July 25, 2013

Builders FirstSource Reports Second Quarter 2013 Results

Second Quarter Adjusted EBITDA Climbs to $16.7 Million as Sales Growth Tops 46%

DALLAS, July 25, 2013 (GLOBE NEWSWIRE) -- Builders FirstSource, Inc. (Nasdaq:BLDR), a leading supplier and manufacturer of structural and related building products for residential new construction in the United States, today reported its results for the second quarter ended June 30, 2013.

Highlights include the following (see financial schedules for more information, including non-GAAP reconciliations):

  • Second quarter 2013 sales increased 46.4 percent to $398.1 million compared to the second quarter of 2012.
  • Operating income was $13.2 million, up over $14 million when compared to an operating loss of ($1.4) million for the second quarter of 2012.
  • Adjusted EBITDA was $16.7 million, a $14.6 million improvement compared to Adjusted EBITDA of $2.1 million for the second quarter of 2012.
  • The company completed a $350 million senior secured notes offering in May 2013, lowering its annual cash interest by approximately $16 million on a go-forward basis.
  • The company also entered into a new $175 million revolving credit facility providing incremental liquidity for the continuing housing market recovery.
  • As a result of the refinancing, the company improved liquidity by approximately $67 million. Total liquidity as of June 30, 2013 was $170.3 million.

Floyd Sherman, Builders FirstSource Chief Executive Officer stated, "I am once again very pleased to report another quarter of improving financial performance. We ended the second quarter with almost $400 million in sales and improved our Adjusted EBITDA by over $14 million on a year-over-year basis, and our second quarter sales grew 46.4 percent compared to the second quarter of 2012. Over the same time period, actual single-family housing starts in the South Region increased 14.5 percent, and single-family units under construction increased 27.4 percent."

Mr. Sherman added, "Lumber and lumber sheet good prices were, on average, 21.5 percent higher during the second quarter of 2013 as compared to those in the same quarter last year, though prices did fall approximately 30 percent during the quarter. Falling prices in the back half of the quarter relieved some of the gross margin pressure we had been experiencing from commodity inflation, and we were able to improve our gross margin by 100 basis points for the current quarter due to both improved pricing and higher sales volumes."

Commenting on the current quarter results, Chad Crow, Builders FirstSource Senior Vice President and Chief Financial Officer added, "Our efficient cost structure is leveraging extremely well against increased sales. For the current quarter, our selling, general and administrative expenses decreased to 17.3 percent of sales as compared to 20.2 percent for the second quarter of 2012." Mr. Crow continued, stating, "Our recent refinancing transaction provides a tremendous boost to our goal of returning to positive net income. For the second quarter of 2013, our interest expense included refinancing costs of approximately $48.4 million. Absent these refinancing costs, we were slightly positive net income for the second quarter. As a result of our new capital structure, our annual cash interest going forward will be approximately $28 million, assuming nothing is drawn on our revolver."

Second Quarter 2013 Results Compared to Second Quarter 2012

(See accompanying financial schedules for full financial details and reconciliations of Non-GAAP financial measures to their GAAP equivalents.)

  • Sales were $398.1 million compared to $271.9 million, an increase of $126.2 million or 46.4 percent. We estimate sales increased 28.9 percent due to increased volume and 17.5 percent due to price.
     
  • Gross margin percentage was 20.7 percent, up from 19.7 percent. Our gross margin increased 0.6 percentage points due to increased sales volume, with the remaining 0.4 percentage points coming from price and sales mix.
     
  • Selling, general and administrative ("SG&A") expenses increased $14.1 million, or 25.6 percent. As a percentage of sales, SG&A expense decreased to 17.3 percent compared to 20.2 percent. Our salaries and benefits expense, excluding stock compensation expense, was $44.0 million, or 11.0 percent of sales, compared to $34.0 million, or 12.5 percent of sales. Delivery expense increased $2.0 million and other general administrative expense increased $1.4 million, both a result of increased sales volume.
     
  • Interest expense was $61.1 million, an increase of $50.6 million. The increase relates primarily to our recent refinancing transaction and includes $6.8 million of unamortized debt discount and $2.1 million of debt issuance cost write-offs in the current quarter, as well as a $39.5 million prepayment premium related to the early termination of our term loan.
     
