e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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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 |
For the quarterly period ended July 2, 2011
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 |
For the transition period from to
Commission file number: 1-32383
BlueLinx Holdings Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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77-0627356 |
(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 |
(Address of principal executive offices)
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(Zip Code) |
(770) 953-7000
(Registrants 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 small 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 þ
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Smaller reporting company o |
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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 5, 2011
there were 61,811,862 shares of BlueLinx Holdings Inc. common stock, par value
$0.01, outstanding.
BLUELINX HOLDINGS INC.
Form 10-Q
For the Quarterly Period Ended July 2, 2011
INDEX
2
PART I. FINANCIAL INFORMATION
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ITEM 1. |
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FINANCIAL STATEMENTS |
BLUELINX HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
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Second Quarter |
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Period from |
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Period from |
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April 3, 2011 |
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April 4, 2010 |
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to |
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to |
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July 2, 2011 |
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July 3, 2010 |
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Net sales |
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$ |
500,810 |
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$ |
540,781 |
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Cost of sales |
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443,165 |
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476,662 |
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Gross profit |
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57,645 |
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64,119 |
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Operating expenses: |
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Selling, general, and administrative |
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56,780 |
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57,089 |
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Depreciation and amortization |
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2,624 |
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3,434 |
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Total operating expenses |
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59,404 |
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60,523 |
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Operating (loss) income |
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(1,759 |
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3,596 |
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Non-operating expenses: |
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Interest expense |
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7,730 |
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8,205 |
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Changes associated with the ineffective interest rate swap |
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(1,256 |
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Other expense, net |
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134 |
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18 |
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Loss before provision for income taxes |
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(9,623 |
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(3,371 |
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Provision for income taxes |
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158 |
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36 |
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Net loss |
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$ |
(9,781 |
) |
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$ |
(3,407 |
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Basic and diluted weighted average number of common shares outstanding |
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31,063 |
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30,699 |
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Basic and diluted net loss per share applicable to common stock |
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$ |
(0.31 |
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$ |
(0.11 |
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See accompanying notes.
3
BLUELINX HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
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Six Months Ended |
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Period from |
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Period from |
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January 2, 2011 |
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January 3, 2010 |
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to |
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to |
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July 2, 2011 |
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July 3, 2010 |
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Net sales |
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$ |
891,414 |
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$ |
971,831 |
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Cost of sales |
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787,500 |
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855,434 |
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Gross profit |
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103,914 |
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116,397 |
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Operating expenses: |
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Selling, general, and administrative |
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105,227 |
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113,603 |
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Depreciation and amortization |
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5,561 |
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7,178 |
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Total operating expenses |
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110,788 |
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120,781 |
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Operating loss |
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(6,874 |
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(4,384 |
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Non-operating expenses: |
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Interest expense |
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16,791 |
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15,520 |
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Changes associated with the ineffective interest rate swap |
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(1,751 |
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(2,061 |
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Other expense, net |
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149 |
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251 |
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Loss before provision for income taxes |
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(22,063 |
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(18,094 |
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Provision for income taxes |
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44 |
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52 |
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Net loss |
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$ |
(22,107 |
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$ |
(18,146 |
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Basic and diluted weighted average number of common shares outstanding |
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30,953 |
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30,643 |
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Basic and diluted net loss per share applicable to common stock |
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$ |
(0.71 |
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$ |
(0.59 |
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See accompanying notes.
4
BLUELINX HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
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July 2, 2011 |
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January 1, 2011 |
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(unaudited) |
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Assets: |
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Current assets: |
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Cash and cash equivalents |
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$ |
6,109 |
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$ |
14,297 |
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Receivables, net |
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205,735 |
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119,202 |
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Inventories, net |
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212,654 |
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188,250 |
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Deferred income tax assets, net |
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59 |
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143 |
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Other current assets |
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62,902 |
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22,768 |
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Total current assets |
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487,459 |
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344,660 |
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Property, plant, and equipment: |
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Land and land improvements |
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51,968 |
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52,540 |
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Buildings |
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97,691 |
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96,720 |
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Machinery and equipment |
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74,495 |
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70,860 |
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Construction in progress |
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1,027 |
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2,028 |
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Property, plant, and equipment, at cost |
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225,181 |
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222,148 |
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Accumulated depreciation |
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(95,985 |
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(92,517 |
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Property, plant, and equipment, net |
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129,196 |
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129,631 |
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Other non-current assets |
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18,613 |
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50,728 |
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Total assets |
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$ |
635,268 |
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$ |
525,019 |
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Liabilities: |
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Current liabilities: |
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Accounts payable |
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$ |
95,322 |
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$ |
62,827 |
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Bank overdrafts |
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28,798 |
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23,089 |
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Accrued compensation |
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5,402 |
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4,594 |
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Current maturities of long-term debt |
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151,507 |
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1,190 |
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Other current liabilities |
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14,938 |
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16,792 |
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Total current liabilities |
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295,967 |
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108,492 |
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Non-current liabilities: |
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Long-term debt |
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323,072 |
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381,679 |
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Deferred income taxes, net |
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107 |
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192 |
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Other non-current liabilities |
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35,514 |
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33,665 |
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Total liabilities |
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654,660 |
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524,028 |
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Stockholders (Deficit) Equity: |
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Common Stock, $0.01 par value, 100,000,000
shares authorized; 33,243,238 and 32,667,504
shares issued at July 2, 2011 and January 1,
2011, respectively |
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332 |
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327 |
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Additional paid-in capital |
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148,567 |
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147,427 |
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Accumulated other comprehensive loss |
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(6,773 |
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(7,358 |
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Accumulated deficit |
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(161,518 |
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(139,405 |
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Total stockholders (deficit) equity |
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(19,392 |
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991 |
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Total liabilities and stockholders (deficit) equity |
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$ |
635,268 |
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$ |
525,019 |
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See accompanying notes.
5
BLUELINX HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
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Six Months Ended |
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Period |
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Period from |
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from January 2, |
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January 3, 2010 |
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2011 to |
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to |
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July 2, 2011 |
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July 3, 2010 |
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Cash flows from operating activities: |
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Net loss |
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$ |
(22,107 |
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$ |
(18,146 |
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Adjustments to reconcile net loss to net cash used in operations: |
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Depreciation and amortization |
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5,561 |
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7,178 |
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Amortization of debt issue costs |
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1,094 |
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379 |
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Payment from terminating the Georgia-Pacific supply agreement |
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4,706 |
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Gain from sale of properties |
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(7,222 |
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Changes associated with the ineffective interest rate swap |
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(1,751 |
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(2,061 |
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Deferred income tax benefit |
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(214 |
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(414 |
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Share-based compensation expense |
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1,137 |
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1,969 |
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Decrease in restricted cash related to the ineffective interest rate swap, insurance, and
other |
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432 |
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5,607 |
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Changes in assets and liabilities: |
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Receivables |
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(86,533 |
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(82,222 |
) |
Inventories |
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(24,404 |
) |
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(52,973 |
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Accounts payable |
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32,495 |
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38,860 |
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Changes in other working capital |
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(1,338 |
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18,538 |
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Other |
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1,804 |
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(2,295 |
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Net cash used in operating activities |
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(101,046 |
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(80,874 |
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Cash flows from investing activities: |
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Property, plant and equipment investments |
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(5,520 |
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(1,263 |
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Proceeds from disposition of assets |
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8,971 |
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656 |
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Net cash provided by (used in) investing activities |
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3,451 |
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(607 |
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Cash flows from financing activities: |
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Repurchase of common stock |
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(583 |
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Increase in borrowings from revolving credit facility |
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91,710 |
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68,687 |
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Payment on capital lease obligations |
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(197 |
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(473 |
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Increase in bank overdrafts |
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5,709 |
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9,880 |
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Increase in restricted cash related to the mortgage |
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(7,815 |
) |
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(6,581 |
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Debt financing costs |
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(91 |
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Other |
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6 |
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Net cash provided by financing activities |
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89,407 |
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70,845 |
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Decrease in cash |
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(8,188 |
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(10,636 |
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Balance, beginning of period |
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14,297 |
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29,457 |
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Balance, end of period |
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$ |
6,109 |
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$ |
18,821 |
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Noncash transactions: |
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Capital
leases |
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$ |
2,544 |
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$ |
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See accompanying notes.
6
BLUELINX HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 2, 2011
1. Basis of Presentation and Background
Basis of Presentation
BlueLinx Holdings Inc. has prepared the accompanying Unaudited Consolidated Financial
Statements, including its accounts and the accounts of its wholly-owned subsidiaries, in accordance
with the instructions to Form 10-Q and therefore they do not include all of the information and
notes required by United States generally accepted accounting principles (GAAP). These interim
financial statements should be read in conjunction with the financial statements and accompanying
notes included in our Annual Report on Form 10-K for the year ended January 1, 2011, as filed with
the Securities and Exchange Commission (SEC). Our fiscal year is a 52- or 53-week period ending
on the Saturday closest to the end of the calendar year. Fiscal year 2011 and fiscal year 2010 each
contain 52 weeks. BlueLinx Corporation is the wholly-owned operating subsidiary of BlueLinx
Holdings Inc. and is referred to herein as the operating subsidiary when necessary.
We believe the accompanying Unaudited Consolidated Financial Statements reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of
our financial position, results of operations and cash flows for the periods presented. The
preparation of the consolidated financial statements in conformity with GAAP requires us to make
estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements
and accompanying notes. Actual results could differ from those estimates and such differences could
be material. In addition, the operating results for interim periods may not be indicative of the
results of operations for a full year. We are exposed to fluctuations in quarterly sales volumes
and expenses due to seasonal factors, with the second and third quarters typically accounting for
the highest sales volumes. These seasonal factors are common in the building products distribution
industry.
We are a leading distributor of building products in North America with approximately 2,000
employees. We offer approximately 10,000 products from over 750 suppliers to service more than
11,500 customers nationwide, including dealers, industrial manufacturers, manufactured housing
producers and home improvement retailers. We operate our distribution business from sales centers
in Atlanta and Denver, and our network of approximately 60 distribution centers.
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 collectability 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 customers
delivery site.
All revenues are recorded at gross. The key indicators used to determine when and how revenue
is recorded are as follows:
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We are the primary obligor responsible for fulfillment and all other aspects
of the customer relationship. |
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Title passes to BlueLinx and we carry all risk of loss related to warehouse
and third-party (reload) inventory and inventory shipped directly from
vendors to our customers. |
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We are responsible for all product returns. |
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We control the selling price for all channels. |
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We select the supplier. |
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We bear all credit risk. |
7
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.
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 $50.0 million and $42.2 million at July 2, 2011 and January 1, 2011,
respectively. Restricted cash primarily includes amounts held in escrow related to our mortgage and
insurance for workers compensation, auto liability, and general liability. Restricted cash is
included in Other current assets and Other non-current assets on the accompanying Consolidated
Balance Sheets.
The table below provides the balances of each individual component in restricted cash as of
July 2, 2011 and January 1, 2011 (in thousands):
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July 2, |
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January 1, |
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2011 |
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2011 |
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Cash in escrow: |
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Mortgage* |
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$ |
38,349 |
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$ |
30,616 |
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Insurance |
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8,781 |
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|
9,430 |
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Other |
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2,422 |
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2,124 |
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Total |
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$ |
49,552 |
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$ |
42,170 |
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* |
|
As a condition of the amendment to the mortgage entered into
on July 14, 2011, discussed further in Footnote 13, Subsequent
Events, a payment of $38.3 million was made from cash held in escrow to settle the mortgage in July 2011. |
Allowance for Doubtful Accounts and Related Reserves
We evaluate the collectability 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 July 2, 2011 and January 1, 2011, these reserves totaled $5.4 million and $5.7 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 July 2, 2011 and January 1,
2011, the market value of our inventory exceeded its cost. Adjustments to earnings resulting from
revisions to lower of cost or market estimates have been insignificant.
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 July 2, 2011 and January 1, 2011, our damaged, excess and obsolete
inventory
reserves were $2.0 million and $1.7 million, respectively. Adjustments to earnings resulting
from revisions to damaged, excess and obsolete estimates have been insignificant.
8
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 reload
facilities; however, ownership remains with the vendor and risk of loss generally 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, price protection 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 July 2, 2011 and January 1, 2011, the vendor rebate receivable
totaled $7.0 million and $8.1 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 July 2, 2011 and January 1, 2011, the customer rebate payable totaled $8.0
million and $6.4 million, respectively. Adjustments to earnings resulting from revisions to rebate
estimates have been insignificant.
Loss per Common Share
We
calculate our basic loss per share by dividing net loss 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 and directors 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
stockholders. Given that the restricted stockholders do not have a contractual obligation to
participate in the losses and the inclusion of such unvested restricted shares in our basic and
dilutive per share calculations would be anti-dilutive, we have not included these amounts in our
weighted average number of common shares outstanding for periods in which we report a net loss.
Therefore, we have not included 2,163,956 and 2,011,365 of unvested restricted shares that had the
right to participate in dividends in our basic and dilutive calculations for the first six months
of fiscal 2011 and for the first six months of fiscal 2010, respectively.
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 using the treasury stock
method. 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
the second quarter of fiscal 2011 and for the first six months of fiscal 2011, we excluded
3,080,772 unvested share-based awards, respectively, from the diluted earnings per share
calculation because they were anti-dilutive. For the second quarter of fiscal 2010 and for the
first six months of fiscal 2010, we excluded 3,178,307 unvested share-based awards, respectively,
from the diluted earnings per share calculation because they were anti-dilutive.
