BMC Stock Holdings, Inc. (Nasdaq: BMCH) (“BMC” or the “Company”),
one of the nation’s leading providers of diversified building
materials and solutions to new construction builders and
professional remodelers in the U.S., today announced its financial
results for the third quarter ended September 30, 2020.
Third Quarter 2020
Highlights
- Net sales increased 13.1% to a record
$1,090.3 million
- Gross profit increased 7.2% to a
record $273.1 million
- SG&A expenses as a percent of net
sales declined 190 basis points to 17.9%
- Net income increased 33.6% to $44.9
million
- Adjusted EBITDA1 improved by 32.9% to
a record $99.2 million
- Adjusted EBITDA margin1 increased 140
basis points to 9.1%
- Diluted earnings per share (EPS)
increased 32.0%, or $0.16, to $0.66
- Adjusted net income per diluted
share1 increased 44.8%, or $0.26, to a record $0.84
- Total liquidity was approximately
$648.5 million, which included $286.2 million of cash and $362.3
million of borrowing capacity under the revolver, with no debt
maturities until 2024.
“BMC delivered record third quarter results,
including double-digit net sales and net income growth, and record
gross profit, Adjusted EBITDA1 and Adjusted Net
Income1,” said Dave Flitman, President and CEO of
BMC. “These strong results were driven by strong demand in our
single-family homes and pro remodel segments and higher lumber
pricing, combined with solid execution against our four-pillar
strategy, including our BMC Operating System-led productivity and
cost savings initiatives. The double- digit sales growth led to
sales in the third quarter exceeding $1 billion for the first time
in our Company’s history. In conjunction with this momentum, we
remain vigilant about keeping our associates, suppliers and
customers safe as the pandemic continues to evolve.”
Mr. Flitman continued, “Looking ahead, I am even
more excited about the strategic combination with Builders
FirstSource, which remains on track to close in late 2020 or early
2021, and I believe it will deliver meaningful shareholder value in
the years to come.”
1 Non-GAAP
Financial MeasuresThis press release
presents Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net
income and Adjusted net income per diluted share, which are
non-GAAP financial measures within the meaning of applicable SEC
rules and regulations. For a reconciliation of Adjusted EBITDA and
Adjusted net income to the most comparable GAAP measures and a
discussion of the reasons why the Company believes that these
non-GAAP financial measures provide information that is useful to
investors, see the discussion and tables included in this press
release under “Reconciliation of GAAP to Non-GAAP Measures.”
Third Quarter 2020 Summary of Financial
Results
|
Three Months Ended September 30, |
(in thousands, except per share data) |
2020 |
|
2019 |
|
Variance |
Net sales |
$ |
1,090,343 |
|
$ |
964,249 |
|
$ |
126,094 |
|
|
|
|
|
|
|
|
Net income
and EPS |
|
|
|
|
|
|
Net income (GAAP) |
$ |
44,895 |
|
$ |
33,597 |
|
$ |
11,298 |
|
Diluted earnings per share (GAAP) |
$ |
0.66 |
|
$ |
0.50 |
|
$ |
0.16 |
|
Adjusted net income (non-GAAP) |
$ |
57,244 |
|
$ |
38,756 |
|
$ |
18,488 |
|
Adjusted net income per diluted share (non-GAAP) |
$ |
0.84 |
|
$ |
0.58 |
|
$ |
0.26 |
|
|
|
|
|
|
|
|
Adjusted
EBITDA (non-GAAP) |
$ |
99,188 |
|
$ |
74,658 |
|
$ |
24,530 |
|
Adjusted EBITDA
margin (non-GAAP) |
9.1 |
% |
7.7 |
% |
1.4 |
% |
|
|
|
|
|
|
|
Net cash provided by
operating activities |
$ |
54,027 |
|
$ |
69,105 |
|
$ |
(15,078 |
) |
Third Quarter 2020 Financial Results Compared to Prior
Year Period
- Net sales
increased 13.1% to a record $1,090.3 million, primarily driven by
growth from price inflation of 10.0%, acquisitions of 3.5% and Core
Organic Growth of 0.6%. These increases were partially offset by a
decrease of 1.0% from closed facilities.
- Gross profit
increased 7.2% to $273.1 million. Gross profit as a percentage of
sales (gross margin) was 25.0%, compared to 26.4% for the third
quarter of 2019. The 140 basis point decline in gross margin was
driven by a decrease in the gross margin in the lumber and lumber
sheet goods and structural components product categories, and a
higher percentage of net sales being derived from lumber and lumber
sheet goods. Gross margins in our lumber and lumber sheet goods and
structural components product categories were lower due to a
significant increase in commodity costs, which increased at a
faster rate than our average selling prices.
- Selling, general
and administrative (“SG&A”) expenses increased 2.4% or $4.6
million to $195.1 million. This increase was primarily related to
an increase of approximately $8.5 million from costs incurred in
relation to the merger transaction with Builders FirstSource and
$7.6 million related to SG&A expenses of recently acquired
businesses. Excluding merger related costs and SG&A from
recently acquired businesses, SG&A expenses declined by $11.5
million or 6.0%, primarily related to decreases in employee wages,
benefits and other employee-related costs, lower fuel costs and
targeted reductions in other costs. SG&A expenses as a percent
of net sales declined 190 basis points to 17.9%.
- Depreciation expense, including the
portion reported within cost of sales, increased $1.4 million
to $15.4 million, compared to $14.0 million in the third
quarter of 2019.
