Financial Analysis

Cedar Creek Deal, Other Costs Push BlueLinx Into the Red

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Fresh off of its acquisition of Cedar Creek, BlueLinx reported today a first-quarter net loss of $13.4 million, swinging from a $600,000 profit in the year-earlier period. Sales rose 2.1% to $437.5 million.
Gross profit totaled $55.3 million, a 1.6% gain, the Atlanta-based distributor said. Gross margin was essentially unchanged at 12.6% of revenues.

A slew of extra charges led to a $6.6 million operating loss compared with a $5.7 million operating profit a year earlier. Interest expenses also rose to $8.5 million from $5.2 million.

The Cedar Creek deal closed April 13, so its numbers weren’t included in the first-quarter report. BlueLinx also executed $110 million worth of sale-leaseback agreements during the first three months of the year as part of its strategy to cut debt. President and CEO Mitch Lewis called the first quarter “perhaps the most productive in the history of BlueLinx.”

The company’s adjusted EBITDA—earnings before interest, taxes, depreciation, amortization, and special charges—jumped to $8.1 million from $700,000 in 2017’s first quarter. Examples of special charges include $8.9 million in charges from stock appreciation rights—rights that BlueLinx will pay out this year and next. In addition, the Atlanta-based distributor incurred $3.6 million in legal, consulting, and professional fees related to the Cedar Creek acquisition, and another $2.2 million in debt modification in connect with a payoff involving commercial mortgage-backed securities.

The company’s balance sheet shows assets of $644.5 million. The liabilities side includes $220.4 million worth of long-term debt as of March 31.

Liquidity has been a concern at BlueLinx and the reason for a slew of sale-leaseback provisions arranged in recent quarters. In this latest period, BlueLinx did four of them, providing $110 million in aggregate gross sale proceeds. The distributor paid off its remaining mortgage principal of $98 million. “With the working capital efficiencies the Company achieved, operating working capital decreased by $2.4 million from the fiscal first quarter 2017,” the company said.
BlueLinx serves dealers in 40 states with more than 50,000 branded and private-label SKUs.

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