BXC - Earnings call transcript Q4 2018

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Operator

Good morning. My name is Mary, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter 2018 Investor Relations Call. All lines have been placed on mute to avoid any background noise. After the speakers’ remarks, there will be a question-and answer-session. you. Thank Instructions] [Operator turn Relations, over Ms. now Director Mary of Investor the will to call Moll, I Moll, may you begin.

Mary Moll

XXXX The Thank www.bluelinxco.com. you, for Investors us quarter section joining We this appreciate conference Mary, and found Company's good for morning, call can of the in presentation the release and earnings everyone. be you earnings slides call. the fourth at website

performance. that I’ll and call presentation those you Joining Mitch in our Officer; Act that Reform Commission. Chief are provided, statements press from statements risks financial operations those the discussed and forward-looking our identified subject Private release the this our but and differ statements and including could limited about Executive today of not and Susan us in materially also Financial within Officer. on to including uncertainties Chief Securities Exchange our to certain actual Lewis, O'Farrell, of These the XXXX filings are future cause results the remind with Litigation includes meaning Securities to

speak only as no references this undertake non-GAAP includes we them presentation With statements to measures. I'll turn Today's over date that, call to the financial Mitch. revise information. and light obligation presentation in to of also the of of new Forward-looking

Mitch Lewis

the year. in Thanks, seeing months two today recent are integration, like in our amendment Mary, the loan, on our what would efforts markets and we you continued to good to the our on of update morning. We performance, fourth quarter's our and first term

April. part-time three for Trousdale performance, on role his will collaborating agreed know into let D. dive with D. Wayne years. basis you a to has fulltime business BlueLinx our continue to leaving next like Wayne with I the Before BlueLinx in I’d be that

decided achieved. culturally, behalf family to of the entire realize value want interest has organization and with time in our have not alternative two ahead. the on synergies together Cedar As one for will we we many has and the the years in instrumental of our the and you was he companies D. him but also Creek contributions bringing he thank helping while been in know, know founders spend of Wayne more D. an BlueLinx of to I bring also past, his team his business the to personally to only

approaching combined pleased cost the are the reduce we transaction that commercial and time We once We firsthand likely seen million to progress synergies. benefits the pleased and anniversary XXXX, we of enthusiasm are Cedar in integration. these achieve will initial confident to acquisition rapidly the entity. we remain exceed increased, of announcement The the the our has with have the we estimate again Creek the one-year felt as the to the the we as promise, are only $XX exit of synergies at of of

with Our new synergies well our $XX to $XX $XX million range. estimate of the between below cost our is achieving $XX and associated million initial million, million

be completed expect efforts of to the of quarter. with In initial by addition, firmly ahead schedule our we most the of third the integration end the integration associated and synergies are

locations investment remaining five significant have two overlap require June. consolidate locations, we may and We consolidated XX At will consolidate. that now locations expect capital point, have additional which by to to

nor additional remaining from incremental will these consolidations are but We our included consolidation not No of $XX-plus-million projected next achieve are of included costs associated locations synergies several any until will to likely annual these months XXXX. the in in synergies, at of the be the over our least assessing these locations any synergies. cost make

our ERP in pace of ahead also are We implementation.

June. ERP of on system anticipate having facilities and our end now our all weekend, past the same this have one of of of platform we XX ERP on locations XX by As the

million necessarily G&A one of to fourth $XX larger the to expect, BlueLinx, with would previously utilize year. been combined has during organization affected. ahead. our is earnings our having in G&A to ERP planned help strength the importantly We reduction enable results. our will results harmonized challenging business information you fully expect have but of accelerated we with the quarter, that exceed implementation When approximately over We experienced with the we on reductions deliver than months reported higher continued in synergies more In disruptive little that will both, it take million the order in headwinds advantage now the anticipate one costs. drive to associated in suppliers and which the system some relationships QX $XX annually, been a this we propel As efficiencies, faced

