BLUELINX HOLDINGS INC.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
|
|
|
(Mark one)
|
|
|
þ
|
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
|
|
For the fiscal year ended December 31, 2005 |
OR |
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
BLUELINX HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Commission file number: 1-32383
|
|
|
Delaware
(State or other jurisdiction of
incorporation or organization) |
|
77-0627356
(I.R.S. Employer
Identification No.) |
4300 Wildwood Parkway, Atlanta, Georgia
(Address of principal executive offices) |
|
30339
(Zip Code) |
Registrants telephone number, including area code:
770-953-7000
Securities registered pursuant to Section 12(b) of the
Act:
|
|
|
Title of Each Class |
|
Name of Exchange on Which Registered |
|
|
|
Common stock, par value $0.01 per share |
|
New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K is
not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any
amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2 of the
Exchange Act (Check one):
Large accelerated
filer o Accelerated
filer þ Non-accelerated
filer o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2 of the
Act). Yes o No þ
The aggregate market value of the registrants common stock
held by non-affiliates of the registrant as of July 1, 2005
was $113,237,850, based on the closing price on the New York
Stock Exchange of $11.01 per share on July 1, 2005.
As of February 17, 2006, the registrant had
30,360,689 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of BlueLinx Holdings Inc.s definitive Proxy
Statement for use in connection with its 2006 Annual Meeting of
Stockholders, scheduled to be held on May 12, 2006, have
been incorporated by reference into Part III of this Report.
BLUELINX HOLDINGS INC.
ANNUAL REPORT ON
FORM 10-K
For the Fiscal Year Ended December 31, 2005
TABLE OF CONTENTS
1
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Annual Report on
Form 10-K includes
forward-looking statements. 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
its 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 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; |
|
|
|
the activities of competitors; |
|
|
|
changes in significant operating expenses; |
|
|
|
changes in the availability of capital; |
|
|
|
our ability to identify acquisition opportunities and
effectively and cost-efficiently integrate acquisitions; |
|
|
|
general economic and business conditions in the United States; |
|
|
|
adverse weather patterns or conditions; |
|
|
|
acts of war or terrorist activities; |
|
|
|
variations in the performance of the financial markets; and |
|
|
|
the other factors described herein under Factors Affecting
Future Results. |
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.
2
PART I
As used herein, unless the context otherwise requires,
BlueLinx, the Company, we,
us and our refer to BlueLinx Holdings
Inc. and its subsidiaries. BlueLinx Corporation is the
wholly-owned operating subsidiary of BlueLinx Holdings Inc. and
is referred to herein as the operating company when
necessary. Reference to fiscal 2005 refers to the
52-week period ended
December 31, 2005. Reference to fiscal 2004
refers to the 52-week
period ended January 1, 2005 (fiscal 2004 is comprised of
the period from inception (March 8, 2004) to
January 1, 2005 and the period from January 4, 2004 to
May 7, 2004). Reference to fiscal 2003 refers
to the 53-week period
ended January 3, 2004.
Company Overview
BlueLinx Holdings Inc., operating through its wholly-owned
subsidiary, BlueLinx Corporation, is a leading distributor of
building products in the United States. The Company operates in
all of the major metropolitan areas in the United States and, as
of December 31, 2005, distributed over 10,000 products to
approximately 12,000 customers through the Companys
network of more than 65 warehouses and third-party operated
warehouses.
The Company distributes products in two principal categories:
structural products and specialty products. Structural products,
which represented approximately 62% and 65% of the
Companys fiscal 2005 and fiscal 2004 gross sales, include
plywood, oriented strand board, or OSB, lumber and other wood
products primarily used for structural support, walls and
flooring in residential construction projects, and metal rebar
and remesh. Specialty products, which represented approximately
38% and 35% of the Companys fiscal 2005 and fiscal 2004
gross sales, include roofing, insulation, moulding, engineered
wood products, vinyl products (used primarily in siding),
composite decking and metal products.
BlueLinxs customers include building materials dealers,
industrial users of building products, manufactured housing
builders and home improvement centers. The Company purchases
products from over 750 vendors and serves as a national
distributor for a number of the Companys suppliers.
BlueLinx distributes products through its owned fleet of over
900 trucks and over 1,200 trailers, as well as by common carrier.
The Company was created on March 8, 2004 as a Georgia
corporation named ABP Distribution Holdings Inc.
(ABP). ABP was owned by Cerberus Capital Management,
L.P. (Cerberus Capital Management, L.P. and its subsidiaries
referred to herein as Cerberus), a private, New
York-based investment firm, and members of our management team.
Prior to May 7, 2004, the Companys assets were owned
by the distribution division (the Division) of
Georgia-Pacific Corporation (Georgia Pacific). The
Division commenced operations in 1954 with 13 warehouses
primarily used as an outlet for Georgia-Pacifics plywood.
On May 7, 2004, Georgia-Pacific sold the Division to ABP.
ABP subsequently merged into BlueLinx Holdings Inc.
On December 17, 2004, the Company consummated an initial
public offering of 9,500,000 shares of its common stock,
par value $.01 per share, at the initial public offering
price of $13.50 per share (the Equity
Offering). On January 5, 2005, the underwriters for
the Equity Offering exercised an option to purchase 685,000
additional shares of common stock to cover the over-allotment of
shares in connection with the Equity Offering.
The Companys principal executive offices are located at
4300 Wildwood Parkway, Atlanta, Georgia 30339 and its
telephone number is (770) 953-7000. The Companys
board committee charters, code of conduct and ethics, and
filings with the U.S. Securities and Exchange Commission,
including annual reports on
Form 10-K,
quarterly reports on
Form 10-Q, current
reports on
Form 8-K, and
amendments to those reports, are accessible free of charge at
www.BlueLinxCo.com. The Company has adopted a Code of Ethics
within the meaning of Item 406(b) of
Regulation S-K.
This Code of Ethics applies to the Companys principal
executive officer, principal financial officer and principal
accounting officer. This Code of Ethics is publicly available at
the Companys official website, www.BlueLinxCo.com
3
or upon request by writing to BlueLinx Holdings Inc., Attn:
Corporate Secretary, 4300 Wildwood Parkway, Atlanta, Georgia
30339. If the Company makes substantial amendments to its Code
of Ethics or grants any waiver, including any implicit waiver,
the Company is required to disclose the nature of such amendment
or waiver on its website or in a report on
Form 8-K of such
amendment or waiver. The reference to the Companys website
does not constitute incorporation by reference of the
information contained at the site.
Products and Services
As of December 31, 2005, the Company distributed over
10,000 different products to approximately 12,000 customers
nationwide. The Company distributes these products in two
principal categories: structural products and specialty
products. Structural products include plywood panels, OSB,
lumber and rebar and remesh. These products are primarily used
for structural support, walls, flooring and roofing in
construction projects. Additional end-uses of the Companys
structural products include outdoor decks, sheathing, crates and
boxes. Approximately 62% and 65% of the Companys fiscal
2005 and fiscal 2004 gross sales consisted of structural
products. Specialty products include engineered lumber, roofing,
insulation, metal products (excluding rebar and remesh), vinyl
products (used primarily in siding), moulding, composite decking
and particleboard. Specialty products generated 38% and 35% of
the Companys gross sales during fiscal 2005 and fiscal
2004, respectively. In some cases, these products are branded.
The Company also provides a wide range of value-added services
and solutions to the Companys customers and vendors
including:
|
|
|
|
|
providing less-than-truckload delivery services; |
|
|
|
pre-negotiated program pricing plans; |
|
|
|
inventory stocking; |
|
|
|
automated order processing through an electronic data
interchange, or EDI, that provides a direct link between the
Companys customers and the Company; |
|
|
|
inter-modal distribution services, including railcar unloading
and cargo reloading onto customers trucks; and |
|
|
|
back-haul services, when otherwise empty trucks are returning
from customer deliveries. |
Distribution Channels
The Company sells products through three main distribution
channels:
Warehouse sales are delivered from the Companys warehouses
to dealers, home improvement centers and industrial users. The
Company delivers products primarily using its fleet of over 900
trucks and over 1,200 trailers, but also occasionally uses
common carriers for peak load flexibility. The Company operates
in all of the major metropolitan areas in the United States
through its network of more than 65 warehouses and
third-party operated warehouses. The Companys warehouses
have over eleven million square feet of space under roof plus
significant outdoor storage space. Warehouse sales accounted for
approximately 52% and 56% of the Companys fiscal 2005 and
fiscal 2004 gross sales.
Reload sales are similar to warehouse sales but are shipped from
third-party warehouses where the Company stores owned product in
order to expand the Companys geographic reach. This
channel is employed primarily to service strategic customers
that would be uneconomical to service from the Companys
warehouses and to distribute large volumes of imported products
such as metal or hardwood
4
plywood from port facilities. A large portion of the
Companys Canadian sales are reload sales. The Company
leases space at some third-party warehouse facilities in Canada.
Reload sales accounted for approximately 13% and 12% of the
Companys fiscal 2005 and fiscal 2004 gross sales.
Direct sales are shipped from the manufacturer to the customer
without the Companys taking physical inventory possession.
This channel requires the lowest amount of committed capital and
fixed costs. Direct sales accounted for approximately 35% and
32% of the Companys fiscal 2005 and fiscal 2004 gross
sales.
Customers
As of December 31, 2005, the Companys customer base
included approximately 12,000 customers across multiple market
segments and various end-use markets, including the following
types of customers:
|
|
|
|
|
building materials dealers; |
|
|
|
industrial users of building products; |
|
|
|
manufactured housing builders; and |
|
|
|
home improvement centers. |
Sales and Marketing
The Companys sales efforts primarily are directed through
its sales force of approximately 1,000 sales representatives.
Approximately 600 of the Companys sales representatives
are located at its two sales centers in Denver and Atlanta.
Within these sales centers, the Companys sales
representatives primarily interact with the Companys
customers over the telephone. The remaining 400 sales
representatives are located throughout the country and are
responsible for maintaining a local dialogue with the
Companys customers, including making frequent, in-person
visits.
The Companys sales force is separated between
industrial/dealer sales and home improvement center sales.
Industrial/dealer sales are managed by regional vice-presidents
with sales teams organized by customer regions. The majority of
industrial/dealer orders are processed by telephone and are
facilitated by the Companys centralized database of
customer preferences and purchasing history. The Company also
has dedicated cross-functional customer support teams focused on
strategic growth with the home improvement centers.
Suppliers
As of December 31, 2005, the Companys vendor base
included over 750 suppliers of both structural and specialty
building products. In some cases, these products are branded.
The Company has supply contracts in place with many of its
vendors. Terms for these agreements frequently include prompt
payment discounts and freight allowances and occasionally
include volume discounts, growth incentives, marketing
allowances, consigned inventory and extended payment terms.
Purchases of products manufactured by Georgia-Pacific accounted
for approximately 28% and approximately 27% of total purchases
in fiscal 2005 and fiscal 2004, respectively, with no other
supplier accounting for more than 4% of the Companys
fiscal 2005 purchases. As part of the acquisition transactions,
whereby the Company acquired the assets of
Georgia-Pacifics distribution division, the Company
entered into a Master Purchase, Supply & Distribution
Agreement with Georgia-Pacific, or the 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 agreement also details the Companys
purchase obligations by product categories, including
substantial minimum purchase volume commitments with respect to
most of the products supplied to the Company. Based on 2005
average market prices, the Companys purchase obligation
under this agreement
5
is approximately $1.2 billion for each of the next three
years. If the Company fails or refuses to purchase any products
that the Company is obligated to purchase pursuant to the Supply
Agreement, Georgia-Pacific has the right to sell products to
third parties and for certain products terminate the
Companys exclusivity, and the Company may be required to
pay monetary penalties. The agreement has a five-year initial
term and remains continuously in effect thereafter unless it is
terminated. Termination of the Supply Agreement requires two
years notice, exercisable after year four. The Supply
Agreement may be terminated by either party for material breach.
However, if the material breach only affects one or more, but
not all, of the product categories, the non-breaching party may
only terminate the Supply Agreement in respect of the affected
product categories, and the Supply Agreement will remain in full
force with respect to the remaining product categories. The
Supply Agreement also provides for certain advertising,
marketing and promotion arrangements between the Company and
Georgia-Pacific for certain products. In addition, the Company
was granted a limited, non-exclusive, royalty-free, fully paid
license to use certain proprietary information and intellectual
property of Georgia-Pacific.
Competition
The U.S. building products distribution market is a highly
fragmented market, served by a small number of multi-regional
distributors, several regionally focused distributors and a
large number of independent local distributors. Local and
regional distributors tend to be closely held and often
specialize in a limited number of segments, such as the roofing
segment, in which they offer a broader selection of products.
Some of the Companys multi-regional competitors are part
of larger companies and therefore have access to greater
financial and other resources than the Company. The Company
competes on the basis of breadth of product offering, consistent
availability of product, product price and quality, reputation,
service and distribution facility location.
The Companys two largest competitors are Weyerhaeuser
Company, or Weyerhaeuser, and Boise Cascade Company, or Boise
Cascade. Weyerhaeuser and Boise Cascade are integrated building
products manufacturers-distributors that offer products
manufactured by themselves as well as third-party manufactured
products. Most major markets are served by at least one of these
distributors.
Seasonality
The Company is 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 the
Companys slowest quarters due to the impact of poor
weather on the construction market. The Companys second
and third quarters are typically its strongest quarters,
reflecting a substantial increase in construction due to more
favorable weather conditions. The Companys working capital
and accounts receivable and payable generally peak in the third
quarter, while inventory generally peaks in second quarter in
anticipation of the summer building season. The Company expects
these trends to continue for the foreseeable future.
Trademarks
The Company has 35 U.S. trademark applications and
registrations, one issued U.S. patent and two Canadian
trademark registrations. Depending on the jurisdiction,
trademarks are valid as long as they are in use and/or their
registrations are properly maintained and they have not become
generic. Registrations of trademarks can generally be renewed
indefinitely as long as the trademarks are in use. The
Companys patent expires in September 2013. The Company
does not believe its business is dependent on any one of the
Companys trademarks or on its patent.
Employees
As of February 15, 2006 the Company employed approximately
3,600 persons on a full-time basis. Approximately 1,200 of the
Companys employees are represented by labor unions. As of
February 15, 2006, the Company had approximately 49
collective bargaining agreements, of which eight, representing
6
240 employees, are up for renewal in 2006. The Company considers
its relationship with its employees generally to be good.
Environmental and Other Governmental Regulations
|
|
|
Environmental Regulation and Compliance |
The Companys operations are subject to various federal,
state, provincial and local laws, rules and regulations. The
Company is subject to environmental laws, rules and regulations
that limit discharges into the environment, establish standards
for the handling, generation, emission, release, discharge,
treatment, storage and disposal of hazardous materials,
substances and wastes, and require cleanup of contaminated soil
and groundwater. These laws, ordinances and regulations are
complex, change frequently and have tended to become more
stringent over time. Many of them provide for substantial fines
and penalties, orders (including orders to cease operations) and
criminal sanctions for violations. They may also impose
liability for property damage and personal injury stemming from
the presence of, or exposure to, hazardous substances. In
addition, certain of the Companys operations require the
Company to obtain, maintain compliance with, and periodically
renew permits.
Certain of these laws, including the Comprehensive Environmental
Response, Compensation, and Liability Act, may require the
investigation and cleanup of an entitys or its
predecessors current or former properties, even if the
associated contamination was caused by the operations of a third
party. These laws also may require the investigation and cleanup
of third-party sites at which an entity or its predecessor sent
hazardous wastes for disposal, notwithstanding that the original
disposal activity accorded with all applicable requirements.
Liability under such laws may be imposed jointly and severally,
and regardless of fault.
Georgia-Pacific Corporation has agreed to indemnify the Company
against any claim arising from environmental conditions that
existed prior to May 7, 2004. In addition, the Company
carries environmental insurance. While the Company does not
expect to incur significant independent costs arising from
environmental conditions, there can be no assurance that all
such costs will be covered by indemnification or insurance.
The Company also is subject to the requirements of the
U.S. Department of Labor Occupational Safety and Health
Administration, or OSHA. In order to maintain compliance with
applicable OSHA requirements, the Company has established
uniform safety and compliance procedures for its operations and
implemented measures to prevent workplace injuries.
The U.S. Department of Transportation, or DOT, regulates
the Companys operations in domestic interstate commerce.
The Company is subject to safety requirements governing
interstate operations prescribed by the DOT. Vehicle dimensions
and driver hours of service also remain subject to both federal
and state regulation.
The Company has incurred and will continue to incur costs to
comply with the requirements of environmental, health and safety
and transportation laws, ordinances and regulations. The Company
anticipates that these requirements will become more stringent
in the future, and the Company cannot assure you that compliance
costs will not be material.
Factors Affecting Future Results
|
|
|
Our industry is highly cyclical, and prolonged periods of
weak demand or excess supply may reduce our net sales and/or
margins, which may reduce our net income. |
The building products distribution industry is subject to
cyclical market pressures. Prices of building products are
determined by overall supply and demand in the market for
building products. Market prices of building products
historically have been volatile and cyclical and we have limited
ability to control the timing and amount of pricing changes for
building products. Demand for building products is driven
7
mainly by factors outside of our control, such as general
economic and political conditions, interest rates, the
construction, repair and remodeling and industrial markets,
weather and population growth. The supply of building products
fluctuates based on available manufacturing capacity, and excess
capacity in the industry can result in significant declines in
market prices for those products. To the extent that prices and
volumes experience a sustained or sharp decline, our net sales
and margins would likely decline as well. Our results in some
periods have been affected by market volatility, including a
reduction in gross profits due to a decline in the resale value
of our structural products inventory. All of these factors make
it difficult to forecast our operating results.
|
|
|
Our cash flows and capital resources may be insufficient
to make required payments on our substantial indebtedness and
future indebtedness. |
We have a substantial amount of debt. As of December 31,
2005, advances outstanding under our revolving credit facility
were approximately $376 million, borrowing availability was
approximately $219 million and outstanding letters of
credit on the facility were approximately $7.6 million. As
of February 17, 2006, borrowing availability under the
revolving credit facility was approximately $158 million.
We also have a mortgage loan in the amount of $165 million.
Our substantial debt could have important consequences to you.
For example, it could:
|
|
|
|
|
make it difficult for us to satisfy our debt obligations; |
|
|
|
make us more vulnerable to general adverse economic and industry
conditions; |
|
|
|
limit our ability to obtain additional financing for working
capital, capital expenditures, acquisitions and other general
corporate requirements; |
|
|
|
expose us to interest rate fluctuations because the interest
rate on the debt under our revolving credit facility is variable; |
|
|
|
require us to dedicate a substantial portion of our cash flow
from operations to payments on our debt, thereby reducing the
availability of our cash flow for operations and other purposes; |
|
|
|
limit our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate; and |
|
|
|
place us at a competitive disadvantage compared to competitors
that may have proportionately less debt. |
In addition, our ability to make scheduled payments or refinance
our obligations depends on our successful financial and
operating performance, cash flows and capital resources, which
in turn depend upon prevailing economic conditions and certain
financial, business and other factors, many of which are beyond
our control. These factors include, among others:
|
|
|
|
|
economic and demand factors affecting the building products
distribution industry; |
|
|
|
pricing pressures; |
|
|
|
increased operating costs; |
|
|
|
competitive conditions; and |
|
|
|
other operating difficulties. |
If our cash flows and capital resources are insufficient to fund
our debt service obligations, we may be forced to reduce or
delay capital expenditures, sell material assets or operations,
obtain additional capital or restructure our debt. Obtaining
additional capital or restructuring our debt could be
accomplished in part, through new or additional borrowings or
placements of debt or equity securities. There is no assurance
that we could obtain additional capital or restructure our debt
on terms acceptable to us or at all. In the event that we are
required to dispose of material assets or operations to meet our
debt service and other obligations, the value realized on such
assets or operations will depend on market conditions and
8
the availability of buyers. Accordingly, any such sale may not,
among other things, be for a sufficient dollar amount. Our
obligations under the revolving credit facility are secured by a
first priority security interest in all of our operating
companys inventories, receivables and proceeds from those
items. In addition, our mortgage loan is secured by our real
property. The foregoing encumbrances may limit our ability to
dispose of material assets or operations. We also may not be
able to restructure our indebtedness on favorable economic
terms, if at all. We may incur substantial additional
indebtedness in the future, including under the revolving credit
facility. Our incurrence of additional indebtedness would
intensify the risks described above.
|
|
|
The instruments governing our indebtedness contain various
covenants limiting the discretion of our management in operating
its business. |
Our revolving credit facility and mortgage loan contain various
restrictive covenants and restrictions, including financial
covenants customary for asset-based loans that limit our
managements discretion in operating our business. In
particular, these instruments limit our ability to, among other
things:
|
|
|
|
|
incur additional debt; |
|
|
|
grant liens on assets; |
|
|
|
make investments, including capital expenditures; |
|
|
|
sell or acquire assets outside the ordinary course of business; |
|
|
|
engage in transactions with affiliates; and |
|
|
|
make fundamental business changes. |
If we fail to maintain minimum excess availability of
$40 million under the revolving credit facility, the
revolving credit facility requires us to (i) maintain
certain financial ratios and (ii) limit our capital
expenditures. If we fail to comply with the restrictions in the
revolving credit facility, the mortgage loan documents or any
other current or future financing agreements, a default may
allow the creditors under the relevant instruments to accelerate
the related debt and to exercise their remedies under these
agreements, which will typically include the right to declare
the principal amount of that debt, together with accrued and
unpaid interest and other related amounts, immediately due and
payable, to exercise any remedies the creditors may have to
foreclose on assets that are subject to liens securing that debt
and to terminate any commitments they had made to supply further
funds.
|
|
|
We have a limited operating history as a separate company.
Accordingly, the Divisions historical financial
information may not be representative of our results as a
separate company. |
On May 7, 2004, we and our operating company acquired the
real estate and operating assets of the Division, respectively.
Therefore, our operating history as a separate company is
limited. Our business strategy as an independent entity may not
be successful on a long-term basis. We may not be able to grow
our business as planned and may not remain a profitable
business. The historical financial information of the Division
included in this filing may not necessarily reflect what our
results of operations, financial condition and cash flows would
have been had we been a separate, independent entity pursuing
our own strategies during the periods presented.
|
|
|
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 28% and approximately 27% of our purchases during
fiscal 2005 and fiscal 2004, respectively. Concurrent with the
acquisition, we entered into a Master Purchase,
Supply & Distribution Agreement with Georgia-Pacific,
which is referred to as the Supply Agreement. The Supply
Agreement has a five-year initial term and remains continuously
in effect thereafter unless it is terminated. Termination of the
Supply Agreement requires two years notice, exercisable
after year four. It may be terminated, including before year
five, by Georgia-Pacific upon a
9
material breach of the agreement by us. If Georgia-Pacific does
not renew the Supply Agreement or if it discontinues sales of a
product, 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.
We believe that the economic terms of the Supply Agreement are
beneficial to us since they provide us with certain discounts
off standard industry pricing indices, certain cash discounts
and favorable payment terms. While we also believe these terms
benefit Georgia-Pacific, Georgia-Pacific could, if it chose,
terminate the Supply Agreement as early as May 7, 2010. If
it did so and we could not obtain comparable terms from
Georgia-Pacific or another vendor thereafter, our operating
performance could be impaired by an interruption in the delivery
of products and/or an increase in cost to us from sourcing
comparable products from other suppliers.
Under the Supply Agreement, we have substantial minimum purchase
volume commitments with respect to a number of products supplied
to us. Based on 2005 average market prices, our purchase
obligations under this agreement are $1.2 billion for each
of the next three years. 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.
|
|
|
Our industry is highly fragmented and competitive. If we
are unable to compete effectively, our net sales and net income
will be reduced. |
The building products distribution industry is highly fragmented
and competitive and the barriers to entry for local competitors
are relatively low. Some of our competitors are part of larger
companies and therefore have access to greater financial and
other resources than us. In addition, certain product
manufacturers sell and distribute their products directly to
customers. Additional manufacturers of products distributed by
us may elect to sell and distribute directly to end-users in the
future or enter into exclusive supply arrangements with other
distributors. Finally, we may not be able to maintain our costs
at a level sufficiently low for us to compete effectively. If we
are unable to compete effectively, our net sales and net income
will be reduced.
|
|
|
Integrating acquisitions may be time-consuming and create
costs that could reduce our net income and cash flows. |
Part of our growth strategy includes pursuing acquisitions. Any
integration process may be complex and time consuming, may be
disruptive to the business and may cause an interruption of, or
a distraction of managements attention from, the business
as a result of a number of obstacles, including but not limited
to:
|
|
|
|
|
the loss of key customers of the acquired company; |
|
|
|
the incurrence of unexpected expenses and working capital
requirements; |
|
|
|
a failure of our due diligence process to identify significant
issues or contingencies; |
|
|
|
difficulties assimilating the operations and personnel of the
acquired company; |
|
|
|
difficulties effectively integrating the acquired technologies
with our current technologies; |
|
|
|
our inability to retain key personnel of acquired entities; |
|
|
|
failure to maintain the quality of customer service; |
10
|
|
|
|
|
our inability to achieve the financial and strategic goals for
the acquired and combined businesses; and |
|
|
|
difficulty in maintaining internal controls, procedures and
policies. |
Any of the foregoing obstacles, or a combination of them, could
increase selling, general and administrative expenses in
absolute terms and/or as a percentage of net sales, which could
in turn negatively impact our net income and cash flows.
We have completed one acquisition, to date, of the assets of
California-based hardwood lumber company Lane Stanton Vance
(LSV), formerly a unit of privately-held Hampton
Distribution Companies. We may not be able to consummate
acquisitions in the future on terms acceptable to us, or at all.
In addition, future acquisitions are accompanied by the risk
that the obligations and liabilities of an acquired company may
not be adequately reflected in the historical financial
statements of that company and the risk that those historical
financial statements may be based on assumptions which are
incorrect or inconsistent with our assumptions or approach to
accounting policies. Any of these material obligations,
liabilities or incorrect or inconsistent assumptions could
adversely impact our results of operations.
|
|
|
A significant percentage of our employees are unionized.
