bxc-20210403

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended April 3, 2021


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

Commission file number: 001-32383


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


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

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

(770) 953-7000

(Registrant’s telephone number, including area code)

Not applicable

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

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	BXC	New York Stock Exchange

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

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

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

Large Accelerated Filer

☐

Accelerated Filer

☑

Non-accelerated Filer

☐

Smaller Reporting Company

☑

Emerging Growth Company

☐

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

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

As of April 30, 2021, there were 9,468,042 shares of BlueLinx Holdings Inc. common stock, par value $0.01, outstanding.

BLUELINX HOLDINGS INC.

Form 10-Q

For the Quarterly Period Ended April 3, 2021

INDEX


			PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements — BlueLinx Holdings Inc. (Unaudited)			1
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)			1
Condensed Consolidated Balance Sheets			2
Condensed Consolidated Statements of Stockholders' Equity (Deficit)			3
Condensed Consolidated Statements of Cash Flows			4
Notes to Condensed Consolidated Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17
Item 3. Quantitative and Qualitative Disclosures About Market Risk			26
Item 4. Controls and Procedures			26

PART II. OTHER INFORMATION
Item 1. Legal Proceedings			27
Item 1A. Risk Factors			27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			28
Item 3. Defaults Upon Senior Securities			28
Item 4. Mine Safety Disclosures			28
Item 5. Other Information			28
Item 6. Exhibits			29

Signature			30

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

(Unaudited)


	Three Months Ended
	April 3, 2021		March 28, 2020
Net sales	$	1,025,469	$	662,070
Cost of sales	845,077		568,861
Gross profit	180,392		93,209
Operating expenses:
Selling, general, and administrative	75,560		74,588
Depreciation and amortization	7,465		7,635
Amortization of deferred gains on real estate	(984)		(984)
Gains from sales of property	(1,287)		(525)
Other operating expenses	112		4,165
Total operating expenses	80,866		84,879
Operating income	99,526		8,330
Non-operating expenses (income):
Interest expense, net	16,234		14,380
Other income, net	(314)		(237)
Income (loss) before provision for (benefit from) income taxes	83,606		(5,813)
Provision for (benefit from) income taxes	21,746		(5,026)
Net income (loss)	$	61,860	$	(787)

Basic income (loss) per share	$	6.53	$	(0.08)
Diluted income (loss) per share	$	6.28	$	(0.08)

Comprehensive income (loss):
Net income (loss)	$	61,860	$	(787)
Other comprehensive income (loss):
Amortization of unrecognized pension gain, net of tax	239		196
Other	11		(16)
Total other comprehensive income	250		180
Comprehensive income (loss)	$	62,110	$	(607)

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


	April 3, 2021		January 2, 2021
ASSETS
Current assets:
Cash	$	179	$	82
Receivables, less allowances of $5,573 and $4,123, respectively	418,815		293,643
Inventories, net	376,423		342,108
Other current assets	33,029		32,581
Total current assets	828,446		668,414
Property and equipment, at cost	310,101		299,935
Accumulated depreciation	(125,769)		(121,223)
Property and equipment, net	184,332		178,712
Operating lease right-of-use assets	48,969		51,142
Goodwill	47,772		47,772
Intangible assets, net	17,067		18,889
Deferred tax assets	66,795		62,899
Other non-current assets	19,099		20,302
Total assets	$	1,212,480	$	1,048,130
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	218,975	$	165,163
Accrued compensation	10,798		24,751
Taxes payable	33,646		7,847
Current maturities of long-term debt, net of debt issuance costs of $0 and $74, respectively	—		1,171
Finance lease liabilities - short-term	7,459		5,675
Operating lease liabilities - short-term	5,123		6,076
Real estate deferred gains - short-term	4,040		4,040
Other current liabilities	11,747		14,309
Total current liabilities	291,788		229,032
Non-current liabilities:
Long-term debt, net of debt issuance costs of $2,615 and $8,936, respectively	355,899		321,270
Finance lease liabilities - long-term	273,815		267,443
Operating lease liabilities - long-term	44,021		44,965
Real estate deferred gains - long-term	77,059		78,009
Pension benefit obligation	21,730		22,684
Other non-current liabilities	25,655		25,635
Total liabilities	1,089,967		989,038
Commitments and Contingencies
STOCKHOLDERS’ EQUITY:
Common Stock, $0.01 par value, 20,000,000 shares authorized, 9,468,042 and 9,462,774 outstanding on April 3, 2021 and January 2, 2021, respectively	95		95
Additional paid-in capital	268,006		266,695
Accumulated other comprehensive loss	(35,742)		(35,992)
Accumulated stockholders’ deficit	(109,846)		(171,706)
Total stockholders’ equity	122,513		59,092
Total liabilities and stockholders’ equity	$	1,212,480	$	1,048,130

