BlueLinx Holdings Inc

Previous wording

This Quarterly Report on Form 10-Q (“Quarterly Report” or “Form 10-Q”) contains forward-looking statements. Forward-looking statements include, without limitation, any statements that predict, forecast, indicate or imply future results, performance, liquidity levels or achievements, and may contain the words “believe,” “anticipate,” “could,” “expect,” “estimate,” “intend,” “may,” “project,” “plan,” “should,” “will,” “will be,” “will likely continue,” “will likely result” “would,” or words or phrases of similar meaning. Forward-looking statements are based on estimates and assumptions made by our management that, although believed by us to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties that may cause our business, strategy, or actual results to differ materially from the forward-looking statements. The forward-looking statements in this report include statements about anticipated effects of adopting certain accounting standards; estimated future annual amortization expense; potential changes to estimates made in connection with revenue recognition; the expected outcome of legal proceedings; industry conditions; seasonality; liquidity and capital resources; our confidence in the Company’s long-term growth strategy; our ability to capitalize on supplier-led price increases and our value-added services; our areas of focus and management initiatives; the demand outlook for construction materials and expectations regarding new home construction, repair and remodel activity and continued investment in existing and new homes; our positioning for long-term value creation; our efforts and ability to generate profitable growth; our ability to increase net sales in specialty product categories; our ability to generate profits and cash from sales of specialty products; our multi-year capital allocation plans; our ability to manage volatility in wood-based commodities; our improvement in execution and productivity; our efforts and ability to maintain a disciplined capital structure and capital allocation strategy; our ability to maintain a strong balance sheet; our ability to focus on operating improvement initiatives and commercial excellence; and whether or not the Company will continue any share repurchases.

Current wording

This Quarterly Report on Form 10-Q (“Quarterly Report” or “Form 10-Q”) contains forward-looking statements. Forward-looking statements include, without limitation, any statements that predict, forecast, indicate or imply future results, performance, liquidity levels or achievements, and may contain the words “believe,” “anticipate,” “could,” “expect,” “estimate,” “intend,” “may,” “project,” “plan,” “should,” “will,” “will be,” “will likely continue,” “will likely result” “would,” or words or phrases of similar meaning. Forward-looking statements are based on estimates and assumptions made by our management that, although believed by us to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties that may cause our business, strategy, or actual results to differ materially from the forward-looking statements. The forward-looking statements in this report include, without limitation, statements about anticipated effects of adopting certain accounting standards; estimated future annual amortization expense; estimates made in connection with revenue recognition; the expected outcome of legal proceedings; the expected outcome of government and regulatory proceedings; industry conditions; seasonality; liquidity and capital resources; our confidence in the Company’s long-term growth strategy; our areas of focus and management initiatives; the demand outlook for construction materials and expectations regarding new home construction, repair and remodel activity and continued investment in existing and new homes; our positioning for long-term value creation; our efforts and ability to generate profitable growth; our ability to increase net sales in specialty product categories; our ability to generate profits and cash from sales of specialty products; our ability to effectively manage inventory; our ability to manage our lease commitments; our ability to negotiate collective bargaining agreements; our multi-year capital allocation plans; our ability to manage volatility in wood-based commodities; our improvement in execution and productivity; our efforts and ability to maintain a disciplined capital structure and capital allocation strategy; our ability to maintain a strong balance sheet; our ability to focus on operating improvement initiatives and commercial excellence; and whether or not the Company will continue any share repurchases.

Previous wording

Migrate sales mix toward higher-margin specialty product categories. The Company is pursuing a revenue mix increasingly weighted toward higher-margin, specialty product categories such as engineered wood, siding, moulding and millwork, outdoor living, specialty lumber and panels, and industrial products. Additionally, the Company is expanding its value-added service offerings designed to simplify complex customer sourcing requirements and provide enhanced service capabilities afforded by the Company’s national platform.

Current wording

Migrate sales mix toward higher-margin specialty product categories. The Company is pursuing a revenue mix increasingly weighted toward higher-margin, specialty product categories such as engineered wood, siding, millwork, outdoor living, specialty lumber and panels, and industrial products. Additionally, the Company is expanding its 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.

Previous wording

Foster a performance-driven culture committed to profitable growth. This includes 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.