- Amortization expense was $5.0 million
compared to $4.6 million in the third quarter of 2019. This
increase was primarily due to the amortization of intangible assets
at recently acquired businesses.
- Interest expense was $5.7 million
compared to $5.8 million in the third quarter of 2019.
- Other income, net, which was derived
primarily from state and local tax incentives, interest income and
customer service charges, was $3.3 million compared to $3.5 million
in the third quarter of 2019.
- Net income was
$44.9 million, or $0.66 per diluted share for the quarter, compared
to $33.6 million, or $0.50 per diluted share, in the third quarter
of 2019.
- Adjusted net income1 increased to
$57.2 million, or $0.84 per diluted share, compared to Adjusted net
income1 of $38.8 million, or $0.58 per diluted share, in the third
quarter of 2019.
- Adjusted EBITDA1
was $99.2 million, up 32.9% from the third quarter of 2019.
- Adjusted EBITDA margin1, defined as
Adjusted EBITDA1 as a percentage of net sales, was 9.1%, up 140
basis points from the prior year period and was a record for the
third quarter.
- Cash provided by operating
activities declined $15.1 million to $54.0 million primarily due to
changes in working capital.
Builders FirstSource and BMC
Transaction
On August 27, 2020, Builders FirstSource, Inc.
and BMC announced that they entered into a definitive merger
agreement under which Builders FirstSource and BMC will combine in
an all-stock merger transaction to create the nation’s premier
supplier of building materials and services. Under the terms of the
agreement, which was unanimously approved by the Boards of
Directors of both companies, BMC shareholders will receive a fixed
exchange ratio of 1.3125 shares of Builders FirstSource common
stock for each share of BMC common stock. Upon completion of the
merger, existing Builders FirstSource shareholders will own
approximately 57% and existing BMC shareholders will own
approximately 43% of the combined company on a fully diluted basis.
The merger is expected to be tax free for U.S. federal income tax
purposes. The transaction is expected to close in late 2020 or
early 2021, subject to, among other things, the expiration or
termination of the applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
as well as other customary closing conditions. The transaction
requires the approval of shareholders of both Builders FirstSource
and BMC.
Liquidity and Capital
Resources
Total liquidity as of September 30, 2020 was
approximately $648.5 million, which included $286.2 million of cash
and cash equivalents and $362.3 million of borrowing availability
under the Company’s asset-backed revolving credit facility. In
addition, the Company has no long-term debt maturities until
2024.
Capital expenditures during the third quarter of
2020, net of proceeds from the sale of property, equipment and real
estate, totaled $21.3 million which was down $0.1 million from the
prior year period. These expenditures were primarily used to fund
purchases of vehicles and equipment to replace aged assets and
support increased sales volume and facility, technology and
automation investments to support our operations. Cash provided by
operating activities declined $15.1 million to $54.0 million
primarily due to changes in working capital. For the first nine
months, cash provided by operating activities increased $8.8
million to $207.2 million. The Company continues to focus on cash
generation.
Stock
Repurchases
During the third quarter of 2020, the Company
did not repurchase any shares of stock. As of September 30, 2020,
the Company had approximately $54.2 million of capacity remaining
under the current share repurchase authorization, which expires in
November 2020.
Conference Call Information
BMC will broadcast a pre-recorded conference
call which will be available on Tuesday, November 3, 2020 at 7:30
a.m. Eastern Time. Prior to the call, an earnings release
presentation will be posted on the Company’s investor relations
website ir.buildwithbmc.com in the “Events and Presentations” tab
under the heading “Presentation Archive.” The pre-recorded
conference call can be accessed by dialing 1-877-407-0784
(domestic) or 1-201-689-8560 (international). The passcode for the
pre-recorded call and replay is 13712113. A telephonic replay will
be available approximately three hours after the call and can be
accessed by dialing 1-844-512-2921 or for international callers,
1-412-317-6671. The pre-recorded call will be available until 11:59
p.m. (Eastern Time) on November 10, 2020.
The webcast of the conference call can be
accessed on the Company’s investor relations website at
ir.buildwithbmc.com and will be available for approximately 90
days.
About BMC Stock Holdings,
Inc.
With $3.6 billion in 2019 net sales, BMC is one
of the nation’s leading providers of diversified building materials
and solutions to new construction builders and professional
remodelers in the U.S. Headquartered in Raleigh, North Carolina,
the Company's comprehensive portfolio of products and services
spans building materials, including millwork and structural
component manufacturing capabilities, consultative showrooms and
design centers, value-added installation management and an
innovative eBusiness platform. BMC serves 45 metropolitan areas
across 18 states, principally in the South and West regions.
Forward-Looking
Statements
This press release contains “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements in this document may
include, without limitation, statements regarding sales growth,
price changes, earnings performance, strategic direction and the
demand for our products. Forward-looking statements are typically
identified by words or phrases such as “may,” “might,” “predict,”
“future,” “seek to,” “assume,” “goal,” “objective,” “continue,”
“will,” “could,” “should,” “would,” “anticipate,” “estimate,”
“expect,” “project,” “intend,” “plan,” “believe,” “target,”
“prospects,” “guidance,” “possible,” “predict,” “propose,”
“potential” and “forecast,” or the negative of such terms and other
words, terms and phrases of similar meaning. Forward-looking
statements involve estimates, expectations, projections, goals,
forecasts, assumptions, risks and uncertainties, many of which are
outside BMC’s control. BMC cautions readers that any
forward-looking statement is not a guarantee of future performance
and that actual results could differ materially from those
contained in the forward-looking statement; therefore, investors
and shareholders should not place undue reliance on such statement.