9
Stock-Based Compensation
We have two stock-based compensation plans covering officers, directors, certain employees and
consultants: the 2004 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. During the first six months of fiscal 2011, the Compensation
Committee granted 618,972 restricted shares of our common stock to certain of our officers.
Restricted shares of 364,303 vested in the first six months of 2011 due to completion of the
vesting term.
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 Statements of Operations. For
the second quarter of fiscal 2011 and for the first six months of fiscal 2011, our total
stock-based compensation expense was $0.4 million and $1.1 million, respectively. For the second
quarter of fiscal 2010 and for the first six months of fiscal 2010, our total stock-based
compensation expense was $0.7 million and $1.9 million, respectively. We did not recognize related
income tax benefits during these periods.
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. In evaluating our ability to recover our
deferred income tax assets, we considered available positive and negative evidence, including our
past operating results, our ability to carryback losses against prior taxable income, the existence
of cumulative losses in the most recent years, our forecast of future taxable income and an excess
of appreciated assets over the tax basis of our net assets. In estimating future taxable income, we
developed 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 and
prudent tax planning strategies. These assumptions required significant judgment about the
forecasts of future taxable income. We considered all of the available positive and negative
evidence during the second quarter of fiscal 2011 and based on the weight of available evidence, we
recorded an additional deferred tax asset and valuation allowance of $3.6 million relating to our
current period net operating losses, which resulted in a total net deferred tax asset of $54.9
million with a valuation allowance of a corresponding amount as of July 2, 2011.
If the realization of deferred tax assets in the future is considered more likely than not, a
reduction to the valuation allowance related to the deferred tax assets would increase net income
in the period such determination is made. The amount of the deferred tax asset considered
realizable is based on significant estimates, and it is possible that changes in these estimates
could materially affect the financial condition and results of operations. Our effective tax rate
may vary from period to period based on changes in estimated taxable income or loss; changes to the
valuation allowance; changes to federal or state tax laws; and as a result of acquisitions.
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 in our Annual Report on Form 10-K for the year-ended January 1, 2011. There
have been nominal changes to our tax positions during the first six months of fiscal 2011.
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 consider whether there were indicators of potential impairment on a quarterly basis.
Indicators of impairment include current period losses combined with a history of losses,
managements 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.
10
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
facilitys undiscounted cash flows over the estimated useful life of the asset, which ranges
between 5-40 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. In the event that
undiscounted cash flows do not exceed the carrying value of a facility, our estimates of fair
market value are generally based on market appraisals and our experience with related market
transactions. We use a two year average of cash flows based on 2010 EBITDA and 2011 projected
EBITDA, which includes a small 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 the Consolidated Financial Statements included in our
Annual Report on Form 10-K for the fiscal year ended January 1, 2011.
Our results for the first six months of fiscal 2011 were negatively impacted by severe winter
weather and a decrease in housing starts when compared to the first six months of fiscal 2010. The
higher number of housing starts in the first six months of 2010 was due in part to the effect of
the housing tax credit expiration which expired in April of 2010. The reductions in volume and
operating income have not resulted in impairment indictors of a magnitude that would result in
reductions to our January 1, 2011 projected undiscounted cash flows, which exceeded our carrying
value in all cases during the performance of our January 1, 2011 impairment analysis.
During
the first quarter of fiscal 2011 our Newtown, CT facility was damaged
due to severe winter weather. As a result of this damage we
recognized an impairment of approximately $1.0 million related to the
damaged building, a loss related to the insurance deductible of $0.1
million and an insurance recovery of $1.0 million in selling, general
and administrative expenses during the first quarter. During the
second quarter of fiscal 2011 we recognized approximately $1.9
million of impairment related to damaged inventory and a
corresponding insurance recovery of the same amount in selling,
general and administrative expenses. The net impact to selling,
general and administrative expenses for the six month period ended
July 2, 2011 was a loss of $0.1 million, which represents the amount
of our insurance deductible. We recorded the recovery of such
losses at the time that the minimum expected proceeds under our
insurance policy became probable and estimable.
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, $0.8 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 July 2, 2011 and January 1, 2011, the self-insurance
reserves totaled $8.1 million and $7.6 million, respectively.
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 for
the first six months of fiscal 2011 and the first six months of fiscal 2010, and Other current
liabilities and Other non-current liabilities on the Consolidated Balance Sheets at July 2, 2011
and January 1, 2011.
11
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 for the first six months of
fiscal 2011 and the first six months of fiscal 2010, and in Accrued compensation on the
Consolidated Balance Sheets for the periods ended July 2, 2011 and January 1, 2011.
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. As of July 2, 2011 and January
1, 2011, there was no remaining accrued severance related to reduction in force initiatives
completed in fiscal 2007.
The table below summarizes the balance of accrued facility consolidation reserve
and changes in the accrual for the second quarter of fiscal 2011 (in thousands):
|
|
|
|
|
Balance at April 2, 2011 |
|
$ |
9,821 |
|
Payments |
|
|
(537 |
) |
Accretion of liability |
|
|
132 |
|
|
|
|
|
Balance at July 2, 2011 |
|
$ |
9,416 |
|
|
|
|
|
The table below summarizes the balance of accrued facility consolidation reserve
and changes in the accrual for the first six months of fiscal 2011 (in thousands):
|
|
|
|
|
Balance at January 1, 2011 |
|
$ |
10,227 |
|
Payments |
|
|
(1,074 |
) |
Accretion of liability |
|
|
263 |
|
|
|
|
|
Balance at July 2, 2011 |
|
$ |
9,416 |
|
|
|
|
|
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 and severance and outplacement costs of $1.0 million. In addition, we executed
other reduction in force initiatives which resulted in $4.2 million of severance. At July 2, 2011
and January 1, 2011, there was no remaining severance reserve.
The table below summarizes the balance of accrued facility consolidation reserve and changes
in the accrual for the second quarter of fiscal 2011 (in thousands):
|
|
|
|
|
Balance at April 2, 2011 |
|
$ |
40 |
|
Payments |
|
|
(76 |
) |
Sublease income |
|
|
46 |
|
|
|
|
|
Balance at July 2, 2011 |
|
$ |
10 |
|
|
|
|
|
The table below summarizes the balance of accrued facility consolidation reserve and changes
in the accrual for the first six months of fiscal 2011 (in thousands):
|
|
|
|
|
Balance at January 1, 2011 |
|
$ |
72 |
|
Payments |
|
|
(152 |
) |
Sublease income |
|
|
90 |
|
|
|
|
|
Balance at July 2, 2011 |
|
$ |
10 |
|
|
|
|
|
12
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 May of 2011, we terminated the lease via a termination payment of $0.4 million.
In addition, we recorded severance charges related to reduction in force initiatives of $1.8
million. There were no facility or severance reserves remaining as of July 2, 2011.
The table below summarizes the balances of the accrued facility consolidation and the changes
in the accruals for the second quarter of fiscal 2011 (in thousands):
|
|
|
|
|
Balance at April 2, 2011 |
|
$ |
484 |
|
Assumption Changes |
|
|
(99 |
) |
Payments |
|
|
(385 |
) |
|
|
|
|
Balance at July 2, 2011 |
|
$ |
0 |
|
|
|
|
|
The table below summarizes the balances of the accrued facility consolidation and the changes
in the accruals for the first six months of fiscal 2011 (in thousands):
|
|
|
|
|
Balance at January 1, 2011 |
|
$ |
523 |
|
Assumption Changes |
|
|
(95 |
) |
Payments |
|
|
(428 |
) |
|
|
|
|
Balance at July 2, 2011 |
|
$ |
0 |
|
|
|
|
|
2010 Severance Costs
During fiscal 2010, we had certain reduction in force activities, which resulted in severance
charges of $1.1 million.
The table below summarizes the balances of the accrued severance reserves and the changes in
the accruals for the second quarter of fiscal 2011 (in thousands):
|
|
|
|
|
Balance at April 2, 2011 |
|
$ |
486 |
|
Assumption Changes |
|
|
(191 |
) |
Payments |
|
|
(103 |
) |
|
|
|
|
Balance at July 2, 2011 |
|
$ |
192 |
|
|
|
|
|
The table below summarizes the balances of the accrued severance reserves and the changes in
the accruals for the first six months of fiscal 2011 (in thousands):
|
|
|
|
|
Balance at January 1, 2011 |
|
$ |
777 |
|
Assumption Changes |
|
|
(254 |
) |
Payments |
|
|
(331 |
) |
|
|
|
|
Balance at July 2, 2011 |
|
$ |
192 |
|
|
|
|
|
2011 Severance Costs
During fiscal 2011, we had certain reduction in force activities, which resulted in severance
charges of $0.5 million.
The table below summarizes the balances of the accrued severance reserves and the changes in
the accruals for the second quarter of fiscal 2011 (in thousands):
|
|
|
|
|
Balance at April 2, 2011 |
|
$ |
21 |
|
Charges |
|
|
345 |
|
Payments |
|
|
(258 |
) |
|
|
|
|
Balance at July 2, 2011 |
|
$ |
108 |
|
|
|
|
|
13
The table below summarizes the balances of the accrued severance reserves and the changes in
the accruals for the first six months of fiscal 2011 (in thousands):
|
|
|
|
|
Balance at January 1, 2011 |
|
$ |
|
|
Charges |
|
|
461 |
|
Payments |
|
|
(353 |
) |
|
|
|
|
Balance at July 2, 2011 |
|
$ |
108 |
|
|
|
|
|
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. At the time of designation, we
ceased recognizing depreciation expense on these assets. As of July 2, 2011 and January 1, 2011,
total assets held for sale were $2.2 million and $1.6 million respectively, and were included in
Other current assets in our Consolidated Balance Sheets. During the first six months of fiscal
2011, we sold certain real properties held for sale that resulted in a $7.2 million gain recorded
in Selling, general, and administrative expenses in the Consolidated Statements of Operations.
All of this activity occurred during the first quarter of 2011. We continue to actively market the
remaining properties that are held for sale. Due to the fact that, as of July 2, 2011 the remaining
properties are all primarily land, depreciation expense is not materially impacted.
5. Comprehensive Loss
The calculation of comprehensive loss is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
|
|
Period from |
|
|
Period from |
|
|
|
April 3, 2011 |
|
|
April 4, 2010 |
|
|
|
to |
|
|
to |
|
|
|
July 2, 2011 |
|
|
July 3, 2010 |
|
Net loss |
|
$ |
(9,781 |
) |
|
$ |
(3,407 |
) |
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
54 |
|
|
|
(742 |
) |
*Unrealized gain from cash flow hedge, net of taxes |
|
|
|
|
|
|
324 |
|
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(9,727 |
) |
|
$ |
(3,825 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
Period from |
|
|
Period from |
|
|
|
January 2, 2011 |
|
|
January 3, 2010 |
|
|
|
to |
|
|
to |
|
|
|
July 2, 2011 |
|
|
July 3, 2010 |
|
Net loss |
|
$ |
(22,107 |
) |
|
$ |
(18,146 |
) |
Other comprehensive income: |
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
351 |
|
|
|
345 |
|
*Unrealized gain from cash flow hedge, net of taxes |
|
|
234 |
|
|
|
649 |
|
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(21,522 |
) |
|
$ |
(17,152 |
) |
|
|
|
|
|
|
|
|
|
|
* |
|
For the second quarter of fiscal 2011 and for the first six months of fiscal 2011, the income
tax expense related to our interest rate swap was $0.0 million and $0.2 million, respectively. For
the second quarter of fiscal 2010 and the first six months of fiscal 2010, the income tax expense
related to our interest rate swap was $0.2 million and $0.4 million, respectively. |
14
6. Employee Benefits
Defined Benefit Pension Plans
Most of our hourly employees participate in noncontributory defined benefit pension plans.
These 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 are required to make a
$3.3 million contribution to the hourly pension plan in fiscal 2011, all of which will be
funded through a pre-funded balance. Benefits under the majority of plans for hourly employees (including multiemployer
plans) are primarily related to years of service.
Net periodic pension cost for our pension plans included the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
|
|
Period from April 3, |
|
|
Period from April 4, |
|
|
|
2011 to July 2, 2011 |
|
|
2010 to July 3, 2010 |
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
523 |
|
|
$ |
498 |
|
Interest cost on projected benefit obligation |
|
|
1,152 |
|
|
|
1,186 |
|
Expected return on plan assets |
|
|
(1,376 |
) |
|
|
(1,232 |
) |
Amortization of unrecognized loss |
|
|
145 |
|
|
|
123 |
|
|
|
|
|
|
|
|
Net periodic pension cost |
|
$ |
444 |
|
|
$ |
575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
Period from January 2, |
|
|
Period from January 3, |
|
|
|
2011 to July 2, 2011 |
|
|
2010 to July 3, 2010 |
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
1,046 |
|
|
$ |
996 |
|
Interest cost on projected benefit obligation |
|
|
2,304 |
|
|
|
2,372 |
|
Expected return on plan assets |
|
|
(2,753 |
) |
|
|
(2,464 |
) |
Amortization of unrecognized loss |
|
|
290 |
|
|
|
246 |
|
|
|
|
|
|
|
|
Net periodic pension cost |
|
$ |
887 |
|
|
$ |
1,150 |
|
|
|
|
|
|
|
|
7. Revolving Credit Facility
As of July 2, 2011, we had outstanding borrowings of $188.9 million and excess availability of
$94.0 million under the terms of our revolving credit facility. The interest rate on the revolving
credit facility was 4.3% at July 2, 2011. As of July 2, 2011 and January 1, 2011, we had
outstanding letters of credit totaling $2.5 million and $5.9 million, respectively, primarily for
the purposes of securing collateral requirements under the interest rate swap (which was terminated
in March of 2011), casualty insurance programs and for guaranteeing lease and certain other
obligations.
