuate during prolonged periods of heavy rain or drought, fires or other unpredictable weather events.
We also are focused on utilizing more fuel-efficient vehicles in our fleet, replacing our warehouse lighting systems with more environmentally friendly lighting solutions, and reducing our landfill waste by prioritizing recycling options, where available. Competition The U.S. building products distribution market is a highly fragmented market, served by national and multi-regional distributors, regionally focused distributors, and independent local distributors.
We continue to make progress on utilizing more fuel-efficient tractors in our fleet. We are also replacing our warehouse lighting systems with more environmentally friendly lighting solutions and reducing our landfill waste by prioritizing recycling options, where available.
Our Associates Our associates are the foundation of our business. BlueLinx has an entrepreneurial and high-performance culture where associates are expected to live by our core values of teamwork, continuous improvement and integrity each and every day.
BlueLinx has a high-performance culture where associates are expected to live by our core values of teamwork, continuous improvement and integrity each and every day. As of December 31, 2022, we employed approximately 2,100 associates and less than one percent of our associates are employed on a part-time basis.
In order to maintain compliance with applicable OSHA requirements, we have established uniform safety and compliance procedures for our operations, and implemented measures designed to prevent workplace injuries. Our safety programs focus on job hazard identification and prevention, coupled with extensive on-going job-specific training.
We are subject to the requirements of the U.S. Department of Labor Occupational Safety and Health Administration (“OSHA”). In order to maintain compliance with applicable OSHA requirements, we have established uniform safety and compliance procedures for our operations, and implemented measures designed to prevent workplace injuries.
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. Together, warehouse and reload sales accounted for approximately 81 percent and 83 percent of our fiscal 2021 and 2020 gross sales, respectively.
Reload sales are similar to warehouse sales but are shipped from non-warehouse locations, 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.
Specialty products, which represented approximately 59 percent and 60 percent of our fiscal 2021 and fiscal 2020 net sales, respectively, include primarily engineered wood products, moulding, siding and trim, cedar, metal products (excluding rebar and remesh) and insulation.
Specialty products, which represented approximately 65 percent, 59 percent, and 60 percent of our fiscal 2022, fiscal 2021, and fiscal 2020 net sales, respectively, include primarily engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products. In some cases, these products are branded by us.
Seasonality We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors common in the building products distribution industry. The first and fourth quarters are typically our lower volume quarters due to the impact of unfavorable weather on the construction market.
We plan to continue to make significant investments in upgrading our fleet into fiscal 2023 and beyond. 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.
These requirements could become more stringent in the future, and we cannot make assurances that compliance costs may not become material. Significant Recent Transactions and Developments Term Loan Facility As of January 2, 2021, we had outstanding borrowings of $43.2 million under our senior secured term loan facility.
These requirements could become more stringent in the future, and we cannot make assurances that compliance costs may not become material. Significant Recent Transactions and Developments Share Repurchase Program On August 23, 2021, our Board of Directors approved a stock repurchase program pursuant to which authorized us to repurchase up to $25.0 million of our common stock.
To help prevent future occurrences, accidents and injuries are investigated with corrective actions implemented locally and communicated to key operations personnel across the enterprise. To enhance the safety of our fleet, we are making a significant investment in “curtainside” trailers that cover and enclose the materials inside.
We also administer post injury/accident corrective action supplemental training as needed and dictated by our root cause investigations. Accidents and injuries are investigated with corrective actions implemented locally and communicated to key operations personnel across the enterprise to help prevent future occurrences.
Our second and third quarters are typically our higher volume quarters, reflecting an increase in construction, due to more favorable weather conditions. In past years, assuming no change in underlying inventory costs, our working capital has increased in the second and third quarters, reflecting general increases in seasonal demand.
The first and fourth quarters are typically our lower volume quarters due to the impact of unfavorable weather on the residential repair and remodel and residential new home construction markets. Our second and third quarters are typically our higher volume quarters, reflecting an increase in repair and remodel and residential new home construction, due to more favorable weather conditions.
As of January 1, 2022, we employed approximately 2,055 associates, and less than one percent of our associates are employed on a part-time basis. Approximately 21 percent of our associates were represented by various local labor unions with terms and conditions of employment subject to collective bargaining agreements (“CBAs”) negotiated between the Company and the local unions.
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”). Five CBAs covering approximately five percent of our associates are up for renewal in fiscal 2023, which we expect to renegotiate by the end of fiscal 2023.
Where we have identified discrepancies between actual compensation and our policies, we have taken action to make pay adjustments to close identified gaps. In addition, we are actively creating employee resource groups, which are designed to facilitate more social and community interaction in our workforce, to foster a more inclusive culture.
In addition, during fiscal 2022, we activated seven employee resource groups that facilitate social, development, and community interaction in our workforce to foster a more inclusive culture. Our Associates Our associates are the foundation of our business.
As of January 1, 2022, women represented 14 percent of our associate population, 20 percent of our executive leadership team, and 29 percent of our Board of Directors, and minorities represented 27 percent of our associate population, 40 percent of our executive leadership team, and 14 percent of our Board of Directors.
We realize the value that diversity, equity and inclusion bring to our business. As of December 31, 2022, employees that identify as female represented 15 percent of our associate population, 14 percent of our executive leadership team, and 25 percent of our Board of Directors.
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Of the $14.4 million in cash invested in fiscal 2021, $9.0 million was invested in the fourth quarter. 4 Products and Services We distribute products in two principal categories: specialty products and structural products.
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We have a strong market position and a broad geographic coverage footprint servicing all 50 states, where we maintain locations that serve 75 percent of the highest growth metropolitan statistical areas as it relates to forecasted housing starts and repair and remodel spend .
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Six CBAs covering approximately six percent of our associates were up for renewal in fiscal 2021. Four of those CBAs were successfully renewed, and another is expected to be completed before the end of the first quarter 2022.
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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.
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The remaining 5 CBA was terminated as a result of the local union disclaiming interest in continuing to represent the associates at the particular location. Two CBAs covering approximately four percent of our associates are up for renewal in fiscal 2022.
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The acquisition of Vandermeer added three distribution facilities in the State of Washington and provides direct access to Seattle and Portland, two of the top 15 highest growth repair and remodel and new construction markets in the United States. Additionally, following the acquisition, we now have coast-to-coast reach and serve all 50 states.
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Also, since the COVID-19 pandemic began, we have actively promoted and encouraged the use of our mental health benefits, which include certain free in-person mental health visits and unlimited online mental health sessions. We also launched quarterly talent reviews to further our succession planning and career development objectives.
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Vandermeer’s product offering and sales mix are similar to ours, with specialty products contributing to the majority of its revenue and gross profit.
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While uncertain, it remains a possibility that changes to our typical seasonality trends could continue during fiscal 2022 should similar market conditions continue. Climate Change Climate change presents potential risks and uncertainties for us.
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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.
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Governmental Regulations The Company is subject to various federal, state, provincial, and local laws, rules, and regulations. We are subject to the requirements of the U.S. Department of Labor Occupational Safety and Health Administration (“OSHA”).
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During the 2022 fiscal year, we allocated $169.3 million of capital towards the following transactions, all of which were funded with cash on hand: • We completed the acquisition of Vandermeer for a total of $67.0 million, which aligns to our specialty products strategy, establishes a meaningful growth platform in the Pacific Northwest, increases market penetration in key specialty product categories, and strengthens strategic supplier relationships.
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Our newest tractors are equipped with collision avoidance systems, blind spot detection and lane departure warning technology, and our newest tractors and trailers are equipped with disc-type brakes to improve stopping distance and driver control. The U.S. Department of Transportation (“DOT”) regulates our operations in domestic interstate commerce.
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The purchase price of $67.0 million includes $63.4 million for the business and $3.6 million for a distribution facility and real estate located in Spokane, Washington, which was acquired in this transaction.
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On April 2, 2021, we repaid the remaining outstanding principal balance under the facility and the facility was terminated. As a result, as of January 1, 2022, we had no outstanding borrowings under the term loan facility.
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This transaction is discussed in more detail in Note 2, Business Combination . • We invested $35.9 million in capital for our business to improve operational performance and productivity. • We repurchased 882,346 shares of our common stock for $66.4 million under our share repurchase program at an average price of $75.28 per share.
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In connection with our repayment of the facility, we expensed $5.8 million of debt issuance costs during the first quarter of fiscal 2021 that we had been amortizing in connection with the facility.
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Of the 882,346 shares we repurchased, 801,015 shares were repurchased through an accelerated share repurchase program. As a component of our decision to terminate the BlueLinx Corporation Hourly Retirement Plan (“the Plan”), we also contributed $11.1 million to the Plan. In exchange for our contributions, we reacquired two real estate properties that were previously contributed to the Plan.
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These costs are included within interest expense, net, on the Consolidated Statements of Operations and reported separately as an adjustment to net income in our Consolidated Statements of Cash Flows.
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This transaction is discussed in more detail in Note 11, Employee Benefits . Products and Services We distribute products in two principal categories: specialty products and structural products.
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While the facility was paid in full as of April 2, 2021, our average interest rate under the facility, exclusive of fees and prepayment premiums, was 8.2 percent and 8.0 percent for the years ended January 2, 2021 and January 1, 2022, respectively.
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This distribution channel, however, requires the lowest amount of committed capital and fixed costs.
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Amendment of our Revolving Credit Facility On August 2, 2021, we amended our revolving credit facility to, among other things, (i) extend the maturity date of the facility from October 10, 2022, to August 2, 2026, (ii) amend the Borrowing Base (as such term is defined under the facility) to include a certain portion of the assets of acquired companies prior to the conduct of a field exam or appraisals thereof by the agent, (iii) modify certain definitions and various affirmative and negative covenants to provide additional flexibility for the Company, and (iv) add customary LIBOR replacement language.
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Additionally, employees that identify as racially or ethnically diverse represented 28 percent of our associate population, 43 percent of our executive leadership team, and 13 percent of our Board of Directors. We are committed to managing the business in a manner that fosters diversity, equity, and inclusion.
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In addition, the amended revolving credit facility now provides for interest on borrowings at a rate per annum equal to (i) LIBOR plus a margin ranging from 1.25 percent to 1.75 percent, with the amount of such margin determined based upon the average of our excess availability for the immediately preceding fiscal quarter as calculated by the agent, for loans based on LIBOR, or (ii) the base rate plus a margin ranging from 0.25 percent to 0.75 percent, with the amount of such margin determined based upon the average of our excess availability for the immediately preceding fiscal quarter as calculated by the agent, for loans based on the base rate, reflecting a decrease of 0.50 percent to the upper limit of each respective margin tier.
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For instance, we are increasing our investments in our benefits programs, which included new and improved medical plans with lower deductibles, out of pocket maximums, free and unlimited virtual mental health counseling, enhanced life insurance benefits, and improved short-term disability benefits starting in 2023.
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As of January 1, 2022, we had zero outstanding borrowings on our revolving credit facility. Share Repurchase Program On August 23, 2021, we announced our Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $25 million of our common stock.
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We also continued our periodic talent reviews to further our succession planning and launched new career development programs.
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Under the 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.
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We experienced a change in our typical seasonality trends during the first half of 2022 due to certain lagging effects of COVID-19, including supply constraints and reduced manufacturing output, which impacted normal supply and demand for our products.
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Our repurchases may be made through a variety of methods, which may include open market purchases, privately negotiated transactions or pursuant to a trading plan that may be adopted in accordance with the Securities and Exchange Commission Rule 10b5-1. As of the date of this filing, we have repurchased no shares under this program.
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While there is 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 increased manufacturing output. Climate Change Climate change presents potential risks and uncertainties for us.
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Senior Secured Notes Transaction During the fourth quarter of 2021, we completed 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 8 on November 15, 2029.
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Weather-related events, such as hurricanes, tornadoes or extreme temperature changes, can impact our operations and result in lost production, supply chain disruptions and increased material costs. Some of our distribution centers are located in areas at greater risk of tornadoes, hurricanes, and floods.
