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Summary of Significant Accounting Policies | 12 Months Ended
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Jan. 04, 2014
Summary Of Significant Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Revenue Recognition We recognize revenue when the following criteria are met: persuasive evidence of an agreement exists, delivery has occurred or services have been rendered, our price to the buyer is fixed and determinable and collectability is reasonably assured. Delivery is not considered to have occurred until the customer takes title and assumes the risks and rewards of ownership. The timing of revenue recognition is largely dependent on shipping terms. For sales transactions designated as FOB (free on board) shipping point, revenue is recorded at the time of shipment. For sales transactions designated FOB destination, revenue is recorded when the product is delivered to the customer’s delivery site. All revenues are recorded gross. The key indicators used to determine when and how revenue is recorded are as follows:
| ● | We are the primary obligor responsible for fulfillment and all other aspects of the customer relationship.
| ● | Title passes from BlueLinx, and we carry all risk of loss related to warehouse and third-party (“reload”) inventory and inventory shipped directly from vendors to our customers.
| ● | We are responsible for all product returns.
| ● | We control the selling price for all channels.
| ● | We select the supplier.
| ● | We bear all credit risk.
In addition, we provide inventory to certain customers through pre-arranged agreements on a consignment basis. Customer consigned inventory is maintained and stored by certain customers; however, ownership and risk of loss remains with us. When the inventory is sold by the customer, we recognize revenue on a gross basis. Customer consigned inventory at January 4, 2014, and December 29, 2012 was approximately $10.1 million and $10.3 million, respectively. All revenues are recorded after trade allowances, cash discounts and sales returns are deducted. Cash discounts and sales returns are estimated using historical experience. Trade allowances are based on the estimated obligations and historical experience. Cash and Cash Equivalents Cash and cash equivalents include all highly-liquid investments with maturity dates of less than three months when purchased. Restricted Cash We had restricted cash of $11.7 million and $9.9 million at January 4, 2014, and December 29, 2012, respectively. Restricted cash primarily includes amounts held in escrow related to our mortgage and insurance for workers’ compensation, auto liability, and general liability. Restricted cash is included in “Other current assets” and “Other non-current assets” on the accompanying Consolidated Balance Sheets. The table below provides the balances of each individual component in restricted cash as of January 4, 2014, and December 29, 2012 (in thousands):
|  | At January 4, 2014 |  |  | At December 29, 2012 |
Cash in escrow: |  |  |  |  |  |
Mortgage |  | $ | — |  |  | $ | 40 |
Insurance |  |  | 7,921 |  |  |  | 7,906 |
Other |  |  | 3,760 |  |  |  | 1,965 |
Total |  | $ | 11,681 |  |  | $ | 9,911 |
During fiscal 2013, 2012 and 2011, changes in restricted cash required under our mortgage were classified in the financing section of our Consolidated Statement of Cash Flows. On September 19, 2012, we entered into an amendment to our mortgage agreement, which provided for the immediate prepayment of approximately $11.8 million of the indebtedness under the mortgage agreement. In addition, on a quarterly basis, starting with the fourth quarter of fiscal 2012, additional funds held as collateral under the mortgage agreement were used to prepay indebtedness under the mortgage agreement, without prepayment premium, up to an aggregate additional prepayment of $10.0 million. Thereafter, any cash remaining in the collateral account under the mortgage agreement, up to an aggregate of $10.0 million, is released to the Company on the last business day of each calendar quarter through the third quarter of fiscal 2014. All funds released pursuant to these provisions may be used by the Company to pay for usual and customary operating expenses. During the period described above in which cash in the collateral account is used to either prepay indebtedness under the mortgage agreement or released to the Company, the lenders will not release any of the cash collateral to the Company for specified capital expenditures as previously provided under the mortgage agreement. Concentrations of Credit Risk Our receivables are principally from customers in the building products industry located in the United States and Canada. We believe concentration of credit risk with respect to receivables is limited due to the large number of customers comprising our customer base. None of our customers individually constitute more than 10% of fiscal 2013 sales. Allowance for Doubtful Accounts and Related Reserves We evaluate the collectability of receivables based on numerous factors, including past transaction history with customers and their creditworthiness. We maintain an allowance for doubtful accounts for each aging category on our aged trial balance, which is aged utilizing contractual terms, based on our historical loss experience. This