Bluelinx issued the following announcement on Aug. 3.
BlueLinx Holdings Inc. (NYSE: BXC), a leading U.S. wholesale distributor of building products, today reported financial results for the three months ended July 3, 2021.
SECOND QUARTER 2021 RESULTS
(all comparisons versus the prior-year period unless otherwise noted)
- Net sales increased to $1.3 billion, an increase of 87%
- Gross margin increased 480 basis points to 19.2%
- Net income of $113 million, an increase of $107 million
- Adjusted EBITDA of $166 million, an increase of $135 million
- Excess availability and cash on hand of $276 million, an increase of $138 million
- Amended and extended revolving credit facility for an additional five years
“Our record-setting second quarter performance was driven by a combination of product price escalations, overall volume growth within our specialty products business and an improved sales mix,” continued Gibson. “Supply-demand imbalances continued to persist across our specialty categories throughout the second quarter, resulting in a succession of supplier price increases that allowed the company to expand its margins. We expect that demand for key specialty categories will continue to outpace supply for the remainder of the current year and likely into the first half of 2022.”
“Commodity wood prices remained volatile during the second quarter,” continued Gibson. “While wood-based commodity prices continued to rise during April and mid-May, lumber prices declined by nearly 50% and 38% during June and July, respectively. In anticipation of the decline in commodity wood prices, we reduced our structural inventory footage to below prior-year levels, which served to mitigate price deflation in the period. We continue to take similar actions into the third quarter, consistent with our disciplined approach to working capital management.”
“Our balance sheet transformation continued during the second quarter. Significant cash flow generation in the period supported further debt reduction and an improved net leverage ratio,” stated Kelly Janzen, Chief Financial Officer. “We ended the second quarter with net debt to trailing twelve-month adjusted EBITDA of 1.5x, including lease finance obligations, the lowest level in the history of our company. Our strong balance sheet provides BlueLinx with significant optionality as we seek to deploy capital toward high-return investments capable of supporting long-term profitable growth.”
FINANCIAL PERFORMANCE
For the three months ended July 3, 2021, BlueLinx generated net sales of $1.3 billion, an increase of $609 million when compared to the prior-year period. BlueLinx reported second quarter net income of $113 million, or $11.61 per diluted share, versus $7 million, or $0.71 per diluted share, in the prior-year period. The year-over-year increase in profitability was attributable to broad-based revenue growth across both the specialty and structural product lines, improved price realization, together with disciplined inventory management and targeted cost control.
Net sales of specialty products, which includes engineered wood, industrial products, cedar, moulding, siding, metal products and insulation, increased $226 million to $675 million in the second quarter. Elevated demand for construction materials, along with continued supply constraints, contributed to price increases throughout the second quarter, improving net sales growth. Specialty sales volumes increased versus the prior-year period, and this increase was primarily attributable to the engineered wood, industrial products, and siding categories. Specialty products gross profit increased $87 million to $165 million, with a year-over-year improvement of 710 basis points in specialty gross margin to 24.4%
Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, increased $383 million to $633 million in the second quarter. Structural products gross profit increased $63 million year over year to $86 million. Wood-based commodity prices increased during the first half of the second quarter, then subsequently declined. Given recent commodity price volatility, the Company continued to closely manage its structural inventory levels during the period. Structural product gross margin increased by 430 basis points year over year to 13.6% for the second quarter.
Adjusted EBITDA, a non-GAAP measure, was $166 million in the second quarter, compared to $31 million in the prior-year period. Cash used in operating activities for the second quarter was $47 million, a decrease of $25 million when compared to the prior year period due to the increase in net working capital resulting from sales growth.
As of July 3, 2021, BlueLinx had total cash and excess availability under its revolving credit facility of $276 million, as compared to $138 million at the end of the second quarter 2020. Total debt outstanding at the end of the second quarter was $600 million, which included $273 million of long-term lease liabilities. The ratio of total net debt to trailing twelve-month Adjusted EBITDA declined to 1.5x at the end of the second quarter, versus 8.1x in the prior-year period. On August 2, 2021, we amended and extended our revolving credit facility for an additional five years.
BUSINESS UPDATE
BlueLinx remains committed to driving a culture of profitable growth within new and existing strategic product categories and geographies, while positioning the company for long-term value creation. As we look towards the future, management’s focus includes:
- Supporting a performance-driven culture that emphasizes growth. BlueLinx believes that a high-impact team drives sustainable outperformance. Our national accounts, regional and branch teams are encouraged to capitalize on inefficiencies and competitive gaps, while expanding capabilities to grow our addressable markets.
