October 24, 2013

Builders FirstSource Reports Third Quarter 2013 Results

Net Income Totals $12.8 Million as Third Quarter Sales Top $400 Million

DALLAS, Oct. 24, 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 third quarter ended September 30, 2013.

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

  • Third quarter 2013 sales increased 38.1 percent to $402.9 million compared to third quarter 2012 sales of $291.8 million.
  • Gross margin percentage improved to 23.0 percent, up from 19.8 percent in the third quarter of 2012.
  • Operating income was $20.3 million, up nearly $22.0 million when compared to an operating loss of ($1.6) million for the third quarter of 2012.
  • Net income was $12.8 million, a $26.4 million improvement over a net loss of ($13.6) million for the third quarter of 2012.
  • Third quarter 2013 Adjusted EBITDA was $23.0 million compared to Adjusted EBITDA of $3.0 million for the third quarter of 2012.
  • Positive cash generation of $24.8 million in the third quarter of 2013 compared to cash used of $14.4 million in the third quarter of 2012.

Floyd Sherman, Builders FirstSource Chief Executive Officer said, "Our trend of improving financial results continued as our top line growth and gross margin increase helped us achieve positive net income and positive cash flow in the current quarter. As we have previously stated, our focus has been on increasing market share while expanding gross margins. To that end, our third quarter sales were $402.9 million, an increase of 38.1 percent when compared to the third quarter of 2012. This marks the eighth consecutive quarter of year-over-year sales growth above 30 percent, and shows our sales growth is still outpacing the increase in residential construction activity."

Mr. Sherman added, "Our gross margin percentage increased to 23.0 percent for the current quarter, up from 19.8 percent for the third quarter of 2012. This margin increase was accomplished in spite of the continuation of a very competitive pricing environment, and was largely due to better customer pricing, an increase in sales volume, and a lower rate of material cost inflation."

Chad Crow, Builders FirstSource Senior Vice President and Chief Financial Officer added, "Equally important to our near term goal of returning to positive net income was continued leveraging of our operating expenses. In the third quarter, our selling, general and administrative expenses decreased to 18.0 percent of sales as compared to 20.1 percent for the third quarter of 2012." Mr. Crow added, "Another highlight of the quarter was our positive cash flow of approximately $25.0 million, resulting in liquidity at the end of the current quarter of $211.5 million, consisting of $50.4 million of available cash and $161.1 million in borrowing availability under our revolving credit facility. Our May 2013 refinancing strengthened our balance sheet and allowed the company to increase its focus on profitable growth and creating shareholder value."

Third Quarter 2013 Results Compared to Third Quarter 2012

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

  • Sales were $402.9 million compared to $291.8 million, an increase of $111.2 million or 38.1 percent. We estimate sales increased 29.6 percent due to increased volume and 8.5 percent due to price.
     
  • Gross margin percentage was 23.0 percent, up from 19.8 percent, a 320 basis point improvement. Our gross margin percent increased 280 basis points due to improved sales price and 40 basis points due to increased sales volume. On a sequential quarter basis, gross margin percentage improved from 20.7 percent to 23.0 percent.
     
  • Selling, general and administrative ("SG&A") expenses increased $13.7 million, or 23.3 percent. As a percentage of sales, SG&A expense decreased to 18.0 percent compared to 20.1 percent. Our salaries and benefits expense, excluding stock compensation expense, was $46.4 million, or 11.5 percent of sales, compared to $35.6 million, or 12.2 percent of sales. Delivery expense increased $1.3 million and other general administrative expense increased $1.4 million, both a result of increased sales volume.
     
  • Interest expense was $7.5 million, a decrease of $3.1 million, which relates primarily to our recent refinancing. For the current year quarter, interest expense included $6.7 million related to our outstanding senior secured notes due 2021 and $0.6 million of amortized deferred loan costs. Interest expense in the third quarter of 2012 included $4.7 million related to our term loan and $4.5 million related to our floating rate notes due 2016. In addition, interest expense in the third quarter of 2012 included a $0.7 million non-cash, fair value adjustment related to stock warrants issued in connection with the term loan and $0.2 million of amortized deferred loan costs.
     
