BLDR 8-K
Builders FirstSource, Inc. (BLDR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| ITEM 2.02. |
Results of Operations and Financial Condition |
On February 20, 2020, the Company issued the news release attached hereto as Exhibit 99.1 reporting the financial results of the Company for the three months and twelve months ended December 31, 2019 (the “Earnings Release”). In the Earnings Release, the Company utilized the non-GAAP financial measures and other items discussed in Appendix A hereto. Appendix A hereto (incorporated herein by reference) also contains certain statements of the Company’s management regarding the use and purposes of the non-GAAP financial measures utilized therein. A reconciliation of the non-GAAP financial measures discussed in the Earnings Release to the comparable GAAP financial measures is included within the Earnings Release.
| ITEM 9.01. |
Financial Statements and Exhibits. |
| (d) | Exhibits. |
See Exhibit Index.
All of the information furnished in Items 2.02 and 9.01 of this report and the accompanying appendix and Exhibit 99.1 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended.
Cautionary Notice
Statements in this report and the schedules hereto that are not purely historical facts or that necessarily depend upon future events, including statements about expected market share gains, forecasted financial performance or other statements about anticipations, beliefs, expectations, hopes, intentions or strategies for the future, may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on forward-looking statements. In addition, oral statements made by our directors, officers and employees to the investor and analyst communities, media representatives and others, depending upon their nature, may also constitute forward-looking statements. All forward-looking statements are based upon currently available information and the Company’s current assumptions, expectations and projections about future events. Forward-looking statements are by nature inherently uncertain, and actual results or events may differ materially from the results or events described in the forward-looking statements as a result of many factors. Builders FirstSource, Inc. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward-looking statements involve risks and uncertainties, many of which are beyond the Company’s control or may be currently unknown to the Company, that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including risks or uncertainties related to the Company’s growth strategies, including gaining market share, or the Company’s revenues and operating results being highly dependent on, among other things, the homebuilding industry, lumber prices and the economy. Builders FirstSource, Inc. may not succeed in addressing these and other risks. Further information regarding the risk factors that could affect our financial and other results are included as Item 1A of our annual report on Form 10-K and may also be described from time to time in the future reports the Company files with the SEC.
Exhibit Index
| Exhibit |
Description | |||
| 99.1 |
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| 104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
| BUILDERS FIRSTSOURCE, INC. | ||
| By: |
/s/ Donald F. McAleenan | |
| Name: |
Donald F. McAleenan | |
| Title: |
Senior Vice President, | |
Dated: February 20, 2020
APPENDIX A
Use of Non-GAAP Financial Measures
We occasionally utilize financial measures and terms not calculated in accordance with accounting principles generally accepted in the United States (“GAAP”) in order to provide investors with an alternative method for assessing our operating results in a manner that enables investors to more thoroughly evaluate our current performance as compared to past performance. We also believe these non-GAAP measures provide investors with a better baseline for modeling our future earnings expectations. Our management uses these non-GAAP measures for the same purpose. We believe that our investors should have access to the same set of tools that we use in analyzing our results. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. Our calculation of Adjusted EBITDA is not necessarily comparable to similarly titled measures reported by other companies. We have provided a definition below for these non-GAAP financial measures, together with an explanation of why management uses these measures and why management believes that these non-GAAP financial measures are useful to investors. In addition, we have provided a reconciliation within the Earnings Release to reconcile these non-GAAP financial measures utilized therein to its equivalent GAAP financial measure.
Adjusted EBITDA
We define Adjusted EBITDA as GAAP net income (loss) before depreciation and amortization, interest expense, income taxes, gain (loss) on sale of assets, (income) loss from closed locations, and other non-cash or special items including asset impairments, facility closure costs, acquisition costs, severance, conversion, transaction and integration costs, and stock compensation expense. Our management uses Adjusted EBITDA as a supplemental measure in the evaluation of our business and believes that Adjusted EBITDA provides a meaningful measure of our performance because it eliminates the effects of period to period changes in taxes, costs associated with capital investments, interest expense, stock compensation expense, and other non-cash and non-recurring items. Adjusted EBITDA is not a financial measure calculated in accordance with GAAP. Accordingly, it should not be considered in isolation or as a substitute for net income (loss) or other financial measures prepared in accordance with GAAP. When evaluating Adjusted EBITDA, investors should consider, among other factors, (i) increasing or decreasing trends in Adjusted EBITDA, (ii) whether Adjusted EBITDA has remained at positive levels historically, and (iii) how Adjusted EBITDA compares to our debt outstanding. We provide a reconciliation of Adjusted EBITDA to GAAP net income (loss). Because Adjusted EBITDA excludes some, but not all, items that affect net income (loss) and may vary among companies, Adjusted EBITDA presented by us may not be comparable to similarly titled measures of other companies. Adjusted EBITDA does not give effect to the cash we must use to service our debt or pay income taxes and thus does not reflect the funds generated from or used in operations or actually available for capital investments.
