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): May 5, 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 May 5, 2020, BlueLinx Holdings Inc. (“BlueLinx” or “the Company”) issued a press release announcing its financial results for the fiscal first quarter ended March 28, 2020. A copy of BlueLinx’s press release is furnished as Exhibit 99.1 hereto.
On May 6, 2020, as previously announced, BlueLinx will hold a teleconference and audio webcast to discuss its financial results from the fiscal first quarter ended March 28, 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: May 5, 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 First Quarter Financial Results
MARIETTA, Ga., May 5, 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 first quarter ended March 28, 2020, and provided a business update and review of current market conditions related to the COVID-19 pandemic.
2020 First Quarter Financial Highlights (all comparisons to prior year period unless otherwise noted)
| • | Net sales of $662 million, compared to $639 million |
|---|---|
| • | Gross margin increased to 14.1%, compared to 13.5% |
| --- | --- |
| • | Net loss of $0.8 million, compared to a net loss of $6.7 million |
| --- | --- |
| • | Adjusted EBITDA of $19.9 million, compared to $16.6 million |
| --- | --- |
| • | Term loan reduction of $78 million since the fourth quarter 2019; most recent balance is $69 million |
| --- | --- |
“Our first quarter results show the continuous and sustained progress that began in the second half of 2019 and a strong start to the year,” Mitch Lewis, President and Chief Executive Officer, stated. “Net sales improved by approximately 9% over the prior year when excluding the impact of our discontinued siding line. We recorded both year over year and sequential gross margin improvement, which combined with the improvement in net sales, drove Adjusted EBITDA to $19.9 million compared to $16.6 million last year, and $10.9 million in the fourth quarter of 2019.”
Mr. Lewis continued, “Our focus shifted towards the end of the first quarter as we implemented numerous actions in response to the COVID-19 pandemic including our highest priority of ensuring a safe and healthy workplace environment for our associates. We cannot predict how the business and social restrictions stemming from the pandemic will ultimately impact the U.S. housing industry and broader economy, however, we do know that our business has weathered a wide range of economic cycles. We are prepared to manage the challenges and opportunities that arise from this trying time and are focused on efficiently supporting our nation’s essential infrastructure needs in partnership with our customers and suppliers.”
2020 First Quarter Financial Results Review
The Company reported net sales of $662 million for the first quarter of 2020, compared to $639 million for the prior year period. Excluding $32 million from the prior year period related to the discontinued siding line, net sales were up approximately 9%. Net sales were driven by higher volumes, and $2 million in commodity price inflation.
The Company recorded gross profit of $93 million during the first quarter, compared to $86 million in the prior year period, with a gross margin of 14.1% compared to 13.5% in the prior year period. Gross margin improved in both structural and specialty categories year-over-year.
The Company recorded a net loss of $0.8 million for the first quarter, compared to a net loss of $6.7 million in the prior year period. First quarter 2020 net loss includes one-time charges for real estate financing obligation costs of $2 million, integration related charges of $1 million, share-based compensation expense of $1 million, and $1 million for restructuring charges. Net loss in the prior year period includes integration related charges of $5 million, share-based compensation expense of $1 million, and restructuring costs of $1 million.
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Capital Structure and Liquidity
During the quarter, the Company favorably amended both its revolving credit facility and term loan facility to enhance liquidity and provide financial flexibility. In January, the Company amended its revolving credit facility to better align advance rates with the seasonality of its business. At the end of February, the Company amended its term loan facility and it will no longer be subject to the quarterly total net leverage ratio covenant when the principal balance of the term loan is less than $45 million. The Company further amended the term loan facility on April 1, 2020, to provide greater financial flexibility by increasing the total net leverage ratio covenants in the second and third quarters of 2020 to 8.75:1.00 from 6.50:1.00 and 6.00:1.00, respectively.
The enhancements that were made in the first quarter to the Company’s capital structure contributed to its strong liquidity position. The Company entered the second quarter with excess availability and cash on hand of approximately $97 million.
