BlueLinx Holdings Inc. (Form: 10-Q, Received: 11/06/2019 16:57:13)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-32383



	BlueLinx Holdings Inc.
	(Exact name of registrant as specified in its charter)



Delaware		77-0627356
(State of Incorporation)		(I.R.S. Employer Identification No.)

1950 Spectrum Circle, Suite 300
Marietta	GA	30067
(Address of principal executive offices)		(Zip Code)

(770) 953-7000

(Registrant’s telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	BXC	New York Stock Exchange

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer	☐	Accelerated Filer	☑	Non-accelerated Filer	☐	Smaller Reporting Company	☑
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of November 4, 2019 there were 9,364,959 shares of BlueLinx Holdings Inc. common stock, par value $0.01, outstanding.

BLUELINX HOLDINGS INC.

Form 10-Q

For the Quarterly Period Ended September 28, 2019

INDEX



	PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements — BlueLinx Holdings Inc. (Unaudited)	1
Condensed Consolidated Statements of Operations and Comprehensive Loss	1
Condensed Consolidated Balance Sheets	2
Condensed Consolidated Statements of Cash Flows	3
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity	4
Notes to Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	26
Item 4. Controls and Procedures	26

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	27
Item 1A. Risk Factors	27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3. Defaults Upon Senior Securities	27
Item 4. Mine Safety Disclosures	27
Item 5. Other Information	27
Item 6. Exhibits	28

Signature	29

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS

(In thousands, except per share data)

(Unaudited)



	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Net sales	$	678,665		$	859,776		$	2,023,814		$	2,190,215
Cost of sales	584,952			768,021			1,749,889			1,939,484
Gross profit	93,713			91,755			273,925			250,731
Operating expenses:
Selling, general, and administrative	79,881			87,692			228,392			238,655
Gains from sales of property	(38		)	—			(9,798		)	—
Depreciation and amortization	7,577			8,068			22,408			18,177
Total operating expenses	87,420			95,760			241,002			256,832
Operating income (loss)	6,293			(4,005		)	32,923			(6,101		)
Non-operating expenses (income):
Interest expense	13,409			13,273			40,527			33,947
Other income, net	(317		)	(94		)	(212		)	(282		)
Loss before provision for (benefit from) income taxes	(6,799		)	(17,184		)	(7,392		)	(39,766		)
Provision for (benefit from) income taxes	244			(7,288		)	69			(7,885		)
Net loss	$	(7,043	)	$	(9,896	)	$	(7,461	)	$	(31,881	)

Basic loss per share	$	(0.75	)	$	(1.07	)	$	(0.80	)	$	(3.46	)
Diluted loss per share	$	(0.75	)	$	(1.07	)	$	(0.80	)	$	(3.46	)

Comprehensive loss:
Net loss	$	(7,043	)	$	(9,896	)	$	(7,461	)	$	(31,881	)
Other comprehensive income (loss):
Foreign currency translation, net of tax	(9		)	—			(2		)	(3		)
Amortization of unrecognized pension gain (loss), net of tax	(1,834		)	201			(1,403		)	605
Pension curtailment, net of tax	—			—			(632		)	—
Other	(7		)	—			9			—
Total other comprehensive income (loss)	(1,850		)	201			(2,028		)	602
Comprehensive loss	$	(8,893	)	$	(9,695	)	$	(9,489	)	$	(31,279	)

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)



	September 28, 2019			December 29, 2018
ASSETS
Current assets:
Cash	$	12,847		$	8,939
Receivables, less allowances of $3,811 and $3,656, respectively	243,905			208,434
Inventories, net	362,389			341,851
Other current assets	42,366			40,629
Total current assets	661,507			599,853
Property and equipment, at cost	321,004			308,398
Accumulated depreciation	(113,740		)	(103,285		)
Property and equipment, net	207,264			205,113
Operating lease right-of-use assets	53,689			—
Goodwill	47,772			47,772
Intangible assets, net	28,354			35,222
Deferred tax assets	54,784			52,645
Other non-current assets	19,259			19,284
Total assets	$	1,072,629		$	959,889
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	179,376		$	149,188
Accrued compensation	8,780			7,974
Current maturities of long-term debt, net of discount and debt issuance costs of $74 and $64, respectively	1,790			1,736
Finance leases - short-term	8,373			7,555
Real estate deferred gains - short-term	4,448			5,330
Operating lease liabilities - short-term	6,381			—
Other current liabilities	13,835			24,985
Total current liabilities	222,983			196,768
Non-current liabilities:
Long-term debt, net of discount and debt issuance costs of $12,081 and $12,665, respectively	488,097			497,939
Finance leases - long-term	155,258			143,486
Real estate financing obligation	44,725			—
Real estate deferred gains - long-term	82,400			86,011
Operating lease liabilities - long-term	47,418			—
Pension benefit obligation	27,625			26,668
Other non-current liabilities	24,694			23,680
Total liabilities	1,093,200			974,552
Commitments and Contingencies
STOCKHOLDERS’ DEFICIT:
Common Stock, $0.01 par value, Authorized - 20,000,000 shares, Issued and Outstanding - 9,364,959 and 9,293,794, respectively	94			92
Additional paid-in capital	260,883			258,596
Accumulated other comprehensive loss	(39,157		)	(37,129		)
Accumulated stockholders’ deficit	(242,391		)	(236,222		)
Total stockholders’ deficit	(20,571		)	(14,663		)
Total liabilities and stockholders’ deficit	$	1,072,629		$	959,889

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Nine Months Ended
	September 28, 2019			September 29, 2018
Net cash used in operating activities	$	(54,940	)	$	(59,293	)

Cash flows from investing activities:
Proceeds from sale of assets	13,699			107,972
Acquisition of business, net of cash acquired	—			(353,094		)
Property and equipment investments	(3,321		)	(1,872		)
Net cash provided by (used in) investing activities	10,378			(246,994		)

Cash flows from financing activities:
Borrowings on revolving credit facilities	512,379			736,254
Repayments on revolving credit facilities	(490,842		)	(503,577		)
Borrowings on term loan	—			180,000
Repayments on term loan	(31,899		)	(900		)
Principal payments on mortgage	—			(97,847		)
Proceeds from real estate transactions	44,725			—
Change in outstanding payments	22,348			14,671
Debt issuance costs	(1,588		)	(10,470		)
Payments on finance lease obligations	(6,445		)	(5,890		)
Repurchase of shares to satisfy employee tax withholdings	(208		)	(3,020		)
Net cash provided by financing activities	48,470			309,221

Net change in cash	3,908			2,934
Cash at beginning of period	8,939			4,696
Cash at end of period	$	12,847		$	7,630

See accompanying Notes.

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(In thousands)

(Unaudited)



	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Stockholders’ Deficit Total
	Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Stockholders’ Deficit Total
Balance, December 29, 2018	9,294		$	92	$	258,596		$	(37,129	)	$	(236,222	)	$	(14,663	)
Net loss	—		—		—			—			(6,719		)	(6,719		)
Adoption of ASC 842, net of tax	—		—		—			—			1,291			1,291
Foreign currency translation, net of tax	—		—		—			7			—			7
Unrealized gain from pension plan, net of tax	—		—		—			1,077			—			1,077
Vesting of restricted stock units	49		1		—			—			—			1
Compensation related to share-based grants	—		—		706			—			—			706
Other	—		—		—			15						15
Balance, March 30, 2019	9,343		93		259,302			(36,030		)	(241,650		)	(18,285		)
Net income	—		—		—			—			6,301			6,301
Unrealized loss from pension plan, net of tax	—		—		—			(1,278		)	—			(1,278		)
Vesting of restricted stock units	32		1		—			—			—			1
Compensation related to share-based grants	—		—		635			—			—			635
Repurchase of shares to satisfy employee tax withholdings	(10	)	—		(208		)	—			—			(208		)
Other	—		—		(2		)	1			—			(1		)
Balance, June 29, 2019	9,365		94		259,727			(37,307		)	(235,349		)	(12,835		)
Net loss	—		—		—			—			(7,043		)	(7,043		)
Foreign currency translation, net of tax	—		—		—			(9		)	—			(9		)
Unrealized loss from pension plan, net of tax	—		—		—			(1,834		)	—			(1,834		)
Compensation related to share-based grants	—		—		1,156			—			—			1,156
Other	—		—		—			(7		)	1			(6		)
Balance, September 28, 2019	9,365		$	94	$	260,883		$	(39,157	)	$	(242,391	)	$	(20,571	)

BLUELINX HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(In thousands)

(Unaudited)



	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Stockholders’ Equity Total
	Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Stockholders’ Equity Total
Balance, December 30, 2017	9,101		$	91	$	259,588		$	(36,507	)	$	(188,170	)	$	35,002
Net loss	—		—		—			—			(13,427		)	(13,427		)
Foreign currency translation, net of tax	—		—		—			6			—			6
Unrealized gain from pension plan, net of tax	—		—		—			203			—			203
Vesting of performance shares	109		1		—			—			—			1
Compensation related to share-based grants	—		—		319			—			—			319
Repurchase of shares to satisfy employee tax withholdings	—		—		(1		)	—			—			(1		)
Other	—		—		—			—			(7		)	(7		)
Balance, March 31, 2018	9,210		92		259,906			(36,298		)	(201,604		)	22,096
Net loss	—		—		—			—			(8,558		)	(8,558		)
Foreign currency translation, net of tax	—		—		—			(9		)	—			(9		)
Unrealized gain from pension plan, net of tax	—		—		—			201			—			201
Vesting of restricted stock units	11		—		—			—			—			—
Compensation related to share-based grants	—		—		338			—			—			338
Repurchase of shares to satisfy employee tax withholdings	(2	)	—		(1,719		)	—			—			(1,719		)
Other	—		—		—			—			7			7
Balance, June 30, 2018	9,219		92		258,525			(36,106		)	(210,155		)	12,356
Net loss	—		—		—			—			(9,896		)	(9,896		)
Unrealized gain from pension plan, net of tax	—		—		—			201			—			201
Vesting of restricted stock units	70		—		—			—			—			—
Compensation related to share-based grants	—		—		635			—			—			635
Repurchase of shares to satisfy employee tax withholdings	—		—		(1,068		)	—			—			(1,068		)
Other	—		—		(4		)	—			—			(4		)
Balance, September 29, 2018	9,289		$	92	$	258,088		$	(35,905	)	$	(220,051	)	$	2,224

See accompanying Notes.

BLUELINX HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 28, 2019

(Unaudited)

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of BlueLinx Holdings Inc. and its wholly owned subsidiaries (the “Company”). These financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted (“GAAP”) in the United States (“U.S.”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K (the “Annual Report on Form 10-K”) for the year ended December 29, 2018, as filed with the Securities and Exchange Commission on March 13, 2019.

Our financial condition as of, and our operating results for, the three and nine-month periods ended September 28, 2019, are not necessarily indicative of the financial condition and results that may be expected for the full year ending December 28, 2019, or any other interim period. Certain prior period amounts have been reclassified to conform to the current period's presentation. These reclassifications did not materially impact the Company's operating income (loss) or consolidated net income (loss).

Subsequent Events

We evaluated subsequent events through the date that our Condensed Consolidated Financial Statements were issued. Except as described in Note 13, no matters were identified that required adjustment of the Condensed Consolidated Financial Statements or additional disclosure.

Outstanding Payments

Outstanding payments represent outstanding checks and electronic payments that have not been presented for payment as of the end of the period. These amounts are typically funded within 24 hours. As of September 28, 2019, and December 29, 2018, outstanding payments of $39.8 million and $17.4 million, respectively, were included in accounts payable on our condensed consolidated balance sheets.

Recently Adopted Accounting Standards

Leases. In 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842).” Topic 842 establishes a new lease accounting model. The most significant changes include the clarification of the definition of a lease, the requirement for lessees to recognize, for all leases, a right-of-use asset and a lease liability in the consolidated balance sheet, and additional quantitative and qualitative disclosures which are designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. Lease expenses will continue to be recognized in the consolidated statement of income (loss) in a manner similar to prior accounting guidance. Lessor accounting under the new standard is substantially unchanged. We adopted this standard, and all related amendments thereto, effective December 30, 2018, the first day of our 2019 fiscal year, using a modified retrospective approach, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented. We have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carry forward the historical accounting relating to lease identification and classification for existing leases upon adoption. We have made an accounting policy election to keep leases with an initial term of 12 months or less off of the consolidated balance sheet. We implemented internal controls and a lease accounting information system to enable the preparation of financial information required by the new standard. The adoption of Topic 842 had a material impact on our condensed consolidated balance sheets but did not have a material impact on our condensed consolidated statements of operations and comprehensive loss. The most significant impact was the recognition of right-of-use assets and lease liabilities of $57.5 million on the condensed consolidated balance sheet. Additionally, $1.7 million of deferred gains associated with sale-leaseback transactions was recorded as a cumulative-effect adjustment to accumulated deficit. See Note 9 “Leases” for additional disclosures regarding our lease commitments.