XXX for revenue are on While our potential arrangements. we to This recast our with every sales an that strength our day. anticipated distribution many as in base, associates supplier in who while ahead. their our enhance commercial enhances call years BlueLinx our that excellence approximately disruptions short-term the supply should channel value our our we partners, We distribution customers with our confident coupled provides confident costs we combination our enhancing remain synergies excellent of

continued While integrating progress and lumber again period deterioration once in negatively results. in was great challenging Cedar made our for two-step products Creek, quarter building we distributors. prices commodity fourth the another impacted The panel

lumber in XX% approximately worst December the fact, while the framing the we end mid-summer In panel from the year, by through structural XX at of composite last about was The have experienced price from dropped markets in that composite index the these declined the XX%. collapse June by years. through decline least index

anticipate commodity fourth and in lumber the these X decline the this about market occurred period want over discuss in and but prices impact in decades. OSB margins that products. is decline don't panel unusual, period, from historic reiterate XX%. has not this two This performance speculation will itself same Susan to over had we to decline that do And the collapse future. our certainly highly X-month impact detail, in our in not to level I was of the by pricing dropped will on quarter the During that to due repeat

apparent and XXXX, products significantly for impacted into and Good quarters of XXXX. is of call, price less for us XXXX. last higher lumber our prices in correlated typically that products, inventory warehouses, margins well prevailing or which As fourth during environment. news gross we and as as in cost the a with moved-up in panel rapidly as these the pricing end towards a have This our third compresses days we products declining and our entered is shipments the of domestic commodity margins the market XX in-transit our commodity discussed our bottoming which in

the fighting also during quarter single-family compared softening Single-family are the we collapse, the approximately we levels. in through commodity declined quarter. XXXX While to the XXXX, XX% in fourth saw starts of housing fourth housing starts

As bullish We seasonally expect, slowdown years. December on was starts housing the impacted family average you level would average long-term below for XXXX, this the starts remain over prospects single-family of as annual volume start as rate in still industry XX% the well. our the XX the housing single last

challenges way additional faced As the we I alluded fixed non-essential was earlier, and in reducing quarter to the salaries fourth eliminating reacted we business. quickly to in costs by one the

impact the and we aspects continue the see business to any first of manage experienced. all aggressively will reductions to of mitigate impact quarter the volume starting to are these declines of the We cost in help

the through customers in we correlating The entered there report this to experienced many as color stronger on first months for of in XXXX. the with days able We than some that you what is year. news XX markets we into first give seeing optimism be to winter are wanted the also February, but and appear the gaining couple remains half we of dropped been over cautious We to January, in last that I've to momentum of volume talk XXXX. can good

the generally XXXX, we start point low a improve muted the than are year, the expectations should patterns relative for warms single-family second While XXXX impacted for which is an the seen of last believe slow inflection housing up. few primarily the starts that range in in optimistic out yard single-digit in rather our to as and dries have the They quarter momentum mid are that have customers result last weather country performance lumber years. to over growth to the

major headwinds their I very can effect. the companies exercises. disintermediation in our will slowdown impact starts that performance, housing mitigate short-term by you The short-term close help focused behind of sales our and integrations organization While the this revenue we understandably tell putting are likely is are the synergy of that intrinsically current nature, integration our us. efforts will excited to

our key the enhanced strategic enhancing products our ultimately service of an organization good our We our integrated was grow more utilizing product important expect will as company. end it on remaining efforts clearly proposition pleased term summer, to step Creek. will and of leverage. for BlueLinx milestone a market in that amendment and our focus the the the to deleveraging think in of We share, enable our loan be reduce offering This essentially are to Cedar we the recent objectives, margins by

identified to partners $XX to through of arrangements amount consolidation million an real addition is sale-leaseback to can into lending approximate in Our specifically ability supported sell that our enter up $XX million this efforts. our This of estate we year.

quarter. by at pursuing to It's provide deleveraging definitive the a BlueLinx. and of information to X actively regarding months the hope are you more activities We be able both second busy these been opportunities end

merged BlueLinx that best a it started, yet to I’d financial benefit service. XX in to integrated a thank in our provide have and XX X now, Susan, will turn this to supply general and key clearly and hard that executive are managers across compensation local like transition who partnerships, to great team. is I’d locations distribution programs, to their we in ERP leadership come. stayed team personally the truly by platform, over We common the facilities, and negotiated new performance. period. for to our focused XX country, on We established And like on understand strategic new teams, It's customer the our commitment during work just entire converted excellence our markets details effort consolidated been getting

Susan O'Farrell

for Thanks, quarter Mitch, It's a pleasure with our fourth everyone. and to you XXXX me speak to and and review morning, results. business today full-year good

year acquisition Cedar of Creek As was with transformative year the BlueLinx April in a Mitch for discussed, XXXX. last

excited integration about our to are the We with made efforts. progress have we date great

you $XX And objective This of at and cost schedule XXXX XXXX exceeded in our cost original now rate refine is $XX further achieve what us will now that of range $XX our expect to million we million of run to are synergies with achieved with acquisition, lower least in even to to million. integration achieve we synergies $XX that by cost estimate the realize end be is results an million we these than along objectives. the million right ahead that also we in continued achieve in are rate XXXX. We double to savings that rate to tighter confidence million, that The integration range synergy and actions, call. exit the over than our after we we we our $XX end-of-year a in XXXX run run continue annual $XX to in you obtaining give quarter $XX We estimate third our shared shared million XXXX.