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The majority of net proceeds from the offering of the 2029 Notes were used to repay borrowings under our revolving credit facility. In conjunction with this offering, we also amended the revolving credit facility to reduce the credit limit from $600 million to $350 million.
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See Item 1A, Risk Factor s for further discussion of the risks posed by climate change.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFactors associated with our industry, the operation of our business, and the markets for our products may cause our quarterly financial results to fluctuate, including: 17 • the commodity nature of many of our products and their price movements, which are driven largely by capacity utilization rates and industry cycles that affect supply and demand; • general economic conditions, including but not limited to housing starts, construction labor shortages, repair and remodel activity and commercial construction, foreclosure rates, interest rates, unemployment rates, and mortgage availability and pricing, as well as other consumer financing mechanisms, that ultimately affect demand for our products; • supply chain disruptions, including those caused by the spread of contagious illness; • the highly competitive nature of our industry; • disintermediation; • the impact of actuarial assumptions and regulatory activity on pension costs and pension funding requirements; • our creditworthiness in addition to the financial condition and creditworthiness of our customers; • our substantial indebtedness, including the possibility that we may not generate sufficient cash flows from operations or that future borrowings may not be available in amounts sufficient to fulfill our debt obligations and fund other liquidity needs; • cost of compliance with government regulations; • adverse customs and tariff rulings including those relating to anti-dumping, countervailing duty, or circumvention investigations; • protectionist trade policies and import tariffs; • labor disruptions, shortages of skilled and technical labor, or increased labor costs; • the impact of cost inflation, which may arise from changes in the economic environment, such as potential litigation; • increased healthcare costs; • the need to successfully implement succession plans for our senior managers and other associates; • our ability to successfully complete potential acquisitions, achieve expected synergies from acquisitions, or efficiently integrate acquired operations; • disruption in our information technology systems; • significant maintenance issues or failures with respect to our tractors, trailers, forklifts, and other major equipment; • severe weather phenomena such as drought, hurricanes, tornadoes, and fire; • condemnations of all or part of our real property; and • fluctuations in the market for our equity.
Biggest changeFactors associated with our industry, the operation of our business, and the markets for our products may cause our quarterly financial results to fluctuate, including: • general economic conditions, including but not limited to housing starts, construction labor shortages, repair and remodel activity and commercial construction, foreclosure rates, interest rates, unemployment rates, and mortgage availability and pricing, as well as other consumer financing mechanisms, that ultimately affect demand for our products; • supply chain disruptions, including those caused by the spread of contagious illness and geopolitical risks; • the highly competitive nature of our industry; • the commodity nature of many of our products and their price movements, which are driven largely by capacity utilization rates and industry cycles that affect supply and demand; • the cessation or reduction of supplier incentive programs, such as supplier rebates and/or deviation programs, and/or our inability to collect supplier incentives due to us; • disintermediation; • the impact of actuarial assumptions and regulatory activity on pension costs and pension funding requirements; • our creditworthiness in addition to the financial condition and creditworthiness of our customers; • our indebtedness, including the possibility that we may not generate sufficient cash flows from operations or that future borrowings may not be available in amounts sufficient to fulfill our debt obligations and fund other liquidity needs; • cost of compliance with government regulations; 16 • adverse customs and tariff rulings including those relating to anti-dumping, countervailing duty, or circumvention investigations; • protectionist trade policies and import tariffs; • labor disruptions, shortages of skilled and technical labor, or increased labor costs; • the impact of inflation, which may arise from changes in the economic environment; • increased healthcare costs; • the need to successfully implement succession plans for our senior managers and other associates; • our ability to successfully complete potential acquisitions, achieve expected synergies from acquisitions, or efficiently integrate acquired operations; • disruption in our information technology systems; • significant maintenance issues or failures with respect to our tractors, trailers, forklifts, and other major equipment; • severe weather phenomena such as drought, hurricanes, tornadoes, and fire; • condemnations of all or part of our real property; and • fluctuations in the market for our equity.
We may also be limited in our ability to pass on increases in freight costs on our products. At times, the sale price for any one or more of the products we produce or distribute may fall below our purchase costs, requiring us to incur losses on product sales.
We may also be limited in our ability to pass on increases in freight costs for our products. At times, the sale price for any one or more of the products we produce or distribute may fall below our purchase costs, requiring us to incur losses on product sales.
Additionally, our business is reliant upon information technology systems to, among other things, manage and route our sales calls, manage inventories and accounts receivable, make purchasing decisions, monitor our results of operations, and place orders with our vendors and process orders from our customers.
Additionally, our business is reliant upon information technology systems to, among other things, manage and route our sales calls, manage inventories and accounts receivable, make purchasing decisions, monitor our results of operations, place orders with our vendors and process orders from our customers.
For example, our substantial indebtedness could: • make us more vulnerable to general adverse economic and industry conditions; • limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, and other general corporate requirements; • expose us to interest rate fluctuations because the interest rate on the debt under our revolving credit facility is variable; • require us to dedicate a substantial portion of our cash flows to payments on our debt, thereby reducing the availability of our cash flows for operations and other purposes; • limit our flexibility in planning for, or reacting to, changes in our business, and the industry in which we operate; and • place us at a competitive disadvantage compared to competitors that may have proportionately less debt, and therefore may be in a better position to obtain more favorable credit terms.
For example, our indebtedness could: • make us more vulnerable to general adverse economic and industry conditions; • limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, and other general corporate requirements; • expose us to interest rate fluctuations because the interest rate on the debt under our revolving credit facility is variable; • require us to dedicate a substantial portion of our cash flows to payments on our debt, thereby reducing the availability of our cash flows for operations and other purposes; • limit our flexibility in planning for, or reacting to, changes in our business, and the industry in which we operate; and • place us at a competitive disadvantage compared to competitors that may have proportionately less debt, and therefore may be in a better position to obtain more favorable credit terms.
As a result of real estate financing transactions through sale-leaseback arrangements, a substantial number of our distribution centers are leased under non-cancelable leases. These leases typically have initial terms of approximately fifteen years, and 19 most provide options to renew for specified periods of time. We may enter into additional sale and lease-back transactions in the future.
As a result of real estate financing transactions through sale-leaseback arrangements, a substantial number of our distribution centers are leased under non-cancelable leases. These leases typically have initial terms of approximately fifteen years, and most provide options to renew for specified periods of time. We may enter into additional sale and lease-back transactions in the future.
Certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, may not constitute a change in control under the indenture governing our senior secured notes. 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 .
Certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, may not constitute a change in control under the indenture governing our senior secured notes. 18 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 .
More restrictive limitations, including those on vehicle weight and size, trailer length and configuration, or driver hours of service would increase our costs, which, if we are unable to pass these cost increases on to our customers, may increase our selling, general and administrative expenses and adversely affect our financial condition, operating results, and cash flows.
More restrictive regulatory limitations, including those on vehicle weight and size, trailer length and configuration, or driver hours of service would increase our costs, which, if we are unable to pass these cost increases on to our customers, may increase our selling, general and administrative expenses and adversely affect our financial condition, operating results, and cash flows.
If the current inflationary environment continues or worsens, we may not be able to adjust the pricing we charge for our products to offset increasing product costs, which would adversely impact our results of operations and cash flows. 10 Our earnings are highly dependent on volumes. Our earnings are highly dependent on volumes, which fluctuate.
If the current inflationary environment continues or worsens, we may not be able to adjust the pricing we charge for our products to offset increasing product costs, which would adversely impact our results of operations and cash flows. 10 Our earnings are highly dependent on volumes.
In addition, the amount and timing of our pension funding obligations are influenced by funding requirements that are established by the 21 Employee Retirement Income and Security Act of 1974, the Pension Protection Act, Congressional Acts, or other governing bodies. Costs and liabilities related to our participation in multi-employer pension plans could increase .
In addition, the amount and timing of our pension funding obligations are influenced by funding requirements that are established by the Employee Retirement Income and Security Act of 1974, the Pension Protection Act, Congressional Acts, or other governing bodies. Costs and liabilities related to our participation in multi-employer pension plans could increase .
Disruptions in these systems could materially impact our ability to buy and sell our products, as well as generally operate our business, which could reduce our revenue. Our success depends on our ability to attract, train, and retain highly qualified associates and other key personnel while controlling related labor costs .
Disruptions in these systems could materially impact our ability to buy and sell our products, as well as generally operate our business, which could reduce our revenue. 13 Our success depends on our ability to attract, train, and retain highly qualified associates and other key personnel while controlling related labor costs .
In order to be successful, we must attract, train, and retain a large number of highly qualified associates while controlling related labor costs. Our ability to control labor costs is subject to numerous external factors, including prevailing wage rates and health and other insurance costs.
In order to be successful, we must attract, train, and retain a large number of highly qualified associates while controlling related labor costs. Our ability to control labor costs is subject to numerous external factors, including labor availability, prevailing wage rates and health and other insurance costs.
These disruptions and deficiencies could lead to increased costs, order and delivery errors, inventory and billing errors, the loss of employees, or the loss of customers, suppliers, or products either overall or in certain markets, which could adversely affect our financial condition, operating results, and cash flows.
These disruptions and deficiencies could lead to increased costs, order and delivery 12 errors, inventory and billing errors, the loss of employees, or the loss of customers, suppliers, or products either overall or in certain markets, which could adversely affect our financial condition, operating results, and cash flows.
In addition, war, terrorism, geopolitical uncertainties, and public health issues could cause damage or disruption to the global economy, and thus could have a material adverse effect on us, our suppliers and our customers. Our operating results depend on the successful implementation of our strategy.
In addition, war, terrorism, geopolitical uncertainties, and public health issues could cause damage or disruption to the global economy, and thus could have a material adverse effect on us, our suppliers and our customers. 14 Our operating results depend on the successful implementation of our strategy.
We are also from time to time subject to casualty, contract, tort, and other claims relating to 14 our business, the products we have distributed in the past or may in the future distribute, and the services we have provided in the past or may in the future provide, either directly or through third parties.
We are also from time to time subject to casualty, contract, tort, and other claims relating to our business, the products we have distributed in the past or may in the future distribute, and the services we have provided in the past or may in the future provide, either directly or through third parties.
In addition, actions of these stockholders may cause periods of fluctuation in our stock price based on 22 temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
In addition, actions of these stockholders may cause periods of fluctuation in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
As cyber-attacks become more sophisticated generally, we may incur significant costs to strengthen our systems from outside intrusions, and/or obtain insurance coverage related to the threat of such attacks.
As cyber-attacks become more sophisticated, we may incur significant costs to strengthen our systems from outside intrusions, and/or obtain insurance coverage related to the threat of such attacks.
The operations at our distribution facilities may be interrupted or impaired by various operating risks, including, but not limited to, risks associated with catastrophic events, such as fires, floods, earthquakes, explosions, natural disasters, severe weather, including hurricanes, tornados and droughts, whether a result of climate change or otherwise, pandemics, including COVID-19, or other similar occurrences; interruptions in the delivery of products via railroad or other inbound transportation means; adverse government regulations; equipment breakdowns or failures; prolonged power failures; unscheduled maintenance outages; information system disruptions or failures due to any number of causes, including cyber-attacks; violations of our permit requirements or revocation of permits; releases of pollutants and hazardous substances to air, soil, surface water or ground water; disruptions in transportation infrastructure, including roads, bridges, railroad tracks and tunnels; shortages of equipment or spare parts; and labor disputes and shortages.
The operations at our distribution facilities may be interrupted or impaired by various operating risks, including, but not limited to, risks associated with catastrophic events, such as war, fires, floods, earthquakes, explosions, natural disasters, severe weather, including hurricanes, tornados and droughts, whether a result of climate change or otherwise, pandemics, or other similar occurrences; interruptions in the delivery of products via railroad or other inbound transportation means; adverse government regulations; equipment breakdowns or failures; prolonged power failures; unscheduled maintenance outages; information system disruptions or failures due to any number of causes; violations of our permit requirements or revocation of permits; releases of pollutants and hazardous substances to air, soil, surface water or ground water; disruptions in transportation infrastructure, including roads, bridges, railroad tracks and tunnels; shortages of equipment or spare parts; and labor disputes and shortages.
