8-K
false 0001316835 0001316835 2021-11-04 2021-11-04

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 4, 2021

 

 

BUILDERS FIRSTSOURCE, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   001-40620   52-2084569

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

2001 Bryan Street, Suite 1600, Dallas, Texas 75201

(Address of Principal Executive Offices)

(214) 880-3500

(Registrant’s telephone number, including area code)

 

 

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:

 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading

Symbol(s)

 

Name of Each Exchange

on Which Registered

Common stock, par value $0.01 per share   BLDR   New York Stock Exchange

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 November 4, 2021, Builders FirstSource, Inc. issued the news release attached hereto as Exhibit 99.1 reporting its financial results for the three and nine months ended September 30, 2021.

ITEM 9.01. Financial Statements and Exhibits.

(d)    Exhibits.

 

Exhibit No.    Description
99.1    News release reporting financial results for the three and nine months ended September 30, 2021, issued by Builders FirstSource, Inc. on November 4, 2021.
104    Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

All of the information included in Items 2.02 and 9.01 of this report and Exhibit 99.1 hereto is being furnished and 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.


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/ Timothy D. Johnson

  Name: Timothy D. Johnson
  Title:   Executive Vice President,
 

    General Counsel and Corporate Secretary

Dated: November 4, 2021

EX-99.1

Exhibit 99.1

 

LOGO

For Immediate Release

Builders FirstSource Reports Record Third Quarter 2021 Results

Record Net Income, Adjusted EBITDA Margin and Free Cash Flow

Core Organic Sales Growth of 16%

Increases Full Year 2021 Adjusted EBITDA Outlook

Net sales of $5.5 billion increased 62.7%

Gross profit of $1.7 billion increased 102.9%

Adjusted EBITDA increased 244.4% to $975.9 million

Adjusted EBITDA margin increased 930 basis points to 17.7%

Free Cash Flow of $1.1 Billion

Repurchased Over 5% of Outstanding Common Shares

November 4, 2021 (Dallas, TX) – Builders FirstSource, Inc. (NYSE: BLDR) today reported its results for the third quarter and nine months ended September 30, 2021.

Third Quarter 2021 BFS Highlights (includes BMC in Q3 2021 and not in Q3 2020)

All Year-Over-Year Comparisons Unless Otherwise Noted:

 

   

Net sales of $5.5 billion for the quarter increased 140.0% driven by the merger with BMC, commodity inflation, and strong organic growth

 

   

Gross profit of $1.7 billion increased 200.1% driven by the merger with BMC, commodity inflation, and double-digit organic growth

 

   

Net income of $613.1 million, or $2.98 per diluted share, and adjusted net income of $696.7 million, or $3.39 per diluted share

Year to Date September 2021 BFS Highlights (includes BMC in Year to Date September, 2021 and not Year to Date September, 2020)

All Year-Over-Year Comparisons Unless Otherwise Noted:

 

   

Net sales of $15.3 billion for the period increased 153.1% driven by the merger with BMC, commodity inflation, and strong organic growth

 

   

Gross profit of $4.4 billion increased 181.0% driven by the merger with BMC, commodity inflation, and strong organic growth

 

   

Net income of $1.3 billion, or $6.18 per diluted share, and adjusted net income of $1.6 billion, or $7.55 per diluted share

 

1


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

Third Quarter 2021 Highlights Compared to Combined Non-GAAP Pro Forma Third Quarter 2020

 

   

Net sales of $5.5 billion for the period increased 62.7% compared to the combined pro forma prior year period

 

   

Commodity inflation increased net sales 38.6%

 

   

Core organic sales increased 16.1%, excluding commodity and acquisition impacts

 

   

Acquisitions, excluding the BMC merger, contributed net sales growth of 8.0%

 

   

Gross profit of $1.7 billion increased 102.9% compared to the combined pro forma prior year period

 

   

As a percentage of net sales, SG&A decreased 300 basis points to 15.9%

 

   

Net income of $613.1 million, or $2.98 per diluted share, and adjusted net income of $696.7 million, or $3.39 per diluted share

 

   

Adjusted EBITDA increased 244.4% to $975.9 million driven by commodity values, strong demand in the residential housing market, and disciplined cost management

 

   

Adjusted EBITDA margin increased 930 basis points to 17.7%

 

   

Strong quarter-end balance sheet with a net debt to LTM Adjusted EBITDA ratio of 0.8x and liquidity of $1.5 billion

Dave Flitman, CEO of Builders FirstSource, commented, “I couldn’t be more proud of our team’s effort and hard work that have resulted in record third quarter and first nine months earnings for Builders FirstSource. We delivered above market core organic growth of 16.1%, along with record gross profit, adjusted EBITDA, adjusted EBITDA margin of 17.7% and free cash flow of $1.1 billion. Our team is executing at a very high level as we continue to outperform the market, especially given the strong demand environment coupled with unprecedented supply chain challenges that have continued to affect the homebuilding industry.”

