BlueLinx Holdings Inc. took advantage of a change in income-tax rules to help turn a $4.8 million operating loss into a $12 million net profit for the fourth quarter, the distributor revealed today in a statement that had President and CEO George Judd declaring: "I believe we have reached the bottom of this four-year decline."
The Atlanta-based company's return to black ink from a $25.1 million net loss in the fourth quarter of 2008 came despite a 27% drop in revenues to $366.1 million and a 23% fall in the volume of goods shipped.
The tax benefit stemmed from a change in the Net Operating Loss carryback provision. Put simply, a company used to be able to apply losses from one year against profits from the previous two years. But under a change that Congress enacted late in 2009, the carryback was extended to five years, back to the middle of the last decade. For many companies in the building material business, that was quite a profitable time.
BlueLinx said it booked a $20.04 million benefit related to the tax refund it anticipates on its 2009 taxable loss. It also recorded a $3.3 million non-cash benefit that it described as being "related to the allocation of income tax expense to other comprehensive income, which is recorded in shareholders' equity, partially offset by other income tax expense."
Even without the tax benefit, BlueLinx had reasons to be optimistic about its condition. Gross profit for the fourth quarter slipped just 2.5% to $45.3 million, gross margins climbed from 9.3% in the fourth quarter of 2008 to 12.4% in the October-December 2009 period, and total operating expenses were cut 32% to $23.2 million. BlueLinx also recognized a deferred gain of $6 million from the sale of a surplus property. In all, its operating loss was reduced to $4.8 million from $26.8 million a year ago.
"While conditions remain difficult, I believe that we have reached the bottom of this four-year decline," Judd said. "As we move forward in 2010, we are confident in our ability to both increase our share of the market and maintain the operating discipline that we demonstrated throughout 2009."
BlueLinx's full-year results showed its net loss nearly doubled to $61.5 million from $31.7 million in 2008, while revenues fell close to half, dropping to $1.65 billion from $2.8 billion. Gross profit shrank to $193.2 million from 2008's $314.9 million, but gross margin inched up to 11.7% from 11.3%. That's in part because operating expenses declined 35.4% to $114.5 million.