COVID-19 Operational Response
“Our primary concern continues to be for the safety and well-being of our employees, their families and our communities,” said Mr. Lewis. The Company formed a cross-functional COVID-19 Disaster Response Team in February and implemented safety and hygiene protocols consistent with the Centers for Disease Control and Prevention (“CDC”) and local guidance. Those protocols continue to evolve in accordance with CDC and local guidelines.
In early March, the Company implemented policies and procedures to protect its associates, serve its customers, and support its suppliers. The Company also moved quickly to develop plans and take actions designed to give the Company financial and operational flexibility during the periods impacted by the pandemic. These actions are intended to reduce the Company’s cost structure, strengthen its balance sheet, and preserve and increase liquidity in response to the COVID-19 pandemic so far, and they include:
| • | Pausing virtually all new hiring |
|---|---|
| • | Limiting all non-essential spending |
| --- | --- |
| • | Substantially reducing headcount and variable operating expense correlating to local market demand declines |
| --- | --- |
| • | Furloughing approximately 15% of salaried workforce |
| --- | --- |
| • | Reducing or eliminating executive and key management base salaries for the next six months |
| --- | --- |
| • | Enhancing working capital efficiency to optimize liquidity for operations |
| --- | --- |
Current Market Conditions
As of the date of this release, the Company’s business has been designated as “essential” in all states in which it operates, and the Company is continuing to operate and provide service to customers and suppliers. The Company has not experienced any significant supply chain disruptions as a result of the COVID-19 pandemic, and the Company’s supply chain has remained intact in all material respects.
During April, many of the Company’s markets have experienced negative sales volume impacts when compared to the prior year. Certain select markets that have stronger shelter-in-place and related restrictions have experienced more significant impacts. Those impacts have been somewhat offset by increases in sales volume in areas where the pandemic has not had as significant of an impact. As a result, overall April daily sales were down approximately 11% over the prior year period. The Company has also experienced below average gross margin in April, primarily related to the degradation in market pricing for structural products in connection with the COVID-19 pandemic. The structural products market began to stabilize in late April, although the Company cannot predict whether this stabilization will continue.
Despite the decline in sales volume, the platform for long-term growth that the Company built through the latter half of 2019 into the start of 2020 has remained intact and should continue to provide a solid foundation for execution as and when the pandemic subsides.
2020 First Quarter Conference Call with Accompanying Slide Presentation
BlueLinx will host a conference call on May 6, 2020, at 10:00 a.m. Eastern Time, accompanied by a supporting slide presentation.
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Participants can access the live conference call via telephone at (877) 873-5864, using Conference ID # 7594658. Investors will also be able to access an archived audio recording of the conference call for one week following the live call by dialing (404) 537 3406, Conference ID # 7594658.
Investors can also listen to the live audio of the conference call and view the accompanying slide presentation by visiting the BlueLinx website, www.BlueLinxCo.com, and selecting the conference link on the Investor Relations page. After the conference call has concluded, an archived recording will be available on the BlueLinx website.
Use of Non-GAAP Measures
The Company reports its financial results in accordance with GAAP. The Company also believes that presentation of certain non-GAAP measures may be useful to investors and may provide a more complete understanding of the factors and trends affecting the business than using reported GAAP results alone. Any non-GAAP measures used herein are reconciled to their most directly comparable GAAP measures herein or in the financial tables accompanying this news release. The Company cautions that non-GAAP measures should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results.
Adjusted EBITDA
We define Adjusted EBITDA as an amount equal to net income plus interest expense and all interest expense related items, income taxes, depreciation and amortization, and further adjusted for certain non-cash items and other special items, including compensation expense from share-based compensation, one-time charges associated with the legal and professional fees and integration costs related to the Cedar Creek acquisition, and gains on sales of properties including amortization of deferred gains.