On July 7, 2010, we reached an agreement with Wells Fargo Bank, National Association,
successor by merger to Wachovia Bank, National Association, and the other signatories to our
existing revolving credit facility, dated August 4, 2006, as amended, to amend the terms thereof.
This amendment extends the date of final maturity of the facility to January 7, 2014 and decreases
the maximum availability under the agreement from $500 million to $400 million. This decrease does
not impact our current available borrowing capacity under the amended revolving credit facility
since the borrowing base, which is based on eligible accounts receivable and inventory, currently
permits less than $400 million in revolving credit facility borrowings. This amendment also
includes an additional $100 million uncommitted accordion credit facility, which will permit us to
increase the maximum borrowing capacity up to $500 million. As a result of reducing our maximum
borrowing capacity from $500 million to $400 million, we recorded expense of $0.2 million in fiscal
2010 for the write-off of the old debt issuance costs associated with the reduction in borrowing
capacity. We also incurred $6.5 million in new debt issuance costs, which we capitalized and will
continue to amortize to interest expense over the renewed debt term.
15
As of July 2, 2011, under the amended agreement, our revolving credit facility contains
customary negative covenants and restrictions for asset based loans. Our most significant covenant
is a requirement that we maintain a fixed charge ratio of 1.1 to 1.0 in the event our excess
availability falls below the greater of $40.0 million or the amount equal to 15% of the lesser of
the borrowing
base or $60.0 million (subject to increase to $75.0 million if we exercise the uncommitted
accordion credit facility in full) (the Excess Availability Threshold). The fixed charge ratio
is calculated as EBITDA divided by the sum of cash payments for income taxes, interest expense,
cash dividends, principal payments on debt, and capital expenditures. EBITDA is defined as
BlueLinx Corporations 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 amended revolving credit facility is less than the Excess
Availability Threshold for three consecutive business days. As of July 2, 2011 and through the time
of the filing of this Form 10-Q, we were in compliance with all covenants. We had $94.0 and $103.4
million of availability as of July 2, 2011 and January 1, 2011, respectively. Our lowest level of
fiscal month end availability in the last three years was $94.0 million as of July 2, 2011. We do
not anticipate our excess availability in fiscal 2011 will drop below the Excess Availability
Threshold. Should our excess availability fall below the Excess Availability Threshold for more
than three consecutive business days, however, we would not meet the required fixed charge ratio
with our current operating results. In addition, we must 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 the Excess Availability Threshold, excluding
unrestricted cash, for three consecutive business days or in the event of default. Our amended
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. On May 11, 2011, we entered into an amendment
to our revolving credit facility that revises certain of the
covenants described in this paragraph, which amendment became
effective subsequent to the fiscal quarter ended July 2, 2011. Refer to Footnote 13, Subsequent Events for additional discussion of this amendment.
On
June 24, 2011, we commenced a rights offering of our common stock to our stockholders, pursuant
to which we distributed to our common stockholders transferable rights to subscribe for and
purchase up to $60 million of our common stock. In conjunction with the rights offering, we
entered into an investment agreement with Cerberus ABP Investor LLC, which beneficially owns
approximately 55% of our common stock before giving effect to the rights offering, to backstop the
rights offering, subject to certain conditions, by purchasing shares of common stock that related
to any rights that remained unexercised at the expiration of the rights offering. The rights
offering, which expired on July 22, 2011, was fully subscribed
and resulted in gross proceeds of
approximately $60 million. The majority of the gross proceeds
from the rights offering of approximately $56 million
were used to pay down the revolving credit facility. We accounted for the rights issued as a
component of additional paid in capital as they were indexed to the
Companys equity and there were
no net cash settlement provisions.
As
of July 2, 2011, our current maturities of long-term debt related to the
revolving credit facility totaled $110.6 million and $78.3 million, respectively. As indicated
above, the majority of the proceeds from the rights offering were
used to pay down a large portion of the
revolving credit facility balance classified as current, subsequent
to the fiscal quarter ended July 2, 2011. A payment on the
revolving credit facility of $50.0 million was made on July 29, 2011 and an additional payment of
$6.0 million was made on August 1, 2011.
The remaining current
maturities of long-term debt related to the revolving credit facility
will be funded through seasonal working capital reductions.
We
believe that amounts available from our revolving credit facility
and other sources are sufficient to fund our routine operations and
capital requirements for the next twelve months. If economic
conditions, especially those related to the housing market, do not
improve, we may need to seek additional sources of capital to support
our operations.
8. 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 and both lenders securitized their Notes in separate commercial mortgage
backed securities pools in 2006. Subsequent to the quarter ended July 2, 2011, an amendment to the
above agreement was executed. Refer to Footnote 13 Subsequent Events for additional discussion of
this amendment.
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 |
|
$ |
39,572 |
* |
2012 |
|
|
2,658 |
|
2013 |
|
|
2,881 |
|
2014 |
|
|
3,072 |
|
2015 |
|
|
3,018 |
|
Thereafter |
|
|
234,211 |
|
|
|
|
* |
|
Payment of $38.3 million was made subsequent to the fiscal
quarter ended July 2, 2011, utilizing cash held in escrow. |
Subsequent to the fiscal quarter ended July 2, 2011, we entered into an amendment to the
mortgage as described below in Footnote 13 Subsequent Events.
16
9. 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 was terminated in March of 2011. The interest rate swap had a
notional amount of $150.0 million and the terms called 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.
During fiscal 2009, we reduced our borrowings under the revolving credit facility by $100.0
million, which reduced outstanding debt below the interest rate swaps 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. 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 swaps notional amount of $150.0 million,
which was during the first quarter of fiscal 2009. The remaining accumulated other comprehensive
income was amortized over the life of the interest rate swap to interest expense.
Changes associated with the ineffective interest rate swap recognized in the Consolidated
Statements of Operations for the period from January 1, 2011 to July 2, 2011 was approximately $1.8
million of income and are comprised of amortization of the remaining accumulated other
comprehensive loss of the ineffective swap of $0.4 million offset by income of $2.2 million related
to reducing the fair value of the ineffective interest rate swap liability to zero. Due to the
termination of the swap in the first quarter of 2011, there was no such activity for the quarter
ended July 2, 2011. Changes associated with the ineffective interest rate swap recognized in the
Consolidated Statements of Operations for the period from January 3, 2010 to July 3, 2010 were
approximately $2.1 million of income and are comprised of amortization of the remaining accumulated
other comprehensive loss over the life of the ineffective swap of $1.1 million offset by income of
$3.1 million related to current year changes in the fair value of the ineffective interest rate
swap liability. Changes associated with the ineffective interest rate swap recognized in the
Consolidated Statements of Operations for the period April 4, 2010 to July 3, 2010 were
approximately $1.3 million of income and are comprised of amortization of the remaining accumulated
other comprehensive loss over the life of the ineffective swap of $0.5 million offset by income of
$1.8 million related to current year changes in the fair value of the ineffective interest rate
swap liability.
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 July 2, 2011 (in
thousands):
|
|
|
|
|
Balance at January 1, 2011 |
|
$ |
444 |
|
Amortization of accumulated other comprehensive loss recorded to interest expense |
|
|
(444 |
) |
|
|
|
|
Balance at July 2, 2011 |
|
$ |
|
|
|
|
|
|
The fair value of our swap liability at January 1, 2011 was $2.2 million.
10. 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).
17
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. The interest rate swap was terminated in March of fiscal 2011.
The following table presents a reconciliation of the level 3 interest rate swap liability
measured at fair value on a recurring basis as of July 2, 2011 (in thousands):
|
|
|
|
|
Fair value at January 1, 2011 |
|
$ |
(2,195 |
) |
Realized gains included in earnings, net |
|
|
2,195 |
|
|
|
|
|
Fair value at July 2, 2011 |
|
$ |
|
|
|
|
|
|
The $2.2 million realized gain is included in Changes associated with ineffective interest
rate swap in the Consolidated Statements of Operations for the six month period ended July 2,
2011.
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 July 2, 2011, the carrying value
and fair value of our mortgage was $285.7 million and $276.7 million, respectively.
11. 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 at arms length terms and are not material to our results of
operations or financial position.
On April 26, 2011, we entered into an investment agreement with Cerberus ABP Investor LLC
(Cerberus) in connection with our rights offering, which expired on July 22, 2011. Pursuant to
the investment agreement, Cerberus agreed to purchase from us, unsubscribed shares of our
common stock, after the other stockholders had exercised their basic subscription rights and
over-subscription privileges in connection with the rights offering, such that gross proceeds of
the rights offering would be no less than $60.0 million. The price per share paid by Cerberus for
such common stock under the investment agreement was equal to the subscription price paid in the
rights offering by all stockholders. As a result of the rights offering, Cerberus purchased only
its pro rata share of the common stock issued in the rights offering.
12. Commitments and Contingencies
Legal Proceedings
During the first six months of fiscal 2011, there were no material changes to our previously
disclosed legal proceedings. 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.
18
Environmental and Legal Matters
From time to time, we are involved in various proceedings incidental to our businesses and we
are subject to a variety of environmental and pollution control laws and regulations in all
jurisdictions in which we operate. Although the ultimate outcome of these proceedings cannot be
determined with certainty, based on presently available information management believes that
adequate reserves have been established for probable losses with respect thereto. 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
As of July 2, 2011, approximately 30% of our total work force is covered by collective
bargaining agreements. Collective bargaining agreements representing approximately 8% of our work
force have expired or will expire within one year.
13. Subsequent Events
On May 10, 2011, we entered into an amendment to our revolving credit facility, which became
effective on July 29, 2011, following the successful completion of the rights offering (see
Footnote 7 Revolving Credit Facility for more information regarding the rights offering). The
amendment to the revolving credit facility (i) reduced the excess liquidity we are required to
maintain under the revolving credit facility to the greater of $35 million or the amount equal to
15% of the lesser of our borrowing base or $400 million, (ii) increased the amount of our accounts
receivable included in the calculation of the borrowing base to 87.5%, (iii) increased the
applicable percentage of the liquidation value of our inventory included in the calculation of the
borrowing base to 90% for the periods January to March 2012 and January to March 2013, subject to
specified EBITDA targets, (iv) included in the calculation of our excess liquidity certain cash on
the balance sheet and subject to a deposit account control agreement, and (v) decreased the amount
of excess liquidity we are required to maintain in order to avoid being required to meet certain
financial ratios and triggering additional limits on capital expenditures under the revolving
credit facility to the greater of $30 million or the amount equal to 15% of the lesser of our
borrowing base or $400 million.
On July 14, 2011, we entered into an amendment to the mortgage which (i) eliminated the
requirement to obtain lender approval for any transfer of equity interests that would reduce
Cerberus ABP Investor LLCs ownership in the Company and certain of our subsidiaries, directly or
indirectly, to less than 51%, (ii) provided for the immediate prepayment of $38.3 million of the
indebtedness under the mortgage without incurring a prepayment premium from funds currently held as
collateral under the mortgage and, if certain conditions are met, will allow for an additional
prepayment on or after July 30, 2014 from funds held as collateral without incurrence of a
prepayment premium, (iii) allow us, at the lenders reasonable discretion, to use a portion of the
cash held as collateral under the mortgage for specified alterations, repairs, replacements and
other improvements to the mortgaged properties, and (iv) in the event certain financial conditions
are met and the Company extends the Amended and Restated Master Lease by and among certain of our
subsidiaries with respect to properties covered by the mortgage for an additional five years, we
may request the lenders to disburse to the Company a portion of the cash held as collateral under
the mortgage.
On July 22, 2011, the unexercised rights issued
in connection with our rights offering,
commenced on June 24, 2011, expired. As of that date, the rights offering was fully subscribed
and, as a result, the backstop provisions with Cerberus, described in Footnote 7, were not
utilized. We received cash proceeds of approximately $60 million, and issued 28.6 million shares of common
stock on July 28, 2011.
We used approximately $56 million of the gross proceeds from the
rights offering to repay outstanding amounts under the revolving
credit facility.
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.
14. Unaudited Supplemental Consolidating Financial Statements
The condensed consolidating financial information as of July 2, 2011 and January 1, 2011 and
for the second quarters and first half of fiscal 2011 and fiscal 2010 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 our Annual Report on Form 10-K for the year ended
January 1, 2011, for a more detailed discussion of these restrictions and the terms of the
facility). Also included in the supplemental condensed consolidated 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.
