Operator
Operator
At this time, I would like to welcome everyone to the BlueLinx's third quarter earnings release conference call. (Operator Instructions) I would now like to introduce Maryon Davis, Director of Investor Relations with BlueLinx's.
BlueLinx Holdings Inc. (BXC)
Q3 2012 Earnings Call· Thu, Nov 1, 2012
$53.21
-5.23%
Same-Day
-4.89%
1 Week
-1.33%
1 Month
+1.78%
vs S&P
+2.88%
Operator
Operator
At this time, I would like to welcome everyone to the BlueLinx's third quarter earnings release conference call. (Operator Instructions) I would now like to introduce Maryon Davis, Director of Investor Relations with BlueLinx's.
Maryon Davis
Management
Thank you, and welcome everyone to the BlueLinx's third quarter 2012 conference call. Our speakers 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 result 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. We will begin the call this morning with opening remarks from George; then Doug will present an in-depth review of the financial statements. Next, George will provide an operations review of the quarter and add a final perspective before opening the call to your questions. Now, let me turn the call over to our Chief Executive Officer, George Judd.
George Judd
Chief Executive Officer
Thank you, Maryon. And good morning, ladies and gentlemen, thank you for joining us this morning. Everyone at BlueLinx extends their deepest sympathy and concern for those impacted by the storm earlier this week. Thankfully our BlueLinx employees are safe and our facilities are all operational, and sustained only limited damage. Doug and I have spent an increasing amount of time recently, talking with a variety of people interested in learning a more about BlueLinx and the future opportunities of our company. We're always excited by this interest and welcome new listeners to today's call. To assist all of our investors and other interested parties, we have posted our latest investor presentation on our website, and we encourage you to review it, more and more about our company, our history, our industry and our strategy and many opportunities that future holds for BlueLinx. Before I turn the call over to Doug to review the financial result, I'll briefly review our current business objectives. Specifically, we're pursuing special product growth with a continuing sense of urgency and commitment. We are managing our structural business to grow overall profitability, not for volume or not for market share. Let me elaborate future on these BlueLinx strategic objectives. We have consistently set our primary strategic objective remains to grow specialty building products revenue to more than 60% of our total sales. Specialty products accounted for 58% of total sales in the third quarter and 55% of total gross margin. Our growth objective for specialty is based on two-key facts. The first is specialty building products steadily or less volatile and carry out margins in special products. This translates the more stable earnings growth and higher profit margins. The second is our focus on the specialty category. This deeply differentiates BlueLinx and the supply chain by positioning us to create significant value for both the manufacturers of these products and our customers. Now, let's look at structural products part of the business. Our structural products business is a vital part of BlueLinx and we continue to refine our systems and processes to manage this business for long-term profitability. Our second objective is to continue to grow our structural products business and with emphasis on profitability and limited exposure to commodity price volatility. We have focused on reducing our exposure to the volatility inherent in structural commodity prices to more effective inventory management, increased program sales and the use of consignment inventories. In summary, our growth objectives and our strategy for reaching them, are clear and consistent. Our progress is steady and our commitment is great. Now, I'll turn the call over to Doug.
Doug Goforth
Chief Financial Officer
Thank you, George. Good morning. Turning to the financial highlight, as Maryon indicated earlier this morning, we released our third quarter 2012 result. For those who may not have seen our third quarter numbers yet, let me offer a quick recap. Revenues for the quarter were $496.8 million, which was up $23.9 million or 5.1%. Operating profit was $10.3 million and that represents a $9.1 million increase. Net income was $3.1 million, which was up $9.3 million. And earnings per diluted share were $0.05 this quarter compared to a loss per diluted share of $0.12 in the third quarter of 2011. I'm very pleased to say, that represents our first quarterly profit since 2009. BlueLinx generated approximately $23 million in cash from operations for the quarter, which is a $6 million increase over the same period last year. Finally, we had approximately $112 million in access availability at the end of the quarter with a cash balance of $7.9 million. Our net debt was approximately $387 million, up approximately $30 million from a year ago. Now, for a closer look at the quarterly and year-to-date financial results. For those of you following along with the slides posted on the Investor Relation sections from BlueLinx's website. I'll begin with Slide 6. Overall, sale for the third quarter ended September 29, totaled $496.8 million, up 5.1% or $23.9 million from the third quarter of 2011. The increase reflects a 0.8% decrease in specialty product sales and a 13.3% increase in structural product sales from the year-ago period. Third quarter sales mix was impacted by increased structural product pricing compared to the year-ago period, with structural sales accounting for 42% and specialty sales accounting from 58% of total revenue during the quarter. The increase in totaled revenue is attributable to increased underlying structural…
George Judd
Chief Executive Officer
Now, let's review the third quarter results in the context of our objectives in current operating environment. Third quarter business environment improved as the underlying market fundamentals and leading indicators continue to strengthen. We operated in a business climate characterized by generally rising structural wood product prices and expectations of an improved housing market. Structural wood based product prices rose during the first two months of the quarter, up again two or three later in the quarter. Actual total U.S. housing starts increased approximately 28% for the third quarter 2012 compared to the same period last year. Single-family starts increased 29% and represents' the housing end-used market to which BlueLinx is mostly closely tied to. It appears that housing market is daily recovering with consistent increases in housing starts and sales, coupled with good affordability conditions. BlueLinx the local markets in which we operate experienced improvements to varying degrees and we managed our business accordingly. We are very pleased to report net income from BlueLinx for the quarter. Certain specialty product revenues fell slightly on lower product pricing and unit volumes. Gross margin of 13.2% was down 10 basis points, on both the year ago and from the second quarter. While we're disappointed with the decline in revenue, it raises an important point regarding our specialty products business. This grouping of product is diverse. It's made up of many end-used markets. Large portions of these products grouping, for example, paneling and roofing products that are more closely tied to repair remodeling markets, and other product such as Hardwood Plywood and Particleboard, tied to our industrial business. These businesses are recovering at a much lower pace than the new residential construction markets. Other portions to this product grouping, they are more closely tied to new construction like siding and trim, engineered…
Operator
Operator
(Operator Instructions) Your first question comes from the line of Alan Weber of Robotti & Company. Alan Weber - Robotti & Company: So I guess the question on the specialty products, given most of your end markets were higher, can you just explain why volumes were lower?