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 purchase many of our products directly from manufacturers, which are then sold and distributed to customers.
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 purchase most of our products directly from manufacturers, which are then sold and distributed to customers.
In addition, operating hazards, such as unloading heavy products, operating large machinery and driving hazards, which are inherent in our business and some of which may be outside of our control, can cause personal injury and loss of life, damage to or destruction of property, plant, and equipment and environmental damage.
In addition, operating hazards, such as delivering and unloading products, operating large machinery and driving hazards, which are inherent in our business and some of which may be outside of our control, can cause personal injury and loss of life, damage to or destruction of property, plant, and equipment and environmental damage.
We are also susceptible to malware, ransomware, denial of service, and other attacks that could adversely affect our information technology systems. Although we utilize various procedures and controls to monitor and mitigate these threats, there can be no assurance that these procedures and controls will be sufficient to prevent security threats from materializing.
We may also be susceptible to phishing attacks, malware, ransomware, denial of service, and other attacks that could adversely affect our information technology systems. Although we utilize various procedures and controls to monitor and mitigate these threats, there can be no assurance that these procedures and controls will be sufficient to prevent security threats from materializing.
Unfavorable housing market conditions could result in financial failures of one or more of our significant customers. Furthermore, we may not necessarily be aware of any deterioration in our customers’ financial position.
Unfavorable housing market conditions could result in financial failures of one or more of our significant customers. Furthermore, we may not be aware of deterioration in our customers’ financial position.
If we fail to comply adequately with the DOT and FMCSA regulations or such regulations become more stringent, we could experience increased inspections, regulatory authorities could take remedial action, including imposing fines or shutting down our operations, or we could be subject to increased audit and compliance costs.
If we fail to comply adequately with such regulations or such regulations become more stringent, we could experience increased inspections, regulatory authorities could take remedial action, including imposing fines or shutting down our operations, or we could be subject to increased audit and compliance costs.
If we determine in the future that there is not sufficient positive evidence to support the remaining valuation of our deferred tax assets, either due to the risk factors described herein or other factors which may impact our net operating carryforwards or other components of our deferred tax assets such as our temporary differences which may arise from tax legislation which we cannot foresee, we may be required to further adjust the valuation allowance to reduce our deferred tax assets, in specific areas or in total.
If we determine in the future that there is not sufficient positive evidence to support the remaining valuation of our deferred tax assets, either due to Part 1, Item 1A, Risk Factors described herein or other factors which may impact our net operating 19 carryforwards or other components of our deferred tax assets such as our temporary differences which may arise from tax legislation which we cannot foresee, we may be required to further adjust the valuation allowance to reduce our deferred tax assets, in specific areas or in total.
Such issues and risks can be magnified by the diversity of product mix our business units carry across multiple major product categories. Excessive increases in the market prices of certain building products can put negative pressure on our operating cash flows by requiring us to invest more in inventory.
Such issues and risks can be magnified by the diversity of product mix our distribution centers carry across multiple major product categories. Excessive increases in the market prices of certain building products can put negative pressure on our operating cash flows by requiring us to invest more in inventory.
General economic weakness, elevated unemployment levels, mortgage delinquency and foreclosure rates, limitations in the availability of mortgage and home improvement financing, and lower housing turnover all limit consumers’ spending, particularly on discretionary items, and affect their confidence level leading to reduced spending on home improvement projects.
General economic weakness, inflation, elevated unemployment levels, mortgage delinquency and foreclosure rates, limitations in the availability of mortgage and home improvement financing, home equity value declines and lower housing turnover all limit consumers’ spending, particularly on discretionary items, and affect their confidence level leading to reduced spending on home improvement projects.
These systems may be vulnerable to natural disasters, telecommunications failures and similar events, employee errors or to intentional acts of misconduct, such as security breaches or attacks. The occurrence of any of these events or acts, or any other unanticipated problems, could result in damage to or the unavailability of these systems.
These systems may be vulnerable to natural disasters, telecommunications or equipment failures, power outages and similar events, employee errors or to intentional acts of misconduct, such as security breaches or cyber-attacks. The occurrence of any of these events or acts, or any other unanticipated problems, could result in damage to or the unavailability of these systems.
Operating Risks Our strategy includes pursuing acquisitions. We may be unsuccessful in making and integrating mergers, acquisitions and investments, and completing divestitures. The integration of acquisitions can involve significant anticipated and unanticipated operational challenges, including integrating different computer, enterprise resource planning, and accounting systems, integrating physical facilities and inventories, and integrating acquired personnel and corporate cultures into our business.
Operating Risks Our strategy includes pursuing acquisitions. We may be unsuccessful in making and integrating mergers, acquisitions and investments. The integration of acquisitions can involve significant anticipated and unanticipated operational challenges, including integrating different computer, enterprise resource planning, and accounting systems, integrating physical facilities and inventories, and integrating businesses and corporate cultures into our business.
Department of Labor, regulations issued by the SEC, accounting standards issued by the Financial Accounting Standards Board (the “FASB”) or similar entities, and state and local zoning restrictions, building codes and contractors’ licensing regulations.
Department of Labor and Federal Trade Commission, regulations issued by the SEC, accounting standards issued by the Financial Accounting Standards Board (“FASB”) or similar entities, and state and local zoning restrictions, building codes and contractors’ licensing regulations.
The extent of the effect of the ongoing COVID-19 pandemic on our operational and financial performance in future periods will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, scope and severity of the pandemic and the spread of COVID-19 variants, the actions taken to contain or mitigate its impact, and the direct and indirect economic effects of the pandemic and related containment measures, among others.
The extent of the effect of COVID-19 variants on our operational and financial performance in future periods will depend on future developments, which cannot be predicted with confidence, including the duration, scope and severity and spread of such COVID-19 variants, the actions taken to contain or mitigate its impact, and direct and indirect economic effects of such and related containment measures, among others.
Any failure to maintain, or increase volumes, alone or combined with fluctuations, such as commodity price inflation or deflation, which would impact the purchase and/or selling price of our products, could adversely affect our results of operations, cash flows, and financial condition. Our industry is highly fragmented and competitive.
Any failure to maintain, or increase volumes, alone or combined with margin fluctuations due to price inflation or deflation, which would impact the purchase and/or selling price of our products, could adversely affect our results of operations, cash flows, and financial condition. Our industry is highly fragmented and competitive.
Our business has experienced, and is likely to continue experiencing, cycles relating to industry capacity and general economic conditions. During 2021, availability of certain building products we distribute was impacted by supply constraints driven by the COVID-19 pandemic and affected the market price of the commodity and commodity-based specialty products we buy and distribute.
Our business has experienced, and is likely to continue experiencing, cycles relating to industry capacity and general economic conditions. For example, during early 2022, availability of certain building products we distribute was impacted by supply constraints driven by the COVID-19 pandemic, which affected the market price of the commodity and commodity-based specialty products we buy and distribute.
Our operating profit may be adversely affected if we are unable to obtain the fuel we require or to fully offset the anticipated impact of higher fuel prices through increased prices or fuel surcharges to our customers.
Our operating profit may be adversely affected if we are unable to obtain the fuel we require or to fully offset the anticipated impact of higher fuel prices or third-party freight costs through increased prices or fuel surcharges to our customers.
For example, we were required to evaluate and maintain reasonable valuation allowances against our remaining state net operating loss carryforwards against our U.S. deferred tax assets as of January 1, 2022.
For example, we were required to evaluate and maintain reasonable valuation allowances against our remaining state net operating loss carryforwards against our U.S. deferred tax assets as of December 31, 2022.
In many of our markets, highly qualified associates are in high demand and we compete with other businesses for these associates and invest resources in training and incentivizing them. In particular, there is significant competition for qualified drivers in the transportation industry.
In many of our markets, highly qualified associates are in high demand and we compete with other businesses for these associates and invest resources in training and incentivizing them. In particular, there is significant competition for qualified drivers in the transportation industry and increasingly more stringent regulatory requirements.
Besides passing fuel costs on to customers, we have at times entered into forward purchase contracts for fuel used at some of our facilities that protect against fuel price increases.
Besides trying to pass fuel costs to customers, we have at times entered into forward purchase contracts for fuel used at some of our facilities that protect against fuel price increases.
However, economic conditions and market factors may make it difficult for us to raise our prices enough to keep up with the rate of inflation, which could reduce our profit margins or reduce the number of customers who can purchase our products.
An inflationary environment can increase the cost of products we purchase. However, economic conditions and market factors may make it difficult for us to raise our prices enough to keep up with the rate of inflation, which could reduce our profit margins or reduce the number of customers who can purchase our products.
When the prices of the products we distribute decline, customer demand for lower prices could result in lower sales prices and, to the extent that our inventory at the time was purchased at higher costs, lower margins.
A decline in the prices of the products we distribute could adversely impact our operating results. When the prices of the products we distribute decline, customer demand for lower prices could result in lower sales prices and, to the extent that our inventory at the time was purchased at higher costs, lower margins.
The actual cost of claims can be different than the historical selected loss development factors because of safety performance, payment patterns, and settlement patterns. The value of our deferred tax assets could become impaired, which could materially and adversely affect our operating results. As of January 1, 2022, we had approximately $60 million in net deferred tax assets.
The actual cost of claims can be different than the historical selected loss development factors because of safety performance, payment patterns, and settlement patterns. The value of our deferred tax assets could become impaired, which could materially and adversely affect our operating results. As of December 31, 2022, we had $56.2 million in net deferred tax assets.
In addition, a shortage of qualified drivers could require us to increase driver compensation, let trucks sit idle, utilize common carriers, utilize less experienced drivers, or face difficulty meeting customer demands, all of which could adversely affect our growth and profitability. Furthermore, our success is highly dependent on the continued services of our management team.
In addition, a shortage of qualified drivers could require us to increase driver compensation, let trucks sit idle, utilize third-party freight more so than normal, utilize less experienced drivers, or face difficulty meeting customer demands, all of which could adversely affect our growth and profitability. Furthermore, our success is highly dependent on the continued services of our management team.
Furthermore, continued consolidation among our suppliers makes it more difficult for us to negotiate favorable pricing, consignment arrangements, and discount programs with our suppliers, thereby resulting in reduced margins and profits. Overall, these pricing pressures may adversely affect our operating results and cash flows.
Furthermore, continued consolidation among our suppliers makes it more difficult for us to negotiate favorable pricing, consignment arrangements, and discount programs with our suppliers, thereby resulting in reduced margins and profits. Overall, these pricing pressures may adversely affect our operating results and cash flows. We are currently experiencing an uncertain inflationary environment.
A significant percentage of our employees are unionized. Wage increases or work stoppages by our unionized employees may reduce our results of operations . As of January 1, 2022, we employed approximately 2,055 employees and less than one percent of our employees are employed on a part-time basis.
A significant percentage of our employees are unionized. Wage increases or work stoppages by our unionized employees may reduce our results of operations . As of December 31, 2022, we employed approximately 2,100 associates and less than one percent of our associates are employed on a part-time basis.
Factors impacting the level of activity in the residential new construction markets include changes in interest rates, inflation, unemployment rates, housing inventory, high foreclosure rates and unsold/foreclosure inventory, availability of financing, labor costs and availability, vacancy rates, local, state and federal government regulation (including mortgage interest deductibility and other tax laws), weakening in the U.S. economy or of any regional or local economy in which we operate, availability of supplies, the COVID-19 pandemic’s impact on the economy and consumer demand and preferences, and shifts in populations away from the markets that we serve.
