Bluelinx Holdings Inc (BXC) 2012 Q1 法說會逐字稿

Good morning. My name is Rachel and I will be your conference operator today. At this time, I would like to welcome everyone to the BlueLinx first-quarter earnings release conference call. (Operator Instructions). As a reminder, ladies and gentlemen, this conference is being recorded today, Thursday, May 3, 2012. Thank you. I would now like to introduce Maryon Davis. You may begin your conference.

Thank you, Rachel, and welcome, everyone, to the BlueLinx first-quarter 2012 conference call. Our speakers this morning are George Judd, Chief Executive Officer, and Doug Goforth, Chief Financial Officer.

Doug will start today's presentation with a review of the quarterly results, then George will provide an operations review of the quarter and add a final perspective before opening the call to your questions.

Our press release was issued earlier this morning. A copy of the release is available in the investor relations section of the Company's website at BlueLinxCo.com.

Before starting the call, I need to refer you to our Safe Harbor statement. I would like to remind everyone that on today's call management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including all statements concerning future or unexpected events or results. Actual results could differ materially from those projected in the Company's forward-looking statements due to known and unknown risks and uncertainties.

A discussion of factors that may affect future results is provided in the Company's filings with the Securities and Exchange Commission. BlueLinx undertakes no obligation to publicly update or revise any forward-looking statements contained in these presentations based on new information or otherwise, except as required by law.

With that requirement completed, I'd like to remind our listeners that we have posted slides on our website. We will be referring to these slides during this call and we encourage you to review them during our remarks. Additionally, the slide package contains an appendix of supplementary tables available for your review.

Now let me turn the call to our Chief Financial Officer, Doug Goforth.

Thanks, Maryon. Good morning, everyone, and thank you for joining us today.

This morning, we reported a GAAP net loss of $11 million, or $0.18 per diluted share, on revenue of $453.7 million. That compares to a GAAP net loss of $12.3 million, or $0.40 per diluted share, on revenue of $390.6 million in the first quarter of last year.

As a reminder, we successfully completed a $60 million rights offering, which resulted in the issuance of approximately 28.6 million additional shares in the third quarter of 2011. Total diluted weighted average number of common shares outstanding at the end of the first quarter of 2012 was 60 million, compared to 30.8 million diluted weighted average common shares in the year-ago period.

During the quarter, we used approximately $89 million in cash from operations, as first-quarter working capital requirements increased $77 million, consistent with our cyclical business and the improving sales environment.

We had approximately $122 million in excess availability at the end of the quarter, with a cash balance of $5.9 million. Our net debt was approximately $401 million, up approximately $18 million from a year ago.

Now for a closer look at the quarterly financial results. For those of you following along with the slides posted on the investor relations section of the BlueLinx website, I will begin with slide five.

Overall sales for the first quarter ended March 31 totaled $453.7 million, up 16.2%, or $63.1 million, from the first quarter of 2011. Specialty sales remained strong, accounting for just under 60% of total revenue. The increase in total revenue is attributable to increased unit volumes and increased underlying product prices for both product categories.

Overall, unit volume rose 11.2% compared to the same period a year ago as specialty unit volume increased 12.4% and structural unit volume increased 9.4% during the quarter.

Moving to slide six. BlueLinx generated approximately $54 million in gross profit for the quarter, up 17.2% from approximately $46 million in the year-ago period. Overall, gross margin was 12% for the quarter, up from last year's 11.8% due to the continued focus on margin expansion; rising product prices for many of the products we distribute, including key grades of wood-based products, roofing insulation, and other specialty products; and growth in our out-of-warehouse business.

Total operating expenses increased to $58.3 million from $51.4 million a year ago, and included $0.6 million and $7.2 million in real estate gains, respectively. Excluding real estate gains, operating expenses were consistent with the same period a year ago, even though sales through the warehouse channel accounted for 100% of the overall revenue increase. Keeping our expenses flat in the quarter reflects our ongoing focus on managing expenses, as evidenced by our ability to offset a $1.1 million increase in our logistics costs, including fuel.

