BLUELINX HOLDINGS INC.
10-Ks and 10-Qs
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Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark one)
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended January 2, 2010
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 1-32383
BLUELINX HOLDINGS INC.
(Exact name of registrant as specified in its charter)
| Delaware | 77-0627356 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) | |
| 4300 Wildwood Parkway, Atlanta, Georgia | 30339 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
770-953-7000
770-953-7000
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Name of Each Exchange on Which Registered | |
| Common stock, par value $0.01 per share | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
Yes
o
No
þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act.
Yes
o
No
þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
þ
No
o
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, 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
o
No
o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
þ
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
| Large accelerated filer o | Accelerated filer o |
Non-accelerated filer
þ
(Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Act). Yes
o
No
þ
The aggregate market value of the registrant’s common stock held by non-affiliates of the
registrant as of July 4, 2009 was $32,878,698, based on the closing price on the New York Stock
Exchange of $2.99 per share on July 4, 2009.
As of March 1, 2010, the registrant had 32,631,562 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of BlueLinx Holdings Inc.’s definitive Proxy Statement for use in connection with its
2009 Annual Meeting of Shareholders, scheduled to be held on May 20, 2010, are incorporated by
reference into Part III of this Report.
BLUELINX HOLDINGS INC.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended January 2, 2010
For the Fiscal Year Ended January 2, 2010
TABLE OF CONTENTS
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PART I
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PART II
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PART III
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PART IV
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| Exhibit 21.1 | ||||||||
| Exhibit 23.1 | ||||||||
| Exhibit 31.1 | ||||||||
| Exhibit 31.2 | ||||||||
| Exhibit 32.1 | ||||||||
| Exhibit 32.2 | ||||||||
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Table of Contents
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Forward-looking statements include, without limitation, any statement that
may predict, forecast, indicate or imply future results, performance or achievements, and may
contain the words “anticipate,” “believe,” “could,” “expect,” “estimate,” “intend,” “may,”
“project,” “plan,” “should,” “will be,” “will likely continue,” “will likely result” or words or
phrases of similar meaning. You should read statements containing these words carefully, because
they discuss our future expectations, contain projections of our future results or state other
“forward-looking” information.
All of these forward-looking statements are based on estimates and assumptions made by us
that, although believed by us to be reasonable, are inherently uncertain. However, there are
events in the future that we are not able to accurately predict or control. The factors listed
under Item 1A, Risk Factors, as well as any cautionary language in this Form 10-K, provide examples
of risks, uncertainties and events that may cause our actual results to differ materially from the
expectations we describe in our forward-looking statements. Although we believe that our
expectations are based on reasonable assumptions, actual results may differ materially from those
in the forward looking statements as a result of various factors, including, but not limited to,
those described under Item 1A, Risk Factors and elsewhere in this Form 10-K.
Forward-looking statements speak only as of the date of this Form 10-K. Except as required
under federal securities laws and the rules and regulations of the SEC, we do not have any
intention, and do not undertake, to update any forward-looking statements to reflect events or
circumstances arising after the date of this Form 10-K, whether as a result of new information,
future events or otherwise. As a result of these risks and uncertainties, readers are cautioned not
to place undue reliance on the forward-looking statements included in this Form 10-K or that may be
made elsewhere from time to time by or on behalf of us. All forward-looking statements attributable
to us are expressly qualified by these cautionary statements.
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As used herein, unless the context otherwise requires, “BlueLinx,” the “Company,” “we,” “us”
and “our” refer to BlueLinx Holdings Inc. and its subsidiaries. BlueLinx Corporation is the
wholly-owned operating subsidiary of BlueLinx Holdings Inc. and is referred to herein as the
“operating company” when necessary. Reference to “fiscal 2009” refers to the 52-week period ended
January 2, 2010. Reference to “fiscal 2008” refers to the 53-week period ended January 3, 2009.
Reference to “fiscal 2007” refers to the 52-week period ended December 29, 2007.
ITEM 1.
BUSINESS.
Company Overview
BlueLinx Holdings Inc., operating through our wholly-owned subsidiary, BlueLinx Corporation,
is a leading distributor of building products in the United States. We operate in all of the major
metropolitan areas in the United States and, as of January 2, 2010, we distributed more than 10,000
products to approximately 11,500 customers through our network of more than 70 warehouses and
third-party operated warehouses.
We distribute products in two principal categories: structural products and specialty
products. Structural products, which represented approximately 44% and 50% of our fiscal 2009 and
fiscal 2008 gross sales, include plywood, oriented strand board (“OSB”), rebar and remesh, lumber
and other wood products primarily used for structural support, walls and flooring in construction
projects. Specialty products, which represented approximately 56% and 50% of our fiscal 2009 and
fiscal 2008 gross sales, include roofing, insulation, specialty panels, moulding, engineered wood
products, vinyl products (used primarily in siding), composite decking and metal products
(excluding rebar and remesh).
Our customers include building materials dealers, industrial users of building products,
manufactured housing builders and home improvement centers. We purchase products from over 750
vendors and serve as a national distributor for a number of our suppliers. We distribute products
through our owned fleet of over 600 trucks and over 1,100 trailers, as well as by common carrier.
Our principal executive offices are located at 4300 Wildwood Parkway, Atlanta, Georgia 30339
and our telephone number is (770) 953-7000. Our filings with the U.S. Securities and Exchange
Commission, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, proxy statements and amendments to those reports, are accessible free of charge at our
official website, www.BlueLinxCo.com. We have adopted a Code of Ethics within the meaning of Item
406(b) of Regulation S-K. This Code of Ethics applies to our principal executive officer, principal
financial officer and principal accounting officer. This Code of Ethics, our board committee
charters and our corporate governance guidelines are publicly
available without charge at www.BlueLinxCo.com or without charge
upon request by writing to BlueLinx Holdings Inc., Attn: Corporate Secretary, 4300 Wildwood
Parkway, Atlanta, Georgia 30339. If we make substantial amendments to our Code of Ethics or grant
any waiver, including any implicit waiver, we are required to disclose the nature of such amendment
or waiver on our website or in a report on Form 8-K of such amendment or waiver. The reference to
our website does not constitute incorporation by reference of the information contained at the
site.
History
We were created on March 8, 2004 as a Georgia corporation named ABP Distribution Holdings Inc.
(“ABP”). ABP was owned by Cerberus Capital Management, L.P. (Cerberus Capital Management, L.P. and
its subsidiaries are referred to herein as “Cerberus”), a private, New York-based investment firm,
and members of our management team. Prior to May 7, 2004, certain of our assets were owned by the
distribution division (the “Division”) of Georgia-Pacific Corporation (“G-P”). The Division
commenced operations in 1954 with 13 warehouses primarily used as an outlet for Georgia-Pacific’s
plywood. On May 7, 2004, Georgia-Pacific sold the assets of the Division to ABP. ABP subsequently
merged into BlueLinx Holdings Inc. On December 17, 2004, we consummated an initial public offering
of our common stock.
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Products and Services
As of January 2, 2010, we distributed more than 10,000 different structural and specialty
products to approximately 11,500 customers nationwide. Our structural products are primarily used
for structural support, walls, flooring and roofing in construction projects. Additional end-uses
of our structural products include outdoor decks, sheathing, crates and boxes. Our specialty
products include engineered lumber, roofing, insulation, metal products (excluding rebar and
remesh), vinyl products (used primarily in siding), moulding, composite decking and particleboard.
In some cases, these products are branded.
We also provide a wide range of value-added services and solutions to our customers and
vendors including:
| • | providing “less-than-truckload” delivery services; |
| • | pre-negotiated program pricing plans; |
| • | inventory stocking; |
| • | automated order processing through an electronic data interchange, or EDI, that provides a direct link between us and our customers; |
| • | inter-modal distribution services, including railcar unloading and cargo reloading onto customers’ trucks; and |
| • | back-haul services, when otherwise empty trucks are returning from customer deliveries. |
Distribution Channels
We sell products through three main distribution channels:
Warehouse Sales
Warehouse sales are delivered from our warehouses to dealers, home improvement centers and
industrial users. We deliver products primarily using our fleet of over 600 trucks and over 1,100
trailers, but also occasionally use common carriers for peak load flexibility. We operate in all of
the major metropolitan areas in the United States through our network of more than 70 warehouses
and third-party operated warehouses. Our warehouses have over ten million square feet of space
under roof plus significant outdoor storage space. Warehouse sales accounted for approximately 64%
and 59% of our fiscal 2009 and fiscal 2008 gross sales, respectively.
Reload Sales
Reload sales are similar to warehouse sales but are shipped from third-party warehouses where
we store owned product in order to expand our geographic reach. This channel is employed primarily
to service strategic customers that would be uneconomical to service from our warehouses and to
distribute large volumes of imported products such as metal or hardwood plywood from port
facilities. Reload sales accounted for approximately 10% and 13% of our gross sales in fiscal 2009
and fiscal 2008, respectively.
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Direct Sales
Direct sales are shipped from the manufacturer to the customer without our taking physical
inventory possession. This channel requires the lowest amount of committed capital and fixed costs.
Direct sales accounted for approximately 26% and 28% of our fiscal 2009 and fiscal 2008 gross
sales, respectively.
Customers
As of January 2, 2010, our customer base included approximately 11,500 customers across
multiple market segments and various end-use markets, including the following types of customers:
| • | building materials dealers; |
| • | industrial users of building products; |
| • | manufactured housing builders; and |
| • | home improvement centers. |
Sales and Marketing
Our sales efforts are directed primarily through our sales force of approximately 500 sales
representatives. Approximately 300 of our sales representatives are located at our two sales
centers in Denver and Atlanta. Within these sales centers, our sales representatives interact with
our customers over the telephone. The remaining 200 sales representatives are located throughout
the country and are responsible for maintaining a local dialogue with our customers, including
making frequent, in-person visits.
Our sales force is separated between industrial/dealer sales and home improvement center
sales. Industrial/dealer sales are managed by regional vice-presidents with sales teams organized
by customer regions. The majority of industrial/dealer orders are processed by telephone and are
facilitated by our centralized database of customer preferences and purchasing history. We also
have dedicated cross-functional customer support teams focused on strategic growth with the home
improvement centers.
Suppliers
As of January 2, 2010, our vendor base included over 750 suppliers of both structural and
specialty building products. In some cases, these products are branded. We have supply contracts in
place with many of our vendors. Terms for these agreements frequently include prompt payment
discounts, freight allowances and occasionally include volume discounts, growth incentives,
marketing allowances, and consigned inventory.
On April 27, 2009, we entered into a Termination and Modification Agreement (“Modification
Agreement”) related to our Master Purchase, Supply and Distribution Agreement (the “Supply
Agreement”) with Georgia Pacific (“G-P”). The Modification Agreement effectively terminates the
existing Supply Agreement with respect to our distribution of G-P plywood, OSB and lumber. We will
continue to distribute a variety of G-P building products, including engineered lumber, which is
covered under a three-year purchase agreement dated February 12, 2009. As a result of terminating
this agreement, we are no longer contractually obligated to make minimum purchases of products from
G-P. As of January 3, 2009, prior to entering into the Modification Agreement, our minimum
purchases requirement had totaled $31.9 million.
G-P agreed to pay us $18.8 million in exchange for our agreement to terminate the Supply
Agreement one year earlier than the originally agreed upon May 7, 2010 termination date. Under the
terms of the Modification Agreement, we received four quarterly cash payments of $4.7 million,
which began on May 1, 2009 and ended on February 1, 2010. As a result of the termination, we
recognized a net gain of $17.8 million in fiscal 2009 as a reduction to operating expense. The
gain was net of a $1.0 million write-off of an intangible asset associated with the Supply
Agreement. We believe the early termination of the Supply Agreement contributed to the decline in
our structural panel sales volume during the second, third, and fourth quarters of fiscal 2009.
However, because the
majority of these sales are through the direct sales channel, the lower structural panel sales
volume had an insignificant impact on our gross profit during for these periods. To the extent we
are unable to replace these volumes with structural product from G-P or other suppliers, the early
termination of the Supply Agreement may continue to negatively impact our sales of structural
products which would impact our net sales and our costs, which in turn could impact our gross
profit, net income, and cash flows. For more information on structural unit volume changes, refer
to the tables under “Selected Factors Affecting Our Operating Results” in our Management,
Discussion and Analysis.
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Competition
The U.S. building products distribution market is a highly fragmented market, served by a
small number of multi-regional distributors, several regionally focused distributors and a large
number of independent local distributors. Local and regional distributors tend to be closely held
and often specialize in a limited number of segments, such as the roofing segment, in which they
offer a broader selection of products. Some of our multi-regional competitors are part of larger
companies and therefore have access to greater financial and other resources than us. We compete on
the basis of breadth of product offering, consistent availability of product, product price and
quality, reputation, service and distribution facility location.
Our two largest competitors are Weyerhaeuser Company and Boise Cascade LLC. Most major
markets are served by at least one of these distributors.
Seasonality
We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal
factors. These seasonal factors are common in the building products distribution industry. The
first and fourth quarters are typically our slowest quarters due to the impact of poor weather on
the construction market. Our second and third quarters are typically our strongest quarters,
reflecting a substantial increase in construction due to more favorable weather conditions. Our
working capital and accounts receivable and payable generally peak in the third quarter, while
inventory generally peaks in the second quarter in anticipation of the summer building season.
Although, we generally expect these trends to continue for the foreseeable future, we have reduced
our inventory as part of our effort to manage to the current weakened demand environment in the
housing market. Additionally, our accounts receivable balance has declined due to the weakened
demand environment for the products we distribute.
Trademarks
As of February 1, 2010, we had 38 U.S. trademark applications and registrations, one issued
U.S. patent and two Canadian trademark registrations. Depending on the jurisdiction, trademarks are
valid as long as they are in use and/or their registrations are properly maintained and they have
not become generic. Registrations of trademarks can generally be renewed indefinitely as long as
the trademarks are in use. Our patent expires in September 2013. We do not believe our business is
dependent on any one of our trademarks or on our patent.
Employees
As of January 2, 2010 we employed approximately 1,900 persons on a full-time basis.
Approximately 30% of our employees are represented by labor unions. As of January 2, 2010, we had
46 collective bargaining agreements, of which 8, representing 51 employees, are up for renewal in
2010. We consider our relationship with our employees generally to be good.
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Executive Officers
The following table contains the name, age and position with our Company of each of our
executive officers as of March 1, 2010.
| Name | Age | Position | ||
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George R. Judd
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48 | President and Chief Executive Officer | ||
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H. Douglas Goforth
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46 | Chief Financial Officer and Treasurer | ||
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Dean A. Adelman
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44 | Chief Administrative Officer |
George R. Judd
has served as our Chief Executive Officer since October 2008 and as our
President since May 2004. Prior to that time, he worked for Georgia-Pacific in a variety of
positions managing both inside and outside sales, national accounts and most recently as Vice
President of Sales and Eastern Operations since 2002. From 2000 until 2002, Mr. Judd worked as Vice
President of the North and Midwest regions of the Distribution Division. He served as Vice
President of the Southeast region from 1999 to 2000. Mr. Judd serves on the board of the Girl
Scouts of Greater Atlanta and leads its design and construction committee. He graduated from
Western Connecticut State University in 1984 with a Bachelor’s degree in Marketing.
H. Douglas Goforth
has served as our Senior Vice President, Chief Financial Officer and
Treasurer since February 2008. From November 2006 until February 2008, Mr. Goforth served as Vice
President and Corporate Controller for Armor Holdings, Inc. which was acquired by BAE Systems in
July 2007. Previously he served as Corporate Controller for BlueLinx from May 2004 until October
2006, where he played a key role in BlueLinx’ 2004 IPO. From 2002 until 2004 he served as
Controller for the Distribution Division of Georgia-Pacific. Mr. Goforth has over 20 years of
combined accounting, finance, treasury, acquisition and management experience with leading
distribution and manufacturing companies including Mitsubishi Wireless Communications, Inc., Yamaha
Motor Manufacturing, Inc. and Ingersoll-Rand. Mr. Goforth is a North Carolina State Board
Certified Public Accountant and earned a Bachelor of Science in Accounting from Mars Hill College
in North Carolina.
Dean A. Adelman
has served as our Chief Administrative Officer since May 2008 and as our Vice
President, Human Resources since October 2005. Prior to that time, he served as Vice President
Human Resources, Staff Development & Training for Corrections Corporation of America. Previously,
Mr. Adelman served as Vice President Human Resources for Arby’s Inc. (formerly RTM Restaurant
Group) from 1998 to 2002. From 1991 to 1998, Mr. Adelman served as senior counsel for
Georgia-Pacific. Mr. Adelman received his Masters of Business Administration from the Kellogg
School of Management at Northwestern University, a Juris Doctor degree from the University of
Georgia School of Law, and a Bachelor of Arts degree from the University of Georgia.
Environmental and Other Governmental Regulations
Environmental Regulation and Compliance
Our operations are subject to various federal, state, provincial and local laws, rules and
regulations. We are subject to environmental laws, rules and regulations that limit discharges into
the environment, establish standards for the handling, generation, emission, release, discharge,
treatment, storage and disposal of hazardous materials, substances and wastes, and require cleanup
of contaminated soil and groundwater. These laws, ordinances and regulations are complex, change
frequently and have tended to become more stringent over time. Many of them provide for substantial
fines and penalties, orders (including orders to cease operations) and criminal sanctions for
violations. They may also impose liability for property damage and personal injury stemming from
the presence of, or exposure to, hazardous substances. In addition, certain of our operations
require us to obtain, maintain compliance with, and periodically renew permits.
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Certain of these laws, including the Comprehensive Environmental Response, Compensation, and
Liability Act, may require the investigation and cleanup of an entity’s or its predecessor’s
current or former properties, even if the associated contamination was caused by the operations of
a third party. These laws also may require the investigation and cleanup of third-party sites at
which an entity or its predecessor sent hazardous wastes for disposal, notwithstanding that the
original disposal activity accorded with all applicable requirements. Liability under such laws may
be imposed jointly and severally, and regardless of fault.
Georgia-Pacific has agreed to indemnify us against any claim arising from environmental
conditions that existed prior to May 7, 2004. In addition, we carry environmental insurance. While
we do not expect to incur significant independent costs arising from environmental conditions,
there can be no assurance that all such costs will be covered by indemnification or insurance.
We are also subject to the requirements of the U.S. Department of Labor Occupational Safety
and Health Administration, or OSHA. In order to maintain compliance with applicable OSHA
requirements, we have established uniform safety and compliance procedures for our operations and
implemented measures to prevent workplace injuries.
The U.S. Department of Transportation, or DOT, regulates our operations in domestic interstate
commerce. We are subject to safety requirements governing interstate operations prescribed by the
DOT. Vehicle dimensions and driver hours of service also remain subject to both federal and state
regulation.
We incur and will continue to incur costs to comply with the requirements of environmental,
health and safety and transportation laws, ordinances and regulations. We anticipate that these
requirements could become more stringent in the future, and we cannot assure you that compliance
costs will not be material.
ITEM 1A.
RISK FACTORS.
In addition to the other information contained in this Form 10-K, the following risk factors
should be considered carefully in evaluating our business. Our business, financial condition, or
results of operations could be materially adversely affected by any of these risks. Additional
risks not presently known to us or that we currently deem immaterial may also impair our business
and operations.
Our industry is highly cyclical, and prolonged periods of weak demand or excess supply may reduce
our net sales and/or margins, which may reduce our net income or cause us to incur losses.
The building products distribution industry is subject to cyclical market pressures. Prices of
building products are determined by overall supply and demand in the market for building products.
Market prices of building products historically have been volatile and cyclical and we have limited
ability to control the timing and amount of pricing changes for building products. Demand for
building products is driven mainly by factors outside of our control, such as general economic and
political conditions, interest rates, availability of mortgage financing, the construction, repair
and remodeling and industrial markets, weather and population growth. The supply of building
products fluctuates based on available manufacturing capacity, and excess capacity in the industry
can result in significant declines in market prices for those products. To the extent that prices
and volumes experience a sustained or sharp decline, our net sales and margins would likely decline
as well. Our results in some periods have been affected by market volatility, including a
reduction in gross profits due to a decline in the resale value of our structural products
inventory. All of these factors make it difficult to forecast our operating results.
Further downward changes in demand for housing could negatively impact our business.
The residential homebuilding industry is sensitive to changes in economic conditions,
including interest rates, foreclosure rates, and availability of financing. Further adverse changes
in these conditions could further decrease demand for new homes. Additional declines in housing
demand could result in lower pricing and demand for many of our building products which could have
increased negative effects on our revenues and operating results.
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Further disruptions in the capital and credit markets may impact the availability of credit and
general business conditions.
If the financial institutions which extended credit commitments to us through our
revolving credit facility are adversely affected by the conditions of the capital and credit
markets, they may become unable to fund borrowings under those credit commitments, which could have
an adverse impact on our financial condition and our ability to borrow funds, if needed, for
working capital, capital expenditures, acquisitions and other corporate purposes.
Continued market disruptions could cause broader economic downturns, which may lead to
lower demand for our products and increased incidence of customers’ inability to pay their
accounts. Bankruptcies by our customers may cause us to incur bad debt expense at levels higher
than historically experienced. Certain of our suppliers may potentially be impacted as well,
causing disruption or delay of product availability. These events would adversely impact our
results of operations, cash flows and financial position.
Our cash flows and capital resources may be insufficient to make required payments on our
substantial indebtedness and future indebtedness.
We have a substantial amount of debt. As of January 2, 2010, advances outstanding under our
revolving credit facility were approximately $56.0 million, borrowing availability was
approximately $157.1 million and outstanding letters of credit on the facility were approximately
$6.0 million. We also have a mortgage loan in the amount of $285.7 million.
Our substantial debt could have important consequences to you. For example, it could:
| • | make it difficult for us to satisfy our debt obligations; |
| • | make us more vulnerable to general adverse economic and industry conditions; |
| • | limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions and other general corporate requirements; |
| • | expose us to interest rate fluctuations because the interest rate on the debt under our revolving credit facility is variable; |
| • | require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow 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. |
In addition, our ability to make scheduled payments or refinance our obligations depends on
our successful financial and operating performance, cash flows and capital resources, which in turn
depend upon prevailing economic conditions and certain financial, business and other factors, many
of which are beyond our control. These factors include, among others:
| • | economic and demand factors affecting the building products distribution industry; |
| • | pricing pressures; |
| • | increased operating costs; |
| • | competitive conditions; and |
| • | other operating difficulties. |
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If our cash flows and capital resources are insufficient to fund our debt service obligations,
we may be forced to reduce or delay capital expenditures, sell material assets or operations,
obtain additional capital or restructure our debt. Obtaining additional capital or restructuring
our debt could be accomplished in part through new or additional borrowings or placements of debt
or equity securities. There is no assurance that we could obtain additional capital or restructure
our debt on terms acceptable to us or at all. In the event that we are required to dispose of
material assets or operations to meet our debt service and other obligations, the value realized on
such assets or operations will depend on market conditions and the availability of buyers.
Accordingly, any such sale may not, among other things, be for a sufficient dollar amount. Our
obligations under the revolving credit facility are secured by a first priority security interest
in all of our operating company’s inventories, receivables and proceeds from those items. In
addition, our mortgage loan is secured by the majority of our real property. The foregoing
encumbrances may limit our ability to dispose of material assets or operations. We also may not be
able to restructure our indebtedness on favorable economic terms, if at all. We may incur
substantial additional indebtedness in the future, including under the revolving credit facility.
Our incurrence of additional indebtedness would intensify the risks described above. As of January
2, 2010, we have no indications that the financial institutions included in our revolving credit
facility would be unable to fulfill their commitments.
The instruments governing our indebtedness contain various covenants limiting the discretion of
our management in operating our business.
Our revolving credit facility and mortgage loan contain various restrictive covenants and
restrictions, including financial covenants customary for asset-based loans that limit our
management’s discretion in operating our business. In particular, these instruments limit our
ability to, among other things:
| • | incur additional debt; | ||
| • | grant liens on assets; | ||
| • | make investments, including capital expenditures; | ||
| • | sell or acquire assets outside the ordinary course of business; | ||
| • | engage in transactions with affiliates; and | ||
| • | make fundamental business changes. |
If we fail to maintain minimum excess availability of $40 million under the revolving credit
facility, the revolving credit facility requires us to (i) maintain certain financial ratios and
(ii) limit our capital expenditures. If we fail to comply with the restrictions in the revolving
credit facility, the mortgage loan documents or any other current or future financing agreements, a
default may allow the creditors under the relevant instruments to accelerate the related debt and
to exercise their remedies under these agreements, which will typically include the right to
declare the principal amount of that debt, together with accrued and unpaid interest and other
related amounts, immediately due and payable, to exercise any remedies the creditors may have to
foreclose on assets that are subject to liens securing that debt and to terminate any commitments
they had made to supply further funds.
We depend upon a single supplier, Georgia-Pacific for a significant percentage of our
products.
Georgia-Pacific is our largest supplier, accounting for approximately 16% and 21% of our
purchases during fiscal 2009 and fiscal 2008, respectively. On May 7, 2004, we entered into a
multi-year Master Purchase, Supply and Distribution Agreement (the “Supply Agreement”) with
Georgia-Pacific. The Supply Agreement had a five-year initial term expiring on May 7, 2009. On
June 6, 2008, Georgia-Pacific notified us of its intent to terminate this Supply Agreement,
effective May 7, 2010. On April 27, 2009, we entered into a Termination and Modification Agreement
(the “Modification Agreement”) related to our Supply Agreement with Georgia-Pacific. The
Modification Agreement effectively terminates the existing Supply Agreement with respect to the
distribution of Georgia-Pacific plywood, OSB and lumber by us. Exhibit B of the Supply Agreement, which covers
11
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decorative paneling products, is excluded from the termination and shall remain in force until May
7, 2010. We will continue to distribute a variety of Georgia-Pacific building products, including
Engineered Lumber, which is covered under a three-year purchase agreement dated February 12, 2009.
If Georgia-Pacific and BlueLinx are unable to agree on supply arrangements for products other than
engineered lumber or if Georgia-Pacific otherwise discontinues sales of product to us, we could
experience a product shortage unless and until we obtain a replacement supplier or suppliers. We
may not be able to obtain replacement products on favorable economic terms. An inability to
replace products on favorable economic terms could adversely impact our net sales and our costs,
which in turn could impact our gross profit, net income and cash flows.
Our industry is highly fragmented and competitive. If we are unable to compete effectively, our
net sales and operating results will be reduced.
The building products distribution industry is highly fragmented and competitive and the
barriers to entry for local competitors are relatively low. Some of our competitors are part of
larger companies and therefore have access to greater financial and other resources than us. In
addition, certain product manufacturers sell and distribute their products directly to customers.
Additional manufacturers of products distributed by us may elect to sell and distribute directly to
end-users in the future or enter into exclusive supply arrangements with other distributors.
Finally, we may not be able to maintain our costs at a level sufficiently low for us to compete
effectively. If we are unable to compete effectively, our net sales and net income will be reduced.
Integrating acquisitions may be time-consuming and create costs that could reduce our operating
results and cash flows.
We
may elect to selectively pursue acquisitions. Any integration process may be
complex and time consuming, may be disruptive to the business and may cause an interruption of, or
a distraction of management’s attention from, the business as a result of a number of obstacles,
including but not limited to:
| • | the loss of key customers of the acquired company; |
| • | the incurrence of unexpected expenses and working capital requirements; |
| • | a failure of our due diligence process to identify significant issues or contingencies; |
| • | difficulties assimilating the operations and personnel of the acquired company; |
| • | difficulties effectively integrating the acquired technologies with our current technologies; |
| • | our inability to retain key personnel of acquired entities; |
| • | failure to maintain the quality of customer service; |
| • | our inability to achieve the financial and strategic goals for the acquired and combined businesses; and |
| • | difficulty in maintaining internal controls, procedures and policies. |
Any of the foregoing obstacles, or a combination of them, could increase selling, general and
administrative expenses in absolute terms and/or as a percentage of net sales, which could in turn
negatively impact our operating results and cash flows.
We may not be able to consummate acquisitions in the future on terms acceptable to us, or at
all. In addition, future acquisitions are accompanied by the risk that the obligations and
liabilities of an acquired company may not be adequately reflected in the historical financial
statements of that company and the risk that those historical financial statements may be based on
assumptions which are incorrect or inconsistent with our assumptions or
approach to accounting policies. Any of these material obligations, liabilities or incorrect
or inconsistent assumptions could adversely impact our results of operations.
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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 2, 2010, approximately 30% of our employees were represented by various labor
unions. As of January 2, 2010, we had 46 collective bargaining agreements, of which 8, covering 51
total employees, are up for renewal in 2010. We may become subject to material cost increases, or
additional work rules imposed by agreements with labor unions. The foregoing could increase our
selling, general and administrative expenses in absolute terms and/or as a percentage of net sales.
In addition, work stoppages or other labor disturbances may occur in the future, which could
adversely impact our net sales and/or selling, general and administrative expenses. All of these
factors could negatively impact our operating results and cash flows.
Increases in the cost of employee benefits, such as pension and other postretirement benefits,
could impact our financial results and cash flow.
Unfavorable changes in the cost of our pension retirement benefits and current employees’
medical benefits could materially impact our financial results and cash flow. We sponsor a number
of defined benefit pension plans covering substantially all of our hourly employees. Our estimates
of the amount and timing of our future funding obligations for our defined benefit pension plans
are based upon various assumptions. These assumptions include, but are not limited to, the discount
rate, projected return on plan assets, compensation increase rates, mortality rates, retirement
patterns, and turnover rates. In addition, the amount and timing of our pension funding obligations
can be influenced by funding requirements that are established by the Employee Retirement Income
and Security Act of 1974 (ERISA), the Pension Protection Act, Congressional Acts, or other
governing bodies. During 2009, we met our required contribution to our defined benefit pension
plans. As of January 2, 2010, the net unfunded status of our benefit plan was $17.9 million. If
the status of our defined benefit plan continues to be unfunded it could require future cash
contributions.
We participate in various multi-employer pension plans in the U.S. The majority of these plans
are underfunded. If, in the future, we choose to withdraw from these plans, we would likely need to
record a withdrawal liability, which may be material to our financial results.
The payment of dividends has been suspended, and resumption is dependant on business conditions,
among other factors; the instruments governing our indebtedness contain various covenants that may
limit our ability to pay dividends.
In the past we have paid dividends on our common stock at the quarterly rate of $0.125 per
share. However, on December 5, 2007, we suspended the payment of dividends on our common stock for
an indefinite period of time. Resumption of the payment of dividends will depend on, among other
things, business conditions in the housing industry, our results of operations, cash requirements,
financial condition, contractual restrictions, provisions of applicable law and other factors that
our board of directors may deem relevant. Accordingly, we may not be able to resume the payment of
dividends at the same quarterly rate in the future, if at all.
Federal and state transportation regulations could impose substantial costs on us which would
reduce our net income.
We use our own fleet of over 600 trucks and over 1,100 trailers to service customers
throughout the United States. The U.S. Department of Transportation, or DOT, regulates our
operations in domestic interstate commerce. We are subject to safety requirements governing
interstate operations prescribed by the DOT. Vehicle dimensions and driver hours of service also
remain subject to both federal and state regulation. More restrictive limitations on vehicle
weight and size, trailer length and configuration, or driver hours of service would increase our
costs, which, if we are unable to pass these cost increases on to our customers increase our
selling, general and administrative expenses and reduce our operating results.
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Environmental laws impose risks and costs on us.
Our operations are subject to federal, state, provincial and local laws, rules and regulations
governing the protection of the environment, including, but not limited to, those regulating
discharges into the air and water, the use, handling and disposal of hazardous or toxic substances,
the management of wastes, the cleanup of contamination and the control of noise and odors. We have
made, and will continue to make, expenditures to comply with these requirements. While we believe,
based upon current information, that we are in substantial compliance with all applicable
environmental laws, rules and regulations, we could be subject to potentially significant fines or
penalties for any failure to comply. Moreover, under certain environmental laws, a current or
previous owner or operator of real property, and parties that generate or transport hazardous
substances that are disposed of at that real property, may be held liable for the cost to
investigate or clean up such real property and for related damages to natural resources. We may be
subject to liability, including liability for investigation and cleanup costs, if contamination is
discovered at one of our current or former warehouse facilities, or at a landfill or other location
where we have disposed of, or arranged for the disposal of, wastes. Georgia-Pacific has agreed to
indemnify us against any claim arising from environmental conditions that existed prior to May 7,
2004. We also carry environmental insurance. However, any remediation costs not related to
conditions existing prior to May 7, 2004 may not be covered by indemnification. In addition,
certain remediation costs may not be covered by insurance. In addition, we could be subject to
claims brought pursuant to applicable laws, rules or regulations for property damage or personal
injury resulting from the environmental impact of our operations. Increasingly stringent
environmental requirements, more aggressive enforcement actions, the discovery of unknown
conditions or the bringing of future claims may cause our expenditures for environmental matters to
increase, and we may incur material costs associated with these matters.