Factors impacting the level of activity in the residential new construction markets include increases in interest rates, inflation, unemployment rates, housing inventory, high foreclosure rates and unsold/foreclosure inventory, availability of financing and mortgages, labor costs and availability, vacancy rates, local, state and federal government regulation (including mortgage interest deductibility and other tax laws), weakening in the U.S. economy or of any regional or local economy in which we operate, availability of supplies, consumer demand and preferences, and shifts in populations away from the markets that we serve, all of which are beyond our control.
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 . The agreements relating to our debt significantly limit, but do not prohibit, our ability to incur additional debt.
Refer to Note 9, Long-Term Debt , for further details. 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 . The agreements relating to our debt significantly limit, but do not prohibit, our ability to incur additional debt.
In addition, work stoppages or other labor disturbances may occur in the future, which could adversely impact our net sales and/or selling, general, and administrative expenses. Wage increases could also be significant in an inflationary environment even in our non-unionized locations.
In addition, work stoppages or other labor disturbances may occur in the future, which could adversely impact our net sales and/or selling, general, and administrative expenses. Wage increases could also be significant in an inflationary environment even in our non-unionized locations. All or some of these factors could negatively impact our operating results and cash flows.
We cannot assure you that we will be able to maintain suitable and adequate insurance on acceptable terms or that such insurance will provide adequate protection against potential liabilities, and the cost of any product liability or other proceeding, even if resolved in our favor, could be substantial.
We cannot predict or, in some cases, control the costs to defend or resolve such claims. We cannot assure our ability to maintain suitable and adequate insurance on acceptable terms or that such insurance will provide adequate protection against potential liabilities, and the cost of any product liability or other proceeding, even if resolved in our favor, could be substantial.
If any of our stockholders were to bring a similar lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and attention of our management and harm our operating results. The activities of activist stockholders could have a negative impact on our business and results of operations .
If any of our stockholders were to bring a similar lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and attention of our management and harm our operating results.
Our operations could also in the future be subject to regulations related to climate change. The ongoing effect of the COVID-19 pandemic and other widespread public health crises may adversely affect our business and results from operations.
Our operations could also in the future be subject to regulations related to climate change. The effect of global pandemics, such as COVID-19, 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.
Many of the building products that we distribute, including oriented strand board (“OSB”), plywood, lumber, and rebar, are commodities that are widely available from other distributors or manufacturers, with prices and volumes determined frequently in an auction market based on participants’ perceptions of short-term supply and demand factors.
In addition to the specialty building products we distribute such as engineered wood, siding, millwork, industrial products, and outdoor living, many of the other building products that we distribute, including oriented strand board, plywood, lumber, and rebar, are commodities that are widely available from other distributors or manufacturers, with prices and volumes determined frequently in an auction market based on participants’ perceptions of short-term supply and demand factors.
Many of our suppliers and manufacturers are located outside of the United States. Thus, import taxes or costs, including new or increased tariffs, anti-dumping duties, countervailing duties, or similar duties, some of which could be applied retroactively, could increase the cost of the products that we distribute.
Thus, import taxes or costs, including new or increased tariffs, anti-dumping duties, countervailing duties, or similar duties, some of which could be applied retroactively, could increase the cost of the products that we distribute.
We are subject to various federal, state, local, and other laws and regulations, including, among other things, transportation regulations promulgated by the DOT, work safety regulations promulgated by OSHA, employment regulations promulgated by the U.S. Equal Employment Opportunity Commission, regulations of the U.S.
We are subject to various federal, state, local, and other laws and regulations, including, among other things, transportation regulations promulgated by the Department of Transportation (“DOT”) and Federal Motor Carrier Safety Administration (“FMCSA”), work safety regulations promulgated by Occupational Safety and Health Administration, employment regulations promulgated by the U.S. Equal Employment Opportunity Commission, regulations of the U.S.
Our transportation operations, upon which we depend to distribute products from our distribution centers, are subject to the regulatory jurisdiction of the DOT and the FMCSA, which have broad administrative powers with respect to our transportation operations. Vehicle dimensions and driver hours of service also are subject to both federal and state regulation.
Our transportation operations, upon which we depend to distribute products from our distribution centers, are subject to the regulatory jurisdiction of the DOT and the FMCSA, which have broad administrative powers with respect to our transportation operations.
In particular, these instruments limit our ability to, among other things: • incur additional debt; • grant liens on assets; • make investments; • repurchase stock; • pay dividends and make distributions; • sell or acquire assets, including certain real estate assets, outside the ordinary course of business; • engage in transactions with affiliates; and • make fundamental business changes.
In particular, these instruments limit our ability to, among other things: • incur additional debt; • grant liens on assets; • make investments; • repurchase stock; • pay dividends and make distributions; • sell or acquire assets, including certain real estate assets, outside the ordinary course of business; • engage in transactions with affiliates; and • make fundamental business changes. 17 These covenants and restrictions could affect our ability to operate our business, and may limit our ability to react to market conditions or take advantage of potential business opportunities as they arise.
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.
Prices of commodity products can be volatile as a result of national and international economic conditions, labor and freight costs, competition, market speculation, government regulation, and trade policies, periodic delays in the delivery of products and inventory levels in various distribution channels.
Although we may elect in the future to take certain actions to reduce interest rate volatility in connection with our variable rate borrowings, we cannot provide assurances that we will be able to do so or that those actions will be effective. Our revolving credit facility includes available interest rate options based on the London Inter-bank Offered Rate (“LIBOR”).
Although we may elect in the future to take certain actions to reduce interest rate volatility in connection with our variable rate borrowings, we cannot provide assurances that we will be able to do so or that those actions will be effective.
As we have no current intention of paying dividends, unless we should decide to do so in the future, any return to stockholders may be limited to the appreciation in their stock. General Risk Factors Changes in, or interpretation of, accounting principles could result in unfavorable accounting changes .
As we have no current intention of paying dividends, unless we should decide to do so in the future, any return to stockholders may be limited to the appreciation in their stock.
Implementation of these rules, future rules, or our own vaccination policies, as well as navigating conflicts between state, local and federal rules, could cause us to experience additional challenges in retaining our employees.
Additionally, implementation of these rules, future rules, or our own vaccination policies, as well as navigating conflicts between state, local and federal rules, could cause us to experience additional challenges in retaining our employees. Regulatory impacts from these rules, or future rules, requiring Company-wide polices could impact us in a significant way.
At January 1, 2022, we had no outstanding debt under our revolving credit facility, and approximately $300 million of debt outstanding under our senior secured notes. Additionally, as of January 1, 2022, outstanding commitments under finance leases were $275 million. Our level of indebtedness could still have considerable consequences for us.
As of December 31, 2022, we had no outstanding debt under our revolving credit facility, and approximately $300.0 million of debt outstanding under our senior secured notes. Additionally, as of December 31, 2022, outstanding commitments under our finance leases were approximately $273.1 million. Our level of indebtedness could still have considerable consequences to our financial condition and operating results.
Public health crises, pandemics, and epidemics, such as the ongoing COVID-19 pandemic, have impacted, and could continue to impact, our operations and financial performance.
Public health crises, pandemics, and epidemics, such as COVID-19, have impacted. our operations and financial performance.
Risks Relating to Our Common Stock 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 .
Broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. 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 we do not make scheduled payments on our debt, we will be in default and the outstanding principal and interest on our debt could be declared to be due and payable, in which case we could be forced into bankruptcy or liquidation or required to substantially restructure or alter our business operations or debt obligations.
If we do not make scheduled payments on our debt, we will be in default and the outstanding principal and interest on our debt could be declared to be due and payable, in which case we could be forced into bankruptcy or liquidation or required to substantially restructure or alter our business operations or debt obligations. 20 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.
In the future, if we are unable to effectively manage our inventory, our cash flows may be negatively affected, which could have a material adverse effect on our business, financial condition, and operating results. 13 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 .
In the future, if we are unable to effectively manage our inventory, our cash flows may be negatively affected, which could have a material adverse effect on our business, financial condition, and operating results.
If we are unable to compete effectively, our net sales and operating results may be reduced . The building and industrial products distribution industry is highly fragmented and competitive, and the barriers to entry for local competitors are relatively low.
If we are unable to compete effectively, our net sales and operating results may be reduced . The building products distribution industry is highly fragmented and competitive, and the barriers to entry for local competitors are relatively low. Competitive factors in our industry include pricing, availability of product, service, delivery capabilities, customer relationships, geographic coverage, and breadth of product offerings.
The trend in our industry toward consolidation could make it more difficult for us to maintain operating margins. Our customers and suppliers also continue to consolidate, and this consolidation could result in the loss of existing customers and suppliers to our competitors. We typically do not enter into minimum purchase contracts with our customers or suppliers.
The trend in our industry toward consolidation could make it more difficult for us to gain or retain market share or maintain operating margins. Our customers and suppliers also continue to consolidate, and this consolidation could result in the loss of existing customers and suppliers to our competitors. We are subject to disintermediation risk.
If interest rates increase, our debt service obligations on this variable rate indebtedness would increase even though the amount borrowed remained the same.
Borrowings under our revolving credit facility bear interest at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on this variable rate indebtedness would increase even though the amount borrowed remained the same.
Approximately 21 percent of our employees were represented by various local labor unions with terms and conditions of employment governed by collective bargaining agreements (“CBAs”). Six CBAs covering approximately six percent of our employees were up for renewal in fiscal 2021.
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”). Five CBAs covering approximately five percent of our associates are up for renewal in fiscal 2023, which we expect to renegotiate by the end of fiscal 2023.
All or some of these factors could negatively impact our operating results and cash flows. 15 Federal, state, local, and other regulations could impose substantial costs and restrictions on our operations that would reduce our net income .
Federal, state, local, and other regulations could impose substantial costs and restrictions on our operations that would reduce our net income .
Our revolving credit facility and senior secured notes contain various covenants and restrictions, including customary financial covenants that limit management’s discretion in operating our business.
The instruments governing our indebtedness contain various covenants limiting the discretion of our management in operating our business, including requiring us to maintain a minimum level of excess liquidity . Our revolving credit facility and senior secured notes contain various covenants and restrictions, including customary financial covenants that limit management’s discretion in operating our business.
These covenants and restrictions could affect our ability to operate our business, and may limit our ability to react to market conditions or take advantage of potential business opportunities as they arise. Additionally, our ability to comply with these covenants may be affected by events beyond our control, including general economic and credit conditions and industry downturns.
Additionally, our ability to comply with these covenants may be affected by events beyond our control, including general economic and credit conditions and industry downturns.
If compliance with our debt obligations materially limits our financial or operating activities, or hinders our ability to adapt to changing industry conditions, we may lose market share, our revenue may decline and our operating results may be negatively affected. 18 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 .
If compliance with our debt obligations materially limits our financial or operating activities, or hinders our ability to adapt to changing industry conditions, we may lose market share, our revenue may decline and our operating results may be negatively affected.
Such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, or a breach of warranties.
Such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, or a breach of warranties. We rely on manufacturers and other suppliers, including manufacturers and suppliers located outside of the United States, to provide us with the products we sell or distribute.
Regulatory restrictions may increase our operating expenses and limit the availability of suitable building lots for our customers, any of which could negatively affect our business, financial condition and results of operations.
Regulatory restrictions may increase our operating expenses and limit the availability of suitable building lots for our customers, any of which could negatively affect our business, financial condition and results of operations. 15 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 .
Failure by our suppliers to continue to supply us with products on commercially reasonable terms, or at all, could have a material adverse effect on our financial condition, operating results, and cash flows. 12 Our dependence on international suppliers and manufacturers for certain products exposes us to risks that could affect our financial condition .
Although in many instances we have agreements with our suppliers, these agreements are generally terminable by either party on limited notice. Failure by our suppliers to continue to supply us with products on commercially reasonable terms, or at all, could have a material adverse effect on our financial condition, operating results, and cash flows.
As a result, our revenue, operating performance, cash flows, and net income may be adversely affected. If petroleum or energy prices increase, our results of operations could be adversely affected . Petroleum and energy prices and availability of petroleum products are subject to political, economic, and market factors that are outside our control.