Mr. Flitman continued, “We remain focused on executing our strategy of investing both organically and through M&A to continue to enhance our portfolio of value-added offerings and faster-growth categories. We are excited to welcome the California TrusFrame team to Builders FirstSource, adding substantial and profitable scale to our value- added products business on the West Coast. In addition, the BMC integration continues to progress exceptionally well, and our realization of cost synergies remains ahead of schedule. Looking to the remainder of the year, we continue to expect both strong demand in single-family housing and solid execution of our strategy to drive above market growth, all of which are reflected in our upwardly revised 2021 outlook.”

Peter Jackson, CFO of Builders FirstSource, commented, “During the third quarter, we used a portion of our significant free cash flow to deploy capital in the repurchase of $578 million of stock, and $816 million in acquisitions. Looking ahead, we remain focused on consistently executing our balanced capital allocation strategy with the goal of meeting our commitment to deliver long-term shareholder value.”

Builders FirstSource Financial Performance Highlights—Third Quarter 2021 Compared to Combined Non-GAAP Pro Forma Third Quarter 2020

Pro Forma Net Sales

 

   

Net sales for the period were $5.5 billion, a 62.7% increase compared to the combined pro forma prior year period. Core organic sales, which excludes acquisitions, commodity price fluctuations and differences in the number of selling days between periods, increased by 16.1%, while commodity price inflation contributed 38.6% to net sales.

 

2


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

   

Value-added core organic sales grew by an estimated 31.2%, led by 44.6% growth in our Manufactured Products category. Robust demand nationally was somewhat hindered by material availability constraints.

 

   

Demand for single family housing continues to drive top-line growth. For the quarter, our core organic customer growth increased 27.5% for Single Family, declined 16.4% for R&R/Other and declined 2.0% for Multi Family. R&R was down as increased commodity costs constrained R&R projects.

 

   

Acquisitions completed during the prior three quarters, excluding the BMC merger, contributed net sales growth of 8.0%.

Gross Profit

 

   

Gross profit was $1.7 billion, an increase of $868.3 million or 102.9% compared with the combined pro forma prior year period. Our gross margin increased 620 basis points to 31.1%, primarily driven by disciplined pricing in a volatile, supply-constrained marketplace, as well as effective and timely sourcing.

Selling, General and Administrative Expenses

 

   

SG&A was $875.0 million, an increase of approximately $234.8 million, or 36.7%, compared to the combined pro forma prior year period, driven primarily by expense related to the BMC merger and other acquisitions including amortization expense of acquired intangibles and one-time charges. Variable compensation was also higher due to the increase in profitability and core organic growth. As a percentage of net sales, total SG&A decreased by 300 basis points to 15.9% due to the impact of higher net sales and continued expense control.

Interest Expense

 

   

Interest expense increased by $2.4 million to $36.0 million compared to the same combined pro forma prior year period. The year-over-year increase is primarily due to the $1.0 billion senior unsecured Notes due 2032 issued in the third quarter, offset by the payoff of the senior unsecured Notes due 2023.

Income Tax Expense

 

   

Driven by higher profitability, income tax expense was $188.3 million, compared to $39.6 million in the combined pro forma prior year period. The effective tax rate in the third quarter was 23.5%, up 30 basis points versus the prior year period.

Net Income

 

   

Net income was $613.1 million, or $2.98 earnings per diluted share, compared to combined pro forma net income of $130.8 million, or $0.63 earnings per diluted share, in the same period a year ago. Adjusted net income was $696.7 million, or $3.39 adjusted earnings per diluted share, compared to combined pro forma adjusted net income of $154.4 million, or $0.74 adjusted earnings per diluted share, in the prior year period. The 351.2% increase in adjusted net income was primarily driven by the increase in net sales and gross margin described above partially offset by higher tax expense and higher SG&A expense. Adjusted earnings per diluted share excludes amortization and one-time expenses related to merger and acquisition activity.

Adjusted EBITDA

 

   

Adjusted EBITDA increased 244.4% to $975.9 million, driven by solid demand across our key customer end-markets, commodity inflation and cost leverage.

 

   

Adjusted EBITDA margin improved to a record 17.7%, which increased 930 basis points compared to the year-over-year pro forma period.