Affiliates of Cerberus control us and may have conflicts of interest with other shareholders in
the future.
Funds and accounts managed by Cerberus or its affiliated management companies, which are
referred to collectively as the controlling shareholder, collectively own approximately 55% of our
common stock. As a result, the controlling shareholder will continue to be able to control the
election of our directors, determine our corporate and management policies and determine, without
the consent of our other shareholders, the outcome of any corporate transaction or other matter
submitted to our shareholders for approval, including potential mergers or acquisitions, asset
sales and other significant corporate transactions.
Five of our ten directors are employees of or advisors to Cerberus. The controlling
shareholder also has sufficient voting power to amend our organizational documents. The interests
of the controlling shareholder may not coincide with the interests of other holders of our common
stock. Additionally, the controlling shareholder is in the business of making investments in
companies and may, from time to time, acquire and hold interests in businesses that compete
directly or indirectly with us. The controlling shareholder may also pursue, for its own account,
acquisition opportunities that may be complementary to our business, and as a result, those
acquisition opportunities may not be available to us. So long as the controlling shareholder
continues to own a significant amount of the outstanding shares of our common stock, it will
continue to be able to strongly influence or effectively control our decisions, including potential
mergers or acquisitions, asset sales and other significant corporate transactions. In addition,
because we are a controlled company within the meaning of the New York Stock Exchange rules, we are
exempt from the NYSE requirements that our board be composed of a majority of independent
directors, and that our compensation and nominating/corporate governance committees be composed
entirely of independent directors.
Even if Cerberus no longer controls us in the future, certain provisions of our charter documents
and agreements and Delaware law could discourage, delay or prevent a merger or acquisition at a
premium price.
Our Amended and Restated Certificate of Incorporation and Bylaws contain provisions that:
| • | permit us to issue, without any further vote or action by the shareholders, up to 30 million shares of preferred stock in one or more series and, with respect to each series, to fix the number of shares constituting the series and the designation of the series, the voting powers (if any) of the shares of such series, and the preferences and other special rights, if any, and any qualifications, limitations or restrictions, of the shares of the series; and |
| • | limit the shareholders’ ability to call special meetings. |
14
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These provisions may discourage, delay or prevent a merger or acquisition at a premium price.
In addition, we are subject to Section 203 of the General Corporation Law of the State of
Delaware, or the DGCL, which also imposes certain restrictions on mergers and other business
combinations between us and any holder of 15% or more of our common stock. Further, certain of our
incentive plans provide for vesting of stock options and/or payments to be made to our employees in
connection with a change of control, which could discourage, delay or prevent a merger or
acquisition at a premium price.
We may incur substantial costs relating to Georgia-Pacific’s product liability related claims.
Georgia-Pacific is a defendant in suits brought in various courts around the nation by
plaintiffs who allege that they have suffered personal injury as a result of exposure to products
containing asbestos. These suits allege a variety of lung and other diseases based on alleged
exposure to products previously manufactured by Georgia-Pacific. Although the terms of the asset
purchase agreement provide that Georgia-Pacific will indemnify us against all obligations and
liabilities arising out of, relating to or otherwise in any way in respect of any product liability
claims (including, without limitation, claims, obligations or liabilities relating to the presence
or alleged presence of asbestos-containing materials) with respect to products purchased, sold,
marketed, stored, delivered, distributed or transported by Georgia-Pacific and its affiliates,
including the Division prior to the acquisition, it could be possible that circumstances may arise
under which asbestos-related claims against Georgia-Pacific could cause us to incur substantial
costs.
For example, in the event that Georgia-Pacific is financially unable to respond to an asbestos
product liability claim, plaintiffs’ lawyers may, in order to obtain recovery, attempt to sue us,
in our capacity as owner of assets sold by Georgia-Pacific, despite the fact that the assets sold
to us did not contain asbestos. Asbestos litigation has, over the years, proved unpredictable, as
the aggressive and well-financed asbestos plaintiffs’ bar has been creative, and often successful,
in bringing claims based on novel legal theories and on expansive interpretations of existing legal
theories. These claims have included claims against companies that did not manufacture asbestos
products. As a result of these factors, a number of companies have been held liable for amounts
far in excess of their perceived exposure. Although we believe, based on our understanding of the
law as currently interpreted, that we should not be held liable for any of Georgia-Pacific’s
asbestos-related claims, and, to the contrary, that we would prevail on summary judgment on any
such claims, there is nevertheless a possibility that new theories could be developed, or that the
application of existing theories could be expanded, in a manner that would result in liability for
us. Any such liability could ultimately be borne by us if Georgia-Pacific is unable to fulfill its
indemnity obligation under the asset purchase agreement with us.
Anti-terrorism measures may harm our business by impeding our ability to deliver products on a
timely and cost-effective basis.
In the event of future terrorist attacks or threats on the United States, federal, state and
local authorities could implement various security measures, including checkpoints and travel
restrictions on large trucks. Our customers typically need quick delivery and rely on our on-time
delivery capabilities. If security measures disrupt or impede the timing of our deliveries, we may
fail to meet the needs of our customers, or may incur increased expenses to do so.
ITEM 1B.
UNRESOLVED STAFF COMMENTS.
None.
15
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ITEM 2.
PROPERTIES.
We operate warehouse facilities in over 65 markets nationwide. We own 60 warehouse facilities
and lease 11 additional warehouse facilities. The total square footage under roof at our owned and
leased warehouses is approximately 10 million square feet. Our Denver sales center and 55 of our
owned warehouse facilities secure our mortgage loan.
Our corporate headquarters located at 4300 Wildwood Parkway, Atlanta, Georgia 30339 is
approximately 250,000 square feet. During the fourth quarter of fiscal 2007, as part of a
restructuring effort, we vacated approximately 100,000 square feet of our corporate headquarters
space which we are actively seeking to sublease.
The following table summarizes our real estate facilities including their inside square
footage:
| Facility Type | Number | Owned Facilities (ft 2 ) | Leased Facilities (ft 2 ) | |||||||||
|
Office Space(1)
|
3 | 68,721 | 251,900 | |||||||||
|
Warehouses
|
71 | 10,115,551 | 636,101 | |||||||||
|
|
||||||||||||
|
TOTAL
|
74 | 10,184,272 | 888,001 | |||||||||
|
|
||||||||||||
| (1) | Includes corporate headquarters in Atlanta, the Denver Sales Center and a call center in Vancouver. We are actively marketing 100,000 square feet for sublease at our Atlanta corporate headquarters. |
We also store materials outdoors, such as lumber and rebar, at all of our warehouse locations,
which increases their distribution and storage capacity. We believe that substantially all of our
property and equipment is in good condition, subject to normal wear and tear. We believe that our
facilities have sufficient capacity to meet current and projected distribution needs.
ITEM 3.
LEGAL PROCEEDINGS.
We are, and from time to time may be, a party to routine legal proceedings incidental to the
operation of our business. The outcome of any pending or threatened proceedings is not expected to
have a material adverse effect on our financial condition, operating results or cash flows, based
on our current understanding of the relevant facts. We establish reserves for pending or
threatened proceedings when the costs associated with such proceedings become probable and can be
reasonably estimated.
ITEM
4.
RESERVED.
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES.
Our equity securities consist of one class of common stock. The common stock began trading on
December 16, 2004. The common stock is traded on the New York Stock Exchange under the symbol
“BXC”. The following table sets forth, for the periods indicated, the range of the high and low
sales prices for the common stock as quoted on the New York Stock Exchange:
| High | Low | |||||||
|
Fiscal Year Ended January 2, 2010
|
||||||||
|
First Quarter
|
$ | 3.30 | $ | 1.20 | ||||
|
Second Quarter
|
$ | 4.60 | $ | 2.25 | ||||
|
Third Quarter
|
$ | 5.93 | $ | 2.96 | ||||
|
Fourth Quarter
|
$ | 4.12 | $ | 2.60 | ||||
|
Fiscal Year Ended January 3, 2009
|
||||||||
|
First Quarter
|
$ | 5.97 | $ | 2.96 | ||||
|
Second Quarter
|
$ | 6.00 | $ | 3.57 | ||||
|
Third Quarter
|
$ | 7.54 | $ | 2.91 | ||||
|
Fourth Quarter
|
$ | 5.60 | $ | 1.02 | ||||
16
Table of Contents
As of March 1, 2010, there were 46 registered shareholders, and, as of that date we estimate
there were approximately 2,500 beneficial owners holding our common stock in nominee or “street”
name.
We paid a cash dividend of $0.125 per share for each of our fiscal quarters beginning in March
2005 and continuing through the fourth quarter of 2007. However, on December 5, 2007, we suspended
the payment of dividends on our common stock for an indefinite period of time. Resumption of the
payment of dividends will depend on, among other things, business conditions in the housing
industry, our results of operations, cash requirements, financial condition, contractual
restrictions, provisions of applicable law and other factors that our board of directors may deem
relevant. See “Item 8. Financial Statements and Supplementary Data, Note 10. Revolving Credit
Facility” for additional information regarding limitations on the ability of BlueLinx Corporation
to transfer funds to its parent, BlueLinx Holdings Inc., which could impact our ability to pay
dividends to our shareholders. Accordingly, we may not be able to resume the payment of dividends
at the same quarterly rate in the future, if at all.
Equity Compensation Plan Information
The following table provides information about the shares of our common stock that may be
issued upon the exercise of options and other awards under our existing equity compensation plans
as of January 2, 2010. Our shareholder-approved equity compensation plans are the 2004 Equity
Incentive Plan and the 2006 Long-Term Equity Incentive Plan. We do not have any non-shareholder
approved equity compensation plans.
| (a) | (b) | (c) | ||||||||||
| Number of Securities | Weighted-Average | Number of Securities Remaining | ||||||||||
| to be Issued Upon | Exercise Price of | Available for Future Issuance Under | ||||||||||
| Exercise of | Outstanding | Equity Compensation Plans | ||||||||||
| Outstanding Options, | Options, Warrants | (Excluding Securities Reflected in | ||||||||||
| Plan Category | Warrants and Rights | and Rights | Column (a)) | |||||||||
|
Equity compensation
plans approved by
security holders
|
928,315 | $ | 6.34 | 1,947,245 | ||||||||
|
Equity compensation
plans not approved
by security holders
|
— | n/a | — | |||||||||
|
Total
|
928,315 | $ | 6.34 | 1,947,245 | ||||||||
17
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Performance Graph
The chart below compares the quarterly percentage change in the cumulative total shareholder
return on our common stock with the cumulative total return on the Russell 2000 Index and a peer
group index for the period commencing January 1, 2005 and ending January 2, 2010, assuming an
investment of $100 and the reinvestment of any dividends.
Our peer group index was selected by us and is comprised of reporting companies with lines of
business and product offerings that are comparable to ours and which we believe most accurately
represent our business. Our peer group consists of the following companies: Beacon Roofing Supply
Inc., Builders Firstsource, Building Materials Holding Corporation, Huttig Building Products Inc.,
Interline Brands Inc., Universal Forest Products Inc. and Watsco Inc.
Cumulative Total Return
Years Ending
Years Ending
| Base Period | ||||||||||||||||||||||||
| Company Name / Index | 01/01/05 | 12/31/05 | 12/30/06 | 12/29/07 | 01/03/09 | 01/02/10 | ||||||||||||||||||
|
BlueLinx Holdings
Inc.
|
100 | 81.02 | 78.14 | 32.44 | 20.72 | 22.87 | ||||||||||||||||||
|
Russell 2000 Index
|
100 | 104.55 | 123.76 | 122.73 | 82.30 | 103.34 | ||||||||||||||||||
|
Peer Group
|
100 | 147.29 | 124.39 | 76.73 | 65.30 | 88.15 | ||||||||||||||||||
Issuer Purchases of Equity Securities
On December 22, 2008, our Board approved a stock repurchase program to acquire up to
$10,000,000 of our outstanding common stock through December 22, 2010. The share repurchases will
be made from time to time at our discretion in the open market or privately negotiated transactions
as permitted by securities laws and other legal requirements, and subject to market conditions and
other factors. The Board may modify, suspend, extend or terminate the program at any time.
| Approximate Dollar | ||||||||||||||||
| Total Number of | Value of Shares | |||||||||||||||
| Total | Average | Shares Purchased as | that May Yet Be | |||||||||||||
| Number of | Price Paid | Part of Publicly | Purchased Under the | |||||||||||||
| Period | Shares | Per Share | Announced Program | Program | ||||||||||||
|
October 4- November 3
|
— | — | 711,852 | $ | 8,136,649 | |||||||||||
|
November 4- December 3
|
8,532 | $ | 2.73 | 720,384 | $ | 8,113,357 | ||||||||||
|
December 4- January 2
|
51,664 | $ | 2.95 | 772,048 | $ | 7,960,948 | ||||||||||
|
Total
|
60,196 | $ | 2.92 | 772,048 | $ | 7,960,948 | ||||||||||
18
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ITEM 6.
SELECTED FINANCIAL DATA.
The following table sets forth certain historical financial data of our Company. The selected
financial data for the fiscal year ended January 2, 2010, the fiscal year ended January 3, 2009,
the fiscal year ended December 29, 2007, the fiscal year ended December 30, 2006, and the fiscal
year ended December 31, 2005 have been derived from our audited financial statements included
elsewhere in this Annual Report on Form 10-K or from prior financial statements. The following
information should be read in conjunction with our financial statements and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| January 2, | January 3, | December 29, | December 30, | December 31, | ||||||||||||||||
| 2010 | 2009 | 2007 | 2006 | 2005 | ||||||||||||||||
| (In thousands, except | ||||||||||||||||||||
| per share data) | ||||||||||||||||||||
|
Statement of Operations Data:
|
||||||||||||||||||||
|
Net sales
|
$ | 1,646,108 | $ | 2,779,699 | $ | 3,833,910 | $ | 4,899,383 | $ | 5,622,071 | ||||||||||
|
Cost of sales
|
1,452,947 | 2,464,766 | 3,441,964 | 4,419,576 | 5,109,632 | |||||||||||||||
|
|
||||||||||||||||||||
|
Gross profit
|
193,161 | 314,933 | 391,946 | 479,807 | 512,439 | |||||||||||||||
|
Operating expenses:
|
||||||||||||||||||||
|
Selling, general and administrative
|
210,214 | 303,403 | 372,754 | 381,554 | 378,008 | |||||||||||||||
|
Net gain from terminating the Georgia-Pacific supply agreement
|
(17,772 | ) | — | — | — | — | ||||||||||||||
|
Depreciation and amortization
|
16,984 | 20,519 | 20,924 | 20,724 | 18,770 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total operating expenses
|
209,426 | 323,922 | 393,678 | 402,278 | 396,778 | |||||||||||||||
|
|
||||||||||||||||||||
|
Operating (loss) income
|
(16,265 | ) | (8,989 | ) | (1,732 | ) | 77,529 | 115,661 | ||||||||||||
|
Non-operating expenses (income):
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Interest expense
|
32,456 | 38,547 | 43,660 | 46,164 | 42,311 | |||||||||||||||
|
Charges associated with the ineffective interest rate swap, net
|
6,252 | — | — | — | — | |||||||||||||||
|
Write-off of debt issue costs
|
1,407 | — | — | 4,864 | — | |||||||||||||||
|
Other expense (income), net
|
519 | 601 | (370 | ) | 320 | 186 | ||||||||||||||
|
|
||||||||||||||||||||
|
(Loss) income before provision for (benefit from) income taxes
|
(56,899 | ) | (48,137 | ) | (45,022 | ) | 26,181 | 73,164 | ||||||||||||
|
Provision for (benefit from) income taxes
|
4,564 | (16,434 | ) | (17,077 | ) | 10,349 | 28,561 | |||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Net (loss) income
|
$ | (61,463 | ) | $ | (31,703 | ) | $ | (27,945 | ) | $ | 15,832 | $ | 44,603 | |||||||
|
|
||||||||||||||||||||
|
Basic weighted average number of common shares outstanding
|
31,017 | 31,083 | 30,848 | 30,618 | 30,195 | |||||||||||||||
|
Basic net (loss) income per share applicable to common stock
|
$ | (1.98 | ) | $ | (1.02 | ) | $ | (0.91 | ) | $ | 0.52 | $ | 1.48 | |||||||
|
Diluted weighted average number of common shares outstanding
|
31,017 | 31,083 | 30,848 | 30,779 | 30,494 | |||||||||||||||
|
Diluted net (loss) income per share applicable to common stock
|
$ | (1.98 | ) | $ | (1.02 | ) | $ | (0.91 | ) | $ | 0.51 | $ | 1.46 | |||||||
|
|
||||||||||||||||||||
|
Dividends declared per share of common stock
|
$ | — | $ | — | $ | 0.50 | $ | 0.50 | $ | 0.50 | ||||||||||
19
Table of Contents
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| January 2, | January 3, | December 29, | December 30, | December 31, | ||||||||||||||||
| 2010 | 2009 | 2007 | 2006 | 2005 | ||||||||||||||||
| (In thousands, except | ||||||||||||||||||||
| per share data) | ||||||||||||||||||||
|
Other Financial Data:
|
||||||||||||||||||||
|
Capital expenditures
|
$ | 1,815 | $ | 4,919 | $ | 13,141 | $ | 9,601 | $ | 12,744 | ||||||||||
|
EBITDA(1)
|
200 | 10,929 | 19,562 | 97,933 | 134,245 | |||||||||||||||
|
Net cash (used in) provided by operating activities
|
(19,853 | ) | 190,390 | 79,842 | 63,204 | 124,937 | ||||||||||||||
|
|
||||||||||||||||||||
|
Net cash provided by (used in) investing activities
|
12,636 | 985 | (9,070 | ) | (18,170 | ) | (28,499 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Net cash used in financing activities
|
$ | (113,679 | ) | $ | (56,781 | ) | $ | (82,055 | ) | $ | (42,312 | ) | $ | (87,690 | ) | |||||
|
Balance Sheet Data (at end of period):
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$ | 29,457 | $ | 150,353 | $ | 15,759 | $ | 27,042 | $ | 24,320 | ||||||||||
|
|
||||||||||||||||||||
|
Working capital
|
247,722 | 320,527 | 448,731 | 520,237 | 529,983 | |||||||||||||||
|
Total assets
|
546,846 | 729,178 | 883,436 | 1,004,362 | 1,157,640 | |||||||||||||||
|
Total debt(2)
|
341,669 | 444,870 | 478,535 | 532,462 | 540,850 | |||||||||||||||
|
|
||||||||||||||||||||
|
Shareholders’ equity
|
$ | 50,820 | $ | 102,852 | $ | 154,823 | $ | 189,399 | $ | 183,852 | ||||||||||
| (1) | EBITDA is an amount equal to net (loss) income plus interest expense, charges associated with ineffective interest rate swap, write-off of debt issue costs, charges associated with mortgage refinancing, income taxes, and depreciation and amortization. EBITDA is presented herein because we believe it is a useful supplement to cash flow from operations in understanding cash flows generated from operations that are available for debt service (interest and principal payments) and further investment in acquisitions. However, EBITDA is not a presentation made in accordance with U.S. generally accepted accounting principles, (“GAAP”), and is not intended to present a superior measure of the financial condition from those determined under GAAP. EBITDA, as used herein, is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculations. | |
| (2) | Total debt represents long-term debt, including current maturities. |
A reconciliation of net cash (used in) provided by operating activities, the most directly
comparable GAAP measure, to EBITDA for each of the respective periods indicated is as follows:
| Year Ended, | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| January 2, | January 3, | December 29, | December 30, | December 31, | ||||||||||||||||
| 2010 | 2009 | 2007 | 2006 | 2005 | ||||||||||||||||
|
Net cash (used in) provided by
operating activities
|
$ | (19,853 | ) | $ | 190,390 | $ | 79,842 | $ | 63,204 | $ | 124,937 | |||||||||
|
Amortization of debt issue costs
|
(2,459 | ) | (2,479 | ) | (2,431 | ) | (2,628 | ) | (3,629 | ) | ||||||||||
|
Net gain from terminating the
Georgia-Pacific supply agreement
|
17,772 | — | — | — | — | |||||||||||||||
|
Payments from terminating the
Georgia-Pacific supply agreement
|
(14,118 | ) | — | — | — | — | ||||||||||||||
|
Vacant property charges, net
|
(1,222 | ) | (4,441 | ) | (11,037 | ) | — | — | ||||||||||||
|
Deferred income tax (provision)
benefit
|
(24,220 | ) | 2,935 | 9,526 | 3,700 | 368 | ||||||||||||||
|
Prepayment fees associated with
sale of property
|
(616 | ) | (1,868 | ) | — | — | — | |||||||||||||
|
Gain on sale of properties
|
10,397 | 1,936 | — | — | — | |||||||||||||||
|
Gain from insurance settlement
|
— | — | 1,698 | — | — | |||||||||||||||
|
Share-based compensation
|
(2,922 | ) | (2,614 | ) | (3,500 | ) | (3,137 | ) | (2,170 | ) | ||||||||||
|
Excess tax benefits from
share-based arrangements
|
— | 81 | 20 | 891 | 71 | |||||||||||||||
|
Changes in assets and liabilities
|
421 | (195,124 | ) | (81,139 | ) | (20,610 | ) | (56,204 | ) | |||||||||||
|
Interest expense
|
32,456 | 38,547 | 43,660 | 46,164 | 42,311 | |||||||||||||||
|
Provision for (benefit from)
income taxes
|
4,564 | (16,434 | ) | (17,077 | ) | 10,349 | 28,561 | |||||||||||||
|
|
||||||||||||||||||||
|
EBITDA
|
$ | 200 | $ | 10,929 | $ | 19,562 | $ | 97,933 | $ | 134,245 | ||||||||||
|
|
||||||||||||||||||||
20
Table of Contents
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with our consolidated financial statements
and related notes and other financial information appearing elsewhere in this
Form 10-K
. In
addition to historical information, the following discussion and other parts of this Form 10-K
contain forward-looking information that involves risks and uncertainties. Our actual results could
differ materially from those anticipated by this forward-looking information due to the factors
discussed under “Risk Factors,” “Cautionary Statement Concerning Forward-Looking Statements” and
elsewhere in this
Form 10-K
.
Overview
Company Background
BlueLinx is a leading distributor of building products in the United States. As of January 2,
2010, we distributed more than 10,000 products to approximately 11,500 customers through our
network of more than 70 warehouses and third-party operated warehouses which serve all major
metropolitan markets in the United States. We distribute products in two principal categories:
structural products and specialty products. Structural products include plywood, OSB, rebar and
remesh, lumber and other wood products primarily used for structural support, walls and flooring in
construction projects. Structural products represented approximately 44% and 50% of our fiscal
2009 and fiscal 2008 gross sales, respectively. Specialty products include roofing, insulation,
moulding, engineered wood, vinyl products (used primarily in siding) and metal products (excluding
rebar and remesh). Specialty products accounted for approximately 56% and 50% of our fiscal 2009
and fiscal 2008 gross sales, respectively.
A number of factors cause our results of operations to fluctuate from period to period. Many
of these factors are seasonal or cyclical in nature. Conditions in the United States housing market
are at historically low levels and continued to deteriorate throughout fiscal 2009. Our operating
results have declined during the past three years as they are closely tied to U.S. housing starts.
Additionally, the mortgage markets have experienced substantial disruption due to a rising number
of defaults in the “subprime” market. This disruption and the related defaults have increased the
inventory of homes for sale and also have caused lenders to tighten mortgage qualification criteria
which further reduces demand for new homes. Forecasters continue to have a bearish outlook for the
housing market, and we expect the downturn in new housing activity will continue to negatively
impact our operating results for the foreseeable future. We continue to prudently manage our
inventories, receivables and spending in this environment. However, along with many forecasters, we
believe U.S. housing demand will improve in the long term based on population demographics and a
variety of other factors.
Selected Factors that Affect our Operating Results
Our operating results are affected by housing starts, mobile home production, industrial
production, repair and remodeling spending and non-residential construction. We believe a
substantial percentage of our sales are directly related to new home construction.
Our operating results are also impacted by changes in product prices. Structural products
prices can vary significantly based on short-term and long-term changes in supply and demand. The
prices of specialty products also can vary from time to time, although they generally are
significantly less variable than structural products.
21
Table of Contents
The following table sets forth changes in net sales by product category, sales variances due
to changes in unit volume and dollar and percentage changes in unit volume and price, in each case
for fiscal 2009, fiscal 2008 and fiscal 2007:
Sales Revenue Variances by Product
| Fiscal 2009 | Fiscal 2008 | Fiscal 2007 | ||||||||||
| (Dollars in millions) | ||||||||||||
|
Sales by Category
|
||||||||||||
|
Structural Products
|
$ | 738 | $ | 1,422 | $ | 2,098 | ||||||
|
Specialty Products
|
948 | 1,412 | 1,802 | |||||||||
|
Other(1)
|
(40 | ) | (54 | ) | (66 | ) | ||||||
|
|
||||||||||||
|
Total Sales
|
$ | 1,646 | $ | 2,780 | $ | 3,834 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Sales Variances
|
||||||||||||
|
Unit Volume $ Change
|
$ | (1,036 | ) | $ | (1,161 | ) | $ | (896 | ) | |||
|
Price/Other(1)
|
(98 | ) | 107 | (169 | ) | |||||||
|
|
||||||||||||
|
Total $ Change
|
$ | (1,134 | ) | $ | (1,054 | ) | $ | (1,065 | ) | |||
|
|
||||||||||||
|
|
||||||||||||
|
Unit Volume % Change
|
(36.6 | )% | (29.7 | )% | (18.0 | )% | ||||||
|
Price/Other(1)
|
(4.2 | )% | 2.2 | % | (3.7 | )% | ||||||
|
|
||||||||||||
|
Total % Change
|
(40.8 | )% | (27.5 | )% | (21.7 | )% | ||||||
|
|
||||||||||||
| (1) | “Other” includes unallocated allowances and discounts. |
The following table sets forth changes in gross margin dollars and percentages by product
category, and percentage changes in unit volume growth by product, in each case for fiscal 2009,
fiscal 2008 and fiscal 2007:
| Fiscal 2009 | Fiscal 2008 | Fiscal 2007 | ||||||||||
| (Dollars in millions) | ||||||||||||
|
Gross Margin $ by Category
|
||||||||||||
|
Structural Products
|
$ | 73 | $ | 134 | $ | 173 | ||||||
|
Specialty Products
|
132 | 200 | 238 | |||||||||
|
Other(1)
|
(12 | ) | (19 | ) | (19 | ) | ||||||
|
|
||||||||||||
|
Total Gross Margin $
|
$ | 193 | $ | 315 | $ | 392 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Gross Margin % by Category
|
||||||||||||
|
Structural Products
|
9.9 | % | 9.4 | % | 8.2 | % | ||||||
|
Specialty Products
|
13.9 | % | 14.2 | % | 13.2 | % | ||||||
|
Total Gross Margin %
|
11.7 | % | 11.3 | % | 10.2 | % | ||||||
|
|
||||||||||||
|
Unit Volume Change by Product
|
||||||||||||
|
Structural Products
|
(40.3 | )% | (34.6 | )% | (19.2 | )% | ||||||
|
Specialty Products
|
(32.8 | )% | (24.0 | )% | (16.4 | )% | ||||||
|
Total Unit Volume Change %
|
(36.6 | )% | (29.7 | )% | (18.0 | )% | ||||||
| (1) | “Other” includes unallocated allowances and discounts. |
The following table sets forth changes in net sales and gross margin by channel and percentage
changes in gross margin by channel, in each case for fiscal 2009, fiscal 2008 and fiscal 2007:
| Fiscal 2009 | Fiscal 2008 | Fiscal 2007 | ||||||||||
| (Dollars in millions) | ||||||||||||
|
Sales by Channel
|
||||||||||||
|
Warehouse/Reload
|
$ | 1,251 | $ | 2,044 | $ | 2,763 | ||||||
|
Direct
|
435 | 790 | 1,137 | |||||||||
|
Other(1)
|
(40 | ) | (54 | ) | (66 | ) | ||||||
|
|
||||||||||||
|
Total
|
$ | 1,646 | $ | 2,780 | $ | 3,834 | ||||||
|
|
||||||||||||
|
Gross Margin by Channel
|
||||||||||||
|
Warehouse/Reload
|
$ | 177 | $ | 284 | $ | 344 | ||||||
|
Direct
|
28 | 50 | 67 | |||||||||
|
Other(1)
|
(12 | ) | (19 | ) | (19 | ) | ||||||
|
|
||||||||||||
|
Total
|
$ | 193 | $ | 315 | $ | 392 | ||||||
|
|
||||||||||||
|
Gross Margin % by Channel
|
||||||||||||
|
Warehouse/Reload
|
14.1 | % | 13.9 | % | 12.5 | % | ||||||
|
Direct
|
6.4 | % | 6.3 | % | 5.9 | % | ||||||
|
Total
|
11.7 | % | 11.3 | % | 10.2 | % | ||||||
22
Table of Contents
Fiscal Year
Our fiscal year is a 52- or 53-week period ending on the Saturday closest to the end of the
calendar year. Fiscal year 2009 contained 52 weeks. Fiscal years 2008 and 2007 contained 53 weeks
and 52 weeks, respectively.
Results of Operations
Fiscal 2009 Compared to Fiscal 2008
The following table sets forth our results of operations for fiscal 2009 and fiscal 2008.
| % of | % of | |||||||||||||||
| Net | Net | |||||||||||||||
| Fiscal 2009 | sales | Fiscal 2008 | sales | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
|
Net sales
|
$ | 1,646,108 | 100.0 | % | $ | 2,779,699 | 100.0 | % | ||||||||
|
Gross profit
|
193,161 | 11.7 | % | 314,933 | 11.3 | % | ||||||||||
|
Selling, general and administrative
|
210,214 | 12.8 | % | 303,403 | 10.9 | % | ||||||||||
|
Net gain from terminating the
Georgia-Pacific Supply Agreement
|
(17,772 | ) | (1.1 | )% | — | 0.0 | % | |||||||||
|
Depreciation and amortization
|
16,984 | 1.0 | % | 20,519 | 0.7 | % | ||||||||||
|
|
||||||||||||||||
|
Operating loss
|
(16,265 | ) | (1.0 | )% | (8,989 | ) | (0.3 | )% | ||||||||
|
Interest expense, net
|
32,456 | 2.0 | % | 38,547 | 1.4 | % | ||||||||||
|
|
||||||||||||||||
|
Changes associated with the ineffective interest rate swap, net
|
6,252 | 0.4 | % | — | 0.0 | % | ||||||||||
|
Write-off of debt issue costs
|
1,407 | 0.1 | % | — | 0.0 | % | ||||||||||
|
Other expense, net
|
519 | 0.0 | % | 601 | 0.0 | % | ||||||||||
|
|
||||||||||||||||
|
Loss before benefit from income taxes
|
(56,899 | ) | (3.5 | )% | (48,137 | ) | (1.7 | )% | ||||||||
|
Provision for (benefit from) income taxes
|
4,564 | 0.3 | % | (16,434 | ) | (0.6 | )% | |||||||||
|
|
||||||||||||||||
|
Net loss
|
$ | (61,463 | ) | (3.7 | )% | $ | (31,703 | ) | (1.1 | )% | ||||||
|
|
||||||||||||||||
Net sales.
For the fiscal year ended January 2, 2010, net sales decreased by 40.8%, or $1.1
billion, to $1.6 billion. Sales during the fiscal year were negatively impacted by a 38.8% decline
in housing starts. New home construction has a significant impact on our sales. Specialty sales,
primarily consisting of roofing, specialty panels, insulation, moulding, engineered wood products,
vinyl siding, composite decking and metal products (excluding rebar and remesh) decreased by $0.4
billion or 32.9% compared to fiscal 2008, due to a 32.8% decrease in unit volume and a 0.1%
decrease in specialty product prices. Structural sales, including plywood, OSB, lumber and metal
rebar, decreased by $0.7 billion, or 48.1% from a year ago, as a result of a 40.3% decrease in unit
volume and 7.8% decrease in structural product prices.
Gross profit.