As a result, our revenue, operating performance, cash flows, and net income may be adversely affected. If 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 .
As a result of labor shortages, particularly among our drivers and material handlers, we could be required to utilize temporary or contract labor. Using temporary or contract labor typically requires higher cost, and temporary or contract labor may be less productive than full-time associates.
Using temporary or contract labor typically requires higher cost, and temporary or contract labor may be less productive than full-time associates.
Commodity price inflation can increase our gross margins on relatively consistent or even lower year over year sales volumes, depending on the degree of commodity price inflation. Fluctuations in commodity prices make it difficult to predict our financial results with any degree of certainty.
Commodity price inflation or deflation can increase or decrease our gross margins on relatively consistent year over year structural sales volumes, depending on the degree of commodity price change.
In addition, continued consolidation among our customers, particularly dealers, and their customers (i.e., home builders), and changes in their respective purchasing policies and payment practices, could result in even further pricing pressure. A decline in the prices of the products we distribute could adversely impact our operating results.
Large customers have historically been able to exert pressure on their outside suppliers and distributors to keep prices low in the highly fragmented building materials distribution industry. In addition, continued consolidation among our customers, particularly dealers, and their customers (i.e., home builders), and changes in their respective purchasing policies and payment practices, could result in even further pricing pressure.
Political events in petroleum-producing regions as well as hurricanes and other weather-related events 20 or natural disasters may cause the price of fuel to increase or the availability of fuel to decrease. Within our business units, we deliver products to our customers primarily via our fleet of trucks, which we fuel both onsite and through street fuel programs.
Petroleum and energy prices and availability of petroleum products are subject to political, geopolitical, economic, and market factors that are outside our control. Political events in petroleum-producing regions as well as hurricanes and other weather-related events or natural disasters may cause the price of fuel to increase or the availability of fuel to decrease.
And interventions and enforcement under the FMCSA Compliance, Safety, and Accountability program may shrink the industry’s pool of drivers as those drivers with unfavorable scores may no longer be eligible to drive. There can be no assurance that we will be able to attract or retain highly qualified associates in the future, including those employed by companies we may acquire.
There can be no assurance that we will be able to attract or retain highly qualified associates in the future, including those employed by companies we may acquire. As a result of labor shortages, particularly among our drivers and material handlers, we could be required to utilize temporary or contract labor.
The consequences of these developments with respect to LIBOR cannot be entirely predicted; however, we do not believe that the discontinuation of LIBOR as a reference rate in our loan agreements will have a material adverse effect on our financial position or materially affect our interest expense.
However, at this time, we do not believe that the replacement of LIBOR by SOFR as a reference rate in our revolving credit facility will have a material adverse effect on our financial position or materially affect our interest expense. Changes in, or interpretation of, accounting principles could result in unfavorable accounting changes .
Regardless, there can be no assurances as to what alternative base rates may be and whether such base rate will be more or less favorable than LIBOR.
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table summarizes our real estate facilities as of January 1, 2022, including their inside square footage, where applicable: Property Type Number Owned facilities (sq. ft.) Leased facilities (sq. ft.) Office Space (1) 1 — 68,023 Warehouses and other real property 64 858,896 9,774,955 Total 65 858,896 9,842,978 (1) Consists of our corporate headquarters in Marietta, Georgia.
Biggest changeThe following table summarizes our real estate facilities as of December 31, 2022, including their inside square footage, where applicable: Property Type Number Owned facilities (sq. ft.) Leased facilities (sq. ft.) Office Space (1) 2 — 72,720 Warehouses and other real property 66 1,528,164 10,661,576 Total 68 1,528,164 10,734,296 (1) Consists of our corporate headquarters in Marietta, Georgia and the corporate office of Vandermeer in Lynnwood, Washington.
Additionally, we lease two warehouse facilities owned by our pension plan. We also store materials in secured outdoor areas at many of our warehouse locations, which increases warehouse distribution and storage capacity. We believe that, collectively, our facilities have sufficient capacity to meet current and projected distribution needs.
We also store materials in secured outdoor areas at many of our warehouse locations, which increases warehouse distribution and storage capacity. We believe that, collectively, our facilities have sufficient capacity to meet current and projected distribution needs.
ITEM 2. PROPERTIES We operate our business out of 64 office and warehouse facilities, 55 of which are leased, and nine of which are owned. The total square footage of our owned real property is approximately 0.9 million square feet, and the total square footage of our leased real property is approximately 9.8 million square feet.
ITEM 2. PROPERTIES We operate our business out of 66 office and warehouse facilities, 54 of which are leased, and 12 of which are owned. The total square footage of our owned real property is approximately 1.5 million square feet, and the total square footage of our leased real property is approximately 10.7 million square feet.
Added
During fiscal 2022, we completed the purchase of two leased properties we had previously contributed to the BlueLinx Hourly Retirement Plan. These properties are currently reflected in our count of warehouses and other real property listed in the table above.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe record receivables from expected settlements and establish reserves for pending or threatened proceedings when the receipts or costs associated with such proceedings become probable and can be reasonably estimated. 23
Biggest changeWe record receivables from expected settlements and establish reserves for pending or threatened proceedings when the receipts or costs associated with such proceedings become probable and can be reasonably estimated. 22

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOn August 23, 2021, we announced our Board of Directors approved a stock repurchase program, with no expiration from the date of authorization, for the repurchase up to $25 million of our common stock. As of January 1, 2022, $25 million was available for repurchases under this program.
Biggest changeIssuer Repurchases of Equity Securities On August 23, 2021, our Board of Directors approved a stock repurchase program pursuant to which authorized us 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.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Our equity securities consist of one class of common stock, which is traded on the New York Stock Exchange under the symbol “BXC”.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information, Holders, and Dividends Our equity securities consist of one class of common stock, which is traded on the New York Stock Exchange under the symbol “BXC”.
The Company occasionally withholds shares of common stock to satisfy tax withholding obligations of employees upon the vesting of such employees’ restricted stock unit awards.
Additionally, we occasionally withhold shares of common stock to satisfy tax withholding obligations of employees upon the vesting of such employees’ restricted stock unit awards.
As of January 1, 2022, there were twelve shareowner accounts of record, and, as of that date, we estimate that there were approximately 8,336 beneficial owners holding our common stock in nominee or “street” name. We have not historically paid dividends on our common stock.
As of December 31, 2022, there were 11 shareowner accounts of record, and, as of that date, we estimate that there were approximately 9,381 beneficial owners holding our common stock in nominee or “street” name. We generally have not paid dividends on our common stock.
The timing and amount of any repurchases under this program depend upon market conditions and may be made at any time or from time to time, without prior notice, through a variety of methods, which may include open market purchases, privately negotiated transactions or pursuant to a trading plan that may be adopted in accordance with the Securities and Exchange Commission Rule 10b5-1.
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.
Removed
The following table summarizes the Company’s common stock repurchase activity for each month of the quarter ended January 1, 2022: Total Number Shares Purchased (1) Average Price Paid Per Share Period October 3 - November 6 — $ — November 7 - December 4 432 $ 71.55 December 5, 2021 - January 1, 2022 402 $ 82.73 Total 834 (1) The Company did not repurchase any of its equity securities during the period covered by this report pursuant its August 2021 stock repurchase program.
Added
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.
Removed
All purchases reflected in the table above pertain to purchases of common stock by the Company in connection with tax withholding obligations of the Company’s employees upon the vesting of such employees’ restricted stock unit awards.
Added
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.
Added
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.
Added
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.
Added
As of December 31, 2022, we have repurchased a total of 882,346 shares for $66.4 million under our $100.0 million share repurchase program, including 801,015 shares purchased through the ASR Agreement, at an average price of $75.28 per share and we have a remaining authorization amount of $33.6 million.
Added
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.
Added
The following table summarizes the Company’s common stock repurchase activity for each month of the quarter ended December 31, 2022: 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 Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 2 - November 5 — $ — — $ 33,572,690 November 6 - December 3 — $ — — $ 33,572,690 December 4 - December 31 10,503 $ 70.98 — $ 33,572,690 Total 10,503 — (1) Shares repurchased during the last month of the quarter ended December 31, 2022 represents shares withheld by us in connection with tax withholding obligations of our employees upon vesting of such employees’ restricted stock unit awards. 24 Securities Authorized for Issuance Under Equity Compensation Plans Information concerning our equity compensation plans is set forth in Item 12 of Part III of this Form 10-K.
Added
Stock Performance Graph The graph below compares the cumulative five-year total return of holders of our common stock with the cumulative total returns of the Russell 2000 Index and the S&P 600 Building Products Index.
Added
The comparison of the cumulative total returns for each investment assumes that $100 was invested in our common stock and the respective indices on December 30, 2017, including reinvestment of any dividends, of which BlueLinx paid none, and its relative performance is tracked through December 31, 2022.
Added
Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal 2020 Fiscal 2021 Fiscal 2022 BlueLinx Holdings Inc. $ 100.00 $ 259.32 $ 134.73 $ 299.80 $ 981.15 $ 728.59 Russell 2000 $ 100.00 $ 87.13 $ 108.70 $ 128.61 $ 146.23 $ 114.70 S&P 600 Building Products Index $ 100.00 $ 73.17 $ 102.99 $ 129.82 $ 193.19 $ 135.92

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFinancing Activities Net cash used in financing activities was $55.8 million during fiscal 2021, which primarily reflected the repayments of the remaining $43.2 million balance on our term loan and net repayments on our revolving credit facility of $286.6 million, in addition to payments on finance leases of $11.2 million, debt financing costs of $5.5 million and repurchase of shares to satisfy employee tax withholdings on the vesting of restricted stock units of $5.2 million, all of which were offset by proceeds from the sale of our senior secured notes, net of discount, of $295.9 million.
Biggest changeNet cash used in financing activities was $55.8 million during fiscal 2021, which primarily reflected the repayments of the remaining $43.2 million balance on our term loan and net repayments on our revolving credit facility of $286.6 million, in addition to principal payments on finance lease obligations of $11.2 million, debt financing costs of $5.5 million and repurchase of shares to satisfy employee tax withholdings on the vesting of restricted stock units of $5.2 million, all of which were partially offset by proceeds from the sale of our senior secured notes, net of discount, of $295.9 million. 32 Share Repurchase Program As discussed elsewhere in this Form 10-K, during fiscal 2022, we 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.
For us, this generally means that we recognize revenue when title to our products is transferred to our customers. Title usually transfers upon shipment to, or receipt at, our customers’ locations, as determined by the specific sales terms of each transaction. Our customers 35 can earn certain incentives including, but not limited to, cash discounts and rebates.
For us, this generally means that we recognize revenue when title to our products is transferred to our customers. Title usually transfers upon shipment to, or receipt at, our customers’ locations, as determined by the specific sales terms of each transaction. Our customers can earn certain incentives including, but not limited to, cash discounts and rebates.
We evaluate our ability to realize the tax benefits associated with deferred tax assets by analyzing our forecasted taxable income using both historical and projected future operating results, the reversal of existing taxable temporary differences, taxable 36 income in prior carryback years (if permitted), and the availability of tax planning strategies.
We evaluate our ability to realize the tax benefits associated with deferred tax assets by analyzing our forecasted taxable income using both historical and projected future operating results, the reversal of existing taxable temporary differences, taxable income in prior carryback years (if permitted), and the availability of tax planning strategies.
In 2021, wood-based commodity index prices began January at record or near-record highs and remained at elevated levels through the first quarter and in to the second quarter. Prices continued to increase to a historical peak in May 2021 and then began to decline through the end of the second quarter and throughout the third quarter of 2021.
In 2021, wood-based commodity index prices began January at record or near-record highs and remained at elevated levels through the first quarter and into the second quarter. Prices continued to increase to a historical peak in May 2021 and then began to decline through the end of the second quarter and throughout the third quarter of 2021.
