10-Q
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li

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-40620

 

BUILDERS FIRSTSOURCE, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

52-2084569

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

2001 Bryan Street, Suite 1600

 

 

Dallas, Texas

 

75201

(Address of principal executive offices)

 

(Zip Code)

(214) 880-3500

(Registrant’s telephone number, including area code)

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Small reporting company

 

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.

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes No

The number of shares of the issuer’s common stock, par value $0.01, outstanding as of July 27, 2022 was 156,075,221.

 

 


 

BUILDERS FIRSTSOURCE, INC.

Index to Form 10-Q

 

 

 

 

 

Page

 

 

PART I — FINANCIAL INFORMATION

 

3

Item 1.

 

Financial Statements

 

3

 

 

Condensed Consolidated Statement of Operations (Unaudited) for Three and Six Months Ended June 30, 2022 and 2021

 

3

 

 

Condensed Consolidated Balance Sheet (Unaudited) as of June 30, 2022 and December 31, 2021

 

4

 

 

Condensed Consolidated Statement of Cash Flows (Unaudited) for the Three and Six Months Ended June 30, 2022 and 2021

 

5

 

 

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) for the Three and Six Months Ended June 30, 2022 and 2021

 

6

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

16

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

23

Item 4.

 

Controls and Procedures

 

23

 

 

PART II — OTHER INFORMATION

 

25

Item 1.

 

Legal Proceedings

 

25

Item 1A.

 

Risk Factors

 

25

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

25

Item 6.

 

Exhibits

 

26

 

2


 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements (unaudited)

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

(in thousands, except per share amounts)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net sales

 

$

6,926,259

 

 

$

5,576,682

 

 

$

12,607,391

 

 

$

9,750,457

 

Cost of sales

 

 

4,514,112

 

 

 

3,993,531

 

 

 

8,362,870

 

 

 

7,097,752

 

Gross margin

 

 

2,412,147

 

 

 

1,583,151

 

 

 

4,244,521

 

 

 

2,652,705

 

Selling, general and administrative expenses

 

 

1,046,279

 

 

 

902,913

 

 

 

2,014,847

 

 

 

1,724,511

 

Income from operations

 

 

1,365,868

 

 

 

680,238

 

 

 

2,229,674

 

 

 

928,194

 

Interest expense, net

 

 

70,715

 

 

 

27,795

 

 

 

112,029

 

 

 

59,639

 

Income before income taxes

 

 

1,295,153

 

 

 

652,443

 

 

 

2,117,645

 

 

 

868,555

 

Income tax expense

 

 

307,944

 

 

 

155,208

 

 

 

490,795

 

 

 

198,740

 

Net income

 

$

987,209

 

 

$

497,235

 

 

$

1,626,850

 

 

$

669,815

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

5.79

 

 

$

2.40

 

 

$

9.36

 

 

$

3.24

 

Diluted

 

$

5.75

 

 

$

2.39

 

 

$

9.27

 

 

$

3.21

 

Weighted average common shares:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

170,378

 

 

 

207,114

 

 

 

173,730

 

 

 

206,844

 

Diluted

 

 

171,549

 

 

 

208,318

 

 

 

175,525

 

 

 

208,470

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

 

(in thousands, except per share amounts)

 

June 30,
2022

 

 

December 31,
2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

166,185

 

 

$

42,603

 

Accounts receivable, less allowances of $48,011 and $39,510 at June 30, 2022 and December 31, 2021, respectively

 

 

2,407,841

 

 

 

1,708,796

 

Other receivables

 

 

228,191

 

 

 

255,075

 

Inventories, net

 

 

2,065,349

 

 

 

1,626,244

 

Contract assets

 

 

270,714

 

 

 

207,587

 

Other current assets

 

 

139,036

 

 

 

127,964

 

Total current assets

 

 

5,277,316

 

 

 

3,968,269

 

Property, plant and equipment, net

 

 

1,420,722

 

 

 

1,385,441

 

Operating lease right-of-use assets, net

 

 

483,545

 

 

 

457,833

 

Goodwill

 

 

3,336,291

 

 

 

3,270,192

 

Intangible assets, net

 

 

1,534,242

 

 

 

1,603,409

 

Other assets, net

 

 

33,786

 

 

 

29,199

 

Total assets

 

$

12,085,902

 

 

$

10,714,343

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,265,461

 

 

$

1,093,370

 

