Builders FirstSource, Inc. (Nasdaq: BLDR) today
reported its results for the first quarter ending March 31, 2019.
“The execution of our strategic priorities is off to a strong
start in 2019. We continued to invest in our industry leading
manufacturing capacity, providing customers with value-added
solutions to fulfill their most important homebuilding needs.
Additionally, our operational efficiency initiatives are producing
tangible results through a more agile and efficient operating
platform. I am extremely pleased with our team’s outperformance and
solid earnings growth in a challenging quarter,” said CEO Chad
Crow.
“These investments, combined with the strength of our platform,
generated sales volume growth of 6.8 percent, led by double-digit
growth in our value-added product categories. Adjusted EBITDA grew
by 22 percent, as our team successfully managed lower commodity
prices and generated growth across our diverse customer end
markets,” added CFO Peter Jackson.
- Net sales for the quarter were lower by 4.1 percent
- Commodity deflation decreased sales by 9.3 percent
- One less sales day in the first quarter of 2019 reduced sales
by 1.6 percent
- Estimated sales volume per day grew by 6.8 percent, led by 10.0
percent volume growth in the value-added product categories
- Adjusted EBITDA margin increased by 130 basis points
- Adjusted Net Income increased by 44 percent
The Company has provided supplemental non-GAAP financial
information for the consolidated company that is adjusted to
exclude one-time integration, one-time refinancing, and other costs
(“Adjusted”). As the information included herein includes non-GAAP
financial information, please refer to the accompanying financial
schedules for non-GAAP reconciliations to their GAAP
equivalents.
First Quarter 2019 Compared to First Quarter 2018:
Net Sales
- Net sales for the first quarter ending March 31, 2019 were $1.6
billion, a 4.1 percent decrease compared to a year ago. Lumber and
lumber sheet goods sales were down 19.6 percent primarily as a
result of the deflation in commodity prices as compared to the same
period a year ago. We achieved increased sales in our remaining
core product categories largely due to higher sales volume.
- Net sales per day declined by 2.5 percent primarily due to
commodity deflation, which depressed sales by 9.3 percent. However,
including the impact of commodity deflation, value-added product
sales per day grew by 8.8 percent, including sales growth of 8.1
percent in the Windows, Doors, and Millwork category and 9.6
percent in Manufactured Products.
- Estimated sales volume per day grew by 6.8 percent as demand
grew across our three customer end markets. Single-family grew by
7.5 percent, repair and remodel / other by 5.2 percent and
multi-family by 4.1 percent.
Gross Margin
- Gross margin was $442.0 million, an increase of $30.9 million,
or 7.5 percent, over the prior year. Gross margin percentage was
27.1 percent, an expansion of approximately 290 basis points
compared to the prior year period. The margin percentage increase
was attributable to the decline in the cost of commodities relative
to our customer pricing commitments as well as continued pricing
discipline. Additionally, growth in the value-added product
categories resulted in an improved mix versus the prior year
period.
- Rapid commodity inflation or deflation can cause short-term
gross margin percentage fluctuations, whereas higher or lower
sustained commodity prices will increase or decrease, respectively,
the Company’s net sales, gross margin and Adjusted EBITDA
dollars.
Selling, General and Administrative Expenses
- SG&A in the first quarter of 2019 was $370.1 million, an
increase of approximately $11.2 million primarily due to increases
in variable compensation related to increased profitability as well
as an increase in insurance costs.
- As a percentage of sales, SG&A increased by 160 basis
points to 22.7 percent mainly as a result of the decreased net
sales due to commodity deflation as well as the factors described
above.
Interest Expense
- Interest expense decreased by $1.8 million to $24.9 million
compared to the same period last year. The year over year reduction
is largely due to the repurchases of the 2024 notes executed in the
fourth quarter of 2018 and the first quarter of 2019. The
transactions also resulted in a gain on debt extinguishment in the
amount of $0.7 million which lowered interest expense.
Income Tax Expense
- Income tax expense in the first quarter of 2019 was $11.3
million or an effective tax rate of approximately 24.0 percent. In
the same period the prior year, income tax expense was $2.2 million
primarily due to the effect of stock compensation windfall
benefits.
Adjusted Net Income
- Net income was $35.7 million, or $0.31 per diluted share,
compared to $23.2 million, or $0.20 per diluted share, in the same
period a year ago.
- Adjusted net income was $39.8 million, or $0.34 per diluted
share, compared to $27.6 million, or $0.24 per diluted share, in
the first quarter of 2018. The increase of $12.2 million, or 44.2
percent, was primarily driven by increased sales volume, improved
profitability and lower interest expense.
