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BMC Stock Holdings, Inc. Announces 2018 Third Quarter Results

Nov 1, 2018

Raleigh, N.C., Nov. 01, 2018 (GLOBE NEWSWIRE) -- BMC Stock Holdings, Inc. (Nasdaq: BMCH) (“BMC” or the “Company”), one of the leading providers of diversified building products, services and innovative solutions in the U.S. residential construction market, today announced its financial results for the third quarter ended September 30, 2018.  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.

Third Quarter 2018 Highlights (Comparisons are to Prior Year Period)

  • Net sales of $990.3 million, an increase of 12.4%, including significant growth in Structural Components and Ready-Frame® sales
  • Net income of $35.9 million, an increase of $17.4 million
  • Adjusted EBITDA (non-GAAP) of $74.4 million, an increase of $15.1 million or 25.4%
  • Adjusted EBITDA margin (non-GAAP) of 7.5%, an increase of 80 basis points
  • Diluted earnings per share of $0.53, an increase of $0.26
  • Adjusted net income per diluted share (non-GAAP) of $0.58, an increase of $0.24
  • Cash provided by operating activities of $59.7 million, an increase of $22.7 million

Commenting on BMC’s third quarter performance, Dave Flitman, President and Chief Executive Officer of BMC, stated, “Our team has demonstrated outstanding execution of our strategy this year, focusing on service levels, driving productivity improvements and providing innovative solutions to our customers.  As a result, we are reporting another quarter of strong financial performance, including significant growth in net income, diluted earnings per share, Adjusted EBITDA and cash from operating activities.  Adjusted EBITDA margin improved 80 basis points to 7.5% for the quarter and is up 110 basis points year-to-date. Contributing to the success this quarter was strong growth in our value-added product categories of Structural Components, which grew 15.0%, and Millwork, Doors & Windows, which grew 11.4%.”

Flitman continued, “While affordability concerns have caused a recent deceleration in housing starts growth, the longer-term fundamentals underlying the housing market remain favorable, including household formation, demographic trends, job growth and higher wages.  With our strong balance sheet and cash flow, our commitment to supporting our customers through innovation and operational excellence and our focus on pursuing the right acquisitions, we remain confident in our ability to deliver solid operating results and are well positioned to drive long-term shareholder value.”

Third Quarter 2018 Summary of Financial Results

During the three months ended September 30, 2018, the Company generated strong improvements in net sales, net income, diluted earnings per share, Adjusted EBITDA and operating cash flow.

   
  Three Months Ended September 30,
(in thousands, except per share data) 2018   2017   Variance
Net sales $ 990,264     $ 881,012     $ 109,252  
           
Net income and EPS          
Net income (GAAP) $ 35,858     $ 18,443     $ 17,415  
Diluted earnings per share (GAAP) $ 0.53     $ 0.27     $ 0.26  
Adjusted net income (non-GAAP) $ 39,459     $ 23,049     $ 16,410  
Adjusted net income per diluted share (non-GAAP) $ 0.58     $ 0.34     $ 0.24  
           
Adjusted EBITDA (non-GAAP) $ 74,368     $ 59,297     $ 15,071  
Adjusted EBITDA margin (non-GAAP) 7.5 %   6.7 %   0.8 %
           
