Builders FirstSource Inc
For the period ended Sep 30, 2024. Filed Nov 5, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 5, 2024
BLDR$62.54-4.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0000950170-24-091788
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-05.
0000950170-24-121436
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 65 previous paragraphs and 65 current paragraphs.
39 unchanged; 21 reworded; 5 added; 3 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 4 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
Executive Officer Transition
Current report
On September 19, 2024, the Company’s board of directors appointed Peter Jackson, Executive Vice President and Chief Financial Officer, as the Company’s next President & Chief Executive Officer and member of its Board of Directors, effective November 6, 2024. Mr. Jackson will succeed Dave Rush, who has served as President & Chief Executive Officer since November 2022 and is retiring after 25 years of dedicated service to the Company, effective November 6, 2024. Mr. Rush will remain on the Company’s board of directors and continue as a special advisor to the Company to ensure a smooth transition. Additionally, the Company’s board of directors appointed Pete Beckmann, Senior Vice President, Financial Planning & Analysis of the Company, to succeed Mr. Jackson as Chief Financial Officer, effective November 6, 2024.
Current report
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $958.3 million, an increase of $18.8 million, or 2.0%, over the third quarter of 2023. Increases in selling, general and administrative expenses were driven by additional operating expenses from locations acquired within the last twelve months and asset write-offs, which were partially offset by lower variable compensation on decreased sales.
Current report
As a percentage of net sales, selling, general and administrative expenses increased to 22.6%, up from 20.7%, for the three months ended September 30, 2024 and 2023, respectively, primarily attributable to reduced operating leverage.
Current report
As a percentage of net sales, selling, general and administrative expenses increased to 22.7%, up from 22.1% for the nine months ended September 30, 2024 and 2023, respectively, primarily attributable to reduced operating leverage.
Removed paragraphs (3)
Previous report
Debt Transaction
Previous report
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 report
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by $44.7 million, or 4.4%, and as a percentage of net sales decreased to 21.8%, down from 22.5% in the second quarter of 2023. This decrease was primarily due to lower variable compensation.
Reworded paragraphs (21)
Previous 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.
Current wording
Through September 30, 2024, we have completed the acquisitions of Quality Door, Hanson Truss, RPM, Schoeneman, TRSMI, Western Truss, CRi, Wyoming Millwork, Sunrise Wood Designs, Reno Truss and High Mountain for an aggregate purchase price of approximately $265.4 million, net of cash acquired. Among other opportunities, 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
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.
Current wording
On August 5, 2024, the Company’s board of directors authorized a new repurchase plan of up to $1.0 billion of the Company’s outstanding shares of common stock. During the nine months ended September 30, 2024, under the previous program and the current authorization, the Company repurchased 6.8 million shares at a weighted average price of $171.37 per share, inclusive of applicable fees and taxes, for a total cost of $1.2 billion.
Previous 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.
Current wording
According to the U.S. Census Bureau, actual U.S. total housing starts were 0.4 million for thethird quarter of 2024, a decrease of 3.5% compared to the third quarter of 2023, and 1.0 million for the nine months ended September 30, 2024, a 3.4% decrease compared to the nine months ended September 30, 2023. Actual U.S. single-family starts for the third quarter of 2024 were 0.3 million, a decrease of 0.5% compared to the third quarter of 2023, and 0.8 million in the first nine months of 2024, a 10.1% increase compared to the same period a year ago. A composite of third-party sources, including the National Association of Home Builders, are forecasting 1.3 million U.S. total housing starts and 1.0 million single-family starts for 2024, which is a decrease of 5.3% and an increase of 5.6%, respectively from 2023. In addition, the Home Improvement Research Institute is forecasting sales in the professional repair and remodel end market to increase approximately 0.1% 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. 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.
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. Despite the challenges posed by higher interest rates and inflation that have impacted demand and affordability for consumers, investors and builders, new home sales remain resilient due to low inventory of existing homes for sale, builder incentives and modifications to home size and complexity. 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 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.
Current wording
Net Sales. Net sales for the three months ended September 30, 2024, were $4.2 billion, a 6.7% decrease from net sales for the three months ended September 30, 2023. Core organic sales decreased net sales by 7.2%, primarily due to a continued downward trend in the multi-family customer segment and decreased single-family activity due to lower housing starts, while commodity price deflation decreased net sales by another 2.9%. These decreases were partially offset by increases in net sales from acquisitions and increased selling days of 2.0% and 1.4%, respectively.
Previous wording
We experienced increased net sales in our lumber and lumber sheet goods due to increased single-family housing starts and commodity inflation. 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.
Current wording
We experienced decreased net sales in our lumber and lumber sheet goods primarily due to commodity deflation. 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 consistent.
Previous 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.
Current wording
Gross Margin. Gross margin decreased $0.2 billion to $1.4 billion. Our gross margin percentage decreased to 32.8% in the third quarter of 2024 from 34.9% in the third quarter of 2023, a 2.1% decrease. This decrease was driven by ongoing multi-family and core organic margin normalization.
Previous wording
Interest Expense, Net. Interest expense was $52.0 million in the second quarter of 2024, a decrease of $1.0 million from the second quarter of 2023. The decrease was due to interest income received during the period, partially offset by higher interest expense on higher average debt balances.