19
The consolidating statement of operations for BlueLinx Holdings Inc. for the period from April
3, 2011 to July 2, 2011 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
Holdings |
|
|
and |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
500,810 |
|
|
$ |
7,429 |
|
|
$ |
(7,429 |
) |
|
$ |
500,810 |
|
Cost of sales |
|
|
|
|
|
|
443,165 |
|
|
|
|
|
|
|
|
|
|
|
443,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
57,645 |
|
|
|
7,429 |
|
|
|
(7,429 |
) |
|
|
57,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
1,387 |
|
|
|
62,822 |
|
|
|
|
|
|
|
(7,429 |
) |
|
|
56,780 |
|
Depreciation and amortization |
|
|
|
|
|
|
1,663 |
|
|
|
961 |
|
|
|
|
|
|
|
2,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,387 |
|
|
|
64,485 |
|
|
|
961 |
|
|
|
(7,429 |
) |
|
|
59,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(1,387 |
) |
|
|
(6,840 |
) |
|
|
6,468 |
|
|
|
|
|
|
|
(1,759 |
) |
Non-operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
2,980 |
|
|
|
4,750 |
|
|
|
|
|
|
|
7,730 |
|
Changes associated with ineffective interest rate swap |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense, net |
|
|
|
|
|
|
133 |
|
|
|
1 |
|
|
|
|
|
|
|
134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before (benefit from) provision for income
taxes |
|
|
(1,387 |
) |
|
|
(9,953 |
) |
|
|
1,717 |
|
|
|
|
|
|
|
(9,623 |
) |
(Benefit from) provision for income taxes |
|
|
706 |
|
|
|
122 |
|
|
|
(670 |
) |
|
|
|
|
|
|
158 |
|
Equity in loss of subsidiaries |
|
|
(7,688 |
) |
|
|
|
|
|
|
|
|
|
|
7,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(9,781 |
) |
|
$ |
(10,075 |
) |
|
$ |
2,387 |
|
|
$ |
7,688 |
|
|
$ |
(9,781 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The consolidating statement of operations for BlueLinx Holdings Inc. for the period from
April 4, 2010 to July 3, 2010 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
Holdings |
|
|
and |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
540,781 |
|
|
$ |
7,456 |
|
|
$ |
(7,456 |
) |
|
$ |
540,781 |
|
Cost of sales |
|
|
|
|
|
|
476,662 |
|
|
|
|
|
|
|
|
|
|
|
476,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
64,119 |
|
|
|
7,456 |
|
|
|
(7,456 |
) |
|
|
64,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
1,561 |
|
|
|
62,939 |
|
|
|
45 |
|
|
|
(7,456 |
) |
|
|
57,089 |
|
Depreciation and amortization |
|
|
|
|
|
|
2,473 |
|
|
|
961 |
|
|
|
|
|
|
|
3,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,561 |
|
|
|
65,412 |
|
|
|
1,006 |
|
|
|
(7,456 |
) |
|
|
60,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(1,561 |
) |
|
|
(1,293 |
) |
|
|
6,450 |
|
|
|
|
|
|
|
3,596 |
|
Non-operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
3,447 |
|
|
|
4,758 |
|
|
|
|
|
|
|
8,205 |
|
Changes associated with ineffective interest rate swap |
|
|
|
|
|
|
(1,256 |
) |
|
|
|
|
|
|
|
|
|
|
(1,256 |
) |
Other (income) expense, net |
|
|
|
|
|
|
(48 |
) |
|
|
66 |
|
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before (benefit from) provision for income
taxes |
|
|
(1,561 |
) |
|
|
(3,436 |
) |
|
|
1,626 |
|
|
|
|
|
|
|
(3,371 |
) |
(Benefit from) provision for income taxes |
|
|
(630 |
) |
|
|
32 |
|
|
|
634 |
|
|
|
|
|
|
|
36 |
|
Equity in loss of subsidiaries |
|
|
(2,476 |
) |
|
|
|
|
|
|
|
|
|
|
2,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(3,407 |
) |
|
$ |
(3,468 |
) |
|
$ |
992 |
|
|
$ |
2,476 |
|
|
$ |
(3,407 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
The consolidating statement of operations for BlueLinx Holdings Inc. for the period from
January 2, 2011 to July 2, 2011 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
Holdings |
|
|
and |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
891,414 |
|
|
$ |
14,857 |
|
|
$ |
(14,857 |
) |
|
$ |
891,414 |
|
Cost of sales |
|
|
|
|
|
|
787,500 |
|
|
|
|
|
|
|
|
|
|
|
787,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
103,914 |
|
|
|
14,857 |
|
|
|
(14,857 |
) |
|
|
103,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
3,005 |
|
|
|
124,301 |
|
|
|
(7,222 |
) |
|
|
(14,857 |
) |
|
|
105,227 |
|
Depreciation and amortization |
|
|
|
|
|
|
3,647 |
|
|
|
1,914 |
|
|
|
|
|
|
|
5,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
3,005 |
|
|
|
127,948 |
|
|
|
(5,308 |
) |
|
|
(14,857 |
) |
|
|
110,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(3,005 |
) |
|
|
(24,034 |
) |
|
|
20,165 |
|
|
|
|
|
|
|
(6,874 |
) |
Non-operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
7,292 |
|
|
|
9,499 |
|
|
|
|
|
|
|
16,791 |
|
Changes associated with the ineffective interest rate swap |
|
|
|
|
|
|
(1,751 |
) |
|
|
|
|
|
|
|
|
|
|
(1,751 |
) |
Other expense, net |
|
|
|
|
|
|
155 |
|
|
|
(6 |
) |
|
|
|
|
|
|
149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before (benefit from) provision for income
taxes |
|
|
(3,005 |
) |
|
|
(29,730 |
) |
|
|
10,672 |
|
|
|
|
|
|
|
(22,063 |
) |
(Benefit from) provision for income taxes |
|
|
(3,481 |
) |
|
|
(637 |
) |
|
|
4,162 |
|
|
|
|
|
|
|
44 |
|
Equity in loss of subsidiaries |
|
|
(22,583 |
) |
|
|
|
|
|
|
|
|
|
|
22,583 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(22,107 |
) |
|
$ |
(29,093 |
) |
|
$ |
6,510 |
|
|
$ |
22,583 |
|
|
$ |
(22,107 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The consolidating statement of operations for BlueLinx Holdings Inc. for the period from
January 3, 2010 to July 3, 2010 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
Holdings |
|
|
and |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
971,831 |
|
|
$ |
14,912 |
|
|
$ |
(14,912 |
) |
|
$ |
971,831 |
|
Cost of sales |
|
|
|
|
|
|
855,434 |
|
|
|
|
|
|
|
|
|
|
|
855,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
116,397 |
|
|
|
14,912 |
|
|
|
(14,912 |
) |
|
|
116,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
3,456 |
|
|
|
124,969 |
|
|
|
90 |
|
|
|
(14,912 |
) |
|
|
113,603 |
|
Depreciation and amortization |
|
|
|
|
|
|
5,257 |
|
|
|
1,921 |
|
|
|
|
|
|
|
7,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
3,456 |
|
|
|
130,226 |
|
|
|
2,011 |
|
|
|
(14,912 |
) |
|
|
120,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(3,456 |
) |
|
|
(13,829 |
) |
|
|
12,901 |
|
|
|
|
|
|
|
(4,384 |
) |
Non-operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
6,013 |
|
|
|
9,507 |
|
|
|
|
|
|
|
15,520 |
|
Changes associated with the ineffective interest rate swap |
|
|
|
|
|
|
(2,061 |
) |
|
|
|
|
|
|
|
|
|
|
(2,061 |
) |
Other expense, net |
|
|
|
|
|
|
214 |
|
|
|
37 |
|
|
|
|
|
|
|
251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before (benefit from) provision for income
taxes |
|
|
(3,456 |
) |
|
|
(17,995 |
) |
|
|
3,357 |
|
|
|
|
|
|
|
(18,094 |
) |
(Benefit from) provision for income taxes |
|
|
(1,318 |
) |
|
|
61 |
|
|
|
1,309 |
|
|
|
|
|
|
|
52 |
|
Equity in loss of subsidiaries |
|
|
(16,008 |
) |
|
|
|
|
|
|
|
|
|
|
16,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(18,146 |
) |
|
$ |
(18,056 |
) |
|
$ |
2,048 |
|
|
$ |
16,008 |
|
|
$ |
(18,146 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
The consolidating balance sheet for BlueLinx Holdings Inc. as of July 2, 2011 follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
Corporation |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Holdings Inc. |
|
|
and Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
90 |
|
|
$ |
6,019 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
6,109 |
|
Receivables |
|
|
|
|
|
|
205,735 |
|
|
|
|
|
|
|
|
|
|
|
205,735 |
|
Inventories |
|
|
|
|
|
|
212,654 |
|
|
|
|
|
|
|
|
|
|
|
212,654 |
|
Deferred income tax assets |
|
|
|
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
59 |
|
Other current assets |
|
|
1,955 |
|
|
|
20,306 |
|
|
|
40,641 |
|
|
|
|
|
|
|
62,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivable |
|
|
59,169 |
|
|
|
10,287 |
|
|
|
2,637 |
|
|
|
(72,093 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
61,214 |
|
|
|
455,060 |
|
|
|
43,278 |
|
|
|
(72,093 |
) |
|
|
487,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and land improvements |
|
|
|
|
|
|
3,021 |
|
|
|
48,947 |
|
|
|
|
|
|
|
51,968 |
|
Buildings |
|
|
|
|
|
|
9,737 |
|
|
|
87,954 |
|
|
|
|
|
|
|
97,691 |
|
Machinery and equipment |
|
|
|
|
|
|
74,495 |
|
|
|
|
|
|
|
|
|
|
|
74,495 |
|
Construction in progress |
|
|
|
|
|
|
1,027 |
|
|
|
|
|
|
|
|
|
|
|
1,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, at cost |
|
|
|
|
|
|
88,280 |
|
|
|
136,901 |
|
|
|
|
|
|
|
225,181 |
|
Accumulated depreciation |
|
|
|
|
|
|
(68,271 |
) |
|
|
(27,714 |
) |
|
|
|
|
|
|
(95,985 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
|
|
|
|
20,009 |
|
|
|
109,187 |
|
|
|
|
|
|
|
129,196 |
|
Investment in subsidiaries |
|
|
(67,763 |
) |
|
|
|
|
|
|
|
|
|
|
67,763 |
|
|
|
|
|
Non-current deferred income tax assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-current assets |
|
|
|
|
|
|
18,472 |
|
|
|
141 |
|
|
|
|
|
|
|
18,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
(6,549 |
) |
|
$ |
493,541 |
|
|
$ |
152,606 |
|
|
$ |
(4,330 |
) |
|
$ |
635,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
203 |
|
|
$ |
95,119 |
|
|
$ |
|
|
|
$ |
|
|
|
|
95,322 |
|
Bank overdrafts |
|
|
|
|
|
|
28,798 |
|
|
|
|
|
|
|
|
|
|
|
28,798 |
|
Accrued compensation |
|
|
20 |
|
|
|
5,382 |
|
|
|
|
|
|
|
|
|
|
|
5,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
|
|
|
|
|
|
110,584 |
|
|
|
40,923 |
|
|
|
|
|
|
|
151,507 |
|
Other current liabilities |
|
|
811 |
|
|
|
12,883 |
|
|
|
1,244 |
|
|
|
|
|
|
|
14,938 |
|
Intercompany payable |
|
|
11,807 |
|
|
|
60,286 |
|
|
|
|
|
|
|
(72,093 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
12,841 |
|
|
|
313,052 |
|
|
|
42,167 |
|
|
|
(72,093 |
) |
|
|
295,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
78,326 |
|
|
|
244,746 |
|
|
|
|
|
|
|
323,072 |
|
Non-current deferred income tax
liabilities |
|
|
|
|
|
|
107 |
|
|
|
|
|
|
|
|
|
|
|
107 |
|
Other non-current liabilities |
|
|
3 |
|
|
|
35,511 |
|
|
|
|
|
|
|
|
|
|
|
35,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
12,844 |
|
|
|
426,996 |
|
|
|
286,913 |
|
|
|
(72,093 |
) |
|
|
654,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders (Deficit)
Equity/Parents Investment |
|
|
(19,393 |
) |
|
|
66,545 |
|
|
|
(134,307 |
) |
|
|
67,763 |
|
|
|
(19,392 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
(6,549 |
) |
|
$ |
493,541 |
|
|
$ |
152,606 |
|
|
$ |
(4,330 |
) |
|
$ |
635,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
The consolidating balance sheet for BlueLinx Holdings Inc. as of January 1, 2011 follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
Corporation |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Holdings Inc. |
|
|
and Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
384 |
|
|
$ |
13,913 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
14,297 |
|
Receivables |
|
|
|
|
|
|
119,202 |
|
|
|
|
|
|
|
|
|
|
|
119,202 |
|
Inventories |
|
|
|
|
|
|
188,250 |
|
|
|
|
|
|
|
|
|
|
|
188,250 |
|
Deferred income tax assets, current |
|
|
|
|
|
|
143 |
|
|
|
|
|
|
|
|
|
|
|
143 |
|
Other current assets |
|
|
669 |
|
|
|
20,500 |
|
|
|
1,599 |
|
|
|
|
|
|
|
22,768 |
|
Intercompany receivable |
|
|
57,208 |
|
|
|
8,759 |
|
|
|
|
|
|
|
(65,967 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
58,261 |
|
|
|
350,767 |
|
|
|
1,599 |
|
|
|
(65,967 |
) |
|
|
344,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and land improvements |
|
|
|
|
|
|
3,027 |
|
|
|
49,513 |
|
|
|
|
|
|
|
52,540 |
|
Buildings |
|
|
|
|
|
|
8,069 |
|
|
|
88,651 |
|
|
|
|
