Builders FirstSource Reports Record Fourth Quarter and Full Year 2020 Results
February 26, 2021 at 07:00 AM EST
DALLAS, Feb. 26, 2021 (GLOBE NEWSWIRE) -- Builders FirstSource, Inc. (Nasdaq: BLDR) today reported its results for the fourth quarter and full year ending December 31, 2020.
Fourth Quarter 2020 Highlights:
On January 1, 2021, Builders FirstSource completed its transformational merger with BMC Stock Holdings (“BMC”) in an all-stock transaction, creating the nation’s premier supplier of building materials and services. As a result, the fourth quarter and full-year results do not include the financial results of BMC.
Chad Crow, CEO of Builders FirstSource, commented, “Record fourth quarter results reflect an exceptional finish to a year of remarkable performance, despite the challenges in 2020. Solid momentum from the continued execution of our strategic plan combined with strong residential market tailwinds positions Builders FirstSource to accelerate its success through the recently completed combination with BMC. The combined company provides a broader platform for growth including a deepened presence in the top housing markets across the nation. It has been my absolute pleasure to help build this great company over the past 21 years, and I believe that Dave Flitman’s proven ability to drive sustainable growth with a defined vision will lead to further value creation for our shareholders in the quarters and years to come.”
Dave Flitman, President of Builders FirstSource who will succeed Mr. Crow as CEO on April 1, added, “We are very excited about our merger, which was overwhelmingly approved by the shareholders of both companies and positions us with a long runway of growth well into the future. I want to thank Chad for his partnership in creating the premier specialty building materials distributor in the U.S. On a pro forma basis, our combined companies achieved outstanding top and bottom-line performance in 2020, including $12.8 billion in net sales and over $1 billion of Adjusted EBITDA. Our integration efforts are progressing very well against our plan and we remain confident in delivering our expected run rate cost savings of $130 million to $150 million by the end of 2023. I look forward to working with our more than 26,000 team members to execute our strategy and foster a culture where we live our values of safety, people, integrity, customers and excellence.”
Peter Jackson, CFO of Builders FirstSource, said, “We entered 2021 with a strong foundation for our best-in-class solutions to thrive, underpinned by a pro forma leverage ratio for our combined companies of 1.3 times and free cash flow in excess of $286 million. We continue to evaluate opportunities to leverage the strength of our balance sheet as our debt falls. Looking ahead, we expect favorable market tailwinds from continued robust new single-family home demand to drive additional growth, and cash generation.”
Builders FirstSource Fourth Quarter 2020 Compared to Fourth Quarter 2019
Selling, General and Administrative Expenses
Income Tax Expense
Builders FirstSource Full Year 2020 Compared to Full Year 2019
Selling, General and Administrative Expenses
Builders FirstSource Capital Structure, Leverage, and Liquidity Information:
Pro Forma Combined Unaudited and Adjusted Financial Data, Fourth Quarter and Full year 2020:
The Company has provided supplemental unaudited financial data of the combined company in this press release. The below financial data combines Builders FirstSource and BMC historical operating results as if the businesses had been operated together on a combined basis during prior periods along with adjustments to reclassify certain BMC historical financial information to conform to Builders FirstSource historical financial information. This financial data is not intended to be, and was not, prepared on a basis consistent with the unaudited pro forma condensed combined financial information included in Builders FirstSource’s Pre-effective amendment to an S-4 filing dated November 17, 2020 with the U.S. Securities and Exchange Commission (the “Pro Forma S-4 Filing”), which provides the pro forma data information prepared in accordance with Article 11 of SEC Regulation S-X.
A table accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/bfaaf86d-1d0e-4277-b6cd-c796d177b955
Pro forma combined sales increased 41.2% to $3.7 billion in the fourth quarter of 2020 compared to $2.7 billion in the fourth quarter of 2019. Core organic grew approximately 13.1%, commodity price inflation increased net sales by approximately 26.5% and acquisitions contributed an additional 1.6%. For the full year 2020, pro forma net sales were $12.8 billion, up 17.0%, as compared to $10.9 billion in the prior year.