There are a number of risks and uncertainties that could cause
actual results to differ materially from the forward-looking
statements included in this communication, and many of these risks
and uncertainties are, and may continue to be, amplified by the
COVID-19 pandemic.
A number of important factors could cause actual
results to differ materially from those indicated by
forward-looking statements. These factors include without
limitation:
- the impact of the COVID-19 pandemic
on our business operations and on local, national and global
economies;
- the state of the homebuilding
industry and repair and remodeling activity, the economy and the
credit markets;
- fluctuation of commodity prices and
prices of our products as a result of national and international
economic and other conditions;
- the impact of potential changes in
our customer or product sales mix;
- our concentration of business in the
Texas, California and Georgia markets;
- the potential loss of significant
customers or a reduction in the quantity of products they
purchase;
- seasonality and cyclicality of the
building products supply and services industry;
- competitive industry pressures and
competitive pricing pressure from our customers and
competitors;
- our exposure to product liability,
warranty, casualty, construction defect, contract, tort, employment
and other claims and legal proceedings;
- our ability to maintain
profitability and positive cash flows;
- our ability to retain our key
employees and to attract and retain new qualified employees, while
controlling our labor costs;
- product shortages, loss of key
suppliers or failure to develop relationships with qualified
suppliers, and our dependence on third-party suppliers and
manufacturers;
- the implementation of our supply
chain and technology initiatives;
- the impact of long-term
noncancellable leases at our facilities;
- our ability to effectively manage
inventory and working capital;
- the credit risk from our
customers;
- our ability to identify or respond
effectively to consumer needs, expectations, market conditions or
trends;
- our ability to successfully
implement our growth strategy;
- the impact of federal, state, local
and other laws and regulations;
- the impact of changes in legislation
and government policy;
- the impact of unexpected changes in
our tax provisions and adoption of new tax legislation;
- our ability to utilize our net
operating loss carryforwards;
- natural or man-made disruptions to
our distribution and manufacturing facilities;
- our exposure to environmental
liabilities and subjection to environmental laws and
regulation;
- the impact of health and safety laws
and regulations;
- the impact of disruptions to our
information technology systems;
- cybersecurity risks;
- our exposure to losses if our
insurance coverage is insufficient;
- our ability to operate on multiple
Enterprise Resource Planning (“ERP”) information systems and
convert multiple systems to a single system;
- the impact of our indebtedness;
- the impact of the various financial
covenants in our secured credit agreement and senior secured notes
indenture
- the completion of the merger with
Builders FirstSource, including the receipt of required approvals
and satisfying the other closing conditions;
- the disruption to and restrictions
placed on our business in connection with the merger with Builders
FirstSource;
- the incurrence of costs related to
the merger with Builders FirstSource; and
- other factors discussed or referred
to in the “Risk Factors” section of BMC's most recent Annual Report
on Form 10-K filed with the SEC on February 27, 2020 as
supplemented in our Quarterly Report on Form 10-Q.
Cautionary Notice Regarding Forward-Looking
Statements
This communication, in addition to historical
information, contains “forward-looking statements” (as defined in
the Private Securities Litigation Reform Act of 1995) regarding,
among other things, future events or the future financial
performance of BMC Stock Holdings, Inc. (“BMC”) and Builders
FirstSource, Inc. (“Builders FirstSource”). Words such as “may,”
“will,” “should,” “plans,” “estimates,” “predicts,” “potential,”
“anticipate,” “expect,” “project,” “intend,” “believe,” or the
negative of these terms, and words and terms of similar substance
used in connection with any discussion of future plans, actions or
events identify forward-looking statements. Any forward-looking
statements involve risks and uncertainties that are difficult to
predict or quantify, and such risks and uncertainties 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 novel coronavirus disease
2019 (also known as “COVID-19”) pandemic and its impact on the
business operations of BMC and Builders FirstSource and on local,
national and global economies, the growth strategies of BMC and
Builders FirstSource, fluctuations of commodity prices and prices
of the products of BMC and Builders FirstSource as a result of
national and international economic and other conditions, or the
significant dependence of both companies’ revenues and operating
results on, among other things, the state of the homebuilding
industry and repair and remodeling activity, lumber prices and the
economy. Neither BMC nor Builders FirstSource may succeed in
addressing these and other risks or uncertainties.
Forward-looking statements relating to the
proposed business combination between BMC and Builders FirstSource
include, but are not limited to: statements about the benefits of
the proposed business combination between BMC and Builders
FirstSource, including future financial and operating results; the
plans, objectives, expectations and intentions of BMC and Builders
FirstSource; the expected timing of completion of the proposed
business combination; and other statements relating to the proposed
merger that are not historical facts. Forward-looking statements
are based on information currently available to BMC and Builders
FirstSource and involve estimates, expectations and projections.