The Company reported an operating loss for the first quarter of $4.1 million, compared to an operating loss of $5.1 million in the prior-year period, reflecting an $8 million increase in gross profit and a $7 million increase in operating expense.

EBITDA loss of $1.8 million improved slightly from a $2.2 million loss in the first quarter of 2011 and reflects our ongoing commitment to cost management and operational efficiency.

Our first-quarter net loss of $11 million, or $0.18 per diluted share, compares with a net loss of $12.3 million, or $0.40 per diluted share, in the first quarter of 2011. Our reported net loss for the period is after interest expense of $6.8 million, compared to interest expense of $7.3 million in the prior-year period, which included $1.8 million in pretax non-cash interest income associated with an interest rate swap. The current year net loss is after a tax provision of approximately $200,000, compared to a tax benefit of approximately $100,000 in the prior-year period.

Turning to cash flow on slide seven. During the quarter, we used approximately $89 million in cash from operating activities, primarily reflecting increased receivables of $59 million in accordance with rising sales and seasonal increases in inventories of $65 million, which were partially offset by a corresponding increase in accounts payable of $47 million. This compares with net cash used by operations of approximately $63 million in the first quarter of 2011.

As we've discussed on prior earnings calls, we will continue to tightly manage our working capital items on an ongoing basis, but as always, we expect to consume cash through the first half of the year as our working capital increases to support an improving business.

Cash provided via financing activities was $89.3 million for the quarter, driven by an $83.2 million increase in outstanding borrowings under our revolving credit facility, a $12.6 million increase in bank overdrafts, and a $2.7 million decrease in restricted cash related to the mortgage, partially offset by a $7.1 million principal repayment on the mortgage and a $2.1 million usage from other items.

As a reminder, during fiscal 2011 we sold certain properties which reduced our mortgage by $6.5 million. These payments were applied to the mortgage loan in the first quarter of fiscal 2012.

The resulting cash balance at March 31 was $5.9 million, compared to $6.2 million a year ago.

Moving to slide eight, we had approximately $122 million of excess availability under our revolving credit facility as of quarter-end. While this is up from the end of 2011, this number will likely decrease while our industry and our Company recover from this historic downturn. But we believe that the amounts available from our revolving credit facilities and other sources will be sufficient to fund our operations and capital requirements for the next 12 months.

The combined debt balance on our mortgage and revolving credit agreements was $413.8 million, an increase of $76.1 million from the fourth quarter of 2011. Net debt at the end of the first quarter was approximately $401 million, compared to approximately $323 million at December 31 and up approximately $18 million from a year ago.

Turning to slide nine, cash cycle days for the first quarter totaled 57. That compares with 56 days in the fourth quarter of 2011 and 55 days in the same period a year ago. Our performance in this area reflects our daily efforts to manage our working-capital risk by selling to the most profitable customers, keeping the right inventory on hand, and paying our suppliers in a timely fashion.

In summary, we grew revenue and expanded our margins in this continued challenging environment. We aggressively managed cost. We invested in inventory for both anticipated seasonal demand and to support our ongoing specialty product focus. As we move forward over the next 12 months, we believe we have the financial resources to remain on our strategic course as the residential housing market continues to recover.

Now let me turn the call over to George.

Thanks, Doug. Good morning.

BlueLinx's first-quarter results improved compared to a year ago and exceeded our overall expectations as the construction markets continue to recover. Building activity increased in all markets as the overall economy improved. New housing inventories fell, and we experienced a milder winter in many markets.

I outlined on previous calls our plan to increase the BlueLinx share of the recovering market by executing targeted growth initiatives that focus on specific markets, specific customers, and value-added products. I've talked about our plan to grow these products while maintaining our price discipline, maintaining or growing our gross margin percentage, and continuing our disciplined cost controls while providing our customers with premium service.