We present Adjusted EBITDA because it is a primary measure used by management to evaluate operating performance and, we believe, helps to enhance investors’ overall understanding of the financial performance and cash flows of our business. We believe Adjusted EBITDA is helpful in highlighting operating trends. We also believe that Adjusted EBITDA is frequently used by securities analysts, investors and other interested parties in their evaluation of companies, many of which present an Adjusted EBITDA measure when reporting their results. However, Adjusted EBITDA is not a presentation made in accordance with GAAP, and is not intended to present a superior measure of our financial condition from those measures determined under GAAP. Adjusted EBITDA, as used herein, is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. This non-GAAP measure is reconciled in the “Reconciliation of Non-GAAP Measurements” table later in this release.
About BlueLinx Holdings Inc.
BlueLinx (NYSE: BXC) is a leading wholesale distributor of building and industrial products in the United States with over 50,000 branded and private-label SKUs, and a broad distribution footprint servicing 40 states. BlueLinx has a differentiated distribution platform, value-driven business model and extensive cache of products across the building products industry. Headquartered in Marietta, Georgia, BlueLinx has over 2,200 associates and distributes its comprehensive range of structural and specialty products to approximately 15,000 national, regional, and local dealers, as well as specialty distributors, national home centers, industrial, and manufactured housing customers. BlueLinx encourages investors to visit its website, www.BlueLinxCo.com, which is updated regularly with financial and other important information about BlueLinx.
Contacts:
Investors:
Kelly C. Janzen, SVP, CFO & 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 around the impact of the pandemic on the U.S. housing industry and broader economy, our preparations to manage the pandemic, our areas of focus during the pandemic, and our related protocols, policies, procedures, plans, and actions and their potential effects on our cost structure, balance sheet, and liquidity; the long-term effects and benefits of amendments to our revolving credit facility and term loan facility, including with respect to liquidity, financial flexibility, and our leverage covenants; the structural products market and its stability; and our platform for long-term growth and its ability to support execution as and when the pandemic subsides.
Forward-looking statements in this press release are based on estimates and assumptions made by our management that, although believed by us to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties that may cause our business, strategy, or actual results to differ materially from the forward-looking statements. These risks and uncertainties include those listed under the heading “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 29, 2018, and those discussed in our Quarterly Reports on Form 10-Q and in our periodic reports filed with the SEC from time to time. We operate in a changing environment in which new risks can emerge from time to time. It is not possible for management to predict all of these risks, nor can it assess the extent to which any factor, or a combination of factors, may cause our business, strategy, or actual results to differ materially from those contained in forward-looking statements. Factors that may cause these differences include, among other things: the COVID-19 pandemic and other contagious illness outbreaks and their potential effects on our industry, suppliers and supply chain, and customers, and our business, results of operations, cash flows, financial condition, and future prospects; our ability to integrate and realize anticipated synergies from acquisitions; loss of material customers, suppliers, or product lines in connection with acquisitions; operational disruption in connection with the integration of acquisitions; our indebtedness and its related limitations; sufficiency of cash flows and capital resources; our ability to monetize real estate assets; fluctuations in commodity prices; adverse housing market conditions; disintermediation by customers and suppliers; changes in prices, supply and/or demand for our products; inventory management; competitive industry pressures; industry consolidation; product shortages; loss of and dependence on key suppliers and manufacturers; import taxes and costs, including new or increased tariffs, anti-dumping duties, countervailing duties, or similar duties; our ability to successfully implement our strategic initiatives; fluctuations in operating results; sale-leaseback transactions and their effects; real estate leases; changes in interest rates; exposure to product liability claims; our ability to complete offerings under our shelf registration statement on favorable terms, or at all; changes in our product mix; petroleum prices; information technology security and business interruption risks; litigation and legal proceedings; natural disasters and unexpected events; activities of activist stockholders; labor and union matters; limits on net operating loss carryovers; pension plan assumptions and liabilities; risks related to our internal controls; retention of associates and key personnel; federal, state, local and other regulations, including environmental laws and regulations; and changes in accounting principles. Given these risks and uncertainties, we caution you not to place undue reliance on forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.