Wage increases or work stoppages by our unionized employees may
reduce our results of operations. |
As of February 15, 2006, approximately 1,200 of our
employees were represented by various labor unions. As of
February 15, 2006, we had approximately 49 collective
bargaining agreements, of which eight, covering 240 total
employees, are up for renewal in 2006. We may become subject to
material cost increases, or additional work rules imposed by
agreements with labor unions. The foregoing could increase our
selling, general and administrative expenses in absolute terms
and/or as a percentage of net sales. In addition, work stoppages
or other labor disturbances may occur in the future, which could
adversely impact our net sales and/or selling, general and
administrative expenses. All of these factors could negatively
impact our net income and cash flows.
|
|
|
Federal and state transportation regulations could impose
substantial costs on us which would reduce our net
income. |
We use our own fleet of over 900 trucks and over 1,200 trailers
to service customers throughout the United States. The
U.S. Department of Transportation, or DOT, regulates our
operations in domestic interstate commerce. We are subject to
safety requirements governing interstate operations prescribed
by the DOT. Vehicle dimensions and driver hours of service also
remain subject to both federal and state regulation. More
restrictive limitations on vehicle weight and size, trailer
length and configuration, or driver hours of service would
increase our costs, which, if we are unable to pass these cost
increases on to our customers, would reduce our gross margins,
increase our selling, general and administrative expenses and
reduce our net income.
|
|
|
Environmental laws impose risks and costs on us. |
Our operations are subject to federal, state, provincial and
local laws, rules and regulations governing the protection of
the environment, including, but not limited to, those regulating
discharges into the air and water, the use, handling and
disposal of hazardous or toxic substances, the management of
wastes, the cleanup of contamination and the control of noise
and odors. We have made, and will continue to make, expenditures
to comply with these requirements. While we believe, based upon
current information, that we are in substantial compliance with
all applicable environmental laws, rules and regulations, we
could be subject to potentially significant fines or penalties
for any failure to comply. Moreover, under certain environmental
laws, a current or previous owner or operator of real property,
and parties that generate or transport hazardous substances that
are disposed of at real property, may be held liable for the
cost to investigate or clean up such real property and for
related damages to natural resources. We may be subject to
liability, including liability for investigation and cleanup
costs, if contamination is discovered at one of our current or
former warehouse facilities, or at a landfill or other location
where we have disposed of, or
11
arranged for the disposal of, wastes. Georgia-Pacific has agreed
to indemnify us against any claim arising from environmental
conditions that existed prior to May 7, 2004. We also carry
environmental insurance. However, any remediation costs not
related to conditions existing prior to May 7, 2004 may not
be covered by indemnification. In addition, certain remediation
costs may not be covered by insurance. In addition, we could be
subject to claims brought pursuant to applicable laws, rules or
regulations for property damage or personal injury resulting
from the environmental impact of our operations. Increasingly
stringent environmental requirements, more aggressive
enforcement actions, the discovery of unknown conditions or the
bringing of future claims may cause our expenditures for
environmental matters to increase, and we may incur material
costs associated with these matters.
|
|
|
Anti-terrorism measures may harm our business by impeding
our ability to deliver products on a timely and cost-effective
basis. |
In the event of future terrorist attacks or threats on the
United States, federal, state and local authorities could
implement various security measures, including checkpoints and
travel restrictions on large trucks. Our customers typically
need quick delivery and rely on our on-time delivery
capabilities. If security measures disrupt or impede the timing
of our deliveries, we may fail to meet the needs of our
customers, or may incur increased expenses to do so.
|
|
|
We may incur substantial costs relating to
Georgia-Pacifics product liability related claims. |
Georgia-Pacific is a defendant in suits brought in various
courts around the nation by plaintiffs who allege that they have
suffered personal injury as a result of exposure to products
containing asbestos. These suits allege a variety of lung and
other diseases based on alleged exposure to products previously
manufactured by Georgia-Pacific. Although the terms of the asset
purchase agreement provide that Georgia-Pacific will indemnify
us against all obligations and liabilities arising out of,
relating to or otherwise in any way in respect of any product
liability claims (including, without limitation, claims,
obligations or liabilities relating to the presence or alleged
presence of asbestos-containing materials) with respect to
products purchased, sold, marketed, stored, delivered,
distributed or transported by Georgia-Pacific and its
affiliates, including the Division prior to the acquisition, we
believe it is possible that circumstances may arise under which
asbestos-related claims against Georgia-Pacific could cause us
to incur substantial costs.
For example, in the event that Georgia-Pacific is financially
unable to respond to an asbestos product liability claim,
plaintiffs lawyers may, in order to obtain recovery,
attempt to sue us, in our capacity as owner of assets sold by
Georgia-Pacific, despite the fact that the assets sold to us did
not contain asbestos. Asbestos litigation has, over the years,
proved unpredictable, as the aggressive and well-financed
asbestos plaintiffs bar has been creative, and often
successful, in bringing claims based on novel legal theories and
on expansive interpretations of existing legal theories. These
claims have included claims against companies that did not
manufacture asbestos products. As a result of these factors, a
number of companies have been held liable for amounts far in
excess of their perceived exposure. Although we believe, based
on our understanding of the law as currently interpreted, that
we should not be held liable for any of Georgia-Pacifics
asbestos-related claims, and, to the contrary, that we would
prevail on summary judgment on any such claims, there is
nevertheless a possibility that new theories could be developed,
or that the application of existing theories could be expanded,
in a manner that would result in liability for us. Any such
liability could ultimately be borne by us if Georgia-Pacific is
unable to fulfill its indemnity obligation under the asset
purchase agreement with us.
|
|
|
Affiliates of Cerberus control us and may have conflicts
of interest with other stockholders in the future. |
Funds and accounts managed by Cerberus or its affiliated
management companies, which are referred to collectively as the
controlling stockholder, collectively own approximately 60% of
our common stock. As a result, the controlling stockholder will
continue to be able to control the election of our directors,
determine our corporate and management policies and determine,
without the consent of our other stockholders, the outcome of
any corporate transaction or other matter submitted to our
stockholders for
12
approval, including potential mergers or acquisitions, asset
sales and other significant corporate transactions.
Five of our ten directors are either employees of or advisors to
Cerberus. The controlling stockholder also has sufficient voting
power to amend our organizational documents. The interests of
the controlling stockholder may not coincide with the interests
of other holders of our common stock. Additionally, the
controlling stockholder is in the business of making investments
in companies and may, from time to time, acquire and hold
interests in businesses that compete directly or indirectly with
us. The controlling stockholder may also pursue, for its own
account, acquisition opportunities that may be complementary to
our business, and as a result, those acquisition opportunities
may not be available to us. So long as the controlling
stockholder continues to own a significant amount of the
outstanding shares of our common stock, it will continue to be
able to strongly influence or effectively control our decisions,
including potential mergers or acquisitions, asset sales and
other significant corporate transactions. In addition, because
we are a controlled company within the meaning of the New York
Stock Exchange rules, we are exempt from the NYSE requirements
that our board be composed of a majority of independent
directors, and that our compensation and nominating/corporate
governance committees be composed entirely of independent
directors.
|
|
|
Even if Cerberus no longer controls us in the future,
certain provisions of our charter documents and agreements and
Delaware law could discourage, delay or prevent a merger or
acquisition at a premium price. |
Our Amended and Restated Certificate of Incorporation and Bylaws
contain provisions that:
|
|
|
|
|
permit us to issue, without any further vote or action by the
stockholders, up to 30 million shares of preferred stock in
one or more series and, with respect to each series, to fix the
number of shares constituting the series and the designation of
the series, the voting powers (if any) of the shares of such
series, and the preferences and other special rights, if any,
and any qualifications, limitations or restrictions, of the
shares of the series; and |
|
|
|
limit the stockholders ability to call special meetings. |
These provisions may discourage, delay or prevent a merger or
acquisition at a premium price.
In addition, we are subject to Section 203 of the General
Corporation Law of the State of Delaware, or the DGCL, which
also imposes certain restrictions on mergers and other business
combinations between us and any holder of 15% or more of our
common stock. Further, certain of our incentive plans provide
for vesting of stock options and/or payments to be made to our
employees in connection with a change of control, which could
discourage, delay or prevent a merger or acquisition at a
premium price.
|
|
|
We intend to pay dividends on our common stock but may
change our dividend policy; the instruments governing our
indebtedness contain various covenants that may limit our
ability to pay dividends. |
We intend to continue to pay dividends on our common stock at
the quarterly rate of $0.125 per share. Our board of
directors may, in its discretion, modify or repeal its dividend
policy. Future dividends, if any, with respect to shares of our
common stock will depend on, among other things, 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 pay dividends in any given amount in the
future, or at all.
Our revolving credit facility limits distributions by our
operating company to us, which, in turn, may limit our ability
to pay dividends to holders of our common stock. See Notes to
Financial Statements Note 8 Revolving Credit
Facility for more information on limits on our ability to
pay dividends.
13
|
|
ITEM 1B. |
UNRESOLVED STAFF COMMENTS. |
None.
The Company leases approximately 250,000 square feet for
its corporate headquarters located at 4300 Wildwood
Parkway, Atlanta, Georgia 30339. The Company operates warehouse
facilities in over 65 markets nationwide. The Company owns
warehouse facilities in 61 of these cities and leases the
remainder. These warehouse facilities secure the Companys
mortgage loan. The total square footage under roof at the
Companys warehouses is approximately 11 million
square feet.
The following table lists each of the Companys warehouse
facilities, including their inside square footage. The Company
also stores materials outdoors, such as lumber and rebar, at all
of its warehouse locations, which increases its distribution and
storage capacity. The Company believes that substantially all of
its property and equipment is in good condition, subject to
normal wear and tear, except for the New Orleans facility, which
is presently closed due to damage from Hurricane Katrina. The
Company believes that its facilities have sufficient capacity to
meet its current and projected distribution needs.
Warehouse & Shed Under Roof Square Footage
|
|
|
|
|
City |
|
Size (Sq. Feet) | |
|
|
| |
Lawrenceville, GA
|
|
|
710,625 |
|
Frederick, MD
|
|
|
684,000 |
|
University Park, IL
|
|
|
670,000 |
|
Yulee, FL
|
|
|
571,700 |
|
Butner, NC
|
|
|
514,300 |
|
Bellingham, MA
|
|
|
453,425 |
|
City of Industry, CA(1)
|
|
|
339,904 |
|
Fort Worth, TX
|
|
|
277,875 |
|
Elkhart, IN(2)
|
|
|
273,540 |
|
Independence, KY
|
|
|
266,135 |
|
Bridgeton, MO
|
|
|
236,253 |
|
Newark, CA
|
|
|
234,090 |
|
North Kansas City, MO
|
|
|
230,600 |
|
Charlotte, NC
|
|
|
202,120 |
|
Ypsilanti, MI
|
|
|
188,109 |
|
Blasdell, NY
|
|
|
181,600 |
|
Erwin, TN
|
|
|
169,800 |
|
Nashville, TN
|
|
|
160,904 |
|
Houston, TX
|
|
|
157,825 |
|
Richmond, VA
|
|
|
152,474 |
|
Maple Grove, MN
|
|
|
148,000 |
|
Albuquerque, NM
|
|
|
147,000 |
|
Midfield, AL
|
|
|
147,600 |
|
New Orleans, LA
|
|
|
145,596 |
|
Tampa, FL
|
|
|
145,300 |
|
Denver, CO
|
|
|
144,040 |
|
Tulsa, OK
|
|
|
143,500 |
|
14
|
|
|
|
|
City |
|
Size (Sq. Feet) | |
|
|
| |
Denville, NJ
|
|
|
142,959 |
|
Riverside, CA
|
|
|
136,000 |
|
Grand Rapids, MI
|
|
|
133,600 |
|
Beaverton, OR
|
|
|
129,389 |
|
Baton Rouge, LA
|
|
|
124,300 |
|
Lake City, FL
|
|
|
110,800 |
|
Memphis, TN
|
|
|
108,640 |
|
Newtown, CT
|
|
|
108,000 |
|
Miami, FL
|
|
|
106,113 |
|
Pensacola, FL
|
|
|
101,800 |
|
Pearl, MS
|
|
|
99,800 |
|
San Antonio, TX
|
|
|
99,220 |
|
Talmadge, OH
|
|
|
99,190 |
|
Allentown, PA
|
|
|
99,000 |
|
Virginia Beach, VA
|
|
|
93,640 |
|
National City, CA
|
|
|
95,000 |
|
Little Rock, AR
|
|
|
92,300 |
|
Springfield, MO
|
|
|
91,000 |
|
Shreveport, LA
|
|
|
87,042 |
|
Des Moines, IA
|
|
|
81,510 |
|
Charleston, SC
|
|
|
81,375 |
|
Shelburne, VT
|
|
|
81,200 |
|
Portland, ME
|
|
|
80,656 |
|
New Stanton, PA
|
|
|
80,100 |
|
Whiteville, NC(3)
|
|
|
79,200 |
|
Yaphank, NY
|
|
|
78,123 |
|
Woodinville, WA
|
|
|
77,925 |
|
Sioux Falls, SD
|
|
|
76,194 |
|
Lubbock, TX
|
|
|
71,721 |
|
Wausau, WI
|
|
|
72,850 |
|
Harlingen, TX
|
|
|
70,404 |
|
El Paso, TX
|
|
|
65,500 |
|
St. Paul, MN
|
|
|
64,080 |
|
North Highlands, CA
|
|
|
52,888 |
|
Oakland, CA(3)
|
|
|
41,535 |
|
Fargo, ND
|
|
|
36,593 |
|
Phoenix, AZ(3)
|
|
|
26,884 |
|
Boise, ID(3)
|
|
|
17,650 |
|
El Cajon, CA(3)
|
|
|
17,300 |
|
Camarillo, CA(3)
|
|
|
15,000 |
|
San Marcos, CA(3)
|
|
|
14,926 |
|
|
|
(1) |
Includes approximately 176,104 square feet of leased space. |
|
(2) |
Includes approximately 142,100 square feet of leased space. |
|
(3) |
Leased warehouses. |
15
|
|
ITEM 3. |
LEGAL PROCEEDINGS. |
On November 19, 2004, the Company 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, the Company filed its answer to the complaint denying
liability. Although the ultimate outcome of this matter cannot
be determined with certainty, the Company believes 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. Accordingly, the Company has not
recorded a reserve with respect to the asserted claim.
The Company is, and from time to time may be, a party to routine
legal proceedings incidental to the operation of its business.
The outcome of any pending or threatened proceedings is not
expected to have a material adverse effect on the financial
condition, operating results or cash flows of the Company, based
on its current understanding of the relevant facts. Legal
expenses incurred related to these contingencies are generally
expensed as incurred. The Company establishes reserves for
pending or threatened proceedings when the costs associated with
such proceedings become probable and can be reasonably estimated.
|
|
ITEM 4. |
SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS. |
No matters were submitted to a vote of security holders during
the fourth quarter of fiscal 2005.
PART II
|
|
ITEM 5. |
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES. |
The Companys equity securities consist of one class of
common stock. The common stock began trading on
December 16, 2004. The common stock is traded on the New
York Stock Exchange under the symbol BXC. The following table
sets forth, for the periods indicated, the range of the high and
low sales prices for the common stock as quoted on the New York
Stock Exchange:
|
|
|
|
|
|
|
|
|
|
|
High | |
|
Low | |
|
|
| |
|
| |
Fiscal Year Ended January 1, 2005
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
|
$ |
14.70 |
|
|
$ |
13.00 |
|
Fiscal Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$ |
18.25 |
|
|
$ |
12.73 |
|
Second Quarter
|
|
|
14.08 |
|
|
|
9.81 |
|
Third Quarter
|
|
|
14.38 |
|
|
|
8.25 |
|
Fourth Quarter
|
|
|
13.86 |
|
|
|
9.25 |
|
As of February 17, 2006, there were 14 registered
stockholders, and, as of that date we estimate there were
approximately 4,300 beneficial owners holding our common
stock in nominee or street name.
The Company currently pays a dividend of $0.125 per share
per quarter. The Company intends to continue to pay dividends on
its common stock at the quarterly rate of $0.125 per share.
The Companys board of directors may, in its discretion,
modify or repeal the Companys dividend policy. Future
dividends, if any, with respect to the Companys shares of
common stock will depend on, among other things, its results of
operations, cash requirements, financial condition, contractual
restrictions, provisions of
16
applicable law and other factors that its board of directors may
deem relevant. See Item 8. Financial Statements and
Supplementary Data, Note 8. Revolving Credit Facility
for additional information regarding limitations on the
ability of BlueLinx Corporation to transfer funds to its parent,
BlueLinx Holdings Inc., which could impact the Companys
ability to pay dividends to its stockholders. Accordingly, the
Company may not be able to continue to pay dividends at the same
quarterly rate in the future, if at all.
Equity Compensation Plan Information
The following table provides information about the shares of
common stock that may be issued upon the exercise of option and
other awards under the Companys existing equity
compensation plans as of December 31, 2005. The
Companys sole stockholder approved equity compensation
plan is the 2004 Equity Incentive Plan. The Company does not
have any non-stockholder approved equity compensation plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | |
|
(b) | |
|
(c) | |
|
|
Number of Securities | |
|
Weighted-Average | |
|
Number of Securities Remaining | |
|
|
to be Issued Upon | |
|
Exercise Price of | |
|
Available for Future Issuance Under | |
|
|
Exercise of | |
|
Outstanding | |
|
Equity Compensation Plans | |
|
|
Outstanding Options, | |
|
Options, Warrants | |
|
(Excluding Securities Reflected in | |
Plan Category |
|
Warrants and Rights | |
|
and Rights | |
|
Column (a)) | |
|
|
| |
|
| |
|
| |
Equity compensation plans approved by security holders
|
|
|
1,917,982 |
|
|
$ |
7.74 |
|
|
|
235,368 |
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
n/a |
|
|
|
|
|
Total
|
|
|
1,917,982 |
|
|
$ |
7.74 |
|
|
|
235,368 |
|
|
|
ITEM 6. |
SELECTED FINANCIAL DATA. |
The Company was created on March 8, 2004 (date of
inception) as a Georgia corporation named ABP Distribution
Holdings Inc. On May 7, 2004, the Company and its operating
company acquired the assets of the distribution division of
Georgia Pacific, or the Division, as described below. On
August 30, 2004, ABP Distribution Holdings Inc. merged into
BlueLinx Holdings Inc., a Delaware corporation. The Consolidated
Financial Statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
The financial statements of the Division reflect the accounts
and results of certain operations of the business conducted by
the Division. The accompanying financial statements of the
Division have been prepared from Georgia-Pacifics
historical accounting records and are presented on a carve-out
basis reflecting these certain assets, liabilities, and
operations. The Division was an unincorporated business of
Georgia-Pacific and, accordingly, Georgia-Pacifics net
investment in these operations (parents net investment) is
presented in lieu of stockholders equity. All significant
intradivision transactions have been eliminated. The financial
statements are not necessarily indicative of the financial
position, results of operations and cash flows that might have
occurred had the Division been an independent entity not
integrated into Georgia-Pacifics other operations. Also,
they may not be indicative of the actual financial position that
might have otherwise resulted, or of future results of
operations or financial position of the Division.
The following table sets forth certain historical financial data
of the Company. The selected financial data for the fiscal year
ended December 31, 2005 (fiscal 2005), the
period from inception (March 8, 2004) to January 1,
2005, the period from January 4, 2004 to May 7, 2004
(the aggregate period from January 4, 2004 through
January 1, 2005 referred to herein as fiscal
2004), the fiscal year ended January 3, 2004
(fiscal 2003), the fiscal year ended
December 28, 2002 (fiscal 2002) and the fiscal
year ended December 29, 2001 (fiscal 2001) have
been derived from the Companys and the Divisions
audited financial statements included elsewhere in this Annual
Report on
Form 10-K or from
prior financial statements (fiscal 2001 and
fiscal 2002). The financial statements prior to
May 7, 2004 are
17
referred to as pre-acquisition period statements.
The following information should be read in conjunction with the
Companys financial statements and Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
The acquisition of the assets of the Division was accounted for
using the purchase method of accounting, and the assets acquired
and liabilities assumed were accounted for at their fair market
values at the date of consummation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
Pre-acquisition Period | |
|
|
| |
|
| |
|
|
|
|
Period from | |
|
|
|
|
|
|
Inception | |
|
Period from | |
|
|
|
|
Year Ended | |
|
(March 8, 2004) | |
|
January 4, | |
|
Year Ended | |
|
Year Ended | |
|
Year Ended | |
|
|
December 31, | |
|
to January 1, | |
|
2004 to May 7, | |
|
January 3, | |
|
December 28, | |
|
December 29, | |
|
|
2005 | |
|
2005 | |
|
2004 | |
|
2004 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share data) | |
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$ |
5,622,071 |
|
|
$ |
3,672,820 |
|
|
$ |
1,885,334 |
|
|
$ |
4,271,842 |
|
|
$ |
3,734,029 |
|
|
$ |
3,768,700 |
|
|
Cost of sales
|
|
|
5,109,632 |
|
|
|
3,339,590 |
|
|
|
1,658,123 |
|
|
|
3,814,375 |
|
|
|
3,370,995 |
|
|
|
3,395,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
512,439 |
|
|
|
333,230 |
|
|
|
227,211 |
|
|
|
457,467 |
|
|
|
363,034 |
|
|
|
373,516 |
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
378,008 |
|
|
|
248,291 |
|
|
|
139,203 |
|
|
|
346,585 |
|
|
|
295,492 |
|
|
|
298,576 |
|
|
Depreciation and amortization
|
|
|
18,770 |
|
|
|
10,132 |
|
|
|
6,175 |
|
|
|
19,476 |
|
|
|
21,757 |
|
|
|
26,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
396,778 |
|
|
|
258,423 |
|
|
|
145,378 |
|
|
|
366,061 |
|
|
|
317,249 |
|
|
|
325,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
115,661 |
|
|
|
74,807 |
|
|
|
81,833 |
|
|
|
91,406 |
|
|
|
45,785 |
|
|
|
48,193 |
|
Non-operating expenses (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
42,311 |
|
|
|
28,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-off of debt issue costs
|
|
|
|
|
|
|
2,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense (income), net
|
|
|
186 |
|
|
|
(516 |
) |
|
|
614 |
|
|
|
376 |
|
|
|
348 |
|
|
|
448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
73,164 |
|
|
|
43,687 |
|
|
|
81,219 |
|
|
|
91,030 |
|
|
|
45,437 |
|
|
|
47,745 |
|
|
Provision for income taxes
|
|
|
28,561 |
|
|
|
17,781 |
|
|
|
30,782 |
|
|
|
34,877 |
|
|
|
17,597 |
|
|
|
18,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
44,603 |
|
|
$ |
25,906 |
|
|
$ |
50,437 |
|
|
$ |
56,153 |
|
|
$ |
27,840 |
|
|
$ |
29,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: preferred stock dividends
|
|
|
|
|
|
|
5,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common stockholders
|
|
$ |
44,603 |
|
|
$ |
20,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of common shares outstanding
|
|
|
30,195 |
|
|
|
19,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share applicable to common stock
|
|
$ |
1.48 |
|
|
$ |
1.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of common shares outstanding
|
|
|
30,494 |
|
|
|
20,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share applicable to common stock
|
|
$ |
1.46 |
|
|
$ |
1.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share of common stock
|
|
$ |
0.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
Pre-acquisition Period | |
|
|
| |
|
| |
|
|
|
|
Period from | |
|
|
|
|
|
|
Inception | |
|
Period from | |
|
|
|
|
Year Ended | |
|
(March 8, 2004) | |
|
January 4, | |
|
Year Ended | |
|
Year Ended | |
|
Year Ended | |
|
|
December 31, | |
|
to January 1, | |
|
2004 to May 7, | |
|
January 3, | |
|
December 28, | |
|
December 29, | |
|
|
2005 | |
|
2005 | |
|
2004 | |
|
2004 | |
|
2002 | |
|
2001 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share data) | |
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$ |
12,744 |
|
|
$ |
9,759 |
|
|
$ |
1,378 |
|
|
$ |
5,404 |
|
|
$ |
3,596 |
|
|
$ |
817 |
|
EBITDA(1)
|
|
|
134,245 |
|
|
|
85,455 |
|
|
|
87,394 |
|
|
|
110,506 |
|
|
|
67,194 |
|
|
|
74,492 |
|
Net cash provided by (used in) operating activities
|
|
|
124,788 |
|
|
|
137,246 |
|
|
|
(113,982 |
) |
|
|
59,575 |
|
|
|
46,690 |
|
|
|
54,395 |
|
Net cash provided by (used in) investing activities
|
|
|
(28,499 |
) |
|
|
(832,992 |
) |
|
|
(1,126 |
) |
|
|
(4,062 |
) |
|
|
(2,785 |
) |
|
|
2,564 |
|
Net cash provided by (used in) financing activities
|
|
$ |
(87,541 |
) |
|
$ |
711,318 |
|
|
$ |
114,602 |
|
|
$ |
(55,162 |
) |
|
$ |
(44,127 |
) |
|
$ |
(57,043 |
) |
Balance Sheet Data (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
24,320 |
|
|
$ |
15,572 |
|
|
|
|
|
|
$ |
506 |
|
|
$ |
155 |
|
|
$ |
377 |
|
Working capital
|
|
|
529,983 |
|
|
|
491,975 |
|
|
|
|
|
|
|
442,672 |
|
|
|
433,917 |
|
|
|
411,381 |
|
Total assets
|
|
|
1,157,640 |
|
|
|
1,137,062 |
|
|
|
|
|
|
|
816,644 |
|
|
|
784,949 |
|
|
|
823,012 |
|
Total debt(2)
|
|
|
540,850 |
|
|
|
652,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130 |
|
Shareholders equity/parents investment
|
|
$ |
183,852 |
|
|
$ |
141,492 |
|
|
|
|
|
|
$ |
637,073 |
|
|
$ |
644,171 |
|
|
$ |
643,929 |
|
|
|
(1) |
EBITDA is an amount equal to net income (loss) plus interest
expense, write-off of debt issue costs, income taxes,
depreciation and amortization. EBITDA is presented herein
because the Company believes it is a useful supplement to cash
flow from operations in understanding cash flows generated from
operations that are available for debt service (interest and
principal payments) and further investment in acquisitions.