Adjusted Net Income
We define adjusted net income as GAAP net income from continuing operations before non-cash or special items including facility closure costs, conversion, acquisition or integration costs, debt prepayment premiums, debt issuance cost write-offs, debt discount/premium write-offs and non-cash release of tax valuation allowance and revaluation of deferred taxes. Our management uses adjusted net income as a supplemental measure in the evaluation of our business and believes that adjusted net income provides a meaningful measure of our performance because it eliminates the effects of period to period non-cash and non-recurring items. Adjusted net income is not a financial measure calculated in accordance with GAAP. Accordingly, it should not be considered in isolation or as a substitute for net income or other financial measures prepared in accordance with GAAP. When evaluating adjusted net income, investors should consider, among other factors, (i) increasing or decreasing trends in adjusted net income, and (ii) whether adjusted net income has remained at positive levels historically. We provide a reconciliation of adjusted net income to GAAP net income. Because adjusted net income excludes some, but not all, items that affect net income (loss) and may vary among companies, net income (loss) presented by us may not be comparable to similarly titled measures of other companies.
Free Cash Flow
We define free cash flow as GAAP net cash from operating activities net of purchases of property, plant and equipment. Our management uses free cash flow as a supplemental measure in the evaluation of our business as we believe it provides a meaningful evaluation of our liquidity. Free cash flow is not a financial measure calculated in accordance with GAAP. Accordingly, it should not be considered in isolation or as a substitute for net cash flow from operations or other financial measures prepared in accordance with GAAP.
Exhibit 99.1
For Immediate Release
Builders FirstSource Reports Fourth Quarter and Full Year 2019 Results
Execution of strategic plan drives record annual profit and cash flow
February 20th, 2020 (Dallas, TX) – Builders FirstSource, Inc. (Nasdaq: BLDR) today reported its results for the fourth quarter and full year ended December 31, 2019.
Fourth Quarter 2019 Highlights:
| • | Net sales for the quarter were $1.8 billion, a decline of $52.4 million, a decrease of 2.9% |
| • | Sales volume grew by an estimated 7.7% with improvement across all three customer segments, led by an 8.7% volume increase in our value-added product categories |
| • | Commodity deflation decreased net sales by an estimated 10.6% |
| • | Adjusted EBITDA of $109.3 million or 6.2% of net sales |
| • | Net income of $41.4 million, or $0.35 per diluted share, and adjusted net income of $47.2 million, or $0.40 per diluted share |
| • | Net debt to Adjusted EBITDA ratio of 2.5x, at the low end of our targeted range |
| • | Acquired Raney Components, a vertically-integrated distributor and installer of value-added products in Florida with annual revenue of approximately $140 million. |
Commenting on the results, CEO Chad Crow remarked, “We delivered another quarter of strong results to end 2019 with a solid foundation to further build on our record of success. Continued focus on our operational excellence initiatives contributed to a robust fourth quarter gross margin, while our full year gross margin improved 230 basis points, allowing us to achieve record annual Adjusted EBITDA of $516 million. Furthermore, we continue to make strategic investments in our operations and acquisitions to drive enhanced growth in margin-accretive products and markets, while preserving our balance sheet strength to support value-enhancing initiatives. We believe we are the strongest company in our industry, which is a real tribute to our team’s hard work and dedication. As we look forward, we are confident that our efforts to further partner with our customers to streamline the construction process will allow us to drive profitable growth in the years to come.”
Peter Jackson, CFO, added, “We closed out the decade on a strong footing underpinned by record full year Adjusted EBITDA and free cash flow. I am very pleased with our de-leveraging progress, as we reduced our net leverage ratio by 0.6x year over year to 2.5x, the low end of our targeted range. Our team’s ability to drive profitable growth while generating cash through working capital efficiency validates the strength of our strategic initiatives to produce meaningful value creation.”