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BLUELINX HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| March 28, 2020 | March 30, 2019 | |||||
| (In thousands, except per share data) | ||||||
| Net sales | $ | 662,070 | $ | 638,701 | ||
| Cost of sales | 568,861 | 552,656 | ||||
| Gross profit | 93,209 | 86,045 | ||||
| Gross margin | 14.1 | % | 13.5 | % | ||
| Operating expenses: | ||||||
| Selling, general, and administrative | 77,769 | 74,410 | ||||
| Gains from sales of property | (525 | ) | — | |||
| Depreciation and amortization | 7,635 | 7,328 | ||||
| Total operating expenses | 84,879 | 81,738 | ||||
| Operating income | 8,330 | 4,307 | ||||
| Non-operating expenses (income): | ||||||
| Interest expense, net | 14,380 | 13,401 | ||||
| Other (income) expense, net | (237 | ) | 150 | |||
| Loss before benefit from income taxes | (5,813 | ) | (9,244 | ) | ||
| Benefit from income taxes | (5,026 | ) | (2,525 | ) | ||
| Net loss | $ | (787 | ) | $ | (6,719 | ) |
| Basic loss per share | $ | (0.08 | ) | $ | (0.72 | ) |
| Diluted loss per share | $ | (0.08 | ) | $ | (0.72 | ) |
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BLUELINX HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 28, 2020 | December 28, 2019 | |||||
|---|---|---|---|---|---|---|
| (In thousands, except share data) | ||||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash | $ | 12,558 | $ | 11,643 | ||
| Receivables, less allowances of $3,875 and $3,236, respectively | 247,940 | 192,872 | ||||
| Inventories, net | 378,634 | 345,806 | ||||
| Other current assets | 26,437 | 27,718 | ||||
| Total current assets | 665,569 | 578,039 | ||||
| Property and equipment, at cost | 308,288 | 308,067 | ||||
| Accumulated depreciation | (117,036 | ) | (112,299 | ) | ||
| Property and equipment, net | 191,252 | 195,768 | ||||
| Operating lease right-of-use assets | 52,502 | 54,408 | ||||
| Goodwill | 47,772 | 47,772 | ||||
| Intangible assets, net | 24,414 | 26,384 | ||||
| Deferred tax assets | 59,308 | 53,993 | ||||
| Other non-current assets | 20,404 | 15,061 | ||||
| Total assets | $ | 1,061,221 | $ | 971,425 | ||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 162,398 | $ | 132,348 | ||
| Accrued compensation | 8,216 | 7,639 | ||||
| Current maturities of long-term debt, net of discount and debt issuance<br> costs of $74 and $74, respectively | 2,176 | 2,176 | ||||
| Finance leases - short-term | 5,924 | 6,385 | ||||
| Real estate deferred gains - short-term | 3,935 | 3,935 | ||||
| Operating lease liabilities - short-term | 7,016 | 7,317 | ||||
| Other current liabilities | 9,903 | 11,323 | ||||
| Total current liabilities | 199,568 | 171,123 | ||||
| Non-current liabilities: | ||||||
| Long-term debt, net of discount and debt issuance costs<br> of $11,861 and $12,481, respectively | 444,937 | 458,439 | ||||
| Real estate financing obligation | 123,765 | 44,914 | ||||
| Finance leases - long-term | 145,427 | 146,611 | ||||
| Real estate deferred gains - long-term | 80,935 | 81,886 | ||||
| Operating lease liabilities - long-term | 45,571 | 47,091 | ||||
| Pension benefit obligation | 22,596 | 23,420 | ||||
| Other non-current liabilities | 24,106 | 24,024 | ||||
| Total liabilities | 1,086,905 | 997,508 | ||||
| Commitments and Contingencies | ||||||
| STOCKHOLDERS' DEFICIT: | ||||||
| Common Stock, $0.01 par value, 20,000,000 shares authorized, <br> 9,366,641 and 9,365,768 outstanding on March 28, 2020 and December 28, 2019, respectively | 94 | 94 | ||||
| Additional paid-in capital | 261,980 | 260,974 | ||||
| Accumulated other comprehensive loss | (34,383 | ) | (34,563 | ) | ||
| Accumulated stockholders’ deficit | (253,375 | ) | (252,588 | ) | ||
| Total stockholders’ deficit | (25,684 | ) | (26,083 | ) | ||
| Total liabilities and stockholders’ deficit | $ | 1,061,221 | $ | 971,425 |
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BLUELINX HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended March 28, 2020 | Three Months Ended March 30, 2019 | |||||
