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Builders FirstSource Reports Third Quarter 2012 Results

DALLAS, Oct. 18, 2012 (GLOBE NEWSWIRE) -- Builders FirstSource, Inc. (Nasdaq:BLDR), a leading supplier and manufacturer of structural and related building products for residential new construction in the United States, today reported its results for the third quarter ended September 30, 2012.

Third Quarter Financial Highlights (unaudited)
Third Third
Quarter Diluted Quarter Diluted
2012 Per Share 2011 Per Share
Sales $ 291.8 million $ 217.2 million
Loss from continuing operations $(12.3) million ($0.13) $(11.5) million ($0.12)
Included in the calculation of loss from continuing operations:
Warrant fair value adjustment $ 0.7 million $0.01 $0.0 million $0.00
Facility closure costs $ 0.7 million $0.00 $0.1 million $0.00
Tax valuation allowance $ 4.6 million $0.05 $4.7 million $0.05
Adjusted loss from continuing operations
$(6.5) million ($0.07) $(6.7) million ($0.07)
Adjusted EBITDA* $3.0 million $(0.7) million
* See reconciliation attached.

"Sales for the third quarter of 2012 were $291.8 million, an increase of 34.3 percent when compared to the third quarter of 2011. Our topline growth continues to exceed the increase in residential construction activity, as actual single-family housing starts in the South Region increased 27.7 percent over the same time period and single-family units under construction increased only 12.4 percent," said Builders FirstSource Chief Executive Officer Floyd Sherman. "For the second consecutive quarter, we reported positive Adjusted EBITDA, finishing with $3.0 million for the current quarter as compared to an Adjusted EBITDA loss of $0.7 million in the third quarter of 2011, and on a year-to-date basis, our Adjusted EBITDA has improved from a loss of $11.7 million in 2011 to positive $3.0 million in 2012."

Continuing, Mr. Sherman added, "We are seeing stronger sales trends as the housing market continues to recover, and our recent market share gains have also certainly contributed to our improving sales. Our sales growth and increased operating efficiencies drove the improvement in our financial results for the quarter."

Chad Crow, Builders FirstSource Senior Vice President and Chief Financial Officer, commented on the current quarter results, saying, "While we were very pleased by the improved building activity and our increased sales during the quarter, our gross margins were again negatively impacted by inflation on commodity lumber within the quarter and our limited ability to adjust intra-quarter customer pricing. While we were able to pass on some price increases as part of our third quarter pricing, we once again experienced a rising commodity market for most of the quarter. Commodity prices increased, on average, 14 percent from the end of the second quarter through mid-September, before falling back somewhat by quarter-end. These factors, combined with what is still an extremely competitive pricing environment, constrained our gross margin during the quarter."