Comprehensive Income. In February 2018, the FASB issued ASU No. 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220).” This standard provides an option to reclassify stranded tax effects within accumulated other comprehensive loss to retained earnings due to the U.S. federal corporate income tax rate change in the Tax Cuts and Jobs Act of 2017. This standard was effective for interim and annual reporting periods beginning after December 15, 2018. We did not exercise the option to make this reclassification.

Accounting Standards Effective in Future Years

Credit Impairment Losses. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).” This ASU sets forth a current expected credit loss (“CECL”) model which requires the measurement of all expected credit losses for financial instruments or other assets (e.g., trade receivables), held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model, is applicable to the measurement of credit losses on financial assets measured at amortized cost, and applies to some off-balance sheet credit exposures. The standard also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity's portfolio. The standard is effective for reporting periods beginning after December 15, 2019. We have not completed our assessment of the standard but we do not expect the adoption to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

Goodwill. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350).” This ASU is intended to simplify the test for goodwill impairments by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the new ASU, a goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The accounting standard will be effective for reporting periods beginning after December 15, 2019, and early adoption is permitted. We do not expect the adoption of the standard to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

Fair Value Measurement. In August 2018, the FASB issued ASU No. 2018-13, “Fair Value (“FV”) Measurement (Topic 820).” Among other modifications, this ASU removes the requirements to disclose: (i) the amount of and reasons for transfers between Level 1 and Level 2 of the FV hierarchy; (ii) the policy for timing transfers between levels; and (iii) the valuation process for Level 3 FV measurements. The standard will require public entities to disclose: (a) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 FV measurements held at the end of the reporting period; and (b) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 FV measurements. The additional disclosure requirements should be applied prospectively for the most recent interim or annual period presented in the fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented. The amendments in this standard are effective for fiscal years beginning after December 15, 2019. Early adoption is permitted, and an entity may adopt the removed or modified disclosures and delay the adoption of new disclosures until the effective date. We have not completed our assessment of the standard but we do not expect the adoption to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

Defined Benefit Pension Plan. In August 2018, the FASB issued ASU No. 2018-14, “Compensation-Retirement-Benefits-Defined Benefit Plans-General (Subtopic 715-20).” The amendments in this update modify the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans by removing six previously required disclosures and adding two. The amendments also clarify certain other disclosure requirements. The amendments in this standard are effective for fiscal years ending after December 15, 2020. Early adoption is permitted. We have not completed our assessment of the standard but we do not expect the adoption to have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

2. 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

3. Goodwill and Other Intangible Assets

In connection with the acquisition of Cedar Creek, we acquired certain intangible assets. As of September 28, 2019, our intangible assets consist of goodwill and other intangible assets including customer relationships, noncompete agreements, and trade names.

Goodwill

Goodwill is the excess of the cost of an acquired entity over the fair value of tangible and intangible assets (including customer relationships, noncompete agreements and trade names) acquired, and liabilities assumed, under acquisition accounting for business combinations. As of September 28, 2019, goodwill was $47.8 million.

Goodwill is not subject to amortization but must be tested for impairment at least annually. This test requires us to assign goodwill to a reporting unit and to determine if the implied fair value of the reporting unit’s goodwill is less than its carrying amount. We evaluate goodwill for impairment during the fourth quarter of each fiscal year. In addition, we will evaluate the carrying value for impairment between annual impairment tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Such events and indicators may include, without limitation, significant declines in the industries in which our products are used, significant changes in capital market conditions, and significant changes in our market capitalization.

Definite-Lived Intangible Assets.

At September 28, 2019, in connection with the acquisition of Cedar Creek, we had definite-lived intangible assets that related to customer relationships, noncompete agreements, and trade names.

At September 28, 2019, the gross carrying amounts, the accumulated amortization, and the net carrying amounts of our definite-lived intangible assets were as follows:



(In thousands)	Gross carrying amounts		Accumulated Amortization			^[1]	Net carrying amounts
Customer relationships	$	25,500	$	(5,885	)		$	19,615
Noncompete agreements	8,254		(3,016		)		5,238
Trade names	6,826		(3,325		)		3,501
Total	$	40,580	$	(12,226	)		$	28,354

^[1] Intangible assets except customer relationships are amortized on straight line basis. Customer relationships are amortized on a double declining balance method.

Amortization Expense

The weighted average estimated useful life remaining for customer relationships, noncompete agreements and trade names is approximately 11 years, 3 years, and 2 years, respectively. Amortization expense for the definite-lived intangible assets was $2.0 million and $6.1 million for the three and nine month periods ended September 28, 2019, respectively. For the three and nine month periods ended September 29, 2018, amortization expense was $2.1 million and $4.0 million.

Estimated amortization expense for definite-lived intangible assets for the remaining portion of 2019 and the next five fiscal years is as follows:



(In thousands)	Estimated Amortization
2019	$	1,970
2020	7,461
2021	4,973
2022	3,111
2023	1,807
2024	1,505

4. Revenue Recognition

We recognize revenue when control of promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Contracts with our customers are generally in the form of standard terms and conditions of sale. From time to time, we may enter into specific contracts with some of our larger customers, which may affect delivery terms. Performance obligations in our contracts generally consist solely of delivery of goods. For all sales channel types, consisting of warehouse, direct, and reload sales, we typically satisfy our performance obligations upon shipment. Our customer payment terms are typical for our industry, and may vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not deemed to be significant by us. For certain sales channels and/or products, our standard terms of payment may be as early as ten days.

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 remain with us. When the consigned inventory is sold by the customer, we recognize revenue, net of trade allowances.

All revenues recognized are net of trade allowances (i.e., rebates), cash discounts and sales returns. Cash discounts and sales returns are estimated using historical experience. Trade allowances are based on the estimated obligations and historical experience. Adjustments to earnings resulting from revisions to estimates on discounts and returns have been insignificant for each of the reported periods. Certain customers may receive cash-based incentives or credits (rebates), which are accounted for as variable consideration. We estimate these amounts based on the expected amount to be provided to customers and reduce revenues recognized. We believe that there will not be significant changes to our estimates of variable consideration.

With the acquisition and integration of Cedar Creek, we changed our internal product hierarchy. The following table presents our revenues disaggregated by revenue source. Certain prior year amounts have been reclassified to conform to the current year product mix of structural and specialty products. Sales and usage-based taxes are excluded from revenues.



	Three Months Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
	(In thousands)
Structural products	$	225,522	$	312,510	$	646,513	$	833,412
Specialty products	453,143		547,266		1,377,301		1,356,803
Total net sales	$	678,665	$	859,776	$	2,023,814	$	2,190,215

Also, due to the acquisition and integration of Cedar Creek, our reload sales are less distinct from warehouse sales as they have been traditionally classified. The following table presents our revenues disaggregated by sales channel. Certain prior year amounts have been reclassified to conform to the current year revenues disaggregated by sales channel. Sales and usage-based taxes are excluded from revenues.



	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
	(In thousands)
Warehouse and reload	$	577,172		$	716,604		$	1,693,206		$	1,815,531
Direct	114,586			153,847			360,252			402,420
Service revenue	272			981			1,033			2,872
Customer discounts and rebates	(13,365		)	(11,656		)	(30,677		)	(30,608		)
Total net sales	$	678,665		$	859,776		$	2,023,814		$	2,190,215

Practical Expedients and Exemptions

We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling, general, and administrative expense.

We have made an accounting policy election to treat any common carrier shipping and handling activities as an expense.

5. Assets Held for Sale and Net Gain on Disposition

In fiscal 2018, we designated certain non-operating properties as held for sale due to strategic realignments of our business. At the time of designation, we ceased recognizing depreciation expense on these assets. As of December 29, 2018, six properties were designated as held for sale, with an additional property designated during the first quarter of 2019. During the nine months ended September 28, 2019, three properties were sold, as further described below. As of September 28, 2019, and December 29, 2018, the net book value of total assets held for sale was $2.1 million and $3.1 million, respectively, and was included in “Other current assets” in our Condensed Consolidated Balance Sheets. Properties held for sale as of September 28, 2019, consisted of land in the Northeast, and four warehouses located in the Midwest and South. We plan to sell these properties within the next 12 months. We continue to actively market all properties that are designated as held for sale.

During the nine months ended September 28, 2019, we sold three non-operating distribution facilities previously designated as “held for sale”. We recognized a gain of $9.8 million in the Condensed Consolidated Statements of Operations as a result of these sales.

6. Long-Term Debt

As of September 28, 2019, and December 29, 2018, long-term debt consisted of the following:



		September 28,			December 29,
(In thousands)	Maturity Date	2019			2018
Revolving Credit Facility (net of discounts and debt issuance costs of $4.9 million and $6.0 million at September 28, 2019 and December 29, 2018, respectively)	October 10, 2022	$	349,982		$	327,319
Term Loan Facility (net of discounts and debt issuance costs of $7.3 million and $6.7 million at September 28, 2019 and December 29, 2018, respectively)	October 13, 2023		139,905			172,356
Total debt			489,887			499,675
Less: current portion of long-term debt			(1,790	)		(1,736	)
Long-term debt, net		$	488,097		$	497,939

Revolving Credit Facility

On April 13, 2018, we entered into an Amended and Restated Credit Agreement with certain of our subsidiaries as borrowers (together with us, the “Borrowers”) or guarantors thereunder, Wells Fargo Bank, National Association, in its capacity as administrative agent, and certain other financial institutions party thereto (the “Revolving Credit Agreement”). The Revolving Credit Agreement provides for a senior secured asset-based revolving loan and letter of credit facility (the “Revolving Credit Facility”) of up to $600 million and an uncommitted accordion feature that permits the Borrowers to increase the facility by an aggregate additional principal amount of up to $150 million, which would allow borrowings of up to $750 million under the Revolving Credit Facility. Letters of credit in an aggregate amount of up to $30 million are also available under the Revolving Credit Agreement, which would reduce the amount of the revolving loans available under the Revolving Credit Facility. The maturity date of the Revolving Credit Agreement is October 10, 2022. The Borrowers’ obligations under the Revolving Credit Agreement are secured by a security interest in substantially all of our and our subsidiaries’ assets (other than real property), including inventories, accounts receivable, and proceeds from those items.

Borrowings under the Revolving Credit Agreement are subject to availability under the Borrowing Base (as that term is defined in the Revolving Credit Agreement). The Borrowers are required to repay revolving loans thereunder to the extent that such revolving loans exceed the Borrowing Base then in effect. The Revolving Credit Facility may be prepaid in whole or in part from time to time without penalty or premium, but including all breakage costs incurred by any lender thereunder.

The Revolving Credit Agreement provides for interest on the loans at a rate per annum equal to (i) LIBOR plus a margin ranging from 1.75 percent to 2.25 percent, with the amount of such margin determined based upon the average of the Borrowers’ excess availability for the immediately preceding fiscal quarter as calculated by the administrative agent, for loans based on LIBOR, or (ii) the administrative agent’s base rate plus a margin ranging from 0.75 percent to 1.25 percent, with the amount of such margin determined based upon the average of the Borrowers’ excess availability for the immediately preceding fiscal quarter as calculated by the administrative agent, for loans based on the base rate.

In the event excess availability falls below the greater of (i) $50 million and (ii) 10 percent of the lesser of (a) the Borrowing Base and (b) the maximum permitted credit at such time, the Revolving Credit Agreement requires maintenance of a fixed charge coverage ratio of 1.0 to 1.0 until such time as the Borrowers’ excess availability has been at least the greater of (i) $50 million and (ii) 10 percent of the lesser of (a) the Borrowing Base and (b) the maximum permitted credit at such time for a period of 30 consecutive days.

The Revolving Credit Agreement also contains representations and warranties and affirmative and negative covenants customary for financings of this type, as well as customary events of default.

As of September 28, 2019, we had outstanding borrowings of $354.8 million, excess availability of $98.2 million, and a weighted average interest rate of 4.4 percent under our Revolving Credit Facility. As of December 29, 2018, our principal balance was $333.3 million, excess availability was $91.7 million, and our weighted average interest rate was 4.6 percent under our Revolving Credit Facility.

We were in compliance with all covenants under the Revolving Credit Agreement as of September 28, 2019.

Term Loan Facility

On April 13, 2018, in connection with the acquisition of Cedar Creek, we entered into a credit and guaranty agreement with HPS Investment Partners, LLC, as administrative agent and collateral agent (“HPS”) and certain other financial institutions as party thereto. On October 24, 2019, the credit and guaranty agreement was amended to, among other things, permit real estate sale leaseback transactions and modify the total net leverage ratio beginning in the third quarter of 2019 (as amended, the “Term Loan Agreement”). The Term Loan Agreement provides for a senior secured first lien loan facility in an aggregate principal amount of $180 million (the “Term Loan Facility”). The maturity date of the Term Loan Agreement is October 13, 2023. The proceeds from the Term Loan Facility were used to fund a portion of the cash consideration payable in connection with the acquisition of Cedar Creek and to fund transaction costs in connection with the acquisition and the Term Loan Facility.

