Filed by Bowne Pure Compliance
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 28, 2008
OR
|
|
|
o |
|
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)
|
|
|
Delaware
|
|
77-0627356 |
(State of Incorporation)
|
|
(I.R.S. Employer Identification No.) |
|
|
|
4300 Wildwood Parkway, Atlanta, Georgia
|
|
30339 |
(Address of principal executive offices)
|
|
(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 is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
|
|
|
|
|
|
|
Large accelerated filer o
|
|
Accelerated filer þ
|
|
Non-accelerated filer o
|
|
Smaller reporting company o |
|
|
|
|
(Do not check if a smaller reporting company) |
|
|
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 4, 2008 there were 32,378,860 shares of BlueLinx Holdings Inc. common stock, par value
$0.01, outstanding.
BLUELINX HOLDINGS INC.
Form 10-Q
For the Quarterly Period Ended June 28, 2008
INDEX
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BLUELINX HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
|
|
Period from |
|
|
Period from |
|
|
|
March 30, 2008 |
|
|
April 1, 2007 |
|
|
|
to |
|
|
to |
|
|
|
June 28, 2008 |
|
|
June 30, 2007 |
|
Net sales |
|
$ |
834,669 |
|
|
$ |
1,081,990 |
|
Cost of sales |
|
|
727,234 |
|
|
|
962,752 |
|
|
|
|
|
|
|
|
Gross profit |
|
|
107,435 |
|
|
|
119,238 |
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general, and administrative |
|
|
81,227 |
|
|
|
93,346 |
|
Depreciation and amortization |
|
|
5,103 |
|
|
|
5,335 |
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
86,330 |
|
|
|
98,681 |
|
|
|
|
|
|
|
|
Operating income |
|
|
21,105 |
|
|
|
20,557 |
|
Non-operating expenses: |
|
|
|
|
|
|
|
|
Interest expense |
|
|
9,385 |
|
|
|
11,798 |
|
Other expense (income), net |
|
|
190 |
|
|
|
(225 |
) |
|
|
|
|
|
|
|
Income before provision for income taxes |
|
|
11,530 |
|
|
|
8,984 |
|
Provision for income taxes |
|
|
4,931 |
|
|
|
3,550 |
|
|
|
|
|
|
|
|
Net income |
|
$ |
6,599 |
|
|
$ |
5,434 |
|
|
|
|
|
|
|
|
Basic weighted average number of common shares outstanding |
|
|
31,079 |
|
|
|
30,848 |
|
|
|
|
|
|
|
|
Basic net income per share applicable to common stock |
|
$ |
0.21 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
Diluted weighted average number of common shares outstanding |
|
|
31,312 |
|
|
|
30,995 |
|
|
|
|
|
|
|
|
Diluted net income per share applicable to common stock |
|
$ |
0.21 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
Dividends declared per share of common stock |
|
$ |
|
|
|
$ |
0.125 |
|
|
|
|
|
|
|
|
See accompanying notes.
3
BLUELINX HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
Period from |
|
|
Period from |
|
|
|
December 29, 2007 |
|
|
December 31, 2006 |
|
|
|
to |
|
|
to |
|
|
|
June 28, 2008 |
|
|
June 30, 2007 |
|
Net sales |
|
$ |
1,551,429 |
|
|
$ |
2,039,104 |
|
Cost of sales |
|
|
1,366,191 |
|
|
|
1,816,111 |
|
|
|
|
|
|
|
|
Gross profit |
|
|
185,238 |
|
|
|
222,993 |
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general, and administrative |
|
|
161,862 |
|
|
|
181,814 |
|
Depreciation and amortization |
|
|
10,071 |
|
|
|
10,734 |
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
171,933 |
|
|
|
192,548 |
|
|
|
|
|
|
|
|
Operating income |
|
|
13,305 |
|
|
|
30,445 |
|
Non-operating expenses: |
|
|
|
|
|
|
|
|
Interest expense |
|
|
18,739 |
|
|
|
22,404 |
|
Other expense (income), net |
|
|
320 |
|
|
|
(608 |
) |
|
|
|
|
|
|
|
(Loss) income before (benefit from) provision for income taxes |
|
|
(5,754 |
) |
|
|
8,649 |
|
(Benefit from) provision for income taxes |
|
|
(1,762 |
) |
|
|
3,404 |
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(3,992 |
) |
|
$ |
5,245 |
|
|
|
|
|
|
|
|
Basic weighted average number of common shares outstanding |
|
|
31,003 |
|
|
|
30,824 |
|
|
|
|
|
|
|
|
Basic net (loss) income per share applicable to common stock |
|
$ |
(0.13 |
) |
|
$ |
0.17 |
|
|
|
|
|
|
|
|
Diluted weighted average number of common shares outstanding |
|
|
31,003 |
|
|
|
30,945 |
|
|
|
|
|
|
|
|
Diluted net (loss) income per share applicable to common stock |
|
$ |
(0.13 |
) |
|
$ |
0.17 |
|
|
|
|
|
|
|
|
Dividends declared per share of common stock |
|
$ |
|
|
|
$ |
0.25 |
|
|
|
|
|
|
|
|
See accompanying notes.
4
BLUELINX HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
June 28, 2008 |
|
|
December 29, 2007 |
|
|
|
(unaudited) |
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
29,791 |
|
|
$ |
15,759 |
|
Receivables, net |
|
|
295,081 |
|
|
|
263,176 |
|
Inventories, net |
|
|
315,368 |
|
|
|
335,887 |
|
Deferred income taxes |
|
|
14,605 |
|
|
|
12,199 |
|
Other current assets |
|
|
38,657 |
|
|
|
53,231 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
693,502 |
|
|
|
680,252 |
|
|
|
|
|
|
|
|
Property, plant, and equipment: |
|
|
|
|
|
|
|
|
Land and land improvements |
|
|
57,362 |
|
|
|
57,295 |
|
Buildings |
|
|
98,550 |
|
|
|
98,420 |
|
Machinery and equipment |
|
|
67,922 |
|
|
|
67,217 |
|
Construction in progress |
|
|
1,360 |
|
|
|
4,212 |
|
|
|
|
|
|
|
|
Property, plant, and equipment, at cost |
|
|
225,194 |
|
|
|
227,144 |
|
Accumulated depreciation |
|
|
(60,954 |
) |
|
|
(54,702 |
) |
|
|
|
|
|
|
|
Property, plant, and equipment, net |
|
|
164,240 |
|
|
|
172,442 |
|
Non-current deferred income taxes |
|
|
2,218 |
|
|
|
2,628 |
|
Other assets |
|
|
19,842 |
|
|
|
28,114 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
879,802 |
|
|
$ |
883,436 |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
176,600 |
|
|
$ |
164,717 |
|
Bank overdrafts |
|
|
38,055 |
|
|
|
37,152 |
|
Accrued compensation |
|
|
11,503 |
|
|
|
10,372 |
|
Current maturities of long-term debt |
|
|
10,048 |
|
|
|
|
|
Other current liabilities |
|
|
28,336 |
|
|
|
19,280 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
264,542 |
|
|
|
231,521 |
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
451,000 |
|
|
|
478,535 |
|
Other long-term liabilities |
|
|
13,016 |
|
|
|
18,557 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
728,558 |
|
|
|
728,613 |
|
|
|
|
|
|
|
|
Shareholders Equity: |
|
|
|
|
|
|
|
|
Common Stock, $0.01 par value,
100,000,000 shares authorized;
32,378,860 and 31,224,959 shares
issued and outstanding at June 28,
2008 and December 29, 2007,
respectively |
|
|
324 |
|
|
|
312 |
|
Additional paid-in-capital |
|
|
142,701 |
|
|
|
142,081 |
|
Accumulated other comprehensive income |
|
|
5,207 |
|
|
|
5,426 |
|
Retained earnings |
|
|
3,012 |
|
|
|
7,004 |
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
151,244 |
|
|
|
154,823 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
879,802 |
|
|
$ |
883,436 |
|
|
|
|
|
|
|
|
See accompanying notes.
5
BLUELINX HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
Period from |
|
|
Period from |
|
|
|
December 29, 2007 |
|
|
December 31, 2006 |
|
|
|
to |
|
|
to |
|
|
|
June 28, 2008 |
|
|
June 30, 2007 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(3,992 |
) |
|
$ |
5,245 |
|
Adjustments to reconcile net (loss) income to cash provided by (used in) operations: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
10,071 |
|
|
|
10,734 |
|
Amortization of debt issue costs |
|
|
1,215 |
|
|
|
1,215 |
|
Deferred income tax benefit |
|
|
(2,931 |
) |
|
|
(1,563 |
) |
Share-based compensation expense |
|
|
1,119 |
|
|
|
2,227 |
|
Excess tax benefits from share-based compensation arrangements |
|
|
(76 |
) |
|
|
(60 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Receivables |
|
|
(31,905 |
) |
|
|
(98,255 |
) |
Inventories |
|
|
20,519 |
|
|
|
(59,536 |
) |
Accounts payable |
|
|
11,883 |
|
|
|
64,503 |
|
Changes in other working capital |
|
|
22,283 |
|
|
|
8,840 |
|
Other |
|
|
2,589 |
|
|
|
2,278 |
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
30,775 |
|
|
|
(64,372 |
) |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Property, plant and equipment investments |
|
|
(1,502 |
) |
|
|
(10,027 |
) |
Proceeds from disposition of assets |
|
|
827 |
|
|
|
1,086 |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(675 |
) |
|
|
(8,941 |
) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from stock options exercised |
|
|
434 |
|
|
|
323 |
|
Excess tax benefits from share-based compensation arrangements |
|
|
76 |
|
|
|
60 |
|
Net (decrease) increase in revolving credit facility |
|
|
(17,487 |
) |
|
|
94,073 |
|
Increase (decrease) in bank overdrafts |
|
|
903 |
|
|
|
(15,678 |
) |
Common stock dividends paid |
|
|
|
|
|
|
(7,784 |
) |
Other |
|
|
6 |
|
|
|
33 |
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(16,068 |
) |
|
|
71,027 |
|
|
|
|
|
|
|
|
Increase (decrease) in cash |
|
|
14,032 |
|
|
|
(2,286 |
) |
Balance, beginning of period |
|
|
15,759 |
|
|
|
27,042 |
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
29,791 |
|
|
$ |
24,756 |
|
|
|
|
|
|
|
|
See accompanying notes.
6
BLUELINX HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 2008
1. Basis of Presentation and Background
Basis of Presentation
BlueLinx Holdings Inc. has prepared the accompanying Unaudited Condensed 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 December 29, 2007,
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 2008 and fiscal
year 2007 contain 53 weeks and 52 weeks, respectively. 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 Condensed 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 2,500
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 more than 70 warehouses and third-party operated
warehouses.
2. Summary of Significant Accounting Policies
Earnings per Common Share
Basic and diluted earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding for the period.
Except when the effect would be anti-dilutive, the diluted earnings per share calculation
includes the dilutive effect of the assumed exercise of stock options and restricted stock using
the treasury stock method. We have excluded stock options to purchase 1.1 million shares for the second quarter of fiscal
2008 because they were antidilutive. In addition, we excluded .4 million restricted stock and
performance share awards for the second quarter of fiscal 2008
because they were antidilutive. For the second quarter of fiscal 2007 and for the first six months ended June 30, 2007, we
excluded stock options to purchase 1.5 million shares because they were antidilutive.
Common Stock Dividends
In the past we have paid dividends on our common stock at the quarterly rate of $0.125 per
share. However, on December 5, 2007, our Board of Directors suspended the payment of dividends on
our common stock for an indefinite period of time. Resumption of the payment of dividends will
depend on, among other things, business conditions in the housing industry, our results of
operations, cash requirements, financial condition, contractual restrictions, provisions of
applicable law and other factors that our Board of Directors may deem relevant. Accordingly, we
may not be able to resume the payment of dividends at the same quarterly rate in the future, if at
all.
7
Income Taxes
Deferred income taxes are provided using the liability method under the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. 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.
In evaluating our ability to recover our deferred income tax assets we consider all 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
and our forecast of future taxable income. In estimating future taxable income, we develop
assumptions including the amount of future state and federal pretax operating income, the reversal
of temporary differences and the implementation of feasible and prudent tax planning strategies.
These assumptions require significant judgment about the forecasts of future taxable income.
Uncertain tax positions are recorded based on the provisions of FASB Interpretation No. 48
(FIN 48), Accounting for Uncertainty in Income Taxes, which prescribes a comprehensive model for
how a company should recognize, measure, present and disclose in its financial statements uncertain
tax positions that the company has taken or expects to take on a tax return (including a discussion
of whether to file or not to file a return in a particular jurisdiction).
For the second quarter of fiscal 2008 and for the
first six months of fiscal 2008, we recognized $4.9 million of tax expense and $1.8 million
of tax benefit, respectively. Our
effective tax rate for these periods was 42.8% and 30.6%, respectively. For the second quarter of fiscal 2007 and for
the first six months of fiscal 2007, our effective tax rate was 39.5% and 39.4%, respectively. The
change in effective tax rate in both periods compared to 2007 primarily resulted from tax expense on
Canadian earnings.
Stock-Based Compensation
We have two stock-based compensation plans covering officers, directors and certain employees
and consultants; the 2004 Long-Term Equity Incentive Plan (the 2004 Plan) and the 2006 Long-Term
Equity Incentive Plan (the 2006 Plan). The plans are designed to motivate and retain individuals
who are responsible for the attainment of our primary long-term performance goals. The plans
provide a means whereby our employees and directors develop a sense of proprietorship and personal
involvement in our development and financial success and encourage them to devote their best
efforts to our business.
The 2004 Plan provides for the grant of nonqualified stock options, incentive stock options
for shares of our common stock and restricted shares of our common stock to participants of the
plan selected by our Board of Directors or a committee of the Board who administer the 2004 Plan.
We reserved 2,222,222 shares of common stock for issuance under the 2004 Plan. The terms and
conditions of awards under the 2004 Plan are determined by the administrator for each grant.
