Builders FirstSource Releases Q3 Results

By / 2 years ago

Builders FirstSourceBuilders FirstSource, Inc. (Nasdaq:BLDR), a leading supplier and manufacturer of structural and related building products for residential new construction and home repair and remodeling in the United States, Thursday reported its results for the third quarter ended September 30, 2015.

Third quarter highlights include:

Completed the acquisition of ProBuild on July 31, one of the largest distributors of building materials to professional builders, contractors and project-oriented consumers in the United States. Through its lumber yards, component facilities, millwork shops, gypsum yards and retail stores across 40 states, ProBuild generated approximately $4.5 billion in sales in 2014.

Pro forma net sales of $1.7 billion were flat compared to the third quarter of 2014, excluding the impact of closed locations. Sales volume grew approximately 6.1 percent over the third quarter of 2014; including 7.0 percent in the homebuilding end market and 3.0 percent in the repair and remodel end market. This was offset 6.1 percent by the negative impact of commodity price deflation on our sales and 0.1 percent impact from closed locations.

Pro forma gross margin percentage was 25.9 percent, up 160 basis points from 24.3 percent in the third quarter of 2014.

Adjusted EBITDA was $113.6 million, or 6.7 percent of sales, compared to $95.9 million, or 5.6 percent of sales, for the third quarter of 2014.

Adjusted net income was $34.7 million, or $0.31 per diluted share, compared to $15.8 million, or $0.14 per diluted share in the third quarter of 2014.

Total liquidity at September 30, 2015 was $685.7 million, consisting of net borrowing availability under the 2015 revolving credit facility and cash on hand.

In the third quarter, we paid down approximately $160 million on the 2015 revolving credit facility subsequent to the acquisition close.

Pro Forma and Adjusted Information, Third Quarter 2015 Compared to Third Quarter 2014

Pro forma sales of $1.7 billion were flat compared to the third quarter of 2014. Sales volume grew approximately 7.0 percent in the homebuilding end market and 3.0 percent in the repair and remodel end market, which was offset 6.1 percent by the negative impact of commodity price deflation on our sales and 0.1 percent impact from closed locations.

Pro forma gross margin percentage was 25.9 percent, up from 24.3 percent last year. Our gross margin percentage increased largely due to improved customer pricing, commodity price deflation, and a higher mix of value-added sales.

Pro forma net interest expense was $43.2 million excluding certain one-time financing costs and normalized for the incremental debt issued to finance the ProBuild acquisition. See supplemental schedule attached for the components of interest expense.

Pro forma income tax expense in the third quarter of 2015 was $1.2 million compared to $1.5 million in the third quarter of 2014.

Normalizing for facility closure costs, certain non-recurring or transaction related items, and other adjustments as detailed in the attached reconciliation, adjusted net income was $34.7 million, or $0.31 per diluted share, compared to $15.8 million, or $0.14 per diluted share, in the third quarter of 2014.

Adjusted EBITDA in the third quarter of 2015 was $113.6 million, or 6.7 percent of sales, compared to $95.9 million, or 5.6 percent of sales in 2014. This represents 18.5 percent growth on a year over year basis. See attached reconciliation.

GAAP Third Quarter 2015 Information Compared to GAAP Third Quarter 2014

Sales for the three months ended September 30, 2015 were $1,276.1 million, a 193.4 percent increase over sales of $434.9 million for the three months ended September 30, 2014. Sales increased $821.6 million or 188.9 percent due primarily to the ProBuild acquisition.
Gross margin increased $227.1 million to $324.8 million. Of this increase, $210.7 million is due to the acquisition of ProBuild.
Net interest expense was $46.0 million in the third quarter of 2015, an increase of $39.6 million from the third quarter of 2014. The increase was primarily related to the financing transactions associated with the acquisition of ProBuild.
Net loss was $8.8 million, or a $0.08 loss per diluted share, compared to net income of $8.5 million, or $0.07 per diluted share, in the third quarter of 2014,primarily due to transaction related expenses.

Liquidity and Capital Resources

Total liquidity at September 30, 2015 was $685.7million, consisting of net borrowing availability under the 2015 revolving credit facility and cash on hand. We had $135.0 million in outstanding borrowings under our 2015 facility as of September 30, 2015. See the attached interest reconciliation.
In the third quarter, we paid down approximately $160 million on the 2015 revolving credit facility subsequent to the acquisition close.
On July 31, 2015, we completed the acquisition of ProBuild. For more information regarding the effect of the ProBuild acquisition on our liquidity, please refer to our Registration Statement on Form S-3 (Registration No. 333-203824) and the related prospectus supplement.
Acquisition and Integration Update

On July 31, 2015, Builders FirstSource acquired ProBuild for $1.6 billion, subject to certain adjustments. The combination creates an industry leader with expanded growth and margin opportunities. We believe that the benefits of the acquisition include:

Increased scale and diversification

Opportunity to expand sales of higher margin products
$100 – $120 million of targeted run rate cost savings before one-time expenses
Favorable timing given the projected housing market recovery and long term growth potential
We are very pleased with the progress and pace of the integration efforts so far. Management and operating teams are in place, and are driving our joint business goals. All six ProBuild Senior Vice Presidents of Operations joined Builders FirstSource management to run six of our nine large regions, bringing 33 years of average industry experience to the combined company. We all have a strong focus on customer service to sustain and grow local market relationships.

 

Outlook

Concluding, Mr. Sherman added, “We continue to believe the long-term outlook for the housing industry remains positive. Our focus will be to leverage our national scale and sales capability to grow faster than the market with a focus on profitable growth, value added products, and continuing to improve our operating margins. By leveraging our sales expertise and national manufacturing capabilities, we believe our company is well positioned to help homebuilders mitigate the impact of well publicized labor shortages. Furthermore, our integration efforts with ProBuild are a high priority for us in the coming months. I remain convinced that the combination of Builders FirstSource and ProBuild will create value for our shareholders and customers alike in the years to come.”


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