Builders FirstSource Inc

Previous wording

We are a leading supplier and manufacturer of building materials, manufactured components and construction services to professional contractors, sub-contractors and consumers. The Company operates approximately 570 locations in 43 states across the United States, which are internally organized into geographic operating divisions. Due to the similar economic characteristics, categories of products, distribution methods and customers, our operating divisions are aggregated into one reportable segment.

Current wording

We are a leading supplier and manufacturer of building materials, manufactured components and construction services to professional contractors, sub-contractors and consumers. The Company operates approximately 580 locations in 43 states across the United States, which are internally organized into geographic operating divisions. Due to the similar economic characteristics, categories of products, distribution methods and customers, our operating divisions are aggregated into one reportable segment.

Previous wording

During the period, we completed the acquisitions of Quality Door and Hanson Truss for an aggregate purchase price of approximately $59.0 million. These acquisitions further expand our market footprint and provide additional operations in our value-add product categories. These transactions are described in further detail in Note 2 to these condensed consolidated financial statements included in Item 1 of this quarterly report on Form 10-Q.

Current wording

Through June 30, 2024, we have completed the acquisitions of Quality Door, Hanson Truss, RPM, Schoeneman and TRSMI for an aggregate purchase price of approximately $132.9 million, net of cash acquired. These acquisitions further expand our market footprint and provide additional operations in our value-add product categories. These transactions are described in further detail in Note 2 to these condensed consolidated financial statements included in Item 1 of this quarterly report on Form 10-Q.

Previous wording

Under share repurchase programs authorized by the board of directors since August 2021, the Company has repurchased a total of 87.2 million shares of common stock, or 42.2% of the Company’s total shares outstanding, at an average price of $70.42, inclusive of applicable fees and taxes. During the three months ended March 31, 2024, the Company repurchased 0.1 million shares at a weighted average price of $202.67 per share, inclusive of applicable fees and taxes, for a total cost of $19.6 million. On February 22,

Current wording

During the six months ended June 30, 2024, the Company repurchased 5.9 million shares at a weighted average price of $170.55 per share, inclusive of applicable fees and taxes, for a total cost of $1.0 billion, which completed the Company’s previously authorized share repurchase plans.

Previous wording

On February 29, 2024, the Company completed a private offering of $1.0 billion in aggregate principal amount of the 6.375% 2034 Notes at an issue price equal to 100% of par value. The Company used the net proceeds from the offering to repay indebtedness outstanding under our Revolving Facility and pay related transaction fees and expenses.

Current wording

On February 29, 2024, the Company completed a private offering of $1.0 billion in aggregate principal amount of the 6.375% 2034 Notes at an issue price equal to 100% of par value. The Company used the net proceeds from the offering to pay related transaction fees and expenses, repay indebtedness outstanding under our Revolving Facility and for general corporate purposes.

Previous wording

According to the U.S. Census Bureau, actual U.S. total housing starts were 0.3 million for thefirst quarter of 2024, an increase of 1.3% compared to the first quarter of 2023. Actual U.S. single-family starts for the first quarter of 2024 were 0.2 million, an increase of 27.0% compared to the first quarter of 2023. A composite of third-party sources, including the National Association of Home Builders, are forecasting 1.4 million U.S. total housing starts and 1.0 million U.S single-family housing starts for 2024, which is relatively flat and an increase of 4.4%, respectively, from 2023. In addition, the Home Improvement Research Institute is forecasting sales in the professional repair and remodel end market to increase approximately 1.3% in 2024 compared to 2023.

Current wording

According to the U.S. Census Bureau, actual U.S. total housing starts were 0.4 million for thesecond quarter of 2024, a decrease of 7.1% compared to the second quarter of 2023. Actual U.S. single-family starts for the second quarter of 2024 were 0.3 million, an increase of 7.4% compared to the second quarter of 2023. A composite of third-party sources, including the National Association of Home Builders, are forecasting 1.4 million U.S. total housing starts and 1.0 million U.S single-family housing starts for 2024, which is relatively flat and an increase of 9.0%, respectively, from 2023. In addition, the Home Improvement Research Institute is forecasting sales in the professional repair and remodel end market to increase approximately 1.2% in 2024 compared to 2023.

