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 29, 2019.
2019 Second Quarter Financial Highlights
(all comparisons to prior year period unless otherwise
noted)
- Net sales of $706 million, compared to $893 million
- Net income of $6 million, compared to a net loss of $9
million
- Gross margin improved to 13.3%, compared to 11.6%
- Gross profit of $94 million, compared to $104 million
- Debt under the term loan and revolving credit facility reduced
by $113 million
Management CommentaryMitch
Lewis, President and Chief Executive Officer, stated, “We are
pleased with our gross margin improvement in the quarter and we
expect to achieve continued margin expansion as our business grows
following our substantially completed integration of Cedar Creek.
We continued to navigate deflationary conditions in commodity wood
products and lower-than-expected single family housing starts
through the first half of this year; however, we are seeing
favorable trends that support our optimism for an improved second
half compared to 2018. We are committed to driving further margin
improvement by realizing operational efficiencies while keeping
costs aligned with business levels and we see numerous advantages
to leveraging our business platform to drive improvement in the
second half of 2019.”
Susan O’Farrell, Senior Vice President and Chief
Financial Officer, added, “Our deleveraging initiatives continued
to proceed as expected during the second quarter of 2019. We were
pleased to announce two sale-leaseback transactions and two sales
of former distribution facilities during the period as part of our
real estate monetization and debt reduction efforts. These
transactions resulted in gross proceeds of approximately $57
million, which were used to repay indebtedness under the Company’s
term loan and revolving credit facility. Debt under the term loan
and revolving credit facility decreased by $113 million compared to
the prior year period. Our excess availability and cash on hand was
approximately $101 million as of June 29, 2019, compared to $92
million at year-end.”
2019 Second Quarter Financial Results
ReviewThe Company reported net sales of $706 million for
the second quarter of 2019, compared to $893 million for the prior
year period.
The Company recorded gross profit of $94 million
during the second quarter, compared to $104 million in the prior
year period, with a gross margin of 13.3% compared to 11.6% in the
prior year period, which prior year period includes an
acquisition-related inventory step-up charge of $11 million.
The Company recorded net income of $6 million
for the second quarter, compared to a net loss of $9 million in the
prior year period. Second quarter 2019 includes gains from
sales of real property of $10 million and one-time charges for
integration costs and professional fees of $4 million related to
the Cedar Creek acquisition. The prior year period included
one-time charges for legal, consulting, and professional fees of
$12 million related to the Cedar Creek acquisition, $11 million in
acquisition-related inventory step-up charges, as well as charges
associated with compensation expense from stock appreciation rights
(SARs) and other share-based compensation of $4 million.
Adjusted EBITDA, which is a non-GAAP measure,
was $25 million for the second quarter, compared to $37 million in
the prior year period.
First Six Months of 2019 Financial
Results ReviewThe Company reported net sales of $1.3
billion in the first six months of 2019, equal to the prior year
period.
The Company recorded gross profit of $180
million during the first six months of 2019, compared to $159
million in the prior year period, with a gross margin of 13.4%
compared to 11.9% in the prior year period, which prior year period
includes an acquisition-related inventory step-up charge of $11
million.
The Company recorded a net loss of $0.4 million
for the first six months of 2019, compared to a net loss of $22
million in the prior year period. The first six months of 2019
includes gains from sales of real property of $10 million and
one-time charges for integration costs and professional fees of $9
million related to the Cedar Creek acquisition. The prior year
period included one-time charges for legal, consulting, and
professional fees of $15 million related to the Cedar Creek
acquisition, as well as charges associated with compensation
expense from stock appreciation rights (SARs) and other share-based
compensation of $13 million, and $11 million in acquisition-related
inventory step-up charges.
Adjusted EBITDA, which is a non-GAAP measure,
was $42 million for the six months of 2019, compared to $45 million
in the prior year period.
2019 Second Quarter Conference Call with
Accompanying Slide PresentationBlueLinx will host a
conference call today (August 7, 2019) 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 # 2687175.
