EX-99.2 3 g02019exv99w2.htm EX-99.2 INVESTOR BOOK JUNE 2006 EX-99.2 INVESTOR BOOK JUNE 2006
 

Exhibit 99.2
 
BlueLinx Investor Book June 2006

 

Safe Harbor Statement Forward-Looking Statement Safe Harbor - This presentation includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All of these forward-looking statements are based on estimates and assumptions made by our management that, although believed by BlueLinx to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of its control, that may cause its business, strategy or actual results to differ materially from the forward-looking statements. These risks and uncertainties may include, among other things: changes in the supply and/or demand for products which we distribute; the activities of competitors; changes in significant operating expenses; changes in the availability of capital; the ability to identify acquisition opportunities and effectively and cost-efficiently integrate acquisitions; general economic and business conditions in the United States; adverse weather patterns or conditions; acts of war or terrorist activities; variations in the performance of the financial markets; and other factors described in the "Risk Factors" section in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and in its periodic reports filed with the SEC. In addition, the statements in this presentation are made as of June 14, 2006. The Company expects that subsequent events or developments will cause its views to change. The Company undertakes no obligation to update any of the forward-looking statements made herein, whether as a result of new information, future events, changes in expectation or otherwise. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to June 14, 2006. Use of Non-GAAP and Pro Forma* Financial Information - To supplement GAAP financial statements, the Company uses non-GAAP, or pro forma measures of operating results. This non-GAAP, or pro forma financial information is provided as additional information for investors and is not in accordance with or an alternative to GAAP. These adjusted results exclude certain costs, expenses, gains and losses, and we believe their exclusion can enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of the operating performance of the Company as opposed to GAAP results, which may include non- recurring, infrequent or other non-cash charges that are not material to the ongoing performance of the Company's business. Company management uses these non-GAAP and pro forma results as a basis for planning and forecasting core business activity in future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net earnings, diluted earnings per share or net cash provided by (used in) operating activities prepared in accordance with generally accepted accounting principles in the United States.

 

BlueLinx Investor Book June 2006 BlueLinx Overview Industry Dynamics Focused Growth Strategy 2006 Q1 Update Looking Forward

 

BlueLinx Overview: Operations Largest Building Products Distributor in U.S. 2005 Revenue: $5.6 Billion ~12,000 customers and 750+ suppliers Product portfolio 10,000+ SKUs 65+ warehouses; 80+ reloads Owned fleet of 900 trucks and 1,200 trailers 3,600 employees, including 1,000 sales NYSE: BXC Analysts Covering: 7 Market Cap: $430.3 Shares Outstanding: 30.7 (diluted) Dividend/Yield: $.50/3.6% P/E (ttm) 9.3 *Based on 6/2/06 close of $14.01 « Sales Center Warehouse LSV « «

 

BlueLinx Overview: Evolution of BlueLinx Growth Strategy Decentralized structure 13 warehouses Outlet for GP Plywood Diversified building products distributor Centralized, nationwide distribution transition "Masters" of the supply chain Decentralized structure 134 warehouses 1954 - 1976 1977 - 1993 1994 - 2000 2004 - Future Centralized platform supports market share growth Organic growth focus supplemented by acquisitions Value proposition: reduce supply chain costs System rationalized & centralized 63 warehouses Integrated IT systems >$400mm one- time investment by GP in systems and infrastructure BlueLinx Georgia-Pacific through May 7, 2004 Improve Gross Margin 2001 - 2003 Rationalized customer base Increased gross margin by 225 basis points

 

BlueLinx Overview: Positioned at the Center of Value Creation Building Products Manufacturers BlueLinx Home Improvement Centers Dealers Repair and Remodeling Residential and Non- Residential Construction Manufactured Housing / Industrial Benefits to Manufacturers Reliable channels to market Consistent production runs Limits inventory investment Allows limited number of customers Limits credit risk and receivable investment Ability to create markets for early life cycle products Benefits to Customers Reliable source of many materials Break bulk quantities Near 100% fill rates Limits vendors and inventory investment Just in time deliveries Safety stock

