Earnings Labs

BlueLinx Holdings Inc. (BXC)

Q1 2012 Earnings Call· Thu, May 3, 2012

$52.69

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Transcript

Operator

Operator

Good morning. My name is Rachel and I’ll be your conference operator today. At this time, I would like to welcome everyone to the BlueLinx’s first quarter 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, Thursday May 3, 2012. Thank you. I would now like to introduce Maryon Davis. You may begin your conference.

Maryon Davis

Management

Thank you, Rachel and welcome everyone to the BlueLinx’s 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 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

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 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 offerings 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 compare to $30.8 million diluted weighted average common shares in the year-ago period. During the quarter we used approximately $89 million in cash for operations as first quarter working capital requirement 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 the slides posted on the Investor Relation section to the BlueLinx website, I will begin with slide 5. 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 and specialty unit volume increased 12.4% and structural unit volume…

George Judd

Chief Executive Officer

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. Billing activity increased in all markets as the overall economy improved. New housing inventory spell and we experienced a milder winter in many markets. I outlined on previous calls our plan to increase BlueLinx’s share with recovery market by executing targeted growth initiatives that focus on to specific markets, specific customers and value added products. I have 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 products out of warehouse and a rising fuel environment is something we've 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 improving trend in market activity has continued into April. BlueLinx will continue to execute on 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 grow revenues 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,…

Operator

Operator

(Operator Instructions) And we do have a question from Alan Weber from Robotti & Company Alan Weber Robotti & Company: Just a question on your SG&A; your operating expenses; just curious, when you take away to gain last year from the real estate, as you said the operating expenses was relatively flat compared to a year ago on and this quarter higher volume. I guess the question is how long can you keep operating expense at these levels?

George Judd

Chief Executive Officer

Well, we got synergies as we grew the business across our fixed cost platform and then our semi-fixed and other. The actual trucks going out of our warehouses everyday had some capacity on and during the first quarter we did a very, very nice job of making sure that our trucks were full. We are a real little less, but we have taken most of it and you know as the second quarter progresses, I would expect that that improvement will soon maximize. But as far as our SG&A, our selling expense, our headquarters expense, and all of our fixed expenses as we have got tight controls on and we expect to keep them where they are. Alan Weber Robotti & Company: And I guess more of a general questions is; is there something with you in the markets where you operate do you see extensive changes from competitiveness, in the competition?

George Judd

Chief Executive Officer

Well, there has been constant changes to this correction where competitors changed footprints, left markets, got a product lines and then we’ve had some competitors that have added product lines and added some markets. It’s constantly changing; it has been a tough long market; housing correction. But overall, my view would be that folks that were really good business operators and at the peak of the market are continuing to be good operators and as soon as the trough and now as recovery comes. The folks that weren’t, some of them are gone and many of them are much smaller. Alan Weber Robotti & Company:

Operator

Operator

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

Doug Goforth

Chief Financial Officer

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

Operator

Operator

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