Adjusted EBITDA
- Adjusted EBITDA grew $18.3 million to $100.9 million, an
increase of 22.2 percent. The increase was largely driven by the
increase in sales volume, particularly in the value-added product
categories, combined with the increased gross margin percentage. As
a result, Adjusted EBITDA improved to 6.2 percent of sales in the
first quarter from 4.9 percent in the same period a year ago.
Capital Structure, Leverage, and Liquidity Information:
- Adjusted EBITDA, on a trailing twelve-month basis, was $519.9
million and net debt was $1,582.4 million as of March 31, 2019. The
leverage ratio decreased from 4.6x net debt / Adjusted EBITDA at
the end of the first quarter of 2018 to 3.0x as of March 31, 2019,
a reduction of 1.6x and in line with the Company’s balance sheet
management target of between 2.5x and 3.5x.
- Due to seasonal working capital needs, net cash used in
operations and investing was $14.7 million. We expect to generate
$190-220 million in cash from operations and investing in 2019,
in-line with the Company's full year cash flow guidance.
- Liquidity as of March 31, 2019 was $585.9 million, consisting
of net borrowing availability under the revolving credit facility
and cash on hand.
Please refer to the accompanying financial schedules for more
information.
Outlook
“Our team demonstrated the breadth, diversity and strength of
our platform in a challenging first quarter. The fundamentals
of demand for housing remain intact as we move into the spring
sales season. Although commodity prices will be a headwind compared
to last year, our fifteen thousand team members are focused on
above market growth and exceptional service to our customers across
our national footprint. This includes executing on our strategic
initiatives in value-added products and our operational excellence
programs. I want to thank our team members who enabled us to
deliver value to our customers and excellent financial results to
our shareholders,” concluded Mr. Crow.
Conference CallBuilders FirstSource will host a conference call
Friday, May 3, 2019 at 9:00 a.m. Central Time (CT) and will
simultaneously broadcast it live on the Internet. The earnings
release presentation will be posted at www.bldr.com under the
“investors” section after the market closes on Thursday, May 2nd.
To participate in the teleconference, please dial into the call a
few minutes before the start time: 800-263-0877 (U.S. and Canada)
and 323-794-2094 (international), Conference ID: 1017206. A replay
of the call will be available at 1:00 p.m. Central Time through May
18th. To access the replay, please dial
888-203-1112 (U.S. and Canada) and 719-457-0820 (international) and
refer to pass code 1017206. 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
2018 Sales: $7.7 Billion | Associates: 15
Thousand | Operations in 39 States
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 400 locations and have a market presence in 75
of the top 100 Metropolitan Statistical Areas, providing geographic
diversity and balanced end market exposure. We service customers
from strategically located distribution facilities and
manufacturing facilities (some 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.
Cautionary NoticeStatements in
this news release and the schedules hereto that are not purely
historical facts or that necessarily depend upon future events,
including statements about expected market share gains, forecasted
financial performance or other statements about anticipations,
beliefs, expectations, hopes, intentions or strategies for the
future, may be forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as
amended. Readers are cautioned not to place undue reliance on
forward-looking statements. In addition, oral statements made by
our directors, officers and employees to the investor and analyst
communities, media representatives and others, depending upon their
nature, may also constitute forward-looking statements. As with the
forward-looking statements included in this release, these
forward-looking statements are by nature inherently uncertain, and
actual results may differ materially as a result of many factors.
All forward-looking statements are based upon information available
to Builders FirstSource, Inc. on the date this release was
submitted. Builders FirstSource, Inc. undertakes no obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. Any
forward-looking statements involve risks and uncertainties that
could cause actual events or results to differ materially from the
events or results described in the forward-looking statements,
including risks or uncertainties related to the Company’s growth
strategies, including gaining market share, or the Company’s
revenues and operating results being highly dependent on, among
other things, the homebuilding industry, lumber prices and the
economy. Builders FirstSource, Inc. may not succeed in addressing
these and other risks. Further information regarding factors that
could affect our financial and other results can be found in the
risk factors section of Builders FirstSource, Inc.’s most
recent annual report on Form 10-K filed with the Securities
and Exchange Commission. Consequently, all forward-looking
statements in this release are qualified by the factors, risks and
uncertainties contained therein.
