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BMC Stock Holdings, Inc. Announces 2017 Second Quarter Results

ATLANTA, Aug. 03, 2017 (GLOBE NEWSWIRE) -- BMC Stock Holdings, Inc. (Nasdaq:BMCH) (“BMC” or the “Company”), one of the leading providers of diversified building products and services in the U.S. residential construction market, today announced its financial results for the second quarter ended June 30, 2017.  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.

Second Quarter 2017 Highlights (Comparisons are to Prior Year Period)

  • Grew net sales by 11.1% to $886.4 million, including significant growth in Ready-Frame® sales
  • Delivered net income of $17.6 million, including merger and integration costs of $6.3 million, compared to net income of $18.0 million in the prior year period, including merger and integration costs of $3.6 million
  • Increased Adjusted EBITDA (non-GAAP) to $59.6 million, up 3.6%
  • Recorded diluted earnings per share of $0.26, compared to $0.27 in the prior year period
  • Expanded adjusted net income per diluted share (non-GAAP) by $0.02 to $0.34
  • Refined expectation of total annual run rate cost savings from the merger to a range of $48 million to $52 million by the end of 2017

Peter Alexander, President and Chief Executive Officer of BMC, commented, “Continuing the solid top-line growth trends that we saw late in the first quarter, we achieved second quarter net sales growth of 11.1%.  We continue to be pleased with the strong performance of Ready-Frame®, which delivered $45 million of sales in the quarter and, in part, helped drive our 14% increase in sales of structural components.  This whole-house solution continues to gain significant traction as we provide builders a way to effectively navigate a tough labor environment, save money and shorten cash conversion cycle times.  In addition, our recent acquisitions contributed $19.2 million in revenue during the quarter, and we continue to pursue additional opportunities to further drive profitable growth.”

Jim Major, Executive Vice President and Chief Financial Officer of BMC, added, “Volatility in the cost of lumber and lumber sheet goods constrained our gross margin percentage in the second quarter, and recent Canadian wildfires have extended this period of market volatility into the third quarter.  However, over the longer-term, we anticipate our gross margin percentage will improve relative to our second quarter 2017 performance and commodity inflation will ultimately provide a more significant tailwind for our operating results.  Our team remains intently focused on driving growth in our value-added product offerings and higher-margin customer categories while, at the same time, executing initiatives to further rationalize our cost structure and improve our operating results.  During the second quarter, we realized an additional $2.8 million of merger-related cost synergies, primarily within cost of sales, and have refined our estimate of total annualized merger-related cost savings to $48 million to $52 million by the end of 2017.”

/EIN News/ -- Second Quarter 2017 Summary of Financial Results

During the three months ended June 30, 2017, the Company generated improvements in net sales and Adjusted EBITDA and continued to make substantial progress on its merger integration plan.

                         
(in thousands, except per share data)   Q2’17   Q2’16   Variance   YTD’17   YTD’16   Variance
Net sales  
                     
Reported net sales (GAAP)   $ 886,375     $ 797,547     $ 88,828     $ 1,644,075     $ 1,524,965     $ 119,110  
                         
Net income and EPS                        
Net income (GAAP)   $ 17,596     $ 17,982     $ (386 )   $ 21,340     $ 11,226     $ 10,114  
Diluted earnings per share (GAAP)   $ 0.26     $ 0.27     $ (0.01 )   $ 0.32     $ 0.17     $ 0.15  
Adjusted net income (non-GAAP)   $ 22,956     $ 21,570     $ 1,386     $ 30,606     $ 26,965     $ 3,641  
Adjusted net income per diluted share (non-GAAP)   $ 0.34     $ 0.32     $ 0.02     $ 0.45     $ 0.41     $ 0.04  
                         
Adjusted EBITDA (non-GAAP)   $ 59,577     $ 57,534     $ 2,043     $ 93,140     $ 91,243     $ 1,897  
Adjusted EBITDA margin (non-GAAP)   6.7 %   7.2 %   (0.5 )%   5.7 %   6.0 %   (0.3 )%
                         
Net cash provided by operating activities   $ 15,130     $ 25,759     $ (10,629 )   $ 11,224     $ 39,388     $ (28,164 )
                                                 


