EX-99.1 2 g03955exv99w1.htm EX-99.1 PRESS RELEASE, DATED NOVEMBER 1, 2006 EX-99.1 PRESS RELEASE, DATED NOVEMBER 1, 2006
 

EXHIBIT 99.1
(BLUELINX LOGO)
4300 Wildwood Parkway
Atlanta, GA 30339
1-888-502-BLUE
www.BlueLinxCo.com
     
BlueLinx Contacts:
    
David Morris, CFO & Treasurer
  Jim Storey, Investor Relations
BlueLinx Holdings Inc.
  BlueLinx Holdings Inc.
(770) 221-2668
  (770) 612-7169
FOR IMMEDIATE RELEASE
BLUELINX ANNOUNCES THIRD-QUARTER RESULTS
— Revenue, Net Income Decline As Housing Starts and Structural Prices Fall Sharply —
— Gross Margin Improves to 10% from 9.4% Prior Year —
ATLANTA — Nov. 1, 2006 — BlueLinx Holdings Inc. (NYSE: BXC), a leading distributor of building products in North America, today reported financial results for the third quarter ended September 30, 2006.
Third-quarter net income totaled $2.3 million, or $0.07 per diluted share, compared with $13.9 million, or $0.46 per share in the year-ago period, which benefited from the September spike in demand for structural products in the wakes of Hurricanes Katrina and Rita. Net income for the latest quarter includes an after-tax charge of $1.4 million, or $0.05 per share, related to ongoing cost reduction efforts.
Revenues for the third quarter decreased 17% to $1.20 billion from $1.45 billion for the same period a year ago, reflecting a 26.8% drop in structural product sales and a 1.1% sales decline in specialty products. Approximately two-thirds of the decline in structural product sales resulted from a 17% decrease in unit volume related to the demand slowdown and the company’s strategy to preserve structural product margins as wood-based structural product prices deteriorated through the quarter. The company’s specialty product unit volume decreased 3.9%, which was partially offset by increased prices. Overall unit volume for the company’s estimated end-use markets declined 8.7% for the period.
Gross profit for the third quarter was $120.9 million, down 11.8% from $137 million in the prior-year period. Gross margin improved 60 basis points, to 10% from 9.4% 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 $104.8 million for the third quarter increased $1.9 million from the same period a year ago, reflecting $2.3 million in severance costs and $0.6 million of ongoing operating expenses associated with Austin Hardwoods, which was acquired in August 2006. Operating income for the quarter was $16.1 million, compared with $34.1 million a year ago.
For the nine months ended September 30, 2006, net income totaled $21.7 million, or $0.71 per diluted share, compared with $30.1 million or $0.99 per share, for the same period a year ago. This year’s nine-month period included an after-tax charge totaling $3 million, or $0.10 per share, related to a mortgage refinancing. Sales for the nine months totaled $3.96 billion, down 7.8% from $4.29 billion the same period a year ago, reflecting lower

 

 

structural product prices and unit volume that were partially offset by a 6.5% increase in specialty product unit volume.
Gross profit increased 4.1% to $387.3 million from $372 million for the year ago period, translating to gross margins of 9.8% and 8.7%, respectively. The increased gross profit for the 2006 nine-month period primarily reflects the company’s focus on specialty product growth and effective management of structural products to preserve margins in a declining price environment. Total operating expenses of $310.3 million for the nine-month period increased $19.2 million, primarily reflecting normal ongoing operating expenses associated with Lane Stanton Vance, the specialty hardwoods distributor acquired by BlueLinx in July 2005, as well as $2.3 million in severance expense and increases in fuel costs and labor rates.
“Our overall financial performance for the third quarter was significantly impacted by the sharp slowdown in new home construction and continued deterioration of wood-based structural product prices,” said Stephen Macadam, chief executive officer. “Housing starts for the quarter fell approximately 19% from year-earlier levels, while prices for key grades of lumber, plywood and OSB, continued deteriorating, dropping another 20% on average from the end of the second quarter. This resulted in lower revenue and net income versus the same period a year ago, when our quarterly performance benefited from the accelerated demand that drove prices sharply higher in September 2005 after Hurricanes Katrina and Rita.
“Despite this challenging environment, we continued to make progress on our long-term growth strategy,” Macadam said. “We gained market share in specialty products, managed our structural products business to preserve margin, and took aggressive steps to adjust our organization to the rapidly changing environment without impeding our ability to grow our specialty business and serve our customers and vendors.”
Specialty unit volume declined 3.9% during the quarter, while the company’s estimated, weighted end-use markets decreased 8.7%. “Specialty unit volume outperformed our end-use markets by nearly five percentage points,” Macadam noted. “Approximately four points were generated by organic growth with the remainder coming from our Austin Hardwoods and LSV acquisitions.”
The company’s overall gross margin for the quarter improved to 10% from 9.4% a year ago. The improvement reflected a 14% gross margin in specialty, up from 13.3% a year ago. Specialty gross margin accounted for 62% of the company’s gross margin dollars in the second quarter. Structural gross margin was 7% for the third quarter, down from 7.3% a year ago, but even with the previous quarter, despite the continued deterioration of wood-based structural product prices.
“We also took aggressive steps to adjust our organization to the rapidly changing environment without impeding our ability to continue growing our specialty business,” Macadam said. “These steps included removing in excess of $15 million in annualized costs from our organization, primarily related to headcount reductions, and identifying another $5 million to $7 million in potential annualized cost savings not related to headcount. Implementation of these planned reductions is underway.
Dollar inventory levels increased from a year ago, primarily a result of increased specialty inventories to both support anticipated higher sales levels of existing products and the introduction of new products. “Due to the abrupt housing-related slowdown, some of the anticipated demand did not materialize in the third quarter and we are in the process of adjusting our specialty inventories accordingly,” Macadam noted. “We are continuing this process and have been making good progress since the end of the third quarter.”
Looking forward, Macadam noted: “We expect a challenging fourth quarter. Our housing related business remained weak in October, and November and December historically are slow months for much of our business. Nevertheless, we believe we have taken the steps necessary to continue progressing in this environment toward our long-term objectives.”

