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BlueLinx Announces 2020 Second Quarter Financial Results

MARIETTA, Ga., Aug. 03, 2020 (GLOBE NEWSWIRE) -- BlueLinx Holdings Inc. (NYSE:BXC), a leading distributor of building and industrial products in the United States, today reported financial results for the fiscal second quarter ended June 27, 2020, and provided a business update and review of current market conditions related to the COVID-19 pandemic.

2020 Second Quarter Financial Highlights (all comparisons to prior year period)

  • Net sales of $699 million, compared to $706 million
  • Gross margin increased 110 basis points to 14.4%, compared to 13.3%
  • Net income of $7 million, compared to $6 million
  • Adjusted EBITDA of $31 million, compared to $25 million
  • Debt under the term loan and revolving credit facility reduced by $125 million 
  • Excess availability and cash on hand of $138 million, up $37 million 

“Our strong second quarter results validate the positive impact we have realized from the operational improvements we began in the second half of 2019 and accelerated earlier this year.  We gained momentum as the quarter progressed, experiencing increased demand and an improving structural products commodity market compared to the lower sales volume and gross margins we saw in April due to the pandemic,” Mitch Lewis, President and Chief Executive Officer, stated. “The market recovery through the quarter resulted in relatively flat net sales compared to last year, while we continued our positive trends recording gross margin improvement and growing Adjusted EBITDA by 24% to $31 million compared to $25 million last year.”

Mr. Lewis continued, “The numerous actions we undertook in response to the COVID-19 pandemic also contributed to the successful financial results this quarter.  Ensuring a safe and healthy workplace environment for our associates continues to be our highest priority.  I am proud of how well our associates have managed the challenges and opportunities that have arisen during these trying times and we are focused on continuing to effectively support our nation’s essential infrastructure needs in partnership with our customers and suppliers.”

2020 Second Quarter Financial Results Review

The Company reported net sales of $699 million for the second quarter of 2020, compared to $706 million for the prior year period. Net sales were up $9 million when excluding $16 million from the prior year period related to the discontinued siding line.  Net sales were positively impacted by higher commodity prices, with $14 million of net sales growth attributable to commodity price inflation in the current period.

The Company recorded gross profit of $101 million during the second quarter, compared to $94 million in the prior year period, with a gross margin of 14.4% compared to 13.3% in the prior year period.

The Company recorded net income of $7 million for the second quarter, compared to $6 million in the prior year period. Second quarter 2020 net income includes one-time items totaling $3 million for restructuring, share-based compensation expense, and integration related charges. Net income in the prior year period included one-time gains from sales of real property of $10 million offset by one-time integration related charges, restructuring costs, and share-based compensation expense totaling $6 million.  Excluding these one-time items, net income increased by $8 million year over year.

Adjusted EBITDA, which is a non-GAAP measure, was $31 million for the second quarter, compared to $25 million in the prior year period, up $6 million or 24%.

Cash provided by operating activities was $72 million, an improvement of $60 million over the prior year period, mainly attributable to improvement in gross profit and a net working capital reduction of approximately $43 million. Excess availability under the revolving credit facility and cash on hand was approximately $138 million as of quarter end, compared to $101 million as of the end of the prior year period.

First Six Months of 2020 Financial Results Review

The Company reported net sales of $1.4 billion in the first six months of 2020, compared to $1.3 billion in the prior year period. Net sales were up $64 million or 5% when excluding $48 million from the prior year period related to the discontinued siding line. 

The Company recorded gross profit of $194 million during the first six months of 2020, compared to $180 million in the prior year period, with a gross margin of 14.3% compared to 13.4% in the prior year period, up 90 basis points.

The Company recorded net income of $6 million for the first six months of 2020, compared to a net loss of $0.4 million in the prior year period. Net income for the first six months of 2020 includes one-time items totaling $8 million for restructuring, share-based compensation, integration related costs, and gains from sales of real property.  Net income from the prior year period included one-time items totaling $12 million for integration related charges, restructuring charges, and share-based compensation expense, offset by $10 million for one-time gains from sales of real property. Excluding these one-time items, net income increased by $12 million over the prior year period.

Adjusted EBITDA was $51 million for the first six months of 2020, compared to $42 million in the prior year period, up $9 million or 21%.

Cash provided by operating activities was $13 million, an improvement of $66 million over the prior year period, mainly attributable to improvement in gross profit and a net working capital reduction of approximately $28 million.