However, EBITDA is not a presentation made in accordance with
generally accepted accounting principles in the United States,
or GAAP, and is not intended to present a superior measure of
the financial condition from those determined under GAAP.
EBITDA, as used herein, is not necessarily comparable to other
similarly titled captions of other companies due to differences
in methods of calculations. |
|
(2) |
Total long-term obligations represent long-term debt, including
current maturities. |
19
A reconciliation of net cash provided by (used in) operating
activities, the most directly comparable GAAP measure, to EBITDA
for each of the respective periods indicated is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
Pre-acquisition Period | |
|
|
| |
|
| |
|
|
|
|
Period from | |
|
Period from | |
|
|
|
|
Year Ended | |
|
Inception (March 8, | |
|
January 4, | |
|
Year Ended | |
|
Year Ended | |
|
|
December 31, | |
|
2004) to January 1, | |
|
2004 to May 7, | |
|
January 3, | |
|
December 28, | |
|
|
2005 | |
|
2005 | |
|
2004 | |
|
2004 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Net cash provided by (used in) operating activities
|
|
$ |
124,788 |
|
|
$ |
137,246 |
|
|
$ |
(113,982 |
) |
|
$ |
59,575 |
|
|
$ |
46,690 |
|
Amortization of debt issue costs
|
|
|
(3,629 |
) |
|
|
(2,323 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax (provision) benefit
|
|
|
368 |
|
|
|
4,469 |
|
|
|
(9,183 |
) |
|
|
(4,598 |
) |
|
|
3,181 |
|
Stock compensation
|
|
|
(2,170 |
) |
|
|
(1,088 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities
|
|
|
(55,984 |
) |
|
|
(99,395 |
) |
|
|
179,777 |
|
|
|
20,652 |
|
|
|
(274 |
) |
Interest expense
|
|
|
42,311 |
|
|
|
28,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
28,561 |
|
|
|
17,781 |
|
|
|
30,782 |
|
|
|
34,877 |
|
|
|
17,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$ |
134,245 |
|
|
$ |
85,455 |
|
|
$ |
87,394 |
|
|
$ |
110,506 |
|
|
$ |
67,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITEM 7. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. |
Overview
The Company is a leading distributor of building products in the
United States. The Company measures its market share based on
data published annually by Home Channel News, or HCN. The
Company defines market share as the Companys sales as a
percentage of the reported sales of the firms on HCNs
list, as adjusted to eliminate firms that do not compete with
the Company and, for certain firms, the portion of their sales
attributable to businesses that do not compete with the Company.
As of December 31, 2005, the Company distributed over
10,000 products to approximately 12,000 customers through
its network of more than 65 warehouses and third-party operated
warehouses which serve all major metropolitan markets in the
United States. The Company distributes products in two principal
categories: structural products and specialty products.
Structural products include plywood, OSB, rebar and remesh,
lumber and other wood products primarily used for structural
support, walls and flooring in construction projects. Structural
products represented approximately 62% and 65% of the
Companys fiscal 2005 and fiscal 2004 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 38% and 35% of the Companys
fiscal 2005 and fiscal 2004 gross sales.
|
|
|
Acquisition of Building Products Distribution
Divisions Assets from Georgia-Pacific |
On March 12, 2004, the Company and its operating company
entered into two separate definitive agreements to acquire the
real estate and operating assets, respectively, of the
distribution division of Georgia-Pacific Corporation (the
Division). The transactions were consummated on
May 7, 2004. The Company refers to the period prior to
May 7, 2004 as the pre-acquisition period. The
Divisions financial data for the pre-acquisition period
generally will not be comparable to the Companys financial
data for the period after the acquisition. The principal factors
affecting comparability are incremental costs that the Company
will incur as a separate company, discussed in greater detail
below; interest costs attributable to debt the Company incurred
in connection with the acquisition transactions and mortgage
refinancing transactions; and the effects of the purchase method
of accounting applied to the acquisition transactions. The
acquisition of the assets of the Division was accounted for
using the purchase method of accounting, and the assets acquired
and liabilities assumed were accounted for at their fair market
values at the date of consummation.
20
|
|
|
Agreements with Georgia-Pacific |
Supply Agreement. On May 7, 2004, the Company
entered into a multi-year supply agreement with Georgia-Pacific.
Under the agreement, the Company has exclusive distribution
rights on certain products and certain customer segments.
Georgia-Pacific is the Companys largest vendor, with
Georgia-Pacific products representing approximately 28% and 27%
of purchases during fiscal 2005 and fiscal 2004, respectively.
Transition Agreements. During the pre-acquisition period,
Georgia-Pacific charged the Division for the estimated cost of
certain functions that were managed by Georgia-Pacific and could
reasonably be directly attributed to the operations of the
Division. These costs included dedicated human resources, legal,
accounting and information systems support. The charges to the
Division were based on Georgia-Pacific managements
estimate of the services specifically used by the Division.
Where determinations based on specific usage alone were
impracticable, other methods and criteria were used that
management believes are equitable and provide a reasonable
estimate of the cost attributable to the Division. The total of
the allocations was $5.9 million and $19.0 million for
the period from January 4, 2004 to May 7, 2004 and
fiscal 2003, respectively. Certain general corporate expenses
were not allocated to the Division. These expenses included
portions of property and casualty insurance premiums, health and
welfare administration costs, human resources administration
costs, finance administration costs and legal costs. The Company
estimates that these incremental costs would have been
approximately $5 million and $13 million for the
period from January 4, 2004 to May 7, 2004 and fiscal
2003, respectively.
The Company believes the assumptions underlying the
Divisions financial statements are reasonable. However,
the Divisions financial statements do not necessarily
reflect what the Companys future results of operations,
financial position and cash flows will be, nor do they reflect
what the Companys results of operations, financial
position and cash flows would have been had the Company been a
separate, independent company during the periods presented.
Selected Factors that Affect the Companys Operating
Results
The Companys operating results are affected by housing
starts, mobile home production, industrial production, repair
and remodeling spending and non-residential construction. The
table below shows increases and decreases with respect to each
of the indicators for fiscal 2005, fiscal 2004 and fiscal 2003.
Included are the Companys estimates of the relative weight
of each of the foregoing end-use markets on the Companys
sales, based on the percentage each end market contributed to
net sales over the applicable period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indicator |
|
Weight | |
|
Fiscal 2005 | |
|
Fiscal 2004 | |
|
Fiscal 2003 | |
|
|
| |
|
| |
|
| |
|
| |
Actual Housing Starts (thousands)
|
|
|
50 |
% |
|
|
2,065 |
|
|
|
1,956 |
|
|
|
1,848 |
|
|
Percentage change
|
|
|
|
|
|
|
5.6 |
% |
|
|
5.8 |
% |
|
|
8.4 |
% |
Actual Mobile Homes (thousands)
|
|
|
8 |
% |
|
|
150 |
|
|
|
131 |
|
|
|
131 |
|
|
Percentage change
|
|
|
|
|
|
|
14.6 |
% |
|
|
0.0 |
% |
|
|
(22.5 |
)% |
Industrial Production (index)
|
|
|
22 |
% |
|
|
1.08 |
|
|
|
1.05 |
|
|
|
1.01 |
|
|
Percentage change
|
|
|
|
|
|
|
3.2 |
% |
|
|
4.1 |
% |
|
|
0.6 |
% |
Repair and Remodel ($ billion)*
|
|
|
15 |
% |
|
|
165 |
|
|
|
165 |
|
|
|
158 |
|
|
Percentage change
|
|
|
|
|
|
|
(0.4 |
)% |
|
|
5.0 |
% |
|
|
(2.4 |
)% |
Non Residential Construction ($ billion)*
|
|
|
5 |
% |
|
|
132 |
|
|
|
136 |
|
|
|
136 |
|
|
Percentage change
|
|
|
|
|
|
|
(3.3 |
)% |
|
|
(0.1 |
)% |
|
|
(3.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted End-Use Change
|
|
|
100 |
% |
|
|
4.4 |
% |
|
|
4.5 |
% |
|
|
2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Constant 2000 dollar basis. |
Source: Data from Resource Information Systems, Inc., or
RISI, updated as of February, 2006, and weighting reflects
management estimates.
21
The Company measures its growth in unit volume (on a constant
dollar basis) compared to the weighted average growth of the
foregoing end-use indicators. The following table illustrates
the Companys unit volume growth versus the end-use
indicators discussed above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2005 | |
|
Fiscal 2004 | |
|
Fiscal 2003 | |
|
|
| |
|
| |
|
| |
BlueLinx Unit Volume Growth
|
|
|
3.9 |
% |
|
|
8.2 |
% |
|
|
2.5 |
%(1) |
Weighted End-Use Market Growth
|
|
|
4.4 |
% |
|
|
4.5 |
% |
|
|
2.0 |
% |
BlueLinx versus Market Growth
|
|
|
(0.5 |
)% |
|
|
3.7 |
% |
|
|
0.5 |
% |
BlueLinx Market Share(2)
|
|
|
NA |
|
|
|
11.8 |
% |
|
|
10.9 |
% |
|
|
(1) |
The Companys unit volume growth for fiscal 2003 of 2.5% is
calculated on a 52-week
basis to be consistent with the fiscal 2004 and fiscal 2005
calculations. The 2003 fiscal calendar actually included an
additional week which resulted in actual unit volume growth of
3.4% for the 53-week
period. |
|
(2) |
As a percentage of the total sales of relevant building material
distributors. Market share for fiscal 2005 is not available.
Market share cannot be calculated until Home Channel News issues
updated market data for 2005. Home Channel News normally issues
its annual market data for any given year in July or August of
the following calendar year. |
The Companys operating results are also impacted by
changes in product prices. Structural products prices can vary
significantly based on short-term and long-term changes in
supply and demand. The prices of specialty products also can
vary from time to time, although they 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, in each
case for fiscal 2005, fiscal 2004 and fiscal 2003:
Sales Revenue Variances by Product
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2005 | |
|
Fiscal 2004 | |
|
Fiscal 2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Sales by Category
|
|
|
|
|
|
|
|
|
|
|
|
|
Structural Products(1)
|
|
$ |
3,548 |
|
|
$ |
3,656 |
|
|
$ |
2,636 |
|
Specialty Products(1)
|
|
|
2,143 |
|
|
|
1,960 |
|
|
|
1,689 |
|
Unallocated Allowances and Adjustments
|
|
|
(69 |
) |
|
|
(58 |
) |
|
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
Total Sales
|
|
$ |
5,622 |
|
|
$ |
5,558 |
|
|
$ |
4,272 |
|
|
|
|
|
|
|
|
|
|
|
Sales Variances
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit Volume $ Change
|
|
$ |
216 |
|
|
$ |
351 |
|
|
$ |
94 |
|
Price/ Other(2)
|
|
|
(152 |
) |
|
|
935 |
|
|
|
444 |
|
|
|
|
|
|
|
|
|
|
|
Total $ Change
|
|
$ |
64 |
|
|
$ |
1,286 |
|
|
$ |
538 |
|
|
|
|
|
|
|
|
|
|
|
Unit Volume % Change
|
|
|
3.9 |
% |
|
|
8.2 |
% |
|
|
2.5 |
% |
Price/ Other(2)
|
|
|
(2.8 |
)% |
|
|
21.9 |
% |
|
|
11.9 |
% |
|
|
|
|
|
|
|
|
|
|
Total % Change
|
|
|
1.1 |
% |
|
|
30.1 |
% |
|
|
14.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
For the quarter ended December 31, 2005, the Company began
classifying metal rebar and remesh as structural product instead
of specialty product. Fiscal 2004 and 2003 Sales by Category
have been adjusted to move sales of rebar/remesh from Specialty
Products sales to Structural Products sales. This adjustment has
no impact on Total Sales. |
|
(2) |
Other includes unallocated allowances and discounts and the
impact of the 53rd week in fiscal 2003. |
22
The following table sets forth changes in gross margin dollars
and percentages by product category, and percentage changes in
unit volume growth by product, in each case for fiscal 2005,
fiscal 2004 and fiscal 2003:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2005 | |
|
Fiscal 2004 | |
|
Fiscal 2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Gross Margin $s by Category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structural Products(1)
|
|
$ |
246 |
|
|
$ |
310 |
|
|
$ |
247 |
|
|
Specialty Products(1)
|
|
|
284 |
|
|
|
280 |
|
|
|
223 |
|
|
Other(2)
|
|
|
(18 |
) |
|
|
(29 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
Total Gross Margin $s
|
|
$ |
512 |
|
|
$ |
561 |
|
|
$ |
457 |
|
|
|
|
|
|
|
|
|
|
|
Gross Margin %s by Category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structural Products(1)
|
|
|
6.9 |
% |
|
|
8.5 |
% |
|
|
9.4 |
% |
|
Specialty Products(1)
|
|
|
13.3 |
% |
|
|
14.3 |
% |
|
|
13.2 |
% |
|
Other(2)
|
|
|
NA |
|
|
|
NA |
|
|
|
NA |
|
|
|
|
|
|
|
|
|
|
|
Total Gross Margin %s
|
|
|
9.1 |
% |
|
|
10.1 |
% |
|
|
10.7 |
% |
|
|
|
|
|
|
|
|
|
|
Unit Volume Growth by Product
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structural Products(1)
|
|
|
3.2 |
% |
|
|
8.6 |
% |
|
|
1.0 |
% |
|
Specialty Products(1)
|
|
|
5.1 |
% |
|
|
7.6 |
% |
|
|
4.4 |
% |
|
|
|
|
|
|
|
|
|
|
Total Unit Volume Growth %s
|
|
|
3.9 |
% |
|
|
8.2 |
% |
|
|
2.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
For the quarter ended December 31, 2005, the Company began
classifying metal rebar and remesh as structural product instead
of specialty product. Fiscal 2004 and 2003 Sales by Category
have been adjusted to move sales of rebar/remesh from Specialty
Products sales to Structural Products sales. This adjustment has
no impact on Total Sales. |
|
(2) |
Other includes unallocated allowances and discounts and the
impact of the 53rd week in fiscal 2003. |
The following table sets forth changes in net sales and gross
margin by channel and percentage changes in gross margin by
channel, in each case for fiscal 2005, fiscal 2004 and fiscal
2003:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2005 | |
|
Fiscal 2004 | |
|
Fiscal 2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Sales by Channel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse/ Reload
|
|
$ |
3,704 |
|
|
$ |
3,819 |
|
|
$ |
2,935 |
|
|
Direct
|
|
|
1,987 |
|
|
|
1,797 |
|
|
|
1,390 |
|
|
Unallocated Allowances and Adjustments
|
|
|
(69 |
) |
|
|
(58 |
) |
|
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
5,622 |
|
|
$ |
5,558 |
|
|
$ |
4,272 |
|
|
|
|
|
|
|
|
|
|
|
Gross Margin by Channel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse/ Reload
|
|
$ |
429 |
|
|
$ |
489 |
|
|
$ |
390 |
|
|
Direct
|
|
|
101 |
|
|
|
101 |
|
|
|
80 |
|
|
Unallocated Allowances and Adjustments
|
|
|
(18 |
) |
|
|
(29 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
512 |
|
|
$ |
561 |
|
|
$ |
457 |
|
|
|
|
|
|
|
|
|
|
|
Gross Margin % by Channel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse/ Reload
|
|
|
11.6 |
% |
|
|
12.8 |
% |
|
|
13.3 |
% |
|
Direct
|
|
|
5.1 |
% |
|
|
5.6 |
% |
|
|
5.8 |
% |
|
Unallocated Allowances and Adjustments
|
|
|
(0.3 |
)% |
|
|
(0.5 |
)% |
|
|
(0.3 |
)% |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9.1 |
% |
|
|
10.1 |
% |
|
|
10.7 |
% |
|
|
|
|
|
|
|
|
|
|
23
The Companys fiscal year is a 52- or
53-week period ending
on the Saturday closest to the end of the calendar year. The
fiscal years 2005 and 2004 contained 52 weeks and fiscal
year 2003 contained 53 weeks. The additional week in fiscal
year 2003 was included in the fourth quarter of that year.
Results of Operations
|
|
|
Fiscal 2005 Compared to Fiscal 2004 |
The following table sets forth the Companys and the
Divisions results of operations for fiscal 2005 and fiscal
2004. The results of operations for fiscal 2004 combine the
pre-acquisition period from January 4, 2004 to May 7,
2004 of the Division and the period from inception
(March 8, 2004) to January 1, 2005 of the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
Pre-acquisition Period | |
|
|
|
|
|
|
| |
|
| |
|
|
|
|
|
|
|
|
Period from | |
|
|
|
|
|
|
|
|
|
|
|
|
Inception | |
|
|
|
Period from | |
|
|
|
|
|
|
|
|
|
|
(March 8, | |
|
|
|
January 4, | |
|
|
|
Combined | |
|
|
|
|
Year Ended | |
|
% of | |
|
2004) to | |
|
% of | |
|
2004 to | |
|
% of | |
|
Year Ended | |
|
% of | |
|
|
December 31, | |
|
Net | |
|
January 1, | |
|
Net | |
|
May 7, | |
|
Net | |
|
January 1, | |
|
Net | |
|
|
2005 | |
|
Sales | |
|
2005 | |
|
Sales | |
|
2004 | |
|
Sales | |
|
2005 | |
|
Sales | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
(Unaudited) | |
|
|
|
|
(Dollars in thousands) | |
|
|
|
|
Net sales
|
|
$ |
5,622,071 |
|
|
|
100.0% |
|
|
$ |
3,672,820 |
|
|
|
100.0% |
|
|
$ |
1,885,334 |
|
|
|
100.0% |
|
|
$ |
5,558,154 |
|
|
|
100.0% |
|
|
Gross profit
|
|
|
512,439 |
|
|
|
9.1% |
|
|
|
333,230 |
|
|
|
9.1% |
|
|
|
227,211 |
|
|
|
12.1% |
|
|
|
560,441 |
|
|
|
10.1% |
|
Selling, general & administrative
|
|
|
378,008 |
|
|
|
6.7% |
|
|
|
248,291 |
|
|
|
6.8% |
|
|
|
139,203 |
|
|
|
7.4% |
|
|
|
387,494 |
|
|
|
7.0% |
|
Depreciation and amortization
|
|
|
18,770 |
|
|
|
0.3% |
|
|
|
10,132 |
|
|
|
0.3% |
|
|
|
6,175 |
|
|
|
0.3% |
|
|
|
16,307 |
|
|
|
0.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
115,661 |
|
|
|
2.1% |
|
|
|
74,807 |
|
|
|
2.0% |
|
|
|
81,833 |
|
|
|
4.3% |
|
|
|
156,640 |
|
|
|
2.8% |
|
Interest expense
|
|
|
42,311 |
|
|
|
0.8% |
|
|
|
28,765 |
|
|
|
0.8% |
|
|
|
|
|
|
|
0.0% |
|
|
|
28,765 |
|
|
|
0.5% |
|
Write-off debt issue costs
|
|
|
|
|
|
|
0.0% |
|
|
|
2,871 |
|
|
|
0.1% |
|
|
|
|
|
|
|
0.0% |
|
|
|
2,871 |
|
|
|
0.1% |
|
Other expense, net
|
|
|
186 |
|
|
|
0.0% |
|
|
|
(516 |
) |
|
|
0.0% |
|
|
|
614 |
|
|
|
0.0% |
|
|
|
98 |
|
|
|
0.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
73,164 |
|
|
|
1.3% |
|
|
|
43,687 |
|
|
|
1.2% |
|
|
|
81,219 |
|
|
|
4.3% |
|
|
|
124,906 |
|
|
|
2.2% |
|
Income tax provision
|
|
|
28,561 |
|
|
|
0.5% |
|
|
|
17,781 |
|
|
|
0.5% |
|
|
|
30,782 |
|
|
|
1.6% |
|
|
|
48,563 |
|
|
|
0.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
44,603 |
|
|
|
0.8% |
|
|
$ |
25,906 |
|
|
|
0.7% |
|
|
$ |
50,437 |
|
|
|
2.7% |
|
|
$ |
76,343 |
|
|
|
1.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales. For the fiscal year ended December 31,
2005, sales were $5.62 billion, up $64 million or 1.1%
from fiscal 2004. Specialty sales, primarily consisting of
roofing, specialty panels, insulation, moulding, engineered wood
products, vinyl siding, composite decking, and metal products
(excluding rebar and remesh), were up $183 million or 9%
higher than fiscal 2004. This increase was driven by 5.1% growth
in unit volume. Structural sales including plywood, OSB, lumber,
and metal rebar, were down $108 million or 3% from a year
ago, as a 3% increase in unit volume was more than offset by
lower plywood and OSB prices.
Gross Profit. Gross profit for 2005 was $512 million
compared to $560 million in fiscal 2004. The decrease in
gross profit of $48 million or 8.6%, compared to 2004 was
driven primarily by a decline in structural product margins from
8.5% in 2004 to 6.9% in fiscal 2005.
Operating Expenses. Operating expenses for fiscal 2005
were $378 million, or 6.7% of net sales, compared to
$387 million, or 7.0% of net sales, during fiscal 2004.
Excluding expenses associated with acquired operations,
operating expenses for fiscal 2005 were $371 million. The
reduction in operating expenses was primarily the result of
decreases in sales promotions and lower bad debt expense,
partially offset by higher fuel costs.
Depreciation and Amortization. Depreciation and
amortization expense totaled $18.8 million for fiscal 2005,
compared with $16.3 million for fiscal 2004. The increase
in depreciation and amortization is
24
primarily due to an increase in capital expenditures for mobile
equipment consisting of trucks, trailers, forklifts and
automobiles.
Operating Income. Operating income for fiscal 2005 was
$116 million, or 2.1% of net sales, versus
$157 million, or 2.8% of net sales, for fiscal 2004,
reflecting the decline in gross profit, partially offset by
lower variable operating expenses.
Interest Expense. Interest expense totaled
$42.3 million for fiscal 2005, which includes interest
expense related to the Companys revolving credit facility,
mortgage and related debt issue cost amortization of
$29.4 million, $9.3 million and $3.6 million,
respectively. Interest expense totaled $28.8 million for
fiscal 2004, which includes interest expense related to the
Companys revolving credit facility, term loan, old
mortgage, new mortgage and debt issue cost amortization of
$13.1 million, $6.4 million, $4.8 million,
$1.4 million and $2.3 million, respectively. Interest
expense on the final working capital settlement with
Georgia-Pacific was $0.8 million. In addition, the Company
wrote off $2.9 million of unamortized debt issue costs upon
retirement of the Companys term loan. The Division did not
incur interest expense prior to the May 7, 2004 acquisition.
Provision for Income Taxes. The Companys effective
tax rate was 39.0% and 38.9% for fiscal 2005 and fiscal 2004,
respectively. The 2005 rate reflects the benefit of various tax
credits approved during the year. Without these credits, the
Companys effective tax rate would have been 39.7%. This
higher effective tax rate is principally a result of BlueLinx
operating as a stand-alone company. As part of Georgia-Pacific,
the Division was combined with the other divisions of
Georgia-Pacific for state tax purposes. As a stand-alone
company, the Company is projecting a state tax rate which is
approximately 2% higher than Georgia-Pacifics carve-out
tax rate. The other differences resulted from higher
non-deductible expenses and deemed repatriation of Canadian
earnings.
Net Income. Net income for fiscal 2005 was
$44.6 million, compared to $76.3 million for fiscal
2004. The Companys net income for the period from
January 4, 2004 to May 7, 2004 was achieved as a
division of Georgia-Pacific and did not include interest expense
and certain corporate overhead expenses that are included in the
results for the same period in fiscal 2005.
On a per-share basis, basic and diluted income applicable to
common stockholders for fiscal 2005 was $1.48 and $1.46,
respectively. Basic and diluted earnings per share for the
period from inception (March 8, 2004) to January 1,
2005 was $1.09 and $1.02, respectively. For the period prior to
May 7, 2004, there were no earnings per share as a result
of the business operating for much of that period as a division
of Georgia-Pacific.