Our position in this distribution model for building products provides easy access to the marketplace for our suppliers and the value proposition of rapid delivery on an as-needed basis to our customers from our network of warehouse facilities.
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.
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 from our revolving credit facility, as needed. We expect that these sources will be sufficient to fund our ongoing cash requirements for the foreseeable future, including at least the next twelve months.
We expect our primary sources of liquidity for the next 12 months to be cash flows from sales and operating activities in the normal course of our operations and availability from our revolving credit facility, as needed, and we expect that these sources will be sufficient to fund our ongoing cash requirements for the foreseeable future, including at least the next 12 months.
At certain times, the selling price for any one or more of the products we distribute, especially those of a commodity nature, may well exceed our purchase price because our prices are based on current replacement cost which, in a dynamic inflationary commodity market, may at times well exceed our purchase price.
At certain times, particularly in a dynamic inflationary commodity market, the selling price for any one or more of the products we distribute, especially those of a commodity nature, may well exceed our purchase price because our prices are based on current replacement cost.
We adjust these reserves, including any impact on the related interest and penalties, in light of changing facts and circumstances, such as the progress of a tax audit. Refer to Note 5, Income Taxes , in the Notes to the Consolidated Financial Statements.
We adjust these reserves, including any impact on the related interest and penalties, in light of changing facts and circumstances, such as the progress of a tax audit. Refer to Note 8, Income Taxes , in the notes to the consolidated financial statements.
During fiscal 2020, as a result of the CARES Act, we elected to defer the payment of employer payroll taxes that would normally be paid during fiscal 2020. The total amount of our payroll tax deferral under the CARES Act was approximately $7.3 million.
During fiscal 2020, as a result of the CARES Act, we elected to defer the payment of employer payroll taxes that would normally be paid during fiscal 2020. The total amount of our payroll tax deferral under the CARES Act was approximately $6.3 million.
We believe that our most critical accounting policies and estimates relate to: (1) pension benefit obligation; (2) revenue recognition; (3) goodwill; and (4) income taxes. Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they involve significant judgments and uncertainties.
We believe that our most critical accounting policies and estimates relate to: (1) revenue recognition; (2) income taxes; (3) business combinations; (4) goodwill; and (5) pension benefit obligation. Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they involve significant judgments and uncertainties.
The depth of our geographic footprint supports meaningful customer proximity across all the markets in which we operate, enabling faster and more efficient service. Similarly, we provide value to our supplier partners by enabling access to the large and fragmented network of lumber yards and dealers that those suppliers could not adequately serve directly.
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.
Factors That Affect Our Operating Results and Trends Our results of operations and financial performance are influenced by a variety of factors, including: (i) the commodity nature of the products we manufacture and distribute; (ii) general economic and industry conditions affecting demand in the housing 27 market; and (iii) cost and availability of the products we distribute.
Factors That Affect Our Operating Results and Trends Our results of operations and financial performance are influenced by a variety of factors, including: (i) general economic and industry conditions affecting demand in the housing market; (ii) the commoditized nature of the products we manufacture and distribute; and (iii) cost and availability of the products we distribute.
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.
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.
Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended January 2, 2021. Executive Level Overview Company Background BlueLinx is a leading wholesale distributor of residential and commercial building products in the United States. We are a “two-step” distributor.
Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended January 1, 2022. Executive Level Overview Company Background BlueLinx is a leading wholesale distributor of residential and commercial building products in the United States. We are a “two-step” distributor.
Commodity Nature of Our Products Many of the building products we distribute, including OSB, plywood, and lumber, are commodities that are widely available from various suppliers with prices and volumes determined frequently in a market based on participants' perceptions and expectations of short-term supply and demand factors.
Commodity Nature of Our Products Many of the building products we distribute, including lumber, as well as panels, such as OSB and plywood, are commodities that are widely available from various suppliers with prices and volumes determined frequently in a market based on participants' perceptions and expectations of short-term supply and demand factors.
The following table represents the percentage price changes on a year-over-year basis of the average monthly composite prices for lumber, including certain lumber subcategories, and average monthly composite prices for panels, including certain panel subcategories, as reflected by Random Lengths, an industry publication, for the periods noted below.
The following table represents the percentage price changes on a year-over-year basis of the average monthly composite prices for lumber and average monthly composite prices for panels as reflected by Random Lengths, an industry publication, for the periods noted below.
While the facility was paid in full as of April 2, 2021, our average interest rate under the facility, exclusive of fees and prepayment premiums, was 8.2 percent and 8.0 percent for the years ended January 2, 2021 and January 1, 2022, respectively.
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 and 8.0 percent for the years ended December 31, 2022 and January 1, 2022, respectively.
As of January 1, 2022, positive evidence continued to outweigh negative evidence, as such no valuation allowance was deemed necessary except to the extent of certain state net operating losses. The valuation allowances related to our net operating losses as of January 1, 2022 was approximately $4.3 million.
As of December 31, 2022, positive evidence continued to outweigh negative evidence, as 36 such no valuation allowance was deemed necessary except to the extent of certain state net operating losses. The valuation allowances related to our net operating losses as of December 31, 2022 was approximately $4.1 million.
See Note 5, Income Taxes , in the Notes to Consolidated Financial Statements. Recently Issued Accounting Pronouncements For a summary of recent accounting pronouncements applicable to our consolidated financial statements, see Note 1, Summary of Significant Accounting Policies , in the Notes to Consolidated Financial Statements.
Recently Issued Accounting Pronouncements For a summary of recent accounting pronouncements applicable to our consolidated financial statements, see Note 1, Summary of Significant Accounting Policies , in the notes to consolidated financial statements. 37
Investing Activities During fiscal 2021, our net cash used by investing activities was $4.1 million, which was substantially driven by cash received from the sale of real estate of $10.3 million, offset by cash paid for investments in property and equipment of $14.4 million.
Net cash used in investing activities was $4.1 million during fiscal 2021, which was primarily driven by cash paid for investments in equipment of $14.4 million throughout fiscal 2021, partially offset by cash received from the sale of real estate of $10.3 million.
Pension Funding Obligations We were required to make cash contributions during 2021 and 2020 totaling approximately $0.3 million and $0.8 million, respectively, relating to our fiscal 2021 and also fiscal 2020 funding year pension contributions. We continue to evaluate pension funding obligations and requirements in order to meet our obligations while maintaining flexibility for working capital requirements.
Pension Funding Obligations We were required to make cash contributions during fiscal 2021 and fiscal 2020 totaling approximately $0.3 million, and $0.8 million, respectively, relating to our fiscal 2021 and fiscal 2020 funding year pension contributions. We continue to evaluate pension funding obligations and requirements in order to meet our obligations.
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 have identified that we have a single reporting unit and we assign our goodwill to that reporting unit. As of January 1, 2022, our goodwill was $47.8 million.
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 have identified that we have a single reporting unit and we assign our goodwill to that reporting unit. As of December 31, 2022, our goodwill was $55.4 million.
This section of this Form 10-K does not address certain items regarding the fiscal year ended December 28, 2019 (“fiscal 2019”). Discussion and analysis of fiscal 2019 and year-to-year comparisons between fiscal 2020 and fiscal 2019 not included in this Form 10-K can be found in “Item 7.
This section of this Form 10-K does not address certain items regarding the fiscal year ended January 2, 2021 (“fiscal 2020”). Discussion and analysis of fiscal 2020 and year-to-year comparisons between fiscal 2021 and fiscal 2020 not included in this Form 10-K can be found in “Item 7.
In conjunction with this offering, we also amended the revolving credit facility to reduce the credit limit from $600 million to $350 million. In conjunction with the reduction of the credit limit of our revolving credit facility, we expensed approximately $1.6 million of debt issuance costs during the fourth quarter of 2021.
In October 2021, in conjunction with the offering of our 2029 Notes, we reduced the credit limit of the Revolving Credit Facility from $600.0 million to $350.0 million. In conjunction with the reduction in the credit limit of our Revolving Credit Facility, we expensed approximately $1.6 million of debt issuance costs during the fourth quarter of 2021.
As a result of the COVID-19 pandemic, manufacturing output was impacted on both the specialty and structural sides of our business. Supply constraints which arose from reduced mill output as a result of the pandemic had an impact on both the availability and pricing of our structural products which contributed to increased market prices throughout the year.
Supply constraints, which arose from reduced mill output as a result of the pandemic, had an impact on both the availability and pricing of our structural products, which contributed to increased market prices throughout the first half of the year.
Liquidity and Capital Resources We expect our material cash requirements for the next twelve months will be for our: • Periodic estimated income tax payments, as required; • Periodic interest payments associated with our senior secured notes, as discussed in Note 6; • Lease agreements which have fixed lease payment obligations, as discussed in Note 11.
Liquidity and Capital Resources We expect our material cash requirements for the foreseeable future, including the next 12 months will be for our: • Periodic estimated income tax payments, as required; • Periodic interest payments associated with our senior secured notes, as discussed in Note 9, Long-Term Debt ; • Lease agreements which have fixed lease payment obligations, as discussed in Note 14, Lease Commitments .
Of the $274.7 million of finance lease commitments as of January 1, 2022, $244.0 million related to real estate and $30.7 million related to equipment.
Of the $273.1 million of finance lease commitments as of December 31, 2022, $243.8 million related to real estate and $29.3 million related to equipment. Of the $274.7 million of finance lease commitments as of January 1, 2022, $244.0 million related to real estate and $30.7 million related to equipment.
Therefore, our profitability with respect to these commodity products depends, in significant part, on commodity prices in addition to managing our cost structure, particularly shipping and handling costs, which represent significant components of our operating costs. Composite structural panel and lumber prices have been historically volatile.
Therefore, our profitability depends, in significant part, on the impact of commodity prices along with inventory levels. In addition to prices, it is also dependent on managing our cost structure, particularly shipping and handling costs, which represent significant components of our operating costs. Composite lumber and panel prices have been historically volatile.
The changes in working capital components included a decrease in cash due to an increase in accounts receivable of $100.8 million offset by an increase in cash due to a decrease in inventory of $3.7 million and an increase in accounts payable of $32.8 million.
The changes in working capital components included a decrease in cash due to an increase in accounts receivable of $46.0 million and an increase inventory of $146.4 million, partially offset by an increase in cash due to an increase in accounts payable of $14.8 million.
Specialty products include items such as engineered wood, industrial products, cedar, moulding, siding, metal products, and insulation. Structural products include items such as lumber, plywood, oriented strand board, rebar, and remesh.
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.
Off-Balance Sheet Arrangements As of January 1, 2022, we did not have any off-balance sheet arrangements. Critical Accounting Policies Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S., which require management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
Critical Accounting Policies Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S., which require management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
With a strong market position, broad geographic coverage footprint servicing over 40 states, and the strength of a locally focused sales force, as a two-step wholesale distributor, we distribute a comprehensive range of products from over 750 suppliers, including some of the leading manufacturers in the industry, such as Ply Gem, Huber Engineered Woods, Georgia-Pacific, Allura, James Hardie, Fiberon, Royal, Oldcastle APG, Louisiana-Pacific, and Weyerhaeuser.
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 national, regional, and local dealers, specialty distributors, national home centers, and manufactured housing customers, many of whom then serve residential and commercial builders and contractors in their respective geographic areas and local markets.
We supply products to a broad base of 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.
Calendar Year Ended December 31 2021 versus 2020 2020 versus 2019 Increase (decrease) in composite lumber prices 50% 59% Increase (decrease) in Western SPF lumber prices 57% 53% Increase (decrease) in Southern pine lumber prices 43% 45% Increase (decrease) in composite panel prices 85% 56% Increase (decrease) in Western fir plywood prices 83% 22% Increase (decrease) in Southern pine plywood prices 73% 29% Increase (decrease) in OSB prices 94% 99% During 2020, pricing for these products declined starting in March 2020, but rebounded during the remaining portion of the second quarter, significantly increasing during most of the third quarter.
