Growth in Structural Component Drives BMC Stock Q1 Sales
Originally published by: BMC Stock Holdings, Inc. — May 5, 2016
The following article was produced and published by the source linked to above, who is solely responsible for its content. SBC Magazine is publishing this story to raise awareness of information publicly available online and does not verify the accuracy of the author’s claims. As a consequence, SBC cannot vouch for the validity of any facts, claims or opinions made in the article.
BMC Stock Holdings, Inc. “BMC Stock” or the “Company”, a diversified lumber and building materials distributor and solutions provider that sells primarily to new construction and remodeling contractors, today reported its financial results for the first quarter ended March 31, 2016.
First Quarter 2016 Financial Highlights and Merger Integration Update
On December 1, 2015, Stock Building Supply Holdings, Inc. (“SBS”) completed its merger transaction (the “Merger”) with Building Material Holdings Corporation (“BMC”). As a result of the Merger, current year results reported pursuant to U.S. generally accepted accounting principles (“GAAP”) are not comparable to prior year periods. For a more detailed explanation, see the “First Quarter 2016 Financial Results - Basis of Presentation” section of this press release.
During the first quarter of 2016, the Company generated significant improvements in its operating results while vigorously executing its integration plan.
- Net sales increased 148.4% to $727.4 million, compared to the first quarter of 2015, and increased 23.2%, compared to Adjusted net sales of $590.4 million in the first quarter of 2015
- Net loss of $6.8 million, or $(0.10) per diluted share, including Merger and integration costs of $2.8 million and integration-related impairment charges of $11.9 million, compared to a net loss of $3.6 million, or $(0.09) per diluted share in the first quarter of 2015
- Adjusted EBITDA increased $18.1 million to $33.7 million, compared to $15.6 million in the first quarter of 2015
- Adjusted net income of $5.4 million, or $0.08 per diluted share, compared to Adjusted net loss of $(0.3) million, or $0.00 per diluted share in the first quarter of 2015
- Net cash provided by operating activities increased $30.8 million, to $13.6 million, compared to net cash used in operating activities of $17.2 million in the first quarter of 2015
- Since closing the Merger, the Company implemented cost synergy initiatives totaling $17 million in future annual run rate savings, and remains on track to achieve annual run rate synergies of $40 to $50 million by the end of 2017
Commenting on first quarter 2016 results, Peter Alexander, President and Chief Executive Officer of BMC Stock, stated “Calendar year 2016 is off to a great start, as outsized growth rates in our structural components and millwork, doors and windows product groups, along with favorable weather conditions, helped drive a 23.2% increase in net sales, including 13.5% organic volume improvement per sales day, compared to Adjusted net sales in the first quarter of 2015. More importantly, we successfully leveraged our strong sales growth profitably, as Adjusted EBITDA margin improved 200 basis points to 4.6%, compared to the first quarter of 2015.”
“Employees across our Company continue to identify and share operational best practices while staying sharply focused on our number one priority - providing best in class customer service and solutions,” added Mr. Alexander. “In numerous locations across our footprint, teams are reorganizing our distribution, structural component and millwork operations in order to reduce cost, maximize capacity utilization, prepare for the introduction of our Ready-Frame product offering in eight new markets, and promote cross-selling opportunities across the entire sales force. Furthermore, we are moving quickly to integrate our operations on a single information technology platform, which will solidify the foundation for further development of our customer-centric eBusiness offerings.”
Jim Major, Executive Vice President and Chief Financial Officer of BMC Stock, commented, “We are pleased with our first quarter 2016 financial performance and the continued progress being made on maximizing Merger-related cost synergies and the identification of potential revenue synergies. Driven by a combination of profitable sales growth and focused operating expense management, our sales and services teams delivered Adjusted EBITDA pull-through of 13.2% of incremental Adjusted net sales dollars for the first quarter of 2016. This solid performance contributed to a significant improvement in operating cash flow, while Adjusted net debt declined to $422.4 million as of March 31, 2016, which is equivalent to 2.9 times our Adjusted EBITDA for the twelve months ended March 31, 2016.”