Current wording

Foster a performance-driven culture committed to business excellence and profitable growth to be the provider of choice for suppliers and customers. This includes enhancing the customer experience through technology enablement; accelerating organic growth within specific product and solutions offerings where the Company is uniquely advantaged; enhancing our performance by leveraging our scale and footprint together with pricing, operational and procurement capabilities; and deploying capital to drive sustained margin expansion, grow cash flow and maintain continued profitable growth.

Previous wording

Maintain a disciplined capital structure and pursue high-return investments that increase the value of the Company. The Company is maintaining a disciplined capital structure while at the same time investing in its business to modernize its distribution facilities, as well as its tractor and trailer fleet, and to improve operational performance. The Company also continues to evaluate potential acquisition targets that complement its existing capabilities, grow its specialty products business, increase customer exposure, expand its geographic reach through potential greenfield expansions in new markets, or a combination thereof. We invested $5.4 million cash in our business and entered into $8.2 million of finance leases during the first quarter of fiscal 2024 to improve operational performance and productivity.

Current wording

Maintain a disciplined capital structure and pursue strategic investments that increase the value of the Company. The Company continues to strategically target acquisition opportunities that grow its specialty products business, expand its geographic reach, or complement its existing capabilities. The Company also continues to identify markets that are potential opportunities for new market development. The Company further seeks to maintain a disciplined capital structure while at the same time investing in its business to modernize its distribution facilities, as well as its tractor and trailer fleet, and to improve operational performance. During the first half of 2024, we engaged in the following transactions:

Previous wording

Our results of operations and financial performance are influenced by a variety of factors, including the following: housing market conditions; pricing and product cost variability; volumes of product sold; competition; the cyclical nature of the industry in which we operate; consolidation among competitors, suppliers, and customers; disintermediation risk; loss of products or key suppliers and manufacturers; our dependence on international suppliers and manufacturers for certain products; effective inventory management relative to our sales volume or the prices of the products we produce; business disruptions; potential acquisitions and the integration and completion of such acquisitions; information technology security risks and business interruption risks; the ability to attract, train, and retain highly qualified associates and other key personnel while controlling related labor costs; exposure to product liability and other claims and legal proceedings related to our business and the products we distribute; natural disasters, catastrophes, fire, wars or other unexpected events; the impacts of climate change; successful implementation of our strategy; wage increases or work stoppages by our union employees; costs imposed by federal, state, local, and other regulations; compliance costs associated with federal, state, and local environmental protection laws; the effects of epidemics, global pandemics or other widespread public health crises and governmental rules and regulations; fluctuations in our operating results; our level of indebtedness and our ability to incur additional debt to fund future needs; the covenants of the instruments governing our indebtedness limiting the discretion of our management in operating the business; the potential to incur more debt; the fact that we have consummated certain sale leaseback transactions with resulting long-term non-cancelable leases, many of which are or will be finance leases; the fact that we lease many of our distribution centers, and we would still be obligated under these leases even if we close a leased distribution center; inability to raise funds necessary to finance a required repurchase of our senior secured notes; a lowering or withdrawal of debt ratings; changes in our product mix; increases in fuel and other energy prices or availability of third-part freight providers; changes in insurance-related deductible/retention reserves based on actual loss development experience; the possibility that the value of our deferred tax assets could become impaired; changes in our expected annual effective tax rate could be volatile; the costs and liabilities related to our participation in multi-employer pension plans could increase; the risk that our cash flows and capital resources may be insufficient to service our existing or future indebtedness; interest rate risk, which could cause our debt service obligations to increase; and changes in, or interpretation of, accounting principles. These fa…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Our results of operations and financial performance are influenced by a variety of factors, including the following: housing market conditions; pricing and product cost variability; volumes of product sold; competition; the cyclical nature of the industry in which we operate; consolidation among competitors, suppliers, and customers; disintermediation risk; loss of products or key suppliers and manufacturers; our dependence on international suppliers and manufacturers for certain products; effective inventory management relative to our sales volume or the prices of the products we produce; business disruptions; potential acquisitions and the integration and completion of such acquisitions; information technology security risks and business interruption risks; the ability to attract, train, and retain highly qualified associates and other key personnel while controlling related labor costs; exposure to product liability and other claims and legal proceedings related to our business and the products we distribute; natural disasters, catastrophes, fire, wars or other unexpected events; the impacts of climate change; successful implementation of our strategy; wage increases or work stoppages by our union employees; costs imposed by federal, state, local, and other regulations; compliance costs associated with federal, state, and local environmental protection laws; the effects of epidemics, global pandemics or other widespread public health crises and governmental rules and regulations; fluctuations in our operating results; our level of indebtedness and our ability to incur additional debt to fund future needs; the covenants of the instruments governing our indebtedness limiting the discretion of our management in operating the business; the potential to incur more debt; the fact that we have consummated certain sale leaseback transactions with resulting long-term non-cancelable leases, many of which are or will be finance leases; the fact that we lease many of our distribution centers, and we would still be obligated under these leases even if we close a leased distribution center; inability to raise funds necessary to finance a required repurchase of our senior secured notes; a lowering or withdrawal of debt ratings; changes in our product mix; increases in fuel and other energy prices or availability of third-part freight providers; changes in insurance-related deductible/retention liabilities based on actual loss development experience; the possibility that the value of our deferred tax assets could become impaired; changes in our expected annual effective tax rate could be volatile; the costs and liabilities related to our participation in multi-employer pension plans could increase; the risk that our cash flows and capital resources may be insufficient to service our existing or future indebtedness; interest rate risk, which could cause our debt service obligations to increase; and changes in, or interpretation of, accounting principles. These…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