 

3


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

Builders FirstSource Financial Performance Highlights – Year to Date September 30, 2021 Compared to Combined Non-GAAP Pro Forma Year to Date September 30, 2020

 

   

Net sales for the period were $15.3 billion, a 69.2% increase compared to the pro forma year-over- year period. Core organic sales, which excludes acquisitions, commodity price fluctuations and differences in the number of selling days between periods, increased by 24.4% while commodity price inflation contributed 40.5% to net sales.

 

   

Value-added core organic sales grew by an estimated 30.3%, led by 48.4% growth in our Manufactured Products category. Robust demand nationally was somewhat hindered by material availability constraints.

 

   

Demand for single family housing continues to drive core organic growth. For the year-over-year period, our core organic growth increased 33.7% for Single Family and increased 0.9% for R&R/Other. There was no change in Multi Family.

 

   

Acquisitions completed during the prior four quarters, excluding the BMC merger, contributed net sales growth of 4.9%.

Gross Profit

 

   

Gross profit was $4.4 billion, an increase of $2.0 billion or 88.3% compared with the combined pro forma prior year period. Our gross margin increased 290 basis points to 28.6%, primarily driven by disciplined pricing in a volatile, supply-constrained marketplace.

Selling, General and Administrative Expenses

 

   

SG&A was $2.6 billion, an increase of approximately $773.2 million or 42.3%, compared to the combined pro forma prior year period, driven primarily by expenses related to the BMC merger and other acquisitions, including amortization expense of acquired intangibles and one-time charges. Variable compensation was also higher due to the increase in profitability and core organic growth. As a percentage of net sales, total SG&A decreased by 320 basis points to 17.0% due to the effect of higher net sales and continued expense control.

Interest Expense

 

   

Interest expense decreased by $27.9 million to $95.6 million compared to the same combined pro forma prior year period. The year-over-year decrease includes higher one-time charges of $28.0 million related to debt financing transactions during the first nine months of 2020, compared to $4.6 million in the first nine months of 2021.

Income Tax Expense

 

   

Driven by higher profitability, income tax expense was $387.1 million, compared to $84.0 million in the combined pro forma prior year period. The effective tax rate was 23.2%, slightly lower than the estimated annual effective tax rate driven primarily by the periodic impact of stock-based compensation adjustments during the nine months ended September 2021.

Net Income

 

   

Net income was $1.3 billion, or $6.18 earnings per diluted share, compared to combined pro forma of $284.2 million, or $1.38 earnings per diluted share, in the same period a year ago. Adjusted net income was $1.6 billion, or $7.55 adjusted earnings per diluted share, compared to a combined pro forma of $351.7 million, or $1.69 adjusted earnings per diluted share, in the prior year period. The 345.6% increase in adjusted net income was primarily driven by the increase in net sales and gross margin. Adjusted earnings per diluted share excludes amortization and one-time expenses related to merger and acquisition activity, as well as losses recognized on the refinancing and extinguishment of debt.

 

4


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

Adjusted EBITDA

 

   

Adjusted EBITDA increased 226.6% to $2.3 billion, driven by solid demand across single family, repair and remodel and other customer end-markets, commodity inflation, and cost leverage.

 

   

Adjusted EBITDA margin improved to 14.9%, which increased 720 basis points compared to the year-over-year pro forma period.

Builders FirstSource Capital Structure, Leverage, and Liquidity Information

 

   

For the first nine months of the year, cash provided by operating activities was $903.2 million; and cash used in investing activities was $970.4 million, including capital expenditures of $148.5 million, net of proceeds. The Company’s free cash was an inflow of $754.8 million, primarily driven by the impact of commodity inflation and core organic growth.

 

   

Liquidity as of September 30, 2021 was $1.5 billion, consisting of over $1.3 billion in net borrowing availability under the revolving credit facility and $225 million cash on hand.

 

   

As of September 30, 2021, Adjusted EBITDA, on a combined pro forma trailing twelve-month basis, was $2.6 billion and net debt was $2.2 billion, resulting in a decrease of our net leverage ratio from 1.6x to 0.8x.

 

   

In the third quarter, BFS repurchased approximately 10,958,400 shares of its common stock at an average price of $52.74, for a total cost of approximately $578 million. As of September 30, 2021, BFS had approximately $422 million remaining under its previously-announced $1.0 billion share repurchase authorization. In October, the Company repurchased an additional 4.5 million shares at an average price of $55.99 leaving $172 million in our current authorization.