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 and
Supplemental Financial InformationThe Company reports its
financial results in accordance with GAAP. The Company also
believes that presentation of certain non-GAAP measures and
GAAP-based and non-GAAP supplemental financial information 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 and
supplemental financial information should be considered in addition
to, but not as a substitute for, the Company’s reported GAAP
results.
Adjusted EBITDA and Pro forma 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 the
financial condition from those 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.
We present pro forma Adjusted EBITDA in the
financial tables accompanying this news release. Pro forma Adjusted
EBITDA for any period is calculated in the same manner as Adjusted
EBITDA, but also combines the historical results of BlueLinx for
the three and six months ended June 30, 2018, with the historical
results of Cedar Creek for the three and six months ended June 30,
2018, giving effect to the Cedar Creek acquisition and related
adjustments as if the acquisition occurred on January 1, 2017.
Supplemental Financial Measures
We completed the acquisition of Cedar Creek on
April 13, 2018 (the “Closing Date”). As a result, Cedar Creek’s
financial results are only included in the combined company’s
reported financial results from the Closing Date forward. To
supplement these reported results, we have provided GAAP-based and
non-GAAP pro forma financial information of the combined company in
the financial tables accompanying this news release that includes
Cedar Creek’s financial results for the relevant periods prior to
the Closing Date. This pro forma information combines the
historical results of BlueLinx for the three and six months ended
June 30, 2018, with the historical results of Cedar Creek for the
three and six months ended June 30, 2018, giving effect to the
Cedar Creek acquisition and related adjustments as if the
acquisition occurred on January 1, 2017.
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:Susan
O’Farrell, 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 expected
margin expansion and the growth of our business; trends in
commodity wood prices and single family housing starts; our
optimism for improved financial results for the second half of 2019
compared to the second half of 2018; our ability to leverage the
size and scale of our platform; and our real estate monetization
strategy and its potential benefits.
Forward-looking statements 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 discussed 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
Securities and Exchange Commission 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: our ability to integrate
and realize anticipated synergies from acquisitions; loss of
material customers, suppliers, or product lines in connection with
acquisitions; our indebtedness and its related limitations;
sufficiency of cash flows and capital resources; changes in
interest rates; 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; new tariffs; our ability to monetize real estate
assets; our ability to successfully implement our strategic
initiatives; fluctuations in operating results; sale-leaseback
transactions and their effects; real estate leases; exposure to
product liability claims; 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(In thousands, except per share
data)(Unaudited)
| |
Three Months Ended |
|
Six Months Ended |
| |
June 29, 2019 |
|
June 30, 2018 |
|
June 29, 2019 |