First Quarter 2016 Financial Results - Basis of Presentation
The Merger was accounted for as a “reverse acquisition” under the acquisition method of accounting, with SBS treated as the legal acquirer and BMC treated as the acquirer for accounting purposes. As such, the Company has accounted for the Merger by using BMC historical information and accounting policies and adding the assets and liabilities of SBS as of the completion date of the Merger at their estimated fair values. As a result, current year results reported pursuant to U.S. GAAP are not comparable to prior year periods.
For informational purposes only, the Company has furnished Adjusted financial information for the three months ended March 31, 2016 and the three months ended March 31, 2015. The prior year Adjusted financial information combines the historical results of BMC for the first quarter of 2015 with the historical results of SBS for the first quarter of 2015. The Adjusted financial information has not been prepared in accordance with GAAP, and is based upon information and assumptions deemed appropriate by the Company’s management. This Adjusted financial information is not necessarily indicative of what the Company’s results actually would have been had the Merger been completed as of January 1, 2015. In addition, this Adjusted financial information is not indicative of future results or current financial conditions and does not reflect any anticipated synergies, operating efficiencies, cost savings or integration costs that have or may result in the future from the Merger. All Adjusted financial information should be read in conjunction with separate historical financial statements and accompanying notes filed with the Securities and Exchange Commission (“SEC”). A reconciliation of Adjusted financial measures to GAAP financial measures is provided in the “Reconciliation of GAAP to Non-GAAP Measures” section of the press release.
First Quarter 2016 Financial Results Compared to Prior Year Period
Net sales in the first quarter of 2016 increased 148.4% to $727.4 million, compared to the first quarter of 2015, primarily as a result of the Merger and the acquisitions of VNS Corporation (“VNS”) and Robert Bowden, Inc. (“RBI”). Net sales in the first quarter of 2016 increased 23.2% to $727.4 million, compared to Adjusted net sales in the first quarter of 2015. The Company estimates net sales increased 10.8% as a result of acquisitions completed in 2015 (excluding the Merger), 13.5% from other volume growth per sales day and 1.6% from one additional sales day compared to the prior year period, and decreased 2.7% as a result of lumber and sheet goods commodity deflation.
Gross profit in the first quarter of 2016 increased 149.8% to $166.6 million, compared to the first quarter of 2015, primarily driven by the Merger and the acquisitions of VNS and RBI. First quarter 2016 Adjusted gross profit grew 22.8%, to $169.5 million, compared to Adjusted gross profit in the first quarter of 2015, primarily as a result of increased sales volume.
First quarter 2016 selling, general and administrative expenses increased 125.5% to $141.8 million, compared to the first quarter of 2015, primarily as a result of the Merger and the acquisitions of VNS and RBI.
Depreciation expense in the first quarter of 2016, including the portion reported within cost of sales, increased to $11.4 million, compared to $4.6 million in the first quarter of 2015. The increase was primarily driven by fixed assets acquired through the Merger and the acquisitions of VNS and RBI, as well as replacements and additions of delivery fleet, material handling equipment and operating equipment.
Amortization expense in the first quarter of 2016 was $5.2 million, compared to $0.0 million in the first quarter of 2015. The amortization expense recognized for the three months ended March 31, 2016 relates to intangible assets acquired through the Merger and the acquisitions of VNS and RBI.
Interest expense in the first quarter of 2016 was $8.2 million, including $0.9 million of non-cash amortized debt issuance costs, compared to $6.7 million in the first quarter of 2015. This increase was primarily the result of borrowings assumed in the Merger.
For the first quarter of 2016, the Company reported an operating loss of $3.9 million, compared to operating income of $0.4 million in the first quarter of 2015, and a net loss of $6.8 million, or $(0.10) per diluted share, compared to a net loss of $3.6 million, or $(0.09) per diluted share in the first quarter of 2015. First quarter 2016 results included approximately $2.8 million in Merger and integration costs and $11.9 million of integration-related impairment charges associated with an Enterprise Resource Planning system which had been under development prior to the Merger.
