BLUELINX HOLDINGS INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the quarterly period ended
July 4, 2015
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the transition period from _________________ to _________________
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Commission file number: 1-32383
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BlueLinx Holdings Inc.
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(Exact name of registrant as specified in its charter)
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Delaware
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77-0627356
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(State of Incorporation)
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(I.R.S. Employer Identification No.)
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4300 Wildwood Parkway, Atlanta, Georgia
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30339
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(Address of principal executive offices)
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(Zip Code)
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(770) 953-7000
(Registrant’s telephone number, including area code)
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
þ
No
o
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.
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
þ
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
o
No
þ
As of
August 13, 2015
there were
89,457,557
shares of BlueLinx Holdings Inc. common stock, par value $0.01, outstanding.
BLUELINX HOLDINGS INC.
Form 10-Q
For the Quarterly Period Ended
July 4, 2015
INDEX
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PAGE
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1
BLUELINX HOLDINGS INC.
COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share data)
(unaudited)
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Three Months Ended
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Six Months Ended
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||||||||||||||
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July 4, 2015
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July 5, 2014
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July 4, 2015
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July 5, 2014
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|||||||||||
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Net sales
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$
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515,656
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$
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531,494
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$
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970,605
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$
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975,438
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|||
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Cost of sales
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455,673
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469,461
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860,426
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860,729
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Gross profit
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59,983
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62,033
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110,179
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114,709
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Operating expenses:
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Selling, general, and administrative
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50,675
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54,925
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100,711
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107,122
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|||||||
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Gains from sales of property
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—
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(5,041
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)
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—
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(5,251
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)
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|||||||
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Depreciation and amortization
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2,438
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2,421
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4,716
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4,773
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Total operating expenses
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53,113
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52,305
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105,427
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106,644
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Net operating income
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6,870
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9,728
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4,752
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8,065
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Non-operating (income) expenses:
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Interest expense
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6,690
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6,859
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13,243
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13,313
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Other (income) expense, net
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29
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(40
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)
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387
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120
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Income (loss) before provision for (benefit from) income taxes
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151
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2,909
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(8,878
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)
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(5,368
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)
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|||||||
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Provision for (benefit from) income taxes
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(2,719
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)
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(327
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)
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(2,803
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)
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4
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|||||||
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Net income (loss)
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$
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2,870
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$
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3,236
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$
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(6,075
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)
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$
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(5,372
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)
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Weighted average common shares:
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|||||||||||||||
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Basic
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87,399
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85,874
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87,282
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85,531
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Diluted
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87,862
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86,472
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87,282
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85,531
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Basic and diluted net income (loss) per share applicable to common stock
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$
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0.03
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$
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0.04
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$
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(0.07
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)
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$
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(0.06
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)
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|||
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Comprehensive income (loss):
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Net income (loss)
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$
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2,870
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$
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3,236
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$
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(6,075
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)
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$
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(5,372
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)
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Other comprehensive income (loss):
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|||||||||||
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Foreign currency translation, net of tax
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(34
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)
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117
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(316
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)
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36
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Amortization of unrecognized pension loss, net of tax
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211
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267
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422
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232
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Pension curtailment, net of tax
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6,102
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—
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6,102
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—
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|||||||
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Total other comprehensive income
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6,279
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384
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6,208
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268
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Comprehensive income (loss)
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$
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9,149
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$
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3,620
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$
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133
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$
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(5,104
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)
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|||
See accompanying Notes.
2
BLUELINX HOLDINGS INC.
(In thousands, except share and per share data)
(unaudited)
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July 4, 2015
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January 3, 2015
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Assets:
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Current assets:
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Cash
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$
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2,844
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$
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4,522
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Receivables, net of allowances of $3.6 million and $3.1 million, respectively
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197,345
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144,537
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Inventories, net
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276,362
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242,546
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Other current assets
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31,680
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23,289
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Total current assets
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508,231
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414,894
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Property, plant, and equipment:
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Land and land improvements
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41,219
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41,095
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Buildings
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90,610
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90,161
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Machinery and equipment
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79,431
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77,279
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Construction in progress
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594
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1,188
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Property, plant, and equipment, at cost
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211,854
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209,723
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Accumulated depreciation
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(107,455
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)
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(104,456
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)
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Property, plant, and equipment, net
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104,399
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105,267
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Non-current deferred income tax assets, net
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501
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501
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Other non-current assets
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10,435
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18,320
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Total assets
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$
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623,566
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$
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538,982
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Liabilities:
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Current liabilities:
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Accounts payable
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$
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115,058
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$
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67,291
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Bank overdrafts
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11,852
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27,280
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Accrued compensation
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4,316
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5,643
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Current maturities of long-term debt
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203,142
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2,679
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Deferred income taxes, net
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518
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518
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Other current liabilities
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13,772
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13,831
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Total current liabilities
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348,658
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117,242
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Non-current liabilities:
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Long-term debt
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264,113
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403,274
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Pension benefit obligation
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31,956
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41,734
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Other non-current liabilities
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13,394
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12,758
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Total liabilities
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658,121
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575,008
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Stockholders’ deficit:
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Common Stock, $0.01 par value, Authorized - 200,000,000 shares; Issued - 89,521,404 and 88,748,638 shares, respectively
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896
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888
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Additional paid-in capital
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254,380
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253,051
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Accumulated other comprehensive loss
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(28,217
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)
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(34,425
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)
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|||
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Accumulated stockholders' deficit
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(261,614
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)
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(255,540
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)
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|||
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Total stockholders’ deficit
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(34,555
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)
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(36,026
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)
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|||
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Total liabilities and stockholders’ deficit
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$
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623,566
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$
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538,982
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See accompanying Notes.
3
BLUELINX HOLDINGS INC.