Gross profit for fiscal 2009 was $193.2 million, or 11.7% of sales, compared to
$314.9 million, or 11.3% of sales, in fiscal 2008. The decrease in gross profit dollars compared
to fiscal 2008 was driven primarily by a decrease in specialty and structural product volumes of
32.9% and 40.3%, respectively, due to the ongoing slowdown in the housing market. Gross margin
percentage increased by 40 basis points to 11.7% primarily due to an increase in specialty sales as
a proportion of our total sales, a shift in channel mix, and continued price discipline.
Selling, general and administrative.
Selling, general and administrative expenses for fiscal
2009 were $210.2 million, or 12.8% of net sales, compared to $303.4 million, or 10.9% of net sales,
during fiscal 2008. The decline in selling, general, and administrative expenses included a
$51.8 million decrease in payroll and payroll related cost due to a decrease in headcount; a
$9.6 million decrease in fuel expense due to a decline in sales volume and fuel prices; a
$10.4 million gain associated with the sale of certain real properties; and a $21.2 million
decrease in other operating expenses as a result of the sales volume reduction that resulted in a
corresponding reduction in variable costs.
23
Table of Contents
Net gain from terminating the Georgia-Pacific Supply Agreement.
During fiscal 2009, G-P agreed
to pay us $18.8 million in exchange for our agreement to enter into the Modification Agreement one
year earlier than the originally agreed upon May 7, 2010 termination date of the Supply Agreement.
As a result of the termination, we recognized a net gain of $17.8 million during fiscal 2009 as a
reduction to operating expense. The gain was net of a $1.0 million write-off of an intangible
asset associated with the Supply Agreement.
Depreciation and amortization.
Depreciation and amortization expense was $17.0 million for
fiscal 2009, compared to $20.5 million for fiscal 2008. The $3.5 million decrease in depreciation
and amortization is primarily related to a decrease in capital expenditures as a result of
decreased demand coupled with a portion of our property and equipment becoming fully depreciated
during fiscal 2009.
Operating loss.
Operating loss for fiscal 2009 was $16.3 million, or 1.0% of sales, compared
to an operating loss of $9.0 million, or 0.3% of sales, for fiscal 2008, reflecting the
$121.8 million decline in gross profit that was offset by a $114.5 million decrease in operating
expenses.
Interest expense, net.
Interest expense for fiscal 2009 was $32.5 million compared to $38.5
million for fiscal 2008. The $6.1 million decline is due to the $103.2 million decrease in debt.
In fiscal 2009, interest expense related to our revolving credit facility and mortgage was
$11.0 million and $19.0 million (includes a $0.6 million prepayment penalty), respectively. In
fiscal 2008, interest expense related to our revolving credit facility and mortgage was
$14.8 million and $21.2 million (includes a $1.9 million prepayment penalty), respectively. In
addition, interest expense included $2.5 million of debt issue cost amortization for fiscal 2009
and for fiscal 2008, respectively.
Changes associated with the ineffective interest rate swap, net.
Changes associated with the
ineffective interest rate swap recognized for fiscal 2009 were $6.3 million and were comprised of a
$9.0 million charge related to the reduction of our borrowings outstanding under the revolving
credit facility below the interest rate swap’s notional amount; $2.9 million of amortization of
accumulated other comprehensive loss offset by income of $5.7 million related to fair value changes
since the date of the reduction at which time we were no longer in a position to use hedge
accounting.
Write-off of debt issue costs
. During fiscal 2009, we permanently reduced our revolving
loan threshold limit from $800.0 million to $500.0 million effective March 30, 2009. As a result,
we recorded expense of $1.4 million for the write-off of deferred financing costs that had been
capitalized associated with the portion of the revolver that was reduced in the first quarter of
fiscal 2009.
Provision for (benefit from) income taxes.
Our effective tax rate was (8.0)% and 34.1% for
fiscal 2009 and fiscal 2008, respectively. The change in our effective tax rate for fiscal 2009 is
largely due to a $29.3 million valuation allowance charge and other income tax expense items
partially offset by a $20.4 million tax benefit related to current year losses that will be carried
back to offset fiscal 2004 and 2005 income and a $5.6 million allocation of tax expense to other
comprehensive income resulting in a current period tax benefit.
Net loss.
Net loss for fiscal 2009 was $61.5 million, compared to $31.7 million for fiscal
2008 as a result of the previous factors.
On a per-share basis, basic and diluted loss applicable to common shareholders for fiscal 2009
were each $1.98. For fiscal 2008, basic and diluted loss per share were each $1.02.
24
Table of Contents
Fiscal 2008 Compared to Fiscal 2007
The following table sets forth our results of operations for fiscal 2008 and fiscal 2007.
| % of | % of | |||||||||||||||
| Net | Net | |||||||||||||||
| Fiscal 2008 | sales | Fiscal 2007 | sales | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
|
Net sales
|
$ | 2,779,699 | 100.0 | % | $ | 3,833,910 | 100.0 | % | ||||||||
|
Gross profit
|
314,933 | 11.3 | % | 391,946 | 10.2 | % | ||||||||||
|
Selling, general and administrative
|
303,403 | 10.9 | % | 372,754 | 9.7 | % | ||||||||||
|
Depreciation and amortization
|
20,519 | 0.7 | % | 20,924 | 0.5 | % | ||||||||||
|
|
||||||||||||||||
|
Operating loss
|
(8,989 | ) | (0.3 | )% | (1,732 | ) | 0.0 | % | ||||||||
|
Interest expense
|
38,547 | 1.4 | % | 43,660 | 1.1 | % | ||||||||||
|
Other expense (income), net
|
601 | 0.0 | % | (370 | ) | 0.0 | % | |||||||||
|
|
||||||||||||||||
|
Loss before benefit from income taxes
|
(48,137 | ) | (1.7 | )% | (45,022 | ) | (1.2 | )% | ||||||||
|
Benefit from income taxes
|
(16,434 | ) | (0.6 | )% | (17,077 | ) | (0.4 | )% | ||||||||
|
|
||||||||||||||||
|
Net loss
|
$ | (31,703 | ) | (1.1 | )% | $ | (27,945 | ) | (0.7 | )% | ||||||
|
|
||||||||||||||||
Net sales.
For the fiscal year ended January 3, 2009, net sales decreased by 27.5%, or $1.1
billion, to $2.8 billion. Sales during the fiscal year were negatively impacted by a 33.3% decline
in housing starts. New home construction has a significant impact on our sales. Specialty sales,
primarily consisting of roofing, specialty panels, insulation, moulding, engineered wood products,
vinyl siding, composite decking and metal products (excluding rebar and remesh) decreased by $0.4
billion or 21.6% compared to fiscal 2007, primarily due to a 24.0% decrease in unit volume offset
by an increase in price of 2.4%. Structural sales, including plywood, OSB, lumber and metal rebar,
decreased by $0.7 billion, or 32.2% from a year ago, primarily as a result of a decrease in unit
volume of 34.6% offset by an increase in price of 2.4%.
Gross profit.
Gross profit for fiscal 2008 was $314.9 million, or 11.3% of sales, compared to
$391.9 million, or 10.2% of sales, in fiscal 2007. The decrease in gross profit dollars compared
to fiscal 2007 was primarily driven by a decrease in specialty and structural product volumes of
24.0% and 34.6%, respectively, due to the continued decline in the housing market and a lower of
cost or market reserve charge of $3.4 million during fiscal 2008 related to a decline in prices for
our structural metal inventory. The increase in gross margin percentage is primarily attributable
to an increase in certain structural metal prices earlier in the year and a shift in product mix
from structural to higher margin specialty products. Additionally, we estimate that the stock
keeping unit (“SKU”) rationalization program, which was a program focused on the sale of slower
moving inventory items, negatively impacted gross margin by approximately 30 basis points in fiscal
2007. Structural gross margin increased to 9.4% in fiscal 2008 from 8.2% in fiscal 2007.
Specialty gross margin increased to 14.2% in fiscal 2008 from 13.2% a year ago.
Selling, general and administrative.
Selling, general and administrative expenses for fiscal
2008 were $303.4 million, or 10.9% of net sales, compared to $372.8 million, or 9.7% of net sales,
during fiscal 2007. The decline in selling, general, and administrative expenses included a
$37.2 million net decrease in payroll and payroll related cost due to a decrease in headcount; a
$8.7 million net decrease in rent expense due to facility consolidation charges of $11.5 million in
fiscal 2007 offset by facility consolidation charges of $4.4 million in fiscal 2008; a $5.4 million
decrease in general maintenance expenses due to a decline in sales volume; and a $18.0 million net
decrease in other operating expenses as a result of our cost reduction initiatives.
Depreciation and amortization.
Depreciation and amortization expense totaled $20.5 million
for fiscal 2008, compared with $20.9 million for fiscal 2007. The decrease in depreciation and
amortization is primarily due to a decrease in capital expenditures for mobile equipment consisting
of trucks, trailers, forklifts and automobiles.
Operating loss.
Operating loss for fiscal 2008 was $9.0 million versus an operating loss of
$1.7 million for fiscal 2007 due to the above factors.
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Interest expense
. Interest expense for fiscal 2008 totaled $38.5 million, down $5.1 million
from fiscal 2007, reflecting lower debt levels and lower interest rates. Interest expense related
to our revolving credit facility, mortgage, and debt issue cost amortization was $14.8 million,
$21.2 million (includes a $1.9 million prepayment penalty) and $2.5 million, respectively, for
fiscal 2008 Interest expense totaled $43.7 million for fiscal 2007, which includes interest
expense related to our revolving credit facility, mortgage, and related debt issue cost
amortization of $22.3 million, $19.0 million, and $2.4 million, respectively.
Benefit from income taxes.
Our effective tax rate was 34.1% and 37.9% for fiscal 2008 and
fiscal 2007, respectively. The decrease in the effective tax rate was primarily due to a valuation
allowance of $1.2 million recorded in fiscal 2008 primarily related to state income deferred tax
assets, higher non-deductible amounts and provisions for U.S. taxes on unremitted earnings in
foreign jurisdictions.
Net loss.
Net loss for fiscal 2008 was $31.7 million, compared to net loss of $27.9 million
for fiscal 2007.
On a per-share basis, basic and diluted loss applicable to common shareholders for fiscal 2008
were each $1.02. Basic and diluted loss per share for fiscal 2007 were each $0.91.
Seasonality
We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal
factors. These seasonal factors are common in the building products distribution industry. The
first and fourth quarters are typically our slowest quarters due to the impact of poor weather on
the construction market. Our second and third quarters are typically our strongest quarters,
reflecting a substantial increase in construction due to more favorable weather conditions. Our
working capital and accounts receivable and payable generally peak in the third quarter, while
inventory generally peaks in the second quarter in anticipation of the summer building season.
Although, we generally expect these trends to continue for the foreseeable future, we have reduced
our inventory as part of our effort to manage to the current weakened demand environment in the
housing market. Additionally, our accounts receivable balance has declined due to the weakened
demand environment for the products we distribute.
Liquidity and Capital Resources
We depend on cash flow from operations and funds available under our revolving credit facility
to finance working capital needs, capital expenditures, dividends and acquisitions. We believe that
the amounts available from this and other sources will be sufficient to fund our routine operations
and capital requirements for the foreseeable future.
The credit markets have recently experienced adverse conditions, which may adversely affect
our lenders ability to fulfill their commitment under our revolving credit facility. Based on
information available to us as of the filing date of this Form 10-K, we have no indications that
the financial institutions included in our revolving credit facility would be unable to fulfill
their commitments.
We may elect to selectively pursue acquisitions. Accordingly, depending on the nature of the
acquisition, we may use cash or stock, or a combination of both, as acquisition currency. Our cash
requirements may significantly increase and incremental cash expenditures will be required in
connection with the integration of the acquired company’s business and to pay fees and expenses in
connection with any acquisitions. To the extent that significant amounts of cash are expended in
connection with acquisitions, our liquidity position may be adversely impacted. In addition, there
can be no assurance that we will be successful in completing acquisitions in the future. For a
discussion of the risks associated with our acquisition strategy, see the risk factor “Integrating
acquisitions may be time-consuming and create costs that could reduce our net income and cash
flows
”
set forth under Item 1A — Risk Factors.
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The following tables indicate our working capital and cash flows for the periods indicated.
| January 2, | January 3, | |||||||
| 2010 | 2009 | |||||||
| (Dollars in thousands) | ||||||||
|
Working capital
|
$ | 247,722 | $ | 320,527 | ||||
| Year Ended | Year Ended | Year Ended | ||||||||||
| January 2, | January 3, | December 29, | ||||||||||
| 2010 | 2009 | 2007 | ||||||||||
|
Cash flows (used in) provided by
operating activities
|
$ | (19,853 | ) | $ | 190,390 | $ | 79,842 | |||||
|
Cash flows provided by (used in)
investing activities
|
12,636 | 985 | (9,070 | ) | ||||||||
|
Cash flows used in financing activities
|
(113,679 | ) | (56,781 | ) | (82,055 | ) | ||||||
Working Capital
Working capital decreased by $72.8 million to $247.7 million at January 2, 2010 from $320.5
million at January 3, 2009. The reduction in working capital reflects an $11.3 million and $16.3
million reduction in inventory and receivables, respectively, and a usage of cash of $103.2 million
to reduce debt. We have reduced inventory levels to meet existing demand, and the reduction in our
accounts receivable balance is due to an overall decline in the housing market related to sales
volume. The current asset reductions were offset by a reduction in the current portion of
long-term debt of $60.0 million due to current year payments.
Operating Activities
During fiscal 2009, cash flows used in operating activities totaled $19.9 million. The primary
driver of cash flow used in operations was a net loss, as adjusted for non-cash charges of $33.6
million and a decrease in accounts payable of $13.7 million due to a reduction in purchase volume
associated with decreased demand resulting from market conditions. These cash outflows were offset
by a decrease in inventories of $16.3 million to meet existing demand and a decrease in accounts
receivable of $11.3 million due to an overall decline in the housing market related to sales
volume.
During fiscal 2008, cash flows provided by operating activities totaled $190.4 million. The
primary driver of cash flow from operations was a decrease in inventories of $146.4 million to meet
existing demand and a decrease in accounts receivable of $132.5 million due to an overall decline
in the housing market related to sales volume. These cash inflows were offset by a decrease in
accounts payable of $86.4 million due to a reduction in purchase volume associated with decreased
demand.
During fiscal 2007, cash flows provided by operating activities totaled $79.8 million. The
primary driver of cash flow from operations was a decrease in inventories of $74.8 million to meet
existing demand and a decrease in receivables of $44.4 million due to an overall decline in the
housing market related to sales volume. These cash inflows were offset by a decrease in accounts
payable of $31.1 million due to a decline in purchase volume associated with a decrease in demand.
Investing Activities
During fiscal 2009 and fiscal 2008, cash flows provided by investing activities totaled $12.6
million and $1.0 million, respectively.
During fiscal 2009 and fiscal 2008, our expenditures for property and equipment were $1.8
million and $4.9 million, respectively. These expenditures were used primarily to purchase computer
equipment, leasehold improvements, and underground storage tanks. We estimate that capital
expenditures for fiscal 2010 will be
approximately $8 million. Of this amount, approximately $2 million is related to capital
leases for new trucks. Our 2010 capital expenditures are anticipated to be paid from our operating
cash.
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Proceeds from the disposition of property and equipment were $14.5 million and $5.9 million
during fiscal 2009 and fiscal 2008, respectively. During fiscal 2009, the proceeds of $14.5
million included $12.4 million related to the sale of certain real properties classified as held
for sale assets included in “Other current assets” on our Consolidated Balance Sheets. For fiscal
2008, the proceeds of $5.9 million included $4.7 million of proceeds related to the sale of certain
real properties classified as held for sale assets included in “Other current assets” on our
Consolidated Balance Sheets.
During fiscal 2007, cash flows used in investing activities totaled $9.1 million. The primary
driver of cash flows used for investing activities in fiscal 2007 was expenditures for property and
equipment of $13.1 million. The expenditures for property and equipment were primarily for mobile
equipment. Proceeds from the disposition of property totaled $4.1 million in fiscal 2007. The
proceeds of $4.1 million included $2.6 million from an insurance settlement related to property
damage from Hurricane Katrina.
Financing Activities
Net cash used in financing activities was $113.7 million during fiscal 2009 and $56.8 million
during fiscal 2008. The net cash used in financing activities in fiscal 2009 primarily reflected
payments on our revolving credit facility of $100.0 million, principal payments on our mortgage of
$3.2 million, and an increase in restricted cash related to our mortgage of $10.3 million.
During fiscal 2008, the net cash used in financing activities primarily reflected payments on
our revolving credit facility of $27.5 million, principal payments on our mortgage of $6.1
million, prepayment fees associated with principal payments on our mortgage of $1.9 million, and a
decrease in bank overdrafts of $12.4 million
Net cash used in financing activities was $82.1 million during fiscal 2007. Net cash used in
financing activities primarily reflected a net decrease in our revolving credit facility of $53.9
million, a decrease in bank overdrafts of $13.1 million, and common dividend payments of $15.6
million.
As of January 2, 2010, we had outstanding borrowings of $56.0 million and excess availability
of $157.1 million under the terms of our revolving credit facility. We classify the lowest
projected balance of the credit facility over the next twelve months of $56.0 million as long-term
debt. As of January 2, 2010 and January 3, 2009, we had outstanding letters of credit totaling
$6.0 million and $12.9 million, respectively, for the purposes of securing collateral requirements
under our interest rate swap, insurance programs and for guaranteeing payment of international
purchases based on the fulfillment of certain conditions. Our revolving credit facility contains
customary negative covenants and restrictions for asset based loans. The only covenant we deem
material is a requirement that we maintain a fixed charge ratio of 1.1 to 1.0 in the event our
excess availability falls below $40.0 million. The fixed charge ratio is calculated as EBITDA over
the sum of cash payments for income taxes, interest expense, cash dividends, principal payments on
debt, and capital expenditures. EBITDA is defined in our credit agreement as BlueLinx Corporation’s
net income before interest and tax expense, depreciation and amortization expense, and other
non-cash charges. The fixed charge ratio requirement only applies to us when excess availability
under our revolving credit facility is less than $40.0 million for three consecutive business days.
We had $157.1 million and $192.4 million of availability as January 2, 2010 and January 3, 2009,
respectively. Our lowest level of availability in the last three years is $157.1 million as of
January 2, 2010. We do not anticipate our excess availability will drop below $40.0 million in the
foreseeable future.
Under our revolving credit facility agreement, we are required to maintain a springing
lock-box arrangement where customer remittances go directly to a lock-box maintained by our lenders
and then are forwarded to our general bank accounts. Our outstanding borrowings are not reduced by
these payments unless our excess availability is less than $40.0 million for three consecutive
business days or in the event of default. Due to this objective criteria established in our
agreement, our revolving credit facility does not contain a subjective acceleration clause which
would allow our lenders to accelerate the scheduled maturities of our debt or to cancel our
agreement.
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Effective March 30, 2009, we elected to permanently reduce our revolving loan threshold
limit from $800 million to $500 million. This reduction does not impact our available borrowing
capacity under our revolving credit facility as our current eligible accounts receivable and
inventory (our “borrowing base”) do not support up to $800.0 million in borrowings. We do not
anticipate our borrowing base will support borrowings in excess of $500.0 million at any point
during the remaining life of the credit facility. This cost-saving initiative will allow us to
reduce our interest expense by $0.8 million annually by lowering our unused line fees. As a result
of this action, we recorded expense of $1.4 million for the write-off of deferred financing costs
that had been capitalized.
On June 12, 2006, we entered into an interest rate swap agreement with Goldman Sachs
Capital Markets, to hedge against interest rate risks related to our variable rate revolving credit
facility. The interest rate swap has a notional amount of $150.0 million and the terms call for us
to receive interest monthly at a variable rate equal to the 30-day LIBOR and to pay interest
monthly at a fixed rate of 5.4%. This interest rate swap was designated as a cash flow hedge.
Through January 9, 2009, the hedge was highly effective in offsetting changes in expected cash
flows. Fluctuations in the fair value of the ineffective portion, if any, of the cash flow hedge
were reflected in earnings.
During fiscal 2009, we reduced our borrowings under the revolving credit facility by
$100.0 million, which reduced outstanding debt below the interest rate swap’s notional amount of
$150.0 million, at which point the hedge became ineffective in offsetting future changes in
expected cash flows during the remaining term of the interest rate swap. We used cash on hand to
pay down this portion of our revolving credit debt during the first, second, and third quarters of
fiscal 2009. As a result, changes in the fair value of the instrument were recorded through
earnings from the point in time that the revolving credit facility balance was reduced below the
interest rate swap’s notional amount of $150.0 million, which was during the first quarter of
fiscal 2009. Charges associated with the ineffective interest rate swap recognized in the
Consolidated Statement of Operations for fiscal 2009 were approximately $6.3 million and are
comprised of a non-cash $9.0 million pro-rata reduction to accumulated other comprehensive loss
with an offsetting charge to earnings related to reducing our borrowings outstanding by $100.0
million, amortization of the remaining accumulated other comprehensive loss over the life of the
ineffective swap of $2.9 million, and income of $5.7 million related to fair value changes since
the date of the reduction. The remaining $2.7 million of accumulated other comprehensive loss will
be amortized over the remaining 16 month term of the interest rate swap and recorded as interest
expense, of which $2.1 million will be amortized over the next 12 months. Any further reductions in
borrowings under our revolving credit facility will result in a pro-rata reduction in accumulated
other comprehensive loss at the payment date with a corresponding charge recorded to interest
expense.
The following table presents a reconciliation of the unrealized losses related to our
interest rate swap measured at fair value in accumulated other comprehensive loss as of January 2,
2010 (in thousands):
|
Balance at January 3, 2009
|
$ | 13,229 | ||
|
Unrealized losses in accumulated other comprehensive loss
|
1,429 | |||
|
Charges associated with ineffective interest rate swap recorded to interest expense
|
(11,983 | ) | ||
|
|
||||
|
Balance at January 2, 2010
|
$ | 2,675 | ||
The fair value of our swap liability at January 2, 2010 and January 3, 2009 was $8.9 million
and $13.2 million, respectively.
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Contractual Commitments.
The following table represents our contractual commitments associated
with our debt and other obligations disclosed above as of January 2, 2010.
| 2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | Total | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Revolving credit facility
|
$ | — | $ | 50,000 | $ | — | $ | — | $ | — | $ | — | $ | 50,000 | ||||||||||||||
|
Term loan facility(1)
|
— | 6,000 | — | — | — | — | 6,000 | |||||||||||||||||||||
|
Mortgage indebtedness
|
— | 1,190 | 3,054 | 3,309 | 3,529 | 274,587 | 285,669 | |||||||||||||||||||||
|
Interest payments on our
revolving credit
facility (2)
|
9,668 | 2,778 | — | — | — | — | 12,446 | |||||||||||||||||||||
|
Interest payments on our
mortgage (3)
|
18,392 | 18,380 | 18,276 | 18,021 | 17,802 | 27,707 | 118,578 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Subtotal
|
28,060 | 78,348 | 21,330 | 21,330 | 21,331 | 302,294 | 472,693 | |||||||||||||||||||||
|
Operating leases(4)
|
6,382 | 5,324 | 4,709 | 4,532 | 4,511 | 18,158 | 43,616 | |||||||||||||||||||||
|
Letters of credit(5)
|
6,039 | — | — | — | — | — | 6,039 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total
|
$ | 40,481 | $ | 83,672 | $ | 26,039 | $ | 25,862 | $ | 25,842 | $ | 320,452 | $ | 522,348 | ||||||||||||||
|
|
||||||||||||||||||||||||||||
| (1) | Term loan facility was used to refinance and consolidate certain loans made by the revolving loan lenders to us. | |
| (2) | Interest on the revolving credit facility is variable, based on 14-day, one-month, two-month, three-month or six-month LIBOR. The interest rate on the revolving credit facility was 2.8% at January 2, 2010. On June 12, 2006, we entered into an interest swap agreement with Goldman Sachs Capital Markets to hedge against interest rate risks on $150 million of our revolving credit facility. The terms call for us to pay interest monthly at 5.4%. Interest payments are based on these rates. The final maturity date on our revolving credit facility is May 7, 2011. | |
| (3) | Interest payments on the mortgage are based on a fixed rate of 6.35%. | |
| (4) | We lease various facilities and vehicles under non-cancelable operating leases. | |
| (5) | Letters of credit not included above under the credit facilities. |
Purchase orders entered into in the ordinary course of business are excluded from the above
table. Amounts for which we are liable under purchase orders are reflected on our Consolidated
Balance Sheets (to the extent entered into prior to the end of the applicable period) as accounts
payable and accrued liabilities.
Critical Accounting Policies
The preparation of our consolidated financial statements and related disclosures in conformity
U.S. generally accepted accounting principles requires our management to make judgments and
estimates that affect the amounts reported in our consolidated financial statements and
accompanying notes. Our management believes that we consistently apply these judgments and
estimates and the consolidated financial statements and accompanying notes fairly represent all
periods presented. However, any differences between these judgments and estimates and actual
results could have a material impact on our Consolidated Statements of Operations and financial
position. Critical accounting estimates, as defined by the Securities and Exchange Commission
(“SEC”), are those that are most important to the portrayal of our financial condition and results
of operations and require our management’s most difficult and subjective judgments and estimates of
matters that are inherently uncertain. Our critical accounting estimates include those regarding
(1) revenue recognition; (2) allowance for doubtful accounts and related reserves; (3) inventory
valuation; (4) fair value measurements; (5) impairment of long-lived assets; and (6) income taxes.
Our significant accounting policies are more fully described in the Notes to the Consolidated
Financial Statements.
Revenue Recognition
We recognize revenue when the following criteria are met: persuasive evidence of an agreement
exists, delivery has occurred or services have been rendered, our price to the buyer is fixed and
determinable and collectibility is reasonably assured. Delivery is not considered to have occurred
until the customer takes title and assumes the risks and rewards of ownership. The timing of
revenue recognition is largely dependent on shipping terms. Revenue is recorded at the time of
shipment for terms designated as FOB (free on board) shipping point. For sales transactions
designated FOB destination, revenue is recorded when the product is delivered to the customer’s
delivery site.
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All revenues are recorded at gross. The key indicators used to determine when and how
revenue is recorded are as follows:
| • | We are the primary obligor responsible for fulfillment and all other aspects of the customer relationship. | ||
| • | Title passes to BlueLinx, and we carry all risk of loss related to warehouse and reload inventory and inventory shipped directly from vendors to our customers. | ||
| • | We are responsible for all product returns. | ||
| • | We control the selling price for all channels. | ||
| • | We select the supplier. | ||
| • | We bear all credit risk. |
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 remains with us. When the inventory is sold by the customer, we
recognize revenue on a gross basis.
All revenues recognized are net of trade allowances, 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.
Allowance for Doubtful Accounts and Related Reserves
We evaluate the collectibility of accounts receivable based on numerous factors, including
past transaction history with customers and their creditworthiness. We maintain an allowance for
doubtful accounts for each aging category on our aged trial balance based on our historical loss
experience. This estimate is periodically adjusted when we become aware of specific customers’
inability to meet their financial obligations (e.g., bankruptcy filing or other evidence of
liquidity problems). As we determine that specific balances will ultimately be uncollectible, we
remove them from our aged trial balance. Additionally, we maintain reserves for cash discounts that
we expect customers to earn as well as expected returns.
Inventory Valuation
Inventories are carried at the lower of cost or market. The cost of all inventories is determined
by the moving average cost method. We include all charges directly or indirectly incurred in
bringing inventory to its existing condition and location. We evaluate our inventory value at the
end of each quarter to ensure that first quality, actively moving inventory, when viewed by
category, is carried at the lower of cost or market.
Additionally, we maintain a reserve for the estimated value impairment associated with
damaged, excess and obsolete inventory. The damaged, excess and obsolete reserve generally includes
discontinued items or inventory that has turn days in excess of 270 days, excluding new items
during their product launch.
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Fair Value Measurements
We are exposed to market risks from changes in interest rates, which may affect our
operating results and financial position. When deemed appropriate, we minimize our risks from
interest rate fluctuations through the use of an interest rate swap. This derivative financial
instrument is used to manage risk and is not used for trading or speculative purposes. The swap is
valued using a valuation model that has inputs other than quoted market prices that are both
observable and unobservable.
We endeavor to utilize the best available information in measuring the fair value of the
interest rate swap. The interest rate swap is classified in its entirety based on the lowest level
of input that is significant to the fair value measurement. To determine fair value of the interest
rate swap we used the discounted estimated future cash flows methodology. Assumptions critical to
our fair value in the period were: (i) the present value factors used in determining fair value
(ii) projected LIBOR, and (iii) the risk of counterparty non-performance risk. These and other
assumptions are impacted by economic conditions and expectations of management. We have determined
that the fair value of our interest rate swap is a level 3 measurement in the fair value hierarchy
as defined in Note 13 of this Annual Report on Form 10-K. The level 3 measurement is the risk of
counterparty non-performance on the interest rate swap liability that is not secured by cash
collateral. The affect of counterparty non-performance is immaterial due to the fact that 75% of
the swap was covered by cash collateral.
Impairment of Long-Lived Assets
Long-lived assets, including property and equipment and intangible assets with definite useful
lives, are reviewed for possible impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable.
We evaluate our long-lived assets each quarter for indicators of potential impairment.
Indicators of impairment include current period losses combined with a history of losses,
management’s decision to exit a facility, reductions in the fair market value of real properties
and changes in other circumstances that indicate the carrying amount of an asset may not be
recoverable.
Our evaluation of long-lived assets is performed at the lowest level of identifiable cash
flows, which is generally the individual distribution facility. In the event of indicators of
impairment, the assets of the distribution facility are evaluated by comparing the facility’s
undiscounted cash flows over the estimated useful life of the asset, which ranges between
5-20 years, to its carrying value. If the carrying value is greater than the undiscounted cash
flows, an impairment loss is recognized for the difference between the carrying value of the asset
and the estimated fair market value. Impairment losses are recorded as a component of “Selling,
general and administrative” expense in the Consolidated Statements of Operations.
Our estimate of undiscounted cash flows is subject to assumptions that affect estimated
operating income at a distribution facility level. These assumptions are related to future sales,
margin growth rates, economic conditions, market competition and inflation. Our estimates of fair
market value are generally based on market appraisals and our experience with related market
transactions. We use a historical average of income, with no growth factor assumption, to estimate
undiscounted cash flows. These assumptions used to determine impairment are considered to be level
3 measurements in the fair value hierarchy as defined in Note 13 of this Annual Report on Form
10-K.
Currently, we are experiencing a reduction in operating income at the distribution
facility level due to the ongoing downturn in the housing market. To the extent that reductions in
volume and operating income have resulted in impairment indicators, in most cases our carrying
values continue to be less than our projected undiscounted cash flows. We had approximately $36
million, out of the $137.2 million in net book value as of January 2, 2010, in fixed assets for
which the undiscounted cash flows were less than the carrying values of the assets. The fair
value of these assets, primarily real estate, exceeded the carrying value by approximately $30
million. As such, we have not identified significant known trends impacting the fair value of
long-lived assets to an extent that would indicate impairment.
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Income Taxes
As of January 2, 2010, our deferred income tax assets were $27.2 million with a full valuation
allowance. Deferred income tax assets and income tax benefits are recognized for temporary
differences between amounts recorded for financial reporting and income tax purposes. In
evaluating our ability to recover our deferred income tax assets, we considered the four sources of
taxable income that should be considered when determining whether a valuation allowance is required
including (from least to most subjective):
| • | taxable income in prior carryback years, if carryback is permitted under the tax law; |
| • | future reversals of existing taxable temporary differences (i.e., offset gross deferred tax assets against gross deferred tax liabilities); |
| • | tax planning strategies; and |
| • | future taxable income exclusive of reversing temporary differences and carryforwards. |
In estimating future taxable income, we develop assumptions including the amount of future
state and federal pretax operating and non-operating income, the reversal of temporary differences
and the implementation of feasible prudent tax planning strategies. These assumptions require
significant judgment about the forecasts of future taxable income. Substantial changes in these
assumptions could result in changes in our judgments around our ability to realize future tax
benefit.
Recently Issued Accounting Pronouncements
In July 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting
Standards Codification (the “Codification”) as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the preparation of financial
statements in conformity with U.S. GAAP. The Codification does not change current U.S. GAAP, but is
intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative
literature related to a particular topic in one place. This Form 10-K for the year ending January
2, 2010 and all subsequent public filings will reference the Codification as the sole source of
authoritative literature.