Adjusted net income in the first quarter of 2016 was $5.4 million, or $0.08 per diluted share, compared to Adjusted net loss of $(0.3) million, or $0.00 per diluted share, in the first quarter of 2015. Adjusted EBITDA in the first quarter of 2016 was $33.7 million, compared to $15.6 million in the first quarter of 2015.
A reconciliation of non-GAAP financial measures to comparable GAAP financial measures is provided in the “Reconciliation of GAAP to Non-GAAP Measures” section of this press release.
Liquidity and Capital Resources
Total liquidity as of March 31, 2016 was approximately $159.1 million, which includes cash and cash equivalents of $4.4 million and $154.7 million of borrowing availability under our asset-backed revolver. Capital expenditures during the first quarter of 2016 totaled $5.5 million, primarily to fund purchases of vehicles and equipment to support increased sales volume and replace aged assets, and facility and technology investments to support our operations. In addition, the Company acquired approximately $2.7 million of assets, consisting primarily of material handling equipment, under capital lease arrangements.
Outlook
“Looking forward in 2016, we believe that macro-economic trends will continue to support steady growth across the residential construction market and our business is well positioned to thrive in the current environment,” stated Mr. Alexander. “We remain focused on expeditiously integrating the BMC and SBS businesses, investing in sales and service capabilities that differentiate us from our local competitors, and optimizing profitable growth opportunities by creating solutions focused on critical industry needs.”
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES |
||||||||
Condensed Consolidated Statements of Operations |
||||||||
(unaudited) |
||||||||
|
|
|
||||||
|
|
Three Months Ended March 31, |
||||||
(in thousands, except per share amounts) |
|
2016 |
|
2015 |
||||
Net sales |
|
|
|
|
||||
Building products |
|
$ |
553,379 |
|
|
$ |
213,874 |
|
Construction services |
|
174,039 |
|
|
78,952 |
|
||
|
|
727,418 |
|
|
292,826 |
|
||
Cost of sales |
|
|
|
|
||||
Building products |
|
420,531 |
|
|
160,813 |
|
||
Construction services |
|
140,270 |
|
|
65,316 |
|
||
|
|
560,801 |
|
|
226,129 |
|
||
Gross profit |
|
166,617 |
|
|
66,697 |
|
||
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
141,781 |
|
|
62,861 |
|
||
Depreciation expense |
|
8,792 |
|
|
3,444 |
|
||
Amortization expense |
|
5,245 |
|
|
— |
|
||
Impairment of assets |
|
11,883 |
|
|
— |
|
||
Merger and integration costs |
|
2,836 |
|
|
— |
|
||
|
|
170,537 |
|
|
66,305 |
|
||
(Loss) income from operations |
|
(3,920 |
) |
|
392 |
|
||
Other income (expense) |
|
|
|
|
||||
Interest expense |
|
(8,231 |
) |
|
(6,730 |
) |
||
Other income, net |
|
1,455 |
|
|
669 |
|
||
Loss before income taxes |
|
(10,696 |
) |
|
(5,669 |
) |
||
Income tax benefit |
|
(3,940 |
) |
|
(2,108 |
) |
||
Net loss |
|
$ |
(6,756 |
) |
|
$ |
(3,561 |
) |
|
|
|
|
|
||||
Weighted average common shares outstanding, basic and diluted |
|
65,338 |
|
|
38,984 |
|
||
Net loss per common share, basic and diluted |