(In thousands)
(unaudited)
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Six Months Ended
July 4, 2015 |
Six Months Ended
July 5, 2014 |
|||||
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Cash flows from operating activities:
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|||||
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Net loss
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$
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(6,075
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)
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$
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(5,372
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)
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Adjustments to reconcile net loss to net cash used in operations:
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|||
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Depreciation and amortization
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4,716
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4,773
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|||
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Amortization of debt discount and issuance costs
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1,506
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1,689
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|||
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Gains from sales of property
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—
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(5,251
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)
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|||
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Severance charges
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853
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1,276
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|||
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Intraperiod income tax allocation related to pension plan
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(1,134
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)
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(150
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)
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|||
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Pension expense
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476
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450
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|||
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Share-based compensation expense
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1,181
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2,873
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|||
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Other
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(643
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)
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232
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|||
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Changes in operating assets and liabilities:
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|||
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Receivables, net
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(52,808
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)
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(55,209
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)
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|||
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Inventories, net
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(33,816
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)
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(44,064
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)
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|||
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Accounts payable
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47,767
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39,620
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|||
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Restructuring liability
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(519
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)
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(1,597
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)
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|||
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Restricted cash related to insurance and other
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(803
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)
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(701
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)
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Prepaid assets
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(1,650
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)
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(7,288
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)
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Accrued compensation and other assets and liabilities
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(5,298
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)
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390
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Net cash used in operating activities
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(46,247
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)
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(68,329
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)
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Cash flows from investing activities:
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Property, plant, and equipment investments
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(1,135
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)
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(1,253
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)
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|||
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Proceeds from sale of assets
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436
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7,213
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|||
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Net cash provided by (used in) investing activities
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(699
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)
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5,960
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|||
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Cash flows from financing activities:
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|||
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Repurchase of shares to satisfy employee tax withholdings
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(261
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)
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(894
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)
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|||
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Repayments on revolving credit facilities
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(187,394
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)
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(216,746
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)
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|||
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Borrowings from revolving credit facilities
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256,647
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290,023
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Principal payments on mortgage
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(8,534
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)
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(8,262
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)
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|||
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Payments on capital lease obligations
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(1,614
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)
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(1,176
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)
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|||
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Increase (decrease) in bank overdrafts
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(15,428
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)
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3,202
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Decrease (increase) in restricted cash related to the mortgage
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1,886
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(1,019
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)
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|||
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Debt financing costs
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(34
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)
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—
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|||
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Payments on stock offering, less expenses paid
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—
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(98
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)
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|||
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Net cash provided by financing activities
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45,268
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65,030
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Increase (decrease) in cash
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(1,678
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)
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2,661
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Cash balance, beginning of period
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4,522
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5,034
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|||
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Cash balance, end of period
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$
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2,844
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$
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7,695
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Supplemental Cash Flow Information
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|||||||
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Noncash investing and financing transactions:
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|||||||
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Equipment under capital leases
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$
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2,029
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$
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1,107
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Debt financing costs
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$
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1,252
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$
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201
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See accompanying Notes.
4
BLUELINX HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 4, 2015
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of BlueLinx Holdings Inc. and its wholly owned subsidiaries (the “Company”). All intercompany accounts have been eliminated in consolidation. These financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K together with Amendment No. 1 to the Annual Report on Form 10-K/A (the “Annual Report on Form 10-K”) for the year ended
January 3, 2015
, as filed with the Securities and Exchange Commission.
New Accounting Standards
In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11,
Inventory.
The ASU requires entities that measure inventory using methods including the average cost method to measure inventory at the lower of cost and net realizable value. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, and for interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of these provisions.
In April 2015, the FASB issued ASU 2015-03,
Interest - Imputation of Interest
. The ASU requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts or premiums. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. Early adoption is permitted. We do not expect that the adoption of these provisions will have a material effect on our consolidated financial statements.
In April 2015, the FASB issued ASU 2015-04,
Compensation - Retirement Benefits
. For entities with a fiscal year-end that does not coincide with a month-end, the ASU permits the entity to measure defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and apply that practical expedient consistently from year to year. ASU 2015-04 is effective for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. We plan to continue measuring the defined benefit plan assets and obligations at our fiscal year-end date.
In April 2015, the FASB issued ASU 2015-05,
Intangibles - Goodwill and Other - Internal-Use Software
. The ASU requires that entities with a cloud computing arrangement that includes a software license, account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the entity should account for the arrangement as a service contract. ASU 2015-05 is effective for fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. Early adoption is permitted. We do not expect that the adoption of these provisions will have a material effect on our consolidated financial statements.
Reclassifications
Certain amounts in the prior years’ consolidated financial statements and notes have been revised to conform to the current year presentation. During fiscal
2015
, we have separately detailed the “Pension Benefit Obligation”, which historically had been presented as “Other non-current liabilities” in the Condensed Consolidated Balance Sheets. To conform the historical presentation to the current presentation, we have separately detailed the “Pension Benefit Obligation” in prior periods from “Other non-current liabilities” in the Condensed Consolidated Balance Sheets.
Additionally, during fiscal
2015
, we reclassified certain amounts, which historically had been presented as “Debt financing costs” to “Borrowings from the revolving credit facilities” in cash flows from financing activities. To conform the historical presentation to the current presentation, we reclassified similar items in prior periods from “Debt financing costs” to “Borrowings from the revolving credit facilities” in cash flows from financing activities.
Also, during fiscal
2015
, we reclassified certain amounts, which historically had been presented as “Selling, general, and administrative” to “Gains from sales of property” in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). To conform the historical presentation to the current presentation, we reclassified similar items in prior periods from “Selling, general, and administrative” to “Gains from sales of property” in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).
5
2. Restructuring Charges
The table below summarizes the remaining balances of the reduction in force activities and the facility lease obligation reserve for the vacant Stockton, California property, which are included in “Other current liabilities” in the accompanying Condensed Consolidated Balance Sheet as of
July 4, 2015
, and the changes in the accrual, which is included in “Selling, general, and administrative” expenses in the accompanying Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the
six
months ended
July 4, 2015
(in thousands):
|
Reduction in
Force Activities
|
Facility Lease Obligation
|
Total Restructuring
|
|||||||||
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Balance at January 3, 2015
|
$
|
313
|
|
$
|
547
|
|
$
|
860
|
|
||
|
Adjustments to reserves
|
(8
|
)
|
8
|
|
—
|
|
|||||
|
Payments
|
(305
|
)
|
(214
|
)
|
(519
|
)
|
|||||
|
Balance at July 4, 2015
|
$
|
—
|
|
$
|
341
|
|
$
|
341
|
|
||
The Stockton, California, lease expires on January 1, 2016.