growth of our As our strength deleveraging. legacy discussed support remains hidden of one estate key Real of calls, sheet. financial our will previous on long-term businesses flexibility business, the asset improved is that balance a combining we've the our attributes key a two on and

an with owned properties are book million million, value four $XXX we a term to times loan XX the so amendment. That's have approximately market with recent why our value. $XXX estimated and of We pleased

certain us with million ability $XX upto reporting and our covenants to sale in to sell to and through monetize addition leasebacks of requirements. allows additional specified flexibility amended XXXX properties, facilities In provide properties our the

XX properties prior million, fourth to our owned the first the leaseback, beginning the will the million enter up term X, deflation. gross quarter. $XX We with $XXX opportunities over decline touch are Cedar same the in January $XXX and full-year. highlights ABL To company. with you acquisition is gross year $XX with which were will pay financial The sale during I'm million or into on move starts for Included to or XX% our sales, as on now and same year. quarter the versus account deleverage leaseback occurred million, to any of pleased is Pro of the $XXX page Creek, fourth down forma the loan housing sale $XX potential in extent the we some forward monetize the balance. reducing on proceeds million line certain into the period. I million, during the million up We of net $XXX take these presentation, we in quarter. Starting remainder quarter this results with share for decline, now were single-family profit Net down last of any profit sales experienced delivered volume impact XXXX XX%. commodity period XX% in our the

the when of you realizable Gross As quarter, and of quarter. was to by prices Mitch gross during lower net LC to continued third from offset back third shared, XX.X% for of the this by $X million or reserve value cost margin commodity impact $XX significantly the reserve. million. add quarter fourth decline the profit wood profit gross was reversal impacting quarter RV the The

consecutive Xth quarter. liquidity, in share on we adjusted we the year that we million. during million EBITDA hand. $XXX had averaging availability the and EBITDA to cash fourth pleased $X positive quarter fourth the with ended quarter of our is quarter, are positive strong the adjusted And For in excess of This

by As highlight gross our margin year. one-time million $X sales XX, was all we were in were by million. in net Full-year of page $XX $X.X million of of the billion gross up Net profit move $XX acquisition that full basis, booked reduced up the million, sales prior or up which the of experienced price $XX inventory further million. was pro to XX%. Full-year third XXXX $XXX the a forma year, deflation RV was Commodity LC related substantially impacted and second billion, billion, step-up offset the by On we’ll over XX.X%, $XXX profit the the charge year gross XXXX quarter. $X.X was approximately half for reversal performance.

which Excluding step-up right well million charge, inventory one-time appreciation of a inventory $XX acquisition-related year, the million of loss step-up acquisition included of previously charge stock for XX%. margin charges, the net million. $XX gross reported $XX one-time acquisition-related as full-year the and was approximately mentioned as We

In this liability, pension million addition of locations our from multiemployer de-risk part to we quarter a pension the future additional $X cash risk greatly benefits plans, as pension continuing negotiated million having four withdrawal at impact assessments from long-term reduction The for to $XX impact during net on XXXX. while obligation. had plan company for of charge, it income consolidated the to an outweigh the of to income, year. third net an withdrawal This accounting strategy pension our partial the annual mitigates multiemployer a immaterial as our

during with experienced the especially manage late macro we We the we are way second pleased expenses in the that XXXX, of year. in environment the half

prices Year-to-date costs. more continuous and half consolidated cost gross of core with cost see Heading million office the tricky especially Given fourth for quarters its on our the significantly creating and our investment personnel. million, while This value decline our over run efficiently staying up since $XX the found in into hard highest XXXX. EBITDA we’re ways adjusted it's $XX $XX lumber the our we approximately -- integration our we With The full-year to structure. in back adjusted the performance resulting was well-positioned in million. sales on are third XXXX. improvement, year-over-year. second was is EBITDA forma of bit have million, operation historic business to to to XXXX, together, commodity profit adjusted impact working negative committed in leaner EBITDA of of P&L, Pro impacted but embedded a and $XX our panel a