The obligations under the Term Loan Agreement are secured by a security interest in substantially all of our and our subsidiaries’ assets, including inventories, accounts receivable, real property, and proceeds from those items.

The Term Loan Agreement requires monthly interest payments, and quarterly principal payments of $450,000, in arrears. The Term Loan Agreement also requires certain mandatory prepayments of outstanding loans, subject to certain exceptions, including prepayments commencing with the fiscal year ending December 28, 2019, based on a percentage of excess cash flow (as defined in the Term Loan Agreement for such fiscal year). The remaining balance is due on the loan maturity date of October 13, 2023.

The Term Loan Facility may be prepaid in whole or in part from time to time, subject to payment of the “Prepayment Premium” (as such term is defined in the Term Loan Agreement) if such voluntary prepayment does not otherwise constitute an exception to the Prepayment Premium under the Term Loan Agreement and is made on or prior to February 28, 2023, and all breakage costs incurred by any lender thereunder.

Borrowings under the Term Loan Agreement may be made as Base Rate Loans or Eurodollar Rate Loans. The Base Rate Loans will bear interest at the rate per annum equal to (i) the greatest of the (a) U.S. prime lending rate published in The Wall Street Journal, (b) the Federal Funds Effective Rate plus 0.50 percent, and (c) the sum of the Adjusted Eurodollar Rate of one month plus 1.00 percent, provided that the Base Rate shall at no time be less than 2.00 percent per annum; and (ii) plus the Applicable Margin, as described below. Eurodollar Rate Loans will bear interest at the rate per annum equal to (i) the ICE Benchmark Administration LIBOR Rate, provided that the Adjusted Eurodollar Rate shall at no time be less than 1.00 percent per annum; plus (ii) the Applicable Margin. The Applicable Margin will be 6.00 percent with respect to Base Rate Loans and 7.00 percent with respect to Eurodollar Rate Loans.

With the October 2019 amendment, the Term Loan Agreement required maintenance of a total net leverage ratio of 7.50 to 1.00 for the fiscal quarter ending September 28, 2019, and such required covenant level generally reduces over the remaining term of the Term Loan Facility as set forth in the amended Term Loan Agreement; provided, that 2019 fourth quarter and subsequent quarterly covenant levels revert to the higher levels existing prior to the October 2019 amendment if we do not reduce the outstanding principal balance of the Term Loan Facility to approximately $95.3 million by January 31, 2020. As of September 28, 2019, we were in compliance with the total net leverage ratio.

The Term Loan Agreement also contains representations, warranties, affirmative and negative covenants customary for financing transactions of this type, and customary events of default. Please refer to our risk factor entitled, “The instruments governing our indebtedness contain various covenants limiting the discretion of our management in operating our business, including requiring us to maintain a minimum level of excess liquidity” in our 2018 Annual Report on Form 10-K.

As of September 28, 2019, we had outstanding borrowings of $147.2 million under our Term Loan Credit Facility and an interest rate of 9.1 percent per annum. At December 29, 2018, our principal balance was $179.1 million with an interest rate of 9.3 percent per annum.

We were in compliance with all covenants under the Term Loan Agreement as of September 28, 2019.

Our remaining scheduled principal payments for fiscal 2019 and the following fiscal years, and thereafter, are as follows:



(In thousands)
2019	$	527
2020		2,250
2021		1,800
2022		1,800
Thereafter		140,824

7. Net Periodic Pension Cost

The following table shows the components of our net periodic pension cost:



	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
	(in thousands)
Service cost	$	29		$	133		$	190		$	399
Interest cost on projected benefit obligation	881			963			2,899			2,889
Expected return on plan assets	(1,339		)	(1,327		)	(3,828		)	(3,981		)
Amortization of unrecognized loss	278			271			857			813
Net periodic pension cost (benefit)	$	(151	)	$	40		$	118		$	120

During the first nine months of fiscal 2019, we renegotiated our collective bargaining agreement with 5 unionized locations. This collective bargaining agreement covers a number of specific items such as wages, medical coverage, and certain other benefit programs, including pension plan participation. As a result of these renegotiations, 49 of the participants in the plan are no longer accruing future years of service under the applicable pension plan, which triggered a curtailment. As a result of the curtailment, we performed a revaluation of plan assets and liabilities. The related pension benefit obligation decreased $0.1 million and $0.3 million for the three and nine months ended September 28, 2019, respectively, as a result of changes in valuation assumptions. An overall increase in plan asset valuation was accompanied by a decrease to accumulated other comprehensive income of $2.5 million and $2.7 million for the three and nine months ended September 28, 2019, respectively, which was recorded in other comprehensive loss on the Condensed Consolidated Statements of Operations and Comprehensive Loss. No intraperiod income tax effect was required to be recorded as a result of the curtailment.

In the third quarter of 2019, we offered a voluntary lump sum payment option to certain qualified former employees or their beneficiaries who are vested participants in the BlueLinx Hourly Pension Plan. Qualified participants had until October 25, 2019 to determine whether to accept the offer. Lump sum payments in connection with the offer are expected to total approximately $9.5 million, and will be completed during the fourth quarter of 2019. The payments are being funded with existing plan assets, and no additional contribution by the Company to the plan was required in connection with the offer. The offer, once completed, will have the effect of decreasing our net periodic pension cost and overall projected benefit obligation, which will be reflected in our 2019 year end consolidated financial statements once the offer, and our year end pension valuation, have been completed.

8. Stock Compensation

Cash-Settled Stock Appreciation Rights (“SARs”)

During fiscal 2016, we granted certain executives and employees cash-settled SARs. The cash-settled SARs vested on July 16, 2018. On the vesting date, half of the vested value of the cash-settled SARs became payable within thirty days of the vesting date, and the remainder payable within one year of the vesting date. The exercise price for the cash-settled SARs was amended so that it was based on a 20 day trading average of the Company’s common stock through the vesting date, in excess of the $7.00 grant date valuation.

On September 28, 2019, there was no remaining liability related to the cash-settled SARs.

Stock Compensation Expense

During the three months ended September 28, 2019 and September 29, 2018, we incurred stock compensation expense of $1.2 million and $1.7 million, respectively. During the nine months ended September 28, 2019 and September 29, 2018, we incurred stock compensation expense of $2.5 million and $14.7 million, respectively. The decrease in our stock compensation expense for the three and nine month periods of fiscal 2019 is attributable to cash-settled SARs expense in the prior year.

9. Leases

Effective December 30, 2018, we adopted ASU No. 2016-02, “Leases (Topic 842)” using the modified retrospective method, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented. We have elected the package of practical expedients permitted under the transition guidance within the new standard. This election allowed us to carry forward our historical lease classification. The adoption of this standard resulted in the recording of operating lease right-of-use (“ROU”) assets and corresponding operating lease liabilities of $57.5 million on the condensed consolidated balance sheet as of December 30, 2018 (adoption date), the first day of fiscal 2019, which amortizes over the lease term.

Our operating and finance (formerly capital) lease portfolio includes leases for real estate, certain logistics equipment and vehicles. The majority of our leases have remaining lease terms of 1 year to 15 years, some of which include one or more options to extend the leases for 5 years. Operating lease ROU assets and liabilities are presented separately on the condensed consolidated balance sheets. Finance lease assets are included in property and equipment and the finance lease obligations are presented separately in the condensed consolidated balance sheet. We have also made the accounting policy election to not separate lease components from non lease components related to leases of several trucks during the second and third quarters of 2019.

When a lease does not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

A portion of our real estate lease cost is generally subject to annual changes in the Consumer Price Index (“CPI”). The changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. In addition, a subset of our vehicle lease cost is considered variable.

The components of lease expense were as follows:



	Three Months Ended September 28, 2019		Nine Months Ended September 28, 2019
	Three Months Ended September 28, 2019		Nine Months Ended September 28, 2019
	(In thousands)
Operating lease cost:	$	2,911	$	9,047
Finance lease cost:
Amortization of right-of-use assets	$	2,589	$	8,481
Interest on lease liabilities	3,467		10,764
Total finance lease costs	$	6,056	$	19,245

Supplemental cash flow information related to leases was as follows:



	Three Months Ended September 28, 2019		Nine Months Ended September 28, 2019
	Three Months Ended September 28, 2019		Nine Months Ended September 28, 2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,990	$	8,957
Operating cash flows from finance leases	3,467		10,764
Financing cash flows from finance leases	2,213		6,445
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	—	$	—
Finance leases	14,403		18,652

Supplemental balance sheet information related to leases was as follows:



(In thousands)	September 28, 2019
(In thousands)	September 28, 2019
Finance leases
Property and equipment	$	168,247
Accumulated depreciation	(22,457		)
Property and equipment, net	$	145,790
Weighted Average Remaining Lease Term (in years)
Operating leases	12.14
Finance leases	20.36
Weighted Average Discount Rate
Operating leases	9.44		%
Finance leases	10.93		%

As of September 28, 2019, maturities of lease liabilities were as follows:



(In thousands)	Operating leases			Finance leases
2019	$	3,380		$	6,232
2020	9,403			22,877
2021	7,485			20,203
2022	6,111			19,216
2023	5,733			18,630
Thereafter	53,118			307,018
Total lease payments	$	85,230		$	394,176
Less: imputed interest	(31,431		)	(230,545		)
Total	$	53,799		$	163,631

At December 29, 2018, our total operating lease commitments were as follows:



(In thousands)
2019	$	11,980
2020	9,928
2021	8,435
2022	8,066
2023	7,539
Thereafter	60,847
Total	$	106,795

10. Commitments and Contingencies

Environmental and Legal Matters

From time to time, we are involved in various proceedings incidental to our businesses, and we are subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which we operate. Although the ultimate outcome of these proceedings cannot be determined with certainty, based on presently available information management believes that adequate reserves have been established for probable losses with respect thereto. Management further believes that, while the ultimate outcome of one or more of these matters could be material to operating results in any given quarter, it will not have a materially adverse effect on our consolidated financial condition, our results of operations, or our cash flows.

Collective Bargaining Agreements

As of September 28, 2019, we had over 2,200 employees on a full-time basis, and approximately 20 percent of our employees were represented by various local labor union Collective Bargaining Agreements (“CBAs”). As of September 28, 2019, less than 1 percent of our employees are covered by CBAs that are up for renewal in fiscal 2019 or are currently expired and under negotiation.

11. Accumulated Other Comprehensive Loss

Comprehensive income (loss) is a measure of income (loss) which includes both net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) results from items deferred from recognition into our Condensed Consolidated Statements of Operations and Comprehensive Loss. Accumulated other comprehensive loss is separately presented on our Condensed Consolidated Balance Sheets as part of stockholders’ deficit.

The changes in balances for each component of accumulated other comprehensive loss for the nine months ended September 28, 2019, were as follows:



(In thousands)	Foreign currency, net of tax			Defined benefit pension plan, net of tax			Other, net of tax		Total Accumulated Other Comprehensive Loss
December 29, 2018, beginning balance	$	660		$	(38,001	)	$	212	$	(37,129	)
Other comprehensive income, net of tax ^[1]	(2		)	(2,035		)	9		(2,028		)
September 28, 2019, ending balance, net of tax	$	658		$	(40,036	)	$	221	$	(39,157	)

^____^{____________________________}

^[1]For the nine months ended September 28, 2019, the actuarial loss recognized in the Condensed Consolidated Statements of Operations and Comprehensive Loss as a component of net periodic pension cost was $2.7 million, net of tax of $0.7 million. Please see Note 7, Net Periodic Pension Cost, for further information.

12. Loss per Share

We calculate basic loss per share by dividing net loss by the weighted average number of common shares outstanding. We calculate diluted earnings per share by dividing net income by the weighted average number of common shares outstanding plus the dilutive effect of outstanding share-based awards, including restricted stock units, and performance units. Due to the financial results for the three and nine month periods ended September 28, 2019, 0.1 million and 0.0 million, respectively, of incremental shares were excluded from the computation of diluted weighted average shares outstanding, because their effect would be anti-dilutive. For the three and nine month periods ended September 29, 2018, 0.0 million and 0.1 million, respectively, of 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 reconciliation of basic loss and diluted loss per common share for the three- and nine-month periods of fiscal 2019 and 2018 were as follows:



	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 loss	$	(7,043	)	$	(9,896	)	$	(7,461	)	$	(31,881	)

Weighted-average shares outstanding - basic	9,366			9,274			9,351			9,209
Dilutive effect of share-based awards	—			—			—			—
Weighted-average shares outstanding - diluted	9,366			9,274			$	9,351		$	9,209

Basic loss per share	$	(0.75	)	$	(1.07	)	$	(0.80	)	$	(3.46	)
Diluted loss per share	$	(0.75	)	$	(1.07	)	$	(0.80	)	$	(3.46	)

13. Subsequent Events

Third Amendment to Term Loan Facility

On October 24, 2019, we amended our Term Loan Facility by entering into that certain Third Amendment to Credit and Guaranty Agreement (the “Amendment”), by and among the Company, as borrower, certain of the Company’s subsidiaries, as guarantors, the lenders party thereto, and HPS, in its capacity as administrative agent.