Third Quarter 2012 Results Compared to Third Quarter 2011

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

  • Sales were $291.8 million compared to $217.2 million in the third quarter of 2011, an increase of $74.6 million, or 34.3 percent. We estimate sales increased approximately 27 percent due to increased volume and 7 percent due to price.
  • Gross margin percentage was 19.8 percent, down from 20.5 percent, a 0.7 percentage point decrease. Specifically, our gross margin decreased 1.5 percentage points largely due to commodity lumber inflation during the quarter relative to fixed customer pricing commitments and was offset by a 0.8 percentage point gross margin improvement due to increased sales volume. On a sequential quarter basis gross margin improved from 19.7 percent to 19.8 percent.
  • Selling, general and administrative ("SG&A") expenses increased $8.5 million, or 16.8 percent. As a percentage of sales, however, SG&A expense decreased from 23.1 percent in the third quarter of 2011 to 20.1 percent in 2012. Salaries and benefits expense, excluding stock compensation expense, was $35.6 million, an increase of $6.8 million, primarily related to higher sales commissions and additional staffing needs to service the increased sales volume.
  • The third quarter of 2012 included $0.7 million of facility closure costs primarily related to revisions of sub-rental income estimates on two previously closed facilities in South Carolina and Tennessee. The company recorded $0.1 million of facility closure costs in the third quarter of 2011.
  • Interest expense was $10.6 million, an increase of $5.3 million from the third quarter of 2011. The increase was primarily due to interest associated with the company's new term loan combined with a $0.7 million, non-cash, fair value adjustment related to stock warrants issued in connection with the term loan.
  • The company recorded $0.0 million of income tax expense in the third quarter of 2012, compared to $0.3 million in the third quarter of 2011. The company recorded an after-tax, non-cash tax valuation allowance of $4.6 million and $4.7 million in 2012 and 2011, respectively, related to its net deferred tax assets. Absent this valuation allowance, the effective tax rate would have been 37.6 percent and 39.2 percent in 2012 and 2011, respectively. As of the end of the current quarter, the company's gross federal income tax net operating loss available for carryforward was $226.2 million.
  • Loss from continuing operations was $12.3 million, or $0.13 loss per diluted share, compared to $11.5 million, or $0.12 loss per diluted share in the third quarter of 2011. Excluding the fair value adjustment for stock warrants, facility closure costs and the tax valuation allowance, loss from continuing operations per diluted share was $0.07. For the third quarter of 2011, loss from continuing operations per diluted share was $0.07, when excluding facility closure costs and the tax valuation allowance. See reconciliation attached.
  • Loss from discontinued operations in the third quarter of 2012 was $1.3 million, or $0.01 loss per diluted share, compared to $0.1 million, or $0.00 loss per diluted share in the third quarter of 2011. Loss from discontinued operations in the current quarter is due primarily to revisions of sub-rental income estimates for a previously closed Ohio facility.
  • Net loss for the third quarter of 2012 was $13.6 million, or $0.14 loss per diluted share, compared to net loss of $11.6 million, or $0.12 loss per diluted share, in the third quarter of 2011.
  • Diluted weighted average shares outstanding were 95.5 million in the third quarter of 2012 compared to 95.0 million in the same quarter of 2011.
  • Adjusted EBITDA was $3.0 million in the third quarter of 2012, compared to a loss of $0.7 million last year. See reconciliation attached.

Liquidity and Capital Resources

  • Liquidity at September 30, 2012 was approximately $55.7 million, representing $90.7 million of cash reduced by the $35.0 million minimum cash requirement in our term loan.
  • In addition to the $90.7 million of cash, the company had $12.8 million in restricted cash at September 30, 2012, of which $1.8 million was included in long-term assets. Restricted cash consists of $11.9 million used to collateralize letters of credit outstanding under the company's letter of credit facility and $0.9 million used as collateral for other casualty insurance obligations.
  • Operating cash flow was negative $11.1 million compared to negative $9.2 million for the third quarter of 2011.
  • Capital expenditures in the third quarter of 2012 were $5.2 million, compared to $1.1 million in the third quarter of 2011. This increase is primarily due to the purchase of our Chelsea, AL location, which was previously a leased facility, and additional buyouts of expiring vehicle and equipment leases.

Regarding the company's liquidity, Mr. Crow said, "Of the $14.4 million of cash used in the third quarter, $9.5 million was cash used for interest, $5.2 million related to capital expenditures and the balance was due to an increase in working capital, offset somewhat by positive EBITDA during the quarter. Our cash usage for fiscal 2012 is expected to be at the high end of original guidance due to the increase in working capital necessary to support our higher-than forecasted sales volume. As a result, we expect to end the year with approximately $90 million of unrestricted cash and $55 million of net liquidity."

Outlook

Concluding, Mr. Sherman added, "We expect the momentum we've achieved from the improvement in the housing industry and our recent market share gains to continue to positively impact our operating results. We remain focused on growing market share and improving our margins in order to drive profitability as the market continues to recover."

Conference Call

Builders FirstSource will host a conference call Friday, October 19, 2012, at 10:00 a.m. Central Time (CT) and will simultaneously broadcast it live over the Internet. To participate in the teleconference, please dial into the call a few minutes before the start time: 888-296-4302 (U.S. and Canada) and 719-325-2425 (international). A replay of the call will be available from 3:00 p.m. through October 24, 2012. To access the replay, please dial 888-203-1112 (U.S. and Canada) and 719-457-0820 (international). Please refer to pass code 4947290. To access the webcast, go to www.bldr.com and click on "Investors." The online archive of the webcast will be available for approximately 90 days.

