Net Income of $0.03 Per Share On $1.0 Billion Revenue
Gross Margin Stable From Year Ago At 10.1% for Quarter
ATLANTA, Nov. 1, 2007 (PRIME NEWSWIRE) -- BlueLinx Holdings Inc. (NYSE:BXC), a leading distributor of building products in North America, today reported financial results for the third quarter ended September 29, 2007.
The company's third-quarter net income totaled $0.9 million, or $0.03 per diluted share, compared with net income of $2.3 million, or $0.07 per share, in the year-ago period. Revenues of $1.02 billion declined 15.6% from $1.20 billion for the same period a year ago. The decline reflects a 14.3% drop in structural product sales and a 16.4% sales decline in specialty products. The sales decline in structural products resulted from unit volume, which fell 14.8% from a year ago, offsetting a year-over-year firming trend in wood-based structural product prices that was driven by higher plywood prices. Specialty product sales decreased largely on unit volume, which declined 14.2%. Overall third-quarter unit volume for the company's estimated weighted end-use markets fell 12.4% from the prior year, driven by a 24% decline in housing starts and a 10.6% decline in the repair & remodel market.
Gross profit for the third quarter totaled $102.8 million, compared with $120.9 million for the prior-year period, largely reflecting reduced unit volume associated with the ongoing housing starts decline. Gross margin was 10.1%, up slightly from 10.0% a year earlier. Structural product gross margin of 7.6% improved 60 basis points from the same period a year ago, but was down 170 basis points from the previous quarter, when the company was able to leverage a modest but temporary upswing in wood-based structural product prices. Specialty product gross margin of 13.8% was down 20 basis points from both a year ago and from the second quarter, reflecting an increasingly competitive pricing environment.
Total operating expenses of $89.9 million decreased $14.9 million, or 14.2%, from the same period a year ago, reflecting lower payroll costs related to headcount reductions implemented in the third quarter of 2006 and lower commissions and incentives. Operating income for the quarter totaled $12.9 million, compared with $16.1 million a year ago.
For the nine months ended September 29, 2007, net income totaled $6.1 million, or $0.20 per diluted share, on revenues of $3.06 billion, compared with net income of $21.7 million, or $0.71 per share, on revenues of $3.96 billion a year ago. Gross profit for the nine months totaled $325.8 million and gross margin was 10.7%, compared with $387.3 million and 9.8%, respectively, a year earlier. Operating expenses declined to $282.5 million from $310.3 million a year ago, primarily reflecting decreases in variable compensation and lower payroll costs related to the headcount reductions, partially offset by normal ongoing operating expenses associated with Austin Hardwoods and expenses associated with business improvement programs.
"Our business environment deteriorated significantly in the third quarter as demand declined sharply, fueled by the well-publicized problems in the credit and housing markets," said Stephen Macadam, chief executive officer. "Despite this challenging environment, we continued to provide quality service to our customers and suppliers, effectively held our overall gross margin at 10.1%, generated cash from operating activities, paid down debt, and reduced our working capital.
"We now are operating in a deep cyclical housing correction expected by many to extend through 2008," Macadam said. "The outlook for our industry has turned significantly more bearish than was the case at the end of the second quarter. As a result, we are taking further steps to reduce costs and right size our company to remain competitive throughout this extended downturn. Over the past several weeks we have identified approximately $30 million in annualized cost savings that we expect to achieve through certain initiatives, including headcount reduction. Most of the implementation is complete and we expect full completion by the end of the year. We expect the cost-reduction efforts to result in after-tax charges for severance and outplacement in the range of $2.5 million to $3 million, or $0.08 to $0.10 per diluted share in the fourth quarter.
"Our company is financially positioned to be able to continue executing throughout this housing downturn," Macadam added. "We diligently managed costs and working capital in the third quarter, ending the period with more than $278 million in excess availability on our revolving credit facility. We expect to continue reducing inventories in the fourth quarter and in 2008 to respond to the lower demand environment, which will generate additional cash. I remain confident that we will continue to execute our long-term business strategy throughout this downturn, and emerge from it well positioned as a leading national distributor of specialty building products."