Contact:Binit SanghviVP Investor
Relations
Builders FirstSource, Inc.(214) 765-3804
Financial Schedules to
Follow
BUILDERS FIRSTSOURCE, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF
OPERATIONS AND COMPREHENSIVE INCOME
|
Three Months EndedMarch
31, |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
(Unaudited)(In thousands,
except per share amounts) |
|
Sales |
$ |
1,631,300 |
|
|
$ |
1,700,436 |
|
Cost of sales |
|
1,189,325 |
|
|
|
1,289,384 |
|
Gross
margin |
|
441,975 |
|
|
|
411,052 |
|
Selling, general and
administrative expenses |
|
370,084 |
|
|
|
358,908 |
|
Income
from operations |
|
71,891 |
|
|
|
52,144 |
|
Interest expense,
net |
|
24,901 |
|
|
|
26,742 |
|
Income
before income taxes |
|
46,990 |
|
|
|
25,402 |
|
Income tax expense |
|
11,282 |
|
|
|
2,182 |
|
Net
income |
$ |
35,708 |
|
|
$ |
23,220 |
|
Comprehensive income |
$ |
35,708 |
|
|
$ |
23,220 |
|
Net income per
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.31 |
|
|
$ |
0.20 |
|
Diluted |
$ |
0.31 |
|
|
$ |
0.20 |
|
Weighted average common
shares: |
|
|
|
|
|
|
|
Basic |
|
115,425 |
|
|
|
114,090 |
|
Diluted |
|
116,531 |
|
|
|
116,696 |
|
BUILDERS FIRSTSOURCE, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEET
|
March 31,
2019 |
|
|
December
31,2018 |
|
|
|
|
|
|
|
|
(Unaudited)(In
thousands, except per share amounts) |
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and
cash equivalents |
$ |
11,724 |
|
|
$ |
10,127 |
|
Accounts
receivable, less allowances of $13,004 and $13,054 at March 31,
2019 and December 31, 2018, respectively |
|
648,942 |
|
|
|
654,170 |
|
Other
receivables |
|
50,833 |
|
|
|
68,637 |
|
Inventories, net |
|
635,499 |
|
|
|
596,896 |
|
Other
current assets |
|
38,756 |
|
|
|
43,921 |
|
Total
current assets |
|
1,385,754 |
|
|
|
1,373,751 |
|
Property, plant and
equipment, net |
|
669,055 |
|
|
|
670,075 |
|
Operating lease
right-of-use assets, net |
|
269,640 |
|
|
|
— |
|
Goodwill |
|
740,411 |
|
|
|
740,411 |
|
Intangible assets,
net |
|
99,286 |
|
|
|
103,154 |
|
Deferred income
taxes |
|
13,128 |
|
|
|
22,766 |
|
Other assets, net |
|
22,191 |
|
|
|
22,152 |
|
Total
assets |
$ |
3,199,465 |
|
|
$ |
2,932,309 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
Accounts
payable |
|
471,338 |
|
|
|
423,168 |
|
Accrued
liabilities |
|
189,237 |
|
|
|
292,526 |
|
Current
portion of operating lease liabilities |
|
60,291 |
|
|
|
— |
|
Current
maturities of long-term debt |
|
17,045 |
|
|
|
15,565 |
|
Total
current liabilities |
|
737,911 |
|
|
|
731,259 |
|
Noncurrent portion of
operating lease liabilities |
|
213,841 |
|
|
|
— |
|
Long-term debt, net of
current maturities, debt discount, and debt issuance costs |
|
1,562,085 |
|
|
|
1,545,729 |
|
Other long-term
liabilities |
|
53,157 |
|
|
|
58,983 |
|
Total
liabilities |
|
2,566,994 |
|
|
|
2,335,971 |
|
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; 115,603 and 115,078 shares
issued and outstanding at March 31, 2019 and December 31,
2018, respectively |
|
1,156 |
|
|
|
1,151 |
|
Additional paid-in capital |
|
560,641 |
|
|
|
560,221 |
|
Retained
earnings |
|
70,674 |
|
|
|
34,966 |
|
Total
stockholders' equity |
|
632,471 |
|
|
|
596,338 |
|
Total
liabilities and stockholders' equity |
$ |
3,199,465 |
|
|
$ |
2,932,309 |
|
BUILDERS FIRSTSOURCE, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH
FLOWS
|
Three months endedMarch
31, |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
(Unaudited)(In
thousands) |
|
