Net Loss Totals $34.1 Million On 17 Percent Revenue Decline Related
to Continued Housing Downturn
Fourth-Quarter Results Also Impacted by Headquarters Consolidation
and Severance Charges and SKU Rationalization
Introduces New Chief Financial Officer
ATLANTA, Feb. 12, 2008 (PRIME NEWSWIRE) -- BlueLinx Holdings Inc. (NYSE:BXC), a leading distributor of building products in North America, today reported financial results for the fourth quarter and full year ended December 29, 2007.
The Company's fourth-quarter net loss totaled $34.1 million, or $1.10 per diluted share, compared with a net loss of $5.9 million, or $0.19 per share, in the year-ago period. The Company's results for the fourth quarter reflect the ongoing downturn in the housing market and were impacted further by several previously announced factors, including:
* an after-tax restructuring charge of $7.0 million, or $0.23 per
share, related to the consolidation of the Company's leased Atlanta
corporate headquarters and sales center into one building from two
buildings ($0.2 million of this charge relates to moving expenses
requiring cash expenditures and the remainder of the charge is
non-cash);
* an after-tax restructuring charge of $3.4 million, or $0.11 per
share, associated with severance and outplacement costs resulting
from the Company's reduction in force; and
* the Company's stock keeping unit ("SKU") rationalization
initiative, whereby it discontinued certain underperforming SKUs
and aggressively sold its inventory in these SKUs. The Company
estimates the SKU rationalization initiative negatively impacted
its gross profit margin by approximately 130 basis points and
earnings per share by approximately $0.20 for the fourth quarter.
Revenues for the fourth quarter decreased 17.2% to $778.9 million from $940.2 million for the same period a year ago, reflecting a 19.6% drop in structural product sales and a 17.1% sales decline in specialty products, both associated with the softness in the housing market. The decline in structural product sales resulted from a 22.7% decrease in unit volume from a year ago, offset slightly by increased underlying product prices relative to the prior year period. Specialty product unit volume decreased 15.1%, with a slight reduction in pricing. Overall unit volume for the Company's estimated end-use markets declined 13.0% for the period as compared to the prior year period.
Gross profit for the fourth quarter totaled $66.1 million, down 28.5% from $92.5 million in the prior year period. The gross profit decline reflects lower unit volume associated with the decline in housing starts offset by a slight increase in underlying product prices relative to last year. Gross margin was 8.5% for the period compared to 9.8% in the prior year period. The Company estimates the SKU rationalization initiative negatively impacted its gross profits by approximately $10 million and its gross margin by approximately 130 basis points for the fourth quarter. Excluding the estimated impact of the SKU rationalization initiative on fourth-quarter results, gross margin would have been consistent with the prior year period.
Total operating expenses of $111.2 million for the fourth quarter increased $19.2 million, or 20.9%, from the same period a year ago. Operating expenses include charges of $17.1 million associated with the Company's headquarters consolidation and with severance and outplacement costs resulting from the Company's reduction in force during the fourth quarter. Operating expenses in the prior year period included a severance charge of $0.7 million. The remaining increase in operating expenses was due in part to increased reserves for doubtful accounts and for consulting expenses. Operating loss for the quarter was $45.1 million, compared with operating income of $0.6 million a year ago. The fourth-quarter operating loss reflects $17.1 million of restructuring charges and the Company's estimated $10.0 million impact of its SKU rationalization program.
For the full year ended December 29, 2007, net loss totaled $27.9 million, or $0.91 per diluted share, compared with net income of $15.8 million, or $0.51 per share, for the prior year. Full-year results included an after-tax charge totaling $10.4 million, or $0.34 per share, related to the Company's fourth-quarter restructuring charge and severance and outplacement costs. Additionally, the Company estimates that its SKU rationalization initiative negatively impacted earnings per share by approximately $0.20 for the full-year period. Reported results benefited from a $1.7 million pre-tax gain, or approximately $0.03 per share, related to an insurance settlement the Company received during the period related to damage caused to its New Orleans facility by Hurricane Katrina. Sales for the year totaled $3.8 billion, down 21.7% from $4.9 billion a year ago, reflecting lower unit volume and lower underlying prices for both structural and specialty products versus the comparable prior year period.
For the full year, gross profit decreased 18.3% to $391.9 million from $479.8 million from the prior year, translating to gross margins of 10.2% and 9.8% for 2007 and 2006, respectively. The increase in gross margin for 2007 is primarily attributable to a shift towards the warehouse channel, which typically provides higher gross margins, and a slight shift in product mix from structural to higher margin specialty products, offset in part by a decline in average underlying product prices compared to the prior year. The Company estimates that the SKU rationalization initiative impacted full year gross profit by $10 million and gross margin by approximately 30 basis points. Total operating expenses of $393.7 million for the year decreased $8.6 million, or 2.1%, from 2006, primarily due to reduced payroll, commissions and other operating expenses. Operating costs for 2007 include headquarters consolidation and severance and outplacement charges of $17.1 million whereas the prior year operating costs included $3.8 million of severance charges.