25
|
|
|
Fiscal 2004 Compared to Fiscal 2003 |
The following table sets forth the Companys and the
Divisions results of operations for fiscal 2004 and fiscal
2003. The results of operations for fiscal 2004 combine the
pre-acquisition period from January 4, 2004 to May 7,
2004 of the Division and the period from inception
(March 8, 2004) to January 1, 2005 of the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
Pre-acquisition Period | |
|
|
|
|
|
Pre-acquisition Period | |
|
|
| |
|
| |
|
|
|
|
|
| |
|
|
Period from | |
|
|
|
|
|
|
|
|
|
|
|
|
Inception | |
|
|
|
Period from | |
|
|
|
|
|
|
|
|
|
|
(March 8, | |
|
|
|
January 4, | |
|
|
|
Combined | |
|
|
|
|
|
|
2004) to | |
|
% of | |
|
2004 to | |
|
% of | |
|
Year Ended | |
|
% of | |
|
Year Ended | |
|
% of | |
|
|
January 1, | |
|
Net | |
|
May 7, | |
|
Net | |
|
January 1, | |
|
Net | |
|
January 3, | |
|
Net | |
|
|
2005 | |
|
Sales | |
|
2004 | |
|
Sales | |
|
2005 | |
|
Sales | |
|
2004 | |
|
Sales | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
|
|
(Unaudited) | |
|
|
|
|
|
|
|
|
(Dollars in thousands) | |
Net sales
|
|
$ |
3,672,820 |
|
|
|
100.0% |
|
|
$ |
1,885,334 |
|
|
|
100.0% |
|
|
$ |
5,558,154 |
|
|
|
100.0% |
|
|
$ |
4,271,842 |
|
|
|
100.0% |
|
|
Gross profit
|
|
|
333,230 |
|
|
|
9.1% |
|
|
|
227,211 |
|
|
|
12.1% |
|
|
|
560,441 |
|
|
|
10.1% |
|
|
|
457,467 |
|
|
|
10.7% |
|
Selling, general & administrative
|
|
|
248,291 |
|
|
|
6.8% |
|
|
|
139,203 |
|
|
|
7.4% |
|
|
|
387,494 |
|
|
|
7.0% |
|
|
|
346,585 |
|
|
|
8.1% |
|
Depreciation and amortization
|
|
|
10,132 |
|
|
|
0.3% |
|
|
|
6,175 |
|
|
|
0.3% |
|
|
|
16,307 |
|
|
|
0.3% |
|
|
|
19,476 |
|
|
|
0.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
74,807 |
|
|
|
2.0% |
|
|
|
81,833 |
|
|
|
4.3% |
|
|
|
156,640 |
|
|
|
2.8% |
|
|
|
91,406 |
|
|
|
2.1% |
|
Interest expense
|
|
|
28,765 |
|
|
|
0.8% |
|
|
|
|
|
|
|
0.0% |
|
|
|
28,765 |
|
|
|
0.5% |
|
|
|
|
|
|
|
0.0% |
|
Write-off debt issue costs
|
|
|
2,871 |
|
|
|
0.1% |
|
|
|
|
|
|
|
0.0% |
|
|
|
2,871 |
|
|
|
0.1% |
|
|
|
|
|
|
|
0.0% |
|
Other expense, net
|
|
|
(516 |
) |
|
|
0.0% |
|
|
|
614 |
|
|
|
0.0% |
|
|
|
98 |
|
|
|
0.0% |
|
|
|
376 |
|
|
|
0.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
43,687 |
|
|
|
1.2% |
|
|
|
81,219 |
|
|
|
4.3% |
|
|
|
124,906 |
|
|
|
2.2% |
|
|
|
91,030 |
|
|
|
2.1% |
|
Income tax provision
|
|
|
17,781 |
|
|
|
0.5% |
|
|
|
30,782 |
|
|
|
1.6% |
|
|
|
48,563 |
|
|
|
0.9% |
|
|
|
34,877 |
|
|
|
0.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
25,906 |
|
|
|
0.7% |
|
|
$ |
50,437 |
|
|
|
2.7% |
|
|
$ |
76,343 |
|
|
|
1.3% |
|
|
$ |
56,153 |
|
|
|
1.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales. Net sales for fiscal 2004 increased
approximately 30% to $5.56 billion from $4.27 billion
during fiscal 2003. Specialty sales, primarily consisting of
roofing, specialty panels, insulation, moulding, engineered wood
products, vinyl siding, composite decking, and metal products
(excluding rebar and remesh), were up $271 million or 16%
higher than fiscal 2003. This increase included a 7.6% increase
in unit volume. Structural sales including plywood, OSB, lumber,
and metal rebar, increased $1.02 billion or approximately
39% from a year ago. This reflects a 8.6% increase in unit
volume as well as higher plywood, OSB and metal rebar prices.
Gross Profit. Gross profit for fiscal 2004 increased by
23%, or $103 million, to $560 million from
$457 million in fiscal 2003. The increase reflects
increased sales, partially offset by a decline in gross profit
margin from 10.7% in fiscal 2003 to 10.1% in fiscal 2004. The
decrease in gross profit margin was primarily the result of a
decline in structural product margins from 9.4% to 8.5% in
fiscal 2004.
Operating Expenses. Operating expenses for fiscal 2004
were $387 million, or 7.0% of net sales, compared to
$347 million, or 8.1% of net sales, during fiscal 2003.
Higher expenses in fiscal 2004 as compared to fiscal 2003 were
primarily due to increases in employee bonuses and sales
commissions due to strong performance and increased variable
expenses such as warehouse and delivery labor associated with
higher unit volume. Additionally, fiscal 2004 included
approximately $10 million in expenses associated with the
acquisition transactions and the related transition.
Depreciation and Amortization. Depreciation and
amortization expense totaled $16.3 million for fiscal 2004,
while depreciation expense totaled $19.5 million for fiscal
2003. Property, plant and equipment was purchased by the Company
for less than Georgia-Pacifics book value. As a result,
book value and associated depreciation following the acquisition
is lower than it was during the pre-acquisition period. The
Company did not have any amortization expense during the
pre-acquisition period.
26
Operating Income. Operating income for fiscal 2004
increased by $66 million to $157 million, or 2.8% of
net sales, from $91 million, or 2.1% of net sales, for
fiscal 2003. This improvement was the result of higher unit
volume, higher product prices and higher gross profit.
Interest Expense. Interest expense totaled
$28.8 million for fiscal 2004, which includes interest
expense related to the Companys revolving credit facility,
term loan, old mortgage, new mortgage and debt issue cost
amortization of $13.1 million, $6.4 million,
$4.8 million, $1.4 million and $2.3 million,
respectively. Interest expense on the final working capital
settlement with Georgia-Pacific was $0.8 million. In
addition, the Company wrote off $2.9 million of unamortized
debt issue costs upon retirement of the Companys term
loan. The Division did not incur interest expense prior to the
May 7, 2004 acquisition.
Provision for Income Taxes. The Companys effective
tax rate was 38.9% and 38.3% for fiscal 2004 and fiscal 2003,
respectively.
Net Income. Net income totaled $76.3 million and
$56.2 million for fiscal 2004 and fiscal 2003,
respectively. Earnings per share for fiscal 2004 and for the
prior year periods is not available as a result of the business
operating for much of that period as a division of
Georgia-Pacific.
Seasonality
The Company is 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 the
Companys slowest quarters due to the impact of poor
weather on the construction market. The Companys second
and third quarters are typically its strongest quarters,
reflecting a substantial increase in construction due to more
favorable weather conditions. The Companys 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. The Company
expects these trends to continue for the foreseeable future.
Liquidity and Capital Resources
The Company depends on cash flow from operations and funds
available under its revolving credit facility to finance working
capital needs, capital expenditures, dividends and acquisitions.
The Company believes that the amounts available from this and
other sources will be sufficient to fund its routine operations
and capital requirements for the foreseeable future. The
Divisions principal source of liquidity historically had
been the consolidated resources of Georgia-Pacific.
Part of the Companys growth strategy is to selectively
pursue acquisitions. Accordingly, depending on the nature of the
acquisition or currency, the Company may use cash or stock, or a
combination of both, as acquisition currency. The Companys
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, the Companys liquidity position may be
adversely impacted. In addition, there can be no assurance that
the Company will be successful in implementing its acquisition
strategy. For a discussion of the risks associated with the
Companys acquisition strategy, see risk factor on
integrating acquisitions.
The following tables indicate the Companys working capital
and cash flows for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
BlueLinx at | |
|
BlueLinx at | |
|
|
December 31, | |
|
January 1, | |
|
|
2005 | |
|
2005 | |
|
|
| |
|
| |
|
|
(Dollars in thousands) | |
Working capital
|
|
$ |
529,983 |
|
|
$ |
491,975 |
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-acquisition | |
|
Combined | |
|
Pre-acquisition | |
|
|
BlueLinx | |
|
Period | |
|
(Unaudited) | |
|
Period | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
Period from | |
|
|
|
|
|
|
|
|
|
|
Inception | |
|
Period from | |
|
|
|
|
|
|
|
|
(March 8, | |
|
January 4, | |
|
|
|
|
|
|
Year Ended | |
|
2004) to | |
|
2004 to | |
|
Year Ended | |
|
Year Ended | |
|
|
December 31, | |
|
January 1, | |
|
May 7, | |
|
January 1, | |
|
January 3, | |
|
|
2005 | |
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in thousands) | |
Cash flows provided by (used for) operating activities
|
|
$ |
124,788 |
|
|
$ |
137,246 |
|
|
$ |
(113,982 |
) |
|
$ |
23,264 |
|
|
$ |
59,575 |
|
Cash flows provided by (used for) investing activities
|
|
|
(28,499 |
) |
|
|
(832,992 |
) |
|
|
(1,126 |
) |
|
|
(834,118 |
) |
|
|
(4,062 |
) |
Cash flows provided by (used for) financing activities
|
|
$ |
(87,541 |
) |
|
$ |
711,318 |
|
|
$ |
114,602 |
|
|
$ |
825,920 |
|
|
$ |
(55,162 |
) |
Working capital increased by $38.0 million, primarily as a
result of a $94.1 million reduction in current maturities
of long term debt and an increase in accounts receivables,
resulting from higher levels of sales, partially offset by an
$87.1 million increase in accounts payable and bank
overdrafts. Additionally, cash increased from $15.6 million
at January 1, 2005 to $24.3 million at
December 31, 2005. The $24.3 million of cash on the
Companys balance sheet at December 31, 2005 primarily
reflects customer remittances received in the Companys
lock-boxes on Friday and Saturday that are not available until
the next Monday, which is part of the following fiscal period.
During fiscal 2005, cash flows provided by operating activities
totaled $125 million. The primary drivers of cash flow from
operations were net income, as adjusted for non-cash charges, of
$68.8 million and an increase in cash flow from operations
related to working capital of $50.0 million reflecting
improvements in working capital management.
During fiscal 2004, cash flows provided by operating activities
totaled $23.3 million. The primary driver of cash flow from
operations was net income, as adjusted for non-cash charges, of
$103.6 million. Offsetting this source of cash was a
decrease in cash flow from operations related to working capital
of $80.2 million. The change in working capital for fiscal
2004 reflected increases in inventory and accounts receivables
associated with increased sales revenue, partially offset by an
increase of $99 million in payables to Georgia-Pacific.
Payables to Georgia-Pacific were classified as parents
investment at January 3, 2004.
During fiscal 2003, cash flows provided by operating activities
totaled $59.6 million, primarily driven by net income of
$56.2 million.
During fiscal 2005 and fiscal 2004, cash flows used for
investing activities totaled $28.5 million and
$834 million, respectively. On May 7, 2004 we and our
operating company acquired the real estate and operating assets
of the Distribution Division. We paid purchase consideration of
approximately $823 million to Georgia-Pacific.
During fiscal 2005, the Companys acquisition related
expenditures totaled $16.9 million.
During fiscal 2005 and fiscal 2004, the Companys
expenditures for property and equipment were $12.7 million
and $11.1 million, respectively. These expenditures were
primarily for mobile equipment consisting of trucks, trailers,
forklifts and sales force automobiles. The Company estimates
that capital expenditures for 2006 will be approximately
$15 million for normal operating activities. The
Companys
28
2006 capital expenditures are anticipated to be paid from its
current cash and cash provided from operating activities.
Proceeds from the sale of property and equipment totaled
$1.2 million and $0.3 million during fiscal 2005 and
fiscal 2004, respectively.
The Companys expenditures for property and equipment were
$5.4 million in fiscal 2003. These expenditures were
primarily for mobile equipment.
Proceeds from the sale of property and equipment totaled
$1.3 million in fiscal 2003.
Net cash provided by (used in) financing activities was
$(87.5) million during fiscal 2005 and $826 million
during fiscal 2004. The $87.5 million net cash used in
financing activities during fiscal 2005 was cash used by the
Company to pay down a portion of its outstanding debt on its
revolving credit facility. The difference in cash provided by
financing activities during fiscal 2004 primarily resulted from
net proceeds from the Companys (i) revolving credit
facility of $487 million, (ii) its mortgage payable of
$165 million, and (iii) its issuance of common stock
of $121 million, all of which relate to the Companys
acquisition of the assets of the Division. Fees paid to issue
debt in 2004 totaled $21.2 million.
The Company paid dividends to its common stockholders in the
aggregate amount of $15.1 million in fiscal 2005.
Cash used for financing activities was $55 million for
fiscal 2003. During the pre-acquisition period, the Company was
financed by Georgia-Pacific and the use of bank overdrafts. Bank
overdrafts are all checks issued by the Company that have not
been presented by the payee for funding.
On May 7, 2004, the Companys operating company
entered into a revolving credit facility. As of
December 31, 2005, advances outstanding under the revolving
credit facility were approximately $376 million. Borrowing
availability was approximately $219 million and outstanding
letters of credit on this facility were approximately
$7.6 million. As of December 31, 2005, the interest
rate on outstanding balances under the revolving credit facility
was 7.16%. As of February 17, 2006, borrowing availability
under the revolving credit facility was approximately
$158 million.
On October 27, 2004, the existing mortgage was refinanced
by a new mortgage loan in the amount of $165 million, which
was provided by Column Financial, Inc., a wholly-owned
subsidiary of Credit Suisse First Boston LLC. The interest rate
on the new mortgage loan is equal to LIBOR (subject to a 2%
floor and a 6% cap), plus a 2.25% spread. On December 31,
2005, the interest rate was 6.62%.
Contractual Commitments. The following table represents
the Companys contractual commitments, excluding interest,
associated with its debt and other obligations disclosed above
as of December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 | |
|
2007 | |
|
2008 | |
|
2009 | |
|
2010 | |
|
Thereafter | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in thousands) | |
Revolving credit facility(1)
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
369,850 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
369,850 |
|
Term loan facility(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000 |
|
|
|
|
|
|
|
|
|
|
|
6,000 |
|
Mortgage indebtedness(1)
|
|
|
|
|
|
|
165,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
|
|
|
|
165,000 |
|
|
|
|
|
|
|
375,850 |
|
|
|
|
|
|
|
|
|
|
|
540,850 |
|
Purchase obligations(2)
|
|
|
1,193,839 |
|
|
|
1,201,671 |
|
|
|
1,201,671 |
|
|
|
400,557 |
|
|
|
|
|
|
|
|
|
|
|
3,997,738 |
|
Operating leases
|
|
|
6,661 |
|
|
|
6,407 |
|
|
|
6,089 |
|
|
|
5,789 |
|
|
|
5,516 |
|
|
|
46,046 |
|
|
|
76,508 |
|
Letters of credit(3)
|
|
|
7,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
1,208,114 |
|
|
$ |
1,373,078 |
|
|
$ |
1,207,760 |
|
|
$ |
782,196 |
|
|
$ |
5,516 |
|
|
$ |
46,046 |
|
|
$ |
4,622,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
(1) |
Interest on the revolving credit facility and mortgage
indebtedness is variable, based on
14-day, one-month,
two-month, three-month or six-month LIBOR for the revolving
credit facility and
30-day LIBOR for the
mortgage indebtedness, in each case plus a spread. The interest
rate on the revolving credit facility was 7.16% at
December 31, 2005. The interest rate on the new mortgage
loan is LIBOR (subject to a 2% floor and a 6% cap) plus a 2.25%
spread, and, at December 31, 2005, was 6.62%. Annual
interest, at the rates noted above, totals $37.8 million,
consisting of $26.9 million for the revolving credit
facility. At December 31, 2005, the outstanding balance of
the Companys credit facility was approximately
$376 million. The revolving credit facility was amended on
January 26, 2006 to, among other things, extend the final
maturity date of the facility to May 7, 2011. |
|
(2) |
The Companys purchase obligations are related to its
Supply Agreement with Georgia-Pacific. |
|
(3) |
Letters of credit not included above under the credit facilities. |
|
(4) |
Term loan facility is used to refinance and consolidate certain
loans made by the revolving loan lenders to the Company. |
Purchase orders entered into in the ordinary course of business
are excluded from the above table. Amounts for which the Company
is liable under purchase orders are reflected on its
consolidated balance sheet (to the extent entered into prior to
the end of the applicable period) as accounts payable and
accrued liabilities.
Critical Accounting Policies
The Companys significant accounting policies are more
fully described in the notes to the consolidated financial
statements. Certain of the Companys 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 the
Companys and the Divisions 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 the Companys financial
condition and results of operations and require
managements most difficult, subjective or complex judgment.
The Company recognizes 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:
|
|
|
|
|
The Company is the primary obligor responsible for fulfillment; |
|
|
|
The Company holds title to all reload inventory and is
responsible for all product returns; |
|
|
|
The Company controls the selling price for all channels; |
|
|
|
The Company selects the supplier; and |
|
|
|
The Company bears all credit risk. |
30
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
years in the three-year period ended January 3, 2004 or the
period from January 4, 2004 to May 7, 2004 or the
period from inception (March 8, 2004) to January 1,
2005, and fiscal 2005.
|
|
|
Allowance for Doubtful Accounts and Related
Reserves |
The Company evaluates the collectibility of accounts receivable
based on numerous factors, including past transaction history
with customers and their creditworthiness. The Company maintains
an allowance for doubtful accounts for each aging category on
the Companys aged trial balance based on the
Companys historical loss experience. This estimate is
periodically adjusted when the Company becomes aware of specific
customers inability to meet their financial obligations
(e.g., bankruptcy filing or other evidence of liquidity
problems). As the Company determines that specific balances will
be ultimately uncollectible, the Company removes them from its
aged trial balance. Additionally, the Company maintains reserves
for cash discounts that it expects customers to earn as well as
expected returns. At December 31, 2005, January 1,
2005 and January 3, 2004, these reserves totaled
$10.9 million, $13.4 million and $9.2 million,
respectively. Adjustments to earnings resulting from revisions
to estimates on discounts and uncollectible accounts have been
insignificant for the three period ended January 3, 2004,
the period from January 4, 2004 to May 7, 2004, the
period from inception (March 8, 2004) to January 1,
2005, and fiscal 2005.
Inventories are carried at the lower of cost or market. The cost
of all inventories is determined by the moving average cost
method. The Company evaluates its inventory value at the end of
each quarter to ensure that first quality, actively moving
inventory, when viewed by category, is carried at the lower of
cost or market. At January 1, 2005, the lower of cost or
market reserve totaled $1.0 million. The market value of
the Companys inventory exceeded its cost at
December 31, 2005.
Additionally, the Company maintains a reserve for the estimated
value impairment associated with damaged and inactive inventory.
The inactive reserve includes inventory that has had no sales in
the past six months or has turn days in excess of 365 days.
At December 31, 2005, January 1, 2005 and
January 3, 2004, the Companys damaged and inactive
inventory reserves totaled $2.7 million, $3.0 million
and $2.1 million, respectively. Adjustments to earnings
resulting from revisions to inactive estimates have been
insignificant for the period ended January 3, 2004, the
period from January 4, 2004 to May 7, 2004, the period
from inception (March 8, 2004) to January 1, 2005, and
fiscal 2005.
|
|
|
Consideration Received from Vendors |
Each year, the Company enters into agreements with many of its
vendors providing for inventory purchase rebates, generally
based on achievement of specified volume purchasing levels and
various marketing allowances that are common industry practice.
The Company accrues for the receipt of vendor rebates based on
purchases, and also reduces inventory value to reflect the net
acquisition cost (purchase price less expected purchase
rebates). At December 31, 2005, January 1, 2005 and
January 3, 2004, the vendor rebate receivable totaled
$13.1 million, $10.2 million and $6.8 million,
respectively. Adjustments to earnings resulting from revisions
to rebate estimates have been insignificant for the period ended
January 3, 2004, the period from January 4, 2004 to
May 7, 2004, the period from inception (March 8, 2004)
to January 1, 2005, and fiscal 2005.
|
|
|
Impairment of Long-Lived Assets |
Long-lived assets, including property and equipment, are
reviewed for possible impairment whenever events or
circumstances indicate that the carrying amount of an asset may
not be recoverable. Determining
31
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.
The Company uses internal cash flow estimates, quoted market
prices when available and independent appraisals as appropriate
to determine fair value. The Company derives the required cash
flow estimates from its historical experience and its internal
business plans and applies 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. The Companys judgment
regarding the existence of impairment indicators is based on
market and operational performance. There have been no
adjustments to earnings resulting from the impairment of
long-lived assets for each of the three periods ended
January 3, 2004 or the period from January 4, 2004 to
May 7, 2004 or the period from inception (March 8,
2004) to January 1, 2005, and fiscal 2005.
Recently Issued Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board
(FASB) issued SFAS No. 123 (revised 2004),
Share-Based Payment (SFAS No. 123R)
which is a revision of SFAS No. 123.
SFAS No. 123R supersedes APB No. 25 and amends
SFAS No. 95, Statement of Cash Flow. Generally,
the approach in SFAS No. 123R is similar to the
approach described in SFAS No. 123. However,
SFAS No. 123R requires all share-based payments to
employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values.
Pro forma disclosure will no longer be an alternative.
SFAS No. 123R is effective for fiscal 2006.
SFAS No. 123R permits public companies to adopt its
requirements using one of two methods:
|
|
|
1. A modified prospective method in which
compensation cost is recognized beginning with the effective
date (a) based on the requirements of
SFAS No. 123R for all share-based payments granted
after the effective date and (b) based on
SFAS No. 123 for all awards granted to employees prior
to the effective date of SFAS No. 123R that remain
unvested on the effective date. |
|
|
2. A modified retrospective method which
includes the requirements of the modified prospective method
described above, but also permits entities to restate the
amounts previously recognized under SFAS No. 123 for
purposes of pro forma disclosures either for (a) all prior
periods presented or (b) prior interim periods in the year
of adoption. |
The Company plans to adopt SFAS No. 123R using the
modified prospective method. The Company does not expect the
adoption of SFAS No. 123R to have a material impact on
its results of operations.
In November 2004, the FASB issued SFAS No. 151,
Inventory Costs an Amendment of
ARB No. 43, Chapter 4
(SFAS No. 151), which is the result of
the FASBs efforts to converge U.S. accounting
standards for inventory with International Accounting Standards.
SFAS No. 151 requires abnormal amounts of idle
facility expense, freight, handling costs, and wasted material
to be recognized as current-period charges. It also requires
that allocation of fixed production overheads to the costs of
conversion be based on the normal capacity of the production
facilities. SFAS No. 151 is effective for inventory
costs incurred during fiscal years beginning after June 15,
2005. The Company does not expect the adoption of
SFAS No. 151 to have a material impact on its results
of operations.
|
|
ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK. |
As a multinational enterprise, the Company is exposed to risks
such as changes in interest rates, commodity prices and foreign
currency exchange rates. The Company employs a variety of
practices to manage these risks, including operating and
financing activities and, where deemed appropriate, the use of
derivative instruments. Derivative instruments are used only for
risk management purposes and not for speculation or trading, and
are not used to address risks related to foreign currency
exchange rates.
32
In accordance with SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended,
the Company records derivative instruments as assets or
liabilities on the balance sheet at fair value. Changes in the
fair value of derivatives are recorded in income.
The Companys 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 could have an impact on
results of operations. A change of 100 basis points in the
market rate of interest would impact interest expense by
approximately $3.8 million based on borrowings outstanding
at December 31, 2005.
The mortgage loan bears interest at a floating rate, equal to
LIBOR plus 225 basis points, determined monthly, subject to
a floor interest rate of 4.25% (a 2% floor on LIBOR, plus
2.25%). Interest is capped pursuant to a rate cap agreement that
caps LIBOR exposure at 6.0% and the overall rate at 8.25% (a
6.0% cap on LIBOR, plus 2.25%). Increases or decreases in
30-day LIBOR rates by
100 basis points between 2.0% and 6.0% will impact results
of operations by $1.65 million.
Less than 1.0% of the Companys net sales are denominated
in currencies other than the U.S. dollar, and the Company
does not believe its total exposure to currency fluctuations to
be significant.
The Company believes that general inflation did not
significantly affect its operating results or markets in fiscal
2005, fiscal 2004 or fiscal 2003. As discussed above, the
Companys results of operations were both favorably and
unfavorably impacted by increases and decreases in the pricing
of certain commodity-based products. Commodity price
fluctuations have from time to time created cyclicality in the
Companys financial performance and may do so in the future.
33
|
|
ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
Index to Financial Statements and Supplemental Data
|
|
|
|
|
|
|
Page | |
|
|
| |
|
|
|
35 |
|
|
|
|
36 |
|
|
|
|
38 |
|
|
|
|
39 |
|
|
|
|
40 |
|
|
|
|
41 |
|
|
|
|
42 |
|
|
|
|
43 |
|
34
BLUELINX HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
To the Shareholders of BlueLinx Holdings Inc.:
Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting
as defined in
Rule 13a-15(f)
under the Securities Exchange Act of 1934. The Companys
internal control over financial reporting is designed to provide
reasonable assurance to the Companys management and board
of directors regarding the preparation and fair presentation of
published financial statements.
Our management, including our chief executive officer and our
chief financial officer, does not expect that our internal
controls over financial reporting will prevent all error and all
fraud. Internal controls, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance
that the objectives of the internal controls are met. Given the
inherent limitations of internal controls, internal controls
over financial reporting may not prevent or detect all
misstatements or fraud. Therefore, no evaluation of internal
control can provide absolute assurance that all control issues
or instances of fraud will be prevented or detected.
Management assessed the effectiveness of the Companys
internal control over financial reporting as of
December 31, 2005. In making this assessment, management
used the criteria established by the Committee of Sponsoring
Organizations of the Treadway Commission set forth in
Internal Control Integrated Framework. Based
on our assessment, the Companys management concluded that,
as of December 31, 2005, the Companys internal
control over financial reporting was effective.
Ernst & Young LLP, the Companys independent
registered public accounting firm, which also audited the
Companys consolidated financial statements included in
this Annual Report on
Form 10-K, has
issued an attestation report on managements assessment of
the Companys internal control over financial reporting, as
stated in their report included in this Annual Report on
Form 10-K.
February 23, 2006
35
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of BlueLinx Holdings
Inc.:
We have audited managements assessment, included in the
accompanying Managements Report on Internal Control Over
Financial Reporting, that BlueLinx Holdings Inc. (formerly ABP
Distribution Holdings Inc.) maintained effective internal
control over financial reporting as of December 31, 2005,
based on criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria).
BlueLinx Holdings Inc.s management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express an
opinion on managements assessment and an opinion on the
effectiveness of the companys internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, managements assessment that BlueLinx
Holdings Inc. maintained effective internal control over
financial reporting as of December 31, 2005, is fairly
stated, in all material respects, based on the COSO criteria.