Net cash provided by operating activities $ 59,689     $ 36,956     $ 22,733  
                       

Third Quarter 2018 Financial Results Compared to Prior Year Period

  • Net sales increased 12.4% to $990.3 million, driven in part by solid 15.0% growth in the Structural Components product category and 11.4% growth in the Millwork, Doors & Windows product category.  The Company estimates that net sales increased 6.3% from higher selling prices of lumber & lumber sheet goods, 4.0% from other organic growth and 2.1% from the acquisition of W.E. Shone Co. (“Shone Lumber”).  The Company also estimates that net sales to single-family homebuilders increased 13.0%, net sales to remodeling contractors increased 15.1% and net sales to multi-family, commercial and other contractors increased 7.0%.  Net sales of Ready-Frame® were $65 million, an increase of 38.4%.
  • Gross profit increased 15.2% to $241.3 million.  Gross profit as a percentage of sales (gross margin) was 24.4%, as compared to 23.8% for the third quarter of 2017.
  • Selling, general and administrative (“SG&A”) expenses increased $17.6 million to $176.2 million.  Approximately $3.4 million of this increase related to SG&A expenses at Shone Lumber, which was acquired earlier this year. Approximately $15.4 million of the increase related to higher employee compensation, benefits and other employee-related costs, and the remaining increase related primarily to a $0.8 million increase in diesel fuel costs.  SG&A expenses as a percent of net sales improved 20 basis points to 17.8%, compared with 18.0% for the third quarter of 2017.
  • Depreciation expense, including the portion reported within cost of sales, decreased to $12.8 million, compared to $13.6 million in the third quarter of 2017.
  • Merger and integration costs decreased to $1.5 million, consisting primarily of system integration costs, compared to $2.6 million in the third quarter of 2017.
  • Amortization expense was $3.8 million, compared to $4.0 million in the third quarter of 2017.
  • Interest expense decreased to $5.9 million, compared to $6.4 million in the third quarter of 2017.
  • Other income, net, increased to $3.0 million, which was derived primarily from state and local tax incentives and customer service charges, compared to $1.1 million in the third quarter of 2017.
  • Net income increased to $35.9 million, or $0.53 per diluted share, compared to $18.4 million, or $0.27 per diluted share, in the third quarter of 2017.
  • Adjusted net income (non-GAAP) increased to $39.5 million, or $0.58 per diluted share (non-GAAP), compared to Adjusted net income of $23.0 million, or $0.34 per diluted share, in the third quarter of 2017.
  • Adjusted EBITDA (non-GAAP) increased 25.4% to $74.4 million, compared to $59.3 million in the third quarter of 2017.
  • Adjusted EBITDA margin (non-GAAP), defined as Adjusted EBITDA as a percentage of net sales, expanded 80 basis points to 7.5%.
  • Cash provided by operating activities increased $22.7 million to $59.7 million.

Liquidity and Capital Resources

Total liquidity as of September 30, 2018 was approximately $371.6 million, which included cash and cash equivalents of $57.7 million and $313.9 million of borrowing availability under the Company’s asset-backed revolver.  Capital expenditures during the third quarter of 2018 totaled $16.4 million.  These expenditures were primarily used to fund purchases of vehicles and equipment to replace aged assets and support increased sales volume, and facility, technology and automation investments to support our operations.

Conference Call Information

BMC will host a conference call on Thursday, November 1, 2018 at 8:30 a.m. Eastern Time and will simultaneously broadcast it live over the Internet.  Prior to the call, an earnings release presentation will be posted on the Company’s investor relations website - ir.buildwithbmc.com - in the “Events and Presentations” tab under the heading “Presentation Archive.”  The conference call can be accessed by dialing 866-548-4713 (domestic) or 323-794-2093 (international).  A telephonic replay will be available approximately three hours after the call and can be accessed by dialing 844-512-2921, or for international callers, 412-317-6671.  The passcode for both the live call and the replay is 7885287.  The telephonic replay will be available until 11:59 p.m. (Eastern Time) on November 8, 2018.  The live webcast of the conference call can be accessed on the Company’s investor relations website at ir.buildwithbmc.com and will be available for approximately 90 days.

Non-GAAP Financial Measures

This press release presents Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share, which are non-GAAP financial measures within the meaning of applicable SEC rules and regulations. For a reconciliation of Adjusted EBITDA and Adjusted net income to the most comparable GAAP measures 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 press release under "Reconciliation of GAAP to Non-GAAP Measures."

About BMC Stock Holdings, Inc.