|
|
|
96,720 |
|
Machinery and equipment |
|
|
|
|
|
|
70,860 |
|
|
|
|
|
|
|
|
|
|
|
70,860 |
|
Construction in progress |
|
|
|
|
|
|
2,028 |
|
|
|
|
|
|
|
|
|
|
|
2,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, at cost |
|
|
|
|
|
|
83,984 |
|
|
|
138,164 |
|
|
|
|
|
|
|
222,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
|
|
|
|
(65,564 |
) |
|
|
(26,953 |
) |
|
|
|
|
|
|
(92,517 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
|
|
|
|
18,420 |
|
|
|
111,211 |
|
|
|
|
|
|
|
129,631 |
|
Investment in subsidiaries |
|
|
(47,943 |
) |
|
|
|
|
|
|
|
|
|
|
47,943 |
|
|
|
|
|
Other non-current assets |
|
|
|
|
|
|
19,602 |
|
|
|
31,126 |
|
|
|
|
|
|
|
50,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
10,318 |
|
|
$ |
388,789 |
|
|
$ |
143,936 |
|
|
$ |
(18,024 |
) |
|
$ |
525,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
59 |
|
|
$ |
62,768 |
|
|
$ |
|
|
|
$ |
|
|
|
|
62,827 |
|
Bank overdrafts |
|
|
|
|
|
|
23,089 |
|
|
|
|
|
|
|
|
|
|
|
23,089 |
|
Accrued compensation |
|
|
|
|
|
|
4,594 |
|
|
|
|
|
|
|
|
|
|
|
4,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
|
|
|
|
|
|
|
|
|
|
1,190 |
|
|
|
|
|
|
|
1,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities |
|
|
|
|
|
|
15,065 |
|
|
|
483 |
|
|
|
1,244 |
|
|
|
16,792 |
|
Intercompany payable |
|
|
9,264 |
|
|
|
57,947 |
|
|
|
|
|
|
|
(67,211 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
9,323 |
|
|
|
163,463 |
|
|
|
1,673 |
|
|
|
(65,967 |
) |
|
|
108,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
97,200 |
|
|
|
284,479 |
|
|
|
|
|
|
|
381,679 |
|
Non-current deferred income tax
liabilities |
|
|
|
|
|
|
192 |
|
|
|
|
|
|
|
|
|
|
|
192 |
|
Other non-current liabilities |
|
|
4 |
|
|
|
33,661 |
|
|
|
|
|
|
|
|
|
|
|
33,665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
9,327 |
|
|
|
294,516 |
|
|
|
286,152 |
|
|
|
(65,967 |
) |
|
|
524,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
(Deficit)/Parents Investment |
|
|
991 |
|
|
|
94,273 |
|
|
|
(142,216 |
) |
|
|
47,943 |
|
|
|
991 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
10,318 |
|
|
$ |
388,789 |
|
|
$ |
143,936 |
|
|
$ |
(18,024 |
) |
|
$ |
525,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
The consolidating statement of cash flows for BlueLinx Holdings Inc. for the period from
January 2, 2011 to July 2, 2011 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
Holdings |
|
|
and |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(22,107 |
) |
|
$ |
(29,093 |
) |
|
$ |
6,510 |
|
|
$ |
22,583 |
|
|
$ |
(22,107 |
) |
Adjustments to reconcile net (loss) income to cash (used in)
provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
3,647 |
|
|
|
1,914 |
|
|
|
|
|
|
|
5,561 |
|
Amortization of debt issuance costs |
|
|
|
|
|
|
1,094 |
|
|
|
|
|
|
|
|
|
|
|
1,094 |
|
Gain from the sale of properties |
|
|
|
|
|
|
|
|
|
|
(7,222 |
) |
|
|
|
|
|
|
(7,222 |
) |
Changes associated with the ineffective interest rate swap |
|
|
|
|
|
|
(1,751 |
) |
|
|
|
|
|
|
|
|
|
|
(1,751 |
) |
Deferred income tax benefit |
|
|
|
|
|
|
(214 |
) |
|
|
|
|
|
|
|
|
|
|
(214 |
) |
Share-based compensation expense |
|
|
|
|
|
|
1,137 |
|
|
|
|
|
|
|
|
|
|
|
1,137 |
|
Decrease (increase) in restricted cash |
|
|
|
|
|
|
432 |
|
|
|
|
|
|
|
|
|
|
|
432 |
|
Equity in earnings of subsidiaries |
|
|
22,583 |
|
|
|
|
|
|
|
|
|
|
|
(22,583 |
) |
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
|
|
|
|
(86,533 |
) |
|
|
|
|
|
|
|
|
|
|
(86,533 |
) |
Inventories |
|
|
|
|
|
|
(24,404 |
) |
|
|
|
|
|
|
|
|
|
|
(24,404 |
) |
Accounts payable |
|
|
123 |
|
|
|
32,352 |
|
|
|
20 |
|
|
|
|
|
|
|
32,495 |
|
Changes in other working capital |
|
|
(452 |
) |
|
|
566 |
|
|
|
(208 |
) |
|
|
(1,244 |
) |
|
|
(1,338 |
) |
Intercompany receivable |
|
|
(1,961 |
) |
|
|
(1,528 |
) |
|
|
(1,519 |
) |
|
|
5,008 |
|
|
|
|
|
Intercompany payable |
|
|
2,543 |
|
|
|
2,339 |
|
|
|
(1,118 |
) |
|
|
(3,764 |
) |
|
|
|
|
Other |
|
|
17 |
|
|
|
(458 |
) |
|
|
2,245 |
|
|
|
|
|
|
|
1,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by (used in) operating activities |
|
|
746 |
|
|
|
(102,414 |
) |
|
|
622 |
|
|
|
|
|
|
|
(101,046 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries |
|
|
(1,040 |
) |
|
|
|
|
|
|
1,040 |
|
|
|
|
|
|
|
|
|
Property, plant and equipment investments |
|
|
|
|
|
|
(2,702 |
) |
|
|
(2,818 |
) |
|
|
|
|
|
|
(5,520 |
) |
Proceeds from disposition of assets |
|
|
|
|
|
|
|
|
|
|
8,971 |
|
|
|
|
|
|
|
8,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
(used in) provided by investing activities |
|
|
(1,040 |
) |
|
|
(2,702 |
) |
|
|
7,193 |
|
|
|
|
|
|
|
3,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net transactions with Parent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in revolving credit facility |
|
|
|
|
|
|
91,710 |
|
|
|
|
|
|
|
|
|
|
|
91,710 |
|
Payments on capital lease obligations |
|
|
|
|
|
|
(197 |
) |
|
|
|
|
|
|
|
|
|
|
(197 |
) |
Increase in bank overdrafts |
|
|
|
|
|
|
5,709 |
|
|
|
|
|
|
|
|
|
|
|
5,709 |
|
Increase in restricted cash related to the mortgage |
|
|
|
|
|
|
|
|
|
|
(7,815 |
) |
|
|
|
|
|
|
(7,815 |
) |
Intercompany receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
97,222 |
|
|
|
(7,815 |
) |
|
|
|
|
|
|
89,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash |
|
|
(294 |
) |
|
|
(7,894 |
) |
|
|
|
|
|
|
|
|
|
|
(8,188 |
) |
Balance, beginning of period |
|
|
384 |
|
|
|
13,913 |
|
|
|
|
|
|
|
|
|
|
|
14,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
90 |
|
|
$ |
6,019 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
6,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncash
transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital leases |
|
$ |
|
|
|
$ |
2,544 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
The consolidating statement of cash flows for BlueLinx Holdings Inc. for the period from
January 3, 2010 to July 3, 2010 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
Holdings |
|
|
and |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(18,146 |
) |
|
$ |
(18,056 |
) |
|
$ |
2,048 |
|
|
$ |
16,008 |
|
|
$ |
(18,146 |
) |
Adjustments to reconcile net (loss) income to cash (used in)
provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
5,254 |
|
|
|
1,924 |
|
|
|
|
|
|
|
7,178 |
|
Amortization of debt issuance costs |
|
|
|
|
|
|
43 |
|
|
|
336 |
|
|
|
|
|
|
|
379 |
|
Payments from terminating the Georgia-Pacific supply
agreement |
|
|
|
|
|
|
4,706 |
|
|
|
|
|
|
|
|
|
|
|
4,706 |
|
Changes associated with the ineffective interest rate swap |
|
|
|
|
|
|
(2,061 |
) |
|
|
|
|
|
|
|
|
|
|
(2,061 |
) |
Deferred income tax benefit |
|
|
|
|
|
|
(414 |
) |
|
|
|
|
|
|
|
|
|
|
(414 |
) |
Share-based compensation expense |
|
|
910 |
|
|
|
1,059 |
|
|
|
|
|
|
|
|
|
|
|
1,969 |
|
Decrease in restricted cash related to the ineffective
interest rate swap, insurance, and other |
|
|
|
|
|
|
5,607 |
|
|
|
|
|
|
|
|
|
|
|
5,607 |
|
Equity in earnings of subsidiaries |
|
|
16,008 |
|
|
|
|
|
|
|
|
|
|
|
(16,008 |
) |
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
|
|
|
|
(82,222 |
) |
|
|
|
|
|
|
|
|
|
|
(82,222 |
) |
Inventories |
|
|
|
|
|
|
(52,973 |
) |
|
|
|
|
|
|
|
|
|
|
(52,973 |
) |
Accounts payable |
|
|
4 |
|
|
|
38,856 |
|
|
|
|
|
|
|
|
|
|
|
38,860 |
|
Changes in other working capital |
|
|
246 |
|
|
|
19,503 |
|
|
|
(1,211 |
) |
|
|
|
|
|
|
18,538 |
|
Intercompany receivable |
|
|
10,376 |
|
|
|
(471 |
) |
|
|
|
|
|
|
(9,905 |
) |
|
|
|
|
Intercompany payable |
|
|
(1,937 |
) |
|
|
(9,433 |
) |
|
|
1,465 |
|
|
|
9,905 |
|
|
|
|
|
Other |
|
|
(14 |
) |
|
|
(2,253 |
) |
|
|
(28 |
) |
|
|
|
|
|
|
(2,295 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
7,447 |
|
|
|
(92,855 |
) |
|
|
4,534 |
|
|
|
|
|
|
|
(80,874 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries |
|
|
(2,123 |
) |
|
|
|
|
|
|
|
|
|
|
2,123 |
|
|
|
|
|
Property, plant and equipment investments |
|
|
|
|
|
|
(1,263 |
) |
|
|
|
|
|
|
|
|
|
|
(1,263 |
) |
Proceeds from disposition of assets |
|
|
|
|
|
|
656 |
|
|
|
|
|
|
|
|
|
|
|
656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
(2,123 |
) |
|
|
(607 |
) |
|
|
|
|
|
|
2,123 |
|
|
|
(607 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net transactions with Parent |
|
|
|
|
|
|
|
|
|
|
2,123 |
|
|
|
(2,123 |
) |
|
|
|
|
Repurchase of common stock |
|
|
(583 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(583 |
) |
Increase in revolving credit facility |
|
|
|
|
|
|
68,687 |
|
|
|
|
|
|
|
|
|
|
|
68,687 |
|
Payments on capital lease obligations |
|
|
|
|
|
|
(473 |
) |
|
|
|
|
|
|
|
|
|
|
(473 |
) |
Increase in bank overdrafts |
|
|
|
|
|
|
9,880 |
|
|
|
|
|
|
|
|
|
|
|
9,880 |
|
Increase in restricted cash related to the mortgage |
|
|
|
|
|
|
|
|
|
|
(6,581 |
) |
|
|
|
|
|
|
(6,581 |
) |
Debt financing costs |
|
|
|
|
|
|
(43 |
) |
|
|
(48 |
) |
|
|
|
|
|
|
(91 |
) |
Intercompany receivable |
|
|
(4,716 |
) |
|
|
|
|
|
|
|
|
|
|
4,716 |
|
|
|
|
|
Intercompany payable |
|
|
|
|
|
|
4,716 |
|
|
|
|
|
|
|
(4,716 |
) |
|
|
|
|
Other |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(5,293 |
) |
|
|
82,767 |
|
|
|
(4,506 |
) |
|
|
(2,123 |
) |
|
|
70,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash |
|
|
31 |
|
|
|
(10,695 |
) |
|
|
28 |
|
|
|
|
|
|
|
(10,636 |
) |
Balance, beginning of period |
|
|
32 |
|
|
|
29,129 |
|
|
|
296 |
|
|
|
|
|
|
|
29,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
63 |
|
|
$ |
18,434 |
|
|
$ |
324 |
|
|
$ |
|
|
|
$ |
18,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
ITEM 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The information contained in this Managements 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. We recommend that you read this MD&A section 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
1, 2011 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 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 our Annual Report on Form 10-K for the year ended January 1, 2011 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, especially
as a result of conditions in the residential housing market; |
|
|
|
inventory levels of new and existing homes for sale; |
|
|
|
general economic and business conditions in the United States; |
|
|
|
the financial condition and credit worthiness of our customers; |
|
|
|
the activities of competitors; |
|
|
|
changes in significant operating expenses; |
|
|
|
risk of losses associated with accidents; |
|
|
|
exposure to product liability claims; |
|
|
|
changes in the availability of capital and interest rates; |
|
|
|
immigration patterns and job and household formation; |
|
|
|
our ability to identify acquisition opportunities and effectively and cost-efficiently
integrate acquisitions; |
|
|
|
adverse weather patterns or conditions; |
|
|
|
acts of war or terrorist activities; |
|
|
|
variations in the performance of the financial markets, including the credit markets; |
|
|
|
the other factors described herein under and in our Annual Report on Form 10-K for the
year ended January 1, 2011 as filed with the SEC. |
26
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.
Overview
Background
We are a leading distributor of building products in the United States. We distribute
approximately 10,000 products to more than 11,500 customers through our network of approximately 60
distribution centers 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, 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 38% of our second quarter of fiscal 2011 gross sales.
