BlueLinx Holdings Inc. (NYSE:BXC), a leading distributor of
building and industrial products in the United States, today
reported financial results for the fiscal first quarter ended March
28, 2020, and provided a business update and review of current
market conditions related to the COVID-19 pandemic.
2020 First Quarter Financial Highlights
(all comparisons to prior year period unless otherwise
noted)
- Net sales of $662 million, compared to $639 million
- Gross margin increased to 14.1%, compared to 13.5%
- Net loss of $0.8 million, compared to a net loss of $6.7
million
- Adjusted EBITDA of $19.9 million, compared to $16.6
million
- Term loan reduction of $78 million since the fourth quarter
2019; most recent balance is $69 million
“Our first quarter results show the continuous
and sustained progress that began in the second half of 2019 and a
strong start to the year,” Mitch Lewis, President and Chief
Executive Officer, stated. “Net sales improved by approximately 9%
over the prior year when excluding the impact of our discontinued
siding line. We recorded both year over year and sequential
gross margin improvement, which combined with the improvement in
net sales, drove Adjusted EBITDA to $19.9 million compared to
$16.6 million last year, and $10.9 million in the fourth quarter of
2019.”
Mr. Lewis continued, “Our focus shifted towards
the end of the first quarter as we implemented numerous actions in
response to the COVID-19 pandemic including our highest priority of
ensuring a safe and healthy workplace environment for our
associates. We cannot predict how the business and social
restrictions stemming from the pandemic will ultimately impact the
U.S. housing industry and broader economy, however, we do know that
our business has weathered a wide range of economic cycles. We are
prepared to manage the challenges and opportunities that arise from
this trying time and are focused on efficiently supporting our
nation’s essential infrastructure needs in partnership with our
customers and suppliers.”
2020 First Quarter Financial Results
Review
The Company reported net sales of $662 million
for the first quarter of 2020, compared to $639 million for the
prior year period. Excluding $32 million from the prior year period
related to the discontinued siding line, net sales were up
approximately 9%. Net sales were driven by higher volumes,
and $2 million in commodity price inflation.
The Company recorded gross profit of $93 million
during the first quarter, compared to $86 million in the prior year
period, with a gross margin of 14.1% compared to 13.5% in the prior
year period. Gross margin improved in both structural and specialty
categories year-over-year.
The Company recorded a net loss of $0.8 million
for the first quarter, compared to a net loss of $6.7 million in
the prior year period. First quarter 2020 net loss includes
one-time charges for real estate financing obligation costs of $2
million, integration related charges of $1 million, share-based
compensation expense of $1 million, and $1 million for
restructuring charges. Net loss in the prior year period includes
integration related charges of $5 million, share-based compensation
expense of $1 million, and restructuring costs of $1 million.
Capital Structure and
Liquidity
During the quarter, the Company favorably
amended both its revolving credit facility and term loan facility
to enhance liquidity and provide financial flexibility. In
January, the Company amended its revolving credit facility to
better align advance rates with the seasonality of its
business. At the end of February, the Company amended its
term loan facility and it will no longer be subject to the
quarterly total net leverage ratio covenant when the principal
balance of the term loan is less than $45 million. The
Company further amended the term loan facility on April 1, 2020, to
provide greater financial flexibility by increasing the total net
leverage ratio covenants in the second and third quarters of 2020
to 8.75:1.00 from 6.50:1.00 and 6.00:1.00, respectively.
The enhancements that were made in the first
quarter to the Company’s capital structure contributed to its
strong liquidity position. The Company entered the second
quarter with excess availability and cash on hand of approximately
$97 million.
COVID-19 Operational
Response
“Our primary concern continues to be for the
safety and well-being of our employees, their families and
our communities,” said Mr. Lewis. The Company formed a
cross-functional COVID-19 Disaster Response Team in February and
implemented safety and hygiene protocols consistent with the
Centers for Disease Control and Prevention (“CDC”) and local
guidance. Those protocols continue to evolve in accordance
with CDC and local guidelines.
