BUILD EASIER
BUILD WITH
BMC
SERVICE YOU CAN COUNT ON
2017 ANNUAL REPORT
company
company
overview
overview
• A leading national building solutions
• A leading national building solutions
provider with strategic footprint in
provider with strategic footprint in
attractive long-term growth markets
attractive long-term growth markets
• Locations in 18 states* representing 65%
• Locations in 18 states* representing 65%
of 2017 single-family building permits
of 2017 single-family building permits
• Significant market presence in 43*
• Significant market presence in 43*
attractive metropolitan areas
attractive metropolitan areas
• Focus on differentiated, value-added
• Focus on differentiated, value-added
products and services that meet critical
products and services that meet critical
industry needs
industry needs
• Proven track record of growth in highly
• Proven track record of growth in highly
fragmented industry positioned for
fragmented industry positioned for
continued recovery
continued recovery
*As of 12/31/17
*As of 12/31/17
DISTRIBUTION
DISTRIBUTION
SERVICES
SERVICES
101 Lumber and
101 Lumber and
Building Materials
Building Materials
Distribution Yards
Distribution Yards
TRUSS
TRUSS
MANUFACTURING
MANUFACTURING
51 READY-FRAME®,
51 READY-FRAME®,
EWP, and Truss and
EWP, and Truss and
Panel Manufacturing
Panel Manufacturing
Facilities
Facilities
MILLWORK
MILLWORK
MANUFACTURING
MANUFACTURING
48 Custom
48 Custom
Millwork Operations
Millwork Operations
READY-FRAME®
READY-FRAME®
Computerized
Computerized
Precision Pre-Cut
Precision Pre-Cut
Framing Packages
Framing Packages
TURNKEY
TURNKEY
SOLUTIONS
SOLUTIONS
Installation
Installation
Management
Management
DESIGN
DESIGN
SERVICES
SERVICES
Design Centers
Design Centers
and Showrooms
and Showrooms
eBUSINESS
eBUSINESS
PLATFORM
PLATFORM
Logistics, Account
Logistics, Account
Services and eCommerce
Services and eCommerce
CORPORATE HEADQUARTERS
CORPORATE HEADQUARTERS
TWO LAKESIDE COMMONS
TWO LAKESIDE COMMONS
980 HAMMOND DR. NE
980 HAMMOND DR. NE
SUITE 500
SUITE 500
678.222.1219
678.222.1219
678.222.1316 Fax
678.222.1316 Fax
ATLANTA, GA 30328
ATLANTA, GA 30328
www.BuildWithBMC.com
www.BuildWithBMC.com
Letter from Interim President and CEO
Letter from Interim President and CEO
To our shareholders:
To our shareholders:
During the two years since our merger, the entire BMC team has worked tirelessly, leveraging the strength and
During the two years since our merger, the entire BMC team has worked tirelessly, leveraging the strength and
capabilities of both predecessor companies, to integrate ourselves into one organization, with one brand, one
capabilities of both predecessor companies, to integrate ourselves into one organization, with one brand, one
strategy and one culture. Through this hard work, we achieved $48 million in annual run rate cost savings from
strategy and one culture. Through this hard work, we achieved $48 million in annual run rate cost savings from
synergies, and today, we are one of the leading providers of building materials and solutions in our industry.
synergies, and today, we are one of the leading providers of building materials and solutions in our industry.
We have a solid balance sheet that sets us apart from some of our closest competitors and provides us with
We have a solid balance sheet that sets us apart from some of our closest competitors and provides us with
tremendous flexibility as we pursue our growth strategies. We’ve introduced innovative capabilities nationwide,
tremendous flexibility as we pursue our growth strategies. We’ve introduced innovative capabilities nationwide,
such as Ready-Frame, to help our customers build faster and more efficiently as they face the challenges of
such as Ready-Frame, to help our customers build faster and more efficiently as they face the challenges of
a tight labor market. We continue to invest in our IT platform, which has strong tools to allow us to win in the
a tight labor market. We continue to invest in our IT platform, which has strong tools to allow us to win in the
marketplace, and which provide an enhanced customer experience.
marketplace, and which provide an enhanced customer experience.
As a result of the solid efforts of our team during this integration, net sales have grown to $3.4 billion for 2017.
As a result of the solid efforts of our team during this integration, net sales have grown to $3.4 billion for 2017.
Sales of Structural Components and Millwork, Doors and Windows, which represents our value-added, higher-
Sales of Structural Components and Millwork, Doors and Windows, which represents our value-added, higher-
margin product categories, are each up significantly in the past 2 years. Net income has increased $62.3 million
margin product categories, are each up significantly in the past 2 years. Net income has increased $62.3 million
since 2015 and Adjusted EBITDA has improved 54% to $200 million.
since 2015 and Adjusted EBITDA has improved 54% to $200 million.
Of course, the success of BMC relies on having the right team in place to execute. I have had the privilege of
Of course, the success of BMC relies on having the right team in place to execute. I have had the privilege of
speaking with many of our employees across the company since taking on the role of Interim President and CEO,
speaking with many of our employees across the company since taking on the role of Interim President and CEO,
and I am continually energized by their commitment and dedication. In 2017, we made our team even stronger
and I am continually energized by their commitment and dedication. In 2017, we made our team even stronger
through the appointments of Michael McGaugh to the role of Executive Vice President and Chief Operating
through the appointments of Michael McGaugh to the role of Executive Vice President and Chief Operating
Officer, Lanesha Minnix as Senior Vice President, General Counsel and Corporate Secretary and Lisa Hamblet
Officer, Lanesha Minnix as Senior Vice President, General Counsel and Corporate Secretary and Lisa Hamblet
to an expanded role as Executive Vice President, eBusiness and Pro Remodeler Segment. In addition, we were
to an expanded role as Executive Vice President, eBusiness and Pro Remodeler Segment. In addition, we were
pleased to welcome Mark Alexander and Henry Buckley to our Board of Directors last summer and Cory Boydston
pleased to welcome Mark Alexander and Henry Buckley to our Board of Directors last summer and Cory Boydston
in March. As we look forward, the Board’s top priority is to identify and appoint the best person for the role of
in March. As we look forward, the Board’s top priority is to identify and appoint the best person for the role of
CEO. The Board has formed a committee to oversee the search process and is working with a leading executive
CEO. The Board has formed a committee to oversee the search process and is working with a leading executive
search firm to find the individual with the right experience, vision and track record to accelerate our strategy and
search firm to find the individual with the right experience, vision and track record to accelerate our strategy and
lead BMC into the future.
lead BMC into the future.
Looking Ahead
Looking Ahead
With the majority of our integration activities in the rearview mirror, we are sharpening our focus on our growth
With the majority of our integration activities in the rearview mirror, we are sharpening our focus on our growth
strategies. With the goal to achieve industry-leading financial performance through operational excellence and
strategies. With the goal to achieve industry-leading financial performance through operational excellence and
customer service leadership, we are striving to be the provider of choice in our industry.
customer service leadership, we are striving to be the provider of choice in our industry.
company
company
overview
overview
• A leading national building solutions
• A leading national building solutions
provider with strategic footprint in
provider with strategic footprint in
attractive long-term growth markets
attractive long-term growth markets
• Locations in 18 states* representing 65%
• Locations in 18 states* representing 65%
of 2017 single-family building permits
of 2017 single-family building permits
• Significant market presence in 43*
• Significant market presence in 43*
attractive metropolitan areas
attractive metropolitan areas
• Focus on differentiated, value-added
• Focus on differentiated, value-added
products and services that meet critical
products and services that meet critical
industry needs
industry needs
• Proven track record of growth in highly
• Proven track record of growth in highly
fragmented industry positioned for
fragmented industry positioned for
continued recovery
continued recovery
*As of 12/31/17
*As of 12/31/17
DISTRIBUTION
DISTRIBUTION
SERVICES
SERVICES
101 Lumber and
101 Lumber and
Building Materials
Building Materials
Distribution Yards
Distribution Yards
TRUSS
TRUSS
MANUFACTURING
MANUFACTURING
51 READY-FRAME®,
51 READY-FRAME®,
EWP, and Truss and
EWP, and Truss and
Panel Manufacturing
Panel Manufacturing
Facilities
Facilities
MILLWORK
MILLWORK
MANUFACTURING
MANUFACTURING
48 Custom
48 Custom
Millwork Operations
Millwork Operations
READY-FRAME®
READY-FRAME®
Computerized
Computerized
Precision Pre-Cut
Precision Pre-Cut
Framing Packages
Framing Packages
TURNKEY
TURNKEY
SOLUTIONS
SOLUTIONS
Installation
Installation
Management
Management
DESIGN
DESIGN
SERVICES
SERVICES
Design Centers
Design Centers
and Showrooms
and Showrooms
eBUSINESS
eBUSINESS
PLATFORM
PLATFORM
Logistics, Account
Logistics, Account
Services and eCommerce
Services and eCommerce
CORPORATE HEADQUARTERS
CORPORATE HEADQUARTERS
TWO LAKESIDE COMMONS
TWO LAKESIDE COMMONS
980 HAMMOND DR. NE
980 HAMMOND DR. NE
SUITE 500
SUITE 500
ATLANTA, GA 30328
ATLANTA, GA 30328
678.222.1219
678.222.1219
678.222.1316 Fax
678.222.1316 Fax
www.BuildWithBMC.com
www.BuildWithBMC.com
Letter from Interim President and CEO
Letter from Interim President and CEO
To our shareholders:
To our shareholders:
During the two years since our merger, the entire BMC team has worked tirelessly, leveraging the strength and
During the two years since our merger, the entire BMC team has worked tirelessly, leveraging the strength and
capabilities of both predecessor companies, to integrate ourselves into one organization, with one brand, one
capabilities of both predecessor companies, to integrate ourselves into one organization, with one brand, one
strategy and one culture. Through this hard work, we achieved $48 million in annual run rate cost savings from
strategy and one culture. Through this hard work, we achieved $48 million in annual run rate cost savings from
synergies, and today, we are one of the leading providers of building materials and solutions in our industry.
synergies, and today, we are one of the leading providers of building materials and solutions in our industry.
We have a solid balance sheet that sets us apart from some of our closest competitors and provides us with
We have a solid balance sheet that sets us apart from some of our closest competitors and provides us with
tremendous flexibility as we pursue our growth strategies. We’ve introduced innovative capabilities nationwide,
tremendous flexibility as we pursue our growth strategies. We’ve introduced innovative capabilities nationwide,
such as Ready-Frame, to help our customers build faster and more efficiently as they face the challenges of
such as Ready-Frame, to help our customers build faster and more efficiently as they face the challenges of
a tight labor market. We continue to invest in our IT platform, which has strong tools to allow us to win in the
a tight labor market. We continue to invest in our IT platform, which has strong tools to allow us to win in the
marketplace, and which provide an enhanced customer experience.
marketplace, and which provide an enhanced customer experience.
As a result of the solid efforts of our team during this integration, net sales have grown to $3.4 billion for 2017.
As a result of the solid efforts of our team during this integration, net sales have grown to $3.4 billion for 2017.
Sales of Structural Components and Millwork, Doors and Windows, which represents our value-added, higher-
Sales of Structural Components and Millwork, Doors and Windows, which represents our value-added, higher-
margin product categories, are each up significantly in the past 2 years. Net income has increased $62.3 million
margin product categories, are each up significantly in the past 2 years. Net income has increased $62.3 million
since 2015 and Adjusted EBITDA has improved 54% to $200 million.
since 2015 and Adjusted EBITDA has improved 54% to $200 million.
Of course, the success of BMC relies on having the right team in place to execute. I have had the privilege of
Of course, the success of BMC relies on having the right team in place to execute. I have had the privilege of
speaking with many of our employees across the company since taking on the role of Interim President and CEO,
speaking with many of our employees across the company since taking on the role of Interim President and CEO,
and I am continually energized by their commitment and dedication. In 2017, we made our team even stronger
and I am continually energized by their commitment and dedication. In 2017, we made our team even stronger
through the appointments of Michael McGaugh to the role of Executive Vice President and Chief Operating
through the appointments of Michael McGaugh to the role of Executive Vice President and Chief Operating
Officer, Lanesha Minnix as Senior Vice President, General Counsel and Corporate Secretary and Lisa Hamblet
Officer, Lanesha Minnix as Senior Vice President, General Counsel and Corporate Secretary and Lisa Hamblet
to an expanded role as Executive Vice President, eBusiness and Pro Remodeler Segment. In addition, we were
to an expanded role as Executive Vice President, eBusiness and Pro Remodeler Segment. In addition, we were
pleased to welcome Mark Alexander and Henry Buckley to our Board of Directors last summer and Cory Boydston
pleased to welcome Mark Alexander and Henry Buckley to our Board of Directors last summer and Cory Boydston
in March. As we look forward, the Board’s top priority is to identify and appoint the best person for the role of
in March. As we look forward, the Board’s top priority is to identify and appoint the best person for the role of
CEO. The Board has formed a committee to oversee the search process and is working with a leading executive
CEO. The Board has formed a committee to oversee the search process and is working with a leading executive
search firm to find the individual with the right experience, vision and track record to accelerate our strategy and
search firm to find the individual with the right experience, vision and track record to accelerate our strategy and
lead BMC into the future.
lead BMC into the future.
Looking Ahead
Looking Ahead
With the majority of our integration activities in the rearview mirror, we are sharpening our focus on our growth
With the majority of our integration activities in the rearview mirror, we are sharpening our focus on our growth
strategies. With the goal to achieve industry-leading financial performance through operational excellence and
strategies. With the goal to achieve industry-leading financial performance through operational excellence and
customer service leadership, we are striving to be the provider of choice in our industry.
customer service leadership, we are striving to be the provider of choice in our industry.
To this end, our strategic priorities are focused around 4 key pillars:
To this end, our strategic priorities are focused around 4 key pillars:
1. Organically Grow Our Value-Added Products and Services. We are making key investments to enhance
1. Organically Grow Our Value-Added Products and Services. We are making key investments to enhance
our manufacturing capabilities in our value-added product lines, such as Trusses, Ready-Frame® and other
our manufacturing capabilities in our value-added product lines, such as Trusses, Ready-Frame® and other
Structural Components as well as Millwork, Doors and Windows. In addition, we are pursuing growth
Structural Components as well as Millwork, Doors and Windows. In addition, we are pursuing growth
across all of our customer segments. In particular, we intend to grow our presence in the Professional
across all of our customer segments. In particular, we intend to grow our presence in the Professional
Remodeling space, which should improve our margin profile and provide a level of protection against the
Remodeling space, which should improve our margin profile and provide a level of protection against the
cyclicality of our industry.
cyclicality of our industry.
2. Enhance Customer Service and Operational Excellence. We are driving our people, process and
2. Enhance Customer Service and Operational Excellence. We are driving our people, process and
performance with lean principles and utilizing the BMC Operating System to focus on creating an
performance with lean principles and utilizing the BMC Operating System to focus on creating an
expectation and culture of continuous improvement. With Kaizen events planned for every market this year,
expectation and culture of continuous improvement. With Kaizen events planned for every market this year,
increasing productivity and gaining efficiency in our processes are a top priority going forward. Our process
increasing productivity and gaining efficiency in our processes are a top priority going forward. Our process
improvements should enable us to enhance the consistency and service levels to our customers.
improvements should enable us to enhance the consistency and service levels to our customers.
3. Continue to Develop a High-Performing Culture. We are committed to the training and development of
3. Continue to Develop a High-Performing Culture. We are committed to the training and development of
our associates and have recently re-launched a trainee program with the goal to hire our next generation of
our associates and have recently re-launched a trainee program with the goal to hire our next generation of
leaders and professionals. In addition, in March, we launched our Leadership Development Program, which
leaders and professionals. In addition, in March, we launched our Leadership Development Program, which
is intended to enhance the leadership skills among our managers, further their knowledge of the BMC
is intended to enhance the leadership skills among our managers, further their knowledge of the BMC
Operating System, pinpoint ways we can identify and utilize our competitive advantages and steer them to
Operating System, pinpoint ways we can identify and utilize our competitive advantages and steer them to
be leaders of change who are committed to achieving growth and strong performance in their respective
be leaders of change who are committed to achieving growth and strong performance in their respective
markets.
markets.
4. Pursue Strategic Tuck-In Acquisitions. Consistent with our first pillar, we intend to pursue opportunities
4. Pursue Strategic Tuck-In Acquisitions. Consistent with our first pillar, we intend to pursue opportunities
that provide additional products and capabilities to enhance our value-added offerings, support our
that provide additional products and capabilities to enhance our value-added offerings, support our
expansion in the Professional Remodeling space or enable us to expand our market share in certain
expansion in the Professional Remodeling space or enable us to expand our market share in certain
existing markets or enter new attractive geographies. We are committed to maintaining a prudent
existing markets or enter new attractive geographies. We are committed to maintaining a prudent
debt to EBITDA ratio of 2.0 to 2.5 times and a disciplined approach to our investment analysis and
debt to EBITDA ratio of 2.0 to 2.5 times and a disciplined approach to our investment analysis and
transaction pricing. However, given the number of organic and inorganic opportunities that exist, along
transaction pricing. However, given the number of organic and inorganic opportunities that exist, along
with the significant cash generation potential that we are forecasting, we should see the opportunity to
with the significant cash generation potential that we are forecasting, we should see the opportunity to
substantially increase our investments in acquisitions over the next several years.
substantially increase our investments in acquisitions over the next several years.
BMC is well positioned as we move past integration and into our next phase of growth. We have a strong team
BMC is well positioned as we move past integration and into our next phase of growth. We have a strong team
and outstanding culture at BMC and I’m confident that our laser focus on customer service, our associates,
and outstanding culture at BMC and I’m confident that our laser focus on customer service, our associates,
innovation, value-added products, and strategic expansions will drive additional shareholder value.
innovation, value-added products, and strategic expansions will drive additional shareholder value.
On behalf of the entire BMC team, I thank you for your support as we continue this journey together.
On behalf of the entire BMC team, I thank you for your support as we continue this journey together.
Portions of the registrant's Proxy Statement for the 2018 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to
Portions of the registrant's Proxy Statement for the 2018 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to
the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant's fiscal year ended December 31,
the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant's fiscal year ended December 31,
Sincerely,
Sincerely,
David L. Keltner,
David L. Keltner,
Interim President and CEO
Interim President and CEO
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
UNITED STATES
UNITED STATES
Washington, D.C. 20549
Washington, D.C. 20549
_____________________________
_____________________________
Form 10-K
Form 10-K
_____________________________
_____________________________
For the fiscal year ended December 31, 2017
For the fiscal year ended December 31, 2017
OR
OR
For the transition period from ___ to ___
For the transition period from ___ to ___
Commission file number 001-36050
Commission file number 001-36050
BMC Stock Holdings, Inc.
BMC Stock Holdings, Inc.
(Exact name of Registrant as specified in its charter)
(Exact name of Registrant as specified in its charter)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
o
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
o
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(State or other jurisdiction of incorporation or organization)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
(I.R.S. Employer Identification No.)
Delaware
Delaware
26-4687975
26-4687975
Two Lakeside Commons
Two Lakeside Commons
980 Hammond Drive NE, Suite 500
980 Hammond Drive NE, Suite 500
Atlanta, Georgia 30328
Atlanta, Georgia 30328
(Address of principal executive offices, including zip code)
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (678) 222-1219
Registrant’s telephone number, including area code: (678) 222-1219
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
Common stock, par value $0.01 per share
Common stock, par value $0.01 per share
(Title of each class)
(Title of each class)
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
(Name of exchange on which registered)
(Name of exchange on which registered)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x
No o
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x
No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o
No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o
No x
Securities registered pursuant to Section 12(g) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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
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, and (2) has been subject to such filing requirements for the past 90 days. Yes x
No o
months, and (2) has been subject to such filing requirements for the past 90 days. Yes x
No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x
posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
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.