"We continue to pursue our strategy while also taking proactive measures to adjust our cost structure to the current business climate," said Stephen Macadam, chief executive officer. "The actions we took during the fourth quarter demonstrate our commitment to aggressively managing costs and working capital in this reduced-demand environment. We generated approximately $98 million in cash from operations during the fourth quarter and ended the year with over $220 million in excess availability on our revolving credit facility. I remain confident that we will continue to execute on our strategy throughout this cyclical downturn and grow our company as a leading national distributor of specialty building products."
New Chief Financial Officer
As previously disclosed, Lynn Wentworth announced her decision to resign her position as the Company's chief financial officer and treasurer effective February 15, 2008. The Company has selected Doug Goforth to succeed Ms. Wentworth and he will join BlueLinx as chief financial officer and treasurer beginning February 18th. Mr. Goforth brings 20 years of combined accounting, finance, treasury, acquisition and management experience with leading distribution and manufacturing companies including Mitsubishi Wireless Communications, Yamaha Motor and Ingersoll-Rand to BlueLinx. His experience also includes over four years with the distribution division of Georgia-Pacific Corporation and as BlueLinx' corporate controller during which time he played a key role in the Company's 2004 initial public offering. "Doug is well versed in the cyclical and seasonal nature of our industry and we know Doug will make an immediate contribution to our Company," said Mr. Macadam. Most recently, Mr. Goforth was vice president and corporate controller, as well as a member of the senior management team, of Armor Holdings Inc. which was acquired by BAE Systems, Inc. in 2007.
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# 33038483. 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 used herein 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 approximately 2,800 people, BlueLinx offers greater than 10,000 products from over 750 suppliers to service approximately 11,500 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 the symbol BXC. Additional information about BlueLinx can be found on its Web site at www.BlueLinxCo.com.
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 our control, that may cause our 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, especially as a result of conditions in the residential housing market; general economic and business conditions in the United States; 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; 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 30, 2006 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, changes in expectation or otherwise, except as required by law.
BlueLinx Holdings Inc.
Statements of Operations
in thousands, except per share data
Quarters Ended Years Ended
---------------------- ----------------------
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
2007 2006 2007 2006
---------- ---------- ---------- ----------
(unaudited) (unaudited) (unaudited)
Net sales $ 778,918 $ 940,249 $3,833,910 $4,899,383
Cost of sales 712,775 847,743 3,441,964 4,419,576
---------- ---------- ---------- ----------
Gross profit 66,143 92,506 391,946 479,807
---------- ---------- ---------- ----------
Operating expenses:
Selling, general, and
administrative 106,114 86,550 372,754 381,554
Depreciation and
amortization 5,084 5,401 20,924 20,724
---------- ---------- ---------- ----------
Total operating
expenses 111,198 91,951 393,678 402,278
---------- ---------- ---------- ----------
Operating income (loss) (45,055) 555 (1,732) 77,529
Non-operating expenses:
Interest expense 9,904 10,659 43,660 46,164
Charges associated
with mortgage
refinancing -- -- -- 4,864
Other (income)
expense, net 231 337 (370) 320
---------- ---------- ---------- ----------
Income (loss) before
provision for (benefit
from) income taxes (55,190) (10,441) (45,022) 26,181
Provision for (benefit
from) income taxes (21,110) (4,576) (17,077) 10,349
---------- ---------- ---------- ----------
Net income (loss) $ (34,080) $ (5,865) $ (27,945) $ 15,832
---------- ---------- ---------- ----------
Basic weighted average
number of common
shares outstanding 30,890 30,745 30,848 30,618
========== ========== ========== ==========
Basic net income (loss)
per share applicable
to common stock $ (1.10) $ (0.19) $ (0.91) $ 0.52
========== ========== ========== ==========
Diluted weighted
average number of
common shares
outstanding 30,890 30,745 30,848 30,779
========== ========== ========== ==========
Diluted net income
(loss) per share
applicable to common
stock $ (1.10) $ (0.19) $ (0.91) $ 0.51
========== ========== ========== ==========
Dividends declared per
share of common stock $ -- $ 0.125 $ 0.375 $ 0.50
========== ========== ========== ==========
BlueLinx Holdings Inc.