3. Employee Benefits
The following table shows the components of net periodic pension cost (in thousands):
|
Three Months Ended
July 4, 2015 |
|
Three Months Ended
July 5, 2014 |
|||||
|
Service cost
|
$
|
300
|
|
$
|
264
|
|
|
|
Interest cost on projected benefit obligation
|
1,250
|
|
1,280
|
|
|||
|
Expected return on plan assets
|
(1,523
|
)
|
(1,510
|
)
|
|||
|
Amortization of unrecognized loss
|
211
|
|
191
|
|
|||
|
Net periodic pension cost
|
$
|
238
|
|
$
|
225
|
|
|
|
Six Months Ended
July 4, 2015 |
Six Months Ended
July 5, 2014 |
||||||
|
Service cost
|
$
|
600
|
|
$
|
528
|
|
|
|
Interest cost on projected benefit obligation
|
2,500
|
|
2,560
|
|
|||
|
Expected return on plan assets
|
(3,046
|
)
|
(3,020
|
)
|
|||
|
Amortization of unrecognized loss
|
422
|
|
382
|
|
|||
|
Net periodic pension cost
|
$
|
476
|
|
$
|
450
|
|
|
As of fiscal year-end 2014, the Company determined that almost all of the participants in the pension plan were inactive. Accordingly, beginning in fiscal 2015, the Company began amortizing actuarial gains and losses over the estimated average remaining life expectancy of the inactive participants, rather than the estimated average remaining service period of the active participants.
During the first six months of fiscal 2015, we renegotiated our collective bargaining agreements with certain unionized locations. These collective bargaining agreements cover a number of specific items such as wages, medical coverage, and certain other benefit programs, including the pension plan. As a result of these renegotiations, a significant percentage of the participants in the plan are no longer accruing future years of service, which triggered a curtailment. The pension benefit obligation decreased
$7.2 million
as a result of changes in actuarial assumptions related to the curtailment, as recorded on the Condensed Consolidated Balance Sheets; along with an increase to accumulated other comprehensive income of
$6.1 million
(net of
$1.1 million
tax expense) recorded in other comprehensive income on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).
6
4. Fair Value Measurements
Carrying amounts for our financial instruments are not significantly different from their fair values, with the exception of our mortgage. To determine the fair value of our mortgage, we use a discounted cash flow model. We believe the mortgage fair value valuation to be Level 2 in the fair value hierarchy, as the valuation model has inputs that are observable for substantially the full term of the liability. As of
July 4, 2015
, the discounted carrying amount and fair value of our mortgage was
$169.2 million
and
$172.2 million
, respectively. The difference between the book value and the fair value is derived from the difference between the period-end market interest rate and the stated rate of our fixed-rate mortgage. The fair value of our debt is not indicative of the amounts at which we could settle our debt.
5. Earnings per Share
We calculate basic earnings per share by dividing net income by the weighted average number of common shares outstanding, excluding unvested restricted shares. We calculate diluted earnings per share by dividing net income by the weighted average number of common shares outstanding plus the dilutive effect of outstanding share-based awards, including stock options and restricted stock awards. Antidilutive common stock equivalents excluded from the diluted earnings per share calculation are not material. Due to year-to-date net losses, basic and diluted earnings per share are equivalent for the six months ended
July 4, 2015
and
July 5, 2014
.
The reconciliation of basic and diluted income per common share for the three months ended
July 4, 2015
and
July 5, 2014
was as follows (in thousands, except per share data):
|
Three Months Ended
July 4, 2015 |
Three Months Ended
July 5, 2014 |
||||||
|
Net income
|
$
|
2,870
|
|
$
|
3,236
|
|
|
|
Basic weighted shares outstanding
|
87,399
|
|
85,874
|
|
|||
|
Dilutive effect of share-based awards
|
463
|
|
598
|
|
|||
|
Diluted weighted average shares outstanding
|
87,862
|
|
86,472
|
|
|||
|
Basic earnings per share
|
$
|
0.03
|
|
$
|
0.04
|
|
|
|
Diluted earnings per share
|
$
|
0.03
|
|
$
|
0.04
|
|
|
7
6. Accumulated Other Comprehensive Loss
The following tables show the components of accumulated other comprehensive loss (in thousands):
|
Foreign currency translation, net
of tax
|
Defined
benefit pension
plan, net of tax
|
Other,
net of tax
|
Total Accumulated Other Comprehensive Income (Loss)
|
||||||||||||
|
January 3, 2015, beginning balance
|
$
|
1,155
|
|
$
|
(35,792
|
)
|
$
|
212
|
|
$
|
(34,425
|
)
|
|||
|
Other comprehensive income (loss), net of tax
|
(316
|
)
|
—
|
|
—
|
|
(316
|
)
|
|||||||
|
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
(1)
|
—
|
|
6,524
|
|
—
|
|
6,524
|
|
|||||||
|
July 4, 2015, ending balance, net of tax
|
$
|
839
|
|
$
|
(29,268
|
)
|
$
|
212
|
|
$
|
(28,217
|
)
|
|||
|
Foreign currency translation, net
of tax
|
Defined
benefit pension
plan, net of tax
|
Other,
net of tax
|
Total Accumulated Other Comprehensive Income (Loss)
|
||||||||||||
|
January 4, 2014, beginning balance
|
$
|
1,636
|
|
$
|
(18,141
|
)
|
$
|
212
|
|
$
|
(16,293
|
)
|
|||
|
Other comprehensive income (loss), net of tax
|
36
|
|
—
|
|
—
|
|
36
|
|
|||||||
|
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
(2)
|
—
|
|
232
|
|
—
|
|
232
|
|
|||||||
|
July 5, 2014, ending balance, net of tax
|
$
|
1,672
|
|
$
|
(17,909
|
)
|
$
|
212
|
|
$
|
(16,025
|
)
|
|||
|
(1)
|
For the six months ended
July 4, 2015
, there was
$0.4 million
of actuarial loss recognized in the statements of operations as a component of net periodic pension cost. There was
$6.1 million
(net of tax expense of
$1.1 million
) of unrecognized actuarial gain based on the pension curtailment (see Note 3). We allocated income tax expense to accumulated other comprehensive income (loss) to the extent the income was recorded in accumulated other comprehensive income (loss) and we have a loss in continuing operations.
|
|
(2)
|
For the six months ended July 5, 2014, there was
$0.2 million
(net of tax expense of
$0.2 million
) of actuarial loss recognized in the statements of operations as a component of net periodic pension cost. We allocated income tax expense to accumulated other comprehensive income (loss) to the extent the income was recorded in accumulated other comprehensive income (loss) and we have a loss in continuing operations.
|
7. Income Tax Expense (Benefit)
The effective tax rate is calculated by dividing our income tax expense (benefit) by income (loss) before provision for (benefit from) income taxes. Our effective income tax rates for the fiscal second quarters ended July 4, 2015 and July 5, 2014 were
(1,800.7)%
and
(11.2)%
, respectively. The effective income tax rates for the six months ended July 4, 2015 and July 5, 2014 were
31.6%
and
(0.1)%
, respectively.