estimate is periodically adjusted when we become aware of specific customers’ inability to meet their financial obligations (e.g., bankruptcy filing or other evidence of liquidity problems). As we determine that specific balances ultimately will be uncollectible, we remove them from our aged trial balance. Additionally, we maintain reserves for cash discounts that we expect customers to earn as well as expected returns. At January 4, 2014, and December 29, 2012, these reserves totaled $4.4 million and $4.7 million, respectively. Inventory Valuation Inventories are carried at the lower of cost or market. The cost of all inventories is determined by the moving average cost method. We have included all material charges directly or indirectly incurred in bringing inventory to its existing condition and location. We evaluate our inventory value at the end of each quarter to ensure that first quality, actively moving inventory, when viewed by category, is carried at the lower of cost or market. During the second quarter of fiscal 2013, we recorded in “Cost of sales” in the Consolidated Statements of Operations and Comprehensive Loss a lower of cost or market charge of $3.8 million related to declines in prices for our lumber, oriented strand board (“OSB”) and plywood inventory. As we sold through inventory impacted by this reserve during the third quarter of fiscal 2013 and prices of lumber, OSB and plywood stabilized, the reserve was reduced to zero as of January 4, 2014. Additionally, we maintain a reserve for the estimated value impairment associated with damaged, excess and obsolete inventory. The damaged, excess and obsolete reserve generally includes discontinued items or inventory that has turn days in excess of 270 days, excluding new items during their product launch. At January 4, 2014, and December 29, 2012, our damaged, excess and obsolete inventory reserves were $1.8 million and $1.1 million, respectively. During the second quarter of fiscal 2013, approximately $1.0 million was recorded in “Cost of sales” in the Consolidated Statements of Operations and Comprehensive Loss for damaged, excess and obsolete inventory related to the closure of five distribution centers. There was $0.3 million of this reserve remaining as of January 4, 2014, related to this inventory. We discuss the closure or ceasing of operations of these distribution centers, which is included in our 2013 restructuring plan (the “2013 restructuring”), further in “Note 3 – Restructuring Charges”. Consignment Inventory We enter into consignment inventory agreements with vendors. This vendor consignment inventory relationship allows us to obtain and store vendor inventory at our warehouses and third-party (“reload”) facilities; however, ownership and risk of loss generally remains with the vendor. When the inventory is sold, we are required to pay the vendor, and we simultaneously take and transfer ownership from the vendor to the customer. Consideration Received from Vendors and Paid to Customers Each year, we enter into agreements with many of our vendors providing for inventory purchase rebates, generally based on achievement of specified volume purchasing levels. We also receive rebates related to price protection and various marketing allowances that are common industry practice. We accrue for the receipt of vendor rebates based on purchases, and also reduce inventory to reflect the net acquisition cost (purchase price less expected purchase rebates). At January 4, 2014, and December 29, 2012, the vendor rebate receivable totaled $7.6 million and $9.0 million, respectively. Adjustments to earnings resulting from revisions to rebate estimates have been immaterial. In addition, we enter into agreements with many of our customers to offer customer rebates, generally based on achievement of specified volume sales levels and various marketing allowances that are common industry practice. We accrue for the payment of customer rebates based on sales to the customer, and also reduce sales to reflect the net sales (sales price less expected customer rebates). At January 4, 2014, and December 29, 2012, the customer rebate payable totaled $6.3 million and $5.5 million, respectively. Adjustments to earnings resulting from revisions to rebate estimates have been immaterial. Shipping and Handling Amounts billed to customers in sales transactions related to shipping and handling are classified as revenue. Shipping and handling costs included in “Selling, general, and administrative” expenses were $99.7 million, $91.2 million, and $87.9 million for fiscal 2013, fiscal 2012, and fiscal 2011, respectively. Advertising Costs Advertising costs are expensed as incurred. Advertising expenses of $1.2 million, $1.1 million, and $1.9 million were included in “Selling, general and administrative” expenses for fiscal 2013, fiscal 2012 and fiscal 2011, respectively. Loss per Common Share We calculate our basic loss per share by dividing net loss by the weighted average number of common shares and participating securities outstanding for the period. Restricted stock granted by us to certain management employees and non-employee directors participate in dividends on the same basis as common shares and are non-forfeitable by the holder. The unvested restricted stock contains non-forfeitable rights to dividends or dividend equivalents. As a result, these share-based awards meet the definition of a participating security and are included in the weighted average number of common shares outstanding, pursuant to the two-class method, for the periods that present net income. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common stockholders. Given that the restricted stockholders do not have a contractual obligation to participate in the losses and the inclusion of such unvested restricted shares in our basic and dilutive per share calculations would be anti-dilutive, we have not included these amounts in our weighted average number of common shares outstanding for periods in which we report a net loss. Therefore, we have not included 1,618,283, 3,554,738 and 2,361,424 of unvested restricted shares that had the right to participate in dividends in our basic and dilutive calculations for fiscal 2013, fiscal 2012, and fiscal 2011, respectively, because all periods reflected net losses. Except when the effect would be anti-dilutive, the diluted earnings per share calculation includes the dilutive effect of the assumed exercise of stock options and performance shares using the treasury stock method. During fiscal 2013, we granted 2,969,424 performance shares under our 2006 Long-Term Equity Incentive Plan (the “2006 Plan”) in which shares are issuable upon satisfaction of certain performance criteria. As of January 4, 2014, we assumed that 2,192,868 of these performance shares will vest, net of forfeitures and vestings to date, based on our assumption that meeting the performance criteria is probable. The performance shares are not considered participating shares under the two-class method because they do not receive any non-transferable rights to dividends. The 2,192,868 performance shares we assume will vest were not included in the computation of diluted earnings per share calculation because they were antidilutive. Except when the effect would be anti-dilutive, the diluted earnings per share calculation includes the dilutive effect of the assumed exercise of stock options and performance shares using the treasury stock method. As we experienced losses in all periods, basic and diluted loss per share are computed by dividing net loss by the weighted average number of common shares outstanding for the period. For fiscal 2013, fiscal 2012, and fiscal 2011, we excluded 4,595,650, 4,460,054 and 3,266,740 unvested share-based awards, respectively, from the diluted earnings per share calculation because they were anti-dilutive. The unvested share-based awards total excludes the assumed exercise of unexpired stock options. On March 27, 2013, we completed a rights offering of common stock to our stockholders (the “2013 Rights Offering”) at a subscription price that was lower than the market price of our common stock. The 2013 Rights Offering was deemed to contain a bonus element that is similar to a stock dividend, requiring us to adjust the weighted average number of common shares used to calculate basic and diluted earnings per share in prior periods retrospectively by a factor of 1.0894. Weighted average shares for fiscal 2012 prior to giving effect to the 2013 Rights Offering were 60,079,528 and 65,451,808 after application of the adjustment factor above. Weighted average shares for fiscal 2011 prior to giving effect to the 2013 Rights Offering were 43,187,315 and 47,049,102 after application of the adjustment factor above. Common Stock Dividends On December 5, 2007, our Board of Directors suspended the payment of dividends on our common stock for an indefinite period of time. Resumption of the payment of dividends will depend on, among other things, business conditions in the housing industry, our results of operations, cash requirements, financial condition, contractual restrictions, provisions of applicable law and other factors that our Board of Directors may deem relevant. Accordingly, we may not be able to resume the payment of dividends at the same quarterly rate in the future, if at all. Property and Equipment Property and equipment are recorded at cost. Lease obligations for which we assume or retain substantially all the property rights and risks of ownership are capitalized. Replacements of major units of property are capitalized and the replaced properties are retired. Replacements of minor components of property and repair and maintenance costs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Useful lives are 2 to 18 years for land improvements, 5 to 40 years for buildings, and 3 to 7 years for machinery and equipment, which includes mobile equipment. Upon retirement or disposition of assets, cost and accumulated depreciation are removed from the related accounts and any gain or loss is included in income. Depreciation expense totaled $9.1 million for fiscal 2013, $8.4 million for fiscal 2012 and $10.4 million for fiscal 2011. During fiscal 2013, we sold certain properties with carrying values of $3.9 million, which resulted in gains totaling $5.2 million. During fiscal 2012, we sold certain properties with carrying values of $7.4 million, which resulted in gains totaling $9.9 million. These gains are recorded in “Selling, general and administrative” expense in the Consolidated Statements of Operations and Comprehensive Loss. All of these properties in fiscal 2013 and fiscal 2012 were classified as held