October 27, 2004
Via Facsimile (212) 593-5955 and U.S. Mail
Barbara V. Tinsley, Esq.
General Counsel and Secretary
BlueLinx Holdings Inc.
4300 Wildwood Parkway
Atlanta, Georgia 30339
Re: BlueLinx Holdings Inc.
Amendment No. 2 to Form S-1 filed October 8, 2004
File No. 333-118750
Dear Ms. Tinsley:
We have reviewed your filing and have the following comments.
Where indicated, we think you should revise your document in response
to these comments. If you disagree, we will consider your explanation
as to why our comment is inapplicable or a revision is unnecessary.
Please be as detailed as necessary in your explanation. In some of
our comments, we may ask you to provide us with supplemental
information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is to assist
you in your compliance with the applicable disclosure requirements and
to enhance the overall disclosure in your filing. We look forward to
working with you in these respects. We welcome any questions you may
have about our comments or on any other aspect of our review. Feel
free to call us at the telephone numbers listed at the end of this
letter.
General
1. We reissue prior comment 1. Since the price range triggers a number
of disclosure matters, we will need sufficient time to process your
amendments once a price range is included. Please understand that the
effect of the price range on disclosure throughout the document may
cause us to raise issues on areas not previously commented on.
2. We reissue prior comment 2.
3. We note your response to prior comments 34, 84, 86 and will review
the information upon receipt.
4. The financial statements should be updated, as necessary, to comply
with Rule 3-12 of Regulation S-X at the effective date of the
registration statement. It is our understanding that the most recent
quarter ended on October 2, 2004. If the financial statements are not
updated to October 2, 2004, tell us and describe in the filing any
adverse developments during the most recent quarter.
5. Each amendment to the registration statement should include a
currently dated consent of the registered public accountant.
6. With respect to your artwork, please revise to delete the terms
"largest distributor" or revise to qualify this statement on the
artwork.
Prospectus Summary, pages 2-5
7. When disclosing the historical results of pre-acquisition periods
outside of the historical financial statements or pro forma
presentation (pages 31 to 35), please inform the reader that the
financial statements used to arrive at these amounts were prepared on
a carve-out basis with not all costs such as interest expense
allocated to these financial statements. In addition, refer the
reader to Note 1 of the financial statements for the year ended
January 3, 2004.
8. Please qualify your statement here and elsewhere in your prospectus
that you "are the largest distributor of building products in the
United States." We note your revised disclosure in the second
paragraph under the subheading "Industry Overview."
9. Please identify the "third-party" you mention in the first sentence
on page 3.
10. We reissue prior comment 11. Remove the section on page 3 or
discuss industry conditions and trends that may harm your business.
In addition, if you want to highlight key aspects of your business
strategy, please do so in a short bullet-point list.
11. We note your response to prior comment 14. Supplementally, please
provide us documents supporting the basis for all of your assertions
about your market share in the industry. We may have further comments.
The Offering, page 6
12. We note your response to prior comment 18. Please revise here and
in the risk factor heading that Cerberus will receive approximately
90% of the proceeds of the offering since it appears that they will
receive at least $129 million of the proceeds of the offering.
Non-GAAP Financial Measures - Working Capital, page 11
13. We note your response to prior comment 5. Paragraph 3 of Chapter
3(A) of ARB 43 defines Working Capital as the excess of current assets
over current liabilities. We do not think it is appropriate to use
the description "Working Capital" to describe an amount determined
other than in accordance with definition provided in ARB 43. Item
10(e)(1)(ii)(E) of Regulation S-K states that a registrant must not
use titles or descriptions of non-GAAP financial measures that are the
same as, or confusingly similar to, titles or descriptions used for
GAAP financial measures. Given this, revise the title of your
measure.
In addition, tell us which comparable companies are using this
measure.
14. Please revise the table you have provided to present working
capital as defined by ARB 43. Correspondingly you should reconcile
working capital as defined by ARB 43 to the Non-GAAP financial
measure. Refer to Item 10(e)(1)(i)(B).
15. Clarify your disclosure to state how management believes the
presentation of this financial measure provides useful information to
investors regarding your liquidity.
16. Your explanation states that much of the investment in inventory
and accounts receivable is borne by vendors through payables and other
non-interest bearing liabilities is a key measure of success used by
distributors and the investment analysts that evaluate them. It is
not clear to us why you would differentiate between interest bearing
and non-interest bearing liabilities in evaluating your financial
performance.