Large accelerated filer
Large accelerated filer
Non-accelerated filer
Non-accelerated filer
x
x
o
(Do not check if a smaller reporting company)
o
(Do not check if a smaller reporting company)
Accelerated filer
Accelerated filer
Smaller reporting company
Smaller reporting company
Emerging growth company
Emerging growth company
o
o
o
o
o
o
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
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 standard pursuant to Section 13(a) of the Exchange Act. o
accounting standard pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o
No x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o
No x
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2017 was approximately $1.16 billion based on the closing
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2017 was approximately $1.16 billion based on the closing
price per share on that date of $21.85 as reported on the Nasdaq Stock Market LLC.
price per share on that date of $21.85 as reported on the Nasdaq Stock Market LLC.
The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, at February 28, 2018 was 67,140,448 shares.
The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, at February 28, 2018 was 67,140,448 shares.
Documents Incorporated by Reference
Documents Incorporated by Reference
No o
No o
2017 .
2017 .
To this end, our strategic priorities are focused around 4 key pillars:
To this end, our strategic priorities are focused around 4 key pillars:
1. Organically Grow Our Value-Added Products and Services. We are making key investments to enhance
1. Organically Grow Our Value-Added Products and Services. We are making key investments to enhance
our manufacturing capabilities in our value-added product lines, such as Trusses, Ready-Frame® and other
our manufacturing capabilities in our value-added product lines, such as Trusses, Ready-Frame® and other
Structural Components as well as Millwork, Doors and Windows. In addition, we are pursuing growth
Structural Components as well as Millwork, Doors and Windows. In addition, we are pursuing growth
across all of our customer segments. In particular, we intend to grow our presence in the Professional
across all of our customer segments. In particular, we intend to grow our presence in the Professional
Remodeling space, which should improve our margin profile and provide a level of protection against the
Remodeling space, which should improve our margin profile and provide a level of protection against the
cyclicality of our industry.
cyclicality of our industry.
2. Enhance Customer Service and Operational Excellence. We are driving our people, process and
2. Enhance Customer Service and Operational Excellence. We are driving our people, process and
performance with lean principles and utilizing the BMC Operating System to focus on creating an
performance with lean principles and utilizing the BMC Operating System to focus on creating an
expectation and culture of continuous improvement. With Kaizen events planned for every market this year,
expectation and culture of continuous improvement. With Kaizen events planned for every market this year,
increasing productivity and gaining efficiency in our processes are a top priority going forward. Our process
increasing productivity and gaining efficiency in our processes are a top priority going forward. Our process
improvements should enable us to enhance the consistency and service levels to our customers.
improvements should enable us to enhance the consistency and service levels to our customers.
3. Continue to Develop a High-Performing Culture. We are committed to the training and development of
3. Continue to Develop a High-Performing Culture. We are committed to the training and development of
our associates and have recently re-launched a trainee program with the goal to hire our next generation of
our associates and have recently re-launched a trainee program with the goal to hire our next generation of
leaders and professionals. In addition, in March, we launched our Leadership Development Program, which
leaders and professionals. In addition, in March, we launched our Leadership Development Program, which
is intended to enhance the leadership skills among our managers, further their knowledge of the BMC
is intended to enhance the leadership skills among our managers, further their knowledge of the BMC
Operating System, pinpoint ways we can identify and utilize our competitive advantages and steer them to
Operating System, pinpoint ways we can identify and utilize our competitive advantages and steer them to
be leaders of change who are committed to achieving growth and strong performance in their respective
be leaders of change who are committed to achieving growth and strong performance in their respective
markets.
markets.
4. Pursue Strategic Tuck-In Acquisitions. Consistent with our first pillar, we intend to pursue opportunities
4. Pursue Strategic Tuck-In Acquisitions. Consistent with our first pillar, we intend to pursue opportunities
that provide additional products and capabilities to enhance our value-added offerings, support our
that provide additional products and capabilities to enhance our value-added offerings, support our
expansion in the Professional Remodeling space or enable us to expand our market share in certain
expansion in the Professional Remodeling space or enable us to expand our market share in certain
existing markets or enter new attractive geographies. We are committed to maintaining a prudent
existing markets or enter new attractive geographies. We are committed to maintaining a prudent
debt to EBITDA ratio of 2.0 to 2.5 times and a disciplined approach to our investment analysis and
debt to EBITDA ratio of 2.0 to 2.5 times and a disciplined approach to our investment analysis and
transaction pricing. However, given the number of organic and inorganic opportunities that exist, along
transaction pricing. However, given the number of organic and inorganic opportunities that exist, along
with the significant cash generation potential that we are forecasting, we should see the opportunity to
with the significant cash generation potential that we are forecasting, we should see the opportunity to
substantially increase our investments in acquisitions over the next several years.
substantially increase our investments in acquisitions over the next several years.
BMC is well positioned as we move past integration and into our next phase of growth. We have a strong team
BMC is well positioned as we move past integration and into our next phase of growth. We have a strong team
and outstanding culture at BMC and I’m confident that our laser focus on customer service, our associates,
and outstanding culture at BMC and I’m confident that our laser focus on customer service, our associates,
innovation, value-added products, and strategic expansions will drive additional shareholder value.
innovation, value-added products, and strategic expansions will drive additional shareholder value.
On behalf of the entire BMC team, I thank you for your support as we continue this journey together.
On behalf of the entire BMC team, I thank you for your support as we continue this journey together.
UNITED STATES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Washington, D.C. 20549
_____________________________
_____________________________
Form 10-K
Form 10-K
_____________________________
_____________________________
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
For the fiscal year ended December 31, 2017
OR
OR
o
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
o
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
For the transition period from ___ to ___
Commission file number 001-36050
Commission file number 001-36050
BMC Stock Holdings, Inc.
BMC Stock Holdings, Inc.
(Exact name of Registrant as specified in its charter)
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
(I.R.S. Employer Identification No.)
Delaware
Delaware
26-4687975
26-4687975
Two Lakeside Commons
Two Lakeside Commons
980 Hammond Drive NE, Suite 500
980 Hammond Drive NE, Suite 500
Atlanta, Georgia 30328
Atlanta, Georgia 30328
(Address of principal executive offices, including zip code)
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (678) 222-1219
Registrant’s telephone number, including area code: (678) 222-1219
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
Common stock, par value $0.01 per share
Common stock, par value $0.01 per share
(Title of each class)
(Title of each class)
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
(Name of exchange on which registered)
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x
No o
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x
No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o
No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o
No x
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
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, and (2) has been subject to such filing requirements for the past 90 days. Yes x
No o
months, and (2) has been subject to such filing requirements for the past 90 days. Yes x
No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x
posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x
No o
No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
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.
Large accelerated filer
Large accelerated filer
Non-accelerated filer
Non-accelerated filer
x
x
o
(Do not check if a smaller reporting company)
o
(Do not check if a smaller reporting company)
Accelerated filer
Accelerated filer
Smaller reporting company
Smaller reporting company
Emerging growth company
Emerging growth company
o
o
o
o
o
o
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
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 standard pursuant to Section 13(a) of the Exchange Act. o
accounting standard pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o
No x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o
No x
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2017 was approximately $1.16 billion based on the closing
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2017 was approximately $1.16 billion based on the closing
price per share on that date of $21.85 as reported on the Nasdaq Stock Market LLC.
price per share on that date of $21.85 as reported on the Nasdaq Stock Market LLC.
The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, at February 28, 2018 was 67,140,448 shares.
The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, at February 28, 2018 was 67,140,448 shares.
Documents Incorporated by Reference
Documents Incorporated by Reference
Portions of the registrant's Proxy Statement for the 2018 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to
Portions of the registrant's Proxy Statement for the 2018 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to
the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant's fiscal year ended December 31,
the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant's fiscal year ended December 31,
2017 .
2017 .
Sincerely,
Sincerely,
David L. Keltner,
David L. Keltner,
Interim President and CEO
Interim President and CEO
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Table of Contents to Form 10-K
Table of Contents to Form 10-K
Cautionary Statement with Respect to Forward-Looking Statements
Cautionary Statement with Respect to Forward-Looking Statements
Item 1.
Item 1.
Item 1A.
Item 1A.
Item 1B.
Item 1B.
Item 2.
Item 2.
Item 3.
Item 3.
Item 4.
Item 4.
Item 5
Item 5
Item 6.
Item 6.
Item 7.
Item 7.
Business
Business
Risk Factors
Risk Factors
Unresolved Staff Comments
Unresolved Staff Comments
Properties
Properties
Legal Proceedings
Legal Proceedings
Mine Safety Disclosures
Mine Safety Disclosures
PART 1
PART 1
PART II
PART II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 8.
Item 9.
Item 9.
Item 9A.
Item 9A.
Item 9B.
Item 9B.
Item 10.
Item 10.
Item 11.
Item 11.
Item 12.
Item 12.
Item 13.
Item 13.
Item 14.
Item 14.
Item 15.
Item 15.
Item 16.
Item 16.
Financial Statements and Supplementary Data
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Controls and Procedures
Controls and Procedures
Other Information
Other Information
Directors, Executive Officers and Corporate Governance
Directors, Executive Officers and Corporate Governance
Executive Compensation
Executive Compensation
PART III
PART III
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Exhibits and Financial Statement Schedules
Form 10-K Summary
Form 10-K Summary
Signatures
Signatures
PART IV
PART IV
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Some of the statements contained in this Annual Report on Form 10-K constitute forward-looking statements within the meaning of Section 27A of the Securities
Some of the statements contained in this Annual Report on Form 10-K constitute forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to expectations, beliefs,
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to expectations, beliefs,
projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts or present facts or
projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts or present facts or
conditions. In many cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,”
conditions. In many cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential” or the negative of these terms or other comparable terminology.
“estimates,” “predicts,” “potential” or the negative of these terms or other comparable terminology.
The forward-looking statements reflect our views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may
The forward-looking statements reflect our views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may
cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the
cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or
expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or
achievements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. These factors
achievements. 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:
include without limitation:
the state of the homebuilding industry and repair and remodeling activity, the economy and the credit markets;
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;
the impact of potential changes in our customer or product sales mix;
our concentration of business in the Texas, California and Georgia markets;
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;
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;
seasonality and cyclicality of the building products supply and services industry;
competitive industry pressures and competitive pricing pressure from our customers and competitors;
competitive industry pressures and competitive pricing pressure from our customers and competitors;
fluctuation of commodity prices and prices of our products;
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 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 maintain profitability;
our ability to retain our key employees and to attract and retain new qualified employees, while controlling our labor costs;
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
product shortages, loss of key suppliers or failure to develop relationships with qualified suppliers, and our dependence on third-party suppliers and
our ability to identify or respond effectively to consumer needs, expectations, market conditions or trends;
our ability to identify or respond effectively to consumer needs, expectations, market conditions or trends;
manufacturers;
manufacturers;
the implementation of our supply chain and technology initiatives;
the implementation of our supply chain and technology initiatives;
the impact of long-term non-cancelable leases at our facilities;
the impact of long-term non-cancelable leases at our facilities;
our ability to effectively manage inventory and working capital;
our ability to effectively manage inventory and working capital;
the credit risk from our customers;
the credit risk from our customers;
the impact of pricing pressure from our customers;
the impact of pricing pressure from our customers;
our ability to successfully implement our growth strategy;
our ability to successfully implement our growth strategy;
the impact of federal, state, local and other laws and regulations;
the impact of federal, state, local and other laws and regulations;
the impact of changes in legislation and government policy;
the impact of changes in legislation and government policy;
the impact of unexpected changes in our tax provisions and adoption of new tax legislation;
the impact of unexpected changes in our tax provisions and adoption of new tax legislation;
our ability to utilize our net operating loss carryforwards;
our ability to utilize our net operating loss carryforwards;
natural or man-made disruptions to our distribution and manufacturing facilities;
natural or man-made disruptions to our distribution and manufacturing facilities;
our exposure to environmental liabilities and subjection to environmental laws and regulation;
our exposure to environmental liabilities and subjection to environmental laws and regulation;
the impact of health and safety laws and regulations;
the impact of health and safety laws and regulations;
the impact of disruptions to our information technology systems;
the impact of disruptions to our information technology systems;
cybersecurity risks;
cybersecurity risks;
our exposure to losses if our insurance coverage is insufficient;
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;
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; and
the impact of our indebtedness; and
the various financial covenants in our secured credit agreement and senior secured notes indenture.
the various financial covenants in our secured credit agreement and senior secured notes indenture.
Certain of these and other factors are discussed in more detail in “Item 1A. Risk Factors” of this Annual Report on Form 10-K. The forward-looking statements
Certain of these and other factors are discussed in more detail in “Item 1A. Risk Factors” of this Annual Report on Form 10-K. The forward-looking statements
included herein are made only as of the date of this Annual Report on Form 10-K and we undertake no obligation to publicly update or revise any forward-looking
included herein are made only as of the date of this Annual Report on Form 10-K and we undertake no obligation to publicly update or revise any forward-looking
statement made by us or on our behalf, whether as a result of new information, future developments, subsequent events or circumstances or otherwise.
statement made by us or on our behalf, whether as a result of new information, future developments, subsequent events or circumstances or otherwise.
1
1
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Table of Contents to Form 10-K
Table of Contents to Form 10-K
Cautionary Statement with Respect to Forward-Looking Statements
Cautionary Statement with Respect to Forward-Looking Statements
Business
Business
Risk Factors
Risk Factors
Unresolved Staff Comments
Unresolved Staff Comments
Properties
Properties
Legal Proceedings
Legal Proceedings
Mine Safety Disclosures
Mine Safety Disclosures
Selected Financial Data
Selected Financial Data
Controls and Procedures
Controls and Procedures
Other Information
Other Information
Item 1.
Item 1.
Item 1A.
Item 1A.
Item 1B.
Item 1B.
Item 2.
Item 2.
Item 3.
Item 3.
Item 4.
Item 4.
Item 5
Item 5
Item 6.
Item 6.
Item 7.
Item 7.
Item 8.
Item 8.
Item 9.
Item 9.
Item 9A.
Item 9A.
Item 9B.
Item 9B.
Item 10.
Item 10.
Item 11.
Item 11.
Item 12.
Item 12.
Item 13.
Item 13.
Item 14.
Item 14.
Item 15.
Item 15.
Item 16.
Item 16.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Directors, Executive Officers and Corporate Governance
Directors, Executive Officers and Corporate Governance
Executive Compensation
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Exhibits and Financial Statement Schedules
Form 10-K Summary
Form 10-K Summary
Signatures
Signatures
PART 1
PART 1
PART II
PART II
PART III
PART III
PART IV
PART IV
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Some of the statements contained in this Annual Report on Form 10-K constitute forward-looking statements within the meaning of Section 27A of the Securities
Some of the statements contained in this Annual Report on Form 10-K constitute forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to expectations, beliefs,
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to expectations, beliefs,
projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts or present facts or
projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts or present facts or
conditions. In many cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,”
conditions. In many cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential” or the negative of these terms or other comparable terminology.
“estimates,” “predicts,” “potential” or the negative of these terms or other comparable terminology.
The forward-looking statements reflect our views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may
The forward-looking statements reflect our views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may
cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the
cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or
expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or
achievements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. These factors
achievements. 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:
include without limitation:
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the state of the homebuilding industry and repair and remodeling activity, the economy and the credit markets;
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;
the impact of potential changes in our customer or product sales mix;
our concentration of business in the Texas, California and Georgia markets;
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;
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;
seasonality and cyclicality of the building products supply and services industry;
competitive industry pressures and competitive pricing pressure from our customers and competitors;
competitive industry pressures and competitive pricing pressure from our customers and competitors;
fluctuation of commodity prices and prices of our products;
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 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 maintain profitability;
our ability to retain our key employees and to attract and retain new qualified employees, while controlling our labor costs;
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
product shortages, loss of key suppliers or failure to develop relationships with qualified suppliers, and our dependence on third-party suppliers and
manufacturers;
manufacturers;
the implementation of our supply chain and technology initiatives;
the implementation of our supply chain and technology initiatives;
the impact of long-term non-cancelable leases at our facilities;
the impact of long-term non-cancelable leases at our facilities;
our ability to effectively manage inventory and working capital;
our ability to effectively manage inventory and working capital;
the credit risk from our customers;
the credit risk from our customers;
the impact of pricing pressure 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 identify or respond effectively to consumer needs, expectations, market conditions or trends;
our ability to successfully implement our growth strategy;
our ability to successfully implement our growth strategy;
the impact of federal, state, local and other laws and regulations;
the impact of federal, state, local and other laws and regulations;
the impact of changes in legislation and government policy;
the impact of changes in legislation and government policy;
the impact of unexpected changes in our tax provisions and adoption of new tax legislation;
the impact of unexpected changes in our tax provisions and adoption of new tax legislation;
our ability to utilize our net operating loss carryforwards;
our ability to utilize our net operating loss carryforwards;
natural or man-made disruptions to our distribution and manufacturing facilities;
natural or man-made disruptions to our distribution and manufacturing facilities;
our exposure to environmental liabilities and subjection to environmental laws and regulation;
our exposure to environmental liabilities and subjection to environmental laws and regulation;
the impact of health and safety laws and regulations;
the impact of health and safety laws and regulations;
the impact of disruptions to our information technology systems;
the impact of disruptions to our information technology systems;
cybersecurity risks;
cybersecurity risks;
our exposure to losses if our insurance coverage is insufficient;
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;
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; and
the impact of our indebtedness; and
the various financial covenants in our secured credit agreement and senior secured notes indenture.
the various financial covenants in our secured credit agreement and senior secured notes indenture.
Certain of these and other factors are discussed in more detail in “Item 1A. Risk Factors” of this Annual Report on Form 10-K. The forward-looking statements
Certain of these and other factors are discussed in more detail in “Item 1A. Risk Factors” of this Annual Report on Form 10-K. The forward-looking statements
included herein are made only as of the date of this Annual Report on Form 10-K and we undertake no obligation to publicly update or revise any forward-looking
included herein are made only as of the date of this Annual Report on Form 10-K and we undertake no obligation to publicly update or revise any forward-looking
statement made by us or on our behalf, whether as a result of new information, future developments, subsequent events or circumstances or otherwise.
statement made by us or on our behalf, whether as a result of new information, future developments, subsequent events or circumstances or otherwise.
1
1
Item 1. Business
Item 1. Business
Overview
Overview
PART I
PART I
BMC Stock Holdings, Inc. is one of the leading providers of diversified building products and services in the U.S. residential construction market. Our objective is
BMC Stock Holdings, Inc. is one of the leading providers of diversified building products and services in the U.S. residential construction market. Our objective is
to provide best-in-class customer service and value-added products to our customers, which are primarily single- and multi-family home builders and professional
to provide best-in-class customer service and value-added products to our customers, which are primarily single- and multi-family home builders and professional
remodelers. Our product offerings include lumber and lumber sheet goods and an array of value-added products, including millwork, doors, windows and structural
remodelers. Our product offerings include lumber and lumber sheet goods and an array of value-added products, including millwork, doors, windows and structural
components such as engineered wood products (“EWP”), floor and roof trusses and wall panels. Our whole-house framing solution, Ready-Frame
®,
which is one
components such as engineered wood products (“EWP”), floor and roof trusses and wall panels. Our whole-house framing solution, Ready-Frame
®,
which is one
of our fastest growing product offerings, saves builders both time and money and improves job site safety. We also offer our customers important services, such as
of our fastest growing product offerings, saves builders both time and money and improves job site safety. We also offer our customers important services, such as
design, product specification, installation and installation management.
design, product specification, installation and installation management.