Calendar Year Ended December 31 2022 versus 2021 2021 versus 2020 2020 versus 2019 Increase (decrease) in composite lumber prices (10)% 50% 59% Increase (decrease) in composite panel prices (18)% 85% 56% During 2020, pricing for these products declined starting in March 2020, but rebounded during the remaining portion of the second quarter, significantly increasing during most of the third quarter.
If these conditions change from those expected, it is reasonably possible that the judgments and estimates described below could change, which may result in our recording additional pension liabilities, or increased tax liabilities, among other effects. Management has discussed the development, selection, and disclosure of critical accounting policies and estimates with the Audit Committee of the Company’s Board of Directors.
If these conditions change from those 35 expected, it is reasonably possible that the judgments and estimates described below could change, which may result in our recording additional pension liabilities, or increased tax liabilities, among other effects.
In addition to the year-over-year average monthly price changes, 2020 and 2021 were years of exceptional price volatility when compared to historical prices over the last seven years. During 2021, both composite lumber and composite panel prices experienced the largest difference between high and low price levels within a calendar year than any year in the last seven years.
During 2021, both composite lumber and composite panel prices experienced the largest difference between high and low price levels within a calendar year than any year in the last seven years.
Debt and Credit Sources As of January 1, 2022, and January 2, 2021, long-term debt consisted of the following: January 1, 2022 January 2, 2021 (In thousands) Senior secured notes (1) $ 300,000 $ — Revolving credit facility (2) — 288,247 Term loan facility (3) — 43,204 Finance lease obligations (4) 274,717 273,118 574,717 604,569 Unamortized debt issuance costs (4,701) (9,010) Unamortized bond discount costs (4,028) — 565,988 595,559 Less: current maturities of long-term debt 7,864 6,846 Long-term debt, net of current maturities $ 558,124 $ 588,713 (1) For the twelve months ended January 1, 2022, our long-term debt was comprised of $300 million of senior secured notes issued in October 2021.
Debt and Credit Sources As of December 31, 2022, and January 1, 2022, long-term debt consisted of the following: December 31, 2022 January 1, 2022 (In thousands) Senior secured notes (1) $ 300,000 $ 300,000 Revolving credit facility (2) — — Finance lease obligations (3) 273,075 274,717 573,075 574,717 Unamortized debt issuance costs (4,057) (4,701) Unamortized bond discount costs (3,519) (4,028) 565,499 565,988 Less: current maturities of long-term debt 7,089 7,864 Long-term debt, net of current maturities $ 558,410 $ 558,124 (1) As of December 31, 2022 and January 1, 2022, our long-term debt was comprised of $300.0 million of senior secured notes issued in October 2021.
Fiscal 2021 Fiscal 2020 ($ in thousands) Net sales by category Specialty products $ 2,520,305 58.9 % $ 1,865,125 60.2 % Structural products 1,756,873 41.1 % 1,232,203 39.8 % Total net sales $ 4,277,178 100.0 % $ 3,097,328 100.0 % The following table sets forth gross margin dollars and percentages by product category versus comparable prior periods.
Fiscal 2022 Fiscal 2021 ($ in thousands) Net sales by product category Specialty products $ 2,871,628 64.5 % $ 2,520,305 58.9 % Structural products 1,578,586 35.5 % 1,756,873 41.1 % Total net sales $ 4,450,214 100.0 % $ 4,277,178 100.0 % 30 The following table sets forth gross margin dollars and percentages by product category versus comparable prior periods.
These taxes are required to be paid in two tranches, with 50 percent due by the end of 2021 and 50 percent due by the end of 2022.
These taxes were required to be paid in two tranches, with 50 percent due by the end of 2021 and 50 percent due by the end of 2022. We made payments of approximately $3.2 million in December 2021 and $3.1 million in December 2022.
At certain other times, the selling price for any one or more of the products we distribute, especially those of a commodity nature, may fall below our purchase costs for the same reasons, requiring us to incur short-term losses on specific sales transactions.
At certain other times, the selling price may fall below our purchase price for the same reasons, requiring us to incur short-term losses on specific sales transactions and/or recognize a reserve for the lower of cost or net realizable value respective to our inventory of products of a commodity nature.
The actual amounts ultimately paid may be different from our estimates, and recorded once they have been determined. Goodwill Goodwill is not subject to amortization, and is tested for impairment at least annually. We perform our annual goodwill impairment test as of the first day of our fiscal fourth quarter.
Goodwill Goodwill is not subject to amortization, and is tested for impairment at least annually. We perform our annual goodwill impairment test as of the first day of our fiscal fourth quarter.
In addition, the amended revolving credit facility now provides for interest on borrowings at a rate per annum equal to (i) LIBOR plus a margin ranging from 1.25 percent to 1.75 percent, with the amount of such margin determined based upon the average of our excess availability for the immediately preceding fiscal quarter as calculated by the agent, for loans based on LIBOR, or (ii) the base rate plus a margin ranging from 0.25 percent to 0.75 percent, with the amount of such margin determined based upon the average of our excess availability for the immediately preceding fiscal quarter as calculated by the agent, for loans based on the base rate, reflecting a decrease of 0.50 percent to the upper limit of each respective margin tier.
Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to (i) LIBOR plus a margin ranging from 1.25 percent to 1.75 percent, with the margin determined based upon average excess availability for the immediately preceding fiscal quarter for loans based on LIBOR, or (ii) the 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.
Fiscal 2021 % of Net Sales Fiscal 2020 % of Net Sales ($ in thousands) Net sales $ 4,277,178 100.0% $ 3,097,328 100.0% Gross profit 778,427 18.2% 477,734 15.4% Selling, general, and administrative 322,205 7.5% 314,228 10.1% Depreciation and amortization 28,192 0.7% 28,901 0.9% Amortization of deferred gains on real estate (3,935) (0.1)% (4,008) (0.1)% Gains from sales of property (8,427) (0.2)% (10,529) (0.3)% Other operating expenses 2,315 0.1% 6,901 0.2% Operating income 438,077 10.2% 142,241 4.6% Interest expense, net 45,507 1.1% 47,414 1.5% Other (income) expense, net (1,306) 0.0% (254) 0.0% Income before provision for income taxes 393,876 9.2% 95,081 3.1% Provision for income taxes 97,743 2.3% 14,199 0.5% Net income $ 296,133 6.9% $ 80,882 2.6% The following table sets forth changes in net sales by product category.
Fiscal 2022 % of Net Sales Fiscal 2021 % of Net Sales ($ in thousands) Net sales $ 4,450,214 100.0% $ 4,277,178 100.0% Gross profit 832,984 18.7% 778,427 18.2% Selling, general, and administrative 366,305 8.2% 322,205 7.5% Depreciation and amortization 27,613 0.6% 28,192 0.7% Amortization of deferred gains on real estate (3,934) (0.1)% (3,935) (0.1)% Gains from sales of property (144) 0.0% (8,427) (0.2)% Other operating expenses 4,057 0.1% 2,315 0.1% Operating income 439,087 9.9% 438,077 10.2% Interest expense, net 42,272 0.9% 45,507 1.1% Other expense (income), net 2,054 0.0% (1,306) 0.0% Income before provision for income taxes 394,761 8.9% 393,876 9.2% Provision for income taxes 98,585 2.2% 97,743 2.3% Net income $ 296,176 6.7% $ 296,133 6.9% The following table sets forth changes in net sales by product category.
The demand for new homes is dependent on a variety of factors, including job growth, changes in population and demographics, the availability and cost of mortgage financing, the supply of new and existing homes, and consumer confidence.
Historically, our operating results have also been correlated with the level of single-family residential housing starts in the U.S. The demand for new homes is dependent on a variety of factors, including job growth, changes in population and demographics, the availability and cost of mortgage financing, the supply of new and existing homes, and consumer confidence.
These costs are included within interest expense, net, on the Consolidated Statements of Operations and reported separately as an adjustment to net income in our Consolidated Statements of Cash Flows.
These costs are included within interest expense, net on the consolidated statements of operations and reported separately as an adjustment to net income in our consolidated statements of cash flows. The Revolving Credit Facility provides for a senior secured asset-based revolving loan and letter of credit facility of up to $350.0 million.
These notes are presented under the long-term debt caption of our balance sheet at $291.3 million which is net of their discount of $4.0 million and the combined carrying value of our debt issuance costs of $4.7 million. Our senior secured notes are presented in this table at their face value .
This presentation is net of their discount of 33 $3.5 million and $4.0 million and the combined carrying value of our debt issuance costs of $4.1 million and $4.7 million at December 31, 2022 and January 1, 2022, respectively. Our senior secured notes are presented in this table at their face value.
Sources and Uses of Cash Operating Activities Fiscal 2021 cash flows provided by operating activities totaled $145.0 million.
Net cash provided by operating activities totaled $145.0 million during fiscal 2021.
Pension Benefit Obligation As discussed in Note 8 of the consolidated financial statements, our pension benefit obligation was $105.9 million and exceeded the fair value of pension plan assets of $94.3 million, resulting in an unfunded obligation of $11.6 million.
Pension Benefit Obligation As discussed in Note 11, Employee Benefits , in the notes to consolidated financial statements, our pension benefit obligation was $82.7 million and exceeded the fair value of pension plan assets of $81.2 million, resulting in an unfunded obligation of $1.5 million.
Selected financial information January 1, 2022 January 2, 2021 (In thousands) Current assets: Cash and cash equivalents $ 85,203 $ 82 Accounts receivable, less allowance for doubtful accounts 339,637 293,643 Inventories, net 488,458 342,108 $ 913,298 $ 635,833 Current liabilities: Accounts payable $ 180,000 $ 165,163 $ 180,000 $ 165,163 Operating working capital $ 733,298 $ 470,670 Operating working capital increased to $733.3 million as of January 1, 2022, from $470.7 million as of January 2, 2021.
Selected financial information December 31, 2022 January 1, 2022 (In thousands) Current assets: Cash and cash equivalents $ 298,943 $ 85,203 Accounts receivable, less allowance for doubtful accounts 251,555 339,637 Inventories, net 484,313 488,458 $ 1,034,811 $ 913,298 Current liabilities: Accounts payable $ 151,626 $ 180,000 $ 151,626 $ 180,000 Operating working capital $ 883,185 $ 733,298 Operating working capital increased by $149.9 million to $883.2 million as of December 31, 2022 from $733.3 million as of January 1, 2022.
Operating working capital is defined as the sum of cash, receivables, and inventory less accounts payable. Management of operating working capital helps us monitor our progress in meeting our goals to enhance our return on working capital assets.
Management of operating working capital helps us monitor our progress in meeting our goals to enhance our return on working capital assets.
The changes in working capital components resulted in a decrease in cash due to an increase in accounts receivables of $46.0 million and an increase inventory of $146.4 million offset by an increase in cash due to an increase in accounts payable of $14.8 million. Fiscal 2020 cash flows used in operating activities totaled $55.0 million.
The changes in working capital components resulted in an increase in cash due to a decrease in accounts receivables of $101.3 million and a decrease inventory of $20.8 million, partially offset by a decrease in accounts payable of $31.8 million.
Cost and Availability of the Products We Distribute The specialty products we distribute are available from select suppliers from which we have established and cultivated relationships in the specific markets we serve. The structural products we distribute are available from a variety of suppliers.
We continue to closely monitor these pricing trends, and work to manage our business, inventory levels, and costs accordingly. Cost and Availability of the Products We Distribute The specialty products we distribute are available from select suppliers from which we have established and cultivated relationships in the specific markets we serve.
These factors have historically produced cyclicality in our results of operations, and we expect this cyclicality to continue in future periods .
These factors have historically produced cyclicality in our results of operations, and we expect this cyclicality to continue in future periods . General Economic Conditions Affecting Demand Many of the factors that cause our operations to fluctuate are seasonal or cyclical in nature.
Some of these differences are permanent, such as expenses that are not deductible in our tax return, and some differences reverse over time, such as depreciation expense. These timing differences create deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities.
