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Builders FirstSource Reports Fourth Quarter And Fiscal Year 2012 Results

Chad Crow, Builders FirstSource Senior Vice President and Chief Financial Officer, added, "Our quarter-over-quarter top line growth of over 49 percent was driven by an estimated 38 percent increase in volume and an 11 percent increase in price. Fourth quarter Adjusted EBITDA of $3.4 million was our strongest quarter of the year, and the momentum gained in 2012 appears to have carried into 2013."

Mr. Crow continued, "From a liquidity standpoint, we ended the year with unrestricted cash of $131.4 million and net liquidity of $116.4 million, after giving effect to the $15.0 million minimum cash requirement contained in our amended term loan agreement. In conjunction with revisions to our letter of credit "LC" facilities made subsequent to year end, we freed up an additional $13.0 million of liquidity by eliminating the cash collateral requirement on LC's. We did not experience the seasonal reduction in working capital we had anticipated given the robust sales performance we saw during the last three months of 2012. This strong sales performance, combined with commodity price inflation, resulted in our working capital actually increasing during the quarter by approximately $12 million. Components of working capital continued to be strong as our accounts receivable days remained relatively flat for the quarter at 36.0 days, inventory turns improved to 9.2x compared to 8.7x for the fourth quarter of 2011, and our accounts payable days were 30 days."

Fourth Quarter 2012 Results Compared to Fourth Quarter 2011

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

  • Sales were $287.6 million compared to $192.7 million last year, an improvement of $94.9 million or 49.3 percent.  We estimate sales increased approximately 38 percent due to increased volume and 11 percent due to price.     
  • Gross margin percentage was 20.2 percent, down from 20.4 percent, a 0.2 percentage point decrease. Our gross margin decreased 1.2 percentage points largely due to commodity lumber inflation during the quarter which was offset by a 1.0 percentage point gross margin improvement due to increased sales volume. On a sequential quarter basis gross margin percentage improved from 19.8 percent to 20.2 percent.  
  • SG&A expenses increased $10.7 million, or 22.8 percent, in the current quarter. We recorded proceeds of $0.6 million from a litigation settlement as a reduction to SG&A expenses during the quarter. As a percentage of sales, SG&A expense decreased from 24.4 percent in the fourth quarter of 2011 to 20.1 percent in the current quarter. Our salaries and benefits expense, excluding stock compensation expense, was $36.8 million, or 12.8 percent of sales, in the current quarter compared to $27.1 million, or 14.1 percent of sales, in the fourth quarter of 2011. Delivery expense increased $1.3 million, or 13.8 percent, as a result of increased sales volume.  
  • Interest expense was $11.0 million in the current quarter, an increase of $2.9 million from the fourth quarter of 2011, primarily due to the issuance of our term loan in December 2011.  
  • We recorded $0.2 million of income tax expense in the fourth quarter of 2012, compared to $0.3 million in the fourth quarter of 2011. We recorded an after-tax, non-cash valuation allowance of $3.6 million and $6.5 million in the fourth quarters of 2012 and 2011, respectively, related to our net deferred tax assets. Absent the valuation allowance, the effective tax rate would have been 31.3 percent and 38.0 percent in the fourth quarters of 2012 and 2011, respectively. As of the end of the current quarter, the company's gross federal income tax net operating loss available for carry-forward was approximately $237 million.  
  • Loss from continuing operations was $11.0 million, or $0.12 loss per diluted share, compared to $16.6 million, or $0.18 loss per diluted share, in the same quarter last year. Excluding facility closure costs, the litigation settlement, the fair value adjustment for stock warrants and the tax valuation allowance, our loss from continuing operations was $0.08 per diluted share for the current quarter. For the fourth quarter of 2011, loss from continuing operations per diluted share was $0.09, when excluding facility closure costs, debt issuance cost write-offs, the fair value adjustment for stock warrants and the tax valuation allowance. See reconciliation attached.  
  • Loss from discontinued operations was $1.0 million, or $0.01 loss per diluted share, compared to a loss of $0.1 million, or $0.00 per diluted share, for the fourth quarter of 2011. Loss from discontinued operations in the current quarter was primarily related to an adjustment to record held for sale real estate at its fair market value.  
  • Net loss for the fourth quarter of 2012 was $12.0 million, or $0.13 loss per diluted share, compared to $16.7 million, or $0.18 loss per diluted share, in the fourth quarter of 2011.   
  • Diluted weighted average shares outstanding were 95.6 million in the fourth quarter of 2012 compared to 95.0 million in the same quarter of 2011.  
  • Adjusted EBITDA was $3.4 million in the current quarter, compared to an Adjusted EBITDA loss of $3.3 million in the same quarter last year. See reconciliation attached.

Liquidity and Capital Resources

  • On December 17, 2012, we amended our $160.0 million first-lien term loan agreement to enhance our liquidity position to support both current and anticipated increases in sales volume. Terms of the amendment included increasing the principal amount by $65.0 million, reducing the minimum cash requirement from $35.0 million to $15.0 million, adding a new $15.0 million LC facility, and increasing the minimum specified collateral value to $225.0 million, contingent upon maintaining certain levels of qualified cash. These amendments to our term loan increased our liquidity by approximately $80 million.     
  • Liquidity at December 31, 2012 was $116.4 million, which included $131.4 million in cash, reduced by the $15.0 million minimum cash requirement in our amended term loan.  
  • In addition to the $131.4 million of cash, the company had $14.0 million in restricted cash at December 31, 2012, of which $1.9 million was included in long-term assets. Restricted cash consists of approximately $13 million used to collateralize outstanding LC's and $0.9 million used as collateral for other casualty insurance obligations.    
  • In conjunction with the term loan amendment, subsequent to year-end we were able to eliminate the cash collateral requirement for our outstanding LC's, thus increasing our liquidity by an additional $13.0 million. We also amended our existing stand-alone $20.0 million LC facility down to $10.0 million. Had these terms been in place at December 31, 2012, our unrestricted cash would have been $144.4 million and our net liquidity would have been $129.4 million.  
  • Capital expenditures were $1.2 million for the current quarter, compared to $2.1 million for the fourth quarter of 2011.

Outlook

Mr. Sherman concluded, "We believe the housing industry will continue to recover in 2013 and that Builders FirstSource is well positioned to take advantage of this recovery. The recent amendment to our term loan gives us substantial additional liquidity to continue growing our business at an accelerated rate. We look forward to building on what was a very successful 2012."

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