|---|---|---|---|---|---|---|
| (In thousands) | ||||||
| Cash flows from operating activities: | ||||||
| Net loss | $ | (787 | ) | $ | (6,719 | ) |
| Adjustments to reconcile net loss to cash used in operations: | ||||||
| Benefit from income taxes | (5,026 | ) | (2,525 | ) | ||
| Depreciation and amortization | 7,635 | 7,328 | ||||
| Amortization of debt issuance costs | 956 | 455 | ||||
| Gains from sales of property | (525 | ) | — | |||
| Share-based compensation | 1,004 | 706 | ||||
| Amortization of deferred gain | (984 | ) | (951 | ) | ||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | (55,068 | ) | (37,908 | ) | ||
| Inventories | (32,828 | ) | (45,479 | ) | ||
| Accounts payable | 30,050 | 26,004 | ||||
| Prepaid and other current assets | (3,006 | ) | (423 | ) | ||
| Other assets and liabilities | (608 | ) | 1,191 | |||
| Net cash used in operating activities | (59,187 | ) | (58,321 | ) | ||
| Cash flows from investing activities: | ||||||
| Acquisition of business, net of cash acquired | — | 6,009 | ||||
| Proceeds from sale of assets | 44 | 143 | ||||
| Property and equipment investments | (1,245 | ) | (1,223 | ) | ||
| Net cash (used in) provided by investing activities | (1,201 | ) | 4,929 | |||
| Cash flows from financing activities: | ||||||
| Borrowings on revolving credit facilities | 204,196 | 197,114 | ||||
| Repayments on revolving credit facilities | (149,079 | ) | (136,892 | ) | ||
| Repayments on term loan | (69,238 | ) | (900 | ) | ||
| Principal payments on real estate financing obligations | (340 | ) | — | |||
| Proceeds from real estate financing obligations | 78,329 | — | ||||
| Debt financing costs | (336 | ) | — | |||
| Repurchase of shares to satisfy employee tax withholdings | (7 | ) | — | |||
| Principal payments on finance lease obligations | (2,222 | ) | (2,187 | ) | ||
| Net cash provided by financing activities | 61,303 | 57,135 | ||||
| Net change in cash | 915 | 3,743 | ||||
| Cash, beginning of period | 11,643 | 8,939 | ||||
| Cash, end of period | $ | 12,558 | $ | 12,682 |
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BLUELINX HOLDINGS INC.
RECONCILIATION OF NON-GAAP MEASUREMENTS
(Unaudited)
The following schedule reconciles net loss to Adjusted EBITDA:
| Quarter Ended | ||||||
|---|---|---|---|---|---|---|
| March 28, 2020 | March 30, 2019 | |||||
| (In thousands) | ||||||
| Net loss | $ | (787 | ) | $ | (6,719 | ) |
| Adjustments: | ||||||
| Depreciation and amortization | 7,635 | 7,328 | ||||
| Interest expense | 14,380 | 13,401 | ||||
| Benefit from income taxes | (5,026 | ) | (2,525 | ) | ||
| Gain from sales of property | (525 | ) | — | |||
| Amortization of deferred gain | (984 | ) | (951 | ) | ||
| Share-based compensation expense | 1,004 | 706 | ||||
| Real estate financing obligation costs | 1,793 | — | ||||
| Merger and acquisition costs ^(1)^ | 1,070 | 4,597 | ||||
| Restructuring, severance, and legal | 1,309 | 764 | ||||
| Adjusted EBITDA | $ | 19,869 | $ | 16,601 |
^(1)^ Reflects primarily legal, professional and other integration costs related to the Cedar Creek acquisition
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bxcq12020earningspresent
BlueLinx (NYSE: BXC) First Quarter 2020 Earnings Call Presentation May 6, 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 potential effects of recent amendments to our term loan and revolving credit facility, including on our liquidity and financial flexibility; the potential effects of safety and economic actions taken in response to the COVID-19 pandemic, including estimated second quarter 2020 cost savings therefrom; the outlook for housing starts and our end- use markets, and the potential effects of the COVID-19 pandemic thereon. 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 Adjusted EBITDA, 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 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. 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
