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Acquisition | 9 Months Ended
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Sep. 29, 2018
Business Combinations [Abstract] |
Acquisition | Acquisition On April 13, 2018, we completed the acquisition of Cedar Creek Holdings, Inc. (“Cedar Creek”) for a preliminary purchase price of approximately $361.8 million. The acquisition was completed pursuant to the terms of an Agreement and Plan of Merger (the "Merger Agreement"), dated as of March 9, 2018, by and among BlueLinx Corporation, one of our wholly owned subsidiaries, Panther Merger Sub, Inc., a wholly-owned subsidiary of BlueLinx Corporation ("Merger Sub"), Cedar Creek, and CharlesBank Equity Fund VII, Limited Partnership (“CharlesBank”). Upon closing the transactions contemplated by the Merger Agreement, among other things, Merger Sub was merged with and into Cedar Creek, with Cedar Creek surviving the acquisition as one of our indirect wholly-owned subsidiaries. As a result of the acquisition, we increased the number of our distribution facilities to approximately 70 facilities, and increased the number of our full-time employees to over 2,500. The merger allowed us to expand our product offerings, while maintaining our existing geographical footprint. Cedar Creek was established in 1977 as a wholesale building materials distribution company that distributes wood products across the United States. Its products include specialty lumber, oriented strand board, siding, cedar, spruce, engineered wood products and other building products. The acquisition is being accounted for under the acquisition method of accounting. The assets acquired, liabilities assumed and the results of operations of the acquired business are included in our consolidated results since April 13, 2018. The acquired business contributed net sales and net loss of $706.6 million and $0.2 million, respectively, to the Company for the period from April 13, 2018, to September 29, 2018. The net loss for the period from April 13, 2018, to September 29, 2018, included integration-related costs and the negative impact of selling a higher cost Cedar Creek inventory recorded at fair value. The following unaudited consolidated pro forma information presents consolidated information as if the acquisition had occurred on January 1, 2017:
|  | Pro forma
|  | Three Months Ended |  | Nine Months Ended
(In thousands, except per share data) |  | September 29, 2018 |  | September 30, 2017 |  | September 29, 2018 |  | September 30, 2017
Net sales |  | $ | 859,776 |  |  | $ | 841,330 |  |  | $ | 2,592,597 |  |  | $ | 2,459,713 |
Net income (loss) |  | (6,219 | ) |  | 8,033 |  |  | (5,455 | ) |  | (20,477 | )
Earnings (loss) per common share: |  |  |  |  |  |  |  |
Basic |  | $ | (0.67 | ) |  | $ | 0.88 |  |  | $ | (0.59 | ) |  | $ | (2.27 | )
Diluted |  | (0.67 | ) |  | 0.87 |  |  | (0.59 | ) |  | (2.27 | )
The pro forma amounts above have been calculated in accordance with GAAP after applying the Company's accounting policies and adjusting: (i) the three- and nine-months ended September 29, 2018, to reflect a $0.9 million and $11.8 million, respectively, charge related to an inventory step-up adjustment, and the three and nine months ended September 30, 2017, for $0 and $11.8 million, respectively; (ii) the three- and nine-months ended September 29, 2018, for $3.8 million and $37.9 million, respectively, for transaction related costs, and the three- and nine-months ended September 30, 2017, for $0 and $37.9 million, respectively. Due to the net loss for the three- and nine-month periods ended September 29, 2018, and for the nine-month period ended September 30, 2017, 0 incremental shares, 0.1 million incremental shares and 0.2 million incremental shares, respectively, from share-based compensation arrangements were excluded from the computation of diluted weighted average shares outstanding, in both periods, because their effect would be anti-dilutive. The pro forma amounts do not include any potential synergies, cost savings or other expected benefits of the acquisition, are presented for illustrative purposes only, and are not necessarily indicative of results that would have been achieved had the acquisition occurred as of January 1, 2017, or of future operating performance. The purchase price of Cedar Creek consisted of the following items:
|  | (In thousands)
Consideration paid to shareholders and amounts paid to creditors: |  |
Payments to Cedar Creek shareholders[1] |  | $ | 166,447 |  |
Subordinated unsecured note (due to shareholder)[2] |  |  | 13,743 |  |
Seller’s transaction costs paid by Company |  |  | 7,349 |  |
Add: pay off of Cedar Creek debt[3] |  |  | 174,213 |  |
Total preliminary cash purchase price |  | $ | 361,752 |  |
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[1] | Payments to Cedar Creek’s shareholders include the purchase of common stock and certain escrow adjustments.
[2] | The Cedar Creek note payable to a shareholder of $13.7 million was paid in full upon the acquisition of Cedar Creek and included $10 million in subordinated debt and $3.7 million in accrued interest.
[3] | To finance the acquisition of Cedar Creek, the Company amended and restated its Revolving Credit Facility to increase the availability thereunder to $600.0 million and also entered into a new $180.0 million senior secured Term Loan Facility (See Note 6).
The purchase is subject to a customary post-closing adjustment for, among other things, the final working capital of the acquired business. The excess of total preliminary purchase price, which includes the aggregate cash consideration paid in excess of the fair value of the tangible and intangible assets acquired, was recorded as goodwill. The goodwill recognized is attributable to the expected operating synergies and growth potential that the Company expects to realize from the acquisition. None of the goodwill generated from the acquisition is deductible for tax purposes. When determining the fair values of assets acquired and liabilities assumed, management made significant estimates, judgments and assumptions. As of September 29, 2018, the purchase price allocation for the acquisition was preliminary and subject to completion. Adjustments to the current fair value estimates in the table below may occur as the process conducted for valuation and assessments is finalized, including tax assets, liabilities and other attributes. We expect to complete the purchase price allocation during the 12-month period following the acquisition date, in line with the acquisition method of accounting, during which time the value of the assets and liabilities may be revised as appropriate. The following table summarizes the preliminary values of the assets acquired and liabilities assumed at the date of the acquisition:
(In thousands) | Preliminary Allocation as of September 29, 2018
Cash and net working capital assets (excluding inventory) | $ | 90,768 |
Inventory |  | 159,227 |
Property and equipment |  | 71,352 |
Other, net |  | 6,992 |
Intangible assets and goodwill: |  |  |
Customer relationships |  | 25,500 |
Non-compete agreements |  | 8,254 |
Trade names |  | 6,826 |
Favorable leasehold interests |  | 800 |
Goodwill |  | 36,787 |
Capital leases and other liabilities |  | (44,754 | )
Cash purchase price | $ | 361,752 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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