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Stockholders’ Equity Total
	Shares	Amount
Balance, Balance, January 2, 2021	9,463	$	95	$	266,695	$	(35,992)	$	(171,706)	$	59,092
Net income	—	—		—		—		61,860		61,860
Foreign currency translation, net of tax	—	—		—		(6)		—		(6)
Impact of pension plan, net of tax	—	—		—		239		—		239
Vesting of restricted stock units	8	—		—		—		—		—
Compensation related to share-based grants	—	—		1,410		—		—		1,410
Repurchase of shares to satisfy employee tax withholdings	(3)	—		(99)		—		—		(99)
Other	—	—		—		17		—		17
Balance, April 3, 2021	9,468	95		268,006		(35,742)		(109,846)		122,513


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Stockholders’ Deficit Total
	Shares	Amount
Balance, Balance, December 28, 2019	9,366	$	94	$	260,974	$	(34,563)	$	(252,588)	$	(26,083)
Net loss	—	—		—		—		(787)		(787)
Foreign currency translation, net of tax	—	—		—		3		—		3
Impact of pension plan, net of tax	—	—		—		196		—		196
Vesting of restricted stock units	2	—		—		—		—		—
Compensation related to share-based grants	—	—		1,004		—		—		1,004
Repurchase of shares to satisfy employee tax withholdings	(1)	—		(7)		—		—		(7)
Other	—	—		9		(19)		—		(10)
Balance, March 28, 2020	9,367	94		261,980		(34,383)		(253,375)		(25,684)

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended
	April 3, 2021		March 28, 2020
Cash flows from operating activities:
Net income (loss)	$	61,860	$	(787)
Adjustments to reconcile net income (loss) to cash used in operations:
Provision for (benefit from) income taxes	21,746		(5,026)
Depreciation and amortization	7,465		7,635
Amortization of debt issuance costs	603		956
Adjustments to debt issuance costs associated with term loan	5,791		—
Gains from sales of property	(1,287)		(525)
Amortization of deferred gains from real estate	(984)		(984)
Share-based compensation	1,410		1,004
Changes in operating assets and liabilities:
Accounts receivable	(125,172)		(55,068)
Inventories	(34,315)		(32,828)
Accounts payable	53,812		30,050
Prepaid and other current assets	(1,246)		(3,006)
Other assets and liabilities	(14,291)		(608)
Net cash used in operating activities	(24,608)		(59,187)

Cash flows from investing activities:
Proceeds from sale of assets	1,810		44
Property and equipment investments	(1,122)		(1,245)
Net cash provided by (used in) investing activities	688		(1,201)

Cash flows from financing activities:
Borrowings on revolving credit facilities	262,210		204,196
Repayments on revolving credit facilities	(191,943)		(149,079)
Repayments on term loan	(43,204)		(69,238)
Proceeds from real estate financing transactions	—		78,329
Debt financing costs	(861)		(336)
Repurchase of shares to satisfy employee tax withholdings	(56)		(7)
Principal payments on finance lease liabilities	(2,129)		(2,562)
Net cash provided by financing activities	24,017		61,303

Net change in cash	97		915
Cash at beginning of period	82		11,643
Cash at end of period	$	179	$	12,558

Supplemental Cash Flow Information
Net income tax refunds during the period	$	—	$	352
Interest paid during the period	$	9,971	$	13,558

See accompanying Notes.

BLUELINX HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

April 3, 2021

(Unaudited)

1. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim Condensed Consolidated Financial Statements include the accounts of BlueLinx Holdings Inc. and its wholly owned subsidiaries (the “Company”). We derived the condensed consolidated balance sheet at April 3, 2021, from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2021 (the “Fiscal 2020 Form 10-K”), as filed with the Securities and Exchange Commission on March 3, 2021. In the opinion of our management, the condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of our statements of operations and comprehensive income (loss) for the three months ended April 3, 2021, and March 28, 2020, our balance sheets at April 3, 2021, and January 2, 2021, our statements of stockholders’ equity (deficit) for the three months ended April 3, 2021, and March 28, 2020, and our statements of cash flows for the three months ended April 3, 2021, and March 28, 2020.

