8-K
BlueLinx Holdings Inc. (BXC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 3, 2020
BLUELINX HOLDINGS INC.
(Exact name of registrant specified in its charter)
| Delaware | 001-32383 | 77-0627356 |
|---|---|---|
| (State or other | (Commission | (I.R.S. Employer |
| jurisdiction of<br><br>incorporation) | File Number) | Identification No.) |
| 1950 Spectrum Circle, Suite 300, Marietta, GA | 30067 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (770) 953-7000
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.01 per share | BXC | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 under the Securities Act (17 CFR 230.405) or Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On August 3, 2020, BlueLinx Holdings Inc. (“BlueLinx” or “the Company”) issued a press release announcing its financial results for the fiscal second quarter ended June 27, 2020. A copy of BlueLinx’s press release is furnished as Exhibit 99.1 hereto.
On August 4, 2020, as previously announced, BlueLinx will hold a teleconference and audio webcast to discuss its financial results from the fiscal second quarter ended June 27, 2020. A copy of supplementary materials that will be referred to in the teleconference and webcast, and which will be posted to the Company's website, is furnished as Exhibit 99.2 hereto.
The information included in this Item 2.02, as well as Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits:
The following exhibits are attached with this Current Report on Form 8-K:
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BlueLinx Holdings Inc. | ||
|---|---|---|
| (Registrant) | ||
| Dated: August 3, 2020 | By: | /s/ Kelly C. Janzen |
| Kelly C. Janzen | ||
| Senior Vice President and Chief Financial Officer |
Exhibit
Exhibit 99.1
1950 Spectrum Circle, Suite 300
Marietta, GA 30067
1-888-502-BLUE
www.BlueLinxCo.com
FOR IMMEDIATE RELEASE
BlueLinx Announces 2020 Second Quarter Financial Results
MARIETTA, Ga., August 3, 2020 - 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%.
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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.
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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
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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.
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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 | ) |
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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, <br> 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 |
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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 |
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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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q22020earningspresentati
BlueLinx (NYSE: BXC) Second Quarter 2020 Earnings Call Presentation August 4, 2020
Notes to Investors Forward-Looking Statements. This presentation 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 presentation include statements about the recovery in single-family housing starts; our areas of focus in response to the COVID-19 pandemic; the potential long-term benefits of working capital efficiencies; our outlook for the single-family housing, Structural products and end-use markets and the conditions thereof; the outlook for Structural product commodity pricing; our pursuit of opportunities to monetize real estate assets and the potential success thereof; trends in our business and the markets in July and their potential impact on our future results. 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 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. Non-GAAP Financial Measures. BlueLinx reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”). We also believe that presentation of certain non-GAAP measures, such as EBITDA, Adjusted EBITDA and our Term Loan Leverage Ratio, 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. Explanations of these non-GAAP measures are included in the accompanying Appendix to this presentation. And any non-GAAP measures used herein are reconciled herein, in the Appendix, or in the financial tables in the Appendix, to their most directly comparable GAAP measures. We caution that non-GAAP measures should be considered in addition to, but not as a substitute for, our reported GAAP results. Cedar Creek Acquisition. 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, and period over period results may not be directly comparable. Product Category Information. With the acquisition and integration of Cedar Creek, we changed our internal product hierarchy within our Structural and Specialty product categories. As a result, prior year amounts have been reclassified to conform to the current year product mix of Structural and Specialty products. Immaterial Rounding Differences. Immaterial rounding adjustments and differences may exist between slides, press releases, and previously issued presentations. This presentation and the associated remarks made during this conference call are integrally related and are intended to be presented and understood together. © 2 0 2 0 BLUELINX C O MP A N Y . A L L R I G H T S R E S E R V E D . 2