In May 2009, the FASB issued guidance on subsequent events that establishes authoritative
accounting and disclosure guidance for recognized and non-recognized subsequent events that occur
after the balance sheet date but before financial statements are issued. The guidance also requires
disclosure of the date through which an entity has evaluated subsequent events and the basis for
that date. This guidance was effective for us beginning with our Quarterly Report on Form 10-Q for
the second quarter and first six months of fiscal 2009, and will be applied prospectively.
In April 2009, the FASB issued guidance which will require that the fair value
disclosures required for all financial instruments be included in interim financial statements.
This guidance also requires entities to disclose the method and significant assumptions used to
estimate the fair value of financial instruments on an interim and annual basis and to highlight
any changes from prior periods. This guidance was effective for us during the third quarter of
fiscal 2009. The adoption of this guidance did not have a material impact on our Consolidated
Financial Statements.
In December 2008, the FASB issued new guidance on retirement benefits. This guidance
requires enhanced disclosures about the plan assets of our defined benefit pension and other
postretirement plans. The enhanced disclosures are intended to provide users of financial
statements with a greater understanding of: (1) how investment allocation decisions are made,
including the factors that are pertinent to an understanding of investment policies and strategies;
(2) the major categories of plan assets; (3) the inputs and valuation techniques used to measure
the fair value of plan assets; (4) the effect of fair value measurements using significant
unobservable inputs (Level 3) on changes in plan assets for the period; and (5) significant
concentrations of risk within plan assets. This new guidance is applicable to employers that are
subject to the disclosure requirements and is effective for fiscal years ending after December 15,
2009. For additional information, refer to Note 8 in our Notes to the Consolidated Financial
Statements.
In June 2008, the FASB issued new guidance on earnings per share. Under this new
guidance, unvested share-based payment awards that contain non-forfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and are to be included
in the computation of earnings per share under the two-class method. This guidance was effective
for us on January 4, 2009 and requires all presented prior-period earnings
per share data to be adjusted retrospectively. For additional information, refer to Note 2 of the
Notes to Consolidated Financial Statements.
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In April 2008, the FASB issued new guidance on intangible assets other than goodwill.
This guidance amends the factors to be considered in developing renewal or extension assumptions
used to determine the useful life of intangible assets. Its intent is to improve the consistency
between the useful life of an intangible asset and the period of expected cash flows used to
measure its fair value. We adopted this guidance on January 4, 2009. The adoption of this guidance
could have a material impact on our Consolidated Financial Statements in the future if acquisitions
are made.
In March 2008, the FASB issued new guidance on derivatives and hedging. This guidance
seeks to improve financial reporting for derivative instruments and hedging activities by requiring
enhanced disclosures regarding the impact on financial position, financial performance, and cash
flows. To achieve this increased transparency, this guidance requires (1) the disclosure of the
fair value of derivative instruments and gains and losses in a tabular format; (2) the disclosure
of derivative features that are credit risk-related; and (3) cross-referencing within the
footnotes. This guidance was effective for us, on a prospective basis, on January 4, 2009. For
additional information, refer to Note 12 of the Notes to Consolidated Financial Statements.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
General.
We are exposed to risks such as changes in interest rates, commodity prices and
foreign currency exchange rates. We employ a variety of practices to manage these risks including
the use of derivative instruments. Derivative instruments are used only for risk management
purposes and not for speculation or trading, and are not used to address risks related to foreign
currency exchange rates. We record derivative instruments as assets or liabilities on the balance
sheet at fair value. The following discussion provides additional information regarding our market
risk exposure.
Interest Rates.
Our revolving credit facility accrues interest based on a floating benchmark
rate (the prime rate or LIBOR rate), plus an applicable margin. A change in interest rates under
the revolving credit facility would have an impact on our results of operations. A change of 100
basis points in the market rate of interest would have an immaterial impact based on borrowings
outstanding at January 2, 2010. Additionally, to the extent changes in interest rates impact the
housing market, we would be impacted by such changes.
On June 9, 2006, certain special purpose entities that are wholly-owned subsidiaries of ours
entered into a $295 million mortgage loan with the German American Capital Corporation. The
mortgage has a term of ten years and a fixed interest rate of 6.35%. By entering into this
mortgage, we insulated ourselves from changes in market interest rates on a portion of our
indebtedness. This mortgage replaced our previously existing $165 million floating rate mortgage,
which had a 7.4% interest rate when it was terminated.
Foreign Exchange Rates
. Less than 1.0% of our net sales are denominated in currencies other
than the U.S. dollar, and we do not believe our total exposure to currency fluctuations to be
significant.
Commodity Prices.
We believe that general inflation did not significantly affect our operating
results or markets in fiscal 2009, fiscal 2008 or fiscal 2007. As discussed above, our results of
operations were both favorably and unfavorably impacted by increases and decreases in the pricing
of certain commodity-based products. Commodity price fluctuations have from time to time created
cyclicality in our financial performance and may do so in the future.
34
Table of Contents
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Financial Statements and Supplemental Data
| Page | ||||
| 36 | ||||
|
|
||||
| 37 | ||||
|
|
||||
| 39 | ||||
|
|
||||
| 40 | ||||
|
|
||||
| 41 | ||||
|
|
||||
| 42 | ||||
|
|
||||
| 43 | ||||
35
Table of Contents
BLUELINX HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Shareholders of BlueLinx Holdings Inc.:
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our
internal control over financial reporting is designed to provide reasonable assurance to our
management and board of directors regarding the preparation and fair presentation of published
financial statements.
Our management, including our chief executive officer and our chief financial officer, does
not expect that our internal controls over financial reporting will prevent all errors and all
fraud. Internal controls, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the objectives of the internal controls are met. Given the inherent
limitations of internal controls, internal controls over financial reporting may not prevent or
detect all misstatements or fraud. Therefore, no evaluation of internal control can provide
absolute assurance that all control issues or instances of fraud will be prevented or detected.
Management assessed the effectiveness of our internal control over financial reporting as of
January 2, 2010. In making this assessment, management used the criteria established by the
Committee of Sponsoring Organizations of the Treadway Commission set forth in
Internal Control —
Integrated Framework.
Based on our assessment, our management concluded that, as of January 2,
2010, our internal control over financial reporting was effective.
Ernst
& Young LLP, an independent registered public accounting firm that audited
our consolidated financial statements as of and for the year ended
January 2, 2010 included in this annual report on Form 10-K,
has issued an attestation report on our internal control over
financial reporting as of January 2, 2010, dated March 2,2010.
March 2, 2010
36
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Board of Directors and Shareholders of BlueLinx Holdings Inc. and subsidiaries
We have audited BlueLinx Holdings Inc. and subsidiaries’ internal control over financial
reporting as of January 2, 2010, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO
criteria). BlueLinx Holdings Inc. and subsidiaries’ management is responsible for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying Management’s Report on
Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, BlueLinx Holdings Inc. and subsidiaries maintained, in all material respects,
effective internal control over financial reporting as of January 2, 2010, based on the COSO
criteria
.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the 2009 Consolidated Financial Statements of BlueLinx Holdings
Inc. and subsidiaries and our report dated March 2, 2010 expressed an unqualified opinion thereon.
|
|
/s/ Ernst & Young LLP |
March 2, 2010
37
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON THE CONSOLIDATED FINANCIAL STATEMENTS
The Board of Directors and Shareholders of BlueLinx Holdings Inc. and subsidiaries
We have audited the accompanying consolidated balance sheets of BlueLinx Holdings Inc. and
subsidiaries as of January 2, 2010 and January 3, 2009, and the related consolidated statements of
operations and comprehensive loss, shareholders’ equity, and cash flows for the years ended January
2, 2010, January 3, 2009, and December 29, 2007. These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of BlueLinx Holdings Inc. and subsidiaries at January
2, 2010 and January 3, 2009, and the consolidated results of their operations and their cash flows
for the years ended January 2, 2010, January 3, 2009, and December 29, 2007, in conformity with U.S.
generally accepted accounting principles.
We
also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), BlueLinx Holdings Inc. and subsidiaries’ internal control over
financial reporting as of January 2, 2010, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 2, 2010 expressed an unqualified opinion thereon.
|
|
/s/ Ernst & Young LLP |
March 2, 2010
38
Table of Contents
BLUELINX HOLDINGS INC. AND SUBSIDIARIES
| January 2, | January 3, | |||||||
| 2010 | 2009 | |||||||
| (In thousands, except share data) | ||||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 29,457 | $ | 150,353 | ||||
|
Receivables, less allowances of $8,387 in
fiscal 2009 and $10,114 in fiscal 2008
|
119,347 | 130,653 | ||||||
|
Inventories, net
|
173,185 | 189,482 | ||||||
|
Deferred income tax assets, net
|
— | 11,868 | ||||||
|
Other current assets
|
44,970 | 34,122 | ||||||
|
|
||||||||
|
Total current assets
|
366,959 | 516,478 | ||||||
|
|
||||||||
|
Property and equipment:
|
||||||||
|
Land and improvements
|
52,621 | 53,426 | ||||||
|
Buildings
|
96,145 | 96,159 | ||||||
|
Machinery and equipment
|
69,767 | 70,491 | ||||||
|
Construction in progress
|
791 | 2,035 | ||||||
|
|
||||||||
|
Property and equipment, at cost
|
219,324 | 222,111 | ||||||
|
Accumulated depreciation
|
(82,141 | ) | (69,336 | ) | ||||
|
|
||||||||
|
Property and equipment, net
|
137,183 | 152,775 | ||||||
|
Non-current deferred income tax assets, net
|
— | 17,468 | ||||||
|
Other non-current assets
|
42,704 | 42,457 | ||||||
|
|
||||||||
|
Total assets
|
$ | 546,846 | $ | 729,178 | ||||
|
|
||||||||
|
|
||||||||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$ | 64,618 | $ | 78,367 | ||||
|
Bank overdrafts
|
27,232 | 24,715 | ||||||
|
Accrued compensation
|
4,879 | 11,552 | ||||||
|
Current maturities of long-term debt
|
— | 60,000 | ||||||
|
Other current liabilities
|
22,508 | 21,317 | ||||||
|
|
||||||||
|
Total current liabilities
|
119,237 | 195,951 | ||||||
|
|
||||||||
|
Non-current liabilities:
|
||||||||
|
Long-term debt
|
341,669 | 384,870 | ||||||
|
Other non-current liabilities
|
35,120 | 45,505 | ||||||
|
|
||||||||
|
Total liabilities
|
496,026 | 626,326 | ||||||
|
|
||||||||
|
|
||||||||
|
SHAREHOLDERS’ EQUITY
|
||||||||
|
Common Stock, $0.01 par value,
100,000,000 shares authorized; 32,179,253
and 32,362,330 shares issued and
outstanding at January 2, 2010 and
January 3, 2009, respectively
|
322 | 323 | ||||||
|
Additional paid-in-capital
|
145,035 | 144,148 | ||||||
|
Accumulated other comprehensive loss
|
(8,375 | ) | (16,920 | ) | ||||
|
Accumulated deficit
|
(86,162 | ) | (24,699 | ) | ||||
|
|
||||||||
|
Total shareholders’ equity
|
50,820 | 102,852 | ||||||
|
|
||||||||
|
Total liabilities and shareholders’ equity
|
$ | 546,846 | $ | 729,178 | ||||
|
|
||||||||
39
Table of Contents
BLUELINX HOLDINGS INC. AND SUBSIDIARIES
COMPREHENSIVE LOSS
| Fiscal Year | Fiscal Year | Fiscal Year | ||||||||||
| Ended | Ended | Ended | ||||||||||
| January 2, | January 3, | December 29, | ||||||||||
| 2010 | 2009 | 2007 | ||||||||||
| (In thousands, except per share data) | ||||||||||||
|
Net sales
|
$ | 1,646,108 | $ | 2,779,699 | $ | 3,833,910 | ||||||
|
Cost of sales
|
1,452,947 | 2,464,766 | 3,441,964 | |||||||||
|
|
||||||||||||
|
Gross profit
|
193,161 | 314,933 | 391,946 | |||||||||
|
|
||||||||||||
|
Operating expenses:
|
||||||||||||
|
Selling, general, and administrative
|
210,214 | 303,403 | 372,754 | |||||||||
|
Net gain from terminating the
Georgia-Pacific supply agreement
|
(17,772 | ) | — | — | ||||||||
|
Depreciation and amortization
|
16,984 | 20,519 | 20,924 | |||||||||
|
|
||||||||||||
|
Total operating expenses
|
209,426 | 323,922 | 393,678 | |||||||||
|
|
||||||||||||
|
Operating loss
|
(16,265 | ) | (8,989 | ) | (1,732 | ) | ||||||
|
Non-operating expenses (income):
|
||||||||||||
|
Interest expense
|
32,456 | 38,547 | 43,660 | |||||||||
|
Changes associated with the ineffective
interest rate swap, net
|
6,252 | — | — | |||||||||
|
Write-off of debt issue costs
|
1,407 | — | — | |||||||||
|
Other expense (income), net
|
519 | 601 | (370 | ) | ||||||||
|
|
||||||||||||
|
Loss before provision for (benefit from)
income taxes
|
(56,899 | ) | (48,137 | ) | (45,022 | ) | ||||||
|
Provision for (benefit from) from income taxes
|
4,564 | (16,434 | ) | (17,077 | ) | |||||||
|
|
||||||||||||
|
Net loss
|
$ | (61,463 | ) | $ | (31,703 | ) | $ | (27,945 | ) | |||
|
|
||||||||||||
|
Basic and diluted weighted average number of
common shares outstanding
|
31,017 | 31,083 | 30,848 | |||||||||
|
|
||||||||||||
|
Basic and diluted net loss per share
applicable to common shares outstanding
|
$ | (1.98 | ) | $ | (1.02 | ) | $ | (0.91 | ) | |||
|
|
||||||||||||
|
Dividends declared per common share
|
$ | — | $ | — | $ | 0.50 | ||||||
|
|
||||||||||||
|
Comprehensive loss:
|
||||||||||||
|
Net loss
|
$ | (61,463 | ) | $ | (31,703 | ) | $ | (27,945 | ) | |||
|
Other comprehensive income (loss):
|
||||||||||||
|
Foreign currency translation, net of taxes
|
1,173 | (2,598 | ) | 1,912 | ||||||||
|
Unrealized net gain (loss) from pension
plan, net of taxes
|
941 | (15,997 | ) | 5,856 | ||||||||
|
Unrealized gain (loss) from ineffective
interest rate swap, net of taxes
|
6,431 | (3,751 | ) | (2,754 | ) | |||||||
|
|
||||||||||||
|
Comprehensive loss
|
$ | (52,918 | ) | $ | (54,049 | ) | $ | (22,931 | ) | |||
|
|
||||||||||||
40
Table of Contents
BLUELINX HOLDINGS INC. AND SUBSIDIARIES
| Fiscal Year | Fiscal Year | Fiscal Year | ||||||||||
| Ended | Ended | Ended | ||||||||||
| January 2, | January 3, | December 29, | ||||||||||
| 2010 | 2009 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
|
||||||||||||
|
Net loss
|
$ | (61,463 | ) | $ | (31,703 | ) | $ | (27,945 | ) | |||
|
Adjustments to reconcile net loss to cash (used in) provided by operations:
|
||||||||||||
|
Depreciation and amortization
|
16,984 | 20,519 | 20,924 | |||||||||
|
Amortization of debt issue costs
|
2,459 | 2,479 | 2,431 | |||||||||
|
Net gain from terminating the Georgia- Pacific Supply Agreement
|
(17,772 | ) | — | — | ||||||||
|
Payments from terminating the Georgia-Pacific Supply Agreement
|
14,118 | — | — | |||||||||
|
Gain from sale of properties
|
(10,397 | ) | (1,936 | ) | — | |||||||
|
Prepayment fees associated with principal payments on mortgage
|
616 | 1,868 | — | |||||||||
|
Changes associated with the ineffective interest rate swap, net
|
6,252 | — | — | |||||||||
|
Write-off of debt issue costs
|
1,407 | — | — | |||||||||
|
Vacant property charges, net
|
1,222 | 4,441 | 11,037 | |||||||||
|
Deferred income tax provision (benefit)
|
24,220 | (2,935 | ) | (9,526 | ) | |||||||
|
Gain from insurance settlement
|
— | — | (1,698 | ) | ||||||||
|
Share-based compensation
|
2,922 | 2,614 | 3,500 | |||||||||
|
Excess tax benefits from share-based compensation arrangements
|
— | (81 | ) | (20 | ) | |||||||
|
Increase in restricted cash related to the ineffective interest rate
swap, insurance, and other
|
(2,511 | ) | (6,210 | ) | (4,770 | ) | ||||||
|
Changes in assets and liabilities:
|
||||||||||||
|
Receivables
|
11,306 | 132,523 | 44,367 | |||||||||
|
Inventories
|
16,297 | 146,405 | 74,799 | |||||||||
|
Accounts payable
|
(13,749 | ) | (86,350 | ) | (31,098 | ) | ||||||
|
Changes in other working capital
|
(13,583 | ) | 20,440 | (6,211 | ) | |||||||
|
Other
|
1,819 | (11,684 | ) | 4,052 | ||||||||
|
|
||||||||||||
|
Net cash (used in) provided by operating activities
|
(19,853 | ) | 190,390 | 79,842 | ||||||||
|
|
||||||||||||
|
Cash flows from investing activities:
|
||||||||||||
|
Property and equipment investments
|
(1,815 | ) | (4,919 | ) | (13,141 | ) | ||||||
|
Proceeds from disposition of assets
|
14,451 | 5,904 | 4,071 | |||||||||
|
|
||||||||||||
|
Net cash provided by (used in) investing activities
|
12,636 | 985 | (9,070 | ) | ||||||||
|
|
||||||||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Repurchase of common stock
|
(2,042 | ) | — | — | ||||||||
|
Proceeds from stock options exercised
|
— | 434 | 496 | |||||||||
|
Excess tax benefits from share-based compensation arrangements
|
— | 81 | 20 | |||||||||
|
Decrease in the revolving credit facility
|
(100,000 | ) | (27,535 | ) | (53,927 | ) | ||||||
|
Principal payments on mortgage
|
(3,201 | ) | (6,130 | ) | — | |||||||
|
Prepayment fees associated with principal payments on mortgage
|
(616 | ) | (1,868 | ) | — | |||||||
|
Increase (decrease) in bank overdrafts
|
2,517 | (12,437 | ) | (13,089 | ) | |||||||
|
Debt financing costs
|
— | (217 | ) | — | ||||||||
|
Common dividends paid
|
— | — | (15,591 | ) | ||||||||
|
Increase in restricted cash related to the mortgage
|
(10,296 | ) | (9,119 | ) | — | |||||||
|
Other
|
(41 | ) | 10 | 36 | ||||||||
|
|
||||||||||||
|
Net cash used in financing activities
|
(113,679 | ) | (56,781 | ) | (82,055 | ) | ||||||
|
|
||||||||||||
|
(Decrease) increase in cash
|
(120,896 | ) | 134,594 | (11,283 | ) | |||||||
|
Cash balance, beginning of period
|
150,353 | 15,759 | 27,042 | |||||||||
|
|
||||||||||||
|
Cash balance, end of period
|
$ | 29,457 | $ | 150,353 | $ | 15,759 | ||||||
|
|
||||||||||||
|
Supplemental Cash Flow Information
|
||||||||||||
|
Net income tax refunds (income taxes paid) during the period
|
$ | 10,299 | $ | 22,762 | $ | (991 | ) | |||||
|
|
||||||||||||
|
Interest paid during the period
|
$ | 28,288 | $ | 36,854 | $ | 40,037 | ||||||
|
|
||||||||||||
41
Table of Contents
BLUELINX HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| Accumulated | Retained | |||||||||||||||||||||||
| Additional | Other | Earnings | ||||||||||||||||||||||
| Common Stock | Paid-In- | Comprehensive | (Accumulated | |||||||||||||||||||||
| BlueLinx Holdings Inc. | Shares | Amount | Capital | Income (Loss) | Deficit) | Totals | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Balance, December 30, 2006
|
30,910 | $ | 309 | $ | 138,066 | $ | 412 | $ | 50,612 | $ | 189,399 | |||||||||||||
|
Net loss
|
— | — | — | — | (27,945 | ) | (27,945 | ) | ||||||||||||||||
|
Foreign currency translation
adjustment, net of tax
|
— | — | — | 1,912 | — | 1,912 | ||||||||||||||||||
|
Unrealized net gain from pension
plan, net of tax
|
— | — | — | 5,856 | — | 5,856 | ||||||||||||||||||
|
Unrealized loss from cash flow
hedge, net of tax
|
— | — | — | (2,754 | ) | — | (2,754 | ) | ||||||||||||||||
|
Unrealized loss from adoption of FIN
48, net of tax
|
— | — | — | — | (72 | ) | (72 | ) | ||||||||||||||||
|
Proceeds from stock options exercised
|
132 | 1 | 495 | — | — | 496 | ||||||||||||||||||
|
Issuance of restricted stock
|
182 | 2 | — | — | — | 2 | ||||||||||||||||||
|
Excess tax benefits from share-based
compensation arrangements
|
— | — | 20 | — | — | 20 | ||||||||||||||||||
|
Compensation related to share-based
grants
|
— | — | 3,500 | — | — | 3,500 | ||||||||||||||||||
|
Common dividends paid
|
— | — | — | — | (15,591 | ) | (15,591 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Balance, December 29, 2007
|
31,224 | $ | 312 | $ | 142,081 | $ | 5,426 | $ | 7,004 | $ | 154,823 | |||||||||||||
|
Net loss
|
— | — | — | — | (31,703 | ) | (31,703 | ) | ||||||||||||||||
|
Foreign currency translation
adjustment, net of tax
|
— | — | — | (2,598 | ) | — | (2,598 | ) | ||||||||||||||||
|
Unrealized net loss from pension
plan, net of tax
|
— | — | — | (15,997 | ) | — | (15,997 | ) | ||||||||||||||||
|
Unrealized loss from cash flow
hedge, net of tax
|
— | — | — | (3,751 | ) | — | (3,751 | ) | ||||||||||||||||
|
Proceeds from stock options exercised
|
116 | 1 | 433 | — | — | 434 | ||||||||||||||||||
|
Issuance of restricted stock
|
1,022 | 10 | — | — | — | 10 | ||||||||||||||||||
|
Excess tax benefits from share-based
compensation arrangements
|
— | — | 81 | — | — | 81 | ||||||||||||||||||
|
Excess tax deficiencies from
share-based compensation
arrangements
|
— | — | (1,061 | ) | — | — | (1,061 | ) | ||||||||||||||||
|
Compensation related to share-based
grants
|
— | — | 2,614 | — | — | 2,614 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Balance, January 3, 2009
|
32,362 | $ | 323 | $ | 144,148 | $ | (16,920 | ) | $ | (24,699 | ) | $ | 102,852 | |||||||||||
|
Net loss
|
— | — | — | — | (61,463 | ) | (61,463 | ) | ||||||||||||||||
|
Foreign currency translation
adjustment, net of tax
|
— | — | — | 1,173 | — | 1,173 | ||||||||||||||||||
|
Unrealized gain from pension plan,
net of tax
|
— | — | — | 941 | — | 941 | ||||||||||||||||||
|
Unrealized gain from cash flow
hedge, net of tax
|
— | — | — | 6,431 | — | 6,431 | ||||||||||||||||||
|
Issuance of restricted stock, net of
forfeitures
|
589 | 6 | — | — | — | 6 | ||||||||||||||||||
|
Repurchase of common stock
|
(772 | ) | (7 | ) | (2,035 | ) | — | — | (2,042 | ) | ||||||||||||||
|
Compensation related to share-based
grants
|
— | — | 2,922 | — | — | 2,922 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Balance, January 2, 2010
|
32,179 | $ | 322 | $ | 145,035 | $ | (8,375 | ) | $ | (86,162 | ) | $ | 50,820 | |||||||||||
|
|
||||||||||||||||||||||||
42
Table of Contents
BLUELINX HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Background
Basis of Presentation
BlueLinx Holdings Inc., operating through our wholly-owned subsidiary, BlueLinx Corporation
(BlueLinx Holdings Inc. and its subsidiaries are collectively referred to as “BlueLinx” or the
“Company”), is a leading distributor of building products in the United States. We operate in all
of the major metropolitan areas in the United States and, as of January 2, 2010, we distributed
more than 10,000 products to approximately 11,500 customers through our network of more than 70
warehouses and third-party operated warehouses. The Consolidated Financial Statements include the
accounts of us and our wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Our fiscal year is a 52 or 53-week period ending on the
Saturday closest to the end of the calendar year. Fiscal 2009 and fiscal 2007 each contained 52
weeks and fiscal 2008 contained 53 weeks. Certain amounts in fiscal 2008 have been reclassified to
conform with the presentation for fiscal 2009.
Nature of Operations
We are a wholesale supplier of building products in North America. We distribute products in
two principal categories: structural products and specialty products. Structural products include
plywood, oriented strand board (“OSB”), rebar and remesh, lumber and other wood products primarily
used for structural support, walls and flooring in construction projects. Specialty products
include roofing, insulation, moulding, engineered wood, vinyl products (used primarily in siding)
and metal products (excluding rebar and remesh). These products are sold to a diversified customer
base, including independent building materials dealers, industrial and manufactured housing
builders and home improvement centers. Net sales by product category are summarized below:
| Fiscal Year | Fiscal Year | Fiscal Year | ||||||||||
| Ended | Ended | Ended | ||||||||||
| January 2, | January 3, | December 29, | ||||||||||
| 2010 | 2009 | 2007 | ||||||||||
| (Dollars in millions) | ||||||||||||
|
Sales by category
|
||||||||||||
|
Structural products
|
$ | 738 | $ | 1,422 | $ | 2,098 | ||||||
|
Specialty products
|
948 | 1,412 | 1,802 | |||||||||
|
Unallocated allowances
and adjustments
|
(40 | ) | (54 | ) | (66 | ) | ||||||
|
|
||||||||||||
|
Total sales
|
$ | 1,646 | $ | 2,780 | $ | 3,834 | ||||||
|
|
||||||||||||
Suppliers
As of January 2, 2010, our vendor base included over 750 suppliers of both structural and
specialty building products. In some cases, these products are branded. We have supply contracts in
place with many of our vendors. Terms for these agreements frequently include prompt payment
discounts and freight allowances and occasionally include volume discounts, growth incentives,
marketing allowances, consigned inventory and extended payment terms.
On April 27, 2009, we entered into a Termination and Modification Agreement (“Modification
Agreement”) related to our Master Purchases, Supply, and Distribution Agreement (the “Supply
Agreement”) with Georgia-Pacific (“G-P”). The Modification Agreement effectively terminates the
existing Supply Agreement with respect to our distribution of G-P plywood, OSB and lumber. As of
January 3, 2009, prior to entering into the Modification Agreement, our minimum purchases
requirement totaled $31.9 million. As a result of terminating this agreement, we are no longer
contractually obligated to make minimum purchases of products from G-P. We will continue to
distribute a variety of G-P building products, including engineered lumber, which is covered under
a three-year purchase agreement dated February 12, 2009.
43
Table of Contents
G-P agreed to pay us $18.8 million in exchange for our agreement to terminate the Supply
Agreement one year earlier than the originally agreed upon May 7, 2010 termination date. Under the
terms of the Modification Agreement, we received four quarterly cash payments of $4.7 million,
which began on May 1, 2009 and ended on February 1, 2010. As a result of the termination, we
recognized a net gain of $17.8 million as a reduction to operating expense. The gain was net of a
$1.0 million write-off of an intangible asset associated with the Supply Agreement. We believe the
early termination of the Supply Agreement contributed to the decline in our structural panel sales
volume during the second, third, and fourth quarters of fiscal 2009. However, because the majority
of these sales are through the direct sales channel, the lower structural panel sales volume had an
insignificant impact on our gross profit during these periods. To the extent we are unable to
replace these volumes with structural product from G-P or other suppliers, the early termination of
the Supply Agreement may continue to negatively impact our sales of structural products which could
impact our net sales and our costs, which in turn could impact our gross profit, net income, and
cash flows.
2. Summary of Significant Accounting Policies
Revenue Recognition
We recognize revenue when the following criteria are met: persuasive evidence of an agreement
exists, delivery has occurred or services have been rendered, our price to the buyer is fixed and
determinable and collectibility is reasonably assured. Delivery is not considered to have occurred
until the customer takes title and assumes the risks and rewards of ownership. The timing of
revenue recognition is largely dependent on shipping terms. Revenue is recorded at the time of
shipment for terms designated as FOB (free on board) shipping point. For sales transactions
designated FOB destination, revenue is recorded when the product is delivered to the customer’s
delivery site.
All revenues are recorded at gross. The key indicators used to determine when and how revenue
is recorded are as follows:
| • | We are the primary obligor responsible for fulfillment and all other aspects of the customer relationship. |
| • | Title passes to BlueLinx and we carry all risk of loss related to warehouse and reload inventory and inventory shipped directly from vendors to our customers. |
| • | We are responsible for all product returns. |
| • | We control the selling price for all channels. |
| • | We select the supplier. |
| • | We bear all credit risk. |
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 remains with us. When the inventory is sold by the customer,
we recognize revenue on a gross basis.
All revenues recognized are net of trade allowances, 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.
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Table of Contents
Cash and Cash Equivalents
Cash and cash equivalents include all highly-liquid investments with maturity dates of less
than three months when purchased.
Restricted Cash
We had restricted cash of $37.5 million and $25.5 million at January 2, 2010 and January 3,
2009, respectively. Restricted cash primarily includes amounts held in escrow related to our
interest rate swap, mortgage, and insurance for workers’ compensation, auto liability, and general
liability. Restricted cash is included in “Other current assets” and “Other non-current assets” on
the accompanying Consolidated Balance Sheets.
The table below provides the balances of each individual component in restricted cash as of
January 2, 2010 and January 3, 2009 (in thousands):
| At January 2, | At January 3, | |||||||
| 2010 | 2009 | |||||||
|
Cash in escrow:
|
||||||||
|
Mortgage
|
$ | 19,415 | $ | 9,119 | ||||
|
Insurance
|
9,411 | — | ||||||
|
Interest rate swap
|
6,690 | 13,590 | ||||||
|
Other
|
2,008 | 2,810 | ||||||
|
|
||||||||
|
Total
|
$ | 37,524 | $ | 25,519 | ||||
|
|
||||||||
During fiscal 2009, we determined it to be appropriate to classify changes in restricted cash
required under our mortgage in the financing section of our Consolidated Statement of Cash Flows.
In order to conform historical presentation to the current and future presentations, we
reclassified $9.1 million from net cash provided by operating activities to net cash used in
financing activities for fiscal 2008 in our Consolidated Statement of Cash Flows.
Concentrations of Credit Risk
Our accounts receivable are principally from customers in the building products industry
located in the United States and Canada. Concentration of credit risk with respect to accounts
receivable; however, is limited due to the large number of customers comprising our customer base.
Allowance for Doubtful Accounts and Related Reserves
We evaluate the collectibility of accounts receivable based on numerous factors, including
past transaction history with customers and their creditworthiness. We maintain an allowance for
doubtful accounts for each aging category on our aged trial balance, which is aged utilizing
contractual terms, based on our historical loss experience. This estimate is periodically adjusted
when we become aware of specific customers’ inability to meet their financial obligations (e.g.,
bankruptcy filing or other evidence of liquidity problems). As we determine that specific balances
will ultimately be uncollectible, we remove them from our aged trial balance. Additionally, we
maintain reserves for cash discounts that we expect customers to earn as well as expected returns.
At January 2, 2010 and January 3, 2009, these reserves totaled $8.4 million and $10.1 million,
respectively. Adjustments to earnings resulting from revisions to estimates on discounts and
uncollectible accounts have been insignificant.
Inventory Valuation
Inventories are carried at the lower of cost or market. The cost of all inventories is
determined by the moving average cost method. We have included all material charges directly or
indirectly incurred in bringing inventory to its existing condition and location. We evaluate our
inventory value at the end of each quarter to ensure that first quality, actively moving inventory,
when viewed by category, is carried at the lower of cost or market. At January 2, 2010, the market
value of our inventory exceeded its cost. At January 3, 2009, the lower of cost or market reserve
was $3.4 million. Adjustments to earnings resulting from revisions to lower of cost or market
estimates have been insignificant.
45
Table of Contents
Additionally, we maintain a reserve for the estimated value impairment associated with
damaged, excess and obsolete inventory. The damaged, excess and obsolete reserve generally includes
discontinued items or inventory that has turn days in excess of 270 days, excluding new items
during their product launch. At January 2, 2010 and January 3, 2009, our damaged, excess and
obsolete inventory reserves were $2.6 million and $4.0 million, respectively. Adjustments to
earnings resulting from revisions to damaged, excess and obsolete estimates have been
insignificant.