 

BlueLinx Overview: Diversified Product, Customer & End Use Segments Structural 58% Paneling Roofing Hardwood plywood Insulation Metal fasteners Hardboard Flake & Particle board Specialty 42% Plywood OSB Lumber Rebar/Remesh New Home Construction 50% Industrial Applications 22% Manufactured Housing 8% Repair & Remodeling 15% Non Residential Construction 5% Product Categories Customer Categories End Use Segments Dealer Industrial Manufactured Housing Home Center ~ 10,000 Products ~ 12,000 Customers 5 End Use Segments Vinyl siding Sanded plywood Stuctural panels Specialty lumber Engineered lumber Moulding Millwork

 

BlueLinx Overview: Diversified Product, Vendor Relationships Diversified Product, Vendor Relationships Diversified Product, Vendor Relationships Diversified Product, Vendor Relationships Diversified Product, Vendor Relationships Diversified Product, Vendor Relationships Diversified Product, Vendor Relationships Diverse & Growing Supply Base

 

BlueLinx Overview: Strategic Objectives Profitably grow specialty revenues to 60+ % of total sales Profitably grow structural revenues while reducing exposure to volatility Outgrow the market over the long term Be the Masters of the Supply Chain for those products we choose to distribute

 

BlueLinx Overview: Experienced Leadership Team Management Team Leadership Background Stephen Macadam CEO George Judd COO David Morris CFO Steve Skinner SVP Duane Goodwin SVP Dave Dalton SVP Sam Gaddis VP 6 Regional VPs RVP CEO Consolidated Container; EVP Georgia-Pacific; McKinsey & Co. VP Eastern operations, Georgia-Pacific; inside and outside sales manager, national accounts manager VP Finance, Georgia-Pacific distribution division; Kimberly- Clark CEO Peppers & Rogers Group, McKinsey & Co. Home Depot, Wal-Mart, procurement and sourcing Regional VP BlueLinx; division sales, management, Georgia-Pacific Georgia-Pacific / BlueLinx, regional account manager, director national accounts Average 20+ years of industry experience Strategy Operations Finance Business Development Supply Chain Western Region National Accounts Regional Operations/Sales

 

BlueLinx Overview: How We Think About Our Business Going Forward 2006 Outlook Housing Uncertainties Starts beginning to slow Inventories rising Expect 2006 housing starts at 1.8-1.9 million, down ~10% YOY Manufactured Housing emerging from recession Repair & Remodel, Industrial Production and Non-Residential Construction all expected to increase YOY Generally lower structural product prices Products with significant energy/petrochemical component expected to increase YOY BXC Goals Offset impact of housing slowdown and structural price declines with product mix and share gains Continue to accelerate Specialty Product growth Focus on industrial and geographic market penetration Effectively manage Structural Product inventory for profitability and to mitigate risk 2000 2001 2002 2003PF 2004PF 2005 EBITDA 42 74 67 93 179 134 Adj EBITDA* 151 162 *2004 and 2005 commodity margins restated at the two-year average (see reconciliation in Appendix) EBITDA TREND Consistent EBITDA growth when normalized to eliminate the impact of commodity margin volatility

 

BlueLinx Investor Book June 2006 BlueLinx Overview Industry Dynamics Focused Growth Strategy 2006 Q1 Update Looking Forward

 

1991-2000 Avg 0.028 2001-2005 Avg -0.021 2006E-2015E Avg 0.023 Growing & Attractive Industry: Solid Long-Term Industry Fundamentals 1991-2000 Avg 1.4 2001-2005 Avg 1.8 2006E-2015E Avg 1.8 Annual Housing Starts (mm) Annual Unit Volume Growth In Other End-Use Markets 50% of Our End-Market 50% of Our End-Market Industrial Repair & Remodeling Mobile homes Non-residential Source: Research Information Systems Inc. (RISI)