Cash flows from
operating activities: |
|
|
|
|
|
|
|
Net income |
$ |
35,708 |
|
|
$ |
23,220 |
|
Adjustments to
reconcile net income to net cash from operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
23,576 |
|
|
|
22,819 |
|
Amortization of debt issuance costs and debt discount |
|
1,149 |
|
|
|
1,149 |
|
Gain on
extinguishment of debt |
|
(680 |
) |
|
|
— |
|
Deferred
income taxes |
|
9,638 |
|
|
|
1,497 |
|
Stock
compensation expense |
|
2,659 |
|
|
|
2,890 |
|
Gain on
sale of assets |
|
(464 |
) |
|
|
(245 |
) |
Changes in assets and
liabilities: |
|
|
|
|
|
|
|
Receivables |
|
22,703 |
|
|
|
(57,132 |
) |
Inventories |
|
(38,603 |
) |
|
|
(85,958 |
) |
Other
current assets |
|
4,732 |
|
|
|
(9,481 |
) |
Other
assets and liabilities |
|
(1,319 |
) |
|
|
1,552 |
|
Accounts
payable |
|
47,371 |
|
|
|
4,376 |
|
Accrued
liabilities |
|
(100,395 |
) |
|
|
(83,012 |
) |
Net cash
provided by (used in) operating activities |
|
6,075 |
|
|
|
(178,325 |
) |
Cash flows from
investing activities: |
|
|
|
|
|
|
|
Purchases
of property, plant and equipment |
|
(21,524 |
) |
|
|
(20,113 |
) |
Proceeds
from sale of property, plant and equipment |
|
720 |
|
|
|
568 |
|
Net cash
used in investing activities |
|
(20,804 |
) |
|
|
(19,545 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
|
Borrowings under revolving credit facility |
|
374,000 |
|
|
|
555,000 |
|
Repayments under revolving credit facility |
|
(331,000 |
) |
|
|
(399,000 |
) |
Repayments of long-term debt and other loans |
|
(24,440 |
) |
|
|
(2,780 |
) |
Exercise
of stock options |
|
216 |
|
|
|
2,041 |
|
Repurchase of common stock |
|
(2,450 |
) |
|
|
(4,855 |
) |
Net cash
provided by financing activities |
|
16,326 |
|
|
|
150,406 |
|
Net change in cash and
cash equivalents |
|
1,597 |
|
|
|
(47,464 |
) |
Cash and cash
equivalents at beginning of period |
|
10,127 |
|
|
|
57,533 |
|
Cash and cash
equivalents at end of period |
$ |
11,724 |
|
|
$ |
10,069 |
|
Supplemental disclosure of non-cash activities
Purchases of property, plant and equipment included in accounts
payable were $1.9 million and $3.2 million for the three months
ended March 31, 2019 and 2018, respectively.
The accompanying notes are an integral part of these condensed
consolidated financial statements.
BUILDERS FIRSTSOURCE, INC. AND
SUBSIDIARIES Reconciliation of Adjusted Non-GAAP
Financial Measures to their GAAP Equivalents
(unaudited) |
|
Note: The company provided detailed explanations of these
non-GAAP financial measures in its Form 8-K filed with the
Securities and Exchange Commission on May 2, 2019. |
|
|
|
|
|
|
|
Three months ended March
31, |
|
Twelve months ended March
31, |
|
2019 |
|
2018 |
|
2019 |
|
|
|
|
|
(in millions) |
|
|
Reconciliation
to Adjusted EBITDA: |
|
|
|
|
|
GAAP Net Income |
$ |
35.7 |
|
$ |
23.2 |
|
$ |
217.7 |
Integration related
expenses |
4.8 |
|
4.4 |
|
19.6 |
Debt issuance and
refinancing cost (1) |
(0.7) |
|
- |
|
(3.9) |
Adjusted Net
Income |
39.8 |
|
27.6 |
|
233.4 |
|
|
|
|
|
|
Weighted average
diluted common shares (in millions) |
116.5 |
|
116.7 |
|
|
Diluted adjusted net
income per share: |
$ |
0.34 |
|
$ |
0.24 |
|
|
Reconciling items: |
|
|
|
|
|
Depreciation and amortization expense |
23.6 |
|
22.8 |
|
98.7 |
Interest
expense, net |
25.6 |
|
26.7 |
|
110.3 |
Income
tax (benefit) expense |
11.3 |
|
2.2 |
|
64.7 |
Stock
compensation expense |
2.7 |
|
2.9 |
|
14.2 |
(Gain)/loss on sale and asset impairments |
(0.4) |
|
0.2 |
|
(1.6) |