Previous wording

We believe the long-term outlook for the housing industry is positive and that the housing industry remains underbuilt due to growth in the underlying demographics compared to historical new construction levels. While historically low existing homes for sale has provided some current resiliency for new home sales, rising interest rates and inflation have tempered near term demand as homes become less affordable for consumers, investors and builders. We believe we are well-positioned to take advantage of favorable long-term industry trends and to strategically increase our market share, both organically and through acquisitions. We will continue to focus on working capital by closely monitoring the credit exposure of our customers, remaining focused on maintaining the right level of inventory and by working with our vendors to improve payment terms and pricing on our products. We strive to achieve the appropriate balance of short-term expense control while maintaining the expertise and capacity to grow the business as market conditions expand.

Current wording

We believe the long-term outlook for the housing industry is positive and that the housing industry remains underbuilt due to growth in the underlying demographics compared to historical new construction levels. Low existing homes for sale, builder incentives and modifications to home size and complexity continue to provide some current resiliency for new home sales despite the challenges from higher interest rates and inflation that have impacted demand and affordability for consumers, investors and builders. We believe we are well-positioned to take advantage of favorable long-term industry trends and to strategically increase our market share, both organically and through acquisitions. We will continue to focus on working capital by closely monitoring the credit exposure of our customers, remaining focused on maintaining the right level of inventory and by working with our vendors to improve payment terms and pricing on our products. We strive to achieve the appropriate balance of short-term expense control while maintaining the expertise and capacity to grow the business as market conditions expand.

Previous wording

Net Sales. Net sales for the three months ended March 31, 2024, were $3.9 billion, a 0.2% increase over net sales of $3.9 billion for the three months ended March 31, 2023. Net sales from acquisitions increased net sales by 1.9%, partially offset by commodity price deflation of 1.7%, while core organic sales remained flat due to the effect of gains from single-family starts increases being offset by decreases in the multi-family, repair-and-remodel and other segments.

Current wording

Net Sales. Net sales for the three months ended June 30, 2024, were $4.5 billion, a 1.6% decrease from net sales for the three months ended June 30, 2023. Core organic sales decreased net sales by 3.8%, primarily due to a continued downward trend in the multi-family customer segment partially offset by increases in the single-family and repair and remodel and other customer segments, while net sales from acquisitions and commodity price inflation increased net sales by 1.9% and 0.3%, respectively.

Previous wording

Gross Margin. Gross margin decreased $0.1 billion to $1.3 billion. Our gross margin percentage decreased to 33.4% in the first quarter of 2024 from 35.3% in the first quarter of 2023, a 1.9% decrease. This decrease was attributable to a timing shift in product mix toward lower-margin, early stage homebuilding products, as well as margin normalization, particularly in our multi-family operations.

Current wording

Gross Margin. Gross margin decreased $0.1 billion to $1.5 billion. Our gross margin percentage decreased to 32.8% in the second quarter of 2024 from 35.2% in the second quarter of 2023, a 2.4% decrease. This decrease was attributable to margin normalization, particularly in our multi-family operations.

Previous wording

Income Tax Expense. We recorded income tax expense of $66.5 million and $91.3 million in the first quarters of 2024 and 2023, respectively. The decrease in the tax expense was primarily driven by a decrease in income before income taxes in the current period. Our effective tax rate was 20.4% in the first quarter of 2024, a decrease from 21.5% in the first quarter of 2023, primarily related to an increase in our stock-based compensation windfall benefit, partially offset by permanent and other differences.

Current wording

Income Tax Expense. We recorded income tax expense of $93.4 million and $119.4 million in the second quarters of 2024 and 2023, respectively. The decrease in the tax expense was primarily driven by a decrease in income before income taxes in the current period. Our effective tax rate was 21.3% in the second quarter of 2024, a decrease from 22.8% in the second quarter of 2023, primarily related to an increase in our stock-based compensation windfall benefit.

Previous wording

We experienced increased net sales in our lumber and lumber sheet goods due to increased single-family housing starts and acquired locations, with the lumber and lumber sheet goods increase partially offset by commodity deflation. Our manufactured products sales declined primarily due to decreased multi-family activity and commodity price deflation. For the comparable period, specialty building products and services and windows, doors and millwork sales remained relatively flat.