Pro Forma Combined Unaudited and Adjusted Information, Third Quarter 2021

The Company has provided supplemental unaudited financial data of the combined company in this press release. The below financial data combines Builders FirstSource and BMC historical operating results as if the businesses had been operated together on a combined basis during prior periods along with adjustments to reclassify certain BMC historical financial information to conform to Builders FirstSource historical financial information. This financial data is not intended to be, and was not, prepared on a basis consistent with the unaudited pro forma condensed combined financial information included in Builders FirstSource’s Pre-effective amendment to an S-4 filing dated November 17, 2020 with the U.S. Securities and Exchange Commission (the “Pro Forma S-4 Filing”), which provides the pro forma data information prepared in accordance with Article 11 of SEC Regulation S-X.

 

5


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

Combined Financial Data

(unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2021     2020     2021     2020  
(in millions)          (Pro Forma)           (Pro Forma)  

Net sales

   $ 5,508.6     $ 3,385.8     $ 15,259.0     $ 9,019.2  

Gross margin

     1,712.5       844.2       4,365.2       2,318.0  

Gross margin %

     31.1     24.9     28.6     25.7

Net income

     613.1       130.8       1,283.0       284.2  

Adjusted EBITDA

     975.9       283.4       2,266.9       694.1  

Adjusted net income

     696.7       154.4       1,567.0       351.7  

 

6


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

BMC Merger Integration

Operating in most of the nation’s largest and fastest growing regions, the combined company is exceptionally positioned for long-term value creation. Since closing the merger with BMC on January 1, 2021, Builders FirstSource has made substantial progress in integrating the two companies while delivering solid execution.

The Company’s increased scale, a strong balance sheet bolstered by robust cash generation, and anticipated annual run-rate synergies of $140 million to $160 million by the end of 2022 are expected to provide greater resources to invest in growth, innovation and ongoing value creation for all stakeholders. The Company delivered $36 million in cost synergies in the third quarter and $74 million for the first nine months of 2021. In addition, the Company now expects 2021 cost synergies to be in the range of $90 million to $110 million.

M&A Update

On July 26, 2021, the Company completed the sale of its standalone Eastern U.S. gypsum distribution operations to L&W Supply for total cash proceeds of $76.2 million. The gypsum business generated sales of approximately $160 million in 2020.

On September 1, 2021, the Company acquired California TrusFrame, LLC, (CTF) who was previously the largest independent producer of value-added building products in California, for $193.4 million. CTF reported trailing twelve months’ sales of approximately $143.2 million as of July 31, 2021.

On September 9, 2021, the Company acquired the Apollo software assets from construction technology startup Katerra for approximately $4.5 million. The Apollo platform provides design collaboration and workflow, construction budgeting and scheduling, and field task assignment with mobile functionality.

2021 Outlook

For 2021, the Company expects significant improvement in its financial performance compared to 2020, including the following:

 

   

Net sales to grow to a range of $19.3 billion to $19.8 billion or approximately 51% to 55% over 2020 combined pro forma net sales of $12.8 billion.

 

   

Adjusted EBITDA to be in a range of $2.85 billion to $2.95 billion or approximately 166% to 176% over 2020 combined pro forma Adjusted EBITDA of $1.07 billion.

 

   

Expected BMC merger integration realized cost savings of $90 million to $110 million.

 

   

Free cash flow in the range of $1.8 billion to $2.0 billion.

The 2021 outlook is based on several assumptions, including the following:

 

   

Single family starts percentage growth across our geographies in the mid teens; multi-family starts percentage increase in the high single digits; and R&R growth in the low single digits.

 

   

Commodity price appreciation of 25% to 29% compared to the prior year.

 

   

Recently completed acquisitions projected to add net sales growth of 5% to 6%.

 

   

Two fewer selling days in 2021 versus 2020 or approximately 1%.

 

   

Depreciation and amortization expenses in the range of $555 million to $565 million, including approximately $320 million of amortization related to intangible assets acquired in the BMC merger. Total depreciation projected to be $190 million and total amortization of $370 million for the full year 2021.

 

   

Total capital expenditures spend in the range of $200 million to $220 million.

 

   

Interest expense in the range of $130 million to $140 million.

 

   

An effective tax rate between 23.0% to 25.0%.