In early March, the Company implemented policies
and procedures to protect its associates, serve its customers, and
support its suppliers. The Company also moved quickly to
develop plans and take actions designed to give the Company
financial and operational flexibility during the periods impacted
by the pandemic. These actions are intended to reduce the
Company’s cost structure, strengthen its balance sheet, and
preserve and increase liquidity in response to the COVID-19
pandemic so far, and they include:
- Pausing virtually all new hiring
- Limiting all non-essential spending
- Substantially reducing headcount and variable operating expense
correlating to local market demand declines
- Furloughing approximately 15% of salaried workforce
- Reducing or eliminating executive and key management base
salaries for the next six months
- Enhancing working capital efficiency to optimize liquidity for
operations
Current Market Conditions
As of the date of this release, the Company’s
business has been designated as “essential” in all states in which
it operates, and the Company is continuing to operate and provide
service to customers and suppliers. The Company has not
experienced any significant supply chain disruptions as a result of
the COVID-19 pandemic, and the Company’s supply chain has remained
intact in all material respects.
During April, many of the Company’s markets have
experienced negative sales volume impacts when compared to the
prior year. Certain select markets that have stronger
shelter-in-place and related restrictions have experienced more
significant impacts. Those impacts have been somewhat offset by
increases in sales volume in areas where the pandemic has not had
as significant of an impact. As a result, overall April daily
sales were down approximately 11% over the prior year period. The
Company has also experienced below average gross margin in April,
primarily related to the degradation in market pricing for
structural products in connection with the COVID-19 pandemic. The
structural products market began to stabilize in late April,
although the Company cannot predict whether this stabilization will
continue.
Despite the decline in sales volume, the
platform for long-term growth that the Company built through the
latter half of 2019 into the start of 2020 has remained intact and
should continue to provide a solid foundation for execution as and
when the pandemic subsides.
2020 First Quarter Conference Call with
Accompanying Slide Presentation
BlueLinx will host a conference call on May 6,
2020, at 10:00 a.m. Eastern Time, accompanied by a supporting slide
presentation.
Participants can access the live conference call
via telephone at (877) 873-5864, using Conference ID # 7594658.
Investors will also be able to access an archived audio recording
of the conference call for one week following the live call by
dialing (404) 537 3406, Conference ID # 7594658.
Investors can also listen to the live audio of
the conference call and view the accompanying slide presentation by
visiting the BlueLinx website, www.BlueLinxCo.com, and selecting
the conference link on the Investor Relations page. After the
conference call has concluded, an archived recording will be
available on the BlueLinx website.
Use of Non-GAAP Measures
The Company reports its financial results in
accordance with GAAP. The Company also believes that presentation
of certain non-GAAP measures may be useful to investors and may
provide a more complete understanding of the factors and
trends affecting the business than using reported GAAP results
alone. Any non-GAAP measures used herein are reconciled to their
most directly comparable GAAP measures herein or in the financial
tables accompanying this news release. The Company cautions that
non-GAAP measures should be considered in addition to, but not as a
substitute for, the Company’s reported GAAP results.
Adjusted EBITDA
We define Adjusted EBITDA as an amount equal to
net income plus interest expense and all interest expense related
items, income taxes, depreciation and amortization, and further
adjusted for certain non-cash items and other special items,
including compensation expense from share-based compensation,
one-time charges associated with the legal and professional fees
and integration costs related to the Cedar Creek acquisition, and
gains on sales of properties including amortization of deferred
gains.
We present Adjusted EBITDA because it is a
primary measure used by management to evaluate operating
performance and, we believe, helps to enhance investors’ overall
understanding of the financial performance and cash flows of our
business. We believe Adjusted EBITDA is helpful in highlighting
operating trends. We also believe that Adjusted EBITDA is
frequently used by securities analysts, investors and other
interested parties in their evaluation of companies, many of which
present an Adjusted EBITDA measure when reporting their results.
However, Adjusted EBITDA is not a presentation made in accordance
with GAAP, and is not intended to present a superior measure of our
financial condition from those measures determined under GAAP.
Adjusted EBITDA, as used herein, is not necessarily comparable to
other similarly titled captions of other companies due to
differences in methods of calculation. This non-GAAP measure
is reconciled in the “Reconciliation of Non-GAAP Measurements”
table later in this release.
About BlueLinx Holdings
Inc.BlueLinx (NYSE: BXC) is a leading wholesale
distributor of building and industrial products in the United
States with over 50,000 branded and private-label SKUs, and a broad
distribution footprint servicing 40 states. BlueLinx has a
differentiated distribution platform, value-driven business model
and extensive cache of products across the building products
industry. Headquartered in Marietta, Georgia, BlueLinx has over
2,200 associates and distributes its comprehensive range of
structural and specialty products to approximately 15,000 national,
regional, and local dealers, as well as specialty distributors,
national home centers, industrial, and manufactured housing
customers. BlueLinx encourages investors to visit its website,
www.BlueLinxCo.com, which is updated regularly with financial and
other important information about BlueLinx.