Second Quarter 2017 Financial Results Compared to Prior Year Period

  • Net sales increased 11.1% to $886.4 million.  The Company estimates that net sales increased 5.5% from increased volumes, 3.2% from lumber and sheet goods commodity price inflation and 2.4% from recent acquisitions.
  • Gross profit as a percent of net sales was 23.9%, as compared to 24.0% for the second quarter of 2016.  This decrease primarily related to a decline in gross profit as a percentage of net sales in the lumber and lumber sheet goods product category of approximately 110 basis points, and a higher percentage of total net sales being derived from lumber and lumber sheet goods.  These decreases were partially offset by approximately $2.3 million of merger-related synergies within cost of goods sold.
  • Selling, general and administrative (“SG&A”) expenses increased 12.8% to $157.8 million.  Healthcare and casualty insurance costs increased by approximately $4.3 million as compared to the prior year, primarily due to unusually low expense in the second quarter of 2016.  The increase in SG&A expenses also reflected costs associated with additional facilities, including four newly-opened and two recently-acquired locations that were not included in the portfolio during the prior year period, higher diesel costs and other variable costs to serve higher sales volumes. SG&A expenses as a percent of net sales was 17.8%, compared to 17.5% for the second quarter of 2016.
  • Depreciation expense, including the portion reported within cost of sales, increased to $13.5 million, compared to $11.9 million in the second quarter of 2016.  The increase was primarily driven by replacements and additions of delivery fleet, material handling equipment and operating equipment.
  • Merger and integration costs increased to $6.3 million, compared to $3.6 million in the second quarter of 2016. This increase was primarily due to the Company’s determination that it had ceased receiving economic benefit from certain non-cancellable license and service contracts related to the New ERP, as defined in the Company’s quarterly and annual filings with the SEC.  The Company recognized approximately $2.8 million of expense within merger and integration costs during the quarter ended June 30, 2017 related to this determination.
  • Amortization expense was $4.1 million, compared to $5.3 million in the second quarter of 2016.  This decrease related to certain intangible assets that became fully amortized.
  • Interest expense decreased to $6.5 million, compared to $8.1 million in the second quarter of 2016.  This decrease primarily resulted from the successful refinancing of the Company’s long-term notes in September 2016.
  • Other income, net, decreased to $1.0 million, compared to $1.4 million in the second quarter of 2016.  This decrease primarily reflected insurance proceeds received during the second quarter of 2016 related to a fire at one of the Company’s facilities during 2015. 
  • Net income decreased $0.4 million to $17.6 million, including merger and integration costs of $6.3 million.
  • Adjusted net income (non-GAAP) increased 6% to $23.0 million, or $0.34 per diluted share, compared to Adjusted net income of $21.6 million, or $0.32 per diluted share, in the second quarter of 2016.
  • Adjusted EBITDA (non-GAAP) increased 3.6% to $59.6 million.
  • Adjusted EBITDA margin (non-GAAP) declined 50 basis points to 6.7%.
  • Cash provided by operating activities of $15.1 million declined by $10.6 million, primarily as a result of larger seasonal increases in working capital and increased inventory investments due to rising costs for lumber and lumber sheet goods.

Liquidity and Capital Resources

Total liquidity as of June 30, 2017 was approximately $248.6 million, which included cash and cash equivalents of $7.3 million and $241.3 million of borrowing availability under the Company’s asset-backed revolver.  Capital expenditures during the second quarter of 2017 totaled $24.1 million.  These expenditures were primarily used to fund purchases of vehicles and equipment to support increased sales volume and replace aged assets, and facility and technology investments to support our operations.  In addition, the Company acquired approximately $0.7 million of assets during the second quarter of 2017 under capital lease arrangements, consisting primarily of material handling equipment.

Conference Call Information

BMC will host a conference call on Thursday, August 3, 2017 at 10:00 a.m. Eastern Time and will simultaneously broadcast it live over the Internet.  The conference call can be accessed by dialing 877-407-0784 (domestic) or 201-689-8560 (international).  A telephonic replay will be available approximately three hours after the call and can be accessed by dialing 844-512-2921, or for international callers, 412-317-6671.  The passcode for both the live call and the replay is 13666107.  The telephonic replay will be available until 11:59 p.m. (Eastern Time) on August 10, 2017.  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 document under "Reconciliation of GAAP to Non-GAAP Measures."