Pursuant to the Amendment, we are permitted to enter into additional real estate sale leaseback transactions, effective from the date of the Amendment through the remaining tenor of the Term Loan Facility, with the net proceeds therefrom to be used for repayment of indebtedness under the Term Loan Facility or the Revolving Credit Facility. In addition, any net proceeds from the sale of “Specified Properties” (as such term is defined under the Term Loan Facility) will be used for repayment of indebtedness under the Term Loan Facility and the Revolving Credit Facility. The Amendment also modified the quarterly total net leverage ratio covenant levels over the term of the Term Loan Facility with the 2019 fourth quarter and subsequent quarterly level modifications reverting to the pre-Amendment levels subject to a designated outstanding principal balance level on January 31, 2020. The Amendment also provides that certain post-period prepayment rights will not apply for purposes of calculating compliance with the total net leverage ratio for the fourth quarter of 2019.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a leading distributor of building and industrial products in the U.S. With a combination of market position and geographic coverage, the buying power of certain centralized procurement, and the strength of a locally-focused sales force, BlueLinx is able to provide a wide range of value-added services and solutions to our customers and suppliers. We are headquartered in Georgia, with executive offices located at 1950 Spectrum Circle, Suite 300, Marietta, Georgia, and we operate our distribution business through a broad network of distribution centers. We serve many major metropolitan areas in the U.S. and deliver building and industrial products to a variety of wholesale and retail customers. We distribute products in two principal categories: structural products and specialty products. Structural products include primarily plywood, oriented strand board, rebar and remesh, lumber, spruce and other wood products primarily used for structural support, walls, and flooring in construction projects. Structural products represented approximately 33% of our third quarter 2019 net sales. Specialty products include primarily engineered wood products, moulding, siding and trim, cedar, metal products (excluding rebar and remesh) and insulation. Specialty products accounted for approximately 67% of our third quarter 2019 net sales.

Recent Developments

Amendment to the Term Loan Facility

On October 24, 2019 we amended our Term Loan Facility. Please refer to Note 6, Long-Term Debt, and Note 13, Subsequent Events, for more details.

Recent Sales of Assets

Third Quarter

In the third quarter, we sold a non-operating distribution facility previously designated as “held for sale” for a gain of $0.1 million.

Fourth Quarter

In October 2019, we completed the sale of the pre-finishing assets and the transfer of the related real estate lease associated with our former pre-finish facility located near St. Louis, Missouri. Also in October 2019, we sold a non-operating distribution facility and a parcel of undeveloped land. This non-operating distribution facility was previously designated as “held for sale.” A total gain of approximately $4.0 million will be recognized in our 2019 fourth quarter and year end consolidated financial statements for these sales.

Industry Conditions

Many of the factors that cause our operations to fluctuate are seasonal or cyclical in nature. Our operating results have historically been correlated with the level of single-family residential housing starts in the U.S. At any time, the demand for new homes is dependent on a variety of factors, including job growth, changes in population and demographics, the availability and cost of mortgage financing, the supply of new and existing homes, and consumer confidence. Since 2011, the U.S. housing market has generally shown improvement. Single family housing starts increased 3.7% in the third quarter of 2019 and the builders confidence index remains high. We continue to believe the housing market improvement trend will continue in the long term, and that we are well-positioned to support our customers.

Our operating results are also affected by commodity pricing, and during the third and fourth quarters of 2018, the industry experienced a significant decline in wood-based commodity prices, which included panels and framing lumber. Lumber prices generally trended upwards during the third quarter of 2019, enhancing gross margins for structural products. Though wood based commodity pricing is returning closer to historical averages, sales realization in the third quarter of 2019 was below the prior year levels, resulting in revenue declines compared to the third quarter of 2018. We continue to closely monitor these pricing trends, and work to manage our business, inventory levels, and costs, accordingly.

Factors That Affect Our Operating Results

Our results of operations and financial performance are influenced by a variety of factors, including the following: the integration of the Cedar Creek business with ours and the potential for disruption in distribution relationships, operational performance and sales resulting therefrom; changes in the prices, supply and/or demand for products that we distribute; inventory management and commodities pricing; new housing starts; repair and remodeling activity; general economic and business conditions in the U.S.; disintermediation by our customers and suppliers; acceptance by our customers of our branded and privately branded products; financial condition and credit worthiness of our customers; supply from key vendors; reliability of the technologies we utilize; activities of competitors; changes in significant operating expenses; fuel costs; risk of losses associated with accidents; exposure to product liability claims and other legal proceedings; changes in the availability of capital and interest rates; adverse weather patterns or conditions; acts of cyber intrusion or other disruptions to our information technology systems; and variations in the performance of the financial markets, including the credit markets.

Results of Operations

The following table sets forth our results of operations for the third quarter of fiscal 2019 and fiscal 2018:



(Dollars in thousands)	Third Quarter of Fiscal 2019			% of Net Sales	Third Quarter of Fiscal 2018			% of Net Sales
Net sales	$	678,665		100.0%	$	859,776		100.0%

Gross profit	93,713			13.8%	91,755			10.7%
Selling, general, and administrative	79,881			11.8%	87,692			10.2%
Gains from sales of property	(38		)	0.0%	—			0.0%
Depreciation and amortization	7,577			1.1%	8,068			0.9%
Operating income (loss)	6,293			0.9%	(4,005		)	(0.5)%
Interest expense	13,409			2.0%	13,273			1.5%
Other income, net	(317		)	0.0%	(94		)	0.0%
Loss before provision for (benefit from) income taxes	(6,799		)	(1.0)%	(17,184		)	(2.0)%
Provision for (benefit from) income taxes	244			0.0%	(7,288		)	(0.8)%
Net loss	$	(7,043	)	(1.0)%	$	(9,896	)	(1.2)%

The following table sets forth our results of operations for the nine-month periods of fiscal 2019 and fiscal 2018:



(Dollars in thousands)	First Nine Months of Fiscal 2019			% of Net Sales	First Nine Months of Fiscal 2018			% of Net Sales
Net sales	$	2,023,814		100.0%	$	2,190,215		100.0%

Gross profit	273,925			13.5%	250,731			11.4%
Selling, general, and administrative	228,392			11.3%	238,655			10.9%
Gains from sales of property	(9,798		)	(0.5)%	—			0.0%
Depreciation and amortization	22,408			1.1%	18,177			0.8%
Operating income (loss)	32,923			1.6%	(6,101		)	(0.3)%
Interest expense	40,527			2.0%	33,947			1.5%
Other income, net	(212		)	0.0%	(282		)	0.0%
Loss before provision for (benefit from) income taxes	(7,392		)	(0.4)%	(39,766		)	(1.8)%
Provision for (benefit from) income taxes	69			0.0%	(7,885		)	(0.4)%
Net loss	$	(7,461	)	(0.4)%	$	(31,881	)	(1.5)%

The following table sets forth net sales by product category for the three and nine-month periods of fiscal 2019 and 2018 (in thousands):



	Three Months Ended				Nine Months Ended
	September 28, 2019		September 29, 2018		September 28, 2019		September 29, 2018
Structural products	$	225,522	$	312,510	$	646,513	$	833,412
Specialty products	453,143		547,266		1,377,301		1,356,803
Net sales	$	678,665	$	859,776	$	2,023,814	$	2,190,215

The following table sets forth gross profit and gross margin percentages by product category for the three and nine-month periods of fiscal 2019 and 2018 (dollars in thousands):



	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Structural products	$	20,183		$	15,151		$	56,187		$	65,177
Specialty products	73,530			82,625			217,738			202,493
Inventory adjustments^[1]	—			(6,021		)	—			(16,939		)
Gross profit	$	93,713		$	91,755		$	273,925		$	250,731
Gross margin percentage by category
Structural products	8.9		%	4.8		%	8.7		%	7.8		%
Specialty products	16.2		%	15.1		%	15.8		%	14.9		%
Total, including adjustments	13.8		%	10.7		%	13.5		%	11.4		%

^[1] ”Inventory adjustments” includes an adjustment for lower of cost or net realizable value of $5.2 million for the three and nine- month periods ended September 29, 2018, and inventory acquisition step-up charges of $0.8 million for the three months ended September 29, 2018, and $11.8 million for the nine months ended September 29, 2018.

Third Quarter of Fiscal 2019 Compared to Third Quarter of Fiscal 2018

Net sales. For the third quarter of fiscal 2019, net sales decreased 21.1 percent, or $181.1 million, compared to the third quarter of fiscal 2018. The sales decrease was driven by declines in wood-based commodity prices and supplier and sales disruptions in connection with our Cedar Creek integration activities.

Gross profit and gross margin. For the third quarter of fiscal 2019, gross profit increased by $2.0 million, or 2.1 percent, compared to the third quarter of fiscal 2018, primarily due to improved gross margins in our structural products business during the quarter. Gross profit was negatively impacted by the lower of cost or net realizable value adjustment on inventory of $5.2 million in the prior year period and the inventory step-up charge related to the Cedar Creek acquisition during the quarter. Gross margin during the same period was 13.8 percent, an increase compared to 10.7 percent in the third quarter of fiscal 2018, driven by improvements in our structural products business.

Selling, general, and administrative expenses. The decrease in selling, general, and administrative expenses of 8.9 percent, or $7.8 million, for the third quarter of fiscal 2019, compared to the third quarter of fiscal 2018, is primarily due to the realization of acquisition synergies, a $0.6 million decrease in stock compensation expense and cost controls for the lower rate of sales.

Depreciation and amortization expense. For the third quarter of fiscal 2019, depreciation and amortization expense decreased by $0.5 million to $7.6 million due to a lower base of depreciable assets.

Interest expense. Interest expense increased by $0.1 million for the third quarter of fiscal 2019, compared to the third quarter of fiscal 2018. The increase was largely attributable to an increase in finance leases.

Provision for income taxes. Our effective tax rate was (3.6) percent and 42.4 percent for the third quarter of fiscal 2019 and 2018, respectively. Our effective tax rate for the third quarter of fiscal 2019 was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, and the effect of the partial valuation allowance for separate company state income tax losses and consolidated interest expense limitation, including a $0.6 million discrete tax expense related to prior periods. The effective tax rate for the third quarter of fiscal 2018 was impacted by: (i) the inclusion of Cedar Creek’s operations from April 13, 2018, to September 29, 2018; (ii) the permanent addback of certain

nondeductible expenses including transaction costs related to the Cedar Creek acquisition; (iii) the discrete tax benefit of $0.6 million for stock vesting; and (iv) the effect of the valuation allowance for separate company state income tax losses generated during the third quarter of fiscal 2018.

Net loss. Our net loss improved over the prior year due to higher gross margins and reduced costs associated with the acquisition of Cedar Creek, partially offset by the decrease in sales.

First Nine Months of Fiscal 2019 Compared to First Nine Months of Fiscal 2018

Net sales. For the first nine months of fiscal 2019, net sales decreased 7.6 percent, or $166.4 million, compared to the first nine months of fiscal 2018. Sales decreased primarily as a result of lower sales realization for structural products, partially offset by the acquisition of Cedar Creek and the inclusion of Cedar Creek’s sales revenue for the full nine months in 2019, as opposed to only during the period of April 13, 2018, the date of closing, to September 29, 2018, in the prior year period. Supplier and sales disruptions in connection with our Cedar Creek integration activities also contributed to the decrease in sales.

Gross profit and gross margin. For the first nine months of fiscal 2019, gross profit increased by $23.2 million, or 9.3 percent, with gross margin of 13.5 percent, compared to 11.4 percent for the first nine months of fiscal 2018. Gross profit was negatively impacted in the prior year by the acquisition related inventory step-up charge of $11.8 million and a lower of cost or net realizable value inventory adjustment of $5.2 million.

Selling, general, and administrative expenses. For the first nine months of fiscal 2019, selling, general, and administrative expenses decreased $10.3 million, or 4.3 percent, compared to the first nine months of fiscal 2018. The inclusion of the Cedar Creek business for the full nine months in 2019, as opposed to the period of April 13, 2018, to September 29, 2018, in the prior year period, increased expenses on a year-over-year basis. This was more than offset by a $12.2 million decrease in stock compensation expense, synergies realized from the acquisition of Cedar Creek, and decreases in cost of sales related to the year-over-year sales decline.