indicates prices the XX. On in call, fourth this our Page impact impact the discussed in page of commodity and we third gross volumes. decline quarter our on the earnings XX margin quarter had continued decline performance. Moving our you to with

volume net we for by from reducing was the and saw and starts. to single-family $X and certainly the third reserve million approximately quarter quarter addition at will we of and near in the to In since XX% $X again sales quarter begun historical decline sales at based to the tick LC million, lumber to not Commodity respectively. have correlated EBITDA February We profit impact lumber remain gross the for X.XX level the compared ending decline, for panels the stable housing X.XX wood which the RV anticipate quarter, in occur do commodities to fourth commodity $XX future. levels, end price took of impact in The prices reversed we XXXX remained December have our million. reduced up, the relatively this recently in and panel and

commodities stability on are we in in alleviate half margin relatively we and XXXX. As the helped of experienced -- now impact can this pressure the that we March, back see stable gross has

Moving uses basis. on an important to understand of it's think annualized cash post-integration to We of XX. the page potential basis

course or illustration, and ways cash estate adjusted in of and working deleveraging on our $XXX our As the take outlays, more XX, we state not then third you if think paying could estimated include major are account capital a estimated it in both This be and Consistent Company see meaningful show page and with a taxes into which to CapEx, changes EBITDA item generation $XX or annual deleverage cash by about and annual few could our seasonally capital, real funded in an BlueLinx. you quarter cash cash then assume attributes smaller remain which does annual million down items, factors our to million be ABL. debt. interest available including leases, the some through either in how presentation,

with our was leverage EBITDA. at expected term $XX in annual X.X loan the adjusted million when pro including run forma synergies implying year-end, loan $XXX term million of times Our only unrealized rate balance

fourth is our capital our high the business, building serve was to us revolver our of financing. part end our XXXX. quarter to the receivables. our supply the seasonally quality with revolver and as day-in, working Remember $XXX we seasons, of chain and and with expands million, The day-out that and balance revolver of inventory customers the Our contracts enabling supports secure

were In remains inventory to as unrealized ABL as than balance of the the and page fact, provides receivables additional sheet, our end December, our valuable million on delever the value that balance. $XXX higher estate at a asset the opportunities approximately well XX, Company. On real

million, $XXX Our by of times a be national worth unencumbered end near XXXX book-value. estate real $XXX appraised the real was appraisal is to firm to approximately estate million the four which

million. sale-leaseback marketing seven is connection In our properties team exited consolidations. These properties, industrial be are now opportunities, industrial we these The service. have we strong offers. the rail as approximately We their including to estimate that we our properties real-estate property of remained location substantial of proactively addition properties as to disposed interest market unsolicited in $XX desirable for with in access to these and value received

quarter leasebacks first NOLs using for few federal As like this XXXX, $XX in to to in contract being are our and of offset properties you use that highlight to we quarter. income second NOLs I also income, a our sale quarter. with million the future. these tax taxable of approximately currently our fourth progress leaving our million have our negotiations estimated of anticipate assets. to the we matter regarding anticipate during fact, occurred We sales the in the potential $XX for able active Due approximately to would available update in

at navigating We We I a suppliers our for income BlueLinx any for opportunities we share this for importantly estate for well-positioned Mary, now, XXXX welcomed ahead. organic we look forward commodity up we sincerely growth, XXXX as BlueLinx hard to may in gains gains second the a with most of from team to are we our work on remaining market goals family. open exceeded half our many are integration year. testament reasons Cedar year and would it historical And thank about our time. but the As offset the And like efforts. have thanks special inorganic our entire of to through continued questions customers their challenging Creek partnership. federal we we'd and ordinary for to like BlueLinx many for NOLs. real market year their that was and think and for throughout contributions. at to results course, today to The your

Operator

Weber question Instructions] Robotti from [Operator line the Alan Advisors. from first Your is of

Your line is open.