Investors are cautioned that all such forward-looking statements
are subject to risks and uncertainties, and important factors could
cause actual events or results to differ materially from those
indicated by such forward- looking statements. With respect to the
proposed business combination between BMC and Builders FirstSource,
these factors could include, but are not limited to: the risk that
BMC and Builders FirstSource may be unable to obtain governmental
and regulatory approvals required for the business combination, or
that required governmental and regulatory approvals may delay the
business combination or result in the imposition of conditions that
could reduce the anticipated benefits from the proposed business
combination or cause the parties to abandon the proposed business
combination; the risk that a condition to closing of the business
combination may not be satisfied, including as a result of the
failure to obtain approval of stockholders of BMC and Builders
FirstSource on the expected terms and schedule or at all; the
length of time necessary to consummate the proposed business
combination, which may be longer than anticipated for various
reasons; the risk that the businesses will not be integrated
successfully; the risk that the cost savings, synergies and growth
from the proposed business combination may not be fully realized or
may take longer to realize than expected; the assumptions on which
the parties’ estimates of future results of the combined business
have been based may prove to be incorrect in a number of material
ways, which could result in an inability to realize the expected
benefits of the proposed business combination or exposure to
material liabilities; the diversion of management time on issues
related to the business combination; the effect of future
regulatory or legislative actions on the companies or the
industries in which they operate; the risk that the credit ratings
of the combined company may be different from what the parties
expect; economic and foreign exchange rate volatility; changes in
the general economic environment, or social or political
conditions, that could affect the businesses; the potential effect
of the announcement or consummation of the proposed business
combination on relationships with customers, suppliers,
competitors, lenders, landlords, management and other employees;
the ability to attract new customers and retain existing customers
in the manner anticipated or at all; the ability to hire and retain
key personnel; reliance on and integration of information
technology systems; the risks associated with assumptions the
parties make in connection with the parties’ critical accounting
estimates and legal proceedings; certain restrictions during the
pendency of the business combination that may affect the ability of
BMC and Builders FirstSource to pursue certain business
opportunities or strategic transactions; and the potential of
international unrest, economic downturn or effects of anticipated
tax rates, raw material costs or availability, benefit or
retirement plan costs, or other regulatory compliance costs.
Additional information concerning other risk
factors pertaining to BMC and Builders FirstSource is also
contained in the parties’ respective most recently filed Annual
Reports on Form 10-K, subsequent Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, and other information filed with the
Securities and Exchange Commission (the “SEC”). Many of these risks
and uncertainties are beyond BMC’s or Builders FirstSource’s
ability to control or predict. Because of these risks and
uncertainties, you should not place undue reliance on these
forward-looking statements. It is not possible to anticipate or
foresee all risks and uncertainties, and investors should not
consider any list of risks and uncertainties to be exhaustive or
complete. Furthermore, neither BMC nor Builders FirstSource
undertakes any obligation to update publicly or revise any
forward-looking statements to reflect events or circumstances that
may arise after the date of this communication. Nothing in this
communication is intended, or is to be construed, as a profit
forecast or to be interpreted to mean that the earnings per share
of the common stock of BMC or of the common stock of Builders
FirstSource for the current or any future financial years, or the
earnings per share of the common stock of the combined company,
will necessarily match or exceed the historical published earnings
per share of the common stock of BMC or Builders FirstSource, as
applicable. Annualized, pro forma, projected and estimated numbers
are used for illustrative purpose only, are not forecasts and may
not reflect actual results. All subsequent written and oral
forward-looking statements concerning BMC, Builders FirstSource,
the proposed business combination, the combined company or other
matters and attributable to BMC, Builders FirstSource or any person
acting on their behalf are expressly qualified in their entirety by
the cautionary statements above.
Additional Information and Where to
Find It
In connection with the proposed business
combination, Builders FirstSource filed with the SEC on October 8,
2020 a registration statement on Form S-4 (the “Registration
Statement”) that includes a prospectus with respect to the shares
of common stock to be issued by Builders FirstSource in the
business combination and a joint proxy statement for BMC’s and
Builders FirstSource’s respective stockholders (the “Joint Proxy
Statement”). This Registration Statement has not yet been declared
effective and the Joint Proxy Statement included therein is in
preliminary form. Each of BMC and Builders FirstSource will send
the definitive Joint Proxy Statement to its stockholders and may
file other documents regarding the business combination with the
SEC. This communication is not a substitute for the Registration
Statement, the Joint Proxy Statement, or any other document that
BMC or Builders FirstSource may send to its stockholders in
connection with the proposed business combination. This
communication is for informational purposes only and does not
constitute, or form a part of, an offer to sell or the solicitation
of an offer to sell or an offer to buy or the solicitation of an
offer to buy any securities, and there shall be no sale of
securities, in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction. No offer of
securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as
amended, and otherwise in accordance with applicable law. INVESTORS
AND SECURITY HOLDERS OF BMC AND BUILDERS FIRSTSOURCE ARE URGED TO
READ THE REGISTRATION STATEMENT, THE JOINT PROXY STATEMENT, AND ANY
OTHER RELEVANT DOCUMENTS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS
THERETO) FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN
THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN
IMPORTANT INFORMATION ABOUT BMC, BUILDERS FIRSTSOURCE, THE PROPOSED
BUSINESS COMBINATION AND RELATED MATTERS. Investors and security
holders of BMC and Builders FirstSource may obtain free copies of
the Registration Statement, the Joint Proxy Statement, and other
documents (including any amendments or supplements thereto)
containing important information about BMC and Builders FirstSource
filed with the SEC, through the website maintained by the SEC at
www.sec.gov. BMC and Builders FirstSource make available free of
charge at ir.buildwithbmc.com and investors.bldr.com, respectively,
copies of materials they file with, or furnish to, the SEC.
Participants in the
Solicitation
BMC, Builders FirstSource, and their respective
directors, executive officers, and other members of management and
employees may be deemed to be participants in the solicitation of
proxies from the stockholders of BMC and Builders FirstSource in
connection with the proposed business combination.
The identity of BMC’s directors and executive
officers and their ownership of BMC’s common stock is set forth in
BMC’s Annual Report on Form 10-K for the fiscal year ended December
31, 2019, which was filed with the SEC on February 27, 2020, and
its proxy statement for its 2020 Annual Meeting of Stockholders,
which was filed with the SEC on March 27, 2020.