  • We recorded a $0.1 million income tax benefit compared to $0.0 million of income tax expense in the third quarter of 2012. We recorded a reduction of the after-tax, non-cash valuation allowance of $3.4 million in the third quarter of 2013. We recorded an increase in the after-tax, non-cash valuation allowance of $ 4.6 million in the third quarter of 2012. Both were related to our net deferred tax assets. Absent the valuation allowance, the effective tax rate inclusive of discrete items would have been 25.8 percent and 37.6 percent in the third quarters of 2013 and 2012, respectively. As of September 30, 2013, our gross federal income tax net operating loss available for carry-forward was approximately $270 million.
     
  • Income from continuing operations was $13.0 million, or $0.13 per diluted share, compared to a loss from continuing operations of $12.3 million, or $0.13 loss per diluted share in the third quarter of 2012. Excluding facility closure costs, the fair value adjustment for stock warrants and the tax valuation allowance, our income from continuing operations was $9.2 million, or $0.09 per diluted share, for the current year quarter, compared to a loss from continuing operations of $6.5 million, or $0.07 loss per diluted share, for the third quarter of 2012. See reconciliation attached.
     
  • Net income was $12.8 million, or $0.13 per diluted share, compared to a net loss of $13.6 million, or $0.14 loss per diluted share. 
     
  • Diluted weighted average shares outstanding were 99.8 million in the third quarter of 2013 compared to 95.5 million in the same quarter of 2012. Restricted stock shares were included in diluted weighted average shares outstanding for the third quarter of 2013 because the company generated net income and excluded in the third quarter of 2012 because the company reported a net loss. Incremental shares related to stock options and stock warrants were included in diluted weighted average shares outstanding for the third quarter of 2013 and excluded in the third quarter of 2012 because their effect was anti-dilutive.
     
  • Adjusted EBITDA was $23.0 million, or 5.7 percent of sales, compared to $3.0 million, or 1.0 percent of sales, for the third quarter of 2012.  See reconciliation attached.

Liquidity and Capital Resources

  • Total liquidity at September 30, 2013 was approximately $211.5 million, which included $50.4 million of available cash and $161.1 million in borrowing availability under our revolver. We had no borrowings during the quarter under our revolver.
     
  • Operating cash flow was $29.7 million for the third quarter of 2013, which included a $14.5 million reduction in working capital. Our new senior secured notes due 2021 require interest payments semi-annually in June and December. Therefore, our third quarter 2013 operating cash flow does not include an interest payment pertaining to these notes of approximately $6.7 million included in accrued liabilities. Operating cash flow was ($11.1) million in the third quarter of 2012, and included $4.0 million related to working capital build.
     
  • Capital expenditures were $4.8 million for the third quarter of 2013, compared to $5.2 million for the same quarter of 2012. We expect capital expenditures in the fourth quarter of 2013 to be approximately $8.0 million, and expect 2014 capital expenditures to be between $15-$20 million, as we continue to invest in our fleet and truss, panel, door and window capabilities.

Outlook

Concluding, Mr. Sherman said, "Despite the challenges we still face within the industry such as the historically low rate of housing starts, availability of credit for homebuyers, shortages of skilled construction labor, and the competitive pricing environment, we believe the demand for housing continues to strengthen and the outlook for continued industry improvement remains positive. We saw our financial results accelerate through the third quarter and are optimistic regarding our outlook, taking seasonal differences into account, for the remainder of the year. I am extremely pleased with our recent financial performance and know it would not have been possible without the dedication and hard work of all our employees." 

Conference Call

Builders FirstSource will host a conference call Friday, October 25, 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: 800-768-6490 (U.S. and Canada) and 785-830-7987 (international). A replay of the call will be available at 3:00 p.m. CT through October 30th. To access the replay, please dial 888-203-1112 (U.S. and Canada) and 719-457-0820 (international) and refer to pass code 2925886. 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 47 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  Nine months ended 
 September 30,September 30,
  2013  2012  2013  2012 
   (in thousands, except per share amounts) 
         
         
 Sales   $ 402,931  $ 291,780  $ 1,120,781  $ 783,088
 Cost of sales   310,437  234,067  883,708  626,592
 Gross margin   92,494  57,713  237,073  156,496
         