Unless otherwise determined by the administrator or as set forth in an award agreement, upon a
Liquidity Event, all unvested awards will become immediately exercisable and the administrator
may determine the treatment of all vested awards at the time of the Liquidity Event. A Liquidity
Event is defined as (1) an event in which any person who is not an affiliate of us becomes the
beneficial owner, directly or indirectly, of fifty percent or more of the combined voting power of
our then outstanding securities or (2) the sale, transfer or other disposition of all or
substantially all of our business, whether by sale of assets, merger or otherwise, to a person
other than Cerberus.
On May 12, 2006 our stockholders approved the 2006 Plan. The 2006 Plan permits the grant of
nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock,
restricted stock units, performance shares, performance units, cash-based awards, and other
stock-based awards. We reserved 1,700,000 shares of our common stock for issuance under the 2006
Plan. The terms and conditions of awards under the 2006 Plan are determined by the administrator
for each grant. Awards issued under the 2006 Plan are subject to accelerated vesting in the event
of a change in control as such event is defined in the 2006 Plan.
At our annual meeting of stockholders on May 21, 2008, our stockholders approved an amendment
to the 2006 Plan which increases the maximum number of shares of common stock we may issue under
the 2006 Plan by 1,500,000 shares from 1,700,000 shares to 3,200,000 shares. The purpose of this
amendment is to assure that we can continue to grant equity awards at levels determined appropriate
by the Board.
8
On May 21, 2008, the Compensation Committee granted a restricted stock award of 250,000
restricted shares of the Company to Howard S. Cohen pursuant to the terms of his employment
agreement. The restricted stock award issued to Mr. Cohen will vest in three equal annual
installments beginning on March 10, 2009.
Compensation expense arising from stock-based awards granted to employees and non-employee
directors is recognized as expense using the straight-line method over the vesting period. As of
June 28, 2008, there was $2.1 million, $5.0 million, $1.2 million and $0.2 million of total
unrecognized compensation expense related to stock options, restricted stock, performance shares
and restricted stock units, respectively. The unrecognized compensation expense for these awards is
expected to be recognized over a period of 2.7 years,
2.5 years, 2.5 years, and 1.3 years,
respectively. As of June 30, 2007, there was $5.0 million, $3.3 million, $2.3 million and
$1.7 million of total unrecognized compensation expense related to stock options, restricted stock,
performance shares and restricted stock units, respectively. The unrecognized compensation expense
for these awards is expected to be recognized over a period of 3.5 years, 2.6 years, 2.5 years, and
2.5 years, respectively.
For the second quarter of fiscal 2008 and for the first six months of fiscal 2008, our total
stock-based compensation expense was $1.2 million. We also recognized related income tax benefits
of $0.5 million for the second quarter of fiscal 2008 and for the first six months of fiscal 2008.
For the second quarter of fiscal 2007 and for the first six months of fiscal 2007, our total
stock-based compensation expense was $1.4 million and $2.2 million, respectively. We also
recognized related income tax benefits of $0.5 million and $0.9 million for the second quarter of
fiscal 2007 and for the first six months of fiscal 2007, respectively.
During the first six months of fiscal 2008 and the first six months of fiscal 2007, total
stock options exercised were 115,758 and 86,019, respectively. These
options were exercised in the first quarter of both periods.
The following table depicts the weighted average assumptions used in connection with the
Black-Scholes-Merton option pricing model to estimate the fair value of stock options granted
during the first six months of fiscal 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from December 29, 2007 to June 28, 2008 |
|
|
|
Time-Based |
|
|
Performance-Based |
|
|
Performance-Based |
|
|
|
Options** |
|
|
Options** |
|
|
Options*** |
|
Risk free interest rate |
|
|
2.70 |
% |
|
|
2.62 |
% |
|
|
2.11 |
% |
Expected dividend yield |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
Expected life |
|
6 years |
|
|
4 years |
|
|
1 year |
|
Expected volatility |
|
|
48 |
% |
|
|
48 |
% |
|
|
48 |
% |
Weighted average fair value |
|
$ |
2.27 |
|
|
$ |
0.67 |
|
|
$ |
1.31 |
|
|
|
|
** |
|
Exercise price exceeded the market price at date of grant. |
|
*** |
|
Exercise price was less than the market price at date of grant (the date the performance
criteria were established is considered the grant date for accounting purposes). |
All options granted during the first six months of fiscal 2008 were granted in the first quarter.
The following table depicts the weighted average assumptions used in connection with the
Black-Scholes-Merton option pricing model to estimate the fair value of stock options granted
during the first six months of fiscal 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from December 31, 2006 to June 30, 2007 |
|
|
|
Time-Based |
|
|
Performance-Based |
|
|
Performance-Based |
|
|
|
Options* |
|
|
Options** |
|
|
Options*** |
|
Risk free interest rate |
|
|
4.78 |
% |
|
|
4.81 |
% |
|
|
5.09 |
% |
Expected dividend yield |
|
|
4.46 |
% |
|
|
4.52 |
% |
|
|
4.52 |
% |
Expected life |
|
7 years |
|
|
5 years |
|
|
1 year |
|
Expected volatility |
|
|
45 |
% |
|
|
45 |
% |
|
|
45 |
% |
Weighted average fair value |
|
$ |
3.77 |
|
|
$ |
2.83 |
|
|
$ |
6.97 |
|
|
|
|
* |
|
Exercise price equaled the market price at date of grant. |
|
** |
|
Exercise price exceeded the market price at date of grant. |
|
*** |
|
Exercise price was less than the market price at date of grant (the date the performance
criteria were established is considered the grant date for accounting purposes). |
9
All options granted during the first six months of fiscal 2007 occurred in the first quarter.
In determining the expected life, we did not rely on our historical exercise data as it does
not provide a reasonable basis upon which to estimate future expected lives due to limited
experience of employee exercises. Instead, we followed a simplified method based on the vesting
term and contractual term as permitted under SEC Staff Accounting Bulletin No. 107.
The expected volatility is based on the historical volatility of our common stock.
The range of risk-free rates used for the first six months of fiscal 2008 and for the first
six months of fiscal 2007 was from 2.11% to 2.70% and 4.78% to 5.10%, respectively. These rates
were based on the U.S. Treasury yield with a term that is consistent with the expected life of the
stock options.
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. Determining whether an impairment has occurred
typically requires various estimates and assumptions, including determining which cash flows are
directly related to the potentially impaired asset, the useful life over which cash flows will
occur, their amount and the assets residual value, if any. In turn, measurement of an impairment
loss requires a determination of fair value, which is based on the best information available. We
use internal cash flow estimates, quoted market prices when available and independent appraisals as
appropriate to determine fair value. We derive the required cash flow estimates from our historical
experience and our internal business plans and apply an appropriate discount rate. If these
projected cash flows are less than the carrying amount, an impairment loss is recognized based on
the fair value of the asset less any costs of disposition. Our judgment regarding the existence of
impairment indicators is based on market and operational performance.
During the second quarter of fiscal 2008, we recorded a non-cash impairment charge of $0.7
million ($0.4 million after tax) to reduce the carrying value of certain long-lived assets to fair
value. This impairment charge was included in Selling, general and administrative expense on our
Consolidated Statement of Operations for the second quarter and the first six months of fiscal
2008.
3. Exit Costs
During the second quarter of fiscal 2008 and the fourth quarter of fiscal 2007, we vacated
leased office space and certain distribution facilities. We accounted for these transactions in
accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities,
which requires that a liability be recognized for a cost 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 exit cost charges
include the estimated losses on the vacated facilities based on our contractual obligations net of
estimated sublease income based on current comparable market rates for leases. We will reassess
this liability periodically based on 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 were included in Selling, general and
administrative expense in the Consolidated Statement of Operations and in Other current
liabilities, and in Other non-current liabilities on the Consolidated Balance Sheet at June 28,
2008 and December 29, 2007.
The following table displays the exit activity and liability balances for the first six months
of fiscal 2008 (in thousands):
|
|
|
|
|
|
|
Exit Costs |
|
Balance at December 29, 2007 |
|
$ |
11,326 |
|
Charges |
|
|
347 |
|
Payments |
|
|
(1,074 |
) |
Accretion of liability |
|
|
409 |
|
|
|
|
|
Balance at June 28, 2008 |
|
$ |
11,008 |
|
|
|
|
|
We did not incur any exit charges during the first six months of fiscal 2007.
10
4. Comprehensive Income (Loss)
The calculation of comprehensive income (loss) is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
|
|
Period from |
|
|
Period from |
|
|
|
March 30, 2008 |
|
|
April 1, 2007 |
|
|
|
to |
|
|
to |
|
|
|
June 28, 2008 |
|
|
June 30, 2007 |
|
Net income |
|
$ |
6,599 |
|
|
$ |
5,434 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
Foreign currency translation, net of taxes |
|
|
151 |
|
|
|
921 |
|
Unrealized gain from cash flow hedge, net of taxes |
|
|
3,009 |
|
|
|
1,557 |
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
9,759 |
|
|
$ |
7,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
Period from |
|
|
Period from |
|
|
|
December 29, 2007 |
|
|
December 31, 2006 |
|
|
|
to |
|
|
to |
|
|
|
June 28, 2008 |
|
|
June 30, 2007 |
|
Net (loss) income |
|
$ |
(3,992 |
) |
|
$ |
5,245 |
|
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
Foreign currency translation, net of taxes |
|
|
(396 |
) |
|
|
913 |
|
Unrealized gain from cash flow hedge, net of taxes |
|
|
178 |
|
|
|
1,284 |
|
|
|
|
|
|
|
|
Comprehensive (loss) income |
|
$ |
(4,210 |
) |
|
$ |
7,442 |
|
|
|
|
|
|
|
|
5. 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 do not expect to make any
contributions to the hourly pension plan in fiscal 2008. 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:
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
|
|
Period from |
|
|
Period from |
|
|
|
March 30, 2008 |
|
|
April 1, 2007 |
|
|
|
to |
|
|
to |
|
|
|
June 28, 2008 |
|
|
June 30, 2007 |
|
|
|
(In thousands) |
|
Service cost |
|
$ |
561 |
|
|
$ |
626 |
|
Interest cost on projected benefit obligation |
|
|
1,109 |
|
|
|
1,054 |
|
Expected return on plan assets |
|
|
(1,501 |
) |
|
|
(1,356 |
) |
Amortization of unrecognized gain |
|
|
(91 |
) |
|
|
|
|
Amortization of unrecognized prior service cost |
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
Net periodic pension cost |
|
$ |
78 |
|
|
$ |
325 |
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
Period from |
|
|
Period from |
|
|
|
December 29, 2007 |
|
|
December 31, 2006 |
|
|
|
to |
|
|
to |
|
|
|
June 28, 2008 |
|
|
June 30, 2007 |
|
|
|
(In thousands) |
|
Service cost |
|
$ |
1,122 |
|
|
$ |
1,252 |
|
Interest cost on projected benefit obligation |
|
|
2,218 |
|
|
|
2,108 |
|
Expected return on plan assets |
|
|
(3,002 |
) |
|
|
(2,712 |
) |
Amortization of unrecognized gain |
|
|
(182 |
) |
|
|
|
|
Amortization of unrecognized prior service cost |
|
|
1 |
|
|
|
2 |
|
|
|
|
|
|
|
|
Net periodic pension cost |
|
$ |
157 |
|
|
$ |
650 |
|
|
|
|
|
|
|
|
6. Revolving Credit Facility
As of June 28, 2008, we had outstanding borrowings of $166 million and excess availability of
$271 million under the terms of our revolving credit facility. Based on borrowing base limitations,
we classify the lowest projected balance of the credit facility over the next twelve months of $156
million as long-term debt. The revolving credit facility contains customary negative covenants and
restrictions for asset based loans, with which we are in compliance.
On June 12, 2006, we entered into an interest rate swap agreement with Goldman Sachs Capital
Markets, to hedge against interest rate risks related to our variable rate revolving credit
facility. The interest rate swap has a notional amount of $150 million and the terms call for us
to receive interest monthly at a variable rate equal to the 30-day LIBOR and to pay interest
monthly at a fixed rate of 5.4%. This interest rate swap is designated as a cash flow hedge.
We expect the hedge to be highly effective in offsetting changes in expected cash flows, as,
at inception, the critical terms of the interest rate swap generally match the critical terms of
the variable rate revolving credit facility. Fluctuations in the fair value of the ineffective
portion, if any, of the cash flow hedge are reflected in earnings. For the first six months of
fiscal 2008 and for the first six months of fiscal 2007, we recognized immaterial amounts of
expense related to the ineffective portion of the hedge.
At June 28, 2008 and December 29, 2007, the fair value of the interest rate swap was a
liability of $6.9 million and $7.1 million, respectively. These balances were included in Other
current liabilities and Other long-term liabilities on the Condensed Consolidated Balance Sheet.
Accumulated other comprehensive income at June 28, 2008 and December 29, 2007 included the net
loss on the cash flow hedge (net of tax) of $4.1 million and $4.3 million, respectively, which
reflects the cumulative amount of comprehensive loss in connection with the change in fair value of
the swap.
During the second quarter of fiscal 2008, we negotiated the release of cash collateral held
for purposes of securing the interest rate swap and replaced that collateral with letters of
credit. As of June 28, 2008, we had outstanding letters of credit totaling $15.8 million, primarily
for purposes of securing collateral requirements under the casualty insurance programs for us, the
interest rate swap, and for guaranteeing payment of international purchases based on the
fulfillment of certain conditions.
7. Mortgage
On June 9, 2006, certain special purpose entities that are wholly-owned subsidiaries of us
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 57 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.