The 18 states in which we operate accounted for approximately 65% of 2017 U.S. single-family housing permits according to the U.S. Census Bureau. Our primary
The 18 states in which we operate accounted for approximately 65% of 2017 U.S. single-family housing permits according to the U.S. Census Bureau. Our primary
operating regions include the South and West regions of the United States (as defined by the U.S. Census Bureau), with a significant portion of our net sales
operating regions include the South and West regions of the United States (as defined by the U.S. Census Bureau), with a significant portion of our net sales
derived from markets within Texas, California and Georgia. Given the local nature of our business, we locate our facilities in close proximity to our key customers
derived from markets within Texas, California and Georgia. Given the local nature of our business, we locate our facilities in close proximity to our key customers
and often co-locate multiple operations in one facility to increase customer service and efficiency.
and often co-locate multiple operations in one facility to increase customer service and efficiency.
house framing.
house framing.
The Company is a Delaware corporation and its common stock is listed on the Nasdaq Stock Market under the ticker symbol “BMCH.”
The Company is a Delaware corporation and its common stock is listed on the Nasdaq Stock Market under the ticker symbol “BMCH.”
Merger of Stock Building Supply Holdings, Inc. and Building Materials Holding Corporation
Merger of Stock Building Supply Holdings, Inc. and Building Materials Holding Corporation
employees.
employees.
We group our building products and services into four product categories: (i) structural components, (ii) lumber & lumber sheet goods, (iii) millwork, doors &
We group our building products and services into four product categories: (i) structural components, (ii) lumber & lumber sheet goods, (iii) millwork, doors &
windows, and (iv) other building products & services. For the year ended December 31, 2017 , our sales of structural components and millwork, doors & windows
windows, and (iv) other building products & services. For the year ended December 31, 2017 , our sales of structural components and millwork, doors & windows
products represented 42% of net sales. Each of these categories includes both manufactured and distributed products. Products in these categories typically carry a
products represented 42% of net sales. Each of these categories includes both manufactured and distributed products. Products in these categories typically carry a
higher gross margin and provide us with opportunities to cross-sell other products and services.
higher gross margin and provide us with opportunities to cross-sell other products and services.
Structural
components
. Structural components are factory-built substitutes for job-site framing and include floor trusses, roof trusses, wall panels and EWP that
Structural
components
. Structural components are factory-built substitutes for job-site framing and include floor trusses, roof trusses, wall panels and EWP that
in many cases we design and cut for each home. Roof trusses, floor trusses and wall panels are built in a factory controlled environment. Engineered floors and
in many cases we design and cut for each home. Roof trusses, floor trusses and wall panels are built in a factory controlled environment. Engineered floors and
beams are cut to the required size and packaged for the given application at many of our locations. Without structural components, builders construct these items
beams are cut to the required size and packaged for the given application at many of our locations. Without structural components, builders construct these items
on site, where weather and variable labor quality can negatively impact construction cost, quality and installation time.
on site, where weather and variable labor quality can negatively impact construction cost, quality and installation time.
In addition to increased efficiency and improved quality, a primary benefit of using structural components is shortening cycle time from start to completion,
In addition to increased efficiency and improved quality, a primary benefit of using structural components is shortening cycle time from start to completion,
eliminating job-site waste and clutter and minimizing the amount of skilled labor that must be sourced for a job site.
eliminating job-site waste and clutter and minimizing the amount of skilled labor that must be sourced for a job site.
Lumber
&
lumber
sheet
goods
. Lumber & lumber sheet goods include dimensional lumber, plywood and oriented strand board ("OSB") products used in on-site
Lumber
&
lumber
sheet
goods
. Lumber & lumber sheet goods include dimensional lumber, plywood and oriented strand board ("OSB") products used in on-site
Millwork,
doors
&
windows
. The millwork, doors & windows products category includes interior and exterior doors, windows, interior trim, custom millwork,
Millwork,
doors
&
windows
. The millwork, doors & windows products category includes interior and exterior doors, windows, interior trim, custom millwork,
moldings, stairs and stair parts, and cabinetry, among other products. We pre-hang interior and exterior doors in many of our markets, which consists of attaching
moldings, stairs and stair parts, and cabinetry, among other products. We pre-hang interior and exterior doors in many of our markets, which consists of attaching
hinges and door jambs to a door slab, thereby reducing on-site installation time and providing a higher quality finished door unit than those constructed on site.
hinges and door jambs to a door slab, thereby reducing on-site installation time and providing a higher quality finished door unit than those constructed on site.
Selecting, designing and managing the procurement of the proper window package for performance and architectural reasons is a key service provided by our
Selecting, designing and managing the procurement of the proper window package for performance and architectural reasons is a key service provided by our
On December 1, 2015, Stock Building Supply Holdings, Inc. (“SBS” or “Legacy SBS”) completed a business combination with privately-held Building Materials
On December 1, 2015, Stock Building Supply Holdings, Inc. (“SBS” or “Legacy SBS”) completed a business combination with privately-held Building Materials
Holding Corporation (“BMHC" or "Legacy BMHC") in accordance with the terms of the Agreement and Plan of Merger, dated as of June 2, 2015, by and between
Holding Corporation (“BMHC" or "Legacy BMHC") in accordance with the terms of the Agreement and Plan of Merger, dated as of June 2, 2015, by and between
SBS and BMHC (the “Merger Agreement”), pursuant to which BMHC merged with and into SBS (the “Merger”). As a result of the business combination, SBS
SBS and BMHC (the “Merger Agreement”), pursuant to which BMHC merged with and into SBS (the “Merger”). As a result of the business combination, SBS
survived the Merger and in connection therewith changed its name to BMC Stock Holdings, Inc.
survived the Merger and in connection therewith changed its name to BMC Stock Holdings, Inc.
Other
building
products
&
services
. Other building products & services consist of various products, including hardware, wood boards, gypsum, insulation,
Other
building
products
&
services
. Other building products & services consist of various products, including hardware, wood boards, gypsum, insulation,
roofing, siding and flooring. This category also includes design assistance and professional installation services of products spanning most of our product
roofing, siding and flooring. This category also includes design assistance and professional installation services of products spanning most of our product
categories. Through our installation services program, we offer scheduling, supplier and subcontractor management, and other services to many of our customers.
categories. Through our installation services program, we offer scheduling, supplier and subcontractor management, and other services to many of our customers.
We also provide professional estimating, product advisory and product display services that assist homebuilders and their clients in selecting the appropriate mix of
We also provide professional estimating, product advisory and product display services that assist homebuilders and their clients in selecting the appropriate mix of
All references to “BMC,” “we,” “us,” “our” or the “Company” in this Annual Report on Form 10-K mean BMC Stock Holdings, Inc.
All references to “BMC,” “we,” “us,” “our” or the “Company” in this Annual Report on Form 10-K mean BMC Stock Holdings, Inc.
Under generally accepted accounting principles in the United States, the Merger was treated as a “reverse merger” under the acquisition method of accounting. For
Under generally accepted accounting principles in the United States, the Merger was treated as a “reverse merger” under the acquisition method of accounting. For
accounting purposes, BMHC is considered to have acquired SBS. Consequently, the historical financial statements of the Company reflect only the operations and
accounting purposes, BMHC is considered to have acquired SBS. Consequently, the historical financial statements of the Company reflect only the operations and
financial condition of BMHC prior to the Merger. The operating results of SBS are included as part of the Company's reported results beginning on the closing date
financial condition of BMHC prior to the Merger. The operating results of SBS are included as part of the Company's reported results beginning on the closing date
of the Merger.
of the Merger.
Our Customers
Our Customers
products to meet their needs.
products to meet their needs.
Manufacturing
Manufacturing
Sales and Marketing
Sales and Marketing
Our manufacturing facilities and related design capabilities are utilized to improve quality, cost and service to our homebuilder and repair and professional
Our manufacturing facilities and related design capabilities are utilized to improve quality, cost and service to our homebuilder and repair and professional
remodeling customers. We utilize specialized assembly and manufacturing technology and various design software packages in our manufacturing and assembly
remodeling customers. We utilize specialized assembly and manufacturing technology and various design software packages in our manufacturing and assembly
activities. We manufacture and assemble products within two of our product categories: structural components and millwork, doors & windows.
activities. We manufacture and assemble products within two of our product categories: structural components and millwork, doors & windows.
We serve a broad customer base across 43 metropolitan areas in 18 states that includes a mix of large-scale production homebuilders, custom homebuilders, multi-
We serve a broad customer base across 43 metropolitan areas in 18 states that includes a mix of large-scale production homebuilders, custom homebuilders, multi-
family builders and professional repair and remodeling contractors. Our largest 10 customers accounted for approximately 20% of our 2017 net sales, with no
family builders and professional repair and remodeling contractors. Our largest 10 customers accounted for approximately 20% of our 2017 net sales, with no
single customer accounting for more than 6% of our 2017 net sales. Our largest customers are comprised primarily of the large production homebuilders, including
single customer accounting for more than 6% of our 2017 net sales. Our largest customers are comprised primarily of the large production homebuilders, including
publicly traded companies such as D.R. Horton, Inc., Hovnanian Enterprises, Inc., Lennar Corporation, PulteGroup, Inc. and Toll Brothers, Inc. In addition to these
publicly traded companies such as D.R. Horton, Inc., Hovnanian Enterprises, Inc., Lennar Corporation, PulteGroup, Inc. and Toll Brothers, Inc. In addition to these
large production homebuilders, we also service and supply regional and local custom homebuilders. We also serve professional residential remodeling contractors
large production homebuilders, we also service and supply regional and local custom homebuilders. We also serve professional residential remodeling contractors
and multi-family and light commercial contractors in most of our markets.
and multi-family and light commercial contractors in most of our markets.
Our Products and Services
Our Products and Services
We seek to attract and retain customers through customer service, product quality, a range of product and service offerings and competitive pricing. This strategy is
We seek to attract and retain customers through customer service, product quality, a range of product and service offerings and competitive pricing. This strategy is
centered on building and maintaining strong customer relationships. We strive to add value for homebuilders through solution-based selling, improved product
centered on building and maintaining strong customer relationships. We strive to add value for homebuilders through solution-based selling, improved product
selection and procurement processes, lower material costs and general project coordination and support.
selection and procurement processes, lower material costs and general project coordination and support.
Our experienced sales and service professionals advise the homebuilder or contractor in areas such as opportunities for cost optimization, increased building or
Our experienced sales and service professionals advise the homebuilder or contractor in areas such as opportunities for cost optimization, increased building or
project efficiencies, new products and regional product preferences. The team coordinates a sequence of site deliveries with the customer. Our large delivery fleet
project efficiencies, new products and regional product preferences. The team coordinates a sequence of site deliveries with the customer. Our large delivery fleet
and inventory management systems enable us to provide “just-in-time” product delivery. We believe this level of service is valued by our customers and generates
and inventory management systems enable us to provide “just-in-time” product delivery. We believe this level of service is valued by our customers and generates
customer loyalty. At January 31, 2018 , we employed approximately 950 sales professionals.
customer loyalty. At January 31, 2018 , we employed approximately 950 sales professionals.
We provide a wide variety of building products and services directly to homebuilder and professional contractor customers. We offer a broad range of products
We provide a wide variety of building products and services directly to homebuilder and professional contractor customers. We offer a broad range of products
sourced through a network of suppliers with whom we have strategic supplier agreements. These products are available through our distribution locations and, in
sourced through a network of suppliers with whom we have strategic supplier agreements. These products are available through our distribution locations and, in
most instances, delivered to the job site. We manufacture floor trusses, roof trusses, wall panels, stairs, specialty millwork, windows and pre-hung doors. We have
most instances, delivered to the job site. We manufacture floor trusses, roof trusses, wall panels, stairs, specialty millwork, windows and pre-hung doors. We have
developed several proprietary capabilities to design, pre-cut, label and bundle lumber and lumber sheet goods into customized framing packages, which we have
developed several proprietary capabilities to design, pre-cut, label and bundle lumber and lumber sheet goods into customized framing packages, which we have
branded Ready-Frame
®
.
We also provide an extensive range of installation services and special order products.
branded Ready-Frame
®
.
We also provide an extensive range of installation services and special order products.
Materials and Supplier Relationships
Materials and Supplier Relationships
We purchase inventory primarily for distribution, some of which is also utilized in our manufacturing plants. The key materials we purchase include dimensional
We purchase inventory primarily for distribution, some of which is also utilized in our manufacturing plants. The key materials we purchase include dimensional
lumber, OSB, EWP, windows, doors and millwork. Our largest suppliers are national lumber and wood products producers and distributors such as Boise Cascade
lumber, OSB, EWP, windows, doors and millwork. Our largest suppliers are national lumber and wood products producers and distributors such as Boise Cascade
Company, Hampton Lumber, LP, Interfor Corporation,
Company, Hampton Lumber, LP, Interfor Corporation,
2
2
3
3
Item 1. Business
Item 1. Business
Overview
Overview
PART I
PART I
BMC Stock Holdings, Inc. is one of the leading providers of diversified building products and services in the U.S. residential construction market. Our objective is
BMC Stock Holdings, Inc. is one of the leading providers of diversified building products and services in the U.S. residential construction market. Our objective is
to provide best-in-class customer service and value-added products to our customers, which are primarily single- and multi-family home builders and professional
to provide best-in-class customer service and value-added products to our customers, which are primarily single- and multi-family home builders and professional
remodelers. Our product offerings include lumber and lumber sheet goods and an array of value-added products, including millwork, doors, windows and structural
remodelers. Our product offerings include lumber and lumber sheet goods and an array of value-added products, including millwork, doors, windows and structural
components such as engineered wood products (“EWP”), floor and roof trusses and wall panels. Our whole-house framing solution, Ready-Frame
®,
which is one
components such as engineered wood products (“EWP”), floor and roof trusses and wall panels. Our whole-house framing solution, Ready-Frame
®,
which is one
of our fastest growing product offerings, saves builders both time and money and improves job site safety. We also offer our customers important services, such as
of our fastest growing product offerings, saves builders both time and money and improves job site safety. We also offer our customers important services, such as
design, product specification, installation and installation management.
design, product specification, installation and installation management.
The 18 states in which we operate accounted for approximately 65% of 2017 U.S. single-family housing permits according to the U.S. Census Bureau. Our primary
The 18 states in which we operate accounted for approximately 65% of 2017 U.S. single-family housing permits according to the U.S. Census Bureau. Our primary
operating regions include the South and West regions of the United States (as defined by the U.S. Census Bureau), with a significant portion of our net sales
operating regions include the South and West regions of the United States (as defined by the U.S. Census Bureau), with a significant portion of our net sales
derived from markets within Texas, California and Georgia. Given the local nature of our business, we locate our facilities in close proximity to our key customers
derived from markets within Texas, California and Georgia. Given the local nature of our business, we locate our facilities in close proximity to our key customers
and often co-locate multiple operations in one facility to increase customer service and efficiency.
and often co-locate multiple operations in one facility to increase customer service and efficiency.
The Company is a Delaware corporation and its common stock is listed on the Nasdaq Stock Market under the ticker symbol “BMCH.”
The Company is a Delaware corporation and its common stock is listed on the Nasdaq Stock Market under the ticker symbol “BMCH.”
Merger of Stock Building Supply Holdings, Inc. and Building Materials Holding Corporation
Merger of Stock Building Supply Holdings, Inc. and Building Materials Holding Corporation
On December 1, 2015, Stock Building Supply Holdings, Inc. (“SBS” or “Legacy SBS”) completed a business combination with privately-held Building Materials
On December 1, 2015, Stock Building Supply Holdings, Inc. (“SBS” or “Legacy SBS”) completed a business combination with privately-held Building Materials
Holding Corporation (“BMHC" or "Legacy BMHC") in accordance with the terms of the Agreement and Plan of Merger, dated as of June 2, 2015, by and between
Holding Corporation (“BMHC" or "Legacy BMHC") in accordance with the terms of the Agreement and Plan of Merger, dated as of June 2, 2015, by and between
SBS and BMHC (the “Merger Agreement”), pursuant to which BMHC merged with and into SBS (the “Merger”). As a result of the business combination, SBS
SBS and BMHC (the “Merger Agreement”), pursuant to which BMHC merged with and into SBS (the “Merger”). As a result of the business combination, SBS
survived the Merger and in connection therewith changed its name to BMC Stock Holdings, Inc.
survived the Merger and in connection therewith changed its name to BMC Stock Holdings, Inc.
All references to “BMC,” “we,” “us,” “our” or the “Company” in this Annual Report on Form 10-K mean BMC Stock Holdings, Inc.
All references to “BMC,” “we,” “us,” “our” or the “Company” in this Annual Report on Form 10-K mean BMC Stock Holdings, Inc.
Under generally accepted accounting principles in the United States, the Merger was treated as a “reverse merger” under the acquisition method of accounting. For
Under generally accepted accounting principles in the United States, the Merger was treated as a “reverse merger” under the acquisition method of accounting. For
accounting purposes, BMHC is considered to have acquired SBS. Consequently, the historical financial statements of the Company reflect only the operations and
accounting purposes, BMHC is considered to have acquired SBS. Consequently, the historical financial statements of the Company reflect only the operations and
financial condition of BMHC prior to the Merger. The operating results of SBS are included as part of the Company's reported results beginning on the closing date
financial condition of BMHC prior to the Merger. The operating results of SBS are included as part of the Company's reported results beginning on the closing date
of the Merger.
of the Merger.
Our Customers
Our Customers
Our Products and Services
Our Products and Services
We serve a broad customer base across 43 metropolitan areas in 18 states that includes a mix of large-scale production homebuilders, custom homebuilders, multi-
We serve a broad customer base across 43 metropolitan areas in 18 states that includes a mix of large-scale production homebuilders, custom homebuilders, multi-
family builders and professional repair and remodeling contractors. Our largest 10 customers accounted for approximately 20% of our 2017 net sales, with no
family builders and professional repair and remodeling contractors. Our largest 10 customers accounted for approximately 20% of our 2017 net sales, with no
single customer accounting for more than 6% of our 2017 net sales. Our largest customers are comprised primarily of the large production homebuilders, including
single customer accounting for more than 6% of our 2017 net sales. Our largest customers are comprised primarily of the large production homebuilders, including
publicly traded companies such as D.R. Horton, Inc., Hovnanian Enterprises, Inc., Lennar Corporation, PulteGroup, Inc. and Toll Brothers, Inc. In addition to these
publicly traded companies such as D.R. Horton, Inc., Hovnanian Enterprises, Inc., Lennar Corporation, PulteGroup, Inc. and Toll Brothers, Inc. In addition to these
large production homebuilders, we also service and supply regional and local custom homebuilders. We also serve professional residential remodeling contractors
large production homebuilders, we also service and supply regional and local custom homebuilders. We also serve professional residential remodeling contractors
and multi-family and light commercial contractors in most of our markets.
and multi-family and light commercial contractors in most of our markets.
We group our building products and services into four product categories: (i) structural components, (ii) lumber & lumber sheet goods, (iii) millwork, doors &
We group our building products and services into four product categories: (i) structural components, (ii) lumber & lumber sheet goods, (iii) millwork, doors &
windows, and (iv) other building products & services. For the year ended December 31, 2017 , our sales of structural components and millwork, doors & windows
windows, and (iv) other building products & services. For the year ended December 31, 2017 , our sales of structural components and millwork, doors & windows
products represented 42% of net sales. Each of these categories includes both manufactured and distributed products. Products in these categories typically carry a
products represented 42% of net sales. Each of these categories includes both manufactured and distributed products. Products in these categories typically carry a
higher gross margin and provide us with opportunities to cross-sell other products and services.
higher gross margin and provide us with opportunities to cross-sell other products and services.
