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BlueLinx Holdings Inc. Reports Operating Results (10-Q)

May 13, 2009 | About:

BlueLinx Holdings Inc. (BXC) filed Quarterly Report for the period ended 2009-04-04.

Bluelinx Holdings is the largest distributor of building products in the United States. Operating in all of the major metropolitan areas in the United States BlueLinx distributes products to more than 11700 customers through its network of warehouses and third-party operated warehouses. BlueLinx Holdings Inc. has a market cap of $107.3 million; its shares were traded at around $3.27 .

Highlight of Business Operations:

As previously announced on June 6, 2008, Georgia-Pacific provided us with notice of its intent to terminate the Supply Agreement, effective May 7, 2010. Georgia-Pacific agreed to pay us $18.8 million in exchange for our agreement to enter into the Modification Agreement one-year earlier than the originally agreed upon termination date of the Supply Agreement. We will receive four quarterly cash payments of $4.7 million beginning on May 1, 2009. We expect to record a net gain of approximately $17.3 million related to this transaction in the second quarter of fiscal 2009 as a reduction to operating expense. The early termination of the Supply Agreement also provides us the opportunity to pursue strategic relationships with other suppliers and customers which were previously prohibited by the terms of the Supply Agreement.

Net Sales. For the first quarter of fiscal 2009, net sales decreased by 43.2%, or $310 million, to $407 million. Sales during the quarter were negatively impacted by a 51% decline in housing starts. New home construction has a significant impact on our sales. Specialty sales, primarily consisting of roofing, specialty panels, insulation, moulding, engineered wood products, vinyl siding, composite decking and metal products (excluding rebar and remesh) decreased by $120 million or 33.9% compared to the first quarter of fiscal 2008, primarily due to a 36.7% decrease in unit volume slightly offset by an increase in price of 2.8%. Structural sales, including plywood, OSB, lumber and metal rebar, decreased by $191 million, or 51.2% from a year ago, primarily as a result of a 46.4% decrease in unit volume and a decrease in price of 4.8%.

Selling, General, and Administrative Expenses. Selling, general and administrative expenses for the first quarter of fiscal 2009 were $57.7 million, or 14.2% of net sales, compared to $80.6 million, or 11.2% of net sales, during the first quarter of fiscal 2008. The decline in operating expenses is due to our continuing efforts to reduce ongoing operating expenses resulting in reduced payroll, commissions, and other operating expenses. Operating expenses for the first quarter of fiscal 2009 and the first quarter of fiscal 2008 include severance-related charges of $1.1 million and $2.0 million, respectively.

Interest Expense, net. Interest expense totaled $8.1 million for the first quarter of fiscal 2009, down $1.2 million from the prior year period due to lower interest rates and lower debt levels. Interest expense related to our revolving credit facility and mortgage was $2.9 million and $4.6 million, respectively, during this period. Interest expense totaled $9.4 million for the first quarter of fiscal 2008. Interest expense related to our revolving credit facility and mortgage was $4.1 million and $4.7 million, respectively, during the first quarter of fiscal 2008. In the first quarter of fiscal 2009 and the first quarter of fiscal 2008, interest expense included $0.6 million of debt issue cost amortization.

Charges associated with ineffective interest rate swap. Charges associated with the ineffective interest rate swap recognized during the first quarter of fiscal 2009 were approximately $4.8 million ($2.9 million, net of tax) and are comprised of a $5.9 million ($3.6 million, net of tax) charge on the date we reduced our borrowings outstanding under the revolving credit facility below the interest rate swaps notional amount, $1.0 million ($0.6 million, net of tax) of amortization of accumulated other comprehensive loss and $(2.1) million ($(1.3) million, net of tax) related to fair value changes since the date of the reduction.

Write-off debt issue costs. During the first quarter of fiscal 2009, we elected to permanently reduce our revolving loan threshold limit from $800 million to $500 million effective March 30, 2009. As a result of this action, we recorded expense of $1.4 million ($0.9 million, net of tax) for the write-off of deferred financing costs that had been capitalized associated with the portion of the revolver that was reduced in the first quarter of fiscal 2009.

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