Contacts:Investors:Kelly C.
Janzen, SVP, CFO & TreasurerBlueLinx Holdings Inc.(770)
953-7000
Mary Moll, Investor Relations(866)
671-5138investor@bluelinxco.com
Forward-looking StatementsThis
press release contains forward-looking statements. Forward-looking
statements include, without limitation, any statement that
predicts, forecasts, indicates or implies future results,
performance, liquidity levels or achievements, and may contain the
words “believe,” “anticipate,” “expect,” “estimate,” “intend,”
“project,” “plan,” “will be,” “will likely continue,” “will likely
result” or words or phrases of similar meaning. The forward-looking
statements in this press release include statements about the
COVID-19 pandemic and our response thereto, including statements
around the impact of the pandemic on the U.S. housing industry and
broader economy, our preparations to manage the pandemic, our areas
of focus during the pandemic, and our related protocols, policies,
procedures, plans, and actions and their potential effects on our
cost structure, balance sheet, and liquidity; the long-term effects
and benefits of amendments to our revolving credit facility and
term loan facility, including with respect to liquidity, financial
flexibility, and our leverage covenants; the structural products
market and its stability; and our platform for long-term growth and
its ability to support execution as and when the pandemic
subsides.
Forward-looking statements in this press release
are based on estimates and assumptions made by our management that,
although believed by us to be reasonable, are inherently uncertain.
Forward-looking statements involve risks and uncertainties that may
cause our business, strategy, or actual results to differ
materially from the forward-looking statements. These risks and
uncertainties include those listed under the heading “Risk Factors”
in Item 1A of our Annual Report on Form 10-K for the year ended
December 29, 2018, and those discussed in our Quarterly Reports on
Form 10-Q and in our periodic reports filed with the SEC from time
to time. We operate in a changing environment in which new risks
can emerge from time to time. It is not possible for management to
predict all of these risks, nor can it assess the extent to which
any factor, or a combination of factors, may cause our business,
strategy, or actual results to differ materially from those
contained in forward-looking statements. Factors that may cause
these differences include, among other things: the COVID-19
pandemic and other contagious illness outbreaks and their potential
effects on our industry, suppliers and supply chain, and customers,
and our business, results of operations, cash flows, financial
condition, and future prospects; our ability to integrate and
realize anticipated synergies from acquisitions; loss of material
customers, suppliers, or product lines in connection with
acquisitions; operational disruption in connection with the
integration of acquisitions; our indebtedness and its related
limitations; sufficiency of cash flows and capital resources; our
ability to monetize real estate assets; fluctuations in commodity
prices; adverse housing market conditions; disintermediation by
customers and suppliers; changes in prices, supply and/or demand
for our products; inventory management; competitive industry
pressures; industry consolidation; product shortages; loss of and
dependence on key suppliers and manufacturers; import taxes and
costs, including new or increased tariffs, anti-dumping duties,
countervailing duties, or similar duties; our ability to
successfully implement our strategic initiatives; fluctuations in
operating results; sale-leaseback transactions and their effects;
real estate leases; changes in interest rates; exposure to product
liability claims; our ability to complete offerings under our shelf
registration statement on favorable terms, or at all; changes in
our product mix; petroleum prices; information technology security
and business interruption risks; litigation and legal proceedings;
natural disasters and unexpected events; activities of activist
stockholders; labor and union matters; limits on net operating loss
carryovers; pension plan assumptions and liabilities; risks related
to our internal controls; retention of associates and key
personnel; federal, state, local and other regulations, including
environmental laws and regulations; and changes in accounting
principles. Given these risks and uncertainties, we caution you not
to place undue reliance on forward-looking statements. We expressly
disclaim any obligation to update or revise any forward-looking
statement as a result of new information, future events or
otherwise, except as required by law.