for sale. See Note 4 for discussion of the held for sale properties sold during the year. Impairment of Long-Lived Assets Long-lived assets, including property and equipment and intangible assets with definite useful lives, are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. We consider whether there were indicators of potential impairment on a quarterly basis. Indicators of impairment include current period losses combined with a history of losses, management’s decision to exit a facility, reductions in the fair market value of real properties and changes in other circumstances that indicate the carrying amount of an asset may not be recoverable. Our evaluation of long-lived assets is performed at the lowest level of identifiable cash flows, which is generally the individual distribution facility. In the event of indicators of impairment, the assets of the distribution facility are evaluated by comparing the facility’s undiscounted cash flows over the estimated useful life of the asset, which ranges between 5-40 years, to its carrying value. If the carrying value is greater than the undiscounted cash flows, an impairment loss is recognized for the difference between the carrying value of the asset and the estimated fair market value. Impairment losses are recorded as a component of “Selling, general and administrative” expense in the Consolidated Statements of Operations and Comprehensive Loss. Our estimate of undiscounted cash flows is subject to assumptions that affect estimated operating income at a distribution facility level. These assumptions are related to future sales, margin growth rates, economic conditions, market competition and inflation. In the event that undiscounted cash flows do not exceed the carrying value of a facility, our estimates of fair market value are generally based on market appraisals and our experience with related market transactions. We use a two year average of cash flows based on 2013 EBITDA and 2014 projected EBITDA, which includes a growth factor assumption, to estimate undiscounted cash flows. These assumptions used to determine impairment are considered to be level 3 measurements in the fair value hierarchy as defined in Note 13. While operating results have declined during the past several years as they are closely tied to U.S. housing starts, during fiscal 2012 we began to see signs of a housing recovery, and our results have improved; however, our sales are still below normal levels. To the extent that reductions in volume and operating income have resulted in impairment indicators, in all cases our carrying values continue to be less than our projected undiscounted cash flows. As such, we have not identified significant known trends impacting the fair value of long-lived assets to an extent that would indicate impairment. During the first quarter of fiscal 2011 our Newtown, CT facility was damaged due to severe winter weather. As a result of the damage to the facility and its contents we received approximately $5.8 million in proceeds from the insurance company comprised of $2.2 million related to the damaged building, $2.4 million related to damaged and destroyed inventory and $1.2 million related to the recovery of additional expenses incurred as a result of the damage. Cash received related to the damaged building was classified as an investing cash inflow in our Consolidated Statements of Cash Flows and used to reduce the principal of our mortgage. All other cash inflows related to the insurance settlement were classified as operating cash flows in our Consolidated Statements of Cash Flows. The majority of the remaining cash inflows were used to fund costs incurred related to the Newtown loss. We recognized a $1.4 million gain in fiscal 2011 of which $1.2 million related to the damaged building and $0.2 million related to the recovery of gross margin on the inventory. We recorded the gain at the time that the recovery of the minimum expected proceeds under our insurance policy became probable and was estimable. This gain was recorded in “Selling, general and administrative expenses” in our Consolidated Statements of Operations and Comprehensive Loss. Share-Based Compensation We recognize compensation expense equal to the grant-date fair value for all share-based payment awards that are expected to vest. This expense is recorded on a straight-line basis over the requisite service period of the entire award, unless the awards are subject to market or performance conditions, in which case we recognize compensation expense over the requisite service period of each separate vesting tranche to the extent market and performance conditions are considered probable. The calculation of fair value related to share-based compensation is subject to certain assumptions discussed in more detail in Note 7. Management updates such estimates when circumstances warrant. All compensation expense related to our share-based payment awards is recorded in “Selling, general and administrative” expense in the Consolidated Statements of Operations and Comprehensive Loss. Income Taxes Deferred income taxes are provided using the liability method. Accordingly, deferred income taxes are recognized for differences between the income tax and financial reporting bases of our assets and liabilities based on enacted tax laws and tax rates applicable to the periods