Q2 2020 Overview • Responded quickly to COVID-19 with focus on safety • Generated strong financial results for Q2 2020 with Net Sales of $699 million, record Gross Margin of 14.4%, and Adjusted EBITDA of $31 million, a $6 million improvement • Builders Confidence Index returns to pre-COVID-19 levels, Single Family Housing starts recovering rapidly • Structural commodity pricing declined dramatically in April but recovered during the quarter helping to drive a Structural gross margin improvement of 151 basis points • Improved liquidity results in ABL Excess Availability and cash on hand of $138 million 3
COVID-19 Update • Safety and health of associates highest priority with respect to all business decisions • Our operations have remained intact and working efficiently; minimal business interruption to-date • Cost containment remains a primary focus • Significant working capital efficiencies achieved with sustainable long-term benefits • Effectively operating in the pandemic environment as an “essential” business has enabled BlueLinx to service customers with minimal disruption 4
Current Market Conditions Single Family Housing Market Dynamics + Improvement versus April low point + Current pricing above prior year + Current mortgage rates at historical lows + Momentum going into the third quarter + Strong demand in repair & remodel - Lumber Futures lower than current price - Some constraints on labor availability - Mills returning to pre-COVID volumes - Increasing cost of raw materials +/- Pandemic creates supply chain disruptions 5
End-Use Market Outlook • Seasonally adjusted single-family housing starts jumped 17.2% from May to June; still down 4% from June 2019 and well below the 50-year historical average • According to the latest National Association of Home Builders (NAHB) / Wells Fargo Housing Market Index (HMI) builder confidence in the market for newly-built single-family homes jumped 14 points to 72 in July • Current 30-year fixed rate mortgage rates under 3.0%; uncertainty around employment outlook US Single Family Housing Starts Builders Confidence Index U.S. Census Bureau, Seasonally Adjusted NAHB Builders Confidence Index (%) (in 000s) 1,100 85 50 Year Historical Average 1,000 75 900 65 800 55 Positive outlook >50% 700 45 600 35 500 25 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 © 2 0 2 0 BLUELINX C O MP A N Y . A L L R I G H T S R E S E R V E D . 6
Financial Overview 7
Q2 2020 Overview All comparisons are made to same period prior year unless otherwise noted Financial Performance Balance Sheet & Liquidity Market Performance • Net Sales of $699 million • Cash provided by operating activities • SFHS seasonally adjusted annual rate • Gained momentum through Q2 of $72 million of 831,000 units in June • $43 million from working capital • Gross margin of 14.4%, up 110 basis • Strong builder confidence and points, surpassing record set in Q1 • ABL Excess Availability and cash on recovering single family housing starts hand of $138 million • Net Income of $7 million, up 6% • COVID-19 impacts isolated to • Bank Debt1 reduction of $125 million individual markets • Adjusted EBITDA of $31 million, up versus Q2 2019 $6 million • Favorable interest rate environment • Term Loan Leverage Ratio of 4.86x for Q2 2020; well below required 8.75x Execution and strong market drove record quarter 1Bank Debt = Term loan and ABL (Revolving Credit Facility) 8
Q2 2020 Results $ in millions Q2 '20 Q2 '19 Var. Q2 2020 Highlights Net Sales $699 $706 ($7) • Q2 Net sales up $9 million excluding impact of discontinued siding line Gross Margin 101 94 7 • SG&A down $4 million through reductions in labor, operating costs, and Gross Margin Rate 14.4% 13.3% 110bps travel excluding Q2 increase in short term incentives SG&A 70 70 (0) • $10 million gain on real estate sales in Q2’19 reduced prior year other expenses Other Expenses 9 2 7 Net Income 7 6 1 • Cash provided by operating activities of $72 million, $43 million from operating EBITDA 29 30 (1) working capital Adjusted EBITDA $31 $25 $6 • Adjusted EBITDA increased 24% over prior year Adjusted EBITDA & Gross Margin Rate Trend $35M 14.4% 14.6% $30M 14.4% 14.1% 14.2% $25M 14.0% $20M 13.8% 13.8% $15M 13.5% 13.5% 13.6% $10M 13.3% 13.4% $5M $17M $25M $19M $11M $20M $31M 13.2% - 13.0% Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Adjusted EBITDA Gross Margin © 2 0 2 0 BLUELINX C O MP A N Y . A L L R I G H T S R E S E R V E D . 9