Specialty products include roofing, insulation, moulding, engineered wood, vinyl products (used
primarily in siding), outdoor living, and metal products (excluding rebar and remesh). Specialty
products accounted for approximately 62% of our second quarter of fiscal 2011 gross sales.
Industry Conditions
As noted above, we operate in a changing environment in which new risks can emerge from time
to time. 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. Our operating results have declined during the past several
years as they are closely tied to U.S. housing starts. Additionally, the mortgage markets have
experienced substantial disruption due to the number of defaults in the 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. 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 Affecting Our Operating Results
Our operating results are affected by housing starts, mobile home production, industrial
production, repair and remodeling spending and non-residential construction. Our operating results
are also impacted by changes in product prices. Structural product prices can vary significantly
based on short-term and long-term changes in supply and demand. The prices of specialty products
can also vary from time to time, although they are generally significantly less variable than
structural products.
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, in each case for the second quarter of fiscal 2011, the second quarter of
fiscal 2010, the first six months of fiscal 2011, the first six months of fiscal 2010, fiscal 2010
and fiscal 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
|
Q2 2011 |
|
|
Q2 2010 |
|
|
2011 YTD |
|
|
2010 YTD |
|
|
2010 |
|
|
2009 |
|
|
|
(Dollars in millions) |
|
|
|
(Unaudited) |
|
Sales by Category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structural Products |
|
$ |
194 |
|
|
$ |
265 |
|
|
$ |
355 |
|
|
$ |
469 |
|
|
$ |
838 |
|
|
$ |
738 |
|
Specialty Products |
|
|
317 |
|
|
|
286 |
|
|
|
552 |
|
|
|
519 |
|
|
|
1,005 |
|
|
|
948 |
|
Other(1) |
|
|
(10 |
) |
|
|
(10 |
) |
|
|
(16 |
) |
|
|
(16 |
) |
|
|
(39 |
) |
|
|
(40 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales |
|
$ |
501 |
|
|
$ |
541 |
|
|
$ |
891 |
|
|
$ |
972 |
|
|
$ |
1,804 |
|
|
$ |
1,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Variances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit Volume $ Change |
|
$ |
(3 |
) |
|
$ |
51 |
|
|
$ |
(23 |
) |
|
$ |
57 |
|
|
$ |
36 |
|
|
$ |
(1,036 |
) |
Price/Other(1) |
|
|
(37 |
) |
|
|
66 |
|
|
|
(58 |
) |
|
|
84 |
|
|
|
122 |
|
|
|
(98 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total $ Change |
|
$ |
(40 |
) |
|
$ |
117 |
|
|
$ |
(81 |
) |
|
$ |
141 |
|
|
$ |
158 |
|
|
$ |
(1,134 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit Volume % Change |
|
|
(0.5 |
)% |
|
|
11.9 |
% |
|
|
(2.4 |
)% |
|
|
6.7 |
% |
|
|
2.2 |
% |
|
|
(36.6 |
)% |
Price/Other(1) |
|
|
(6.7 |
)% |
|
|
15.8 |
% |
|
|
(5.8 |
)% |
|
|
10.3 |
% |
|
|
7.4 |
% |
|
|
(4.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total % Change |
|
|
(7.2 |
)% |
|
|
27.7 |
% |
|
|
(8.2 |
)% |
|
|
17.0 |
% |
|
|
9.6 |
% |
|
|
(40.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Other includes unallocated allowances and discounts. |
27
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, in each case for the
second quarter of fiscal 2011, the second quarter of fiscal 2010, the first six months of fiscal
2011, the first six months of fiscal 2010, fiscal 2010 and fiscal 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
|
Q2 2011 |
|
|
Q2 2010 |
|
|
2011 YTD |
|
|
2010 YTD |
|
|
2010 |
|
|
2009 |
|
|
|
(Dollars in millions) |
|
|
|
(Unaudited) |
|
Gross Margin $s by
Category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structural Products |
|
$ |
17 |
|
|
$ |
24 |
|
|
$ |
34 |
|
|
$ |
46 |
|
|
$ |
77 |
|
|
$ |
73 |
|
Specialty Products |
|
|
46 |
|
|
|
44 |
|
|
|
79 |
|
|
|
77 |
|
|
|
148 |
|
|
|
132 |
|
Other (1) |
|
|
(5 |
) |
|
|
(4 |
) |
|
|
(9 |
) |
|
|
(7 |
) |
|
|
(14 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Margin $s |
|
$ |
58 |
|
|
$ |
64 |
|
|
$ |
104 |
|
|
$ |
116 |
|
|
$ |
211 |
|
|
$ |
193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin %s by Category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structural Products |
|
|
8.8 |
% |
|
|
9.1 |
% |
|
|
9.6 |
% |
|
|
9.8 |
% |
|
|
9.1 |
% |
|
|
9.9 |
% |
Specialty Products |
|
|
14.5 |
% |
|
|
15.4 |
% |
|
|
14.3 |
% |
|
|
14.8 |
% |
|
|
14.7 |
% |
|
|
13.9 |
% |
Total Gross Margin %s |
|
|
11.5 |
% |
|
|
11.9 |
% |
|
|
11.7 |
% |
|
|
12.0 |
% |
|
|
11.7 |
% |
|
|
11.7 |
% |
Unit Volume Change by Product |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structural Products |
|
|
(18.9 |
)% |
|
|
9.7 |
% |
|
|
(21.6 |
)% |
|
|
5.0 |
% |
|
|
(2.5 |
)% |
|
|
(40.3 |
)% |
Specialty Products |
|
|
16.5 |
% |
|
|
13.5 |
% |
|
|
15.0 |
% |
|
|
8.0 |
% |
|
|
5.7 |
% |
|
|
(32.8 |
)% |
Total Change in Unit Volume %s |
|
|
(0.5 |
)% |
|
|
11.9 |
% |
|
|
(2.4 |
)% |
|
|
6.7 |
% |
|
|
2.2 |
% |
|
|
(36.6 |
)% |
|
|
|
(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 the second quarter of fiscal 2011, the second
quarter of fiscal 2010, the first six months of fiscal 2011, the first six months of fiscal 2010,
fiscal 2010 and fiscal 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
|
Q2 2011 |
|
|
Q2 2010 |
|
|
2011 YTD |
|
|
2010 YTD |
|
|
2010 |
|
|
2009 |
|
|
|
(Dollars in millions) |
|
|
|
(Unaudited) |
|
Sales by Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse/Reload |
|
$ |
400 |
|
|
$ |
423 |
|
|
$ |
708 |
|
|
$ |
758 |
|
|
$ |
1,429 |
|
|
$ |
1,251 |
|
Direct |
|
|
111 |
|
|
|
128 |
|
|
|
199 |
|
|
|
230 |
|
|
|
414 |
|
|
|
435 |
|
Other(1) |
|
|
(10 |
) |
|
|
(10 |
) |
|
|
(16 |
) |
|
|
(16 |
) |
|
|
(39 |
) |
|
|
(40 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
501 |
|
|
$ |
541 |
|
|
$ |
891 |
|
|
$ |
972 |
|
|
$ |
1,804 |
|
|
$ |
1,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin by Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse/Reload |
|
$ |
55 |
|
|
$ |
60 |
|
|
$ |
100 |
|
|
$ |
111 |
|
|
$ |
201 |
|
|
$ |
177 |
|
Direct |
|
|
8 |
|
|
|
8 |
|
|
|
13 |
|
|
|
12 |
|
|
|
24 |
|
|
|
28 |
|
Other(1) |
|
|
(5 |
) |
|
|
(4 |
) |
|
|
(9 |
) |
|
|
(7 |
) |
|
|
(14 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
58 |
|
|
$ |
64 |
|
|
$ |
104 |
|
|
$ |
116 |
|
|
$ |
211 |
|
|
$ |
193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
|
Q2 2011 |
|
|
Q2 2010 |
|
|
2011 YTD |
|
|
2010 YTD |
|
|
2010 |
|
|
2009 |
|
|
|
(Dollars in millions) |
|
|
|
(Unaudited) |
|
Gross Margin % by Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse/Reload |
|
|
13.8 |
% |
|
|
14.2 |
% |
|
|
14.1 |
% |
|
|
14.6 |
% |
|
|
14.1 |
% |
|
|
14.1 |
% |
Direct |
|
|
7.2 |
% |
|
|
6.3 |
% |
|
|
6.5 |
% |
|
|
5.2 |
% |
|
|
5.8 |
% |
|
|
6.4 |
% |
Total |
|
|
11.5 |
% |
|
|
11.9 |
% |
|
|
11.7 |
% |
|
|
12.0 |
% |
|
|
11.7 |
% |
|
|
11.7 |
% |
|
|
|
(1) |
|
Other includes unallocated allowances and adjustments. |
28
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 2011 and fiscal year 2010 each contain 52 weeks.
Results of Operations
Second Quarter of Fiscal 2011 Compared to Second Quarter of Fiscal 2010
The following table sets forth our results of operations for the second quarter of fiscal 2011
and second quarter of fiscal 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
Second Quarter of |
|
|
Net |
|
|
Second Quarter of |
|
|
Net |
|
|
|
Fiscal 2011 |
|
|
Sales |
|
|
Fiscal 2010 |
|
|
Sales |
|
|
|
(Unaudited) |
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
(Dollars in thousands) |
|
Net sales |
|
$ |
500,810 |
|
|
|
100.0 |
% |
|
$ |
540,781 |
|
|
|
100.0 |
% |
Gross profit |
|
|
57,645 |
|
|
|
11.5 |
% |
|
|
64,119 |
|
|
|
11.9 |
% |
Selling,
general and administrative |
|
|
56,780 |
|
|
|
11.3 |
% |
|
|
57,089 |
|
|
|
10.6 |
% |
Depreciation and amortization |
|
|
2,624 |
|
|
|
0.5 |
% |
|
|
3,434 |
|
|
|
0.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
|
|
(1,759 |
) |
|
|
(0.4 |
%) |
|
|
3,596 |
|
|
|
0.7 |
% |
Interest expense |
|
|
7,730 |
|
|
|
1.5 |
% |
|
|
8,205 |
|
|
|
1.5 |
% |
Changes associated with the ineffective interest rate swap |
|
|
|
|
|
|
0.0 |
% |
|
|
(1,256 |
) |
|
|
(0.2 |
)% |
Other expense, net |
|
|
134 |
|
|
|
0.0 |
% |
|
|
18 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes |
|
|
(9,623 |
) |
|
|
(1.9 |
)% |
|
|
(3,371 |
) |
|
|
(0.6 |
)% |
Provision for income taxes |
|
|
158 |
|
|
|
0.0 |
% |
|
|
36 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(9,781 |
) |
|
|
(2.0 |
)% |
|
$ |
(3,407 |
) |
|
|
(0.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales. For the second quarter of fiscal 2011, net sales decreased by 7.4%, or $40.0
million, to $500.8 million. Sales during the quarter were negatively impacted by a decrease in
housing starts and a reduction in sales volume. 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) increased by $30.6 million, or 10.7%, compared to the second quarter of fiscal
2010, primarily due to an increase in specialty unit volume of 16.5%, partially offset by a
decrease in specialty products prices of 5.9%. Structural sales, including plywood, OSB, lumber
and metal rebar, decreased by $71.8 million, or 27.0% from a year ago, primarily as a result of a
decrease in unit volume of 18.9% and a decrease in structural product prices of 8.2%.
Gross profit. Gross profit for the second quarter of fiscal 2011 was $57.6 million, or 11.5%
of sales, compared to $64.1 million, or 11.9% of sales, in the prior year period. The decrease in
gross profit dollars compared to the second quarter of fiscal 2010 was driven primarily by a
decrease in structural product volumes of 18.9%, due to the Companys efforts to manage gross
margin under commodity pricing pressure coupled with the expiration of the housing credit in April
2010. The decrease in structural volumes was offset by an increase in specialty product volumes of
16.5%. The gross margin percentage decreased by 40 basis points to 11.5% primarily due to a shift
from the warehouse channel to the reload channel and lower prices,
which were temporarily inflated in the year-ago period due to the
Chilean earthquake.
Selling
, general, and administrative expenses. Selling, general and administrative expenses
were $56.8 million, or 11.3% of net sales, for the second quarter
of fiscal 2011, compared to $57.1 million, or 10.6% of net sales, a $0.3 million decrease compared to the
second quarter of fiscal 2010. This decrease is primarily due to the
reduction in variable compensation of $0.9 million and a gain on
sales of assets of $0.5 million, partially offset by a $1.1 million
increase in fuel expense.
Depreciation and amortization. Depreciation and amortization expense totaled $2.6 million for
the second quarter of fiscal 2011, compared to $3.4 million for the second quarter of fiscal 2010.
The $0.8 million decrease in depreciation and amortization is primarily related to a portion of our
property and equipment becoming fully depreciated during fiscal 2011 coupled with capital
expenditures not keeping pace with our historical purchase levels of property and equipment and
sales of certain depreciable assets during the current period.
Operating (loss) income. Operating loss for the second quarter of fiscal 2011 was $(1.8)
million, or (0.4)% of sales, compared to operating income of $3.6 million, or 0.7% of sales, in the
second quarter of fiscal 2010, reflecting a decrease in gross profit dollars of
$6.5 million, as a result of factors described above. This decrease is partially offset by a
decrease in selling, general, and administrative expenses and depreciation of $0.3 million and $0.8
million, respectively.