Structural
components
. Structural components are factory-built substitutes for job-site framing and include floor trusses, roof trusses, wall panels and EWP that
Structural
components
. Structural components are factory-built substitutes for job-site framing and include floor trusses, roof trusses, wall panels and EWP that
in many cases we design and cut for each home. Roof trusses, floor trusses and wall panels are built in a factory controlled environment. Engineered floors and
in many cases we design and cut for each home. Roof trusses, floor trusses and wall panels are built in a factory controlled environment. Engineered floors and
beams are cut to the required size and packaged for the given application at many of our locations. Without structural components, builders construct these items
beams are cut to the required size and packaged for the given application at many of our locations. Without structural components, builders construct these items
on site, where weather and variable labor quality can negatively impact construction cost, quality and installation time.
on site, where weather and variable labor quality can negatively impact construction cost, quality and installation time.
In addition to increased efficiency and improved quality, a primary benefit of using structural components is shortening cycle time from start to completion,
In addition to increased efficiency and improved quality, a primary benefit of using structural components is shortening cycle time from start to completion,
eliminating job-site waste and clutter and minimizing the amount of skilled labor that must be sourced for a job site.
eliminating job-site waste and clutter and minimizing the amount of skilled labor that must be sourced for a job site.
Lumber
&
lumber
sheet
goods
. Lumber & lumber sheet goods include dimensional lumber, plywood and oriented strand board ("OSB") products used in on-site
Lumber
&
lumber
sheet
goods
. Lumber & lumber sheet goods include dimensional lumber, plywood and oriented strand board ("OSB") products used in on-site
house framing.
house framing.
Millwork,
doors
&
windows
. The millwork, doors & windows products category includes interior and exterior doors, windows, interior trim, custom millwork,
Millwork,
doors
&
windows
. The millwork, doors & windows products category includes interior and exterior doors, windows, interior trim, custom millwork,
moldings, stairs and stair parts, and cabinetry, among other products. We pre-hang interior and exterior doors in many of our markets, which consists of attaching
moldings, stairs and stair parts, and cabinetry, among other products. We pre-hang interior and exterior doors in many of our markets, which consists of attaching
hinges and door jambs to a door slab, thereby reducing on-site installation time and providing a higher quality finished door unit than those constructed on site.
hinges and door jambs to a door slab, thereby reducing on-site installation time and providing a higher quality finished door unit than those constructed on site.
Selecting, designing and managing the procurement of the proper window package for performance and architectural reasons is a key service provided by our
Selecting, designing and managing the procurement of the proper window package for performance and architectural reasons is a key service provided by our
employees.
employees.
Other
building
products
&
services
. Other building products & services consist of various products, including hardware, wood boards, gypsum, insulation,
Other
building
products
&
services
. Other building products & services consist of various products, including hardware, wood boards, gypsum, insulation,
roofing, siding and flooring. This category also includes design assistance and professional installation services of products spanning most of our product
roofing, siding and flooring. This category also includes design assistance and professional installation services of products spanning most of our product
categories. Through our installation services program, we offer scheduling, supplier and subcontractor management, and other services to many of our customers.
categories. Through our installation services program, we offer scheduling, supplier and subcontractor management, and other services to many of our customers.
We also provide professional estimating, product advisory and product display services that assist homebuilders and their clients in selecting the appropriate mix of
We also provide professional estimating, product advisory and product display services that assist homebuilders and their clients in selecting the appropriate mix of
products to meet their needs.
products to meet their needs.
Manufacturing
Manufacturing
Our manufacturing facilities and related design capabilities are utilized to improve quality, cost and service to our homebuilder and repair and professional
Our manufacturing facilities and related design capabilities are utilized to improve quality, cost and service to our homebuilder and repair and professional
remodeling customers. We utilize specialized assembly and manufacturing technology and various design software packages in our manufacturing and assembly
remodeling customers. We utilize specialized assembly and manufacturing technology and various design software packages in our manufacturing and assembly
activities. We manufacture and assemble products within two of our product categories: structural components and millwork, doors & windows.
activities. We manufacture and assemble products within two of our product categories: structural components and millwork, doors & windows.
Sales and Marketing
Sales and Marketing
We seek to attract and retain customers through customer service, product quality, a range of product and service offerings and competitive pricing. This strategy is
We seek to attract and retain customers through customer service, product quality, a range of product and service offerings and competitive pricing. This strategy is
centered on building and maintaining strong customer relationships. We strive to add value for homebuilders through solution-based selling, improved product
centered on building and maintaining strong customer relationships. We strive to add value for homebuilders through solution-based selling, improved product
selection and procurement processes, lower material costs and general project coordination and support.
selection and procurement processes, lower material costs and general project coordination and support.
Our experienced sales and service professionals advise the homebuilder or contractor in areas such as opportunities for cost optimization, increased building or
Our experienced sales and service professionals advise the homebuilder or contractor in areas such as opportunities for cost optimization, increased building or
project efficiencies, new products and regional product preferences. The team coordinates a sequence of site deliveries with the customer. Our large delivery fleet
project efficiencies, new products and regional product preferences. The team coordinates a sequence of site deliveries with the customer. Our large delivery fleet
and inventory management systems enable us to provide “just-in-time” product delivery. We believe this level of service is valued by our customers and generates
and inventory management systems enable us to provide “just-in-time” product delivery. We believe this level of service is valued by our customers and generates
customer loyalty. At January 31, 2018 , we employed approximately 950 sales professionals.
customer loyalty. At January 31, 2018 , we employed approximately 950 sales professionals.
We provide a wide variety of building products and services directly to homebuilder and professional contractor customers. We offer a broad range of products
We provide a wide variety of building products and services directly to homebuilder and professional contractor customers. We offer a broad range of products
sourced through a network of suppliers with whom we have strategic supplier agreements. These products are available through our distribution locations and, in
sourced through a network of suppliers with whom we have strategic supplier agreements. These products are available through our distribution locations and, in
most instances, delivered to the job site. We manufacture floor trusses, roof trusses, wall panels, stairs, specialty millwork, windows and pre-hung doors. We have
most instances, delivered to the job site. We manufacture floor trusses, roof trusses, wall panels, stairs, specialty millwork, windows and pre-hung doors. We have
developed several proprietary capabilities to design, pre-cut, label and bundle lumber and lumber sheet goods into customized framing packages, which we have
developed several proprietary capabilities to design, pre-cut, label and bundle lumber and lumber sheet goods into customized framing packages, which we have
branded Ready-Frame
®
.
We also provide an extensive range of installation services and special order products.
branded Ready-Frame
®
.
We also provide an extensive range of installation services and special order products.
Materials and Supplier Relationships
Materials and Supplier Relationships
We purchase inventory primarily for distribution, some of which is also utilized in our manufacturing plants. The key materials we purchase include dimensional
We purchase inventory primarily for distribution, some of which is also utilized in our manufacturing plants. The key materials we purchase include dimensional
lumber, OSB, EWP, windows, doors and millwork. Our largest suppliers are national lumber and wood products producers and distributors such as Boise Cascade
lumber, OSB, EWP, windows, doors and millwork. Our largest suppliers are national lumber and wood products producers and distributors such as Boise Cascade
Company, Hampton Lumber, LP, Interfor Corporation,
Company, Hampton Lumber, LP, Interfor Corporation,
2
2
3
3
Norbord Inc., West Fraser Timber Co. Ltd. and Weyerhaeuser Company and building products manufacturers such as James Hardie Industries plc, JELD-WEN
Norbord Inc., West Fraser Timber Co. Ltd. and Weyerhaeuser Company and building products manufacturers such as James Hardie Industries plc, JELD-WEN
Holding, Inc., Masonite International Corp, Metrie, Inc. and MI Windows and Doors, Inc. We believe there is sufficient supply in the marketplace to source most
Holding, Inc., Masonite International Corp, Metrie, Inc. and MI Windows and Doors, Inc. We believe there is sufficient supply in the marketplace to source most
of our requirements without reliance on any particular supplier and that our diversity of suppliers affords us purchasing flexibility. We also work with our suppliers
of our requirements without reliance on any particular supplier and that our diversity of suppliers affords us purchasing flexibility. We also work with our suppliers
to ensure that we have sufficient adaptability and flexibility to service our customers' needs as they evolve and as their markets grow. For certain customers, we
to ensure that we have sufficient adaptability and flexibility to service our customers' needs as they evolve and as their markets grow. For certain customers, we
institute purchasing programs on raw materials such as OSB to align portions of our procurement costs with our customer pricing commitments. We balance our
institute purchasing programs on raw materials such as OSB to align portions of our procurement costs with our customer pricing commitments. We balance our
lumber and OSB purchases with a mix of contract and spot market purchases to ensure consistent quantities of product necessary to fulfill customer contracts, to
lumber and OSB purchases with a mix of contract and spot market purchases to ensure consistent quantities of product necessary to fulfill customer contracts, to
source products at the lowest possible cost and to minimize our exposure to the volatility of commodity lumber prices.
source products at the lowest possible cost and to minimize our exposure to the volatility of commodity lumber prices.
We currently source products from over 1,500 suppliers in order to reduce our dependence on any single company and to maximize purchasing leverage. For the
We currently source products from over 1,500 suppliers in order to reduce our dependence on any single company and to maximize purchasing leverage. For the
year ended December 31, 2017, no supplier accounted for more than 10% of our total materials purchases. We believe we are one of the largest customers for
year ended December 31, 2017, no supplier accounted for more than 10% of our total materials purchases. We believe we are one of the largest customers for
many of our suppliers, and therefore have significant purchasing leverage.
many of our suppliers, and therefore have significant purchasing leverage.
We seek to maintain strong relationships with our suppliers and we believe opportunities exist to improve purchasing terms in the future, including inventory
We seek to maintain strong relationships with our suppliers and we believe opportunities exist to improve purchasing terms in the future, including inventory
storage or “just-in-time” delivery to reduce our inventory carrying costs.
storage or “just-in-time” delivery to reduce our inventory carrying costs.
History
History
•
•
•
•
•
•
•
•
•
•
•
•
the volatility of lumber prices;
the volatility of lumber prices;
the cyclical nature of the homebuilding industry;
the cyclical nature of the homebuilding industry;
general economic conditions in the markets in which we compete;
general economic conditions in the markets in which we compete;
the pricing policies of our competitors;
the pricing policies of our competitors;
the production schedules of our customers; and
the production schedules of our customers; and
the effects of weather.
the effects of weather.
Seasonality and Other Factors
Seasonality and Other Factors
Our first and fourth quarters have historically been, and are generally expected to continue to be, adversely affected by weather patterns in some of our markets,
Our first and fourth quarters have historically been, and are generally expected to continue to be, adversely affected by weather patterns in some of our markets,
causing reduced construction activity. In addition, quarterly results historically have reflected, and are expected to continue to reflect, fluctuations from period to
causing reduced construction activity. In addition, quarterly results historically have reflected, and are expected to continue to reflect, fluctuations from period to
period arising from the following factors, among others:
period arising from the following factors, among others:
Competition
Competition
The lumber and building materials ("LBM") distribution industry in the United States is highly fragmented, with a number of retailers and distributors offering a
The lumber and building materials ("LBM") distribution industry in the United States is highly fragmented, with a number of retailers and distributors offering a
broad range of products and services. Demand for our products is largely driven by the level of activity in the U.S. residential construction market, particularly in
broad range of products and services. Demand for our products is largely driven by the level of activity in the U.S. residential construction market, particularly in
single-family new construction, which has experienced improving demand trends influenced by job growth, consumer confidence, market demographics, levels of
single-family new construction, which has experienced improving demand trends influenced by job growth, consumer confidence, market demographics, levels of
household formations, interest rate levels, inventories of available housing units and other external factors. According to the U.S. Census Bureau, from 2005 to
household formations, interest rate levels, inventories of available housing units and other external factors. According to the U.S. Census Bureau, from 2005 to
2011, single-family housing starts in the United States declined by approximately 75% to 0.43 million, which was significantly less than the 50-year average rate
2011, single-family housing starts in the United States declined by approximately 75% to 0.43 million, which was significantly less than the 50-year average rate
of approximately 1.0 million per year. Following several challenging years, single-family housing starts increased on a year-over-year basis each year from 2012 to
of approximately 1.0 million per year. Following several challenging years, single-family housing starts increased on a year-over-year basis each year from 2012 to
2017, with starts in 2015 , 2016 and 2017 reaching 0.71 million, 0.78 million and 0.85 million, respectively.
2017, with starts in 2015 , 2016 and 2017 reaching 0.71 million, 0.78 million and 0.85 million, respectively.
We compete in the professional building contractor segment of the U.S. residential new construction building products supply market (the “Pro Segment”). Our
We compete in the professional building contractor segment of the U.S. residential new construction building products supply market (the “Pro Segment”). Our
customers primarily consist of professional homebuilders and those that provide construction services to them. We focus on a distinctly different target market than
customers primarily consist of professional homebuilders and those that provide construction services to them. We focus on a distinctly different target market than
home center retailers such as The Home Depot and Lowe’s, which primarily serve do-it-yourself and remodeling customers. The principal methods of competition
home center retailers such as The Home Depot and Lowe’s, which primarily serve do-it-yourself and remodeling customers. The principal methods of competition
in the Pro Segment are developing long-term relationships with professional builders and retaining such customers by delivering a full range of high-quality
in the Pro Segment are developing long-term relationships with professional builders and retaining such customers by delivering a full range of high-quality
products on time and offering trade credit, competitive pricing, flexibility in transaction processing, and integrated service and product packages, as well as
products on time and offering trade credit, competitive pricing, flexibility in transaction processing, and integrated service and product packages, as well as
offering value-added products and services such as structural components and installation. Our market positions in the highly competitive Pro Segment create
offering value-added products and services such as structural components and installation. Our market positions in the highly competitive Pro Segment create
economies of scale that allow us to supply our customers cost-effectively, which both enhances profitability and reduces the risk of losing customers to
economies of scale that allow us to supply our customers cost-effectively, which both enhances profitability and reduces the risk of losing customers to
competitors.
competitors.
We have and will continue to experience competition for homebuilder business. Many of our competitors are predominantly small, privately owned companies,
We have and will continue to experience competition for homebuilder business. Many of our competitors are predominantly small, privately owned companies,
local and regional materials distributors, single or multi-site lumberyards, and truss manufacturing and millwork operations. Many of these companies have limited
local and regional materials distributors, single or multi-site lumberyards, and truss manufacturing and millwork operations. Many of these companies have limited
access to capital and lack sophisticated IT systems and large-scale procurement capabilities. We believe we have substantial competitive advantages over these
access to capital and lack sophisticated IT systems and large-scale procurement capabilities. We believe we have substantial competitive advantages over these
smaller competitors due to our long-standing customer relationships, local market knowledge, integrated supply chain and competitive pricing. We also face
smaller competitors due to our long-standing customer relationships, local market knowledge, integrated supply chain and competitive pricing. We also face
competition from large national lumber and building materials companies. For example, our largest competitors in our local markets often include one or more of
competition from large national lumber and building materials companies. For example, our largest competitors in our local markets often include one or more of
84 Lumber Co., Builders FirstSource, Inc., Carter Lumber Company and US LBM Holdings, LLC.
84 Lumber Co., Builders FirstSource, Inc., Carter Lumber Company and US LBM Holdings, LLC.
Employees
Employees
At January 31, 2018 , we had approximately 9,100 full-time equivalent employees, approximately 220 of whom were represented by unions. We believe that we
At January 31, 2018 , we had approximately 9,100 full-time equivalent employees, approximately 220 of whom were represented by unions. We believe that we
have good relations with our employees.
have good relations with our employees.
4
4
BMHC was created in 1987 and initially operated approximately 20 lumber and building materials distribution facilities located in the West. The company grew
BMHC was created in 1987 and initially operated approximately 20 lumber and building materials distribution facilities located in the West. The company grew
primarily through acquisitions and expanded its footprint throughout the South and West regions of the United States.
primarily through acquisitions and expanded its footprint throughout the South and West regions of the United States.
SBS’s predecessor was founded as Carolina Builders Corporation in Raleigh, North Carolina in 1922 and began operating under the Stock Building Supply name
SBS’s predecessor was founded as Carolina Builders Corporation in Raleigh, North Carolina in 1922 and began operating under the Stock Building Supply name
in 2003. In addition, certain companies acquired by SBS were founded as early as 1822. On August 14, 2013, SBS completed its initial public offering.
in 2003. In addition, certain companies acquired by SBS were founded as early as 1822. On August 14, 2013, SBS completed its initial public offering.
On December 1, 2015, BMHC and SBS completed the Merger, with SBS surviving the Merger. In connection with the Merger, SBS was renamed BMC Stock
On December 1, 2015, BMHC and SBS completed the Merger, with SBS surviving the Merger. In connection with the Merger, SBS was renamed BMC Stock
Holdings, Inc.
Holdings, Inc.
Intellectual Property
Intellectual Property
Regulation and Legislation
Regulation and Legislation
codes and regulations.
codes and regulations.
We possess an array of intellectual property rights, including patents, trademarks, trade names, proprietary technology and know-how and other proprietary rights
We possess an array of intellectual property rights, including patents, trademarks, trade names, proprietary technology and know-how and other proprietary rights
that are important to our brand and marketing strategy. In particular, we maintain registered trademarks for BMC
® and the BMC logo, Fortis
® and Artrim
® , two
that are important to our brand and marketing strategy. In particular, we maintain registered trademarks for BMC
® and the BMC logo, Fortis
® and Artrim
® , two
of our private label lines, and our Ready-Frame
® system. In addition, we maintain registered trademarks for the trade names under which certain of our local
of our private label lines, and our Ready-Frame
® system. In addition, we maintain registered trademarks for the trade names under which certain of our local
branches operate. While we do not believe our business is dependent on any one of our trademarks, we believe that our trademarks are important to the
branches operate. While we do not believe our business is dependent on any one of our trademarks, we believe that our trademarks are important to the
development and conduct of our business as well as the marketing of our products. We vigorously protect all of our intellectual property rights.
development and conduct of our business as well as the marketing of our products. We vigorously protect all of our intellectual property rights.
We are subject to various federal, state and local government regulations applicable to the business generally in the jurisdictions in which we operate, including
We are subject to various federal, state and local government regulations applicable to the business generally in the jurisdictions in which we operate, including
laws and regulations relating to our relationships with our employees, public health and safety, work place safety, transportation, zoning, business, environmental,
laws and regulations relating to our relationships with our employees, public health and safety, work place safety, transportation, zoning, business, environmental,
contractor licensing and fire codes. We strive to operate each of our distribution, manufacturing, retail and service facilities in accordance with applicable laws,
contractor licensing and fire codes. We strive to operate each of our distribution, manufacturing, retail and service facilities in accordance with applicable laws,
Transportation
and
Work
Place
Safety
. Our operations in domestic interstate commerce are subject to the regulatory jurisdiction of the Department of
Transportation
and
Work
Place
Safety
. Our operations in domestic interstate commerce are subject to the regulatory jurisdiction of the Department of
Transportation ("DOT"), which has broad administrative powers with respect to our transportation operations. We are subject to safety requirements governing
Transportation ("DOT"), which has broad administrative powers with respect to our transportation operations. We are subject to safety requirements governing
interstate operations prescribed by the DOT. Vehicle dimensions and driver hours of service also are subject to both federal and state regulation. Our operations are
interstate operations prescribed by the DOT. Vehicle dimensions and driver hours of service also are subject to both federal and state regulation. Our operations are
also subject to the regulatory jurisdiction of the Occupational Safety and Health Administration ("OSHA"), which has broad administrative powers with respect to
also subject to the regulatory jurisdiction of the Occupational Safety and Health Administration ("OSHA"), which has broad administrative powers with respect to
workplace and jobsite safety. Our operators are also subject to state and federal labor laws regulating hours worked and compensation paid.
workplace and jobsite safety. Our operators are also subject to state and federal labor laws regulating hours worked and compensation paid.