Consignment Inventory
We enter into consignment inventory agreements with our vendors. This vendor consignment
inventory relationship allows us to obtain and store vendor inventory at our warehouses and
third-party (“reload”) facilities; however, ownership and risk of loss remains with the vendor.
When the inventory is sold, we are required to the pay the vendor and we simultaneously take and
transfer ownership from the vendor to the customer.
Consideration Received from Vendors and Paid to Customers
Each year, we enter into agreements with many of our vendors providing for inventory purchase
rebates, generally based on achievement of specified volume purchasing levels and various marketing
allowances that are common industry practice. We accrue for the receipt of vendor rebates based on
purchases, and also reduce inventory value to reflect the net acquisition cost (purchase price less
expected purchase rebates). At January 2, 2010 and January 3, 2009, the vendor rebate receivable
totaled $6.1 million and $6.3 million, respectively. Adjustments to earnings resulting from
revisions to rebate estimates have been insignificant.
In addition, we enter into agreements with many of our customers to offer customer rebates,
generally based on achievement of specified volume sales levels and various marketing allowances
that are common industry practice. We accrue for the payment of customer rebates based on sales to
the customer, and also reduce sales value to reflect the net sales (sales price less expected
customer rebates). At January 2, 2010 and January 3, 2009, the customer rebate payable totaled $5.3
million and $7.3 million, respectively. Adjustments to earnings resulting from revisions to rebate
estimates have been insignificant.
Shipping and Handling
Amounts billed to customers in sales transactions related to shipping and handling are
classified as revenue. Shipping and handling costs included in “Selling, general, and
administrative” expenses were $84.4 million, $118.7 million, and $137.4 million for fiscal 2009,
fiscal 2008, and fiscal 2007, respectively.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expenses of $1.8 million, $2.5
million, and $6.5 million were included in “Selling, general and administrative” expenses for
fiscal 2009, fiscal 2008, and fiscal 2007, respectively.
Earnings per Common Share
We calculate our basic earnings per share by dividing net income by the weighted average
number of common shares and participating securities outstanding for the period. Restricted stock
granted by us to certain management level employees participate in dividends on the same basis as
common shares and are non-forfeitable by the holder. The unvested restricted stock contains
non-forfeitable rights to dividends or dividend equivalents. As a result, these share-based awards
meet the definition of a participating security and are included in the weighted average number of
common shares outstanding, pursuant to the two-class method, for the periods that present net
income. The two-class method is an earnings allocation formula that treats a participating
security as having rights to earnings that would otherwise have been available to common
shareholders. Given that the restricted shareholders do not have a
contractual obligation to participate in the losses, we have not included these amounts in our
weighted average number of common shares outstanding for periods in which we report a net loss. In
addition, because the inclusion of such unvested restricted shares in our basic and dilutive per
share calculations would be anti-dilutive, we have not included 1,539,129, 1,201,288, and 330,840
of unvested restricted shares that had the right to participate in dividends in our basic and
dilutive calculations for fiscal 2009, fiscal 2008, and fiscal 2007, respectively, because all
periods reflected net losses.
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Table of Contents
Except when the effect would be anti-dilutive, the diluted earnings per share calculation
includes the dilutive effect of the assumed exercise of stock options and performance shares using
the treasury stock method. During fiscal 2008, we granted 834,071 performance shares under our
2006 Long-Term Incentive Plan in which shares are issuable upon satisfaction of certain performance
criteria. As of January 2, 2010, we assumed that a total of 180,605 performance shares will
eventually vest based on our assumption that certain performance criteria will be met and that
certain shares will be forfeited over the vesting term. The 180,605 performance shares we assume
will vest were not included in the computation of diluted earnings per share due to the net loss
for the period. We will continue to evaluate the effect of the performance conditions on our
diluted earnings per share calculation and will change our assumptions if it becomes probable that
the performance conditions will not be met. Our restricted stock units are settled in cash upon
vesting and are considered liability awards. Therefore, these restricted stock units are not
included in the computation of the basic and diluted earnings per share.
As we experienced losses in all periods, basic and diluted loss per share are computed by
dividing net loss by the weighted average number of common shares outstanding for the period. For
fiscal 2009, fiscal 2008, and fiscal 2007, we excluded 2,648,049, 2,532,109, and 2,045,854 unvested
share-based awards, respectively, from the diluted earnings per share calculation because they were
anti-dilutive.
Common Stock Dividends
In the past we have paid dividends on our common stock at the quarterly rate of $0.125 per
share. However, on December 5, 2007, our Board of Directors suspended the payment of dividends on
our common stock for an indefinite period of time. Resumption of the payment of dividends will
depend on, among other things, business conditions in the housing industry, our results of
operations, cash requirements, financial condition, contractual restrictions, provisions of
applicable law and other factors that our Board of Directors may deem relevant. Accordingly, we may
not be able to resume the payment of dividends at the same quarterly rate in the future, if at all.
Property and Equipment
Property and equipment are recorded at cost. Lease obligations for which we assume or retain
substantially all the property rights and risks of ownership are capitalized. Replacements of major
units of property are capitalized and the replaced properties are retired. Replacements of minor
components of property and repair and maintenance costs are charged to expense as incurred.
Depreciation is computed using the straight-line method over the estimated useful lives of the
related assets. Useful lives are 2 to 18 years for land improvements, 5 to 40 years for buildings,
and 3 to 7 years for machinery and equipment, which includes mobile equipment. Upon retirement or
disposition of assets, cost and accumulated depreciation are removed from the related accounts and
any gain or loss is included in income. Depreciation expense totaled $15.3 million for fiscal 2009
and $18.0 million for fiscal 2008 and fiscal 2007.
During fiscal 2008 and fiscal 2007, we capitalized costs related to internally developed
software. As of January 2, 2010 and January 3, 2009, the total amount capitalized for internally
developed software was $5.8 million. Accumulated depreciation related to internally developed
software totaled $2.8 million and $1.0 million at January 2, 2010 and January 3, 2009,
respectively. For fiscal 2007, there was no depreciation recorded for these assets as they were
not placed in service at the end of fiscal 2007.
47
Table of Contents
Impairment of Long-Lived Assets
Long-lived assets, including property and equipment and intangible assets with definite useful
lives, are reviewed for possible impairment whenever events or circumstances indicate that the
carrying amount of an asset may not be recoverable.
We evaluate our long-lived assets each quarter for indicators of potential impairment.
Indicators of impairment include current period losses combined with a history of losses,
management’s decision to exit a facility, reductions in the fair market value of real properties
and changes in other circumstances that indicate the carrying amount of an asset may not be
recoverable.
Our evaluation of long-lived assets is performed at the lowest level of identifiable cash
flows, which is generally the individual distribution facility. In the event of indicators of
impairment, the assets of the distribution facility are evaluated by comparing the facility’s
undiscounted cash flows over the estimated useful life of the asset, which ranges between 5-20
years, to its carrying value. If the carrying value is greater than the undiscounted cash flows,
an impairment loss is recognized for the difference between the carrying value of the asset and the
estimated fair market value. Impairment losses are recorded as a component of “Selling, general
and administrative” expenses in the Consolidated Statements of Operations.
Our estimate of undiscounted cash flows is subject to assumptions that affect estimated
operating income at a distribution facility level. These assumptions are related to future sales,
margin growth rates, economic conditions, market competition and inflation. Our estimates of fair
market value are generally based on market appraisals and our experience with related market
transactions. We use a historical average of income, with no growth factor assumption, to estimate
undiscounted cash flows. The assumptions used to determine impairment are considered to be level 3
measurements in the fair value hierarchy as defined in Note 13.
During fiscal 2008, we recorded a non-cash impairment charge of $0.4 million to reduce the
carrying value of certain long-lived assets to fair value as a result of unfavorable market
conditions associated with our custom milling operations in California. This impairment charge was
included in “Selling, general and administrative” expense in our Consolidated Statement of
Operations for fiscal 2008.
Currently, we are experiencing a reduction in operating income at the distribution facility
level due to the ongoing downturn in the housing market. To the extent that reductions in volume
and operating income have resulted in impairment indicators, in most cases our carrying values
continue to be less than our projected undiscounted cash flows. We had approximately $36 million,
out of the $137.2 million in net book value as of January 2, 2010, in fixed assets for which the
undiscounted cash flows were less than the carrying values of the assets. The fair value of these
assets, primarily real estate, exceeded the carrying value by approximately $30 million. As such,
we have not identified significant known trends impacting the fair value of long-lived assets to an
extent that would indicate impairment.
Intangible Assets with Definite Useful Lives
The table below summarizes the balances of our intangible assets as of January 2, 2010:
| Useful | Gross | Accumulated | Net Carrying | |||||||||||||
| Lives (yrs) | Carrying Amount | Amortization | Amount | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Intangible assets:
|
||||||||||||||||
|
Customer relationships
|
6.0 | $ | 8,201 | $ | (7,282 | ) | $ | 919 | ||||||||
|
Internally Developed Software
|
3.0 | 4,113 | (4,113 | ) | — | |||||||||||
|
Trade names
|
1.0 | 279 | (279 | ) | — | |||||||||||
|
Non-compete agreements
|
3.3 | 230 | (217 | ) | 13 | |||||||||||
|
|
||||||||||||||||
|
|
$ | 12,823 | $ | (11,891 | ) | $ | 932 | |||||||||
|
|
||||||||||||||||
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Table of Contents
The table below summarizes the balances of our intangible assets as of January 3, 2009:
| Useful | Gross | Accumulated | Net Carrying | |||||||||||||
| Lives (yrs) | Carrying Amount | Amortization | Amount | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Intangible assets:
|
||||||||||||||||
|
Customer relationships
|
6.0 | $ | 8,201 | $ | (5,909 | ) | $ | 2,292 | ||||||||
|
Internally developed software
|
3.0 | 4,113 | (4,113 | ) | — | |||||||||||
|
Supply agreement
|
6.0 | 5,329 | (4,134 | ) | 1,195 | |||||||||||
|
Trade names
|
1.0 | 279 | (279 | ) | — | |||||||||||
|
Non-compete agreements
|
3.3 | 230 | (174 | ) | 56 | |||||||||||
|
|
||||||||||||||||
|
|
$ | 18,152 | $ | (14,609 | ) | $ | 3,543 | |||||||||
|
|
||||||||||||||||
Amortization expense for intangible assets was $1.6 million, $2.5 million and $3.0 million for
fiscal 2009, fiscal 2008 and fiscal 2007, respectively. During fiscal 2009, we wrote-off of $1.0
million related to the termination of the G-P supply agreement (see Note 1). This charge, related
to the remaining balance of the amount capitalized in connection with the Supply Agreement, was
recorded against the gain on the termination of the G-P Supply Agreement in “Selling, general, and
administrative” expenses on our Consolidated Statement of Operations.
Estimated amortization expense for each of the five succeeding years is as follows:
| (In thousands) | ||||
|
For fiscal 2010
|
$ | 617 | ||
|
For fiscal 2011
|
$ | 200 | ||
|
For fiscal 2012
|
$ | 115 | ||
|
For fiscal 2013
|
$ | — | ||
|
For fiscal 2014
|
$ | — | ||
Stock-Based Compensation
We recognize compensation expense equal to the grant-date fair value for all share-based
payment awards that are expected to vest. This expense is recorded on a straight-line basis over
the requisite service period of the entire award, unless the awards are subject to market or
performance conditions, in which case we recognize compensation expense over the requisite service
period of each separate vesting tranche to the extent market and performance conditions are
considered probable. The calculation of fair value related to stock compensation is subject to
certain assumptions discussed in more detail in Note 7. Management updates such estimates when
circumstances warrant. All compensation expense related to our share-based payment awards is
recorded in “Selling, general and administrative” expense in the Consolidated Statement of
Operations.
Shareholders’ Equity
During the fourth quarter of fiscal 2008, our Board of Directors authorized the Company to
repurchase up to $10.0 million of our common stock over the next two years. Under the terms of the
repurchase program, we may repurchase shares in open market purchases or through privately
negotiated transactions. We will use cash on hand to fund repurchases of our common stock. As of
January 2, 2010, we repurchased 0.8 million shares for $2.0 million.
Income Taxes
Deferred income taxes are provided using the liability method. Accordingly, deferred income
taxes are recognized for differences between the income tax and financial reporting bases of our
assets and liabilities based on enacted tax laws and tax rates applicable to the periods in which
the differences are expected to affect taxable income. We recognize a valuation allowance, when
based on the weight of all available evidence, we believe it is more likely than not that some or
all of our deferred tax assets will not be realized. Such amounts are disclosed in Note 5.
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We generally believe that the positions taken on previously filed tax returns are more likely
than not to be sustained by the taxing authorities. We have recorded income tax and related
interest liabilities where we believe our position may not be sustained. Such amounts are
disclosed in Note 5.
Foreign Currency Translation
The functional currency for our Canadian operations is the Canadian dollar. The translation of
the applicable currencies into United States dollars is performed for balance sheet accounts using
current exchange rates in effect at the balance sheet date and for revenue and expense accounts
using a weighted average exchange rate during the period. Any related translation adjustments are
recorded directly in shareholders’ equity. Foreign currency transaction gains and losses are
reflected in the Consolidated Statements of Operations. Accumulated other comprehensive loss at
January 2, 2010 and January 3, 2009 included the gain from foreign currency translation (net of
tax) of $1.5 million and $0.3 million, respectively.
Derivatives
We are exposed to risks such as changes in interest rates, commodity prices and foreign
currency exchange rates. We employ a variety of practices to manage these risks including the use
of derivative instruments. Derivative instruments are used only for risk management purposes and
not for speculation or trading, and are not used to address risks related to foreign currency
exchange rates. We record derivative instruments as assets or liabilities on the balance sheet at
fair value.
Compensated Absences
We accrue for the costs of compensated absences to the extent that the employee’s right to
receive payment relates to service already rendered, the obligation vests or accumulates, payment
is probable and the amount can be reasonably estimated.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles (“GAAP”) requires management to make certain estimates and assumptions. These estimates
and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, as well as reported amounts of
revenues and expenses during the reporting period. Actual results could differ from these estimates
and such differences could be material.
New Accounting Standards
In July 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting
Standards Codification (the “Codification”) as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the preparation of financial
statements in conformity with U.S. GAAP. The Codification does not change current U.S. GAAP, but is
intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative
literature related to a particular topic in one place. This Form 10-K for the year ending January
2, 2010 and all subsequent public filings will reference the Codification as the sole source of
authoritative literature.
In May 2009, the FASB issued guidance on subsequent events that establishes authoritative
accounting and disclosure guidance for recognized and non-recognized subsequent events that occur
after the balance sheet date but before financial statements are issued. The guidance also requires
disclosure of the date through which an entity has evaluated subsequent events and the basis for
that date. This guidance was effective for us beginning with our Quarterly Report on Form 10-Q for
the second quarter and first six months of fiscal 2009, and will be applied prospectively.
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In April 2009, the FASB issued guidance which will require that the fair value
disclosures required for all financial instruments be included in interim financial statements.
This guidance also requires entities to disclose the method and significant assumptions used to
estimate the fair value of financial instruments on an interim and annual basis and to highlight
any changes from prior periods. This guidance was effective for us during the third quarter of
fiscal 2009. The adoption of this guidance did not have a material impact on our Consolidated
Financial Statements.
In December 2008, the FASB issued new guidance on retirement benefits. This guidance
requires enhanced disclosures about the plan assets of our defined benefit pension and other
postretirement plans. The enhanced disclosures are intended to provide users of financial
statements with a greater understanding of: (1) how investment allocation decisions are made,
including the factors that are pertinent to an understanding of investment policies and strategies;
(2) the major categories of plan assets; (3) the inputs and valuation techniques used to measure
the fair value of plan assets; (4) the effect of fair value measurements using significant
unobservable inputs (Level 3) on changes in plan assets for the period; and (5) significant
concentrations of risk within plan assets. This new guidance is applicable to employers that are
subject to the disclosure requirements and is effective for fiscal years ending after December 15,
2009. The adoption of this guidance had no impact on our Consolidated Financial Statements. For
additional information, refer to Note 8 in our Notes to the Consolidated Financial Statements.
In March 2008, the FASB issued new guidance on derivatives and hedging. This guidance
seeks to improve financial reporting for derivative instruments and hedging activities by requiring
enhanced disclosures regarding the impact on financial position, financial performance, and cash
flows. To achieve this increased transparency, this guidance requires (1) the disclosure of the
fair value of derivative instruments and gains and losses in a tabular format; (2) the disclosure
of derivative features that are credit risk-related; and (3) cross-referencing within the
footnotes. This guidance was effective for us, on a prospective basis, on January 4, 2009. The
adoption of this guidance did not have a material impact on our Consolidated Financial Statements.
For additional information, refer to Note 12 of the Notes to the Consolidated Financial Statements.
3. Restructuring Charges
We account for exit and disposal costs by recognizing a liability for costs associated with an
exit or disposal activity at fair value in the period in which it is incurred or when the entity
ceases using the right conveyed by a contract (i.e. the right to use a leased property). Our
restructuring charges included accruals for estimated losses on facility costs based on our
contractual obligations net of estimated sublease income based on current comparable market rates
for leases. We reassess this liability periodically based on current market conditions. Revisions
to our estimates of this liability could materially impact our operating results and financial
position in future periods if anticipated events and key assumptions, such as the timing and
amounts of sublease rental income, either do not materialize or change. These costs are included in
“Selling, general, and administrative” expenses in the Consolidated Statements of Operations and
“Other current liabilities” and “Other non-current liabilities” on the Consolidated Balance Sheets
for the fiscal year ended and at January 2, 2010 and January 3, 2009.
We account for severance and outplacement costs by recognizing a liability for employees’
rights to post-employment benefits. These costs are included in “Selling, general, and
administrative” expenses in the Consolidated Statements of Operations and in “Accrued compensation”
on the Consolidated Balance Sheets for the fiscal year ended and at January 2, 2010 and January 3,
2009.
2007 Facility Consolidation and Severance Costs
During fiscal 2007, we announced a plan to adjust our cost structure in order to manage our
costs more effectively. The plan included the consolidation of our corporate headquarters and
sales center to one building from two buildings and reduction in force initiatives which resulted
in charges of $17.1 million during the fourth quarter of fiscal 2007. Since the inception of this
plan, we have recorded additional charges of $0.8 million and $2.4 million during fiscal 2009 and
fiscal 2008, respectively, due to a modification of certain sublease income assumptions related to
the sublease of the vacated headquarters’ building. As of January 2, 2010 and January 3, 2009,
there was no remaining accrued severance related to reduction in force initiatives completed in
fiscal 2007.
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Table of Contents
The table below summarizes the balance of accrued facility consolidation reserve and the
changes in the accrual for fiscal 2009 (in thousands):
|
Balance at January 3, 2009
|
$ | 12,340 | ||
|
Assumption changes
|
775 | |||
|
Payments
|
(2,135 | ) | ||
|
Accretion of discount used to calculate liability
|
775 | |||
|
|
||||
|
Balance at January 2, 2010
|
$ | 11,755 | ||
|
|
||||
2008 Facility Consolidation and Severance Costs
During fiscal 2008, our board of directors approved a plan to exit our custom milling
operations in California primarily due to the impact of unfavorable market conditions on that
business. The closure of the custom milling facilities resulted in facility consolidation charges
of $2.0 million during fiscal 2008. In addition, we recorded severance and outplacement costs of
$1.0 million in connection with involuntary terminations at our custom milling facilities and $4.2
million related to reduction in force initiatives. At January 2, 2010, there was no severance
reserve. At January 3, 2009, our severance reserve totaled $0.5 million. During fiscal 2009, we
modified certain assumptions related to sublease income and rental payments that resulted in a
reduction to the reserve of approximately $0.2 million.
The table below summarizes the balances of the accrued facility consolidation and severance
reserves and the changes in the accruals for fiscal 2009 (in thousands):
| Facility | Severance | |||||||||||
| Consolidation | Costs | Total | ||||||||||
|
Balance at January 3, 2009
|
$ | 1,792 | $ | 512 | $ | 2,304 | ||||||
|
Assumption changes
|
(195 | ) | — | (195 | ) | |||||||
|
Payments
|
(1,130 | ) | (512 | ) | (1,642 | ) | ||||||
|
Sublease income
|
80 | — | 80 | |||||||||
|
Accretion of liability
|
98 | — | 98 | |||||||||
|
|
||||||||||||
|
Balance at January 2, 2010
|
$ | 645 | $ | — | $ | 645 | ||||||
|
|
||||||||||||
2009 Facility Consolidations and Severance Costs
During fiscal 2009, we exited our BlueLinx Hardwoods facility in Austin, Texas to improve
overall effectiveness and efficiency by consolidating these operations with our San Antonio and
Houston branches. Our exit of the Austin facility resulted in a facility consolidation charge of
$0.7 million. In addition, we recorded severance charges related to reduction in force initiatives
of $1.8 million.
The table below summarizes the balances of the accrued facility consolidation and severance
reserves and the changes in the accruals for fiscal 2009 (in thousands):
| Facility | Severance | |||||||||||
| Consolidation | Costs | Total | ||||||||||
|
Balance at January 3, 2009
|
$ | — | $ | — | $ | — | ||||||
|
Charges
|
731 | 1,813 | 2,544 | |||||||||
|
Assumption changes
|
(88 | ) | — | (88 | ) | |||||||
|
Payments
|
(95 | ) | (1,662 | ) | (1,757 | ) | ||||||
|
Accretion of liability
|
23 | — | 23 | |||||||||
|
|
||||||||||||
|
Balance at January 2, 2010
|
$ | 571 | $ | 151 | $ | 722 | ||||||
|
|
||||||||||||
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Table of Contents
4. Assets Held for Sale and Net Gain on Disposition
As part of our restructuring efforts to improve our cost structure and cash flow, we closed
certain facilities and designated them as assets held for sale during fiscal 2008. At the time of
designation, we ceased recognizing depreciation expense on these assets. As of January 2, 2010
and January 3, 2009, total assets held for sale were $1.6 million and $3.0 million, respectively,
and were included in “Other current assets” in our Consolidated Balance Sheets. During fiscal 2009
and fiscal 2008, we sold certain real properties held for sale that resulted in a $10.4 million
gain and $1.9 million gain, respectively, recorded in “Selling, general, and administrative”
expenses in the Consolidated Statements of Operations. We continue to actively market the
remaining properties that are held for sale. Due to the fact that these properties are all land,
depreciation expense is not impacted.
5. Income Taxes
Our provision for (benefit from) income taxes consists of the following:
| Fiscal Year | Fiscal Year | Fiscal Year | ||||||||||
| Ended | Ended | Ended | ||||||||||
| January 2, | January 3, | December 29, | ||||||||||
| 2010 | 2009 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Federal income taxes:
|
||||||||||||
|
Current
|
$ | (19,800 | ) | $ | (12,736 | ) | $ | (7,420 | ) | |||
|
Deferred
|
18,475 | (2,149 | ) | (7,627 | ) | |||||||
|
State income taxes:
|
||||||||||||
|
Current
|
(263 | ) | (973 | ) | (1,106 | ) | ||||||
|
Deferred
|
5,745 | (786 | ) | (2,012 | ) | |||||||
|
Foreign income taxes:
|
||||||||||||
|
Current
|
407 | 210 | 975 | |||||||||
|
Deferred
|
— | — | 113 | |||||||||
|
|
||||||||||||
|
Provision for
(benefit from)
income taxes
|
$ | 4,564 | $ | (16,434 | ) | $ | (17,077 | ) | ||||
|
|
||||||||||||
The federal statutory income tax rate was 35%. Our provision for (benefit from) income taxes
is reconciled to the federal statutory amount as follows:
| Fiscal Year | Fiscal Year | Fiscal Year | ||||||||||
| Ended | Ended | Ended | ||||||||||
| January 2, | January 3, | December 29, | ||||||||||
| 2010 | 2009 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Benefit from income taxes computed at
the federal statutory tax rate
|
$ | (19,912 | ) | $ | (16,893 | ) | $ | (15,758 | ) | |||
|
Benefit from state income taxes, net
of federal benefit
|
(2,276 | ) | (1,706 | ) | (1,579 | ) | ||||||
|
Valuation allowance change
|
25,864 | 1,179 | — | |||||||||
|
Other
|
888 | 986 | 260 | |||||||||
|
|
||||||||||||
|
Provision for (benefit from) income
taxes
|
$ | 4,564 | $ | (16,434 | ) | $ | (17,077 | ) | ||||
|
|
||||||||||||
Our income before provision for income taxes for our Canadian operations was $1.2 million,
$0.7 million and $2.5 million for fiscal 2009, fiscal 2008 and fiscal 2007, respectively.
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Table of Contents
For fiscal 2009, we recognized tax expense of $4.6 million. The expense recognized for the
year is comprised of $20.4 million of federal tax benefit, $5.6 million of deferred income tax
benefit resulting from the allocation of
income tax expense to other comprehensive income offset by $29.3 million of a tax valuation
allowance charge related to the change in judgment regarding the realizability of our net deferred
tax asset. The $20.4 million federal benefit was recorded as a result of an enacted change in tax
law during the fourth quarter, which allows us to carryback our current year federal taxable losses
against 2004 and 2005 taxable income.
In accordance with the intraperiod tax allocation provisions of U.S. GAAP, we are required to
consider all items (including items recorded in other comprehensive income) in determining the
amount of tax benefit that results from a loss from continuing operations that should be allocated
to continuing operations. As a result, in addition to our federal income tax benefit, we recorded
a $5.6 million non-cash tax benefit on the loss from continuing operations for 2009, which is
offset in full by income tax expense recorded in other comprehensive income. While the income tax
benefit from continuing operations is reported in our Consolidated Statement of Operations, the
income tax expense on other comprehensive income is recorded directly to accumulated other
comprehensive loss, which is a component of shareholders’ equity.
Our financial statements contain certain deferred tax assets which have arisen primarily as a
result of tax benefits associated with the loss before income taxes incurred during fiscal 2008 and
fiscal 2009, as well as net deferred income tax assets resulting from other temporary differences
related to certain reserves, pension obligations and differences between book and tax depreciation
and amortization. We record a valuation allowance against our net deferred tax assets when we
determine that based on the weight of available evidence, it is more likely than not our net
deferred tax assets will not be realized.
In our evaluation of the weight of available evidence, we considered recent reported losses as
negative evidence which carried substantial weight. Therefore, we considered evidence related to
the four sources of taxable income, to determine whether such positive evidence outweighed the
negative evidence associated with the losses incurred. The positive evidence considered included:
| • | taxable income in prior carryback years, if carryback is permitted under the tax law; |
| • | future reversals of existing taxable temporary differences |
| • | tax planning strategies; and |
| • | future taxable income exclusive of reversing temporary differences and carryforwards. |
As of January 3, 2009, we relied on projected cumulative pretax profit for the three year
period ended 2010, which was substantially driven by projected positive results from operations in
2010 developed using the housing start forecasts available at that time and operating expense
reductions of 15% in 2009 and 6% in 2010. We develop housing starts assumptions using internal
data, which is validated using external housing start forecasts published by third party sources.
Our business is closely tied to housing starts and third party estimates of housing starts are
considered when estimating revenue. At the end of fiscal 2008 and through early March 2009,
housing starts were projected to be 716,000 for 2009 and 950,000 for 2010. Additionally, expected
gains from the disposal of appreciated real estate in fiscal 2009 and fiscal 2010 impacted our
projections of cumulative pretax income for the three year period ended 2010. The fair value of
our real estate assets substantially exceed the carrying value, which resulted in us being in a
unique position with the ability to forecast and consider such gains in our projection of future
income.
Based on the weight of the available positive and negative evidence at the end of fiscal 2008
and through early March 2009, we concluded that the evidence relative to potential future income
generated from operations and the sale of appreciated real estate carried enough weight to overcome
the weight of the negative evidence of losses. Therefore, we concluded that the federal deferred
tax assets recorded as of January 3, 2009 were more likely than not realizable.
With regard to our state deferred tax assets, we considered the positive evidence associated
with tax planning strategies that could be implemented to avoid the loss of these deferred tax
assets. Considering the weight of this evidence, we recorded tax benefits in the states where the
tax planning strategy was executable. Therefore, we recorded a valuation allowance of $1.1 million
for those states where we would not be able to execute the strategy as of the end of fiscal 2008.
We also recorded a valuation allowance for $0.3 million related to non-deductible excess
compensation.
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Table of Contents
During the first quarter of fiscal 2009, we evaluated the weight of available positive and
negative evidence relative to changes in the environment during the first quarter of 2009. In late
March and April, subsequent to the filing of the fiscal 2008 10-K, we experienced a substantial
drop in revenue compared to expectations. In addition, due to a combination of tighter lending
standards and deteriorating conditions in residential construction, negotiations stalled or were
terminated for several of our planned sales of real estate. Also, during the first quarter,
external estimates for fiscal 2009 housing starts dropped from 716,000 to 616,000.
As such, these changes in our internal assumptions and the revised external expectations of
2009 housing starts resulted in a change in our projections from cumulative pretax income to
cumulative pretax loss for the three year period ended 2010, causing us to conclude that, as of
April 4, 2009, the weight of the positive evidence was no longer sufficient to overcome the weight
of the negative evidence of a three year cumulative loss, therefore, a full valuation allowance for
all deferred income tax assets was necessary at the end of the first quarter of fiscal 2009. Based
on the conclusions reached, we continued to maintain a full valuation allowance during the
remainder of 2009.
The components of our net deferred income tax assets (liabilities) are as follows:
| January 2, | January 3, | |||||||
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Deferred income tax assets:
|
||||||||
|
Inventory reserves
|
$ | 3,452 | $ | 4,484 | ||||
|
Compensation-related accruals
|
5,435 | 4,927 | ||||||
|
Accruals and reserves
|
679 | 813 | ||||||
|
Accounts receivable
|
2,045 | 3,498 | ||||||
|
Restructuring costs
|
5,056 | 5,506 | ||||||
|
Derivatives
|
3,440 | 5,118 | ||||||
|
Pension
|
6,039 | 6,616 | ||||||
|
Benefit from NOL carryovers (1)
|
6,234 | 5,355 | ||||||
|
Other
|
499 | 525 | ||||||
|
|
||||||||
|
Total gross deferred income tax assets
|
32,879 | 36,842 | ||||||
|
Less: Valuation allowances
|
(27,226 | ) | (1,362 | ) | ||||
|
|
||||||||
|
Total net deferred income tax assets
|
$ | 5,653 | $ | 35,480 | ||||
|
|
||||||||
|
|
||||||||
|
Deferred income tax liabilities:
|
||||||||
|
Intangible assets
|
(87 | ) | (1,006 | ) | ||||
|
Property and equipment
|
(3,979 | ) | (3,374 | ) | ||||
|
Pension
|
— | — | ||||||
|
Other
|
(1,587 | ) | (1,764 | ) | ||||
|
|
||||||||
|
Total deferred income tax liabilities
|
(5,653 | ) | (6,144 | ) | ||||
|
|
||||||||
|
Deferred income tax assets, net
|
$ | — | $ | 29,336 | ||||
|
|
||||||||
| (1) | Our federal and state NOL carryovers will expire over 3 to 20 years. |
Activity in our deferred tax asset valuation allowance for fiscal 2009 and fiscal 2008 was as
follows:
| Fiscal Year | Fiscal Year | |||||||
| Ended | Ended | |||||||
| January 2, | January 3, | |||||||
| 2010 | 2009 | |||||||
|
Balance at beginning of the year
|
$ | 1,362 | $ | — | ||||
|
Valuation allowance provided for taxes related to:
|
||||||||
|
Loss before income taxes
|
(3,472 | ) | — | |||||
|
Effect of a change in judgment
|
29,336 | 1,362 | ||||||
|
|
||||||||
|
Balance at end of the year
|
$ | 27,226 | $ | 1,362 | ||||
|
|
||||||||
55
Table of Contents
We have recorded income tax and related interest liabilities where we believe certain of our
tax positions are not more likely than not to be sustained if challenged. The following table
summarizes the activity related to our unrecognized tax benefits:
| (In thousands) | ||||
|
Balance at December 31, 2006
|
$ | 111 | ||
|
Increases related to current year tax positions
|
57 | |||
|
Additions for tax positions in prior years
|
— | |||
|
Reductions for tax positions in prior years
|
— | |||
|
Settlements
|
(18 | ) | ||
|
|
||||
|
Balance at December 29, 2007
|
$ | 150 | ||
|
Increases related to current year tax positions
|
63 | |||
|
Additions for tax positions in prior years
|
48 | |||
|
Reductions for tax positions in prior years
|
— | |||
|
Settlements
|
— | |||
|
|
||||
|
Balance at January 3, 2009
|
$ | 261 | ||
|
Increases related to current year tax positions
|
526 | |||
|
Additions for tax positions in prior years
|
— | |||
|
Reductions for tax positions in prior years
|
(25 | ) | ||
|
Settlements
|
(23 | ) | ||
|
|
||||
|
Balance at January 2, 2010
|
$ | 739 | ||
|
|
||||
Included in the unrecognized tax benefits of $0.7 million at January 2, 2010
was $0.6 million of tax benefits that, if recognized, would reduce
our annual effective tax rate. We also accrued a nominal amount of interest related to these
unrecognized tax benefits during 2009, and this amount is reported in “Interest expense” in our
Consolidated Statement of Operations. We do not expect our unrecognized tax benefits to change
significantly over the next 12 months.