in which the differences are expected to affect taxable income. We recognize a valuation allowance, when based on the weight of all available evidence, we believe it is more likely than not that some or all of our deferred tax assets will not be realized. In evaluating our ability to recover our deferred income tax assets, we considered available positive and negative evidence, including our past operating results, our ability to carryback losses against prior taxable income, the existence of cumulative losses in the most recent years, our forecast of future taxable income and an excess of appreciated assets over the tax basis of our net assets. In estimating future taxable income, we developed assumptions including the amount of future state and federal pretax operating and non-operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions required significant judgment about the forecasts of future taxable income. When we considered all of the available positive and negative evidence, when based on the weight of all available evidence, we believe it is more likely than not that some or all of our deferred tax assets will not be realized. Such amounts are disclosed in Note 5 of the Notes to the Consolidated Financial Statements. If the realization of deferred tax assets in the future is considered more likely than not, a reduction to the valuation allowance related to the deferred tax assets would increase net income in the period such determination is made. The amount of the deferred tax asset considered realizable is based on significant estimates, and it is possible that changes in these estimates could materially affect the financial condition and results of operations. Our effective tax rate may vary from period to period based on changes in estimated taxable income or loss; changes to the valuation allowance; changes to federal or state tax laws; and as a result of acquisitions. We generally believe that the positions taken on previously filed tax returns are more likely than not to be sustained by the taxing authorities. We have recorded income tax and related interest liabilities where we believe our position may not be sustained. Such amounts are disclosed in Note 5 of the Notes to the Consolidated Financial Statements. Foreign Currency Translation The functional currency for our Canadian operations is the Canadian dollar. The translation of the applicable currencies into U.S. 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 stockholders’ equity. Foreign currency transaction gains and losses are reflected in the Consolidated Statements of Operations and Comprehensive Loss. Accumulated other comprehensive loss at January 4, 2014, and December 29, 2012 included the accumulated gain from foreign currency translation (net of tax) of $1.6 million and $1.8 million, respectively. Compensated Absences We accrue for the costs of compensated absences to the extent that the employee’s right to receive payment relates to service already rendered, the obligation vests or accumulates, payment is probable and the amount can be reasonably estimated. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and such differences could be material. Reclassifications During fiscal 2012, we classified certain amounts, which had historically been presented as “Property, plant and equipment investments” in the “Cash flows from investing activities” section of the Consolidated Statements of Cash Flows to “Other” changes in the “Cash flows from operating activities” section of the Consolidated Statements of Cash Flows. To conform the historical presentation to the current and future presentation, we reclassified similar items in prior periods from “Net cash (used in) provided by investing activities” to “Net cash used in operating activities” in our Consolidated Statements of Cash Flows. The presentation of these same items during fiscal 2013 is consistent with the adjusted presentation in fiscal 2012 and will be going forward. New Accounting Standards In the first quarter of fiscal 2013, the Financial Accounting Standards Board (the “FASB”) issued an amendment to previously issued guidance which requires companies to report, in one place, information about reclassifications out of accumulated other comprehensive income (“AOCI”). The update also requires companies to present reclassifications by component when reporting changes in AOCI balances. For significant items reclassified out of AOCI to net income in their entirety in the period, companies must report the effect of the reclassifications on the respective line items in the statement where net income is presented. In certain circumstances, this can be done on the face of that statement. Otherwise, it must be presented in the notes. For items not reclassified to net income in their entirety in the period, companies must cross-reference in a note to other required disclosures. The amendments are effective for public companies in fiscal years, and interim periods within those years, beginning after December 15, 2012. We adopted this guidance during the first quarter of fiscal 2013; refer to “Note 17 – Accumulated Other Comprehensive Loss” for the required disclosures. There were no other accounting pronouncements adopted during fiscal 2013 that had a material impact on our financial statements.

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