BLUELINX HOLDINGS
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
Three Months Ended |
|
March 28,2020 |
|
March 30,2019 |
|
(In thousands, except per share data) |
Net sales |
$ |
662,070 |
|
|
$ |
638,701 |
|
Cost of sales |
568,861 |
|
|
552,656 |
|
Gross profit |
93,209 |
|
|
86,045 |
|
Gross margin |
14.1 |
% |
|
13.5 |
% |
Operating expenses: |
|
|
|
Selling, general, and administrative |
77,769 |
|
|
74,410 |
|
Gains from sales of property |
(525 |
) |
|
— |
|
Depreciation and amortization |
7,635 |
|
|
7,328 |
|
Total operating expenses |
84,879 |
|
|
81,738 |
|
Operating income |
8,330 |
|
|
4,307 |
|
Non-operating expenses
(income): |
|
|
|
Interest expense, net |
14,380 |
|
|
13,401 |
|
Other (income) expense, net |
(237 |
) |
|
150 |
|
Loss before benefit from
income taxes |
(5,813 |
) |
|
(9,244 |
) |
Benefit from income taxes |
(5,026 |
) |
|
(2,525 |
) |
Net loss |
$ |
(787 |
) |
|
$ |
(6,719 |
) |
|
|
|
|
Basic loss per share |
$ |
(0.08 |
) |
|
$ |
(0.72 |
) |
Diluted loss per share |
$ |
(0.08 |
) |
|
$ |
(0.72 |
) |
|
|
|
|
|
|
|
|
BLUELINX HOLDINGS
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS
|
March 28,2020 |
|
December 28,2019 |
|
(In thousands, except share data) |
ASSETS |
Current assets: |
|
|
|
Cash |
$ |
12,558 |
|
|
$ |
11,643 |
|
Receivables, less allowances of $3,875 and $3,236,
respectively |
247,940 |
|
|
192,872 |
|
Inventories, net |
378,634 |
|
|
345,806 |
|
Other current assets |
26,437 |
|
|
27,718 |
|
Total current assets |
665,569 |
|
|
578,039 |
|
Property and equipment, at
cost |
308,288 |
|
|
308,067 |
|
Accumulated depreciation |
(117,036 |
) |
|
(112,299 |
) |
Property and equipment,
net |
191,252 |
|
|
195,768 |
|
Operating lease right-of-use
assets |
52,502 |
|
|
54,408 |
|
Goodwill |
47,772 |
|
|
47,772 |
|
Intangible assets, net |
24,414 |
|
|
26,384 |
|
Deferred tax assets |
59,308 |
|
|
53,993 |
|
Other non-current assets |
20,404 |
|
|
15,061 |
|
Total assets |
$ |
1,061,221 |
|
|
$ |
971,425 |
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
Current liabilities: |
|
|
|
Accounts payable |
$ |
162,398 |
|
|
$ |
132,348 |
|
Accrued compensation |
8,216 |
|
|
7,639 |
|
Current maturities of long-term debt, net of discount and debt
issuance costs of $74 and $74, respectively |
2,176 |
|
|
2,176 |
|
Finance leases - short-term |
5,924 |
|
|
6,385 |
|
Real estate deferred gains - short-term |
3,935 |
|
|
3,935 |
|
Operating lease liabilities - short-term |
7,016 |
|
|
7,317 |
|
Other current liabilities |
9,903 |
|
|
11,323 |
|
Total current liabilities |
199,568 |
|
|
171,123 |
|
Non-current liabilities: |
|
|
|
Long-term debt, net of discount and debt issuance costs of
$11,861 and $12,481, respectively |
444,937 |
|
|
458,439 |
|
Real estate financing obligation |
123,765 |
|
|
44,914 |
|
Finance leases - long-term |
145,427 |
|
|
146,611 |
|
Real estate deferred gains - long-term |
80,935 |
|
|
81,886 |
|
Operating lease liabilities - long-term |
45,571 |
|
|
47,091 |
|
Pension benefit obligation |
22,596 |
|
|
23,420 |
|
Other non-current liabilities |
24,106 |
|
|
24,024 |
|
Total liabilities |
1,086,905 |
|
|
997,508 |
|
Commitments and
Contingencies |
|
|
|
STOCKHOLDERS' DEFICIT: |
Common Stock, $0.01 par value, 20,000,000 shares authorized,
9,366,641 and 9,365,768 outstanding on March 28, 2020 and December
28, 2019, respectively |
94 |
|
|
94 |
|
Additional paid-in capital |
261,980 |
|
|