Dividend
On October 31, 2007 the BlueLinx Board of Directors declared a $0.125 dividend on the company's common shares for the quarter ended September 29, 2007. The dividend is payable on December 28, to shareholders of record on December 14, 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# 21169778. 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 approximately 2,900 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 its 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 or otherwise, except as required by law.
BlueLinx Holdings Inc.
Statements of Operations
in thousands, except per share data
Quarters Ended Nine Months Ended
---------------------- ----------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2007 2006 2007 2006
---------- ---------- ---------- ----------
(unaudited) (unaudited) (unaudited) (unaudited)
Net sales $1,015,888 $1,203,578 $3,054,992 $3,959,134
Cost of sales 913,078 1,082,672 2,729,189 3,571,833
---------- ---------- ---------- ----------
Gross profit 102,810 120,906 325,803 387,301
---------- ---------- ---------- ----------
Operating expenses:
Selling, general,
and administrative 84,826 99,615 266,640 295,004
Depreciation and
amortization 5,106 5,217 15,840 15,323
---------- ---------- ---------- ----------
Total operating
expenses 89,932 104,832 282,480 310,327
---------- ---------- ---------- ----------
Operating income 12,878 16,074 43,323 76,974
Non-operating
expenses:
Interest expense 11,352 12,046 33,756 35,505
Charges associated
with mortgage
refinancing -- -- -- 4,864
Other (income)/
expense, net 7 (29) (601) (17)
---------- ---------- ---------- ----------
Income before
provision for income
taxes 1,519 4,057 10,168 36,622
Provision for income
taxes 629 1,765 4,033 14,925
---------- ---------- ---------- ----------
Net income 890 2,292 6,135 21,697
---------- ---------- ---------- ----------
Basic weighted average
number of common
shares outstanding 30,853 30,662 30,834 30,576
========== ========== ========== ==========
Basic net income per
share applicable to
common stock $ 0.03 $ 0.07 $ 0.20 $ 0.71
========== ========== ========== ==========
Diluted weighted
average number of
common shares
outstanding 30,951 30,782 30,947 30,762
========== ========== ========== ==========
Diluted net income
per share applicable
to common stock $ 0.03 $ 0.07 $ 0.20 $ 0.71
========== ========== ========== ==========
Dividends declared
per share of common
stock $ 0.125 $ 0.125 $ 0.38 $ 0.38
========== ========== ========== ==========
BlueLinx Holdings Inc.
Balance Sheets
in thousands
----------- -----------
September 29, December 30,
2007 2006
----------- -----------
(unaudited)
Assets:
Current assets:
Cash $ 25,000 $ 27,042
Receivables 371,222 307,543
Inventories 424,522 410,686
Deferred income taxes 9,429 9,024
Other current assets 42,333 44,948
----------- -----------
Total current assets 872,506 799,243
----------- -----------
Property, plant, and equipment:
Land and land improvements 57,141 56,985
Buildings 97,156 95,814
Machinery and equipment 66,462 61,955
Construction in progress 5,485 2,025
----------- -----------
Property, plant, and equipment, at cost 226,244 216,779
Accumulated depreciation (50,470) (38,530)
----------- -----------
Property, plant, and equipment, net 175,774 178,249
Other non-current assets 24,982 26,870
----------- -----------
Total assets 1,073,262 1,004,362
=========== ===========
Liabilities :
Current liabilities:
Accounts payable $ 224,787 $ 195,815
Bank overdrafts 37,346 50,241
Accrued compensation 10,905 8,574
Current maturities of long-term debt 100,147 9,743
Other current liabilities 16,113 14,633
----------- -----------
Total current liabilities 389,298 279,006
----------- -----------
Noncurrent liabilities:
Long-term debt 480,853 522,719
Deferred income taxes 516 1,101
Other long-term liabilities 14,468 12,137
----------- -----------
Total liabilities 885,135 814,963
----------- -----------
Shareholders' Equity:
Common stock 312 309
Additional paid in capital 141,394 138,066
Accumulated other comprehensive income 1,363 412
Retained earnings 45,058 50,612
----------- -----------
Total shareholders' equity 188,127 189,399
----------- -----------
----------- -----------
Total liabilities and equity $ 1,073,262 $ 1,004,362
=========== ===========
BlueLinx Holdings Inc.