|
June 30, 2018 |
|
Net sales |
$ |
706,448 |
|
|
$ |
892,952 |
|
|
$ |
1,345,149 |
|
|
$ |
1,330,439 |
|
| Cost of sales |
612,281 |
|
|
789,301 |
|
|
1,164,937 |
|
|
1,171,463 |
|
| Gross profit |
94,167 |
|
|
103,651 |
|
|
180,212 |
|
|
158,976 |
|
| Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general, and administrative |
74,101 |
|
|
91,723 |
|
|
148,511 |
|
|
150,963 |
|
|
Gains from sales of property |
(9,760 |
) |
|
— |
|
|
(9,760 |
) |
|
— |
|
|
Depreciation and amortization |
7,503 |
|
|
7,444 |
|
|
14,831 |
|
|
10,109 |
|
|
Total operating expenses |
71,844 |
|
|
99,167 |
|
|
153,582 |
|
|
161,072 |
|
| Operating income (loss) |
22,323 |
|
|
4,484 |
|
|
26,630 |
|
|
(2,096 |
) |
| Non-operating expenses
(income): |
|
|
|
|
|
|
|
|
Interest expense |
13,717 |
|
|
12,194 |
|
|
27,118 |
|
|
20,674 |
|
|
Other (income) expense, net |
(45 |
) |
|
(94 |
) |
|
105 |
|
|
(188 |
) |
| Income (loss) before provision
for (benefit from) income taxes |
8,651 |
|
|
(7,616 |
) |
|
(593 |
) |
|
(22,582 |
) |
| Provision for (benefit from)
income taxes |
2,350 |
|
|
942 |
|
|
(175 |
) |
|
(597 |
) |
| Net income (loss) |
$ |
6,301 |
|
|
$ |
(8,558 |
) |
|
$ |
(418 |
) |
|
$ |
(21,985 |
) |
| |
|
|
|
|
|
|
|
| Basic earnings (loss) per
share |
$ |
0.67 |
|
|
$ |
(0.93 |
) |
|
$ |
(0.04 |
) |
|
$ |
(2.40 |
) |
| Diluted earnings (loss) per
share |
$ |
0.67 |
|
|
$ |
(0.93 |
) |
|
$ |
(0.04 |
) |
|
$ |
(2.40 |
) |
BLUELINX HOLDINGS
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands, except share
data)(Unaudited)
| |
June 29, 2019 |
|
December 29, 2018 |
|
ASSETS |
| Current assets: |
|
|
|
|
Cash |
$ |
12,662 |
|
|
$ |
8,939 |
|
|
Receivables, less allowances of $3,811 and $3,656,
respectively |
262,042 |
|
|
208,434 |
|
|
Inventories, net |
358,652 |
|
|
341,851 |
|
|
Other current assets |
44,066 |
|
|
40,629 |
|
| Total current assets |
677,422 |
|
|
599,853 |
|
| Property and equipment, at
cost |
310,751 |
|
|
308,398 |
|
|
Accumulated depreciation |
(111,853 |
) |
|
(103,285 |
) |
| Property and equipment,
net |
198,898 |
|
|
205,113 |
|
| Operating lease right-of-use
assets |
55,240 |
|
|
— |
|
| Goodwill |
47,772 |
|
|
47,772 |
|
| Intangible assets, net |
30,324 |
|
|
35,222 |
|
| Deferred tax assets |
52,193 |
|
|
52,645 |
|
| Other non-current assets |
19,305 |
|
|
19,284 |
|
| Total assets |
$ |
1,081,154 |
|
|
$ |
959,889 |
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
| Current liabilities: |
|
|
|
|
Accounts payable |
$ |
174,860 |
|
|
$ |
149,188 |
|
|
Accrued compensation |
7,712 |
|
|
7,974 |
|
|
Current maturities of long-term debt, net of discount and debt
issuance |
1,427 |
|
|
1,736 |
|
|
Finance leases - short-term |
8,166 |
|
|
7,555 |
|
|
Real estate deferred gains - short-term |
3,935 |
|
|
5,330 |
|
|
Operating lease liabilities - short-term |
6,690 |
|
|
— |
|
|
Other current liabilities |
18,625 |
|
|
24,985 |
|
| Total current liabilities |
221,415 |
|
|
196,768 |
|
| Non-current liabilities: |
|
|
|
|
Long-term debt, net of discount and debt issuance costs |
501,909 |
|
|
497,939 |
|
|
Real estate financing obligation |
44,822 |
|
|
— |
|
|
Finance leases - long-term |
144,116 |
|
|
143,486 |
|
|
Real estate deferred gains - long-term |
83,788 |
|
|
86,011 |
|
|
Pension benefit obligation |
26,089 |
|
|
26,668 |
|
|
Operating lease liabilities - long-term |
48,672 |
|
|
— |
|
|
Other non-current liabilities |
23,178 |
|
|
23,680 |
|
| Total liabilities |
1,093,989 |
|
|
974,552 |
|
| Commitments and
Contingencies |
|
|
|
|
STOCKHOLDERS' DEFICIT: |
|
