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BMC Stock Holdings Announces 2016 First Quarter Results

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ATLANTA, May 05, 2016 (GLOBE NEWSWIRE) -- BMC Stock Holdings, Inc. (Nasdaq: STCK) ("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."

Conference Call Information
BMC Stock will host a conference call on Thursday, May 5, 2016 at 10:00 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, 858-384-5517.  The passcode for the live call and the replay is 13634510.  The telephonic replay will be available until 11:59 p.m. (Eastern Time) on May 12, 2016.   The live webcast of the conference call can be accessed on the Company's investor relations website at ir.bmcstock.com and will be available for approximately 90 days.

Non-GAAP Financial Measures
This press release presents Adjusted net sales, Adjusted gross profit, Adjusted EBITDA, Adjusted net income (loss) and Adjusted net debt, which are non-GAAP financial measures within the meaning of applicable SEC rules and regulations.  For a reconciliation of Adjusted net sales, Adjusted gross profit, Adjusted EBITDA and Adjusted net income (loss) to the most comparable GAAP measure and a discussion of the reasons why the Company believes that these non-GAAP financial measures provide information that is useful to investors, see the tables included in this document under "Reconciliation of GAAP to Non-GAAP Measures."

About BMC Stock Holdings
Headquartered in Atlanta, Georgia, BMC Stock is one of the nation's leading providers of diversified building products and services to professional builders and contractors in the residential housing market.  The Company's comprehensive portfolio of products and services spans building materials, including millwork and structural component manufacturing capabilities, consultative showrooms and design centers, value-added installation management services and an innovative eBusiness platform capable of supporting all of the Company's customers' needs.  BMC Stock serves 42 metropolitan areas across 17 states, principally in the fast-growing South and West regions.

Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements in this document may include, without limitation, statements regarding sales growth, price changes, earnings performance, strategic direction and the demand for our products.  Forward-looking statements are typically identified by words or phrases such as "may," "might," "predict," "future," "seek to," "assume," "goal," "objective," "continue," "will," "could," "should," "would," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "prospects," "guidance," "possible," "predict," "propose," "potential" and "forecast," or the negative of such terms and other words, terms and phrases of similar meaning. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties, many of which are outside BMC Stock's control.  BMC Stock cautions readers that any forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement; therefore, investors and shareholders should not place undue reliance on such statements.  Such forward-looking statements include, but are not limited to, statements about the benefits of the recently completed Merger with BMC, including future financial and operating results, plans, objectives, expectations and intentions, and other statements that are not historical facts.  There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this communication.  Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include risks and uncertainties relating to:  the risk that the BMC business will not be integrated successfully or that such integration will take longer, be more difficult, time-consuming or costly to accomplish than expected; the risk that the cost savings and any other synergies from the Merger may not be fully realized or may take longer to realize than expected; disruption from the Merger may make it more difficult to maintain relationships with customers, employees or suppliers; the diversion of management time on Merger-related issues; general worldwide economic conditions and related uncertainties; changes in the markets for BMC Stock's business segments; unanticipated downturns in business relationships with customers; competitive pressures on the Company's sales and pricing; increases in the cost of material, energy and other production costs, or unexpected costs that cannot be recouped in product pricing; the introduction of competing technologies; unexpected technical or marketing difficulties; unexpected claims, charges, litigation or dispute resolutions; the effect of changes in governmental regulations; and other factors discussed or referred to in the "Risk Factors" section of BMC Stock's most recent Annual Report on Form 10-K filed with the SEC on March 15, 2016, and our subsequent filings with the SEC.  All such factors are difficult to predict and are beyond BMC Stock's control.  All forward-looking statements attributable to BMC Stock or persons acting on BMC Stock's behalf are expressly qualified in their entirety by the foregoing cautionary statements.  All such statements speak only as of the date made, and BMC Stock undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.


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,
 2016
 December 31,
 2015
Assets   
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