10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).Yes ☐ No ☒

The number of shares of the issuer’s common stock, par value $0.01, outstanding as of July 28, 2023, was 125,036,644.

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

1. Basis of Presentation

Builders FirstSource, Inc., a Delaware corporation formed in 1998, is a leading supplier and manufacturer of building materials, manufactured components and construction services to professional homebuilders, sub-contractors, remodelers and consumers. The Company operates approximately 570 locations in 42 states across the United States. In this quarterly report, references to the “Company,” “we,” “our,” “ours” or “us” refer to Builders FirstSource, Inc. and its consolidated subsidiaries unless otherwise stated or the context otherwise requires.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all recurring adjustments and normal accruals necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the dates and periods presented. Results for interim periods are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period. Intercompany transactions are eliminated in consolidation.

The condensed consolidated balance sheet as of December 31, 2022, is derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. This condensed consolidated balance sheet as of December 31, 2022, and the unaudited condensed consolidated financial statements included herein should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, 2022, included in our most recent annual report on Form 10-K for fiscal year 2022 (“2022 Form 10-K”). Accounting policies used in the preparation of these unaudited condensed consolidated financial statements are consistent with the accounting policies described in the Notes to Consolidated Financial Statements included in our 2022 Form 10-K.

The accounting policies of our operating segments are consistent with the accounting policies described in the Notes to Consolidated Financial Statements included in our 2022 Form 10-K. Since the Company operates in one reportable segment, the primary measures reviewed by our CEO, whom we have determined to be our chief operating decision maker, including revenue, gross margin and income before income taxes, are shown in these condensed consolidated financial statements.

Business Combinations

When they meet the requirements under ASC 805, Business Combinations, merger and acquisition transactions are accounted for using the acquisition method, and accordingly the results of operations of the acquiree are included in the Company’s consolidated financial statements from the acquisition date. The consideration transferred is allocated to the identifiable assets acquired and liabilities assumed based on estimated fair values at the acquisition date, with any excess recorded as goodwill. Transaction-related costs are expensed in the period the costs are incurred. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill.

Comprehensive Income

Comprehensive income is equal to net income for all periods presented.

Reclassifications

The prior periods’ amounts disclosed in Note 3 have been reclassified to conform to the current year presentation. These reclassifications had no impact on net income, total assets and liabilities, stockholders’ equity, or cash flows as previously reported. Certain prior periods’ amounts presented in the Condensed Consolidated Statement of Cash Flows for other non-cash adjustments and other asset and liabilities have been reclassified to conform to the current year presentation. These reclassifications had no impact on the operating or total cash flows as previously reported.

Recent Accounting Pronouncements

The Company reviews new accounting standards as issued or updated. There were no recently issued standards or updates adopted in the period that had a material impact on these condensed consolidated financial statements.

2. Business Combinations

During the first six months of the year, we acquired certain assets and the operations of Noltex Holdings, Inc. and its affiliates (“Noltex”), Builder’s Millwork Supply (“BMS”), and JB Millworks (“JBM”) for a combined total of $96.6 million. Noltex manufactures trusses and provides building components to the single- and multi-family markets, serving Texas markets in the Dallas-Fort Worth, San Antonio, Houston, Lubbock, and Midland areas. BMS and JBM manufacture and supply millwork and trim in the Anchorage, Alaska and Chattanooga, Tennessee areas, respectively.

The acquisitions were funded with a combination of cash on hand and borrowings under our $1.8 billion revolving credit facility due January 17, 2028 (the “Revolving Facility”). The transactions were accounted for by the acquisition method, and accordingly the results of operations have been included in the Company’s consolidated financial statements from the acquisition dates. The purchase price was allocated to the assets acquired and liabilities assumed based on estimated fair values at the acquisition dates, with the excess of purchase price over the estimated fair value of the net assets acquired recorded as goodwill.

The following table summarizes the aggregate fair values of the assets acquired and liabilities assumed for the acquisitions described above:


	Total
	(in thousands)
Accounts receivable	$	1,508
Inventories		13,330
Other current assets		28
Property, plant and equipment		9,071
Operating lease right-of-use assets		8,356
Finance lease right-of-use assets		528
Goodwill		42,965
Intangible assets


Delaware		52-2084569
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6031 Connection Drive, Suite 400
Irving, Texas		75039
(Address of principal executive offices)		(Zip Code)


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common stock, par value $0.01 per share	BLDR	New York Stock Exchange


		Page
	PART I — FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
	Condensed Consolidated Statement of Operations (Unaudited) for the Three and Six Months Ended June 30, 2023 and 2022	3
	Condensed Consolidated Balance Sheet (Unaudited) as of June 30, 2023, and December 31, 2022	4
	Condensed Consolidated Statement of Cash Flows (Unaudited) for the Six Months ended June 30, 2023 and 2022	5
	Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) for the Three and Six Months Ended June 30, 2023 and 2022	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
	PART II — OTHER INFORMATION	21
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 5.	Other Information	22
Item 6.	Exhibits	23