First Quarter of Fiscal 2024 Compared to First Quarter of Fiscal 2023

Current wording

First Six Months of Fiscal 2024 Compared to First Six Months of Fiscal 2023

Previous wording

The increase in consolidated gross margin percentage in the current period was due to a net benefit of $6.5 million for import duty items in the current period for our specialty products. The import duty items were related to changes in retroactive rates for anti-dumping duties resulting in a credit to Cost of products sold of $16.9 million, partially offset by classification adjustments for certain goods imported by the Company that resulted in an increase in Cost of products sold of $10.4 million. The net benefit from import duties added 0.9% to the consolidated gross margin percentage for the current period.

Current wording

For the first six months of fiscal 2024, the Company generated consolidated net sales of $1.5 billion, a decrease of $119 million, or 7.4 percent, compared to the first six months of fiscal 2023. The decrease in net sales in the current period was attributable to both specialty products and structural products as sales were negatively impacted by challenges in the housing and building products sectors and by declining lumber and panel prices. The Company’s gross profit for the first six months of fiscal 2024 decreased by $19.2 million to $250.1 million from $269.3 million in the prior year period and this decline was attributable to both specialty products and structural products. The Company’s gross margin percentage was 16.7 percent for both periods. Gross margin percentage and gross profit benefited in the current period by a net benefit in specialty products of $9.1 million for import duty items. The import duty items were related to changes in retroactive rates for anti-dumping duties resulting in a credit to cost of products sold of $16.9 million, partially offset by classification adjustments for certain goods imported by the Company that resulted in an increase in Cost of products sold of $7.7 million. Not including this net benefit, the Company’s gross margin percentage would have been 16.1 percent in the current period.

Previous wording

Our selling, general, and administrative expenses (“SG&A”) were $91.3 million in the first quarter of 2024, comparable with the $91.2 million for the prior year period. Depreciation and amortization expense increased 22.2 percent, compared to the first quarter of fiscal 2023. The increase in depreciation and amortization is due to a higher base of amortizable and depreciable assets in the first quarter of fiscal 2024 when compared the prior-year period, resulting from our continued focus on capital investment. Other operating expenses decreased $2.8 million compared to the first quarter of fiscal 2023; the prior year period included $3.7 million for restructuring costs related to our leadership transition and costs related to settlement of our legacy defined benefit pension plan.

Current wording

Depreciation and amortization expense increased 24.8 percent compared to the first six months of fiscal 2023 due to a higher base of depreciable assets throughout the first six months of fiscal 2024 when compared the prior-year period, resulting from our continued focus on capital investment.

Previous wording

Our effective tax rates were 24.1 percent and 26.5 percent for the first quarter of fiscal 2024 and 2023, respectively. Our effective tax rate for both periods was impacted by the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, slightly offset by a benefit from the vesting of restricted stock units, which occurred during each period. For the current quarter, the partial release of a valuation allowance for deferred income taxes lowered our effective income tax rate by 1.4 percent. We anticipate that our annual effective income tax rate for fiscal 2024 will be approximately 26 percent.