Also, in our opinion, BlueLinx Holdings Inc. maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2005, based on the COSO
criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of BlueLinx Holdings Inc. and
subsidiaries as of December 31, 2005 and January 1,
2005, and the related consolidated statements of operations and
comprehensive income, shareholders equity, and cash flows
for the year ended December 31, 2005 and for the period
from inception (March 8, 2004) to January 1, 2005 and
our report dated February 23, 2006 expressed an unqualified
opinion thereon.
Atlanta, Georgia
February 23, 2006
36
BLUELINX HOLDINGS INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of BlueLinx Holdings
Inc.
We have audited the accompanying consolidated balance sheets of
BlueLinx Holdings Inc. (formerly ABP Distribution Holdings Inc.)
and subsidiaries as of December 31, 2005 and
January 1, 2005, and the related consolidated statements of
operations and comprehensive income, shareholders equity,
and cash flows for the year ended December 31, 2005 and for
the period from inception (March 8, 2004) to
January 1, 2005. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of BlueLinx Holdings Inc. and subsidiaries as
of December 31, 2005 and January 1, 2005, and the
consolidated results of their operations and cash flows for the
year ended December 31, 2005 and for the period from
inception (March 8, 2004) to January 1, 2005, in
conformity with U.S. generally accepted accounting
principles.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of BlueLinx Holdings Inc.s internal control
over financial reporting as of December 31, 2005, based on
criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated February 23, 2006
expressed an unqualified opinion thereon.
Atlanta, Georgia
February 23, 2006
37
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Georgia-Pacific
Corporation
We have audited the accompanying statements of revenue and
direct expenses and comprehensive income, direct cash flows, and
parents investment of the Building Products Distribution
Division of Georgia-Pacific Corporation for the period from
January 4, 2004 to May 7, 2004 and for the year ended
January 3, 2004. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As described in Note 1, the statements of revenue and
direct expenses and comprehensive income, direct cash flows, and
parents investment for the period from January 4,
2004 to May 7, 2004 and for the year ended January 3,
2004 have been prepared for the purpose of possible sale of the
Building Products Distribution Division of Georgia-Pacific
Corporation, and are not intended to be a complete presentation
of the Building Products Distribution Division of
Georgia-Pacific Corporations financial position or results
of operations as if it were operated on a stand-alone basis.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the revenue and direct
expenses and comprehensive income, direct cash flows, and
parents investment of the Building Products Distribution
Division of Georgia-Pacific Corporation for the period from
January 4, 2004 to May 7, 2004 and for the year ended
January 3, 2004, in conformity with U.S. generally
accepted accounting principles.
As discussed in Note 2, in 2003, the Building Products
Distribution Division adopted the expense recognition provisions
of Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based
Compensation, as amended.
Atlanta, Georgia
March 20, 2005
38
BLUELINX HOLDINGS INC.
(formerly ABP Distributions Holdings Inc.)
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
BlueLinx | |
|
|
December 31, | |
|
January 1, | |
|
|
2005 | |
|
2005 | |
|
|
| |
|
| |
|
|
(In thousands) | |
ASSETS |
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
24,320 |
|
|
$ |
15,572 |
|
|
Receivables, less allowances of $10,945 in fiscal 2005 and
$13,407 in fiscal 2004
|
|
|
399,093 |
|
|
|
363,688 |
|
|
Inventories, net
|
|
|
473,068 |
|
|
|
500,231 |
|
|
Deferred income tax assets
|
|
|
6,678 |
|
|
|
6,122 |
|
|
Other current assets
|
|
|
44,909 |
|
|
|
34,203 |
|
|
|
|
|
|
|
|
Total current assets
|
|
|
948,068 |
|
|
|
919,816 |
|
|
|
|
|
|
|
|
Property, plant, and equipment:
|
|
|
|
|
|
|
|
|
|
Land and improvements
|
|
|
56,521 |
|
|
|
55,573 |
|
|
Buildings
|
|
|
93,381 |
|
|
|
93,133 |
|
|
Machinery and equipment
|
|
|
54,200 |
|
|
|
41,063 |
|
|
Construction in progress
|
|
|
2,350 |
|
|
|
5,089 |
|
|
|
|
|
|
|
|
Property, plant, and equipment, at cost
|
|
|
206,452 |
|
|
|
194,858 |
|
Accumulated depreciation
|
|
|
(22,403 |
) |
|
|
(7,880 |
) |
|
|
|
|
|
|
|
Property, plant, and equipment, net
|
|
|
184,049 |
|
|
|
186,978 |
|
Other assets
|
|
|
25,523 |
|
|
|
30,268 |
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
1,157,640 |
|
|
$ |
1,137,062 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
327,004 |
|
|
$ |
270,271 |
|
|
Bank overdrafts
|
|
|
62,392 |
|
|
|
32,033 |
|
|
Accrued compensation
|
|
|
13,494 |
|
|
|
18,292 |
|
|
Current maturities of long-term debt
|
|
|
|
|
|
|
94,103 |
|
|
Other current liabilities
|
|
|
15,195 |
|
|
|
13,142 |
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
418,085 |
|
|
|
427,841 |
|
|
|
|
|
|
|
|
Noncurrent liabilities:
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
540,850 |
|
|
|
558,000 |
|
|
Deferred income taxes
|
|
|
1,911 |
|
|
|
740 |
|
|
Other long-term liabilities
|
|
|
12,942 |
|
|
|
8,989 |
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
973,788 |
|
|
|
995,570 |
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY |
|
Common Stock, $0.01 par value, 100,000,000 shares
authorized; 30,251,019 and 29,500,000 shares issued and
outstanding at December 31, 2005 and January 1, 2005,
respectively
|
|
|
303 |
|
|
|
295 |
|
|
Additional paid-in-capital
|
|
|
132,346 |
|
|
|
121,306 |
|
|
Accumulated other comprehensive income
|
|
|
1,023 |
|
|
|
(789 |
) |
|
Retained earnings
|
|
|
50,180 |
|
|
|
20,680 |
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
183,852 |
|
|
|
141,492 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$ |
1,157,640 |
|
|
$ |
1,137,062 |
|
|
|
|
|
|
|
|
See accompanying notes.
39
BLUELINX HOLDINGS INC.
(formerly ABP Distributions Holdings Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
STATEMENTS OF REVENUE AND DIRECT EXPENSES AND
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
Pre-acquisition Period | |
|
|
| |
|
| |
|
|
|
|
Period from | |
|
|
|
|
Fiscal Year | |
|
Inception | |
|
Period from | |
|
Fiscal Year | |
|
|
Ended | |
|
(March 8, 2004) | |
|
January 4, | |
|
Ended | |
|
|
December 31, | |
|
to January 1, | |
|
2004 to May 7, | |
|
January 3, | |
|
|
2005 | |
|
2005 | |
|
2004 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except share data) | |
Net sales
|
|
$ |
5,622,071 |
|
|
$ |
3,672,820 |
|
|
$ |
1,885,334 |
|
|
$ |
4,271,842 |
|
Cost of sales
|
|
|
5,109,632 |
|
|
|
3,339,590 |
|
|
|
1,658,123 |
|
|
|
3,814,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
512,439 |
|
|
|
333,230 |
|
|
|
227,211 |
|
|
|
457,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and administrative
|
|
|
378,008 |
|
|
|
248,291 |
|
|
|
139,203 |
|
|
|
346,585 |
|
|
Depreciation and amortization
|
|
|
18,770 |
|
|
|
10,132 |
|
|
|
6,175 |
|
|
|
19,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
396,778 |
|
|
|
258,423 |
|
|
|
145,378 |
|
|
|
366,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
115,661 |
|
|
|
74,807 |
|
|
|
81,833 |
|
|
|
91,406 |
|
Non-operating expenses (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
42,311 |
|
|
|
28,765 |
|
|
|
|
|
|
|
|
|
Write-off of debt issue costs
|
|
|
|
|
|
|
2,871 |
|
|
|
|
|
|
|
|
|
Other expense (income), net
|
|
|
186 |
|
|
|
(516 |
) |
|
|
614 |
|
|
|
376 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
73,164 |
|
|
|
43,687 |
|
|
|
81,219 |
|
|
|
91,030 |
|
Provision for income taxes
|
|
|
28,561 |
|
|
|
17,781 |
|
|
|
30,782 |
|
|
|
34,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
44,603 |
|
|
|
25,906 |
|
|
$ |
50,437 |
|
|
$ |
56,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: preferred stock dividends
|
|
|
|
|
|
|
5,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common shareholders
|
|
$ |
44,603 |
|
|
$ |
20,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of common shares outstanding
|
|
|
30,195 |
|
|
|
19,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share applicable to common shares
|
|
$ |
1.48 |
|
|
$ |
1.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of common shares
|
|
|
30,494 |
|
|
|
20,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share applicable to common stock
|
|
$ |
1.46 |
|
|
$ |
1.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
|
$ |
0.50 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
44,603 |
|
|
$ |
25,906 |
|
|
$ |
50,437 |
|
|
$ |
56,153 |
|
Other comprehensive income (loss): Foreign currency translation,
net of taxes
|
|
|
276 |
|
|
|
747 |
|
|
|
(612 |
) |
|
|
1,062 |
|
Minimum pension liability, net of taxes
|
|
|
1,536 |
|
|
|
(1,536 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$ |
46,415 |
|
|
$ |
25,117 |
|
|
$ |
49,825 |
|
|
$ |
57,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
40
BLUELINX HOLDINGS INC.
(formerly ABP Distributions Holdings Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
STATEMENTS OF DIRECT CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
|
Pre-acquisition Period | |
|
|
| |
|
|
| |
|
|
|
|
Period from | |
|
|
|
|
|
Fiscal Year | |
|
Inception | |
|
|
Period from | |
|
Fiscal Year | |
|
|
Ended | |
|
(March 8, 2004) | |
|
|
January 4, 2004 | |
|
Ended | |
|
|
December 31, | |
|
to January 1, | |
|
|
to May 7, | |
|
January 3, | |
|
|
2005 | |
|
2005 | |
|
|
2004 | |
|
2004 | |
|
|
| |
|
| |
|
|
| |
|
| |
|
|
(In thousands) | |
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
44,603 |
|
|
$ |
25,906 |
|
|
|
$ |
50,437 |
|
|
$ |
56,153 |
|
Adjustments to reconcile net income to cash provided by (used
in) operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
18,770 |
|
|
|
10,132 |
|
|
|
|
6,175 |
|
|
|
19,476 |
|
|
Amortization of debt issue costs
|
|
|
3,629 |
|
|
|
2,323 |
|
|
|
|
|
|
|
|
|
|
|
Write-off of debt issue costs
|
|
|
|
|
|
|
2,871 |
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax provision (benefit)
|
|
|
(368 |
) |
|
|
(4,469 |
) |
|
|
|
9,183 |
|
|
|
4,598 |
|
|
Stock compensation
|
|
|
2,170 |
|
|
|
1,088 |
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(30,609 |
) |
|
|
221,529 |
|
|
|
|
(292,350 |
) |
|
|
(53,654 |
) |
|
|
Inventories
|
|
|
36,889 |
|
|
|
(13,080 |
) |
|
|
|
(145,689 |
) |
|
|
3,391 |
|
|
|
Accounts payable
|
|
|
56,605 |
|
|
|
(97,694 |
) |
|
|
|
257,772 |
|
|
|
17,683 |
|
|
|
Changes in other working capital
|
|
|
(12,902 |
) |
|
|
(13,156 |
) |
|
|
|
2,464 |
|
|
|
11,078 |
|
|
|
Other
|
|
|
6,001 |
|
|
|
1,796 |
|
|
|
|
(1,974 |
) |
|
|
850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
124,788 |
|
|
|
137,246 |
|
|
|
|
(113,982 |
) |
|
|
59,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions, net of cash acquired
|
|
|
(16,908 |
) |
|
|
(823,330 |
) |
|
|
|
|
|
|
|
|
|
Property, plant and equipment investments
|
|
|
(12,744 |
) |
|
|
(9,759 |
) |
|
|
|
(1,378 |
) |
|
|
(5,404 |
) |
Proceeds from sale of assets
|
|
|
1,153 |
|
|
|
97 |
|
|
|
|
252 |
|
|
|
1,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in investing activities
|
|
|
(28,499 |
) |
|
|
(832,992 |
) |
|
|
|
(1,126 |
) |
|
|
(4,062 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock, net
|
|
|
8,548 |
|
|
|
120,513 |
|
|
|
|
|
|
|
|
|
|
Proceeds from stock options exercised
|
|
|
478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in revolving credit facility
|
|
|
(111,253 |
) |
|
|
487,103 |
|
|
|
|
|
|
|
|
|
|
Debt financing costs
|
|
|
(570 |
) |
|
|
(21,236 |
) |
|
|
|
|
|
|
|
|
|
Increase (decrease) in bank overdrafts
|
|
|
30,359 |
|
|
|
(34,836 |
) |
|
|
|
26,250 |
|
|
|
7,566 |
|
Common dividends paid
|
|
|
(15,103 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net transactions with Georgia-Pacific Corporation
|
|
|
|
|
|
|
|
|
|
|
|
88,352 |
|
|
|
(62,728 |
) |
Issuance of preferred stock
|
|
|
|
|
|
|
95,000 |
|
|
|
|
|
|
|
|
|
|
Redemption of preferred stock
|
|
|
|
|
|
|
(95,000 |
) |
|
|
|
|
|
|
|
|
|
Preferred stock dividends paid
|
|
|
|
|
|
|
(5,226 |
) |
|
|
|
|
|
|
|
|
|
Proceeds from issuance of other long-term debt
|
|
|
|
|
|
|
365,000 |
|
|
|
|
|
|
|
|
|
|
Retirement of other long-term debt
|
|
|
|
|
|
|
(200,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(87,541 |
) |
|
|
711,318 |
|
|
|
|
114,602 |
|
|
|
(55,162 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
|
|
|
8,748 |
|
|
|
15,572 |
|
|
|
|
(506 |
) |
|
|
351 |
|
Balance, beginning of period
|
|
|
15,572 |
|
|
|
|
|
|
|
|
506 |
|
|
|
155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$ |
24,320 |
|
|
$ |
15,572 |
|
|
|
$ |
|
|
|
$ |
506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid during the period
|
|
$ |
33,067 |
|
|
$ |
23,446 |
|
|
|
$ |
21,941 |
|
|
$ |
30,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid during the period
|
|
$ |
38,502 |
|
|
$ |
25,351 |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
41
BLUELINX HOLDINGS INC.
(formerly ABP Distributors Holdings Inc.)
STATEMENTS OF SHAREHOLDERS EQUITY AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF GEORGIA-PACIFIC
CORPORATION
STATEMENTS OF PARENTS INVESTMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated | |
|
|
|
|
|
|
Other | |
|
|
|
|
Parents | |
|
Comprehensive | |
|
|
Pre-acquisition Period |
|
Investment | |
|
Income (Loss) | |
|
Totals | |
|
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Balance, December 28, 2002
|
|
$ |
645,221 |
|
|
$ |
(1,050 |
) |
|
$ |
644,171 |
|
Net income
|
|
|
56,153 |
|
|
|
|
|
|
|
56,153 |
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
1,062 |
|
|
|
1,062 |
|
Net transactions with Georgia-Pacific
|
|
|
(64,313 |
) |
|
|
|
|
|
|
(64,313 |
) |
|
|
|
|
|
|
|
|
|
|
Balance January 3, 2004
|
|
|
637,061 |
|
|
|
12 |
|
|
|
637,073 |
|
Net income
|
|
|
50,437 |
|
|
|
|
|
|
|
50,437 |
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
(612 |
) |
|
|
(612 |
) |
Net transactions with Georgia-Pacific
|
|
|
88,684 |
|
|
|
|
|
|
|
88,684 |
|
|
|
|
|
|
|
|
|
|
|
Balance, May 7, 2004
|
|
$ |
776,182 |
|
|
$ |
(600 |
) |
|
$ |
775,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated | |
|
|
|
|
|
|
|
|
Additional | |
|
Other | |
|
|
|
|
|
|
Common | |
|
Paid-In- | |
|
Comprehensive | |
|
Retained | |
|
|
BlueLinx Holdings Inc. |
|
Stock | |
|
Capital | |
|
Income (Loss) | |
|
Earnings | |
|
Totals | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Balance, at inception (March 8, 2004)
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,906 |
|
|
|
25,906 |
|
Foreign currency translation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
747 |
|
|
|
|
|
|
|
747 |
|
Amount related to minimum pension liability, net of tax
|
|
|
|
|
|
|
|
|
|
|
(1,536 |
) |
|
|
|
|
|
|
(1,536 |
) |
Issuance of common stock to investors
|
|
|
200 |
|
|
|
4,800 |
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
Issuance of common stock-initial public offering, net
|
|
|
95 |
|
|
|
115,418 |
|
|
|
|
|
|
|
|
|
|
|
115,513 |
|
Compensation related to stock-option grants
|
|
|
|
|
|
|
1,088 |
|
|
|
|
|
|
|
|
|
|
|
1,088 |
|
Preferred dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,226 |
) |
|
|
(5,226 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2005
|
|
|
295 |
|
|
|
121,306 |
|
|
|
(789 |
) |
|
|
20,680 |
|
|
|
141,492 |
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,603 |
|
|
|
44,603 |
|
Foreign currency translation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
276 |
|
|
|
|
|
|
|
276 |
|
Amount related to minimum pension liability, net of tax
|
|
|
|
|
|
|
|
|
|
|
1,536 |
|
|
|
|
|
|
|
1,536 |
|
Issuance of common stock initial public offering, net
|
|
|
7 |
|
|
|
8,541 |
|
|
|
|
|
|
|
|
|
|
|
8,548 |
|
Proceeds from stock options exercised
|
|
|
1 |
|
|
|
329 |
|
|
|
|
|
|
|
|
|
|
|
330 |
|
Compensation related to stock-option grants
|
|
|
|
|
|
|
2,170 |
|
|
|
|
|
|
|
|
|
|
|
2,170 |
|
Common dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,103 |
) |
|
|
(15,103 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2005
|
|
$ |
303 |
|
|
$ |
132,346 |
|
|
$ |
1,023 |
|
|
$ |
50,180 |
|
|
$ |
183,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
42
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
1. |
Basis of Presentation and Background |
BlueLinx Holdings Inc. was created on March 8, 2004 as a
Georgia corporation named ABP Distribution Holdings Inc. On
May 7, 2004, BlueLinx Holdings Inc. and its operating
subsidiary, BlueLinx Corporation, (BlueLinx Holdings Inc. and
its subsidiaries collectively referred to as the
Company) acquired the assets of the Building
Products Distribution Division (the Division) of
Georgia-Pacific Corporation (Georgia-Pacific), as
described below. On August 30, 2004, ABP Distribution
Holdings Inc. merged into BlueLinx Holdings Inc., a Delaware
corporation. The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated. The Companys fiscal year is a
52-week or
53-week period ending
on the Saturday closest to the end of the calendar year. Fiscal
2004 contained 52 weeks. Certain 2004 amounts have been
reclassified to conform with 2005 presentation.
On December 17, 2004, BlueLinx Holdings Inc. consummated an
initial public offering of 9,500,000 shares of its common
stock, par value $.01 per share, at the initial public
offering price of $13.50 per share (the Equity
Offering). On January 5, 2005, the underwriters for
the Equity Offering exercised an option to purchase 685,000
additional shares of common stock to cover the over-allotment of
shares in connection with the Equity Offering. The Company
received net proceeds from the Equity Offering of
$124 million (including net proceeds of $8.5 million
from the exercise of the over-allotment option). Net proceeds
from the offering and funds from the Companys revolving
credit facility were used (i) to repay the Companys
$100 million term loan plus accrued and unpaid interest
thereon, and (ii) to redeem the remainder of the
Companys series A preferred stock, of which
approximately $38.5 million was outstanding, and pay all
accrued and unpaid dividends thereon. Unamortized debt issue
costs of approximately $3 million were written off upon
retirement of the term loan.
The financial statements of the Division reflect the accounts
and results of certain operations of the business conducted by
the Division. The accompanying combined financial statements of
the Division have been prepared from Georgia-Pacifics
historical accounting records and are presented on a carve-out
basis reflecting these certain assets, liabilities, and
operations. The Division was an unincorporated business of
Georgia-Pacific and, accordingly, Georgia-Pacifics net
investment in these operations (parents net investment) is
presented in lieu of shareholders equity. All significant
intradivision transactions have been eliminated. The financial
statements are not necessarily indicative of the financial
position, results of operations and cash flows that might have
occurred had the Division been an independent entity not
integrated into Georgia-Pacifics other operations. Also,
they may not be indicative of the actual financial position that
might have otherwise resulted, or of future results of
operations or financial position of the Division. The Company
operates as one reportable segment.
The Company is a wholesale supplier of building products in
North America. The Company distributes building products
including lumber, structural panels (including plywood and
oriented strand board), hardwood plywood, roofing, insulation,
metal products, vinyl siding and particleboard. These products
are sold to a diversified customer base, including independent
building materials dealers,
43
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
industrial and manufactured housing builders and home
improvement centers. Net sales by product category are
summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
|
Pre-acquisition Period | |
|
|
| |
|
|
| |
|
|
|
|
Period from | |
|
|
|
|
|
Fiscal Year | |
|
Inception | |
|
|
Period from | |
|
Fiscal Year | |
|
|
Ended | |
|
(March 8, 2004) to | |
|
|
January 4, 2004 to | |
|
Ended | |
|
|
December 31, | |
|
January 1, | |
|
|
May 7, | |
|
January 3, | |
|
|
2005 | |
|
2005 | |
|
|
2004 | |
|
2004 | |
|
|
| |
|
| |
|
|
| |
|
| |
|
|
(Dollars in millions) | |
|
|
(Dollars in millions) | |
Sales by category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structural products
|
|
$ |
3,548 |
|
|
$ |
2,392 |
|
|
|
$ |
1,264 |
|
|
$ |
2,636 |
|
Specialty products
|
|
|
2,143 |
|
|
|
1,314 |
|
|
|
|
646 |
|
|
|
1,689 |
|
Unallocated allowances and adjustments
|
|
|
(69 |
) |
|
|
(33 |
) |
|
|
|
(25 |
) |
|
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales
|
|
$ |
5,622 |
|
|
$ |
3,673 |
|
|
|
$ |
1,885 |
|
|
$ |
4,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On July 22, 2005, the Company completed the acquisition of
California-based hardwood lumber company Lane Stanton Vance
(LSV), formerly a unit of privately-held Hampton
Distribution Companies. The acquisition of the assets of LSV was
accounted for using the purchase method of accounting, and the
assets acquired and liabilities assumed were accounted for based
on their fair market values at the date of consummation. Other
SFAS No. 141 disclosures are omitted as they are not
significant.
On March 12, 2004, BlueLinx Holdings Inc. and its operating
company, BlueLinx Corporation, entered into two separate
definitive agreements to acquire the real estate and operating
assets, respectively, of the Division. The transactions were
consummated on May 7, 2004. The Company refers to the
period prior to May 7, 2004 as the pre-acquisition
period. The acquisition of the assets of the Division were
accounted for using the purchase method of accounting, and the
assets acquired and liabilities assumed were accounted for based
on their fair market values at the date of consummation.
The total purchase price for the acquisition of the assets,
including fees and expenses, was approximately
$823 million. The asset purchase was funded with net
proceeds of $526 million from drawings under the
Companys asset-based revolving credit facility, net
proceeds of $97 million from its term loan, proceeds of
$100 million from a mortgage loan made to the Company by
ABPMC LLC (ABPMC), an affiliate of the
Companys controlling stockholder, Cerberus Capital
Management, L.P. (Cerberus), proceeds of
$95 million from issuance of preferred stock and proceeds
of $5 million from issuance of common stock. In addition,
the Company paid debt issue costs of $12.1 million and
$3.2 million for its asset-based revolving credit facility
and the Companys term loan facility, respectively. The
working capital settlement payment was funded with proceeds from
the Companys revolving credit facility.
44
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes the estimated fair value of the
assets acquired and liabilities assumed at the date of
acquisition of the Division (amounts in millions).
|
|
|
|
|
Accounts receivable
|
|
$ |
585 |
|
Inventories
|
|
|
487 |
|
Deferred income tax assets
|
|
|
3 |
|
Other current assets
|
|
|
11 |
|
Intangible assets
|
|
|
16 |
|
Property, plant & equipment
|
|
|
186 |
|
|
|
|
|
Total assets
|
|
|
1,288 |
|
|
|
|
|
Accounts payable
|
|
|
368 |
|
Bank overdrafts
|
|
|
67 |
|
Accrued compensation
|
|
|
19 |
|
Other current liabilities
|
|
|
2 |
|
Deferred income tax liabilities
|
|
|
3 |
|
Other non-current liabilities
|
|
|
6 |
|
|
|
|
|
Total liabilities
|
|
|
465 |
|
|
|
|
|
Fair value of net assets acquired
|
|
$ |
823 |
|
|
|
|
|
The Companys intangible assets are comprised of customer
relationships, internally developed software, and supply
agreements each totaling $7.3 million, $4.1 million
and $5.3 million, respectively. These assets are being
amortized over a period of 6 years, 3 years, and
6 years, respectively. Amortization expense for intangible
assets was $3.5 million and $2.2 million for fiscal
2005 and the period from inception (March 8, 2004) to
January 1, 2005, respectively. Accumulated amortization was
$5.7 million at December 31, 2005.
Estimated amortization expense for each of the five succeeding
years is as follows:
|
|
|
|
|
|
|
(In thousands) | |
For fiscal 2006
|
|
$ |
3,575 |
|
For fiscal 2007
|
|
$ |
2,582 |
|
For fiscal 2008
|
|
$ |
2,107 |
|
For fiscal 2009
|
|
$ |
2,107 |
|
For fiscal 2010
|
|
$ |
765 |
|
As part of the acquisition transactions, the Company entered
into a Master Purchase, Supply & Distribution Agreement
with Georgia-Pacific (the Supply Agreement). The
Company believes that the economic terms of the Supply Agreement
are beneficial, since they provide the Company with certain
discounts off standard industry pricing indices, certain cash
discounts and favorable payment terms. 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 agreement
also details the Companys purchase obligations by product
categories, including substantial minimum purchase volume
commitments with respect to most of the products supplied to the
Company. Based on 2005 average market prices, the Companys
purchase obligations under this agreement are
45
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
approximately $1.2 billion for each of the next three
years. If the Company fails or refuses to purchase any products
that it is obligated to purchase pursuant to the Supply
Agreement, Georgia-Pacific has the right to sell products to
third parties and, for certain products, terminate the
Companys exclusivity, and the Company may be required to
pay monetary penalties. The agreement has a five-year initial
term and remains continuously in effect thereafter unless it is
terminated. Termination of the Supply Agreement requires two
years notice, exercisable after year four. The Supply
Agreement may be terminated by either party for material breach.