Gains from sales of property. Sales of property with no leaseback in the first nine months of fiscal 2019 resulted in gains recognized of $9.8 million. Gains from the sale and leaseback of property in the first nine months of fiscal 2018 were deferred, due to the rules of accounting for sale and leaseback transactions, and are amortized as a credit to selling, general, and administrative expenses in the amount of approximately $1.0 million per fiscal quarter.

Depreciation and amortization expense. For the first nine months of fiscal 2019, depreciation and amortization expense increased by $4.2 million to $22.4 million due to the acquisition of Cedar Creek, which resulted in a higher depreciable asset base and the addition of depreciable intangible assets.

Interest expense. Interest expense increased by $6.6 million for the first nine months of fiscal 2019, compared to the first nine months of fiscal 2018. The increase was largely attributable to a higher average debt balance over the period, coupled with a higher average interest rate on outstanding debt. We increased our outstanding debt to finance the acquisition of Cedar Creek in the prior year and incurred transaction costs that are amortized as interest expense.

Provision for income taxes. Our effective tax rate was (0.9) percent and 19.8 percent for the first nine months of fiscal 2019 and 2018, respectively. Our effective tax rate for the first nine months of fiscal 2019 was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, and the effect of the partial valuation allowance for separate company state income tax losses and consolidated interest expense limitation, including a $0.6 million discrete tax expense related to prior periods. In addition, during the first nine months of fiscal 2019, we recorded discrete tax expense of $0.2 million for a shortfall on stock vesting which was offset by a $0.2 million discrete tax benefit for claiming state tax credits. The effective tax rate for the first nine months of fiscal 2018 was impacted by: (i) the inclusion of Cedar Creek’s operations from April 13, 2018, to September 29, 2018; (ii) the permanent addback of certain nondeductible expenses including transaction costs related to the Cedar Creek acquisition; and (iii) the effect of the valuation allowance for separate company state losses.

Net loss. Net loss was substantially impacted by the factors described above including: (i) gain on sale of properties in fiscal 2019 of $9.8 million, (ii) higher selling, general and administrative expenses in fiscal 2018 resulting from the acquisition of Cedar Creek and related transaction fees totaling $19.1 million, along with an inventory valuation step-up charge of $11.8 million; (iii) increased interest expense due to higher interest rates on outstanding debt; and (iv) $14.7 million of additional expense recognized for cash-settled stock appreciation rights and other share based compensation in fiscal 2018.

Seasonality

We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors common in the building products distribution industry. The first and fourth fiscal quarters are typically our lower volume quarters, due to the impact of poor weather on the construction market. Our second and third fiscal quarters are typically our higher volume quarters, reflecting an increase in construction, due to more favorable weather conditions. Assuming no change in underlying inventory costs, our working capital generally increases in the fiscal second and third quarters, reflecting increased seasonal demand.

Liquidity and Capital Resources

We expect our primary sources of liquidity to be cash flows from sales in the normal course of our operations and borrowings under our Revolving Credit Facility. We expect that these sources will fund our ongoing cash requirements for the foreseeable future. We believe that sales in the normal course of our operations, and amounts currently available from our Revolving Credit Facility and other sources, will be sufficient to fund our routine operations, including working capital requirements, for at least the next 12 months.

Long-Term Debt

As of September 28, 2019, and December 29, 2018, long-term debt consisted of the following:



		September 28,			December 29,
(In thousands)	Maturity Date	2019			2018
Revolving Credit Facility (net of discounts and debt issuance costs of $4.9 million and $6.0 million at September 28, 2019 and December 29, 2018, respectively)	October 10, 2022	$	349,982		$	327,319
Term Loan Facility (net of discounts and debt issuance costs of $7.3 million and $6.7 million at September 28, 2019 and December 29, 2018, respectively)	October 13, 2023		139,905			172,356
Total debt			489,887			499,675
Less: current portion of long-term debt			(1,790	)		(1,736	)
Long-term debt, net		$	488,097		$	497,939

Revolving Credit Facility

On April 13, 2018, we amended and restated our Revolving Credit Facility to provide for a senior secured revolving loan and letter of credit facility of up to $600 million and an uncommitted accordion feature that permits us to increase the facility by an aggregate additional principal amount of up to $150 million. If we obtain the full amount of the additional increases in commitments, the Revolving Credit Facility will allow borrowings of up to $750 million. Borrowings under the Revolving Credit Facility are subject to availability under the Borrowing Base (as that term is defined in the Revolving Credit Agreement). Letters of credit in an aggregate amount of up to $30 million are also available under the Revolving Credit Agreement, which would reduce the amount of the revolving loans available under the Revolving Credit Facility. The Revolving Credit Agreement provides for interest at a rate per annum equal to (i) LIBOR plus a margin ranging from 1.75 percent to 2.25 percent, with the margin determined based upon average excess availability for the immediately preceding fiscal quarter for loans based on LIBOR, or (ii) the administrative agent’s base rate plus a margin ranging from 0.75 percent to 1.25 percent, with the margin based upon average excess availability for the immediately preceding fiscal quarter for loans based on the base rate.

If excess availability falls below the greater of (i) $50 million and (ii) 10 percent of the lesser of (a) the borrowing base and (b) the maximum permitted credit at such time, the Revolving Credit Agreement requires maintenance of a fixed charge coverage ratio of 1.0 to 1.0 until excess availability has been at least the greater of (i) $50 million and (ii) 10 percent of the lesser of (a) the borrowing base and (b) the maximum permitted credit at such time for a period of 30 consecutive days.

As of September 28, 2019, we had outstanding borrowings of $354.8 million and excess availability of $98.2 million under our Revolving Credit Facility with a weighted average interest rate of 4.4 percent. As of December 29, 2018 our principal balance was $333.3 million, excess availability was $91.7 million and our stated interest rate was 4.6 percent under our Revolving Credit Facility.

Term Loan Facility

On April 13, 2018, we entered into the Term Loan Agreement with HPS and certain other financial institutions as party thereto, and on October 24, 2019, we amended the Term Loan Agreement. The Term Loan Agreement provides for a Term Loan Facility of $180 million secured by substantially all of our assets. Borrowings under the Term Loan Agreement may be made as Base Rate Loans or Eurodollar Rate Loans. The Base Rate Loans will bear interest at the rate per annum equal to (i) the greatest of the (a) U.S. prime lending rate published in The Wall Street Journal, (b) the Federal Funds Effective Rate plus 0.50 percent, and (c) the sum of the Adjusted Eurodollar Rate of one month plus 1.00 percent, provided that the Base Rate shall at no time be less than 2.00 percent per annum; and (ii) plus the Applicable Margin, as described below. Eurodollar Rate Loans will bear interest at the rate per annum equal to (i) the ICE Benchmark Administration LIBOR Rate, provided that the Adjusted Eurodollar Rate shall at no time be less than 1.00 percent per annum; plus (ii) the Applicable Margin. The Applicable Margin will be 6.00 percent with respect to Base Rate Loans and 7.00 percent with respect to Eurodollar Rate Loans.

Under the Term Loan Agreement, we are permitted to enter into real estate sale leaseback transactions with the net proceeds therefrom to be used for repayment of indebtedness under the Term Loan Facility, subject to payment an applicable prepayment premium, or, under certain circumstances, repayment of indebtedness under our Revolving Credit Facility. In addition, proceeds from the sale of “Specified Properties” (as that term is defined in the Term Loan Agreement) will be used for the repayment of indebtedness under the Term Loan Facility, subject to payment of an applicable prepayment premium, or, under certain circumstances, repayment of indebtedness under our Revolving Credit Facility.

As of September 28, 2019, we had outstanding borrowings of $147.2 million under our Term Loan Facility and a stated interest rate of 9.1 percent per annum. At December 29, 2018, our principal balance was $179.1 million, with a stated interest rate of 9.3 percent per annum under our Term Loan Facility.

Mortgage Payoff and Finance Lease Commitments

On January 10, 2018, we completed sale-leaseback transactions on four distribution centers. We sold these properties for gross proceeds of $110.0 million. As a result of the transactions, we recognized finance lease assets and obligations totaling $95.1 million on these properties, and a total deferred gain of $83.9 million, which will be amortized over the lives of the applicable leases, in accordance with U.S. GAAP. The net proceeds received from the transactions were used to pay the remaining balance of our mortgage of $97.8 million, in its entirety, in the first quarter of fiscal 2018.

Our total finance lease commitments, which substantially relate to leases of property, totaled $163.6 million as of September 28, 2019.

Interest Rates

Our Revolving Credit Facility and our Term Loan Facility include available interest rate options based on the London Inter-bank Offered Rate (LIBOR). It is widely expected that LIBOR will be discontinued after 2021, and the U.S. and other countries are currently working to replace LIBOR with alternative reference rates. The consequences of these developments with respect to LIBOR cannot be entirely predicted; however we do not believe that the discontinuation of LIBOR as a reference rate in our loan agreements will have a material adverse effect on our financial position or materially affect our interest expense.

Sources and Uses of Cash

Operating Activities

Net cash used in operating activities for the first nine months of fiscal 2019 was $54.9 million, compared to net cash used in operating activities of $59.3 million in the first nine months of fiscal 2018. During the first nine months of fiscal 2019, cash used in operating activities decreased primarily from the decrease in working capital from the prior year.

Investing Activities

Net cash provided by investing activities for the first nine months of fiscal 2019 was $10.4 million compared to net cash used in investing activities of $247.0 million in the first nine months of fiscal 2018. The net cash provided in the current year primarily related to the proceeds from the sale of assets of $13.7 million. Net cash used in the prior year primarily related to the $353.1 million of net cash paid for the acquisition of Cedar Creek during the second quarter of 2018, offset by the proceeds from the sale-leaseback transactions in the first quarter of 2018.

Financing Activities

Net cash provided by financing activities totaled $48.5 million for the first nine months of fiscal 2019, compared to $309.2 million for the first nine months of fiscal 2018. The decrease in net cash provided by financing activities is due to the decrease in borrowings in the current year relative to borrowings in the prior year, which included borrowings for the acquisition of Cedar Creek.

Operating Working Capital ^[1]



Selected financial information (in thousands)
	September 28, 2019		December 29, 2018		September 29, 2018
Current assets:
Cash	$	12,847	$	8,939	$	7,630
Receivables, less allowance for doubtful accounts	243,905		208,434		285,489
Inventories, net	362,389		341,851		401,222
Other current assets	42,366		40,629		44,947
Total current assets	$	661,507	$	599,853	$	739,288

Current liabilities:
Accounts payable	$	179,376	$	149,188	$	190,078
Accrued compensation	8,780		7,974		7,611
Current maturities of long-term debt, net of discount	1,790		1,736		1,736
Finance leases - short-term	8,373		7,555		8,058
Real estate deferred gains - short-term	4,448		5,330		5,330
Operating lease liabilities - short-term	6,381		—		—
Other current liabilities	13,835		24,985		21,528
Total current liabilities	$	222,983	$	196,768	$	234,341

Operating working capital	$	440,314	$	404,821	$	506,683

^{___________________________}

^[1] Operating working capital is defined as current assets less current liabilities plus the current portion of long-term debt.

Operating working capital is an important measurement we use to determine the efficiencies of our operations and our ability to readily convert assets into cash.

Operating working capital of $440.3 million at September 28, 2019, compared to $404.8 million as of December 29, 2018, increased on a net basis by approximately $35.5 million. The increase in operating working capital is primarily driven by seasonal increases in accounts receivable and inventory to support expected increases in sales activity during the summer building season, offset by increases in accounts payable.

Operating working capital decreased from September 29, 2018, to September 28, 2019, by $66.4 million, primarily driven by the decrease in sales and decline in commodity prices.

Critical Accounting Policies

The preparation of our consolidated financial statements and related disclosures in conformity with GAAP requires our management to make judgments and estimates that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. There have been no material changes to our critical accounting policies from the information provided in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 29, 2018.

Forward-Looking Statements

This report contains forward-looking statements. Forward-looking statements include, without limitation, any statement that predicts, forecasts, indicates or implies future results, performance, liquidity levels 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. The forward-looking statements in this report include statements about the anticipated effects of adopting certain accounting standards; estimated future annual amortization expense; potential changes to estimates made in connection with revenue recognition; the expected outcome of legal proceedings; industry conditions; seasonality; and liquidity and capital resources.

