RedBuilt LLC – Q3 Review 2011
Kurt Liebich, President and Chief Executive
RedBuilt LLC – Q2 Review 2011
Kurt Liebich, President and Chief Executive
RedBuilt continues to have a strong safety record, having achieved a recordable incident rate of 1.9 during the YTD period ending June 30, 2011, a slight improvement over the 2010 recordable incident rate of 2.0.
The U.S. residential and commercial construction markets continued along the bottom of the trough in Q2. With high unemployment, low consumer confidence and difficult financing conditions, the construction market is struggling to gain any signs of life. Despite these difficult operating conditions, RedBuilt’s diversification efforts are beginning to pay off.
While the business struggled in the first half of the year, performance indicators are moving in the right direction. As a result, RedBuilt’s order file has reached the highest level since its formation in the fall of 2009. Also, over the last 18 months, RedBuilt has been working to diversify its business, so that it is not dependent on a recovery in the U.S. commercial construction market.
While we do not expect to see a significant improvement in RedBuilt’s core commercial business for quite some time, we are encouraged by the level of current activity and we look forward to reporting improved results in the second half of 2011.
RedBuilt LLC – Q1 Review 2011
Kurt Liebich, President and Chief Executive
The U.S. commercial construction industry reached a cyclical bottom in Q1 2010, and for the last 18 months, the industry and RedBuilt’s operating performance has been “bouncing on bottom.” Despite the dismal operating conditions and resulting financial performance, RedBuilt is seeing the early signs of a modest recovery in the commercial construction market. We are hopeful that the worst is behind us, and that we will realize the benefit of the improving U.S. economy.
Our diversification efforts also are beginning to create value. We have developed new business in western Canada, and we have developed a recurring stream of business in Australia. We expect these international markets to contribute to year-over-year growth in 2011. While the general economic conditions have been bleak for commercial construction, we anticipated a long and slow recovery with the prospect of a period of continued losses when we acquired the assets that formed RedBuilt in 2009. At the end of Q1 2011, on a consolidated basis, RedBuilt and its parent company had substantial free liquidity.
RedBuilt LLC – Q3 Review 2010
Kurt Liebich, President and Chief Executive
RedBuilt’s safety culture and performance remain excellent. In the third quarter, we operated incident free, and YTD we have suffered two recordable incidents, which brings our Recordable Incident Rate to 1.23, slightly above our target of less than 1.0. The 200+ associates in the business have worked over 1,000 days without a lost time accident.
The commercial construction industry, which is RedBuilt’s primary market, remains mired in the Great Recession. Most indicators suggest that the worst is behind us, but we are continuing to “bounce along bottom.” We do not expect a significant recovery until at least 2012.
Since the acquisition closed in August 2009, we have developed additional products and market segments to help us survive the downturn in the commercial construction market. We have made solid progress. We have introduced a new scaffold plank and concrete forming line, and we have received code approvals to re-enter the Canadian, Japanese and Australian markets. In 2010, we will sell into these new segments, and we expect to realize significant growth in 2011, which will help us to offset the weakness in our core commercial business.
While we will continue to experience very difficult operating conditions over the next 18 months, we remain confident that we will be able to generate long-term value.
RedBuilt LLC – Q2 Review 2010
Kurt Liebich, President and Chief Executive Officer
RedBuilt is a leading national provider of structural roof and floor system solutions for commercial buildings and an innovator of patented engineered wood products. RedBuilt’s engineered wood structural systems are used in the construction of schools, hospitals, banks, multifamily residences, restaurants and hotels, as well as all other types of commercial construction. RedBuilt’s sales are primarily in the continental United States, with additional business in Hawaii, Alaska and now Canada and Japan. As a secondary matter, RedBuilt also sells niche commercial applications including concrete forms, scaffold planks and other ancillary industrial products.
While the company’s sales are small compared to the entire commercial construction industry, RedBuilt is the dominant supplier of engineered wood commercial structures and operates at higher margins than competing commercial structure providers due chiefly to its large, experienced, industry-leading consultative sales and engineering team.
RedBuilt continued to experience a very difficult operating environment in Q2 2010. Both the residential and commercial construction industries in the United States remain very weak, and while the markets appear to have stabilized, the amount of construction activity is leveling off near the trough of the cycle. Additionally, during the quarter, the cost of RedBuilt’s primary raw materials (OSB and veneer) increased by roughly 25% on average from Q1 2010. While this raw material price increase was short-lived, it had an impact on Redbuilt’s gross margins.
We do not expect any improvement in the fundamentals of the U.S. commercial construction industry for the balance of this year; however, RedBuilt expects its financial performance to improve significantly. This improvement will be driven by several factors. First, during Q2, RedBuilt raised prices to offset the increase it had experienced in raw material costs. Second, the rapid run-up in raw material costs was not sustainable, and by the end of Q2, these costs had free-fallen to the levels of early Q1. Third, the company has completed a capital project at its Stayton facility that will lower its manufacturing costs and open access to new industrial markets (primarily scaffold plank and concrete forming). Finally, the company has received the requisite code approvals to export product into Canada and Japan, creating the ability to grow the business in these new geographic segments.
RedBuilt has many difficult quarters ahead, but we remain confident that we have positioned the company to weather the storm and to create value when the recovery in the construction industry begins to emerge.