Structural Product Commodity Pricing Update Framing Lumber Composite Price Structural Panel Composite Price Source: Random Lengths Source: Random Lengths $550 $550 2020 2020 $450 $450 5YR AVG $383 2019 2018 5YR AVG $404 $350 $350 2018 2019 $250 $250 Mar Jun Sep Dec Mar Jun Sep Dec • Structural gross margins benefitted by increases in underlying commodity pricing within the quarter • Recovery from mid-April enhanced structural margins which remained below Q1 levels • Overall sales volumes rebounded through the quarter to levels consistent with prior year, with a slight change in mix toward Structural products • July average lumber and panel composite pricing above 2018 levels at $558 and $552, respectively © 2 0 2 0 BLUELINX C O MP A N Y . A L L R I G H T S R E S E R V E D . 10
Sales and Gross Margin by Product Q2’19 vs. Q2’20 Sales by Product Historical Gross Margin Q2’19 Q2’20 17.3% 16.4% $706M $699M 15.9% 16.2% 16.1% 15.2% Specialty 14.4% 13.8% 14.1% Structural Structural Total 13.5% 13.3% 13.5% $224M $250M 32% 36% Specialty 10.1% 9.5% 9.3% $482M Specialty 8.9% 8.7% 68% $449M Structural 7.7% 64% Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Second Quarter Highlights • Specialty revenues disrupted by COVID-19 impacts early in the quarter • Primarily industrial end markets • Gross Margin improvement trend continued • 35 basis points higher than Q1 2020 • Specialty gross margin increased to 17.3%, Structural gross margin decline since Q1 driven by April lows • Most Specialty major product categories had improved gross margins year-over-year © 2 0 2 0 BLUELINX C O MP A N Y . A L L R I G H T S R E S E R V E D . 11
Operating Working Capital1 $ in millions Jun-20 Jun-19 Variance • Decreased inventory balance by $65 Current assets: million since the end of the first quarter Cash $11 $13 ($2) -15% Receivables 265 262 3 1% • Days Sales of Inventory remains Inventories, net 314 358 (44) -12% significantly better than prior year $590 $633 ($43) -7% • 7.4 days improvement Current liabilities: • Year over year, Q2 Days Sales Accounts payable $159 $175 ($16) -9% Outstanding improved by 2.2 days $159 $175 ($16) -9% Operating working capital $431 $458 ($27) -6% Working capital focus supporting strong cash flow 1Operating working capital is defined as the sum of cash, receivables, and inventory less accounts payable. 12
Capital Structure • ABL reduced to 2019 seasonal low point through efficiently managing working capital and generating positive operating cash flow • Continued focus on reducing Term Loan to $45 million to eliminate the Term Loan Leverage Ratio covenant • Term Loan Leverage Ratio 4.86x for Q2 2020; well below required 8.75x • Actively pursuing opportunities to monetize certain owned properties • Interest expense reduction of over $2 million for Q2 2020 compared to the prior year period; effective interest rates of 2.6% and 8.0% for the ABL and Term Loan, respectively 1 $ in millions $700M Bank Debt Deleveraging $600M $572M $516M $502M $473M $500MTerm Loan $178M $459M $147M $147M $77M $391M $400M $147M $69M $300M $200M ABL $394M $369M $382M $355M $326M $322M $100M - Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20 1Bank Debt = Term loan and ABL (Revolving Credit Facility) 13
July 2020 Update • Sales volumes positive to prior year, with both Structural and Specialty increasing • Growth stronger in Structural • Positive in all operating regions • Average commodity prices over 50% higher than July 2019 • Continued emphasis on working capital management • Carefully monitoring Structural inventory to manage the risk of a pricing decline • Ongoing deleveraging efforts through monetizing our real estate portfolio • Focused on strategic sales growth opportunities 14
Appendix 15
Cash Flow Statement $ in millions Q2 ‘20 YTD ‘20 Actual Prior Year Actual Prior Year Cash flows from operating activities: Net income $6.7 $6.3 $5.9 ($0.4) Changes in net cash from other operating activities 18.1 7.2 20.3 5.5 Changes in operating assets and liabilities: Receivables (16.7) (15.4) (71.8) (53.6) Inventories 64.7 28.7 31.8 (16.8) Accounts payable (3.5) 5.5 26.6 25.7 Decrease (increase) in prepaid assets (0.2) (7.7) (3.2) (8.1) Other assets and liabilities 9.7 (6.4) 9.2 (5.7) Net cash provided by operating activities $72.1 $11.9 $12.9 ($53.0) Cash flows from investing activities: Acquisition of business - net of cash acquired 0.0 0.0 0.0 6.0 Property, plant, and equipment investments (0.5) (0.5) (1.8) (1.8) Proceeds from disposition of assets 0.1 10.6 0.1 10.8 Net cash (used in) provided by investing activities ($0.4) $10.1 ($1.7) $15.0 Cash flows from financing activities: Repayments/borrowings on revolving credit facilities (59.4) (24.4) (4.3) 35.8 Repayments on term loan (8.6) (31.0) (77.9) (31.9) Proceeds from sale/leaseback transactions 0.0 44.8 78.3 44.8 Payments on finance lease obligations (2.4) (2.0) (4.6) (4.4) Other (2.3) (9.4) (2.9) (2.5) Net cash used in financing activities ($72.7) ($22.0) ($11.4) $41.8 (Decrease) increase in cash (1.1) (0.0) (0.1) 3.8 Cash balance, beginning of period 12.6 12.7 11.6 8.9 Cash balance, end of period $11.5 $12.7 $11.5 $12.7 © 2 0 2 0 BLUELINX C O MP A N Y . A L L R I G H T S R E S E R V E D . 16