Risk Factors, pages 12-20
We may incur substantial costs relating to Georgia-Pacific`s. . . ,
page 17
17. We reissue prior comment 28. Please clarify why judges and juries
may determine that you are liable for Georgia-Pacific product
liability related claims. We may have further comments.
Affiliates of Cerberus control us. . . , page 18
18. We reissue prior comment 30. Please disclose that five of your
directors are affiliated with Cerberus.
Our controlling stockholder and its affiliates will receive a
significant. . . , page 19
19. Disclose that Cerberus and its affiliates will receive $35 million
for the preferred stock and that it will receive a total of at least
$129 million out of the proceeds of the offering. Also quantify the
amount of interest to be paid on the term loan and the amount of
dividends to be paid on the preferred stock.
Use of Proceeds, page 22
20. We note on page 3 you disclose your belief that having a public
company will be useful in pursuing acquisitions. Please disclose if
you intend to use proceeds for this purpose. Refer to Item 504 of
Regulation S-K, instruction 6.
Capitalization, page 24
21. So that it is clear that the presently outstanding $100 million
mortgage loan issued on May 7, 2004 by ABPMC, an affiliate of
Cerberus, will be refinanced by the third party mortgage and mezzanine
financing described on page 76 simultaneously with the proposed
offering, revise the presentation in the table of capitalization on
page 24 to show the new $165 million of debt as a separate line item.
Include a description or cross reference to a description of the
mortgage and mezzanine financing.
Management, page 68
22. Please disclose Michael Rossi`s affiliation with Cerberus.
Principal Stockholders, page 74
23. We reissue prior comment 56. Please include in the footnotes to
the table the securities issuable within 60 days.
Certain Relationships and Related Transactions, page 76
24. We reissue our prior comment 60 with respect to the each reported
transaction for which you did not state was at least as fair to the
company as you would expect to negotiate with third parties.
25. Please disclose the name of the lender for your mortgage loan and
explain why you have included this financing in this section.
26. Tell us more about the terms of the mezzanine loans that you will
secure simultaneously with the offering. We assume that the 61
warehouse properties you refer to are the warehouse properties listed
under the caption, Properties and Facilities, on page 62. We also
assume that the loan documents and master lease agreement will be
filed as exhibits. Please confirm.
27. Clarify your disclosure to state why you have characterized this
financing as mezzanine. In addition, clarify what you mean by "direct
membership interests in our property-owning consolidated
subsidiaries."
28. With respect to the 61 warehouse properties that will act as
security for the mortgage loan and mezzanine financing, tell us the
carrying amount of the properties in the BlueLinx July 3, 2004 balance
sheet and the appraised amount of the properties.
Underwriting, pages 89-92
29. We reissue prior comment 66. Disclose the amount of the fees paid
to Goldman Sachs under the revolving credit facility.
30. We reissue prior comment 67. Disclose that the representatives
will use their sole discretion in determining whether to consent to
waiving the 180-day lock-up agreement.
31. We note your response to prior comment 69. Please provide us with
copies of all information concerning your company or prospectus that
has appeared on Yahoo`s website.
Financial Statements
Environmental and Legal Matters
32. We note your response to prior comment 81. Provide detailed
disclosures about the terms of the indemnification. We note that on
page 16 you disclose, "However, any remediation costs may not be
covered by indemnification or insurance." We also note that in Section
8.4(d) of the Asset Purchase Agreement, Georgia Pacific can dispute
its obligation to indemnify you for an environmental matter, which
indicates that you may not be fully indemnified of all pre-closing
environmental liabilities. Please advise.
Statements of Certain Assets and Liabilities and Consolidated Balance
Sheets, pages F-3 and F-25)
33. Separately disclose accounts payable and bank overdrafts. Note
that if any individual component exceeds 5% of total current
liabilities, it should be stated separately on the balance sheet or in
the notes to the financial statements. Refer to paragraph 20 of Rule
5-02 of Regulation S-X.
34. If material, separately show transportation equipment and disclose
the estimated useful life for depreciation purposes.