Environmental
. Our operations and properties are also subject to federal, state and local laws and regulations relating to the use, storage, handling, generation,
Environmental
. Our operations and properties are also subject to federal, state and local laws and regulations relating to the use, storage, handling, generation,
transportation, treatment, emission, release, discharge and disposal of hazardous materials, substances and wastes and relating to the investigation and cleanup of
transportation, treatment, emission, release, discharge and disposal of hazardous materials, substances and wastes and relating to the investigation and cleanup of
contaminated properties, including off-site disposal locations, stormwater and other run-off and similar issues. We have not incurred material costs in the past to
contaminated properties, including off-site disposal locations, stormwater and other run-off and similar issues. We have not incurred material costs in the past to
comply with environmental laws and regulations. However, we could be subject to material costs, liabilities or claims relating to environmental compliance in the
comply with environmental laws and regulations. However, we could be subject to material costs, liabilities or claims relating to environmental compliance in the
future, especially in the event of changes in existing laws and regulations or in their interpretation or enforcement.
future, especially in the event of changes in existing laws and regulations or in their interpretation or enforcement.
As current and former owners, lessees and operators of real property, we can be held liable for the investigation or remediation of contamination on or from such
As current and former owners, lessees and operators of real property, we can be held liable for the investigation or remediation of contamination on or from such
properties, in some circumstances regardless of whether we knew of or caused such contamination. Our current expenditures with respect to environmental
properties, in some circumstances regardless of whether we knew of or caused such contamination. Our current expenditures with respect to environmental
investigation and remediation at our facilities are immaterial, although no
investigation and remediation at our facilities are immaterial, although no
5
5
Holding, Inc., Masonite International Corp, Metrie, Inc. and MI Windows and Doors, Inc. We believe there is sufficient supply in the marketplace to source most
Holding, Inc., Masonite International Corp, Metrie, Inc. and MI Windows and Doors, Inc. We believe there is sufficient supply in the marketplace to source most
of our requirements without reliance on any particular supplier and that our diversity of suppliers affords us purchasing flexibility. We also work with our suppliers
of our requirements without reliance on any particular supplier and that our diversity of suppliers affords us purchasing flexibility. We also work with our suppliers
to ensure that we have sufficient adaptability and flexibility to service our customers' needs as they evolve and as their markets grow. For certain customers, we
to ensure that we have sufficient adaptability and flexibility to service our customers' needs as they evolve and as their markets grow. For certain customers, we
institute purchasing programs on raw materials such as OSB to align portions of our procurement costs with our customer pricing commitments. We balance our
institute purchasing programs on raw materials such as OSB to align portions of our procurement costs with our customer pricing commitments. We balance our
lumber and OSB purchases with a mix of contract and spot market purchases to ensure consistent quantities of product necessary to fulfill customer contracts, to
lumber and OSB purchases with a mix of contract and spot market purchases to ensure consistent quantities of product necessary to fulfill customer contracts, to
source products at the lowest possible cost and to minimize our exposure to the volatility of commodity lumber prices.
source products at the lowest possible cost and to minimize our exposure to the volatility of commodity lumber prices.
We currently source products from over 1,500 suppliers in order to reduce our dependence on any single company and to maximize purchasing leverage. For the
We currently source products from over 1,500 suppliers in order to reduce our dependence on any single company and to maximize purchasing leverage. For the
year ended December 31, 2017, no supplier accounted for more than 10% of our total materials purchases. We believe we are one of the largest customers for
year ended December 31, 2017, no supplier accounted for more than 10% of our total materials purchases. We believe we are one of the largest customers for
many of our suppliers, and therefore have significant purchasing leverage.
many of our suppliers, and therefore have significant purchasing leverage.
The lumber and building materials ("LBM") distribution industry in the United States is highly fragmented, with a number of retailers and distributors offering a
The lumber and building materials ("LBM") distribution industry in the United States is highly fragmented, with a number of retailers and distributors offering a
broad range of products and services. Demand for our products is largely driven by the level of activity in the U.S. residential construction market, particularly in
broad range of products and services. Demand for our products is largely driven by the level of activity in the U.S. residential construction market, particularly in
single-family new construction, which has experienced improving demand trends influenced by job growth, consumer confidence, market demographics, levels of
single-family new construction, which has experienced improving demand trends influenced by job growth, consumer confidence, market demographics, levels of
household formations, interest rate levels, inventories of available housing units and other external factors. According to the U.S. Census Bureau, from 2005 to
household formations, interest rate levels, inventories of available housing units and other external factors. According to the U.S. Census Bureau, from 2005 to
2011, single-family housing starts in the United States declined by approximately 75% to 0.43 million, which was significantly less than the 50-year average rate
2011, single-family housing starts in the United States declined by approximately 75% to 0.43 million, which was significantly less than the 50-year average rate
of approximately 1.0 million per year. Following several challenging years, single-family housing starts increased on a year-over-year basis each year from 2012 to
of approximately 1.0 million per year. Following several challenging years, single-family housing starts increased on a year-over-year basis each year from 2012 to
2017, with starts in 2015 , 2016 and 2017 reaching 0.71 million, 0.78 million and 0.85 million, respectively.
2017, with starts in 2015 , 2016 and 2017 reaching 0.71 million, 0.78 million and 0.85 million, respectively.
We compete in the professional building contractor segment of the U.S. residential new construction building products supply market (the “Pro Segment”). Our
We compete in the professional building contractor segment of the U.S. residential new construction building products supply market (the “Pro Segment”). Our
customers primarily consist of professional homebuilders and those that provide construction services to them. We focus on a distinctly different target market than
customers primarily consist of professional homebuilders and those that provide construction services to them. We focus on a distinctly different target market than
home center retailers such as The Home Depot and Lowe’s, which primarily serve do-it-yourself and remodeling customers. The principal methods of competition
home center retailers such as The Home Depot and Lowe’s, which primarily serve do-it-yourself and remodeling customers. The principal methods of competition
in the Pro Segment are developing long-term relationships with professional builders and retaining such customers by delivering a full range of high-quality
in the Pro Segment are developing long-term relationships with professional builders and retaining such customers by delivering a full range of high-quality
products on time and offering trade credit, competitive pricing, flexibility in transaction processing, and integrated service and product packages, as well as
products on time and offering trade credit, competitive pricing, flexibility in transaction processing, and integrated service and product packages, as well as
offering value-added products and services such as structural components and installation. Our market positions in the highly competitive Pro Segment create
offering value-added products and services such as structural components and installation. Our market positions in the highly competitive Pro Segment create
economies of scale that allow us to supply our customers cost-effectively, which both enhances profitability and reduces the risk of losing customers to
economies of scale that allow us to supply our customers cost-effectively, which both enhances profitability and reduces the risk of losing customers to
We have and will continue to experience competition for homebuilder business. Many of our competitors are predominantly small, privately owned companies,
We have and will continue to experience competition for homebuilder business. Many of our competitors are predominantly small, privately owned companies,
local and regional materials distributors, single or multi-site lumberyards, and truss manufacturing and millwork operations. Many of these companies have limited
local and regional materials distributors, single or multi-site lumberyards, and truss manufacturing and millwork operations. Many of these companies have limited
access to capital and lack sophisticated IT systems and large-scale procurement capabilities. We believe we have substantial competitive advantages over these
access to capital and lack sophisticated IT systems and large-scale procurement capabilities. We believe we have substantial competitive advantages over these
smaller competitors due to our long-standing customer relationships, local market knowledge, integrated supply chain and competitive pricing. We also face
smaller competitors due to our long-standing customer relationships, local market knowledge, integrated supply chain and competitive pricing. We also face
competition from large national lumber and building materials companies. For example, our largest competitors in our local markets often include one or more of
competition from large national lumber and building materials companies. For example, our largest competitors in our local markets often include one or more of
84 Lumber Co., Builders FirstSource, Inc., Carter Lumber Company and US LBM Holdings, LLC.
84 Lumber Co., Builders FirstSource, Inc., Carter Lumber Company and US LBM Holdings, LLC.
Competition
Competition
competitors.
competitors.
Employees
Employees
At January 31, 2018 , we had approximately 9,100 full-time equivalent employees, approximately 220 of whom were represented by unions. We believe that we
At January 31, 2018 , we had approximately 9,100 full-time equivalent employees, approximately 220 of whom were represented by unions. We believe that we
have good relations with our employees.
have good relations with our employees.
4
4
Norbord Inc., West Fraser Timber Co. Ltd. and Weyerhaeuser Company and building products manufacturers such as James Hardie Industries plc, JELD-WEN
Norbord Inc., West Fraser Timber Co. Ltd. and Weyerhaeuser Company and building products manufacturers such as James Hardie Industries plc, JELD-WEN
Seasonality and Other Factors
Seasonality and Other Factors
We seek to maintain strong relationships with our suppliers and we believe opportunities exist to improve purchasing terms in the future, including inventory
We seek to maintain strong relationships with our suppliers and we believe opportunities exist to improve purchasing terms in the future, including inventory
storage or “just-in-time” delivery to reduce our inventory carrying costs.
storage or “just-in-time” delivery to reduce our inventory carrying costs.
History
History
Our first and fourth quarters have historically been, and are generally expected to continue to be, adversely affected by weather patterns in some of our markets,
Our first and fourth quarters have historically been, and are generally expected to continue to be, adversely affected by weather patterns in some of our markets,
causing reduced construction activity. In addition, quarterly results historically have reflected, and are expected to continue to reflect, fluctuations from period to
causing reduced construction activity. In addition, quarterly results historically have reflected, and are expected to continue to reflect, fluctuations from period to
period arising from the following factors, among others:
period arising from the following factors, among others:
•
•
•
•
•
•
•
•
•
•
•
•
the volatility of lumber prices;
the volatility of lumber prices;
the cyclical nature of the homebuilding industry;
the cyclical nature of the homebuilding industry;
general economic conditions in the markets in which we compete;
general economic conditions in the markets in which we compete;
the pricing policies of our competitors;
the pricing policies of our competitors;
the production schedules of our customers; and
the production schedules of our customers; and
the effects of weather.
the effects of weather.
BMHC was created in 1987 and initially operated approximately 20 lumber and building materials distribution facilities located in the West. The company grew
BMHC was created in 1987 and initially operated approximately 20 lumber and building materials distribution facilities located in the West. The company grew
primarily through acquisitions and expanded its footprint throughout the South and West regions of the United States.
primarily through acquisitions and expanded its footprint throughout the South and West regions of the United States.
SBS’s predecessor was founded as Carolina Builders Corporation in Raleigh, North Carolina in 1922 and began operating under the Stock Building Supply name
SBS’s predecessor was founded as Carolina Builders Corporation in Raleigh, North Carolina in 1922 and began operating under the Stock Building Supply name
in 2003. In addition, certain companies acquired by SBS were founded as early as 1822. On August 14, 2013, SBS completed its initial public offering.
in 2003. In addition, certain companies acquired by SBS were founded as early as 1822. On August 14, 2013, SBS completed its initial public offering.
On December 1, 2015, BMHC and SBS completed the Merger, with SBS surviving the Merger. In connection with the Merger, SBS was renamed BMC Stock
On December 1, 2015, BMHC and SBS completed the Merger, with SBS surviving the Merger. In connection with the Merger, SBS was renamed BMC Stock
Holdings, Inc.
Holdings, Inc.
Intellectual Property
Intellectual Property
We possess an array of intellectual property rights, including patents, trademarks, trade names, proprietary technology and know-how and other proprietary rights
We possess an array of intellectual property rights, including patents, trademarks, trade names, proprietary technology and know-how and other proprietary rights
that are important to our brand and marketing strategy. In particular, we maintain registered trademarks for BMC
® and the BMC logo, Fortis
® and Artrim
® , two
that are important to our brand and marketing strategy. In particular, we maintain registered trademarks for BMC
® and the BMC logo, Fortis
® and Artrim
® , two
of our private label lines, and our Ready-Frame
® system. In addition, we maintain registered trademarks for the trade names under which certain of our local
of our private label lines, and our Ready-Frame
® system. In addition, we maintain registered trademarks for the trade names under which certain of our local
branches operate. While we do not believe our business is dependent on any one of our trademarks, we believe that our trademarks are important to the
branches operate. While we do not believe our business is dependent on any one of our trademarks, we believe that our trademarks are important to the
development and conduct of our business as well as the marketing of our products. We vigorously protect all of our intellectual property rights.
development and conduct of our business as well as the marketing of our products. We vigorously protect all of our intellectual property rights.
Regulation and Legislation
Regulation and Legislation
We are subject to various federal, state and local government regulations applicable to the business generally in the jurisdictions in which we operate, including
We are subject to various federal, state and local government regulations applicable to the business generally in the jurisdictions in which we operate, including
laws and regulations relating to our relationships with our employees, public health and safety, work place safety, transportation, zoning, business, environmental,
laws and regulations relating to our relationships with our employees, public health and safety, work place safety, transportation, zoning, business, environmental,
contractor licensing and fire codes. We strive to operate each of our distribution, manufacturing, retail and service facilities in accordance with applicable laws,
contractor licensing and fire codes. We strive to operate each of our distribution, manufacturing, retail and service facilities in accordance with applicable laws,
codes and regulations.
codes and regulations.
Transportation
and
Work
Place
Safety
. Our operations in domestic interstate commerce are subject to the regulatory jurisdiction of the Department of
Transportation
and
Work
Place
Safety
. Our operations in domestic interstate commerce are subject to the regulatory jurisdiction of the Department of
Transportation ("DOT"), which has broad administrative powers with respect to our transportation operations. We are subject to safety requirements governing
Transportation ("DOT"), which has broad administrative powers with respect to our transportation operations. We are subject to safety requirements governing
interstate operations prescribed by the DOT. Vehicle dimensions and driver hours of service also are subject to both federal and state regulation. Our operations are
interstate operations prescribed by the DOT. Vehicle dimensions and driver hours of service also are subject to both federal and state regulation. Our operations are
also subject to the regulatory jurisdiction of the Occupational Safety and Health Administration ("OSHA"), which has broad administrative powers with respect to
also subject to the regulatory jurisdiction of the Occupational Safety and Health Administration ("OSHA"), which has broad administrative powers with respect to
workplace and jobsite safety. Our operators are also subject to state and federal labor laws regulating hours worked and compensation paid.
workplace and jobsite safety. Our operators are also subject to state and federal labor laws regulating hours worked and compensation paid.
Environmental
. Our operations and properties are also subject to federal, state and local laws and regulations relating to the use, storage, handling, generation,
Environmental
. Our operations and properties are also subject to federal, state and local laws and regulations relating to the use, storage, handling, generation,
transportation, treatment, emission, release, discharge and disposal of hazardous materials, substances and wastes and relating to the investigation and cleanup of
transportation, treatment, emission, release, discharge and disposal of hazardous materials, substances and wastes and relating to the investigation and cleanup of
contaminated properties, including off-site disposal locations, stormwater and other run-off and similar issues. We have not incurred material costs in the past to
contaminated properties, including off-site disposal locations, stormwater and other run-off and similar issues. We have not incurred material costs in the past to
comply with environmental laws and regulations. However, we could be subject to material costs, liabilities or claims relating to environmental compliance in the
comply with environmental laws and regulations. However, we could be subject to material costs, liabilities or claims relating to environmental compliance in the
future, especially in the event of changes in existing laws and regulations or in their interpretation or enforcement.
future, especially in the event of changes in existing laws and regulations or in their interpretation or enforcement.
As current and former owners, lessees and operators of real property, we can be held liable for the investigation or remediation of contamination on or from such
As current and former owners, lessees and operators of real property, we can be held liable for the investigation or remediation of contamination on or from such
properties, in some circumstances regardless of whether we knew of or caused such contamination. Our current expenditures with respect to environmental
properties, in some circumstances regardless of whether we knew of or caused such contamination. Our current expenditures with respect to environmental
investigation and remediation at our facilities are immaterial, although no
investigation and remediation at our facilities are immaterial, although no
5
5
assurance can be provided that more significant investigation and remediation will not be required in the future as a result of spills or releases of petroleum
assurance can be provided that more significant investigation and remediation will not be required in the future as a result of spills or releases of petroleum
products or other hazardous substances or the discovery of currently unknown environmental conditions, or changes in legislation, laws, rules or regulations or
products or other hazardous substances or the discovery of currently unknown environmental conditions, or changes in legislation, laws, rules or regulations or
their interpretation or enforcement.
their interpretation or enforcement.
Item 1A. Risk Factors
Item 1A. Risk Factors
Risks Related to Our Business
Risks Related to Our Business
To date, costs to comply with applicable laws and regulations relating to the protection of the environment and natural resources have not had a material adverse
To date, costs to comply with applicable laws and regulations relating to the protection of the environment and natural resources have not had a material adverse
effect on our business, financial condition, operating results or cash flow. There can be no assurance that such laws and regulations will not become more stringent
effect on our business, financial condition, operating results or cash flow. There can be no assurance that such laws and regulations will not become more stringent
in the future or that we will not incur costs in the future in order to comply with such laws and regulations. We did not incur material capital expenditures for
in the future or that we will not incur costs in the future in order to comply with such laws and regulations. We did not incur material capital expenditures for
environmental controls in fiscal year 2017 and do not anticipate material capital expenditures in this regard in fiscal year 2018 .
environmental controls in fiscal year 2017 and do not anticipate material capital expenditures in this regard in fiscal year 2018 .
other important factors.
other important factors.
Business
. Our suppliers are subject to various laws and regulations, including in particular laws and regulations regulating labor, forestry and the environment. We
Business
. Our suppliers are subject to various laws and regulations, including in particular laws and regulations regulating labor, forestry and the environment. We
consult with our suppliers as appropriate to confirm they have determined they are in material compliance with applicable laws and regulations. Generally, our
consult with our suppliers as appropriate to confirm they have determined they are in material compliance with applicable laws and regulations. Generally, our
suppliers agree contractually to comply with our expectations concerning environmental, labor and health and safety matters.
suppliers agree contractually to comply with our expectations concerning environmental, labor and health and safety matters.
Products that we import into the United States are subject to laws and regulations imposed in conjunction with such importation, including those issued and/or
Products that we import into the United States are subject to laws and regulations imposed in conjunction with such importation, including those issued and/or
enforced by U.S. Customs and Border Protection. In addition, certain of our products are subject to laws and regulations relating to the importation, acquisition or
enforced by U.S. Customs and Border Protection. In addition, certain of our products are subject to laws and regulations relating to the importation, acquisition or
sale of illegally harvested agricultural products and the emissions of hazardous materials. We work closely with our suppliers to help ensure material compliance
sale of illegally harvested agricultural products and the emissions of hazardous materials. We work closely with our suppliers to help ensure material compliance
with the applicable laws and regulations in these areas.
with the applicable laws and regulations in these areas.
Financial Information
Financial Information
We have one reportable segment. For certain additional information about our segment, see Note 15 to the consolidated financial statements included in Item 8 of
We have one reportable segment. For certain additional information about our segment, see Note 15 to the consolidated financial statements included in Item 8 of
this Annual Report on Form 10-K.
this Annual Report on Form 10-K.