We file U.S., state, and foreign income tax returns in jurisdictions with varying statutes of
limitations. The 2006 through 2009 tax years generally remain subject to examination by federal
and most state and foreign tax authorities.
6. Receivables
We have a diversified customer base concentrated in the building products business. Credit
risk is monitored and provisions for expected losses are provided as determined necessary by
management. We generally do not require collateral.
The following reflects our activity in receivables related reserve accounts:
| Beginning | Expense/ | Write offs and | Ending | |||||||||||||
| Balance | (Income) | Other, Net | Balance | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Fiscal 2007
|
||||||||||||||||
|
Allowance for
doubtful accounts
and related
reserves
|
$ | 7,736 | $ | 6,975 | $ | (4,175 | ) | $ | 10,536 | |||||||
|
Fiscal 2008
|
||||||||||||||||
|
Allowance for
doubtful accounts
and related
reserves
|
$ | 10,536 | $ | 5,764 | $ | (6,186 | ) | $ | 10,114 | |||||||
|
Fiscal 2009
|
||||||||||||||||
|
Allowance for
doubtful accounts
and related
reserves
|
$ | 10,114 | $ | 3,879 | $ | (5,606 | ) | $ | 8,387 | |||||||
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Table of Contents
7. Stock-Based Compensation
We have two stock-based compensation plans covering officers, directors and certain employees
and consultants; the 2004 Long Term Equity Incentive Plan (the “2004 Plan”) and the 2006 Long Term
Equity Incentive Plan (the “2006 Plan”). The plans are designed to motivate and retain individuals
who are responsible for the attainment of our primary long-term performance goals. The plans
provide a means whereby our employees and directors develop a sense of proprietorship and personal
involvement in our development and financial success and encourage them to devote their best
efforts to our business. Although we do not have a formal policy on the matter, we issue new shares
of our common stock to participants, upon the exercise of options or vesting of restricted stock,
out of the total amount of common shares authorized for issuance under the 2004 Plan and the 2006
Plan.
The 2004 Plan provides for the grant of nonqualified stock options, incentive stock options
and restricted shares of our common stock to participants of the plan selected by our Board of
Directors or a committee of the Board who administer the 2004 Plan. We reserved 2,222,222 shares of
our common stock for issuance under the 2004 Plan. The terms and conditions of awards under the
2004 Plan are determined by the administrator for each grant.
The 2006 Plan permits the grant of nonqualified stock options, incentive stock options, stock
appreciation rights, restricted stock, restricted stock units, performance shares, performance
units, cash-based awards, and other stock-based awards. We reserved 3,200,000 shares of our common
stock for issuance under the 2006 Plan. The terms and conditions of awards under the 2006 Plan are
determined by the administrator for each grant. Awards issued under the 2006 Plan are subject to
accelerated vesting in the event of a change in control as such event is defined in the 2006 Plan.
On January 13, 2009, the Compensation Committee granted 651,150 restricted shares of our common
stock to certain of our officers.
We recognize compensation expense equal to the grant-date fair value for all share-based
payment awards that are expected to vest. This expense is recorded on a straight-line basis over
the requisite service period of the entire award, unless the awards are subject to market or
performance conditions, in which case we recognize compensation expense over the requisite service
period of each separate vesting tranche to the extent the occurrence of such conditions are
probable. All compensation expense related to our share-based payment awards is recorded in
“Selling, general and administrative” expense in the Consolidated Statement of Operations.
Compensation expense arising from stock-based awards granted to employees and non-employee
directors is recognized as expense using the straight-line method over the vesting period. As of
January 2, 2010, there was $0.8 million, $2.9 million, and $0.2 million of total unrecognized
compensation expense related to stock options, restricted stock, and performance shares,
respectively. The unrecognized compensation expense for stock options, restricted stock, and
performance shares is expected to be recognized over a period of 1.1 years, 1.5 years, and 1.0
year, respectively. As of January 3, 2009, there was $1.7 million, $3.7 million, $0.1 million and
$0.7 million of total unrecognized compensation expense related to stock options, restricted stock,
restricted stock units and performance shares, respectively. The unrecognized compensation expense
for stock options, restricted stock, restricted stock units and performance shares was expected to
be recognized over a period of 2.1 years, 2.0 years, 1.0 years and 2.0 years, respectively.
For fiscal 2009, fiscal 2008 and fiscal 2007, our total stock-based compensation expense was
$3.0 million, $2.6 million, and $3.6 million, respectively. We also recognized related income tax
benefits of $1.2 million, $1.0 million and $1.4 million, respectively.
The total fair value of the options vested in fiscal 2009, fiscal 2008 and fiscal 2007 was
$0.6 million, $0.8 million and $2.3 million, respectively. For restricted stock, the total fair
value vested in fiscal 2009 and fiscal 2008 was $1.2 million and $0.8 million, respectively. In
fiscal 2007, there were no shares of restricted stock that vested.
Cash proceeds from the exercise of stock options for fiscal 2008 and fiscal 2007 totaled $0.4
million and $0.5 million, respectively. There were no stock option exercises during fiscal 2009.
In our Consolidated Statement of Cash Flows, we present the benefits of tax deductions in excess of
recognized compensation expense as both a financing cash inflow and an operating cash outflow. For
fiscal 2008 and fiscal 2007, we included $0.08 million and $0.02 million, respectively, of excess
tax benefits in cash flows from financing activities. There were no excess tax benefits in fiscal
2009.
57
Table of Contents
The following table depicts the weighted average assumptions used in connection with the
Black-Scholes option pricing model to estimate the fair value of time-based options and
performance-based options granted during fiscal 2008 (there were no options granted during fiscal
2009):
| Performance- | Performance- | |||||||||||
| Time-Based | Based | Based | ||||||||||
| Options (1) | Options (2) | Options (3) | ||||||||||
|
Risk free interest rate
|
2.70 | % | 2.62 | % | 2.11 | % | ||||||
|
Expected dividend yield
|
0.0 | % | 0.0 | % | 0.0 | % | ||||||
|
Expected life
|
6 years | 4 years | 1 year | |||||||||
|
Expected volatility
|
48 | % | 48 | % | 48 | % | ||||||
|
Weighted average fair value
|
$ | 2.27 | $ | 0.67 | $ | 1.31 | ||||||
| (1) | Exercise price equaled the market price at date of grant. | |
| (2) | Exercise price exceeded the market price at date of grant. | |
| (3) | Exercise price was less than the market price at date of grant (the date the performance criteria were established is considered the grant date for accounting purposes). |
The following table depicts the weighted average assumptions used in connection with the
Black-Scholes option pricing model to estimate the fair value of time-based options and
performance-based options granted during fiscal 2007:
| Performance- | ||||||||||||
| Time-Based | Time-Based | Based | ||||||||||
| Options (1) | Options (2) | Options (3) | ||||||||||
|
Risk free interest rate
|
4.78 | % | 4.81 | % | 5.09 | % | ||||||
|
Expected dividend yield
|
4.46 | % | 4.52 | % | 4.52 | % | ||||||
|
Expected life
|
7 years | 5 years | 1 year | |||||||||
|
Expected volatility
|
45 | % | 45 | % | 45 | % | ||||||
|
Weighted average fair value
|
$ | 3.77 | $ | 2.83 | $ | 6.97 | ||||||
| (1) | Exercise price equaled market price at date of grant. | |
| (2) | Exercise price exceeded the market price at date of grant. | |
| (3) | Exercise price was less than the market price at date of grant (the date the performance criteria were established is considered the grant date for accounting purposes). |
In determining the expected life, we followed a simplified method based on the vesting term
and contractual term. The range of risk-free rates for fiscal 2008, fiscal 2007 and fiscal 2006
was from 2.11% to 2.70%, 4.78% to 5.10% and 4.34% to 5.05%, respectively. The expected volatility
is based on the historical volatility of our common stock.
58
Table of Contents
The tables below summarize activity and include certain additional information related to our
outstanding employee stock options for the three years ended January 2, 2010.
| Weighted | ||||||||
| Average | ||||||||
| Exercise | ||||||||
| Shares | Price | |||||||
|
Options outstanding at December 30, 2006
|
1,717,531 | $ | 11.47 | |||||
|
Options granted
|
160,375 | 8.58 | ||||||
|
Options exercised
|
(132,230 | ) | 3.75 | |||||
|
Options forfeited
|
(184,053 | ) | 11.16 | |||||
|
Options expired
|
(71,328 | ) | 3.75 | |||||
|
|
||||||||
|
Options outstanding at December 29, 2007
|
1,490,295 | 12.24 | ||||||
|
Options granted
|
798,884 | 4.64 | ||||||
|
Options exercised
|
(113,138 | ) | 3.75 | |||||
|
Options forfeited
|
(693,815 | ) | 12.50 | |||||
|
Options expired
|
( 443,711 | ) | 13.07 | |||||
|
|
||||||||
|
Options outstanding at January 3, 2009
|
1,038,515 | 6.78 | ||||||
|
|
||||||||
|
Options granted
|
— | — | ||||||
|
Options exercised
|
— | — | ||||||
|
Options forfeited
|
(30,268 | ) | 13.67 | |||||
|
Options expired
|
( 79,932 | ) | 9.39 | |||||
|
|
||||||||
|
Options outstanding at January 2, 2010
|
928,315 | 6.34 | ||||||
|
|
||||||||
|
Options exercisable at January 2, 2010
|
371,488 | $ | 7.43 | |||||
|
|
||||||||
| Outstanding | Exercisable | |||||||||||||||||||||||
| Weighted | Weighted | |||||||||||||||||||||||
| Average | Remaining | Average | Remaining | |||||||||||||||||||||
| Number of | Exercise | Contractual Life | Number of | Exercise | Contractual Life | |||||||||||||||||||
| Price Range | Options | Price | (in Years) | Options | Price | (in Years) | ||||||||||||||||||
|
$4.66
|
750,000 | $ | 4.66 | 8.2 | 250,000 | $ | 4.66 | 8.2 | ||||||||||||||||
|
$10.29-$14.01
|
178,315 | $ | 13.41 | 6.3 | 121,488 | $ | 13.13 | 6.2 | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
928,315 | 371,488 | ||||||||||||||||||||||
The following tables summarize activity for our performance shares, restricted stock awards
and restricted stock unit awards during fiscal 2009, fiscal 2008, and fiscal 2007:
| Performance Shares | Restricted Stock | Restricted Stock Units | ||||||||||||||||||
| Weighted | Weighted | |||||||||||||||||||
| Number of | Average Fair | Number of | Average Fair | |||||||||||||||||
| Awards | Value | Awards | Value | Number of Awards ( 1 ) | ||||||||||||||||
|
Outstanding at December 30, 2006
|
— | $ | — | 147,412 | $ | 13.99 | 119,250 | |||||||||||||
|
Granted
|
245,025 | 10.46 | 218,063 | 10.50 | 99,325 | |||||||||||||||
|
Vested
|
— | — | — | — | — | |||||||||||||||
|
Forfeited
|
(20,306 | ) | 10.46 | (34,635 | ) | 12.18 | (30,450 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Outstanding at December 29, 2007
|
224,719 | 10.46 | 330,840 | 11.89 | 188,125 | |||||||||||||||
|
Granted
|
834,071 | 3.73 | 1,396,609 | 4.36 | — | |||||||||||||||
|
Vested
|
— | — | (166,604 | ) | 5.05 | — | ||||||||||||||
|
Forfeited
|
(766,484 | ) | 5.68 | (359,557 | ) | 6.81 | (23,425 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Outstanding at January 3, 2009
|
292,306 | 3.79 | 1,201,288 | 5.62 | 164,700 | |||||||||||||||
|
Granted
|
— | — | 681,151 | 2.64 | — | |||||||||||||||
|
Vested
|
— | — | (250,000 | ) | 4.86 | — | ||||||||||||||
|
Forfeited
|
(111,701 | ) | 3.82 | (93,310 | ) | 5.58 | (20,150 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Outstanding at January 2, 2010
|
180,605 | $ | 3.78 | 1,539,129 | $ | 4.42 | 144,550 | |||||||||||||
|
|
||||||||||||||||||||
| (1) | As these awards will be settled in cash, the fair value of the restricted stock units is marked-to-market each reporting period through the date of settlement. On January 2, 2010, the fair value of these awards was based on the closing price of our common stock of $2.77. |
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The intrinsic value of stock options exercised during fiscal 2008 and fiscal 2007 was $0.1
million and $0.8 million, respectively.
8. Employee Benefits
Defined Benefit Pension Plans
Most of our hourly employees participate in noncontributory defined benefit pension plans,
which include a plan that is administered solely by us (the “hourly pension plan”) and
union-administered multiemployer plans. Our funding policy for the hourly pension plan is based on
actuarial calculations and the applicable requirements of federal law. We met our required
contribution to the hourly pension plan in fiscal 2009. Contributions to multiemployer plans are
generally based on negotiated labor contracts. We contributed $1.0 million, $1.1 million and $1.4
million to union administered multiemployer pension plans for fiscal 2009, fiscal 2008 and fiscal
2007, respectively. Benefits under the majority of plans for hourly employees (including
multiemployer plans) are primarily related to years of service.
The following tables set forth the change in projected benefit obligation and the change in plan
assets for the hourly pension plan:
| January 2, | January 3, | |||||||
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Change in projected benefit obligation:
|
||||||||
|
Projected benefit obligation at beginning of period
|
$ | 72,015 | $ | 70,471 | ||||
|
Service cost
|
1,808 | 2,245 | ||||||
|
Interest cost
|
4,511 | 4,435 | ||||||
|
Actuarial loss
|
4,844 | 71 | ||||||
|
Curtailment
|
— | (913 | ) | |||||
|
Benefits paid
|
(3,678 | ) | (4,294 | ) | ||||
|
|
||||||||
|
Projected benefit obligation at end of period
|
79,500 | 72,015 | ||||||
|
|
||||||||
|
Change in plan assets:
|
||||||||
|
Fair value of assets at beginning of period
|
$ | 55,049 | $ | 72,318 | ||||
|
Actual return (loss) on plan assets
|
10,192 | (20,475 | ) | |||||
|
Employer contributions
|
— | 7,500 | ||||||
|
Benefits paid
|
(3,678 | ) | (4,294 | ) | ||||
|
|
||||||||
|
Fair value of assets at end of period
|
61,563 | 55,049 | ||||||
|
|
||||||||
|
Unfunded Status of Plan
|
$ | (17,937 | ) | $ | (16,966 | ) | ||
|
|
||||||||
We recognize the funded status (i.e., the difference between the fair value of plan assets and
the projected benefit obligations) of our pension plan in our Consolidated Balance Sheets, with a
corresponding adjustment to accumulated other comprehensive (loss) income, net of tax. On January
2, 2010, we measured the fair value of our plan assets and benefit obligations. As of January 2,
2010 and January 3, 2009, the net unfunded status of our benefit plan was $17.9 million and $17.0
million, respectively. These amounts were included in “Other non-current liabilities” on our
Consolidated Balance Sheets. The net adjustment to other comprehensive income (loss) for fiscal
2009, fiscal 2008, and fiscal 2007 was $1.5 million gain ($0.9 million gain, net of tax), $26.0
million loss ($15.9 million loss net of tax) and $9.6 million gain ($5.9 million gain net of tax),
respectively, which represents the net unrecognized actuarial gain (loss) and unrecognized prior
service cost.
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The funded status and the amounts recognized on our Consolidated Balance Sheets for the hourly
pension plan are set forth in the following table:
| January 2, | January 3, | |||||||
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Funded status
|
$ | (17,937 | ) | $ | (16,966 | ) | ||
|
Unrecognized prior service cost
|
3 | 4 | ||||||
|
Unrecognized actuarial loss
|
13,231 | 14,772 | ||||||
|
|
||||||||
|
Net amount recognized
|
$ | (4,703 | ) | $ | (2,190 | ) | ||
|
|
||||||||
|
Amounts recognized on the balance sheet consist of:
|
||||||||
|
Accrued pension liability
|
(17,937 | ) | (16,966 | ) | ||||
|
Accumulated other comprehensive loss (pre-tax)
|
13,234 | 14,776 | ||||||
|
|
||||||||
|
Net amount recognized
|
$ | (4,703 | ) | $ | (2,190 | ) | ||
|
|
||||||||
The portion of estimated net loss for the hourly pension plan that is expected to be amortized
from Accumulated Other Comprehensive Loss into net periodic cost over the next fiscal year is $0.5
million. The expected amortization of prior service cost recognized into net periodic cost over
the next fiscal year is nominal.
The accumulated benefit obligation for the hourly pension plan was $77.4 million and $69.6
million at January 2, 2010 and January 3, 2009, respectively.
Net periodic pension cost for our pension plans included the following:
| Fiscal Year Ended | Fiscal Year Ended | Fiscal Year Ended | ||||||||||
| January 2, | January 3, | December 29, | ||||||||||
| 2010 | 2009 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Service cost
|
$ | 1,808 | $ | 2,245 | $ | 2,506 | ||||||
|
Interest cost on projected benefit obligation
|
4,511 | 4,435 | 4,216 | |||||||||
|
Expected return on plan assets
|
(4,531 | ) | (6,002 | ) | (5,424 | ) | ||||||
|
Amortization of unrecognized loss (gain)
|
723 | (365 | ) | — | ||||||||
|
Amortization of unrecognized prior service cost
|
— | 2 | 1 | |||||||||
|
|
||||||||||||
|
Net periodic pension cost
|
$ | 2,511 | $ | 315 | $ | 1,299 | ||||||
|
|
||||||||||||
The following assumptions were used to determine the projected benefit obligation at the
measurement date and the net periodic pension cost:
| January 2, | January 3, | |||||||
| 2010 | 2009 | |||||||
|
Projected benefit obligation:
|
||||||||
|
Discount rate
|
6.11 | % | 6.42 | % | ||||
|
Average rate of increase in future compensation levels
|
4.00 | % | 4.00 | % | ||||
|
Net periodic pension cost
|
||||||||
|
Discount rate
|
6.42 | % | 6.45 | % | ||||
|
Average rate of increase in future compensation levels
|
4.00 | % | 4.00 | % | ||||
|
Expected long-term rate of return on plan assets
|
8.50 | % | 8.50 | % | ||||
Our estimates of the amount and timing of our future funding obligations for our defined
benefit pension plans are based upon various assumptions specified above. These assumptions
include, but are not limited to, the discount rate, projected return on plan assets, compensation
increase rates, mortality rates, retirement patterns, and turnover rates.
Determination of expected long-term rate of return
In developing expected return assumptions for our pension plan, the most influential decision
affecting long-term portfolio performance is the determination of overall asset allocation. An
asset class is a group of securities that exhibit similar characteristics and behave similarly in
the marketplace. The three main asset classes are equities, fixed income, and cash equivalents.
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Upon calculation of the historical risk premium for each asset class, an expected rate of
return can be established based on assumed 90-day Treasury bill rates. Based on the normal asset
allocation structure of the portfolio (65% equities, 30% fixed income, and 5% cash) with historical
compound annualized risk free rate of 4.49%, the expected overall portfolio return is 8.50% as of
January 2, 2010.
Our percentage of fair value of total assets by asset category as of our measurement date is
as follows:
| January 2, | January 3, | |||||||
| Asset Category | 2010 | 2009 | ||||||
|
Equity securities — domestic
|
53 | % | 52 | % | ||||
|
Equity securities — international
|
14 | % | 13 | % | ||||
|
Fixed income
|
32 | % | 21 | % | ||||
|
Other (1)
|
1 | % | 14 | % | ||||
|
|
||||||||
|
Total
|
100 | % | 100 | % | ||||
|
|
||||||||
| (1) | At January 3, 2009 Other represents cash contributed on January 3, 2009. |
The fair value of our plan assets by asset category as of January 2, 2010 was as follows:
| Asset Category | Level 1 | |||
|
Equity securities — domestic
|
$ | 29,528 | ||
|
Equity securities — international
|
8,499 | |||
|
Fixed income
|
19,870 | |||
|
Other
|
3,666 | |||
|
|
||||
|
Total
|
$ | 61,563 | ||
|
|
||||
See Note 13 for a discussion of the levels of inputs to determine fair value.
Investment policy and strategy
Plan assets are managed as a balanced portfolio comprised of two major components: an equity
portion and a fixed income portion. The expected role of plan equity investments will be to
maximize the long-term real growth of fund assets, while the role of fixed income investments will
be to generate current income, provide for more stable periodic returns, and provide some downside
protection against the possibility of a prolonged decline in the market value of equity
investments. We will review this investment policy statement at least once per year. In addition,
the portfolio will be reviewed quarterly to determine the deviation from target weightings and will
be rebalanced as necessary. Target allocations for fiscal 2010 are 50% domestic and 15%
international equity investments, 30% fixed income investments, and 5% cash. The expected
long-term rate of return for the plan’s total assets is based on the expected return of each of the
above categories, weighted based on the target allocation for each class.
Our estimated future benefit payments reflecting expected future service are as follows:
| Fiscal Year Ending | (In thousands) | |||
|
January 1, 2011
|
$ | 3,782 | ||
|
December 31, 2011
|
3,967 | |||
|
December 29, 2012
|
4,125 | |||
|
December 28, 2013
|
4,444 | |||
|
January 3, 2015
|
4,655 | |||
|
January 2, 2016- December 29, 2018
|
$ | 28,577 | ||
During fiscal 2010, we are required to make a minimum required contribution of $1.8 million to
our defined benefit plan.
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Defined Contribution Plans
Our employees also participate in several defined contribution plans. Contributions to the
plans are based on employee contributions and compensation. Contributions to these plans totaled
$0.1 million, $4.1 million and $5.1 million for fiscal 2009, fiscal 2008 and fiscal 2007,
respectively. During fiscal 2009, we suspended the Company matching contributions to our defined
salaried contribution plan as part of our cost reduction initiatives.
9. Inventory Reserve Accounts
The following reflects our activity for inventory reserve accounts:
| Beginning | Write-offs and | Ending | ||||||||||||||
| Balance | Expense | Other, net | Balance | |||||||||||||
|
Fiscal 2007
|
||||||||||||||||
|
Obsolescence/damaged inventory reserve
|
$ | 5,062 | $ | 1,570 | $ | (2,268 | ) | $ | 4,364 | |||||||
|
Lower of cost or market reserve
|
$ | — | $ | 125 | $ | (104 | ) | $ | 21 | |||||||
|
Fiscal 2008
|
||||||||||||||||
|
Obsolescence/damaged inventory reserve
|
$ | 4,364 | $ | 1,892 | $ | (2,225 | ) | $ | 4,031 | |||||||
|
Lower of cost or market reserve
|
$ | 21 | $ | 3,400 | $ | (21 | ) | $ | 3,400 | |||||||
|
Fiscal 2009
|
||||||||||||||||
|
Obsolescence/damaged inventory reserve
|
$ | 4,031 | $ | 909 | $ | (2,367 | ) | $ | 2,573 | |||||||
|
Lower of cost or market reserve
|
$ | 3,400 | $ | 419 | $ | (3,819 | ) | $ | — | |||||||
10. Revolving Credit Facility
As of January 2, 2010, we had outstanding borrowings of $56.0 million and excess availability
of $157.1 million under the terms of our revolving credit facility. The interest rate on the
revolving credit facility was 2.8% at January 2, 2010. The contractual maturity date of the
revolving credit facility is May 7, 2011.
Based on borrowing base limitations, we classify the lowest projected balance of the credit
facility over the next twelve months of $56.0 million as long-term debt. As of January 2, 2010 and
January 3, 2009, we had outstanding letters of credit totaling $6.0 million and $12.9 million,
respectively, primarily for the purposes of securing collateral requirements under the interest
rate swap, casualty insurance programs and for guaranteeing payment of international purchases
based on the fulfillment of certain conditions. Our revolving credit facility contains customary
negative covenants and restrictions for asset based loans. The only covenant we deem material is a
requirement that we maintain a fixed charge ratio of 1.1 to 1.0 in the event our excess
availability falls below $40.0 million. The fixed charge ratio is calculated as EBITDA over the
sum of cash payments for income taxes, interest expense, cash dividends, principal payments on
debt, and capital expenditures. EBITDA is defined as BlueLinx Corporation’s net income before
interest and tax expense, depreciation and amortization expense, and other non-cash charges. The
fixed charge ratio requirement only applies to us when excess availability under our revolving
credit facility is less than $40.0 million for three consecutive business days. As of January 2,
2010, we were in compliance with all covenants. We had $157.1 million and $192.4 million of
availability as January 2, 2010 and January 3, 2009, respectively. Our lowest level of
availability in the last three years is $157.1 million as of January 2, 2010. We do not anticipate
our excess availability will drop below $40.0 million in the foreseeable future.
Under our revolving credit facility agreement, we maintain a springing lock-box arrangement
where customer remittances go directly to a lock-box maintained by our lenders and then are
forwarded to our general bank
accounts. Our outstanding borrowings are not reduced by these payments unless our excess
availability is less than $40.0 million for three consecutive business days or in the event of
default. Our revolving credit facility does not contain a subjective acceleration clause which
would allow our lenders to accelerate the scheduled maturities of our debt or to cancel our
agreement.
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Table of Contents
Effective March 30, 2009, we permanently reduced our revolving loan threshold limit from
$800.0 million to $500.0 million. This reduction does not impact our available borrowing capacity
under our revolving credit facility as our current eligible accounts receivable and inventory (our
“borrowing base”) do not support up to $800.0 million in borrowings. We do not anticipate our
borrowing base will support borrowings in excess of $500.0 million at any point during the
remaining life of the credit facility. This cost-saving initiative will allow us to reduce our
interest expense by $0.8 million annually by lowering our unused line fees. As a result of this
action, we recorded expense of $1.4 million for the write-off of deferred financing costs that had
been capitalized associated with the borrowing capacity that was reduced during the first quarter
of fiscal 2009.
11. Mortgage
On June 9, 2006, certain special purpose entities that are wholly-owned subsidiaries of ours
entered into a $295 million mortgage loan with the German American Capital Corporation. The
mortgage has a term of ten years and is secured by 55 distribution facilities and 1 office building
owned by the special purpose entities. The stated interest rate on the mortgage is fixed at 6.35%.
German American Capital Corporation assigned half of its interest in the mortgage loan to Wachovia
Bank, National Association.
During fiscal 2009 and fiscal 2008, we sold certain real properties that ceased operations.
As a result of the sale of these properties during these periods, we reduced our mortgage loan by
$3.2 million and $6.1 million, respectively. In addition, during fiscal 2009 and fiscal 2008, we
incurred a mortgage prepayment penalty of $0.6 million and $1.9 million, respectively, recorded in
“Interest expense” on the Consolidated Statements of Operations.
The mortgage loan requires interest-only payments through June 2011. The balance of the loan
outstanding at the end of ten years will then become due and payable. The principal will be paid in
the following increments (in thousands):
|
2011
|
$ | 1,190 | ||
|
2012
|
3,054 | |||
|
2013
|
3,309 | |||
|
2014
|
3,529 | |||
|
2015
|
3,763 | |||
|
Thereafter
|
270,824 |
12. Derivatives
We are exposed to risks such as changes in interest rates, commodity prices and foreign
currency exchange rates. We employ a variety of practices to manage these risks, including
operating and financing activities and, where deemed appropriate, the use of derivative
instruments. Derivative instruments are used only for risk management purposes and not for
speculation or trading, and are not used to address risks related to foreign currency rates. We
record derivative instruments as assets or liabilities on the balance sheet at fair value.
On June 12, 2006, we entered into an interest rate swap agreement with Goldman Sachs Capital
Markets, to hedge against interest rate risks related to our variable rate revolving credit
facility. The interest rate swap has a notional amount of $150.0 million and the terms call for us
to receive interest monthly at a variable rate equal to the 30-day LIBOR and to pay interest
monthly at a fixed rate of 5.4%. This interest rate swap was designated as a cash flow hedge.
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Table of Contents
Through January 9, 2009, the hedge was highly effective in offsetting changes in expected cash
flows. Fluctuations in the fair value of the ineffective portion, if any, of the cash flow hedge
were reflected in earnings.
During fiscal 2009, we reduced our borrowings under the revolving credit facility by
$100.0 million, which reduced outstanding debt below the interest rate swap’s notional amount of
$150.0 million, at which point the hedge became ineffective in offsetting future changes in
expected cash flows during the remaining term of the interest rate swap. We used cash on hand to
pay down this portion of our revolving credit debt during the first, second, and third quarters of
fiscal 2009. As a result, changes in the fair value of the instrument were recorded through
earnings from the point in time that the revolving credit facility balance was reduced below the
interest rate swap’s notional amount of a $150.0 million, which was during the first quarter of
fiscal 2009. Charges associated with the ineffective interest rate swap recognized in the
Consolidated Statement of Operations for fiscal 2009 were approximately $6.3 million and are
comprised of a non-cash $9.0 million pro-rata reduction to accumulated other comprehensive loss
with an offsetting charge to earnings related to reducing our borrowings outstanding by $100.0
million, amortization of the remaining accumulated other comprehensive loss over the life of the
ineffective swap of $2.9 million, and income of $5.7 million related to fair value changes since
the date of the reduction. The remaining $2.7 million of accumulated other comprehensive loss will
be amortized over the remaining 16 month term of the interest rate swap and recorded as interest
expense, of which $2.1 million will be amortized over the next 12 months. Any further reductions in
borrowings under our revolving credit facility will result in a pro-rata reduction in accumulated
other comprehensive loss at the payment date with a corresponding charge recorded to interest
expense.
The following table presents a reconciliation of the unrealized losses related to our interest
rate swap measured at fair value in accumulated other comprehensive loss as of January 2, 2010 (in
thousands):
|
Balance at January 3, 2009
|
$ | 13,229 | ||
|
Unrealized losses in accumulated other comprehensive loss
|
1,429 | |||
|
Charges associated with ineffective interest rate swap recorded to interest expense
|
(11,983 | ) | ||
|
|
||||
|
Balance at January 2, 2010
|
$ | 2,675 | ||
|
|
||||
13. Fair Value Measurements
We determine a fair value measurement based on the assumptions a market participant would use
in pricing an asset or liability. The fair value measurement guidance established a three level
hierarchy making a distinction between market participant assumptions based on (i) unadjusted
quoted prices for identical assets or liabilities in an active market (Level 1), (ii) quoted prices
in markets that are not active or inputs that are observable either directly or indirectly for
substantially the full term of the asset or liability (Level 2), and (iii) prices or valuation
techniques that require inputs that are both unobservable and significant to the overall fair value
measurement (Level 3).
We are exposed to market risks from changes in interest rates, which may affect our operating
results and financial position. When deemed appropriate, we minimize our risks from interest rate
fluctuations through the use of an interest rate swap. This derivative financial instrument is used
to manage risk and is not used for trading or speculative purposes. The swap is valued using a
valuation model that has inputs other than quoted market prices that are both observable and
unobservable.
We endeavor to utilize the best available information in measuring the fair value of the
interest rate swap. The interest rate swap is classified in its entirety based on the lowest level
of input that is significant to the fair value measurement. To determine fair value of the interest
rate swap we used the discounted estimated future cash flows methodology. Assumptions critical to
our fair value in the period were: (i) the present value factors used in determining fair value
(ii) projected LIBOR, and (iii) the risk of non-performance. These and other assumptions are
impacted by economic conditions and expectations of management. We have determined that the fair
value of our interest rate swap is a level 3 measurement in the fair value hierarchy. The level 3
measurement is the risk of counterparty non-performance on the interest rate swap liability that is
not secured by cash collateral. The risk of counterparty non-performance did not affect the fair
value at January 2, 2010 and at January 3, 2009 due to the fact that the risk of counterparty
non-performance was nominal as 75% and 100% of collateral was cash collateral at
January 2, 2010 and January 3, 2009, respectively. The fair value of the interest rate swap was a
liability of $8.9 million and $13.2 million at January 2, 2010 and January 3, 2009, respectively.
