Costs stemming from its April 13 acquisition of Cedar Creek shook up BlueLinx's second-quarter financial report, the distributor reported today. Using generally accepted accounting principles (GAAP), BlueLinx swung to a loss. But when measured by other metrics, it turned a profit.
The GAAP report shows BlueLinx recording an $8.6 million net loss in the quarter from a $3.2 million profit in the year-earlier period, even though net sales shot up 88.4% to $893 million. But these numbers exclude Cedar Creek revenues for the April-to-June quarter prior to April 13, while they include hefty acquisition charges.
If Cedar Creek had been owned by BlueLinx as of April 1, 2017, and the acqusition costs were excluded, the report would have shown net income rising 54% to $9.2 million on a 12% sales increase to $948.6 million, BlueLinx said.
The company's use of adjusted EBITDA--earnings before interest, taxes, depreciation, amortization, and one-time costs--also reveals how taking over Cedar Creek affected BlueLinx's books. Starting with a net loss of $8.6 million, BlueLinx credited itself $7.4 million in depreciation and amortization costs (3.3 times more than in the year-earlier quarter), $12.2 million worth of interest expense (a 127% increase), $3.8 million in share-based compensation expense (roughly 5.4 times more), $10.9 million in inventory step up adjustments (versus $0 the year before) and $11.6 million in merger and acquisition costs (also versus $0 in 2017's second quarter).
Put all those in plus a few other, minor charges and adjusted EBITDA for the quarter nearly tripled, to $37 million from a year-earlier $12.8 million. Adjusted EBITDA on a pro forma basis, in which one assumes Cedar Creek was part of BlueLinx since April 2017, totaled $37.6 million, up from $30.6 milion.
“We are pleased with our second quarter results during the period in which we also completed the acquisition of Cedar Creek,” said Mitch Lewis, president and CEO, said in the press release. “While we are still early in our 18-month integration process, based on specific opportunities we have identified and actions taken to date, we are increasingly confident in our ability to generate at least $50 million in annual synergies. We remain well-positioned to continue our growth and drive enhanced value for our shareholders.”
The company's balance sheet shows that, as of June 30, long-term debt accounts for $615.1 million of the distributor's $1.13 billion in total liabilities. That's more than double the $276.7 million in long-term debt it had last Dec. 30.