The mortgage loan requires interest-only payments for the first five years followed by level
monthly payments of principal and interest based on an amortization period of thirty years. The
balance of the loan outstanding at the end of ten years will then become due and payable. The
principal will be paid in the following increments (in thousands):
|
|
|
|
|
2011 |
|
$ |
1,511 |
|
2012 |
|
|
3,172 |
|
2013 |
|
|
3,437 |
|
2014 |
|
|
3,665 |
|
2015 |
|
|
3,908 |
|
Thereafter |
|
$ |
279,307 |
|
12
8. Fair Value Measurements
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which defines fair
value, establishes a framework for measuring fair value under GAAP, and expands disclosures about
fair value measurements. SFAS No. 157 applies to other
accounting pronouncements that require or permit fair value measurements. The new guidance is
effective for financial statements issued for fiscal years beginning after November 15, 2007, and
for interim periods within those fiscal years. In February 2008, FSP 157-1 Application of FASB
Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair
Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 was
issued. FSP 157-1 removed leasing transactions accounted for under Statement 13 and related
guidance from the scope of SFAS No. 157. FSP 157-2 Partial Deferral of the Effective Date of
Statement 157 deferred the effective date of SFAS No. 157 for all nonfinancial assets and
nonfinancial liabilities to fiscal years beginning after November 15, 2008.
SFAS No. 157, defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement
date (exit price). SFAS No. 157 classifies inputs used to measure fair value into the following
hierarchy:
|
|
|
|
|
Level 1
|
|
Unadjusted quoted prices in active markets for identical assets or
liabilities. |
|
|
|
|
|
Level 2
|
|
Unadjusted quoted prices in active markets for similar assets or
liabilities, or Unadjusted quoted prices for identical or similar assets or
liabilities in markets that are not active, or Inputs other than quoted prices that are observable for the asset
or liability. |
|
|
|
|
|
Level 3
|
|
Unobservable inputs for the asset or liability. |
We are exposed to market risks from changes in interest rates, which may affect our operating
results and financial position. When deemed appropriate, we minimize our risks from interest rate
fluctuations through the use of an interest rate swap. This derivative financial instrument is
used to manage risk and is not used for trading or speculative purposes. The swap is valued using
a valuation model that has inputs other than quoted market prices that are both observable and
unobservable.
We endeavor to utilize the best available information in measuring the fair value of the
interest rate swap. The interest rate swap is classified in its entirety based on the lowest level
of input that is significant to the fair value measurement. We have determined that our interest
rate swap is a level 3 liability in the fair value hierarchy. The fair value of the interest rate
swap was $6.9 million as of June 28, 2008.
The implementation of SFAS No. 157 for financial assets and financial liabilities, effective
December 30, 2007, did not have a material impact on our consolidated financial position and
results of operations. We are currently assessing the impact of SFAS No. 157 for pension related
financial assets and nonfinancial assets and nonfinancial liabilities on our consolidated financial
position and results of operations.
9. 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.
13
10. Commitments and Contingencies
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 June 28, 2008, approximately 31% of our total work force is covered by collective
bargaining agreements. Collective bargaining agreements representing approximately 7% of our work
force will expire within one year.
Preference Claim
On November 19, 2004, we received a letter from Wickes Lumber, or Wickes, asserting that
approximately $16 million in payments received by the Division during the 90-day period prior to
Wickes January 20, 2004 Chapter 11 filing were preferential payments under section 547 of the
United States Bankruptcy Code. On October 14, 2005, Wickes Inc. filed a lawsuit in the United
States Bankruptcy Court for the Northern District of Illinois titled Wickes Inc. v. Georgia
Pacific Distribution Division (BlueLinx), (Bankruptcy Adversary Proceeding No. 05-2322) asserting
its claim. On November 14, 2005, we filed an answer to the complaint denying liability. Although
the ultimate outcome of this matter cannot be determined with certainty, we believe Wickes
assertion to be without merit and, in any event, subject to one or more complete defenses,
including, but not limited to, that the payments were made and received in the ordinary course of
business and were a substantially contemporaneous exchange for new value given to Wickes.
Supply Agreement with Georgia-Pacific
On May 7, 2004, we entered into a multi-year supply agreement with Georgia-Pacific. Under the
agreement, we have exclusive distribution rights on certain products and certain customer segments.
Georgia-Pacific is our largest vendor, with Georgia-Pacific products representing approximately 25%
of our purchases during fiscal 2007. On June 6, 2008, Georgia-Pacific notified us of its intent to
terminate this supply agreement, effective May 7, 2010. Georgia-Pacific and BlueLinx are currently
in discussions regarding a new agreement which would govern the purchase, supply and distribution
arrangements between the two parties after May 7, 2010. Georgia-Pacific and BlueLinx are
continuing to work together pursuant to the terms of the existing Supply Agreement.
The Supply Agreement details distribution rights by product categories, including exclusivity
rights and minimum supply volume commitments from Georgia-Pacific with respect to certain products.
This Supply Agreement also details our purchase obligations by product categories, including
minimum purchase volume commitments with respect to most of the products supplied to us. In
addition, the Supply Agreement also provides for advertising, marketing and promotion arrangements
between BlueLinx and Georgia-Pacific for certain products.
11. Recently Issued Accounting Pronouncements
In June 2008, the FASB issued FSP No. Emerging Issues Task Force (EITF) 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities (FSP
03-6-1). FSP 03-6-1 clarifies that unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities
and are to be included in the computation of earnings per share under the two-class method
described in SFAS No. 128, Earnings Per Share. This FSP is effective for us on January 1, 2009
and requires all presented prior-period earnings per share data to be adjusted retrospectively. We
are still in the process of evaluating the impact FSP 03-6-1 will have on our Consolidated
Financial Statements. For additional information about our share-based payment awards, refer to
Note 2 of the Notes to Consolidated Financial Statements in our Form 10-K.
In April 2008, the FASB issued FASB Staff Position (FSP) No. 142-3, Determination of the
Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors to be considered in
developing renewal or extension assumptions used to determine the useful life of intangible assets
under SFAS No. 142, Goodwill and Other Intangible Assets. Its intent is to improve the
consistency between the useful life of an intangible asset and the period of expected cash flows
used to measure its fair value. This FSP is effective for us on January 1, 2009. We are still in
the process of evaluating the impact FSP 142-3, but do not expect it to have a material impact on
our Consolidated Financial Statements.
In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 161, Disclosures about Derivative Instruments and Hedging
Activities An Amendment of SFAS No. 133 (SFAS 161). SFAS 161 seeks to improve financial
reporting for derivative instruments and hedging activities by requiring enhanced disclosures
regarding the impact on financial position, financial performance, and cash flows. To achieve this
increased transparency,
SFAS 161 requires (1) the disclosure of the fair value of derivative instruments and gains and
losses in a tabular format; (2) the disclosure of derivative features that are credit risk-related;
and (3) cross-referencing within the footnotes. SFAS 161 is effective, on a prospective basis, for
fiscal years beginning after November 15, 2008. We are in the process of evaluating the new
disclosure requirements under SFAS 161.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements (SFAS No. 160). SFAS No. 160 establishes requirements for ownership interests
in subsidiaries held by parties other than the Company (sometimes called minority interests) be
clearly identified, presented, and disclosed in the consolidated statement of financial position
within equity, but separate from the parents equity. All changes in the parents ownership
interests are required to be accounted for consistently as equity transactions and any
noncontrolling equity investments in deconsolidated subsidiaries must be measured initially at fair
value. SFAS No. 160 is effective, on a prospective basis, for fiscal years beginning after December
15, 2008. However, presentation and disclosure requirements must be retrospectively applied to
comparative financial statements. We are currently assessing the impact of SFAS No. 160 on our
consolidated financial position, results of operations and cash flows.
In December 2007, the FASB issued SFAS 141 (revised 2007) Business Combinations (SFAS 141R).
SFAS 141R establishes principles and requirements for how the acquirer of a business recognizes and
measures in its financial statements the identifiable assets acquired, the liabilities assumed, and
any noncontrolling interest in the acquiree. SFAS 141R also provides guidance for recognizing and
measuring the goodwill acquired in the business combination and determines what information to
disclose to enable users of the financial statements to evaluate the nature and financial effects
of the business combination. SFAS No. 141R is effective, on a prospective basis, for fiscal years
beginning after December 15, 2008. We are currently evaluating the potential impact, if any, of the
adoption of SFAS 141R on our consolidated financial position, results of operations and cash flows.
12. Subsequent Event
On July 15, 2008, our board of directors approved a plan to exit our custom milling operations
in California. We are taking this action primarily based on our analysis of the impact of
unfavorable market conditions on the business. We expect to complete the closure of the milling
operation during the third quarter of fiscal 2008. We expect to incur a pre-tax charge of
approximately $4 million, or an after tax charge of approximately $0.08 per diluted share related
to this action in the third quarter. Approximately $1.5 million of the total charge will require
cash expenditures during the third quarter.
13. Unaudited Supplemental Condensed Consolidating Financial Statements
The unaudited condensed consolidating financial information as of June 28, 2008 and December
29, 2007 and for the periods from March 30, 2008 to June 28, 2008 and April 1, 2007 to June 30,
2007 is provided due to restrictions in our revolving credit facility that limit distributions by
BlueLinx Corporation, our wholly-owned operating 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 December 29, 2007, 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-one 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. Certain of the warehouse properties
collateralize a mortgage loan and none of the properties are available to satisfy the debts and
other obligations of either BlueLinx Corporation or us.
14
The condensed consolidating statement of operations for BlueLinx Holdings Inc. for the period
from March 30, 2008 to June 28, 2008 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings |
|
|
BlueLinx |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Corporation |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
834,669 |
|
|
$ |
7,618 |
|
|
$ |
(7,618 |
) |
|
$ |
834,669 |
|
Cost of sales |
|
|
|
|
|
|
727,234 |
|
|
|
|
|
|
|
|
|
|
|
727,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
107,435 |
|
|
|
7,618 |
|
|
|
(7,618 |
) |
|
|
107,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
332 |
|
|
|
88,393 |
|
|
|
120 |
|
|
|
(7,618 |
) |
|
|
81,227 |
|
Depreciation and amortization |
|
|
|
|
|
|
4,033 |
|
|
|
1,070 |
|
|
|
|
|
|
|
5,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
332 |
|
|
|
92,426 |
|
|
|
1,190 |
|
|
|
(7,618 |
) |
|
|
86,330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(332 |
) |
|
|
15,009 |
|
|
|
6,428 |
|
|
|
|
|
|
|
21,105 |
|
Non-operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
4,493 |
|
|
|
4,892 |
|
|
|
|
|
|
|
9,385 |
|
Other expense (income), net |
|
|
|
|
|
|
190 |
|
|
|
|
|
|
|
|
|
|
|
190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for (benefit from) income taxes |
|
|
(332 |
) |
|
|
10,326 |
|
|
|
1,536 |
|
|
|
|
|
|
|
11,530 |
|
Provision for (benefit from) income taxes |
|
|
(129 |
) |
|
|
4,461 |
|
|
|
599 |
|
|
|
|
|
|
|
4,931 |
|
Equity in income (loss) of subsidiaries |
|
|
6,802 |
|
|
|
|
|
|
|
|
|
|
|
(6,802 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
6,599 |
|
|
$ |
5,865 |
|
|
$ |
937 |
|
|
$ |
(6,802 |
) |
|
$ |
6,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The condensed consolidating statement of operations for BlueLinx Holdings Inc. for the period
from April 1, 2007 to June 30, 2007 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings |
|
|
BlueLinx |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Corporation |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
1,081,990 |
|
|
$ |
7,518 |
|
|
$ |
(7,518 |
) |
|
$ |
1,081,990 |
|
Cost of sales |
|
|
|
|
|
|
962,752 |
|
|
|
|
|
|
|
|
|
|
|
962,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
119,238 |
|
|
|
7,518 |
|
|
|
(7,518 |
) |
|
|
119,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
279 |
|
|
|
100,459 |
|
|
|
126 |
|
|
|
(7,518 |
) |
|
|
93,346 |
|
Depreciation and amortization |
|
|
|
|
|
|
4,276 |
|
|
|
1,059 |
|
|
|
|
|
|
|
5,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