 

Growing & Attractive Industry: Market Growth of Two-Step Distribution 2001 2002 2003 2004 Total Market Revenue 32.9 36.4 39.2 47.1 Source: Home Channel News, July 2005

 

BlueLinx 11.8 WY 11.1 Boise Cascade 6 North Pacific Group 4.2 Huttig 2 Other 64.6 Many Small and Medium Sized Players <$250m 100 $250m - $500m 13 $500m - $1bn 6 $1bn-$2.5bn 5 >$2.5bn 3 Number of Competitors By Revenue Growing & Attractive Industry: Largest in a Highly Fragmented Industry, Ripe for Consolidation Highly Fragmented Industry Weyerhaeuser 11.1% Boise Cascade 6.0% Universal FP 4.2% Consists of several hundred small, local distributors BlueLinx 11.8% Other 64.9% 2004 Market Share Source: Home Channel News, July 2005 Huttig BP 2.0%

 

BlueLinx Investor Book June 2006 BlueLinx Overview Industry Dynamics Focused Growth Strategy 2006 Q1 Update Looking Forward

 

Focused Growth Strategy: BXC Strategic Framework Mission: "Be the Masters of the Supply Chain for those products we choose to distribute." Value Proposition: Provide the lowest total cost of sales and distribution through the supply chain Drive end-user demand, thereby increasing sales for our customers and our suppliers Objectives: Gross Margin: 10+% Specialty Mix: 60+% Unit Sales: Outgrow the market Improvement Efforts Strategic Enablers Growth Initiatives Strategy Initiatives and Enablers: Gross Margin Improvement Cost Improvement Productivity Improvement Asset Management Product & Vendor Mgmt. Marketing Excellence Sales Processes & Support Information Technology Results Tracking & Accountability Talent Development & Acquisition Accelerate Specialty growth Target high-growth accounts Increase volume in high-return segments Pursue supplemental acquisitions

 

Focused Growth Strategy: Specialty Products - Four-Part Strategy Team with Manufacturers to Introduce New Products Continuing national roll-out of Louisiana-Pacific's WeatherBest composite decking Beginning distribution of L-P's SmartSide engineered wood siding, soffit and trim Executing systematic, disciplined approach to develop product portfolio Further Penetrate Geographic Markets Expanding specialty products into new geographic markets Putting people and products in place to capitalize on opportunities in western markets Grow Share in Under-Represented Market Segments Actively executing market-by-market initiative to grow presence in industrials (customers who use building products in the manufacturing process (cabinets, furniture, fixtures, containers, concrete forms, etc.) Industrials represent approximately 22% of our end-use markets and BXC has about 3% market share Industrials are well suited to the BlueLinx value proposition and specialty products focus Pursue Acquisitions as a Patient, Disciplined Acquirer In 2005, purchased California-based Lane Stanton Vance, specialty hardwood distributor Actively looking for partners who will add value

 

Focused Growth Strategy: Specialty Highlight - Introducing New Products Specialty Highlight - Introducing New Products Specialty Highlight - Introducing New Products Chosen in September by Louisiana-Pacific to nationally distribute its WeatherBest composite decking product All 1,000 BlueLinx sales employees trained and warehouses stocked within 45 days Program has potential to generate annualized revenues in excess of $100 million over the first two years Announced expanded relationship with L-P in April with the addition of SmartSide engineered wood siding products.