However, if the material breach only affects one or more, but
not all, of the product categories, the non-breaching party may
only terminate the Supply Agreement in respect of the affected
product categories and the Supply Agreement will remain in full
force with respect to the remaining product categories. The
Supply Agreement also provides for certain advertising,
marketing and promotion arrangements between the Company and
Georgia-Pacific for certain products. In addition, the Company
was granted a limited, non-exclusive, royalty-free, fully paid
license to use certain proprietary information and intellectual
property of Georgia-Pacific. The Companys net purchases
from Georgia-Pacific were approximately $1.4 billion and
$1 billion for fiscal 2005 and the period from May 7,
2004 to January 1, 2005, respectively.
The following table summarizes the fiscal 2004 and the fiscal
2003 pro forma results as if the acquisition of the Division
occurred on December 29, 2002 (amounts in millions, except
per share data).
|
|
|
|
|
|
|
|
|
|
|
Year Ended | |
|
Year Ended | |
|
|
January 1, | |
|
January 3, | |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Net sales
|
|
$ |
5,558 |
|
|
$ |
4,272 |
|
Income before income taxes
|
|
|
112 |
|
|
|
34 |
|
Net income
|
|
|
66 |
|
|
|
20 |
|
Net income applicable to common stock
|
|
|
55 |
|
|
|
10 |
|
Basic earnings per share
|
|
|
2.92 |
|
|
|
0.54 |
|
Diluted earnings per share
|
|
|
2.73 |
|
|
|
0.51 |
|
Fiscal 2004 includes approximately $8 million in expenses
associated with the acquisition transactions.
At the closing of the acquisition, the Companys operating
company entered into a transition services agreement with
Georgia-Pacific. The services covered under the agreement
included all currently provided support services in the several
operating areas, including transportation management and sales
and marketing. The Company agreed to compensate Georgia-Pacific
for services provided during the transition period on an agreed
upon cost-plus basis. These agreements expired during fiscal
2005.
In addition to the transition services agreement, the Company
also entered into agreements with Georgia-Pacific to provide
transition services in information technology (IT)
and human resources. The IT support services agreement provided
for infrastructure, business systems, operational systems, and
network support services for a period of one-year, however, the
Companys operating company elected to terminate most
sub-categories of IT support services during fiscal 2004. The
human resources agreement provided for payroll, employee
benefits administration, and other specified human
resources-related administrative services expired
December 31, 2004, when the Company converted to its own
service.
Charges for transition services were approximately
$0.4 million and $8.0 million during fiscal 2005 and
the period from inception (March 8, 2004) through
January 1, 2005, respectively.
46
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
Transactions with Georgia-Pacific during the
pre-acquisition period |
During the pre-acquisition period, Georgia-Pacific charged the
Division for the estimated cost of certain functions that were
managed by Georgia-Pacific and could reasonably be directly
attributed to the operations of the Division. These costs
included dedicated human resource, legal, accounting, and
information systems support. The charges to the Division were
based on managements estimate of such services
specifically used by the Division. Where determinations based on
specific usage alone were impracticable, other methods and
criteria were used that management believes are equitable and
provide a reasonable estimate of the cost attributable to the
Division. The total of these allocations was $5.9 million
and $19.0 million for the period from January 4, 2004
to May 7, 2004 and fiscal 2003, respectively. Certain
general corporate expenses were not allocated to the Division.
These expenses included portions of property and casualty
insurance premiums, health and welfare administration costs,
human resources administration costs, finance administration
costs, and legal costs. The Company estimates that these
incremental costs would have been approximately $5 million
and $13 million for fiscal 2004 and fiscal 2003,
respectively.
The Company believes the assumptions underlying the
Divisions financial statements are reasonable. However,
the Divisions financial statements may not necessarily
reflect the results of operations, financial position and cash
flows in the future or what the results of operations, financial
position and cash flows would have been had the Company been a
separate, independent company during the periods presented.
A portion of Georgia-Pacifics employee benefit costs,
including pension and postretirement healthcare and life
insurance benefits, was allocated to the Division. The Division
was allocated pension and other employee benefit costs related
to its participation in Georgia-Pacifics noncontributory
defined benefit pension plans and postretirement healthcare and
life insurance benefit plans. Approximately $3 million and
$11 million was recorded in the accompanying statements of
operations for the period from January 4, 2004 to
May 7, 2004 and fiscal 2003, respectively, related to the
Division employees participation in Georgia-Pacifics
defined benefit pension and postretirement plans.
The allocation was determined by independent actuaries and was
based on the number of its employees and their attributable
benefits and an attributable share of plan assets and related
benefit accounting items and was calculated in accordance with
Statements of Financial Accounting Standards, or
SFAS No. 87, Employers Accounting for
Pensions, and SFAS No. 106, Employers
Accounting for Postretirement Benefits Other Than Pensions,
respectively. The Divisions participation in
Georgia-Pacifics pension plans qualified as one employer
in a multi-employer pension plan in accordance with Staff
Accounting Bulletin, or SAB No. 55, Allocation of
Expenses and Related Disclosure in Financial Statements of
Subsidiaries, Divisions or Lesser Business Components of Another
Entity; Cheap Stock. The Division has accounted for its
participation in Georgia-Pacifics noncontributory defined
benefit pension plans in accordance with multi-employer pension
plan guidance in SFAS No. 87. The Company believes
such method of allocation is equitable and provides a reasonable
estimate of the amounts attributable to the Division.
The Division purchased a substantial amount of its inventory
from Georgia-Pacific; principally lumber, structural panels and
industrial wood products (including particleboard, hardboard and
softboard). Such transactions were in the ordinary course of
business at negotiated prices determined between the Division
and Georgia-Pacific and may not have reflected spot market
prices. Sales to Georgia-Pacific were $4 million and
$8 million for the period from January 4, 2004 to
May 7, 2004 and fiscal 2003, respectively. Purchases from
Georgia-Pacific were $519 million and $1.07 billion
for the period from January 4, 2004 to May 7, 2004 and
fiscal 2003, respectively. In the period from January 4,
2004 to
47
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
May 7, 2004, Georgia-Pacific transferred approximately
$2 million of fixed assets to the Division in non-cash
transfers. In fiscal 2003, the Division transferred
approximately $2 million of fixed assets to Georgia-Pacific
in non-cash transfers. Amounts payable to or receivable from
Georgia-Pacific were settled through intercompany accounts at
the end of each month. All settlements with Georgia-Pacific were
classified as Net transactions with Georgia-Pacific
Corporation in the accompanying statements of cash flows.
The amount of parents investment included in the balance
sheet represents a net balance as the result of various
transactions between the Division and Georgia-Pacific. There
were no terms of settlement or interest charges associated with
the account balance. The balance was primarily the result of the
Divisions participation in Georgia-Pacifics central
cash management program, wherein all the Divisions cash
receipts were remitted to Georgia-Pacific and all cash
disbursements were funded by Georgia-Pacific. Other transactions
included intercompany purchases and sales, certain direct and
allocated portions of legal, environmental, self-insurance and
human resource obligations administered by Georgia-Pacific, as
well as the Divisions share of the current portion of the
parents consolidated federal and state income tax
liability and various other administrative expenses incurred by
the parent on the Divisions behalf. The average balance
due from Georgia-Pacific was $669 million and
$442 million for the period from January 4, 2004 to
May 7, 2004 and fiscal 2003, respectively.
The Division was not allocated a portion of
Georgia-Pacifics consolidated debt. No portion of
Georgia-Pacifics interest expense was allocated to the
Division.
|
|
2. |
Summary of Significant Accounting Policies |
Cash equivalents include time deposits and other securities with
original maturities of three months or less.
|
|
|
Allowance for Doubtful Accounts |
The Company provides an allowance for receivables it believes
may not be collectible. Specific reserves are recorded where a
specific customer has an inability to pay. For all other
customers, reserves are recognized based on historical
collection experience.
Long-lived assets are reviewed for impairment whenever facts and
circumstances indicate that the carrying value of an asset may
not be recoverable. For assets to be held and used, an
impairment is recognized when the estimated undiscounted net
future cash flows is less than the carrying value. If an
impairment exists, an adjustment is made to write the asset down
to its estimated fair value and an impairment loss is recorded
for the difference between the carrying value and the estimated
fair value.
The Company recognizes 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.
48
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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:
|
|
|
|
|
The Company is the primary obligor responsible for fulfillment; |
|
|
|
The Company holds title to all reload inventory and is
responsible for all product returns; |
|
|
|
The Company controls the selling price for all channels; |
|
|
|
The Company selects the supplier; and |
|
|
|
The Company bears 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.
Amounts billed to customers in sales transactions related to
shipping and handling are classified as revenue. Shipping and
handling costs included in selling, general and administrative
expenses were $144 million, $87.0 million,
$45.2 million and $136 million for fiscal 2005, for
the period from inception (March 8, 2004) to
January 1, 2005, for the period from January 4, 2004
to May 7, 2004, and in fiscal 2003, respectively.
Advertising costs are expensed as incurred. Advertising expenses
of $8.1 million, $13.3 million, $6.5 million and
$7.4 million were included in selling, general and
administrative expenses for fiscal 2005, for the period from
inception (March 8, 2004) to January 1, 2005, for the
period from January 4, 2004 to May 7, 2004 and in
fiscal 2003, respectively.
|
|
|
Earnings per Common Share |
Basic and diluted earnings per share are computed by dividing
net income less dividend requirements on the series A
preferred stock, if applicable, by the weighted average number
of common shares outstanding for the period. The Company
redeemed all of its outstanding series A preferred stock
during fiscal 2004.
Except when the effect would be anti-dilutive, the diluted
earnings per share calculation includes the dilutive effect of
the assumed exercise of stock options using the treasury stock
method.
On October 20, 2005, the Company granted an option to the
Companys chief executive officer to
purchase 750,000 shares of the Companys common
stock at an exercise price of $13.50, which was above the then
current trading price of the underlying common stock as quoted
by the New York Stock Exchange at such time. The options vest in
five equal annual installments, beginning in October 2006. These
options were excluded from the Companys diluted earnings
per share calculation because they were anti-dilutive for fiscal
2005.
Additionally, stock options to purchase 24,000 shares,
granted after October 20, 2005, were also excluded from the
diluted earnings per share calculation because they were
anti-dilutive for fiscal 2005.
49
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On each of March 10, May 8, July 21 and
November 7, 2005, the Companys Board of Directors
declared a quarterly dividend of $0.125 per share on the
Companys common stock. The Companys controlling
shareholder, Cerberus ABP Investor LLC (Cerberus),
received dividends of approximately $9.1 million in fiscal
2005 as a result of its ownership of 18,100,000 shares of
the Companys common stock.
Inventories are valued at the lower of moving average cost or
market. Prior to May 7, 2004, during the pre-acquisition
period, the last-in,
first-out (LIFO) method was used to determine the
cost of those inventories purchased from Georgia-Pacific. The
impact of the change in the LIFO reserve on cost of sales for
fiscal 2004 was $3.3 million of expense. Inventories
consist primarily of finished goods.
|
|
|
Property, Plant, and Equipment |
Property, plant, and equipment are recorded at cost. Lease
obligations for which the Company assumes or retains
substantially all the property rights and risks of ownership are
capitalized. Replacements of major units of property are
capitalized and the replaced properties are retired.
Replacements of minor components of property and repair and
maintenance costs are charged to expense as incurred.
Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets. Useful lives are 2
to 15 years for land improvements, 5 to 33 years for
buildings, and 3 to 7 years for machinery and equipment,
which includes mobile equipment. Upon retirement or disposition
of assets, cost and accumulated depreciation are removed from
the related accounts and any gain or loss is included in income.
Depreciation expense totaled $15.2 million,
$7.9 million, $6.2 million and $19.5 million for
fiscal 2005, for the period from inception (March 8, 2004)
to January 1, 2005, for the period from January 4,
2004 to May 7, 2004 and in fiscal 2003, respectively.
The Division was allocated interest on projects when
construction takes considerable time and entails major
expenditures. Such interest was charged to the property, plant,
and equipment accounts and amortized over the approximate lives
of the related assets.
|
|
|
Compensated Absences and Termination Costs |
The Company accrues for the costs of compensated absences to the
extent that the employees right to receive payment relates
to service already rendered, the obligation vests or
accumulates, payment is probable and the amount can be
reasonably estimated.
The Company has adopted the fair value method of recording
stock-based compensation in accordance with Statement of
Financial Accounting Standards No. 123 Accounting for
Stock-Based Compensation (SFAS 123).
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
50
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
taxes are recognized for differences between the income tax and
financial reporting bases of the assets and liabilities of the
Company based on enacted tax laws and tax rates applicable to
the periods in which the differences are expected to affect
taxable income.
During the pre-acquisition period, the Division computed an
income tax provision as though it filed separate returns. The
Division was included in Georgia-Pacifics consolidated
federal income tax return and the consolidated returns of
certain states. Current taxes were paid by Georgia-Pacific.
|
|
|
Foreign Currency Translation |
The functional currency for Canadian operations is the Canadian
dollar. The translation of the applicable currencies into United
States dollars is performed for balance sheet accounts using
current exchange rates in effect at the balance sheet date and
for revenue and expense accounts using a weighted average
exchange rate during the period. Any related translation
adjustments are recorded directly in shareholders equity.
Foreign currency transaction gains and losses are reflected in
the accompanying financial statements.
As a multinational enterprise, the Company is exposed to risks
such as changes in interest rates, commodity prices and foreign
currency exchange rates. The Company employs a variety of
practices to manage these risks, including operating and
financing activities and, where deemed appropriate, the use of
derivative instruments. Derivative instruments are used only for
risk management purposes and not for speculation or trading, and
are not used to address risks related to foreign currency
exchange rates.
In accordance with SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended,
the Company records derivative instruments as assets or
liabilities on the balance sheet at fair value. Changes in the
fair value of derivatives are recorded in income.
The Company had restricted cash of $7.4 million and
$5.1 million at December 31, 2005 and January 1,
2005, respectively. Restricted cash primarily includes amounts
held in escrow related to the Companys mortgage (see
Note 9). Restricted cash is included in other current
assets on the accompanying balance sheet.
Carrying amounts for all of the Companys financial
instruments approximate fair value.
In BlueLinx Holdings Inc.s financial statements in
Note 14, BlueLinx Holdings Inc.s investment in
subsidiaries is stated at cost plus equity in undistributed
earnings of subsidiaries since date of acquisition. BlueLinx
Holdings Inc.s share of net income of its unconsolidated
subsidiaries is included in consolidated income using the equity
method. BlueLinx Holdings Inc.s financial statements
should be read in conjunction with the Companys
consolidated financial statements.
51
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make certain estimates and assumptions.
These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, as well as
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates and
such differences could be material.
In December 2004, the Financial Accounting Standards Board
(FASB) issued SFAS No. 123 (revised 2004),
Share-Based Payment (SFAS No. 123R)
which is a revision of SFAS No. 123.
SFAS No. 123R supersedes APB No. 25 and amends
SFAS No. 95, Statement of Cash Flows. Generally, the
approach in SFAS No. 123R is similar to the approach
described in SFAS No. 123. However,
SFAS No. 123R requires all share-based payments to
employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values.
Pro forma disclosure will no longer be an alternative.
SFAS No. 123R is effective for fiscal 2006.
SFAS No. 123R permits public companies to adopt its
requirements using one of two methods:
|
|
|
1. A modified prospective method in which
compensation cost is recognized beginning with the effective
date (a) based on the requirements of
SFAS No. 123R for all share-based payments granted
after the effective date and (b) based on
SFAS No. 123 for all awards granted to employees prior
to the effective date of SFAS No. 123R that remain
unvested on the effective date. |
|
|
2. A modified retrospective method which
includes the requirements of the modified prospective method
described above, but also permits entities to restate the
amounts previously recognized under SFAS No. 123 for
purposes of pro forma disclosures either for (a) all prior
periods presented or (b) prior interim periods in the year
of adoption. |
The Company plans to adopt SFAS No. 123R using the
modified prospective method. The Company does not expect the
adoption of SFAS No. 123R to have a material impact on
its results of operations.
In November 2004, the FASB issued SFAS No. 151,
Inventory Costs an Amendment of
ARB No. 43, Chapter 4
(SFAS No. 151), which is the result of
the FASBs efforts to converge U.S. accounting
standards for inventory with International Accounting Standards.
SFAS No. 151 requires abnormal amounts of idle
facility expense, freight, handling costs, and wasted material
to be recognized as current-period charges. It also requires
that allocation of fixed production overheads to the costs of
conversion be based on the normal capacity of the production
facilities. SFAS No. 151 is effective for inventory
costs incurred during fiscal years beginning after June 15,
2005. The Company does not expect the adoption of
SFAS No. 151 to have a material impact on its results
of operations.
52
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the pre-acquisition period, the provisions for income taxes
include the Divisions allocated portion of current income
taxes and those deferred because of temporary differences
between the financial statement and tax basis of assets and
liabilities. The Companys provision for income taxes
consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
|
|
|
|
| |
|
|
Pre-acquisition Period | |
|
|
|
|
Period from | |
|
|
| |
|
|
Fiscal Year | |
|
Inception | |
|
|
Period from | |
|
Fiscal Year | |
|
|
Ended | |
|
(March 8, 2004) to | |
|
|
January 4, 2004 to | |
|
Ended | |
|
|
December 31, | |
|
January 1, | |
|
|
May 7, | |
|
January 3, | |
|
|
2005 | |
|
2005 | |
|
|
2004 | |
|
2004 | |
|
|
| |
|
| |
|
|
| |
|
| |
|
|
(In thousands) | |
|
|
(In thousands) | |
Federal income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$ |
23,625 |
|
|
$ |
19,021 |
|
|
|
$ |
19,006 |
|
|
$ |
25,525 |
|
|
Deferred
|
|
|
(143 |
) |
|
|
(4,081 |
) |
|
|
|
8,081 |
|
|
|
4,655 |
|
State income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
4,877 |
|
|
|
2,338 |
|
|
|
|
2,363 |
|
|
|
3,469 |
|
|
Deferred
|
|
|
(262 |
) |
|
|
(466 |
) |
|
|
|
1,005 |
|
|
|
283 |
|
Foreign income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
427 |
|
|
|
891 |
|
|
|
|
230 |
|
|
|
1,285 |
|
|
Deferred
|
|
|
37 |
|
|
|
78 |
|
|
|
|
97 |
|
|
|
(340 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$ |
28,561 |
|
|
$ |
17,781 |
|
|
|
$ |
30,782 |
|
|
$ |
34,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The federal statutory income tax rate was 35%. The
Companys provision for income taxes is reconciled to the
federal statutory amount as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
|
|
|
|
| |
|
|
Pre-acquisition Period | |
|
|
|
|
Period from | |
|
|
| |
|
|
Fiscal Year | |
|
Inception | |
|
|
Period from | |
|
Fiscal Year | |
|
|
Ended | |
|
(March 8, 2004) to | |
|
|
January 4, 2004 to | |
|
Ended | |
|
|
December 31, | |
|
January 1, | |
|
|
May 7, | |
|
January 3, | |
|
|
2005 | |
|
2005 | |
|
|
2004 | |
|
2004 | |
|
|
| |
|
| |
|
|
| |
|
| |
|
|
(In thousands) | |
|
|
(In thousands) | |
Provision for income taxes computed at the federal statutory tax
rate
|
|
$ |
25,607 |
|
|
$ |
15,289 |
|
|
|
$ |
28,427 |
|
|
$ |
31,860 |
|
State income taxes, net of federal benefit
|
|
|
2,926 |
|
|
|
1,748 |
|
|
|
|
2,201 |
|
|
|
2,467 |
|
Other
|
|
|
28 |
|
|
|
744 |
|
|
|
|
154 |
|
|
|
550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$ |
28,561 |
|
|
$ |
17,781 |
|
|
|
$ |
30,782 |
|
|
$ |
34,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys income before income taxes for its Canadian
operations was $1.7 million for fiscal 2005 and
$2.3 million for the period from inception (March 8,
2004) to January 1, 2005.
Approximately $1.0 million of tax benefit was included in
other comprehensive income relating to the reversal of the
minimum pension liability (see note 6).
53
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The components of the Companys net deferred income tax
assets (liabilities) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
January 1, | |
|
|
2005 | |
|
2005 | |
|
|
| |
|
| |
|
|
(In thousands) | |
Deferred income tax assets:
|
|
|
|
|
|
|
|
|
|
Inventory reserves
|
|
$ |
2,709 |
|
|
$ |
1,450 |
|
|
Compensation-related accruals
|
|
|
5,994 |
|
|
|
4,711 |
|
|
Accruals and reserves
|
|
|
3,952 |
|
|
|
2,826 |
|
|
Property, plant, and equipment
|
|
|
|
|
|
|
681 |
|
|
Other
|
|
|
|
|
|
|
483 |
|
|
|
|
|
|
|
|
|
|
$ |
12,655 |
|
|
$ |
10,151 |
|
|
|
|
|
|
|
|
Deferred income tax liabilities:
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
(3,459 |
) |
|
|
(4,628 |
) |
|
Property, plant and equipment
|
|
|
(3,763 |
) |
|
|
|
|
|
Other
|
|
|
(666 |
) |
|
|
(141 |
) |
|
|
|
|
|
|
|
|
|
|
(7,888 |
) |
|
|
(4,769 |
) |
|
|
|
|
|
|
|
Deferred income tax assets (liabilities), net
|
|
$ |
4,767 |
|
|
$ |
5,382 |
|
|
|
|
|
|
|
|
The Company has a diversified customer base concentrated in the
building products business. Credit risk is monitored and
provisions for expected losses are provided as determined
necessary by management. The Company generally does not require
collateral.
The following reflects the Companys activity in
receivables related reserve accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning | |
|
|
|
Expense/ | |
|
Writeoffs and | |
|
Ending | |
|
|
Balance | |
|
Acquisitions | |
|
(Income) | |
|
Other, Net | |
|
Balance | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Fiscal 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts and related reserves
|
|
$ |
9,544 |
|
|
$ |
|
|
|
$ |
6,473 |
|
|
$ |
(6,804 |
) |
|
$ |
9,213 |
|
Period from January 4, 2004 to May 7, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts and related reserves
|
|
$ |
9,213 |
|
|
$ |
|
|
|
$ |
5,578 |
|
|
$ |
(315 |
) |
|
$ |
14,476 |
|
Period from Inception (March 8, 2004) to January 1,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts and related reserves
|
|
$ |
|
|
|
$ |
14,476 |
|
|
$ |
(238 |
) |
|
$ |
(831 |
) |
|
$ |
13,407 |
|
Fiscal 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts and related reserves
|
|
$ |
13,407 |
|
|
$ |
75 |
|
|
$ |
678 |
|
|
$ |
(3,215 |
) |
|
$ |
10,945 |
|
54
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
5. |
Stock-Based Compensation |
|
|
|
2004 Long Term Equity Incentive Plan |
The 2004 long term equity incentive plan is designed to motivate
and retain individuals who are responsible for the attainment of
the Companys primary long-term performance goals and
covers employees, directors and consultants. The plan provides
for the grant of nonqualified stock options, incentive stock
options for shares of the Companys common stock and
restricted shares of the Companys common stock to
participants of the plan selected by the Companys board of
directors or a committee of the board (the
Administrator). 2,222,222 shares of common
stock have been reserved under the plan. The terms and
conditions of awards are determined by the Administrator for
each grant, except that, unless otherwise determined by the
Administrator, or as set forth in an award agreement, options
vest and become exercisable as follows: fifty percent of an
option grant vests one third on the first anniversary of the
grant date, one third on the second anniversary of the grant
date and one third on the third anniversary of the grant date;
and the remaining fifty percent of the option grant vests in
tranches of equal amounts on the December 31 following the
first, second, third and fourth anniversary of the grant date if
certain performance targets established by the board as of the
December 31 of the applicable year are attained.
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 the Companys affiliate becomes the beneficial
owner, directly or indirectly, of fifty percent or more of the
combined voting power of the Companys then outstanding
securities or (2) the sale, transfer or other disposition
of all or substantially all of the Companys business,
whether by sale of assets, merger or otherwise to a person other
than Cerberus.
On May 11, 2005, the Company granted an option to Richard
Marchese, a newly appointed independent member of the board of
directors, to purchase 10,000 shares of the
Companys common stock at an exercise price of
$11.69 per share. These options will vest at the end of the
directors initial term, which coincides with the
Companys 2006 annual meeting of stockholders on
May 12, 2006.
On October 20, 2005, the Company granted an option to
Stephen Macadam, the Companys chief executive officer, to
purchase 750,000 shares of the Companys common
stock at an exercise price of $13.50. The options vest in five
equal annual installments beginning on October 20, 2006.
On December 13, 2005, the Company granted an option to
Richard Grant, a newly appointed independent member of the board
of directors, to purchase 10,000 shares of the
Companys common stock at an exercise price of
$11.40 per share. These options will vest on
December 13, 2006.
On August 30, 2004, the Company granted certain of its
employees options to purchase an aggregate amount of
1,029,000 shares of the Companys common stock at an
exercise price of $3.75 per share. 70% of each option
granted to the employees vests in equal annual installments on
the first, second and third anniversary of the date of grant
(Time-Based Options). The remaining 30% of each
option vests in equal amounts on December 31 following the
first, second, third and fourth anniversary of the date of grant
provided that certain performance targets to be established by
the board or the compensation committee are attained
(Performance-Based Options). These options were not
subject to accelerated vesting upon the consummation of the
Equity Offering.