With $3.4 billion in 2017 net sales, BMC is a leading provider of diversified building products, services and innovative solutions to builders, contractors and professional remodelers in the U.S. residential housing market.  Headquartered in Raleigh, NC, the Company's comprehensive portfolio of products and solutions 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. BMC serves 45 metropolitan areas across 19 states, principally in the 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's control. BMC 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 statement. 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.  These factors include without limitation:

  • the state of the homebuilding industry and repair and remodeling activity, the economy and the credit markets;
  • the impact of potential changes in our customer or product sales mix;
  • our concentration of business in the Texas, California and Georgia markets;
  • the potential loss of significant customers or a reduction in the quantity of products they purchase;
  • seasonality and cyclicality of the building products supply and services industry;
  • competitive industry pressures and competitive pricing pressure from our customers and competitors;
  • fluctuation of commodity prices and prices of our products;
  • our exposure to product liability, warranty, casualty, construction defect, contract, tort, employment and other claims and legal proceedings;
  • our ability to maintain profitability;
  • our ability to retain our key employees and to attract and retain new qualified employees, while controlling our labor costs;
  • product shortages, loss of key suppliers or failure to develop relationships with qualified suppliers, and our dependence on third-party suppliers and manufacturers;
  • the implementation of our supply chain and technology initiatives;
  • the impact of long-term non-cancelable leases at our facilities;
  • our ability to effectively manage inventory and working capital;
  • the credit risk from our customers;
  • the impact of pricing pressure from our customers;
  • our ability to identify or respond effectively to consumer needs, expectations, market conditions or trends;
  • our ability to successfully implement our growth strategy;
  • the impact of federal, state, local and other laws and regulations;
  • the impact of changes in legislation and government policy;
  • the impact of unexpected changes in our tax provisions and adoption of new tax legislation;
  • our ability to utilize our net operating loss carryforwards;
  • natural or man-made disruptions to our distribution and manufacturing facilities;
  • our exposure to environmental liabilities and subjection to environmental laws and regulation;
  • the impact of health and safety laws and regulations;
  • the impact of disruptions to our information technology systems;
  • cybersecurity risks;
  • our exposure to losses if our insurance coverage is insufficient;
  • our ability to operate on multiple Enterprise Resource Planning ("ERP") information systems and convert multiple systems to a single system;
  • the impact of our indebtedness;
  • the various financial covenants in our secured credit agreement and senior secured notes indenture; and
  • other factors discussed or referred to in the "Risk Factors" section of BMC's most recent Annual Report on Form 10-K filed with the SEC on March 1, 2018.

Certain of these and other factors are discussed in more detail in the “Risk Factors” section of BMC’s 2017 Annual Report on Form 10-K, as supplemented by BMC’s Quarterly Reports on Form 10-Q.  All such factors are difficult to predict and are beyond BMC's control. All forward-looking statements attributable to BMC or persons acting on BMC'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 undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless otherwise required by law.

Investor Relations Contact
BMC Stock Holdings, Inc.
Carey Phelps
(678) 222-1228

 
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
       
  Three Months Ended September 30,   Nine Months Ended September 30,
(in thousands, except per share amounts) 2018   2017   2018   2017
Net sales              
Building products $ 773,787     $ 671,316     $ 2,201,863     $ 1,919,923  
Construction services 216,477     209,696     621,064     605,164  
  990,264     881,012     2,822,927     2,525,087  
Cost of sales              
Building products 568,713     499,182     1,631,022     1,427,253  
Construction services 180,248     172,285     511,919     498,405  
  748,961     671,467     2,142,941     1,925,658  
Gross profit 241,303     209,545     679,986     599,429  
               
Selling, general and administrative expenses 176,204     158,602     506,236     465,305  
Depreciation expense 10,059     11,053     29,323     32,555  
Amortization expense 3,790     4,026     11,263     11,947  
Merger and integration costs 1,459     2,574     3,627     13,339  
  191,512     176,255     550,449     523,146  
Income from operations 49,791     33,290     129,537     76,283  
Other income (expense)              
Interest expense (5,926 )   (6,377 )   (17,916 )   (18,960 )
Other income, net 2,953     1,083     7,830     2,366  
Income before income taxes 46,818     27,996     119,451     59,689  
Income tax expense 10,960     9,553     27,829     19,906  
Net income $ 35,858     $ 18,443     $ 91,622     $ 39,783  
               