First Quarter 2020 – Overview • First Quarter Net Sales were $662 million increasing $23 million versus Q1 2019 • Up 9% excluding the discontinued siding line • Gross Margin improved to 14.1%, the Company’s highest quarterly Gross Margin since going public in 2004 • First Quarter Adjusted EBITDA of $19.9 million was up $3.3 million versus the same period last year • Closed real estate transactions that decreased the Term Loan principal balance by $78 million since year end • Term Loan and ABL reduced by $166 million since Q2 2018 • 13 properties, approximately $40 million market value, remaining in owned portfolio • Negotiated favorable ABL and Term Loan amendments; revised terms will help support potential liquidity needs during COVID-19 pandemic • Actively managing health and safety risks associated with COVID-19 3
Key Pandemic Safety Actions • Established financial and operational risk management team, led by Chief Executive Officer • Created COVID-19 Emergency Preparedness Task Force in February led by Chief Administrative Officer • Prioritized associate health and safety with respect to all business decisions, including: • Enhanced safety procedures for company drivers, including contactless delivery procedures • Established rigorous protocols for all material handlers including social distancing and daily cleaning • Launched hygiene and sanitization awareness campaign at HQ and distribution centers • Implemented enhanced cleaning and disinfecting procedures such as fog sprayers • Instituted work from home policy for all non-essential employees • Imposed ban on employee business travel, including flights and local visits • Instituted procedural changes to manage business in a virtual environment • Following or exceeding all State guidelines regarding the pandemic Currently there are no confirmed COVID-19 cases among any BlueLinx Associates 4
Key Pandemic Economic Actions Fixed Cost Response • CEO base salary reduced to $1 per month for 6 months beginning April 1 • Executive leadership reduced base salaries by 10% for six months effective April 1 • Board voted to reduce their 2nd and 3rd quarter 2020 cash compensation by 20% • Furloughed approximately 15% of existing salaried associates • Certain associates redeployed to strengthen support for accounts receivable, accounts payable and centralized inventory analysis and control • Estimated savings of approximately $13 million on an annualized basis Variable Cost Response • Limited all non-essential spending and delayed new capital expenditures • Implemented rigorous spending criteria through dedicated regional operational leadership • Established daily expense monitoring to correlate to volume declines in local markets Actions to Enhance Liquidity • Negotiated favorable term loan covenant amendments to provide financial flexibility • ABL changes to enhance borrowing base and increase excess availability • Maximizing working capital efficiency 5
End-Use Market Outlook MARKET OUTLOOK • COVID-19 pandemic creates short-term pressure and unpredictability while long-term prospects remain strong • March 2020 Builders Confidence Index of 72 fell to 30 in April due to uncertainty surrounding markets and the pandemic • April 30-year fixed rate mortgage rates down to 3.2%, lowest since 1971 • Pandemic creates uncertainty in housing starts estimates for 2020 U.S. SINGLE FAMILY HOUSING STARTS BUILDERS CONFIDENCE INDEX (in 000s) U.S. Census Bureau, Seasonally Adjusted NAHB Builders Confidence Index (%) 1,400 80 70 1,200 50-Year Historical Average 1,029K 60 1,000 Historical Average 51 50 800 40 600 30 400 20 200 10 0 0 2008 2010 2012 2014 2016 2018 2020 2008 2010 2012 2014 2016 2018 2020 6
