BlueLinx Holdings Inc. — Form 10-Q Summary
Business context and reporting period
The filing covers the quarter ended March 30, 2013 (fiscal Q1 2013), not 2012 Q1 as stated in the request metadata. The comparable period ended March 31, 2012. BlueLinx distributes structural and specialty building products through approximately 55 distribution centers; results are seasonal, with the second and third quarters typically strongest.
Financial performance and liquidity
Amounts below are in millions of dollars, except per-share data.
| Metric | Q1 2013 | Q1 2012 |
|---|---|---|
| Net sales | $503.2 | $453.7 |
| Gross profit / margin | $56.5 / 11.2% | $54.2 / 12.0% |
| Operating loss | $(5.1) | $(4.1) |
| Interest expense | $7.2 | $6.8 |
| Net loss | $(12.6) | $(11.0) |
| Basic and diluted loss per share | $(0.19) | $(0.17) |
| Operating cash flow | $(95.8) | $(88.5) |
- Sales rose 10.9%. Structural sales increased 27.7%, driven mainly by a 23.2% increase in prices and 4.5% higher unit volume; specialty sales rose 1.1%.
- Gross profit dollars increased, but gross margin fell 80 basis points, primarily because structural products—a lower-margin category—made up a greater share of sales.
- Cash used in operations reflected seasonal working-capital investment: receivables increased $61.4 million and inventory increased $89.6 million, partly offset by a $64.1 million increase in accounts payable. Capital expenditures were $1.0 million.
- At March 30, cash was $5.3 million and working capital was $310.4 million. Total current assets were $567.1 million and current liabilities $256.7 million.
- Reported current and long-term debt totaled approximately $447.7 million, versus $377.4 million at December 29, 2012. This includes $240.4 million outstanding on the U.S. revolver, $2.0 million on the Canadian revolver, and a $205.3 million mortgage. The U.S. revolver’s interest rate was 4.0%; the mortgage rate is fixed at 6.35%.
- U.S. revolving-credit availability was $123.4 million, with a further $2.2 million available under the Canadian facility. The company reported compliance with facility covenants. Stockholders’ equity improved to $5.6 million from a $20.6 million deficit at year-end.
Material changes versus the comparable period
- Despite higher sales, operating loss widened by about $1.0 million and net loss by about $1.6 million. SG&A rose $3.4 million, including $0.9 million of Fremont-to-Stockton transition costs; higher gross profit partly offset the increase.
- The $40 million rights offering was fully subscribed and issued 22.9 million shares. The filing reports approximately $38.6 million of net proceeds after incurred expenses; the cash-flow statement records $39.9 million of proceeds less expenses paid by quarter-end. The offering increased issued shares and improved reported equity.
- The U.S. revolving facility was amended on March 29, 2013, changing borrowing-base and availability provisions and extending maturity; the filing reports $2.8 million of related debt fees.
- The company recorded $0.7 million of pension-related other comprehensive income. Fiscal Q1 2013 also included a $0.2 million gain related to the prior sale of its Fremont property.
Outlook, commentary, risks and contingencies
- Management said it believes a housing recovery is beginning and expects housing demand to improve over the long term, while cautioning that housing activity remains below historical averages and continues to pressure results. No quantitative earnings or sales guidance was provided.
- Management believes credit availability and other sources will fund routine operations and capital requirements for the next 12 months. It does not expect U.S. revolver availability to fall below the covenant threshold in fiscal 2013. However, management stated that at current operating results the company would not meet the fixed-charge coverage covenant if that threshold were breached.
- The company had not paid $2.1 million of its 2012 required pension contributions while an IRS waiver request remained under review. If denied, the full 2012 contribution would be due in fiscal 2013. A subsequent-quarter contribution of real property appraised at approximately $6.8 million is expected to exceed 2013 pension cash-contribution requirements, including the 2012 amount if the waiver is denied; the company will lease the property back for 20 years.
- Key business exposures include housing starts and product prices, customer creditworthiness, competition, fuel and operating costs, weather, and access to capital. The company reported no material change in risk factors or market-risk disclosures. It said pending legal matters were not expected, based on current information, to materially adversely affect its financial condition, results or cash flows; environmental matters could affect results in a given quarter.
- All $82.9 million of net deferred tax assets were offset by a valuation allowance at quarter-end. The filing notes that future changes in estimated realizability could affect earnings.
Important facts for investors to verify
- Confirm the period: this is fiscal Q1 2013, ended March 30, 2013, rather than 2012 Q1.
- Review whether sales growth and housing demand translate into improved operating results, given the lower gross-margin mix and rising SG&A.
- Monitor working-capital needs, revolver borrowings and availability, and the consequences of falling below the facility’s excess-availability threshold.
- Verify rights-offering proceeds and share-count effects, including the retrospective adjustment to comparative per-share calculations.
- Track the IRS pension-waiver decision, required contributions and accounting for the subsequent real-estate contribution and leaseback.