Builders FirstSource reports Q1 net loss of US$11.8M compared with US$19.2M loss a year earlier, on sales up 45.7% to US$319.7M; CEO highlights sixth consecutive quarter of topline growth of more than 30%

Wendy Lisney

DALLAS , April 26, 2013 (press release) – First Quarter Adjusted EBITDA Increases to $5.4 Million on 46% Sales Growth

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 first quarter ended March 31, 2013.

Highlights include the following (see financial schedules for more information, including non-GAAP reconciliations):

First quarter 2013 sales increased 45.7 percent to $319.7 million, when compared to first quarter 2012.
Adjusted EBITDA for the current quarter was $5.4 million, a $7.5 million improvement when compared to an Adjusted EBITDA loss of ($2.1) million for the first quarter of 2012.

Commenting on the company's results, Floyd Sherman, Builders FirstSource Chief Executive Officer said, "I am very pleased to start our fiscal year with such strong financial results, as we ended the first quarter with over $319 million in sales and improved our Adjusted EBITDA by $7.5 million. We were able to achieve topline growth of greater than 30 percent for a sixth consecutive quarter." Mr. Sherman added, "Our sales increase once again exceeded the increase in residential construction activity, as actual single-family housing starts in the South Region increased 27.4 percent and single-family units under construction increased 23.2 percent."

Chad Crow, Builders FirstSource Senior Vice President and Chief Financial Officer, added, "Though our sales growth for the quarter was very positive, the commodity lumber price inflation we experienced during the quarter once again placed significant downward pressure on gross margins. Subsequent to setting first quarter customer pricing in late December, commodity lumber prices increased 20 percent through the end of the first quarter. While we were able to obtain price increases from many of our customers during the quarter, they were not enough to offset the continued commodity price inflation. For the quarter, we estimate commodity lumber inflation negatively impacted gross margin by 1.8 percentage points."

First Quarter 2013 Results Compared to First Quarter 2012

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

Sales were $319.7 million compared to $219.4 million last year, an increase of $100.3 million or 45.7 percent. We estimate sales increased 29.7 percent due to increased volume and 16.0 percent due to price.
Gross margin percentage was 19.5 percent in the current quarter, down from 20.6 percent in the same quarter last year. Our gross margin decreased 1.8 percentage points largely due to commodity lumber inflation during the quarter, which was offset by a 0.7 percentage point gross margin improvement due to increased sales volume.
Selling, general and administrative ("SG&A") expenses increased $10.2 million, or 20.2 percent, in the current quarter. As a percentage of sales, SG&A expense decreased to 19.1 percent in the current quarter, as compared to 23.2 percent in the first quarter of 2012. Our salaries and benefits expense, excluding stock compensation expense, was $37.7 million, or 11.8 percent of sales, in the current quarter compared to $31.1 million, or 14.2 percent of sales, in the first quarter of 2012. Delivery expense increased $1.4 million and other general administrative expense increased $1.2 million, both a result of increased sales volume.
Interest expense was $12.5 million in the current quarter, a decrease of $0.6 million from the first quarter of 2012. The decrease was primarily related to a $2.7 million reduction in the non-cash, fair value adjustment related to stock warrants issued in connection with our term loan, offset by interest on the additional term loan principal borrowed in December 2012.
We recorded $0.3 million of income tax expense in the first quarter of 2013, compared to $0.2 million in the first quarter of 2012. We recorded an after-tax, non-cash valuation allowance of $4.4 million and $7.0 million in the first quarters of 2013 and 2012, respectively, related to our net deferred tax assets. Absent the valuation allowance, the effective tax rate would have been 36.3 percent in both the first quarter of 2013 and 2012. As of the end of the current quarter, the company's gross federal income tax net operating loss available for carry-forward was approximately $245 million.
Loss from continuing operations was $11.6 million, or $0.12 loss per diluted share, compared to $19.1 million, or $0.20 loss per diluted share, in the same quarter last year. Excluding the fair value adjustment for stock warrants and the tax valuation allowance, our loss from continuing operations was $0.07 per diluted share for the current quarter compared to a $0.09 loss per diluted share for the first quarter of 2012. See reconciliation attached.
Net loss for the first quarter of 2013 was $11.8 million, or $0.12 loss per diluted share, compared to $19.2 million, or $0.20 loss per diluted share, in the first quarter of 2012.
Diluted weighted average shares outstanding were 96.0 million in the first quarter of 2013 compared to 95.3 million in the same quarter of 2012.
Adjusted EBITDA was $5.4 million in the current quarter, compared to an Adjusted EBITDA loss of $2.1 million in the same quarter last year. See reconciliation attached.

Liquidity and Capital Resources

Liquidity at March 31, 2013 was $102.7 million, which included $117.7 million in cash, reduced by the $15.0 million minimum cash requirement in our amended term loan.
Cash usage for the current quarter was $26.8 million, of which $18.9 million was due to a build in working capital related to our higher sales volumes. The remainder of our cash usage related to $1.0 million of capital expenditures and $10.9 million of cash interest, offset somewhat by cash provided by operations.
During the current quarter, we amended and reduced our existing $20.0 million stand-alone letter of credit ("LC") facility to $10.0 million. In addition, we transferred the $12.4 million of LC's outstanding under the stand-alone facility to our new $15.0 million LC sub-facility. This transfer eliminated the cash collateral requirement for our outstanding LC's and thus increased our overall liquidity at the time by $13.0 million. As of March 31, 2013, we have $12.6 million of LC's outstanding under our sub-facility and nothing outstanding under our stand-alone facility.
Operating cash flow was negative $25.2 million for the current quarter, compared to negative $14.9 million for the first quarter of 2012, the difference primarily attributable to $16.5 million more in working capital build during the first quarter of 2013.
Capital expenditures were $1.0 million for the first quarter of 2013, compared to $1.7 million for the first quarter of 2012.

Outlook

Concluding, Mr. Sherman said, "We are excited about the prospects for the homebuilding industry, and the outlook continues to suggest favorable opportunities for Builders FirstSource. The National Association of Homebuilders ("NAHB") is now predicting a 24.2 percent increase in single-family housing starts for 2013, and an additional 28.8 percent increase in 2014. We believe Builders FirstSource is well positioned to take advantage of this recovery. Our strategy remains focused on increasing our market share and improving our operating margins as we move into the spring and summer building season."

Conference Call

Builders FirstSource will host a conference call Friday, April 26, 2013 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: 888-461-2021 (U.S. and Canada) and 719-785-1768 (international). A replay of the call will be available at 3:00 p.m. CT through May 1st. To access the replay, please dial 888-203-1112 (U.S. and Canada) and 719-457-0820 (international) and refer to pass code 6046293. The live webcast and archived replay can also be accessed on the company's website at www.bldr.com under the "Investors" section. 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.

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.