279 |
|
|
|
104,735 |
|
|
|
1,185 |
|
|
|
(7,518 |
) |
|
|
98,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(279 |
) |
|
|
14,503 |
|
|
|
6,333 |
|
|
|
|
|
|
|
20,557 |
|
Non-operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
6,905 |
|
|
|
4,893 |
|
|
|
|
|
|
|
11,798 |
|
Other expense (income), net |
|
|
|
|
|
|
(219 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
(225 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for (benefit from) income taxes |
|
|
(279 |
) |
|
|
7,817 |
|
|
|
1,446 |
|
|
|
|
|
|
|
8,984 |
|
Provision for (benefit from) income taxes |
|
|
(109 |
) |
|
|
3,095 |
|
|
|
564 |
|
|
|
|
|
|
|
3,550 |
|
Equity in income (loss) of subsidiaries |
|
|
5,604 |
|
|
|
|
|
|
|
|
|
|
|
(5,604 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
5,434 |
|
|
$ |
4,722 |
|
|
$ |
882 |
|
|
$ |
(5,604 |
) |
|
$ |
5,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
The condensed consolidating statement of operations for BlueLinx Holdings Inc. for the period
from December 29, 2007 to June 28, 2008 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings |
|
|
BlueLinx |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Corporation |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
1,551,429 |
|
|
$ |
15,235 |
|
|
$ |
(15,235 |
) |
|
$ |
1,551,429 |
|
Cost of sales |
|
|
|
|
|
|
1,366,191 |
|
|
|
|
|
|
|
|
|
|
|
1,366,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
185,238 |
|
|
|
15,235 |
|
|
|
(15,235 |
) |
|
|
185,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
646 |
|
|
|
176,211 |
|
|
|
240 |
|
|
|
(15,235 |
) |
|
|
161,862 |
|
Depreciation and amortization |
|
|
|
|
|
|
7,931 |
|
|
|
2,140 |
|
|
|
|
|
|
|
10,071 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
646 |
|
|
|
184,142 |
|
|
|
2,380 |
|
|
|
(15,235 |
) |
|
|
171,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(646 |
) |
|
|
1,096 |
|
|
|
12,855 |
|
|
|
|
|
|
|
13,305 |
|
Non-operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
8,955 |
|
|
|
9,784 |
|
|
|
|
|
|
|
18,739 |
|
Other expense (income), net |
|
|
|
|
|
|
333 |
|
|
|
(13 |
) |
|
|
|
|
|
|
320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for (benefit from) income taxes |
|
|
(646 |
) |
|
|
(8,192 |
) |
|
|
3,084 |
|
|
|
|
|
|
|
(5,754 |
) |
Provision for (benefit from) income taxes |
|
|
(252 |
) |
|
|
(2,713 |
) |
|
|
1,203 |
|
|
|
|
|
|
|
(1,762 |
) |
Equity in income (loss) of subsidiaries |
|
|
(3,598 |
) |
|
|
|
|
|
|
|
|
|
|
3,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(3,992 |
) |
|
$ |
(5,479 |
) |
|
$ |
1,881 |
|
|
$ |
3,598 |
|
|
$ |
(3,992 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The condensed consolidating statement of operations for BlueLinx Holdings Inc. for the period
from December 31, 2006 to June 30, 2007 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings |
|
|
BlueLinx |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Corporation |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
2,039,104 |
|
|
$ |
15,036 |
|
|
$ |
(15,036 |
) |
|
$ |
2,039,104 |
|
Cost of sales |
|
|
|
|
|
|
1,816,111 |
|
|
|
|
|
|
|
|
|
|
|
1,816,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
222,993 |
|
|
|
15,036 |
|
|
|
(15,036 |
) |
|
|
222,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
716 |
|
|
|
195,891 |
|
|
|
243 |
|
|
|
(15,036 |
) |
|
|
181,814 |
|
Depreciation and amortization |
|
|
|
|
|
|
8,618 |
|
|
|
2,116 |
|
|
|
|
|
|
|
10,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
716 |
|
|
|
204,509 |
|
|
|
2,359 |
|
|
|
(15,036 |
) |
|
|
192,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(716 |
) |
|
|
18,484 |
|
|
|
12,677 |
|
|
|
|
|
|
|
30,445 |
|
Non-operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
12,620 |
|
|
|
9,784 |
|
|
|
|
|
|
|
22,404 |
|
Other expense (income), net |
|
|
|
|
|
|
(367 |
) |
|
|
(241 |
) |
|
|
|
|
|
|
(608 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for (benefit from) income taxes |
|
|
(716 |
) |
|
|
6,231 |
|
|
|
3,134 |
|
|
|
|
|
|
|
8,649 |
|
Provision for (benefit from) income taxes |
|
|
(279 |
) |
|
|
2,461 |
|
|
|
1,222 |
|
|
|
|
|
|
|
3,404 |
|
Equity in income (loss) of subsidiaries |
|
|
5,682 |
|
|
|
|
|
|
|
|
|
|
|
(5,682 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
5,245 |
|
|
$ |
3,770 |
|
|
$ |
1,912 |
|
|
$ |
(5,682 |
) |
|
$ |
5,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
The condensed consolidating balance sheet for BlueLinx Holdings Inc. as of June 28, 2008
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
Holdings |
|
|
and |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
4 |
|
|
$ |
29,724 |
|
|
$ |
63 |
|
|
$ |
|
|
|
$ |
29,791 |
|
Receivables |
|
|
|
|
|
|
295,081 |
|
|
|
|
|
|
|
|
|
|
|
295,081 |
|
Inventories |
|
|
|
|
|
|
315,368 |
|
|
|
|
|
|
|
|
|
|
|
315,368 |
|
Deferred income taxes |
|
|
|
|
|
|
14,633 |
|
|
|
|
|
|
|
(28 |
) |
|
|
14,605 |
|
Other current assets |
|
|
100 |
|
|
|
38,557 |
|
|
|
|
|
|
|
|
|
|
|
38,657 |
|
Intercompany receivable |
|
|
22,044 |
|
|
|
|
|
|
|
|
|
|
|
(22,044 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
22,148 |
|
|
|
693,363 |
|
|
|
63 |
|
|
|
(22,072 |
) |
|
|
693,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and land improvements |
|
|
|
|
|
|
3,067 |
|
|
|
54,295 |
|
|
|
|
|
|
|
57,362 |
|
Buildings |
|
|
|
|
|
|
7,520 |
|
|
|
91,030 |
|
|
|
|
|
|
|
98,550 |
|
Machinery and equipment |
|
|
|
|
|
|
67,922 |
|
|
|
|
|
|
|
|
|
|
|
67,922 |
|
Construction in progress |
|
|
|
|
|
|
1,360 |
|
|
|
|
|
|
|
|
|
|
|
1,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, at cost |
|
|
|
|
|
|
79,869 |
|
|
|
145,325 |
|
|
|
|
|
|
|
225,194 |
|
Accumulated depreciation |
|
|
|
|
|
|
(43,340 |
) |
|
|
(17,614 |
) |
|
|
|
|
|
|
(60,954 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
|
|
|
|
36,529 |
|
|
|
127,711 |
|
|
|
|
|
|
|
164,240 |
|
Investment in subsidiaries |
|
|
129,242 |
|
|
|
|
|
|
|
|
|
|
|
(129,242 |
) |
|
|
|
|
Deferred income taxes |
|
|
|
|
|
|
3,496 |
|
|
|
|
|
|
|
(1,278 |
) |
|
|
2,218 |
|
Other non-current assets |
|
|
|
|
|
|
14,864 |
|
|
|
4,978 |
|
|
|
|
|
|
|
19,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
151,390 |
|
|
$ |
748,252 |
|
|
$ |
132,752 |
|
|
$ |
(152,592 |
) |
|
$ |
879,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
118 |
|
|
$ |
176,482 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
176,600 |
|
Bank overdrafts |
|
|
|
|
|
|
38,055 |
|
|
|
|
|
|
|
|
|
|
|
38,055 |
|
Accrued compensation |
|
|
|
|
|
|
11,503 |
|
|
|
|
|
|
|
|
|
|
|
11,503 |
|
Deferred income taxes |
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
(28 |
) |
|
|
|
|
Current maturities of long-term debt |
|
|
|
|
|
|
10,048 |
|
|
|
|
|
|
|
|
|
|
|
10,048 |
|
Other current liabilities |
|
|
|
|
|
|
23,164 |
|
|
|
5,172 |
|
|
|
|
|
|
|
28,336 |
|
Intercompany payable |
|
|
|
|
|
|
21,792 |
|
|
|
252 |
|
|
|
(22,044 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
146 |
|
|
|
281,044 |
|
|
|
5,424 |
|
|
|
(22,072 |
) |
|
|
264,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
156,000 |
|
|
|
295,000 |
|
|
|
|
|
|
|
451,000 |
|
Deferred income taxes |
|
|
|
|
|
|
|
|
|
|
1,278 |
|
|
|
(1,278 |
) |
|
|
|
|
Other long-term liabilities |
|
|
|
|
|
|
13,016 |
|
|
|
|
|
|
|
|
|
|
|
13,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
146 |
|
|
|
450,060 |
|
|
|
301,702 |
|
|
|
(23,350 |
) |
|
|
728,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity/Parents Investment |
|
|
151,244 |
|
|
|
298,192 |
|
|
|
(168,950 |
) |
|
|
(129,242 |
) |
|
|
151,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
151,390 |
|
|
$ |
748,252 |
|
|
$ |
132,752 |
|
|
$ |
(152,592 |
) |
|
$ |
879,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
The condensed consolidating balance sheet for BlueLinx Holdings Inc. as of December 29, 2007
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
Corporation |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Holdings Inc. |
|
|
and Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
3 |
|
|
$ |
15,699 |
|
|
$ |
57 |
|
|
$ |
|
|
|
$ |
15,759 |
|
Receivables |
|
|
|
|
|
|
263,176 |
|
|
|
|
|
|
|
|
|
|
|
263,176 |
|
Inventories |
|
|
|
|
|
|
335,887 |
|
|
|
|
|
|
|
|
|
|
|
335,887 |
|
Deferred income taxes |
|
|
|
|
|
|
12,277 |
|
|
|
|
|
|
|
(78 |
) |
|
|
12,199 |
|
Other current assets |
|
|
271 |
|
|
|
52,960 |
|
|
|
|
|
|
|
|
|
|
|
53,231 |
|
Intercompany receivable |
|
|
18,103 |
|
|
|
611 |
|
|
|
|
|
|
|
(18,714 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
18,377 |
|
|
|
680,610 |
|
|
|
57 |
|
|
|
(18,792 |
) |
|
|
680,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and land improvements |
|
|
|
|
|
|
3,000 |
|
|
|
54,295 |
|
|
|
|
|
|
|
57,295 |
|
Buildings |
|
|
|
|
|
|
7,390 |
|
|
|
91,030 |
|
|
|
|
|
|
|
98,420 |
|
Machinery and equipment |
|
|
|
|
|
|
67,217 |
|
|
|
|
|
|
|
|
|
|
|
67,217 |
|
Construction in progress |
|
|
|
|
|
|
4,212 |
|
|
|
|
|
|
|
|
|
|
|
4,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, at cost |
|
|
|
|
|
|
81,819 |
|
|
|
145,325 |
|
|
|
|
|
|
|
227,144 |
|
Accumulated depreciation |
|
|
|
|
|
|
(39,228 |
) |
|
|
(15,474 |
) |
|
|
|
|
|
|
(54,702 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
|
|
|
|
42,591 |
|
|
|
129,851 |
|
|
|
|
|
|
|
172,442 |
|
Investment in subsidiaries |
|
|
137,155 |
|
|
|
|
|
|
|
|
|
|
|
(137,155 |
) |
|
|
|
|
Non-current deferred income taxes |
|
|
|
|
|
|
4,327 |
|
|
|
|
|
|
|
(1,699 |
) |
|
|
2,628 |
|
Other non-current assets |
|
|
|
|
|
|
22,822 |
|
|
|
5,292 |
|
|
|
|
|
|
|
28,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
155,532 |
|
|
$ |
750,350 |
|
|
$ |
135,200 |
|
|
$ |
(157,646 |
) |
|
$ |
883,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
20 |
|
|
$ |
164,697 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
164,717 |
|
Bank overdrafts |
|
|
|
|
|
|
37,152 |
|
|
|
|
|
|
|
|
|
|
|
37,152 |
|
Accrued compensation |
|
|
|
|
|
|
10,372 |
|
|
|
|
|
|
|
|
|
|
|
10,372 |
|
Deferred income taxes |
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
(78 |
) |
|
|
|
|
Other current liabilities |
|
|
|
|
|
|
15,145 |
|
|
|
4,135 |
|
|
|
|
|
|
|
19,280 |
|
Intercompany payable |
|
|
611 |
|
|
|
17,632 |
|
|
|
471 |
|
|
|
(18,714 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
709 |
|
|
|
244,998 |
|
|
|
4,606 |
|
|
|
(18,792 |
) |
|
|
231,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
|
|
|
183,535 |
|
|
|
295,000 |
|
|
|
|
|
|
|
478,535 |
|
Deferred income taxes |
|
|
|
|
|
|
|
|
|
|
1,699 |
|
|
|
(1,699 |
) |
|
|
|
|
Other non-current liabilities |
|
|
|
|
|
|
18,557 |
|
|
|
|
|
|
|
|
|
|
|
18,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
709 |
|
|
|
447,090 |
|
|
|
301,305 |
|
|
|
(20,491 |
) |
|
|
728,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity/Parents Investment |
|
|
154,823 |
|
|
|
303,260 |
|
|
|
(166,105 |
) |
|
|
(137,155 |
) |
|
|
154,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
155,532 |
|
|
$ |
750,350 |
|
|
$ |
135,200 |
|
|
$ |
(157,646 |
) |
|
$ |
883,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
The condensed consolidating statement of cash flows for BlueLinx Holdings Inc. for the period
from December 29, 2007 to June 28, 2008 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings |
|
|
BlueLinx |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Corporation |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(3,992 |
) |
|
$ |
(5,479 |
) |
|
$ |
1,881 |
|
|
$ |
3,598 |
|
|
$ |
(3,992 |
) |
Adjustments to reconcile net income to cash (used
in) provided by operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
7,931 |
|
|
|
2,140 |
|
|
|
|
|
|
|
10,071 |
|
Amortization of debt issue costs |
|
|
|
|
|
|
901 |
|
|
|
314 |
|
|
|
|
|
|
|
1,215 |
|
Deferred income tax benefit |
|
|
(50 |
) |
|
|
(2,460 |
) |
|
|
(421 |
) |
|
|
|
|
|
|
(2,931 |
) |
Share-based compensation expense |
|
|
|
|
|
|
1,119 |
|
|
|
|
|
|
|
|
|
|
|
1,119 |
|
Excess tax benefits from share-based
compensation arrangements |
|
|
|
|
|
|
(76 |
) |
|
|
|
|
|
|
|
|
|
|
(76 |
) |
Equity in earnings of subsidiaries |
|
|
3,598 |
|
|
|
|
|
|
|
|
|
|
|
(3,598 |
) |
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
|
|
|
|
(31,905 |
) |
|
|
|
|
|
|
|
|
|
|
(31,905 |
) |
Inventories |
|
|
|
|
|
|
20,519 |
|
|
|
|
|
|
|
|
|
|
|
20,519 |
|
Accounts payable |
|
|
98 |
|
|
|
11,785 |
|
|
|
|
|
|
|
|
|
|
|
11,883 |
|
Changes in other working capital |
|
|
171 |
|
|
|
21,075 |
|
|
|
1,037 |
|
|
|
|
|
|
|
22,283 |
|
Intercompany receivable |
|
|
(3,941 |
) |
|
|
611 |
|
|
|
|
|
|
|
3,330 |
|
|
|
|
|
Intercompany payable |
|
|
(611 |
) |
|
|
4,160 |
|
|
|
(219 |
) |
|
|
(3,330 |
) |
|
|
|
|
Other |
|
|
|
|
|
|
2,589 |
|
|
|
|
|
|
|
|
|
|
|
2,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
(4,727 |
) |
|
|
30,770 |
|
|
|
4,732 |
|
|
|
|
|
|
|
30,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries |
|
|
4,212 |
|
|
|
|
|
|
|
|
|
|
|
(4,212 |
) |
|
|
|
|
Property, plant and equipment investments |
|
|
|
|
|
|
(1,502 |
) |
|
|
|
|
|
|
|
|
|
|
(1,502 |
) |
Proceeds from sale of assets |
|
|
|
|
|
|
827 |
|
|
|
|
|
|
|
|
|
|
|
827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
4,212 |
|
|
|
(675 |
) |
|
|
|
|
|
|
(4,212 |
) |
|
|
(675 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net transactions with Parent |
|
|
|
|
|
|
514 |
|
|
|
(4,726 |
) |
|
|
4,212 |
|
|
|
|
|
Proceeds from stock options exercised |
|
|
434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
434 |
|
Excess tax benefits from share-based compensation
arrangements |
|
|
76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76 |
|
Net decrease in revolving credit facility |
|
|
|
|
|
|
(17,487 |
) |
|
|
|
|
|
|
|
|
|
|
(17,487 |
) |
Increase in bank overdrafts |
|
|
|
|
|
|
903 |
|
|
|
|
|
|
|
|
|
|
|
903 |
|
Common dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
516 |
|
|
|
(16,070 |
) |
|
|
(4,726 |
) |
|
|
4,212 |
|
|
|
(16,068 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash |
|
|
1 |
|
|
|
14,025 |
|
|
|
6 |
|
|
|
|
|
|
|
14,032 |
|
Balance, beginning of period |
|
|
3 |
|
|
|
15,699 |
|
|
|
57 |
|
|
|
|
|
|
|
15,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
4 |
|
|
$ |
29,724 |
|
|
$ |
63 |
|
|
$ |
|
|
|
$ |
29,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
The condensed consolidating statement of cash flows for BlueLinx Holdings Inc. for the period