About Builders FirstSource

Headquartered in Dallas, Texas, Builders FirstSource is a leading supplier and manufacturer of structural and related building products for residential new construction. The company operates 53 distribution centers and 44 manufacturing facilities in 9 states, principally in the southern and eastern United States. Manufacturing facilities include plants that manufacture roof and floor trusses, wall panels, stairs, aluminum and vinyl windows, custom millwork and pre-hung doors. Builders FirstSource also distributes windows, interior and exterior doors, dimensional lumber and lumber sheet goods, millwork and other building products. For more information about Builders FirstSource, visit the company's website at www.bldr.com.

Cautionary Notice

Statements in this news release and the schedules hereto that are not purely historical facts or that necessarily depend upon future events, including statements about expected market share gains, plans to reduce costs, forecasted financial performance or other statements about anticipations, beliefs, expectations, hopes, intentions or strategies for the future, may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on forward-looking statements. All forward-looking statements are based upon information available to Builders FirstSource, Inc. on the date this release was submitted. Builders FirstSource, Inc. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including risks or uncertainties related to the Company's growth strategies, including gaining market share, or the Company's revenues and operating results being highly dependent on, among other things, the homebuilding industry, lumber prices and the economy. Builders FirstSource, Inc. may not succeed in addressing these and other risks. Further information regarding factors that could affect our financial and other results can be found in the risk factors section of Builders FirstSource, Inc.'s most recent annual report on Form 10-K filed with the Securities and Exchange Commission. Consequently, all forward-looking statements in this release are qualified by the factors, risks and uncertainties contained therein.