Builders FirstSource Reports Fourth Quarter 2019 Results (Continued)
Fourth Quarter 2019 Compared to Fourth Quarter 2018
Net Sales
| • | Net sales were $1.8 billion, a 2.9% decrease compared to the same period a year ago driven by the impact of deflation in commodity prices of approximately 10.6%. Lumber and lumber sheet goods sales declined by 16.1%, attributable to the deflation in commodity prices as compared to the same period a year ago. Our remaining product categories, excluding gypsum, roofing and insulation, achieved increased sales on higher volumes. |
| • | Sales volume, excluding commodity deflation, grew by an overall 7.7%. Our single-family end market grew by an estimated 7.5%, repair and remodel / other by 6.8% and multi-family by 13.3%. Sales volume in our value-added product categories grew by 8.7%, including 10.7% in Manufactured Products and 6.9% in our Windows, Doors and Millwork categories. |
Gross Margin
| • | Gross margin was $476.6 million compared to $492.8 million, a decrease of 3.3% over the prior year driven by the commodity deflation impact on net sales, mostly offset by an improved product mix and our continued focus on pricing discipline. Gross margin percentage remained relatively steady at 27.0 % versus 27.1% in the prior year period. |
Selling, General and Administrative Expenses
| • | SG&A was consistent with the fourth quarter of 2018, as operational efficiencies fully offset increased variable expenses related to higher sales volume. |
| • | SG&A as a percentage of net sales was 22.8%, an increase of 60 basis points, primarily the result of the impact of commodity price deflation on our net sales. |
Interest Expense
| • | Interest expense was $27.5 million in the fourth quarter of 2019, an increase of $4.1 million from the fourth quarter of 2018. This increase was primarily attributable to one-time charges of $3.5 million related to the partial repayment of the term loan in that period. |
| • | In addition, interest expense for the fourth quarter 2018 included a $3.2 million gain on debt extinguishment. However, these increases were partially offset by reduced interest expense attributable to lower outstanding debt balances in the fourth quarter of 2019 compared to the fourth quarter of 2018. |
Income Tax Expense
| • | Income tax expense was $6.3 million, or an effective tax rate of 13.2%, compared to $15.0 million, or an effective tax rate of 22.4% in the prior year. The year over year decrease was mainly driven by one-time items impacting the rate in the quarter. |
Adjusted Net Income
| • | Net income was $41.4 million, or $0.35 per diluted share, compared to $52.0 million, or $0.45 per diluted share, in the same period a year ago. |
| • | Adjusted net income was $47.2 million, or $0.40 per diluted share, compared to $53.1 million, or $0.46 per diluted share, in the prior year quarter. The decrease was primarily driven by the deflationary impact of commodity prices on net sales. |
Adjusted EBITDA
| • | Adjusted EBITDA declined $15.7 million to $109.3 million, a decrease of 12.6%. The decrease was primarily driven by lower gross margin dollars due to the impact of commodity price deflation on net sales. As a result, Adjusted EBITDA declined to 6.2% of sales in the fourth quarter from 6.9% in the same period a year ago. |
Builders FirstSource Reports Fourth Quarter 2019 Results (Continued)
Full Year December 31, 2019 Financial Information:
Net Sales
| • | Net sales were $7.3 billion, a 5.8% decrease compared to the prior year, driven by the impact of commodity price deflation. Sales volume increased by an estimated 6.5%, driven by increased volumes across all of our product categories, led by growth in value-added product categories. |
Gross Margin
| • | Gross profit increased $53.9 million to $2.0 billion. Our gross margin percentage increased to 27.2% from 24.9% in the prior year period, a 230 basis point improvement. The increase was primarily attributable to an improved product mix, the decline in the cost of commodities relative to our customer pricing commitments, and continued pricing discipline. In addition, sales growth from our higher margin, value-added product categories contributed to increased gross profit dollars and percentage compared to the prior year period. |
Interest Expense
| • | Interest expense was $109.6 million in 2019, an increase of $1.3 million from 2018. The increase was due to lower outstanding debt balances offset by $10.2 million in one-time charges related to the debt transactions executed during the year. In addition, interest expense for the full year 2018 included a $3.2 million gain on debt extinguishment. |
Adjusted Net Income
| • | Net income was $221.8 million, or $1.90 per diluted share, compared to $205.2 million, or $1.76 per diluted share, in the prior year period, representing an increase of $0.14 per diluted share, or 8.0%. |
| • | Adjusted net income was $245.1 million, or $2.09 per diluted share, compared to $221.2 million, or $1.90 per diluted share in the year ago period, representing an increase of $0.19 per diluted share. The year over year increase in adjusted net income of $23.9 million, or 10.8%, was primarily driven by the higher gross margin. |
Adjusted EBITDA
| • | Adjusted EBITDA grew $14.5 million to $516.1 million, or 7.1% of net sales, compared to $501.6 million, or 6.5% of sales, attributable to higher gross margin dollars partially offset by increases in variable compensation related to the growth in estimated sales volume and profitability. The 2.9% increase in Adjusted EBITDA, and the 60 basis points improvement in EBITDA margin, were primarily due to the factors described above. |
Capital Structure, Leverage, and Liquidity Information:
| • | Net debt was $1,285.9 million as of December 31, 2019. The net debt to Adjusted EBITDA leverage ratio remained steady at 2.5x compared to September 30, 2019, at the low end of the Company’s previously stated leverage target ratio of between 2.5x and 3.5x. |
| • | Cash provided by operating activities was $504.0 million in 2019 which was positively impacted by commodity deflation on the value of working capital compared to the prior year period. |
| • | Cash used in investing activities was $199.2 million in 2019 including $92.9 million used for our acquisitions of Sun State and Raney in 2019 and capital expenditures of $112.9 million. |
| • | Liquidity as of December 31, 2019 was $695.3 million, consisting of $14.1 million cash on hand and $681.2 million net borrowing availability under our revolving credit facility. |
| • | In February of 2020, we issued $550.0 million in aggregate principal amount of senior unsecured notes due 2030 to redeem the remaining $503.9 million in aggregate principal amount of our senior secured notes due 2024, as well as, $47.5 million in aggregate principal amount of our senior secured notes due in 2027, and to pay related transaction premiums, fees and expenses. |
Builders FirstSource Reports Fourth Quarter 2019 Results (Continued)
Acquisition Activity:
In December 2019, we acquired certain assets and the operations of Raney Components and Raney Construction (“Raney”). Raney manufactures and installs wall panels, roof trusses, roof decking, interior wall framing and other select building products to its customers across Florida, with annual revenue of approximately $140 million.