from December 31, 2006 to June 30, 2007 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings |
|
|
BlueLinx |
|
|
LLC |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Corporation |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
5,245 |
|
|
$ |
3,770 |
|
|
$ |
1,912 |
|
|
$ |
(5,682 |
) |
|
$ |
5,245 |
|
Adjustments to reconcile net income to cash (used
in) provided by operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
8,618 |
|
|
|
2,116 |
|
|
|
|
|
|
|
10,734 |
|
Amortization of debt issue costs |
|
|
|
|
|
|
903 |
|
|
|
312 |
|
|
|
|
|
|
|
1,215 |
|
Deferred income tax benefit |
|
|
(86 |
) |
|
|
(1,061 |
) |
|
|
(416 |
) |
|
|
|
|
|
|
(1,563 |
) |
Share-based compensation expense |
|
|
|
|
|
|
2,227 |
|
|
|
|
|
|
|
|
|
|
|
2,227 |
|
Excess tax benefits from share-based
compensation arrangements |
|
|
|
|
|
|
(60 |
) |
|
|
|
|
|
|
|
|
|
|
(60 |
) |
Equity in earnings of subsidiaries |
|
|
(5,682 |
) |
|
|
|
|
|
|
|
|
|
|
5,682 |
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
|
|
|
|
(98,255 |
) |
|
|
|
|
|
|
|
|
|
|
(98,255 |
) |
Inventories |
|
|
|
|
|
|
(59,536 |
) |
|
|
|
|
|
|
|
|
|
|
(59,536 |
) |
Accounts payable |
|
|
|
|
|
|
64,503 |
|
|
|
|
|
|
|
|
|
|
|
64,503 |
|
Changes in other working capital |
|
|
508 |
|
|
|
6,924 |
|
|
|
1,408 |
|
|
|
|
|
|
|
8,840 |
|
Intercompany receivable |
|
|
(207 |
) |
|
|
|
|
|
|
|
|
|
|
207 |
|
|
|
|
|
Intercompany payable |
|
|
|
|
|
|
532 |
|
|
|
(325 |
) |
|
|
(207 |
) |
|
|
|
|
Other |
|
|
|
|
|
|
2,308 |
|
|
|
(30 |
) |
|
|
|
|
|
|
2,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
(222 |
) |
|
|
(69,127 |
) |
|
|
4,977 |
|
|
|
|
|
|
|
(64,372 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries |
|
|
7,624 |
|
|
|
|
|
|
|
|
|
|
|
(7,624 |
) |
|
|
|
|
Property, plant and equipment investments |
|
|
|
|
|
|
(9,578 |
) |
|
|
(449 |
) |
|
|
|
|
|
|
(10,027 |
) |
Proceeds from sale of assets |
|
|
|
|
|
|
1,086 |
|
|
|
|
|
|
|
|
|
|
|
1,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
7,624 |
|
|
|
(8,492 |
) |
|
|
(449 |
) |
|
|
(7,624 |
) |
|
|
(8,941 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net transactions with Parent |
|
|
|
|
|
|
(3,078 |
) |
|
|
(4,546 |
) |
|
|
7,624 |
|
|
|
|
|
Proceeds from stock options exercised |
|
|
323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
323 |
|
Excess tax benefits from share-based compensation
arrangements |
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60 |
|
Net increase in revolving credit facility |
|
|
|
|
|
|
94,073 |
|
|
|
|
|
|
|
|
|
|
|
94,073 |
|
Decrease in bank overdrafts |
|
|
|
|
|
|
(15,678 |
) |
|
|
|
|
|
|
|
|
|
|
(15,678 |
) |
Common dividends paid |
|
|
(7,784 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,784 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(7,401 |
) |
|
|
75,317 |
|
|
|
(4,513 |
) |
|
|
7,624 |
|
|
|
71,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash |
|
|
1 |
|
|
|
(2,302 |
) |
|
|
15 |
|
|
|
|
|
|
|
(2,286 |
) |
Balance, beginning of period |
|
|
2 |
|
|
|
27,017 |
|
|
|
23 |
|
|
|
|
|
|
|
27,042 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
3 |
|
|
$ |
24,715 |
|
|
$ |
38 |
|
|
$ |
|
|
|
$ |
24,756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
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 condensed 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 December 29, 2007 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 Factors Affecting Future Results in our Annual Report on Form 10-K
for the year ended December 29, 2007 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; |
|
|
|
|
fuel costs; |
|
|
|
|
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; |
|
|
|
|
our ability to agree to a new supply agreement with Georgia-Pacific after May 7, 2010, or
otherwise obtain replacement products on favorable economic terms; |
21
|
|
|
acts of war or terrorist activities; |
|
|
|
|
variations in the performance of the financial markets, including the credit markets; and |
|
|
|
|
the other factors described herein under Factors Affecting Future Results in our Annual
Report on Form 10-K for the year ended December 29, 2007 as filed with the SEC. |
Given these risks and uncertainties, we caution you not to place undue reliance on
forward-looking statements. We undertake no obligation to publicly update or revise any
forward-looking statement as a result of new information, future events or otherwise, except as
required by law.
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 more than 70
warehouses and third-party operated warehouses which serve all major metropolitan markets in the
United States. We distribute products in two principal categories: structural products and
specialty products. Structural products include plywood, 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 52% of our second quarter of
fiscal 2008 gross sales. Specialty products include roofing, insulation, moulding, engineered wood,
vinyl products (used primarily in siding) and metal products (excluding rebar and remesh).
Specialty products accounted for approximately 48% of our second quarter of fiscal 2008 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 and continued to deteriorate throughout the second quarter of
fiscal 2008. Our operating results have declined during the past two years as they are closely
tied to U.S. housing starts. Additionally, the mortgage markets have experienced substantial
disruption due to a rising number of defaults in the subprime market. This disruption and the
related defaults increased the inventory of homes for sale and also caused lenders to tighten
mortgage qualification criteria which further reduced demand for new homes. Forecasters continue
to have a bearish outlook for the housing market and we expect the downturn in new housing activity
will continue to negatively impact our operating results for the foreseeable future. We continue
to prudently manage our inventories, receivables and spending in this environment. However, along
with many forecasters, we believe U.S. housing demand will improve in the long term based on
population demographics and a variety of other factors.
Supply Agreement with Georgia-Pacific
On May 7, 2004, we entered into a multi-year supply agreement with Georgia-Pacific. Under the
agreement, we have exclusive distribution rights on certain products and certain customer segments.
Georgia-Pacific is our largest vendor, with Georgia-Pacific products representing approximately 25%
of our purchases during fiscal 2007. On June 6, 2008, Georgia-Pacific notified us of its intent to
terminate this supply agreement, effective May 7, 2010. Georgia-Pacific and BlueLinx are currently
in discussions regarding a new agreement which would govern the purchase, supply and distribution
arrangements between the two parties after May 7, 2010. Georgia-Pacific and BlueLinx are
continuing to work together pursuant to the terms of the existing Supply Agreement.
The Supply Agreement details distribution rights by product categories, including exclusivity
rights and minimum supply volume commitments from Georgia-Pacific with respect to certain products.
This Supply Agreement also details our purchase obligations by product categories, including
minimum purchase volume commitments with respect to most of the products supplied to us. In
addition, the Supply Agreement also provides for advertising, marketing and promotion arrangements
between BlueLinx and Georgia-Pacific for certain products.
Subsequent Event
On July 15, 2008, our board of directors approved a plan to exit our custom milling operations
in California. We are taking this action primarily based on our analysis of the impact of
unfavorable market conditions on the business. We expect to complete the closure of the milling
operation during the third quarter of fiscal 2008. We expect to incur a pre-tax charge of
approximately $4 million, or an after tax charge of approximately $0.08 per diluted share related
to this action in the third quarter. Approximately $1.5 million of the total charge will require
cash expenditures during the third quarter.
22
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 2008, the second quarter of
fiscal 2007, the first six months of fiscal 2008, the first six months of fiscal 2007, fiscal 2007
and fiscal 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
|
Q2 2008 |
|
|
Q2 2007 |
|
|
2008 YTD |
|
|
2007 YTD |
|
|
2007 |
|
|
2006 |
|
|
|
(Dollars in millions) |
|
|
|
(Unaudited) |
|
Sales by Category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structural Products |
|
$ |
443 |
|
|
$ |
598 |
|
|
$ |
815 |
|
|
$ |
1,117 |
|
|
$ |
2,098 |
|
|
$ |
2,788 |
|
Specialty Products |
|
|
403 |
|
|
|
501 |
|
|
|
757 |
|
|
|
957 |
|
|
|
1,802 |
|
|
|
2,197 |
|
Other(1) |
|
|
(11 |
) |
|
|
(17 |
) |
|
|
(21 |
) |
|
|
(35 |
) |
|
|
(66 |
) |
|
|
(86 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales |
|
$ |
835 |
|
|
$ |
1,082 |
|
|
$ |
1,551 |
|
|
$ |
2,039 |
|
|
$ |
3,834 |
|
|
$ |
4,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Variances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit Volume $ Change |
|
$ |
(286 |
) |
|
$ |
(229 |
) |
|
$ |
(532 |
) |
|
$ |
(534 |
) |
|
$ |
(896 |
) |
|
$ |
(398 |
) |
Price/Other(1) |
|
|
39 |
|
|
|
(68 |
) |
|
|
44 |
|
|
|
(183 |
) |
|
|
(169 |
) |
|
|
(325 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total $ Change |
|
$ |
(247 |
) |
|
$ |
(297 |
) |
|
$ |
(488 |
) |
|
$ |
(717 |
) |
|
$ |
(1,065 |
) |
|
$ |
(723 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit Volume % Change |
|
|
(26.0 |
)% |
|
|
(16.3 |
)% |
|
|
(25.6 |
)% |
|
|
(19.1 |
)% |
|
|
(18.0 |
)% |
|
|
(7.0 |
)% |
Price/Other(1) |
|
|
3.1 |
% |
|
|
(5.2 |
)% |
|
|
1.7 |
% |
|
|
(6.9 |
)% |
|
|
(3.7 |
)% |
|
|
(5.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total % Change |
|
|
(22.9 |
)% |
|
|
(21.5 |
)% |
|
|
(23.9 |
)% |
|
|
(26.0 |
)% |
|
|
(21.7 |
)% |
|
|
(12.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Other includes unallocated allowances and discounts. |
The following table sets forth changes in gross margin dollars and percentages by product
category, and percentage changes in unit volume growth by product, in each case for the second
quarter of fiscal 2008, the second quarter of fiscal 2007, the first six months of fiscal 2008, the
first six months of fiscal 2007, fiscal 2007 and fiscal 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
|
Q2 2008 |
|
|
Q2 2007 |
|
|
2008 YTD |
|
|
2007 YTD |
|
|
2007 |
|
|
2006 |
|
|
|
(Dollars in millions) |
|
|
|
(Unaudited) |
|
Gross Margin $s by Category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structural Products |
|
$ |
53 |
|
|
$ |
56 |
|
|
$ |
85 |
|
|
$ |
101 |
|
|
$ |
173 |
|
|
$ |
194 |
|
Specialty Products |
|
|
58 |
|
|
|
70 |
|
|
|
108 |
|
|
|
134 |
|
|
|
238 |
|
|
|
308 |
|
Other (1) |
|
|
(4 |
) |
|
|
(7 |
) |
|
|
(8 |
) |
|
|
(12 |
) |
|
|
(19 |
) |
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Margin $s |
|
$ |
107 |
|
|
$ |
119 |
|
|
$ |
185 |
|
|
$ |
223 |
|
|
$ |
392 |
|
|
$ |
480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin %s by Category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structural Products |
|
|
12.0 |
% |
|
|
9.3 |
% |
|
|
10.4 |
% |
|
|
9.0 |
% |
|
|
8.2 |
% |
|
|
7.0 |
% |
Specialty Products |
|
|
14.4 |
% |
|
|
14.0 |
% |
|
|
14.3 |
% |
|
|
14.0 |
% |
|
|
13.2 |
% |
|
|
14.0 |
% |
Other (1) |
|
NA |
|
|
NA |
|
|
NA |
|
|
NA |
|
|
NA |
|
|
NA |
|
Total Gross Margin %s |
|
|
12.9 |
% |
|
|
11.0 |
% |
|
|
11.9 |
% |
|
|
10.9 |
% |
|
|
10.2 |
% |
|
|
9.8 |
% |
Change in Unit Volume by Product |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structural Products |
|
|
(30.3 |
)% |
|
|
(17.1 |
)% |
|
|
(29.2 |
)% |
|
|
(19.9 |
)% |
|
|
(19.2 |
)% |
|
|
(11.8 |
)% |
Specialty Products |
|
|
(20.8 |
)% |
|
|
(15.3 |
)% |
|
|
(21.5 |
)% |
|
|
(18.0 |
)% |
|
|
(16.4 |
)% |
|
|
1.0 |
% |
Total Change in Unit Volume %s |
|
|
(26.0 |
)% |
|
|
(16.3 |
)% |
|
|
(25.6 |
)% |
|
|
(19.1 |
)% |
|
|
(18.0 |
)% |
|
|
(7.0 |
)% |
|
|
|
(1) |
|
Other includes unallocated allowances and discounts. |
23
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 2008, the second
quarter of fiscal 2007, the first six months of fiscal 2008, the first six months of fiscal 2007,
fiscal 2007 and fiscal 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
|
Q2 2008 |
|
|
Q2 2007 |
|
|
2008 YTD |
|
|
2007 YTD |
|
|
2007 |
|
|
2006 |
|
|
|
(Dollars in millions) |
|
|
|
(Unaudited) |
|
Sales by Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse/Reload |
|
$ |
622 |
|
|
$ |
783 |
|
|
$ |
1,133 |
|
|
$ |
1,464 |
|
|
$ |
2,763 |
|
|
$ |
3,326 |
|
Direct |
|
|
224 |
|
|
|
316 |
|
|
|
439 |
|
|
|
610 |
|
|
|
1,137 |
|
|
|
1,659 |
|
Other(1) |
|
|
(11 |
) |
|
|
(17 |
) |
|
|
(21 |
) |
|
|
(35 |
) |
|
|
(66 |
) |
|
|
(86 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
835 |
|
|
$ |
1,082 |
|
|
$ |
1,551 |
|
|
$ |
2,039 |
|
|
$ |
3,834 |
|
|
$ |
4,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin by Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse/Reload |
|
$ |
97 |
|
|
$ |
106 |
|
|
$ |
166 |
|
|
$ |
198 |
|
|
$ |
344 |
|
|
$ |
407 |
|
Direct |
|
|
14 |
|
|
|
20 |
|
|
|
27 |
|
|
|
37 |
|
|
|
67 |
|
|
|
95 |
|
Other(1) |
|
|
(4 |
) |
|
|
(7 |
) |
|
|
(8 |
) |
|
|
(12 |
) |
|
|
(19 |
) |
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
107 |
|
|
$ |
119 |
|
|
$ |
185 |
|
|
$ |
223 |
|
|
$ |
392 |
|
|
$ |
480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
|
Q2 2008 |
|
|
Q2 2007 |
|
|
2008 YTD |
|
|
2007 YTD |
|
|
2007 |
|
|
2006 |
|
|
|
(Dollars in millions) |
|
|
|
(Unaudited) |
|
Gross Margin % by Channel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse/Reload |
|
|
15.6 |
% |
|
|
13.5 |
% |
|
|
14.7 |
% |
|
|
13.5 |
% |
|
|
12.5 |
% |
|
|
12.2 |
% |
Direct |
|
|
6.3 |
% |
|
|
6.3 |
% |
|
|
6.2 |
% |
|
|
6.1 |
% |
|
|
5.9 |
% |
|
|
5.7 |
% |
Unallocated Allowances and Adjustments |
|
|
(0.5 |
)% |
|
|
(0.6 |
)% |
|
|
(0.5 |
)% |
|
|
(0.6 |
)% |
|
|
(0.5 |
)% |
|
|
(0.4 |
)% |
Total |
|
|
12.9 |
% |
|
|
11.0 |
% |
|
|
11.9 |
% |
|
|
10.9 |
% |
|
|
10.2 |
% |
|
|
9.8 |
% |
|
|
|
(1) |
|
Other includes unallocated allowances and adjustments. |
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 2008 contains 53 weeks. Fiscal years 2007 and 2006 each contain 52
weeks.
