BlueLinx Announces Third Quarter 2021 Results
BlueLinx Holdings Inc., a leading U.S. wholesale distributor of building products, reported financial results for the three months ended October 2, 2021.
Third Quarter 2021 Highlights
(All comparisons versus the prior-year period unless otherwise noted)
-Net sales of $971 million, an increase of 11%
-Net income of $47 million, a decrease of 14%
-Adjusted EBITDA of $79 million, a decrease of 2%
-Strong cash flow from operations of $104 million, up 70%
-Net leverage ratio reduced for the sixth consecutive quarter to 1.3x
-Completed $300 million 6.0% senior secured notes offering in October 2021
“As a leading wholesale distributor of building products, BlueLinx continues to deliver a differentiated value proposition across the growing regional markets we serve, one that leverages our deep supplier relationships, diverse product offerings and integrated support services to provide an exceptional customer experience,” stated Dwight Gibson, President & CEO of BlueLinx.
“Our excellent third quarter performance was highlighted by continued growth in specialty product sales and robust cash flow generation,” continued Gibson. “We delivered specialty product gross margins well above historical averages as we continue to capitalize on supplier-led price increases and our value-added services. In contrast, our structural product gross margins were significantly impacted by the historical decline of over 60% in commodity wood prices that began at the end of the second quarter. Despite that, we managed inventory and pricing exceptionally well, quickly absorbing the impact and finishing the quarter with strong structural gross margins.
“Looking ahead, our focus remains on developing world class employee engagement and customer service to drive growth within higher-gross margin product and service categories,” continued Gibson. “The demand outlook for construction materials remains strong, with expectations for continued growth in domestic new home construction and renovation activity over a multi-year period.”
“We generated strong cash flow from operations of $104 million in the third quarter, an increase of approximately $43 million versus the prior-year period. In addition, we continued to reduce our net leverage for the sixth consecutive quarter,” stated Kelly Janzen, CFO of BlueLinx. “In October, we issued $300 million of 6.0% senior secured notes due 2029, increasing our access to long-term capital at an attractive fixed rate. This offering had no impact to our net leverage profile, as a majority of the proceeds from the offering were used to reduce the outstanding balance on our existing revolving credit facility. Following this transaction and our strong cash flow generation in the third quarter, we now have $433 million of available liquidity from cash on hand and excess availability under our revolving credit facility to support the continued growth of the business.”
Third Quarter Financial Performance
For the three months ended October 2, 2021, BlueLinx generated net sales of $971 million, an increase of $100 million, or 11%, when compared to the prior-year period. BlueLinx reported third quarter net income of $47 million, or $4.74 per diluted share, versus $55 million, or $5.72 per diluted share, in the prior-year period. The year over year decrease in net income is due primarily to the significant decline in the market value of higher-cost commodity wood product inventory sold during the third quarter and to a lesser extent, an approximately $8 million, non-recurring gain on the sale of property recorded in Q3 2020.
Net sales of specialty products, which includes engineered wood, industrial products, cedar, moulding, siding, metal products and insulation, increased $145 million year over year, or 29%, to $641 million in the third quarter. Specialty products gross profit increased $62 million year over year to $148 million, resulting in a gross margin of 23.0%, up 560 basis points. These increases in both net sales and gross profit were primarily driven by price increases reflective of both continued robust demand and ongoing supply constraints. Specialty products experienced a low double-digit sales volume decline year-over-year due to widespread supply chain disruptions. Notably, however, sales volume increased year over year in some key, high-value categories, including industrial products, moulding and siding.
Net sales of structural products, which includes products such as lumber, plywood, oriented strand board, rebar, and remesh, declined $45 million year over year, or 12%, to $330 million in the third quarter due to significant price deflation for commodity wood products. This price deflation adversely impacted the market value of higher cost commodity wood product inventory sold through the first two months of the period. For the quarter, gross profit was 1.7% of net sales with gross profit improving to 7.0% in September.