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 that may cause our business, strategy, or actual results to differ materially from the forward-looking statements. These risks and uncertainties include those discussed under the heading “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 29, 2018, and those discussed elsewhere in this report and in future reports that we file with the SEC. 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 that may cause these differences include, among other things: our ability to integrate and realize anticipated synergies from acquisitions; loss of material customers, suppliers, or product lines in connection with acquisitions; our indebtedness and its related limitations; sufficiency of cash flows and capital resources; changes in interest rates; fluctuations in commodity prices; adverse housing market conditions; disintermediation by customers and suppliers; changes in prices, supply and/or demand for our products; inventory management; competitive industry pressures; industry consolidation; product shortages; loss of and dependence on key suppliers and manufacturers; new tariffs; our ability to monetize real estate assets; our ability to successfully implement our strategic initiatives; fluctuations in operating results; sale-leaseback transactions and their effects; real estate leases; exposure to product liability claims; changes in our product mix; petroleum prices; information technology security and business interruption risks; litigation and legal proceedings; natural disasters and unexpected events; activities of activist stockholders; labor and union matters; limits on net operating loss carryovers; pension plan assumptions and liabilities; risks related to our internal controls; retention of associates and key personnel; federal, state, local and other regulations, including environmental laws and regulations; and changes in accounting principles. Given these risks and uncertainties, we caution you not to place undue reliance on forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Our management performed an evaluation, as of the end of the period covered by this report on Form 10-Q, under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

During the period covered by this report, other than described below, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

On April 13, 2018, we acquired Cedar Creek Holdings, Inc. in a business combination. The Company is in the process of integrating the policies, processes, information technology systems and other components of internal controls over financial reporting of the combined business. Management’s assessment of the Company’s internal control over financial reporting for the fiscal year 2019 will include the internal controls over financial reporting of Cedar Creek.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During the third quarter of fiscal 2019, there were no material changes to our legal proceedings as disclosed in our Annual Report on Form 10-K for the year ended December 29, 2018. Additionally, we are, and from time to time may be, a party to routine legal proceedings incidental to the operation of our business. The outcome of any pending or threatened proceedings is not expected to have a material adverse effect on our financial condition, operating results, or cash flows, based on our current understanding of the relevant facts. Legal expenses incurred related to these contingencies are generally expensed as incurred.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the year ended December 29, 2018.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not repurchase any of our equity securities during the period covered by this report pursuant to any publicly announced plan or program, and no such plan or program is presently in effect. From time to time, we withhold shares upon the vesting of employee equity awards to satisfy certain tax obligations due in connection therewith, and the withholding of shares may be deemed to be repurchases of our equity securities. No such withholding occurred during the third quarter of 2019.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS



Exhibit Number		Description
10.1		Third Amendment to Credit and Guaranty Agreement, dated October 24, 2019, by and among BlueLinx Holdings Inc., as borrower, certain subsidiaries of BlueLinx Holdings Inc., as guarantors, the lenders party thereto, and HPS Investment Partners, LLC, in its capacity as administrative agent
10.2		Form of 2019 Time Based Restricted Stock Unit Award Agreement under the BlueLinx Holdings, Inc. 2016 Amended and Restated Long-Term Incentive Plan, as amended
10.3		Form of 2019 Performance Based Restricted Stock Unit Award Agreement under the BlueLinx Holdings, Inc. 2016 Amended and Restated Long-Term Incentive Plan, as amended
31.1	*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	**	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	**	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.Def		Definition Linkbase Document.
101.Pre		Presentation Linkbase Document.
101.Lab		Labels Linkbase Document.
101.Cal		Calculation Linkbase Document.
101.Sch		Schema Document.
101.Ins		Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.


	*	Filed herewith.
	**	Exhibit is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.




		BlueLinx Holdings Inc.
		(Registrant)

Date: November 6, 2019	By:	/s/ Susan C. O’Farrell
		Susan C. O’Farrell
		Senior Vice President, Chief Financial Officer, Treasurer, and Principal Accounting Officer

EXHIBIT 10.1 THIRD AMENDMENT TO CREDIT AND GUARANTY AGREEMENT THIRD AMENDMENT (this “Agreement”) dated as of October 24, 2019 among BlueLinx Holdings Inc. (the “Borrower”), the “Guarantors” referred to on the signature pages hereto, the Lenders executing this Agreement on the signature pages hereto and HPS INVESTMENT PARTNERS, LLC, in its capacity as Administrative Agent (the “Administrative Agent”) under the Credit Agreement referred to below. WHEREAS, the Borrower, the Guarantors party thereto, the Lenders party thereto and the Administrative Agent are parties to that certain Credit and Guaranty Agreement, dated as of April 13, 2018 (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”). WHEREAS, the Credit Parties, the Lenders party hereto constituting the Requisite Lenders and the Administrative Agent desire to amend the Credit Agreement on the terms set forth herein. NOW THEREFORE, in consideration of the premises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Definitions. Except as otherwise defined in this Agreement, terms defined in the Credit Agreement, after giving effect to this Agreement, are used herein as defined therein. This Agreement shall constitute a Credit Document for all purposes of the Credit Agreement and the other Credit Documents. Section 2. Amendments. Subject to the satisfaction of the conditions precedent specified in Section 4 below, effective as of the Third Amendment Effective Date, the Credit Agreement is hereby amended as follows: (a) The following new definitions shall be added to Section 1.1 of the Credit Agreement in the appropriate alphabetical order: “Average Availability” means, as of any date, the sum of the aggregate amount of “Excess Availability” (as defined in the ABL Credit Agreement) for each of the 10 consecutive Business Days immediately preceding such date (as calculated by the Borrower as of the end of each respective day) divided by ten. “Other Leaseback Transactions” means any Sale and Leaseback Transaction in respect of real property following the Third Amendment Effective Date.

“Permitted Leaseback Transactions” means each of the 2019 Leaseback Transactions and the Other Leaseback Transactions. “Specified Properties Payment Threshold” means, as of any date of determination, an Average Availability equal to or greater than $80,000,000. “Third Amendment” means that certain Third Amendment to Credit and Guaranty Agreement, dated as of the Third Amendment Effective Date, by and among the Borrower, the “Guarantors” referred to the on the signature pages thereto, the Lenders party thereto and the Administrative Agent. “Third Amendment Effective Date” October 24, 2019. “Third Amendment Fee Letter” means that certain Fee Letter dated as of the Third Amendment Effective Date among the Borrower and the Administrative Agent. (b) The definition of “2019 Leaseback Transactions” shall be restated in its entirety as follows: ““2019 Leaseback Transactions” means one or more Sale and Leaseback Transactions in respect of the 2019 Leaseback Properties.” (c) The definition of “Applicable Make-Whole Amount” shall be restated in its entirety as follows: ““Applicable Make-Whole Amount” means, with respect to any repayment or prepayment of the Loans (other than (i) any prepayment made with proceeds of a 2019 Leaseback Transaction to the extent set forth in clause (B) of the proviso to Section 2.11, (ii) a prepayment made with the proceeds of the Specified Properties to the extent set forth in clause (C)(1) of the proviso to Section 2.11 and (iii) to the extent set forth in clause (D) of the proviso to Section 2.11), an amount equal to the amount of interest that would have been paid on the principal amount of the Loans being so repaid or prepaid for the period from and including the date of such repayment or prepayment to but excluding the date that is the one (1) year anniversary of the Second Amendment Effective Date (in each case, calculated on the basis of the interest rate with respect to the Loans that is in effect on the date of such repayment or prepayment and on the basis of actual days elapsed over a year of three hundred sixty- five (365) days).” 2

(d) The definition of “Asset Sale” shall be amended by replacing the final sentence thereof with the following: “Each Permitted Leaseback Transaction shall constitute an Asset Sale.” (e) The definition of “Attributable Indebtedness” shall be restated in its entirety as follows: ““Attributable Indebtedness” means, when used with respect to any Permitted Leaseback Transaction, as at the time of determination, the present value (discounted at a rate equivalent to Borrower’s then-current weighted average cost of funds for borrowed money as at the time of determination, compounded on a semi-annual basis) of the total obligations of the lessee for rental payments during the remaining term of the lease included in any such Permitted Leaseback Transaction.” (f) The definition of “Credit Document” shall be restated in its entirety as follows: ““Credit Document” means any of this Agreement, the Notes, if any, the Collateral Documents, the Second Amendment Fee Letter, the Third Amendment Fee Letter, and all other documents, certificates, instruments or agreements executed and delivered by or on behalf of a Credit Party for the benefit of the Administrative Agent or any Lender in connection with this Agreement on or after the date hereof.” (g) The definition of “Real Property Capital Leases” shall be restated in its entirety as follows: ““Real Property Capital Leases” means (i) each Capital Lease obligation or financing obligation with respect to Real Estate Assets set forth on Schedule 6.1(a) and (ii) any future lease of (or any agreement conveying the right to use) any Real Estate Asset by such Person as lessee which is permitted under Section 6.1(i) and which, in accordance with GAAP, is or is required to be reflected as a capital lease on the balance sheet of such Person; provided, that, for purposes of calculating compliance with the Total Net Leverage Ratio, any lease or financing permitted hereunder occurring after the Closing Date that (a) involves any Real Estate Asset and (b) that arises out of a Permitted Leaseback Transaction, shall be excluded from clause (i)(A) of the calculation of the Total Net Leverage Ratio, in the case of each of clause (i) and (ii) above, 3

notwithstanding any accounting treatment that may be required under GAAP.” (h) The definition of Sale and Leaseback Transaction” shall be restated in its entirety as follows: ““Sale and Leaseback Transaction” means any transaction pursuant to which a Credit Party or any of its Subsidiaries, directly or indirectly, becomes or remains liable as lessee or as a guarantor or other surety with respect to any lease of any property (whether real, personal or mixed), whether now owned or hereafter acquired, which a Credit Party (a) has sold or transferred or is to sell or to transfer to any other Person, or (b) intends to use for substantially the same purpose as any other property which has been or is to be sold or transferred by a Credit Party to any Person in connection with such lease.” (i) Section 1.4 of the Credit Agreement shall be amended by adding the following clause (e) immediately following clause (d) thereof: “(e) Notwithstanding anything to the contrary contained herein, for purposes of determining compliance with the financial covenant set forth in Section 6.7, (i) in the event that the outstanding principal balance of the Loans is greater than $95,298,863.91 on January 31, 2020, (A) the ratios required to comply with Section 6.7 for the Fiscal Quarter ending on December 28, 2019 and each Fiscal Quarter ending thereafter shall revert to the ratios set forth for such Fiscal Quarters in Section 6.7 immediately prior to the Third Amendment Effective Date (and the effectiveness of the amendments to Section 6.7 pursuant to the Third Amendment shall automatically terminate and be unwound), (B) the $10,000,000 cap set forth in clause (a) of the definition of “Consolidated Net Income” shall be reduced to zero and no adjustments to Consolidated EBITDA shall be permitted to be made under sub-clauses (vi) and (xiv) of clause (a) of the definition of “Consolidated EBITDA” (which amounts under such sub-clauses shall be deemed to be zero), in each case, for purposes of calculating the Total Net Leverage Ratio for the Fiscal Quarter ending on December 28, 2019 and each Fiscal Quarter ending thereafter, and (C) the Borrower shall no longer be permitted to exercise the cure rights set forth in Section 8.3 hereof, and (ii) in the event that the Borrower has made voluntary prepayments of the Loans under Section 2.9 and/or mandatory prepayments of the Loans under Section 2.10(a) or 2.10(c) in an aggregate principal amount of at least $50,925,000 during the period commencing on the Third Amendment Effective Date and ending on January 31, 2020, the principal amount of the 4