In addition, on August 31, 2004, the Company granted each
of the Companys three independent directors options to
purchase 10,000 shares of the Companys common
stock at an exercise price of
55
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$3.75 per share. Each of these options vested at the end of
the directors initial term, which coincided with the
Companys 2005 annual meeting of stockholders on
May 11, 2005. The Company also granted options to
purchase 200,000 shares of the Companys common
stock at an exercise price of $3.75 to the Companys
chairman in consideration for his service as chairman of the
board of directors. The chairmans options also vested on
May 11, 2005.
The Company recorded $2.2 million and $1.1 million of
stock compensation expense during fiscal 2005 and the period
from inception (March 8, 2004) to January 1, 2005,
respectively. The Company recognizes compensation cost for
awards with pro rata vesting on a straight-line basis.
The following table depicts the weighted average assumptions
used in connection with the Black-Scholes option pricing model
to estimate the fair value of time-based options granted during
fiscal 2005:
|
|
|
|
|
|
|
|
|
|
|
Chief Executive | |
|
Time-Based | |
|
|
Officer Options* | |
|
Options** | |
|
|
| |
|
| |
Risk free interest rate
|
|
|
4.40 |
% |
|
|
4.39 |
% |
Expected dividend yield
|
|
|
3.90 |
% |
|
|
4.45 |
% |
Expected life
|
|
|
7 years |
|
|
|
7 years |
|
Expected volatility
|
|
|
50 |
% |
|
|
48 |
% |
Weighted average fair value
|
|
$ |
4.76 |
|
|
$ |
3.90 |
|
|
|
* |
Exercise price of $13.50 exceeded market price at date of grant. |
|
|
** |
Exercise price equaled market price at date of grant. |
Performance-Based Options include options for which the
financial target has been set by the board of directors, or a
committee thereof. On February 1, 2006, the compensation
committee set the financial target for 73,425 options subject to
vesting criteria in 2006. The compensation committee has not yet
set the financial target for options subject to performance
based vesting criteria in periods after 2006.
The following table depicts the weighted average assumptions
used in connection with the Black-Scholes option pricing model
to estimate the fair value of options granted during the period
from inception (March 8, 2004) to January 1, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance- | |
|
|
Time-Based | |
|
Based | |
|
|
Options* | |
|
Options** | |
|
|
| |
|
| |
Risk free interest rate
|
|
|
3.4 |
% |
|
|
3.85 |
% |
Expected dividend yield
|
|
|
2.0 |
% |
|
|
3.0 |
% |
Expected life
|
|
|
7 years |
|
|
|
7 years |
|
Expected volatility
|
|
|
0 |
% |
|
|
45 |
% |
Weighted average fair value
|
|
$ |
5.82 |
|
|
$ |
8.57 |
|
|
|
|
|
* |
Time-Based Options include options granted to the Companys
independent directors and the Companys chairman. |
|
|
** |
Performance-Based Options include options for which the
financial target has been set by the board of directors, or a
committee thereof. On November 17, 2004, the board of
directors set the financial target for options subject to
vesting criteria in 2005. |
56
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Additional information related to the Companys existing
employee stock options for the two years ended December 31,
2005 excluding Performance-Based Options for which the financial
targets have not been set totaling 222,300.
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted | |
|
|
|
|
Average | |
|
|
|
|
Exercise | |
|
|
Shares | |
|
Price | |
|
|
| |
|
| |
Options outstanding at inception (March 8, 2004)
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
1,030,187 |
|
|
$ |
3.75 |
|
Options exercised/surrendered
|
|
|
|
|
|
|
|
|
Options cancelled
|
|
|
(17,050 |
) |
|
$ |
3.75 |
|
Options outstanding at Jan. 1, 2005
|
|
|
1,013,137 |
|
|
$ |
3.75 |
|
Options exercisable at Jan. 1, 2005
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
788,900 |
|
|
$ |
13.38 |
|
Options exercised/surrendered
|
|
|
(68,872 |
) |
|
$ |
3.75 |
|
Options cancelled
|
|
|
(37,483 |
) |
|
$ |
3.75 |
|
Options outstanding at Dec. 31, 2005
|
|
|
1,695,682 |
|
|
$ |
8.23 |
|
Options exercisable at Dec. 31, 2005
|
|
|
395,525 |
|
|
$ |
3.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding | |
|
Exercisable | |
|
|
| |
|
| |
|
|
|
|
Weighed | |
|
|
|
|
|
Weighed | |
|
|
|
|
Average | |
|
Remaining | |
|
|
|
Average | |
|
|
Number of | |
|
Exercise | |
|
Contractual Life | |
|
Number of | |
|
Exercise | |
Price Range |
|
Options | |
|
Price | |
|
(in Years) | |
|
Options | |
|
Price | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
$ 3.75
|
|
|
906,782 |
|
|
$ |
3.75 |
|
|
|
3.37 |
|
|
|
395,525 |
|
|
$ |
3.75 |
|
10.29-13.50
|
|
|
788,900 |
|
|
|
13.38 |
|
|
|
9.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,695,682 |
|
|
|
|
|
|
|
|
|
|
|
395,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain of the Divisions employees participated in equity
compensation plans sponsored by Georgia-Pacific.
Georgia-Pacifics plans authorize grants of stock options,
restricted stock and performance awards with respect to
Georgia-Pacific common stock. As of January 3, 2004,
employees of the Division held options to
purchase 84,293 shares of Georgia-Pacific common stock
at exercise prices ranging from $25.84 to $64.71 per share.
Employees of the Division also held 193,732 stock appreciation
rights at exercise prices ranging from $15.22 to $29.47. In
addition, employees of the Division held 260,990 shares of
restricted stock and 176,872 performance award units. The shares
of restricted stock vest in three annual installments, 25% each
on June 5, 2004 and 2005, and 50% on June 5, 2006.
During fiscal 2003, employees of the Division were granted
260,990 shares of restricted stock, and 176,782 stock
appreciation rights. During the period from January 4, 2004
to May 7, 2004, the Division recorded approximately
$4 million of stock-based compensation expense related to
these plans. Of this amount, approximately $3 million
related to accelerated vesting of certain awards upon
change-of-control.
Until fiscal 2003, Georgia-Pacific accounted for its stock-based
compensation plans in accordance with Accounting Principles
Board, or APB, Opinion No. 25 and disclosed the pro forma
effects on net income as provided by SFAS No. 123,
Accounting for Stock-Based Compensation. However,
effective at the beginning of fiscal 2003, Georgia-Pacific
adopted the fair value method of accounting for stock-based
compensation utilizing the prospective method provided for in
SFAS No. 148, Accounting for Stock-Based
57
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Compensation Transition and Disclosure. Under
the prospective method, stock options awarded or modified in
fiscal 2003 and thereafter are accounted for using the fair
value method and stock options issued prior to fiscal 2003
continue to be accounted for under APB Opinion No. 25. Had
compensation cost for these awards been determined based on the
fair value at the grant dates in fiscal 2002 and fiscal 2001
consistent with the method of SFAS No. 123, the pro
forma net income would have been as follows:
|
|
|
|
|
|
|
|
January 3, | |
|
|
2004 | |
|
|
| |
Net income:
|
|
|
|
|
|
As reported
|
|
$ |
56,153 |
|
|
Pro forma
|
|
|
56,146 |
|
Stock-based compensation cost net of taxes, included in the
determination of net income as reported
|
|
|
927 |
|
The fair value method of accounting for stock-based compensation
plans recognizes the value of options granted as compensation
over the options vesting period. For purposes of
calculating the pro forma effects of stock-based awards,
compensation expense for awards with pro rata vesting is
recognized on a straight-line basis.
The following table depicts the weighted average assumptions
used in connection with the Black-Scholes option pricing model
to estimate the fair value of options granted in fiscal 2003:
|
|
|
|
|
|
|
Fiscal 2003 | |
|
|
Options | |
|
|
| |
Risk free interest rate
|
|
|
4.1 |
% |
Expected dividend yield
|
|
|
3.3 |
% |
Expected life
|
|
|
10 years |
|
Expected volatility
|
|
|
54 |
% |
Option forfeiture rate
|
|
|
0 |
% |
Weighted average fair value
|
|
$ |
6.85 |
|
Additional information related to Georgia-Pacifics
existing employee stock options for the year ended
January 3, 2004 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted | |
|
|
|
|
Average | |
|
|
|
|
Exercise | |
|
|
Shares | |
|
Price | |
|
|
| |
|
| |
Options outstanding at Dec. 28, 2002
|
|
|
826,152 |
|
|
$ |
30.01 |
|
|
Options cancelled
|
|
|
(741,859 |
) |
|
$ |
30.13 |
|
|
|
|
|
|
|
|
|
Options outstanding at Jan. 3, 2004
|
|
|
84,293 |
|
|
$ |
28.99 |
|
|
Options exercisable at Jan. 3, 2004
|
|
|
84,045 |
|
|
$ |
28.98 |
|
|
Option prices per share:
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
$ |
24.44-$41.59 |
|
|
|
|
|
58
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
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. The Company does
not expect to make any contributions to the hourly pension plan
in fiscal 2006. Contributions to multiemployer plans are
generally based on negotiated labor contracts. The Company
contributed $1.5 million, $0.9 million,
$0.6 million and $1.5 million to union administered
multiemployer pension plans for fiscal 2005, for the period from
inception (March 8, 2004) to January 1, 2005, for the
period from January 4, 2004 to May 7, 2004 and in
fiscal 2003, respectively. Benefits under the majority of plans
for hourly employees (including multiemployer plans) are
primarily related to years of service.
An accrued pension liability of $6.5 million at
December 31, 2005, was included in Other long-term
liabilities on the accompanying balance sheet. Pursuant to
the provisions of SFAS No. 87, Employers
Accounting for Pensions, an additional liability of
$1.5 million (net of taxes), which was recorded as of
January 1, 2005, was reversed in fiscal 2005, because the
estimated minimum pension liability was $0 at December 31,
2005. The Company used October 1, 2005 as the measurement
date for the hourly pension plan.
The following tables set forth the change in projected benefit
obligation and the change in plan assets for the hourly pension
plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from | |
|
|
|
|
Inception | |
|
|
Fiscal Year Ended | |
|
(March 8, 2004) | |
|
|
December 31, | |
|
to January 1, | |
|
|
2005 | |
|
2005 | |
|
|
| |
|
| |
|
|
(In thousands) | |
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of period
|
|
$ |
68,962 |
|
|
$ |
61,689 |
|
|
Service cost
|
|
|
2,600 |
|
|
|
1,511 |
|
|
Interest cost
|
|
|
3,879 |
|
|
|
2,591 |
|
|
Actuarial (gain) loss
|
|
|
(2,996 |
) |
|
|
4,196 |
|
|
Benefits paid
|
|
|
(2,397 |
) |
|
|
(1,025 |
) |
|
Acquisition of LSV
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at end of period
|
|
$ |
70,073 |
|
|
$ |
68,962 |
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
Fair value of assets at beginning of period
|
|
$ |
58,399 |
|
|
$ |
57,743 |
|
|
Actual return on plan assets
|
|
|
6,693 |
|
|
|
1,681 |
|
|
Benefits paid
|
|
|
(2,397 |
) |
|
|
(1,025 |
) |
|
|
|
|
|
|
|
Fair value of assets at end of period
|
|
$ |
62,695 |
|
|
$ |
58,399 |
|
|
|
|
|
|
|
|
59
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The funded status and the amounts recognized on the accompanying
balance sheets for the hourly pension plan are set forth in the
following table:
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
January 1, | |
|
|
2005 | |
|
2005 | |
|
|
| |
|
| |
|
|
(In thousands) | |
Funded status
|
|
$ |
(7,378 |
) |
|
$ |
(10,563 |
) |
Unrecognized Prior Service Cost (LSV)
|
|
|
25 |
|
|
|
|
|
Unrecognized actuarial loss
|
|
|
829 |
|
|
|
5,682 |
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$ |
(6,524 |
) |
|
$ |
(4,881 |
) |
|
|
|
|
|
|
|
Amounts recognized on the balance sheet consist of:
|
|
|
|
|
|
|
|
|
Accrued pension liability
|
|
|
(6,524 |
) |
|
|
(7,392 |
) |
Accumulated other comprehensive income
|
|
|
|
|
|
|
2,511 |
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$ |
(6,524 |
) |
|
$ |
(4,881 |
) |
|
|
|
|
|
|
|
The accumulated benefit obligation for the hourly pension plan
was $67 million and $66 million at December 31,
2005 and January 1, 2005, respectively.
Net periodic pension cost for our pension plans included the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from | |
|
|
|
|
Inception | |
|
|
Fiscal Year Ended | |
|
(March 8, 2004) | |
|
|
December 31, | |
|
to January 1, | |
|
|
2005 | |
|
2005 | |
|
|
| |
|
| |
|
|
(In thousands) | |
|
(In thousands) | |
Service cost
|
|
$ |
2,600 |
|
|
$ |
1,511 |
|
Interest cost on projected benefit obligation
|
|
|
3,879 |
|
|
|
2,591 |
|
Expected return on plan assets
|
|
|
(4,836 |
) |
|
|
(3,168 |
) |
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$ |
1,643 |
|
|
$ |
934 |
|
|
|
|
|
|
|
|
The following assumptions were used to determine the projected
benefit obligation at the measurement date and the net periodic
pension cost:
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
January 1, | |
|
|
2005 | |
|
2005 | |
|
|
| |
|
| |
Projected benefit obligation:
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.90% |
|
|
|
5.75% |
|
|
Average rate of increase in future compensation levels
|
|
|
4.00% |
|
|
|
4.00% |
|
|
Expected long-term rate of return on plan assets
|
|
|
8.50% |
|
|
|
8.50% |
|
Net periodic pension cost
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.75% |
|
|
|
6.50% |
|
|
Average rate of increase in future compensation levels
|
|
|
4.00% |
|
|
|
4.00% |
|
|
Expected long-term rate of return on plan assets
|
|
|
8.50% |
|
|
|
8.50% |
|
60
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Companys percentage of fair value of total assets by
asset category as of our measurement date are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
October 1, | |
|
October 2, | |
Asset Category |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
Equity securities domestic
|
|
|
62 |
% |
|
|
61 |
% |
|
Equity securities international
|
|
|
16 |
% |
|
|
15 |
% |
|
Fixed income
|
|
|
22 |
% |
|
|
23 |
% |
|
Other
|
|
|
0 |
% |
|
|
1 |
% |
|
|
|
|
|
|
|
Total
|
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
Investment policy and strategy |
Plan assets are managed as a balanced portfolio comprised of two
major components: an equity portion and a fixed income portion.
The expected role of plan equity investments will be to maximize
the long-term real growth of fund assets, while the role of
fixed income investments will be to generate current income,
provide for more stable periodic returns, and provide some
downside protection against the possibility of a prolonged
decline in the market value of fund equity investments. The
Company will review this investment policy statement at least
once per year. In addition, the portfolio will be reviewed
quarterly to determine the deviation from target weightings and
will be rebalanced as necessary. Target allocations for 2006 are
60% domestic and 15% international equity investments, and 25%
fixed income investments.
The expected long-term rate of return for the plans total
assets is based on the expected return of each of the above
categories, weighted based on the target allocation for each
class. Equity securities are expected to return 10% to 11% over
the long-term, while debt securities are expected to return
between 5% and 6%.
The Companys estimated future benefit payments reflecting
expected future service are as follows:
|
|
|
|
|
Fiscal Year Ending |
|
|
|
|
|
|
|
(In thousands) | |
December 30, 2006
|
|
$ |
3,038 |
|
December 29, 2007
|
|
|
3,162 |
|
January 3, 2009
|
|
|
3,383 |
|
January 2, 2010
|
|
|
3,629 |
|
January 1, 2011
|
|
|
3,882 |
|
December 31, 2011-January 2, 2016
|
|
|
23,752 |
|
|
|
|
Defined Contribution Plans |
The Companys employees also participate in several defined
contribution plans. Contributions to the plans are based on
employee contributions and compensation. Contributions to these
plans totaled $12.2 million, $7.3 million,
$3.3 million and $4.8 million for fiscal 2005, for the
period from inception (March 8, 2004) to January 1,
2005, for the period from January 4, 2004 to May 7,
2004 and in fiscal 2003, respectively.
61
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
Retirement and Consulting Agreement |
On October 20, 2005, the Company announced that Charles H.
McElrea was retiring from his position as chief executive
officer. In connection with Mr. McElreas retirement,
the Company and Mr. McElrea entered into a retirement and
consulting agreement pursuant to which the Company agreed to pay
Mr. McElrea a consulting fee of $58,890 per month,
payable in 24 monthly installments. The first such
installment shall be due and payable on the date that is
6 months after his retirement date. The retirement and
consulting agreement also contains confidentiality provisions,
as well as a covenant not to compete during the term of the
agreement. Mr. McElrea will continue to serve as a member
of the Companys Board of Directors. The Company recorded
the entire consulting fee expense under Mr. McElreas
agreement of $1.4 million in the fourth quarter of fiscal
2005.
|
|
7. |
Inventory Reserve Accounts |
The following reflects the Companys activity for inventory
reserve accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning | |
|
|
|
|
|
|
|
Ending | |
|
|
Balance | |
|
Acquisitions | |
|
Expense | |
|
(Income) | |
|
Balance | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Fiscal 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIFO reserve
|
|
$ |
36,280 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(4,301 |
) |
|
$ |
31,979 |
|
Obsolescence/damaged inventory reserve
|
|
$ |
2,825 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(699 |
) |
|
$ |
2,126 |
|
Period from January 4, 2004 to May 7, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIFO reserve
|
|
$ |
31,979 |
|
|
$ |
|
|
|
$ |
3,327 |
|
|
$ |
|
|
|
$ |
35,306 |
|
Obsolescence/damaged inventory reserve
|
|
$ |
2,126 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(547 |
) |
|
$ |
1,579 |
|
Period from Inception (March 8, 2004) to January 1,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obsolescence/damaged inventory reserve
|
|
$ |
|
|
|
$ |
1,579 |
|
|
$ |
1,386 |
|
|
$ |
|
|
|
$ |
2,965 |
|
Lower of cost or market reserve
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,041 |
|
|
$ |
|
|
|
$ |
1,041 |
|
Fiscal 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obsolescence/damaged inventory reserve
|
|
$ |
2,965 |
|
|
$ |
204 |
|
|
$ |
1,376 |
|
|
$ |
(1,820 |
) |
|
$ |
2,725 |
|
Lower of cost or market reserve
|
|
$ |
1,041 |
|
|
$ |
|
|
|
$ |
134 |
|
|
$ |
(1,175 |
) |
|
$ |
|
|
|
|
8. |
Revolving Credit Facility |
On May 7, 2004, the Company entered into a revolving credit
facility. The revolving credit facility, as amended, has a
revolving loan limit of $800 million and matures on
May 7, 2011. Advances under the revolving credit facility
are made as prime rate loans or LIBOR loans at the
Companys election. The revolving credit facility loans are
secured by a first priority security interest in all inventory
and receivables and all other personal property. The
Companys revolving loan limit of $800 million
includes a term loan for $6 million used to refinance and
consolidate certain loans made by the revolving loan lenders to
the Company. Borrowing availability under the revolving credit
facility is based on eligible accounts receivable and inventory.
As of December 31, 2005, the Company had outstanding
borrowings of $376 million and availability of
$219 million under the terms of the revolving credit
facility. The Company classifies the lowest projected balance of
the credit facility over the next twelve months of
$376 million as long term debt. As of February 17,
2006, borrowing availability under the revolving credit facility
was approximately $158 million.
62
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Interest rates payable upon such advances are based upon the
prime rate or LIBOR rate, depending on the type of loan the
Company chooses, plus an applicable margin. In general,
borrowings are at LIBOR rate plus 2.25% and/or prime plus 0.75%.
However, the applicable interest rates for prime rate and
Eurodollar loans are subject to adjustments based on the
Companys EBITDA amount as defined in the revolving credit
facility. At December 31, 2005, the interest rate
prevailing on the revolving credit facility was 7.16%. Under the
revolving credit facility, as of December 31, 2005, the
Company paid an unused line fee of 0.375% on the unused portion
of the commitment. As part of an amendment to the revolving
credit facility on January 26, 2005, the Companys
unused line fees were reduced to 0.25% on the unused portion of
the commitment In fiscal 2005, and from the period from
inception (March 8, 2004) to January 1, 2005, the
Company incurred $0.6 million and $12.1 million of
debt financing costs, respectively, related to the revolving
credit facility which are being amortized over the term of the
facility.
The revolving credit facility contains customary negative
covenants and restrictions for asset based loans, with which the
Company is in compliance. In addition, the revolving credit
facility requires, during a period commencing on the date on
which the amount of excess availability under the revolving
credit facility has been less than $40 million for the
third consecutive business day and ending on a subsequent date
on which the amount of adjusted excess availability has been
equal to or greater than $40 million for the sixtieth
consecutive day, that (i) BlueLinx meet a monthly fixed
charge coverage test, as defined in the revolving credit
agreement and (ii) BlueLinx not incur capital expenditures
of more than $20 million in any fiscal year. When measured,
BlueLinx is required to maintain a fixed charge coverage ratio
of 1.1 to 1.0.
The revolving credit facility limits distributions by BlueLinx
Corporation, the operating company, to its parent, BlueLinx
Holdings Inc., which, in turn, may limit the BlueLinx Holding
Inc.s ability to pay dividends to holders of common stock.
The revolving credit facility currently permits BlueLinx
Corporation to pay dividends to BlueLinx Holdings Inc.
(i) in an amount equal to the sum of the Companys
federal, state and local income tax liability that is
attributable to the operating company and its subsidiaries and
(ii) for the Companys general administrative expenses
and/or operating expenses incurred by the Company on behalf of
its operating company or its subsidiaries in an amount not to
exceed $2.5 million in any fiscal year. In addition, the
revolving credit facility permits the operating company to pay
dividends to the Company in an aggregate amount not to exceed
the sum of 50% of the operating companys cumulative net
income earned since May 7, 2004, plus 50% of the
first $100 million of capital contributions made by the
Company to the operating company after October 26, 2004,
plus 100% of each capital contribution made by the
Company to the operating company after such first
$100 million of capital contributions, so long as:
|
|
|
(i) the operating company does not pay dividends to the
Company in excess of $25 million in the aggregate in any
fiscal year; |
|
|
(ii) no default or event of default exists under the
revolving credit facility, and no default or event of default
will occur as a result of the dividend payment; |
|
|
(iii) both immediately before giving effect to the dividend
and immediately following the dividend payment, the amount of
modified adjusted excess availability under the
revolving credit facility is at least $70 million; and |
|
|
(iv) agents under the revolving credit facility have
received the operating companys unaudited internally
prepared financial statements for the fiscal quarter immediately
preceding the date of such |
63
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
dividend, together with a compliance certificate and any
supporting documentation the agent may request. |
At December 31, 2005, the Company had outstanding letters
of credit totaling $7.6 million, primarily for the purposes
of securing collateral requirements under the casualty insurance
programs for the Company and for guaranteeing payment of
international purchases based on fulfillment of certain
conditions.
On October 27, 2004, certain of the Companys
wholly-owned subsidiaries, which own the 61 warehouse properties
owned and occupied by BlueLinx Corporation, obtained from Column
Financial, Inc., a wholly-owned subsidiary of Credit Suisse
First Boston LLC, a mortgage loan in the amount of
$165 million (the Mortgage). Each mortgage
borrower is a special-purpose entity, i.e., it is a separate
legal entity from its affiliates (including without limitation,
the Company and BlueLinx Corporation) whose assets and credit
are not available to satisfy the debts and other obligations of
such affiliates or any other person or entity. The Mortgage has
an initial maturity date of November 9, 2007 and has two
one-year extension options, the exercise of which is conditioned
on payment of a fee equal to 0.25% of the then outstanding loan
balance and subject to
loan-to-value
determinations and the purchase of a new interest rate cap.
The Mortgage was used to pay off the Companys previously
existing $100 million principal amount of mortgage debt
plus $0.4 million of accrued and unpaid interest thereon
and redeem 56,475 shares of the Companys
series A preferred stock at an aggregate redemption price
of approximately $59.2 million (including accrued and
unpaid dividends thereon). In addition, the Company paid closing
costs of $4.6 million in connection with the Mortgage.
The Mortgage bears interest at a floating rate, equal to LIBOR
plus 225 basis points, determined monthly, subject to a
floor interest rate of 4.25% (a 2% floor on LIBOR plus 2.25%).
The Company has the option to convert to a Prime Rate Loan, in
which interest would be Prime plus Prime Rate Spread. Prime Rate
Spread would equal LIBOR minus Prime at the time of conversion,
not to be less than 0.0%. Interest on the Mortgage loan is
capped pursuant to a separate rate cap agreement at 8.25% (a 6%
cap on LIBOR plus 2.25%). At December 31, 2005, the
interest rate prevailing on the Mortgage was 6.62%.
Prepayment of the loan is permitted in whole or in part (with a
fee of 2% of the outstanding principal balance of the loan being
prepaid if the prepayment occurs through, and including,
May 9, 2006; 1% of the outstanding principal balance of the
loan being prepaid if the prepayment occurs after May 9,
2006 through, and including, October 9, 2006; and zero if
the prepayment occurs after October 9, 2006.) An exit fee
of 0.50% of the outstanding principal balance is also payable if
the loan is not refinanced with the existing lender.
|
|
10. |
Related Party Transactions |
|
|
|
Temporary Staffing Provider |
The Company uses Tandem Staffing Solutions, or Tandem, an
affiliate of Cerberus, as the temporary staffing company for its
office located in Atlanta, Georgia. The Company incurred total
temporary staffing expenses of $1.9 million and
$1.6 million for fiscal 2005 and for the period from
inception (March 8, 2004) to January 1, 2005,
respectively. As of December 31, 2005 and January 1,
2005, the Company had accounts payable in the amount of $48,733
and $136,000 to Tandem, respectively.
