BlueLinx Announces Third Quarter 2020 Results

BlueLinx Holdings Inc. (“BlueLinx” or the “Company”), a leading distributor of building and industrial products, today reported financial results for the three months ended September 26, 2020.

2020 Third Quarter Financial Results Review

(all comparisons versus the prior-year period unless otherwise noted)

– Net sales increased $192 million, or 28.3%, to $871 million
– Gross margin increased 450 basis points to 18.3%
– Net income increased $62 million to $55 million
– Adjusted EBITDA was $81 million, increasing by $62 million
– Reduced total outstanding bank debt by $181 million
– Excess availability and cash on hand increased to $202 million
– Term Loan reduced in October to $44 million, eliminating total net leverage ratio covenant

“This was a transformative quarter for BlueLinx as we took advantage of our operational improvements over the last year to maximize our financial performance,” said Mitch Lewis, President and CEO. “Although the COVID-19 pandemic continued to affect our business and the broader economy, we drove significant increases in net sales as well as historical levels of net income and Adjusted EBITDA by closely managing an improving housing market and an unprecedented inflationary environment in our wood-based structural product markets. We remain focused on our strategic imperatives, including organic sales growth, margin expansion and disciplined working capital management. We also continue to support our employees and our country’s essential infrastructure needs during the COVID-19 pandemic through strong partnerships with both our customers and suppliers.”

“During the past year, we continued to execute on our deleveraging strategy by taking decisive actions to reduce our outstanding indebtedness through cash flow from operations and sale leaseback transactions,” stated Kelly Janzen, Chief Financial Officer. “Over the past twelve months, we reduced our outstanding bank debt by more than $180 million and increased our available liquidity by ending the quarter with $202 million in excess availability under our revolving credit facility and cash on hand. In October, we further reduced our indebtedness under our term loan by an additional $14 million to approximately $44 million outstanding, which reduced our Company’s interest expense and eliminated that facility’s total net leverage ratio covenant.”

BlueLinx reported net sales of $871 million in the third quarter, compared to $679 million in the prior year period and gross profit of $159 million, compared to $94 million in the prior year period. Net sales during the quarter benefitted significantly from historic price inflation across key wood-based commodities during the period, primarily impacting net sales of structural products. The unusual impact of wood-based commodity price inflation on structural product net sales is estimated to have increased overall net sales between $105 million and $115 million for the quarter. Structural product gross margin was also favorably impacted by this price inflation as the Company reported structural product gross margin of 19.6% for the third quarter compared to 9.0% in the prior year period. Third quarter net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, were $375 million, while net sales for specialty products, which includes products such as engineered wood, cedar, moulding, siding, metal products and insulation, accounted for $496 million in the period.

The Company reported net income of $55 million in the third quarter, or $5.72 per diluted share, compared to a net loss of $7 million, or $(0.75) per diluted share, in the prior-year period. Third quarter 2020 net income benefited from approximately $8 million, or $0.84 per diluted share, of non-recurring items, including a gain on a sale-leaseback transaction involving our Denver facility, versus a reduction of $5 million from non-recurring items, or $(0.50) per diluted share, in the prior-year period. Excluding these non-recurring items, net income increased by $49 million on a year-over-year basis in the third quarter, when compared to the third quarter 2019.

Adjusted EBITDA, a non-GAAP measure, was a record $81 million in the third quarter, compared to $19 million in the prior-year period. Cash provided by operating activities was $61 million in the third quarter, an increase of $46 million versus the prior-year period, primarily attributable to the year-over-year increase in Adjusted EBITDA.

Business Update

While the COVID-19 pandemic continued to impact many aspects of the Company’s business and operations in the 2020 third quarter, that impact was offset by the improving housing market and rapid escalation in wood-based commodity prices. BlueLinx worked to capitalize on these favorable trends by executing on its strategic priorities during the quarter:

– Sales performance. BlueLinx is focused on sales growth through several initiatives at the national, regional and local levels. The Company recently added two key leaders to run its national dealer and home center customer markets to better capitalize on the Company’s large geographic footprint. Additionally, the Company continued its strategic supplier partnerships to drive marquee brands while emphasizing high performing product categories. BlueLinx also continued its local entrepreneurial initiatives through a coordinated process to take advantage of local market strategic opportunities.