Current wording

Our effective income tax rates were 24.4 percent and 25.1 percent for the first six months of fiscal 2024 and 2023, respectively. Our effective income tax rate for both periods was impacted by state taxes as well as the permanent addback of certain nondeductible expenses, including meals and entertainment and executive compensation, offset by a benefit from the vesting of restricted stock units. For fiscal 2024, we expect our annual effective income tax rate will be approximately 26 percent.

Previous wording

We expect our primary sources of liquidity to be cash flows from sales and operating activities in the normal course of our operations, cash and cash equivalents on hand, and availability from our revolving credit facility, as needed. We expect that these sources will be sufficient to fund our ongoing cash requirements for at least the next 12 months and into the foreseeable future. As of March 30, 2024, we had $481.3 million of cash and cash equivalents plus $346.5 million of availability on our revolving credit facility.

Current wording

We expect our primary sources of liquidity to be cash flows from sales and operating activities in the normal course of our operations, cash and cash equivalents on hand, and availability from our revolving credit facility, as needed. We expect that these sources will be sufficient to fund our ongoing cash requirements for at least the next 12 months and into the foreseeable future. As of June 29, 2024, we had $491 million of cash and cash equivalents plus $346.5 million of availability on our revolving credit facility.

Previous wording

In October 2021, we completed a private offering of $300 million of our six percent senior secured notes due 2029 (the “2029 Notes”). Interest is payable semi-annually. Our 2029 Notes are scheduled to mature on November 15, 2029, and no principal is due until that time as long as we remain in compliance with the related covenants. As of March 30, 2024, we were in compliance with these covenants.

Current wording

In October 2021, we completed the private offering of $300 million of our 6.0 percent senior secured notes due 2029 (the “2029 Notes”). Interest is payable semi-annually. Our 2029 Notes are scheduled to mature on November 15, 2029, and no principal is due until that time as long as we remain in compliance with the related covenants. As of June 29, 2024, we were in compliance with these covenants.

Previous wording

Our amended revolving credit facility matures on August 2, 2026, provided we remain in compliance with the related covenants. As of March 30, 2024, we were in compliance with these covenants.

Current wording

Our existing revolving credit facility (“Revolving Credit Facility”) with Wells Fargo, National Association, as administrative agent (“Agent”), and certain other financial institutions, matures on August 2, 2026, provided we remain in compliance with the related covenants. As of June 29, 2024, we were in compliance with such covenants.

Previous wording

Any outstanding borrowings under the revolving credit facility bear interest at a rate per annum equal to (i) Adjusted Term Secured Overnight Financing Rate (“SOFR”) (calculated as SOFR plus 0.1%) plus a margin ranging from 1.25 percent to 1.75 percent, with the margin determined based upon average excess availability for the immediately preceding fiscal quarter for loans based on SOFR, or (ii) the agent’s base rate (as that term is defined in the revolving credit agreement) plus a margin ranging from 0.25 percent to 0.75 percent, with the margin based upon average excess availability for the immediately preceding fiscal quarter for loans based on the base rate.

Current wording

Any outstanding borrowings under our Revolving Credit Facility bear interest at a rate per annum equal to (i) Adjusted Term Secured Overnight Financing Rate (“SOFR”) (calculated as SOFR plus 0.1 percent) plus a margin ranging from 1.25 percent to 1.75 percent, with the margin determined based upon average excess availability for the immediately preceding fiscal quarter for loans based on SOFR, or (ii) the Agent’s base rate (as that term is defined in the agreement for the Revolving Credit Facility) plus a margin ranging from 0.25 percent to 0.75 percent, with the margin based upon average excess availability for the immediately preceding fiscal quarter for loans based on the base rate.

Previous wording

Borrowings under the Revolving Credit Facility are subject to availability under the Borrowing Base (as that term is defined in the revolving credit agreement). The Company is required to repay revolving loans thereunder to the extent that such revolving loans exceed the Borrowing Base then in effect. The Revolving Credit Facility may be prepaid in whole or in part from time to time without penalty or premium but including all breakage costs incurred by any lender thereunder.

Current wording

Borrowings under our Revolving Credit Facility are subject to availability under the Borrowing Base (as that term is defined in the agreement for the Revolving Credit Facility). The Company is required to repay revolving loans thereunder to the extent that such revolving loans exceed the Borrowing Base then in effect. Our Revolving Credit Facility may be prepaid in whole or in part from time to time without penalty or premium but including all breakage costs incurred by any lender thereunder.