Results of Operations
Second Quarter of Fiscal 2008 Compared to Second Quarter of Fiscal 2007
The following table sets forth our results of operations for the second quarter of fiscal 2008
and second quarter of fiscal 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from |
|
|
|
|
|
|
Period from |
|
|
|
|
|
|
March 30, 2008 |
|
|
% of |
|
|
April 1, 2007 |
|
|
% of |
|
|
|
to |
|
|
Net |
|
|
to |
|
|
Net |
|
|
|
June 28, 2008 |
|
|
Sales |
|
|
June 30, 2007 |
|
|
Sales |
|
|
|
(Unaudited) |
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
(Dollars in thousands) |
|
Net sales |
|
$ |
834,669 |
|
|
|
100.0 |
% |
|
$ |
1,081,990 |
|
|
|
100.0 |
% |
Gross profit |
|
|
107,435 |
|
|
|
12.9 |
% |
|
|
119,238 |
|
|
|
11.0 |
% |
Selling, general & administrative |
|
|
81,227 |
|
|
|
9.7 |
% |
|
|
93,346 |
|
|
|
8.6 |
% |
Depreciation and amortization |
|
|
5,103 |
|
|
|
0.6 |
% |
|
|
5,335 |
|
|
|
0.5 |
% |
Operating income |
|
|
21,105 |
|
|
|
2.5 |
% |
|
|
20,557 |
|
|
|
1.9 |
% |
Interest expense |
|
|
9,385 |
|
|
|
1.1 |
% |
|
|
11,798 |
|
|
|
1.1 |
% |
Other expense (income), net |
|
|
190 |
|
|
|
0.0 |
% |
|
|
(225 |
) |
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before benefit from income taxes |
|
|
11,530 |
|
|
|
1.4 |
% |
|
|
8,984 |
|
|
|
0.8 |
% |
Provision for income taxes |
|
|
4,931 |
|
|
|
0.6 |
% |
|
|
3,550 |
|
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
6,599 |
|
|
|
0.8 |
% |
|
$ |
5,434 |
|
|
|
0.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Net Sales. For the second quarter of fiscal 2008, net sales decreased by 22.9%, or $247
million, to $835 million. Sales during the quarter were negatively impacted by a 31.6% decline in
housing starts. We estimate that new home construction represents at least 50% of our end-use
markets. Specialty sales, primarily consisting of roofing, specialty panels, insulation, moulding,
engineered wood products, vinyl siding, composite decking and metal products (excluding rebar and
remesh) decreased by $98 million or 19.6% compared to the second quarter of fiscal 2007, reflecting
a decline in unit volume. Structural sales, including plywood, OSB, lumber and metal rebar,
decreased by $155 million, or 25.9% from a year ago, also primarily as a result of a decrease in
unit volume.
Gross Profit. Gross profit for the second quarter of fiscal 2008 was $107 million, or 12.9%
of sales, compared to $119 million, or 11.0% of sales, in the prior year period. The decrease in
gross profit dollars compared to the second quarter of fiscal 2007 was driven primarily by reduced
unit volume associated with the ongoing slowdown in the housing
market. Gross margin percentage increased by
1.9% to 12.9%, reflecting the increase, as a percentage of our total
sales, of higher-margin specialty products and increases in product
prices. Our ongoing initiatives to increase margin across all product
categories also contributed to the increased gross margin.
Selling, General, and Administrative Expenses. Selling, general and administrative expenses
for the second quarter of fiscal 2008 were $81.2 million, or 9.7% of net sales, compared to $93.3
million, or 8.6% of net sales, during the second quarter of fiscal 2007. The dollar decline
primarily reflects lower payroll expense related to reduced headcount. Our ongoing focus on
managing expenses to the current operating environment also contributed to this decline.
Depreciation and Amortization. Depreciation and amortization expense totaled $5.1 million for
the second quarter of fiscal 2008, compared with $5.3 million for the second quarter of fiscal
2007.
Operating Income. Operating income for the second quarter of fiscal 2008 was $21.1 million, or
2.5% of sales, versus operating income of $20.6 million, or 1.9% of sales, in the second quarter of
fiscal 2007, reflecting a decrease in operating expenses of $12.4 million.
Interest Expense, net. Interest expense totaled $9.4 million, down $2.4 million from the prior
year reflecting lower debt levels. Interest expense related to our revolving credit facility and
mortgage was $4.1 million and $4.7 million, respectively, during this period. Interest expense
totaled $11.8 million for the second quarter of fiscal 2007. Interest expense related to our
revolving credit facility and mortgage was $6.5 million and $4.7 million, respectively, during this
period. In addition, interest expense included $0.6 million of debt issue cost amortization for
each of the second quarter of fiscal 2008 and the second quarter of fiscal 2007.
Provision for Income Taxes. The effective tax rate was 42.8% and 39.5% for the second quarter
of fiscal 2008 and the second quarter of fiscal 2007, respectively. The increase in the effective
tax rate for the second quarter of fiscal 2008, compared to the same period last year, resulted
from tax expense on Canadian earnings.
Net Income. Net income for the second quarter of fiscal 2008 was $6.6 million compared to
net income of $5.4 million for the second quarter of fiscal 2007.
On a per-share basis, basic and diluted earnings applicable to common stockholders for the
second quarter of fiscal 2008 were each $0.21. Basic and diluted earnings per share for the second
quarter of 2007 were each $0.18.
Year-to-Date Fiscal 2008 Compared to Year-to-Date Fiscal 2007
The following table sets forth our results of operations for the first six months of fiscal
2008 and the first six months of fiscal 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from |
|
|
|
|
|
|
Period from |
|
|
|
|
|
|
December 29, 2007 |
|
|
% of |
|
|
December 31, 2006 |
|
|
% of |
|
|
|
to |
|
|
Net |
|
|
to |
|
|
Net |
|
|
|
June 28, 2008 |
|
|
Sales |
|
|
June 30, 2007 |
|
|
Sales |
|
|
|
(Unaudited) |
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
(Dollars in thousands) |
|
Net sales |
|
$ |
1,551,429 |
|
|
|
100.0 |
% |
|
$ |
2,039,104 |
|
|
|
100.0 |
% |
Gross profit |
|
|
185,238 |
|
|
|
11.9 |
% |
|
|
222,993 |
|
|
|
10.9 |
% |
Selling, general & administrative |
|
|
161,862 |
|
|
|
10.4 |
% |
|
|
181,814 |
|
|
|
8.9 |
% |
Depreciation and amortization |
|
|
10,071 |
|
|
|
0.6 |
% |
|
|
10,734 |
|
|
|
0.5 |
% |
Operating income |
|
|
13,305 |
|
|
|
0.9 |
% |
|
|
30,445 |
|
|
|
1.5 |
% |
Interest expense |
|
|
18,739 |
|
|
|
1.2 |
% |
|
|
22,404 |
|
|
|
1.1 |
% |
Other expense (income), net |
|
|
320 |
|
|
|
0.0 |
% |
|
|
(608 |
) |
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before (benefit from) provision for income taxes |
|
|
(5,754 |
) |
|
|
(0.4 |
)% |
|
|
8,649 |
|
|
|
0.4 |
% |
(Benefit from) provision for income taxes |
|
|
(1,762 |
) |
|
|
(0.1 |
)% |
|
|
3,404 |
|
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(3,992 |
) |
|
|
(0.3 |
)% |
|
$ |
5,245 |
|
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Net Sales. For the first six months of fiscal 2008, net sales decreased by 23.9%, or $488
million, to $1.6 billion. Sales during this period were negatively impacted by a 30.1% decline in
housing starts. We estimate that new home construction represents at least 50% of our end-use
markets. Specialty sales, primarily consisting of roofing, specialty panels, insulation, moulding,
engineered wood products, vinyl siding, composite decking and metal products (excluding rebar and
remesh) decreased by $200 million or 20.9% compared to the first six months of fiscal 2007,
reflecting a decline in unit volume. Structural sales, including plywood, OSB, lumber and metal
rebar, decreased by $301 million, or 26.9% from a year ago, also primarily as a result of a
decrease in unit volume.
Gross Profit. Gross profit for the first six months of fiscal 2008 was $185 million, or 11.9%
of sales, compared to $223 million, or 10.9% of sales, in the prior year period. The decrease in
gross profit dollars compared to the first six months of fiscal 2007 was driven primarily by
reduced unit volume associated with the ongoing slowdown in the housing market. Gross margin
percentage increased by 1.0% to 11.9%, reflecting the increase, as a percentage of our total sales, of
higher-margin specialty products and increases in product prices. Our ongoing initiatives to
increase margins across all product categories also contributed to the increased gross margin.
Selling, General, and Administrative Expenses. Selling, general and administrative expenses
for the first six months of fiscal 2008 were $162 million, or 10.4% of net sales, compared to $182
million, or 8.9% of net sales, during the first six months of fiscal 2007. The dollar decline
primarily reflects lower payroll expense related to reduced headcount. Our ongoing focus on
managing expenses to the current operating environment also contributed to this decline.
Depreciation and Amortization. Depreciation and amortization expense totaled $10.1 million for
the first six months of fiscal 2008, compared with $10.7 million for the first six months of fiscal
2007.
Operating Income. Operating income for the first six months of fiscal 2008 was $13.3 million,
or 0.9% of sales, versus operating income of $30.4 million, or 1.5% of sales, in the first six
months of fiscal 2007, reflecting the decline in revenue due to decreased unit volume.
Interest Expense, net. Interest expense totaled $18.7 million, down $3.7 million from the
prior year reflecting lower debt levels. Interest expense related to our revolving credit facility
and mortgage was $8.1 million and $9.4 million, respectively, during this period. Interest expense
totaled $22.4 million for the first six months of fiscal 2007. Interest expense related to our
revolving credit facility and mortgage was $11.6 million and $9.6 million, respectively, during
this period. In addition, interest expense included $1.2 million of debt issue cost amortization
for the first six months of fiscal 2008 and for the first six months of fiscal 2007, respectively.