64
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For fiscal 2005, the Company incurred expenses in the amount of
$480,800 for consulting services provided to the Company by
consultants on retainer to Cerberus. As of December 31,
2005, the Company had accounts payable in the amount of $417,850
for these services.
|
|
|
Overhead Expense Reimbursement |
For fiscal 2005 and the period from inception (March 8,
2004) to January 1, 2005, the Company incurred expenses in
the amount of $134,542 and $183,449, respectively, related to
reimbursements to Cerberus for various overhead expenses
directly related to the Company business. As of
December 31, 2005 and January 1, 2005, the Company had
accounts payable related to these expenses of $70,100 and
$26,969, respectively.
The Company uses ATC Associates, Inc. (ATC) and SBI Group
(SBI), Cerberus affiliates, for real estate surveys and
information technology consulting. These expenses totaled
$90,793 and $567,753 for fiscal 2005 and fiscal 2004,
respectively.
The Company purchased software licenses and a maintenance
agreement from SSA Global, a Cerberus affiliate. These payments
were directly related to the transfer of the Companys
existing financial reporting software from Georgia-Pacific.
These payments totaled $338,128 and $1.4 million for fiscal
2005 and the period from inception (March 8, 2004) to
January 1, 2005, respectively.
For fiscal 2005, the Company incurred expenses for car rentals
in the amount of $390,001. These services were provided by
Vanguard Car Rental USA Inc., an affiliate of Cerberus. As of
December 31, 2005, the Company had accounts payable in the
amount of $41,445 related to these expenses.
The Company made interest payments of $4.8 million to
ABPMC, an affiliate of Cerberus, related to the Companys
$100 million old mortgage loan which was repaid in full in
fiscal 2004.
The Company made interest payments of $6.4 million related
to the Companys term loan. Cerberus and Aozora Bank Ltd.,
an affiliate of Cerberus, held 94% of the $100 million term
loan. The term loan was repaid in full in fiscal 2004.
During fiscal 2004, the Company paid dividends of
$5.2 million related to the Companys series A
preferred stock, 100% of which was owned by Cerberus. The
Company redeemed all $95 million of its issued and
outstanding series A preferred stock during fiscal 2004.
65
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
11. |
Commitments and Contingencies |
Total rental expense was approximately $6.5 million,
$5.1 million, $2.4 million and $6.9 million for
fiscal 2005, for the period from inception (March 8, 2004)
to January 1, 2005, for the period from January 4,
2004 to May 7, 2004 and in fiscal 2003, respectively.
At December 31, 2005, total commitments of the Company
under long-term, noncancelable operating leases were as follows
(in thousands):
|
|
|
|
|
2006
|
|
$ |
6,661 |
|
2007
|
|
|
6,407 |
|
2008
|
|
|
6,089 |
|
2009
|
|
|
5,789 |
|
2010
|
|
|
5,516 |
|
Thereafter
|
|
|
46,046 |
|
|
|
|
|
Total
|
|
$ |
76,508 |
|
|
|
|
|
Certain of the Companys operating leases have extension
options.
|
|
|
Environmental and Legal Matters |
The Company is, and from time to time may be, involved in
various legal proceedings incidental to its businesses and is
subject to a variety of environmental and pollution control laws
and regulations in all jurisdictions in which it operates.
Management believes that the disposition of these matters will
not have a materially adverse effect on the financial condition
or results of operations of the Company.
Georgia-Pacific is a defendant in suits brought in various
courts around the nation by plaintiffs who allege that they have
suffered personal injury as a result of exposure to products
containing asbestos. These suits allege a variety of lung and
other diseases based on alleged exposure to products previously
manufactured by Georgia-Pacific. Although the terms of the Asset
Purchase Agreement provide that Georgia-Pacific will indemnify
the Company against all obligations and liabilities arising out
of, relating to or otherwise in any way in respect of any
product liability claims (including, without limitation, claims,
obligations or liabilities relating to the presence or alleged
presence of asbestos-containing materials) with respect to
products purchased, sold, marketed, stored, delivered,
distributed or transported by Georgia-Pacific and its
affiliates, including the Division prior to the acquisition, the
Company believes that circumstances may arise under which
asbestos-related claims against Georgia-Pacific could cause it
to incur substantial costs.
For example, in the event that Georgia-Pacific is financially
unable to respond to an asbestos product liability claim,
plaintiffs lawyers may, in order to obtain recovery,
attempt to sue the Company, in its capacity as owner of assets
sold by Georgia-Pacific, despite the fact that the assets sold
to the Company did not contain asbestos. Asbestos litigation
has, over the years, proved unpredictable, as the aggressive and
well-financed asbestos plaintiffs bar has been creative,
and often successful, in bringing claims based on novel legal
theories and on expansive interpretations of existing legal
theories. These claims have included claims against companies
that did not manufacture asbestos products. As a result of these
factors, a number of companies have been held liable for amounts
far in excess of their perceived exposure.
66
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Although the Company believes, based on its understanding of the
law as currently interpreted, that it should not be held liable
for any of Georgia-Pacifics asbestos-related claims, and,
to the contrary, that it would prevail on summary judgment on
any such claims, there is nevertheless a possibility that new
theories could be developed, or that the application of existing
theories could be expanded, in a manner that would result in
liability for the Company. Any such liability could ultimately
be borne by the Company if Georgia-Pacific is unable to fulfill
its indemnity obligation under the Asset Purchase Agreement.
|
|
|
Collective Bargaining Agreements |
Approximately 33% of the Companys total work force is
covered by collective bargaining agreements. Collective
bargaining agreements representing approximately 6.7% of the
Companys work force will expire within one year.
On November 19, 2004, the Company 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, the Company filed its answer to the complaint denying
liability. Although the ultimate outcome of this matter cannot
be determined with certainty, the Company believes 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. Accordingly, the Company has not
recorded a reserve with respect to the asserted claim.
Hurricane Katrina caused significant damage at the
Companys distribution center in New Orleans, Louisiana.
The facility ceased operations prior to the arrival of the storm
on August 29, 2005 and has not reopened. There was
approximately $2.4 million in inventory located at the
facility that has been declared a total loss by the
Companys insurer. Damage to the building and furniture,
fixtures and equipment is expected to exceed $2.0 million.
The cost recognized by the Company related to the damage is
$250,000, which is the amount of its insurance deductible. The
Company still has claims pending with insurance carriers.
On January 26, 2006, the Company reached an agreement with
Wachovia Bank, National Association and the other signatories
thereto to amend the terms of our existing revolving credit
agreement. The Third Amendment to the Loan and Security
Agreement dated January 26, 2006, reduces the applicable
prime rate margin and Eurodollar rate margin used to calculate
the Companys interest rate under the revolving credit
agreement, reduces unused line fees, provides more flexibility
to the Company for permitted acquisitions under the revolving
credit agreement and extends the final maturity date to
May 7, 2011. The revolving credit agreement, as amended on
January 26, 2006, is discussed in Note 8 above.
67
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
13. |
Unaudited Selected Quarterly Financial Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter | |
|
Second Quarter | |
|
Third Quarter | |
|
Fourth Quarter | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
Pre- | |
|
|
|
Pre- | |
|
|
|
|
|
|
BlueLinx | |
|
|
|
acquisition | |
|
BlueLinx | |
|
BlueLinx | |
|
acquisition | |
|
BlueLinx | |
|
BlueLinx | |
|
|
(Consolidated) | |
|
BlueLinx | |
|
Period | |
|
(Consolidated) | |
|
(Consolidated) | |
|
Period | |
|
(Consolidated) | |
|
(Consolidated) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
Period from | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception | |
|
Three | |
|
|
|
|
|
|
|
Three | |
|
Three | |
|
Three | |
|
Three | |
|
|
|
|
(March 8, | |
|
Months | |
|
|
|
Period from | |
|
Month | |
|
Months | |
|
Months | |
|
Months | |
|
Months | |
|
|
Three Months | |
|
2004) to | |
|
Ended | |
|
Three Months | |
|
May 8, 2004 | |
|
Ended | |
|
Ended | |
|
Ended | |
|
Ended | |
|
Ended | |
|
|
Ended April 2, | |
|
April 3, | |
|
April 3, | |
|
Ended July 2, | |
|
to July 3, | |
|
May 7, | |
|
October 1, | |
|
October 2, | |
|
December 31, | |
|
January 1, | |
|
|
2005(a) | |
|
2004 | |
|
2004 | |
|
2005(b) | |
|
2004(e) | |
|
2004 | |
|
2005(c) | |
|
2004(f) | |
|
2005(d) | |
|
2005(g) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share amounts) | |
Net sales
|
|
$ |
1,351,619 |
|
|
$ |
|
|
|
$ |
1,279,882 |
|
|
$ |
1,486,976 |
|
|
$ |
955,612 |
|
|
$ |
605,452 |
|
|
$ |
1,454,217 |
|
|
$ |
1,509,581 |
|
|
$ |
1,329,259 |
|
|
$ |
1,207,627 |
|
|
Gross profit
|
|
|
119,328 |
|
|
|
|
|
|
|
154,098 |
|
|
|
115,681 |
|
|
|
89,528 |
|
|
|
73,113 |
|
|
|
137,037 |
|
|
|
142,278 |
|
|
|
140,393 |
|
|
|
101,424 |
|
|
Net income(loss)
|
|
$ |
8,418 |
|
|
$ |
(356 |
) |
|
$ |
34,319 |
|
|
$ |
7,751 |
|
|
$ |
11,552 |
|
|
$ |
16,119 |
|
|
$ |
13,896 |
|
|
$ |
20,515 |
|
|
$ |
14,538 |
|
|
$ |
(5,806 |
) |
Net income (loss) applicable to common stockholders
|
|
$ |
8,418 |
|
|
|
|
|
|
|
|
|
|
$ |
7,751 |
|
|
$ |
9,712 |
|
|
|
|
|
|
$ |
13,896 |
|
|
$ |
18,028 |
|
|
$ |
14,538 |
|
|
$ |
(7,061 |
) |
Basic net income (loss) per share applicable to common stock
|
|
$ |
0.28 |
|
|
|
|
|
|
|
|
|
|
$ |
0.26 |
|
|
$ |
0.56 |
|
|
|
|
|
|
$ |
0.46 |
|
|
$ |
1.00 |
|
|
$ |
0.48 |
|
|
$ |
(0.34 |
) |
Diluted net income (loss) per share applicable to common stock
|
|
$ |
0.28 |
|
|
|
|
|
|
|
|
|
|
$ |
0.25 |
|
|
$ |
0.52 |
|
|
|
|
|
|
$ |
0.46 |
|
|
$ |
0.93 |
|
|
$ |
0.48 |
|
|
$ |
(0.34 |
) |
|
|
(a) |
During the three months ended April 2, 2005, basic and
diluted weighted average shares were 30,154,890 and 30,457,896,
respectively. |
|
|
|
(b) |
|
During the three months ended July 2, 2005, basic and
diluted weighted average shares were 30,185,556 and 30,475,752,
respectively. |
|
(c) |
|
During the three months ended October 1, 2005, basic and
diluted weighted average shares were 30,198,643 and 30,493,289,
respectively. |
|
(d) |
|
During the three months ended December 31, 2005, basic and
diluted weighted average shares were 30,239,604 and 30,550,977,
respectively. Stock options to purchase 778,900 shares
were excluded from the Companys diluted earnings per share
calculation because they were anti-dilutive. |
|
(e) |
|
During the two months ended July 3, 2004, basic and diluted
weighted average shares were 18,100,000, and 19,287,500,
respectively. |
|
(f) |
|
During the three months ended October 2, 2004, basic and
diluted weighted average shares were 18,100,000 and 19,405,870,
respectively. |
|
(g) |
|
During the three months ended January 1, 2005, basic and
diluted weighted average shares were 20,506,667. Stock options
were excluded from the calculation of diluted earnings per share
for the three months ended January 1, 2005 because they
were anti-dilutive. |
|
|
14. |
Supplemental Condensed Consolidating/ Combined Financial
Statements |
The condensed consolidating financial information as of
December 31, 2005, January 1, 2005 and for fiscal
2005, and the period from inception (March 8, 2004) to
January 1, 2005 is provided due to restrictions in the
Companys revolving credit facility that limit
distributions by BlueLinx Corporation, the operating company and
a wholly-owned subsidiary of the Company, to the Company, which,
in turn, may limit the Companys ability to pay dividends
to holders of its common stock (see Note 8, Revolving
Credit Facility, for a more detailed discussion of these
restrictions and the terms of the facility). Also included in
the supplemental condensed consolidated/combining financial
statements are sixty-one single member
68
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
limited liability companies, which are wholly owned by the
Company (the LLC subsidiaries). The LLC subsidiaries
own certain warehouse properties that are occupied by BlueLinx
Corporation, each under the terms of a master lease agreement.
The warehouse properties collateralize a mortgage loan and are
not available to satisfy the debts and other obligations of
either the Company or BlueLinx Corporation. The supplemental
condensed combining financial statements for the period from
January 4, 2004 to May 7, 2004 and fiscal 2003 also
present the financial position, results of operations and cash
flows for the pre-acquisition period as if the current structure
of the Company had been outstanding for the period presented.
The condensed consolidating statement of operations for BlueLinx
Holdings Inc. for the fiscal year ended December 31, 2005
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
BlueLinx | |
|
LLC | |
|
|
|
|
|
|
Holdings Inc. | |
|
Corporation | |
|
Subsidiaries | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Net sales
|
|
$ |
|
|
|
$ |
5,622,071 |
|
|
$ |
19,600 |
|
|
$ |
(19,600 |
) |
|
$ |
5,622,071 |
|
Cost of sales
|
|
|
|
|
|
|
5,109,632 |
|
|
|
|
|
|
|
|
|
|
|
5,109,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
512,439 |
|
|
|
19,600 |
|
|
|
(19,600 |
) |
|
|
512,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
1,779 |
|
|
|
395,368 |
|
|
|
461 |
|
|
|
(19,600 |
) |
|
|
378,008 |
|
|
Depreciation and amortization
|
|
|
|
|
|
|
14,486 |
|
|
|
4,284 |
|
|
|
|
|
|
|
18,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
1,779 |
|
|
|
409,854 |
|
|
|
4,745 |
|
|
|
(19,600 |
) |
|
|
396,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(1,779 |
) |
|
|
102,585 |
|
|
|
14,855 |
|
|
|
|
|
|
|
115,661 |
|
Non-operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
31,624 |
|
|
|
10,687 |
|
|
|
|
|
|
|
42,311 |
|
|
Other expense (income), net
|
|
|
|
|
|
|
296 |
|
|
|
(110 |
) |
|
|
|
|
|
|
186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
(1,779 |
) |
|
|
70,665 |
|
|
|
4,278 |
|
|
|
|
|
|
|
73,164 |
|
Provision (benefit) for income taxes
|
|
|
(683 |
) |
|
|
27,601 |
|
|
|
1,643 |
|
|
|
|
|
|
|
28,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income (loss) of subsidiaries
|
|
|
45,699 |
|
|
|
|
|
|
|
|
|
|
|
(45,699 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
44,603 |
|
|
$ |
43,064 |
|
|
$ |
2,635 |
|
|
$ |
(45,699 |
) |
|
$ |
44,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The condensed consolidating statement of operations for BlueLinx
Holdings Inc. for the period from inception (March 8, 2004)
to January 1, 2005 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
BlueLinx | |
|
LLC | |
|
|
|
|
|
|
Holdings Inc. | |
|
Corporation | |
|
Subsidiaries | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Net sales
|
|
$ |
|
|
|
$ |
3,672,820 |
|
|
$ |
10,662 |
|
|
$ |
(10,662 |
) |
|
$ |
3,672,820 |
|
Cost of sales
|
|
|
|
|
|
|
3,339,590 |
|
|
|
|
|
|
|
|
|
|
|
3,339,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
333,230 |
|
|
|
10,662 |
|
|
|
(10,662 |
) |
|
|
333,230 |
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
432 |
|
|
|
258,380 |
|
|
|
141 |
|
|
|
(10,662 |
) |
|
|
248,291 |
|
|
Depreciation and amortization
|
|
|
|
|
|
|
7,320 |
|
|
|
2,812 |
|
|
|
|
|
|
|
10,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
432 |
|
|
|
265,700 |
|
|
|
2,953 |
|
|
|
(10,662 |
) |
|
|
258,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(432 |
) |
|
|
67,530 |
|
|
|
7,709 |
|
|
|
|
|
|
|
74,807 |
|
Non-operating expenses (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
22,183 |
|
|
|
6,582 |
|
|
|
|
|
|
|
28,765 |
|
Write-off of debt issue costs
|
|
|
|
|
|
|
2,871 |
|
|
|
|
|
|
|
|
|
|
|
2,871 |
|
Other (income), net
|
|
|
|
|
|
|
(516 |
) |
|
|
|
|
|
|
|
|
|
|
(516 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision (benefit) for income taxes
|
|
|
(432 |
) |
|
|
42,992 |
|
|
|
1,127 |
|
|
|
|
|
|
|
43,687 |
|
Provision (benefit) for income taxes
|
|
|
(168 |
) |
|
|
17,510 |
|
|
|
439 |
|
|
|
|
|
|
|
17,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income of subsidiaries
|
|
|
26,170 |
|
|
|
|
|
|
|
|
|
|
|
(26,170 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
25,906 |
|
|
$ |
25,482 |
|
|
$ |
688 |
|
|
$ |
(26,170 |
) |
|
|
25,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Preferred stock dividends
|
|
|
5,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common shareholders
|
|
$ |
20,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The pre-acquisition condensed combining statement of operations
for the Distribution Division for the period from
January 4, 2004 to May 7, 2004 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution | |
|
|
|
|
|
|
Division | |
|
|
|
|
|
|
Excluding | |
|
|
|
|
|
|
Warehouse | |
|
Warehouse | |
|
|
|
|
Properties | |
|
Properties | |
|
Combined | |
|
|
| |
|
| |
|
| |
Net sales
|
|
$ |
1,885,334 |
|
|
$ |
|
|
|
$ |
1,885,334 |
|
Cost of sales
|
|
|
1,658,123 |
|
|
|
|
|
|
|
1,658,123 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
227,211 |
|
|
|
|
|
|
|
227,211 |
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
139,203 |
|
|
|
|
|
|
|
139,203 |
|
|
Depreciation and amortization
|
|
|
3,786 |
|
|
|
2,389 |
|
|
|
6,175 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
142,989 |
|
|
|
2,389 |
|
|
|
145,378 |
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
84,222 |
|
|
|
(2,389 |
) |
|
|
81,833 |
|
Non-operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net
|
|
|
614 |
|
|
|
|
|
|
|
614 |
|
|
|
|
|
|
|
|
|
|
|
Income before provision (benefit) for income taxes
|
|
|
83,608 |
|
|
|
(2,389 |
) |
|
|
81,219 |
|
Provision (benefit) for income taxes
|
|
|
31,687 |
|
|
|
(905 |
) |
|
|
30,782 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
51,921 |
|
|
$ |
(1,484 |
) |
|
$ |
50,437 |
|
|
|
|
|
|
|
|
|
|
|
The condensed combining statement of operations for the
Distribution Division for fiscal 2003 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution | |
|
|
|
|
|
|
Division | |
|
|
|
|
|
|
Excluding | |
|
|
|
|
|
|
Warehouse | |
|
Warehouse | |
|
|
|
|
Properties | |
|
Properties | |
|
Combined | |
|
|
| |
|
| |
|
| |
Net sales
|
|
$ |
4,271,842 |
|
|
$ |
|
|
|
$ |
4,271,842 |
|
Cost of sales
|
|
|
3,814,375 |
|
|
|
|
|
|
|
3,814,375 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
457,467 |
|
|
|
|
|
|
|
457,467 |
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
346,585 |
|
|
|
|
|
|
|
346,585 |
|
|
Depreciation and amortization
|
|
|
12,497 |
|
|
|
6,979 |
|
|
|
19,476 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
359,082 |
|
|
|
6,979 |
|
|
|
366,061 |
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
98,385 |
|
|
|
(6,979 |
) |
|
|
91,406 |
|
Non-operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net
|
|
|
376 |
|
|
|
|
|
|
|
376 |
|
|
|
|
|
|
|
|
|
|
|
Income before provision (benefit) for income taxes
|
|
|
98,009 |
|
|
|
(6,979 |
) |
|
|
91,030 |
|
Provision (benefit) for income taxes
|
|
|
37,551 |
|
|
|
(2,674 |
) |
|
|
34,877 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
60,458 |
|
|
$ |
(4,305 |
) |
|
$ |
56,153 |
|
|
|
|
|
|
|
|
|
|
|
71
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The condensed consolidating balance sheet for BlueLinx Holdings
Inc. as of December 31, 2005 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
BlueLinx | |
|
LLC | |
|
|
|
|
|
|
Holdings Inc. | |
|
Corporation | |
|
Subsidiaries | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
13 |
|
|
$ |
24,307 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
24,320 |
|
|
Receivables
|
|
|
|
|
|
|
399,093 |
|
|
|
|
|
|
|
|
|
|
|
399,093 |
|
|
Inventories
|
|
|
|
|
|
|
473,068 |
|
|
|
|
|
|
|
|
|
|
|
473,068 |
|
|
Deferred income taxes
|
|
|
|
|
|
|
7,069 |
|
|
|
|
|
|
|
(391 |
) |
|
|
6,678 |
|
|
Other current assets
|
|
|
1,003 |
|
|
|
43,906 |
|
|
|
|
|
|
|
|
|
|
|
44,909 |
|
|
Intercompany receivable
|
|
|
683 |
|
|
|
1,578 |
|
|
|
|
|
|
|
(2,261 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,699 |
|
|
|
949,021 |
|
|
|
|
|
|
|
(2,652 |
) |
|
|
948,068 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and land improvements
|
|
|
|
|
|
|
2,360 |
|
|
|
54,161 |
|
|
|
|
|
|
|
56,521 |
|
|
Buildings
|
|
|
|
|
|
|
4,034 |
|
|
|
89,347 |
|
|
|
|
|
|
|
93,381 |
|
|
Machinery and equipment
|
|
|
|
|
|
|
54,200 |
|
|
|
|
|
|
|
|
|
|
|
54,200 |
|
|
Construction in progress
|
|
|
|
|
|
|
2,350 |
|
|
|
|
|
|
|
|
|
|
|
2,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, at cost
|
|
|
|
|
|
|
62,944 |
|
|
|
143,508 |
|
|
|
|
|
|
|
206,452 |
|
|
Accumulated depreciation
|
|
|
|
|
|
|
(15,405 |
) |
|
|
(6,998 |
) |
|
|
|
|
|
|
(22,403 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
47,539 |
|
|
|
136,510 |
|
|
|
|
|
|
|
184,049 |
|
|
Investment in subsidiaries
|
|
|
184,177 |
|
|
|
|
|
|
|
|
|
|
|
(184,177 |
) |
|
|
|
|
|
Deferred income taxes
|
|
|
|
|
|
|
1,311 |
|
|
|
|
|
|
|
(1,311 |
) |
|
|
|
|
|
Other non-current assets
|
|
|
|
|
|
|
21,532 |
|
|
|
3,991 |
|
|
|
|
|
|
|
25,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
185,876 |
|
|
$ |
1,019,403 |
|
|
$ |
140,501 |
|
|
$ |
(188,140 |
) |
|
$ |
1,157,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
55 |
|
|
$ |
326,949 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
327,004 |
|
|
Bank overdrafts
|
|
|
|
|
|
|
62,392 |
|
|
|
|
|
|
|
|
|
|
|
62,392 |
|
|
Accrued compensation
|
|
|
|
|
|
|
13,494 |
|
|
|
|
|
|
|
|
|
|
|
13,494 |
|
|
Current maturities of long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
391 |
|
|
|
|
|
|
|
|
|
|
|
(391 |
) |
|
|
|
|
|
Other current liabilities
|
|
|
|
|
|
|
12,835 |
|
|
|
2,360 |
|
|
|
|
|
|
|
15,195 |
|
|
Intercompany payable
|
|
|
1,578 |
|
|
|
|
|
|
|
683 |
|
|
|
(2,261 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
2,024 |
|
|
|
415,670 |
|
|
|
3,043 |
|
|
|
(2,652 |
) |
|
|
418,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
375,850 |
|
|
|
165,000 |
|
|
|
|
|
|
|
540,850 |
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
3,222 |
|
|
|
(1,311 |
) |
|
|
1,911 |
|
|
Other long-term liabilities
|
|
|
|
|
|
|
12,117 |
|
|
|
825 |
|
|
|
|
|
|
|
12,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,024 |
|
|
|
803,637 |
|
|
|
172,090 |
|
|
|
(3,963 |
) |
|
|
973,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity/ Parents Investment
|
|
|
183,852 |
|
|
|
215,766 |
|
|
|
(31,589 |
) |
|
|
(184,177 |
) |
|
|
183,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$ |
185,876 |
|
|
$ |
1,019,403 |
|
|
$ |
140,501 |
|
|
$ |
(188,140 |
) |
|
$ |
1,157,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
BLUELINX HOLDINGS INC.
(Formerly ABP Distribution Holdings Inc.) AND
BUILDING PRODUCTS DISTRIBUTION DIVISION OF
GEORGIA-PACIFIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The condensed consolidating balance sheet for BlueLinx Holdings
Inc. as of January 1, 2005 follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlueLinx | |
|
BlueLinx | |
|
LLC | |
|
|
|
|
|
|
Holdings Inc. | |
|
Corporation | |
|
Subsidiaries | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
3 |
|
|
$ |
15,569 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
15,572 |
|
|
Receivables
|
|
|
|
|
|
|
363,688 |
|
|
|
|
|
|
|
|
|
|
|
363,688 |
|
|
Inventories
|
|
|
|
|
|
|
500,231 |
|
|
|
|
|
|
|
|
|
|
|
500,231 |
|
|
Deferred income taxes
|
|
|
|
|
|
|
6,122 |
|
|
|
|
|
|
|
|
|
|
|
6,122 |
|
|