Weighted average common shares outstanding              
Basic 67,329     66,958     67,246     66,860  
Diluted 67,896     67,442     67,743     67,341  
               
Net income per common share              
Basic $ 0.53     $ 0.28     $ 1.36     $ 0.60  
Diluted $ 0.53     $ 0.27     $ 1.35     $ 0.59  
                               


 
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
       
(in thousands, except share amounts) September 30, 2018   December 31, 2017
Assets      
Current assets      
Cash and cash equivalents $ 57,691     $ 11,750  
Accounts receivable, net of allowances 380,307     322,892  
Inventories, net 356,608     309,060  
Contract assets 33,319      
Costs in excess of billings on uncompleted contracts     28,738  
Income taxes receivable     3,748  
Prepaid expenses and other current assets 62,315     57,949  
Total current assets 890,240     734,137  
Property and equipment, net of accumulated depreciation 297,356     295,820  
Customer relationship intangible assets, net of accumulated amortization 162,282     166,306  
Other intangible assets, net of accumulated amortization 1,067     1,306  
Goodwill 264,318     261,792  
Other long-term assets 11,546     13,989  
Total assets $ 1,626,809     $ 1,473,350  
Liabilities and Stockholders' Equity      
Current liabilities      
Accounts payable $ 205,312     $ 174,583  
Accrued expenses and other liabilities 102,140     96,262  
Contract liabilities 32,703      
Billings in excess of costs on uncompleted contracts     18,428  
Income taxes payable 2,404      
Interest payable 9,572     4,769  
Current portion:      
Long-term debt and capital lease obligations 6,964     7,739  
Insurance reserves 14,525     13,496  
Total current liabilities 373,620     315,277  
Insurance reserves 41,334     38,470  
Long-term debt 345,144     349,059  
Long-term portion of capital lease obligations 10,485     14,838  
Deferred income taxes 3,082     1,768  
Other long-term liabilities 6,486     7,039  
Total liabilities 780,151     726,451  
Commitments and contingencies      
Stockholders' equity      
Preferred stock, $0.01 par value, 50.0 million shares authorized, no shares issued and outstanding at September 30, 2018 and December 31, 2017      
Common stock, $0.01 par value, 300.0 million shares authorized, 67.6 million and 67.3 million shares issued, and 67.3 million and 67.1 million outstanding at September 30, 2018 and December 31, 2017, respectively 676     673  
Additional paid-in capital 668,961     659,440  
Retained earnings 182,229     90,607  
Treasury stock, at cost, 0.3 million and 0.2 million shares at September 30, 2018 and December 31, 2017, respectively (5,208 )   (3,821 )
Total stockholders' equity 846,658     746,899  
Total liabilities and stockholders' equity $ 1,626,809     $ 1,473,350  
               


 
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
   
  Nine Months Ended September 30,
(in thousands) 2018   2017
Cash flows from operating activities      
Net income $ 91,622     $ 39,783  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation expense 37,297     40,049  
Amortization of intangible assets 11,263     11,947  
Amortization of debt issuance costs 1,263     1,263  
Deferred income taxes 1,314     1,755  
Non-cash stock compensation expense 8,226     4,751  
(Gain) loss on sale of property, equipment and real estate (3,435 )   301  
Other non-cash adjustments 686     898  
Change in assets and liabilities, net of effects of acquisitions      
Accounts receivable, net of allowances (59,768 )   (46,591 )
Inventories, net (41,883 )   (30,837 )
Accounts payable 29,897     22,633  
Other assets and liabilities 34,156     2,228  
Net cash provided by operating activities 110,638     48,180  
Cash flows from investing activities      
Purchases of property, equipment and real estate (42,704 )   (51,292 )
Purchases of businesses, net of cash acquired (20,970 )   (38,737 )
Insurance proceeds 1,991      
Proceeds from sale of property, equipment and real estate 10,968     3,545  
Net cash used in investing activities (50,715 )   (86,484 )
Cash flows from financing activities      
Proceeds from revolving line of credit 713,264     769,458  
Repayments of proceeds from revolving line of credit (717,726 )   (717,626 )
Payments on capital lease obligations (5,937 )   (7,753 )
Principal payments on other notes (75 )   (2,603 )
Other financing activities, net (3,508 )   28  
Net cash (used in) provided by financing activities (13,982 )   41,504  
Net increase in cash and cash equivalents 45,941     3,200  
Cash and cash equivalents      
Beginning of period 11,750     8,917  
End of period $ 57,691     $ 12,117  
               