(Benefit from) Provision for Income Taxes. The effective tax rate was 30.6% and 39.4% for the
first six months of fiscal 2008 and the first six months of fiscal 2007, respectively. The
decrease in the effective tax rate for the first six months of fiscal 2008, compared to the same
period last year, resulted from tax expense on Canadian earnings.
Net (loss) income. Net loss for the first six months of fiscal 2008 was $4.0 million
compared to net income of $5.2 million for the first six months of fiscal 2007.
On a per-share basis, basic and diluted loss applicable to common stockholders for the first
six months of fiscal 2008 were each $0.13. Basic and diluted earnings per share for the first six
months of 2007 were each $0.17.
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 primarily to the impact of poor
weather on the construction market. Our second and third quarters are typically our strongest
quarters, reflecting a substantial increase in construction due to more favorable weather
conditions. Our working capital and accounts receivable and payable generally peak in the third
quarter, while inventory generally peaks in the second quarter in anticipation of the summer
building season. Although we generally expect these trends to continue for the foreseeable future,
we reduced our inventory in the second quarter of 2008 as part of our effort to manage to the
current demand environment in the housing market.
26
Liquidity and Capital Resources
We depend on cash flow from operations and funds available under our revolving credit facility
to finance working capital needs, capital expenditures, dividends and acquisitions. We believe that
the amounts available from this and other sources will be sufficient to fund our routine operations
and capital requirements for the foreseeable future.
Part of our growth strategy is 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 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
identifying acquisition targets and implementing our acquisition strategy. For a discussion of the
risks associated with our acquisition strategy, see the risk factor on integrating acquisitions in
our Annual Report on
Form 10-K.
The following tables indicate our working capital and cash flows for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
June 28, 2008 |
|
|
December 29, 2007 |
|
|
|
(Dollars in thousands) |
|
|
|
(Unaudited) |
|
Working capital |
|
$ |
428,960 |
|
|
$ |
448,731 |
|
|
|
|
|
|
|
|
|
|
|
|
Period from |
|
|
Period from |
|
|
|
December 29, 2007 |
|
|
December 31, 2006 |
|
|
|
to |
|
|
to |
|
|
|
June 28, 2008 |
|
|
June 30, 2007 |
|
|
|
(Dollars in thousands) |
|
|
|
(Unaudited) |
|
Cash flows provided by (used in) operating activities |
|
$ |
30,775 |
|
|
$ |
(64,372 |
) |
Cash flows used in investing activities |
|
|
(675 |
) |
|
|
(8,941 |
) |
Cash flows (used in) provided by financing activities |
|
$ |
(16,068 |
) |
|
$ |
71,027 |
|
Working Capital
Working capital decreased by $19.8 million to $429 million at June 28, 2008 primarily as a
result of increases in accounts payable, current maturities of long-term debt, and other current
liabilities of $11.9 million, $10.0 million and $9.1 million, respectively, as well as decreases in
inventories and other current assets of $20.5 million and $14.6 million, respectively. These
changes were partially offset by an increase in accounts receivable of $31.9 million.
Additionally, cash increased from $15.8 million on December 29, 2007 to $29.8 million at June 28,
2008, primarily due to reductions of working capital. The $29.8 million of cash on our balance sheet at June 28, 2008 includes customer
remittances received in our lock boxes on Friday and Saturday that are not available until Monday,
which is part of the following fiscal period.
Operating Activities
During the first six months of fiscal 2008 and fiscal 2007, cash flows provided by (used in)
operating activities totaled $30.8 million and $(64.4) million, respectively. The increase of
$95.1 million in cash flows provided by operating activities was primarily the result of a source
of cash related to a reduction in the changes in working capital of $107 million. This source of
cash was offset by a $9.2 million decrease in net income.
Investing Activities
During the first six months of fiscal 2008 and fiscal 2007, cash flows used in investing
activities totaled $0.7 million and $8.9 million, respectively.
During the first six months of fiscal 2008 and fiscal 2007, our expenditures for property and
equipment were $1.5 million and $10 million, respectively. The cash used in investing activities in
the first six months of fiscal 2007 was primarily for programs designed to improve and fine tune
our capabilities in inventory management and forecasting, in financial budgeting and reporting, in
order tracking and visibility and in product marketing. These and other programs did not require the
same level of investment in 2008 and our capital expenditures declined accordingly.
Proceeds from the sale of property and equipment totaled $0.8 million and $1.1 million for the
first six months of fiscal 2008 and fiscal 2007, respectively.
27
Financing Activities
Net cash (used in) provided by financing activities was $(16.1) million during the first six
months of fiscal 2008 compared to $71.0 million during the first six months of fiscal 2007. The
$87.1 million decrease in cash provided by financing activities was primarily driven by a decrease
in borrowings under our revolving credit facility of $112 million. This decrease was offset by an
increase in bank overdrafts of $16.6 million. We paid no dividends to our common stockholders in
the first six months of 2008. In the first six months of 2007, we paid dividends to our common
stockholders in the aggregate amount of $7.8 million.
Debt and Credit Sources
On May 7, 2004, our operating subsidiary entered into a revolving credit facility. As of June
28, 2008, advances outstanding under the revolving credit facility were approximately $166 million.
Excess borrowing availability was approximately $271 million. As of June 28, 2008, the interest
rate on outstanding balances under the revolving credit facility was 4.75%. For the second quarter
and first six months of fiscal 2008, interest expense related to the revolving credit facility was
$4.1 million and $8.1 million, respectively. For the second quarter and first six months of fiscal
2007, interest expense related to the revolving credit facility was $6.5 million and $11.6 million,
respectively.
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 57 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.
On June 12, 2006, we entered into an interest rate swap agreement with Goldman Sachs Capital
Markets (GSCM), to hedge against interest rate risks related to our variable rate revolving credit
facility. The interest rate swap has a notional amount of $150 million and the terms call 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 is designated as a cash flow hedge.
We expect the hedge to be highly effective in offsetting changes in expected cash flows, as,
at inception, the critical terms of the interest rate swap generally match the critical terms of
the variable rate revolving credit facility. Fluctuations in the fair value of the ineffective
portion, if any, of the cash flow hedge are reflected in earnings. For the first six months of
fiscal 2008 and for the first six months of fiscal 2007, we recognized an immaterial amount of
expense related to the ineffective portion of the hedge.
At June 28, 2008 and December 29, 2007, the fair value of the interest rate swap was a
liability of $6.9 million and $7.1 million, respectively. These balances were included in Other
current liabilities and Other long-term liabilities on the Condensed Consolidated Balance Sheet.
Accumulated other comprehensive income at June 28, 2008 and December 29, 2007 included the net
loss on the cash flow hedge (net of tax) of $4.1 million and $4.3 million, respectively, which
reflects the cumulative amount of comprehensive loss in connection with the change in fair value of
the swap.
Contractual Obligations
There have been no 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 December 29, 2007 except, as
discussed above, Georgia-Pacifics notification to us of its intent to terminate the Supply
Agreement, effective May 7, 2010. Georgia-Pacific and BlueLinx are currently in discussions
regarding a new agreement which would govern the purchase, supply and distribution arrangements
between the two parties after May 7, 2010. Georgia-Pacific and BlueLinx are continuing to work
together pursuant to the terms of the existing Supply Agreement.
28
Critical Accounting Policies
Our significant accounting policies are more fully described in the notes to the consolidated
financial statements. Certain of our accounting policies require the application of significant
judgment by management in selecting the appropriate assumptions for calculating financial
estimates. As with all judgments, they are subject to an inherent degree of uncertainty. These
judgments are based on our historical experience, current economic trends in the industry,
information provided by customers, vendors and other outside sources and managements estimates, as
appropriate.
The following are accounting policies that management believes are important to the portrayal
of our financial condition and results of operations and require managements most difficult,
subjective or complex judgment.
Revenue Recognition
We recognize revenue when the following criteria are met: persuasive evidence of an agreement
exists, delivery has occurred or services have been rendered, our price to the buyer is fixed and
determinable and collectibility is reasonably assured. Delivery is not considered to have occurred
until the customer takes title and assumes the risks and rewards of ownership. The timing of
revenue recognition is largely dependent on shipping terms. Revenue is recorded at the time of
shipment for terms designated as FOB (free on board) shipping point. For sales transactions
designated FOB destination, revenue is recorded when the product is delivered to the customers
delivery site.
All sales are recorded at gross in accordance with the guidance outlined by EITF 99-19 and in
accordance with standard industry practice. The key indicators used to determine this are as
follows:
|
|
|
We are the primary obligor responsible for fulfillment; |
|
|
|
|
We hold title to all reload inventory and are responsible for all product returns; |
|
|
|
|
We control the selling price for all channels; |
|
|
|
|
We select the supplier; and |
|
|
|
|
We bear all credit risk. |
All revenues recognized are net of trade allowances, cash discounts and sales returns. Cash
discounts and sales returns are estimated using historical experience. Trade allowances are based
on the estimated obligations and historical experience. Adjustments to earnings resulting from
revisions to estimates on discounts and returns have been insignificant for each of the reported
periods.
Allowance for Doubtful Accounts and Related Reserves
We evaluate the collectibility of accounts receivable based on numerous factors, including
past transaction history with customers and their creditworthiness. We maintain an allowance for
doubtful accounts for each aging category on our aged trial balance based on our historical loss
experience. This estimate is periodically adjusted when we become aware of specific customers
inability to meet their financial obligations (e.g., bankruptcy filing or other evidence of
liquidity problems). As we determine that specific balances will be ultimately 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 June 28, 2008 and December 29, 2007
these allowances totaled $14.0 million and $10.5 million, respectively.
Stock-Based Compensation
Compensation expense arising from stock-based awards granted to employees and non-employee
directors is recognized as expense using the straight-line method over the vesting period. As of
June 28, 2008, there was $2.1 million, $5.0 million, $1.2 million and $0.2 million of total
unrecognized compensation expense related to stock options, restricted stock, performance shares
and restricted stock units, respectively. The unrecognized compensation expense for these awards is
expected to be recognized over a period of 2.7 years,
2.5 years, 2.5 years, and 1.3 years,
respectively. As of June 30, 2007, there was $5.0 million, $3.3 million, $2.3 million and $1.7
million of total unrecognized compensation expense related to stock options, restricted stock,
performance shares and restricted stock units, respectively. The unrecognized compensation expense
for these awards is expected to be recognized over a period of 3.5 years, 2.6 years, 2.5 years, and
2.5 years, respectively.
For the second quarter of fiscal 2008 and for the first six months of fiscal 2008, our total
stock-based compensation expense was $1.2 million. We also
recognized related income tax benefits of $0.5 million for the second quarter of fiscal 2008 and
for the first six months of fiscal 2008. For the second quarter of fiscal 2007 and
for the first six months of fiscal 2007, our total stock-based compensation expense was $1.4
million and $2.2 million, respectively. We also recognized related income tax benefits of $0.5 million and $0.9 million for the second quarter of fiscal
2007 and for the first six months of fiscal 2007, respectively.
29
Inventories
Inventories are carried at the lower of cost or market. The cost of all inventories is
determined by the moving average cost method. 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 December 29, 2007, the lower of cost or market reserve
was immaterial. The market value of our inventory exceeded its cost at June 28, 2008.
Additionally, we maintain a reserve for the estimated value of impairment associated with
damaged, excess and obsolete inventory. At June 28, 2008 and December 29, 2007, our damaged, excess
and obsolete inventory reserves totaled $5.3 million and $4.4 million, respectively. Adjustments to
earnings resulting from revisions to inactive inventory estimates have been insignificant.
Consideration Received from Vendors and Paid to Customers
Each year, we enter into agreements with many of our vendors providing for purchase rebates,
generally based on achievement of specified volume purchasing levels and various marketing
allowances that are common industry practice. We accrue for the receipt of vendor rebates based on
purchases, and also reduce inventory value to reflect the net acquisition cost (purchase price less
expected purchase rebates). 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 June 28, 2008, the vendor rebate receivable and customer
rebate payable totaled $7.8 million and $6.3 million, respectively. At December 29, 2007, these
balances totaled $7.5 million and $11.1 million, respectively. Adjustments to earnings resulting
from revisions to rebate estimates have been insignificant for each of the reported periods.
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. Determining whether an impairment has occurred
typically requires various estimates and assumptions, including determining which cash flows are
directly related to the potentially impaired asset, the useful life over which cash flows will
occur, their amount and the assets residual value, if any. In turn, measurement of an impairment
loss requires a determination of fair value, which is based on the best information available. We
use internal cash flow estimates, quoted market prices when available and independent appraisals as
appropriate to determine fair value. We derive the required cash flow estimates from our historical
experience and our internal business plans and apply an appropriate discount rate. If these
projected cash flows are less than the carrying amount, an impairment loss is recognized based on
the fair value of the asset less any costs of disposition. Our judgment regarding the existence of
impairment indicators is based on market and operational performance.
During the second quarter of fiscal 2008, we recorded a non-cash impairment charge of $0.7
million ($0.4 million after tax) to reduce the carrying value of certain long-lived assets to fair
value. This impairment charge was included in Selling, general and administrative expense on our
Consolidated Statement of Operations for the second quarter and the first six months of fiscal
2008.
Income Taxes
Deferred income tax assets and income tax benefits are provided for temporary differences
between amounts recorded for financial reporting and income tax purposes. If, for some reason, the
combination of future years income (or loss) combined with the reversal of temporary differences
results in a loss, such losses can be carried back to prior years or carried forward to future
years to recover the deferred tax assets. In accordance with SFAS No. 109, Accounting for Income
Taxes (SFAS 109), we evaluate our deferred tax assets quarterly to determine if valuation
allowances are required. SFAS 109 requires that companies assess whether valuation allowances
should be established based on the consideration of all available evidence using a more likely
than not standard.
In evaluating our ability to recover our deferred income tax assets we consider all 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
and our forecast of future taxable income. In estimating future taxable income, we develop
assumptions including the amount of future state and federal pretax operating income, the reversal
of temporary differences and the implementation
of feasible and prudent tax planning strategies. These assumptions require significant
judgment about the forecasts of future taxable income.