RedBuilt LLC – Q1 Review 2010
Kurt Liebich, President and Chief Executive Officer
RedBuilt is a leading national provider of structural roof and floor system solutions for commercial buildings and an innovator of patented engineered wood products.
As anticipated, RedBuilt’s sales fell in the first quarter of 2010, reflecting the seasonal lull in commercial and industrial construction activity. The commercial construction market remains in the doldrums. Year-over-year non-residential construction expenditure throughout the United States is down nearly 25% from the slow pace of a year ago. Competition has been fierce in commercial and industrial construction, as building products supply companies and residential builders have aggressively sought to capture new business by bidding on all jobs – residential, commercial, industrial, or highly specialized. It is worth noting that RedBuilt has maintained its strong financial position, despite market conditions. RedBuilt has actually increased its liquidity relative to the date the business was acquired and continued to demonstrate disciplined cost management during the first quarter.
RedBuilt is addressing the challenging market conditions by making great strides in diversifying its product offerings into new industrial markets and remaining aggressive in its core markets. To that end, RedBuilt received a loan from the State of Oregon in February 2010 to fund a series of capital expenditures. These projects will allow the company’s facility in Stayton, Oregon to manufacture products for new markets, such as concrete forming, scaffold planking and other niche industrial markets. RedBuilt has also entered foreign markets, including Japan and Canada. The company successfully navigated the arduous process of receiving certification to sell its engineered wood products into the Japanese market in record time, a testament to the tremendous capability of RedBuilt’s engineers. Finally, RedBuilt completed a transition from Weyerhaeuser’s legacy information system to a new and versatile platform, doing so under budget and on time.
RedBuilt LLC – Q4 Review 2009
Kurt Liebich, President and Chief Executive Officer
The launch of RedBuilt – formerly a division of Weyerhaeuser – was a highlight of 2009 for Atlas. RedBuilt is a nationwide supplier of roof trusses and floor joists, along with additional specialty products for construction. RedBuilt has a well-established reputation for providing high-quality service and just-in-time delivery, which reduces construction costs, ties up less capital and results in fewer delays and errors for the builder. The company is led by an exceptionally entrepreneurial management team, which oversees an experienced sales and engineering force. RedBuilt has 235 employees and four manufacturing and assembly operations.
Coincident with the sale in August, operations were restructured to dramatically reduce costs, creating a leaner, more efficient company that generated positive EBITDA (earnings before interest, taxes, depreciation, and amortization) during Atlas ownership in 2009, despite exceptionally weak market conditions. The business had been losing approximately $1 million a month in 2009 prior to our purchase.
The most brutal commercial construction market in history will continue to depress demand in 2010, but the RedBuilt business is stable. It benefits from a lean, highly variable cost platform. Once markets recover, RedBuilt is positioned to prosper as the dominant and only national player in its market sector. For the next 12 months, RedBuilt will continue to focus on managing costs and preserving liquidity, fighting to win every job in its core commercial business, and on continued improvements in its safety record. In this area, RedBuilt management has left little room for improvement, ending 2009 with only one recordable incident, an outstanding performance.
This year, RedBuilt also plans to reintroduce a series of industrial products – scaffold planks and concrete-forming materials – and compete in new market segments, including hotel/motel and multi-family construction. The company, headquartered in Boise, Idaho, also plans to compete in new geographic areas, particularly targeting Japan and western Canada.
RedBuilt LLC – Q3 Review 2009
Kurt Liebich, President and Chief Executive Officer
New to Atlas Holdings, but certainly not new to the market, RedBuilt LLC was formed in Q3 following Atlas’ purchase of the Trus Joist Commercial Division from Weyerhaeuser. RedBuilt LLC manufactures and designs joists, beams and wood trusses for commercial, industrial and multifamily residential building applications. The Company, established 50 years ago, has 235 employees. Its headquarters are in Boise, ID and it operates manufacturing and assembly facilities in Chino, CA, Hillsboro and Stayton, OR, Delaware, OH and sales locations throughout the United States.
Before the transaction closed, several steps were taken to position the business for profitability: the management structure was flattened, facilities were consolidated, unneeded leases were eliminated and headcount was reduced to match current demand. These moves are helping RedBuilt get back to its core competencies: innovative product designs and aggressive sales and marketing efforts. In September, the Company brought its sales team together with key engineering and manufacturing team members in a conference to “re-spark” the creative and entrepreneurial atmosphere that brought the business its original enduring success.
RedBuilt experienced a stabilization of the booking activity in late Q2 and Q3, and late in Q3 the Company realized a modest uptick in both booking and sales activity. However, heading into Q4 2009 and Q1 2010, we expect business to soften based on seasonal construction patterns and early indications from the field. The Company is well-positioned in the market, it is well-capitalized, and its sales team is highly motivated to continue to uncover and create new opportunities. Under the guidance of its deeply experienced management team led by CEO Kurt Liebich, RedBuilt is also continuing to focus on cost reductions as well as Continuous Improvement Process initiatives and product innovation.
The hard work of transitioning RedBuilt away from a large corporate owner into an entrepreneurial and focused enterprise is ongoing. However, the expected installation of new production equipment (paid for, in part, with Oregon state development financing) will help the Company innovate and diversify its product lines, and the continued movement of accounting and production functions from Weyerhaeuser’s legacy systems to a separate environment is expected to result in additional cost savings.