 

7


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

Conference Call

Builders FirstSource will host a conference call Thursday, November 4, 2021, at 8:00 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 before the market opens on Thursday, November 4th at 6:00am CT. To participate in the teleconference, please dial into the call a few minutes before the start time: 866-518-6930 (U.S. and Canada) and 1-203-518-9797 (international), Conference ID: BLDRQ32021. A replay of the call will be available at 12:00 p.m. Central Time through Sunday, November 11, 2021. To access the replay, please dial 800-839-2871 (U.S. and Canada) and 402-271-9155 (international) and refer to pass code BLDRQ32021. 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 39 states with approximately 550 locations and have a market presence in 47 of the top 50 and 84 of the top 100 MSA’s, 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.

Forward-Looking Statements

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, synergies, 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 recent novel coronavirus disease 2019 (also known as “COVID-19”) pandemic, the Company’s growth strategies, including gaining market share and its digital strategies, 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

 

8


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

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.

Non-GAAP Financial Measures

The financial measures entitled Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, diluted Adjusted net income per share and Free cash flow are not financial measures recognized under GAAP and are therefore non-GAAP financial measures. The Company believes that these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to the Company’s financial condition and operating results.

Adjusted EBITDA is defined as GAAP net income before depreciation and amortization expense, interest expense, net, income tax expense and other non-cash or special items including stock compensation expense, acquisition and integration expense, debt issuance and refinancing costs, gains (loss) on sale and asset impairments and other items. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net sales. Adjusted net income is defined as GAAP net income before non-cash or special items including acquisition and integration expense and debt issuance and refinancing cost offset by the tax effect of those adjustments to net income. Adjusted net income per diluted share is defined as Adjusted net income divided by weighted average diluted common shares outstanding. Free cash flow is defined as GAAP net cash from operating activities less capital expenditures, net of proceeds from the sale of property, plant and equipment.

Company management uses Adjusted EBITDA, Adjusted EBITDA margin and Adjusted net income as supplemental measures in its evaluation of the Company’s business, including for trend analysis, purposes of determining management incentive compensation and budgeting and planning purposes. Company management believes that these measures provide a meaningful measure of the Company’s performance and a better baseline for comparing financial performance across periods because these measures eliminate the effects of period to period changes, in the case of Adjusted EBITDA and Adjusted EBITDA margin, in taxes, costs associated with capital investments, interest expense, stock compensation expense, and other non-cash and non-recurring items and, in the case of Adjusted net income, in certain non-recurring items. Company management also uses free cash flow as a supplemental measure in its evaluation of the Company’s business, including for purposes of its internal liquidity assessments. Company management believes that free cash flow provides a meaningful evaluation of the Company’s liquidity.

The Company believes that these non-GAAP financial measures provide additional tools for investors to use in evaluating ongoing operating results, cash flows and trends and in comparing the Company’s financial measures with other companies in the Company’s industry, which may present similar non-GAAP financial measures to investors. However, the Company’s calculation of these financial measures are not necessarily comparable to similarly titled measures reported by other companies. Company management does not consider these financial measures in isolation or as alternatives to financial measures determined in accordance with GAAP. Furthermore, items that are excluded and other adjustments and assumptions that are made in calculating these non-GAAP financial measures are significant components in understanding and assessing the Company’s financial performance. These non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, the Company’s GAAP financial measures. Further, because these non-GAAP financial measures are not determined in accordance with GAAP and are thus susceptible to varying calculations, the non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures of other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables below.

 

9


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

The Company’s Adjusted EBITDA outlook, free cash flow and full-year forecast for its effective tax rate on operations exclude the impact of certain income and expense items that management believes are not part of underlying operations. These items may include, but are not limited to, loss on early extinguishment of debt, restructuring charges, certain tax items, and charges associated with non-recurring professional and legal fees associated with acquisitions. The Company’s management cannot estimate on a forward-looking basis without unreasonable effort the impact these income and expense items will have on its reported Net income, operating cash flow and its reported effective tax rate because these items, which could be significant, are difficult to predict and may be highly variable. As a result, the Company does not provide a reconciliation to the most comparable GAAP financial measure for its Adjusted EBITDA or free cash flow outlook or its effective tax rate on operations forecast. Please see the Forward-Looking Statements section of this release for a discussion of certain risks relevant to the Company’s outlook.

