ATLANTA — BlueLinx Holdings Inc., a distributor of building and industrial products in the United States, today reported financial results for the fiscal third quarter ended Sept. 29, 2018.
“BlueLinx remains focused on integrating our second quarter acquisition of Cedar Creek and is pleased to announce that we expect our synergies efforts by the end of the year to result in an annual benefit of at least $25 million in 2019,” said Mitch Lewis, President and Chief Executive Officer. “While the wood-based commodity markets have proven challenging over the last few months, our third quarter performance provides evidence that our diversity can afford protection during market dislocations. We remain confident in our ability to deliver the expected synergies of at least $50 million annually, continue to operate effectively to realize market opportunities from our combination, and are well-positioned to drive enhanced value for our customers and shareholders.”
Susan O’Farrell, Senior Vice President and Chief Financial Officer, added, “We remain focused on our strategic objectives, making significant progress with our integration efforts and delivering solid financial results despite the significant headwinds we incurred. Our excess availability and cash on hand during the quarter averaged $142 million demonstrating our strong liquidity and deleveraging potential.”
BlueLinx completed the acquisition of Cedar Creek on April 13, 2018 (the “Closing Date”). Under generally accepted accounting principles (GAAP), Cedar Creek’s financial results are only included in the combined company’s reported financial results from the Closing Date forward and are not reflected in the combined company’s reported financial results for any periods prior to the Closing Date. In this release, to supplement and aid in an understanding of the combined company’s reported financial results, BlueLinx is also providing certain GAAP-based and non-GAAP Pro forma financial information of the combined company that includes Cedar Creek’s financial results for the relevant periods prior to the Closing Date, as if the acquisition occurred on Jan. 1, 2017. See “Use of Non-GAAP Measures and Supplementary Information” below and the accompanying financial schedules for more information, including descriptions of any such pro forma measures that may be non-GAAP measures and reconciliations of those non-GAAP measures to their most directly comparable GAAP measures.
Third Quarter 2018 Results Compared to Prior Year Period
The Company reported net sales of $859.8 million for the third quarter of 2018, up $380.5 million or 79.4 percent from the prior year period. Pro forma net sales were up $18.4 million or 2.2 percent.
The Company recorded gross profit of $91.8 million during the third quarter, up $31.2 million or 51.5 percent from the prior year period, with a gross margin of 10.7%. Gross profit was negatively impacted by a lower of cost or net realizable value adjustment on inventory of $5.2 million related to lumber and wood productacquisition-relatedrelated inventory step-up charges of $0.9 million due to the second quarter acquisition of Cedar Creek. Pro forma gross profit was $92.6 million during the third quarter, down $17.6 million or 16.0 percent. The Company recorded a net loss of $9.9 million for the third quarter, compared to a net income of $5.7 million in the prior year period. In addition to the lower of cost or net realizable value inventory and inventory step-up adjustments, the net loss was negatively impacted by a partial multi-employer pension plan withdrawal charge of $6.5 million and acquisition related fees of $3.8 million. Pro forma net loss for the third quarter was $6.2 million.
Adjusted EBITDA, which is a non-GAAP measure, was $16.6 million for the third quarter, up $2.7 million or 19.0 percent from this period a year ago. Pro forma Adjusted EBITDA, also a non-GAAP measure, was $16.6 millionfor the third quarter, down $13.5 million or 44.7 percent.
First Nine Months of 2018 Compared to Prior Year Period
For the first nine months of 2018, the Company generated net sales of $2.2 billion, up $808.3 million or 58.5 percent from the prior year period. Pro forma net sales for the first nine months were $2.6 billion, up $132.9 million or 5.4 percent.
The Company recorded gross profit of $250.7 million during the first nine months of 2018, up $75.2 million or 42.8 percent from the prior year period, with a gross margin of 11.4 percent. Gross profit was negatively impacted by acquisition related inventory step-up charges of $11.8 million and a lower of cost or net realizable value inventory adjustment of $5.2 million. Excluding the effect of acquisition related inventory step-up charges of $11.8 million, gross margin was 12.0 percent. Pro forma gross profit for the first nine months of 2018 was $313.3 million, down $0.2 million or 0.1 percent.
The Company incurred one-time charges during the first nine months of 2018 for legal, professional and other integration costs of $19.1 million related to the Cedar Creek acquisition. Additionally, the Company incurred $14.7 million in share-based compensation expense and $11.8 million of acquisition-related inventory step-up charges. Taking these items into account, the Company recorded a net loss of $31.9 million for the first nine months of 2018, compared to net income of $9.5 million in the prior year period. Pro forma net loss for the first nine months of 2018 was $5.5 million, a $15.0 million or 73.4 percent improvement over the prior year period.
Adjusted EBITDA was $61.7 million for the first nine months of 2018, up $27.6 million or 81.0 percent from the prior year period. Pro forma Adjusted EBITDA was $73.2 million, down $8.8 million or 10.8 percent.
Capital Structure and Liquidity
Excess availability under the amended ABL and cash on hand as of Sept. 29, 2018, was approximately $123 million, and averaged approximately $142 million for the quarter.