Stock Building Supply reports Q4 net income of US$3.0M compared with US$3.8M loss a year earlier on sales up 21% to US$305.2M; CEO highlights strong revenue growth, profit improvement, on continued US housing industry recovery

Wendy Lisney

RALEIGH, North Carolina , February 25, 2014 (press release) – Fourth Quarter 2013 Net Income of $3.0 Million and Adjusted EBITDA of $9.6 Million

Stock Building Supply Holdings, Inc. (Nasdaq:STCK), a large, 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 fourth quarter and year ended December 31, 2013.

Fourth Quarter 2013 Financial Highlights

• Net sales of $305.2 million, up 21.0%, compared to $252.1 million for the fourth quarter of 2012
• Operating income of $5.1 million, compared to operating loss of $5.2 million for the fourth quarter of 2012
• Net income of $3.0 million, compared to a net loss of $3.8 million for the fourth quarter of 2012
• Adjusted EBITDA of $9.6 million, compared to $3.1 million for the fourth quarter of 2012

Full Year 2013 Financial Highlights

• Net sales of $1,197.0 million, up 27.0%, compared to $942.4 million for full year 2012
• Net loss of $4.6 million, including $10.0 million of initial public offering ("IPO") transaction-related costs, compared to net loss of $14.5 million for full year 2012
• Adjusted EBITDA of $27.8 million, compared to $2.0 million for full year 2012

Commenting on the Company's results, Jeff Rea, Chief Executive Officer of Stock Building Supply, stated, "During the fourth quarter of 2013, the U.S. housing industry continued its recovery and our business delivered strong revenue growth and profit improvement. Over the course of 2013, our net sales to single-family homebuilders grew nearly 31% and our net sales to remodeling contractors increased over 18%. This revenue growth, which outpaced the underlying increase in US single-family housing starts of 15.5%, as reported by the US Census Bureau, enabled us to expand our operating profit margins and accelerate investments in our business."

Commenting on the fourth quarter and full year results, Jim Major, Executive Vice President and Chief Financial Officer, stated, "During the past year, we continued to implement our productivity initiatives in order to achieve margin improvements from our net sales growth and operating cost structure. These initiatives contributed to a reduction in our selling, general and administrative expenses as a percentage of net sales to 21.3% for full year 2013, compared to 23.5% in 2012. We also increased our gross profit as a percentage of net sales to 22.9% for full year 2013 as compared to 22.8% in 2012 and achieved sequential improvements in our gross margin percentage during each of the last three quarters of 2013."

Mr. Major added, "In February 2014, we increased the size of our secured revolving credit facility from $150.0 million to $200.0 million and extended the maturity to December 31, 2017. We believe this amendment will further enhance our ability to capitalize on future growth and productivity opportunities and maintain an attractive overall cost of capital."

Fourth Quarter 2013 Financial Results Compared to Prior Year Period

Net sales for the fourth quarter of 2013 totaled $305.2 million, up $53.1 million, or 21.0%, compared to $252.1 million in the fourth quarter of 2012. The Company estimates net sales increased 18.7% related to increased volume and 2.3% due to increased selling prices. The increase in sales volume was primarily driven by increased single-family housing starts and increased demand arising from higher remodeling activity.

Gross profit in the fourth quarter of 2013 was $73.7 million, up $16.0 million, or 27.7%, compared to $57.7 million in the fourth quarter of 2012, primarily as a result of increased sales volume. The gross margin percentage for the fourth quarter of 2013 increased 130 basis points to 24.2% from 22.9% in the fourth quarter of 2012, primarily as a result of structural components and windows and other exterior products representing a higher percentage of total net sales, improved gross margins on sales of lumber and lumber sheet goods and increased consideration from suppliers due to higher purchase volume.

Selling, general and administrative expenses during the fourth quarter of 2013 were $66.5 million, up $8.9 million, or 15.4%, from $57.6 million in the fourth quarter of 2012. This increase was primarily driven by variable costs to serve higher sales volume, such as sales commissions, shipping and handling costs and other variable compensation, which increased by $4.6 million. Other salary, wage, benefit and taxation costs increased $3.8 million, primarily as a result of headcount additions to serve increased sales volume and sales opportunities arising from the improved residential construction market.

Operating income in the fourth quarter of 2013 was $5.1 million, compared to an operating loss of $5.2 million in the fourth quarter of 2012. Net income during the quarter totaled $3.0 million, or $0.11 per diluted share, compared to a net loss of $3.8 million, or ($0.36) per diluted share, in the fourth quarter of 2012.