  • We recorded $0.4 million of income tax expense compared to $0.1 million. We recorded an after-tax, non-cash valuation allowance of $17.0 million and $4.3 million in the second quarters of 2013 and 2012, respectively, related to our net deferred tax assets. Absent the valuation allowance, the effective tax rate would have been 34.6 percent and 34.9 percent in the second quarters of 2013 and 2012, respectively. As of June 30, 2013, our gross federal income tax net operating loss available for carry-forward was approximately $295 million.
     
  • Loss from continuing operations was $48.3 million, or $0.50 loss per diluted share, compared to $12.0 million, or $0.13 loss per diluted share. Excluding the refinancing costs, the fair value adjustment for stock warrants and the tax valuation allowance, our income from continuing operations was $0.5 million, or $0.01 per diluted share, for the current year quarter. Excluding the fair value adjustment for stock warrants and the tax valuation allowance, our loss from continuing operations was $7.1 million, or $0.07 per diluted share, for the second quarter of 2012. See reconciliation attached.
     
  • Net loss was $48.2 million, or $0.50 loss per diluted share, compared to $12.1 million, or $0.13 loss per diluted share.
     
  • Diluted weighted average shares outstanding were 96.3 million compared to 95.4 million.
     
  • Adjusted EBITDA was $16.7 million compared to $2.1 million. See reconciliation attached.

Liquidity and Capital Resources

  • In May 2013, we completed a Rule 144A offering of $350 million aggregate principal amount of 7.625% senior secured notes due 2021. At the same time, we entered into a new 5-year $175 million revolving credit facility led by SunTrust Bank.  We used the proceeds from the offering, together with cash on hand, to redeem our 2016 notes, pay off our outstanding term loan, including the prepayment premium, and to pay fees and expenses related to the transaction.
     
  • Total liquidity at June 30, 2013 was approximately $170 million, which included $25.5 million in available cash and $162.3 million of borrowing availability under our new revolver, reduced by a $17.5 million minimum excess availability requirement in our revolver.
     
  • Cash used for the second quarter of 2013 was $92.2 million. Of the $92.2 million, $53.7 million was cash paid for refinancing costs, $27.4 million was due to working capital build during the quarter and $14.7 million was net cash used to retire long-term debt. Cash used for the second quarter of 2012 was $24.5 million, with $15.4 million related to working capital build.
     
  • Capital expenditures were $3.6 million for the second quarter of 2013, compared to $2.2 million for the same quarter of 2012.

Outlook

Concluding, Mr. Sherman said, "As the recovery in the housing market continues, we believe our year-over-year sales growth for the second half of 2013 will be driven by the combination of market share gains and increases in overall customer demand. We will maintain our focus on improving our gross margins and further leveraging our operating cost structure."

Conference Call

Builders FirstSource will host a conference call Friday, July 26, 2013 at 10:00 a.m. Central Time (CT) and will simultaneously broadcast it live over the Internet. To participate in the teleconference, please dial into the call a few minutes before the start time: 888-599-4880 (U.S. and Canada) and 913-312-0934 (international). A replay of the call will be available at 3:00 p.m. CT through July 31st.  To access the replay, please dial 888-203-1112 (U.S. and Canada) and 719-457-0820 (international) and refer to pass code 1001112. 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 a leading supplier and manufacturer of structural and related building products for residential new construction. The company operates 53 distribution centers and 45 manufacturing facilities in 9 states, principally in the southern and eastern United States. Manufacturing facilities include plants that manufacture roof and floor trusses, wall panels, stairs, aluminum and vinyl windows, custom millwork and pre-hung doors. Builders FirstSource also distributes windows, interior and exterior doors, dimensional lumber and lumber sheet goods, millwork and other building products. For more information about Builders FirstSource, visit the company's website at www.bldr.com.

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, plans to reduce costs, 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. 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.

Financial Schedules to Follow

 
 
 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES 
 Condensed Consolidated Statements of Operations 
 (unaudited) 
         
         
  Three months ended  Six months ended 
 June 30,June 30,
  2013  2012  2013  2012 
   (in thousands, except per share amounts) 
         
         
Sales   $ 398,148  $ 271,919  $ 717,850  $ 491,308
Cost of sales   315,916  218,255  573,271  392,525
Gross margin   82,232  53,664  144,579  98,783
         
