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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarterly period ended
OR
For the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Trading Symbol(s) |
Name of Each Exchange on Which Registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).Yes
The number of shares of the issuer’s common stock, par value $0.01, outstanding as of August 1, 2024, was
BUILDERS FIRSTSOURCE, INC.
Index to Form 10-Q
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Page |
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3 |
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Item 1. |
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3 |
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3 |
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Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2024, and December 31, 2023 |
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5 |
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6 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 5. |
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Item 6. |
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24 |
2
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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(in thousands, except per share amounts) |
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2024 |
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2023 |
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2024 |
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2023 |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross margin |
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Selling, general and administrative expenses |
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Income from operations |
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Interest expense, net |
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Income before income taxes |
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Income tax expense |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Net income per share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average common shares: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except per share amounts) |
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June 30, |
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December 31, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, less allowances of $ |
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Other receivables |
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Inventories |
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Contract assets |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use assets, net |
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Goodwill |
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Intangible assets, net |
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Other assets, net |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Contract liabilities |
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Current portion of operating lease liabilities |
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Current maturities of long-term debt |
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Total current liabilities |
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Noncurrent portion of operating lease liabilities |
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Long-term debt, net of current maturities, discounts and issuance costs |
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Deferred income taxes |
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Other long-term liabilities |
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Total liabilities |
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nts and contingencies (Note 11) |
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Stockholders' equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six Months Ended |
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(in thousands) |
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2024 |
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2023 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Deferred income taxes |
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Stock-based compensation expense |
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Other non-cash adjustments |
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Changes in assets and liabilities, net of assets acquired and liabilities assumed: |
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Receivables |
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Inventories |
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Contract assets |
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Other current assets |
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Other assets and liabilities |
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Accounts payable |
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Accrued liabilities |
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Contract liabilities |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Cash used for acquisitions, net of cash acquired |
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Purchases of property, plant and equipment |
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Proceeds from sale of property, plant and equipment |
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Cash used for equity investments |
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— |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Borrowings under revolving credit facility |
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Repayments under revolving credit facility |
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Proceeds from long-term debt and other loans |
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— |
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Repayments of long-term debt and other loans |
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( |
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Payments of loan costs |
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Payment of acquisition-related deferred and contingent consideration |
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( |
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— |
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Tax withholdings on and exercises of equity awards |
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( |
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Repurchase of common stock |
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( |
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( |
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Net cash used in financing activities |
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( |
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Net change in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental disclosures of cash flow information: |
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Cash paid for interest |
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$ |
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$ |
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Cash paid for income taxes |
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Supplemental disclosures of non-cash activities: |
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Non-cash or accrued consideration for acquisitions |
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$ |
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$ |
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Accrued purchases of property, plant and equipment |
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Right-of-use assets obtained in exchange for operating lease obligations |
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Amounts accrued related to repurchases of common stock |
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— |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
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Additional |
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Common Stock |
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Paid-in |
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Retained |
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(in thousands) |
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Shares |
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Amount |
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Capital |
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Earnings |
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Total |
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Balance at December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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Vesting of restricted stock units |
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( |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Repurchase of common stock (1) |
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( |
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( |
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— |
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( |
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Exercise of stock options |
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— |
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— |
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Shares withheld for restricted stock units vested |
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( |
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( |
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( |
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— |
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( |
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Net income |
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— |
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— |
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— |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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Vesting of restricted stock units |
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( |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Repurchase of common stock (1) |
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( |
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( |
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— |
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( |
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Exercise of stock options |
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— |
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— |
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Shares withheld for restricted stock units vested |
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( |
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( |
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( |
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— |
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( |
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Net income |
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— |
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— |
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— |
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Balance at June 30, 2023 |
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Balance at December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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Vesting of restricted stock units |
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( |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Repurchase of common stock (2) |
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( |
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( |
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— |
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( |
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( |
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Exercise of stock options |
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— |
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— |
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Shares withheld for restricted stock units vested |
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( |
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( |
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( |
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— |
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( |
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Net income |
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— |
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— |
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— |
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Balance at March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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Vesting of restricted stock units |
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( |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Repurchase of common stock (2) |
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( |
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( |
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— |
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( |
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( |
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Exercise of stock options |
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— |
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— |
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Shares withheld for restricted stock units vested |
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( |
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( |
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( |
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— |
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( |
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Net income |
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— |
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— |
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— |
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Balance at June 30, 2024 |
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The accompanying notes are an integral part of these consolidated financial statements.