Pro Forma Combined Financial Data

For avoidance of doubt, the Pro Forma Combined Unaudited and Adjusted Information also was not intended to be, and was not, prepared on a basis consistent with the unaudited pro forma condensed combined financial information included in Builders FirstSource’s Pre-effective amendment to an S-4 filing dated November 17, 2020 with the U.S. Securities and Exchange Commission (the “Pro Forma S-4 Filing”), which provides the pro forma financial information prepared in accordance with Article 11 of SEC Regulation S-X. For instance, the Supplemental Unaudited Combined Financial Information does not give effect to the BMC merger under the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 805, Business Combinations (“ASC Topic 805”), with Builders FirstSource treated as the legal and accounting acquirer, and was not prepared to reflect the merger as if it occurred on the first day of any of the fiscal periods presented. The Pro Forma Combined Unaudited and Adjusted Information has not been adjusted to give effect to pro forma events that are (1) directly attributable to the merger, (2) factually supportable, or (3) expected to have a continuing impact on the combined results of Builders FirstSource and BMC. Consequently, the Pro Forma Combined Unaudited and Adjusted Information is intentionally different from, but does not supersede, the pro forma financial information set forth in the Pro Forma S-4 Filing or the pro forma financial information set forth in the Company’s most recent quarterly report on Form 10-Q.

In addition, the Pro Forma Combined Unaudited and Adjusted Information does not purport to indicate the results that actually would have been obtained had the companies been operated together during the periods presented, or which may be realized in the future. The Pro Forma Combined Unaudited and Adjusted Information have no impact on Builders FirstSource’s or BMC’s previously reported consolidated balance sheets or statements of operations, cash flows or equity.

#    #    #

 

10


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

Contact:

Michael Neese

SVP, Investor Relations

Builders FirstSource, Inc.

(214) 765-3804

 

11


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(unaudited)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
(in thousands, except per share amounts)    2021      2020      2021      2020  

Net sales

   $ 5,508,590      $ 2,295,450      $ 15,259,047      $ 6,028,114  

Cost of sales

     3,796,138        1,724,799        10,893,890        4,474,718  
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross margin

     1,712,452        570,651        4,365,157        1,553,396  

Selling, general and administrative expenses

     875,012        430,893        2,599,523        1,223,436  
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations

     837,440        139,758        1,765,634        329,960  

Interest expense, net

     35,954        28,043        95,593        106,786  
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     801,486        111,715        1,670,041        223,174  

Income tax expense

     188,341        25,783        387,081        49,551  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 613,145      $ 85,932      $ 1,282,960      $ 173,623  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income per share:

           

Basic

   $ 3.00      $ 0.74      $ 6.23      $ 1.49  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

   $ 2.98      $ 0.73      $ 6.18      $ 1.48  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares:

           

Basic

     204,268        116,731        205,976        116,542  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

     205,630        118,026        207,513        117,690  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

12


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

 

     Nine Months Ended
September 30,
 
(in thousands)    2021     2020  

Cash flows from operating activities:

    

Net income

   $ 1,282,960     $ 173,623  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     401,500       87,298  

Deferred income taxes

     (65,696     3,155  

Stock-based compensation expense

     25,288       12,098  

Net gain on sale of assets

     (32,235     (1,413

Other non-cash adjustments

     4,805       7,884  

Changes in assets and liabilities, net of assets acquired and liabilities assumed:

    

Receivables

     (756,511     (230,627

Inventories

     (321,068     (189,692

Other current assets

     5,491       (5,076

Other assets and liabilities

     16,653       60,439  

Accounts payable

     103,006       205,570  

Accrued liabilities

     239,024       31,887  
  

 

 

   

 

 

 

Net cash provided by operating activities

     903,217       155,146  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Cash used for acquisitions, net of cash acquired

     (898,113     (15,893

Proceeds from divestiture of business

     76,162       —    

Purchases of property, plant and equipment

     (160,179     (83,508

Proceeds from sale of property, plant and equipment

     11,728       3,298  
  

 

 

   

 

 

 

Net cash used in investing activities

     (970,402     (96,103
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Borrowings under revolving credit facility

     2,420,000       791,000  

Repayments under revolving credit facility

     (2,495,000     (818,000

Proceeds from long-term debt and other loans

     1,000,000       895,625  

Repayments of long-term debt and other loans

     (471,360     (561,541

Payments of debt extinguishment costs

     (2,475     (22,686

Payments of loan costs

     (17,970     (13,800

Exercise of stock options

     537       1,343  

Repurchase of common stock

     (565,618     (4,153
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (131,886     267,788  
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     (199,071     326,831  
  

 

 

   

 

 

 

Cash and cash equivalents at beginning of period

     423,806       14,096  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 224,735     $ 340,927  
  

 

 

   

 

 

 

 

13


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(unaudited)

 

(in thousands, except per share amounts)    September 30,
2021
     December 31,
2020
 

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 224,735      $ 423,806  

Accounts receivable, less allowances of $38,627 and $17,637 at September 30, 2021 and December 31, 2020, respectively

     2,134,269        880,018  

Other receivables

     167,309        76,436  

Inventories, net

     1,616,553        784,527  

Other current assets

     88,368        58,895  
  

 