In January 2020, we acquired certain assets and the operations of Bianchi & Company, Inc. (“Bianchi”). Bianchi is a supplier and installer of interior and exterior doors, crown moldings, open stair rail, chair rail, wainscoting, commercial hollow metal frames and doors and other custom millwork to its customers in the Carolina markets. Bianchi has annual revenue of approximately $30 million.
Since July 2019, we have completed five tuck-in acquisitions, adding six truss and millwork facilities to supplement organic growth, which in aggregate are expected to generate approximately $240 million in annual value-added net sales.
Outlook:
Peter Jackson, CFO, concluded, “I am extremely positive on the outlook for Builders FirstSource in the new decade ahead. Our company is well positioned to be the building supply company of choice for builders thanks to our enhanced geographic reach, diversified product offerings, national manufacturing capabilities, and strong partnerships with our customers. We are excited about our plans to drive greater value through our operational excellence initiatives as well as capitalizing on a strong economy and steady growth in the single family housing market. The continued execution of our strategic plan, in combination with an overall positive macroeconomic environment, puts us on firm footing to achieve our full year 2020 objectives. Thank you to all of our associates for their hard work and dedication to help us further advance our premier industry position.”
The Company has provided supplemental non-GAAP financial information for the consolidated company that is adjusted to exclude one-time integration, one-time refinancing, and other costs (“Adjusted”). As the information herein includes non-GAAP financial information, please refer to the accompanying financial schedules for non-GAAP reconciliations to their GAAP equivalents.
Conference Call
Builders FirstSource will host a conference call Friday, February 21st, 2019 at 9:00 a.m. Central Time (CT) and will simultaneously broadcast it live on the Internet. The earnings release presentation will be posted at www.bldr.com under the “investors” section after the market closes on Thursday, February 20th. To participate in the teleconference, please dial into the call a few minutes before the start time: 800-367-2403 (U.S. and Canada) and 334-777-6978 (international), Conference ID: 8532776. A replay of the call will be available at 1:00 p.m. Central Time through March 7th. To access the replay, please dial 888-203-1112 (U.S. and Canada) and 719-457-0820 (international) and refer to pass code 8532776. The live webcast and archived replay can also be accessed on the Company’s website at www.bldr.com under the “Investors” section. The online archive of the webcast will be available for approximately 90 days.
About Builders FirstSource
Headquartered in Dallas, Texas, Builders FirstSource is the largest U.S supplier of building products, prefabricated components, and value-added services to the professional market segment for new residential construction and repair and remodeling. We provide customers an integrated homebuilding solution, offering manufacturing, supply, delivery and installation of a full range of structural and related building products. We operate in 40 states with approximately 400 locations and have a market presence in 77 of the top 100 Metropolitan Statistical Areas, providing geographic diversity and balanced end market exposure. We service customers from strategically located distribution and manufacturing facilities (certain of which are co-located) that produce value-added products such as roof and floor trusses, wall panels, stairs, vinyl windows, custom millwork and pre-hung doors. Builders FirstSource also distributes dimensional lumber and lumber sheet goods, millwork, windows, interior and exterior doors, and other building products. For more information about Builders FirstSource, visit the Company’s website at www.bldr.com.
Builders FirstSource Reports Fourth Quarter 2019 Results (Continued)
Cautionary Notice
Statements in this news release and the schedules hereto that are not purely historical facts or that necessarily depend upon future events, including statements about expected market share gains, forecasted financial performance or other statements about anticipations, beliefs, expectations, hopes, intentions or strategies for the future, may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on forward-looking statements. In addition, oral statements made by our directors, officers and employees to the investor and analyst communities, media representatives and others, depending upon their nature, may also constitute forward-looking statements. As with the forward-looking statements included in this release, these forward-looking statements are by nature inherently uncertain, and actual results may differ materially as a result of many factors. All forward-looking statements are based upon information available to Builders FirstSource, Inc. on the date this release was submitted. Builders FirstSource, Inc. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including risks or uncertainties related to the Company’s growth strategies, including gaining market share, or the Company’s revenues and operating results being highly dependent on, among other things, the homebuilding industry, lumber prices and the economy. Builders FirstSource, Inc. may not succeed in addressing these and other risks. Further information regarding factors that could affect our financial and other results can be found in the risk factors section of Builders FirstSource, Inc.’s most recent annual report on Form 10-K filed with the Securities and Exchange Commission. Consequently, all forward-looking statements in this release are qualified by the factors, risks and uncertainties contained therein.