Adjusted EBITDA in the fourth quarter of 2013 totaled $9.6 million, up $6.5 million, compared to $3.1 million in the fourth quarter of 2012. Adjusted income from continuing operations for the fourth quarter of 2013 increased $4.1 million to $3.6 million, compared to an adjusted net loss from continuing operations of $0.5 million in the fourth quarter of 2012. A reconciliation of non-GAAP (adjusted) financial measures to comparable GAAP financial measures is provided as an appendix to this release.

Full Year 2013 Financial Results Compared to Full Year 2012

Net sales for 2013 totaled $1,197.0 million, up $254.6 million, or 27.0%, compared to $942.4 million in 2012. The Company estimates net sales increased 19.6% related to increased volume and 7.4% due to increased selling prices. The increase in sales volume was primarily driven by increased single-family housing starts and increased demand arising from higher remodeling activity.

Gross profit in 2013 was $274.4 million, up $59.7 million, or 27.8%, compared to $214.7 million in 2012, primarily as a result of increased sales volume. The gross margin percentage increased 10 basis points to 22.9% from 22.8%.

Selling, general and administrative expenses for 2013 were $254.9 million, up $33.7 million, or 15.3%, from $221.2 in 2012. This increase was primarily driven by variable costs to serve higher sales volume, such as sales commissions, shipping and handling costs and other variable compensation, which increased by $18.9 million. Other salary, wage, benefit and taxation costs increased $10.3 million, primarily as a result of headcount additions to serve increased sales volume and sales opportunities arising from the improved residential construction market.

Operating income for 2013 was $0.8 million compared to an operating loss of $18.9 million in 2012. Net loss for 2013 was $4.6 million, or ($0.36) per diluted share, compared to a net loss of $14.5 million, or ($1.83) per diluted share, in 2012. During 2013, the Company's operating income and net loss were impacted by $10.0 million of IPO transaction-related costs, which included a $9.0 million fee for terminating our management services agreement with The Gores Group, LLC.

Adjusted EBITDA in 2013 totaled $27.8 million, up $25.8 million, compared to $2.0 million in 2012. Adjusted income from continuing operations in 2013 increased $16.3 million to $7.4 million, compared to an adjusted loss from continuing operations of $8.9 million in 2012. A reconciliation of non-GAAP (adjusted) financial measures to comparable GAAP financial measures is provided as an appendix to this release.

Liquidity and Capital Resources

Total liquidity as of December 31, 2013 was approximately $72.1 million, which includes cash and cash equivalents of $1.1 million and $71.0 million of borrowing availability under our existing revolver.

Capital expenditures during the fourth quarter and full year 2013 totaled $4.9 million and $7.4 million, respectively, primarily to fund purchases of delivery fleet and material handling equipment.

Outlook

"While we are pleased with the progress our business made over the past year, we see many opportunities to expand and enhance our capabilities to serve our customers," added Mr. Rea. "As we look ahead to 2014, we are encouraged by macro-economic trends that generally support growth in residential new construction and remodeling activity. While many of our customers and local operations have been impacted by adverse weather events quarter-to-date, as we look ahead to the balance of 2014, we remain optimistic. Additionally, we intend to accelerate investment in our core product and service capabilities in order to capture the growth opportunities that will be available to us as the housing recovery continues."

Conference Call

Stock Building Supply will host a conference call on Tuesday, February 25, 2014 at 8:30 a.m. Eastern Time and will simultaneously broadcast it live over the Internet. The conference call can be accessed by dialing 877-407-0784 (domestic) or 201-689-8560 (international). A telephonic replay will be available approximately three hours after the call and can be accessed by dialing 877-870-5176, or for international callers, 1-858-384-5517. The passcode for the live call and the replay is 13575802. The telephonic replay will be available until 11:59 pm (Eastern Time) on March 4, 2014. The live webcast and archived replay can also be accessed on the Company's investor relations website at ir.stocksupply.com. The online archive of the webcast will be available for approximately 90 days.

About Stock Building Supply

Stock Building Supply operates in 21 metropolitan areas in 14 states primarily in the South and West regions of the United States (as defined by the U.S. Census Bureau). Today, we serve our customers from 69 strategically located facilities. We offer approximately 39,000 stock keeping units, as well as a broad range of customized products, including lumber and lumber sheet goods, millwork, doors, flooring, windows, structural components, engineered wood products, trusses, wall panels and other exterior products. Our customer base includes production homebuilders, custom homebuilders and remodeling contractors.

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