Even a casual NASCAR fan could see where Georgia-Pacific's (GP) building products distribution group was headed prior to the total asset sale of the division to Atlanta-based start-up BlueLinx Corp. in May 2004. “Three years ago on the hood of the No. 45 Kyle Petty car it said ‘Georgia-Pacific Building Products,'” observes BlueLinx president and COO and 20-year GP veteran George Judd. “The last two years it said ‘Brawny.'” According to Judd, the logo switch to the GP paper towel brand spoke volumes about where distribution stood on the greater-GP radar versus consumer product marketing: It was a non-strategic asset.
Now, approximately a year after the GP distribution arm teamed up with New York–based Cerberus Capital Management to buy itself out from GP in a total asset sale, BlueLinx finds itself the inheritor of a vast building products distribution network that includes 64 warehouse distribution centers, 3,300 employees, 900 salespeople, and 1,000 trucks making 1,500 deliveries a day to pro dealer lumberyards, industrial manufacturers, and big-box retailers.
Like GP, BlueLinx is on the big board at the New York Stock Exchange after completing an initial public offering in December 2004. Most of the previous senior management under GP's building products division—including Judd and BlueLinx CEO and director Charles McElrea—were key players in the asset sale and have remained on board to drive BlueLinx's growth as a solo entity.
So where does BlueLinx differ from the GP distribution division of the past? “The good news is that a lot has not changed,” says Tom Apsey, general manager for Tucker, Ga.–based Brand Vaughn Lumber, a single-unit independent that has continued to buy the majority of its engineered lumber, molding, commodity lumber, and plywood from BlueLinx over the past year. “We had a great relationship with them when they were Georgia-Pacific, so the good news from our perspective is that a lot of things stayed the same: the good service, the quality product, the competitive pricing.”
According to BlueLinx executives, the real change is a focus on non-complacency as BlueLinx attempts to gain a greater share of its distribution markets to pro dealers across the United States. BlueLinx revenues for the first quarter of 2005 hit $1.35 billion, a solid 5.5 percent increase over the $1.28 billion reported in the first quarter of 2004, according to a May 9 earnings release. “BlueLinx accomplished a great deal during the first quarter, advancing our organic growth strategy to increase unit volume by adding profitable customers [and] continuing to enlarge the vendor base and increasing customers' share of purchases,” McElrea said during the earnings call.
Not everything was rosy on the 2005 first-quarter balance sheet, however. While BlueLinx has been able to grow sales with its GP-inherited infrastructure of facilities, personnel, and equipment, the company for the first time has been forced to account for that infrastructure's overhead on the bottom line. Previously assumed under the larger corporate GP umbrella, overhead—combined with lower gross margins on structural and specialty products—knocked BlueLinx's 2005 first-quarter profit back approximately 69 percent from $27.3 million in the first quarter of 2004 to this year's first-quarter take of $8.4 million.
Still, the fixed costs of solid corporate infrastructure should fuel increasing sales—and increasing profits—at BlueLinx for some time to come.
As the self-described “largest building products distributor” in North America, BlueLinx will be shooting for that growth largely through organic increases in market share, which Judd currently estimates at about 11 percent nationwide. “Of our 900 salespeople, 300 are territory sales managers and live and work in the markets that they serve,” Judd says. “They are responsible for growing BlueLinx's share in their geographies, and that's really how we measure our business.”
Helping to drive that growth is a new mixture of products for BlueLinx's pro dealer channel customers to choose from. And although Kyle Petty is no longer in the mix, BlueLinx is continuing with pedal-to-the-metal promotions, partnering with the Orange County Choppers to create a one-of-a-kind BlueLinx custom motorcycle that debuted at the 2005 International Builders' Show (IBS). Since IBS, the chopper has been making stops at pro dealer and distributor locations as part of BlueLinx's 15-month “Open Road” marketing drive, and will be awarded to Lennar corporate executive director Tom Brick—the winner of an IBS drawing co-sponsored by GP vinyl siding—at the conclusion of the tour.
The “Open Road” pro dealer chopper visits so far have helped BlueLinx's organic growth drive. Judd estimates that approximately 200 to 300 contractors show up at each stop on the tour and are staying on to buy product, purchases that have catalyzed a 3.4 percent increase in unit sales for BlueLinx, according to the May 9 earning release.
“We want to help our customers add to the top line and manage their costs and margins,” Judd says.
The crew at Brand Vaughn Lumber couldn't agree more. “The partnership with Georgia-Pacific and now BlueLinx has enabled us to grow our business,” says Apsey.