About BMC Stock Holdings, Inc.

With $3.1 billion in 2016 net sales, BMC is one of the nation's leading providers of diversified building products and services to builders, contractors and professional remodelers in the U.S. residential housing market.  Headquartered in Atlanta, Georgia, 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 43 metropolitan areas across 18 states, principally in the fast-growing South and West regions.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this document may include, without limitation, statements regarding sales growth, price changes, earnings performance, strategic direction and the demand for our products. Forward-looking statements are typically identified by words or phrases such as "may," "might," "predict," "future," "seek to," "assume," "goal," "objective," "continue," "will," "could," "should," "would," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "prospects," "guidance," "possible," "predict," "propose," "potential" and "forecast," or the negative of such terms and other words, terms and phrases of similar meaning. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties, many of which are outside BMC'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.

A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. These factors include without limitation:

  • the state of the homebuilding industry and repair and remodeling activity, the economy and the credit markets;
  • seasonality and cyclicality of the building products supply and services industry;
  • competitive industry pressures and competitive pricing pressure from our customers and competitors;
  • inflation or deflation of 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;
  • the impact of our indebtedness;
  • the various financial covenants in our secured credit agreement and senior secured notes indenture;
  • our concentration of business in the Texas, California and Georgia markets;
  • the potential negative impacts from the significant decline in oil prices on employment, home construction and remodeling activity in Texas (particularly the Houston metropolitan area) and other markets dependent on the energy industry;
  • 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 a housing market decline may have on our business, including the potential for impairment losses or the closing or idling of under-performing locations;
  • 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 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;
  • the potential loss of significant customers or a reduction in the quantity of products they purchase;
  • 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 disruptions to our information technology systems;
  • cybersecurity risks;
  • risks related to the continued integration of Building Materials Holding Corporation and Stock Building Supply Holdings, Inc. and successful operation of the post-merger company;
  • our ability to operate on multiple Enterprise Resource Planning information systems and convert multiple systems to a single system; 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, 2017.

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.


 
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
         
    Three Months Ended June 30,   Six Months Ended June 30,
(in thousands, except per share amounts)
  2017   2016   2017   2016
Net sales
  $ 886,375   $ 797,547   $ 1,644,075   $ 1,524,965
Cost of sales   674,688     605,892     1,254,191     1,166,693  
Gross profit   211,687     191,655     389,884     358,272  
                 
Selling, general and administrative expenses   157,789     139,897     306,677     281,678  
Depreciation expense   10,941     9,290     21,502     18,082  
Amortization expense   4,100     5,288     7,921     10,533  
Merger and integration costs   6,324     3,597     10,765     6,433  
Impairment of assets   26         26     11,883  
    179,180     158,072     346,891     328,609  
Income from operations   32,507     33,583     42,993     29,663  
Other income (expense)                
Interest expense   (6,495 )   (8,121 )   (12,583 )   (16,352 )
Other income, net   964     1,411     1,283     2,866  
Income before income taxes   26,976     26,873     31,693     16,177  
Income tax expense   9,380     8,891     10,353     4,951  
Net income   $ 17,596     $ 17,982     $ 21,340     $ 11,226  
                 
Weighted average common shares outstanding                
Basic   66,927     65,839     66,810     65,589  
Diluted   67,394     66,417     67,290     66,137  
                 
Net income per common share                
Basic   $ 0.26     $ 0.27     $ 0.32     $ 0.17  
Diluted   $ 0.26     $ 0.27     $ 0.32     $ 0.17  
                                 


 
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)

(in thousands, except share and per share amounts)   June 30,
 2017
  December 31,
 2016
Assets
       