The effective tax rate for the second quarter of fiscal 2015 was substantially due to an allocation of income tax expense to other comprehensive income (loss) for an actuarial gain associated with the curtailment of our pension plan which resulted in a benefit to continuing operations. Due to the income recognized in other comprehensive income for the pension curtailment during the second quarter of fiscal 2015, the intraperiod tax allocation rules require that we allocate income tax expense to other comprehensive income and recognize an income tax benefit in continuing operations even though our loss from continuing operations does not provide a current period incremental tax benefit due to our full valuation allowance at the beginning and end of the period.
The effective tax rate for the first six months of fiscal 2015 was due to the actuarial gain associated with the aforementioned curtailment of our pension plan for the fiscal second quarter 2015, and a full valuation allowance recorded against our tax benefit. The tax benefit to continuing operations for the second quarter of fiscal 2015 and the first six months of fiscal 2015 was partially offset by tax expense related to gross receipts, Canadian, and certain state taxes recorded on a separate company basis.
The effective tax rates for the second quarter and first six months of fiscal 2014 were largely due to a full valuation allowance recorded against our tax benefit related to our fiscal 2014 loss. Also, during the second quarter and first six months of fiscal 2014, we allocated income tax expense to other comprehensive income (loss) to the extent income was recorded in accumulated other comprehensive loss, resulting in a benefit to continuing operations.
8
8. Liquidity
A portion of our debt is classified as “Current maturities of long-term debt” on our Condensed Consolidated Balance Sheet as of July 4, 2015, since it is due within the next twelve months. These amounts consist of the May 1, 2016,
$35.0 million
payment due under the U.S. revolving credit facility, which is inclusive of the
$20.0 million
Tranche A Loan, which is otherwise due on June 30, 2016; and the balance of our mortgage of approximately
$169.2 million
as of July 4, 2015, of which
$166.7 million
is due in full on July 1, 2016. We are currently exploring various refinancing and other means to address these upcoming payments.
9
The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) has been derived from our historical financial statements and is intended to provide information to assist you in better understanding and evaluating our financial condition and results of operations. This MD&A section should be read in conjunction with our consolidated financial statements and notes to those statements included in Item 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the year ended
January 3, 2015
, as filed with the U.S. Securities and Exchange Commission (the “SEC”). This MD&A section is not a comprehensive discussion and analysis of our financial condition and results of operations, but rather updates disclosures made in the aforementioned filing.
The discussion below contains 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. These forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance, liquidity levels or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “plan,” “will be,” “will likely continue,” “will likely result” or words or phrases of similar meaning. All of these forward-looking statements are based on estimates and assumptions made by our management that, although believed by us to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental, and technological factors outside of our control; that may cause our business, strategy, or actual results to differ materially from the forward-looking statements. These risks and uncertainties may include those discussed under the heading “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended
January 3, 2015
, as filed with the SEC, and other factors, some of which may not be known to us. We operate in a changing environment in which new risks can emerge from time to time. It is not possible for management to predict all of these risks, nor can it assess the extent to which any factor, or a combination of factors, may cause our business, strategy, or actual results to differ materially from those contained in forward-looking statements. Factors you should consider that could cause these differences include, among other things:
|
•
|
changes in the prices, supply and/or demand for products which we distribute;
|
|
•
|
inventory management and commodities pricing;
|
|
•
|
new housing starts and inventory levels of existing homes for sale;
|
|
•
|
general economic and business conditions in the United States;
|
|
•
|
acceptance by our customers of our privately branded products;
|
|
•
|
financial condition and creditworthiness of our customers;
|
|
•
|
continuation of supply from our key vendors;
|
|
•
|
reliability of the technologies we utilize;
|
|
•
|
activities of competitors;
|
|
•
|
changes in significant operating expenses;
|
|
•
|
fuel costs;
|
|
•
|
risk of losses associated with accidents;
|
|
•
|
exposure to product liability claims;
|
|
•
|
changes in the availability of capital and interest rates;
|
|
•
|
adverse weather patterns or conditions;
|
|
•
|
acts of cyber intrusion;
|
|
•
|
variations in the performance of the financial markets, including the credit markets; and
|
|
•
|
other factors described herein and in Item 1A our Annual Report on Form 10-K for the year ended
January 3, 2015
, as filed with the SEC.
|
Given these risks and uncertainties, we caution you not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law.
Executive Level Overview
Background
We are a leading distributor of building products in North America. The Company is headquartered in Atlanta, Georgia, and we operate our distribution business through a current network of
48
distribution centers. We operate in all of the major metropolitan areas in the United States (“U.S.”). 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. Structural products represented approximately 40% of our
second
quarter of fiscal
2015
net sales. Specialty products include roofing, insulation,
10
moulding, engineered wood, vinyl products (used primarily in siding), outdoor living, and metal products (excluding rebar and remesh). Specialty products accounted for approximately 60% of our
second
quarter of fiscal
2015
net sales.
Industry Conditions
Many of the factors that cause our operations to fluctuate are seasonal or cyclical in nature.
Key Business Metrics
Net Sales
Net sales result primarily from the distribution of products to dealers, industrial manufacturers, manufactured housing producers, and home improvement retailers. All revenues recognized are net of trade allowances, cash discounts, and sales returns. In addition, we provide inventory to certain customers through pre-arranged agreements on a consignment basis. When consigned inventory is sold by the customer, we recognize revenue on a gross basis. Net sales may not be comparable year-over-year due to closed facilities, unusual weather patterns, and/or market-driven fluctuations in the prices of the inventories we sell.
Gross Profit
Gross profit primarily represents revenues less the product cost from our suppliers (net of earned rebates and discounts), including the cost of inbound freight. The cost of outbound freight, purchasing, receiving, and warehousing are included in selling, general, and administrative expenses within operating expenses. Our gross profit may not be comparable to that of other companies, as other companies may include some or all of the costs related to their distribution network in cost of sales. Market price fluctuations, particularly on structural products vulnerable to commodity price variability, may impact our gross profit.