29
Interest expense. Interest expense totaled $7.7 million for the second quarter of fiscal 2011
compared to $8.2 million for the second quarter of fiscal 2010. The $0.5 million decline is
largely due to the termination of the ineffective interest rate swap in March of fiscal 2011, which
eliminated related fees classified as interest expense of $1.9 million. This decrease was
partially offset by a $0.2 million increase in amortization of debt issuance costs and a $1.2
million increase in interest expense incurred on the revolving credit facility. Interest expense
included $0.7 million and $0.5 million of debt issue cost amortization for the second quarter of
fiscal 2011 and the second quarter of fiscal 2010, respectively. During the second quarter of
fiscal 2011, interest expense related to our revolving credit facility and mortgage was $2.4
million and $4.6 million, respectively. During the second quarter of fiscal 2010, interest expense
related to our revolving credit facility and mortgage was $1.2 million and $4.6 million,
respectively. See Liquidity and Capital Resources below for a description of amendments to both
the revolving credit facility and the mortgage.
Changes associated with ineffective interest rate swap. The $1.3 million of income for the
second quarter of fiscal 2010 is related to the ineffective interest rate swap which was terminated
in March of fiscal 2011.
Provision
for income taxes. The effective tax rate was (1.6)% and (1.1)% for the second
quarter of fiscal 2011 and the second quarter of fiscal 2010, respectively. The unusual effective
tax rate in both periods is driven by a full valuation allowance recorded against our second
quarter federal and state benefit and tax expense related to gross receipts, Canadian and certain
state taxes.
Net loss. Net loss for the second quarter of fiscal 2011 was $(9.8) million compared to a
net loss of $(3.4) million for the second quarter of fiscal 2010 as a result of the above factors.
On a per-share basis, basic and diluted loss applicable to common stockholders for the second
quarter of fiscal 2011 and for the second quarter of fiscal 2010 were each $(0.31) and $(0.11),
respectively.
First Six Months of Fiscal 2011 Compared to First Six Months of Fiscal 2010
The following table sets forth our results of operations for the first six months of fiscal
2011 and the first six months of fiscal 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
First Six Months of |
|
|
Net |
|
|
First Six Months of |
|
|
Net |
|
|
|
Fiscal 2011 |
|
|
Sales |
|
|
Fiscal 2010 |
|
|
Sales |
|
|
|
(Unaudited) |
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
(Dollars in thousands) |
|
Net sales |
|
$ |
891,414 |
|
|
|
100.0 |
% |
|
$ |
971,831 |
|
|
|
100.0 |
% |
Gross profit |
|
|
103,914 |
|
|
|
11.7 |
% |
|
|
116,397 |
|
|
|
12.0 |
% |
Selling,
general and administrative |
|
|
105,227 |
|
|
|
11.8 |
% |
|
|
113,603 |
|
|
|
11.7 |
% |
Depreciation and amortization |
|
|
5,561 |
|
|
|
0.6 |
% |
|
|
7,178 |
|
|
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(6,874 |
) |
|
|
(0.8 |
)% |
|
|
(4,384 |
) |
|
|
(0.5 |
)% |
Interest expense |
|
|
16,791 |
|
|
|
1.9 |
% |
|
|
15,520 |
|
|
|
1.6 |
% |
Changes associated with the ineffective interest rate swap |
|
|
(1,751 |
) |
|
|
(0.2 |
)% |
|
|
(2,061 |
) |
|
|
(0.2 |
)% |
Other expense, net |
|
|
149 |
|
|
|
0.0 |
% |
|
|
251 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes |
|
|
(22,063 |
) |
|
|
(2.5 |
)% |
|
|
(18,094 |
) |
|
|
(1.9 |
)% |
Provision for income taxes |
|
|
44 |
|
|
|
0.0 |
% |
|
|
52 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(22,107 |
) |
|
|
(2.5 |
)% |
|
$ |
(18,146 |
) |
|
|
(1.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales. For the first six months of fiscal 2011, net sales decreased by 8.2%, or $80.4
million, to $891.4 million. Sales during the first six months were negatively impacted by a
decrease in housing starts and a decrease of 21.6% in structural product volumes. 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) increased by $32.5 million or 6.3% compared
to the first six months of fiscal 2010, reflecting a 15.0% increase in unit volume and a 8.8%
decrease in prices. Structural sales, including plywood, OSB, lumber and metal rebar, decreased by
$114.2 million, or 24.3% from a year ago, primarily due to a 21.6% decrease in unit volume and a
2.7% decrease in product prices.
30
Gross profit. Gross profit for the first six months of fiscal 2011 was $103.9 million, or
11.7% of sales, compared to $116.4 million, or 12.0% of sales, in the prior year period. The
decrease in gross profit dollars compared to the first six months of fiscal 2010 was driven
primarily by a decrease in structural unit volumes of 21.6%, due to the Companys efforts to
manage gross margin under commodity pricing pressure coupled with the expiration of the housing
credit in April 2010. The gross margin percentage decreased by 30 basis points to 11.7% primarily
due to a shift from the warehouse channel to the reload channel and
lower prices, which were temporarily inflated in the year-ago period
due to the Chilean earthquake.
Selling, general, and administrative. Selling, general and administrative expenses for the
first six months of fiscal 2011 were $105.2 million, or 11.8% of net sales, compared to $113.6
million, or 11.7% of net sales, during the first six months of fiscal 2010. The decrease in
selling, general, and administrative expenses was primarily due to
inclusion of a $7.2 million gain on sale of real estate in the first
six months of 2011.
Depreciation and amortization. Depreciation and amortization expense totaled $5.6 million for
the first six months of fiscal 2011, compared with $7.2 million for the first six months of fiscal
2010. The $1.6 million decrease in depreciation and amortization is primarily related to a portion
of our property and equipment becoming fully depreciated during fiscal 2011 coupled with capital
expenditures not keeping pace with our historical purchase levels of property and equipment. In
addition, certain depreciating assets were sold during the current period.
Operating loss. Operating loss for the first six months of fiscal 2011 was $(6.9) million, or
(0.8)% of sales, compared to $(4.4) million, or (0.5)% of sales, in the prior year period. The
change in operating loss reflects a $12.5 million decrease in gross profit as a result of the above
factors. This decrease is partially offset by a decrease in selling, general, and administrative
expenses, resulting primarily from the sale of real estate, and depreciation of $8.4 million and $1.6 million, respectively.
Interest expense. Interest expense totaled $16.8 million for the first six months of fiscal
2011 compared to $15.5 million for the first six months of fiscal 2010. The $1.3 million increase
is largely due to a $2.3 million increase in interest expense from our revolving credit facility
related to a higher average debt balance and a $0.7 million increase in amortization of debt
issuance costs related to the additional costs capitalized for the amendment of the revolving
credit facility in 2010. This increase was offset by a decrease of $1.7 million in swap and other
fixed charges due to the conclusion of the interest rate swap. Interest expense included $1.1
million and $0.4 million of debt issue cost amortization for the first six months of fiscal 2011
and for the first six months of fiscal 2010, respectively. During the first six months of fiscal
2011, interest expense related to our revolving credit facility and mortgage was $4.3 million and
$9.2 million, respectively. During the first six months of fiscal 2010, interest expense related
to our revolving credit facility and mortgage was $2.1 million and $9.2 million, respectively. See
Liquidity and Capital Resources below for a description of amendments to both the revolving
credit facility and the mortgage.
Changes associated with ineffective interest rate swap. Changes associated with the
ineffective interest rate swap totaled $1.8 million of income for the first six months of fiscal
2011 compared to $2.1 million of income for the first six months of fiscal 2010. The decrease is
primarily related to the change in the swaps fair value and a decrease in amortization expense due
to the termination of the swap in March 2011.
Provision
for income taxes. The effective tax rate was (0.2)% and (0.3)% for the first six
months of fiscal 2011 and the first six months of fiscal 2010, respectively. The unusual effective
tax rate in both periods is driven by a full valuation allowance recorded against our year to date
federal and state benefit and tax expense related to gross receipts, Canadian and certain state
taxes.
Net loss. Net loss for the first six months of fiscal 2011 was $(22.1) million compared to a
net loss of $(18.1) million for the first six months of fiscal 2010 as a result of the above
factors.
On a per-share basis, basic and diluted loss per share applicable to common stockholders for
the first six months of fiscal 2011 and for the first six months of fiscal 2010 were $(0.71) and
$(0.59), respectively.
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.
31
Liquidity and Capital Resources
We depend on cash flow from operations and funds available under our revolving credit facility
to finance working capital needs and capital expenditures. We had approximately $94.0 million of
excess availability under our amended revolving credit facility as of July 2, 2011. As of the
period ended July 2, 2011, under our amended revolving credit facility, we were required to
maintain our excess availability above the greater of $40.0 million or the amount equal to 15% of
the lesser of the borrowing base, as defined therein, or $60.0 million (subject to increase to
$75.0 million if we exercise the uncommitted accordion provision in the amended revolving credit
facility in full). If we fail to maintain this minimum excess availability, the amended revolving
credit facility requires us to (i) maintain certain financial ratios, which we would not meet with
current operating results, and (ii) limit our capital expenditures, which would have a negative
impact on our ability to finance working capital needs and capital expenditures. As described
under the Debt and Credit Sources section below, subsequent to the fiscal quarter end, an amendment
to the revolving credit facility became effective that impacts the covenants described above.
On
July 24, 2011, we commenced a rights offering of our common stock to our stockholders, pursuant
to which we distributed to our common stockholders transferable rights to subscribe for and
purchase up to $60 million of our common stock. In conjunction with the rights offering, we
entered into an investment agreement with Cerberus ABP Investor LLC, which beneficially owns
approximately 55% of our common stock before giving effect to the rights offering, to backstop the
rights offering, subject to certain conditions, by purchasing shares of common stock that related
to any rights that remained unexercised at the expiration of the rights offering. The rights
offering, which expired on July 22, 2011, was fully subscribed
and resulted in gross proceeds of
approximately $60 million. The majority of the gross proceeds
from the rights offering of approximately $56 million
were used to pay down the revolving credit facility. We accounted for the rights issued as a
component of additional paid in capital as they were indexed to the
Companys equity and there were
no net cash settlement provisions. The rights offering was contingent on entry by us into
amendments to both our revolving credit facility and our mortgage. Both amendments are described
in Footnote 13 Subsequent Events.
We believe that the amounts available from our revolving credit
facility and other sources are sufficient to fund our routine
operations and capital requirements for the next twelve months. If
economic conditions, especially those related to the housing market,
do not improve, we may need to seek additional sources of capital to
support our operations.
We may elect to selectively pursue acquisitions. Accordingly, depending on the nature of the
acquisition or currency, 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 companys 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 acquisitions, 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 in our Annual Report on Form 10-K for the
year ended January 1, 2011, as filed with the SEC.
The following tables indicate our working capital and cash flows for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
July 2, 2011 |
|
|
January 1, 2011 |
|
|
|
(Dollars in thousands) |
|
|
|
(Unaudited) |
|
Working capital |
|
$ |
191,492 |
|
|
$ |
236,168 |
|
|
|
|
|
|
|
|
|
|
|
|
First Six Months of |
|
|
First Six Months of |
|
|
|
Fiscal 2011 |
|
|
Fiscal 2010 |
|
|
|
(Dollars in thousands) |
|
|
|
(Unaudited) |
|
Cash flows used in operating activities |
|
$ |
(101,046 |
) |
|
$ |
(80,874 |
) |
Cash flows provided by (used in) investing activities |
|
|
3,451 |
|
|
|
(607 |
) |
Cash flows provided by financing activities |
|
|
89,407 |
|
|
|
70,845 |
|
Working Capital
Working capital decreased by $44.7 million to $191.5 million at July 2, 2011 from $236.2
million at January 1, 2011. The decrease in working capital was primarily attributable to
increases in our current maturities of long term debt related to the amendments to the revolving
credit facility and mortgage. As part of the amendments to our revolving credit facility and the
mortgage, we used the majority of the net proceeds obtained from the stock rights offering, subsequent
to the quarter end, to repay
outstanding amounts under the revolving credit facility and used cash held in escrow to pay
down the mortgage in July 2011. Our accounts payable and overdrafts also increased as we purchased
more products to meeting existing demand. These changes are partially offset by increases in
receivables and inventory. We increased inventory levels to meet existing demand, and the increase
in accounts receivable is due to increased sales volume due to seasonality.
32
Operating Activities
During the first six months of fiscal 2011, cash flows used in operating activities totaled
$101.0 million. The primary drivers of cash flow used in operations were increases in accounts
receivable of $86.5 million due to an increase in sales volume coupled with seasonal payment
patterns and an increase in inventories of $24.4 million due to an increase in purchases to meet
current demand. These cash outflows were offset by an increase in accounts payable of $32.5
million due the seasonality of our business and the related purchasing patterns.
During the first six months of fiscal 2010, cash flows used in operating activities totaled
$80.9 million. The primary drivers of cash flow used in operations were increases in accounts
receivable of $82.2 million due to an increase in sales volume coupled with seasonal payment
patterns and an increase in inventories of $53.0 million due to an increase in prices for certain
structural products and an increase in purchases to meet current demand. These cash outflows were
offset by an increase in accounts payable of $38.9 million due the seasonality of our business. In
addition, changes in other working capital increased by $18.5 million largely due to a federal tax
refund of $20.0 million received in fiscal 2010.
Investing Activities
During the first six months of fiscal 2011 and fiscal 2010, cash flows provided by (used in)
investing activities totaled $3.5 million and $(0.6) million, respectively.
During the first six months of fiscal 2011 and fiscal 2010, our expenditures for property and
equipment were $5.5 million and $1.3 million, respectively. These expenditures were used primarily
to purchase a replacement property for a facility sold during the first quarter of 2011, computer
equipment and leasehold improvements. Our capital expenditures for fiscal 2011 are anticipated to
be paid from our revolving credit facility.