These timing differences create deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities.
CARES Act In an attempt to assist businesses during the COVID-19 pandemic, Congress enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act on March 27, 2020. The CARES Act contained several provisions, including tax-based measures, meant to counteract the effects of the COVID-19 pandemic.
The extent of the effects of future public health crises, including a resurgence of COVID, or related containment measures and government responses are highly uncertain and cannot be predicted. CARES Act In an attempt to assist businesses during the COVID-19 pandemic, Congress enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act on March 27, 2020.
Tax law requires items to be included in the tax return at different times than when these items are reflected in the consolidated financial statements. As a result, the annual tax rate reflected in our consolidated financial statements is different from that reported in our tax return (our cash tax rate).
Settlement of any particular issue would usually require the use of cash. Tax law requires items to be included in the tax return at different times than when these items are reflected in the consolidated financial statements.
While our estimates and assumptions are based on our knowledge of current events and actions we may undertake in the future, actual results ultimately may differ from these estimates and assumptions. For a discussion of the Company’s significant accounting policies, see Note 1, Summary of Significant Accounting Policies , in the Notes to Consolidated Financial Statements.
Management has discussed the development, selection, and disclosure of critical accounting policies and estimates with the audit committee of the Company’s board of directors. While our estimates and assumptions are based on our knowledge of current events and actions we may undertake in the future, actual results ultimately may differ from these estimates and assumptions.
We made payments of approximately $3.2 million in December 2021 and will make payments for the remaining $3.1 million by December 2022. 29 Results of Operations Fiscal 2021 Compared to Fiscal 2020 The following table sets forth our results of operations for fiscal 2021 and fiscal 2020, which were comprised of 52 weeks and 53 weeks, respectively.
Results of Operations Fiscal 2022 Compared to Fiscal 2021 The following table sets forth our results of operations for fiscal 2022 and fiscal 2021, both of which were comprised of 52 weeks.
Income Taxes Our annual tax rate is based on our income, statutory tax rates, and tax planning opportunities available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our annual tax expense and in evaluating our tax positions.
The actual amounts ultimately paid may be different from our estimates, and recorded once they have been determined. Income Taxes Our annual tax rate is based on our income, statutory tax rates, and tax planning opportunities available to us in the various jurisdictions in which we operate.
See Note 8, Employee Benefits , in the Notes to the Consolidated Financial Statements. Interest Rates Our revolving credit facility includes available interest rate options based on LIBOR. It is widely expected that LIBOR will be discontinued after June 30, 2023, and the U.S. and other countries are currently working to replace LIBOR with alternative reference rates.
See Note 11, Employee Benefits , in the notes to the consolidated financial statements for more information related to our defined benefit pension plan and our plan to terminate. Interest Rates 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.
Significant Recent Transactions and Developments Term Loan Facility As of January 2, 2021, we had outstanding borrowings of $43.2 million under our senior secured term loan facility. On April 2, 2021, we repaid the remaining outstanding principal balance under the facility and the facility was terminated.
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 December 31, 2022, we had zero outstanding borrowings under the term loan facility, which has been extinguished.
The increase in operating working capital is primarily due to an increase in cash of $85.1 million, accounts receivable of $46.0 million, and inventory of $146.4 million, offset by an increase in accounts payable of $14.8 million. The increases in cash resulted from primarily from the issuance of our senior secured notes in October 2021.
The increase in operating working capital is primarily due to an increase in cash of $213.7 million and a decrease in accounts payable of $28.4 million, partially offset by a decrease in accounts receivable of $88.1 million, and a decrease in inventory of $4.1 million.
We also entered into new finance lease agreements for new tractors for our fleet totaling $3.8 million and $10.5 million during fiscal 2020 and 2021, respectively. Our total finance lease commitments, including the properties associated with these transactions, totaled $274.7 million and $273.1 million as of January 1, 2022 and January 2, 2021, respectively.
We recognized $9.1 million and $10.5 million for tractors acquired as a component of our fleet investment plan during fiscal 2022 and fiscal 2021, respectively. Our total finance lease commitments totaled $273.1 million and $274.7 million as of December 31, 2022 and January 1, 2022, respectively.
Fiscal 2021 Fiscal 2020 ($ in thousands) Gross profit $ by category: Specialty products $ 561,520 $ 319,577 Structural products 216,907 158,157 Total gross profit $ 778,427 $ 477,734 Gross margin % by category Specialty products 22.3 % 17.1 % Structural products 12.3 % 12.8 % Total gross margin % 18.2 % 15.4 % 30 Discussion of Results of Operations Net sales of $4.3 billion in fiscal 2021, an increase of 38.1 percent, or $1.2 billion, from fiscal 2020.
Fiscal 2022 Fiscal 2021 ($ in thousands) Gross profit by product category: Specialty products $ 640,370 $ 561,520 Structural products 192,614 216,907 Total gross profit $ 832,984 $ 778,427 Gross margin % by product category Specialty products 22.3 % 22.3 % Structural products 12.2 % 12.3 % Total gross margin % 18.7 % 18.2 % Discussion of Results of Operations for Fiscal 2022 Compared to Fiscal 2021 For fiscal 2022, we generated net sales of $4.5 billion, an increase of $173.0 million when compared to fiscal 2021.
As of January 1, 2022, we had zero outstanding borrowings on our revolving credit facility. Share Repurchase Program On August 23, 2021, we announced our Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $25 million of our common stock.
Significant Recent Transactions and Developments Share Repurchase Program On August 23, 2021, our Board of Directors approved a stock repurchase program pursuant to which authorized us to repurchase up to $25.0 million of our common stock.
Our effective tax rate for both periods was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, and the effect of our partial release of our valuation allowance for separate company state income tax losses.
Our effective tax rate for 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 during fiscal 2022 and fiscal 2021.
As a result, as of January 1, 2022, we had no outstanding borrowings under the term loan facility. In connection with our repayment of the facility, we expensed $5.8 million of debt issuance costs during the first quarter of fiscal 2021 that we had been amortizing in connection with the facility.
In connection with our repayment of the outstanding principal balance in full on April 2, 2021, we expensed $5.8 34 million of debt issuance costs that we were amortizing in connection with our former term loan facility.
The consequences of these development with respect to LIBOR cannot be entirely predicted; however, we do not believe that the discontinuation of LIBOR as a reference rate in our loan agreements will have a material adverse effect on our financial position or materially affect our interest expense.
However, at this time, we do not believe that the replacement of LIBOR by SOFR as a reference rate in our revolving credit facility will have a material adverse effect on our financial position or materially affect our interest expense. Off-Balance Sheet Arrangements As of December 31, 2022, we did not have any off-balance sheet arrangements.
Reduced manufacturing capacity combined with increased demand for our specialty products also had an impact on the products we distribute in this category, namely vinyl siding. The continued availability of both specialty and structural products may have an impact on our operating results and are discussed in more detail in Part I, Item 1A, Risk Factors .
Reduced manufacturing capacity combined with increased demand for our specialty products also had an impact on the products we distribute in this 29 category, namely vinyl siding, during the first half of 2022. During the back half of fiscal 2022, we saw easing supply constraints, which resulted in increased availability and decreased market prices.
When normalized for the additional operating week in fiscal 2020, our fiscal 2021 selling, general and administrative expenses increased $13.9 million. Depreciation and amortization expense decreased 2.5 percent, or $0.7 million, compared to 2020.
Our selling, general, and administrative expenses increased 13.7 percent, or $44.1 million, compared to fiscal 2021.
Of the $273.1 million of finance lease commitments as of January 2, 2021, $243.7 million related to real estate and $29.4 million related to equipment. 34 Investments in Property and Equipment Our investments in property and equipment consist of cash paid for owned assets and the inception of financing lease arrangements for long-lived assets to support our distribution infrastructure.
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 consolidated balance sheet.
(2) The average effective interest rate was 2.5 percent and 3.3 percent for the years ended January 1, 2022 and January 2, 2021, respectively. (3) The average interest rate, exclusive of fees and prepayment penalties, was 8.0 percent and 8.2 percent for the years ended January 1, 2022 and January 2, 2021, respectively.
(2) The average effective interest rate was zero percent and 2.5 percent for the years ended December 31, 2022 and January 1, 2022, respectively. (3) Refer to Note 14, Lease Commitments , for interest rates associated with finance lease obligations.
This was offset by the $7.4 million in debt issuance costs expensed during the first and third quarters of fiscal 2021 related to the extinguishment of our former term loan facility and credit limit reduction of our revolving credit facility. Our effective tax rate was 24.8 percent and 14.9 percent for fiscal 2021 and 2020, respectively.
The decrease is primarily due to $7.4 million in debt issuance costs expensed in fiscal 2021 related to the extinguishment of our former term loan facility and credit limit reduction of our revolving credit facility, partially 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.
Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, increased $524.7 million to $1.8 billion during fiscal 2021 due to commodity wood products price inflation. Structural sales volumes declined overall versus the prior-year period given our reduction in purchases in response to historic fluctuations in the wood-based commodity markets.
Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, decreased $178.3 million to $1.6 billion in fiscal 2022. The decrease in wood-based commodity prices of our structural products and modestly lower volume are the primary contributors to the decrease in net sales for fiscal 2022.
Other operating expenses decreased 66.5 percent, or $4.6 million, compared to fiscal 2020 primarily due to a decrease in spending related to integration and restructuring related costs reported during fiscal 2021. Our interest expense, net, for fiscal 2021, decreased by 4.0 percent, or $1.9 million, compared to the prior year period.
Other operating expenses increased $1.7 million compared to fiscal 2021 primarily due to higher restructuring related costs, including severance payments, incurred in fiscal 2022. Interest expense, net, decreased by 7.1 percent, or $3.2 million, compared to fiscal 2021.
We believe the housing market improvement trend will continue in the long term, and that we are well-positioned to support our customers. For additional information regarding the risk factors impacting our business, please refer to Part I, Item 1A, Risk Factors.
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. For additional information regarding the risk factors impacting our business, refer to Part I, Item 1A, Risk Factors.
The increase in sales, general, and administrative expenses is due to net increases in our variable compensation, such as sales commissions and incentives of approximately $5.9 million, general and administration cost of approximately $4.5 million. These increases were partially offset by a decrease in payroll and related cost of approximately $1.4 million and logistics decrease of approximately $1.0 million.
The increase in sales, general, and administrative expenses is due primarily to increases in logistics expenses of $17.4 million related to increased delivery costs, primarily resulting from increases in fuel prices, $22.3 million related to key growth and productivity initiatives, and $4.5 million related to higher variable incentive compensation, such as sales commissions and stock compensation.
During fiscal 2020, our net cash provided by investing activities was $9.2 million, which was substantially driven by cash received from the sale of real estate of $12.8 million, offset by cash paid for investments in equipment of $3.7 million.
Investing Activities Net cash used in investing activities was $98.7 million during fiscal 2022, which was primarily driven by $63.8 million in cash, net of cash acquired, used to fund our acquisition of Vandermeer in the fourth quarter of fiscal 2022, as well as $35.9 million in cash paid for investments in our business to improve operational performance and productivity throughout fiscal 2022.
As of January 1, 2022, we had zero outstanding borrowings on our revolving credit facility. Senior Secured Notes Transaction During the fourth quarter of 2021, we completed a private offering of $300 million of our six percent senior secured notes due 2029 (the “2029 Notes”).
Senior Secured Notes In October 2021, we completed a private offering of $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 gross value of these assets are included in their respective category in the “Property and equipment, at cost” section on our consolidated balance sheet. For fiscal 2021, we invested $14.4 million in cash related to investments in long-lived assets and entered into finance leases totaling $10.5 million, for a total investment of $24.9 million.
For fiscal 2021, we invested $25.0 million in long-lived assets primarily related to investments in our distribution facilities and to a lesser extent, upgrading our fleet, which includes $14.4 million in cash investments and $10.5 million in new finance leases recognized for tractors acquired as a component of our fleet investment plan.

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