Common Stock, $0.01 par value, Authorized - 20,000,000
shares, Issued and Outstanding - 9,364,959 and 9,293,794,
respectively |
94 |
|
|
92 |
|
|
Additional paid-in capital |
259,727 |
|
|
258,596 |
|
|
Accumulated other comprehensive loss |
(37,307 |
) |
|
(37,129 |
) |
|
Accumulated stockholders’ deficit |
(235,349 |
) |
|
(236,222 |
) |
| Total stockholders’
deficit |
(12,835 |
) |
|
(14,663 |
) |
| Total liabilities and
stockholders’ deficit |
$ |
1,081,154 |
|
|
$ |
959,889 |
|
BLUELINX HOLDINGS
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(In
thousands)(Unaudited)
| |
Six Months Ended |
| |
June 29, 2019 |
|
June 30, 2018 |
|
Net cash used in operating activities |
$ |
(67,688 |
) |
|
$ |
(98,470 |
) |
| |
|
|
|
| Cash flows from
investing activities: |
|
|
|
|
Proceeds from sale of assets |
10,758 |
|
|
107,960 |
|
|
Acquisition of business, net of cash acquired |
— |
|
|
(353,094 |
) |
|
Property and equipment investments |
(1,784 |
) |
|
(577 |
) |
| Net cash provided by
(used in) investing activities |
8,974 |
|
|
(245,711 |
) |
| |
|
|
|
| Cash flows from
financing activities: |
|
|
|
|
Borrowings on revolving credit facilities |
365,519 |
|
|
534,380 |
|
|
Repayments on revolving credit facilities |
(329,683 |
) |
|
(267,449 |
) |
|
Borrowings on term loan |
— |
|
|
180,000 |
|
|
Repayments on term loan |
(31,899 |
) |
|
(450 |
) |
|
Principal payments on mortgage |
— |
|
|
(97,847 |
) |
|
Proceeds from real estate transactions |
44,822 |
|
|
— |
|
|
Change in outstanding payments |
19,706 |
|
|
10,919 |
|
|
Debt issuance costs |
(1,588 |
) |
|
(9,775 |
) |
|
Payments on finance lease obligations |
(4,232 |
) |
|
(3,262 |
) |
|
Repurchase of shares to satisfy employee tax withholdings |
(208 |
) |
|
(1,821 |
) |
| Net cash provided by
financing activities |
62,437 |
|
|
344,695 |
|
| |
|
|
|
| Net change in cash |
3,723 |
|
|
514 |
|
| Cash at beginning of
period |
8,939 |
|
|
4,696 |
|
| Cash at end of period |
$ |
12,662 |
|
|
$ |
5,210 |
|
BLUELINX HOLDINGS
INC.SUPPLEMENTARY INFORMATION(In
thousands)(Unaudited)
Pro Forma Sales, Gross Profit and Net
Loss
The following unaudited consolidated pro forma information
presents consolidated information as if the Cedar Creek acquisition
had occurred on January 1, 2017:
| |
Pro forma |
| |
Quarter Ended |
|
Six Months Ended |
| (In
thousands) |
June 29, 2019 |
|
June 30, 2018 |
|
June 29, 2019 |
|
June 30, 2018 |
|
Net sales |
$ |
706,448 |
|
|
$ |
948,555 |
|
|
$ |
1,345,149 |
|
|
$ |
1,732,822 |
|
| Gross Profit |
94,167 |
|
|
120,990 |
|
|
180,212 |
|
|
220,698 |
|
| Net income (loss) |
9,425 |
|
|
9,180 |
|
|
6,118 |
|
|
(1,439 |
) |
The pro forma amounts above have been calculated in accordance
with GAAP after applying the Company's accounting policies and
adjusting the three and six months ended June 29, 2019 for
$4.2 million and $8.8 million, and the three and six months ended
June 30, 2018 for $30.4 million and $34.0 million, respectively,
for transaction related costs, net of tax. Due to the net loss for
the six-month period ended June 30, 2018, 164,550 incremental
shares from share-based compensation arrangements were excluded
from the computation of diluted weighted average shares outstanding
because their effect would be anti-dilutive. The pro forma amounts
do not include any potential synergies, cost savings or other
expected benefits of the acquisition, are presented for
illustrative purposes only, and are not necessarily indicative of
results that would have been achieved had the acquisition occurred
as of January 1, 2017, or of future operating performance.