Current Market Conditions • April daily revenue 11% below prior year, down 8% excluding the impact of the discontinued siding line • Dealer demand driven primarily from existing home builder contracts • Reduced pipeline of new home contracts may ultimately further impact demand • Market demand varies significantly among regions and metropolitan areas • Northeast appears to be hardest hit in April • Florida and Southeast remain relatively strong • Home Center sales volume outperforming traditional dealer sales volume • Appears that shelter in place has allowed for increase in DIY projects • April commodity prices created pressure on gross margins • Composite lumber and panel price indices are down 18% and 16%, respectively, from year to date peak in early March • Wood based commodity prices stabilized towards the end of April 7
Financial Overview
Financial Summary – First Quarter 2020 • Net Sales of $662 million, compared to $639 million • Market share growth strategies being implemented • Increase of $55 million or 9%, excluding impact of discontinued siding line • Gross Profit of $93 million, compared to $86 million • Gross Margin of 14.1%, up 60 basis points • Net Loss of $0.8 million, improved from Net Loss of $6.7 million • Adjusted EBITDA of $19.9 million, up $3.3 million compared to $16.6 million • ABL Excess Availability, including cash on hand, approximately $97 million at quarter end All comparisons are made to same period prior year unless otherwise noted 9
Commodity Lumber and Panel Prices FRAMING LUMBER COMPOSITE PRICE STRUCTURAL PANEL COMPOSITE PRICE Source: Random Lengths Source: Random Lengths $550 $550 $450 $450 5YR AVG $404 2020 2020 5YR AVG $383 2019 2018 $350 $350 2018 2019 $250 $250 Mar Jun Sep Dec Mar Jun Sep Dec FIRST QUARTER HIGHLIGHTS • Effect on net sales from commodity prices were favorable for the first time since early 2018 • Modest impact on net sales of $2 million in Q1 2020 • Wood based structural commodity prices began to fall precipitously in early March • Framing lumber prices fell 18% and structural panel prices fell 16% from March peak • Commodity prices stabilized in mid-April and have begun to strengthen 10
Sales and Gross Margin by Product Q1’19 vs. Q1’20 SALES BY PRODUCT HISTORICAL GROSS MARGIN 16.4% Q1’19 Q1’20 16.2% 16.1% 15.9% 15.2% Specialty Structural Structural 10.1% 31% 9.5% 36% 8.9% 8.7% 7.7% Specialty Specialty 64% 69% Structural Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 FIRST QUARTER HIGHLIGHTS • Gross Margins continued improving trend since Q1 2019 • Highest gross margin in over 15 years • Specialty gross margin increased to 16.4% • Up 120 basis points versus the prior year period • All specialty product categories had improved margins year-over-year • Structural margins influenced by increase in underlying commodity pricing through early March • Negatively impacted in late March through April due to significant decline in commodity market 11
Capital Structure and Deleveraging TERM LOAN REDUCTION • Term Loan principal balance reduced by $78 $ in millions million since Q4 2019 • Current principal balance is $69 million • Reduction to $45 million eliminates leverage covenant • ABL Excess Availability of $97 million as Q1 2020 53% reduction since Q4 2019 • ABL and Term Loan amendments provide $179 financial flexibility during pandemic $147 • Higher seasonal advance rates on ABL • Term Loan leverage ratio increased to 8.75x $77 $69 for Q2 and Q3 2020 from 6.5x and 6.0x, respectively Q4'18 Q4'19 Q1'20 Apr'20 12
Appendix
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. 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, consulting, and professional fees 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. 14
Adjusted EBITDA $ in millions (Unaudited) Q1 2020 Q1 2019 Net Loss $ (0.8) $ (6.7) Adjustments: Depreciation and amortization 7.6 7.3 Interest expense 14.4 13.4 Benefit from income taxes (5.0) (2.5) Gain from sales of property (0.5) - Amortization of deferred gain (1.0) (1.0) Share-based compensation expense 1.0 0.7 Real estate financing obligation costs 1.8 - Merger and acquisition costs(1) 1.1 4.6 Restructuring, severance, and legal 1.3 0.8 Adjusted EBITDA $ 19.9 $ 16.6 (1) Reflects primarily legal, professional, and other integration costs related to the Cedar Creek acquisition 15
Please reference the Earnings Release, 10-K and 10-Q available on our website www.BlueLinxCo.com 16