Alan Weber

the you kind where can a -- of Could talk you Mitch, about with that? about today of issues you just suppliers. regarding talked kind guess are little you I explain

Mitch Lewis

Yes.

help So, it's we us But have an And supply integration we our approach of iterative had product first used categories. our through we perspective, -- third-party from gone round to process. have synergy the and that. base a consultant group strategically

and you difficult May it and the expect, which time XXXX, process very were hot, So, would it of you opportunities. difficult would particularly negotiate when was started as getting expect June in as we commodity markets to potential the a also, was was products

basis, what doing to we're is back chain, on a through, now opportunities going to category So, our supply are rationalize we that. product look at

had The was with I have a some we in that of supply we've to from and some was discussions definitely that other disruption the connection perspective. point rationalizations had, alluding

realigning a brands the that extent And so, is which that some to we categories of in we have natural. product the have we're certain

You have doing as will concern scale was well synergies because we're companies it that process a very a that we facilities, markets the that that talked have the as the we may the the integrate companies together business opportunity perspective. from long-term of disruption that the confidence sales and about share for we of business so the as have now have bode as include the industry unbeatable. in may this not to sales bringing company and effort for We forth. remains that leadership well acquisition, we this the to disruption and any over we feel and confident intentionally the the the and the from sales what recall we and team as long-term relates together -- bringing when outset did from we that supplier The consolidate local breadth

Alan Weber

about that the kind kind synergies, Can positive just And really of you guess, quantify, you sales but talk happen? that. on I And of just could about on when can't talk a follow-up that. the

Mitch Lewis

of We're starting that see now. to some

of or able were -- or So, those products. one territories we that had geographic push legacy the things those the have brands markets either facilities was sell didn't the existing product of opportunity take that one and categories to in to to we do

We're good now. to continue positive believe, some happening to in getting that's very the of to we that's response some key And both will, relationships territories coming with propel them. and product So, sell we continue out. grow that suppliers, ability that have and volume for

difficult As move Any particular far products takes. timeframe, clear-cut that and effort as to long time a it's exactly are it's market how you location existing takes to typically into displace some trying time. new share, say an and

Alan Weber

is, my declines, mean, guess, and I you? In -- those Is look of year, before surprised at the volume the kind know numbers mean actually you that part words, obviously, the any pro anything are or the months you when half I you obviously other of last began, given you surprised And forma really about disappointed what that pricing. of that results Okay. and the talk you? which in I last six quarter in -- question basically, down, there didn't

Mitch Lewis

I sales very our look an way and interesting year half market the it's that moved profit. if see margin that at to would the the did of we one disappointing. do, product structural was three-year compared And imply what to want however things, exercise, you And the two you $XX-plus-million back to then a of the the there. margin clearly obviously, was a typical, of Alan, Well, use, in think exercise you gross or saw to

was think obviously, the homerun to and be the candor, of us. we happened, of all hit a one would understanding the I in Now, significant consolidations. decline in very the every didn't it's what different. may I past important But, true say, future and commodity from clearly a

that And as some of in quickly as strategy, which pension pretty the a talked plans made move challenging. about locations we to it we multi-employer had perspective, some so, long-term from us was a related

like really the I that terrific, implications say, some I what put we've team And would dedicated, we've proud we the is So, I about feel long-term as an integration integration. on as that of speed really story strategy an it was probably be anything But, long-term integrated, of team more a in benefits you fully the together which was critical think, and done. of good way underappreciated the going about of feels in for generally, was should that. of short-term the the market know which

So, generally, I good the anticipate. market we created about we really that And just think has headwinds us feel not for did some it.

Operator

next open. Our The [indiscernible]. [ph] from the is Dougherty line of Tim from question is line

Unidentified Analyst

Hey.

headwinds seen Just wondering, of since we've million kind we this quarter margin lumber November, $XX that $XX of sort here behind period, of can assume gross bottom we year? of in December is a kind time million, as us, this enter

Mitch Lewis

about since anomaly the talk answer hadn’t certainly gross standpoint, we an that it, experienced it six in months margin two a is last was as short yes. think, the From I decades. we

starting expect Difficulty] So, we we're that that. And to would [Technical see

Unidentified Analyst

million the an seen here, from headwind headwinds investor presentation $XX structural prices do then, the $XX have any side? we've in And business? of side the commodity on kind you there of to quarterly Is commodity million

Mitch Lewis

the No, they we especially. difficulty] markets, not Yes, good specialty look not impact certainly I were nowhere as that the about mean, we standpoint. near feel where no in, were at [technical they

the So, commodities really bleed our we're much specialty pure from products. into over not seeing

Operator

[Operator Speakers, time. you. further to at Instructions] back questions There I turn are over this call the no

Mitch Lewis

everyone's interest in And look progress time thank next Well, your our during We forward we to sharing BlueLinx. you appreciate with and certainly you, Mary. call. Okay. our continued

Operator

This concludes today's conference call. Thank you everyone for joining.

You disconnect. may now

BlueLinx (BXC) 13 Mar 192018 Q4 Earnings call transcript