BlueLinx Reports 1Q Results, COVID-19 Operational Response & Other Updates
BlueLinx Holdings, Inc. (the “Company”), a leading distributor of building and industrial products in the United States, today reported financial results for the fiscal first quarter ended March 28, 2020, and provided a business update and review of current market conditions related to the COVID-19 pandemic.
2020 First Quarter Financial Highlights
“Our first quarter results show the continuous and sustained progress that began in the second half of 2019 and a strong start to the year,” Mitch Lewis, President and Chief Executive Officer, stated. “Net sales improved by approximately 9% over the prior year when excluding the impact of our discontinued siding line. We recorded both year over year and sequential gross margin improvement, which combined with the improvement in net sales, drove Adjusted EBITDA to $19.9 million compared to $16.6 million last year, and $10.9 million in the fourth quarter of 2019.”
Mr. Lewis continued, “Our focus shifted towards the end of the first quarter as we implemented numerous actions in response to the COVID-19 pandemic including our highest priority of ensuring a safe and healthy workplace environment for our associates. We cannot predict how the business and social restrictions stemming from the pandemic will ultimately impact the U.S. housing industry and broader economy, however, we do know that our business has weathered a wide range of economic cycles. We are prepared to manage the challenges and opportunities that arise from this trying time and are focused on efficiently supporting our nation’s essential infrastructure needs in partnership with our customers and suppliers.”
Capital Structure and Liquidity
During the quarter, the Company favorably amended both its revolving credit facility and term loan facility to enhance liquidity and provide financial flexibility. In January, the Company amended its revolving credit facility to better align advance rates with the seasonality of its business. At the end of February, the Company amended its term loan facility and it will no longer be subject to the quarterly total net leverage ratio covenant when the principal balance of the term loan is less than $45 million. The Company further amended the term loan facility on April 1, 2020, to provide greater financial flexibility by increasing the total net leverage ratio covenants in the second and third quarters of 2020 to 8.75:1.00 from 6.50:1.00 and 6.00:1.00, respectively.
The enhancements that were made in the first quarter to the Company’s capital structure contributed to its strong liquidity position. The Company entered the second quarter with excess availability and cash on hand of approximately $97 million.
COVID-19 Operational Response
“Our primary concern continues to be for the safety and well-being of our employees, their families and our communities,” said Mr. Lewis. The Company formed a cross-functional COVID-19 Disaster Response Team in February and implemented safety and hygiene protocols consistent with the Centers for Disease Control and Prevention (“CDC”) and local guidance. Those protocols continue to evolve in accordance with CDC and local guidelines.
In early March, the Company implemented policies and procedures to protect its associates, serve its customers, and support its suppliers. The Company also moved quickly to develop plans and take actions designed to give the Company financial and operational flexibility during the periods impacted by the pandemic. These actions are intended to reduce the Company’s cost structure, strengthen its balance sheet, and preserve and increase liquidity in response to the COVID-19 pandemic so far, and they include:
– Pausing virtually all new hiring
– Limiting all non-essential spending
– Substantially reducing headcount and variable operating expense correlating to local market demand declines
– Furloughing approximately 15% of salaried workforce
– Reducing or eliminating executive and key management base salaries for the next six months
– Enhancing working capital efficiency to optimize liquidity for operations
Current Market Conditions
As of the date of this release, the Company’s business has been designated as “essential” in all states in which it operates, and the Company is continuing to operate and provide service to customers and suppliers. The Company has not experienced any significant supply chain disruptions as a result of the COVID-19 pandemic, and the Company’s supply chain has remained intact in all material respects.
During April, many of the Company’s markets have experienced negative sales volume impacts when compared to the prior year. Certain select markets that have stronger shelter-in-place and related restrictions have experienced more significant impacts. Those impacts have been somewhat offset by increases in sales volume in areas where the pandemic has not had as significant of an impact. As a result, overall April daily sales were down approximately 11% over the prior year period. The Company has also experienced below average gross margin in April, primarily related to the degradation in market pricing for structural products in connection with the COVID-19 pandemic. The structural products market began to stabilize in late April, although the Company cannot predict whether this stabilization will continue.
Despite the decline in sales volume, the platform for long-term growth that the Company built through the latter half of 2019 into the start of 2020 has remained intact and should continue to provide a solid foundation for execution as and when the pandemic subsides.
For the full first quarter results, click here.
About BlueLinx Holdings Inc.
BlueLinx (NYSE: BXC) is a leading wholesale distributor of building and industrial products in the United States with over 50,000 branded and private-label SKUs, and a broad distribution footprint servicing 40 states. BlueLinx has a differentiated distribution platform, value-driven business model and extensive cache of products across the building products industry. Headquartered in Marietta, Georgia, BlueLinx has over 2,200 associates and distributes its comprehensive range of structural and specialty products to approximately 15,000 national, regional, and local dealers, as well as specialty distributors, national home centers, industrial, and manufactured housing customers. BlueLinx encourages investors to visit its website, www.BlueLinxCo.com, which is updated regularly with financial and other important information about BlueLinx.
Kelly C. Janzen – Senior Vice President, CFO & Treasurer – (770) 953-7000
Source: BlueLinx Holdings, Inc.