Earnings Labs

BlueLinx Holdings Inc. (BXC)

Q4 2011 Earnings Call· Wed, Feb 15, 2012

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Transcript

Operator

Operator

Good morning. My name is David and I’ll be your conference operator today. At this time, I would like to welcome everyone to the BlueLinx’s Fourth Quarter 2011 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. (Operator Instructions) As a reminder, ladies and gentlemen, this conference is being recorded, today, February 15th, 2012. Thank you. I would now like to introduce Maryon Davis. Ma’am, you may begin your conference.

Maryon Davis

Management

Thank you, David, and welcome everyone to the BlueLinx’s fourth quarter 2011 conference call. Our speakers this morning are George Judd, Chief Executive Officer and Doug Goforth, Chief Financial Officer. 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 view them during our remarks. Additionally, the slide package contains an appendix of supplementary tables available for your review. Now, let me turn the call over to our Chief Financial Officer, Doug Goforth.

Doug Goforth

Chief Financial Officer

Thank you, Maryon. I will start with the discussion of fourth quarter and full year financial results, then George will provide some additional commentary and closed with the final perspective. BlueLinx’s financial performance for the fourth quarter of 2011 improved compared to a year ago as we continue to make strides growing our Specialty Products business. Although the housing market and overall economy remained very challenging, we did experience small improvements in business demand in certain markets during the quarter. For the fourth quarter actual US single family housing starts were up 2.4% compared to the fourth quarter of 2010, the first rise in single family starts this year. Actual total U.S. housing starts increased 22.6% for the fourth quarter 2011 compared to the same period last year. Against this backdrop we worked hard to achieve our objectives continuing to cultivate new customers and strengthen supplier relationships. We focused on profitable long-term relationships and profitable transactions. And as we have said before we continue to use this environment to invest in people, processes and program improvement that will help ensure our success as we move forward in 2012 and beyond. Last, but certainly not least, we continue to aggressively manage cost and working capital. Today, we reported a GAAP net loss of $10.3 million or $0.17 per deluded share on revenue of $391.1 million. That compares to a GAAP net loss of $20.2 million or $0.66 per diluted share on revenue of $367.9 million in the fourth quarter of last year. Now, let’s review the results in more detail. For those of you following along with the slides posted on the investor relations section of the BlueLinx website, I will begin with slide 5. Overall sales for the fourth quarter in the December 31 totaled $391.1 million up 6.3% or…

George Judd

Chief Executive Officer

Thank you, Doug, and good morning. Keeping our focus on specialty products, today I am pleased to tell you about two exciting developments in our specialty business. Last quarter we announced our plan to launch a complete line of privately branded engineered products. Today, I am pleased to report that this week we’d launched our engineered product line branded onCENTER. The onCENTER branded engineered products were made available to dealer and lumber customers across the country on February 13. All onCENTER BLI Joists and LVL are backed by limited life time warranty and supported by our full service cross functional team of engineers, technicians, software developers, inside sales and field based market managers. We are excited to introduce the onCENTER brand to the market and to present our customers with a superior engineered product solution. Secondly, subsequent to the quarter end, we entered into a new distribution agreement with a Weyerhaeuser to become the independent distributor of Weyerhaeuser's engineered wood products in the New England area effective February 13, 2012. BlueLinx won this distribution agreement after rigorous process in which we emerged as the best fit for the New England market based on our operational capabilities alignment with Weyerhaeuser local strategies and our strong reputation and relationship with the same New England customer base. We are excited about the opportunity to work in New England with a great partner like Weyerhaeuser. They have a long standing presence in the forest products industry and distribution is an important part of their success. As we moved to the selection process, it became clear that we share a lot in common, including a deep commitment to New England and taking care of our customers, which makes Weyerhaeuser and BlueLinx a great fit. The agreement applies to the New England market and does not…

Operator

Operator

(Operator Instructions) Your first question comes from the line of Alan Weber with Robotti & Company. Alan Weber - Robotti & Company: First question is you made a comment about -- I forgot the exact quote but something in the press release that there is still -- you still have a lot of work to do to return to profitability. When you kind of say that, can you kind of talk about how you think it’s really in terms of end markets are somewhat out of your control but internally I guess kind of what are some of the major -- is there anything different that you expect to do in 2012 kind of or it’s a just a continuation of what you’ve been doing to get towards profitability?

George Judd

Chief Executive Officer

Yeah, really what we’re referring to is that as soon as this long wait begins and much steeper housing contraction, then we certainly expected and that everybody that I ever talked to had expected that five years ago. We talked about housing the bubble bursting. We’ve made a lot of adjustments to BlueLinx that we did not expect. And we did present again in 2011, where we consolidated some markets, well we closed our Sacramento, California facility and sold the property and serviced those customers from our Fremont facility, and we’ve retained the large percentage of the business. So we’re constantly looking at models on how we can serve our customers in a more effective and cost efficient way. And secondly on product line expansion. We expanded our metal product line significantly in the end of 2009 and we grew that business. So now, it’s a major part of our revenue and gross profit dollars. So, in 2011, we have a few things in the pipeline for 2012. We haven’t announced them. We’re working on them. That we’re hoping will also provide that type of revenue and gross profit growth. And thirdly, the thing we did announce in the first quarter with -- within engineered lumber. In the last three years our engineered lumber margins has declined and so we worked for 18 months frankly to come up with a new plan and new options on how we could take a business that was underperforming, and return it to the top tiers of product performance, which started about five years ago. We’re excited about what we’re now. So those types of things we’re constantly adjusting and working. We agree we can’t control how many houses get build, we’re excited what we feel in the markets right now. In the first quarter we saw some activity and that seems to be continuing. And we had a large team down at the International Builder Show last week in Orlando and activity was better, and large builders that we met with, and customers that we met with down there were much more optimistic about 2012. So we’re excited about that. We can control it. But we constantly have to be making adjustments to make sure that we capitalize on it. Alan Weber - Robotti & Company: And I guess as a follow-up question just, kind of the announcements that you made this week regarding, the Weyerhaeuser engineered products. Any idea what that means in terms of volume or revenue?

Doug Goforth

Chief Financial Officer

Yes, we did adjust, not anything we’re prepared to disclose. Alan Weber - Robotti & Company: Right, I guess I’m right, I guess really okay. I just wasn’t sure, okay. That’s fine. And I guess my last question is kind of a general question, when you think it through for arbitrarily I’m not really asking for projections, but if revenues were up say 10% next year, is I mean is the idea that you expect to overgrow this profit margin to improve while SG&A is relatively flat or SG&A start to go up in absolute dollars if you start to get some increase in revenue?

George Judd

Chief Executive Officer

Well we certainly work real hard and are pushing our organization to manage expenses as business returns and as volumes start to grow. But we will have to grow, we’ll have to add some more drivers and we’ll have to add some more material handlers to fixed cost that go with our -- in our bucket. But we’re going to manage aggressively our corporate overhead and our sales expansion. Alan Weber - Robotti & Company: Okay great. Thank you very much.

George Judd

Chief Executive Officer

Thanks for your questions thanks.

Operator

Operator

There are no further questions. Mr. Judd, do you have any closing remarks?

George Judd

Chief Executive Officer

Yes, thanks everybody for joining us today for our call, and I look forward to speaking with everybody again next quarter.