30
The Company has recorded certain deferred income tax assets as of June 28, 2008. Realization
is dependent on generating sufficient taxable income. The Company believes the deferred income tax
assets will be realized through taxable income generated during available loss carryback periods
and future taxable income, including but not limited to taxable income that would be generated by
the implementation of feasible and prudent tax planning strategies. Although realization is not
assured, management believes that it is more likely than not that all of the deferred income tax
assets will be realized. The amount of the deferred income tax assets considered realizable,
however, could be reduced in the near term if estimates of future taxable income available via loss
carryback are reduced or if we are unable to implement existing tax planning strategies. During
2008, we will continue to closely monitor the current economic downturn in the housing and
construction sectors on a quarterly basis. Should conditions reach a level during 2008 that
necessitates the recording of a valuation allowance against our deferred income tax assets based
upon all of the evidence, both positive and negative, it will be recorded in the period that such
changes in estimates are made. The recording of a valuation allowance would result in additional
income tax expense in such period and could have a significant impact on our future earnings.
Uncertain tax positions are recorded based on the provisions of FASB Interpretation No. 48
(FIN 48), Accounting for Uncertainty in Income Taxes, which prescribes a comprehensive model for
how a company should recognize, measure, present and disclose in its financial statements uncertain
tax positions that the company has taken or expects to take on a tax return (including a discussion
of whether to file or not to file a return in a particular jurisdiction).
Exit Costs
During the second quarter of 2008 and the fourth quarter of fiscal 2007 we vacated leased
office space and certain distribution facilities. We accounted for these transactions in accordance
with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which requires
that a liability be recognized for the cost 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 exit costs include the estimated losses on
the vacated facilities based on our contractual obligations net of estimated sublease income based
on current comparable market rates for leases. We will reassess this liability periodically based
on 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. At June 28, 2008 and December 29, 2007, the vacant property reserve totaled $11.0 million
and $11.3 million, respectively. These balances were included in Other current liabilities, and
in Other long-term liabilities on the Consolidated Balance Sheet.
Recently Issued Accounting Pronouncements
In June 2008, the FASB issued FSP No. Emerging Issues Task Force (EITF) 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities (FSP
03-6-1). FSP 03-6-1 clarifies that unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities
and are to be included in the computation of earnings per share under the two-class method
described in SFAS No. 128, Earnings Per Share. This FSP is effective for us on January 1, 2009
and requires all presented prior-period earnings per share data to be adjusted retrospectively. We
are still in the process of evaluating the impact FSP 03-6-1 will have on our Consolidated
Financial Statements. For additional information about our share-based payment awards, refer to
Note 2 of the Notes to Consolidated Financial Statements in our Form 10-K.
In April 2008, the FASB issued FASB Staff Position (FSP) No. 142-3, Determination of the
Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors to be considered in
developing renewal or extension assumptions used to determine the useful life of intangible assets
under SFAS No. 142, Goodwill and Other Intangible Assets. Its intent is to improve the
consistency between the useful life of an intangible asset and the period of expected cash flows
used to measure its fair value. This FSP is effective for us on January 1, 2009. We are still in
the process of evaluating the impact FSP 142-3, but do not expect it to have a material impact on
our Consolidated Financial Statements.
In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 161, Disclosures about Derivative Instruments and Hedging
Activities An Amendment of SFAS No. 133 (SFAS 161). SFAS 161 seeks to improve financial
reporting for derivative instruments and hedging activities by requiring enhanced disclosures
regarding the impact on financial position, financial performance, and cash flows. To achieve this
increased transparency,
SFAS 161 requires (1) the disclosure of the fair value of derivative instruments and gains and
losses in a tabular format; (2) the disclosure of derivative features that are credit risk-related;
and (3) cross-referencing within the footnotes. SFAS 161 is effective, on a prospective basis, for
fiscal years beginning after November 15, 2008. We are in the process of evaluating the new
disclosure requirements under SFAS 161.
31
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements (SFAS No. 160). SFAS No. 160 establishes requirements for ownership interests
in subsidiaries held by parties other than the Company (sometimes called minority interests) be
clearly identified, presented, and disclosed in the consolidated statement of financial position
within equity, but separate from the parents equity. All changes in the parents ownership
interests are required to be accounted for consistently as equity transactions and any
noncontrolling equity investments in deconsolidated subsidiaries must be measured initially at fair
value. SFAS No. 160 is effective, on a prospective basis, for fiscal years beginning after December
15, 2008. However, presentation and disclosure requirements must be retrospectively applied to
comparative financial statements. We are currently assessing the impact of SFAS No. 160 on our
consolidated financial position, results of operations and cash flows.
In December 2007, the FASB issued SFAS 141 (revised 2007) Business Combinations (SFAS 141R).
SFAS 141R establishes principles and requirements for how the acquirer of a business recognizes and
measures in its financial statements the identifiable assets acquired, the liabilities assumed, and
any noncontrolling interest in the acquiree. SFAS 141R also provides guidance for recognizing and
measuring the goodwill acquired in the business combination and determines what information to
disclose to enable users of the financial statements to evaluate the nature and financial effects
of the business combination. SFAS No. 141R is effective, on a prospective basis, for fiscal years
beginning after December 15, 2008. We are currently evaluating the potential impact, if any, of the
adoption of SFAS 141R on our consolidated financial position, results of operations and cash flows.
In February, 2007, the FASB issued SFAS No. 159 The Fair Value Option for Financial Assets and
Financial Liabilities (SFAS No. 159). SFAS No. 159 permits entities to choose to measure many
financial assets and financial liabilities at fair value. Unrealized gains and losses on items for
which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective
for fiscal years beginning after November 15, 2007. We have elected to not adopt the fair value
option in measuring certain financial assets and liabilities.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which defines fair
value, establishes a framework for measuring fair value under GAAP, and expands disclosures about
fair value measurements. SFAS No. 157 applies to other accounting pronouncements that require or
permit fair value measurements. The new guidance is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and for interim periods within those fiscal years.
In February 2008, FSP 157-1 Application of FASB Statement No. 157 to FASB Statement No. 13 and
Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease
Classification or Measurement under Statement 13 was issued. FSP 157-1 removed leasing
transactions accounted for under Statement 13 and related guidance from the scope of SFAS No. 157.
FSP 157-2 Partial Deferral of the Effective Date of Statement 157 deferred the effective date of
SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities to fiscal years beginning
after November 15, 2008.
SFAS No. 157, defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement
date (exit price). SFAS No. 157 classifies inputs used to measure fair value into the following
hierarchy:
|
|
|
|
|
Level 1
|
|
Unadjusted quoted prices in active markets for identical assets or
liabilities. |
|
|
|
|
|
Level 2
|
|
Unadjusted quoted prices in active markets for similar assets or
liabilities, or Unadjusted quoted prices for identical or similar assets or
liabilities in markets that are not active, or Inputs other than quoted prices that are observable for the asset
or liability. |
|
|
|
|
|
Level 3
|
|
Unobservable inputs for the asset or liability. |
32
We are exposed to market risks from changes in interest rates, which may affect our operating
results and financial position. When deemed appropriate, we minimize our risks from interest rate
fluctuations through the use of an interest rate swap. This derivative financial instrument is
used to manage risk and is not used for trading or speculative purposes. The swap is valued using
a valuation model that has inputs other than quoted market prices that are both observable and
unobservable.
We endeavor to utilize the best available information in measuring the fair value of the
interest rate swap. The interest rate swap is classified in its entirety based on the lowest level
of input that is significant to the fair value measurement. We have determined that our interest
rate swap is a level 3 liability in the fair value hierarchy. The fair value of the interest rate
swap was $6.9 million as of June 28, 2008.
The implementation of SFAS No. 157 for financial assets and financial liabilities, effective
December 30, 2007, did not have a material impact on our consolidated financial position and
results of operations. We are currently assessing the impact of SFAS No. 157 for pension related
financial assets and nonfinancial assets and nonfinancial liabilities on our consolidated financial
position and results of operations.
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 December 29, 2007, other than those discussed below.
Our revolving credit facility accrues interest based on a floating benchmark rate (the prime
rate or LIBOR rate), plus an applicable margin. A change in interest rates under the revolving
credit facility would have an impact on our results of operations. A change of 100 basis points in
the market rate of interest would impact interest expense by approximately $0.2 million based on
borrowings outstanding at June 28, 2008. Additionally, to the extent changes in interest rates
impact the housing market, we would be impacted by such changes.
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 quarter ended June 28, 2008, 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.
33
ITEM 1A. RISK FACTORS
There have been no material changes in our risk factors from those disclosed in our Annual
Report on Form 10-K for the year ended December 29, 2007 as filed with the SEC, other than those
discussed below.
We depend upon a single supplier, Georgia-Pacific, for a significant percentage of our products
and have significant purchase commitments under our Supply Agreement with Georgia-Pacific.
Georgia-Pacific is our largest supplier, accounting for approximately 25% and approximately
24% of our purchases during fiscal 2007 and fiscal 2006, respectively. On May 7, 2004, we entered
into a multi-year Supply Agreement with Georgia-Pacific. The Supply Agreement had a five-year
initial term expiring on May 7, 2009. On June 6, 2008, Georgia-Pacific notified us of its intent
to terminate this Supply Agreement, effective May 7, 2010. Georgia-Pacific and BlueLinx continue
to participate in discussions regarding a new agreement which would govern the purchase, supply and
distribution arrangements between the two parties after May 7, 2010. Georgia-Pacific and BlueLinx
are continuing to work together pursuant to the terms of the existing Supply Agreement. Upon a
material breach of the agreement by us, Georgia-Pacific may terminate the agreement at anytime. If
Georgia-Pacific and BlueLinx are unable to agree on a new supply agreement or Georgia-Pacific
otherwise discontinues sales of product to us after May 7, 2010, we would experience a product
shortage unless and until we obtain a replacement supplier. We may not be able to obtain
replacement products on favorable economic terms, if at all. An inability to replace products on
favorable economic terms would adversely impact our net sales and our costs, which in turn could
impact our gross profit, net income and cash flows.
Under the Supply Agreement, we have substantial minimum purchase volume commitments with
respect to a number of products supplied to us. Based on 2007 average market prices, our purchase
obligations under this agreement are $0.3 billion for the remaining term of the agreement. These
products account for a majority of our purchases from Georgia-Pacific. If we fail or refuse to
purchase any products that we are obligated to purchase pursuant to the Supply Agreement,
Georgia-Pacific has the right to sell products to third parties and, for certain products,
terminate our exclusivity, which could reduce our net sales due to the unavailability of products
or our gross profit if we are required to pay higher product prices to other suppliers. A
reduction in our net sales or gross profit may also reduce our net income and cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 21, 2008 we held our annual meeting of stockholders, at which time our stockholders
voted on (1) the election of nine directors to serve on our board of directors for a one-year term
that will expire at the annual meeting of shareholders in 2009 or until their successors are duly
elected and qualified, (2) approval of an amendment to the BlueLinx Holdings Inc. 2006 Long-Term
Equity Incentive Plan to increase the number of shares available for grant from 1,700,000 to
3,200,000, and (3) ratification of the appointment of Ernst & Young LLP as our independent
registered public accounting firm for fiscal year 2008. Proxies were solicited for the annual
meeting pursuant to Regulation 14A of the Exchange Act. A total of 25,099,350 shares of our common
stock were represented by proxy at the meeting, representing 78% of the shares eligible to vote.
The results of the voting are set forth below.
|
1. |
|
Election of directors to serve on our board of directors: |
|
|
|
|
|
|
|
|
|
Name |
|
Votes For |
|
|
Votes Withheld |
|
Howard S. Cohen |
|
|
24,056,046 |
|
|
|
1,043,304 |
|
Richard S. Grant |
|
|
24,867,732 |
|
|
|
231,618 |
|
Richard B. Marchese |
|
|
24,866,832 |
|
|
|
232,518 |
|
Steven F. Mayer |
|
|
24,045,694 |
|
|
|
1,053,656 |
|
Charles H. McElrea |
|
|
24,036,550 |
|
|
|
1,062,800 |
|
Alan H. Schumacher |
|
|
24,863,032 |
|
|
|
236,318 |
|
Mark A. Suwyn |
|
|
23,935,759 |
|
|
|
1,163,591 |
|
Robert G. Warden |
|
|
24,042,992 |
|
|
|
1,056,358 |
|
M. Richard Warner |
|
|
24,060,426 |
|
|
|
1,038,924 |
|
|
2. |
|
Approval of an amendment to the BlueLinx Holdings Inc. 2006 Long-Term Equity
Incentive Plan: |
|
|
|
|
|
Votes For |
|
Votes Against |
|
Abstain |
20,061,908
|
|
1,099,509
|
|
9,912 |
|
3. |
|
Ratification of appointment of Ernst & Young LLP as our independent registered
public accounting firm: |
|
|
|
|
|
Votes For |
|
Votes Against |
|
Abstain |
25,039,637
|
|
46,675
|
|
13,038 |
34
ITEM 6. EXHIBITS
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
|
|
10.1 |
|
|
Settlement Agreement and General Release between BlueLinx Corporation and Barbara V. Tinsley dated April 7, 2008. |
|
|
|
|
|
|
10.2 |
|
|
Retention Incentive Agreement between BlueLinx Corporation and Duane G. Goodwin dated April 1, 2008. |
|
|
|
|
|
|
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. |
35
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, 2008 |
/s/ Howard D. Goforth
|
|
|
Howard D. Goforth |
|
|
Chief Financial Officer and Treasurer |
|
|
36
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
|
|
10.1 |
|
|
Settlement Agreement and General Release between BlueLinx Corporation and Barbara V. Tinsley dated April 7, 2008. |
|
|
|
|
|
|
10.2 |
|
|
Retention Incentive Agreement between BlueLinx Corporation and Duane G. Goodwin dated April 1, 2008. |
|
|
|
|
|
|
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. |
37