6
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Builders FirstSource, Inc., a Delaware corporation formed in
In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all recurring adjustments and normal accruals necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the dates and periods presented. Results for interim periods are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period. Intercompany transactions are eliminated in consolidation.
The condensed consolidated balance sheet as of December 31, 2023, is derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. This condensed consolidated balance sheet as of December 31, 2023, and the unaudited condensed consolidated financial statements included herein should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, 2023, included in our most recent annual report on Form 10-K for fiscal year 2023 (“2023 Form 10-K”). Accounting policies used in the preparation of these unaudited condensed consolidated financial statements are consistent with the accounting policies described in the Notes to Consolidated Financial Statements included in our 2023 Form 10-K.
The accounting policies of our operating segments are consistent with the accounting policies described in the Notes to Consolidated Financial Statements included in our 2023 Form 10-K. Since the Company operates in one reportable segment, the primary measures reviewed by our CEO, whom we have determined to be our chief operating decision maker, including revenue, gross margin and income before income taxes, are shown in these condensed consolidated financial statements.
Business Combinations
When they meet the requirements under ASC 805, Business Combinations, merger and acquisition transactions are accounted for using the acquisition method, and accordingly the results of operations of the acquiree are included in the Company’s consolidated financial statements from the acquisition date. The consideration transferred is allocated to the identifiable assets acquired and liabilities assumed based on estimated fair values at the acquisition date, with any excess recorded as goodwill. Transaction-related costs are expensed in the period the costs are incurred. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill.
Comprehensive Income
Comprehensive income is equal to net income for all periods presented.
Equity Investments
The Company’s equity investments are accounted for using equity method accounting and are recorded as other assets, net in the accompanying Condensed Consolidated Balance Sheets as of June 30, 2024, and are not considered significant to the Company.
Reclassifications
Certain prior periods’ amounts have been reclassified to conform to the current year presentation, including changing the composition of our product categories, and amounts presented as repurchases of common stock and tax withholdings on and exercises of equity awards. Prior period amounts related to product categories as disclosed in Note 3 have been reclassified to conform to the current year presentation.
The prior period amounts related to tax withholdings on equity awards have been reclassified from repurchases of common stock and combined with exercises of stock options to conform to the present year presentation. Reclassifications had no impact on net income, total assets and liabilities, stockholders’ equity, financing cash flows, or total cash flows as previously reported.
7
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through additional and more detailed information about a reportable segment's expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to enhance the transparency and decision usefulness of income tax disclosures. This amendment modifies the rules on income tax disclosures to require entities to disclose: (i) specific categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold; (ii) the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes, as well as individual jurisdictions in which income taxes paid is equal to or greater than five percent of total income taxes paid net of refunds; (iii) the income or loss from continuing operations before income tax expense, or benefit, disaggregated between domestic and foreign; and (iv) income tax expense or benefit from continuing operations disaggregated by federal, state and foreign. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis, though retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.
2. Business Combinations
During the first six months of 2024, we completed the acquisitions of Quality Door & Millwork, Inc. (“Quality Door”), Hanson Truss Components, Inc. (“Hanson Truss”), RPM Wood Products, Inc. (“RPM”), Schoeneman Bros. Company (“Schoeneman”) and TRSMI, LLC (“TRSMI”) for a combined total of approximately $
During the first six months of 2023, we completed the acquisitions of Noltex Holdings, Inc. and its affiliates (“Noltex”), Builder’s Millwork Supply (“BMS”), and JB Millworks (“JBM”) for a combined total of $
The acquisitions were funded with a combination of cash on hand and borrowings under our $
The following table summarizes the aggregate fair values of the assets acquired and liabilities assumed for acquisitions during the periods ended June 30, 2024, and June 30, 2023:
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Total Acquisitions |
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2024 |
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2023 |
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(in thousands) |
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Cash and cash equivalents |
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$ |
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$ |
— |
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Accounts receivable |
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Inventories |
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Other current assets |
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Property, plant and equipment |
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Operating lease right-of-use assets |
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Finance lease right-of-use assets |
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— |
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Intangible assets |
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Other assets |
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— |
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Total assets |
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$ |
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$ |
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Accounts payable |
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$ |
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$ |
— |
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Accrued liabilities |
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Contract liabilities |
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Operating lease liabilities |
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Finance lease liabilities |
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— |
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Total liabilities |
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$ |
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$ |
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Goodwill |
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Total purchase consideration |
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Accrued contingent consideration and purchase price adjustments |
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( |
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Less: cash acquired |
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( |
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— |
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Total cash consideration |
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$ |
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$ |
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3. Revenue
The following table disaggregates our sales by product category:
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Three Months Ended |
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Six Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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(in thousands) |
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Lumber & lumber sheet goods |
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$ |
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$ |
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$ |
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$ |
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Manufactured products |
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Windows, doors & millwork |
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Specialty building products & services |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Due to ongoing system integrations and conversions, our product alignment continues to be refined. We have reclassified prior periods net sales by product category to conform to current period presentation. The impact to each of the prior periods’ net sales for lumber & lumber sheet goods, manufactured products, windows, doors & millwork, and specialty building products & services was
The timing of revenue recognition, invoicing and cash collection results in accounts receivable, unbilled receivables, contract assets and contract liabilities. Contract assets include unbilled amounts when the revenue recognized exceeds the amount billed to the customer, and amounts representing a right to payment from previous performance that is conditional on something other than passage of time, such as retainage. Contract liabilities consist of customer advances and deposits, and deferred revenue.