|
$ |
(0.10 |
) |
|
$ |
(0.09 |
) |
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES |
||||||||
Condensed Consolidated Balance Sheets |
||||||||
(unaudited) |
||||||||
(in thousands, except per share amounts) |
|
March 31, |
|
December 31, |
||||
Assets |
|
|
|
|
||||
Current assets |
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
4,364 |
|
|
$ |
1,089 |
|
Accounts receivable, net of allowances |
|
329,096 |
|
|
303,176 |
|
||
Inventories, net |
|
254,118 |
|
|
243,960 |
|
||
Costs in excess of billings on uncompleted contracts |
|
24,122 |
|
|
22,528 |
|
||
Income taxes receivable |
|
10,297 |
|
|
11,390 |
|
||
Prepaid expenses and other current assets |
|
29,830 |
|
|
31,817 |
|
||
Total current assets |
|
651,827 |
|
|
613,960 |
|
||
Property and equipment, net of accumulated depreciation |
|
280,819 |
|
|
295,978 |
|
||
Deferred income taxes |
|
2,500 |
|
|
— |
|
||
Customer relationship intangible assets, net of accumulated amortization |
|
173,834 |
|
|
177,036 |
|
||
Other intangible assets, net of accumulated amortization |
|
8,857 |
|
|
10,900 |
|
||
Goodwill |
|
254,616 |
|
|
254,664 |
|
||
Other long-term assets |
|
18,253 |
|
|
18,601 |
|
||
Total assets |
|
$ |
1,390,706 |
|
|
$ |
1,371,139 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
||||
Current liabilities |
|
|
|
|
||||
Accounts payable |
|
$ |
177,961 |
|
|
$ |
135,632 |
|
Accrued expenses and other liabilities |
|
83,077 |
|
|
91,888 |
|
||
Billings in excess of costs on uncompleted contracts |
|
16,021 |
|
|
15,888 |
|
||
Interest payable |
|
1,384 |
|
|
6,882 |
|
||
Current portion: |
|
|
|
|
||||
Long-term debt and capital lease obligations |
|
9,415 |
|
|
10,129 |
|
||
Insurance deductible reserves |
|
18,566 |
|
|
17,888 |
|
||
Total current liabilities |
|
306,424 |
|
|
278,307 |
|
||
Insurance deductible reserves |
|
38,130 |
|
|
37,334 |
|
||
Long-term debt |
|
399,082 |
|
|
400,216 |
|
||
Long-term portion of capital lease obligations |
|
16,874 |
|
|
16,495 |
|
||
Deferred income taxes |
|
— |
|
|
3,021 |
|
||
Other long-term liabilities |
|
6,171 |
|
|
6,834 |
|
||
Total liabilities |
|
766,681 |
|
|
742,207 |
|
||
Commitments and contingencies |
|
|
|
|
||||
Stockholders' equity |
|
|
|
|
||||
Common stock, $0.01 par value, 300.0 million shares authorized, 65.4 million and 65.4 million shares issued, and 65.4 million and 65.3 million outstanding at March 31, 2016 and December 31, 2015, respectively |
|
654 |
|
|
654 |
|
||
Additional paid-in capital |
|
628,774 |
|
|
626,402 |
|
||
Retained (deficit) earnings |
|
(4,454 |
) |
|
2,302 |
|
||
Treasury stock, at cost, 0.1 million and less than 0.1 million shares at March 31, 2016 and December 31, 2015, respectively |
|
(949 |
) |
|
(426 |
) |
||
Total stockholders' equity |
|
624,025 |
|
|
628,932 |
|
||
Total liabilities and stockholders' equity |
|
$ |
1,390,706 |
|
|
$ |
1,371,139 |
|
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES |
||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||
(unaudited) |
||||||||
|
|
Three Months Ended March 31, |
||||||
(in thousands) |
|
2016 |
|
2015 |
||||