The identity of Builders FirstSource’s directors
and executive officers and their ownership of the common stock of
Builders FirstSource is set forth in Builders FirstSource’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2019,
which was filed with the SEC on February 21, 2020, and its proxy
statement for its 2020 Annual Meeting of Stockholders, which was
filed with the SEC on April 28, 2020.
Investors may obtain additional information
regarding the interest of such participants and a description of
their direct and indirect interests, by security holdings or
otherwise, by reading the Registration Statement, the Joint Proxy
Statement, and other materials filed with the SEC in connection
with the proposed business combination when they become available.
You may obtain these documents free of charge through the website
maintained by the SEC at www.sec.gov and from the websites of BMC
or Builders FirstSource as described above.
Investor Relations
Contact
BMC Stock Holdings, Inc. Michael NeeseSVP, Strategy and Investor
Relations (919) 431-1796
BMC STOCK HOLDINGS, INC. AND
SUBSIDIARIESCondensed Consolidated Statements of Operations
(unaudited)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
(in thousands, except per share amounts) |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Net sales |
$ |
1,090,343 |
|
$ |
964,249 |
|
$ |
2,991,118 |
|
$ |
2,736,029 |
|
Cost of sales |
|
817,261 |
|
|
709,482 |
|
|
2,228,086 |
|
|
2,019,363 |
|
Gross profit |
|
273,082 |
|
|
254,767 |
|
|
763,032 |
|
|
716,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
195,143 |
|
|
190,579 |
|
|
557,010 |
|
|
546,116 |
|
Depreciation expense |
|
11,767 |
|
|
10,501 |
|
|
34,990 |
|
|
30,117 |
|
Amortization expense |
|
5,016 |
|
|
4,552 |
|
|
15,045 |
|
|
13,237 |
|
Impairment of assets |
|
— |
|
|
115 |
|
|
2,255 |
|
|
644 |
|
|
|
211,926 |
|
|
205,747 |
|
|
609,300 |
|
|
590,114 |
|
Income from operations |
|
61,156 |
|
|
49,020 |
|
|
153,732 |
|
|
126,552 |
|
Other income (expense) |
|
|
|
|
Interest expense |
|
(5,744 |
) |
|
(5,773 |
) |
|
(17,880 |
) |
|
(17,385 |
) |
Other income, net |
|
3,289 |
|
|
3,540 |
|
|
9,128 |
|
|
10,159 |
|
Income before income taxes |
|
58,701 |
|
|
46,787 |
|
|
144,980 |
|
|
119,326 |
|
Income tax expense |
|
13,806 |
|
|
13,190 |
|
|
34,434 |
|
|
29,680 |
|
Net income |
$ |
44,895 |
|
$ |
33,597 |
|
$ |
110,546 |
|
$ |
89,646 |
|
Weighted average common shares outstanding
Basic |
|
67,141 |
|
66,685 |
|
67,001 |
|
66,681 |
Diluted |
|
67,967 |
|
67,361 |
|
67,725 |
|
67,240 |
|
|
|
|
|
Net income per common share |
|
|
|
|
Basic |
$ |
0.67 |
$ |
0.50 |
$ |
1.65 |
$ |
1.34 |
Diluted |
$ |
0.66 |
$ |
0.50 |
$ |
1.63 |
$ |
1.33 |
BMC STOCK HOLDINGS, INC. AND
SUBSIDIARIESCondensed Consolidated Balance Sheets(unaudited)
(in thousands, except share
and per share amounts) |
September 30,2020 |
December 31,2019 |
Assets |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ |
286,221 |
$ |
165,496 |
Accounts receivable, net of allowances of $9,671 and $8,318 at
September 30, 2020 and December 31, 2019, respectively |
|
393,735 |
|
325,741 |
Inventories |
|
413,031 |
|
331,969 |
Contract assets |
|
36,422 |
|
32,125 |
Income taxes receivable |
|
— |
|
7,504 |
Prepaid expenses and other current assets |
|
76,239 |
|
66,818 |
Total current assets |
|
1,205,648 |
|
929,653 |
Property and equipment, net of
accumulated depreciation |
|
366,444 |
|
345,466 |
Operating lease right-of-use
assets |
|
131,868 |
|
139,907 |
Customer relationship intangible
assets, net of accumulated amortization |
|
170,200 |
|
185,049 |
Other intangible assets, net of
accumulated amortization |
|
385 |
|
580 |
Goodwill |
|
295,390 |
|
297,146 |
Other long-term assets |
|
7,599 |
|
8,300 |
Total assets |
$ |
2,177,534 |
$ |
1,906,101 |
Liabilities and Stockholders' EquityCurrent
liabilities
Accounts payable |
$ |
300,075 |
|
$ |
189,644 |
|
Accrued expenses and other liabilities |
|
116,285 |
|
|
117,825 |
|
Contract liabilities |
|
44,980 |
|
|
31,094 |
|
Income taxes payable |
|
10,395 |
|
|
— |
|
Interest payable |
|
9,572 |
|
|
4,759 |
|
Current portion: |
|
|
Long-term debt and finance lease obligations |
|
3,210 |
|
|
5,577 |
|
Operating lease liabilities |
|
27,635 |
|
|
26,147 |
|
Insurance reserves |
|
16,746 |
|
|
16,328 |
|
Total current liabilities |
|
528,898 |
|
|
391,374 |
|
Insurance reserves |
|
43,287 |
|
|
43,536 |
|
Long-term debt |
|
346,659 |
|
|
346,032 |
|
Long-term portion of finance
lease obligations |
|
4,689 |
|
|
6,959 |
|
Long-term portion of operating
lease liabilities |
|
113,572 |
|
|
120,832 |
|
Deferred income taxes |
|
22,613 |
|
|
15,195 |
|
Other long-term liabilities |
|
15,309 |
|
|
661 |
|
Total liabilities |
|
1,075,027 |
|
|
924,589 |
|
Commitments and
contingencies |
|
|
Stockholders'
equity |
Preferred stock, $0.01 par value, 50.0 million shares authorized,
no shares issued and outstanding at September 30, 2020 and December
