BlueLinx Holdings, Inc. Q1 2010 Earnings Call Transcript

BlueLinx Holdings, Inc. Q1 2010 Earnings Call Transcript
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BlueLinx Holdings, Inc. (BXC)

Q1 2010 Earnings Call

May 6, 2010 10:00 pm ET

Executives

Maryon Davis - Director, Finance & IR

Doug Goforth - CFO

George Judd - CEO

Analysts

Steve Chercover - D. A. Davidson

Alex Ovshey - Goldman Sachs

Alan Weber - Robotti & Company

Presentation

Operator

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Good morning. My name is Kerri , 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. 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, May 6, 2010. Thank you.

I would now like to introduce Maryon Davis with BlueLinx. Ms. Davis, you may begin your conference.

Maryon Davis

Thank you, Kerri, and welcome ladies and gentlemen to the BlueLinx first quarter 2010 conference call. With us 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

Good morning, everyone, and thank you for joining us this morning. I will review the quarterly financial results, then George will provide an operations review of the quarter and add a final perspective before opening the call to your questions.

Let’s begin with the quarterly overview. Overall unit volume grew 1.4% compared to the year ago period with both specialty and structural product groups showing increases. Specialty volume grew 2.2% highlighted with growth in roofing, installation, engineered lumber, and structural siding. Structural products grew 0.3% on strong lumber volumes offset by declines in OSB volumes related to the termination of the Georgia-Pacific supply agreement last year.

Overall, gross margin was 12.1% for the quarter, up from last year’s 10.9% due to our continued focus on margin expansion, rising product prices, and growth in our out of warehouse business. For the first quarter of 2010, we reported a net loss of $14.7 million or $0.48 per share on revenues of 431 million.

During the quarter, we used 47 million in cash for operations and we had approximately 186 million in excess availability at the end of the quarter with a cash balance of 13 million. Excess availability is up from 157 million at the end of the fourth quarter, due to higher seasonal levels of accounts receivable and inventory. Our net debt was 331 million, up 38 million from the prior quarter.

For a closer look at quarterly financial results, for those 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 April 3 totaled 431 million, up 6% or 24 million from the first quarter 2009. This is our first year-over-year increase in quarterly revenue in four years. Specialty sales were flat year-over-year, while structural product sales increased 11.6% from the same period last year with the majority of the increase coming from higher wood-based product selling prices.

Benchmark rates of wood-based structural products increased approximately 50% over the prior year period. Specialty products comprised 53% of total sales down from 56% in the first quarter of 2009, largely due to the increase in demand and selling prices for structural products.

Moving to slide six, BlueLinx generated approximately 52.3 million in gross profit for the quarter. Our focus on gross margin performance benefited during the quarter from both rising wood-based structural product prices and shifts in our channel mix. Compared with the same period last year, revenue flowing through the warehouse increased, while lower margin direct ship revenue decreased. Gross margin was 12.1%, which is up 1.2% from the prior year quarter with both specialty and structural margins showing increases over the prior year quarter.

Operating expenses for the quarter totaled 60.3 million for a decrease of 2.4 million or 3.9% from a year ago. The decline in operating expenses reflects the impact of decreases in payroll and payroll related cost related to lower head count, lower bad debt expense related to improved receivable performance, partially offset by increases in fuel and other logistics costs as we shipped more products out of the warehouse. The overall decline reflects the company’s ongoing focus on managing expenses to the current operating environment.

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