 
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Net Sales by Product Category
(unaudited)
           
  Three Months Ended
 September 30, 2018
  Three Months Ended
 September 30, 2017
   
(in thousands) Net Sales   % of Sales   Net Sales   % of Sales   % Change
Structural components $ 166,919     16.9 %   $ 145,185     16.5 %   15.0 %
Lumber & lumber sheet goods 357,286     36.1 %   294,699     33.5 %   21.2 %
Millwork, doors & windows 251,606     25.4 %   225,804     25.6 %   11.4 %
Other building products & services 214,453     21.6 %   215,324     24.4 %   (0.4 )%
Total net sales $ 990,264     100.0 %   $ 881,012     100.0 %   12.4 %
                                 


           
  Nine Months Ended
 September 30, 2018
  Nine Months Ended
 September 30, 2017
   
(in thousands) Net Sales   % of Sales   Net Sales   % of Sales   % Change
Structural components $ 470,365     16.7 %   $ 393,382     15.6 %   19.6 %
Lumber & lumber sheet goods 1,013,495     35.9 %   829,634     32.9 %   22.2 %
Millwork, doors & windows 730,318     25.9 %   677,554     26.8 %   7.8 %
Other building products & services 608,749     21.5 %   624,517     24.7 %   (2.5 )%
Total net sales $ 2,822,927     100.0 %   $ 2,525,087     100.0 %   11.8 %
                                 


 
Net Sales by Customer Type
(unaudited)
           
  Three Months Ended
 September 30, 2018
  Three Months Ended
 September 30, 2017
   
(in thousands) Net Sales   % of Sales   Net Sales   % of Sales   % Change
Single-family homebuilders $ 749,543     75.7 %   $ 663,599     75.3 %   13.0 %
Remodeling contractors 114,062     11.5 %   99,085     11.3 %   15.1 %
Multi-family, commercial & other contractors 126,659     12.8 %   118,328     13.4 %   7.0 %
Total net sales $ 990,264     100.0 %   $ 881,012     100.0 %   12.4 %


           
  Nine Months Ended
 September 30, 2018
  Nine Months Ended
 September 30, 2017
   
(in thousands) Net Sales   % of Sales   Net Sales   % of Sales   % Change
Single-family homebuilders $ 2,143,910     75.9 %   $ 1,881,003     74.5 %   14.0 %
Remodeling contractors 326,918     11.6 %   279,415     11.1 %   17.0 %
Multi-family, commercial & other contractors 352,099     12.5 %   364,669     14.4 %   (3.4 )%
Total net sales $ 2,822,927     100.0 %   $ 2,525,087     100.0 %   11.8 %
                                 

BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Measures
(unaudited)

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share are intended as supplemental measures of the Company’s performance that are not required by, or presented in accordance with, GAAP.  The Company believes that Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share 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 net income plus interest expense, interest income, income tax expense, depreciation and amortization, merger and integration costs, non-cash stock compensation expense, acquisition costs and other items.    
  • Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net sales.
  • Adjusted net income is defined as net income plus merger and integration costs, non-cash stock compensation expense,  acquisition costs, other items and after tax effecting those items.   
  • Adjusted net income per diluted share is defined as Adjusted net income divided by diluted weighted average shares.