Accrued liabilities

 

 

904,934

 

 

 

718,904

 

Contract liabilities

 

 

259,029

 

 

 

216,097

 

Current portion of operating lease liabilities

 

 

96,504

 

 

 

96,680

 

Current maturities of long-term debt

 

 

2,885

 

 

 

3,660

 

Total current liabilities

 

 

2,528,813

 

 

 

2,128,711

 

Noncurrent portion of operating lease liabilities

 

 

401,995

 

 

 

375,289

 

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

 

 

3,552,362

 

 

 

2,926,122

 

Deferred income taxes

 

 

339,494

 

 

 

362,121

 

Other long-term liabilities

 

 

126,885

 

 

 

119,619

 

Total liabilities

 

 

6,949,549

 

 

 

5,911,862

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

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; 160,226 and 179,820 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

1,602

 

 

 

1,798

 

Additional paid-in capital

 

 

4,244,374

 

 

 

4,260,670

 

Retained earnings

 

 

890,377

 

 

 

540,013

 

Total stockholders' equity

 

 

5,136,353

 

 

 

4,802,481

 

Total liabilities and stockholders' equity

 

$

12,085,902

 

 

$

10,714,343

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

(in thousands)

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

1,626,850

 

 

$

669,815

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

229,805

 

 

 

261,553

 

Deferred income taxes

 

 

(22,627

)

 

 

(32,753

)

Stock-based compensation expense

 

 

18,156

 

 

 

18,867

 

Other non-cash adjustments

 

 

8,614

 

 

 

3,534

 

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

 

 

 

 

 

 

Receivables

 

 

(637,115

)

 

 

(753,320

)

Inventories

 

 

(419,560

)

 

 

(840,283

)

Contract assets

 

 

(63,127

)

 

 

(113,823

)

Other current assets

 

 

(6,790

)

 

 

(53,672

)

Other assets and liabilities

 

 

23,707

 

 

 

10,201

 

Accounts payable

 

 

168,144

 

 

 

448,527

 

Accrued liabilities

 

 

160,794

 

 

 

154,334

 

Contract liabilities

 

 

40,219

 

 

 

23,244

 

Net cash provided by (used in) operating activities

 

 

1,127,070

 

 

 

(203,776

)

Cash flows from investing activities:

 

 

 

 

 

 

Cash acquired in BMC Merger

 

 

 

 

 

167,490

 

Prepayments for acquisitions

 

 

 

 

 

(225,000

)

Cash used for acquisitions

 

 

(192,945

)

 

 

(24,833

)

Purchases of property, plant and equipment

 

 

(119,538

)

 

 

(98,293

)

Proceeds from sale of property, plant and equipment

 

 

5,395

 

 

 

9,321

 

Net cash used in investing activities

 

 

(307,088

)

 

 

(171,315

)

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings under revolving credit facility

 

 

3,599,000

 

 

 

1,769,000

 

Repayments under revolving credit facility

 

 

(3,353,000

)

 

 

(1,233,000

)

Proceeds from long-term debt and other loans

 

 

1,001,500

 

 

 

 

Repayments of long-term debt and other loans

 

 

(614,146

)

 

 

(470,330

)

Payments of debt extinguishment costs

 

 

(20,672

)

 

 

(2,475

)

Payments of loan costs

 

 

(15,816

)

 

 

(4,272

)

Exercise of stock options

 

 

434

 

 

 

335

 

Repurchase of common stock

 

 

(1,293,700

)

 

 

(17,707

)

Net cash (used in) provided by financing activities

 

 

(696,400

)

 

 

41,551

 

Net change in cash and cash equivalents

 

 

123,582

 

 

 

(333,540

)

Cash and cash equivalents at beginning of period

 

 

42,603

 

 

 

423,806

 

Cash and cash equivalents at end of period

 

$

166,185

 

 

$

90,266

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

85,646

 

 

$

53,600

 

Cash paid for income taxes

 

 

430,789

 

 

 

191,070

 

Supplemental disclosures of non-cash activities:

 

 

 

 

 

 

Non-cash or accrued consideration for acquisitions

 

$

7,371

 

 

$

3,658,362

 

Accrued purchases of property, plant and equipment

 

 

10,392

 

 

 

9,616

 

Right-of-use assets obtained in exchange for operating lease obligations

 

 

67,039

 

 

 

29,146

 

Assets acquired under finance lease obligations

 

 

 