Selling, general and administrative expenses (includes stock-based compensation expense of $966 and $947 for the three months ended in 2013 and 2012, respectively, and $3,285 and $2,672 for the nine months ended in 2013 and 2012, respectively.)   72,343  58,650  202,432  164,443
 Facility closure costs   (197)  692  (86)  896
 Income (loss) from operations   20,348  (1,629)  34,727  (8,843)
 Interest expense, net   7,525  10,618  81,083  34,184
 Income (loss) from continuing operations before income taxes   12,823  (12,247)  (46,356)  (43,027)
 Income tax (benefit) expense   (129)  33  586  351
 Income (loss) from continuing operations   12,952  (12,280)  (46,942)  (43,378)
Loss from discontinued operations (net of income tax expense of $0 in 2013 and 2012, respectively)   (158)  (1,285)  (278)  (1,430)
 Net income (loss)   $ 12,794  $ (13,565)  $ (47,220)  $ (44,808)
         
 Basic net income (loss) per share:         
 Income (loss) from continuing operations   $ 0.13  $ (0.13)  $ (0.49)  $ (0.46)
 Loss from discontinued operations   (0.00)  (0.01)  (0.00)  (0.01)
 Net income (loss)   $ 0.13  $ (0.14)  $ (0.49)  $ (0.47)
         
 Diluted net income (loss) per share:         
 Income (loss) from continuing operations   $ 0.13  $ (0.13)  $ (0.49)  $ (0.46)
 Loss from discontinued operations   (0.00)  (0.01)  (0.00)  (0.01)
 Net income (loss)   $ 0.13  $ (0.14)  $ (0.49)  $ (0.47)
         
 Weighted average common shares:         
 Basic   97,229  95,514  96,314  95,401
 Diluted   99,765  95,514  96,314  95,401
 
 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES 
 Sales by Product Category 
 (unaudited) 
         
         
  Three months ended September 30, 
  2013  2012 
   (in thousands) 
         
 Prefabricated components   $ 82,955 20.6%  $ 56,137 19.2%
 Windows & doors   84,436 21.0%  61,821 21.2%
 Lumber & lumber sheet goods   137,514 34.1%  97,305 33.4%
 Millwork   37,434 9.3%  28,048 9.6%
 Other building products & services   60,592 15.0%  48,469 16.6%
 Total sales   $ 402,931 100.0%  $ 291,780 100.0%
         
         
  Nine months ended September 30, 
  2013  2012 
   (in thousands) 
         
 Prefabricated components   $ 221,981 19.8%  $ 150,818 19.3%
 Windows & doors   225,831 20.1%  170,841 21.8%
 Lumber & lumber sheet goods   403,593 36.0%  251,677 32.1%
 Millwork   101,672 9.1%  75,845 9.7%
 Other building products & services   167,704 15.0%  133,907 17.1%
 Total sales   $ 1,120,781 100.0%  $ 783,088 100.0%
 
 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES 
 Condensed Consolidated Balance Sheets 
 (unaudited) 
     
     
  September 30,  December 31, 
  2013  2012 
   (in thousands, except per share amounts) 
     
 ASSETS     
 Current assets:     
 Cash and cash equivalents   $ 50,356  $ 131,432
 Restricted cash   --  12,068
 Accounts receivable, less allowance of $3,788 and $2,831 at September 30, 2013 and December 31, 2012, respectively   164,049  117,405
 Inventories   125,291  108,999
 Other current assets   11,690  9,968
 Total current assets   351,386  379,872
 Property, plant and equipment, net   46,404  44,084
 Goodwill   111,193  111,193
 Other assets, net   24,887  15,692
 Total assets   $ 533,870  $ 550,841
     
 LIABILITIES AND STOCKHOLDERS' EQUITY     
 Current liabilities:     
 Accounts payable   $ 90,867  $ 79,397
 Accrued liabilities   60,544  37,778
 Current maturities of long-term debt   65  60
 Total current liabilities   151,476  117,235
 Long-term debt, net of current maturities   353,922  360,895
 Other long-term liabilities   23,020  24,615
 Total liabilities   528,418  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; 97,276 and 96,916 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively   967  957
 Additional paid-in capital   368,037  363,471
 Accumulated deficit   (363,552)  (316,332)
 Total stockholders' equity   5,452  48,096
 Total liabilities and stockholders' equity   $ 533,870  $ 550,841
     
