-- Net Income, Before Mortgage Refinancing Charge, Up 62 Percent --
-- GAAP Net Income, Including Mortgage Refinancing Charge,
Up 24 Percent --
-- Specialty Product Unit Volume Up 9.6 Percent From Prior Year --
ATLANTA, Aug. 9, 2006 (PRIMEZONE) -- BlueLinx Holdings Inc. (NYSE:BXC), a leading distributor of building products in North America, today reported financial results for the second quarter ended July 1, 2006.
The company's second-quarter net income, excluding a previously announced after-tax charge of $3 million, or $0.10 per diluted share associated with the company's mortgage refinancing, totaled $12.6 million, or $0.41 per diluted share, a 62% increase compared with year-ago net income. Second-quarter GAAP net income, which includes the mortgage refinancing charge, totaled $9.6 million, or $0.31 per diluted share, compared with $7.8 million, or $0.25 per diluted share, for the same quarter a year ago.
Revenues for the second quarter decreased 7.3% to $1.38 billion from $1.49 billion for the same period a year ago. The decline reflects a 16.9% decrease in structural product sales which was partially offset by an 11.2% increase in specialty product sales. The specialty sales gain was driven by a 9.6% increase in unit volume and slightly higher specialty product prices. Lane Stanton Vance (LSV), the specialty hardwoods distributor acquired by BlueLinx in July 2005, contributed 2.6 percentage points of the total specialty unit volume growth. Approximately two-thirds of the decline in structural product sales resulted from decreased unit volume as the company focused on preserving its structural product margins against steadily deteriorating wood-based structural product prices during the quarter.
Gross profit for the second quarter rose to $136.4 million from $115.7 million in the prior-year period. Gross margin improved 210 basis points, to 9.9% from 7.8% a year ago, reflecting growth in higher-margin specialty products and effective management of structural product inventory in a declining price environment for wood-based structural products. Total operating expenses of $103.2 million for the second quarter increased $10.7 million from the same period a year ago, reflecting normal ongoing operating expenses associated with LSV, as well as higher expenses for incentive compensation related to increased specialty product sales, increased salaries and staffing, and sales promotion expenses. Operating income for the quarter was $33.3 million, compared with $23.2 million a year ago.
For the six months ended July 1, 2006, net income, excluding the after-tax mortgage refinancing related charge of $3 million, or $0.10 per diluted share, totaled $22.4 million, or $0.73 per diluted share. GAAP net income for the period, which includes the charge, totaled $19.4 million, or $0.63 per diluted share, compared with $16.2 million, or $0.53 per diluted share, a year ago. Sales for the six months totaled $2.76 billion, down 2.9% from $2.84 billion the same period a year ago, reflecting lower structural product prices and unit volume that were partially offset by a 12.1% increase in specialty product unit volume.
Gross profit increased 13% to $266.4 million from $235 million for the year ago period, translating to gross margins of 9.7% and 8.3%, respectively. The increased gross profit for the first six months of 2006 primarily reflects the company's focus on specialty product growth and its effective management of structural products to preserve margins in a declining price environment. Total operating expenses of $205.5 million for the six-month period increased $17.3 million, primarily reflecting normal ongoing operating expenses associated with LSV, as well as higher expenses for incentive compensation related to increased specialty products sales, increased salaries and staffing, and increased fuel costs.
During the 2006 second quarter, BlueLinx entered into a $295 million, 10-year fixed rate mortgage with an interest rate of 6.4%, replacing its existing $165 million floating-rate mortgage which was at 7.4% at the time of the refinancing. The company used the remaining proceeds from the refinancing to pay down approximately $125 million of its outstanding line of credit. Additionally, the company entered into a $150 million, five-year interest rate swap to convert floating rate LIBOR interest rates on a portion of its current credit line to a fixed interest rate of 5.4%. These actions reduce the company's projected annual interest expenses by approximately $1.6 million after tax, or $0.05 per diluted share, compared with the company's existing interest rates at the time of the refinancing, and provide protection against possible increases in market interest rates. As part of this refinancing, the company recorded a charge of $3 million, or $0.10 per diluted share associated with the early termination of its previous mortgage.