Other
management-identified adjustments (2) |
(1.7) |
|
0.2 |
|
0.2 |
Adjusted
EBITDA |
$ |
100.9 |
|
$ |
82.6 |
|
$ |
519.9 |
Adjusted
EBITDA Margin |
6.2% |
|
4.9% |
|
6.8% |
|
|
|
|
|
|
(1) Gains
associated with extinguishing long term debt in 2019 and
2018. |
|
|
|
|
(2) Primarily relates
to severance and one time cost. |
|
|
|
|
|
BUILDERS FIRSTSOURCE, INC. AND
SUBSIDIARIES |
|
Financial Data |
|
(adjusted and unaudited) |
|
|
|
|
|
Three months ended March
31, |
|
2019 |
|
2018 |
|
|
|
(in millions except per share amounts) |
Net sales |
1,631.3 |
|
1,700.4 |
Cost of sales |
1,189.3 |
|
1,289.4 |
Gross
margin |
442.0 |
|
411.0 |
Gross
margin % |
27.1% |
|
24.2% |
Adjusted
SG&A/Other (excluding depreciation and amortization) as a % of
sales (1) |
20.9% |
|
19.3% |
Adjusted EBITDA |
100.9 |
|
82.6 |
Adjusted
EBITDA margin % |
6.2% |
|
4.9% |
Depreciation and
amortization |
(23.6) |
|
(22.8) |
Interest expense, net
of debt issuance cost and refinancing |
(25.6) |
|
(26.7) |
Income tax expense |
(11.3) |
|
(2.2) |
Other adjustments |
(0.6) |
|
(3.3) |
Adjusted
Net Income |
$ |
39.8 |
|
$ |
27.6 |
Basic adjusted net
income per share: |
$ |
0.34 |
|
$ |
0.24 |
Diluted adjusted net
income per share: |
$ |
0.34 |
|
$ |
0.24 |
Weighted average common
shares (in millions) |
|
|
|
Basic |
115.4 |
|
114.1 |
Diluted |
116.5 |
|
116.7 |
|
|
|
|
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 May 2, 2019. |
|
(1) Adjusted SG&A and other as a percentage of sales is
defined as GAAP SG&A less depreciation and
amortization, stock comp, acquisition, integration and other
expenses. GAAP SG&A in Q1-19 of $370.1M less $23.6M
depreciation and amortization, less $4.8M of integration
expenses, less $2.7M of stock comp and plus $2.1M gain from
sales, and amortization, less $4.8M of integration expenses,
less $2.7M of stock comp and plus $2.1M gain from
sales, impairments, and other. |
|
BUILDERS FIRSTSOURCE, INC. AND
SUBSIDIARIES |
|
Sales by Product Category |
|
(unaudited) |
|
|
Three months ended March
31, |
|
|
|
|
|
2019 |
|
2018 |
|
|
|
|
|
Net
Sales |
|
% of Net
Sales |
|
Net
Sales |
|
% of
NetSales |
|
% Change |
|
% Change Per
Day |
Lumber & Lumber
Sheet Goods |
$ |
517.7 |
|
31.7% |
|
$ |
643.9 |
|
37.9% |
|
-19.6% |
|
-18.3% |
Manufactured
Products |
317.4 |
|
19.5% |
|
294.2 |
|
17.3% |
|
7.9% |
|
9.6% |
Windows, Doors &
Millwork |
353.4 |
|
21.7% |
|
332.1 |
|
19.5% |
|
6.4% |
|
8.1% |
Gypsum, Roofing &
Insulation |
120.9 |
|
7.4% |
|
112.9 |
|
6.6% |
|
7.1% |
|
8.8% |
Siding, Metal &
Concrete Products |
149.9 |
|
9.2% |
|
142.2 |
|
8.4% |
|
5.5% |
|
7.1% |
Other |
172.0 |
|
10.5% |
|
175.1 |
|
10.3% |
|
-1.8% |
|
-0.2% |
Total
adjusted net sales |
$ |
1,631.3 |
|
100.0% |
|
$ |
1,700.4 |
|
100.0% |
|
-4.1% |
|
-2.5% |
|
BUILDERS FIRSTSOURCE, INC. AND
SUBSIDIARIES |
|
Interest Reconciliation |
|
(unaudited) |
|
|
|
|
|
|
Three months ended March
31, |
|
|
Interest Expense |
|
Net
DebtOutstanding |
|
|
|
|
(in millions) |
2024 Secured Notes @
5.625% Fixed |
$ |
9.6 |
|
$ |
675.9 |
|
2024 Term
Loan @ 5.2% (Floating LIBOR) |
6.6 |
|
457.1 |
|
Revolving
Credit Facility @ 3.9% (Floating LIBOR) |
2.9 |
|
222.0 |
|
Amortization of deferred loan costs and debt discount |
1.1 |
|
|
|
Finance
leases and other finance obligations |
5.2 |
|
239.1 |
|
Gain on
debt extinguishment |
(0.7) |
|
|
|
Other |
0.2 |
|
|
|
Cash |
|
|
(11.7) |
|
Total |
$ |
24.9 |
|
$ |
1,582.4 |
|
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