In the first-quarter 2012, we executed against this plan. We grew our specialty value-added products and our structural products business. We increased our margins and we kept expenses flat. Keeping expenses flat while shipping over 20% more product out of warehouse in a rising fuel environment is something we worked very hard to achieve.

Over the past three quarters, we have seen improvement in our markets across the country. The activity in some markets has improved more than others, but business conditions have shown gradual improvement in all markets.

Although we do not give guidance, I will say that the improving trends in market activity has continued into April. BlueLinx will continue to execute our plan as markets improve. We have invested in inventory, and our team is focused on providing great service to our customers.

During the quarter, we grew our revenue 16.2% compared to last year's first quarter. The value-added product lines, targeted markets, and targeted customers led this growth. These strategic products grew by approximately 24% during the quarter compared to a year ago. Continued growth of these products at or above historical margins, combined with our cost control strategies, will return BlueLinx to profitability.

We continue to work with our vendor partners around the world to grow existing product sales and add new products to our product portfolio. We remain focused on expanding our product portfolio as our markets recover.

During the first quarter, our margins increased to 12% from 11.8% a year ago. Our specialty gross margins, which accounted for 62% of our gross margin dollars, increased to 12.6% from 12.2% a year ago. Structural product gross margins fell to 9.9% from 10.4% a year ago. We're working hard and will continue to work hard to improve our gross margin performance.

We did a nice job managing expenses during the quarter. We focused on our logistics expenses. We grew our out-of-warehouse sales faster than our reload or direct business. The combination of more volume and improved performance drove logistics costs as a percentage of sales down, even as fuel expenses increased. We will remain focused on all costs.

We narrowed our first-quarter net loss to $11 million from $12.3 million in the year-ago period. After adjusting for significant special items, our comparable adjusted pretax loss for the first quarter was $11.4 million, or a 47%, or $10 million, improvement over the same period a year ago.

In conclusion, business is improving, but it's still significantly below what I would consider a normal or healthy market. BlueLinx has made improvements to perform in this market and in a healthy market. The combination of successful execution of our strategy and a continued recovery out of the housing and construction markets will return BlueLinx to profitability.

With that, I will open the call to questions. Operator?

(Operator Instructions). Alan Weber, Robotti & Co.

Good morning. Just a quick question on your SG&A -- your operating expenses. Just curious, when you take away the gain last year from the real estate -- as you said, the operating expenses was relatively flat compared to a year ago and this quarter on higher volume. I guess the question is, how long can you keep operating expenses at these levels?

We got synergies as we grew the business across our fixed-cost platform, and then our semi-fixed, you know, the actual trucks going out of our warehouse every day, had some capacity on them, and during the first quarter, we did a very, very nice job of making sure that our trucks were full.

We got a little room left, but we've taken most of it, and as the second quarter progresses, I would expect that that improvement, we'll soon maximize it. But as far as our SG&A, our selling expense, our headquarters expense, and all of our fixed expenses, we've got tight controls on them and we expect to keep them where they are.

Okay, and I guess my other general question is, from your view in the markets where you operate, do you see any substantial changes from the -- you know, in the competition?

There's been constant changes through this correction where competitors have changed their footprints, left markets, got out of product lines, and then we've had some competitors that have added product lines and added some markets.

It's constantly changing. It's been a tough, long market -- housing correction. But overall, my view would be that the folks that were really good business operators at the peak of the market are continuing to be good operators through the trough and now as the recovery comes. The folks that weren't, some of them are gone and many of them are much smaller.

Okay, great. Thank you very much, and you know, going in the right direction, for sure. Thank you.

Thanks, Alan.

Thanks, Alan.

Thank you. At this time, there are no additional questions. I would now like to turn it back to Mr. Judd for any closing comments.

Okay, thank you. Thank you all for joining us this morning. We will talk to you next quarter.

Thank you, ladies and gentlemen, for your participation. You may now disconnect.