"We managed our business well during the second quarter," said Stephen Macadam, chief executive officer. "We continued to grow our specialty products business and effectively managed our structural products business in an operating environment characterized by deteriorating wood-based structural product prices and a softening housing industry. Specialty unit volume climbed 9.6% from a year ago as we continued to focus on our long-term objective of expanding specialty products to more than 60% of total sales. The strong unit volume growth in specialty outpaced our overall end-use markets by approximately 11 percentage points during the quarter, and was the primary driver of our 11.2% increase in specialty product sales for the second quarter.
"During the quarter, the housing market softened and prices for key grades of plywood, lumber and OSB declined approximately 12% from the end of the first quarter, pressuring both unit volume and prices in our structural products business," Macadam noted. "This resulted in a 16.9% decline in structural sales from a year ago. We managed our structural products business effectively in these conditions, expanding structural gross margin to 7% for the quarter from 5.3% last year. The overall decline in revenue was a result of our structural products strategy focusing on margin preservation over unit volume growth in the current environment.
"At the same time, we continued to make the necessary investments in people, processes, inventory and our financial structure to support the future growth of our company," Macadam continued. "We expanded inventory in specialty products to support both existing and new programs, and we continued to invest in sales, marketing and product procurement professionals, particularly in the specialty products area. In addition, through a series of actions that included a major mortgage refinancing, we lowered ongoing interest rate costs and substantially reduced our exposure to interest rate increases.
"As we progress into the second half of 2006, we are operating in an environment in which the housing industry has slowed further from the second quarter, and in which wood-based structural product prices have continued to weaken," Macadam said. "Despite this increasingly difficult environment, we believe we are positioned to continue progressing toward our long-term strategic objectives. Our business is diversified in terms of both end-use customers and geography. While new home construction represents approximately 50% of our end-use markets, we currently achieve a significant portion of our specialty unit volume growth through our other end-use markets, which include industrials, repair and remodel, and manufactured housing. In addition, we believe the geographic diversity of our business makes us less susceptible to regional fluctuations in demand. Most importantly, we believe BlueLinx is positioned to grow as a market leader, operating from a unique business platform and executing a strategy focused on growing our higher-margin, less-price-sensitive specialty products business while profitably managing our structural business."
Dividend
On August 8, 2006, the BlueLinx Board of Directors declared a $0.125 dividend on the company's common shares for the quarter ended July 1, 2006. The dividend is payable on September 29, 2006, to shareholders of record on September 15, 2006.
Conference Call
BlueLinx will host a conference call today at 10:00 a.m. Eastern Time, accompanied by a supporting slide presentation. Investors may listen to the conference call and download the presentation by going to the Investor Relations page of the BlueLinx Web site at www.BlueLinxCo.com. Investors also can access a recording of the conference call for one week by calling 706-645-9291, Conference ID No. 3213806. The recording will be available two hours after the conference call has concluded. Investors also can access a recording of this call on the BlueLinx Web site where a replay of the Webcast will be available for 90 days.
Use of Non-GAAP Measures
BlueLinx reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). The company also believes that presentation of certain non-GAAP measures, i.e., results excluding certain charges, provides useful information for the understanding of its ongoing operations and enables investors to focus on period-over-period operating performance, without the impact of significant special items, and thereby enhances the user's overall understanding of the company's current financial performance relative to past performance and provides a better baseline for modeling future earnings expectations. Non-GAAP measures are reconciled 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.
About BlueLinx Holdings Inc.
Headquartered in Atlanta, Georgia, BlueLinx Holdings Inc., operating through its wholly owned subsidiary BlueLinx Corporation, is a leading distributor of building products in North America. Employing more than 3,600 people, BlueLinx offers 10,000 products from over 750 suppliers to service approximately 12,000 customers nationwide, including dealers, industrial manufacturers, manufactured housing producers and home improvement retailers. The company operates its distribution business from sales centers in Atlanta and Denver, and its network of more than 70 warehouses. BlueLinx, which is on the Fortune 500 list of the nation's largest companies, is traded on the New York Stock Exchange under symbol BXC. Additional information about BlueLinx can be found on its Web site at www.BlueLinxCo.com.