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	2023		2022		2023		2022
Net sales	$	4,528,890	$	6,926,259	$	8,412,204	$	12,607,391
Cost of sales		2,933,944		4,514,112		5,445,858		8,362,870
Gross margin		1,594,946		2,412,147		2,966,346		4,244,521
Selling, general and administrative expenses		1,017,874		1,046,279		1,922,091		2,014,847
Income from operations		577,072		1,365,868		1,044,255		2,229,674
Interest expense, net		53,016		70,715		95,124		112,029
Income before income taxes		524,056		1,295,153		949,131		2,117,645
Income tax expense		119,437		307,944		210,726		490,795
Net income	$	404,619	$	987,209	$	738,405	$	1,626,850

Net income per share:
Basic	$	3.19	$	5.79	$	5.59	$	9.36
Diluted	$	3.16	$	5.75	$	5.54	$	9.27
Weighted average common shares:
Basic		126,977		170,378		132,034		173,730
Diluted		128,066		171,549		133,247		175,525


(in thousands, except per share amounts)	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	89,316	$	80,445
Accounts receivable, less allowances of $59,762 and $67,980, respectively		1,618,666		1,448,139
Other receivables		245,893		234,966
Inventories, net		1,362,250		1,426,196
Contract assets		190,514		183,700
Other current assets		98,578		124,201
Total current assets		3,605,217		3,497,647
Property, plant and equipment, net		1,676,244		1,567,631
Operating lease right-of-use assets, net		483,991		485,704
Goodwill		3,499,819		3,456,854
Intangible assets, net		1,412,377		1,550,944
Other assets, net		55,464		36,380
Total assets	$	10,733,112	$	10,595,160
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,061,965	$	803,479
Accrued liabilities		599,623		739,009
Contract liabilities		190,262		193,178
Current portion of operating lease liabilities		99,692		100,758
Current maturities of long-term debt		4,314		6,355
Total current liabilities		1,955,856		1,842,779
Noncurrent portion of operating lease liabilities		409,231		404,463
Long-term debt, net of current maturities, discounts and issuance costs		3,670,400		2,977,842
Deferred income taxes		231,758		269,660
Other long-term liabilities		123,807		137,850
Total liabilities		6,391,052		5,632,594
Commitments and contingencies (Note 11)
Stockholders' equity:
Preferred stock, $0.01 par value, 10,000 shares authorized; zero shares issued and outstanding		—		—
Common stock, $0.01 par value, 300,000 shares authorized; 125,032 and 138,864 shares issued and outstanding at June 30, 2023, and December 31, 2022, respectively		1,250		1,389
Additional paid-in capital		4,249,053		4,257,667
Retained earnings		91,757		703,510
Total stockholders' equity		4,342,060		4,962,566
Total liabilities and stockholders' equity	$	10,733,112	$	10,595,160


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐


							Additional
	Common Stock						Paid-in			Retained
(in thousands)	Shares			Amount			Capital			Earnings			Total
Balance at December 31, 2021		179,820		$	1,798		$	4,260,670		$	540,013		$	4,802,481
Vesting of restricted stock units		1,018			11			(11	)	—				—
Stock-based compensation expense	—			—				8,840		—				8,840
Repurchase of common stock (1)		(3,593	)		(36	)		—			(285,915	)		(285,951	)
Exercise of stock options		42			—			421		—				421
Shares withheld for restricted stock units vested		(401	)		(4	)		(29,380	)	—				(29,384	)
Net income	—			—			—				639,640			639,640
Balance at March 31, 2022		176,886		$	1,769		$	4,240,540		$	893,738		$	5,136,047
Vesting of restricted stock units		300			3			(3	)	—				—
Stock-based compensation expense	—			—				9,316		—				9,316
Repurchase of common stock (1)		(16,871	)		(169	)	—				(990,570	)		(990,739	)
Exercise of stock options		1			—			13		—				13
Shares withheld for restricted stock units vested		(90	)		(1	)		(5,492	)	—				(5,493	)
Net income	—			—			—				987,209			987,209
Balance at June 30, 2022		160,226		$	1,602		$	4,244,374		$	890,377		$	5,136,353

Balance at December 31, 2022		138,864		$	1,389		$	4,257,667		$	703,510		$	4,962,566
Vesting of restricted stock units		687			7			(7	)	—				—
Stock-based compensation expense	—			—				11,026		—				11,026
Repurchase of common stock (1)		(7,546	)		(75	)		—			(627,533	)		(627,608	)
Exercise of stock options		38			—			315		—				315
Shares withheld for restricted stock units vested		(276	)		(3	)		(22,850	)	—				(22,853	)
Net income	—			—			—				333,786			333,786
Balance at March 31, 2023		131,767		$	1,318		$	4,246,151		$	409,763		$	4,657,232
Vesting of restricted stock units		319			3			(3	)		—			—
Stock-based compensation expense		—			—			12,395			—			12,395
Repurchase of common stock (1)		(6,970	)		(70	)		—			(722,625	)		(722,695	)
Exercise of stock options		16			—			157			—			157
Shares withheld for restricted stock units vested		(100	)		(1	)		(9,647	)		—			(9,648	)
Net income		—			—			—			404,619			404,619
Balance at June 30, 2023		125,032		$	1,250		$	4,249,053		$	91,757		$	4,342,060