Current wording

We experienced increased net sales in our lumber and lumber sheet goods primarily due to increased single-family housing starts and acquired locations. Our manufactured products sales declined as multi-family continues to trend downward. For the comparable period, specialty building products and services and windows, doors and millwork sales remained relatively flat.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $22.0 million, or 2.4%, primarily due to additional operating expenses from additional locations acquired within the last twelve months. As a percentage of net sales, selling, general and administrative expenses increased to 23.8%, up from 23.3% in the first quarter of 2023.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $22.6 million, or 1.2%. This decrease was primarily due to decreased variable compensation, partially offset by additional operating expenses from locations acquired within the last twelve months. As a percentage of net sales, selling, general and administrative expenses remained flat at 22.8% for the six months ended June 30, 2024 and 2023.

Previous wording

Interest Expense, Net. Interest expense was $48.3 million in the first quarter of 2024, an increase of $6.2 million from the first quarter of 2023. The increase was primarily due to higher debt balances with the issuance of the 6.375% 2034 Notes.

Current wording

Interest Expense, Net. Interest expense was $100.4 million in the six months ended June 30, 2024, an increase of $5.2 million from the six months ended June 30, 2023. Interest expense increased primarily due to higher debt balances partially offset by interest income received in the second quarter of 2024.

Previous wording

As of March 31, 2024, we did not have any outstanding borrowings under our Revolving Facility, and our net excess borrowing availability was $1.7 billion after being reduced by outstanding letters of credit totaling $66.5 million. Excess availability must equal or exceed a minimum specified amount, currently $180.0 million, or we are required to meet a fixed charge coverage ratio of 1.00 to 1.00. We were not in violation of any covenants or restrictions imposed by any of our debt agreements at March 31, 2024.

Current wording

As of June 30, 2024, we had $99.0 million in outstanding borrowings under our Revolving Facility, and our net excess borrowing availability was $1.6 billion after being reduced by outstanding letters of credit totaling $66.3 million. Excess availability must equal or exceed a minimum specified amount, currently $180.0 million, or we are required to meet a fixed charge coverage ratio of 1.00 to 1.00. We were not in violation of any covenants or restrictions imposed by any of our debt agreements at June 30, 2024.

Previous wording

Our liquidity at March 31, 2024, was $2.4 billion, which consists of net borrowing availability under the Revolving Facility and cash on hand.

Current wording

Our liquidity at June 30, 2024, was $1.7 billion, which consists of net borrowing availability under the Revolving Facility and cash on hand.

Previous wording

Cash provided by operating activities was $0.3 billion for the three months ended March 31, 2024, compared to cash provided by operating activities of $0.7 billion for the three months ended March 31, 2023. The decrease in cash provided by operating activities was largely the result of lower net income and an increase in net working capital in the first three months of 2024.

Current wording

Cash provided by operating activities was $0.8 billion for the six months ended June 30, 2024, compared to cash provided by operating activities of $1.0 billion for the six months ended June 30, 2023. The decrease in cash provided by operating activities was largely the result of lower net income and changes in the timing of accounts payable outflows in the first six months of 2024.

Previous wording

For the three months ended March 31, 2024, the cash used in investing decreased $27.8 million when compared to the prior year primarily due to using $20.3 million less cash for acquisitions and $10.2 million less cash for net purchases of property and equipment.

Current wording

For the six months ended June 30, 2024, the cash used in investing decreased $3.8 million when compared to the prior year primarily due to using $46.2 million less cash for net purchases of property and equipment, offset by $42.4 million more cash for acquisitions.

Previous wording

Cash provided by financing activities was $465.2 million for the three months ended March 31, 2024, which consisted primarily of a net $987.5 million received for the issuance of the 6.375% 2034 Notes, offset by $464.0 million net payments on the Revolving Facility. Cash used in financing activities was $411.6 million for the three months ended March 31, 2023, which consisted primarily of $603.8 million repurchases of common stock, offset by $217.0 million in net borrowings on the Revolving Facility.

Current wording

Cash used in financing activities was $0.4 billion for the six months ended June 30, 2024, which consisted primarily of $1.0 billion for repurchases of common stock and $0.4 billion net payments on the Revolving Facility, offset by a net $1.0 billion received for the issuance of the 6.375% 2034 Notes. Cash used in financing activities was $0.7 billion for the six months ended June 30, 2023, which consisted primarily of $1.4 billion for repurchases of common stock, offset by $0.7 billion in net borrowings on the Revolving Facility.