# # #
Contact:
Binit Sanghvi
VP Investor Relations
Builders FirstSource, Inc.
(214) 765-3804
Financial Schedules to Follow
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
| Three Months Ended December 31, |
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| 2019 | 2018 | |||||||
| (In thousands, except per share amounts) | ||||||||
| Net sales |
$ | 1,763,573 | $ | 1,815,980 | ||||
| Cost of sales |
1,287,017 | 1,323,201 | ||||||
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| Gross margin |
476,556 | 492,779 | ||||||
| Selling, general and administrative expenses |
401,418 | 402,302 | ||||||
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| Income from operations |
75,138 | 90,477 | ||||||
| Interest expense, net |
27,480 | 23,408 | ||||||
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| Income before income taxes |
47,658 | 67,069 | ||||||
| Income tax expense |
6,291 | 15,048 | ||||||
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| Net income |
$ | 41,367 | $ | 52,021 | ||||
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| Comprehensive income |
$ | 41,367 | $ | 52,021 | ||||
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| Net income per share: |
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| Basic |
$ | 0.36 | $ | 0.45 | ||||
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| Diluted |
$ | 0.35 | $ | 0.45 | ||||
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| Weighted average common shares: |
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| Basic |
115,932 | 114,898 | ||||||
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| Diluted |
117,483 | 116,375 | ||||||
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BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
| Years Ended December 31, | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands, except per share amounts) | ||||||||||||
| Net sales |
$ | 7,280,431 | $ | 7,724,771 | $ | 7,034,209 | ||||||
| Cost of sales |
5,303,602 | 5,801,831 | 5,306,818 | |||||||||
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| Gross margin |
1,976,829 | 1,922,940 | 1,727,391 | |||||||||
| Selling, general and administrative expenses |
1,584,523 | 1,553,972 | 1,442,288 | |||||||||
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| Income from operations |
392,306 | 368,968 | 285,103 | |||||||||
| Interest expense, net |
109,551 | 108,213 | 193,174 | |||||||||
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| Income before income taxes |
282,755 | 260,755 | 91,929 | |||||||||
| Income tax expense |
60,946 | 55,564 | 53,148 | |||||||||
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| Net income |
$ | 221,809 | $ | 205,191 | $ | 38,781 | ||||||
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| Comprehensive income |
$ | 221,809 | $ | 205,191 | $ | 38,781 | ||||||
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| Net income per share: |
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| Basic |
$ | 1.92 | $ | 1.79 | $ | 0.34 | ||||||
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| Diluted |
$ | 1.90 | $ | 1.76 | $ | 0.34 | ||||||
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| Weighted average common shares outstanding: |
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| Basic |
115,713 | 114,586 | 112,587 | |||||||||
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| Diluted |
117,025 | 116,554 | 115,597 | |||||||||
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BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
| December 31, | ||||||||
| 2019 | 2018 | |||||||
| (In thousands, except per share amounts) | ||||||||
| ASSETS | ||||||||
| Current assets: |
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| Cash and cash equivalents |
$ | 14,096 | $ | 10,127 | ||||
| Accounts receivable, less allowances of $13,492 and $13,054 at December 31, 2019 and 2018, respectively |
614,946 | 654,170 | ||||||
| Other receivables |
77,447 | 68,637 | ||||||
| Inventories, net |
561,255 | 596,896 | ||||||
| Other current assets |
39,123 | 43,921 | ||||||
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| Total current assets |
1,306,867 | 1,373,751 | ||||||
| Property, plant and equipment, net |
721,887 | 670,075 | ||||||
| Operating lease right-of-use assets, net |
292,684 | — | ||||||
| Goodwill |
769,022 | 740,411 | ||||||
| Intangible assets, net |
128,388 | 103,154 | ||||||
| Deferred income taxes |
8,417 | 22,766 | ||||||
| Other assets, net |
22,225 | 22,152 | ||||||
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| Total assets |
$ | 3,249,490 | $ | 2,932,309 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
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| Accounts payable |
436,823 | 423,168 | ||||||