Selling, general and administrative expenses (includes stock-based compensation expense of $984 and $922 for the three months ended in 2013 and 2012, respectively, and $2,319 and $1,725 for the six months ended in 2013 and 2012, respectively.)   69,011  54,960  130,089  105,793
Facility closure costs   52  76  111  204
Income (loss) from operations   13,169  (1,372)  14,379  (7,214)
Interest expense, net   61,058  10,461  73,558  23,566
Loss from continuing operations before income taxes   (47,889)  (11,833)  (59,179)  (30,780)
Income tax expense   400  144  715  318
Loss from continuing operations   (48,289)  (11,977)  (59,894)  (31,098)
Income (loss) from discontinued operations (net of income tax expense of $0 in 2013 and 2012, respectively)   83  (78)  (120)  (145)
Net loss   $ (48,206)  $ (12,055)  $ (60,014)  $ (31,243)
         
Basic and diluted net loss per share:         
Loss from continuing operations   $ (0.50)  $ (0.13)  $ (0.62)  $ (0.33)
Income (loss) from discontinued operations   0.00  (0.00)  (0.00)  (0.00)
Net loss   $ (0.50)  $ (0.13)  $ (0.62)  $ (0.33)
         
Weighted average common shares:         
Basic and diluted   96,349  95,427  96,170  95,344
 
 
 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES 
 Sales by Product Category 
 (unaudited) 
         
         
  Three months ended June 30, 
  2013  2012 
   (in thousands) 
         
 Prefabricated components   $ 78,206 19.7%  $ 51,232 18.8%
 Windows & doors   77,790 19.5%  59,294 21.8%
 Lumber & lumber sheet goods   149,282 37.5%  87,942 32.4%
 Millwork   35,185 8.8%  26,394 9.7%
 Other building products & services   57,685 14.5%  47,057 17.3%
 Total sales   $ 398,148 100.0%  $ 271,919 100.0%
         
         
  Six months ended June 30, 
  2013  2012 
   (in thousands) 
         
 Prefabricated components   $ 139,026 19.4%  $ 94,681 19.3%
 Windows & doors   141,395 19.7%  109,020 22.2%
 Lumber & lumber sheet goods   266,079 37.1%  154,372 31.4%
 Millwork   64,238 8.9%  47,797 9.7%
 Other building products & services   107,112 14.9%  85,438 17.4%
 Total sales   $ 717,850 100.0%  $ 491,308 100.0%
 
 
 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES 
 Condensed Consolidated Balance Sheets 
 (unaudited) 
     
     
  June 30,  December 31, 
  2013  2012 
   (in thousands, except per share amounts) 
     
ASSETS     
Current assets:     
Cash and cash equivalents   $ 25,511  $ 131,432
Restricted cash   --  12,068
Accounts receivable, less allowance of $3,692 and $2,831 at June 30, 2013 and December 31, 2012, respectively   157,877  117,405
Inventories   129,172  108,999
Other current assets   12,677  9,968
Total current assets   325,237  379,872
Property, plant and equipment, net   43,562  44,084
Goodwill   111,193  111,193
Other assets, net   25,515  15,692
Total assets   $ 505,507  $ 550,841
     
LIABILITIES AND STOCKHOLDERS' EQUITY     
Current liabilities:     
Accounts payable   $ 90,575  $ 79,397
Accrued liabilities   46,291  37,778
Current maturities of long-term debt   64  60
Total current liabilities   136,930  117,235
Long-term debt, net of current maturities   353,939  360,895
Other long-term liabilities   23,090  24,615
Total liabilities   513,959  502,745
Commitments and contingencies     
Stockholders' equity:     
Preferred stock, $0.01 par value, 10,000 shares authorized; zero shares issued and outstanding   --  --
Common stock, $0.01 par value, 200,000 shares authorized; 97,189 and 96,916 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively   965  957
Additional paid-in capital   366,929  363,471
Accumulated deficit   (376,346)  (316,332)
Total stockholders' (deficit) equity   (8,452)  48,096
Total liabilities and stockholders' equity   $ 505,507  $ 550,841
 
 
 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES 
 Condensed Consolidated Statements of Cash Flows 
 (unaudited) 
     