 

 

Dividend
On October 31, 2006, the BlueLinx Board of Directors declared a $0.125 dividend on the company’s common shares for the quarter ended September 30, 2006. The dividend is payable on December 29, 2006, to shareholders of record on December 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# 9139948. 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 3,400 people, BlueLinx offers approximately 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.
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.
— Tables to Follow —

 

 

BlueLinx Holdings Inc.
Statements of Operations
     in thousands, except per share data
                                 
    Quarters Ended     Nine Months Ended  
    September 30,     October 1,     September 30,     October 1,  
    2006     2005     2006     2005  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
Net sales
   $ 1,203,578     $ 1,454,217     $ 3,959,134     $ 4,292,812  
Cost of sales
     1,082,672       1,317,180       3,571,833       3,920,766  
 
                        
Gross profit
     120,906       137,037       387,301       372,046  
 
                        
Operating expenses:
                                
Selling, general, and administrative
     99,615       97,926       295,004       277,309  
Depreciation and amortization
     5,217       4,993       15,323       13,793  
 
                        
Total operating expenses
     104,832       102,919       310,327       291,102  
 
                        
 
                                
Operating income
     16,074       34,118       76,974       80,944  
Non-operating expenses:
                                
Interest expense
     12,046       11,216       35,505       31,206  
Charges associated with mortgage refinancing
     —       —       4,864       —  
Other expense (income), net
     (29 )     (295 )     (17 )     58  
 
                        
 
                                
Income before provision for income taxes
     4,057       23,197       36,622       49,680  
Provision for income taxes
     1,765       9,301       14,925       19,615  
 
                        
 
Net income
     2,292       13,896       21,697       30,065  
 
                        
 
                                
Basic weighted average number of common shares outstanding
    30,662       30,199       30,576       30,180  
 
                        
Basic net income per share applicable to common stock
  $ 0.07     $ 0.46     $ 0.71     $ 1.00  
 
                        
Diluted weighted average number of common shares outstanding
    30,782       30,493       30,762       30,459  
 
                        
Diluted net income per share applicable to common stock
   $ 0.07     $ 0.46     $ 0.71     $ 0.99  
 
                        
Dividends declared per share of common stock
   $ 0.125     $ 0.125     $ 0.375     $ 0.375  
 
                        

 

 

BlueLinx Holdings Inc.
Balance Sheets
in thousands
                 
    September 30,     December 31,  
    2006     2005  
    (unaudited)          
Assets:
                
Current assets:
                
Cash
   $ 24,182     $ 24,320  
Receivables
     435,052       399,093  
Inventories
     471,229       473,068  
Deferred income taxes
     8,204       6,678  
Other current assets
     46,904       44,909  
 
            
Total current assets
     985,571       948,068  
 
            
 
                
Property, plant, and equipment:
                
Land and land improvements
     56,979       56,521  
Buildings
     95,291       93,381  
Machinery and equipment
     61,362       54,200  
Construction in progress
     1,506       2,350  
 
            
Property, plant, and equipment, at cost
     215,138       206,452  
Accumulated depreciation
     (34,605 )     (22,403 )
 