- Migrating revenue mix toward higher-margin specialty product categories. While BlueLinx remains committed to providing a full array of structural products, the Company intends to pursue targeted product line growth within less commoditized, high-demand specialty categories, while increasing the average mix of specialty revenue across its local market distribution centers.
- Deploying a capital allocation strategy that supports long-term growth. On a trailing twelve-month basis, BlueLinx has transformed its balance sheet, one highlighted by a material reduction in our net leverage ratio and improved access to liquidity. As a result, the Company continues to actively evaluate its capital allocation strategy with a goal of enhancing overall shareholder value and supporting long term growth, which may include acquisitions that complement its existing capabilities. It also provides the ability to accelerate organic investments and during the second half of 2021, the Company intends to allocate close to $10 million to its fleet and facilities to improve operational performance and productivity.
- Domestic residential construction activity remained elevated during July 2021, contributing to sustained demand for construction materials in the Company’s end-markets.
- Gross margins on specialty products sold during July remained at levels consistent with those reported in the second quarter 2021, given robust demand across key product categories and continued price increases.
- Continued wood-based commodity price volatility contributed to gross margin rates that were closer to historical levels on structural inventories sold during July, as the Company continued to manage its structural inventory and margins closely during the continued decline in wood-based commodity prices.
- Given the deflationary environment in structural products, working capital is expected to decrease, resulting in meaningful cash generation during the second half of 2021.
BlueLinx will host a conference call on August 4, 2021, at 10:00 a.m. Eastern Time, accompanied by a supporting slide presentation. Participants can access the live conference call via telephone at 877-407-4018, using Conference ID #13721148. Investors will also be able to access an archived audio recording of the conference call for one week following the live call by dialing 844-512-2921, Conference ID # 13721148.
Investors can also listen to the live audio of the conference call and view the accompanying slide presentation by visiting the BlueLinx website, www.BlueLinxCo.com, and selecting the conference link on the Investor Relations page. After the conference call has concluded, an archived recording will be available on the BlueLinx website.
NON-GAAP MEASURES
The Company reports its financial results in accordance with GAAP. The Company also believes that presentation of certain non-GAAP measures may be useful to investors and may provide a more complete understanding of the factors and trends affecting the business than using reported GAAP results alone. Any non-GAAP measures used herein are reconciled to their most directly comparable GAAP measures herein or in the financial tables accompanying this news release. The Company cautions that non-GAAP measures should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results.
Adjusted EBITDA
BlueLinx defines Adjusted EBITDA as an amount equal to net income plus interest expense and all interest expense related items, income taxes, depreciation and amortization, and further adjusted for certain non-cash items and other special items, including compensation expense from share-based compensation, one-time charges associated with the legal and professional fees and integration costs related to the Cedar Creek acquisition, and gains on sales of properties including amortization of deferred gains.
The Company presents Adjusted EBITDA because it is a primary measure used by management to evaluate operating performance. Management believes this metric helps to enhance investors’ overall understanding of the financial performance and cash flows of the business. Management also believes Adjusted EBITDA is helpful in highlighting operating trends. Adjusted EBITDA is frequently used by securities analysts, investors, and other interested parties in their evaluation of companies, many of which present an Adjusted EBITDA measure when reporting their results. However, Adjusted EBITDA is not a presentation made in accordance with GAAP and is not intended to present a superior measure of our financial condition from those measures determined under GAAP. Adjusted EBITDA, as used herein, is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. This non-GAAP measure is reconciled in the “Reconciliation of Non-GAAP Measurements” table later in this release.
Net Debt and Net Leverage Ratio
BlueLinx determines our net debt based on total short- and long-term debt, including our outstanding balances under the Company’s term loan and revolving credit facility and the total amount of obligations under its financing leases, less cash, and cash equivalents.
After determining net debt, BlueLinx determines its overall net leverage ratio by dividing net debt by trailing twelve-month Adjusted EBITDA. Management believes that this ratio is useful to investors because it is an indicator of the Company’s ability to meet its future financial obligations. In addition, the ratio is a measure that is frequently used by investors and creditors. Net debt and overall net leverage ratio are not presentations made in accordance with GAAP and are not intended to present a superior measure of the Company’s financial condition from measures and ratios determined under GAAP. In addition, the Company’s net debt and overall net leverage ratio, as used herein, are not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. This non-GAAP measure is reconciled in the “Reconciliation of Non-GAAP Measurements” table later in this release.
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