Balance Sheets
in thousands
December 29, December 30,
2007 2006
------------ ------------
(unaudited)
Assets:
Current assets:
Cash $ 15,759 $ 27,042
Receivables 263,176 307,543
Inventories 335,887 410,686
Deferred income taxes 12,199 9,024
Other current assets 53,231 44,948
------------ ------------
Total current assets 680,252 799,243
------------ ------------
Property, plant, and equipment:
Land and land improvements 57,295 56,985
Buildings 98,420 95,814
Machinery and equipment 67,217 61,955
Construction in progress 4,212 2,025
------------ ------------
Property, plant, and equipment, at cost 227,144 216,779
Accumulated depreciation (54,702) (38,530)
------------ ------------
Property, plant, and equipment, net 172,442 178,249
Other non-current assets 30,742 26,870
------------ ------------
Total assets $ 883,436 $ 1,004,362
============ ============
Liabilities:
Current liabilities:
Accounts payable $ 164,717 $ 195,815
Bank overdrafts 37,152 50,241
Accrued compensation 10,372 8,574
Current maturities of long-term debt -- 9,743
Other current liabilities 19,280 14,633
------------ ------------
Total current liabilities 231,521 279,006
------------ ------------
Noncurrent liabilities:
Long-term debt 478,535 522,719
Deferred income taxes -- 1,101
Other long-term liabilities 18,557 12,137
------------ ------------
Total liabilities 728,613 814,963
------------ ------------
Shareholders' Equity:
Common stock 312 309
Additional paid in capital 142,081 138,066
Accumulated other comprehensive income 5,354 412
Retained earnings 7,076 50,612
------------ ------------
Total shareholders' equity 154,823 189,399
------------ ------------
Total liabilities and equity $ 883,436 $ 1,004,362
============ ============
BlueLinx Holdings Inc.
Statements of Cash Flows
in thousands
Years Ended
---------------------------
December 29, December 30,
2007 2006
------------ ------------
(unaudited)
Cash flows from operating activities:
Net income (loss) $ (27,945) $ 15,832
Adjustments to reconcile net income
(loss) to cash provided by operations:
Depreciation and amortization 20,924 20,724
Amortization of debt issue costs 2,431 2,628
Charges associated with mortgage
refinancing -- 4,864
Non-cash vacant property charges 11,037 --
Deferred income tax benefit (9,526) (3,700)
Gain from insurance settlement (1,698) --
Share-based compensation 3,637 3,137
Excess tax benefits from share-based
compensation arrangements (20) (891)
Changes in assets and liabilities:
Receivables 44,367 94,113
Inventories 74,799 66,504
Accounts payable (31,098) (131,594)
Changes in other working capital (6,211) (4,889)
Other (855) (3,524)
------------ ------------
Net cash provided by operating activities 79,842 63,204
------------ ------------
Cash flows from investing activities:
Acquisitions, net of cash acquired -- (9,391)
Property, plant, and equipment
investments (13,141) (9,601)
Proceeds from disposition of assets 4,071 822
------------ ------------
Net cash used in investing activities (9,070) (18,170)
------------ ------------
Cash flows from financing activities:
Proceeds from stock options exercised 496 1,913
Excess tax benefits from share-based
compensation arrangements 20 891
Net decrease in revolving credit facility (53,927) (138,388)
Proceeds from new mortgage -- 295,000
Debt financing costs -- (6,703)
Retirement of old mortgage -- (165,000)
Prepayment fees associated with old
mortgage -- (2,475)
Decrease in bank overdrafts (13,089) (12,151)
Common dividends paid (15,591) (15,400)
Other 36 1
------------ ------------
Net cash used in financing activities (82,055) (42,312)
------------ ------------
Increase (decrease) in cash (11,283) 2,722
Balance, beginning of period 27,042 24,320
------------ ------------
Balance, end of period $ 15,759 $ 27,042
============ ============
BlueLinx Holdings Inc.
Reconciliation of Non-GAAP Financial Measures to their GAAP Equivalents
in thousands, except per share data
Quarters Ended Year Ended
--------------------- ---------------------
Dec. 29, Dec. 30, Dec. 29, Dec. 30,
2007 2006 2007 2006
--------- --------- --------- ---------
(unaudited) (unaudited) (unaudited) (unaudited)
Reconciliation of Income
Before Charges and
Income Before Charges
Per Share:
Net income (loss) $ (34,080) $ (5,865) $ (27,945) $ 15,832
Reconciling Items:
Write-off of
unamortized debt
issuance costs -- -- -- 2,828
Termination penalty
resulting from
prepayment of old
mortgage -- -- -- 1,650
Unamortized exit
penalty resulting
from prepayment of
old mortgage -- -- -- 386
--------- --------- --------- ---------
Charges associated with
mortgage refinancing -- -- -- 4,864
Tax effect of
reconciling items at
39.0% -- -- -- (1,897)
--------- --------- --------- ---------
Adjusted net income
(loss) (1) $ (34,080) $ (5,865) $ (27,945) $ 18,799
========= ======== ======== ========
Diluted weighted average
number of common shares
outstanding: 30,890 30,745 30,848 30,779
Diluted net income
(loss) per share
applicable to common
stock $ (1.10) $ (0.19) $ (0.91) $ 0.51
Reconciling Items:
Write-off of
unamortized debt
issuance costs -- -- -- 0.09
Termination penalty
resulting from
prepayment of old
mortgage -- -- -- 0.06
Exit penalty resulting
from prepayment of
old mortgage -- -- -- 0.01
--------- --------- --------- ---------
Charges associated with
mortgage refinancing -- -- -- 0.16
Tax effect of
reconciling items at
39.0% -- -- -- (0.06)
--------- --------- --------- ---------
Diluted adjusted net
income (loss) per share
applicable to common
stock (1) $ (1.10) $ (0.19) $ (0.91) $ 0.61
========= ========= ========= =========
Note (1) -- Net income before mortgage refinancing 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.