Available Information
Available Information
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, we file
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, we file
reports, proxy statements and other information with the Securities and Exchange Commission ("SEC"). Our annual reports on Form 10-K, quarterly reports on
reports, proxy statements and other information with the Securities and Exchange Commission ("SEC"). Our annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, proxy statements and other information and amendments to those reports filed or furnished pursuant to Section 13(a) or
Form 10-Q, current reports on Form 8-K, proxy statements and other information and amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Exchange Act are, or will be, available through the investor relations section of our website buildwithbmc.com by following the links to "Financial
15(d) of the Exchange Act are, or will be, available through the investor relations section of our website buildwithbmc.com by following the links to "Financial
Information" and "SEC Filings." Our investor relations website can also be accessed directly at ir.buildwithbmc.com. Reports are available on our website free of
Information" and "SEC Filings." Our investor relations website can also be accessed directly at ir.buildwithbmc.com. Reports are available on our website free of
charge as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. In addition, our directors and certain senior officers are
charge as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. In addition, our directors and certain senior officers are
required to file with the SEC initial statements of beneficial ownership and statements of change in beneficial ownership of our securities, which are also available
required to file with the SEC initial statements of beneficial ownership and statements of change in beneficial ownership of our securities, which are also available
on our website at the same location. The information on the respective websites of the Company, its subsidiaries or affiliates is not, and shall not be deemed to be a
on our website at the same location. The information on the respective websites of the Company, its subsidiaries or affiliates is not, and shall not be deemed to be a
part of this Annual Report on Form 10-K or incorporated into any other filings the Company makes with the SEC.
part of this Annual Report on Form 10-K or incorporated into any other filings the Company makes with the SEC.
In addition to our website, you may read and copy public reports we file with or furnish to the SEC at the SEC’s Public Reference Room at 100 F Street, N.E.,
In addition to our website, you may read and copy public reports we file with or furnish to the SEC at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains
Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains
an Internet site that contains our reports, proxy statements and other information that we electronically file with, or furnish to, the SEC at www.sec.gov.
an Internet site that contains our reports, proxy statements and other information that we electronically file with, or furnish to, the SEC at www.sec.gov.
6
6
The industry in which we operate is dependent upon the homebuilding industry and repair and remodeling activity, the economy, the credit markets and
The industry in which we operate is dependent upon the homebuilding industry and repair and remodeling activity, the economy, the credit markets and
The building products supply and services industry is highly dependent on new single-family home construction, multi-family construction and repair and
The building products supply and services industry is highly dependent on new single-family home construction, multi-family construction and repair and
remodeling activity, which in turn are dependent upon a number of factors, including interest rates, consumer confidence, employment rates, wage rates,
remodeling activity, which in turn are dependent upon a number of factors, including interest rates, consumer confidence, employment rates, wage rates,
foreclosure rates, housing inventory levels, housing demand, the availability of land, local zoning and permitting processes, the availability of construction
foreclosure rates, housing inventory levels, housing demand, the availability of land, local zoning and permitting processes, the availability of construction
financing, the availability of qualified trade laborers and the health of the economy and mortgage markets. Unfavorable changes in demographics, credit markets,
financing, the availability of qualified trade laborers and the health of the economy and mortgage markets. Unfavorable changes in demographics, credit markets,
mortgage rates, consumer confidence, health care costs, housing affordability, housing inventory levels, a weakening of the national economy or of any regional or
mortgage rates, consumer confidence, health care costs, housing affordability, housing inventory levels, a weakening of the national economy or of any regional or
local economy in which we operate, changes in legislation and government policy and other factors beyond our control could adversely affect consumer spending,
local economy in which we operate, changes in legislation and government policy and other factors beyond our control could adversely affect consumer spending,
result in decreased demand for homes and adversely affect our business.
result in decreased demand for homes and adversely affect our business.
The homebuilding industry underwent a significant downturn that began in mid-2006 and began to stabilize in late 2011. The downturn in the homebuilding
The homebuilding industry underwent a significant downturn that began in mid-2006 and began to stabilize in late 2011. The downturn in the homebuilding
industry resulted in a substantial reduction in demand for our products and services, which in turn had a significant adverse effect on our business during fiscal
industry resulted in a substantial reduction in demand for our products and services, which in turn had a significant adverse effect on our business during fiscal
years 2007 through 2012. The U.S. Census Bureau reported approximately 849,000 single-family housing starts for 2017 , which is an increase of approximately
years 2007 through 2012. The U.S. Census Bureau reported approximately 849,000 single-family housing starts for 2017 , which is an increase of approximately
9% from 2016 , but still well below historical averages over the past 50 years. There is significant uncertainty regarding the timing and extent of any continued
9% from 2016 , but still well below historical averages over the past 50 years. There is significant uncertainty regarding the timing and extent of any continued
recovery in construction and repair and remodeling activity and resulting product demand levels. The positive impact of a recovery on our business may also be
recovery in construction and repair and remodeling activity and resulting product demand levels. The positive impact of a recovery on our business may also be
dampened to the extent the average selling price or average size of new single family homes decreases, which could cause homebuilders to decrease spending on
dampened to the extent the average selling price or average size of new single family homes decreases, which could cause homebuilders to decrease spending on
our products and services. According to the U.S. Census Bureau, the average square footage of a new single family home start decreased by approximately 2% in
our products and services. According to the U.S. Census Bureau, the average square footage of a new single family home start decreased by approximately 2% in
2016 compared to 2015, which was the first annual decrease in seven years. This trend has continued through the first three quarters of 2017. If conditions in the
2016 compared to 2015, which was the first annual decrease in seven years. This trend has continued through the first three quarters of 2017. If conditions in the
housing industry deteriorate, we may need to take goodwill and/or asset impairment charges. Any such non-cash charges would have an adverse effect on our
housing industry deteriorate, we may need to take goodwill and/or asset impairment charges. Any such non-cash charges would have an adverse effect on our
financial results. In addition, in response to industry conditions, we may have to temporarily idle or permanently close certain facilities in under-performing
financial results. In addition, in response to industry conditions, we may have to temporarily idle or permanently close certain facilities in under-performing
regions. Any such facility closures could have a significant adverse effect on our business, financial condition, operating results and cash flows.
regions. Any such facility closures could have a significant adverse effect on our business, financial condition, operating results and cash flows.
In addition, beginning in 2007, the mortgage markets experienced substantial disruption due to increased defaults, primarily as a result of credit quality
In addition, beginning in 2007, the mortgage markets experienced substantial disruption due to increased defaults, primarily as a result of credit quality
deterioration. The disruption resulted in a stricter regulatory environment and reduced availability of mortgages for potential home buyers due to a tight credit
deterioration. The disruption resulted in a stricter regulatory environment and reduced availability of mortgages for potential home buyers due to a tight credit
market and stricter standards to qualify for mortgages. Mortgage financing and commercial credit for smaller homebuilders, as well as for the development of new
market and stricter standards to qualify for mortgages. Mortgage financing and commercial credit for smaller homebuilders, as well as for the development of new
residential lots, continue to be constrained. As the housing industry is dependent upon the economy as well as potential homebuyers’ access to mortgage financing
residential lots, continue to be constrained. As the housing industry is dependent upon the economy as well as potential homebuyers’ access to mortgage financing
and homebuilders’ access to commercial credit, prolonged constraint of the credit markets could have a significant adverse effect on our business, financial
and homebuilders’ access to commercial credit, prolonged constraint of the credit markets could have a significant adverse effect on our business, financial
condition, operating results and cash flows.
condition, operating results and cash flows.
Changes in our customer or product sales mix could affect our operating results.
Changes in our customer or product sales mix could affect our operating results.
Our operating results may vary according to the amount and type of products we sell to each of our primary customer types: new single-family homebuilders,
Our operating results may vary according to the amount and type of products we sell to each of our primary customer types: new single-family homebuilders,
remodeling contractors, and multi-family builders and light commercial builders. We tend to realize higher gross margins on sales to remodeling contractors due to
remodeling contractors, and multi-family builders and light commercial builders. We tend to realize higher gross margins on sales to remodeling contractors due to
the smaller product volumes purchased by those customers, as well as the more customized nature of the projects those customers generally undertake. Gross
the smaller product volumes purchased by those customers, as well as the more customized nature of the projects those customers generally undertake. Gross
margins on sales to single-family, multi-family and light commercial customers can vary based on a variety of factors, including the purchase volumes of the
margins on sales to single-family, multi-family and light commercial customers can vary based on a variety of factors, including the purchase volumes of the
individual customer, the mix of products sold to that customer, the size and selling price of the project being constructed and the number of upgrades added to the
individual customer, the mix of products sold to that customer, the size and selling price of the project being constructed and the number of upgrades added to the
project before or during its construction.
project before or during its construction.
We generate significant business from the large single-family homebuilders; however, our gross margins on sales to them tend to be lower than our gross margins
We generate significant business from the large single-family homebuilders; however, our gross margins on sales to them tend to be lower than our gross margins
on sales to other market segments. A shift in our sales mix towards the larger homebuilders could negatively impact our gross margins.
on sales to other market segments. A shift in our sales mix towards the larger homebuilders could negatively impact our gross margins.
In addition, we typically realize greater gross margins on more highly engineered and customized products, or ancillary products that are often purchased based on
In addition, we typically realize greater gross margins on more highly engineered and customized products, or ancillary products that are often purchased based on
convenience and are therefore less price sensitive to our customers. For example, sales of lumber & lumber sheet goods tend to generate lower gross margins due
convenience and are therefore less price sensitive to our customers. For example, sales of lumber & lumber sheet goods tend to generate lower gross margins due
to their commodity nature and the relatively low switching costs of sourcing those products from different suppliers. Structural components and millwork, doors &
to their commodity nature and the relatively low switching costs of sourcing those products from different suppliers. Structural components and millwork, doors &
windows often generate higher
windows often generate higher
7
7
assurance can be provided that more significant investigation and remediation will not be required in the future as a result of spills or releases of petroleum
assurance can be provided that more significant investigation and remediation will not be required in the future as a result of spills or releases of petroleum
Item 1A. Risk Factors
Item 1A. Risk Factors
products or other hazardous substances or the discovery of currently unknown environmental conditions, or changes in legislation, laws, rules or regulations or
products or other hazardous substances or the discovery of currently unknown environmental conditions, or changes in legislation, laws, rules or regulations or
their interpretation or enforcement.
their interpretation or enforcement.
Risks Related to Our Business
Risks Related to Our Business
To date, costs to comply with applicable laws and regulations relating to the protection of the environment and natural resources have not had a material adverse
To date, costs to comply with applicable laws and regulations relating to the protection of the environment and natural resources have not had a material adverse
effect on our business, financial condition, operating results or cash flow. There can be no assurance that such laws and regulations will not become more stringent
effect on our business, financial condition, operating results or cash flow. There can be no assurance that such laws and regulations will not become more stringent
in the future or that we will not incur costs in the future in order to comply with such laws and regulations. We did not incur material capital expenditures for
in the future or that we will not incur costs in the future in order to comply with such laws and regulations. We did not incur material capital expenditures for
environmental controls in fiscal year 2017 and do not anticipate material capital expenditures in this regard in fiscal year 2018 .
environmental controls in fiscal year 2017 and do not anticipate material capital expenditures in this regard in fiscal year 2018 .
Business
. Our suppliers are subject to various laws and regulations, including in particular laws and regulations regulating labor, forestry and the environment. We
Business
. Our suppliers are subject to various laws and regulations, including in particular laws and regulations regulating labor, forestry and the environment. We
consult with our suppliers as appropriate to confirm they have determined they are in material compliance with applicable laws and regulations. Generally, our
consult with our suppliers as appropriate to confirm they have determined they are in material compliance with applicable laws and regulations. Generally, our
suppliers agree contractually to comply with our expectations concerning environmental, labor and health and safety matters.
suppliers agree contractually to comply with our expectations concerning environmental, labor and health and safety matters.
Products that we import into the United States are subject to laws and regulations imposed in conjunction with such importation, including those issued and/or
Products that we import into the United States are subject to laws and regulations imposed in conjunction with such importation, including those issued and/or
enforced by U.S. Customs and Border Protection. In addition, certain of our products are subject to laws and regulations relating to the importation, acquisition or
enforced by U.S. Customs and Border Protection. In addition, certain of our products are subject to laws and regulations relating to the importation, acquisition or
sale of illegally harvested agricultural products and the emissions of hazardous materials. We work closely with our suppliers to help ensure material compliance
sale of illegally harvested agricultural products and the emissions of hazardous materials. We work closely with our suppliers to help ensure material compliance
with the applicable laws and regulations in these areas.
with the applicable laws and regulations in these areas.
We have one reportable segment. For certain additional information about our segment, see Note 15 to the consolidated financial statements included in Item 8 of
We have one reportable segment. For certain additional information about our segment, see Note 15 to the consolidated financial statements included in Item 8 of
Financial Information
Financial Information
this Annual Report on Form 10-K.
this Annual Report on Form 10-K.
Available Information
Available Information
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, we file
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, we file
reports, proxy statements and other information with the Securities and Exchange Commission ("SEC"). Our annual reports on Form 10-K, quarterly reports on
reports, proxy statements and other information with the Securities and Exchange Commission ("SEC"). Our annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, proxy statements and other information and amendments to those reports filed or furnished pursuant to Section 13(a) or
Form 10-Q, current reports on Form 8-K, proxy statements and other information and amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Exchange Act are, or will be, available through the investor relations section of our website buildwithbmc.com by following the links to "Financial
15(d) of the Exchange Act are, or will be, available through the investor relations section of our website buildwithbmc.com by following the links to "Financial
Information" and "SEC Filings." Our investor relations website can also be accessed directly at ir.buildwithbmc.com. Reports are available on our website free of
Information" and "SEC Filings." Our investor relations website can also be accessed directly at ir.buildwithbmc.com. Reports are available on our website free of
charge as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. In addition, our directors and certain senior officers are
charge as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. In addition, our directors and certain senior officers are
required to file with the SEC initial statements of beneficial ownership and statements of change in beneficial ownership of our securities, which are also available
required to file with the SEC initial statements of beneficial ownership and statements of change in beneficial ownership of our securities, which are also available
on our website at the same location. The information on the respective websites of the Company, its subsidiaries or affiliates is not, and shall not be deemed to be a
on our website at the same location. The information on the respective websites of the Company, its subsidiaries or affiliates is not, and shall not be deemed to be a
part of this Annual Report on Form 10-K or incorporated into any other filings the Company makes with the SEC.
part of this Annual Report on Form 10-K or incorporated into any other filings the Company makes with the SEC.
In addition to our website, you may read and copy public reports we file with or furnish to the SEC at the SEC’s Public Reference Room at 100 F Street, N.E.,
In addition to our website, you may read and copy public reports we file with or furnish to the SEC at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains
Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains
an Internet site that contains our reports, proxy statements and other information that we electronically file with, or furnish to, the SEC at www.sec.gov.
an Internet site that contains our reports, proxy statements and other information that we electronically file with, or furnish to, the SEC at www.sec.gov.
6
6
The industry in which we operate is dependent upon the homebuilding industry and repair and remodeling activity, the economy, the credit markets and
The industry in which we operate is dependent upon the homebuilding industry and repair and remodeling activity, the economy, the credit markets and
other important factors.
other important factors.
The building products supply and services industry is highly dependent on new single-family home construction, multi-family construction and repair and
The building products supply and services industry is highly dependent on new single-family home construction, multi-family construction and repair and
remodeling activity, which in turn are dependent upon a number of factors, including interest rates, consumer confidence, employment rates, wage rates,
remodeling activity, which in turn are dependent upon a number of factors, including interest rates, consumer confidence, employment rates, wage rates,
foreclosure rates, housing inventory levels, housing demand, the availability of land, local zoning and permitting processes, the availability of construction
foreclosure rates, housing inventory levels, housing demand, the availability of land, local zoning and permitting processes, the availability of construction
financing, the availability of qualified trade laborers and the health of the economy and mortgage markets. Unfavorable changes in demographics, credit markets,
financing, the availability of qualified trade laborers and the health of the economy and mortgage markets. Unfavorable changes in demographics, credit markets,
mortgage rates, consumer confidence, health care costs, housing affordability, housing inventory levels, a weakening of the national economy or of any regional or
mortgage rates, consumer confidence, health care costs, housing affordability, housing inventory levels, a weakening of the national economy or of any regional or
local economy in which we operate, changes in legislation and government policy and other factors beyond our control could adversely affect consumer spending,
local economy in which we operate, changes in legislation and government policy and other factors beyond our control could adversely affect consumer spending,
result in decreased demand for homes and adversely affect our business.
result in decreased demand for homes and adversely affect our business.
The homebuilding industry underwent a significant downturn that began in mid-2006 and began to stabilize in late 2011. The downturn in the homebuilding
The homebuilding industry underwent a significant downturn that began in mid-2006 and began to stabilize in late 2011. The downturn in the homebuilding
industry resulted in a substantial reduction in demand for our products and services, which in turn had a significant adverse effect on our business during fiscal
industry resulted in a substantial reduction in demand for our products and services, which in turn had a significant adverse effect on our business during fiscal
years 2007 through 2012. The U.S. Census Bureau reported approximately 849,000 single-family housing starts for 2017 , which is an increase of approximately
years 2007 through 2012. The U.S. Census Bureau reported approximately 849,000 single-family housing starts for 2017 , which is an increase of approximately
9% from 2016 , but still well below historical averages over the past 50 years. There is significant uncertainty regarding the timing and extent of any continued
9% from 2016 , but still well below historical averages over the past 50 years. There is significant uncertainty regarding the timing and extent of any continued
recovery in construction and repair and remodeling activity and resulting product demand levels. The positive impact of a recovery on our business may also be
recovery in construction and repair and remodeling activity and resulting product demand levels. The positive impact of a recovery on our business may also be
dampened to the extent the average selling price or average size of new single family homes decreases, which could cause homebuilders to decrease spending on
dampened to the extent the average selling price or average size of new single family homes decreases, which could cause homebuilders to decrease spending on
our products and services. According to the U.S. Census Bureau, the average square footage of a new single family home start decreased by approximately 2% in
our products and services. According to the U.S. Census Bureau, the average square footage of a new single family home start decreased by approximately 2% in
2016 compared to 2015, which was the first annual decrease in seven years. This trend has continued through the first three quarters of 2017. If conditions in the
2016 compared to 2015, which was the first annual decrease in seven years. This trend has continued through the first three quarters of 2017. If conditions in the
housing industry deteriorate, we may need to take goodwill and/or asset impairment charges. Any such non-cash charges would have an adverse effect on our
housing industry deteriorate, we may need to take goodwill and/or asset impairment charges. Any such non-cash charges would have an adverse effect on our
financial results. In addition, in response to industry conditions, we may have to temporarily idle or permanently close certain facilities in under-performing
financial results. In addition, in response to industry conditions, we may have to temporarily idle or permanently close certain facilities in under-performing
regions. Any such facility closures could have a significant adverse effect on our business, financial condition, operating results and cash flows.
regions. Any such facility closures could have a significant adverse effect on our business, financial condition, operating results and cash flows.
In addition, beginning in 2007, the mortgage markets experienced substantial disruption due to increased defaults, primarily as a result of credit quality
In addition, beginning in 2007, the mortgage markets experienced substantial disruption due to increased defaults, primarily as a result of credit quality
deterioration. The disruption resulted in a stricter regulatory environment and reduced availability of mortgages for potential home buyers due to a tight credit
deterioration. The disruption resulted in a stricter regulatory environment and reduced availability of mortgages for potential home buyers due to a tight credit
market and stricter standards to qualify for mortgages. Mortgage financing and commercial credit for smaller homebuilders, as well as for the development of new
market and stricter standards to qualify for mortgages. Mortgage financing and commercial credit for smaller homebuilders, as well as for the development of new
residential lots, continue to be constrained. As the housing industry is dependent upon the economy as well as potential homebuyers’ access to mortgage financing
residential lots, continue to be constrained. As the housing industry is dependent upon the economy as well as potential homebuyers’ access to mortgage financing
and homebuilders’ access to commercial credit, prolonged constraint of the credit markets could have a significant adverse effect on our business, financial
and homebuilders’ access to commercial credit, prolonged constraint of the credit markets could have a significant adverse effect on our business, financial
condition, operating results and cash flows.
condition, operating results and cash flows.
