BlueLinx Holdings Inc.
Q4 2008 Earnings Call Transcript

Published: 17 Feb 2009

[Operator:]

Good morning, my name is Christy and I will be your conference operator today. At this time I would like to welcome everyone to the BlueLinx Fourth Quarter Earnings Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded, today Tuesday February 17, 2009. I would now like to introduce Mr. Russ Zukowski with Investor Relations. Mr. Zukowski, you may begin your conference.

[Russ Zukowski:]

Thank you operator and welcome everyone to the BlueLinx Fourth Quarter 2008 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. For those of you who do not have a copy, it is available on the Investor Relations section of the company’s website www.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. The 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 would like to remind our listeners that we have posted slides on our website. We will be referring to these slides during the 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. Now let me turn the call over to our CEO George Judd.

[George Judd:]

Thank you, Russ, and thank you everyone for joining us this morning for the BlueLinx Fourth Quarter Earnings Conference Call. The housing and building products markets continue to be very difficult in the fourth quarter; however as I stated in our earnings prerelease last month, we continue to focus on those items which we can control, operating expenses, working capital, margin and serving the needs of our customers. BlueLinx fourth quarter performance reflects the challenging environment we are operating in today, as well as our focus on cash management. For the fourth quarter we reported a net loss of $0.81 per diluted share, which includes restructuring and other charges, which Doug will discuss later in the call. Our results for the first quarter were impacted by the continued weakening demand environment with housing starts declining by 44% from the prior year period. Underlying wood based product prices decreased 24% from the end of the third quarter of 2008 and structural metal prices, which had increased earlier in the year, declined rapidly during the quarter. We continue to be highly focused on managing cash flow by aggressively managing inventories, receivables, and spending, while always focusing on serving the needs of our customers, suppliers, and shareholders. We ended the fourth quarter with a cash balance of $150 million and reduced our net debt. We are working with many strategic customers, not only to expand our product penetration and provide reliable just in time service, but also to develop new and additional ways to enhance our services to them. And, we are working with key vendors to become their distributor of choice. I am excited by our new and extended supplier agreement with Georgia Pacific on Georgia Pacific brand engineered lumbar products. We continue to work on the other key Georgia Pacific product lines, plywood, and OSB, regarding our supply agreement also. Even in these difficult market conditions, there are many opportunities to grow our share. BlueLinx is focused on doing just that in 2009. While it is difficult to predict when the market will rebound, I am confident that we’ll emerge from this downturn in a much stronger competitive position than we were when the downturn began almost three years ago. Now I would like to turn the call over to Doug Goforth, our Chief Financial Officer, who will walk you through our financial results for the quarter and for the full year periods.

[Doug Goforth:]

Thanks, George. Good morning everyone and thank you for joining us today. As George mentioned earlier and as noted in our press release this morning, our results included the following restructuring and other charges

[George Judd:]

Thanks, Doug. While we continue to operate in a weak economy and in the worst housing market on record, our primary focus remains on managing cash flow and on working with our customers to ensure we are satisfying their needs. We have a flexible capital structure that provides us the liquidity necessary to continue to execute in an extended cyclical down turn while positioning the company to be the supply chain solution of choice once this housing correction has run its course. While it is difficult to predict when the turn around will occur, I believe our efforts will position BlueLinx to participate in that rebound as the leading building products distributor in the US. I certainly believe our ongoing focus on tightly managing all aspects of our company in this environment, combined with our highly dedicated employee base, has allowed us to separate ourselves from our competitors. Finally, I would like to thank our best in the industry employees, customers and vendors who have worked so hard in this difficult environment. BlueLinx is well positioned to win in the building products industry now and in the future when the industry recovers from this unprecedented down turn. With that we will open the call to questions for Doug and myself.

[Operator:]

(Operator Instructions) Your first question comes from Steven Chercover of D. A. Davidson & Co.

[Steven Chercover:]

I had two quick questions please. First of all with respect to real estate, you have told us that the gain was $8.3 million. Can you tell us how much cash that’s going to provide you with?

[Doug Goforth:]

Well the cash was last year, Steve, and we used the majority of that to pay down the mortgage. The actual transactions closed in fiscal 2008; it’s a gain that gets recognized in 2009.

[Steven Chercover:]

I see, so what was the sale price, if you get $20 million and it was on the books for $12.

[Doug Goforth:]

Well it was a couple pieces of property; I don’t really want to get in to the individual sales prices for those properties, but it generated enough cash to pay down the debt.

[Steven Chercover:]

Okay. I was looking at the statement of cash flows and I didn’t see it. Do you contemplate additional sales perhaps this year?

[Doug Goforth:]

Yes.

[Steven Chercover:]

Okay and if I recall, when BlueLinx came out of the gates you were around a 10% market share in general. Can you give us a sense of where you think your market share is today?

[George Judd:]

Yes, Steve, we don’t think that’s materially changed. We believe we’re still in the 10% to 11% market share.

[Steven Chercover:]

But there’s got to be a great number of competitors, mainly private, but some public as well, that are hemorrhaging. So, do you expect to see a lot of attrition in the next year or so?

[George Judd:]

Well, you know it’s hard to predict what our competitors will do. You know the building products industry has traditionally had a lot of wherewithal to maintain their business operations in any market conditions. BlueLinx is focused on the things that are important to BlueLinx and I’m sure our competitors are doing those same things.

[Steven Chercover:]

I’m sure they are. My last question is with respect to your truck fleet. Are you doing anything there? Is that coming down in size?

[George Judd:]

Yes. The truck fleet is coming down with volumes. We have not actually sold a lot of equipment just because the market is so weak for used trucks today. We’ve moved up the real old tractors that were part of our regular schedule, but we need fewer tractors, thus the reduced CapEx quite frankly.

[Steven Chercover:]

So basically you’re not buying any new ones. Is there any difficulty in maintaining the ones that you have?

[George Judd:]

No. With the miles that we’re driving today our fleet is properly sized.

[Steven Chercover:]

Okay, thank you.

[Operator:]

There are no further questions at this time. Gentlemen, are there any closing remarks?

[George Judd:]

Thank you all for joining us on the fourth quarter earnings call.

[Operator:]

This concludes today’s conference call.