Cash flows from operating activities |
|
|
|
|
||||
Net loss |
|
$ |
(6,756 |
) |
|
$ |
(3,561 |
) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
||||
Depreciation expense |
|
11,437 |
|
|
4,628 |
|
||
Amortization of intangible assets |
|
5,245 |
|
|
— |
|
||
Amortization of debt issuance costs |
|
915 |
|
|
569 |
|
||
Amortization of original issue discount |
|
62 |
|
|
61 |
|
||
Amortization of inventory step-up charges |
|
2,884 |
|
|
— |
|
||
Deferred income taxes |
|
(5,521 |
) |
|
— |
|
||
Non-cash stock compensation expense |
|
1,889 |
|
|
848 |
|
||
Impairment of assets |
|
11,883 |
|
|
— |
|
||
Loss (gain) on sale of property, equipment and real estate |
|
18 |
|
|
(537 |
) |
||
Gain on insurance proceeds |
|
(1,003 |
) |
|
— |
|
||
Change in assets and liabilities |
|
|
|
|
||||
Accounts receivable, net of allowances |
|
(25,920 |
) |
|
984 |
|
||
Inventories, net |
|
(13,042 |
) |
|
(2,660 |
) |
||
Accounts payable |
|
43,425 |
|
|
1,451 |
|
||
Other assets and liabilities |
|
(11,887 |
) |
|
(18,980 |
) |
||
Net cash provided by (used in) operating activities |
|
13,629 |
|
|
(17,197 |
) |
||
Cash flows from investing activities |
|
|
|
|
||||
Change in restricted assets |
|
— |
|
|
21,017 |
|
||
Purchases of property, equipment and real estate |
|
(5,471 |
) |
|
(6,758 |
) |
||
Proceeds from sale of property, equipment and real estate |
|
217 |
|
|
1,065 |
|
||
Insurance proceeds |
|
1,003 |
|
|
— |
|
||
Other investing activities |
|
— |
|
|
101 |
|
||
Net cash (used in) provided by investing activities |
|
(4,251 |
) |
|
15,425 |
|
||
Cash flows from financing activities |
|
|
|
|
||||
Proceeds from revolving line of credit |
|
364,270 |
|
|
— |
|
||
Repayments of proceeds from revolving line of credit |
|
(364,978 |
) |
|
— |
|
||
Borrowings under other notes |
|
— |
|
|
1,138 |
|
||
Principal payments on other notes |
|
(2,043 |
) |
|
(1,411 |
) |
||
Payments on capital lease obligations |
|
(1,933 |
) |
|
(1,087 |
) |
||
Other financing activities |
|
(1,419 |
) |
|
(404 |
) |
||
Net cash used in financing activities |
|
(6,103 |
) |
|
(1,764 |
) |
||
Net increase (decrease) in cash and cash equivalents |
|
3,275 |
|
|
(3,536 |
) |
||
Cash and cash equivalents |
|
|
|
|
||||
Beginning of period |
|
1,089 |
|
|
63,262 |
|
||
End of period |
|
$ |
4,364 |
|
|
$ |
59,726 |
|
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES |
||||||||||||||||
Net Sales by Product Category |
||||||||||||||||
(unaudited) |
||||||||||||||||
|
|
|
|
|
|
|||||||||||
|
Three Months Ended |
|
Three Months Ended |
|
|
|||||||||||
(in thousands) |
Net Sales |
|
% of Sales |
|
Net Sales |
|
% of Sales |
|
% Change |
|||||||
Structural components |
$ |
110,381 |
|
|
15.2 |
% |
|
$ |
45,432 |
|
|
15.5 |
% |
|
143.0 |
% |
Lumber & lumber sheet goods |
209,302 |
|
|
28.8 |
% |
|
91,100 |
|
|
31.1 |
% |
|
129.7 |
% |
||
Millwork, doors & windows |
217,899 |
|
|
30.0 |
% |
|
82,135 |
|
|
28.0 |
% |
|
165.3 |
% |
||
Other building products & services |
189,836 |
|
|
26.0 |
% |
|
74,159 |
|
|
25.4 |
% |
|
156.0 |
% |
||
Total net sales |
$ |
727,418 |
|
|
100.0 |
% |
|
$ |
292,826 |
|
|
100.0 |
% |
|
148.4 |
% |