 

 

1,644

 

Amounts accrued for repurchases of common stock

 

 

69,412

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

 

 

(in thousands)

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Total

 

Balance at December 31, 2020

 

 

116,829

 

 

$

1,168

 

 

$

589,241

 

 

$

562,374

 

 

$

1,152,783

 

Merger consideration

 

 

89,586

 

 

 

896

 

 

 

3,657,466

 

 

 

 

 

3,658,362

 

Vesting of restricted stock units

 

 

648

 

 

 

6

 

 

 

(6

)

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

10,402

 

 

 

 

 

10,402

 

Exercise of stock options

 

 

27

 

 

 

1

 

 

 

234

 

 

 

 

 

235

 

Shares withheld for restricted stock units vested

 

 

(232

)

 

 

(2

)

 

 

(10,415

)

 

 

 

 

(10,417

)

Net income

 

 

 

 

 

 

 

 

172,580

 

 

 

172,580

 

Balance at March 31, 2021

 

 

206,858

 

 

$

2,069

 

 

$

4,246,922

 

 

$

734,954

 

 

$

4,983,945

 

Vesting of restricted stock units

 

 

472

 

 

 

5

 

 

 

(5

)

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

8,465

 

 

 

 

 

8,465

 

Exercise of stock options

 

 

16

 

 

 

 

 

99

 

 

 

 

 

99

 

Shares withheld for restricted stock units vested

 

 

(150

)

 

 

(2

)

 

 

(7,287

)

 

 

 

 

(7,289

)

Net income

 

 

 

 

 

 

 

 

497,235

 

 

 

497,235

 

Balance at June 30, 2021

 

 

207,196

 

 

$

2,072

 

 

$

4,248,194

 

 

$

1,232,189

 

 

$

5,482,455

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

179,820

 

 

$

1,798

 

 

$

4,260,670

 

 

$

540,013

 

 

$

4,802,481

 

Vesting of restricted stock units

 

 

1,018

 

 

 

11

 

 

 

(11

)

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

8,840

 

 

 

 

 

8,840

 

Repurchase of common stock (1)

 

 

(3,593

)

 

 

(36

)

 

 

 

 

 

(285,915

)

 

 

(285,951

)

Exercise of stock options

 

 

42

 

 

 

 

 

 

421

 

 

 

 

 

421

 

Shares withheld for restricted stock units vested

 

 

(401

)

 

 

(4

)

 

 

(29,380

)

 

 

 

 

(29,384

)

Net income

 

 

 

 

 

 

 

 

639,640

 

 

 

639,640

 

Balance at March 31, 2022

 

 

176,886

 

 

$

1,769

 

 

$

4,240,540

 

 

$

893,738

 

 

$

5,136,047

 

Vesting of restricted stock units

 

 

300

 

 

 

3

 

 

 

(3

)

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

9,316

 

 

 

 

 

9,316

 

Repurchase of common stock (1)

 

 

(16,871

)

 

 

(169

)

 

 

 

 

(990,570

)

 

 

(990,739

)

Exercise of stock options

 

 

1

 

 

 

 

 

 

13

 

 

 

 

 

13

 

Shares withheld for restricted stock units vested

 

 

(90

)

 

 

(1

)

 

 

(5,492

)

 

 

 

 

(5,493

)

Net income

 

 

 

 

 

 

 

 

987,209

 

 

 

987,209

 

Balance at June 30, 2022

 

 

160,226

 

 

$

1,602

 

 

$

4,244,374

 

 

$

890,377

 

 

$

5,136,353

 

 

1.
Pursuant to repurchase programs authorized by our board of directors, we repurchased and retired 16.9 million shares of our common stock at an average price of $58.72 per share for $990.7 million, inclusive of fees, during the three months ended June 30, 2022. We repurchased and retired 3.6 million shares of our common stock at an average price of $79.58 per share for $286.0 million, inclusive of fess, during the three months ended March 31, 2022.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

6


 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. Basis of Presentation

Builders FirstSource, Inc., a Delaware corporation formed in 1998, is a leading supplier and manufacturer of building materials, manufactured components and construction services to professional homebuilders, sub-contractors, remodelers and consumers. The Company operates approximately 560 locations in 42 states across the United States. In this quarterly report, references to the “Company,” “we,” “our,” “ours” or “us” refer to Builders FirstSource, Inc. and its consolidated subsidiaries unless otherwise stated or the context otherwise requires.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all recurring adjustments and normal accruals necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the dates and periods presented. Results for interim periods are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period. Intercompany transactions are eliminated in consolidation.