31, 2019 |
|
— |
|
|
— |
|
Common stock, $0.01 par value, 300.0 million shares authorized,
69.0 million and 68.3 million shares issued, and 67.2 million and
66.8 million outstanding at September 30, 2020 and December 31,
2019, respectively |
|
690 |
|
|
683 |
|
Additional paid-in capital |
|
702,045 |
|
|
687,255 |
|
Retained earnings |
|
430,736 |
|
|
320,190 |
|
Treasury stock, at cost, 1.8 million and 1.5 million shares at
September 30, 2020 and December 31, 2019, respectively |
|
(30,964 |
) |
|
(26,616 |
) |
Total stockholders' equity |
|
1,102,507 |
|
|
981,512 |
|
Total liabilities and stockholders' equity |
$ |
2,177,534 |
|
$ |
1,906,101 |
|
BMC STOCK HOLDINGS, INC. AND
SUBSIDIARIESCondensed Consolidated Statements of Cash
Flows(unaudited)
|
Nine Months Ended September
30, |
(in thousands) |
|
2020 |
|
|
2019 |
|
Cash flows from operating
activities |
|
|
Net income |
$ |
110,546 |
|
$ |
89,646 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
Depreciation expense |
|
45,702 |
|
|
39,722 |
|
Amortization of intangible assets |
|
15,045 |
|
|
13,237 |
|
Amortization of debt issuance costs |
|
952 |
|
|
1,124 |
|
Deferred income taxes |
|
7,418 |
|
|
4,857 |
|
Non-cash stock compensation expense |
|
11,110 |
|
|
9,177 |
|
Gain on sale of property, equipment and real estate |
|
(518 |
) |
|
(1,839 |
) |
Other non-cash adjustments |
|
2,395 |
|
|
2,314 |
|
Change in assets and liabilities, net of effects of
acquisitions |
|
|
Accounts receivable, net of allowances |
|
(68,365 |
) |
|
(24,068 |
) |
Inventories |
|
(81,004 |
) |
|
(494 |
) |
Accounts payable |
|
121,405 |
|
|
68,456 |
|
Other assets and liabilities |
|
42,508 |
|
|
(3,715 |
) |
Net cash provided by operating activities |
|
207,194 |
|
|
198,417 |
|
Cash flows from investing
activities |
|
|
Purchases of property, equipment
and real estate |
|
(71,037 |
) |
|
(67,582 |
) |
Proceeds from sale of property,
equipment and real estate |
|
1,258 |
|
|
4,444 |
|
Purchases of businesses, net of
cash acquired |
|
— |
|
|
(85,780 |
) |
Insurance proceeds |
|
— |
|
|
107 |
|
Net cash used in investing activities |
|
(69,779 |
) |
|
(148,811 |
) |
Cash flows from financing
activities |
|
|
Proceeds from revolving credit
facility |
|
144,000 |
|
|
110,987 |
|
Repayments of proceeds from
revolving credit facility |
|
(144,000 |
) |
|
(110,987 |
) |
Repurchases of common stock under
share repurchase program |
|
(1,416 |
) |
|
(16,446 |
) |
Payments on finance lease
obligations |
|
(4,613 |
) |
|
(5,094 |
) |
Other financing activities,
net |
|
(10,661 |
) |
|
(5,530 |
) |
Net cash used in financing activities |
|
(16,690 |
) |
|
(27,070 |
) |
Net increase in cash and cash equivalents |
|
120,725 |
|
|
22,536 |
|
Cash and cash
equivalents |
|
|
Beginning of period |
|
165,496 |
|
|
150,723 |
|
End of period |
$ |
286,221 |
|
$ |
173,259 |
|
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIESNet
Sales by Product Category (unaudited)
|
Three Months EndedSeptember 30, 2020 |
Three Months EndedSeptember 30,
2019 |
|
|
(in thousands) |
Net Sales |
% of Sales |
Net Sales |
% of Sales |
% Change |
CoreOrganicGrowth (a) |
Millwork, doors & windows |
$ |
299,812 |
27.5% |
$ |
285,750 |
29.6% |
4.9% |
2.0% |
Structural components |
185,910 |
17.1% |
175,344 |
18.2% |
6.0% |
3.1% |
Lumber & lumber sheet
goods |
383,626 |
35.2% |
274,908 |
28.5% |
39.5% |
3.7% |
Other building products &
services |
220,995 |
20.2% |
228,247 |
23.7% |
(3.2)% |
(7.1)% |
Total net sales |
$ |
1,090,343 |
100.0% |
$ |
964,249 |
100.0% |
13.1% |
0.6% |
|
Nine Months EndedSeptember 30, 2020 |
Nine Months EndedSeptember 30, 2019 |
|
|
(in thousands) |
Net Sales |
% of Sales |
Net Sales |
% of Sales |
% Change |
CoreOrganicGrowth (a) |
Millwork, doors & windows |
$ |
883,480 |
29.5% |
$ |
796,807 |
29.1% |
10.9% |
4.4% |
Structural components |
510,789 |
17.1% |
483,575 |
17.7% |
5.6% |
2.3% |
Lumber & lumber sheet
goods |
935,582 |
31.3% |
798,722 |
29.2% |
17.1% |
1.4% |
Other building products &
services |
661,267 |
22.1% |
656,925 |
24.0% |
0.7% |
(4.4)% |
Total net sales |
$ |
2,991,118 |
100.0% |
$ |
2,736,029 |
100.0% |
9.3% |
1.0% |
Net Sales by Customer Type(unaudited)
|
Three Months EndedSeptember 30, 2020 |
Three Months EndedSeptember 30, 2019 |
|
|
(in thousands) |
Net Sales |
% of Sales |
Net Sales |
% of Sales |
% Change |
CoreOrganicGrowth (a) |
Single-family homebuilders |
$ |
811,081 |
74.4% |
$ |
718,690 |
74.5% |
12.9% |
0.8% |
Remodeling contractors |
143,536 |
13.2% |
115,756 |
12.0% |
24.0% |
5.0% |
Multi-family, commercial &
other contractors |
135,726 |
12.4% |
129,803 |
13.5% |
4.6% |
(4.9)% |
Total net sales |
$ |
1,090,343 |
100.0% |
$ |
964,249 |
100.0% |
13.1% |
0.6% |
|
Nine Months EndedSeptember 30, 2020 |
Nine Months EndedSeptember 30, 2019 |
|
|
(in thousands) |
Net Sales |
% of Sales |
Net Sales |
% of Sales |
% Change |
CoreOrganicGrowth (a) |