Proceeds from the disposition of property totaled $9.0 million and $0.7 million for the first
six months of fiscal 2011 and fiscal 2010, respectively. The proceeds
from disposition of assets in the first six months of fiscal 2011 were
primarily related to the sale of our Nashville facility for $6.9 million.
Financing Activities
Net cash provided by financing activities was $89.4 million and $70.8 million during the first
six months of fiscal 2011 and the first six months of fiscal 2010, respectively. The net cash
provided by financing activities primarily reflected an increase in the balance of our revolving
credit facility of $91.7 million and an increase in bank overdrafts of $5.7 million partially offset
by an increase in restricted cash related to our mortgage of $7.8 million. The net cash provided
by financing activities in the first six months of fiscal 2010 primarily reflected an increase in
the balance of our revolving credit facility of $68.7 million and an increase in bank overdrafts of
$9.9 million partially offset by an increase in restricted cash related to our mortgage of $6.6
million.
Debt and Credit Sources
As of July 2, 2011, we had outstanding borrowings of $188.9 million and excess availability of
$94.0 million under the terms of our revolving credit facility. The interest rate on the revolving
credit facility was 4.3% at July 2, 2011. As of July 2, 2011 and January 1, 2011, we had
outstanding letters of credit totaling $2.5 million and $5.9 million, respectively, primarily for
the purposes of securing collateral requirements under the interest rate swap (which was terminated
in March of 2011), casualty insurance programs and for guaranteeing lease and certain other
obligations.
On July 7, 2010, we reached an agreement with Wells Fargo Bank, National Association,
successor by merger to Wachovia Bank, National Association, and the other signatories to our
existing revolving credit facility, dated August 4, 2006, as amended, to amend the terms thereof.
This amendment extends the date of final maturity of the facility to January 7, 2014 and decreases
the maximum availability under the agreement from $500 million to $400 million. This decrease does
not impact our current available borrowing capacity under the amended revolving credit facility
since the borrowing base, which is based on eligible accounts
receivable and inventory, currently permits less than $400 million in revolving credit facility borrowings.
This amendment also includes an additional $100 million uncommitted accordion credit facility,
which will permit us to increase the maximum borrowing capacity up to $500 million. As a result of
reducing our maximum borrowing capacity from $500 million to $400 million, we recorded expense of
$0.2 million in fiscal 2010 for the write-off of the old debt issuance costs associated with the
reduction in borrowing capacity. We also incurred $6.5 million in new debt issuance costs, which
we capitalized and will continue to amortize to interest expense over the renewed debt term.
33
As of July 2, 2011, under the amended agreement, our revolving credit facility contains
customary negative covenants and restrictions for asset based loans. Our most significant covenant
is a requirement that we maintain a fixed charge ratio of 1.1 to 1.0 in the event our excess
availability falls below the greater of $40.0 million or the amount equal to 15% of the lesser of
the borrowing base or $60.0 million (subject to increase to $75.0 million if we exercise the
uncommitted accordion credit facility in full) (the Excess Availability Threshold). The fixed
charge ratio is calculated as EBITDA divided by the sum of cash payments for income taxes, interest
expense, cash dividends, principal payments on debt, and capital expenditures. EBITDA is defined
as BlueLinx Corporations 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 amended revolving credit facility is less than the Excess
Availability Threshold for three consecutive business days. As of July 2, 2011 and through the time
of the filing of this Form 10-Q, we were in compliance with all covenants. We had $94.0 and $103.4
million of availability as of July 2, 2011 and January 1, 2011, respectively. Our lowest level of
fiscal month end availability in the last three years was $94.0 million as of July 2, 2011. We do
not anticipate our excess availability in fiscal 2011 will drop below the Excess Availability
Threshold. Should our excess availability fall below the Excess Availability Threshold for more
than three consecutive business days, however, we would not meet the required fixed charge ratio
with our current operating results. In addition, we must 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 the Excess Availability Threshold, excluding
unrestricted cash, for three consecutive business days or in the event of default. Our amended
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. As
described below, subsequent to the fiscal quarter ended July 2, 2011, an amendment
to our revolving credit facility became effective that revises certain of the covenants described in this paragraph.
On May 10, 2011, we entered into an amendment to our revolving credit facility, which became
effective on July 29, 2011. The amendment to the revolving credit facility (i) reduced the excess
liquidity we are required to maintain under the revolving credit facility to the greater of $35
million or the amount equal to 15% of the lesser of our borrowing base or $400 million, (ii)
increased the amount of our accounts receivable included in the calculation of the borrowing base
to 87.5%, (iii) increased the applicable percentage of the liquidation value of our inventory
included in the calculation of the borrowing base to 90% for the periods January to March 2012 and
January to March 2013, subject to specified EBITDA targets, (iv) included in the calculation of our
excess liquidity certain cash on the balance sheet and subject to a deposit account control
agreement, and (v) decreased the amount of excess liquidity we are required to maintain in order to
avoid being required to meet certain financial ratios and triggering additional limits on capital
expenditures under the revolving credit facility to the greater of $30 million or the amount equal
to 15% of the lesser of our borrowing base or $400 million.
On July 14, 2011, we entered into an amendment to
the mortgage, which (i) eliminated the
requirement to obtain lender approval for any transfer of equity interests that would reduce
Cerberus ABP Investor LLCs ownership in the Company and certain of our subsidiaries, directly or
indirectly, to less than 51%, (ii) provided for the immediate prepayment of $38.3 million of the
indebtedness under the mortgage without incurring a prepayment premium from funds currently held as
collateral under the mortgage and, if certain conditions are met, will allow for an additional
prepayment on or after July 30, 2014 from funds held as collateral without incurrence of a
prepayment premium, (iii) allow us, at the lenders reasonable discretion, to use a portion of the
cash held as collateral under the mortgage for specified alterations, repairs, replacements and
other improvements to the mortgaged properties, and (iv) in the event certain financial conditions
are met and the Company extends the Amended and Restated Master Lease by and among certain of our
subsidiaries with respect to properties covered by the mortgage for an additional five years, we
may request the lenders to disburse to the Company a portion of the cash held as collateral under
the mortgage.
Effectiveness of the amendment to the revolving credit facility was contingent on the
successful completion of the rights offering. In addition, consummation of the rights offering was
contingent on entry by us into both the amendment to the revolving credit facility and the
mortgage. We believe that the amounts available from our revolving credit facility and other
sources are sufficient to fund our routine operations and capital requirements for the next 12
months. Payments of $38.3 million and approximately $56 million were made on the mortgage and the revolving
credit facility, respectively, subsequent to the fiscal quarter ended July 2, 2011. If economic
conditions,
especially those related to the housing market, do not improve, we may need to seek additional
sources of capital to support our operations.
34
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 was terminated in March of 2011. The interest rate swap had a
notional amount of $150 million and the terms called for us to receive interest monthly at a
variable rate equal to 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.
During fiscal 2009, we reduced our borrowings under the revolving credit facility by $100.0
million, which reduced outstanding debt below the interest rate swaps 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 swaps
notional amount of $150.0 million, which was during the first quarter of fiscal 2009. The
reduction in debt below the interest rate swap notional amount resulted in a pro rata reduction to
accumulated other comprehensive income with an offsetting charge to interest expense. The
remaining accumulated other comprehensive income was amortized over the life of the interest rate
swap to interest expense.
Changes associated with the ineffective interest rate swap recognized in the Consolidated
Statement of Operations for the quarter ended July 2, 2011 and for the period from January 1, 2011
to July 2, 2011 were approximately $1.8 million of income and are comprised of amortization of the
remaining accumulated other comprehensive loss of the ineffective swap of $0.4 million offset by
income of $2.2 million related to reducing the fair value of the ineffective interest rate swap
liability to zero. Changes associated with the ineffective interest rate swap recognized in the
Consolidated Statement of Operations for the period from April 4, 2010 to July 3, 2010 were
approximately $1.3 million of income and are comprised of amortization of the remaining accumulated
other comprehensive loss over the life of the ineffective swap of $0.5 million offset by income of
$1.8 million related to current year changes in the fair value of the ineffective interest rate
swap liability. Changes associated with the ineffective interest rate swap recognized in the
Consolidated Statement of Operations for the period from January 3, 2010 to July 3, 2010 were
approximately $2.1 million of income and are comprised of amortization of the remaining accumulated
other comprehensive loss over the life of the ineffective swap of $1.0 million offset by income of
$3.1 million related to current year changes in the fair value of the ineffective interest rate
swap liability.
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 July 2, 2011 (in
thousands):
|
|
|
|
|
Balance at January 1, 2011 |
|
$ |
444 |
|
Amortization of accumulated other comprehensive loss recorded to interest expense |
|
|
(444 |
) |
|
|
|
|
Balance at July 2, 2011 |
|
$ |
|
|
|
|
|
|
The fair value of our swap liability at January 1, 2011 was $2.2 million.
Contractual Obligations
As
part of the amendment to our mortgage and revolving credit facility,
described above, payments of $38.3 million and approximately $56
million, respectively, were made
in July 2011. There have been no other material changes to our contractual obligations from those
disclosed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 1, 2011.
Critical Accounting Policies
Stock
Based Compensation
During
the first six months of fiscal 2011, the Compensation Committee
granted 618,972 restricted shares of our common stock to certain of
our officers. Restricted shares of 364,303 vested in the first six
months of 2011 due to completion of the vesting term. For the second
quarter of fiscal 2011 and for the first six months of fiscal 2011,
our total stock-based compensation expense was $0.4 million and $1.1
million, respectively. For the second quarter of fiscal 2010 and for
the first six months of fiscal 2010, our total stock-based
compensation expense was $0.7 million and $1.9 million, respectively.
We did not recognize related income tax benefits during these periods.
The preparation of our consolidated financial statements and related disclosures in conformity
with 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. There have been no material changes to our accounting policies from the
information provided in Item 7 of our Annual Report on Form 10-K for the fiscal year ended January
1, 2011.
35
|
|
|
ITEM 3. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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 1, 2011.
|
|
|
ITEM 4. |
|
CONTROLS AND PROCEDURES |
Our management performed an evaluation, as of the end of the period covered by this report on
Form 10-Q, under the supervision of our chief executive officer and chief financial officer of the
effectiveness of the design and operation of our disclosure controls and procedures (as defined in
rule 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the Exchange
Act)). Based on that evaluation, our chief executive officer and chief financial officer have
concluded that our disclosure controls and procedures are effective to ensure that information
required to be disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SECs 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 control 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.
PART II. OTHER INFORMATION
|
|
|
ITEM 1. |
|
LEGAL PROCEEDINGS |
During the first six months of fiscal 2011, there were no material changes to our previously
disclosed legal proceedings. 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 has been no material changes in our risk factors from those disclosed in our Annual
Report on Form 10-K for the year ended January 1, 2011 as filed with the SEC.
At
the 2011 Annual Meeting, stockholders approved an amendment to our 2006 Long-Term Equity
Incentive Plan to increase the number of shares available for grant thereunder from 3,200,000
shares to 5,200,000 and to permit the grant of awards exempt from the deduction limit of Section
162(m) of the Internal Revenue Code. In addition, the stockholders also approved an amendment to
our Short-Term Incentive Plan (the STIP) to give us the ability to structure incentive
compensation under the STIP to avoid having the $1 million deduction limit of Section 162(m) of the
Internal Revenue Code applied to certain parts of awards to be granted under the STIP. In
approving the amendment, the stockholders also approved a complete restatement of the STIP Other
than described above, no other material changes were made to either the 2006 Long-Term Equity
Incentive Plan or the STIP.
36
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
|
|
10.1 |
|
|
Amended and Restated BlueLinx Holdings, Inc. 2006 Long-Term Equity Incentive Plan (as amended
through May 19, 2011 and restated solely for purposes of filing pursuant to Item 601 of Regulation
S-K) (Incorporated by reference to Appendix A to the proxy statement for the 2011 Annual Meeting
of Stockholders filed on Schedule 14A with the Securities and Exchange Commission on April 18,
2011.) |
|
|
|
|
|
|
10.2 |
|
|
BlueLinx Holdings, Inc. Short-Term Incentive Plan (as amended and restated effective January 1,
2011) (Incorporated by reference to Attachment B to the proxy statement for the 2011 Annual
Meeting of Stockholders filed on Schedule 14A with the Securities and Exchange Commission on April
18, 2011.) |
|
|
|
|
|
|
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 Registrants Quarterly Report on Form 10-Q for the
quarterly period ended July 2, 2011, formatted in Extensible Business Reporting Language (XBRL): |
|
|
|
|
(i) Consolidated Statements of Operations, (ii) Consolidated Balance Sheets, (iii) Consolidated
Statements of Cash Flows and (iv) Notes to Consolidated Financial Statements.* |
|
|
|
* |
|
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not to be
filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the
Securities Act of 1933, as amended, or Section 18 of the Securities Act of 1934, as amended, and
otherwise are not subject to liability under these sections. |
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly
caused this report to be signed on their behalf by the undersigned hereunto duly authorized.
|
|
|
|
|
|
|
BlueLinx Holdings Inc. |
|
|
|
|
(Registrant) |
|
|
|
|
|
|
|
Date: August 5, 2011
|
|
/s/ H. Douglas Goforth
H. Douglas Goforth
|
|
|
|
|
Chief Financial Officer and Treasurer |
|
|
38
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
|
|
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. |
39