Current wording
Interest Expense, Net. Interest expense was $54.3 million in the third quarter of 2024, an increase of $4.1 million from the third quarter of 2023. The increase was due to higher average debt balances.
Previous 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.
Current wording
Income Tax Expense. We recorded income tax expense of $89.0 million and $140.0 million in the third quarters of 2024 and 2023, respectively. Our effective tax rate was 23.8% in the third quarter of 2024 and 23.7% in the third quarter of 2023. The decrease in the tax expense was primarily driven by a decrease in income before income taxes in the current period.
Previous wording
Six Months ended June 30, 2024 Compared with the Six Months ended June 30, 2023
Current wording
Nine Months ended September 30, 2024 Compared with the Nine Months ended September 30, 2023
Previous wording
Net Sales. Net sales for the six months ended June 30, 2024, were $8.3 billion, a 0.8% decrease over net sales of $8.4 billion for the six months ended June 30, 2023. Core organic sales decreased net sales by 2.1%, primarily due to a continued downward trend in the multi-family customer segment partially offset by an increase in the single-family customer segment, while commodity price deflation decreased net sales by an additional 0.6%. These decreases were partially offset by increased net sales from acquisitions of 1.9%.
Current wording
Net Sales. Net sales for the nine months ended September 30, 2024, were $12.6 billion, a 2.8% decrease over net sales of $12.9 billion for the nine months ended September 30, 2023. Core organic sales decreased net sales by 3.8%, primarily due to a continued downward trend in the multi-family customer segment, a slight decrease in the single-family customer segment offset by a similar increase in the repair and remodel and other customer segment, while commodity price deflation decreased net sales by an additional 1.4%. These decreases were partially offset by increased net sales from acquisitions and selling days of 1.9% and 0.5%, respectively.
Previous 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.
Current wording
We experienced increased net sales in our lumber and lumber sheet goods primarily due to increased single-family housing starts. 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 consistent.
Previous wording
Gross Margin. Gross margin decreased $0.2 billion to $2.8 billion, and our gross margin percentage decreased to 33.1% for the six months ended June 30, 2024, from 35.3% in the six months ended June 30, 2023, a 2.2% decrease. This decrease was attributable to margin normalization, particularly in our multi-family operations.
Current wording
Gross Margin. Gross margin decreased $0.4 billion to $4.1 billion, and our gross margin percentage decreased to 33.0% for the nine months ended September 30, 2024, from 35.1% in the nine months ended September 30, 2023, a 2.1% decrease. This decrease was attributable to margin normalization, particularly in our multi-family operations.
Previous 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.
Current wording
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $2.9 billion, a decrease of $3.8 million, or 0.1% from 2023. This decrease was primarily due to decreased variable compensation on decreased sales and reduced intangible amortization, partially offset by additional operating expenses from locations acquired within the last twelve months and asset write-offs.
Previous 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.
Current wording
Interest Expense, Net. Interest expense was $154.6 million in the nine months ended September 30, 2024, an increase of $9.3 million from the nine months ended September 30, 2023. Interest expense increased primarily due to higher debt balances partially offset by interest income received in 2024.
Previous wording
Income Tax Expense. We recorded income tax expense of $159.9 million and $210.7 million for the six months ended June 30, 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 21.0% in the first six months ended June 30, 2024, a decrease from 22.2% in the first six months ended June 30, 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 $248.8 million and $350.7 million for the nine months ended September 30, 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 21.9% in the first nine months ended September 30, 2024, a decrease from 22.8% in the first nine months ended September 30, 2023, primarily related to an increase in our stock-based compensation windfall benefit, partially offset by permanent and other differences.
Previous 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.
Current wording
As of September 30, 2024, we had no 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 $65.4 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 September 30, 2024.
Previous 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.
Current wording
Our liquidity at September 30, 2024, was $2.1 billion, which consists of net borrowing availability under the Revolving Facility and cash on hand.
Previous 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.
Current wording
Cash provided by operating activities was $1.5 billion for the nine months ended September 30, 2024, compared to cash provided by operating activities of $1.7 billion for the nine months ended September 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, partially offset by cash inflows from accounts receivable in the first nine months of 2024.
Previous 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.
Current wording
For the nine months ended September 30, 2024, the cash used in investing increased $58.8 million when compared to the prior year primarily due to using $114.0 million more cash for acquisitions, offset by $62.8 million less cash for net purchases of property and equipment.
Previous 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.
Current wording
Cash used in financing activities was $0.7 billion for the nine months ended September 30, 2024, which consisted primarily of $1.2 billion for repurchases of common stock and $0.5 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 $1.2 billion for the nine months ended September 30, 2023, which consisted primarily of $1.6 billion for repurchases of common stock, offset by $0.4 billion in net borrowings on the Revolving Facility.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
On August 5, 2024, the Company’s board of directors authorized a new repurchase plan of up to $1.0 billion of the Company’s outstanding shares of common stock.
Previous report — wording carried elsewhere
This transaction is described in Note 8 to the condensed consolidated financial statements included in Item 1 of this quarterly report on Form 10-Q. From time to time, based on market conditions and other factors and subject to compliance with applicable laws and regulations, the Company may repurchase or call its notes, repay debt, repurchase shares of its common stock or otherwise enter into transactions regarding its capital structure.