Single-family homebuilders |
$ |
2,188,240 |
73.2% |
$ |
2,064,382 |
75.5% |
6.0% |
(1.2)% |
Remodeling contractors |
375,904 |
12.6% |
314,277 |
11.5% |
19.6% |
7.1% |
Multi-family, commercial &
other contractors |
426,974 |
14.2% |
357,370 |
13.0% |
19.5% |
8.7% |
Total net sales |
$ |
2,991,118 |
100.0% |
$ |
2,736,029 |
100.0% |
9.3% |
1.0% |
(a) |
Core Organic
Growth is calculated as the total change in net sales excluding the
estimated impact of changes in commodity-related prices, the net
sales of non-comparable acquired or closed operations and changes
in selling days, as applicable. |
BMC STOCK HOLDINGS, INC. AND
SUBSIDIARIESReconciliation of GAAP to Non-GAAP Measures
(unaudited)
Adjusted EBITDA, Adjusted EBITDA margin,
Adjusted net income and Adjusted net income per diluted share are
intended as supplemental measures of the Company’s performance that
are not required by, or presented in accordance with, GAAP. The
Company believes that Adjusted EBITDA, Adjusted EBITDA margin,
Adjusted net income and Adjusted net income per diluted share
provide useful information to management and investors regarding
certain financial and business trends relating to the Company’s
financial condition and operating results.
- Adjusted EBITDA is defined as net
income plus interest expense (income), income tax expense,
depreciation and amortization, merger-related costs, non-cash stock
compensation expense, acquisition and integration costs and other
items.
- Adjusted EBITDA
margin is defined as Adjusted EBITDA divided by net sales.
- Adjusted net income is defined as net
income plus merger-related costs, non-cash stock compensation
expense, acquisition and integration costs, other items and after
tax effecting those items.
- Adjusted net
income per diluted share is defined as Adjusted net income divided
by diluted weighted average shares.
Company management uses Adjusted EBITDA and
Adjusted net income for trend analysis, for purposes of determining
management incentive compensation and for budgeting and planning
purposes. Adjusted EBITDA is used in monthly financial reports
prepared for management and the board of directors. The Company
believes that the use of Adjusted EBITDA, Adjusted EBITDA margin,
Adjusted net income and Adjusted net income per diluted share
provides additional tools for investors to use in evaluating
ongoing operating results and trends and in comparing the Company’s
financial measures with other distribution and retail companies,
which may present similar non-GAAP financial measures to investors.
However, the Company’s calculation of Adjusted EBITDA, Adjusted
EBITDA margin, Adjusted net income and Adjusted net income per
diluted share are not necessarily comparable to similarly titled
measures reported by other companies. Company management does not
consider Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net
income and Adjusted net income per diluted share in isolation or as
alternatives to financial measures determined in accordance with
GAAP. The principal limitation of Adjusted EBITDA, Adjusted EBITDA
margin, Adjusted net income and Adjusted net income per diluted
share is that they exclude significant expenses and income that are
required by GAAP to be recorded in the Company’s financial
statements. Some of these limitations are: (i) Adjusted EBITDA,
Adjusted EBITDA margin, Adjusted net income and Adjusted net income
per diluted share do not reflect changes in, or cash requirements
for, working capital needs; (ii) Adjusted EBITDA and Adjusted
EBITDA margin do not reflect interest expense, or the requirements
necessary to service interest or principal payments on debt; (iii)
Adjusted EBITDA and Adjusted EBITDA margin do not reflect income
tax expenses or the cash requirements to pay taxes; (iv) Adjusted
EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted
net income per diluted share do not reflect historical cash
expenditures or future requirements for capital expenditures or
contractual commitments; (v) although depreciation and amortization
charges are non-cash charges, the assets being depreciated and
amortized will often have to be replaced in the future and Adjusted
EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted
net income per diluted share do not reflect any cash requirements
for such replacements and (vi) Adjusted EBITDA, Adjusted EBITDA
margin, Adjusted net income and Adjusted net income per diluted
share do not consider the potentially dilutive impact of issuing
non-cash stock-based compensation. In order to compensate for these
limitations, management presents Adjusted EBITDA, Adjusted EBITDA
margin, Adjusted net income and Adjusted net income per diluted
share in conjunction with GAAP results. Readers should review the
reconciliations of net income to Adjusted EBITDA and Adjusted net
income below, and should not rely on any single financial measure
to evaluate the Company’s business.