Non-GAAP Measures BlueLinx reports its financial results in accordance with GAAP, but we also believe 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. We caution that non-GAAP measures should be considered in addition to, but not as a substitute for, our reported GAAP results. EBITDA and Adjusted EBITDA. We define EBITDA as an amount equal to net income plus interest expense and all interest expense related items, income taxes, depreciation and amortization, and we define Adjusted EBITDA as EBITDA adjusted for certain non-cash items and other special items, including compensation expense from share based compensation, one-time charges associated with the legal, consulting, and professional fees related to the Cedar Creek acquisition, and gains on sales of properties including amortization of deferred gains. We present EBITDA and Adjusted EBITDA because they are the primary measures used by management to evaluate operating performance and, we believe, help to enhance investors’ overall understanding of the financial performance and cash flows of our business. We believe EBITDA and Adjusted EBITDA are helpful in highlighting operating trends. We also believe that EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in their evaluation of companies, many of which present an EBITDA Adjusted EBITDA measure when reporting their results. However, EBITDA and Adjusted EBITDA are not presentations made in accordance with GAAP, and are not intended to present a superior measure of the financial condition from those determined under GAAP. EBITDA and Adjusted EBITDA, as used herein, are not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. Term Loan Leverage Ratio. Our term loan agreement requires us to maintain a Term Loan Leverage Ratio below certain levels. The Term Loan Leverage Ratio is calculated by dividing “Consolidated Total Debt” by “Consolidated EBITDA,” as those terms are defined in our term loan agreement. “Consolidated Total Debt” under the term loan agreement is determined by adding the balance of our term loan, the prior month’s average balance of our revolving credit facility, and our equipment finance lease liability, and reducing that amount by unrestricted cash up to $10.0 million. On June 27, 2020, the balance of our term loan was $68.8 million, the average balance of our revolving credit facility for the prior month was $320.1 million, our equipment finance lease liability was $29.2 million, and unrestricted cash was $10.0 million, resulting in “Consolidated Total Debt” of $408.1 million for purposes of the Term Loan Leverage Ratio. Liabilities related to sale-leaseback transactions are excluded from the calculation of “Consolidated Total Debt”. “Consolidated EBITDA” under the term loan agreement is generally determined by taking the Adjusted EBITDA that we report, which is calculated as described above, and adding additional adjustments and add-backs specified by the term loan agreement. We believe that our Term Loan Leverage Ratio is a meaningful metric to investors in evaluating our financial leverage. In addition, as mentioned above, our term loan agreement requires us to maintain our Term Loan Leverage Ratio below certain levels. Under the term loan agreement, the required Term Loan Leverage Ratio is 8.75:1.00 for the second and third quarters of 2020, and then it generally reduces on a quarterly basis for the remaining term of the loan. The Term Loan Leverage Ratio is not a presentation made in accordance with GAAP, and is not intended to present a superior measure of the financial condition from ratios determined under GAAP. Term Loan Leverage Ratio, as used herein, is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. © 2 0 2 0 BLUELINX C O MP A N Y . A L L R I G H T S R E S E R V E D . 17
Adjusted EBITDA $ in millions Q1 ‘19 Q2 ‘19 Q3 ‘19 Q4 ‘19 Q1 ‘20 Q2 ‘20 TTM Net income (loss) ($6.7) $6.3 ($7.0) ($10.2) ($0.8) $6.7 ($11.3) Adjustments: Depreciation and amortization 7.3 7.5 7.6 7.8 7.6 7.1 30.1 Interest expense, net 13.4 13.7 13.4 13.7 14.4 11.5 53.0 Provision for (benefit from) income taxes (2.5) 2.4 0.2 (4.0) (5.0) 3.4 (5.4) EBITDA 11.5 29.9 14.2 7.3 16.2 28.7 66.4 Gain from sales of property (9.8) (0.0) (3.3) (0.5) - (3.8) Amortization of deferred gain (1.0) (1.0) (1.1) (1.0) (1.0) (1.0) (4.0) Share-based compensation expense 0.7 0.6 1.2 0.1 1.0 0.9 3.1 Pension settlement and withdrawal costs 0.9 3.5 4.4 Merger and acquisition costs1 4.6 4.2 2.5 3.0 1.1 0.6 7.1 Restructuring and other2 0.8 1.0 1.3 1.3 3.1 2.0 7.7 Adjusted EBITDA $16.6 $24.9 $19.0 $10.9 $19.9 $31.2 $81.0 Term Loan adjustments and add-backs3 3.0 4 Consolidated EBITDA $84.0 1Reflects primarily legal, professional, and other integration costs related to the Cedar Creek acquisition 2Reflects costs related to our restructuring efforts, such as severance, net of other one-time non-operating items 3Adjusments and add-backs specified by the Term Loan agreement 4Use for purposes of calculating Term Loan Leverage Ratio under the Company’s Term Loan agreement © 2 0 2 0 BLUELINX C O MP A N Y . A L L R I G H T S R E S E R V E D . 18
Please reference the Earnings Release, 10-K and 10-Q available on our website www.BlueLinxCo.com © 2 0 2 0 BLUELINX C O MP A N Y . A L L R I G H T S R E S E R V E D . 19