260,974 |
|
Accumulated other comprehensive loss |
(34,383 |
) |
|
(34,563 |
) |
Accumulated stockholders’ deficit |
(253,375 |
) |
|
(252,588 |
) |
Total stockholders’
deficit |
(25,684 |
) |
|
(26,083 |
) |
Total liabilities and
stockholders’ deficit |
$ |
1,061,221 |
|
|
$ |
971,425 |
|
|
|
|
|
|
|
|
|
BLUELINX HOLDINGS
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
Three Months EndedMarch 28, 2020 |
|
Three Months EndedMarch 30, 2019 |
|
(In thousands) |
Cash flows from
operating activities: |
|
|
|
Net loss |
$ |
(787 |
) |
|
$ |
(6,719 |
) |
Adjustments to reconcile net
loss to cash used in operations: |
|
|
|
Benefit from income taxes |
(5,026 |
) |
|
(2,525 |
) |
Depreciation and amortization |
7,635 |
|
|
7,328 |
|
Amortization of debt issuance costs |
956 |
|
|
455 |
|
Gains from sales of property |
(525 |
) |
|
— |
|
Share-based compensation |
1,004 |
|
|
706 |
|
Amortization of deferred gain |
(984 |
) |
|
(951 |
) |
Changes in operating assets
and liabilities: |
|
|
|
Accounts receivable |
(55,068 |
) |
|
(37,908 |
) |
Inventories |
(32,828 |
) |
|
(45,479 |
) |
Accounts payable |
30,050 |
|
|
26,004 |
|
Prepaid and other current assets |
(3,006 |
) |
|
(423 |
) |
Other assets and liabilities |
(608 |
) |
|
1,191 |
|
Net cash used in operating
activities |
(59,187 |
) |
|
(58,321 |
) |
Cash flows from
investing activities: |
|
|
|
Acquisition of business, net
of cash acquired |
— |
|
|
6,009 |
|
Proceeds from sale of
assets |
44 |
|
|
143 |
|
Property and equipment
investments |
(1,245 |
) |
|
(1,223 |
) |
Net cash (used in) provided by
investing activities |
(1,201 |
) |
|
4,929 |
|
Cash flows from
financing activities: |
|
|
|
Borrowings on revolving credit
facilities |
204,196 |
|
|
197,114 |
|
Repayments on revolving credit
facilities |
(149,079 |
) |
|
(136,892 |
) |
Repayments on term loan |
(69,238 |
) |
|
(900 |
) |
Principal payments on real
estate financing obligations |
(340 |
) |
|
— |
|
Proceeds from real estate
financing obligations |
78,329 |
|
|
— |
|
Debt financing costs |
(336 |
) |
|
— |
|
Repurchase of shares to
satisfy employee tax withholdings |
(7 |
) |
|
— |
|
Principal payments on finance
lease obligations |
(2,222 |
) |
|
(2,187 |
) |
Net cash provided by financing
activities |
61,303 |
|
|
57,135 |
|
|
|
|
|
Net change in cash |
915 |
|
|
3,743 |
|
Cash, beginning of period |
11,643 |
|
|
8,939 |
|
Cash, end of period |
$ |
12,558 |
|
|
$ |
12,682 |
|
|
|
|
|
|
|
|
|
BLUELINX HOLDINGS
INC.RECONCILIATION OF NON-GAAP
MEASUREMENTS(Unaudited)
The following schedule reconciles net loss to
Adjusted EBITDA:
|
Quarter Ended |
|
March 28,2020 |
|
March 30,2019 |
|
(In thousands) |
Net loss |
$ |
(787 |
) |
|
$ |
(6,719 |
) |
Adjustments: |
|
|
|
Depreciation and amortization |
7,635 |
|
|
7,328 |
|
Interest expense |
14,380 |
|
|
13,401 |
|
Benefit from income taxes |
(5,026 |
) |
|
(2,525 |
) |
Gain from sales of property |
(525 |
) |
|
— |
|
Amortization of deferred gain |
(984 |
) |
|
(951 |
) |
Share-based compensation expense |
1,004 |
|
|
706 |
|
Real estate financing obligation costs |
1,793 |
|
|
— |
|
Merger and acquisition costs (1) |
1,070 |
|
|
4,597 |
|
Restructuring, severance, and legal |
1,309 |
|
|
764 |
|
Adjusted EBITDA |
$ |
19,869 |
|
|
$ |
16,601 |
|
(1) Reflects primarily legal, professional and
other integration costs related to the Cedar Creek acquisition
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