 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES 
 Condensed Consolidated Statements of Cash Flows 
 (unaudited) 
     
     
  Nine months ended September 30, 
  2013  2012 
   (in thousands) 
Cash flows from operating activities:    
Net loss  $ (47,220)  $ (44,808)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization  7,341  8,253
Amortization and write-off of deferred loan costs  3,450  514
Amortization and write-off of debt discount  7,794  1,022
Fair value adjustment of stock warrants  558  4,417
Deferred income taxes  875  338
Bad debt expense  866  458
Net non-cash income from discontinued operations  (195)  -- 
Stock compensation expense  3,285  2,672
Net gain on sale of assets  (167)  (27)
Changes in assets and liabilities:    
Receivables  (47,510)  (47,109)
Inventories  (16,292)  (20,139)
Other current assets  (2,028)  (1,710)
Other assets and liabilities  (973)  103
Accounts payable  11,470  35,555
Accrued liabilities  22,574  11,615
Net cash used in operating activities  (56,172)  (48,846)
     
Cash flows from investing activities:    
Purchases of property, plant and equipment  (9,392)  (9,156)
Proceeds from sale of property, plant and equipment  1,674  219
Decrease in restricted cash  13,030  2,250
Net cash provided by (used in) investing activities  5,312  (6,687)
     
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  (364,763)  (39)
Payments of deferred loan costs  (15,539)  (358)
Payment of recapitalization costs  (37)  -- 
Exercise of stock options  1,159  268
Repurchase of common stock  (1,036)  (496)
Net cash used in financing activities  (30,216)  (625)
     
Net change in cash and cash equivalents  (81,076)  (56,158)
Cash and cash equivalents at beginning of period  131,432  146,833
Cash and cash equivalents at end of period  $ 50,356  $ 90,675
         
 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES 
 Supplemental Interest Expense Information 
 (unaudited - dollars in thousands) 
         
         
         
  Three months ended  Nine months ended 
 September 30,September 30,
  2013  2012  2013  2012 
         
         
 Detail of Interest Expense:         
 Term loan   $ --  $ 4,702  $ 10,638  $ 14,004
 Prepayment Penalty - Term Loan   --  --  39,475  --
 2021 notes   6,710  --  9,117  --
 2016 notes   --  4,541  9,083  13,623
 Credit facility   207  10  392  27
 Change in fair value of stock warrants (1)   (198)  691  558  4,417
 Amortization of debt discount (1) (2)   --  355  7,794  1,022
 Amortization of deferred loan costs (1) (3)   617  174  3,450  515
 Other   189  145  576  576
 Interest expense, net   $ 7,525  $ 10,618  $ 81,083  $ 34,184
         
         
 (1) Non-cash item 
 (2) Includes $6,797 write-off of term loan discount for the nine months ended September 30, 2013 
 (3) Includes $2,150 write-off of debt issuance costs related to term loan & 2016 notes for the nine months ended September 30, 2013 
 
 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 October 24, 2013. 
         
         
  Three months ended     
 September 30,    
  2013  2012     
         
 Reconciliation to Adjusted EBITDA:         
 Net income (loss)   $ 12,794  $ (13,565)    
 Reconciling items:         
 Depreciation and amortization expense   2,033  2,912    
 Interest expense, net   7,525  10,618    
 Income tax (benefit) expense   (129)  33    
 Loss from discontinued operations, net of tax   158  1,285    
 Facility closure costs   (197)  692    
 Stock compensation expense   966  947    
 Other   (129)  38    
 Adjusted EBITDA   $ 23,021  $ 2,960    
         
         
         
  Three months ended 
  September 30, 
 20132012
  Pre-Tax  Net of Tax  Pre-Tax  Net of Tax 
         
 Reconciliation to Adjusted loss from continuing operations:         
 Income (loss) from continuing operations     $ 12,952    $ (12,280)
 Reconciling items:         
 Facility closure costs  (197)  (120) 692  423
 Warrant fair value adjustment     (198)    691
 Tax valuation allowance     (3,443)    4,633
 Adjusted income (loss) from continuing operations     $ 9,191    $ (6,533)
         
 Weighted average diluted shares outstanding     99,765    95,514
         
 Adjusted income (loss) from continuing operations per diluted share     $ 0.09    $ (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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