The BlueLinx Corporation logo is available at http://www.primezone.com/newsroom/prs/?pkgid=2091
Forward-looking Statements
This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All of these forward-looking statements are based on estimates and assumptions made by our management that, although believed by BlueLinx to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of its control, that may cause its business, strategy or actual results to differ materially from the forward-looking statements. These risks and uncertainties may include, among other things: changes in the supply and/or demand for products that we distribute; the activities of competitors; changes in significant operating expenses; changes in the availability of capital; the ability to identify acquisition opportunities and effectively and cost-efficiently integrate acquisitions; general economic and business conditions in the United States; adverse weather patterns or conditions; acts of war or terrorist activities; variations in the performance of the financial markets; and other factors described in the "Risk Factors" section in the company's Annual Report on Form 10-K for the year ended December 31, 2005, and in its periodic reports filed with the Securities and Exchange Commission from time to time. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. BlueLinx undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.
BlueLinx Holdings Inc.
Statements of Operations
in thousands, except per share data
Quarters Ended Six Months Ended
---------------------- ----------------------
July 1, July 2, July 1, July 2,
2006 2005 2006 2005
---------- ---------- ---------- ----------
(unaudited) (unaudited) (unaudited) (unaudited)
Net sales $1,378,950 $1,486,976 $2,755,556 $2,838,595
Cost of sales 1,242,507 1,371,295 2,489,161 2,603,586
---------- ---------- ---------- ----------
Gross profit 136,443 115,681 266,395 235,009
---------- ---------- ---------- ----------
Operating expenses:
Selling, general,
and
administrative 98,122 87,948 195,389 179,383
Depreciation and
amortization 5,063 4,557 10,106 8,800
---------- ---------- ---------- ----------
Total operating
expenses 103,185 92,505 205,495 188,183
---------- ---------- ---------- ----------
Operating income 33,258 23,176 60,900 46,826
Non-operating
expenses:
Interest expense 12,262 10,656 23,459 19,990
Charges associated
with mortgage
refinancing 4,864 -- 4,864 --
Other (income)
expense, net (69) 224 12 353
---------- ---------- ---------- ----------
Income before
provision for
income taxes 16,201 12,296 32,565 26,483
Provision for income
taxes 6,590 4,545 13,160 10,314
---------- ---------- ---------- ----------
Net income $ 9,611 $ 7,751 $ 19,405 $ 16,169
========== ========== ========== ==========
Basic weighted
average number of
common shares
outstanding 30,649 30,186 30,533 30,170
========== ========== ========== ==========
Basic net income per
share applicable to
common stock $ 0.31 $ 0.26 $ 0.64 $ 0.54
========== ========== ========== ==========
Diluted weighted
average number of
common shares
outstanding 30,790 30,476 30,751 30,458
========== ========== ========== ==========
Diluted net income
per share applicable
to common stock $ 0.31 $ 0.25 $ 0.63 $ 0.53
========== ========== ========== ==========
Dividends declared
per share of common
stock $ 0.125 $ 0.125 $ 0.25 $ 0.25
========== ========== ========== ==========
BlueLinx Holdings Inc.
Balance Sheet
in thousands
July 1, December 31,
2006 2005
----------- -----------
(unaudited)
Assets:
Current assets:
Cash $ 27,146 $ 24,320
Receivables 469,121 399,093
Inventories 532,161 473,068
Deferred income taxes 7,556 6,678
Other current assets 44,680 44,909
----------- -----------
Total current assets 1,080,664 948,068
----------- -----------
Property, plant, and equipment:
Land and land improvements 56,534 56,521
Buildings 93,720 93,381
Machinery and equipment 57,177 54,200
Construction in progress 1,314 2,350
----------- -----------
Property, plant, and equipment, at cost 208,745 206,452
Accumulated depreciation (30,468) (22,403)
----------- -----------
Property, plant, and equipment, net 178,277 184,049
Other non-current assets 27,402 25,523
----------- -----------
Total assets $ 1,286,343 $ 1,157,640
=========== ===========
Liabilities :
Current liabilities:
Accounts payable $ 313,869 $ 327,004
Bank overdrafts 59,358 62,392
Accrued compensation 10,402 13,494
Current maturities of long-term debt 126,362 --
Other current liabilities 11,530 15,195
----------- -----------
Total current liabilities 521,521 418,085
----------- -----------
Noncurrent liabilities:
Long-term debt 550,000 540,850
Deferred income taxes 1,309 1,911
Other long-term liabilities 13,645 12,942
----------- -----------
Total liabilities 1,086,475 973,788
----------- -----------
Shareholders' Equity:
Common stock 308 303
Additional paid in capital 135,898 132,346
Accumulated other comprehensive income 1,757 1,023
Retained earnings 61,905 50,180
----------- -----------
Total shareholders' equity 199,868 183,852
----------- -----------
----------- -----------
Total liabilities and equity $ 1,286,343 $ 1,157,640
=========== ===========
BlueLinx Holdings Inc.