Business Update and Review of Market Conditions

As of the date of this release, our markets are still in various stages of re-opening following the shelter-in-place and non-essential business closure orders that were implemented in March and April.  Infection, hospitalization and mortality rates from COVID-19 remain significant, and the Company cannot predict the trajectory of the virus over the remainder of 2020 and beyond.  We expect that the pandemic, and business and social restrictions stemming from the pandemic, will continue to affect the broader economy, and potentially the U.S. housing industry.

While the long-term economic impacts of COVID-19 remain uncertain, to date the residential building products industry has proven to be resilient, rebounding from the significant declines experienced earlier during the pandemic. The Company has remained an “essential” business in all states in which it operates, allowing us to serve our customers while following strict health safety protocols across all our operations as recommended by the Centers for Disease Control and Prevention and state and local governments. During the quarter, our cross-functional COVID-19 Disaster Response Team implemented safety and hygiene protocols consistent with CDC and local guidance, and we took action on plans designed to reduce our cost structure, strengthen our balance sheet, and further increase liquidity in response to the pandemic.

Market conditions have improved with increases in single family housing starts, the return of the Builder’s Confidence Index to pre COVID-19 levels, and continued strong commodity markets. Cost containment actions and improvements to managing working capital not only contributed to the Company’s successful financial results in the second quarter but should also produce long-term, sustainable benefits.

During July, the Company’s sales volumes were positive relative to the prior year period, with increases in sales volume in both the structural and specialty categories. The Company also experienced July gross margins above its historical averages. This improvement was primarily driven by the increase in market pricing for structural products, which is currently trending well above July 2019 levels, but which may fluctuate significantly over the remainder of the quarter depending on various factors, including the impact of the pandemic on current market conditions. 

2020 Second Quarter Conference Call with Accompanying Slide Presentation

BlueLinx will host a conference call on August 4, 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 # 3795155. 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 # 3795155.

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 approximately 2,000 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 & Treasurer
BlueLinx Holdings Inc.
(770) 953-7000

Mary Moll, Investor Relations
(866) 671-5138
investor@bluelinxco.com

Forward-looking Statements
This 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 about the potential trajectory of the pandemic and the potential effects of the pandemic on the U.S. housing industry and broader economy; market conditions and the response of the building products industry to the pandemic; and the potential future benefits of our cost containment actions and working capital improvements.

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 28, 2019, 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
(Unaudited)

  Three Months Ended   Six Months Ended
  June 27, 2020   June 29, 2019   June 27, 2020   June 29, 2019
               
  (In thousands, except per share data)
Net sales $ 698,776     $ 706,448     $ 1,360,846     $ 1,345,149  
Cost of sales 597,956     612,281     1,166,817     1,164,937  
Gross profit 100,820     94,167     194,029     180,212  
Gross margin 14.4 %   13.3 %   14.3 %   13.4 %
Operating expenses:              
Selling, general, and administrative 69,710     70,150     143,314     139,235  
Depreciation and amortization 7,063     7,503     14,698     14,831  
Gains from sales of property     (9,760 )   (525 )   (9,760 )
Other operating expenses 1,962     3,951     6,127     9,276  
Total operating expenses 78,735     71,844     163,614     153,582  
Operating income 22,085     22,323     30,415     26,630  
Non-operating expenses (income):              
Interest expense, net 11,535     13,717     25,915     27,118  
Other (income) expense, net 417     (45 )   180     105  
Income (loss) before provision for (benefit from) income taxes 10,133     8,651     4,320     (593 )
Provision for (benefit from) income taxes 3,438     2,350     (1,588 )   (175 )
Net income (loss) $ 6,695     $ 6,301     $ 5,908     $ (418 )
               
Basic income (loss) per share $ 0.71     $ 0.67     $ 0.63     $ (0.04 )
Diluted income (loss) per share $ 0.71     $ 0.67     $ 0.63     $ (0.04 )