Previous wording

Our finance lease liabilities consist of leases related to equipment and vehicles, and to real estate, with the majority of those finance lease commitments relating to the real estate financing transactions that we completed in recent years. Our total finance lease commitments totaled $292.1 million and $285.4 million as of March 30, 2024 and December 30, 2023, respectively. Of the $292.1 million of finance lease commitments as of March 30, 2024, $243.6 million related to real estate and $48.4 million related to equipment. Of the $285.4 million of finance lease commitments as of December 30, 2023, $243.2 million related to real estate and $42.3 million related to equipment.

Current wording

Our finance lease obligations consist of leases for real estate, equipment, and vehicles totaling $291.3 million and $285.4 million as of June 29, 2024 and December 30, 2023, respectively. Of the $291.3 million as of June 29, 2024, $243.4 million related to real estate and $48.0 million related to equipment. Of the $285.4 million as of December 30, 2023, $243.2 million related to real estate and $42.3 million related to equipment.

Previous wording

Net cash used in operating activities for the first three months of fiscal 2024 was $31.1 million, compared to net cash provided by operating activities of $89.0 million in the first three months of fiscal 2023. This decrease of $120.1 million in cash generated from operating activities in the current year period compared to the prior year period was primarily a result of seasonal inventory purchases in the current year period. The net source of cash generated in the prior year period was driven by significant inventory reduction efforts.

Current wording

Net cash provided by operating activities for the first six months of fiscal 2024 was $4.7 million compared to net cash provided of $153.1 million in the first six months of fiscal 2023. The decrease in cash provided by operating activities during the first six months of fiscal 2024 was primarily a result of a decrease in net income for the current year period plus higher cash generated in the prior year period from changes in working capital, primarily inventory.

Previous wording

Under this share repurchase program, the Company may repurchase its common stock from time to time, without prior notice, subject to prevailing market conditions and other considerations. Repurchases may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, accelerated share repurchase programs, tender offers or pursuant to a trading plan that may be adopted in accordance with the Securities and Exchange Commission Rule 10b5-1.

Current wording

Under the 2023 share repurchase program, we may repurchase our common stock at any time or from time to time, without prior notice, subject to prevailing market conditions and other considerations. Our repurchases may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, accelerated share repurchase programs, tender offers or pursuant to a trading plan that may be adopted in accordance with the Securities and Exchange Commission Rule 10b5-1.

Previous wording

Net working capital is an important measurement we use to determine the efficiencies of our operations and our ability to readily convert assets into cash. Net working capital is defined as the sum of accounts receivables and inventory, less accounts payable, each determined in accordance with GAAP and included in our consolidated balance sheets. This metric differs from traditional working capital in that it excludes certain current assets and current liabilities that are reported in our consolidated balance sheets. Management of net working capital helps us monitor our progress in meeting our goals to enhance working capital assets.

Current wording

Net working capital is an important measurement we use to determine the efficiencies of our operations and our ability to readily convert assets into cash. Net working capital is defined as the sum of accounts receivables and inventory, less accounts payable, each determined in accordance with GAAP and included in our consolidated balance sheets. This metric differs from traditional working capital in that it excludes certain current assets and current liabilities that are reported in our consolidated balance sheets. Net working capital of $451.7 million as of June 29, 2024, compared to $414.1 million as of December 30, 2023, increased on a net basis by approximately $37.6 million, as shown below:

Previous wording

Our investments in capital assets consist of cash paid for owned assets and the inception of financing lease arrangements for long-lived assets to support our distribution infrastructure. The gross values of these assets are included in property and equipment, at cost on our condensed consolidated balance sheet. For the first quarter of 2024, we invested $5.4 million in property and equipment, including $3.9 million for our distribution facilities and $1.5 million in fleet upgrades. Additionally, during the first quarter of 2024, we entered into finance leases of $8.2 million for fleet upgrades. For the first quarter of 2023, we invested $9.0 million cash in long-lived assets primarily for our distribution facilities and to a lesser extent, upgrading our fleet.

Current wording

Our investments in capital assets consist of cash paid for owned assets and the inception of financing lease arrangements for long-lived assets to support our distribution infrastructure. The gross value of these assets is included in property and equipment, at cost on our unaudited condensed consolidated balance sheets.