            
Property, plant, and equipment, net
     180,533       184,049  
Other non-current assets
     28,412       25,523  
 
            
Total assets
     1,194,516       1,157,640  
 
            
 
                
Liabilities :
                
Current liabilities:
                
Accounts payable
   $ 252,451     $ 327,004  
Bank overdrafts
     68,569       62,392  
Accrued compensation
     12,679       13,494  
Current maturities of long-term debt
     71,008       —  
Other current liabilities
     14,897       15,195  
 
            
Total current liabilities
     419,604       418,085  
 
            
Noncurrent liabilities:
                
Long-term debt
     561,500       540,850  
Deferred income taxes
     1,241       1,911  
Other long-term liabilities
     14,815       12,942  
 
            
Total liabilities
     997,160       973,788  
 
            
 
                
Shareholders’ Equity:
                
Common stock
     311       303  
Additional paid in capital
     137,066       132,346  
Accumulated other comprehensive income
     (361 )     1,023  
Retained earnings
     60,340       50,180  
 
            
Total shareholders’ equity
     197,356       183,852  
 
            
 
                
 
            
Total liabilities and equity
   $ 1,194,516     $ 1,157,640  
 
            

 

 

BlueLinx Holdings Inc.
Statements of Cash Flows
     in thousands
                 
    Nine Months Ended  
    September 30,     October 1,  
    2006     2005  
    (unaudited)     (unaudited)  
Cash flows from operating activities:
                
Net income
   $ 21,697     $ 30,065  
Adjustments to reconcile net income to cash provided by (used in) operations:
                
Depreciation and amortization
     15,323       13,793  
Amortization of debt issue costs
     2,018       2,704  
Charges associated with mortgage refinancing
     4,864       —  
Deferred income tax benefit
     (1,876 )     (1,027 )
Stock-based compensation
     2,209       1,701  
Changes in assets and liabilities:
                
Receivables
     (33,396 )     (158,401 )
Inventories
     5,961       91,976  
Accounts payable
     (74,959 )     54,485  
Changes in other working capital
     (3,368 )     (10,911 )
Other
     (2,237 )     3,998  
 
            
Net cash provided by (used in) operating activities
     (63,764 )     28,383  
 
            
 
                
Cash flows from investing activities:
                
Acquisitions, net of cash acquired
     (9,353 )     (17,021 )
Property, plant, and equipment investments
     (7,267 )     (10,034 )
Proceeds from sale of assets
     465       814  
 
            
Net cash used in investing activities
     (16,155 )     (26,241 )
 
            
 
                
Cash flows from financing activities:
                
Issuance of common stock, net
     —       8,541  
Proceeds from stock options exercised
     1,744       151  
Excess tax benefits from stock-based compensation
     882       49  
Net increase (decrease) in revolving credit facility
     (38,342 )     1,834  
Proceeds from new mortgage
     295,000       —  
Debt financing costs
     (6,668 )     (570 )
Retirement of old mortgage
     (165,000 )     —  
Prepayment fees associated with old mortgage
     (2,475 )     —  
Increase in bank overdrafts
     6,177       11,920  
Common dividends paid
     (11,537 )     (11,319 )
 
            
Net cash provided by financing activities
     79,781       10,606  
 
            
 
                
Increase (decrease) in cash
     (138 )     12,748  
Balance, beginning of period
     24,320       15,572  
 
            
Balance, end of period
   $ 24,182     $ 28,320  
 
            

 

 

BlueLinx Holdings Inc.
Reconciliation of Non-GAAP Financial Measures to their GAAP Equivalents
     in thousands, except per share data
                                 
    Quarters Ended     Nine Months Ended  
    September 30,     October 1,     September 30,     October 1,  
    2006     2005     2006     2005  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
Reconciliation of Net income before mortgage refinancing and Net income before mortgage refinancing per share:
                                
 
Net Income
   $ 2,292     $ 13,896     $ 21,697     $ 30,065  
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 )     —  
 
                        
Net income before mortgage refinancing(1)
   $ 2,292     $ 13,896     $ 24,664     $ 30,065  
 
                        
 
                                
Diluted weighted average number of common shares outstanding:
     30,782       30,493       30,762       30,459  
 
Diluted net income per share applicable to common stock
   $ 0.07     $ 0.46     $ 0.71     $ 0.99  
Reconciling Items:
                                
Write-off of unamortized debt issuance costs
     —       —       0.09       —  
Termination penalty resulting from prepayment of old mortgage
     —       —       0.06       —  
Unamortized 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 net income before mortgage refinancing per share applicable to common stock (1)
   $ 0.07     $ 0.46     $ 0.81     $ 0.99  
 
                        
 
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.