Statements of Cash Flows
in thousands
Six Months Ended
-----------------------
July 1, July 2,
2006 2005
--------- ---------
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 19,405 $ 16,169
Adjustments to reconcile net income
to cash used in operations:
Depreciation and amortization 10,106 8,800
Amortization of debt issue costs 1,409 1,893
Charges associated with mortgage
refinancing 4,864 --
Deferred income tax benefit (1,733) (1,311)
Stock-based compensation 1,246 1,370
Changes in assets and
liabilities:
Receivables (70,028) (145,817)
Inventories (59,093) 14,098
Accounts payable (13,733) 64,876
Changes in other working capital (6,378) (17,446)
Other 498 622
--------- ---------
Net cash used in operating activities (113,437) (56,746)
--------- ---------
Cash flows from investing activities:
Property, plant, and equipment
investments (2,785) (6,323)
Proceeds from sale of assets 332 650
--------- ---------
Net cash used in investing activities (2,453) (5,673)
--------- ---------
Cash flows from financing activities:
Issuance of common stock, net -- 8,600
Proceeds from stock options exercised 1,483 38
Excess tax benefits from stock-based
compensation 863 --
Net increase in revolving credit facility 5,512 62,492
Proceeds from new mortgage 295,000 --
Debt financing costs (5,953) --
Retirement of old mortgage (165,000) --
Prepayment fees associated with old
mortgage (2,475) --
Increase (decrease) in bank overdrafts (3,034) 10,460
Common dividends paid (7,680) (7,546)
--------- ---------
Net cash provided by financing activities 118,716 74,044
--------- ---------
Increase in cash 2,826 11,625
Balance, beginning of period 24,320 15,572
--------- ---------
Balance, end of period $ 27,146 $ 27,197
========= =========
BlueLinx Holdings Inc.
Reconciliation of Non-GAAP Financial Measures to their
GAAP Equivalents in thousands, except per share data
Quarters Ended Six Months Ended
-------------------- --------------------
July 1, July 2, July 1, July 2,
2006 2005 2006 2005
-------- -------- -------- --------
(unaudited) (unaudited) (unaudited) (unaudited)
Reconciliation of Net
income before mortgage
refinancing charges
and
Net income before
mortgage refinancing
charges per share:
Net Income $ 9,611 $ 7,751 $ 19,405 $ 16,169
Reconciling Items:
Write-off of
unamortized debt
issuance costs 2,828 -- 2,828 --
Termination penalty
resulting from
prepayment of old
mortgage 1,650 -- 1,650 --
Unamortized exit
penalty resulting
from prepayment of
old mortgage 386 -- 386 --
-------- -------- -------- --------
Charges associated with
mortgage refinancing 4,864 -- 4,864 --
Tax effect of
reconciling items
at 39.0% (1,897) -- (1,897) --
-------- -------- -------- --------
Net income before
mortgage refinancing
charges(a) $ 12,578 $ 7,751 $ 22,372 $ 16,169
======== ======== ======== ========
Diluted weighted average
number of common
shares outstanding: 30,790 30,476 30,751 30,458
Diluted net income per
share applicable to
common stock $ 0.31 $ 0.25 $ 0.63 $ 0.53
Reconciling Items:
Write-off of
unamortized debt
issuance costs 0.09 -- 0.09 --
Termination penalty
resulting from
prepayment of old
mortgage 0.06 -- 0.06 --
Unamortized exit
penalty resulting
from prepayment of
old mortgage 0.01 -- 0.01 --
-------- -------- -------- --------
Charges associated with
mortgage refinancing 0.16 -- 0.16 --
Tax effect of
reconciling items
at 39.0% (0.06) -- (0.06) --
-------- -------- -------- --------
Diluted net income
before mortgage
refinancing charges
per share applicable
to common stock (a) $ 0.41 $ 0.25 $ 0.73 $ 0.53
======== ======== ======== ========
Note (a) -- Net income before mortgage refinancing charges is a
non-GAAP performance measure and is not intended to be a performance
measure that should be regarded as an alternative to or more
meaningful than GAAP net income.