 

    

 

 

 

Total current assets

     4,231,234        2,223,682  

Property, plant and equipment, net

     1,336,890        749,130  

Operating lease right-of-use assets, net

     444,073        274,562  

Goodwill

     3,141,594        785,305  

Intangible assets, net

     1,629,363        119,882  

Other assets, net

     25,994        21,110  
  

 

 

    

 

 

 

Total assets

   $ 10,809,148      $ 4,173,671  
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

   $ 1,004,521      $ 600,357  

Accrued liabilities

     930,189        385,536  

Current portion of operating lease liabilities

     94,651        61,625  

Current maturities of long-term debt

     3,819        27,335  
  

 

 

    

 

 

 

Total current liabilities

     2,033,180        1,074,853  

Noncurrent portion of operating lease liabilities

     360,271        219,239  

Long-term debt, net of current maturities, discounts and issuance costs

     2,419,664        1,596,905  

Deferred income taxes

     330,998        49,495  

Other long-term liabilities

     141,609        80,396  
  

 

 

    

 

 

 

Total liabilities

     5,285,722        3,020,888  
  

 

 

    

 

 

 

Commitments and contingencies (Note 13)

     

Stockholders’ equity:

     

Preferred stock, $0.01 par value, 10,000 shares authorized; zero shares issued and outstanding

     —          —    

Common stock, $0.01 par value, 300,000 shares authorized; 196,288 and 116,829 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

     1,963        1,168  

Additional paid-in capital

     4,254,262        589,241  

Retained earnings

     1,267,201        562,374  
  

 

 

    

 

 

 

Total stockholders’ equity

     5,523,426        1,152,783  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 10,809,148      $ 4,173,671  
  

 

 

    

 

 

 

 

14


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

Reconciliation of Adjusted Non-GAAP Financial Measures to their GAAP Equivalents

(unaudited)

 

     Three Months Ended     Nine Months Ended    

Twelve Months Ended

 
     September 30,     September 30,     September 30,  
(in millions)    2021     2020     2021     2020     2021  

Reconciliation to Adjusted EBITDA:

          

GAAP net income

   $ 613.1     $ 85.9     $ 1,283.0     $ 173.6     $ 1,422.9  

Acquisition and integration expense

     17.6       10.8       107.5       14.4       118.4  

Debt issuance and refinancing cost (1)

     —         —         4.6       28.0       5.9  

Amortization expense

     92.3       5.4       261.6       16.7       266.9  

Tax-effect of adjustments to net income

     (26.4     (3.9     (89.7     (14.2     (93.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 696.7     $ 98.2     $ 1,567.0     $ 218.6     $ 1,720.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average diluted common shares

     205.6       118.0       207.5       117.7    

Diluted adjusted net income per share:

   $ 3.39     $ 0.83     $ 7.55     $ 1.86    

Reconciling items:

          

Depreciation expense

   $ 47.7     $ 24.0     $ 139.9     $ 70.6     $ 163.8  

Interest expense, net

     36.0       28.0       91.0       78.8       118.6  

Income tax expense

     214.7       29.7       476.8       63.8       526.1  

Stock compensation expense

     6.2       5.4       18.9       12.1       23.8  

Gain on sale and asset impairments

     (25.7     (1.2     (27.4     (1.3     (29.3

Other management-identified adjustments (2)

     0.3       0.3       0.7       0.7       0.8  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 975.9     $ 184.3     $ 2,266.9     $ 443.2     $ 2,524.0  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin

     17.7     8.0     14.9     7.4     14.2

 

(1)

Costs associated with issuing and extinguishing long term debt in 2021 and 2020.

(2)

Primarily relates to severance and other one time costs.

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

Financial Data

(unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
(in millions, except per share amounts)    2021     2020     2021     2020  

Net sales

   $ 5,508.6     $ 2,295.5     $ 15,259.0     $ 6,028.1  

Cost of sales

     3,796.1       1,724.8       10,893.8       4,474.7  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     1,712.5       570.7       4,365.2       1,553.4  

Gross margin %

     31.1     24.9     28.6     25.8

Adjusted SG&A/Other (excluding depreciation and amortization) as a % of sales (1)

     12.9     16.8     13.7     18.4

Adjusted EBITDA

     975.9       184.3       2,266.9       443.2  

Adjusted EBITDA margin %

     17.7     8.0     14.9     7.4

Depreciation expense

     (47.7     (24.0     (139.9     (70.6

Interest expense, net of debt issuance cost and refinancing

     (36.0     (28.0     (91.0     (78.8

Income tax expense

     (214.7     (29.7     (476.8     (63.8

Other adjustments

     19.2       (4.5     7.8       (11.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 696.7     $ 98.2     $ 1,567.0     $ 218.6  
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic adjusted net income per share:

   $ 3.41     $ 0.84     $ 7.61     $ 1.88  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted adjusted net income per share:

   $ 3.39     $ 0.83     $ 7.55     $ 1.86  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares

        

Basic

     204.3       116.7       206.0     116.5  

Diluted

     205.6       118.0       207.5     117.7  

 

(1)

Adjusted SG&A and other as a percentage of sales is defined as GAAP SG&A less depreciation and amortization, stock compensation, acquisition, integration and other expenses.    

 

15


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

Interest Reconciliation

(unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30, 2021     September 30, 2021  
(in millions)    Interest
Expense
     Net Debt
Outstanding
    Interest
Expense
     Net Debt
Outstanding
 

2032 Unsecured notes @ 4.25%

   $ 8.1      $ 1,000.0     $ 8.1      $ 1,000.0  

2030 Unsecured notes @ 5.00%

     6.9        550.0       20.6        550.0  

2027 Secured notes @ 6.75%

     11.7        695.0       36.1        695.0  

2024 Secured Notes @ 5.625%

          

2024 Term Loan @ 4.4% Floating LIBOR

          

Revolving credit facility @ 2.80% Floating LIBOR

     3.2        —         8.2        —    

Amortization of debt issuance costs, discount and premium

     1.1        —         2.7        —    

Finance leases and other finance obligations

     5.0        207.7       15.3        207.7  

Debt issuance and refinancing cost

     —            4.6     

Other

     —          —         —          —    

Cash

     —          (224.7     —          (224.7
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 36.0      $ 2,228.0     $ 95.6      $ 2,228.0  
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(in millions)    Three Months Ended
September 30, 2021
    Nine Months Ended
September 30, 2021
 

Free Cash Flow

    

Operating activities

   $ 1,107.0     $ 903.2  

Less: Capital expenditures, net of proceeds

     (59.5     (148.5
  

 

 

   

 

 

 

Free cash flow

   $ 1,047.5     $ 754.8  
  

 

 

   

 

 

 

 

16


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

Sales by Product Category

(unaudited)

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2021     2020           2021     2020        
(in millions)   Net Sales     % of
Net Sales
    Net Sales     % of
Net Sales
    %
Change
    Net Sales     % of
Net Sales
    Net Sales     % of
Net Sales
    %
Change
 

Manufactured products

  $ 1,253.9       22.8   $ 421.3       18.4     197.6   $ 3,162.1       20.7   $ 1,141.6       18.9     177.0

Windows, doors & millwork

    864.6       15.7     420.2       18.3     105.8     2,413.1       15.8     1,215.5       20.2     98.5
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

Value-added products

    2,118.5       38.5     841.5       36.7     151.8     5,575.3       36.5     2,357.1       39.1     136.5

Gypsum, roofing & insulation

    168.5       3.1     149.5       6.5     12.7     510.9       3.3     386.2       6.4     32.3

Siding, metal & concrete products

    414.2       7.5     212.4       9.3     95.0     1,132.2       7.4     581.8       9.7     94.6

Other

    406.9       7.4     240.5       10.4     69.2     1,314.1       8.6     676.8       11.2     94.2
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

Specialized products & other

    989.6       18.0     602.4       26.2     64.3     2,957.2       19.4     1,644.8       27.3     79.8

Lumber & lumber sheet goods

    2,400.5       43.5     851.6       37.1     181.9     6,726.6       44.1     2,026.2       33.6     232.0
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

Total net sales

  $ 5,508.6       100.0   $ 2,295.5       100.0     140.0   $ 15,259.0       100.0   $ 6,028.1       100.0     153.1
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

17


Builders FirstSource Reports Third Quarter 2021 Results (continued)

 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

Combined Financial Data

(unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2021     2020     2021     2020  
(in millions)          (Pro Forma)           (Pro Forma)  

Net sales

   $ 5,508.6     $ 3,385.8     $ 15,259.0     $ 9,019.2  

Gross margin

     1,712.5       844.2       4,365.2       2,318.0  

Gross margin %

     31.1     24.9     28.6     25.7

Net income

     613.1       130.8       1,283.0       284.2  

Adjusted EBITDA

     975.9       283.4       2,266.9       694.1  

Adjusted net income

     696.7       154.4       1,567.0       351.7  

 

18