Pro forma combined gross margin percentage in the fourth quarter 2020 was 26.0%, down from 26.8% in the prior period. The decrease in gross margin percentage was primarily attributable to a shift in sales mix driven by commodity inflation compared to the prior year period. Additionally, the sharp rise in commodity prices during the quarter relative to our short-term customer pricing commitments contributed to the decline. For the full year 2020, pro forma gross margin percentage was 25.8%, down from 26.9% in the prior year.
Pro forma combined net interest expense in the fourth quarter and full year 2020 was $34.5 million and $158.0 million, respectively.
Pro forma combined Adjusted net income was $217.6 million in the fourth quarter of 2020, compared to $67.0 million in the fourth quarter of 2019.
Pro forma combined Adjusted EBITDA in the fourth quarter of 2020 was $377.8 million, or 10.1% of sales, compared to $167.6 million, or 6.3% of sales in 2019. This represents 125.4% growth on a year over year basis.
Capital Markets Update:
In January of 2021, the Company amended and extended the maturity of its existing $900 million Revolving Credit Facility. The amendment increased total commitments by $500 million, up to $1.4 billion in total, while extending the maturity by an additional 26 months to January 2026. The increase and extension of this facility provides the Company with an improved capital base that better represents the larger reach and scale of the company going forward.
On February 16, 2021, pursuant to the optional call feature in the 2027 Indenture, the Company gave notice that on March 3, 2021, $82.5 million of 2027 notes will be redeemed at a redemption price equal to 103% of the principal amount of the notes, plus accrued and unpaid interest.
At the end of the fourth quarter, the Company’s pro forma combined net debt was approximately $1.4 billion, which was 1.3 times its proforma combined LTM adjusted EBITDA. In addition, the Company has no long-term debt maturities due until 2027.
BMC Merger Integration:
Operating in some of the nation's largest and fastest growing regions, the combined company is exceptionally positioned for long-term value creation. Since closing the merger with BMC on January 1, 2021, Builders FirstSource has made substantial progress in integrating the two companies.
The Company’s increased scale, a strong balance sheet bolstered by robust cash generation, and anticipated annual run-rate synergies of $130 million to $150 million by the end 2023 expected to provide greater resources to invest in growth, innovation and ongoing value creation for all stakeholders.
For 2021, the Company expects significant improvement in its financial performance, including the following:
The 2021 outlook is based on several assumptions, including the following:
About Builders FirstSource
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, forecasted financial performance or other statements about anticipations, beliefs, expectations, hopes, synergies, 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. In addition, oral statements made by our directors, officers and employees to the investor and analyst communities, media representatives and others, depending upon their nature, may also constitute forward-looking statements. As with the forward-looking statements included in this release, these forward-looking statements are by nature inherently uncertain, and actual results may differ materially as a result of many factors. 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 recent novel coronavirus disease 2019 (also known as “COVID-19”) pandemic, the Company’s merger with BMC, 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 (the “SEC”) and in the other reports filed by the Company with the SEC. Consequently, all forward-looking statements in this release are qualified by the factors, risks and uncertainties contained therein.
Non-GAAP Financial Measures
The financial measures entitled Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, diluted Adjusted net income per share and Free cash flow are not financial measures recognized under GAAP and are therefore non-GAAP financial measures. The Company believes that these non-GAAP financial measures 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 GAAP net income before depreciation and amortization expense, interest expense, net, income tax expense and other non-cash or special items including stock compensation expense, acquisition and integration expense, debt issuance and refinancing costs, gains (loss) on sale and asset impairments and other items. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net sales. Adjusted net income is defined as GAAP net income before non-cash or special items including acquisition and integration expense and debt issuance and refinancing cost offset by the tax effect of those adjustments to net income. Adjusted net income per diluted share is defined as Adjusted net income divided by weighted average diluted common shares outstanding. Free cash flow is defined as GAAP net cash from operating activities less capital expenditures, net of proceeds from the sale of property, plant and equipment.
Company management uses Adjusted EBITDA, Adjusted EBITDA margin and Adjusted net income as supplemental measures in its evaluation of the Company’s business, including for trend analysis, purposes of determining management incentive compensation and budgeting and planning purposes. Company management believes that these measures provide a meaningful measure of the Company’s performance and a better baseline for comparing financial performance across periods because these measures eliminate the effects of period to period changes, in the case of Adjusted EBITDA and Adjusted EBITDA margin, in taxes, costs associated with capital investments, interest expense, stock compensation expense, and other non-cash and non-recurring items and, in the case of Adjusted net income, in certain non-recurring items. Company management also uses free cash flow as a supplemental measure in its evaluation of the Company’s business, including for purposes of its internal liquidity assessments. Company management believes that free cash flow provides a meaningful evaluation of the Company’s liquidity.