– Reduced bank debt and eliminated the Term Loan total net leverage ratio covenant. Total bank debt, which is comprised of amounts outstanding under the Company’s term loan and revolving credit facility, was reduced by $70 million in the third quarter 2020 to $321 million, and has been reduced by $181 million over the twelve months ended September 26, 2020. BlueLinx reduced outstanding bank debt through a combination of improved cash flow from operations and real estate sale leasebacks. In October, the Company paid down the term loan by an additional $14 million leaving the remaining balance at $44 million, eliminating the total net leverage ratio covenant.

– Improved operating efficiency. Recent cost reduction actions continued to support improved operating efficiency during the third quarter. Overall selling, general and administrative expense increased $3 million as compared to prior year due to higher variable incentive compensation and sales commissions of approximately $10 million, offset by reductions of overhead costs, primarily related to reduced labor. BlueLinx continues to focus on reducing non-essential costs throughout the organization, while selectively investing in resources to support strategic sales growth.

Market and Business Outlook

Conditions within the residential housing construction markets continued to improve during the third quarter. Within the new residential housing construction market, single-family housing starts, a key economic indicator with a high historical correlation to the Company’s business, increased by 17% in the third quarter over the prior year period, and have steadily increased each of the last four months on a year-over-year basis, with September hitting the highest level in over 13 years. Additionally, the Builders’ Confidence Index , according to the NAHB, was at an all-time high in October. Annualized single-family housing starts for 2020 are estimated to be approximately 43% below peak cyclical levels and below the 50-year average. Total U.S. monthly supply of homes also remained constrained, with housing inventory at the end of the third quarter at approximately 40% below the 20-year average. Within the residential remodel market, existing home sales and remodeling expenditures continued to increase during the third quarter versus prior-year levels. According to the NAHB, the Remodeling Market Index (RMI) increased 71% to 82 for third quarter 2020, when compared to the first quarter RMI of 48. The Company anticipates that the current apparent trend toward deurbanization, coupled with a historically low interest rate environment, should continue to benefit both new residential construction and remodel activity over the long-term.

While wood-based commodity prices have dropped dramatically since the end of the third quarter, the Company’s structural product gross margin for the month of October is anticipated to be above fourth quarter 2019 levels. The Company continues to work to manage commodity price volatility through the centralized management of purchasing and inventory levels, together with mitigation strategies to reduce the impact of commodity price declines including contract-based pricing and consigned inventory.

As of the date of this release, the rates of infection, hospitalization, and mortality associated with the COVID-19 virus continue to fluctuate, causing some state and local governmental authorities to consider new or reinstated mitigation measures, and we expect that existing and new mitigation measures have had, and will continue to have, a substantial impact on businesses around the world. While the residential building products industry has been resilient, the trajectory of the pandemic continues to evolve rapidly, and we cannot predict the extent to which our financial condition, results of operations, or cash flows will ultimately be impacted. We are closely monitoring the impact of the pandemic on industry conditions, the progress of mitigation measures, and any pandemic-related restrictions that may have an impact on our business.

For the full third quarter results, click here.

About BlueLinx Holdings, Inc.

BlueLinx (NYSE: BXC) is a leading wholesale distributor of building and industrial products in the United States with over 50,000 branded and private-label SKUs, and a broad distribution footprint servicing 40 states. BlueLinx has a differentiated distribution platform, value-driven business model and extensive cache of products across the building products industry. Headquartered in Marietta, Georgia, BlueLinx has approximately 2,000 associates and distributes its comprehensive range of structural and specialty products to approximately 15,000 national, regional, and local dealers, as well as specialty distributors, national home centers, industrial, and manufactured housing customers. BlueLinx encourages investors to visit its website, www.BlueLinxCo.com, which is updated regularly with financial and other important information about BlueLinx.

Contact:

Mary Moll – Investor Relations – investor@bluelinxco.com – (866) 671-5138

Source: BlueLinx Holdings, Inc.