We have condensed or omitted certain notes and other information from the interim condensed consolidated financial statements presented in this report. Therefore, these condensed consolidated interim financial statements should be read in conjunction with the Fiscal 2020 Form 10-K. In addition, certain prior period amounts have been reclassified to conform to the current period's presentation. These reclassifications did not impact operating income or consolidated net income (loss). The results for the three months ended April 3, 2021, are not necessarily indicative of results that may be expected for the full year ending January 1, 2022, or any other interim period.

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

Our financial statements are prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which requires us to make estimates based on assumptions about current and, for some estimates, future economic and market conditions, which affect reported amounts and related disclosures in our financial statements. Although our current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position. Some of our estimates may be affected by the ongoing novel coronavirus (“COVID-19”) pandemic. The severity, magnitude, and duration, as well as the economic consequences of the COVID-19 pandemic, are uncertain, rapidly changing, and difficult to predict. As a result, our accounting estimates and assumptions may change over time in response to the continuing COVID-19 pandemic.

On April 13, 2018, we completed the acquisition of Cedar Creek Holdings, Inc. (“Cedar Creek”). Results for Cedar Creek are included in the consolidated financial information presented herein.

Reclassification of Prior Period Presentation

We have reclassified certain costs within the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 28, 2020, from selling, general and administrative to amortization of deferred gains on real estate and other operating expenses. These costs primarily relate to the amortization of gains from prior real estate sales and the integration of the acquisition of Cedar Creek.

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

Recently Adopted Accounting Standards

Defined Benefit Pension Plan. In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-14, “Compensation-Retirement-Benefits-Defined Benefit Plans-General (Subtopic 715-20).” The amendments in this update modify the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans by removing six previously required disclosures and adding two. The ASU also removes

the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost, and the benefit obligation for postretirement healthcare benefits. We adopted this standard effective for fiscal year 2020. The adoption of this standard did not have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

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

Accounting Standards Effective in Future Periods

Credit Impairment Losses. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).” This ASU sets forth a current expected credit loss (“CECL”) model which requires the measurement of all expected credit losses for financial instruments or other assets (e.g., trade receivables), held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model, is applicable to the measurement of credit losses on financial assets measured at amortized cost, and applies to some off-balance sheet credit exposures. The standard also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity's portfolio. ASU 2019-10 extended the effective date of ASU 2016-13 to interim and annual periods beginning after December 15, 2022, for certain public business entities, including smaller reporting companies. We have not completed our assessment of the standard, but we do not expect the adoption to have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

2. Goodwill and Other Intangible Assets

In connection with the acquisition of Cedar Creek, we acquired certain intangible assets. As of April 3, 2021, our intangible assets consist of goodwill and other intangible assets including customer relationships, noncompete agreements, and trade names.

Goodwill

Goodwill is the excess of the cost of an acquired entity over the fair value of tangible and intangible assets (including customer relationships, noncompete agreements, and trade names) acquired, and liabilities assumed, under acquisition accounting for business combinations. As of April 3, 2021, goodwill was $47.8 million.

Goodwill is not subject to amortization but must be tested for impairment at least annually. This test requires us to assign goodwill to a reporting unit and to determine if the fair value of the reporting unit’s goodwill is less than its carrying amount. We evaluate goodwill for impairment during the fourth quarter of each fiscal year. In addition, we will evaluate the carrying value for impairment between annual impairment tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Such events and indicators may include, without limitation, significant declines in the industries in which our products are used, significant changes in capital market conditions, and significant changes in our market capitalization. No such indicators were present during the first quarter of fiscal 2021. Our one reporting unit has a fair value that exceeds its carrying value as of April 3, 2021.

Definite-Lived Intangible Assets

On April 3, 2021, the gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets were as follows:


	Weighted Average Remaining Useful Lives	Gross Carrying Amounts		Accumulated Amortization		(1)	Net Carrying Amounts
		(In thousands)
Customer relationships	9	$	25,500	$	(10,663)		$	14,837
Noncompete agreements	1	8,254		(6,111)			2,143
Trade names	1	6,826		(6,739)			87
Total		$	40,580	$	(23,513)		$	17,067

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

Amortization Expense

Amortization expense for the definite-lived intangible assets was $1.8 million and $2.0 million for the three-month periods ended April 3, 2021, and March 28, 2020, respectively.