BLUELINX HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

  June 27, 2020   December 28, 2019
       
  (In thousands, except share data)
ASSETS
Current assets:      
Cash $ 11,530     $ 11,643  
Receivables, less allowances of $3,911 and $3,236, respectively 264,642     192,872  
Inventories, net 313,979     345,806  
Other current assets 26,509     27,718  
Total current assets 616,660     578,039  
Property and equipment, at cost 308,616     308,067  
Accumulated depreciation (122,123 )   (112,299 )
Property and equipment, net 186,493     195,768  
Operating lease right-of-use assets 50,802     54,408  
Goodwill 47,772     47,772  
Intangible assets, net 22,591     26,384  
Deferred tax assets 54,494     53,993  
Other non-current assets 20,292     15,061  
Total assets $ 999,104     $ 971,425  
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:      
Accounts payable $ 158,920     $ 132,348  
Accrued compensation 11,140     7,639  
Current maturities of long-term debt, net of debt issuance costs of $74 and $74, respectively 2,176     2,176  
Finance lease liabilities - short-term 5,958     6,486  
Operating lease liabilities - short-term 6,633     7,317  
Real estate deferred gains - short-term 4,040     3,935  
Other current liabilities 11,011     11,222  
Total current liabilities 199,878     171,123  
Non-current liabilities:      
Long-term debt, net of debt issuance costs of $10,915 and $12,481, respectively 377,880     458,439  
Finance lease liabilities - long-term 266,622     191,525  
Operating lease liabilities - long-term 44,169     47,091  
Real estate deferred gains - long-term 79,984     81,886  
Pension benefit obligation 22,109     23,420  
Other non-current liabilities 26,710     24,024  
Total liabilities 1,017,352     997,508  
Commitments and Contingencies      
STOCKHOLDERS' DEFICIT:
Common Stock, $0.01 par value, 20,000,000 shares authorized,
  9,461,412 and 9,365,768 outstanding on June 27, 2020 and December 28, 2019, respectively
95     94  
Additional paid-in capital 262,587     260,974  
Accumulated other comprehensive loss (34,250 )   (34,563 )
Accumulated stockholders’ deficit (246,680 )   (252,588 )
Total stockholders’ deficit (18,248 )   (26,083 )
Total liabilities and stockholders’ deficit $ 999,104     $ 971,425  


BLUELINX HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

  Six Months Ended
  June 27, 2020   June 29, 2019
       
  (In thousands)
Cash flows from operating activities:      
Net income (loss) $ 5,908     $ (418 )
Adjustments to reconcile net income (loss) to cash provided by (used in) operations:      
Benefit from income taxes (1,588 )   (175 )
Depreciation and amortization 14,698     14,831  
Amortization of debt issuance costs 1,903     1,614  
Gains from sales of property (525 )   (9,760 )
Amortization of deferred gain (1,967 )   (1,902 )
Share-based compensation 1,858     1,341  
Changes in operating assets and liabilities:      
Accounts receivable (71,770 )   (53,608 )
Inventories 31,827     (16,800 )
Accounts payable 26,572     25,672  
Prepaid and other current assets (3,200 )   (8,078 )
Other assets and liabilities 9,185     (5,766 )
Net cash provided by (used in) operating activities 12,901     (53,049 )
       
Cash flows from investing activities:      
Acquisition of business, net of cash acquired     6,009  
Proceeds from sale of assets 102     10,758  
Property and equipment investments (1,752 )   (1,784 )
Net cash (used in) provided by investing activities (1,650 )   14,983  
       
Cash flows from financing activities:      
Borrowings on revolving credit facilities 350,236     365,519  
Repayments on revolving credit facilities (354,509 )   (329,683 )
Repayments on term loan (77,852 )   (31,899 )
Proceeds from real estate financing transactions 78,263     44,822  
Debt financing costs (2,665 )   (2,359 )
Repurchase of shares to satisfy employee tax withholdings (254 )   (208 )
Principal payments on finance lease liabilities (4,583 )   (4,403 )
Net cash (used in) provided by financing activities (11,364 )   41,789  
       
Net change in cash (113 )   3,723  
Cash at beginning of period 11,643     8,939  
Cash at end of period $ 11,530     $ 12,662  


BLUELINX HOLDINGS INC.
RECONCILIATION OF NON-GAAP MEASUREMENTS
(Unaudited)

The following schedule reconciles net income (loss) to Adjusted EBITDA:

  Quarter Ended   Six Months Ended
  June 27, 2020   June 29, 2019   June 27, 2020   June 29, 2019
               
  (In thousands)
Net income (loss) $ 6,695     $ 6,301     $ 5,908     $ (418 )
Adjustments:              
Depreciation and amortization 7,063     7,503     14,698     14,831  
Interest expense, net 11,535     13,717     25,915     27,118  
Provision for (benefit from) income taxes 3,438     2,350     (1,588 )   (175 )
Amortization of deferred gain (984 )   (951 )   (1,967 )   (1,902 )
Gain from sales of property     (9,760 )   (525 )   (9,760 )
Share-based compensation expense 854     635     1,858     1,341  
Merger and acquisition costs (1) 609     4,193     1,680     8,773  
Restructuring and other (2) 1,994     950     5,089     1,731  
Adjusted EBITDA $ 31,204     $ 24,938     $ 51,068     $ 41,539  

(1) Reflects primarily legal, professional and other integration costs related to the Cedar Creek acquisition

(2) Reflects costs related to our restructuring efforts, such as severance, net of other one-time non-operating items


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Source: BlueLinx Corporation