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
(in thousands, except per share amounts)
Sales $ 291,780 $ 217,194 $ 783,088 $ 586,416
Cost of sales 234,067 172,755 626,592 467,741
Gross margin 57,713 44,439 156,496 118,675
Selling, general and administrative expenses (includes stock-based compensation expense of $947 and $1,665 for the three months ended in 2012 and 2011, respectively, and $2,672 and $3,645 for the nine months ended in 2012 and 2011, respectively.) 58,650 50,200 164,443 145,866
Facility closure costs 692 115 896 2,019
Loss from operations (1,629) (5,876) (8,843) (29,210)
Interest expense, net 10,618 5,319 34,184 16,859
Loss from continuing operations before income taxes (12,247) (11,195) (43,027) (46,069)
Income tax expense 33 268 351 1,917
Loss from continuing operations (12,280) (11,463) (43,378) (47,986)
Loss from discontinued operations (net of income tax expense of $0 in 2012 and 2011, respectively) (1,285) (101) (1,430) (311)
Net loss $ (13,565) $ (11,564) $ (44,808) $ (48,297)
Basic and diluted net loss per share:
Loss from continuing operations $ (0.13) $ (0.12) $ (0.46) $ (0.51)
Loss from discontinued operations (0.01) (0.00) (0.01) (0.00)
Net loss $ (0.14) $ (0.12) $ (0.47) $ (0.51)
Weighted average common shares:
Basic and diluted 95,514 94,976 95,401 94,929
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Sales by Product Category
(unaudited)
Three months ended September 30,
2012 2011
(in thousands)
Prefabricated components $ 56,137 19.2% $ 41,038 18.9%
Windows & doors 61,821 21.2% 51,300 23.6%
Lumber & lumber sheet goods 97,305 33.4% 61,900 28.5%
Millwork 28,048 9.6% 22,174 10.2%
Other building products & services 48,469 16.6% 40,782 18.8%
Total sales $ 291,780 100.0% $ 217,194 100.0%
Nine months ended September 30,
2012 2011
(in thousands)
Prefabricated components $ 150,818 19.3% $ 112,048 19.1%
Windows & doors 170,841 21.8% 136,142 23.2%
Lumber & lumber sheet goods 251,677 32.1% 170,749 29.1%
Millwork 75,845 9.7% 61,417 10.5%
Other building products & services 133,907 17.1% 106,060 18.1%
Total sales $ 783,088 100.0% $ 586,416 100.0%
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
September 30, December 31,
2012 2011
(in thousands, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents $ 90,675 $ 146,833
Restricted cash 11,058 13,229
Accounts receivable, less allowance of $2,747 and $2,138 at September 30, 2012 and December 31, 2011, respectively 123,080 76,429
Inventories 90,168 73,327
Other current assets 14,376 9,843
Total current assets 329,357 319,661
Property, plant and equipment, net 49,471 48,224
Goodwill 111,193 111,193
Other assets, net 8,751 9,725
Total assets $ 498,772 $ 488,803
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 84,173 $ 48,618
Accrued liabilities 36,346 25,183
Current maturities of long-term debt 59 54
Total current liabilities 120,578 73,855
Long-term debt, net of current maturities 298,433 297,455
Other long-term liabilities 20,901 16,269
Total liabilities 439,912 387,579
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; 96,813 and 96,806 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively 956 950
Additional paid-in capital 362,188 359,750
Accumulated deficit (304,284) (259,476)
Total stockholders' equity 58,860 101,224
Total liabilities and stockholders' equity $ 498,772 $ 488,803
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
Nine months ended September 30,
2012 2011
(in thousands)
Cash flows from operating activities:
Net loss $ (44,808) $ (48,297)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 8,253 10,569
Amortization of deferred loan costs 514 628
Amortization of debt discount 1,022 -
Fair value adjustment of stock warrants 4,417 -
Deferred income taxes 338 1,692
Bad debt expense 458 366
Stock compensation expense 2,672 3,645
Net gain on sale of assets (27) (276)
Changes in assets and liabilities:
Receivables (47,109) (27,594)
Inventories (16,841) (7,223)
Other current assets (4,533) (2,643)
Other assets and liabilities 103 340
Accounts payable 35,555 17,495
Accrued liabilities 11,140 3,360
Net cash used in operating activities (48,846) (47,938)
Cash flows from investing activities:
Purchases of property, plant and equipment (9,156) (2,735)
Proceeds from sale of property, plant and equipment 219 394
Decrease in restricted cash 2,250 -
Net cash used in investing activities (6,687) (2,341)
Cash flows from financing activities:
Payments of long-term debt and other loans (39) (36)
Deferred loan costs (358) -
Exercise of stock options 268 -
Repurchase of common stock (496) (2)
Net cash used in financing activities (625) (38)
Net change in cash and cash equivalents (56,158) (50,317)
Cash and cash equivalents at beginning of period 146,833 103,234
Cash and cash equivalents at end of period $ 90,675 $ 52,917
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Supplemental Interest Expense Information
(unaudited - dollars in thousands)
Three months ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
Detail of Interest Expense:
Term loan $ 4,702 $ - $ 14,004 $ -
Floating rate notes 4,541 4,625 13,623 13,802
Credit facility 10 316 27 932
Change in fair value of stock warrants * 691 - 4,417 -
Amortization of debt discount * 355 - 1,022 -
Amortization of deferred loan costs * 174 209 515 628
Other 145 169 576 1,497
Interest expense, net $ 10,618 $ 5,319 $ 34,184 $ 16,859
* Non-cash item
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures to their GAAP Equivalents
(unaudited - dollars in thousands)
Note: The company provided detailed explanations of these non-GAAP financial measures in its Form 8-K filed with the Securities and Exchange Commission on October 18, 2012.
Three months ended
September 30,
2012 2011
Reconciliation to Adjusted EBITDA:
Net loss $ (13,565) $ (11,564)
Reconciling items:
Depreciation and amortization expense 2,912 3,364
Interest expense, net 10,618 5,319
Income tax expense 33 268
Loss from discontinued operations, net of tax 1,285 101
Facility closure costs 692 115
Stock compensation expense 947 1,665
Other 38 (9)
Adjusted EBITDA $ 2,960 $ (741)
Adjusted EBITDA as percentage of sales 1.0% -0.3%
Three months ended
September 30,
2012 2011
Pre-Tax Net of Tax Pre-Tax Net of Tax
Reconciliation to Adjusted loss from continuing operations:
Loss from continuing operations $ (12,280) $ (11,463)
Reconciling items:
Facility closure costs 692 423 115 70
Warrant fair value adjustment 691 --
Tax valuation allowance 4,633 4,658
Adjusted loss from continuing operations $ (6,533) $ (6,735)
Weighted average diluted shares outstanding 95,514 94,976
Adjusted loss from continuing operations per diluted share $ (0.07) $ (0.07)
CONTACT: Chad Crow Senior Vice President and Chief Financial Officer Builders FirstSource, Inc. (214) 880-3585Source:Builders FirstSource, Inc.