Adjusted EBITDA
Adjusted EBITDA is an amount equal to net income (loss) plus interest expense and all interest expense related items (e.g., write-off of debt issuance costs, charges associated with mortgage refinancing), income taxes, depreciation and amortization, and further adjusted to exclude non-cash items and certain other adjustments to Consolidated Net Income (Loss). We present Adjusted EBITDA because it is a primary measure used by management to evaluate operating performance and helps to enhance investors’ overall understanding of the financial performance of our business. However, Adjusted EBITDA is not a presentation made in accordance with GAAP, and is not intended to present a superior measure of the financial condition from those determined under GAAP. Adjusted EBITDA, as used herein, is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation.
We believe Adjusted EBITDA is helpful in highlighting operating trends. We further believe that Adjusted EBITDA is frequently used by securities analysts, investors, and other interested parties in their evaluation of companies, many of which present an Adjusted EBITDA measure when reporting their results. We compensate for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than using GAAP results alone.
The Company's Adjusted EBITDA for the quarters ended
July 4, 2015
and
July 5, 2014
, and the first
six
months of fiscal
2015
and fiscal
2014
are shown in the following table:
|
Quarter Ended
|
Six Months Ended
|
|||||||||||||||
|
July 4, 2015
|
July 5, 2014
|
July 4, 2015
|
July 5, 2014
|
|||||||||||||
|
(Dollars in thousands)
(unaudited)
|
||||||||||||||||
|
Net income (loss)
|
$
|
2,870
|
|
$
|
3,236
|
|
$
|
(6,075
|
)
|
$
|
(5,372
|
)
|
||||
|
Adjustments:
|
||||||||||||||||
|
Depreciation and amortization
|
2,438
|
|
2,421
|
|
4,716
|
|
4,773
|
|
||||||||
|
Interest expense
|
6,690
|
|
6,859
|
|
13,243
|
|
13,313
|
|
||||||||
|
Provision for (benefit from) income taxes
|
(2,719
|
)
|
(327
|
)
|
(2,803
|
)
|
4
|
|
||||||||
|
Gain from the sale of properties
|
—
|
|
(5,041
|
)
|
—
|
|
(5,251
|
)
|
||||||||
|
Share-based compensation expense, excluding restructuring
|
519
|
|
637
|
|
1,135
|
|
1,327
|
|
||||||||
|
Restructuring, severance, debt fees, and other
|
(36
|
)
|
2,821
|
|
(65
|
)
|
2,821
|
|
||||||||
|
Adjusted EBITDA
|
$
|
9,762
|
|
$
|
10,606
|
|
$
|
10,151
|
|
$
|
11,615
|
|
||||
11
Results of Operations
The following table sets forth our results of operations for the
second
quarters of fiscal
2015
and
2014
:
|
|
Second Quarter of Fiscal 2015
|
% of
Net
Sales
|
Second Quarter of Fiscal 2014
|
% of
Net
Sales
|
|||||||
|
(Dollars in thousands)
(unaudited)
|
|||||||||||
|
Net sales
|
$
|
515,656
|
|
100.0%
|
$
|
531,494
|
|
100.0%
|
|||
|
Gross profit
|
59,983
|
|
11.6%
|
62,033
|
|
11.7%
|
|||||
|
Selling, general, and administrative
|
50,675
|
|
9.8%
|
54,925
|
|
10.3%
|
|||||
|
Gains from sales of property
|
—
|
|
—%
|
(5,041
|
)
|
(9.2)%
|
|||||
|
Depreciation and amortization
|
2,438
|
|
0.5%
|
2,421
|
|
0.5%
|
|||||
|
Net operating income
|
6,870
|
|
1.3%
|
9,728
|
|
1.8%
|
|||||
|
Interest expense
|
6,690
|
|
1.3%
|
6,859
|
|
1.3%
|
|||||
|
Other (income) expense, net
|
29
|
|
—%
|
(40
|
)
|
—%
|
|||||
|
Income before benefit from income taxes
|
151
|
|
0.0%
|
2,909
|
|
0.5%
|
|||||
|
Benefit from income taxes
|
(2,719
|
)
|
(0.5)%
|
(327
|
)
|
(0.1)%
|
|||||
|
Net income
|
$
|
2,870
|
|
0.6%
|
$
|
3,236
|
|
0.6%
|
|||
The following table sets forth our results of operations for the first six months of fiscal years
2015
and
2014
:
|
|
First Six Months of Fiscal 2015
|
% of
Net
Sales
|
First Six Months of Fiscal 2014
|
% of
Net
Sales
|
|||||||
|
(Dollars in thousands)
(unaudited)
|
|||||||||||
|
Net sales
|
$
|
970,605
|
|
100.0%
|
$
|
975,438
|
|
100.0%
|
|||
|
Gross profit
|
110,179
|
|
11.4%
|
114,709
|
|
11.8%
|
|||||
|
Selling, general, and administrative
|
100,711
|
|
10.4%
|
107,122
|
|
11.0%
|
|||||
|
Gains from sales of property
|
—
|
|
—%
|
(5,251
|
)
|
(0.5)%
|
|||||
|
Depreciation and amortization
|
4,716
|
|
0.5%
|
4,773
|
|
0.5%
|
|||||
|
Net operating income
|
4,752
|
|
0.5%
|
8,065
|
|
0.8%
|
|||||
|
Interest expense
|
13,243
|
|
1.4%
|
13,313
|
|
1.4%
|
|||||
|
Other expense, net
|
387
|
|
—%
|
120
|
|
—%
|
|||||
|
Loss before provision for (benefit from) income taxes
|
(8,878
|
)
|
(0.9)%
|
(5,368
|
)
|
(0.6)%
|
|||||
|
Provision for (benefit from) income taxes
|
(2,803
|
)
|
(0.3)%
|
4
|
|
—%
|
|||||
|
Net loss
|
$
|
(6,075
|
)
|
(0.6)%
|
$
|
(5,372
|
)
|
(0.6)%
|
|||
12
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 versus comparable prior periods:
|
Quarter Ended
|
Six Months Ended
|
||||||||||||||
|
July 4, 2015
|
July 5, 2014
|
July 4, 2015
|
July 5, 2014
|
||||||||||||
|
|
(Dollars in millions)
(unaudited)
|
||||||||||||||
|
Sales by category
|
|
|
|||||||||||||
|
Structural products
|
$
|
207
|
|
$
|
219
|
|
$
|
395
|
|
$
|
404
|
|
|||
|
Specialty products
|
313
|
|
317
|
|
587
|
|
581
|
|
|||||||
|
Other
(1)
|
(4
|
)
|
(4
|
)
|
(11
|
)
|
(10
|
)
|
|||||||
|
Total sales
|
$
|
516
|
|
$
|
532
|
|
$
|
971
|
|
$
|
975
|
|
|||
|
Sales variances $
|
|
|
|
|
|||||||||||
|
Unit volume $ change from prior year
|
$
|
(2
|
)
|
$
|
11
|
|
|||||||||
|
Price/other
(1)
|
(14
|
)
|
(16
|
)
|
|||||||||||
|
Total $ change
|
$
|
(16
|
)
|
$
|
(5
|
)
|
|||||||||
|
Sales variances %
|
|||||||||||||||
|
Unit volume % change from prior year
|
(0.4
|
)%
|
1.1
|
%
|
|||||||||||
|
Price/other
(1)
|
(2.6
|
)%
|
(1.6
|
)%
|
|||||||||||
|
Total % change
|
(3.0
|
)%
|
(0.5
|
)%
|
|||||||||||
|
(1)
|
“Other” includes unallocated allowances and discounts.