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


	Estimated Amortization
	(In thousands)
2021	$	3,499
2022	2,763
2023	1,807
2024	1,505
2025	1,423
2026	1,423

3. Revenue Recognition

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

Contracts with our customers are generally in the form of standard terms and conditions of sale. From time to time, we may enter into specific contracts, which may affect delivery terms. Performance obligations in our contracts generally consist solely of delivery of goods. For all sales channel types, consisting of warehouse, direct, and reload sales, we typically satisfy our performance obligations upon shipment. Our customer payment terms are typical for our industry, and may vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not deemed to be significant by us. For certain sales channels and/or products, our standard terms of payment may be as early as ten days.

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

All revenues recognized are net of trade allowances (i.e., rebates), cash discounts, and sales returns. Cash discounts and sales returns are estimated using historical experience. Trade allowances are based on the estimated obligations and historical experience. Adjustments to earnings resulting from revisions to estimates on discounts and returns have been insignificant for

each of the reported periods. Certain customers may receive cash-based incentives or credits, which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized. We believe that there will not be significant changes to our estimates of variable consideration.

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


	Three Months Ended
	April 3, 2021		March 28, 2020
	(In thousands)
Structural products	$	462,409	$	240,722
Specialty products	563,060		421,348
Total net sales	$	1,025,469	$	662,070

The following table presents our revenues disaggregated by sales channel. Warehouse sales are delivered from our warehouses. Reload sales are similar to warehouse sales but are shipped from third-party warehouses where we store owned products to enhance our operating efficiencies. This channel is employed primarily to service strategic customers that would be less economical to service from our warehouses, and to distribute large volumes of imported products from port facilities. Direct sales are shipped from the manufacturer to the customer without our taking physical possession of the inventory and, as a result, typically generate lower margins than our warehouse and reload distribution channels. This distribution channel requires the lowest amount of committed capital and fixed costs. Following the acquisition and integration of Cedar Creek, our reload sales were less distinct from warehouse sales, as they have been classified in prior periods. Sales and usage-based taxes are excluded from revenues.


	Three Months Ended
	April 3, 2021		March 28, 2020
	(In thousands)
Warehouse and reload	$	849,419	$	545,892
Direct	191,130		125,582
Customer discounts and rebates	(15,080)		(9,404)
Total net sales	$	1,025,469	$	662,070

4. Assets Held for Sale

During the quarter ended April 3, 2021, we sold the non-operating facility located in Birmingham, Alabama, previously identified as “held for sale.” We recognized a gain of $1.3 million in the Condensed Consolidated Statement of Operations as a result of this sale.

As of April 3, 2021, and January 2, 2021, the net book value of total assets held for sale was $0.9 million and $1.3 million, respectively, and was included in “Other current assets” in our Condensed Consolidated Balance Sheets. Only one of our non-operating properties was designated as “held for sale” as of April 3, 2021. This property is a former distribution facility located in Houston, Texas. We vacated this property and designated it as held for sale during fiscal 2020. We continue to actively market this property, and we plan to sell this property within the next 12 months.

5. Long-Term Debt

As of April 3, 2021, and January 2, 2021, long-term debt consisted of the following:


	April 3, 2021		January 2, 2021
	(In thousands)
Revolving Credit Facility (1)	$	358,514	$	288,247
Term Loan Facility (2)	—		43,204
Finance lease obligations (3)	281,274		273,118
	639,788		604,569
Unamortized debt issuance costs	(2,615)		(9,010)
	637,173		595,559
Less: current maturities of long-term debt	7,459		6,846
Long-term debt, net of current maturities	$	629,714	$	588,713

(1) The average effective interest rate was 2.4 percent and 2.8 percent for the quarters ended April 3, 2021 and January 2, 2021, respectively.

(2) The average interest rate, exclusive of fees and prepayment premiums, was 8.0 percent for the quarters ended April 3, 2021, and January 2, 2021.

(3) Refer to Note 8, Leases, for interest rates associated with finance lease obligations.