BMC STOCK HOLDINGS, INC. AND
SUBSIDIARIESReconciliation of GAAP to Non-GAAP Measures (continued)
(unaudited)
The following is a reconciliation of net income to Adjusted
EBITDA and Adjusted net income.
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
(in thousands, except per share amounts) |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Net income |
$ |
44,895 |
|
$ |
33,597 |
|
$ |
110,546 |
|
$ |
89,646 |
|
Interest expense |
|
5,744 |
|
|
5,773 |
|
|
17,880 |
|
|
17,385 |
|
Interest income |
|
(224 |
) |
|
(1,047 |
) |
|
(1,146 |
) |
|
(2,832 |
) |
Income tax expense |
|
13,806 |
|
|
13,190 |
|
|
34,434 |
|
|
29,680 |
|
Depreciation and
amortization |
|
20,453 |
|
|
18,535 |
|
|
60,747 |
|
|
52,959 |
|
Merger-related costs |
|
8,488 |
|
|
— |
|
|
9,150 |
|
|
— |
|
Non-cash stock compensation
expense |
|
4,612 |
|
|
3,014 |
|
|
11,110 |
|
|
9,177 |
|
Acquisition and integration
costs (a) |
|
1,377 |
|
|
1,524 |
|
|
4,566 |
|
|
6,294 |
|
Business reorganization costs
(b) |
|
37 |
|
|
72 |
|
|
3,256 |
|
|
300 |
|
Other items (c) |
|
— |
|
|
— |
|
|
— |
|
|
(222 |
) |
Adjusted EBITDA |
$ |
99,188 |
|
$ |
74,658 |
|
$ |
250,543 |
|
$ |
202,387 |
|
Adjusted EBITDA margin |
|
9.1 |
% |
|
7.7 |
% |
|
8.4 |
% |
|
7.4 |
% |
|
|
|
|
|
Net income |
$ |
44,895 |
|
$ |
33,597 |
|
$ |
110,546 |
|
$ |
89,646 |
|
Merger-related costs |
|
8,488 |
|
|
— |
|
|
9,150 |
|
|
— |
|
Non-cash stock compensation
expense |
|
4,612 |
|
|
3,014 |
|
|
11,110 |
|
|
9,177 |
|
Acquisition and integration
costs (a) |
|
1,377 |
|
|
1,524 |
|
|
4,566 |
|
|
6,294 |
|
Business reorganization costs
(b) |
|
37 |
|
|
72 |
|
|
3,256 |
|
|
300 |
|
Other items (d) |
|
— |
|
|
1,635 |
|
|
— |
|
|
1,413 |
|
Tax effect of adjustments to
net income (e) |
|
(2,165 |
) |
|
(1,086 |
) |
|
(5,350 |
) |
|
(3,674 |
) |
Adjusted net income |
$ |
57,244 |
|
$ |
38,756 |
|
$ |
133,278 |
|
$ |
103,156 |
|
|
|
|
|
|
Diluted weighted average
shares |
|
67,967 |
|
|
67,361 |
|
|
67,725 |
|
|
67,240 |
|
Adjusted net income per
diluted share |
$ |
0.84 |
|
$ |
0.58 |
|
$ |
1.97 |
|
$ |
1.53 |
|
(a) |
Represents
costs for acquisitions and related integration costs, as well as
system integration and other costs related to the integration of
Building Materials Holding Corporation and Stock Building Supply
Holdings, Inc. as a result of the 2015 merger transaction
(which have been separately called out in historical
presentations). |
(b) |
For the three and nine months ended September 30, 2020,
represents asset impairment and other charges related to the
closure or relocation of the operations of certain of the Company’s
facilities, which were not related to the COVID-19 pandemic, and
severance expense related to permanent headcount reductions due to
the impact of the COVID-19 pandemic. For the three and nine months
ended September 30, 2019, represents asset impairment charges and
the effect of certain customary post-closing adjustments related to
the November 1, 2018 disposition of the Company’s Coleman Floor
business. |
(c) |
For the nine months ended September 30, 2019, represents income
from a recovery made by the Company related to a fire at one of the
Company’s facilities during 2015 (the “Recovery Income”) and the
effect of the settlement of pending litigation for an amount below
what was previously accrued (the “Litigation Settlement”). |
(d) |
For the three months ended September 30, 2019, represents out
of period income tax expense (the “Income Tax Adjustment”). For the
nine months ended September 30, 2019, represents the Income Tax
Adjustment, Recovery Income and Litigation Settlement. |
(e) |
The tax effect of adjustments to net income was based on the
respective transactions’ income tax rate, which was 23.4%, 23.6%,
23.5% and 23.6% for the three months ended September 30, 2020 and
2019 and the nine months ended September 30, 2020 and 2019,
respectively. The tax effect of adjustments to net income excludes
non-deductible merger-related costs of $5.3 million for the three
and nine months ended September 30, 2020 and the Income Tax
Adjustment for the three and nine months ended September 30,
2019. |
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