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Acquisition of Cedar Creek | 9 Months Ended
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Sep. 28, 2019
Business Combinations [Abstract] |
Acquisition of Cedar Creek | Acquisition of Cedar Creek On April 13, 2018, we completed the acquisition of Cedar Creek Holdings, Inc. (“Cedar Creek”) for a 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. 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 merger as one of our indirect wholly-owned subsidiaries. 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 was accounted for under the acquisition method of accounting. The assets acquired, liabilities assumed and results of operations of the acquired business have been included in our consolidated results since April 13, 2018. 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 28, 2019 |  | September 29, 2018 |  | September 28, 2019 |  | September 29, 2018
Net sales |  | $ | 678,665 |  |  | $ | 859,776 |  |  | $ | 2,023,814 |  |  | $ | 2,592,597 |
Net income (loss) |  | (5,194 | ) |  | (6,219 | ) |  | 937 |  |  | (5,455 | )
Earnings (loss) per common share: |  |  |  |  |  |  |  |
Basic |  | $ | (0.55 | ) |  | $ | (0.67 | ) |  | $ | 0.10 |  |  | $ | (0.59 | )
Diluted |  | (0.55 | ) |  | (0.67 | ) |  | 0.10 |  |  | (0.59 | )
The pro forma amounts above have been calculated in accordance with GAAP after applying the Company's accounting policies and adjusting the three and nine months ended September 28, 2019, for $1.8 million and $8.4 million, and the three and nine months ended September 29, 2018, for $3.7 million and $40.3 million, respectively, for transaction related costs, net of tax. Due to the net loss for the three month period ended September 28, 2019, 114,000 incremental shares from share-based compensation arrangements were excluded from the computation of diluted weighted average shares outstanding 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 |  |
Repayment of Cedar Creek debt[3] |  |  | 174,213 |  |
Total cash purchase price |  | $ | 361,752 |  |
[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 capacity thereunder to $600.0 million and also entered into a new $180.0 million senior secured Term Loan Facility. (See Note 6)
The excess of total 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. The following table summarizes the values of the assets acquired and liabilities assumed at the date of the acquisition:
(In thousands) | Allocation as of December 29, 2018
Cash and net working capital assets (excluding inventory) | $ | 88,318 |
Inventory |  | 159,227 |
Property and equipment |  | 71,203 |
Other, net |  | (1,395 | )
Intangible assets and goodwill: |  |  |
Customer relationships |  | 25,500 |
Non-compete agreements |  | 8,254 |
Trade names |  | 6,826 |
Favorable leasehold interests |  | 800 |
Goodwill |  | 47,772 |
Finance leases and other liabilities |  | (44,753 | )
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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