| Accrued liabilities |
308,950 | 292,526 | ||||||
| Current portion of operating lease liabilities |
61,653 | — | ||||||
| Current maturities of long-term debt |
13,875 | 15,565 | ||||||
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| Total current liabilities |
821,301 | 731,259 | ||||||
| Noncurrent portion of operating lease liabilities |
236,948 | — | ||||||
| Long-term debt, net of current maturities, debt discount, premium and issuance costs |
1,277,398 | 1,545,729 | ||||||
| Deferred income taxes |
36,645 | — | ||||||
| Other long-term liabilities |
52,245 | 58,983 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
2,424,537 | 2,335,971 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.01 par value, 10,000 shares authorized; zero shares issued and outstanding at December 31, 2019 and 2018 |
— | — | ||||||
| Common stock, $0.01 par value, 200,000 shares authorized; 116,052 and 115,078 shares issued and outstanding at December 31, 2019 and 2018, respectively |
1,161 | 1,151 | ||||||
| Additional paid-in capital |
574,955 | 560,221 | ||||||
| Retained earnings |
248,837 | 34,966 | ||||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
824,953 | 596,338 | ||||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 3,249,490 | $ | 2,932,309 | ||||
|
|
|
|
|
|||||
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
| Years Ended December 31, | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands) | ||||||||||||
| Cash flows from operating activities: |
||||||||||||
| Net income |
$ | 221,809 | $ | 205,191 | $ | 38,781 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
| Depreciation and amortization |
100,038 | 97,906 | 92,993 | |||||||||
| Amortization of debt discount, premium and issuance costs |
3,880 | 4,642 | 6,092 | |||||||||
| Loss (gain) on extinguishment of debt |
8,189 | (3,170 | ) | 56,657 | ||||||||
| Deferred income taxes |
50,994 | 51,823 | 49,104 | |||||||||
| Stock compensation expense |
12,239 | 14,420 | 13,508 | |||||||||
| Net (gain) loss on sales of assets and asset impairments |
(949 | ) | (1,393 | ) | 6,965 | |||||||
| Changes in assets and liabilities, net of assets acquired and liabilities assumed: |
||||||||||||
| Receivables |
42,789 | (9,221 | ) | (75,673 | ) | |||||||
| Inventories |
44,202 | (5,425 | ) | (60,645 | ) | |||||||
| Other current assets |
4,674 | (10,356 | ) | 8 | ||||||||
| Other assets and liabilities |
1,611 | 5,637 | 8,315 | |||||||||
| Accounts payable |
4,070 | (89,392 | ) | 65,764 | ||||||||
| Accrued liabilities |
10,500 | 22,168 | (23,341 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| Net cash provided by operating activities |
504,046 | 282,830 | 178,528 | |||||||||
|
|
|
|
|
|
|
|||||||
| Cash flows from investing activities: |
||||||||||||
| Purchases of property, plant and equipment |
(112,870 | ) | (101,411 | ) | (62,407 | ) | ||||||
| Proceeds from sale of property, plant and equipment |
6,545 | 4,753 | 2,981 | |||||||||
| Cash used for acquisitions |
(92,855 | ) | — | — | ||||||||
|
|
|
|
|
|
|
|||||||
| Net cash used in investing activities |
(199,180 | ) | (96,658 | ) | (59,426 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Cash flows from financing activities: |
||||||||||||
| Borrowings under revolving credit facility |
1,040,000 | 1,662,000 | 1,370,000 | |||||||||
| Repayments under revolving credit facility |
(1,192,000 | ) | (1,833,000 | ) | (1,020,000 | ) | ||||||
| Proceeds from long-term debt and other loans |
478,375 | 3,818 | — | |||||||||
| Repayments of long-term debt and other loans |
(610,834 | ) | (65,312 | ) | (379,926 | ) | ||||||
| Payments of debt extinguishment costs |
(2,301 | ) | (134 | ) | (48,704 | ) | ||||||
| Payments of loan costs |
(8,618 | ) | — | (2,799 | ) | |||||||
| Exercise of stock options |
4,873 | 3,945 | 8,055 | |||||||||
| Repurchase of common stock |
(10,392 | ) | (4,895 | ) | (2,644 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net cash used in financing activities |
(300,897 | ) | (233,578 | ) | (76,018 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net increase (decrease) in cash and cash equivalents |
3,969 | (47,406 | ) | 43,084 | ||||||||
| Cash and cash equivalents at beginning of period |
10,127 | 57,533 | 14,449 | |||||||||
|
|
|
|
|
|
|
|||||||
| Cash and cash equivalents at end of period |
$ | 14,096 | $ | 10,127 | $ | 57,533 | ||||||
|
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|
|||||||
Supplemental disclosure of non-cash activities
For the years ended December 31, 2019, 2018 and 2017, the Company retired assets subject to other finance obligations of $0.6 million, $0.6 million and $14.0 million and extinguished the related other finance obligations of $0.6 million, $0.7 million and $11.7 million, respectively.