|
The following table sets forth changes in gross margin dollars and percentage changes by product category, and percentage changes in unit volume growth by product, versus comparable prior periods:
|
Quarter Ended
|
Six Months Ended
|
||||||||||||||
|
July 4, 2015
|
July 5, 2014
|
July 4, 2015
|
July 5, 2014
|
||||||||||||
|
(Dollars in millions)
(unaudited) |
|||||||||||||||
|
Gross profit by category
|
|||||||||||||||
|
Structural products
|
$
|
17
|
|
$
|
18
|
|
$
|
30
|
|
$
|
33
|
|
|||
|
Specialty products
|
42
|
|
44
|
|
78
|
|
78
|
|
|||||||
|
Other
(1)
|
1
|
|
—
|
|
2
|
|
4
|
|
|||||||
|
Total gross profit
|
$
|
60
|
|
$
|
62
|
|
$
|
110
|
|
$
|
115
|
|
|||
|
Gross margin % by category
|
|
|
|
|
|||||||||||
|
Structural products
|
8.0
|
%
|
8.2
|
%
|
7.7
|
%
|
8.2
|
%
|
|||||||
|
Specialty products
|
13.6
|
%
|
13.8
|
%
|
13.3
|
%
|
13.4
|
%
|
|||||||
|
Total gross margin %
|
11.6
|
%
|
11.7
|
%
|
11.4
|
%
|
11.8
|
%
|
|||||||
|
Unit volume change by product, from prior year
|
|
|
|
|
|
|
|
|
|||||||
|
Structural products
|
0.9
|
%
|
2.0
|
%
|
|||||||||||
|
Specialty products
|
(1.3
|
)%
|
0.5
|
%
|
|||||||||||
|
Total change in unit volume %
|
(0.4
|
)%
|
1.1
|
%
|
|||||||||||
|
(1)
|
“Other” includes unallocated allowances and discounts.
|
13
Second
Quarter of Fiscal
2015
Compared to
Second
Quarter of Fiscal
2014
Net sales.
For the
second
quarter of fiscal
2015
, net sales decreased
3.0%
, or
$16.0 million
. The decrease in sales was driven by a decrease in structural product prices. Structural sales volume increased slightly by
0.9%
, while structural product prices declined
6.5%
, primarily due to weakness in the lumber commodity markets. The pricing impact of these lower commodity prices was $13.0 million. Specialty sales decreased by $4.0 million or 1.3%, compared to the second quarter of fiscal 2014. Specialty sales were impacted by a decrease in unit volume of 1.3%.
Gross profit.
For the second quarter of fiscal
2015
, gross profit decreased by
3.3%
, or
$2.0 million
. The decrease was driven by lower unit volumes.
Selling, general, and administrative expenses.
Selling, general, and administrative expenses decreased
$4.3 million
compared to the second quarter of fiscal 2014. This decrease was impacted by a $2.6 million decrease in costs related to severance, restructuring, and litigation; and a $1.0 million decrease in fuel costs related to our fuel purchase commitment and lower market fuel prices.
Provision for (benefit from) income taxes.
Our effective tax rate was calculated by dividing our income tax benefit of
$2.7 million
by income before benefit from income taxes of
$0.2 million
, which resulted in an effective tax rate of
(1,800.7)%
for the second quarter of fiscal 2015. The unusual effective tax rate was substantially due to an allocation of income tax expense to other comprehensive income (loss) for an actuarial gain associated with the curtailment of our pension plan which resulted in a significant benefit to continuing operations. This tax benefit to continuing operations was partially offset by tax expense related to gross receipts, Canadian, and certain state taxes recorded on a separate company basis.
The effective tax rate for the second quarter of fiscal 2014 of
(11.2)%
was largely due to a full valuation allowance recorded against our tax benefit related to our fiscal 2014 loss. The effect of the valuation allowance was offset by state income taxes, gross receipts taxes, and foreign income taxes recorded on a separate company basis partially offset by various refundable tax credits. Also, during the second quarter of fiscal 2014, we allocated income tax expense to other comprehensive income (loss) to the extent income was recorded in accumulated other comprehensive loss, resulting in a benefit to continuing operations.
First Six Months of Fiscal 2015 Compared to First Six Months of Fiscal 2014
Net sales.
For the six months of fiscal
2015
, net sales decreased by 0.4%, or $4.8 million. The decrease in sales was driven by a decrease in structural product prices. Structural sales for the first six months of fiscal 2015 were affected by a 4.3% decline in structural product prices due to the weakness in lumber commodity markets, offset by an increase in unit volume of 2.0%. The pricing impact of these lower commodity prices in the first six months of fiscal 2015 was a decrease of $16.0 million. Specialty sales increased by $6.0 million or 1.0%, compared to the first six months of fiscal 2014. Specialty sales benefited by both an increase in unit volume of 0.5% and an increase in pricing and other changes of 0.5%.
Gross profit.
For the first six months of fiscal
2015
, gross profit decreased by 4.0%, or $4.5 million. The decrease was driven by lower unit volumes.
Selling, general, and administrative expenses.
Selling, general, and administrative expenses decreased $6.4 million compared to the first six months of fiscal 2014. This decrease was largely driven by a $2.5 million decrease in fuel costs resulting from our fuel purchase commitment and lower market fuel prices, in addition to a $2.7 million decrease in costs related to severance, restructuring, and litigation, for the year to date period.