Loans included in Consolidated Total Debt for purposes of calculating the Total Net Leverage Ratio for the Fiscal Quarter ending December 28, 2019 shall be deemed to be the principal amount of the Loans outstanding as of January 31, 2020.” (j) Section 2.10(a) of the Credit Agreement shall be restated in its entirety as follows: “(a) Asset Sales. Not later than the fifth Business Day following the date of receipt by the Borrower or any of its Subsidiaries of any Net Asset Sale Proceeds (other than from (x) the sale of any Specified Properties after the Third Amendment Effective Date and (y) Permitted Leaseback Transactions), the Borrower shall prepay the Loans in an aggregate amount equal to such Net Asset Sale Proceeds, together with accrued interest thereon and any premium payable pursuant to Section 2.11; provided that (i) to the extent any such Net Asset Sale Proceeds constitute proceeds of ABL Priority Collateral (including the portion of Net Asset Sale Proceeds constituting proceeds of ABL Priority Collateral from an Asset Sale of the Equity Interests of any Credit Party that owns ABL Priority Collateral), then the mandatory prepayment pursuant to this Section 2.10(a) with respect to Net Asset Sale Proceeds constituting proceeds of ABL Priority Collateral shall be in an amount equal to 100% of such Net Asset Sale Proceeds minus the amount of such Net Asset Sale Proceeds that are then required to be used to prepay Indebtedness under the ABL Credit Agreement, and (ii) (A) so long as no Default or Event of Default shall have occurred and be continuing, and (B) to the extent that (x) such Net Asset Sale Proceeds consist of proceeds of the sale of Specified Properties prior to the Third Amendment Effective Date, or (y) the Net Asset Sale Proceeds (other than from the sale of any Specified Properties) reinvested in accordance with this Section 2.10(a) from the Closing Date through the applicable date of determination, together with the aggregate amount of Net Insurance/Condemnation Proceeds reinvested in accordance with Section 2.10(b) and Net Extraordinary Receipts reinvested in accordance with Section 2.10(f), do not exceed $15,000,000 in the aggregate, then, in each case, Borrower shall have the option, directly or through one or more of its Subsidiaries, to invest (or commit to invest) all or a portion of such Net Asset Sale Proceeds in long-term productive assets of the general type used in the business of the Borrower and its Subsidiaries within twelve (12) months of receipt thereof (or, if committed to be reinvested within such twelve (12) month period, within six (6) months of such twelve (12) month period); provided that with respect to any Net Asset Sale Proceeds from the sale of any Specified Property prior to the Third Amendment Effective Date, 5

such permitted reinvestment period shall end on January 30, 2020. For the avoidance of doubt, any Net Asset Sale Proceeds not so invested during such twelve (12) month period (or, (x) in the case of commitments, within six (6) months of such twelve (12) month period and (y) in the case of Net Asset Sale Proceeds from the sale of any applicable Specified Property, by January 30, 2020) shall be required to be used to make a mandatory prepayment of the Loans on the Business Day after such period ends. Notwithstanding the foregoing provisions of this Section 2.10(a), the Net Asset Sale Proceeds of (I) any Specified Property sold after the Third Amendment Effective Date and (II) any Permitted Leaseback Transaction shall be excluded from the requirements of this Section 2.10(a) and shall instead be required to repay the Loans and applied in accordance with Section 2.10(c) of this Agreement.” (k) Section 2.10(c) of the Credit Agreement shall be restated in its entirety as follows: “(c) Proceeds of Sale and Leaseback Transaction; Specified Properties. Not later than two (2) Business Days after receipt of the Net Asset Sale Proceeds of any Permitted Leaseback Transaction or, to the extent sold after the Third Amendment Effective Date, any Specified Property, the Borrower shall apply such Net Asset Sale Proceeds as follows: (i) in the case of 2019 Leaseback Transactions made prior to the Third Amendment Effective Date, (A) the first $30,000,000 of Net Asset Sale Proceeds for all 2019 Leaseback Transactions shall be paid to the Administrative Agent, for the account of the Lenders, for application to the prepayment of the principal amount of the Loans, together with accrued interest thereon and the Prepayment Premium payable pursuant to Section 2.11; and (B) thereafter, any remaining Net Asset Sale Proceeds in an aggregate amount in excess of $30,000,000 for all 2019 Leaseback Transactions, after giving effect to the payments specified in the foregoing clause (i)(A), shall be applied to repay Indebtedness under the ABL Credit Agreement; (ii) all Net Asset Sale Proceeds from Other Leaseback Transactions shall be paid to the Administrative Agent, for the account of the Lenders, for application to the prepayment of the principal amount of the Loans, together with accrued interest thereon and any Prepayment Premium applicable thereto; provided that the aggregate amount required to be paid pursuant to this clause (c)(ii) from and after February 1, 6

2020 shall be reduced by an amount equal to $40,000,000 minus the aggregate Net Asset Sale Proceeds that the Borrower has paid pursuant to this clause (c)(ii) during the period from the Third Amendment Effective Date through and including January 31, 2020 (which amount shall in no event be less than $0); and (iii) all Net Asset Sale Proceeds from Specified Properties sold after the Third Amendment Effective Date shall be paid to the Administrative Agent, for the account of the Lenders, for application to the prepayment of the principal amount of the Loans, together with accrued interest thereon and any Prepayment Premium applicable thereto; provided that, notwithstanding the foregoing, with respect to the first $10,000,000 of Net Asset Sale Proceeds from Specified Properties received by the Borrower after January 31, 2020 (A) if, as of the date of receipt of any such Net Asset Sale Proceeds, the Specified Properties Payment Threshold is not satisfied, 100% of such Net Asset Sale Proceeds shall be used to repay Indebtedness under the ABL Credit Agreement, and (B) if, as of the date of receipt of any such Net Asset Sale Proceeds, the Specified Properties Payment Threshold is satisfied, 50% of such Net Asset Sale Proceeds shall be used to repay Indebtedness under the ABL Credit Agreement, with the remainder to be paid to the Administrative Agent, for the account of the Lenders, for application to the prepayment of the principal amount of the Loans, together with accrued interest thereon and any Prepayment Premium applicable thereto (and thereafter all such Net Asset Sale Proceeds in excess of $10,000,000 shall be paid to the Administrative Agent, for the account of the Lenders, for application to the prepayment of the principal amount of the Loans, together with accrued interest thereon and any Prepayment Premium applicable thereto).” (l) Section 2.11 of the Credit Agreement shall be restated in its entirety as follows: “2.11 Prepayment Premium. In the event that all or any portion of the Loans is repaid or prepaid for any reason (including as a result of any mandatory prepayments, voluntary prepayments, payments made following acceleration of the Loans or after an Event of Default but excluding payments of the purchase price in connection with an assignment of the Loans made pursuant to Section 2.20(b)) prior to the fourth anniversary of the Second Amendment Effective Date, such repayments or prepayments will 7

be made together with a premium equal to (i) 3.00% of the amount repaid or prepaid and accompanied by the Applicable Make-Whole Amount as of the date of such repayment or prepayment, if such repayment or prepayment occurs on or prior to the first anniversary of the Second Amendment Effective Date, (ii) 3.00% of the amount repaid or prepaid, if such repayment or prepayment occurs after the first anniversary of the Second Amendment Effective Date but on or prior to the second anniversary of the Second Amendment Effective Date, (iii) 2.00% of the amount repaid or prepaid, if such repayment or prepayment occurs after the second anniversary of the Second Amendment Effective Date but on or prior to the third anniversary of the Second Amendment Effective Date and (iv) 1.00% of the amount repaid or prepaid, if such repayment or prepayment occurs after the third anniversary of the Second Amendment Effective Date but on or prior to the fourth anniversary of the Second Amendment Effective Date (the foregoing premiums (including the Applicable Make-Whole Amount), the “Prepayment Premium”); provided that (A) the Prepayment Premium shall not apply to (1) scheduled amortization Installment payments made by Borrower pursuant to Section 2.8, (2) mandatory prepayments by Borrower pursuant to Section 2.10(b), Sections 2.10(e), 2.10(f) and 2.10(g), and (3) mandatory prepayments by Borrower pursuant to Sections 2.10(a) and 2.10(c) not exceeding $15,000,000 in the aggregate prior to the Third Amendment Effective Date, (B) in the case of mandatory prepayments by Borrower with the Net Asset Sale Proceeds of a 2019 Leaseback Transaction pursuant to Section 2.10(c) made prior to the Third Amendment Effective Date, the Applicable Make-Whole Amount component of the Prepayment Premium shall not apply and such prepayments will be made together with a premium equal to 3.00% of the amount prepaid in lieu of any other Prepayment Premium (except to the extent permitted by the immediately preceding clause (A)(3)), (C) in the case of prepayments of the Loans made with the proceeds of the Specified Properties made on or prior to the first anniversary of the Second Amendment Effective Date, (1) for the first $25,000,000 of such prepayments of the Loans, the Applicable Make-Whole Amount component of the Prepayment Premium shall not apply and such prepayments will be made together with a premium equal to 3.00% of the amount prepaid in lieu of any other Prepayment Premium, and (2) for such prepayments of the Loans in excess of the amount specified in the 8

immediately preceding sub-clause (1), the Prepayment Premium (including the Applicable Make-Whole Amount component thereof) shall apply, and (D) for the first $50,925,000 of voluntary prepayments of the Loans under Section 2.9 and/or mandatory prepayments of the Loans under Section 2.10(a) or 2.10(c) made by Borrower during the period commencing on the Third Amendment Effective Date and ending on January 31, 2020, the Applicable Make-Whole Amount component of the Prepayment Premium shall not apply to such prepayments and such prepayments will be made together with a premium equal to 3.00% of the amount prepaid in lieu of any other Prepayment Premium. If the Loans are accelerated or otherwise become due prior to their maturity date, in each case, as a result of an Event of Default (including upon the occurrence of a bankruptcy or insolvency event (including the acceleration of claims by operation of law)), the amount of principal of and premium on the Loans that becomes due and payable shall equal 100% of the principal amount of the Loans plus the Prepayment Premium in effect on the date of such acceleration or such other prior due date, as if such acceleration or other occurrence were a voluntary prepayment of the Loans accelerated or otherwise becoming due. Without limiting the generality of the foregoing, it is understood and agreed that if the Loans are accelerated or otherwise become due prior to their maturity date, in each case, in respect of any Event of Default (including upon the occurrence of a bankruptcy or insolvency event (including the acceleration of claims by operation of law)), the Prepayment Premium applicable with respect to a voluntary prepayment of the Loans will also be due and payable on the date of such acceleration or such other prior due date as though the Loans were voluntarily prepaid as of such date and shall constitute part of the Obligations, in view of the impracticability and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of each Lender’s loss as a result thereof. Any premium payable above shall be presumed to be the liquidated damages sustained by each Lender and the Borrower agrees that it is reasonable under the circumstances currently existing. THE BORROWER EXPRESSLY WAIVES (TO THE FULLEST EXTENT IT MAY LAWFULLY DO SO) THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE PREPAYMENT PREMIUM IN CONNECTION WITH ANY SUCH ACCELERATION. The Borrower expressly agrees (to the fullest extent it may lawfully do 9

so) that: (A) the Prepayment Premium is reasonable and is the product of an arm’s length transaction between sophisticated business people, ably represented by counsel; (B) the Prepayment Premium shall be payable notwithstanding the then prevailing market rates at the time payment is made; (C) there has been a course of conduct between the Lenders and the Borrower giving specific consideration in this transaction for such agreement to pay the Prepayment Premium; and (D) the Borrower shall be estopped hereafter from claiming differently than as agreed to in this paragraph.” (m) Section 2.12(b) of the Credit Agreement shall be restated in its entirety as follows: “(b) Application of Mandatory Prepayments by Type of Loans. Any amount required to be paid pursuant to Sections 2.10(a) through 2.10(g) shall be applied on a pro rata basis to the remaining scheduled amortization Installments of principal of the Loans (including the final payment). Notwithstanding the foregoing, any amount required to be paid pursuant to Section 2.10(c) shall be applied to the remaining scheduled amortization Installments of principal of the Loans (including the final payment) in inverse order of maturity.” (n) Section 6.1(i) of the Credit Agreement shall be restated in its entirety as follows: “(i) (x) Attributable Indebtedness with respect to Permitted Leaseback Transactions, and (y) Indebtedness of the Borrower or its Subsidiaries with respect to Capital Lease obligations and purchase money obligations in an aggregate amount not to exceed the greater of $30,000,000 and 29.0% of Consolidated EBITDA as of the most recently ended Measurement Period; provided that any such Indebtedness (i) is issued and any Liens securing such Indebtedness are created within 180 days after the acquisition, construction, lease or improvement of the asset financed, and (ii) shall be secured only by the asset acquired in connection with the incurrence of such Indebtedness;” (o) Section 6.7 of the Credit Agreement shall be restated in its entirety as follows: “6.7 Financial Covenant. The Total Net Leverage Ratio as of the last day of any Fiscal Quarter (commencing with the Fiscal Quarter ending September 29, 2018) shall not exceed the corresponding ratio set forth below: 10

Fiscal Quarter Total Net Ending Leverage Ratio September 29, 2018 8.25 to 1.00 December 29, 2018 6.75 to 1.00 March 30, 2019 8.00 to 1.00 June 29, 2019 8.25 to 1.00 September 28, 2019 7.50 to 1.00 December 28, 2019 6.25 to 1.00 March 28, 2020 6.25 to 1.00 June 27, 2020 6.50 to 1.00 September 26, 2020 6.00 to 1.00 January 2, 2021 5.25 to 1.00 April 3, 2021 5.00 to 1.00 July 3, 2021 4.75 to 1.00 October 2, 2021 4.50 to 1.00 January 1, 2022 4.25 to 1.00 April 2, 2022 4.00 to 1.00 July 2, 2022 3.75 to 1.00 Thereafter 3.50 to 1.00 (p) Section 6.8(e) of the Credit Agreement shall be restated in its entirety as follows: “(e) Dispositions of the Specified Properties, so long as (i) the consideration received for such assets shall be (A) in an amount at least equal to the Fair Market Value thereof and (B) paid solely in Cash, and (ii) if such sale occurs after the Third Amendment Effective Date, not later than two (2) Business Days after receipt thereof, the Net Asset Sale Proceeds thereof shall be applied to prepay the Loans pursuant to Section 2.10(c);” (q) Section 6.8(g) of the Credit Agreement shall be restated in its entirety as follows: “(g) Other Leaseback Transactions, so long as (A) no Event of Default shall have occurred and be continuing, or would result therefrom, (B) the consideration received therefor shall be (i) in an amount at least equal to the Fair Market Value thereof (determined in good faith by the Board of Directors of the Borrower 11