Statements of Cash Flows
in thousands
Nine Months Ended
---------------------
Sept. 29, Sept. 30,
2007 2006
--------- ---------
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 6,135 $ 21,697
Adjustments to reconcile net income
to cash used in operations:
Depreciation and amortization 15,840 15,323
Amortization of debt issue costs 1,823 2,018
Charges associated with mortgage refinancing -- 4,864
Deferred income tax benefit (1,135) (1,876)
Share-based compensation 3,061 2,209
Gain from insurance settlement (1,698) --
Excess tax benefits from share-based
compensation arrangements (41) (882)
Changes in assets and liabilities:
Receivables (63,679) (33,396)
Inventories (13,836) 5,961
Accounts payable 28,972 (74,959)
Changes in other working capital 5,238 (2,486)
Other 415 (2,237)
--------- ---------
Net cash used in operating activities (18,905) (63,764)
--------- ---------
Cash flows from investing activities:
Acquisitions, net of cash acquired -- (9,353)
Property, plant, and equipment investments (11,943) (7,267)
Proceeds from sale of assets 4,335 465
--------- ---------
Net cash used in investing activities (7,608) (16,155)
--------- ---------
Cash flows from financing activities:
Proceeds from stock options exercised 442 1,744
Excess tax benefits from share-based
compensation arrangements 41 882
Net increase (decrease) in revolving credit
facility 48,538 (38,342)
Proceeds from new mortgage -- 295,000
Debt financing costs -- (6,668)
Retirement of old mortgage -- (165,000)
Prepayment fees associated with old mortgage -- (2,475)
Increase (decrease) in bank overdrafts (12,895) 6,177
Common dividends paid (11,689) (11,537)
Other 34 --
--------- ---------
Net cash provided by financing activities 24,471 79,781
--------- ---------
Decrease in cash (2,042) (138)
Balance, beginning of period 27,042 24,320
--------- ---------
Balance, end of period $ 25,000 $ 24,182
========= =========
BlueLinx Holdings, Inc.
Reconciliation of Non-GAAP Financial Measures to their GAAP
Equivalents
in thousands, except per share data
Quarters Ended Nine Months Ended
------------------- -------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2007 2006 2007 2006
-------- -------- -------- --------
(unaudited)(unaudited)(unaudited)(unaudited)
Reconciliation of Income
Before Charges and
Income Before Charges
Per Share:
Net Income $ 890 $ 2,292 $ 6,135 $ 21,697
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 (a) $ 890 $ 2,292 $ 6,135 $ 24,664
======== ======== ======== ========
Diluted weighted average
number of common shares
outstanding: 30,951 30,782 30,947 30,762
Diluted net income per
share applicable to
common stock $ 0.03 $ 0.07 $ 0.20 $ 0.71
Reconciling Items:
Write-off of
unamortized
debt issuance costs -- -- -- 0.09
Termination penalty
resulting from
prepayment of old
mortgage -- -- -- 0.05
Exit penalty resulting
from prepayment of old
mortgage -- -- -- 0.01
------------------ -------------------
Charges associated with
mortgage refinancing -- -- -- 0.15
Tax effect of
reconciling items at
39.0% -- -- -- (0.06)
-------- -------- -------- --------
Diluted adjusted net
income per share
applicable to
common stock (a) $ 0.03 $ 0.07 $ 0.20 $ 0.80
======== ======== ======== ========
Note (a) - 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.