Provision for (benefit from) income taxes.
Our effective tax rate was
31.6%
and
(0.1)%
for the first six months of fiscal 2015 and the first six months of fiscal 2014, respectively. The effective tax rate for the first six months of fiscal 2015 was largely due to the allocation of income tax expense to other comprehensive income (loss) for the actuarial gain associated with the curtailment of our pension plan which resulted in a benefit to continuing operations, as discussed above, as well as a full valuation allowance recorded against our tax benefit. The effective tax rate for the first six months of fiscal 2014 largely was due to a full valuation allowance recorded against our tax benefit related to our fiscal 2014 loss. Also, during the first six months of fiscal 2014, we allocated income tax expense to other comprehensive income (loss) to the extent income was recorded in accumulated other comprehensive loss, resulting in a benefit to continuing operations.
Seasonality
We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors common in the building products distribution industry. The first and fourth quarters are typically our slower quarters, due to the impact of poor weather on the construction market. Our second and third quarters are typically our stronger quarters, reflecting a substantial increase in construction due to more favorable weather conditions. Our 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.
14
Liquidity and Capital Resources
We expect our primary sources of liquidity to be cash flows from sales in the normal course of our operations, and borrowings under our revolving credit facilities, and we expect that these sources will fund our ongoing cash requirements for the foreseeable future. We believe that the amounts currently available from our revolving credit facilities and other sources will be sufficient to fund our routine operations for at least the next 12 months, excluding the May 1, 2016, $35.0 million payment due under the U.S. revolving credit facility, which is inclusive of the $20.0 million Tranche A Loan, and the balance of our mortgage due in full on July 1, 2016. These items are classified as “Current maturities of long-term debt” in our Condensed Consolidated Balance Sheet as of July 4, 2015. We are currently exploring various refinancing and other means to address these upcoming payments.
Revolving Credit Facilities
On August 4, 2006, we entered into the U.S. revolving credit facility which is held by Wells Fargo Bank, National Association, and other lenders (“U.S. revolving credit facility”), as later amended. On February 18, 2015, we refinanced our U.S. revolving credit facility, including the $20.0 million Tranche A Loan, with the Tenth Amendment to the U.S. revolving credit facility (the “Tenth Amendment”).
The Tenth Amendment extends the maturity date of the U.S. revolving credit facility to April 15, 2017; requires the refinancing, extension or replacement of our current mortgage on or before May 1, 2016, such that the maturity date of the new mortgage facility is no earlier than July 15, 2017; and requires the repayment of not less than $35.0 million by May 1, 2016, which must be paid from sources other than normal operations. This amount is classified in “Current maturities of long-term debt” in our Condensed Consolidated Balance Sheet as of July 4, 2015. “Sources other than normal operations” may include proceeds received from a mortgage refinancing, a rights offering, or other non-operating activities.
Additionally, the Tenth Amendment extends the final maturity date of the Tranche A Loan to June 30, 2016, with the principal amount decreasing by $2.0 million each month beginning on April 1, 2016, and payment of the remaining balance within the $35.0 million as referenced above. However, such decreases will not occur if, after giving effect to the applicable reduction, excess availability will be less than $50.0 million. The Tenth Amendment also amends the interest rate for the Tranche A Loan to begin increasing by 25 basis points each 90 days, beginning on April 1, 2015, with a maximum increase of 100 basis points; and increases our fixed charge coverage ratio requirement to 1.2 to 1.0 in certain situations while the Tranche A Loan is outstanding.
The U.S. revolving credit facility has a final maturity date of April 15, 2017, and maximum available credit of $467.5 million, which includes the $20.0 million Tranche A Loan. The $20 million Tranche A Loan is classified in “Current maturities of long-term debt” in our Condensed Consolidated Balance Sheet as of July 4, 2015. The U.S. revolving credit facility also includes an additional $75.0 million uncommitted accordion credit facility, which permits us to increase the maximum available credit up to $542.5 million.
Our subsidiary BlueLinx Building Products Canada Ltd. has a revolving credit agreement with Canadian Imperial Bank of Commerce (the “Canadian revolving credit facility”) due upon the earlier of August 12, 2016 or the maturity date of the U.S. revolving credit facility. The Canadian revolving credit facility has a maximum available credit of $10.0 million. The Canadian revolving credit facility also provides for an additional $5.0 million uncommitted accordion credit facility, which permits us to increase the maximum available credit up to $15.0 million.
As of
July 4, 2015
, we had outstanding borrowings of $300.0 million and excess availability of
$65.0 million
under the terms of these revolving credit facilities. We are in compliance with all covenants under these revolving credit facilities.
Mortgage
As of
July 4, 2015
, the balance on our mortgage loan was
$169.2 million
. This amount is classified in “Current maturities of long-term debt” in our Condensed Consolidated Balance Sheet as of July 4, 2015. The mortgage is secured by our owned distribution facilities. The mortgage carries a prepayment penalty of
approximately $1.0 million per month
through December 31, 2015. Principal payments of approximately $0.2 million are due monthly, with the remaining balance of the mortgage of approximately
$166.7 million
due on July 1, 2016. Under the terms of our mortgage, as amended, we are required to transfer certain funds to be held as cash collateral. This cash collateral may be used to prepay the mortgage. As of July 4, 2015, there was approximately
$4.2 million
in cash collateral, recorded in “Other current assets” on the Condensed Consolidated Balance Sheets. We are currently exploring various means to address the impending maturity of the mortgage.
15
Sources and Uses of Cash
Operating Activities
Net cash used in operating activities for the first
six
months of fiscal
2015
was
$46.2 million
, compared to net cash used in operating activities of
$68.3 million
in the first
six
months of fiscal
2014
. Net cash used in operations in the first six months of fiscal 2015 was primarily driven by decreases compared to the corresponding prior period of
$10.2 million
in inventories, and
$5.6 million
in prepaid expenses; and increases in accounts payable of
$8.1 million
, and
$5.7 million
in accrued compensation and other liabilities.
Investing Activities
Net cash used in investing activities for the first
six
months of fiscal
2015
was
$0.7 million
compared to net cash provided by investing activities of
$6.0 million
in the first
six
months of fiscal
2014
. The decrease was due to a lack of real estate sales in fiscal 2015 as compared to fiscal 2014. The 2014 net cash provided by investing activities included $6.9 million of proceeds related to the sale of the Portland, Oregon, distribution center in the first six months of fiscal 2014.