Note 1. Basis of Presentation and Background - Allocation of Costs
from Georgia-Pacific, page F-7
35. We note your response to prior comment 79. Please provide the
average balance due to or due from Georgia-Pacific for each period for
which an income statement is required. In addition, disclose that you
are unable to provide estimates of the components of the intercompany
balances at each of the balance sheet dates. Refer to Question 4 of
SAB Topic 1.B.1.
Business Combinations, page F-30
36. We note your response comment 39. We also note discussion of the
master supply agreement provided on pages 14, 15 and 61. Please
expand your disclosure to provide a summary of the terms of the master
supply agreement including why you believe that the economic terms are
beneficial to you. The filing should include disclosure about the
pricing mechanism in the supply agreement sufficient to provide an
understanding of the reason the agreement is beneficial to the
company. In addition, provide us with the valuation report used to
arrive at the $5 million supply agreement intangible asset.
Item 15. Recent Sales of Unregistered Securities, page II-2
37. With respect to the first three items on your list, please revise
to state the facts upon which you determined that each sale was exempt
from registration.
38. We note your response to prior comment 84. In May 2004 the
Company issued 1,900,000 common shares in a private placement at 25
cents per share to 6 employees. While the per share amount is the same
as that for the issuance of 18,099,900 to Cerberus, the founding
shareholder at the same time, we do not believe the transaction with
Cerberus necessarily establishes the fair value of the shares sold in
the private placement. Absent any transactions with independent third
parties, it is not clear how you determined the fair value of the
shares sold in the private placement to employees. Please advise.
Please provide the staff with your valuation analysis or other support
in order to establish that the transaction should not be treated as
compensatory.
39. In addition, for the options issued on August 30, 2004 and August
31, 2004, provide us with your calculation of the $5.82 per option
fair value using the Black-Scholes stock option pricing model. Your
response should also include a summary of the assumptions used in the
model as well as your basis for using those assumptions. The
assumptions discussed should include the interest rate, volatility,
duration and fair value at the date of grant. Explain the basis of
the fair value at the date of grant.
40. We note your response to prior comment 85. Provide the following
disclosures as previously requested for shares issued to employees, as
applicable, by grant date:
* Number of options or shares granted;
* Exercise price;
* Fair Value of common stock;
* Intrinsic value per option, if any;
* Whether the valuation used to determine the fair value of the equity
instruments was contemporaneous or retrospective; and
* If the valuation specialist was a related party, indicate as such.
Closing Comments
As appropriate, please amend your registration statement in response
to these comments. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover letter
with your amendment that keys your responses to our comments and
provides any requested supplemental information. Detailed cover
letters greatly facilitate our review. Please understand that we may
have additional comments after reviewing your amendment and responses
to our comments.
We urge all persons who are responsible for the accuracy and adequacy
of the disclosure in the filings reviewed by the staff to be certain
that they have provided all information investors require for an
informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have
made.
Notwithstanding our comments, in the event the company requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such request,
acknowledging that:
? should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy and
accuracy of the disclosure in the filing; and
? the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
In addition, please be advised that the Division of Enforcement
has access to all information you provide to the staff of the Division
of Corporation Finance in connection with our review of your filing or
in response to our comments on your filing.
We will consider a written request for acceleration of the effective
date of the registration statement as a confirmation of the fact that
those requesting acceleration are aware of their respective
responsibilities under the Securities Act of 1933 and the Securities
Exchange Act of 1934 as they relate to the proposed public offering of
the securities specified in the above registration statement. We will
act on the request and, pursuant to delegated authority, grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding requesting
acceleration of a registration statement. Please allow adequate time
after the filing of any amendment for further review before submitting
a request for acceleration. Please provide this request at least two
business days in advance of the requested effective date.
Please direct questions regarding accounting comments to Nudrat Salik
at (202) 942-7769, or in her absence, to Nathan Cheney at (202) 942-
1804. Direct questions on other disclosure issues to Brigitte
Lippmann at (202) 942-0755 or Lesli Sheppard at (202) 942-1887. In
this regard, please do not hesitate to contact the undersigned at
(202) 942-1950.
Sincerely,
Pamela A. Long
Assistant Director
cc: Michael R. Littenberg, Esq.
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Barbara V. Tinsley, Esq.
BlueLinx Holdings Inc.
October 27, 2004
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0404
DIVISION OF
CORPORATION FINANCE