The condensed consolidated balance sheet as of December 31, 2021 is derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. This condensed consolidated balance sheet as of December 31, 2021 and the unaudited condensed consolidated financial statements included herein should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, 2021 included in our most recent annual report on Form 10-K (“Form 10-K”). Accounting policies used in the preparation of these unaudited condensed consolidated financial statements are consistent with the accounting policies described in the Notes to Consolidated Financial Statements included in our Form 10-K.

The accounting policies of our operating segments are consistent with the accounting policies described in the Notes to Consolidated Financial Statements included in our Form 10-K. Since the Company operates in one reportable segment, the primary measures reviewed by our CEO, whom we have determined to be our chief operating decision maker, including revenue, gross margin and income before income taxes, are shown in these condensed consolidated financial statements.

Business Combinations

When they meet the requirements under ASC 805, Business Combinations, merger and acquisition transactions are accounted for using the acquisition method, and accordingly the results of operations of the acquiree are included in the Company’s consolidated financial statements from the acquisition date. The consideration transferred is allocated to the identifiable assets acquired and liabilities assumed based on estimated fair values at the acquisition date, with any excess recorded as goodwill. Transaction-related costs are expensed in the period the costs are incurred. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill.

Comprehensive Income

Comprehensive income is equal to net income for all periods presented.

Reclassifications

Certain prior periods’ amounts have been reclassified to conform to the current year presentation, including presenting contract assets and contract liabilities separately on the face of the financial statements, whereas, these contract assets and contract liabilities had previously been presented as a component of accounts receivable and accrued liabilities, respectively. Reclassifications had no impact on net income, total assets and liabilities, stockholders’ equity, or cash flows as previously reported. We have changed the composition of our product categories, including a decrease to four product categories. As a result of these changes, prior period amounts, as disclosed in Note 3, have been reclassified to conform to the current year presentation.

Recent Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers which intends to address diversity and inconsistency in the accounting related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. This standard is effective for fiscal years beginning after December 15, 2022,

7


 

including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The purpose of ASU 2020-04 is to provide optional guidance for a period of time related to accounting for reference rate reform on financial reporting. It is intended to reduce the potential burden of reviewing contract modifications related to discontinued rates. The amendments and optional expedients in this update are effective, as elected, beginning March 12, 2020 through December 31, 2022 and may be elected by topic. We have not elected adoption of this optional guidance and do not intend to elect this guidance before the sunset date of December 31, 2022, as there is no material impact on our consolidated financial statements.

2. Business Combinations

On April 1, 2022, we acquired certain assets and operations of Panel Truss of Longview, Inc., Panel Truss – Hearne, LLC, Case-Hill, Inc., Panel Truss-Dallas, LLC, Truss Ops Trucking, LLC and Truss Ops, LLC (the “Texas Panel Truss Businesses”), and Panel Truss – Oakwood, LLC Panel Truss – Townville, LLC and Panel Truss – Ringgold, LLC (the “East Panel Truss Businesses”) for approximately $89.1 million and $79.6 million, which includes $7.0 million of contingent and deferred consideration. Each of the acquired businesses provides building components primarily to multi-family markets, serving such markets in Texas, Georgia and South Carolina.

On April 1, 2022, we acquired substantially all of the assets and operations of Valley Truss Co., Inc. ("Valley Truss") for approximately $31.6 million, which includes $0.4 million of deferred consideration. Valley Truss is a manufacturer of floor and roof trusses located in Boise, Idaho.

Each of these acquisitions were funded with a combination of cash on hand and borrowings under our 2026 revolving credit facility (“2026 facility"). These transactions were accounted for by the acquisition method, and accordingly the results of operations have been included in the Company’s consolidated financial statements from the acquisition date. The purchase price was allocated to the assets acquired and liabilities assumed based on estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the net assets acquired recorded as goodwill.

The following table summarizes the aggregate fair values of the assets acquired and liabilities assumed for the acquisitions described above:

 

 

 

Total

 

 

 

(in thousands)

 

Accounts receivable

 

$

34,959

 

Inventories

 

 

19,544

 

Property, plant and equipment

 

 

16,118

 

Operating lease right-of-use assets

 

 

9,795

 

Goodwill

 

 

66,099