Revolving Credit Facility

We have a revolving credit facility that we entered into in April 2018 with Wells Fargo Bank, National Association, as administrative agent, and certain other financial institutions party thereto (the “Revolving Credit Facility”), with a maturity date of October 10, 2022. The Revolving Credit facility includes a committed senior secured asset-based revolving loan and letter of credit facility of up to $600 million, and an uncommitted accordion feature that permits us to increase the facility by an aggregate additional principal amount of up to $150 million. Our obligations under the Revolving Credit Facility are secured by a security interest in substantially all of our assets other than real property.

Loans under the Revolving Credit Facility bear interest at a rate per annum equal to (i) LIBOR plus a margin ranging from 1.75 percent to 2.25 percent, with the amount of such margin determined based upon the average of our excess availability for the immediately preceding fiscal quarter as calculated by the administrative agent, for loans based on LIBOR, or (ii) the administrative agent’s base rate plus a margin ranging from 0.75 percent to 1.25 percent, with the amount of such margin determined based upon the average of our excess availability for the immediately preceding fiscal quarter as calculated by the administrative agent, for loans based on the base rate.

As of April 3, 2021, we had outstanding borrowings of $358.5 million and excess availability of $238.1 million under our Revolving Credit Facility. As of January 2, 2021, we had outstanding borrowings of $288.2 million and excess availability of $184.3 million under our Revolving Credit Facility. Our average effective interest rate under the facility was 2.4 percent and 2.8 percent for the quarters ended April 3, 2021 and January 2, 2021, respectively. For the quarter ended March 28, 2020, our average effective interest rate under the Revolving Credit Facility was 4.2 percent.

The Revolving Credit Facility contains certain financial and other covenants, and our right to borrow under the Revolving Credit Facility is conditioned upon, among other things, our compliance with these covenants. We were in compliance with all covenants under the Revolving Credit Facility as of April 3, 2021.

Term Loan Facility

We previously had a term loan facility that we entered into in April 2018 with HPS Investments Partners, LLC, as administrative and collateral agent, and certain other financial institutions party thereto (the “Term Loan Facility”), with a maturity date of October 13, 2023. The Term Loan Facility provided for a senior secured first lien loan facility in an initial aggregate principal amount of $180 million and was secured by a security interest in substantially all of our assets.

As of January 2, 2021, we had outstanding borrowings of $43.2 million under the Term Loan Facility. On April 2, 2021, we repaid the remaining outstanding principal balance of the Term Loan Facility, and, as a result, as of April 3, 2021, we had no outstanding borrowings under the Term Loan Facility, which has been extinguished. In connection with our repayment of the outstanding principal balance in full on April 2, 2021, we expensed $5.8 million of debt issuance costs that we had been amortizing in connection with our former Term Loan Facility. These costs are included within interest expense, net, on the

Condensed Consolidated Statements of Operations and reported separately as an adjustment to net income in our Condensed Consolidated Statements of Cash Flows.

Our average interest rate under the facility, exclusive of fees and prepayment premiums, was approximately 8.0 percent for the quarters ended April 3, 2021 and January 2, 2021. For the quarter ended March 28, 2020, our average interest rate under the Term Loan Facility, exclusive of fees and prepayment premiums, was approximately 8.7 percent.

Finance Lease Obligations

Our finance lease liabilities consist of leases related to equipment and vehicles, and real estate, with the majority of those finance leases related to real estate. For more information on our finance lease obligations, refer to Note 8, Leases.

6. Net Periodic Pension Benefit

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


	Three Months Ended
	April 3, 2021		March 28, 2020
	(In thousands)
Service cost (1)	$	—	$	—
Interest cost on projected benefit obligation	505		723
Expected return on plan assets	(1,140)		(1,210)
Amortization of unrecognized gain	321		263
Net periodic pension benefit	$	(314)	$	(224)

(1) Service cost is not a part of our net periodic pension benefit as our pension plan is frozen for all participants.

7. Stock Compensation

During the three months ended April 3, 2021, and March 28, 2020, we incurred stock compensation expense of $1.4 million and $1.0 million, respectively. The increase in our stock compensation expense for the three-month period is attributable to having more outstanding equity-based awards during this period than in the prior year.