BLUELINX HOLDINGS
INC.RECONCILIATION OF NON-GAAP
MEASUREMENTS(In
thousands)(Unaudited)
The following schedule reconciles net income
(loss) to Adjusted EBITDA:
| |
Quarter Ended |
|
Six Months Ended |
| |
June 29, 2019 |
|
June 30, 2018 |
|
June 29, 2019 |
|
June 30, 2018 |
|
Net income (loss) |
$ |
6,301 |
|
|
$ |
(8,558 |
) |
|
$ |
(418 |
) |
|
$ |
(21,985 |
) |
| Adjustments: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
7,503 |
|
|
7,444 |
|
|
14,831 |
|
|
10,109 |
|
|
Interest expense |
13,717 |
|
|
12,194 |
|
|
27,118 |
|
|
20,674 |
|
|
Benefit from income taxes |
2,350 |
|
|
942 |
|
|
(175 |
) |
|
(597 |
) |
|
Gain from sales of property |
(9,760 |
) |
|
— |
|
|
(9,760 |
) |
|
— |
|
|
Amortization of deferred gain |
(951 |
) |
|
(1,300 |
) |
|
(1,902 |
) |
|
(2,470 |
) |
|
Share-based compensation expense |
635 |
|
|
3,763 |
|
|
1,341 |
|
|
12,963 |
|
|
Inventory step-up adjustment |
— |
|
|
10,918 |
|
|
— |
|
|
10,918 |
|
|
Merger and acquisition costs (1) |
4,193 |
|
|
11,642 |
|
|
8,773 |
|
|
15,234 |
|
|
Restructuring, severance, and legal |
950 |
|
|
(47 |
) |
|
1,731 |
|
|
225 |
|
| Adjusted EBITDA |
$ |
24,938 |
|
|
$ |
36,998 |
|
|
$ |
41,539 |
|
|
$ |
45,071 |
|
____________________(1) Reflects primarily legal, professional
and other integration costs related to the Cedar Creek
acquisition
The following table reconciles our pro forma net income (loss)
to pro forma Adjusted EBITDA:
| |
Quarter Ended |
|
Six Months Ended |
| |
June 29, 2019 |
|
June 30, 2018 |
|
June 29, 2019 |
|
June 30, 2018 |
|
Pro forma net income (loss) |
$ |
9,425 |
|
|
$ |
9,180 |
|
|
$ |
6,118 |
|
|
$ |
(1,439 |
) |
| Adjustments: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
7,503 |
|
|
8,670 |
|
|
14,831 |
|
|
17,644 |
|
|
Interest expense |
13,717 |
|
|
12,604 |
|
|
27,118 |
|
|
26,611 |
|
|
Provision for (benefit from) income taxes |
3,419 |
|
|
4,773 |
|
|
2,062 |
|
|
3,104 |
|
|
Gain from sales of property |
(9,760 |
) |
|
— |
|
|
(9,760 |
) |
|
— |
|
|
Amortization of deferred gain |
(951 |
) |
|
(1,300 |
) |
|
(1,902 |
) |
|
(2,470 |
) |
|
Share-based compensation expense |
635 |
|
|
3,763 |
|
|
1,341 |
|
|
12,963 |
|
|
Restructuring, severance, and legal |
950 |
|
|
(47 |
) |
|
1,731 |
|
|
226 |
|
| Pro forma adjusted EBITDA |
$ |
24,938 |
|
|
$ |
37,643 |
|
|
$ |
41,539 |
|
|
$ |
56,639 |
|
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