Company management uses Adjusted EBITDA and Adjusted net income for trend analyses, for purposes of determining management incentive compensation and for budgeting and planning purposes.  Adjusted EBITDA is used in monthly financial reports prepared for management and the board of directors.  The Company believes that the use of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share provides additional tools for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with other distribution and retail companies, which may present similar non-GAAP financial measures to investors.  However, the Company’s calculation of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share are not necessarily comparable to similarly titled measures reported by other companies.  Company management does not consider Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share in isolation or as alternatives to financial measures determined in accordance with GAAP.  The principal limitation of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements.  Some of these limitations are: (i) Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share do not reflect changes in, or cash requirements for, working capital needs; (ii) Adjusted EBITDA and Adjusted EBITDA margin do not reflect interest expense, or the requirements necessary to service interest or principal payments on debt; (iii) Adjusted EBITDA and Adjusted EBITDA margin do not reflect income tax expenses or the cash requirements to pay taxes; (iv) Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; (v) although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share do not reflect any cash requirements for such replacements and (vi) Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share do not consider the potentially dilutive impact of issuing non-cash stock-based compensation.  In order to compensate for these limitations, management presents Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted net income per diluted share in conjunction with GAAP results.  Readers should review the reconciliations of net income to Adjusted EBITDA and Adjusted net income below, and should not rely on any single financial measure to evaluate the Company’s business.

BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Measures (continued)
(unaudited)

The following is a reconciliation of net income to Adjusted EBITDA and Adjusted net income.

       
  Three Months Ended September 30,   Nine Months Ended September 30,
(in thousands, except per share amounts) 2018   2017   2018   2017
Net income $ 35,858     $ 18,443     $ 91,622     $ 39,783  
Interest expense 5,926     6,377     17,916     18,960  
Interest income (117 )       (117 )    
Income tax expense 10,960     9,553     27,829     19,906  
Depreciation and amortization 16,626     17,625     48,560     51,996  
Merger and integration costs 1,459     2,574     3,627     13,339  
Non-cash stock compensation expense 3,310     1,366     8,226     4,751  
Acquisition costs (a)         267     317  
Other items (b) 346     3,359     2,447     3,385  
Adjusted EBITDA $ 74,368     $ 59,297     $ 200,377     $ 152,437  
Adjusted EBITDA margin 7.5 %   6.7 %   7.1 %   6.0 %
               
Net income $ 35,858     $ 18,443     $ 91,622     $ 39,783  
Merger and integration costs 1,459     2,574     3,627     13,339  
Non-cash stock compensation expense 3,310     1,366     8,226     4,751  
Acquisition costs (a)         267     317  
Other items (c) 43     3,359     2,144     3,385  
Tax effect of adjustments to net income (d) (1,211 )   (2,693 )   (3,443 )   (7,920 )
Adjusted net income $ 39,459     $ 23,049     $ 102,443     $ 53,655  
               
Diluted weighted average shares 67,896     67,442     67,743     67,341  
Adjusted net income per diluted share $ 0.58     $ 0.34     $ 1.51     $ 0.80  
                               


   
(a) For the nine months ended September 30, 2018, represents costs incurred related to the acquisition of W.E. Shone Co. For the nine months ended September 30, 2017, represents costs incurred related to the acquisitions of Code Plus Components, LLC and Texas Plywood and Lumber Company, Inc.
(b) For the three and nine months ended September 30, 2018, represents costs incurred in connection with the departure of the Company’s former chief executive officer and the search for and appointment of his permanent replacement (“CEO Transition Costs”). For the three and nine months ended September 30, 2017, represents asset impairment charges related to real estate held for sale and expense incurred related to pending litigation.
(c) For the three and nine months ended September 30, 2018, represents CEO Transition Costs and a tax benefit related to a measurement period adjustment to the Company’s accounting for the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). For the three and nine months ended September 30, 2017, represents asset impairment charges related to real estate held for sale and expense incurred related to pending litigation.
(d) The tax effect of adjustments to net income was based on the respective transactions’ income tax rate, which was 23.7%, 36.9%, 23.6% and 37.1% for the three months ended September 30, 2018 and 2017 and the nine months ended September 30, 2018 and 2017, respectively. The tax effect of adjustments to net income excludes the measurement period adjustment to the Company’s accounting for the 2017 Tax Act for the three and nine months ended September 30, 2018 and non-deductible Merger and integration costs of $0.5 million for the nine months ended September 30, 2017.
   

 

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Source: BMC Stock Holdings, Inc.

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