8. Leases

We have operating and finance leases for certain of our distribution facilities, office space, land, mobile fleet, and equipment. Many of our leases are non-cancelable and typically have a defined initial lease term, and some provide options to renew at our election for specified periods of time. The majority of our leases have remaining lease terms of 1 year to 15 years, some of which include one or more options to extend the leases for 5 years. Our leases generally provide for fixed annual rentals. Certain of our leases include provisions for escalating rent based on, among other things, contractually defined increases and/or changes in the Consumer Price Index (“CPI”). The known changes to lease payments are included in the lease liability at lease commencement. Unknown changes related to CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. In addition, a subset of our vehicle lease cost is considered variable. Some of our leases require us to pay taxes, insurance, and maintenance expenses associated with the leased assets. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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

Finance Lease Liabilities

Our finance lease liabilities consist of leases related to equipment and vehicles, and real estate. As noted in the table below, a majority of our finance leases, formally known as capital leases, relate to real estate.

During 2017 and 2018, we entered into real estate financing transactions on warehouse facilities in Tampa, FL; Ft. Worth, TX; Bellingham, PA; Frederick, MD; Lawrenceville, GA; and Raleigh, NC. These transactions were completed pursuant to sale-leaseback arrangements, and upon their completion, we entered into long-term leases on the properties for initial terms of 15 years with multiple 5-year renewal options, with one having a single 10-year renewal option. We accounted for these transactions in accordance with the FASB’s Accounting Standards Codification (“ASC”) Topic 840, which was the lease accounting standard in effect at the inception of these arrangements. We have recorded these transactions as finance lease liabilities on our balance sheet. As of April 3, 2021, and January 2, 2021, total unrecognized deferred gains related to these transactions were $81.1 million and $82.0 million, respectively.

During 2019, we entered into real estate financing transactions on two warehouse facilities. On May 19, 2019, we completed a real estate financing transaction on a warehouse facility in University Park, IL for net proceeds of $21.8 million. On June 20, 2019, we completed a real estate financing transaction on a warehouse facility in Yulee, FL for net proceeds of $13.3 million. These two transactions were completed pursuant to sale-leaseback arrangements, and upon their completion, we entered into long-term leases on the properties for initial terms of 15 years with multiple 5-year renewal options. Gross proceeds of these transactions were $45.0 million.

During fiscal 2020, we completed several real estate financing transactions. On December 31, 2019, we completed real estate financing transactions on warehouse facilities in Madison, TN; Kansas City, MO; Richmond, VA; and Bridgeton, MO for aggregate net proceeds of $27.2 million. On January 31, 2020, we completed real estate financing transactions on warehouse facilities in Charlotte, NC; Memphis, TN; Independence, KY; San Antonio, TX; Portland, ME; Denville, NJ; Yaphank, NY; Pensacola, FL; and Tallmadge, OH for aggregate net proceeds of $34.1 million. On February 28, 2020, we completed a real estate financing transaction on a warehouse facility in Elkhart, IN for net proceeds of $7.5 million. These transactions were completed pursuant to sale-leaseback arrangements, and upon their completion, we entered into long-term leases on the properties for initial terms from 15 years to 18 years with multiple 5-year renewal options. Gross proceeds of these transactions were $78.3 million.

We determined that the transactions in fiscal 2019 and 2020 did not qualify as sales in accordance with ASC 842. Therefore, for accounting purposes, the transactions were not accounted for as sale-leaseback transactions, and no gain or loss was recorded. We determined that these leases qualified for finance lease treatment and recorded them accordingly. The net book value of the assets related to these transactions remains on our books as property and equipment and we continue to depreciate the assets over their remaining useful lives.

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

The following table presents our assets and liabilities related to our leases as of April 3, 2021 and January 2, 2021:


		April 3, 2021		January 2, 2021
		(In thousands)
Assets	Classification
Operating lease right-of-use assets	Operating lease right-of-use assets	$	48,969	$	51,142
Finance lease right-of-use assets (1)	Property and equipment, net	156,382		148,561
Total lease right-of-use assets		$	205,351	$	199,703

Liabilities
Current portion
Operating lease liabilities	Operating lease liabilities - short term	$	5,123	$	6,076
Finance lease liabilities	Finance lease liabilities - short term	7,459		5,675
Non-current portion
Operating lease liabilities	Operating lease liabilities - long term	44,021		44,965
Finance lease liabilities	Finance lease liabilities - long term	273,815		267,443
Total lease liabilities		$	330,418	$	324,159

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $62.5 million and $58.6 million as of April 3, 2021 and January 2, 2021, respectively.

The components of lease expense were as follows:


	Three Months Ended
	April 3, 2021		March 28, 2020
	(In thousands)
Operating lease cost:	$	3,050	$	3,120