George Judd
Chief Executive Officer
When we blend all of those products together into this thing we call specialty products. They were really dropped down during the quarter by one really big code or product grouping and that was roofing. You probably have read many of the roofing product public companies numbers for the quarter were also very disappointing. Our roofing business is a big business. And it had substantial declines in volume. That weighted the average down significantly. And we'll say, the year was front end loaded in roofing activity, when it was compared against last year when we had a different type of storms, than we just had this week. Last year, we had a lot of winds and tornados in roofing and hail damage, that drove unprecedented roofing shingle growth. So that and a couple of other codes that were, such as paneling products, which I mentioned in my prepared comments saw declines during the quarter. And that's very much tied to our retail business. And our retail business was flat during the quarter. And also when you have codes with significant revenue that didn't grow or shrunk, as far our weighted average on the other product codes that performed significantly above housing like siding and trim and our engineered lumber products had a good quarter. Our molding products, which were tied to housing, had a good quarter. And we call those strategic products. Those are the products we're focusing our inventory dollars, our sales team and trying to drive that growth as housing rebounds. We are optimistic that as the economy continues to improve, that our businesses and things like Particleboard and Hardboard that are more closely tied to where we classifies our industrial business, speak about that as like furniture companies, store fixtures. And we do a big business with people who produce all the store fixture furniture for retail. That business has been slow. But it is starting to see some sign to life and we expect that to heat up as the economy heats up. Alan Weber - Robotti & Company: I just have two quick follow-up questions, one was, there was a slide presentation different than what you went through this morning, I guess that presentation you made, you talked about some private label products that have been introduced last year. So can you talk about those? And the question was, since you mentioned the storms that help grouping last year, what is the result of the current storm on the east coast. What does that mean for the company?
George Judd
Chief Executive Officer
Well, let me get the storm one first. So the storm, it's too early for us to tell what that will mean. And unfortunately for all of our friends and family, and I grew up there and have a lot of friends and family and co-workers, that are still trying to figure out what this storm means, but there will be repair. And repair will drive some demand. I don't know what that's going to translate to. But there will be increased demand and BlueLinx has a good market of share in those geographies. So I'll expect an uptick in something. But it won't happen fast. One of the things that everybody has got to be careful for, those types of repair remodels, they unwind. So there will be over a months and years. That's not going to happen. Everybody is not going to rebuild next quarter. With regards to the private label and the other deck that we putting on our website, we do have a growth plan that has one product code for example is SteelLinx, which is our metal product family. Those products are produced all over the world. We'd like to take them to market in one-packaging, one-marketing program. So if you go on our website, you'll see that we have a SteelLinx family of products, that's fasteners, that's concrete accessories and other metal type products, we call that SteelLinx. We kicked also a program that we did talked about last year about this time, with regards to our on-center, which on-center is engineered lumber products, that we bring to market. Doing a very nice job there, and that's growing. And we have line call ProLine. And ProLine has some millwork products and some exterior trim products. They are globally sourced products that we have manufactured to our specs. We market, we developed the brand, and we bring a distributor across the United States. And we're very happy with our growth that we see in that family of products as well.
Operator
Operator
At this time, there are no further questions. I will turn the call back over to Mr. George for any closing comments.
George Judd
Chief Executive Officer
Well, thank you. Thank you for listening in on the BlueLinx's third quarter call. We look forward to talk to you next quarter. And for those of you in the Northeast are unable to listen to us, good luck. And we look forward to helping you dig out from the storm. Thank you all.
Operator
Operator
Ladies and gentlemen, this concludes today's conference. You may now disconnect.