The Company believes that these non-GAAP financial measures provide additional tools for investors to use in evaluating ongoing operating results, cash flows and trends and in comparing the Company’s financial measures with other companies in the Company’s industry, which may present similar non-GAAP financial measures to investors. However, the Company’s calculation of these financial measures are not necessarily comparable to similarly titled measures reported by other companies. Company management does not consider these financial measures in isolation or as alternatives to financial measures determined in accordance with GAAP. Furthermore, items that are excluded and other adjustments and assumptions that are made in calculating these non-GAAP financial measures are significant components in understanding and assessing the Company’s financial performance. These non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, the Company’s GAAP financial measures. Further, because these non-GAAP financial measures are not determined in accordance with GAAP and are thus susceptible to varying calculations, the non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures of other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables below.
The Company’s Adjusted EBITDA outlook and full-year forecast for its effective tax rate exclude the impact of certain income and expense items that management believes are not part of underlying operations. These items may include, but are not limited to, loss on early extinguishment of debt, restructuring charges, certain tax items, and charges associated with non-recurring professional and legal fees associated with acquisitions. The Company’s management cannot estimate on a forward-looking basis without unreasonable effort the impact these income and expense items will have on its reported Net income and its reported effective tax rate because these items, which could be significant, are difficult to predict and may be highly variable. As a result, the Company does not provide a reconciliation to the most comparable GAAP financial measure for its Adjusted EBITDA outlook or its effective tax rate on operations forecast. Please see the Forward-Looking Statements section of this release for a discussion of certain risks relevant to the Company’s outlook.
Pro Forma Combined Financial Data
For avoidance of doubt, the Pro Forma Combined Unaudited and Adjusted Financial Data included in this release was not intended to be, and was not, prepared on a basis consistent with the unaudited pro forma condensed combined financial data included in Builders FirstSource’s Registration Statement on Form S-4 filed with the SEC and that was declared effective by the SEC on November 18, 2020 (the “Form S-4”), which provides the pro forma financial data prepared in accordance with Article 11 of SEC Regulation S-X. For instance, the Pro Forma Combined Unaudited and Adjusted Financial Data does not give effect to the BMC merger under the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 805, Business Combinations (“ASC Topic 805”), with Builders FirstSource treated as the legal and accounting acquirer, and was not prepared to reflect the merger as if it occurred on the first day of any of the fiscal periods presented. The Pro Forma Combined Unaudited and Adjusted Financial Data has not been adjusted to give effect to pro forma events that are (1) directly attributable to the merger, (2) factually supportable, or (3) expected to have a continuing impact on the combined results of Builders FirstSource and BMC. Consequently, the Pro Forma Combined Unaudited and Adjusted Financial Data is intentionally different from, but does not supersede, the pro forma financial data set forth in the Form S-4.
In addition, the Pro Forma Combined Unaudited and Adjusted Financial Data does not purport to indicate the results that actually would have been obtained had the companies been operated together during the periods presented, or which may be realized in the future. The Pro Forma Combined Unaudited and Adjusted Financial Data have no impact on Builders FirstSource’s or BMC’s previously reported consolidated balance sheets or statements of operations, cash flows or equity.
Tables accompanying this announcement are available at
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES Pro Forma Combined Financial DataBUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES Consolidated Statement of Operations and Comprehensive IncomeBUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES Consolidated Statement of Operations and Comprehensive IncomeBUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES Financial DataBUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES Consolidated Balance SheetBUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES Consolidated Statement of Cash FlowsBUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES Reconciliation of Adjusted Non-GAAP Financial Measures to their GAAP EquivalentsBUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES Sales by Product CategoryBUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES Interest ReconciliationBUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES Free Cash FlowBUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES Pro Forma Combined Financial DataBUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES Pro Forma Combined Financial Data