Adjusted EBITDA was $79 million in the third quarter, compared to $81 million in the prior-year period. The Company generated cash flow from operations of $104 million and free cash flow of $102 million in the third quarter 2021, up 70% and 66%, respectively, from the prior-year period. Free cash flow is net of $2.5 million of capital expenditures in the period as the Company continued to increase investments in its trailer fleet and distribution facilities to drive efficiency and scalability.
Debt and Liquidity
As of October 2, 2021, total debt and net debt were $500 million, which included the balance on our revolving credit facility and $271 million of long-term finance lease obligations. Our net leverage ratio, which we calculate as the ratio of net debt to trailing twelve month Adjusted EBITDA was 1.3x, down from 4.1x in the prior year period.
On October 18, 2021, the Company completed an offering of $300 million aggregate principal amount of its 6.0% Senior Secured Notes due 2029. In conjunction with this transaction, the capacity under the Company’s revolving credit facility was reduced to $350 million, down from $600 million. A majority of the proceeds of the offering were used to pay down all outstanding borrowings under the Company’s revolving credit facility.
Following these actions, as of October 29, 2021, available liquidity was $433 million, including $87 million of cash on hand and approximately $346 million of available capacity on our revolving credit facility. Total debt was at $577 million and net debt was $490 million. Our net leverage ratio remained at approximately 1.3x.
BlueLinx remains committed to driving a culture of profitable growth within new and existing product lines and geographies, while positioning the company for long-term value creation. The following initiatives represent key areas of management focus:
-Foster a performance-driven culture committed to profitable growth. BlueLinx is currently focused on enhancing the customer experience; accelerating organic growth within specific product and solutions offerings where the Company is uniquely advantaged; and deploying capital to drive sustained margin expansion, grow cash flow and maintain continued profitable growth.
-Migrate revenue mix toward higher-margin specialty product categories. BlueLinx expects to pursue a revenue mix increasingly weighted toward higher-margin, in-demand specialty product categories. Management also intends to expand on value-added service offerings designed to simplify complex customer sourcing requirements, together with marketing, inventory and pricing services afforded by the Company’s national platform.
-Maintain a disciplined capital structure and pursue high-return investments that support growth. On a trailing twelve-month basis, BlueLinx has significantly transformed its balance sheet, underscored by a material reduction in its net leverage and improved access to liquidity. Given this, the Company expects to accelerate capital investments designed to improve the efficiency and reliability of existing assets, including distribution centers and fleet assets. In the fourth quarter, the Company expects to invest up to $10 million in its trailer fleet and distribution facilities to improve operational performance and productivity. The Company also continues to evaluate potential acquisition targets that complement its existing capabilities, customer exposure, geographic reach, or a combination thereof.
Fourth Quarter Trends
-Domestic residential construction activity remained elevated, contributing to sustained demand for construction materials across the Company’s end-markets.
-Specialty products gross margin in October remained consistent with the third quarter given continued robust demand and favorable pricing dynamics across key product categories.
-Structural products gross margin for October was in the low double digits, up sharply versus third quarter. The Company continues to prudently manage structural product inventories, mitigating spot market price exposure.
For the complete press release, click here.
About BlueLinx Holdings
BlueLinx (NYSE: BXC) is a leading U.S. wholesale distributor of residential and commercial building products with both branded and private-label SKUs across product categories such as lumber, panels, engineered wood, siding, millwork, metal building products, and other construction materials. With a strong market position, broad geographic coverage footprint servicing 40 states, and the strength of a locally focused sales force, we distribute our comprehensive range of products to over 15,000 national, regional, and local dealers, specialty distributors, national home centers, and manufactured housing customers. BlueLinx is able to provide a wide range of value added services and solutions to our customers and suppliers. We are headquartered in Georgia, with executive offices located at 1950 Spectrum Circle, Marietta, Georgia, and we operate our distribution business through a broad network of distribution centers. BlueLinx encourages investors to visit its website, www.BlueLinxCo.com, which is updated regularly with financial and other important information about BlueLinx.
Noel Ryan – BXC@val-adv.com – (720) 778-2415
Source: BlueLinx Holdings, Inc.