Changes in our customer or product sales mix could affect our operating results.
Changes in our customer or product sales mix could affect our operating results.
Our operating results may vary according to the amount and type of products we sell to each of our primary customer types: new single-family homebuilders,
Our operating results may vary according to the amount and type of products we sell to each of our primary customer types: new single-family homebuilders,
remodeling contractors, and multi-family builders and light commercial builders. We tend to realize higher gross margins on sales to remodeling contractors due to
remodeling contractors, and multi-family builders and light commercial builders. We tend to realize higher gross margins on sales to remodeling contractors due to
the smaller product volumes purchased by those customers, as well as the more customized nature of the projects those customers generally undertake. Gross
the smaller product volumes purchased by those customers, as well as the more customized nature of the projects those customers generally undertake. Gross
margins on sales to single-family, multi-family and light commercial customers can vary based on a variety of factors, including the purchase volumes of the
margins on sales to single-family, multi-family and light commercial customers can vary based on a variety of factors, including the purchase volumes of the
individual customer, the mix of products sold to that customer, the size and selling price of the project being constructed and the number of upgrades added to the
individual customer, the mix of products sold to that customer, the size and selling price of the project being constructed and the number of upgrades added to the
project before or during its construction.
project before or during its construction.
We generate significant business from the large single-family homebuilders; however, our gross margins on sales to them tend to be lower than our gross margins
We generate significant business from the large single-family homebuilders; however, our gross margins on sales to them tend to be lower than our gross margins
on sales to other market segments. A shift in our sales mix towards the larger homebuilders could negatively impact our gross margins.
on sales to other market segments. A shift in our sales mix towards the larger homebuilders could negatively impact our gross margins.
In addition, we typically realize greater gross margins on more highly engineered and customized products, or ancillary products that are often purchased based on
In addition, we typically realize greater gross margins on more highly engineered and customized products, or ancillary products that are often purchased based on
convenience and are therefore less price sensitive to our customers. For example, sales of lumber & lumber sheet goods tend to generate lower gross margins due
convenience and are therefore less price sensitive to our customers. For example, sales of lumber & lumber sheet goods tend to generate lower gross margins due
to their commodity nature and the relatively low switching costs of sourcing those products from different suppliers. Structural components and millwork, doors &
to their commodity nature and the relatively low switching costs of sourcing those products from different suppliers. Structural components and millwork, doors &
windows often generate higher
windows often generate higher
7
7
gross margins relative to other products. A shift in our sales mix towards the lumber & lumber sheet goods product category could negatively impact our gross
gross margins relative to other products. A shift in our sales mix towards the lumber & lumber sheet goods product category could negatively impact our gross
margins.
margins.
others: the volatility of lumber prices; the cyclical nature of the homebuilding industry; general economic conditions in the markets in which we compete; the
others: the volatility of lumber prices; the cyclical nature of the homebuilding industry; general economic conditions in the markets in which we compete; the
pricing policies of our competitors and the production schedules of our customers.
pricing policies of our competitors and the production schedules of our customers.
We conduct a significant portion of our business in Texas, California and Georgia, which exposes us to the homebuilding activities within the markets of
We conduct a significant portion of our business in Texas, California and Georgia, which exposes us to the homebuilding activities within the markets of
these states.
these states.
Our industry is highly fragmented and competitive, and increased competitive pressure may adversely affect our results.
Our industry is highly fragmented and competitive, and increased competitive pressure may adversely affect our results.
We presently conduct a significant portion of our business in Texas, California and Georgia, which represented approximately 33%, 13% and 12%, respectively, of
We presently conduct a significant portion of our business in Texas, California and Georgia, which represented approximately 33%, 13% and 12%, respectively, of
2017 total net sales. Sales activities in these markets and in most of the other markets in which we operate have declined from time to time, particularly as a result
2017 total net sales. Sales activities in these markets and in most of the other markets in which we operate have declined from time to time, particularly as a result
of slow economic growth. In the last several years, many of these markets have benefited from better than average employment growth, which has aided
of slow economic growth. In the last several years, many of these markets have benefited from better than average employment growth, which has aided
homebuilding activities, but we cannot assure you that these conditions will continue. Local economic conditions can depend on a variety of factors, including
homebuilding activities, but we cannot assure you that these conditions will continue. Local economic conditions can depend on a variety of factors, including
national economic conditions, local and state budget situations and the impact of cutbacks in federal spending and employment. In addition, the significant decline
national economic conditions, local and state budget situations and the impact of cutbacks in federal spending and employment. In addition, the significant decline
in oil prices in recent years may negatively impact home construction and remodeling activity in Texas (particularly in the Houston metropolitan area, which
in oil prices in recent years may negatively impact home construction and remodeling activity in Texas (particularly in the Houston metropolitan area, which
accounted for 11% of our 2017 total net sales) and other markets with significant employment in the energy sector. Such a reduction in construction and
accounted for 11% of our 2017 total net sales) and other markets with significant employment in the energy sector. Such a reduction in construction and
remodeling activities could negatively impact our operating results in those markets in the future. Additionally, our concentration in these markets increases our
remodeling activities could negatively impact our operating results in those markets in the future. Additionally, our concentration in these markets increases our
exposure to natural disasters and other events adversely impacting these markets. If homebuilding activity declines in one or more of the markets in which we
exposure to natural disasters and other events adversely impacting these markets. If homebuilding activity declines in one or more of the markets in which we
operate, our costs may not decline at all or at the same rate and therefore may negatively impact our operating results.
operate, our costs may not decline at all or at the same rate and therefore may negatively impact our operating results.
Because our operations are currently concentrated in these areas, a prolonged economic downturn or localized adverse events in the future in one or more of these
Because our operations are currently concentrated in these areas, a prolonged economic downturn or localized adverse events in the future in one or more of these
areas or a particular industry that is fundamental to one of these areas, particularly within Texas, could have a material adverse effect on our business, financial
areas or a particular industry that is fundamental to one of these areas, particularly within Texas, could have a material adverse effect on our business, financial
condition, operating results and cash flows, and a disproportionately greater impact on us than other lumber and building material companies with more diversified
condition, operating results and cash flows, and a disproportionately greater impact on us than other lumber and building material companies with more diversified
operations. To the extent the oil and gas industries, which can be very volatile, are negatively impacted by declining commodity prices, climate change, legislation
operations. To the extent the oil and gas industries, which can be very volatile, are negatively impacted by declining commodity prices, climate change, legislation
or other factors, a result could be a reduction in employment, or other negative economic consequences, which in turn could adversely impact home sales and
or other factors, a result could be a reduction in employment, or other negative economic consequences, which in turn could adversely impact home sales and
activities in Texas and certain of our other markets.
activities in Texas and certain of our other markets.
The loss of any of our significant customers or a reduction in the quantity of products they purchase could affect our financial health.
The loss of any of our significant customers or a reduction in the quantity of products they purchase could affect our financial health.
Our ten largest customers generated approximately 20% and 18% of our net sales for the years ended December 31, 2017 and 2016 , respectively. We cannot
Our ten largest customers generated approximately 20% and 18% of our net sales for the years ended December 31, 2017 and 2016 , respectively. We cannot
guarantee that we will maintain or improve our relationships with these customers or that we will continue to supply these customers at historical levels. Due to the
guarantee that we will maintain or improve our relationships with these customers or that we will continue to supply these customers at historical levels. Due to the
weak housing market over the past several years in comparison to long-term averages, many of our homebuilder customers substantially reduced their construction
weak housing market over the past several years in comparison to long-term averages, many of our homebuilder customers substantially reduced their construction
activity. Some homebuilder customers exited or severely curtailed building activity in certain of our markets.
activity. Some homebuilder customers exited or severely curtailed building activity in certain of our markets.
In addition, production homebuilders and other customers may: (i) seek to purchase some of the products that we currently sell directly from manufacturers; (ii)
In addition, production homebuilders and other customers may: (i) seek to purchase some of the products that we currently sell directly from manufacturers; (ii)
elect to establish their own building products manufacturing and distribution facilities or (iii) give advantages to manufacturing or distribution intermediaries in
elect to establish their own building products manufacturing and distribution facilities or (iii) give advantages to manufacturing or distribution intermediaries in
which they have an economic stake. Continued consolidation among production homebuilders could also result in a loss of some of our present customers to our
which they have an economic stake. Continued consolidation among production homebuilders could also result in a loss of some of our present customers to our
competitors. The loss of one or more of our significant customers or deterioration in our relations with any of them could adversely affect our business, financial
competitors. The loss of one or more of our significant customers or deterioration in our relations with any of them could adversely affect our business, financial
condition, operating results and cash flows. Furthermore, our customers typically are not required to purchase any minimum amount of products from us. The
condition, operating results and cash flows. Furthermore, our customers typically are not required to purchase any minimum amount of products from us. The
contracts into which we have entered with most of our professional customers typically provide that we supply particular products or services for a certain period
contracts into which we have entered with most of our professional customers typically provide that we supply particular products or services for a certain period
of time when and if ordered by the customer. Should our customers purchase our products in significantly lower quantities than they have in the past, such
of time when and if ordered by the customer. Should our customers purchase our products in significantly lower quantities than they have in the past, such
decreased purchases could have a material adverse effect on our business, financial condition, operating results and cash flows.
decreased purchases could have a material adverse effect on our business, financial condition, operating results and cash flows.
The building products supply and services industry is seasonal and cyclical.
The building products supply and services industry is seasonal and cyclical.
Our industry is seasonal. Although weather patterns affect our operating results throughout the year, our first and fourth quarters have historically been, and are
Our industry is seasonal. Although weather patterns affect our operating results throughout the year, our first and fourth quarters have historically been, and are
generally expected to continue to be, adversely affected by weather patterns in some of our markets, causing reduced construction activity. To the extent that
generally expected to continue to be, adversely affected by weather patterns in some of our markets, causing reduced construction activity. To the extent that
hurricanes, severe storms, earthquakes, floods, fires, droughts, other natural disasters or similar events occur in the markets in which we operate, our business may
hurricanes, severe storms, earthquakes, floods, fires, droughts, other natural disasters or similar events occur in the markets in which we operate, our business may
be adversely affected.
be adversely affected.
The building products supply and services industry is highly fragmented and competitive. We face significant competition from local, regional and national
The building products supply and services industry is highly fragmented and competitive. We face significant competition from local, regional and national
building materials chains, as well as from privately-owned single site enterprises. Any of these competitors may (i) foresee the course of market development more
building materials chains, as well as from privately-owned single site enterprises. Any of these competitors may (i) foresee the course of market development more
accurately than we do, (ii) provide superior service and sell superior products, (iii) have the ability to produce or supply similar products and services at a lower
accurately than we do, (ii) provide superior service and sell superior products, (iii) have the ability to produce or supply similar products and services at a lower
cost, (iv) develop stronger relationships with our customers, (v) adapt more quickly to new technologies or evolving customer requirements than we do or (vi)
cost, (iv) develop stronger relationships with our customers, (v) adapt more quickly to new technologies or evolving customer requirements than we do or (vi)
develop a superior branch network in our markets. As a result, we may not be able to compete successfully with them. In addition, home center retailers and/or
develop a superior branch network in our markets. As a result, we may not be able to compete successfully with them. In addition, home center retailers and/or
eCommerce retailers, which have historically concentrated their sales efforts on retail consumers and small contractors, may in the future intensify their marketing
eCommerce retailers, which have historically concentrated their sales efforts on retail consumers and small contractors, may in the future intensify their marketing
efforts to professional homebuilders. Furthermore, certain product manufacturers sell and distribute their products directly to production homebuilders. The volume
efforts to professional homebuilders. Furthermore, certain product manufacturers sell and distribute their products directly to production homebuilders. The volume
of such direct sales could increase in the future. Additionally, manufacturers and specialty distributors who sell products to us may elect to sell and distribute
of such direct sales could increase in the future. Additionally, manufacturers and specialty distributors who sell products to us may elect to sell and distribute
directly to homebuilders in the future or enter into exclusive supplier arrangements with other distributors. Consolidation of production homebuilders may result in
directly to homebuilders in the future or enter into exclusive supplier arrangements with other distributors. Consolidation of production homebuilders may result in
increased competition for their business. Finally, we may not be able to maintain our operating costs or product prices at a level sufficiently low for us to compete
increased competition for their business. Finally, we may not be able to maintain our operating costs or product prices at a level sufficiently low for us to compete
effectively. If we are unable to compete effectively, our business, financial condition, operating results and cash flows may be adversely affected.
effectively. If we are unable to compete effectively, our business, financial condition, operating results and cash flows may be adversely affected.
Some of our competitors are larger than we are and have greater financial resources. These resources may afford those competitors greater purchasing power,
Some of our competitors are larger than we are and have greater financial resources. These resources may afford those competitors greater purchasing power,
increased financial flexibility and more capital resources for expansion and improvement.
increased financial flexibility and more capital resources for expansion and improvement.
Certain of our products are commodities and fluctuations in prices of these commodities could affect our operating results.
Certain of our products are commodities and fluctuations in prices of these commodities could affect our operating results.
Many of the building products we distribute, including OSB, plywood, lumber and particleboard, are commodities that are widely available from other
Many of the building products we distribute, including OSB, plywood, lumber and particleboard, are commodities that are widely available from other
manufacturers or distributors with prices and volumes determined frequently based on participants’ perceptions of short-term supply and demand factors. A
manufacturers or distributors with prices and volumes determined frequently based on participants’ perceptions of short-term supply and demand factors. A
shortage of capacity or excess capacity in the industry can result in significant increases or declines in market prices for those products, often within a short period
shortage of capacity or excess capacity in the industry can result in significant increases or declines in market prices for those products, often within a short period
of time.
of time.
Prices of commodity products can also change as a result of national and international economic conditions, labor and freight costs, competition, market
Prices of commodity products can also change as a result of national and international economic conditions, labor and freight costs, competition, market
speculation, government regulation and trade policies, as well as from periodic delays in the delivery of lumber and other products. Short-term changes in the cost
speculation, government regulation and trade policies, as well as from periodic delays in the delivery of lumber and other products. Short-term changes in the cost
of these materials, some of which are subject to significant fluctuations, are sometimes passed on to our customers but our pricing quotation periods and pricing
of these materials, some of which are subject to significant fluctuations, are sometimes passed on to our customers but our pricing quotation periods and pricing
pressure from our competitors may limit our ability to pass on such price changes. For example, we frequently enter into extended pricing commitments, which
pressure from our competitors may limit our ability to pass on such price changes. For example, we frequently enter into extended pricing commitments, which
may compress our gross margins in periods of inflation. At times, the price at which we can charge our customers for any one or more products may even fall
may compress our gross margins in periods of inflation. At times, the price at which we can charge our customers for any one or more products may even fall
below the price at which we can purchase such products, requiring us to incur short-term losses on product sales. Excessive spikes in the market prices of certain
below the price at which we can purchase such products, requiring us to incur short-term losses on product sales. Excessive spikes in the market prices of certain
building products, such as lumber, can also put negative pressure on our operating cash flows by requiring us to invest more in inventory. We may also be limited
building products, such as lumber, can also put negative pressure on our operating cash flows by requiring us to invest more in inventory. We may also be limited
in our ability to pass on increases in freight costs on our products due to the price of fuel.
in our ability to pass on increases in freight costs on our products due to the price of fuel.
Some of our products are imported into the United States and may be subject to tariffs or import duties that may impact the price of the products and limit their
Some of our products are imported into the United States and may be subject to tariffs or import duties that may impact the price of the products and limit their
availability. Furthermore, the ongoing trade dispute between the United States and Canada following the expiration of the Softwood Lumber Agreement in 2015
availability. Furthermore, the ongoing trade dispute between the United States and Canada following the expiration of the Softwood Lumber Agreement in 2015
could lead to increased volatility in prices of softwood lumber imported from Canada. For the year ended December 31, 2017, we purchased between $250 million
could lead to increased volatility in prices of softwood lumber imported from Canada. For the year ended December 31, 2017, we purchased between $250 million
and $270 million of inventory from Canada.
and $270 million of inventory from Canada.
Periods of generally increasing prices provide the opportunity for higher sales and increased gross profit (subject to the extended pricing commitments described
Periods of generally increasing prices provide the opportunity for higher sales and increased gross profit (subject to the extended pricing commitments described
above), while generally declining price environments may result in declines in sales and profitability. In particular, low market prices for wood products over a
above), while generally declining price environments may result in declines in sales and profitability. In particular, low market prices for wood products over a
sustained period can adversely affect our business, financial condition, operating results and cash flows, as can excessive spikes in market prices. For the year
sustained period can adversely affect our business, financial condition, operating results and cash flows, as can excessive spikes in market prices. For the year
ended December 31, 2017 , average composite framing lumber prices and average composite structural panel prices (a composite calculation based on index prices
ended December 31, 2017 , average composite framing lumber prices and average composite structural panel prices (a composite calculation based on index prices
for OSB and plywood) as reported by Random Lengths were approximately 19% and 18% higher, respectively, than the prior year. Our lumber & lumber sheet
for OSB and plywood) as reported by Random Lengths were approximately 19% and 18% higher, respectively, than the prior year. Our lumber & lumber sheet
goods product category represented approximately 33% of net sales in 2017 . If lumber or structural panel prices were to decline significantly from current levels,
goods product category represented approximately 33% of net sales in 2017 . If lumber or structural panel prices were to decline significantly from current levels,
The building products supply and services industry is also subject to cyclical market pressures. Quarterly results historically have reflected, and are expected to
The building products supply and services industry is also subject to cyclical market pressures. Quarterly results historically have reflected, and are expected to
continue to reflect, fluctuations from period to period arising from the following factors, among
continue to reflect, fluctuations from period to period arising from the following factors, among
our sales and profits could be negatively affected.
our sales and profits could be negatively affected.
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gross margins relative to other products. A shift in our sales mix towards the lumber & lumber sheet goods product category could negatively impact our gross
gross margins relative to other products. A shift in our sales mix towards the lumber & lumber sheet goods product category could negatively impact our gross
others: the volatility of lumber prices; the cyclical nature of the homebuilding industry; general economic conditions in the markets in which we compete; the
others: the volatility of lumber prices; the cyclical nature of the homebuilding industry; general economic conditions in the markets in which we compete; the
pricing policies of our competitors and the production schedules of our customers.
pricing policies of our competitors and the production schedules of our customers.
We conduct a significant portion of our business in Texas, California and Georgia, which exposes us to the homebuilding activities within the markets of
We conduct a significant portion of our business in Texas, California and Georgia, which exposes us to the homebuilding activities within the markets of
Our industry is highly fragmented and competitive, and increased competitive pressure may adversely affect our results.
Our industry is highly fragmented and competitive, and increased competitive pressure may adversely affect our results.
margins.
margins.
these states.
these states.
