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Builders FirstSource Reports Third Quarter 2015 Results

Successfully Completed acquisition of ProBuild Holdings LLC

Third Quarter Adjusted Net Income of $0.31 per Diluted Share, an Increase of $0.17 versus 2014

Third Quarter Adjusted EBITDA of $114 Million, an Increase of $18 Million versus 2014

DALLAS, Nov. 5, 2015 (GLOBE NEWSWIRE) -- Builders 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, today reported its results for the third quarter ended September 30, 2015.

The Company has provided supplemental financial information of the combined company in this press release that is adjusted to include ProBuild's financial results for the relevant periods prior to July 31, 2015 ("Closing Date"). See accompanying financial schedules for more information, including non-GAAP reconciliations.

Third quarter highlights include the following:

  • 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.

Commenting on the company's results, Builders FirstSource CEO Floyd Sherman said, "We ended the third quarter of 2015 with pro forma sales of $1.7 billion, flat to prior year excluding the impact of closed locations, but grew adjusted EBITDA by 19 percent or $18 million. We were able to achieve these positive results despite the negative impact of commodity deflation on our current quarter sales. Average market prices for framing lumber have fallen approximately 22 percent since the beginning of the year. As a result, our third quarter 2015 pro forma lumber and lumber sheet good sales excluding closed locations were down 6 percent versus third quarter 2014. However, our value-added pro forma sales excluding closed locations of prefabricated components, windows & doors, and millwork increased 6 percent versus third quarter 2014.

Mr. Sherman added "Since the closing of the ProBuild acquisition on July 31, I am even more confident that this acquisition will drive significant value for our customers and stockholders. We have created a more diversified company with enhanced scale and an improved geographic footprint, enabling a broader, more efficient platform of manufacturing and distribution capabilities going forward. We have solidified a clear roadmap to deliver cost savings, and have already implemented changes that are expected to yield over $30 million of the projected $100-120 million of annualized cost savings. We believe these cost savings will begin to benefit our fourth quarter results."

Chad Crow, Builders FirstSource President and CFO, commented, "We have continued our focus on profitable growth as evidenced by the approximately 160 basis point expansion in our pro forma gross margin percentage and the approximately 110 basis point adjusted EBITDA margin growth we achieved this quarter. We paid down approximately $160 million on the revolving credit facility in the quarter since the acquisition close.

Mr. Crow commented further, "I am very pleased with the progress we have made to date on integrating our two companies, and the pool of talent we have across our combined organization continues to impress me. All aspects of the integration, including system conversions and facility consolidations, are now in full swing and are progressing as planned."

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

The Company has provided supplemental financial information of the combined company in this press release that is adjusted to include ProBuild's financial results for the relevant periods prior to the Closing Date. (See accompanying financial schedules for full financial details and reconciliations of non-GAAP financial measures to their GAAP equivalents.)

  • 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

ProBuild's financial results are only included in the combined company's financial statements from the closing date forward and are not reflected in the combined company's historical financial statements. Accordingly, ProBuild's financial results are not included in the Generally Accepted Accounting Principles ("GAAP") results for any periods prior to the closing.

  • 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...

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