These balances are included in “Other current liabilities” and “Other non-current liabilities” on
the Consolidated Balance Sheets.
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Table of Contents
The following table presents a reconciliation of the level 3 interest rate swap liability
measured at fair value on a recurring basis as of January 2, 2010 (in thousands):
|
Fair value at January 3, 2009
|
$ | (13,229 | ) | |
|
Unrealized gains included in earnings, net
|
5,734 | |||
|
Unrealized losses in accumulated other comprehensive loss
|
(1,429 | ) | ||
|
|
||||
|
Fair value at January 2, 2010
|
$ | (8,924 | ) | |
|
|
||||
The $5.7 million unrealized gain is included in “Interest expense” in the Consolidated
Statements of Operations.
Carrying amounts for our financial instruments are not significantly different from their fair
value, with the exception of our mortgage. To determine the fair value of our mortgage, we used a
discounted cash flow model. Assumptions critical to our fair value in the period were present value
factors used in determining fair value and an interest rate. At January 2, 2010, the carrying
value and fair value of our mortgage was $285.7 million and $287.4 million, respectively.
14. Related Party Transactions
Cerberus Capital Management, L.P., our equity sponsor, retains consultants that specialize in
operations management and support and who provide Cerberus with consulting advice concerning
portfolio companies in which funds and accounts managed by Cerberus or its affiliates have
invested. From time to time, Cerberus makes the services of these consultants available to
Cerberus portfolio companies. We believe that the terms of these consulting arrangements are
favorable to us, or, alternatively, are materially consistent with those terms that would have been
obtained by us in an arrangement with an unaffiliated third party. We have normal service,
purchase and sales arrangements with other entities that are owned or controlled by Cerberus. We
believe that these transactions are not material to our results of operations or financial
position.
15. Commitments and Contingencies
Self-Insurance
It is our policy to self-insure, up to certain limits, traditional risks including workers’
compensation, comprehensive general liability, and auto liability. Our self-insured deductible for
each claim involving workers’ compensation, comprehensive general liability (including product
liability claims), and auto liability is limited to $0.8 million, $1.0 million, and $2.0 million,
respectively. We are also self-insured up to certain limits for certain other insurable risks,
primarily physical loss to property ($0.1 million per occurrence) and the majority of our medical
benefit plans ($0.3 million per occurrence). Insurance coverage is maintained for catastrophic
property and casualty exposures as well as those risks required to be insured by law or contract. A
provision for claims under this self-insured program, based on our estimate of the aggregate
liability for claims incurred, is revised and recorded annually. The estimate is derived from both
internal and external sources including but not limited to actuarial estimates. The actuarial
estimates are subject to uncertainty from various sources, including, among others, changes in
claim reporting patterns, claim settlement patterns, judicial decisions, legislation, and economic
conditions. Although, we believe that the actuarial estimates are reasonable, significant
differences related to the items noted above could materially affect our self-insurance
obligations, future expense and cash flow. At January 2, 2010 and January 3, 2009, the
self-insurance reserves totaled $9.2 million and $8.9 million, respectively.
Operating Leases
Total rental expense was approximately $6.8 million, $9.1 million and $7.8 million for fiscal
2009, fiscal 2008 and fiscal 2007, respectively.
66
Table of Contents
At January 2, 2010, our total commitments under long-term, non-cancelable operating leases
were as follows (in thousands):
|
2010
|
$ | 6,382 | ||
|
2011
|
5,324 | |||
|
2012
|
4,709 | |||
|
2013
|
4,532 | |||
|
2014
|
4,511 | |||
|
Thereafter
|
18,158 | |||
|
|
||||
|
Total
|
$ | 43,616 | ||
|
|
||||
Certain of our operating leases have extension options and escalation clauses.
Environmental and Legal Matters
We are involved in various proceedings incidental to our businesses and are subject to a
variety of environmental and pollution control laws and regulations in all jurisdictions in which
we operate. Although the ultimate outcome of these proceedings cannot be determined with certainty,
based on presently available information management believes that adequate reserves have been
established for probable losses with respect thereto. Management further believes that the ultimate
outcome of these matters could be material to operating results in any given quarter but will not
have a materially adverse effect on our long-term financial condition, our results of operations,
or our cash flows.
Collective Bargaining Agreements
Approximately 30% of our total work force is covered by collective bargaining agreements.
Collective bargaining agreements representing approximately 1% of our hourly work force will expire
within one year.
16. Subsequent Events
We evaluated subsequent events through the time of the filing of our Annual Report on Form
10-K. We are not aware of any other significant events that occurred subsequent to the balance
sheet date but prior to the filing of this report that would have a material impact on our
Consolidated Financial Statements.
17. Accumulated Other Comprehensive Loss
Comprehensive income (loss) is a measure of income which includes both net income and other
comprehensive income (loss). Other comprehensive income (loss) results from items deferred from
recognition into our income statement. Accumulated other comprehensive loss is separately presented
on our balance sheet as part of common shareholders’ equity. Other comprehensive income (loss) was
$8.5 million, $(22.3) million and $5.0 million for fiscal 2009, fiscal 2008, and fiscal 2007,
respectively.
Other comprehensive income (loss) for fiscal 2009, fiscal 2008 and fiscal 2007 included tax
(expense) benefits of $(4.1) million, $2.4 million, and ($1.8) million, respectively, related to
our interest rate swap (see Note 12). For fiscal 2009, fiscal 2008, and fiscal 2007, other
comprehensive income (loss) included tax (expense) benefits of $(0.6) million, $10.2 million, and
$(3.7) million related to our pension plan (see Note 8). Income tax expense recorded in other
comprehensive income (loss) related to foreign currency translation was $0.8 million for fiscal
2009.
67
Table of Contents
The accumulated balances for each component of other comprehensive income (loss) were as
follows:
| Fiscal Year | Fiscal Year | Fiscal Year | ||||||||||
| Ended | Ended | Ended | ||||||||||
| January 2, | January 3, | December 29, | ||||||||||
| 2010 | 2009 | 2007 | ||||||||||
|
Foreign currency translation adjustment, net of tax
|
$ | 1,450 | $ | 279 | $ | 2,877 | ||||||
|
Unrealized net (loss) gain from pension
plan, net of tax
|
(8,220 | ) | (9,158 | ) | 6,839 | |||||||
|
Unrealized loss from cash flow hedge, net of tax
|
(1,605 | ) | (8,041 | ) | (4,290 | ) | ||||||
|
|
||||||||||||
|
Accumulated other comprehensive (loss) income
|
$ | (8,375 | ) | $ | (16,920 | ) | $ | 5,426 | ||||
|
|
||||||||||||
18. Unaudited Selected Quarterly Financial Data
| First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||||||||||||||||||
| Three | Three | Three | Three | Three | Three | Three | Three | |||||||||||||||||||||||||
| Months | Months | Months | Months | Months | Months | Months | Months | |||||||||||||||||||||||||
| Ended | Ended | Ended | Ended | Ended | Ended | Ended | Ended | |||||||||||||||||||||||||
| April 4, | March 29, | July 4, | June 29, | October 3, | September 27, | January 2, | January 3, | |||||||||||||||||||||||||
| 2009 (a) | 2008 (b) | 2009 (c) | 2008 (d) | 2009(e) | 2008(f) | 2010 (g) | 2009 (h) | |||||||||||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Net sales
|
$ | 407,111 | $ | 716,760 | $ | 423,526 | $ | 834,669 | $ | 449,363 | $ | 726,756 | $ | 366,108 | $ | 501,514 | ||||||||||||||||
|
Gross profit
|
44,276 | 77,803 | 48,300 | 107,435 | 55,305 | 83,249 | 45,280 | 46,446 | ||||||||||||||||||||||||
|
Operating expenses:
|
||||||||||||||||||||||||||||||||
|
Selling, general and
administrative
|
56,587 | 78,637 | 54,015 | 79,827 | 55,396 | 70,617 | 52,460 | 64,064 | ||||||||||||||||||||||||
|
Net gain from
terminating the
Georgia-Pacific Supply
Agreement
|
— | — | (17,351 | ) | — | (203 | ) | — | (218 | ) | — | |||||||||||||||||||||
|
Gain from sale of
properties
|
— | — | (4,237 | ) | — | (169 | ) | — | (5,990 | ) | (1,936 | ) | ||||||||||||||||||||
|
Restructuring and
other charges
|
1,078 | 1,998 | 1,074 | 1,400 | — | 3,176 | — | 5,620 | ||||||||||||||||||||||||
|
Depreciation and
amortization
|
5,030 | 4,968 | 4,241 | 5,103 | 3,882 | 4,940 | 3,831 | 5,508 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Operating (loss) income
|
(18,419 | ) | (7,800 | ) | 10,558 | 21,105 | (3,601 | ) | 4,516 | (4,803 | ) | (26,810 | ) | |||||||||||||||||||
|
Non-operating expenses:
|
||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Interest expense
|
8,117 | 9,354 | 7,890 | 9,385 | 7,987 | 8,791 | 7,846 | 9,149 | ||||||||||||||||||||||||
|
Changes associated
with ineffective
interest rate swap,
net
|
4,832 | — | 1,078 | — | 1,431 | — | (1,089 | ) | — | |||||||||||||||||||||||
|
Prepayment fees
associated with
principal payments on
mortgage
|
— | — | 616 | — | — | — | — | 1,868 | ||||||||||||||||||||||||
|
Write-off of debt
issue costs
|
1,407 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Other (income) expense
|
(157 | ) | 130 | 315 | 190 | 324 | 65 | 37 | 216 | |||||||||||||||||||||||
|
(Benefit from)
provision for income
taxes
|
(1,301 | ) | (6,693 | ) | 31 | 4,931 | 120 | (1,746 | ) | (23,622 | ) | (14,105 | ) | |||||||||||||||||||
|
Tax valuation allowance
|
29,336 | — | — | — | — | — | — | 1,179 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Net (loss) income
|
$ | (60,653 | ) | $ | (10,591 | ) | $ | 628 | $ | 6,599 | $ | (13,463 | ) | $ | (2,594 | ) | $ | 12,025 | $ | (25,117 | ) | |||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Basic net (loss)
income per share
applicable to common
shares
|
$ | (1.95 | ) | $ | (0.34 | ) | $ | 0.02 | $ | 0.20 | $ | (0.44 | ) | $ | (0.08 | ) | $ | 0.37 | $ | (0.81 | ) | |||||||||||
|
Diluted net (loss)
income per share
applicable to common
shares
|
$ | (1.95 | ) | $ | (0.34 | ) | $ | 0.02 | $ | 0.20 | $ | (0.44 | ) | $ | (0.08 | ) | $ | 0.37 | $ | (0.81 | ) | |||||||||||
68
Table of Contents
| (a) | During the three months ended April 4, 2009, basic and diluted weighted average shares were 31,083,451. Total share-based awards of 2,748,826 were excluded from our diluted earnings per share calculation because they were anti-dilutive. | |
| (b) | During the three months ended March 29, 2008, basic and diluted weighted average shares were 30,927,815. Total share-based awards of 2,595,279 were excluded from our diluted earnings per share calculation because they were anti-dilutive. | |
| (c) | During the three months ended July 4, 2009, basic and diluted weighted average shares were 32,565,601 and 32,663,997, respectively. Total share-based awards of 928,315 were excluded from our diluted earnings per share calculation because they were anti-dilutive. | |
| (d) | During the three months ended June 29, 2008, basic and diluted weighted average shares were 32,408,620 and 32,497,620, respectively. Total share-based awards of 1,333,382 were excluded from our diluted earnings per share calculation because they were anti-dilutive. | |
| (e) | During the three months ended October 3, 2009, basic and diluted weighted average shares were 30,948,318. Total share-based awards of 2,671,158 were excluded from our diluted earnings per share calculation because they were anti-dilutive. | |
| (f) | During the three months ended September 27, 2008, basic and diluted weighted average shares were 31,150,522. Total share-based awards of 2,755,105 were excluded from our diluted earnings per share calculation because they were anti-dilutive. | |
| (g) | During the three months ended January 2, 2010, basic and diluted weighted average shares were 32,550,129 and 32,666,189, respectively. Total share-based awards of 928,315 were excluded from our diluted earnings per share calculation because they were anti-dilutive. | |
| (h) | During the three months ended January 3, 2009, basic and diluted weighted average shares were 31,163,973. Total share-based awards of 2,532,109 were excluded from our diluted earnings per share calculation because they were anti-dilutive. |
19. Supplemental Condensed Consolidating Financial Statements
The condensed consolidating financial information as of January 2, 2010 and January 3, 2009
and for fiscal 2009, fiscal 2008 and fiscal 2007 is provided due to restrictions in our revolving
credit facility that limit distributions by BlueLinx Corporation, our operating company and our
wholly-owned subsidiary, to us, which, in turn, may limit our ability to pay dividends to holders
of our common stock (see Note 10, Revolving Credit Facility, for a more detailed discussion of
these restrictions and the terms of the facility). Also included in the supplemental condensed
consolidated/combining financial statements are sixty-two single member limited liability
companies, which are wholly owned by us (the “LLC subsidiaries”). The LLC subsidiaries own certain
warehouse properties that are occupied by BlueLinx Corporation, each under the terms of a master
lease agreement. The warehouse properties collateralize a mortgage loan and are not available to
satisfy the debts and other obligations of either us or BlueLinx Corporation.
69
Table of Contents
The condensed consolidating statement of operations for BlueLinx Holdings Inc. for the fiscal
year ended January 2, 2010 follows (in thousands):
| BlueLinx | ||||||||||||||||||||
| BlueLinx | Corporation | LLC | ||||||||||||||||||
| Holdings | and Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
Net sales
|
$ | — | $ | 1,646,108 | $ | 29,916 | $ | (29,916 | ) | $ | 1,646,108 | |||||||||
|
Cost of sales
|
— | 1,452,947 | — | — | 1,452,947 | |||||||||||||||
|
|
||||||||||||||||||||
|
Gross profit
|
— | 193,161 | 29,916 | (29,916 | ) | 193,161 | ||||||||||||||
|
|
||||||||||||||||||||
|
Operating expenses (income):
|
||||||||||||||||||||
|
Selling, general and administrative
|
5,809 | 244,378 | (10,057 | ) | (29,916 | ) | 210,214 | |||||||||||||
|
Net gain from terminating the Georgia-Pacific supply agreement
|
— | (17,772 | ) | — | — | (17,772 | ) | |||||||||||||
|
Depreciation and amortization
|
— | 13,060 | 3,924 | — | 16,984 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total operating expenses (income)
|
5,809 | 239,666 | (6,133 | ) | (29,916 | ) | 209,426 | |||||||||||||
|
|
||||||||||||||||||||
|
Operating (loss) income
|
(5,809 | ) | (46,505 | ) | 36,049 | — | (16,265 | ) | ||||||||||||
|
Non-operating expenses:
|
||||||||||||||||||||
|
Interest expense
|
— | 13,223 | 19,233 | — | 32,456 | |||||||||||||||
|
Charges associated with ineffective
interest rate swap
|
— | 6,252 | — | — | 6,252 | |||||||||||||||
|
Write-off of debt issuance costs
|
— | 1,407 | — | — | 1,407 | |||||||||||||||
|
Other expense (income), net
|
— | 767 | (248 | ) | — | 519 | ||||||||||||||
|
|
||||||||||||||||||||
|
(Loss) income before (benefit from)
provision for income taxes
|
(5,809 | ) | (68,154 | ) | 17,064 | — | (56,899 | ) | ||||||||||||
|
(Benefit from) provision for income taxes
|
(2,261 | ) | 170 | 6,655 | — | 4,564 | ||||||||||||||
|
Equity in (loss) income of subsidiaries
|
(57,915 | ) | — | — | 57,915 | — | ||||||||||||||
|
|
||||||||||||||||||||
|
Net (loss) income
|
$ | (61,463 | ) | $ | (68,324 | ) | $ | 10,409 | $ | 57,915 | $ | (61,463 | ) | |||||||
|
|
||||||||||||||||||||
The condensed consolidating statement of operations for BlueLinx Holdings Inc. for the fiscal
year ended January 3, 2009 follows (in thousands):
| BlueLinx | ||||||||||||||||||||
| BlueLinx | Corporation | LLC | ||||||||||||||||||
| Holdings Inc. | and Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
Net sales
|
$ | — | $ | 2,779,699 | $ | 30,470 | $ | (30,470 | ) | $ | 2,779,699 | |||||||||
|
Cost of sales
|
— | 2,464,766 | — | — | 2,464,766 | |||||||||||||||
|
|
||||||||||||||||||||
|
Gross profit
|
— | 314,933 | 30,470 | (30,470 | ) | 314,933 | ||||||||||||||
|
|
||||||||||||||||||||
|
Operating expenses:
|
||||||||||||||||||||
|
Selling, general and administrative
|
4,191 | 329,199 | 483 | (30,470 | ) | 303,403 | ||||||||||||||
|
Depreciation and amortization
|
— | 16,180 | 4,339 | — | 20,519 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total operating expenses
|
4,191 | 345,379 | 4,822 | (30,470 | ) | 323,922 | ||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Operating (loss) income
|
(4,191 | ) | (30,446 | ) | 25,648 | — | (8,989 | ) | ||||||||||||
|
Non-operating expenses:
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Interest expense
|
— | 16,765 | 21,782 | — | 38,547 | |||||||||||||||
|
Other expense (income), net
|
— | 720 | (119 | ) | — | 601 | ||||||||||||||
|
|
||||||||||||||||||||
|
(Loss) income before (benefit from)
provision for income taxes
|
(4,191 | ) | (47,931 | ) | 3,985 | — | (48,137 | ) | ||||||||||||
|
(Benefit from) provision for income
taxes
|
(1,222 | ) | (16,766 | ) | 1,554 | — | (16,434 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Equity in loss of subsidiaries
|
(28,734 | ) | — | — | 28,734 | — | ||||||||||||||
|
|
||||||||||||||||||||
|
Net (loss) income
|
$ | (31,703 | ) | $ | (31,165 | ) | $ | 2,431 | $ | 28,734 | $ | (31,703 | ) | |||||||
|
|
||||||||||||||||||||
70
Table of Contents
The condensed consolidating statement of operations for BlueLinx Holdings Inc. for the fiscal
year ended December 29, 2007 follows (in thousands):
| BlueLinx | ||||||||||||||||||||
| BlueLinx | Corporation | LLC | ||||||||||||||||||
| Holdings Inc. | and Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
Net sales
|
$ | — | $ | 3,833,910 | $ | 30,470 | $ | (30,470 | ) | $ | 3,833,910 | |||||||||
|
Cost of sales
|
— | 3,441,964 | — | — | 3,441,964 | |||||||||||||||
|
|
||||||||||||||||||||
|
Gross profit
|
— | 391,946 | 30,470 | (30,470 | ) | 391,946 | ||||||||||||||
|
|
||||||||||||||||||||
|
Operating expenses:
|
||||||||||||||||||||
|
Selling, general and administrative
|
1,198 | 401,528 | 498 | (30,470 | ) | 372,754 | ||||||||||||||
|
Depreciation and amortization
|
— | 16,680 | 4,244 | — | 20,924 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total operating expenses
|
1,198 | 418,208 | 4,742 | (30,470 | ) | 393,678 | ||||||||||||||
|
|
||||||||||||||||||||
|
Operating (loss) income
|
(1,198 | ) | (26,262 | ) | 25,728 | — | (1,732 | ) | ||||||||||||
|
Non-operating expenses:
|
||||||||||||||||||||
|
Interest expense
|
— | 24,091 | 19,569 | — | 43,660 | |||||||||||||||
|
Other income, net
|
— | (111 | ) | (259 | ) | — | (370 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
(Loss) income before (benefit from)
provision for income taxes
|
(1,198 | ) | (50,242 | ) | 6,418 | — | (45,022 | ) | ||||||||||||
|
(Benefit from) provision for income
taxes
|
(471 | ) | (19,128 | ) | 2,522 | — | (17,077 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Equity in loss of subsidiaries
|
(27,218 | ) | — | — | 27,218 | — | ||||||||||||||
|
|
||||||||||||||||||||
|
Net (loss) income
|
$ | (27,945 | ) | $ | (31,114 | ) | $ | 3,896 | $ | 27,218 | $ | (27,945 | ) | |||||||
|
|
||||||||||||||||||||
71
Table of Contents
The condensed consolidating balance sheet for BlueLinx Holdings Inc. as of January 2, 2010
follows (in thousands):
| BlueLinx | ||||||||||||||||||||
| Corporation | ||||||||||||||||||||
| BlueLinx | and | LLC | ||||||||||||||||||
| Holdings Inc. | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
Assets:
|
||||||||||||||||||||
|
Current assets:
|
||||||||||||||||||||
|
Cash
|
$ | 32 | $ | 29,129 | $ | 296 | $ | — | $ | 29,457 | ||||||||||
|
Receivables
|
— | 119,347 | — | — | 119,347 | |||||||||||||||
|
Inventories
|
— | 173,185 | — | — | 173,185 | |||||||||||||||
|
Deferred income tax assets
|
275 | (910 | ) | — | 635 | — | ||||||||||||||
|
Other current assets
|
925 | 42,172 | 1,873 | — | 44,970 | |||||||||||||||
|
Intercompany receivable
|
63,905 | 5,793 | — | (69,698 | ) | — | ||||||||||||||
|
|
||||||||||||||||||||
|
Total current assets
|
65,137 | 368,716 | 2,169 | (69,063 | ) | 366,959 | ||||||||||||||
|
|
||||||||||||||||||||
|
Property and equipment:
|
||||||||||||||||||||
|
Land and land improvements
|
— | 3,134 | 49,487 | — | 52,621 | |||||||||||||||
|
Buildings
|
— | 7,494 | 88,651 | — | 96,145 | |||||||||||||||
|
Machinery and equipment
|
— | 69,767 | — | — | 69,767 | |||||||||||||||
|
Construction in progress
|
— | 791 | — | — | 791 | |||||||||||||||
|
|
||||||||||||||||||||
|
Property and equipment, at cost
|
— | 81,186 | 138,138 | — | 219,324 | |||||||||||||||
|
Accumulated depreciation
|
— | (59,030 | ) | (23,111 | ) | — | (82,141 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Property and equipment, net
|
— | 22,156 | 115,027 | — | 137,183 | |||||||||||||||
|
Investment in subsidiaries
|
(11,755 | ) | — | — | 11,755 | — | ||||||||||||||
|
Non-current deferred income
tax assets
|
— | 5,075 | 2,227 | (7,302 | ) | — | ||||||||||||||
|
Other non-current assets
|
— | 19,016 | 23,688 | — | 42,704 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total assets
|
$ | 53,382 | $ | 414,963 | $ | 143,111 | $ | (64,610 | ) | $ | 546,846 | |||||||||
|
|
||||||||||||||||||||
|
Liabilities:
|
||||||||||||||||||||
|
Current liabilities:
|
||||||||||||||||||||
|
Accounts payable
|
$ | 38 | $ | 64,580 | $ | — | $ | — | 64,618 | |||||||||||
|
Bank overdrafts
|
— | 27,232 | — | — | 27,232 | |||||||||||||||
|
Accrued compensation
|
16 | 4,863 | — | — | 4,879 | |||||||||||||||
|
|
||||||||||||||||||||
|
Deferred income tax liabilities
|
(635 | ) | — | — | 635 | — | ||||||||||||||
|
|
||||||||||||||||||||
|
Other current liabilities
|
— | 20,637 | 1,871 | — | 22,508 | |||||||||||||||
|
Intercompany payable
|
3,143 | 61,644 | 4,911 | (69,698 | ) | — | ||||||||||||||
|
|
||||||||||||||||||||
|
Total current liabilities
|
2,562 | 178,956 | 6,782 | (69,063 | ) | 119,237 | ||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Non-current liabilities:
|
||||||||||||||||||||
|
Long-term debt
|
— | 56,000 | 285,669 | — | 341,669 | |||||||||||||||
|
Non-current deferred income
tax liabilities
|
— | 2,524 | 4,778 | (7,302 | ) | — | ||||||||||||||
|
Other non-current liabilities
|
— | 35,120 | — | — | 35,120 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total liabilities
|
2,562 | 272,600 | 297,229 | (76,365 | ) | 496,026 | ||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Shareholders’ Equity/Parent’s
Investment
|
50,820 | 142,363 | (154,118 | ) | 11,755 | 50,820 | ||||||||||||||
|
|
||||||||||||||||||||
|
Total liabilities and equity
|
$ | 53,382 | $ | 414,963 | $ | 143,111 | $ | (64,610 | ) | $ | 546,846 | |||||||||
|
|
||||||||||||||||||||
72
Table of Contents
The condensed consolidating balance sheet for BlueLinx Holdings Inc. as of January 3, 2009
follows (in thousands):
| BlueLinx | ||||||||||||||||||||
| Corporation | ||||||||||||||||||||
| BlueLinx | and | LLC | ||||||||||||||||||
| Holdings Inc. | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
Assets:
|
||||||||||||||||||||
|
Current assets:
|
||||||||||||||||||||
|
Cash
|
$ | 32 | $ | 150,259 | $ | 62 | $ | — | $ | 150,353 | ||||||||||
|
Receivables
|
— | 130,653 | — | — | 130,653 | |||||||||||||||
|
Inventories
|
— | 189,482 | — | — | 189,482 | |||||||||||||||
|
Deferred income tax assets
|
290 | 11,578 | — | 11,868 | ||||||||||||||||
|
Other current assets
|
371 | 33,678 | 73 | — | 34,122 | |||||||||||||||
|
Intercompany receivable
|
40,146 | 6,041 | 3,229 | (49,416 | ) | — | ||||||||||||||
|
|
||||||||||||||||||||
|
Total current assets
|
40,839 | 521,691 | 3,364 | (49,416 | ) | 516,478 | ||||||||||||||
|
|
||||||||||||||||||||
|
Property and equipment:
|
||||||||||||||||||||
|
Land and land improvements
|
— | 3,103 | 50,323 | — | 53,426 | |||||||||||||||
|
Buildings
|
— | 7,497 | 88,662 | — | 96,159 | |||||||||||||||
|
Machinery and equipment
|
— | 70,491 | — | — | 70,491 | |||||||||||||||
|
Construction in progress
|
— | 2,035 | — | — | 2,035 | |||||||||||||||
|
|
||||||||||||||||||||
|
Property and equipment, at cost
|
— | 83,126 | 138,985 | — | 222,111 | |||||||||||||||
|
Accumulated depreciation
|
— | (50,150 | ) | (19,186 | ) | — | (69,336 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Property and equipment, net
|
— | 32,976 | 119,799 | — | 152,775 | |||||||||||||||
|
Investment in subsidiaries
|
68,858 | — | — | (68,858 | ) | — | ||||||||||||||
|
Non-current deferred income tax
assets
|
— | 18,045 | — | (577 | ) | 17,468 | ||||||||||||||
|
Other non-current assets
|
— | 22,168 | 20,289 | — | 42,457 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total assets
|
$ | 109,697 | $ | 594,880 | $ | 143,452 | $ | (118,851 | ) | $ | 729,178 | |||||||||
|
|
||||||||||||||||||||
|
Liabilities:
|
||||||||||||||||||||
|
Current liabilities:
|
||||||||||||||||||||
|
Accounts payable
|
$ | 117 | $ | 78,250 | $ | — | $ | — | 78,367 | |||||||||||
|
Bank overdrafts
|
— | 24,715 | — | — | 24,715 | |||||||||||||||
|
Accrued compensation
|
687 | 10,865 | — | — | 11,552 | |||||||||||||||
|
Current maturities of long-term debt
|
60,000 | — | — | 60,000 | ||||||||||||||||
|
Other current liabilities
|
— | 20,934 | 383 | — | 21,317 | |||||||||||||||
|
Intercompany payable
|
6,041 | 38,924 | 4,451 | (49,416 | ) | — | ||||||||||||||
|
|
||||||||||||||||||||
|
Total current liabilities
|
6,845 | 233,688 | 4,834 | (49,416 | ) | 195,951 | ||||||||||||||
|
|
||||||||||||||||||||
|
Non-current liabilities:
|
||||||||||||||||||||
|
Long-term debt
|
— | 96,000 | 288,870 | — | 384,870 | |||||||||||||||
|
Non-current deferred income tax
liabilities
|
— | — | 577 | (577 | ) | — | ||||||||||||||
|
Other non-current liabilities
|
— | 39,205 | 6,300 | — | 45,505 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total liabilities
|
6,845 | 368,893 | 300,581 | (49,993 | ) | 626,326 | ||||||||||||||
|
|
||||||||||||||||||||
|
Shareholders’ Equity/Parent’s
Investment
|
102,852 | 225,987 | (157,129 | ) | (68,858 | ) | 102,852 | |||||||||||||
|
|
||||||||||||||||||||
|
Total liabilities and equity
|
$ | 109,697 | $ | 594,880 | $ | 143,452 | $ | (118,851 | ) | $ | 729,178 | |||||||||
|
|
||||||||||||||||||||
73
Table of Contents
The condensed consolidating statement of cash flows for BlueLinx Holdings Inc. for the fiscal year
ended January 2, 2010 follows (in thousands):
| BlueLinx | BlueLinx | LLC | ||||||||||||||||||
| Holdings Inc. | Corporation | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
Cash flows from operating activities:
|
||||||||||||||||||||
|
Net (loss) income
|
$ | (61,463 | ) | $ | (68,324 | ) | $ | 10,409 | $ | 57,915 | $ | (61,463 | ) | |||||||
|
Adjustments to reconcile net (loss) income to cash
(used in) provided by operations:
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Depreciation and amortization
|
— | 13,059 | 3,925 | — | 16,984 | |||||||||||||||
|
Amortization of debt issue costs
|
— | 1,806 | 653 | — | 2,459 | |||||||||||||||
|
Net gain from terminating the Georgia-Pacific
supply agreement
|
— | (17,772 | ) | — | — | (17,772 | ) | |||||||||||||
|
Payments from terminating the Georgia-Pacific
supply agreement
|
— | 14,118 | — | — | 14,118 | |||||||||||||||
|
Gain from sale properties
|
— | (169 | ) | (10,228 | ) | — | (10,397 | ) | ||||||||||||
|
Prepayment penalty associated with sale of
facility
|
— | — | 616 | — | 616 | |||||||||||||||
|
Charges associated with ineffective interest
rate swap, net
|
— | 6,252 | — | — | 6,252 | |||||||||||||||
|
Write-off of debt issuance costs
|
— | 1,407 | — | — | 1,407 | |||||||||||||||
|
Vacant property charges, net
|
— | 1,222 | — | — | 1,222 | |||||||||||||||
|
Deferred income tax (benefit) provision
|
(620 | ) | 22,565 | 2,275 | — | 24,220 | ||||||||||||||
|
Share-based compensation expense
|
1,773 | 1,149 | — | — | 2,922 | |||||||||||||||
|
Increase in restricted cash related to the
ineffective interest swap, insurance, and other
|
— | (2,511 | ) | — | — | (2,511 | ) | |||||||||||||
|
Equity in earnings of subsidiaries
|
57,915 | — | — | (57,915 | ) | — | ||||||||||||||
|
Changes in assets and liabilities:
|
||||||||||||||||||||
|
Receivables
|
— | 11,306 | — | — | 11,306 | |||||||||||||||
|
Inventories
|
— | 16,297 | — | — | 16,297 | |||||||||||||||
|
Accounts payable
|
(79 | ) | (13,670 | ) | — | — | (13,749 | ) | ||||||||||||
|
Changes in other working capital
|
(1,225 | ) | (10,585 | ) | (1,773 | ) | — | (13,583 | ) | |||||||||||
|
Intercompany receivable
|
(1,039 | ) | 248 | 3,229 | (2,438 | ) | — | |||||||||||||