The Company purchased equipment which was financed through finance lease obligations of $16.5 million, and capital lease obligations of $10.2 million and $14.2 million in the years ended December 31, 2019, 2018 and 2017, respectively. In addition, purchases of property, plant and equipment included in accounts payable were $3.4 million, $2.4 million and $3.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Reconciliation of Adjusted Non-GAAP Financial Measures to their GAAP Equivalents
(unaudited)
Note: The company provided detailed explanations of these non-GAAP financial measures in its Form 8K filed with the Securities and Exchange Commission on February 20, 2020.
| Three months ended December 31, |
Twelve months ended December 31, |
|||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| (in millions) | (in millions) | |||||||||||||||
| Reconciliation to Adjusted EBITDA: |
||||||||||||||||
| GAAP Net Income |
$ | 41.4 | $ | 52.0 | $ | 221.8 | $ | 205.2 | ||||||||
| Integration related expenses |
2.3 | 4.3 | 13.1 | 19.2 | ||||||||||||
| Debt issuance and refinancing cost (1) |
3.5 | (3.2 | ) | 10.2 | (3.2 | ) | ||||||||||
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|
|
|
|||||||||
| Adjusted Net Income |
47.2 | 53.1 | 245.1 | 221.2 | ||||||||||||
|
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|
|||||||||
| Weighted average diluted common shares (in millions) |
117.5 | 116.4 | 117.0 | 116.6 | ||||||||||||
| Diluted adjusted net income per share: |
$ | 0.40 | $ | 0.46 | $ | 2.09 | $ | 1.90 | ||||||||
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|
|||||||||
| Reconciling items: |
||||||||||||||||
| Depreciation and amortization expense |
28.3 | 25.2 | 100.1 | 97.9 | ||||||||||||
| Interest expense, net |
24.0 | 26.6 | 99.4 | 111.4 | ||||||||||||
| Income tax (benefit) expense |
6.3 | 15.0 | 61.0 | 55.6 | ||||||||||||
| Stock compensation expense |
2.9 | 4.5 | 12.3 | 14.4 | ||||||||||||
| (Gain)/loss on sale and asset impairments |
0.3 | (0.9 | ) | (0.9 | ) | (1.0 | ) | |||||||||
| Other management-identified adjustments (2) |
0.3 | 1.5 | (0.9 | ) | 2.1 | |||||||||||
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|||||||||
| Adjusted EBITDA |
$ | 109.3 | $ | 125.0 | $ | 516.1 | $ | 501.6 | ||||||||
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|
|||||||||
| Adjusted EBITDA Margin |
6.2 | % | 6.9 | % | 7.1 | % | 6.5 | % | ||||||||
| (1) | Costs associated with issuing and extinguishing long term debt in 2019 and 2018. |
| (2) | Primarily relates to severance and one time cost. |
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Financial Data
(adjusted and unaudited)
| Three months ended December 31, |
Twelve months ended December 31, |
|||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| (in millions except per share amounts) | ||||||||||||||||
| Net sales |
1,763.6 | 1,816.0 | 7,280.4 | 7,724.8 | ||||||||||||
| Gross margin |
476.6 | 492.8 | 1,976.8 | 1,922.9 | ||||||||||||
| Gross margin % |
27.0 | % | 27.1 | % | 27.2 | % | 24.9 | % | ||||||||
| Adjusted SG&A/Other (excluding depreciation and amortization) as a % of sales (1) |
20.8 | % | 20.3 | % | 20.1 | % | 18.4 | % | ||||||||
| Adjusted EBITDA |
109.3 | 125.0 | 516.1 | 501.6 | ||||||||||||
| Adjusted EBITDA margin % |
6.2 | % | 6.9 | % | 7.1 | % | 6.5 | % | ||||||||
| Depreciation and amortization |
(28.3 | ) | (25.2 | ) | (100.1 | ) | (97.9 | ) | ||||||||
| Interest expense, net of debt issuance cost and refinancing |
(24.0 | ) | (26.6 | ) | (99.4 | ) | (111.4 | ) | ||||||||
| Income tax expense |
(6.3 | ) | (15.0 | ) | (61.0 | ) | (55.6 | ) | ||||||||
| Other adjustments |
(3.5 | ) | (5.1 | ) | (10.5 | ) | (15.5 | ) | ||||||||
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|
|||||||||
| Adjusted Net Income |
$ | 47.2 | $ | 53.1 | $ | 245.1 | $ | 221.2 | ||||||||
|
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|
|||||||||
| Basic adjusted net income per share: |
$ | 0.41 | $ | 0.46 | $ | 2.12 | $ | 1.93 | ||||||||
|
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|
|||||||||
| Diluted adjusted net income per share: |
$ | 0.40 | $ | 0.46 | $ | 2.09 | $ | 1.90 | ||||||||
|
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| Weighted average common shares (in millions) |
||||||||||||||||
| Basic |
115.9 | 114.9 | 115.7 | 114.6 | ||||||||||||
| Diluted |
117.5 | 116.4 | 117.0 | 116.6 | ||||||||||||
Note: The company provided detailed explanations of these non-GAAP financial measures in its Form 8-K filed with the Securities and Exchange Commission on February 20, 2020.