Financing Activities
Net cash provided by financing activities of
$45.3 million
for the first
six
months of fiscal
2015
reflected net borrowings on the revolving lines of credit of
$69.3 million
, offset by a decrease in bank overdrafts of
$15.4 million
. The net cash provided by financing activities of
$65.0 million
in the first
six
months of fiscal
2014
primarily was driven by net borrowings on the revolving lines of credit of $73.2 million, partially offset by principal payments on the mortgage of $8.3 million. We anticipate borrowings on our revolving lines of credit to fluctuate due to seasonal factors, with higher borrowings expected during the typically strong second and third quarters, and lower borrowings anticipated during the typically slower fourth and first quarters.
Working Capital
Working capital is an important measurement used in determining the efficiencies of our operations and our ability to readily convert assets into cash. The material components of working capital for us include accounts receivable, inventory, accounts payable, and bank overdrafts. The current portion of our long-term debt has been excluded due to the significant variance during the period resulting from amounts anticipated to be refinanced. Working capital management helps to ensure that we can maximize our return on assets and continue to invest in the operations for future growth.
Our working capital requirements reflect the seasonal nature of our business. Working capital components at
July 4, 2015
, compared to
January 3, 2015
, increased on a net basis due to increases in purchase volume associated with projected increased demand in the third quarter of fiscal 2015, and seasonal payment patterns. We anticipate the accounts receivable and inventory components of our working capital calculation will continue to fluctuate on a seasonal basis. Our inventories and receivables increased by
$33.8 million
and
$52.8 million
, respectively, as we move into our peak selling season.
Contractual Obligations
There have been no material changes to our contractual obligations from those disclosed above or in Item 7 of our Annual Report on Form 10-K for the fiscal year ended
January 3, 2015
.
Critical Accounting Policies
The preparation of our consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires our management to make judgments and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. There have been no material changes to our critical accounting policies from the information provided in Item 7 of our Annual Report on Form 10-K for the fiscal year ended
January 3, 2015
.
There have been no material changes in market risk from the information provided in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended
January 3, 2015
.
16
Our management performed an evaluation, as of the end of the period covered by this report on Form 10-Q, under the supervision of our chief executive officer and chief financial officer of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.
There were no changes in our internal controls over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
17
During the
second
quarter of fiscal
2015
, there were no material changes to our legal proceedings as disclosed in our Annual Report on Form 10-K for the year ended
January 3, 2015
. Additionally, we are, and from time to time may be, a party to routine legal proceedings incidental to the operation of our business. The outcome of any pending or threatened proceedings is not expected to have a material adverse effect on our financial condition, operating results, or cash flows, based on our current understanding of the relevant facts. Legal expenses incurred related to these contingencies are generally expensed as incurred.
There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended
January 3, 2015
, as filed with the SEC, except as discussed below:
Our common stock may be delisted from the New York Stock Exchange.
On July 29, 2015, the Company was notified by the New York Stock Exchange (“NYSE”) that the average closing price of the Company’s common stock had fallen below $1.00 per share over a period of 30 consecutive trading days, which is the minimum average share price for continued listing on the NYSE.
Although we intend to take actions designed to bring our stock price within the required compliance levels within the NYSE's specified time frame, we cannot assure that our plans will be successful within that time frame, or at all. Delisting would have an adverse effect on the liquidity of our common stock and, as a result, the market price for our common stock might decline. Delisting could also make it more difficult for us to raise additional capital. The Company intends to actively monitor the closing share price for its common stock and will consider available options, including equity-based actions, such as a reverse stock split, to resolve the deficiency and regain compliance.
On August 11, 2015, Ronald E. Kolka notified the Company of his decision to resign from the Board of Directors of the Company, effective immediately. Mr. Kolka’s decision to resign was not a result of any disagreement with the Company on any matter relating to the Company's operations, policies, or practices.
18
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
|
|
|
|
10.1
|
BlueLinx Holdings Inc. Executive Severance Plan (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on May 27, 2015).
|
|
|
10.2
|
Form of Executive Restrictive Covenant Agreement (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on May 27, 2015).
|
|
|
10.3
|
BlueLinx Holdings Inc. 2006 Long-Term Equity Incentive Plan Restricted Stock Unit Award Agreement for Executives and Employees (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on May 27, 2015).
|
|
|
10.4
|
Separation Agreement between Sara E. Epstein and BlueLinx Corporation, dated May 21, 2015 (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on May 27, 2015).
|
|
|
10.5
|
Separation Agreement between Robert P. McKagen and BlueLinx Corporation, dated June 16, 2015 (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on June 18, 2015).
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
101
|
|
The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended July 4, 2015, formatted in Extensible Business Reporting Language (“XBRL”): (i) Consolidated Statements of Operations and Comprehensive Loss, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows and (iv) Notes to Consolidated Financial Statements (Unaudited).
|
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
|
|
|
|
|
|
BlueLinx Holdings Inc.
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
Date: August 13, 2015
|
By:
|
/s/ Susan C. O’Farrell
|
|
|
|
|
Susan C. O’Farrell
|
|
|
|
|
Senior Vice President, Chief Financial Officer, Treasurer, and Principal Accounting Officer
|
|
20
|
EXHIBIT INDEX
|
||
|
Exhibit
Number
|
|
Description
|
|
10.1
|
BlueLinx Holdings Inc. Executive Severance Plan (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on May 27, 2015).
|
|
|
10.2
|
Form of Executive Restrictive Covenant Agreement (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on May 27, 2015).
|
|
|
10.3
|
BlueLinx Holdings Inc. 2006 Long-Term Equity Incentive Plan Restricted Stock Unit Award Agreement for Executives and Employees (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on May 27, 2015).
|
|
|
10.4
|
Separation Agreement between Sara E. Epstein and BlueLinx Corporation, dated May 21, 2015 (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on May 27, 2015).
|
|
|
10.5
|
Separation Agreement between Robert P. McKagen and BlueLinx Corporation, dated June 16, 2015 (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on June 18, 2015).
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
101
|
|
The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended July 4, 2015, formatted in Extensible Business Reporting Language (“XBRL”): (i) Consolidated Statements of Operations and Comprehensive Loss, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows and (iv) Notes to Consolidated Financial Statements (Unaudited).
|
21
TABLE OF CONTENTS
Part I. Financial InformationItem 1. Financial StatementsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II. Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 5. Other InformationItem 6. Exhibits