|
Intercompany payable
|
(2,898 | ) | — | 460 | 2,438 | — | ||||||||||||||
|
Other
|
— | 2,017 | (198 | ) | — | 1,819 | ||||||||||||||
|
|
||||||||||||||||||||
|
Net cash (used in) provided by operating activities
|
(7,636 | ) | (21,585 | ) | 9,368 | — | (19,853 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Cash flows from investing activities:
|
||||||||||||||||||||
|
Investment in subsidiaries
|
32,392 | — | — | (32,392 | ) | — | ||||||||||||||
|
|
||||||||||||||||||||
|
Property, plant and equipment investments
|
— | (1,815 | ) | — | — | (1,815 | ) | |||||||||||||
|
Proceeds from sale of assets
|
— | 2,027 | 12,424 | — | 14,451 | |||||||||||||||
|
|
||||||||||||||||||||
|
Net cash provided by (used in) investing activities
|
32,392 | 212 | 12,424 | (32,392 | ) | 12,636 | ||||||||||||||
|
|
||||||||||||||||||||
|
Cash flows from financing activities:
|
||||||||||||||||||||
|
Net transactions with Parent
|
— | (24,994 | ) | (7,398 | ) | 32,392 | — | |||||||||||||
|
Repurchase of common stock
|
(2,042 | ) | — | — | — | (2,042 | ) | |||||||||||||
|
Decrease in revolving credit facility
|
— | (100,000 | ) | — | — | (100,000 | ) | |||||||||||||
|
Payment of principal on mortgage
|
— | — | (3,201 | ) | — | (3,201 | ) | |||||||||||||
|
Prepayment fees associated with sale of facility
|
— | — | (616 | ) | — | (616 | ) | |||||||||||||
|
Increase in bank overdrafts
|
— | 2,517 | — | — | 2,517 | |||||||||||||||
|
Increase in restricted cash related to the mortgage
|
— | — | (10,296 | ) | (10,296 | ) | ||||||||||||||
|
Intercompany receivable
|
(22,720 | ) | — | — | 22,720 | — | ||||||||||||||
|
Intercompany payable
|
— | 22,720 | — | (22,720 | ) | — | ||||||||||||||
|
Other
|
6 | — | (47 | ) | — | (41 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Net cash (used in) provided by financing activities
|
(24,756 | ) | (99,757 | ) | (21,558 | ) | 32,392 | (113,679 | ) | |||||||||||
|
|
||||||||||||||||||||
|
(Decrease) increase in cash
|
— | (121,130 | ) | 234 | — | (120,896 | ) | |||||||||||||
|
Balance, beginning of period
|
32 | 150,259 | 62 | — | 150,353 | |||||||||||||||
|
|
||||||||||||||||||||
|
Balance, end of period
|
$ | 32 | $ | 29,129 | $ | 296 | $ | — | $ | 29,457 | ||||||||||
|
|
||||||||||||||||||||
|
Supplemental cash flow information:
|
||||||||||||||||||||
|
Net income tax refunds (income taxes paid) during
the period
|
$ | — | $ | 10,797 | $ | (498 | ) | $ | — | $ | 10,299 | |||||||||
|
|
||||||||||||||||||||
|
Interest paid during the period
|
$ | — | $ | 11,373 | $ | 16,915 | $ | — | $ | 28,288 | ||||||||||
|
|
||||||||||||||||||||
74
Table of Contents
The condensed consolidating statement of cash flows for BlueLinx Holdings Inc. for the fiscal
year ended January 3, 2009 follows (in thousands):
| BlueLinx | ||||||||||||||||||||
| Corporation | ||||||||||||||||||||
| BlueLinx | and | LLC | ||||||||||||||||||
| Holdings Inc. | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
Cash flows from operating activities:
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Net (loss) income
|
$ | (31,703 | ) | $ | (31,165 | ) | $ | 2,431 | $ | 28,734 | $ | (31,703 | ) | |||||||
|
Adjustments to reconcile net (loss) income to cash
(used in) provided by operations:
|
||||||||||||||||||||
|
Depreciation and amortization
|
— | 16,181 | 4,338 | — | 20,519 | |||||||||||||||
|
Amortization of debt issue costs
|
— | 1,839 | 640 | — | 2,479 | |||||||||||||||
|
Non-cash vacant property charges
|
— | 4,441 | — | — | 4,441 | |||||||||||||||
|
Deferred income tax benefit
|
(368 | ) | (1,445 | ) | (1,122 | ) | — | (2,935 | ) | |||||||||||
|
Prepayment fees associated with principal
payments on new mortgage
|
— | — | 1,868 | — | 1,868 | |||||||||||||||
|
Gain from sale of properties
|
— | — | (1,936 | ) | — | (1,936 | ) | |||||||||||||
|
Share-based compensation
|
1,482 | 1,132 | — | — | 2,614 | |||||||||||||||
|
Excess tax benefits from share-based compensation
arrangements
|
— | (81 | ) | — | — | (81 | ) | |||||||||||||
|
Increase in restricted cash related to the
interest swap, insurance, and other
|
— | (6,210 | ) | — | — | (6,210 | ) | |||||||||||||
|
Equity in earnings of subsidiaries
|
28,734 | — | — | (28,734 | ) | — | ||||||||||||||
|
Changes in assets and liabilities:
|
||||||||||||||||||||
|
Receivables
|
— | 132,523 | — | — | 132,523 | |||||||||||||||
|
Inventories
|
— | 146,405 | — | — | 146,405 | |||||||||||||||
|
Accounts payable
|
97 | (86,447 | ) | — | — | (86,350 | ) | |||||||||||||
|
Changes in other working capital
|
587 | 20,577 | (724 | ) | — | 20,440 | ||||||||||||||
|
Intercompany receivable
|
(751 | ) | (5,430 | ) | — | 6,181 | — | |||||||||||||
|
Intercompany payable
|
5,430 | — | 751 | (6,181 | ) | — | ||||||||||||||
|
Other
|
— | (11,539 | ) | (145 | ) | — | (11,684 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Net cash (used in) provided by operating activities
|
3,508 | 180,781 | 6,101 | — | 190,390 | |||||||||||||||
|
|
||||||||||||||||||||
|
Cash flows from investing activities:
|
||||||||||||||||||||
|
Investment in subsidiaries
|
17,288 | — | — | (17,288 | ) | — | ||||||||||||||
|
Property and equipment investments
|
— | (4,919 | ) | — | — | (4,919 | ) | |||||||||||||
|
Proceeds from disposition of assets
|
— | 1,211 | 4,693 | — | 5,904 | |||||||||||||||
|
|
||||||||||||||||||||
|
Net cash provided by (used in) investing activities
|
17,288 | (3,708 | ) | 4,693 | (17,288 | ) | 985 | |||||||||||||
|
|
||||||||||||||||||||
|
Cash flows from financing activities:
|
||||||||||||||||||||
|
Net transactions with Parent
|
— | (23,833 | ) | 6,545 | 17,288 | — | ||||||||||||||
|
Proceeds from stock options exercised
|
434 | — | — | — | 434 | |||||||||||||||
|
Excess tax benefits from stock-based compensation
arrangements
|
81 | — | — | — | 81 | |||||||||||||||
|
Decrease in revolving credit facility
|
— | (27,535 | ) | — | — | (27,535 | ) | |||||||||||||
|
Debt financing costs
|
— | — | (217 | ) | — | (217 | ) | |||||||||||||
|
Principal payments on new mortgage
|
— | — | (6,130 | ) | — | (6,130 | ) | |||||||||||||
|
Prepayment fees associated with principal payments
on new mortgage
|
— | — | (1,868 | ) | — | (1,868 | ) | |||||||||||||
|
Decrease in bank overdrafts
|
— | (12,437 | ) | — | — | (12,437 | ) | |||||||||||||
|
Increase in restricted cash related to the
mortgage
|
— | — | (9,119 | ) | — | (9,119 | ) | |||||||||||||
|
Intercompany receivable
|
(21,292 | ) | — | — | 21,292 | — | ||||||||||||||
|
|
||||||||||||||||||||
|
Intercompany payable
|
21,292 | — | (21,292 | ) | — | |||||||||||||||
|
|
||||||||||||||||||||
|
Other
|
10 | — | — | — | 10 | |||||||||||||||
|
|
||||||||||||||||||||
|
Net cash provided by (used in) financing activities
|
(20,767 | ) | (42,513 | ) | (10,789 | ) | 17,288 | (56,781 | ) | |||||||||||
|
|
||||||||||||||||||||
|
Increase in cash
|
29 | 134,560 | 5 | — | 134,594 | |||||||||||||||
|
Balance, beginning of period
|
3 | 15,699 | 57 | — | 15,759 | |||||||||||||||
|
|
||||||||||||||||||||
|
Balance, end of period
|
$ | 32 | $ | 150,259 | $ | 62 | $ | — | $ | 150,353 | ||||||||||
|
|
||||||||||||||||||||
|
Supplemental cash flow information:
|
||||||||||||||||||||
|
Net income tax refunds (income taxes paid) during
the period
|
$ | — | $ | 23,100 | $ | (338 | ) | $ | — | $ | 22,762 | |||||||||
|
|
||||||||||||||||||||
|
Interest paid during the period
|
$ | — | $ | 16,196 | $ | 20,658 | $ | — | $ | 36,854 | ||||||||||
|
|
||||||||||||||||||||
75
Table of Contents
The condensed consolidating statement of cash flows for BlueLinx Holdings Inc. for the fiscal
year ended December 29, 2007 follows (in thousands):
| BlueLinx | ||||||||||||||||||||
| Corporation | ||||||||||||||||||||
| BlueLinx | and | LLC | ||||||||||||||||||
| Holdings Inc. | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
Cash flows from operating activities:
|
||||||||||||||||||||
|
Net (loss) income
|
$ | (27,945 | ) | $ | (31,114 | ) | $ | 3,896 | $ | 27,218 | $ | (27,945 | ) | |||||||
|
Adjustments to reconcile net (loss) income to cash
(used in) provided by operations:
|
||||||||||||||||||||
|
Depreciation and amortization
|
— | 16,680 | 4,244 | — | 20,924 | |||||||||||||||
|
Amortization of debt issue costs
|
— | 1,806 | 625 | — | 2,431 | |||||||||||||||
|
Non-cash vacant property charges
|
— | 11,037 | — | — | 11,037 | |||||||||||||||
|
Deferred income tax benefit
|
(73 | ) | (8,621 | ) | (832 | ) | — | (9,526 | ) | |||||||||||
|
Gain from insurance settlement
|
— | (1,698 | ) | — | — | (1,698 | ) | |||||||||||||
|
Share-based compensation
|
— | 3,500 | — | — | 3,500 | |||||||||||||||
|
Excess tax benefits from share-based compensation
arrangements
|
— | (20 | ) | — | — | (20 | ) | |||||||||||||
|
Increase in restricted cash related to the
interest swap, insurance, and other
|
— | (4,770 | ) | — | — | (4,770 | ) | |||||||||||||
|
Equity in earnings of subsidiaries
|
27,218 | — | — | (27,218 | ) | — | ||||||||||||||
|
Changes in assets and liabilities:
|
||||||||||||||||||||
|
Receivables
|
— | 44,367 | — | — | 44,367 | |||||||||||||||
|
Inventories
|
— | 74,799 | — | — | 74,799 | |||||||||||||||
|
Accounts payable
|
— | (31,098 | ) | — | — | (31,098 | ) | |||||||||||||
|
Changes in other working capital
|
226 | (8,281 | ) | 4,350 | (2,506 | ) | (6,211 | ) | ||||||||||||
|
Intercompany receivable
|
293 | (611 | ) | — | 318 | — | ||||||||||||||
|
Intercompany payable
|
611 | (160 | ) | (2,639 | ) | 2,188 | — | |||||||||||||
|
Other
|
— | 4,085 | (33 | ) | — | 4,052 | ||||||||||||||
|
|
||||||||||||||||||||
|
Net cash (used in) provided by operating activities
|
330 | 69,901 | 9,611 | — | 79,842 | |||||||||||||||
|
|
||||||||||||||||||||
|
Cash flows from investing activities:
|
||||||||||||||||||||
|
Investment in subsidiaries
|
32,376 | — | — | (32,376 | ) | — | ||||||||||||||
|
Property and equipment investments
|
— | (11,424 | ) | (1,717 | ) | — | (13,141 | ) | ||||||||||||
|
Proceeds from disposition of assets
|
— | 4,071 | — | — | 4,071 | |||||||||||||||
|
|
||||||||||||||||||||
|
Net cash provided by (used in) investing activities
|
32,376 | (7,353 | ) | (1,717 | ) | (32,376 | ) | (9,070 | ) | |||||||||||
|
|
||||||||||||||||||||
|
Cash flows from financing activities:
|
||||||||||||||||||||
|
Net transactions with Parent
|
— | (24,482 | ) | (7,894 | ) | 32,376 | — | |||||||||||||
|
|
||||||||||||||||||||
|
Proceeds from stock options exercised
|
496 | — | — | — | 496 | |||||||||||||||
|
Excess tax benefits from stock-based compensation
arrangements
|
20 | — | — | — | 20 | |||||||||||||||
|
Decrease in revolving credit facility
|
— | (53,927 | ) | — | — | (53,927 | ) | |||||||||||||
|
Decrease in bank overdrafts
|
— | (13,089 | ) | — | — | (13,089 | ) | |||||||||||||
|
Common dividends paid
|
(15,591 | ) | — | — | — | (15,591 | ) | |||||||||||||
|
Intercompany receivable
|
(17,632 | ) | — | — | 17,632 | — | ||||||||||||||
|
Intercompany payable
|
— | 17,632 | — | (17,632 | ) | — | ||||||||||||||
|
Other
|
2 | — | 34 | — | 36 | |||||||||||||||
|
|
||||||||||||||||||||
|
Net cash (used in) provided by financing activities
|
(32,705 | ) | (73,866 | ) | (7,860 | ) | 32,376 | (82,055 | ) | |||||||||||
|
|
||||||||||||||||||||
|
Increase (decrease) in cash
|
1 | (11,318 | ) | 34 | — | (11,283 | ) | |||||||||||||
|
Balance, beginning of period
|
2 | 27,017 | 23 | — | 27,042 | |||||||||||||||
|
|
||||||||||||||||||||
|
Balance, end of period
|
$ | 3 | $ | 15,699 | $ | 57 | $ | — | $ | 15,759 | ||||||||||
|
|
||||||||||||||||||||
|
Supplemental cash flow information:
|
||||||||||||||||||||
|
Income taxes paid during the period
|
$ | — | $ | 777 | $ | 214 | $ | — | $ | 991 | ||||||||||
|
|
||||||||||||||||||||
|
Interest paid during the period
|
$ | — | $ | 22,658 | $ | 17,379 | $ | — | $ | 40,037 | ||||||||||
|
|
||||||||||||||||||||
76
Table of Contents
The condensed consolidating statement of shareholders’ equity for BlueLinx Holdings Inc. for
fiscal 2007, fiscal 2008 and fiscal 2009 follows (in thousands):
| BlueLinx | ||||||||||||||||||||
| Corporation | ||||||||||||||||||||
| BlueLinx | and | LLC | ||||||||||||||||||
| Holdings Inc. | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
Balance, December 30, 2006
|
$ | 189,399 | $ | 350,414 | $ | (162,107 | ) | $ | (188,307 | ) | $ | 189,399 | ||||||||
|
Net income (loss)
|
(27,945 | ) | (31,114 | ) | 3,896 | 27,218 | (27,945 | ) | ||||||||||||
|
Foreign currency translation adjustment, net of tax
|
1,912 | 1,912 | — | (1,912 | ) | 1,912 | ||||||||||||||
|
Unrealized net gain from pension plan, net of tax
|
5,856 | 5,856 | — | (5,856 | ) | 5,856 | ||||||||||||||
|
Unrealized loss from cash flow hedge, net of tax
|
(2,754 | ) | (2,754 | ) | — | 2,754 | (2,754 | ) | ||||||||||||
|
Unrealized loss from adoption of FIN 48, net of tax
|
(72 | ) | (72 | ) | — | 72 | (72 | ) | ||||||||||||
|
Proceeds from stock options exercised
|
496 | — | — | — | 496 | |||||||||||||||
|
Issuance of restricted stock
|
2 | — | — | — | 2 | |||||||||||||||
|
Excess tax benefits from share-based compensation
arrangements
|
20 | — | — | — | 20 | |||||||||||||||
|
Compensation expense related to share-based grants
|
3,500 | — | — | — | 3,500 | |||||||||||||||
|
Common stock dividends
|
(15,591 | ) | — | (15,591 | ) | |||||||||||||||
|
Net transactions with the parent
|
— | (20,982 | ) | (7,894 | ) | 28,876 | — | |||||||||||||
|
|
||||||||||||||||||||
|
Balance, December 29, 2007
|
$ | 154,823 | $ | 303,260 | $ | (166,105 | ) | $ | (137,155 | ) | $ | 154,823 | ||||||||
|
Net income (loss)
|
(31,703 | ) | (31,165 | ) | 2,431 | 28,734 | (31,703 | ) | ||||||||||||
|
Foreign currency translation adjustment, net of tax
|
(2,598 | ) | (2,598 | ) | — | 2,598 | (2,598 | ) | ||||||||||||
|
Unrealized net loss from pension plan, net of tax
|
(15,997 | ) | (15,997 | ) | — | 15,997 | (15,997 | ) | ||||||||||||
|
Unrealized loss from cash flow hedge, net of tax
|
(3,751 | ) | (3,751 | ) | — | 3,751 | (3,751 | ) | ||||||||||||
|
Proceeds from stock options exercised
|
434 | — | — | — | 434 | |||||||||||||||
|
Issuance of restricted stock
|
10 | — | — | — | 10 | |||||||||||||||
|
Excess tax benefits from share-based compensation
arrangements
|
81 | — | — | — | 81 | |||||||||||||||
|
Excess tax deficiencies from share-based
compensation arrangements
|
(1,061 | ) | — | — | — | (1,061 | ) | |||||||||||||
|
Compensation expense related to share-based grants
|
2,614 | — | — | — | 2,614 | |||||||||||||||
|
Net transactions with the parent
|
— | (23,762 | ) | 6,545 | 17,217 | — | ||||||||||||||
|
|
||||||||||||||||||||
|
Balance, January 3, 2009
|
$ | 102,852 | $ | 225,987 | $ | (157,129 | ) | $ | (68,858 | ) | $ | 102,852 | ||||||||
|
Net income (loss)
|
(61,463 | ) | (68,324 | ) | 10,409 | 57,915 | (61,463 | ) | ||||||||||||
|
Foreign currency translation adjustment, net of tax
|
1,173 | 1,173 | — | (1,173 | ) | 1,173 | ||||||||||||||
|
Unrealized net gain from pension plan, net of tax
|
941 | 941 | — | (941 | ) | 941 | ||||||||||||||
|
Unrealized gain from cash flow hedge, net of tax
|
6,431 | 6,431 | — | (6,431 | ) | 6,431 | ||||||||||||||
|
Issuance of restricted stock
|
6 | — | — | — | 6 | |||||||||||||||
|
Repurchase of restricted stock
|
(2,042 | ) | — | — | — | (2,042 | ) | |||||||||||||
|
Compensation expense related to share-based grants
|
2,922 | — | — | — | 2,922 | |||||||||||||||
|
Net transactions with the Parent
|
— | (23,845 | ) | (7,398 | ) | 31,243 | — | |||||||||||||
|
|
||||||||||||||||||||
|
Balance, January 2, 2010
|
$ | 50,820 | $ | 142,363 | $ | (154,118 | ) | $ | 11,755 | $ | 50,820 | |||||||||
|
|
||||||||||||||||||||
77
Table of Contents
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A.
CONTROLS AND PROCEDURES.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to
be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, and that such information is accumulated and
communicated to our management, including our chief executive officer and chief financial officer,
as appropriate, to allow timely decisions regarding required disclosure. Management necessarily
applied its judgment in assessing the costs and benefits of such controls and procedures that, by
their nature, can provide only reasonable assurance regarding management’s control objectives.
Our management performed an evaluation, as of the end of the period covered by this report on
Form 10-K, under the supervision of our chief executive officer and chief financial officer of the
effectiveness of the design and operation of our disclosure controls and procedures (as defined in
rule 13a-15(e) and 15d-15(e) of the Exchange Act). Based on that evaluation, our chief executive
officer and chief financial officer have concluded that our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms, and is accumulated and communicated to our
management including our chief executive officer and chief financial officer, to allow timely
decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting and the Report of Independent
Registered Public Accounting Firm thereon are set out in Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred during the fiscal quarter
ended January 2, 2010 that materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
The certifications of our Chief Executive Officer and Chief Financial Officer required by
Section 302 of the Sarbanes-Oxley Act of 2002 are filed as Exhibits 31.1 and 31.2 to this Annual
Report on Form 10-K. Additionally, as required by Section 303A.12 (a) of the NYSE Listed Company
Manual, our Chief Executive Officer filed a certification with the NYSE on June 15, 2009 reporting
that he was not aware of any violation by us of the NYSE’s Corporate Governance listing standards.
ITEM 9B.
OTHER INFORMATION.
None.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Certain information required by this Item is set forth in our definitive proxy statement for
the 2010 Annual Meeting of Shareholders of BlueLinx Holdings Inc. to be held on May 20, 2010, and
is incorporated herein by reference. Information regarding executive officers is included under
Item 1 of this report and is incorporated herein by reference.
78
Table of Contents
ITEM 11.
EXECUTIVE COMPENSATION.
The information required by this Item is set forth in our definitive proxy statement for the
2010 Annual Meeting of Shareholders of BlueLinx Holdings Inc. to be held on May 20, 2010, and is
incorporated herein by reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS.
The information required by this Item is set forth in our definitive proxy statement for the
2010 Annual Meeting of Shareholders of BlueLinx Holdings Inc. to be held on May 20, 2010, and is
incorporated herein by reference.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
The information required by this Item is set forth in our definitive proxy statement for the
2010 Annual Meeting of Shareholders of BlueLinx Holdings Inc. to be held on May 20, 2010, and is
incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this Item is set forth in our definitive proxy statement for the
2010 Annual Meeting of Shareholders of BlueLinx Holdings Inc. to be held on May 20, 2010, and is
incorporated herein by reference.
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) Financial Statements, Schedules and Exhibits
1.
Financial Statements.
The Financial Statements of BlueLinx Holdings Inc. and the Reports
of Independent Registered Public Accounting Firm are presented under Item 8 of this Form 10-K.
2.
Financial Statement Schedules.
Not applicable.
3.
Exhibits.
| Exhibit | ||||||
| Number | Item | |||||
| 3.1 |
Amended and Restated Certificate of Incorporation of BlueLinx
|
(A) | ||||
|
|
||||||
| 3.2 |
Amended and Restated By-Laws of BlueLinx
|
(A) | ||||
|
|
||||||
| 4.1 |
Registration Rights Agreement, dated as of May 7, 2004, by and among
BlueLinx and the initial holders specified on the signature pages
thereto
|
(C) | ||||
|
|
||||||
| 4.2 |
Letter Agreement, dated as of August 30, 2004, by and among BlueLinx,
Cerberus ABP Investor LLC, Charles H. McElrea, George R. Judd, David J.
Morris, James C. Herbig, Wayne E. Wiggleton and Steven C. Hardin
|
(C) | ||||
|
|
||||||
| 4.3 |
Investment Letter, dated March 10, 2004, between BlueLinx and Cerberus
ABP Investor LLC, as Purchaser of Common Stock
|
(B) | ||||
|
|
||||||
| 4.4 |
Investment Letter, dated May 7, 2004, between BlueLinx and Cerberus ABP
Investor LLC, as Purchaser of Common Stock
|
(B) | ||||
| 4.5 |
Executive Purchase Agreement dated May 7, 2004 by and among BlueLinx,
Cerberus ABP Investor LLC and Charles H. McElrea
|
(B) | ||||
|
|
||||||
| 4.6 |
Executive Purchase Agreement dated May 7, 2004 by and among BlueLinx,
Cerberus ABP Investor LLC and George R. Judd
|
(B) | ||||
|
|
||||||
| 10.1 |
Asset Purchase Agreement, dated as of March 12, 2004, by and among
Georgia-Pacific Corporation, Georgia-Pacific Building Materials Sales,
Ltd. and BlueLinx Corporation
|
(C) | ||||
|
|
||||||
| 10.2 |
First Amendment to Asset Purchase Agreement, dated as of May 6, 2004,
by and among Georgia-Pacific Corporation, Georgia-Pacific Building
Materials Sales, Ltd. and BlueLinx Corporation
|
(C) | ||||
79
Table of Contents
| Exhibit | ||||||
| Number | Item | |||||
| 10.3† |
Master Purchase, Supply and Distribution Agreement, dated May 7, 2004
by and between BlueLinx Corporation and Georgia-Pacific
|
(A) | ||||
|
|
||||||
| 10.4 |
BlueLinx Holdings Inc. 2004 Long Term Equity Incentive Plan
|
(C) | ||||
|
|
||||||
| 10.5 |
Form of Director and Officer Indemnification Agreement
|
(A) | ||||
|
|
||||||
| 10.6 |
BlueLinx Holdings Inc. Short-Term Incentive Plan (incorporated by
reference to Form 8-K filed with the Securities and Exchange Commission
on February 7, 2006)
|
|||||
|
|
||||||
| 10.7 |
BlueLinx Holdings Inc. 2006 Long-Term Equity Incentive Plan Restricted
Stock Award Agreement (incorporated by reference to Form 8-K filed with
the Securities and Exchange Commission on June 9, 2006)
|
|||||
|
|
||||||
| 10.8 |
BlueLinx Holdings Inc. 2006 Long-Term Equity Incentive Plan
Nonqualified Stock Option Award Agreement (incorporated by reference to
Form 8-K filed with the Securities and Exchange Commission on June 9,
2006)
|
|||||
|
|
||||||
| 10.9 |
Amended and Restated Master Lease Agreement, dated as of June 9, 2006,
by and between ABP AL (Midfield) LLC and the other parties identified
as landlords therein and BlueLinx Corporation as tenant (incorporated
by reference to Form 8-K filed with the Securities and Exchange
Commission on June 15, 2006)
|
|||||
|
|
||||||
| 10.10† |
Loan and Security Agreement, dated as of June 9, 2006, between the
entities set forth therein collectively as borrower and German American
Capital Corporation as Lender (incorporated by reference to Form 10-Q
filed with the Securities and Exchange Commission on November 6, 2009)
|
|||||
|
|
||||||
| 10.11 |
Guaranty of Recourse Obligations, dated as of June 9, 2006, by BlueLinx
Holdings Inc. for the benefit of German American Capital Corporation
(incorporated by reference to Form 8-K filed with the Securities and
Exchange Commission on June 15, 2006)
|
|||||
|
|
||||||
| 10.12 |
Environmental Indemnity Agreement, dated as of June 9, 2006, by
BlueLinx Holdings Inc. in favor of German American Capital Corporation
(incorporated by reference to Form 8-K filed with the Securities and
Exchange Commission on June 15, 2006)
|
|||||
|
|
||||||
| 10.13† |
Amended and Restated Loan and Security Agreement, dated August 4, 2006,
by and between BlueLinx Corporation, Wachovia and the other signatories
listed therein (incorporated by reference to Form 10-Q filed with the
Securities and Exchange Commission on November 6, 2009)
|
|||||
|
|
||||||
| 10.14† |
Letter Agreement, dated December 18, 2006, relating to and amending the
Master Purchase, Supply and Distribution Agreement between
Georgia-Pacific Corporation and BlueLinx Corporation dated May 7, 2004
(incorporated by reference to Form 8-K filed with the Securities and
Exchange Commission on December 22, 2006)
|
|||||
|
|
||||||
| 10.15 |
BlueLinx Holdings Inc. 2006 Long-Term Equity Incentive Plan Form of
Performance Share Award Agreement (incorporated by reference to Form
8-K filed with the Securities and Exchange Commission on April 4, 2007)
|
|||||
|
|
||||||
| 10.16 |
BlueLinx Holdings Inc. 2004 Long-Term Equity Incentive Plan Form of
Restricted Stock Award Agreement (incorporated by reference to Form 8-K
filed with the Securities and Exchange Commission on January 11, 2008)
|
|||||
|
|
||||||
| 10.17 |
Employment Agreement between BlueLinx Corporation and Howard D.
Goforth, dated February 11, 2008, effective February 18, 2008
(incorporated by reference to Form 8-K filed with the Securities and
Exchange Commission on February 15, 2008)
|
|||||
|
|
||||||
| 10.18 |
Employment Agreement between BlueLinx Corporation and George R. Judd,
dated October 29, 2008, effective November 1, 2008 (incorporated by
reference to Form 8-K filed with the Securities and Exchange Commission
on November 4, 2008)
|
|||||
80
Table of Contents
| Exhibit | ||||||
| Number | Item | |||||
| 10.19 |
Termination and Modification Agreement by and among BlueLinx
Corporation, BlueLinx Services, Inc., and Georgia-Pacific LLC, date
April 27, 2009 (incorporated by reference to Form 8-K filed with the
Securities and Exchange Commission April 29, 2009.
|
|||||
|
|
||||||
| 10.20 |
Settlement Agreement and General Release between Duane Goodwin and
BlueLinx Corporation dated March 27, 2009 (incorporated by reference to
Form 10-Q filed with the Securities and Exchange Commission on May 13,
2009)
|
|||||
|
|
||||||
| 10.21 |
Employment Agreement between BlueLinx Corporation and Dean A. Adelman,
dated June 4, 2009 (incorporated by reference to Form 8-K filed with
the Securities and Exchange Commission on June 8, 2009).
|
|||||
|
|
||||||
| 14.1 |
BlueLinx Code of Ethical Conduct (incorporated by reference to Exhibit
14 to Annual Report on Form 10-K for the year ended January 1, 2005,
filed with the Securities and Exchange Commission on March 22, 2005)
|
|||||
|
|
||||||
| 21.1 |
List of subsidiaries of the Company
|
* | ||||
|
|
||||||
| 23.1 |
Consent of Independent Registered Public Accounting Firm
|
* | ||||
|
|
||||||
| 31.1 |
Certification of George R. Judd, Chief Executive Officer, pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
* | ||||
|
|
||||||
| 31.2 |
Certification of Howard D. Goforth, Chief Financial Officer and
Treasurer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
* | ||||
|
|
||||||
| 32.1 |
Certification of George R. Judd, Chief Executive Officer, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
* | ||||
|
|
||||||
| 32.2 |
Certification of Howard D. Goforth, Chief Financial Officer and
Treasurer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
* | ||||
| * | Filed herewith. | |
| † | Portions of this document were omitted and filed separately with the SEC pursuant to a request for confidential treatment in accordance with Rule 24b-2 of the Exchange Act. | |
| (A) | Previously filed as an exhibit to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-118750) filed with the Securities and Exchange Commission on November 26, 2004. | |
| (B) | Previously filed as an exhibit to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-118750) filed with the Securities and Exchange Commission on October 8, 2004. | |
| (C) | Previously filed as an exhibit to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (Reg. No. 333-118750) filed with the Securities and Exchange Commission on October 1, 2004. |
81
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
| BLUELINX HOLDINGS INC. | ||||||
| (Registrant) | ||||||
|
|
||||||
|
|
By: |
/s/ George R. Judd
|
||||
|
|
President and Chief Executive Officer | |||||
Date: March 2, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
| Signature Name | Capacity | Date | ||
|
|
||||
|
/s/ George R. Judd
|
President and Chief Executive Officer and Director (Principal Executive Officer) | March 2, 2010 | ||
|
|
||||
|
/s/ Howard D. Goforth
|
Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) | March 2, 2010 | ||
|
|
||||
|
/s/ Scott T. Phillips
|
Chief Accounting Officer (Principal Accounting Officer) | March 2, 2010 | ||
|
|
||||
|
/s/ Howard S. Cohen
|
Chairman | March 2, 2010 | ||
|
|
||||
|
/s/ Richard S. Grant
|
Director | March 2, 2010 | ||
|
|
||||
|
/s/ Steven F. Mayer
|
Director | March 2, 2010 | ||
|
|
||||
|
/s/ Richard B. Marchese
|
Director | March 2, 2010 | ||
|
|
||||
|
/s/ Charles H. McElrea
|
Director | March 2, 2010 | ||
|
|
||||
|
/s/ Alan H. Schumacher
|
Director | March 2, 2010 | ||
|
|
||||
|
/s/ Mark A. Suwyn
|
Director | March 2, 2010 | ||
|
|
||||
|
/s/ Robert G. Warden
|
Director | March 2, 2010 | ||
|
|
||||
|
/s/ M. Richard Warner
|
Director | March 2, 2010 |
82
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. ReservedPart IIItem 5. Market For Registrant S Common Equity, Related Shareholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Shareholder MattersItem 13. Certain Relationships and Related Transactions and Director IndependenceItem 14. Principal Accounting Fees and ServicesPart IVItem 15. Exhibits, Financial Statement Schedules