| (1) | Adjusted SG&A and other as a percentage of sales is defined as GAAP SG&A less depreciation and amortization, stock comp, acquisition, integration and other expenses. GAAP SG&A in Q4-19 of $401.4M less $28.3M depreciation and amortization, less $2.3M of integration expenses, less $2.9M of stock comp, less $0.6 in gains on assets, impairments, and other. GAAP SG&A in FY19 of $1584.5M less $100.1M depreciation and amortization, less $13.1M of integration expenses, less $12.3M of stock comp, plus $1.8 in gains on assets, impairments, and other. |
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Sales by Product Category
(adjusted and unaudited)
| Three months ended December 31, |
Twelve months ended December 31, |
|||||||||||||||||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||||||||||||||
| Net Sales | % of Net Sales |
Net Sales | % of Net Sales |
% Change |
Net Sales | % of Net Sales |
Net Sales | % of Net Sales |
% Change |
|||||||||||||||||||||||||||||||
| Manufactured Products |
$ | 356.7 | 20.2 | % | $ | 341.1 | 18.8 | % | 4.6 | % | $ | 1,449.5 | 19.9 | % | $ | 1,392.0 | 18.0 | % | 4.1 | % | ||||||||||||||||||||
| Windows, Doors & Millwork |
391.1 | 22.2 | % | 365.7 | 20.1 | % | 6.9 | % | 1,542.9 | 21.2 | % | 1,445.9 | 18.7 | % | 6.7 | % | ||||||||||||||||||||||||
|
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|
|||||||||||||||||||||
| Value-Added Products |
747.8 | 42.4 | % | 706.8 | 38.9 | % | 5.8 | % | 2,992.4 | 41.1 | % | 2,837.9 | 36.7 | % | 5.4 | % | ||||||||||||||||||||||||
| Gypsum, Roofing & Insulation |
119.6 | 6.8 | % | 127.7 | 7.0 | % | -6.3 | % | 528.6 | 7.3 | % | 528.4 | 6.9 | % | 0.0 | % | ||||||||||||||||||||||||
| Siding, Metal & Concrete Products |
170.3 | 9.6 | % | 169.4 | 9.4 | % | 0.5 | % | 712.6 | 9.8 | % | 697.8 | 9.0 | % | 2.1 | % | ||||||||||||||||||||||||
| Other |
199.0 | 11.3 | % | 183.7 | 10.1 | % | 8.3 | % | 795.2 | 10.9 | % | 758.5 | 9.8 | % | 4.8 | % | ||||||||||||||||||||||||
|
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|
|||||||||||||||||||||
| Specialized Products |
488.9 | 27.7 | % | 480.8 | 26.5 | % | 1.7 | % | 2,036.4 | 28.0 | % | 1,984.7 | 25.7 | % | 2.6 | % | ||||||||||||||||||||||||
| Lumber & Lumber Sheet Goods |
$ | 526.9 | 29.9 | % | $ | 628.4 | 34.6 | % | -16.1 | % | $ | 2,251.6 | 30.9 | % | $ | 2,902.2 | 37.6 | % | -22.4 | % | ||||||||||||||||||||
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|
|||||||||||||||||||||
| Total adjusted net sales |
$ | 1,763.6 | 100.0 | % | $ | 1,816.0 | 100.0 | % | -2.9 | % | $ | 7,280.4 | 100.0 | % | $ | 7,724.8 | 100.0 | % | -5.8 | % | ||||||||||||||||||||
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|||||||||||||||||||||
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Interest Reconciliation
(unaudited)
| Three months ended December 31, |
||||||||
| Interest Expense | Net Debt Outstanding | |||||||
| (in millions) | ||||||||
| 2027 Secured Notes @ 6.75% Fixed |
$ | 7.9 | $ | 475.0 | ||||
| 2024 Secured Notes @ 5.625% Fixed |
7.1 | 503.9 | ||||||
| 2024 Term Loan @ 5.6% (Floating LIBOR) |
1.5 | 52.0 | ||||||
| Revolving Credit Facility @ 4.4% (Floating LIBOR) |
1.2 | 27.0 | ||||||
| Amortization of debt issuance costs, discount and premium |
0.9 | |||||||
| Finance leases and other finance obligations |
5.4 | 242.1 | ||||||
| Loss on debt extinguishment Cash |
3.5 | (14.1 | ) | |||||
|
|
|
|
|
|||||
| Total |
$ | 27.5 | $ | 1,285.9 | ||||
|
|
|
|
|
|||||
| Three months ended December 31, |
Twelve months ended December 31, |
|||||||
| 2019 | 2019 | |||||||
| (in millions) | (in millions) | |||||||
| Free Cash Flow |
||||||||
| Operating activities |
$ | 144 | $ | 504 | ||||
| Less: Capital expenditures |
(35 | ) | (113 | ) | ||||
|
|
|
|
|
|||||
| Free Cash Flow |
$ | 109 | $ | 391 | ||||
|
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|
|||||