 

Objective & Rationale Grow market share in Industrials Industrials represent ~22% of end-use markets; currently have ~3% market share Offers high contribution margin and increases specialty product opportunities Strategy Identify & pursue "high-opportunity" geographic areas with strong manufacturing base Create tailored value proposition for key customer segments Work with suppliers to form strategic relationships & develop new products Highlights Six regional market plans currently being executed Hired China-based procurement specialist Adding cut-to-size capabilities at select facilities Working with manufacturer on new flooring product for R-V industry Secured exclusive distribution agreement based on regional market plan Focused Growth Strategy: Specialty Highlight - Working to Grow Share in Industrials

 

Focused Growth Strategy: Structural Products - Effective Inventory Management Focus on improved profitability and reduced risk In 2005, reduced "high risk" structural inventory by $41 million, or 18% from 2004 Q1 structural inventory down 17% from year ago Increased utilization of consignment and program inventories Expanding imports from Europe and other areas offering lowest- cost sourcing Driving OSB business through direct channel Focusing on structural products with "specialty product" characteristics Long-length lumber Specialty plywood MSR lumber

 

Focused Growth Strategy: Outgrow the Market Over the Long Term Market Share Growth* 2002 0.104 2003 0.109 2004 0.118 Unit Volume Growth vs. End-Use Market Year over Year Change Weighted End-Use Market Growth BlueLinx Growth 2003 0.02 0.025 2004 0.047 0.082 2005 0.044 0.039 Q1 '06(TTM) 0.041 0.043 *Source: Home Channel News, July 2005

 

Focused Growth Strategy: Evolving to Achieve Our Objectives Commodities-focused, distribution arm of manufacturer Customer-focused, solutions-driven, value- added distribution partner 55%+ structural products FROM: TO: 60%+ specialty products Structural products- driven earnings volatility Specialty products-driven stable earnings growth Developing integrated management systems Leveraging management systems to create value Volume orientation Profit orientation Managing through complex internal transformations Managing to create maximum value in the supply chain

 

BlueLinx Investor Book June 2006 BlueLinx Overview Industry Dynamics Focused Growth Strategy 2006 Q1 Update Looking Forward

 

2006 Q1 Update (Vs. Year Ago): Executing on Our Plan Revenue: Up 2% to $1.38 billion Specialty up 15.7% - Structural dn 5.6% Unit Volume: Total Up 5% Specialty Up 14.9% - Structural dn 0.8% Gross margin: Total 9.4% vs. 8.8% Specialty 13.9% - Structural 6.8% Inventory: Total $501 million, dn 3% Specialty up 5.7% - Structural reduced 16.8% Net income: $9.8 million-/$0.32/shr vs. $8.4 million/$0.28 Working capital turn days: 40 vs. year-ago 43 Total debt: down $101 million vs. year ago

 

2006 Q1 Update: Accelerating Specialty Growth Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 % of Total Revenue 0.37 0.36 0.39 0.41 0.42 % of GM 0.53 0.61 0.54 0.55 0.62 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Structural 0.042 0.064 9.0000000013148E-03 0.002 -0.008 Specialty 0.017 0.005 0.058 0.127 0.149 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Structural 0.07 0.053 0.073 0.083 0.068 Specialty 0.126 0.129 0.133 0.143 0.139

 

BlueLinx Investor Book June 2006 BlueLinx Overview Industry Dynamics Focused Growth Strategy 2006 Q1 Update Looking Forward

 

Looking Forward: 2006 Go-Forward Initiatives Expand relationships with existing and new specialty product vendors who recognize the BlueLinx value proposition Continue and improve disciplined inventory management to help mitigate price volatility impact on structural products Target growing accounts that serve attractive high-growth markets Increase volume in under represented segments, e.g., industrials Invest in the people and processes necessary to support specialty business growth Be a patient, disciplined acquirer

 

BXC Investment Considerations: Largest independent building products distributor in highly fragmented industry ripe for consolidation Positioned at the center of the supply chain to create maximum value for both manufacturers and customers Diversified products, customers & end use segments Solid long-term industry fundamentals Demonstrated progress in growing specialty products business and effectively managing structural products business

 