     
  Six months ended June 30, 
  2013  2012 
   (in thousands) 
Cash flows from operating activities:    
Net loss  $ (60,014)  $ (31,243)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization  5,308  5,341
Amortization and write-off of deferred loan costs  2,833  341
Amortization and write-off of debt discount  7,794  668
Fair value adjustment of stock warrants  755  3,726
Deferred income taxes  429  226
Bad debt expense  649  167
Net non-cash income from discontinued operations  (195)  -- 
Stock compensation expense  2,319  1,725
Net gain on sale of assets  (24)  (54)
Changes in assets and liabilities:    
Receivables  (41,121)  (37,373)
Inventories  (20,173)  (18,973)
Other current assets  (2,641)  1,671
Other assets and liabilities  562  (857)
Accounts payable  11,178  30,910
Accrued liabilities  6,473  5,948
Net cash used in operating activities  (85,868)  (37,777)
     
Cash flows from investing activities:    
Purchases of property, plant and equipment  (4,595)  (3,988)
Proceeds from sale of property, plant and equipment  617  58
Decrease in restricted cash  13,030  675
Net cash provided by (used in) investing activities  9,052  (3,255)
     
Cash flows from financing activities:    
Borrowings under revolving credit facility  30,000  -- 
Payments under revolving credit facility  (30,000)  -- 
Proceeds from issuance of long term debt  350,000  -- 
Payments of long-term debt and other loans  (364,746)  (26)
Payments of deferred loan costs  (14,301)  (287)
Payment of recapitalization costs  (37)  -- 
Exercise of stock options  1,015  98
Repurchase of common stock  (1,036)  (496)
Net cash used in financing activities  (29,105)  (711)
     
Net change in cash and cash equivalents  (105,921)  (41,743)
Cash and cash equivalents at beginning of period  131,432  146,833
Cash and cash equivalents at end of period  $ 25,511  $ 105,090
 
 
 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES 
 Supplemental Interest Expense Information 
 (unaudited - dollars in thousands) 
         
         
         
  Three months ended  Six months ended 
 June 30,June 30,
  2013  2012  2013  2012 
       
         
 Detail of Interest Expense:         
Term loan   $ 4,169  $ 4,651  $ 10,638  $ 9,302
Prepayment Penalty - Term Loan   39,475  --  39,475  --
2021 notes   2,407  --  2,407  --
2016 notes   4,566  4,540  9,083  9,082
Credit facility   171  9  185  17
Change in fair value of stock warrants (1)   329  578  755  3,726
Amortization of debt discount (1) (2)   7,206  340  7,794  668
Amortization of deferred loan costs (1) (3)   2,538  170  2,833  341
Other   197  173  388  430
Interest expense, net   $ 61,058  $ 10,461  $ 73,558  $ 23,566
         
         
 (1) Non-cash item   
 (2) Includes $6,797 write-off of term loan discount   
 (3) Includes $2,150 write-off of debt issuance costs related to term loan & 2016 notes   
 
 
 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES 
 Reconciliation of Non-GAAP Financial Measures to their GAAP Equivalents 
 (unaudited - dollars in thousands) 
         
         
 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 July 25, 2013. 
         
  Three months ended     
 June 30,    
  2013  2012     
         
 Reconciliation to Adjusted EBITDA:         
 Net loss   $ (48,206)  $ (12,055)    
 Reconciling items:         
Depreciation and amortization expense   2,534  2,491    
Interest expense, net   61,058  10,461    
Income tax expense   400  144    
Income (loss) from discontinued operations, net of tax   83  (78)    
Stock compensation expense   984  922    
Other   50  63    
Adjusted EBITDA   $ 16,737  $ 2,104    
         
         
         
  Three months ended 
  June 30, 
 20132012
  Pre-Tax  Net of Tax  Pre-Tax  Net of Tax 
         
 Reconciliation to Adjusted loss from continuing operations:         
 Loss from continuing operations     $ (48,289)    $ (11,977)
 Reconciling items:         
Prepayment premium  39,475  25,658    --
Debt issuance cost write-offs  2,150  1,398    --
Debt discount write-offs  6,797  4,418    --
Warrant fair value adjustment     329    578
Tax valuation allowance     16,968    4,269
Adjusted income (loss) from continuing operations     $ 482    $ (7,130)
         
Weighted average diluted shares outstanding     96,349    95,427
         
Adjusted income (loss) from continuing operations per diluted share     $ 0.01    $ (0.07)
CONTACT: Chad Crow
         Senior Vice President and Chief Financial Officer
         Builders FirstSource, Inc.
         (214) 880-3585
         Marcie Hyder
         Vice President and Corporate Controller
         Builders FirstSource, Inc.
         (214) 880-3551


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