Bluelinx Holdings Inc. — Form 10-K Summary
Reporting-period note: The supplied filing is the annual report for the 52-week fiscal year ended December 29, 2012, not a 2011 Q4 filing. It also provides unaudited quarterly data, including the fourth quarter of 2012 compared with the fourth quarter of 2011.
Business context
BlueLinx distributes structural and specialty building products across the United States, serving approximately 11,500 customers with products from more than 750 suppliers through about 55 distribution centers. Fiscal 2012 sales were approximately 42% structural products and 58% specialty products. Results are seasonal and closely tied to housing construction and building-product prices.
Key financial metrics
| Metric | FY 2012 | FY 2011 |
|---|---|---|
| Net sales | $1.908 billion | $1.755 billion |
| Gross profit / margin | $230.1 million / 12.1% | $210.1 million / 12.0% |
| Operating income (loss) | $5.5 million | $(8.3) million |
| Net loss | $(23.0) million | $(38.6) million |
| EBITDA (non-GAAP) | $14.1 million | $1.8 million |
| Cash from operating activities | $(74.3) million | $(50.3) million |
| Capital expenditures | $2.8 million | $6.5 million |
| Cash and cash equivalents at year-end | $5.2 million | $4.9 million |
| Working capital at year-end | $272.4 million | $233.4 million |
| Total debt at year-end | $383.8 million | $341.0 million |
Cash used in operations reflected the net loss and working-capital investment, including increases of $44.5 million in inventory and $18.6 million in receivables. Investing activities provided $16.4 million, mainly reflecting property-sale proceeds; financing activities provided $58.2 million, including increased revolver borrowings. Stockholders’ equity moved to a deficit of $20.6 million from positive equity of $8.4 million.
At year-end, the company reported $169.5 million drawn and $86.0 million excess availability on its U.S. revolver, plus $1.9 million drawn and $2.0 million availability on its Canadian facility. Mortgage principal was approximately $206.0 million. The U.S. revolver matures January 7, 2014; the mortgage includes a substantial $191.8 million scheduled principal payment in 2016.
Material changes versus prior period
- Sales rose 8.7%, supported by a reported 28% increase in single-family housing starts. Structural sales increased 14.3%, largely on higher prices, while specialty sales rose 4.3%.
- Gross profit increased $19.9 million and operating results improved to income from a loss. Net loss narrowed by $15.5 million, but the company remained unprofitable.
- EBITDA increased to $14.1 million; this included $9.9 million of gains on property sales, so it was not solely a reflection of recurring operating performance.
- Operating cash outflow worsened by $23.9 million, chiefly due to inventory and receivables growth. U.S. revolver borrowings rose from $93.4 million to $169.5 million.
- The defined-benefit pension plan’s unfunded status increased to $46.6 million from $35.5 million, mainly reflecting actuarial losses, including the lower discount-rate assumption.
In the unaudited fourth-quarter data, sales were $440.3 million versus $391.1 million in Q4 2011; operating loss was $4.5 million versus $2.6 million, and net loss was $11.4 million versus $10.3 million.
Outlook, risks, contingencies and unusual items
- Management described signs of housing-market recovery and expected longer-term improvement, but said housing activity remained below historical levels and continued improvement was uncertain. Higher sales were expected to require additional inventory and receivables, consuming some revolver availability.
- The company planned a $40 million gross-proceeds rights offering, estimating approximately $39 million net proceeds for repayment of the U.S. revolver. Completion was not assured; Cerberus’s stated intention to participate was nonbinding.
- Management intended to extend and amend the U.S. revolving facility, with closing expected to depend on satisfactory documentation and completion of the rights offering. The filing cautions that the amendment might not be consummated.
- The company said it was in compliance with credit-facility covenants at filing, but reported that if U.S. revolver availability fell below the applicable threshold, it would not meet the fixed-charge coverage covenant using current operating results. Availability was $49.8 million above the stated minimum at year-end.
- The company had not paid $2.1 million of its 2012 minimum pension contribution while an IRS waiver request remained under review. It also expected three 2013 quarterly cash contributions of $0.8 million each and was considering contributing personal property to the plan.
- Principal risks include housing and product-price cyclicality, customer credit losses, leverage and refinancing, covenant-triggered restrictions, supplier concentration, competition, pension funding, union negotiations, environmental and transportation regulation, and foreign sourcing. Dividends remained suspended indefinitely.
- FY 2012 included $9.9 million of property-sale gains and a $0.5 million insurance-settlement gain. The company also paid $5.9 million related to its headquarters lease amendment and remained obligated for an additional $0.3 million by December 31, 2013.
- Routine legal proceedings were not expected by management to have a material adverse effect based on current information. The financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting.
Most important facts for investors to verify
- Confirm the filing period: this is FY 2012, with Q4 comparisons, rather than a 2011 Q4 10-K.
- Track completion, pricing, dilution and use of proceeds of the proposed rights offering, and whether the revolver extension was finalized.
- Monitor liquidity, revolver availability, working-capital cash consumption, and the 2014 revolver maturity and 2016 mortgage principal payment.
- Assess recurring profitability separately from property-sale and insurance gains, and evaluate whether operating cash flow improves as sales grow.
- Check the IRS decision on the unpaid pension contribution, future required funding and changes in the plan’s unfunded status.