BlueLinx Holdings' CEO Discusses Q1 2011 Results - Earnings Call Transcript

BlueLinx Holdings Inc. ( BXC)

Q1 2011 Earnings Call

May 5, 2011 10:00 AM ET

Executives

Maryon Davis – Director, Finance and IR

George Judd – President and CEO

Douglas Goforth – CFO, SVP and Treasurer

Analysts

Steve Chercover – D. A. Davidson

Presentation

Operator

Good morning. My name is Carly and I’ll 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 call is being recorded, today, May 05, 2011. Thank you.

I’d now like to introduce Ms. Maryon Davis, you may begin your call.

Maryon Davis

Thank you, Carly, and welcome ladies and gentlemen to the BlueLinx first quarter 2011 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 use 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 Executive Officer, George Judd.

George Judd

Thanks, Maryon. Good morning, thank you for joining us today. Before beginning our remarks regarding the first quarter 2011 results, I would like comment on our press release issued April 26, 2011 announcing a $60 million planned rights offering. We filed the registration statement with the Securities and Exchange Commission which contains a preliminary prospectus as the rights offering across these proceeds will not have comments or take any questions regarding the offering.

We will take questions at the conclusion of this call regarding our first quarter results. Thank you for your understanding of this matter and with I will turn the call over to Douglas Goforth, Chief Financial Officer to review the first quarter.

Douglas Goforth

Thanks George and good morning everyone. I’ll start with an overview of the quarterly results and George will provide an operations review of the quarter and close with final perspective. For those of you following along with the slides posted on the Investor Relations section in the BlueLinx website, I will begin with slide 5.

Overall, sales for the first quarter ended April 2, totaled $390.6 million, down 9.4% or approximately $40.4 million from the first quarter of 2010, which benefited from the first time homebuyer tax credit. Specialty sales increased slightly year-over-year, reflecting a 1% increase in product selling prices offset by a small decline in volumes.

Structural product sales decreased 20.8% from the same period last year. This decrease was driven by 25.2% decrease in units sold and reflects a 4.4% year-over-year increase in product selling prices as demand for these products softened during the quarter.

Specialty products comprised 59% of total sales up from 53% in the first quarter of 2010 as we continued to focus on value added products and services. Overall, unit volume declined a 11.8% compared to the year ago period.

Housing continues to underperform, actual total US housing starts decline 9.9% for the first quarter of 2011, compared to the same period last year with single-family starts, which our business is closely tied to down 21.3%.

The environment for home building and home remodeling continues to face substantial headwinds with an overhand of inventory, low consumer confidence and high unemployment. These conditions combined with the loss of the first homebuyer tax credit, an extreme win a weather condition negatively impacted our first quarter financial results.

Turning to slide 6, BlueLinx generated approximately $46 million in gross profit for the quarter. Overall, gross margin was 11.8%, which is down 0.3% from prior year quarter. Structural margins were flat with the prior year quarter at 10.7%, and improve 1.2% from the fourth quarter due our emphasis on price discipline and margin improvement. We consider 10.7% a strong structural margin performance considering the price and demand challenges that we face in our market.

Specialty gross margin for the quarter was 13.8% compared with 14.4% in the year ago quarter. The specialty margin decline is largely result of a shift to the lower margin channel for certain specialty products in a highly competitive pricing environment.

Total operating expenses decreased to $51.4 million from $60.3 million a year ago and included $7.2 million in real estate gains. We have been managing our costs diligently and will continue to manage our cost structure relative to business conditions as we move forward in 2011.

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