Current assets        
Cash and cash equivalents   $ 7,341     $ 8,917  
Accounts receivable, net of allowances   370,594     313,304  
Inventories, net   315,823     272,276  
Costs in excess of billings on uncompleted contracts   25,963     26,373  
Income taxes receivable       2,437  
Prepaid expenses and other current assets   53,821     43,635  
Total current assets   773,542     666,942  
Property and equipment, net of accumulated depreciation   302,050     286,741  
Deferred income taxes       550  
Customer relationship intangible assets, net of accumulated amortization   173,138     164,191  
Other intangible assets, net of accumulated amortization   2,356     3,024  
Goodwill   262,077     254,832  
Other long-term assets   18,669     18,734  
Total assets   $ 1,531,832     $ 1,395,014  
Liabilities and Stockholders' Equity        
Current liabilities        
Accounts payable   $ 202,743     $ 165,540  
Accrued expenses and other liabilities   91,937     88,786  
Billings in excess of costs on uncompleted contracts   19,831     15,691  
Income taxes payable   2,697      
Interest payable   4,944     5,619  
Current portion:        
Long-term debt and capital lease obligations   8,704     11,155  
Insurance reserves   14,494     16,021  
Total current liabilities   345,350     302,812  
Insurance reserves   38,315     39,184  
Long-term debt   410,952     344,827  
Long-term portion of capital lease obligations   18,531     20,581  
Deferred income taxes   3,605      
Other long-term liabilities   7,511     7,009  
Total liabilities   824,264     714,413  
Commitments and contingencies        
Stockholders' equity        
Preferred stock, $0.01 par value, 50.0 million shares authorized, no shares issued and outstanding at June 30, 2017 and December 31, 2016        
Common stock, $0.01 par value, 300.0 million shares authorized, 67.1 million and 66.8 million shares issued, and 66.9 million and 66.7 million outstanding at June 30, 2017 and December 31, 2016, respectively   671     668  
Additional paid-in capital   655,217     649,280  
Retained earnings   54,522     33,182  
Treasury stock, at cost, 0.2 million and 0.1 million shares at June 30, 2017 and December 31, 2016, respectively   (2,842 )   (2,529 )
Total stockholders' equity   707,568     680,601  
Total liabilities and stockholders' equity   $ 1,531,832     $ 1,395,014  
                 


 
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
     
    Six Months Ended June 30,
(in thousands)
  2017   2016
Cash flows from operating activities
       
Net income   $ 21,340     $ 11,226  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation expense   26,450     23,288  
Amortization of intangible assets   7,921     10,533  
Amortization of debt issuance costs   842     1,846  
Deferred income taxes   4,155     (1,975 )
Non-cash stock compensation expense   3,385     3,693  
Loss (gain) on sale of property, equipment and real estate   280     (372 )
Impairment of assets   26     11,883  
Amortization of inventory step-up charges       2,884  
Gain on insurance proceeds       (1,003 )
Other non-cash adjustments   419     92  
Change in assets and liabilities, net of effects of acquisitions        
Accounts receivable, net of allowances   (51,197 )   (40,188 )
Inventories, net   (39,017 )   (26,295 )
Accounts payable   37,088     40,579  
Other assets and liabilities   (468 )   3,197  
    Net cash provided by operating activities   11,224     39,388  
Cash flows from investing activities        
Purchases of property, equipment and real estate   (34,782 )   (19,522 )
Purchases of businesses, net of cash acquired   (38,737 )    
Proceeds from sale of property, equipment and real estate   1,038     964  
Insurance proceeds       1,151  
    Net cash used in investing activities   (72,481 )   (17,407 )
Cash flows from financing activities        
Proceeds from revolving line of credit   485,388     790,535  
Repayments of proceeds from revolving line of credit   (418,666 )   (813,791 )
Principal payments on other notes   (2,580 )   (2,501 )
Payments on capital lease obligations   (5,259 )   (4,268 )
Proceeds from issuance of common stock, net of offering costs       13,614  
Other financing activities, net   798     (655 )
   Net cash provided by (used in) financing activities   59,681     (17,066 )
   Net (decrease) increase in cash and cash equivalents   (1,576 )   4,915  
Cash and cash equivalents        
Beginning of period   8,917     1,089  
End of period   $ 7,341     $ 6,004  
                 


 
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Net Sales by Product Category
(unaudited)
             
    Three Months Ended
 June 30, 2017
  Three Months Ended
June 30, 2016 (a)
   
(in thousands)   Net Sales   % of Sales   Net Sales   % of Sales   % Change
Structural components   $ 138,306     15.6 %   $ 121,187     15.2 %   14.1 %
Lumber & lumber sheet goods   290,499     32.8 %   244,830     30.7 %   18.7 %
Millwork, doors & windows   240,999     27.2 %   228,423     28.6 %   5.5 %
Other building products & services   216,571     24.4 %   203,107     25.5 %   6.6 %
Total net sales   $ 886,375     100.0 %   $ 797,547     100.0 %   11.1 %
                                   