Through June 30, 2024, and 2023, we recognized as revenue approximately
9
4. Net Income per Common Share
Net income per common share (“EPS”) is calculated in accordance with the Earnings per Share topic of the FASB Accounting Standards Codification, which requires the presentation of basic and diluted EPS. Basic EPS is computed using the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common shares outstanding during the period, plus the dilutive effect of potential common shares.
The table below presents the calculation of basic and diluted EPS:
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Three Months Ended |
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Six Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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(in thousands, except per share amounts) |
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Numerator: |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Denominator: |
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Weighted average shares outstanding, basic |
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Dilutive effect of options and RSUs |
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Weighted average shares outstanding, diluted |
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Net income per share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Antidilutive and contingent RSUs excluded from diluted EPS |
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5. Goodwill
The following table sets forth the changes in the carrying amount of goodwill:
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(in thousands) |
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Balance as of December 31, 2023 (1) |
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$ |
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Acquisitions |
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Balance as of June 30, 2024 (1) |
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$ |
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(1) Goodwill is presented net of historical accumulated impairment losses of $
In 2024, the change in the carrying amount of goodwill is attributable to the acquisitions completed during the year. As of June 30, 2024, no impairment triggering events have occurred. The amount allocated to goodwill is attributable to the assembled workforce, synergies and expected growth from the expanded product and service offerings of acquisitions. The goodwill recognized from the TRSMI business combinations will not be deductible for tax purposes. The $
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6. Intangible Assets
The following table presents intangible assets as of:
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June 30, 2024 |
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December 31, 2023 |
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Gross |
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Accumulated Amortization |
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Gross |
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Accumulated Amortization |
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(in thousands) |
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Customer relationships |
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$ |
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$ |
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$ |
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$ |
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Trade names |
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( |
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( |
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Non-compete agreements |
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( |
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( |
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Developed technology |
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( |
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( |
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Total intangible assets |
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$ |
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$ |
( |
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$ |
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$ |
( |
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In connection with the current year acquisitions, we recorded customer relationships intangible assets of $
During the three and six months ended June 30, 2024, we recorded amortization expense in relation to the above-listed intangible assets of $
The following table presents the estimated amortization expense for intangible assets for the years ending December 31:
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(in thousands) |
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2024 (from July 1, 2024) |
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$ |
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2025 |
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2026 |
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2027 |
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2028 |
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Thereafter |
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Total future intangible amortization expense |
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$ |
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7. Accrued Liabilities
Accrued liabilities consisted of the following as of:
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June 30, |
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December 31, |
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(in thousands) |
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Accrued payroll and other employee related expenses |
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$ |
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$ |
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Self-insurance reserves |
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Accrued business taxes |
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Accrued interest |
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Accrued rebates payable |
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Accrued excise tax for repurchases of common stock |
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Accrued contingent consideration & purchase price adjustments |
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Other |
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Total accrued liabilities |
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$ |
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$ |
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8. Long-Term Debt
Long-term debt consisted of the following as of:
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June 30, |
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December 31, |
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(in thousands) |
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Revolving credit facility (1) |
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$ |
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$ |
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— |
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Other finance obligations |
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Finance lease obligations |
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Unamortized debt discount/premium and debt issuance costs |
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( |
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( |
) |
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Less: current maturities of long-term debt |
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Long-term debt, net of current maturities, discounts and issuance costs |
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$ |
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$ |
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2024 Debt Transactions
On February 29, 2024, the Company completed a private offering of $
In connection with the issuance of the <