(or similar governing body)) and (ii) paid solely in Cash, and (C) not later than two (2) Business Days after receipt thereof, the Net Asset Sale Proceeds thereof shall be applied to prepay the Loans to the extent required pursuant to Section 2.10(c); and” (r) Section 6.8(h) of the Credit Agreement shall be restated in its entirety as follows: “(h) the 2019 Leaseback Transactions made prior to the Third Amendment Effective Date, so long as (A) no Event of Default shall have occurred and be continuing, or would result therefrom, and after giving effect to such transaction, the Borrower shall be in Pro Forma Compliance (determined in accordance with Section 1.4(d)) with Section 6.7 of the Credit Agreement for the Measurement Period most recently ended, (B) such 2019 Leaseback Transactions shall be completed within (x) six (6) months after the Second Amendment Effective Date in the case of any Initial Leaseback Property, provided that if the Borrower has entered into a binding contract for the sale and leaseback of such Initial Leaseback Property within six (6) months after the Second Amendment Effective Date, the period specified in this sub-clause (x) to consummate such 2019 Leaseback Transaction shall be extended to nine (9) months after the Second Amendment Effective Date, or (y) nine months of the Second Amendment Effective Date in the case of any Other Leaseback Property, (C) the aggregate Fair Market Value of all such properties sold in such 2019 Leaseback Transactions does not exceed $50,000,000 and the consideration received therefor shall be (i) in an amount at least equal to the Fair Market Value thereof (determined in good faith by the Board of Directors of the Borrower (or similar governing body)) and (ii) paid solely in Cash, and (D) not later than two (2) Business Days after receipt of the Net Asset Sale Proceeds of the 2019 Leaseback Transactions, the Borrower shall apply the proceeds as required by Section 2.10(c).” (s) Section 6.8 of the Credit Agreement shall be amended by deleting the following paragraph at the end thereof: “Notwithstanding the foregoing provisions of this Section 6.8 or the provisions of Section 6.10 to the contrary, the 2019 Leaseback Transactions shall be permitted to made under Section 6.8(h) but not any other clause of this Section 6.8 or Section 6.10.” (t) Section 6.10 of the Credit Agreement shall be restated in its entirety as follows: 12

““6.10 [Reserved].” (u) Section 8.3(d) of the Credit Agreement shall be restated in its entirety as follows: “(d) During the term of this Agreement, the Borrower may not exercise the cure right set forth in this Section 8.3 (x) in connection with any Event of Default in respect of Section 6.7 as of the end of the Fiscal Quarter ending December 28, 2019 or (y) more than three (3) times in the aggregate.” Section 3. Representations and Warranties. Each Credit Party represents and warrants to each Agent and the Lenders that, after giving effect to this Agreement, (a) the representations and warranties set forth in Section 4 of the Credit Agreement, and in each of the other Credit Documents, are true and complete in all material respects on the date hereof as if made on and as of the date hereof (or, if any such representation or warranty is expressly stated to have been made as of a specific date, such representation or warranty shall be true and correct as of such specific date), and as if each reference in said Section 4 to “this Agreement” included reference to the Credit Agreement after giving effect to this Agreement and (b) no Default or Event of Default has occurred and is continuing as of the date hereof. Section 4. Conditions Precedent. The amendments set forth in Section 2 hereof shall each become effective, as of the date hereof (the “Third Amendment Effective Date”), upon satisfaction of the following conditions: (a) Execution. The Administrative Agent shall have received counterparts of (i) this Agreement executed by the Borrower, the Guarantors party to the Credit Agreement and Lenders party to the Credit Agreement constituting the Requisite Lenders and (ii) the Third Amendment Fee Letter executed by the Borrower. (b) Corporate Authorizations. The Administrative Agent shall have received the following, in form and substance reasonably satisfactory to the Administrative Agent resolutions of the board of directors or similar governing body of the Borrower approving and authorizing the execution, delivery and performance of the Agreement as of the date hereof, certified as of the date hereof by its secretary or an assistant secretary as being in full force and effect without modification or amendment. (c) Amendment Fee. The Administrative Agent, for the account of each Lender, shall have received the amendment fee specified in the Third Amendment Fee Letter. (d) Expenses. The Borrower shall have paid all reasonable and documented out-of-pocket fees, charges and disbursements due and payable under the Credit Documents on or prior to the date hereof, including all reasonable and documented out-of-pocket fees, charges and disbursements of Administrative Agent and counsel to Administrative Agent. 13

Section 5. No Novation or Mutual Departure. The Borrower expressly acknowledges and agrees that there has not been, and this Agreement does not constitute or establish, a novation with respect to the Credit Agreement or any other Credit Document, or a mutual departure from the strict terms, provisions, and conditions thereof, other than with respect to the amendments contained in Section 2 hereof. Section 6. Confirmation. Each Credit Party (a) confirms its obligations under the Collateral Documents, (b) confirms that its Obligations under the Credit Agreement as modified hereby are entitled to the benefits of the pledges set forth in the Collateral Documents, (c) confirms that its Obligations under the Credit Agreement as modified hereby constitute “Secured Obligations” (as defined in the Collateral Documents) and (d) agrees that the Credit Agreement as modified hereby is the Credit Agreement under and for all purposes of the Collateral Documents. Each party, by its execution of this Agreement, hereby confirms that the Secured Obligations shall remain in full force and effect, and such Secured Obligations shall continue to be entitled to the benefits of the grant set forth in the Collateral Documents. Each Guarantor (a) confirms its Guaranteed Obligations under the Credit Agreement, (b) confirms that the Guaranteed Obligations under the Credit Agreement as modified hereby are entitled to the benefits of the guarantee set forth in Section 7 of the Credit Agreement and (c) confirms that the Obligations under the Credit Agreement as modified hereby constitute “Guaranteed Obligations”. Each Credit Party, by its execution of this Agreement, hereby confirms that the Guaranteed Obligations shall remain in full force and effect. Section 7. Miscellaneous. (a) This Agreement shall be limited as written and nothing herein shall be deemed to constitute an amendment or waiver of any other term, provision or condition of any of the Credit Documents in any other instance than as expressly set forth herein or prejudice any right or remedy that any Lender or any Agent may now have or may in the future have under any of the Credit Documents. Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect. This Agreement, the Credit Agreement and the other Credit Documents constitute the entire agreement among the parties with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and verbal, among the parties or any of them with respect to the subject matter hereof. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Agreement by signing any such counterpart. Delivery of a counterpart by electronic transmission shall be effective as delivery of a manually executed counterpart hereof. (b) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER (INCLUDING, WITHOUT LIMITATION, ANY CLAIMS SOUNDING IN CONTRACT LAW OR TORT LAW ARISING OUT OF THE SUBJECT MATTER HEREOF AND ANY DETERMINATIONS WITH RESPECT TO POST-JUDGMENT INTEREST) SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES 14

THEREOF THAT WOULD RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAW OF THE STATE OF NEW YORK. (c) Each of the undersigned Lenders, by its execution hereof, authorizes and directs the Administrative Agent to execute and deliver this Agreement upon the satisfaction of the conditions precedent described above (which shall be conclusively evidenced by such Lender’s execution hereof). (d) Each of the undersigned Lenders confirms the authority of the Administrative Agent and Collateral Agent to, and the Administrative Agent and Collateral Agent each agrees to, in each case without further written consent or authorization from any Secured Party, execute any documents or instruments necessary to release any Lien encumbering any item of Collateral that is the subject of a Permitted Leaseback Transaction permitted under the Credit Agreement (as amended hereby). [Signature pages follow] 15

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. BORROWER: BLUELINX HOLDINGS INC. By: /s/ Mitchell B. Lewis Name: Mitchell B. Lewis Title: President and Chief Executive Officer S-1

GUARANTORS: CEDAR CREEK HOLDINGS, INC. By: /s/ Mitchell B. Lewis Name: Mitchell B. Lewis Title: President and Chief Executive Officer BLUELINX CORPORATION By: /s/ Mitchell B. Lewis Name: Mitchell B. Lewis Title: President and Chief Executive Officer BLUELINX FLORIDA HOLDINGS NO.1 INC. BLUELINX FLORIDA HOLDINGS N O. 2 INC. CEDAR CREEK LLC CEDAR CREEK CORP. ASTRO BUILDINGS INC. LAKE STATES LUMBER, INC. VENTURE DEVELOPMENT & CONSTRUCTION, LLC By: /s/ Mitchell B. Lewis Name: Mitchell B. Lewis Title: President and Chief Executive Officer BLUELINX FLORIDA LP By: BlueLinx Florida Holdings No. 2 Inc., its General Partner By: /s/ Mitchell B. Lewis Name: Mitchell B. Lewis Title: President and Chief Executive Officer S-2

ABP AL (MIDFIELD) LLC ABP CO II (DENVER) LLC ABP FL (LAKE CITY) LLC ABP FL (PENSACOLA) LLC ABP FL (YULEE) LLC ABP IA (DES MOINES) LLC ABP IL (UNIVERSITY PARK) LLC ABP IN (ELKHART) LLC ABP KY (INDEPENDENCE) LLC ABP LA (NEW ORLEANS) LLC ABP ME (PORTLAND) LLC ABP MI (GRAND RAPIDS) LLC ABP MN (MAPLE GROVE) LLC ABP MO (KANSAS CITY) LLC ABP MO (SPRINGFIELD) LLC ABP MO (BRIDGETON) LLC ABP MO (KANSAS CITY) LLC ABP NC (CHARLOTTE) LLC ABP NJ (DENVILLE) LLC ABP NY (YAPHANK) LLC ABP OH (TALMADGE) LLC ABP OK (TULSA) LLC ABP PA (STANTON) LLC ABP SC (CHARLESTON) LLC ABP TN (ERWIN) LLC ABP TN (MEMPHIS) LLC ABP TN (MADISON) LLC ABP TX (EL PASO) LLC ABP TX (HOUSTON) LLC ABP TX (LUBBOCK) LLC ABP TX (SAN ANTONIO) LLC ABP VA (RICHMOND) LLC ABP VT (SHELBURNE) LLC By: BlueLinx Holdings Inc., as Sole Manager By: /s/ Mitchell B. Lewis Name: Mitchell B. Lewis Title: President and Chief Executive Officer S-3

ADMINISTRATIVE AGENT: HPS INVESTMENT PARTNERS, LLC, as Administrative Agent By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-4

REQUISITE LENDERS: SPECIALTY LOAN FUND 2016, L.P., as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-5

SPECIALTY LOAN ONTARIO FUND 2016, L.P., as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-6

SPECIALTY LOAN FUND 2016-L, L.P., as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-7

SLF 2016 INSTITUTIONAL HOLDINGS, L.P., as Lender By: HPS Investment Partners, LLC, its Service Provider By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-8

MORENO STREET DIRECT LENDING FUND, L.P., as Lender By: PS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-9

SPECIALTY LOAN VG FUND, L.P., as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-10

NDT SENIOR LOAN FUND, L.P., as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-11

AIGUILLES ROUGES SECTOR B INVESTMENT FUND, L.P., as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-12

FALCON CREDIT FUND, L.P., as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-13

RELIANCE STANDARD LIFE INSURANCE COMPANY, as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-14

TMD-DL HOLDING, LLC, as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-15

TOKIO MILLENNIUM RE AG, L.P., as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-16

SPECIALTY LOAN FUND – CX – 2, L.P., as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-17

CACTUS DIRECT LENDING FUND, L.P., as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-18

PRIVATE LOAN OPPORTUNITIES FUND, L.P., as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-19

RED CEDAR FUND 2016, L.P., as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-20

PACIFIC INDEMNITY COMPANY, as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-21

AXA EQUITABLE LIFE INSURANCE COMPANY, as Lender By: HPS Investment Partners, LLC, its Investment Manager By: /s/ Vikas Keswani Name: Vikas Keswani Title: Managing Director S-22



November 6, 2019	/s/ Susan C. O'Farrell
	Susan C. O'Farrell
	Chief Financial Officer and Treasurer


(1)	I have reviewed this quarterly report on Form 10-Q of BlueLinx Holdings Inc.;


(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


(4)	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



November 6, 2019	/s/ Mitchell B. Lewis
	Mitchell B. Lewis
	President and Chief Executive Officer


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.