Appendix TOPIC PAGE Fundamentals 31 Revenues by Quarter 32 Unit Volume Growth by Quarter 33 Market Growth by Quarter 34 Gross Margin by Quarter 35 Inventory by Quarter 36 Quarterly Volume by Region 37 Gross Margin % Analysis 38 Channel Mix Analysis 39 Structural Product Price Trends 40 Capital Structure Position 41 Balanced Liquidity Illustration 42 EBITDA Reconciliation 43-44

 

BlueLinx Holdings Inc. Fundamentals* TRADING NYSE: BXC 7 Analysts Providing Research Market Capitalization $430.3 million Shares Outstanding 30.7 million (diluted) Avg. Daily Trading Vol. 196,150 (3 m) Float (%) 33 52-Week Range $16.95 (3/14/06) -- $8.25 (8/10/05) VALUATION Dividend/yield $0.50/3.6% Debt to Total Capital 76% (4/01/06) Cash per share $0.89 (4/01/06) Book value per share $6.27 (4/01/06) P/E Ratio (ttm) 9.3 Return on Equity (ttm) 24% * As of 6/02/06 closing price of $14.01, except where noted

 

BlueLinx Holdings Inc. Revenues by Quarter Revenues by Quarter Revenues by Quarter

 

BlueLinx Holdings Inc. Unit Volume Growth By Quarter Unit Volume Growth By Quarter Unit Volume Growth By Quarter

 

BlueLinx Holdings Inc. Market Growth By Quarter Source: Data from Resource Information Systems, Inc., or RISI, updated as of April 2006, weighted using management's estimates. Source: Data from Resource Information Systems, Inc., or RISI, updated as of April 2006, weighted using management's estimates.

 

BlueLinx Holdings Inc. Gross Margin by Quarter Gross Margin by Quarter Gross Margin by Quarter

 

BlueLinx Holdings Inc. Inventory by Quarter Inventory by Quarter Inventory by Quarter

 

BlueLinx Holdings Inc. Quarterly Volume by Region *Miscellaneous consists of cash and competitive discounts, Canadian conversion, service revenue and other miscellaneous items. $ millions (unaudited) (unaudited) (unaudited)

 

BlueLinx Holdings Inc. Gross Margin % Analysis Gross Margin % Analysis Gross Margin % Analysis

 

BlueLinx Holdings Inc. Revenue Channel Mix Analysis Revenue Channel Mix Analysis Revenue Channel Mix Analysis

 

BlueLinx Holdings Inc. Structural Products Price Trends* Structural Products Price Trends* Structural Products Price Trends* Structural Products Price Trends* Structural Products Price Trends* *Source: Data from Random Lengths Publications, Inc., updated as of June 2, 2006. *Source: Data from Random Lengths Publications, Inc., updated as of June 2, 2006.

 

BlueLinx Holdings Inc. Capital Structure Position BXC Leverage -- Current State BXC Leverage -- Current State All low-cost asset-based borrowing Creates low WACC Liquidity balanced to working capital needs Liquidity balanced to working capital needs Liquidity balanced to working capital needs Key Metrics Debt as % of total capital as of 4/1/06 76% Revolver excess availability as of 4/1/06 $230 mln Average interest rate YTD 4/1/06 7.6% Interest expense - % of sales YTD 4/1/06 0.8% BXC Priorities For Free Cash Flow Maintain consistent dividend Invest in growth - where ROCE > WACC Pay down debt Working On... Negotiated amendment on revolver that reduced interest rate spreads over LIBOR by 50bp - signed January 26, 2006; and evaluating interest rate swap opportunities to fix interest rates on a portion of the revolver Pursuing mortgage refinancing at favorable long-term rates Debt to Total Capital Ratio of 76% is manageable Low borrowing cost / Asset-based / Liquidity balanced

 

BlueLinx Holdings Inc. Balanced Liquidity Illustration

 

BlueLinx Holdings Inc. EBITDA Reconciliation

 

BlueLinx Holdings Inc. EBITDA Reconciliation