    Six Months Ended
 June 30, 2017
  Six Months Ended
June 30, 2016 (a)
   
(in thousands)   Net Sales   % of Sales   Net Sales   % of Sales   % Change
Structural components   $ 248,197     15.1 %   $ 230,077     15.1 %   7.9 %
Lumber & lumber sheet goods   534,935     32.5 %   458,362     30.1 %   16.7 %
Millwork, doors & windows   451,750     27.5 %   446,410     29.3 %   1.2 %
Other building products & services   409,193     24.9 %   390,116     25.5 %   4.9 %
Total net sales   $ 1,644,075     100.0 %   $ 1,524,965     100.0 %   7.8 %
                                   

(a) Certain prior year amounts have been reclassified to conform to the current year presentation.

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, income tax expense, depreciation and amortization, merger and integration costs, non-cash stock compensation expense, acquisition costs, impairment of assets and inventory step-up charges.
  • 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, impairment of assets, inventory step-up charges 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 and Adjusted net income 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 and Adjusted net income do not reflect changes in, or cash requirements for, working capital needs; (ii) Adjusted EBITDA does not reflect interest expense, or the requirements necessary to service interest or principal payments on debt; (iii) Adjusted EBITDA does not reflect income tax expenses or the cash requirements to pay taxes; (iv) Adjusted net income and Adjusted EBITDA 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 and Adjusted net income do not reflect any cash requirements for such replacements and (vi) Adjusted net income and Adjusted EBITDA 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 and Adjusted net income 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 June 30,   Six Months Ended June 30,
 
  2017   2016   2017   2016
Net income
  $ 17,596   $ 17,982   $ 21,340   $ 11,226
Interest expense   6,495     8,121     12,583     16,352  
Income tax expense   9,380     8,891     10,353     4,951  
Depreciation and amortization   17,558     17,139     34,371     33,821  
Merger and integration costs   6,324     3,597     10,765     6,433  
Non-cash stock compensation expense   2,154     1,804     3,385     3,693  
Acquisition costs (a)   44         317      
Impairment of assets (b)   26         26     11,883  
Inventory step-up charges (c)               2,884  
Adjusted EBITDA   $ 59,577     $ 57,534     $ 93,140     $ 91,243  
Adjusted EBITDA margin   6.7 %   7.2 %   5.7 %   6.0 %
                 
Net income   $ 17,596     $ 17,982     $ 21,340     $ 11,226  
Merger and integration costs   6,324     3,597     10,765     6,433  
Non-cash stock compensation expense   2,154     1,804     3,385     3,693  
Acquisition costs (a)   44         317      
Impairment of assets (b)   26         26     11,883  
Inventory step-up charges (c)               2,884  
Tax effect of adjustments to net income (d)   (3,188 )   (1,813 )   (5,227 )   (9,154 )
Adjusted net income   $ 22,956     $ 21,570     $ 30,606     $ 26,965  
                 
Diluted weighted average shares   67,394     66,417     67,290     66,137  
Adjusted net income per diluted weighted average share   $ 0.34     $ 0.32     $ 0.45     $ 0.41  


(a) Represents costs incurred during the three and six months ended June 30, 2017 related to the acquisitions of Code Plus Components, LLC and Texas Plywood and Lumber Company, Inc.
(b) During the first quarter of 2016, the Company decided to integrate all operations under the Legacy SBS ERP system, and to discontinue use of the Legacy BMHC ERP system. In connection with this decision, the Company impaired capitalized software costs of $11.9 million.
(c) Represents expense incurred during the six months ended June 30, 2016 in relation to the sell-through of SBS inventory which was stepped up in value in connection with the merger.
(d) The tax effect of adjustments to net income was based on the respective transactions’ income tax rate, which was 37.3%, 38.1%, 37.3% and 38.1% for the three months ended June 30, 2017 and 2016 and the six months ended June 30, 2017 and 2016, respectively. The tax effect of adjustments to net income exclude non-deductible Merger-related costs of $0.0 million, $0.6 million, $0.5 million and $0.8 million for the three months ended June 30, 2017 and 2016 and the six months ended June 30, 2017 and 2016, respectively.

 

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

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