We presently conduct a significant portion of our business in Texas, California and Georgia, which represented approximately 33%, 13% and 12%, respectively, of
We presently conduct a significant portion of our business in Texas, California and Georgia, which represented approximately 33%, 13% and 12%, respectively, of
2017 total net sales. Sales activities in these markets and in most of the other markets in which we operate have declined from time to time, particularly as a result
2017 total net sales. Sales activities in these markets and in most of the other markets in which we operate have declined from time to time, particularly as a result
of slow economic growth. In the last several years, many of these markets have benefited from better than average employment growth, which has aided
of slow economic growth. In the last several years, many of these markets have benefited from better than average employment growth, which has aided
homebuilding activities, but we cannot assure you that these conditions will continue. Local economic conditions can depend on a variety of factors, including
homebuilding activities, but we cannot assure you that these conditions will continue. Local economic conditions can depend on a variety of factors, including
national economic conditions, local and state budget situations and the impact of cutbacks in federal spending and employment. In addition, the significant decline
national economic conditions, local and state budget situations and the impact of cutbacks in federal spending and employment. In addition, the significant decline
in oil prices in recent years may negatively impact home construction and remodeling activity in Texas (particularly in the Houston metropolitan area, which
in oil prices in recent years may negatively impact home construction and remodeling activity in Texas (particularly in the Houston metropolitan area, which
accounted for 11% of our 2017 total net sales) and other markets with significant employment in the energy sector. Such a reduction in construction and
accounted for 11% of our 2017 total net sales) and other markets with significant employment in the energy sector. Such a reduction in construction and
remodeling activities could negatively impact our operating results in those markets in the future. Additionally, our concentration in these markets increases our
remodeling activities could negatively impact our operating results in those markets in the future. Additionally, our concentration in these markets increases our
exposure to natural disasters and other events adversely impacting these markets. If homebuilding activity declines in one or more of the markets in which we
exposure to natural disasters and other events adversely impacting these markets. If homebuilding activity declines in one or more of the markets in which we
operate, our costs may not decline at all or at the same rate and therefore may negatively impact our operating results.
operate, our costs may not decline at all or at the same rate and therefore may negatively impact our operating results.
Because our operations are currently concentrated in these areas, a prolonged economic downturn or localized adverse events in the future in one or more of these
Because our operations are currently concentrated in these areas, a prolonged economic downturn or localized adverse events in the future in one or more of these
areas or a particular industry that is fundamental to one of these areas, particularly within Texas, could have a material adverse effect on our business, financial
areas or a particular industry that is fundamental to one of these areas, particularly within Texas, could have a material adverse effect on our business, financial
condition, operating results and cash flows, and a disproportionately greater impact on us than other lumber and building material companies with more diversified
condition, operating results and cash flows, and a disproportionately greater impact on us than other lumber and building material companies with more diversified
operations. To the extent the oil and gas industries, which can be very volatile, are negatively impacted by declining commodity prices, climate change, legislation
operations. To the extent the oil and gas industries, which can be very volatile, are negatively impacted by declining commodity prices, climate change, legislation
or other factors, a result could be a reduction in employment, or other negative economic consequences, which in turn could adversely impact home sales and
or other factors, a result could be a reduction in employment, or other negative economic consequences, which in turn could adversely impact home sales and
activities in Texas and certain of our other markets.
activities in Texas and certain of our other markets.
The loss of any of our significant customers or a reduction in the quantity of products they purchase could affect our financial health.
The loss of any of our significant customers or a reduction in the quantity of products they purchase could affect our financial health.
Our ten largest customers generated approximately 20% and 18% of our net sales for the years ended December 31, 2017 and 2016 , respectively. We cannot
Our ten largest customers generated approximately 20% and 18% of our net sales for the years ended December 31, 2017 and 2016 , respectively. We cannot
guarantee that we will maintain or improve our relationships with these customers or that we will continue to supply these customers at historical levels. Due to the
guarantee that we will maintain or improve our relationships with these customers or that we will continue to supply these customers at historical levels. Due to the
weak housing market over the past several years in comparison to long-term averages, many of our homebuilder customers substantially reduced their construction
weak housing market over the past several years in comparison to long-term averages, many of our homebuilder customers substantially reduced their construction
activity. Some homebuilder customers exited or severely curtailed building activity in certain of our markets.
activity. Some homebuilder customers exited or severely curtailed building activity in certain of our markets.
In addition, production homebuilders and other customers may: (i) seek to purchase some of the products that we currently sell directly from manufacturers; (ii)
In addition, production homebuilders and other customers may: (i) seek to purchase some of the products that we currently sell directly from manufacturers; (ii)
elect to establish their own building products manufacturing and distribution facilities or (iii) give advantages to manufacturing or distribution intermediaries in
elect to establish their own building products manufacturing and distribution facilities or (iii) give advantages to manufacturing or distribution intermediaries in
which they have an economic stake. Continued consolidation among production homebuilders could also result in a loss of some of our present customers to our
which they have an economic stake. Continued consolidation among production homebuilders could also result in a loss of some of our present customers to our
competitors. The loss of one or more of our significant customers or deterioration in our relations with any of them could adversely affect our business, financial
competitors. The loss of one or more of our significant customers or deterioration in our relations with any of them could adversely affect our business, financial
condition, operating results and cash flows. Furthermore, our customers typically are not required to purchase any minimum amount of products from us. The
condition, operating results and cash flows. Furthermore, our customers typically are not required to purchase any minimum amount of products from us. The
contracts into which we have entered with most of our professional customers typically provide that we supply particular products or services for a certain period
contracts into which we have entered with most of our professional customers typically provide that we supply particular products or services for a certain period
of time when and if ordered by the customer. Should our customers purchase our products in significantly lower quantities than they have in the past, such
of time when and if ordered by the customer. Should our customers purchase our products in significantly lower quantities than they have in the past, such
decreased purchases could have a material adverse effect on our business, financial condition, operating results and cash flows.
decreased purchases could have a material adverse effect on our business, financial condition, operating results and cash flows.
The building products supply and services industry is seasonal and cyclical.
The building products supply and services industry is seasonal and cyclical.
Our industry is seasonal. Although weather patterns affect our operating results throughout the year, our first and fourth quarters have historically been, and are
Our industry is seasonal. Although weather patterns affect our operating results throughout the year, our first and fourth quarters have historically been, and are
generally expected to continue to be, adversely affected by weather patterns in some of our markets, causing reduced construction activity. To the extent that
generally expected to continue to be, adversely affected by weather patterns in some of our markets, causing reduced construction activity. To the extent that
hurricanes, severe storms, earthquakes, floods, fires, droughts, other natural disasters or similar events occur in the markets in which we operate, our business may
hurricanes, severe storms, earthquakes, floods, fires, droughts, other natural disasters or similar events occur in the markets in which we operate, our business may
be adversely affected.
be adversely affected.
The building products supply and services industry is also subject to cyclical market pressures. Quarterly results historically have reflected, and are expected to
The building products supply and services industry is also subject to cyclical market pressures. Quarterly results historically have reflected, and are expected to
continue to reflect, fluctuations from period to period arising from the following factors, among
continue to reflect, fluctuations from period to period arising from the following factors, among
The building products supply and services industry is highly fragmented and competitive. We face significant competition from local, regional and national
The building products supply and services industry is highly fragmented and competitive. We face significant competition from local, regional and national
building materials chains, as well as from privately-owned single site enterprises. Any of these competitors may (i) foresee the course of market development more
building materials chains, as well as from privately-owned single site enterprises. Any of these competitors may (i) foresee the course of market development more
accurately than we do, (ii) provide superior service and sell superior products, (iii) have the ability to produce or supply similar products and services at a lower
accurately than we do, (ii) provide superior service and sell superior products, (iii) have the ability to produce or supply similar products and services at a lower
cost, (iv) develop stronger relationships with our customers, (v) adapt more quickly to new technologies or evolving customer requirements than we do or (vi)
cost, (iv) develop stronger relationships with our customers, (v) adapt more quickly to new technologies or evolving customer requirements than we do or (vi)
develop a superior branch network in our markets. As a result, we may not be able to compete successfully with them. In addition, home center retailers and/or
develop a superior branch network in our markets. As a result, we may not be able to compete successfully with them. In addition, home center retailers and/or
eCommerce retailers, which have historically concentrated their sales efforts on retail consumers and small contractors, may in the future intensify their marketing
eCommerce retailers, which have historically concentrated their sales efforts on retail consumers and small contractors, may in the future intensify their marketing
efforts to professional homebuilders. Furthermore, certain product manufacturers sell and distribute their products directly to production homebuilders. The volume
efforts to professional homebuilders. Furthermore, certain product manufacturers sell and distribute their products directly to production homebuilders. The volume
of such direct sales could increase in the future. Additionally, manufacturers and specialty distributors who sell products to us may elect to sell and distribute
of such direct sales could increase in the future. Additionally, manufacturers and specialty distributors who sell products to us may elect to sell and distribute
directly to homebuilders in the future or enter into exclusive supplier arrangements with other distributors. Consolidation of production homebuilders may result in
directly to homebuilders in the future or enter into exclusive supplier arrangements with other distributors. Consolidation of production homebuilders may result in
increased competition for their business. Finally, we may not be able to maintain our operating costs or product prices at a level sufficiently low for us to compete
increased competition for their business. Finally, we may not be able to maintain our operating costs or product prices at a level sufficiently low for us to compete
effectively. If we are unable to compete effectively, our business, financial condition, operating results and cash flows may be adversely affected.
effectively. If we are unable to compete effectively, our business, financial condition, operating results and cash flows may be adversely affected.
Some of our competitors are larger than we are and have greater financial resources. These resources may afford those competitors greater purchasing power,
Some of our competitors are larger than we are and have greater financial resources. These resources may afford those competitors greater purchasing power,
increased financial flexibility and more capital resources for expansion and improvement.
increased financial flexibility and more capital resources for expansion and improvement.
Certain of our products are commodities and fluctuations in prices of these commodities could affect our operating results.
Certain of our products are commodities and fluctuations in prices of these commodities could affect our operating results.
Many of the building products we distribute, including OSB, plywood, lumber and particleboard, are commodities that are widely available from other
Many of the building products we distribute, including OSB, plywood, lumber and particleboard, are commodities that are widely available from other
manufacturers or distributors with prices and volumes determined frequently based on participants’ perceptions of short-term supply and demand factors. A
manufacturers or distributors with prices and volumes determined frequently based on participants’ perceptions of short-term supply and demand factors. A
shortage of capacity or excess capacity in the industry can result in significant increases or declines in market prices for those products, often within a short period
shortage of capacity or excess capacity in the industry can result in significant increases or declines in market prices for those products, often within a short period
of time.
of time.
Prices of commodity products can also change as a result of national and international economic conditions, labor and freight costs, competition, market
Prices of commodity products can also change as a result of national and international economic conditions, labor and freight costs, competition, market
speculation, government regulation and trade policies, as well as from periodic delays in the delivery of lumber and other products. Short-term changes in the cost
speculation, government regulation and trade policies, as well as from periodic delays in the delivery of lumber and other products. Short-term changes in the cost
of these materials, some of which are subject to significant fluctuations, are sometimes passed on to our customers but our pricing quotation periods and pricing
of these materials, some of which are subject to significant fluctuations, are sometimes passed on to our customers but our pricing quotation periods and pricing
pressure from our competitors may limit our ability to pass on such price changes. For example, we frequently enter into extended pricing commitments, which
pressure from our competitors may limit our ability to pass on such price changes. For example, we frequently enter into extended pricing commitments, which
may compress our gross margins in periods of inflation. At times, the price at which we can charge our customers for any one or more products may even fall
may compress our gross margins in periods of inflation. At times, the price at which we can charge our customers for any one or more products may even fall
below the price at which we can purchase such products, requiring us to incur short-term losses on product sales. Excessive spikes in the market prices of certain
below the price at which we can purchase such products, requiring us to incur short-term losses on product sales. Excessive spikes in the market prices of certain
building products, such as lumber, can also put negative pressure on our operating cash flows by requiring us to invest more in inventory. We may also be limited
building products, such as lumber, can also put negative pressure on our operating cash flows by requiring us to invest more in inventory. We may also be limited
in our ability to pass on increases in freight costs on our products due to the price of fuel.
in our ability to pass on increases in freight costs on our products due to the price of fuel.
Some of our products are imported into the United States and may be subject to tariffs or import duties that may impact the price of the products and limit their
Some of our products are imported into the United States and may be subject to tariffs or import duties that may impact the price of the products and limit their
availability. Furthermore, the ongoing trade dispute between the United States and Canada following the expiration of the Softwood Lumber Agreement in 2015
availability. Furthermore, the ongoing trade dispute between the United States and Canada following the expiration of the Softwood Lumber Agreement in 2015
could lead to increased volatility in prices of softwood lumber imported from Canada. For the year ended December 31, 2017, we purchased between $250 million
could lead to increased volatility in prices of softwood lumber imported from Canada. For the year ended December 31, 2017, we purchased between $250 million
and $270 million of inventory from Canada.
and $270 million of inventory from Canada.
Periods of generally increasing prices provide the opportunity for higher sales and increased gross profit (subject to the extended pricing commitments described
Periods of generally increasing prices provide the opportunity for higher sales and increased gross profit (subject to the extended pricing commitments described
above), while generally declining price environments may result in declines in sales and profitability. In particular, low market prices for wood products over a
above), while generally declining price environments may result in declines in sales and profitability. In particular, low market prices for wood products over a
sustained period can adversely affect our business, financial condition, operating results and cash flows, as can excessive spikes in market prices. For the year
sustained period can adversely affect our business, financial condition, operating results and cash flows, as can excessive spikes in market prices. For the year
ended December 31, 2017 , average composite framing lumber prices and average composite structural panel prices (a composite calculation based on index prices
ended December 31, 2017 , average composite framing lumber prices and average composite structural panel prices (a composite calculation based on index prices
for OSB and plywood) as reported by Random Lengths were approximately 19% and 18% higher, respectively, than the prior year. Our lumber & lumber sheet
for OSB and plywood) as reported by Random Lengths were approximately 19% and 18% higher, respectively, than the prior year. Our lumber & lumber sheet
goods product category represented approximately 33% of net sales in 2017 . If lumber or structural panel prices were to decline significantly from current levels,
goods product category represented approximately 33% of net sales in 2017 . If lumber or structural panel prices were to decline significantly from current levels,
our sales and profits could be negatively affected.
our sales and profits could be negatively affected.
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We are exposed to product liability, warranty, casualty, construction defect, contract, tort, employment and other claims and legal proceedings related to
We are exposed to product liability, warranty, casualty, construction defect, contract, tort, employment and other claims and legal proceedings related to
our business, products and services as well as services provided for us through third parties.
our business, products and services as well as services provided for us through third parties.
team or other experienced, senior employees or sales force employees could impair our ability to execute our business plan, cause us to lose customers and reduce
team or other experienced, senior employees or sales force employees could impair our ability to execute our business plan, cause us to lose customers and reduce
our net sales, or lead to employee morale problems and/or the loss of other key employees. In any such event, our business, financial condition, operating results
our net sales, or lead to employee morale problems and/or the loss of other key employees. In any such event, our business, financial condition, operating results
We are from time to time involved in product liability, warranty, casualty, construction defect, contract, tort, employment and other claims relating to our business,
We are from time to time involved in product liability, warranty, casualty, construction defect, contract, tort, employment and other claims relating to our business,
the products we manufacture, distribute or install, and services we provide, either directly or through third parties, that, if adversely determined, could adversely
the products we manufacture, distribute or install, and services we provide, either directly or through third parties, that, if adversely determined, could adversely
affect our business, financial condition, operating results and cash flows if we were unable to receive indemnification for such claims or were not adequately
affect our business, financial condition, operating results and cash flows if we were unable to receive indemnification for such claims or were not adequately
insured for such claims. We rely on manufacturers and other suppliers to provide us with many of the products we sell, distribute or install. Because we do not
insured for such claims. We rely on manufacturers and other suppliers to provide us with many of the products we sell, distribute or install. Because we do not
have direct control over the quality of such products manufactured or supplied by such third-party suppliers, we are exposed to risks relating to the quality of such
have direct control over the quality of such products manufactured or supplied by such third-party suppliers, we are exposed to risks relating to the quality of such
products. In addition, we are exposed to potential claims arising from the conduct of our employees, homebuilders and their subcontractors, and third-party
products. In addition, we are exposed to potential claims arising from the conduct of our employees, homebuilders and their subcontractors, and third-party
installers for which we may be liable. We and they are subject to regulatory requirements and risks applicable to general contractors, which include management of
installers for which we may be liable. We and they are subject to regulatory requirements and risks applicable to general contractors, which include management of
licensing, permitting and quality of our third-party installers. If we fail to manage these processes effectively or provide proper oversight of these services, we
licensing, permitting and quality of our third-party installers. If we fail to manage these processes effectively or provide proper oversight of these services, we
could suffer lost sales, fines and lawsuits, as well as damage to our reputation, which could adversely affect our business.
could suffer lost sales, fines and lawsuits, as well as damage to our reputation, which could adversely affect our business.
Product liability, warranty, casualty, construction defect, contract, tort, employment and other claims can be expensive to defend and can divert the attention of
Product liability, warranty, casualty, construction defect, contract, tort, employment and other claims can be expensive to defend and can divert the attention of
management and other personnel for significant periods, regardless of the ultimate outcome. Claims of this nature could also have a negative impact on customer
management and other personnel for significant periods, regardless of the ultimate outcome. Claims of this nature could also have a negative impact on customer
confidence in our products and our Company. We cannot assure you that any current or future claims will not adversely affect our business, financial condition,
confidence in our products and our Company. We cannot assure you that any current or future claims will not adversely affect our business, financial condition,
operating results and cash flows.
operating results and cash flows.
and cash flows could be adversely affected.
and cash flows could be adversely affected.
On January 10, 2018, we announced that Peter C. Alexander was leaving the Company under mutual agreement, effective immediately, and would be replaced by
On January 10, 2018, we announced that Peter C. Alexander was leaving the Company under mutual agreement, effective immediately, and would be replaced by
David Keltner, a member of the Board of Directors, as interim President and Chief Executive Officer while the Board conducts a search for a permanent
David Keltner, a member of the Board of Directors, as interim President and Chief Executive Officer while the Board conducts a search for a permanent
replacement. Any change in senior management involves significant inherent risk, and any failure to identify a suitable replacement or maintain a smooth transition
replacement. Any change in senior management involves significant inherent risk, and any failure to identify a suitable replacement or maintain a smooth transition
process could hinder our strategic planning, execution and future performance. While we endeavor to minimize any negative impact associated with changes such
process could hinder our strategic planning, execution and future performance. While we endeavor to minimize any negative impact associated with changes such
as these, there may be uncertainty among investors, employees and others regarding our future direction and performance. Any disruption in our operations,
as these, there may be uncertainty among investors, employees and others regarding our future direction and performance. Any disruption in our operations,
uncertainty regarding our future or negative public perception regarding the change could have a material adverse effect on our business, financial condition,
uncertainty regarding our future or negative public perception regarding the change could have a material adverse effect on our business, financial condition,
operating results and cash flows.
operating results and cash flows.
Our ability to control labor costs is subject to numerous external factors, including prevailing wage rates, the impact of legislation or regulations governing wages,
Our ability to control labor costs is subject to numerous external factors, including prevailing wage rates, the impact of legislation or regulations governing wages,
regulations governing payment of workers on a "piece-work" or "piece-rate" basis, labor relations, healthcare benefits, and health and other insurance costs. In
regulations governing payment of workers on a "piece-work" or "piece-rate" basis, labor relations, healthcare benefits, and health and other insurance costs. In
addition, we compete with other companies for many of our employees in hourly and piece-rate positions, and we invest significant resources in training and
addition, we compete with other companies for many of our employees in hourly and piece-rate positions, and we invest significant resources in training and
motivating them to maintain a high level of job satisfaction. These positions have historically had high turnover rates, which can lead to increased training and
motivating them to maintain a high level of job satisfaction. These positions have historically had high turnover rates, which can lead to increased training and
retention costs. If we are unable to attract or retain highly qualified employees in the future, it could adversely impact our operating results.
retention costs. If we are unable to attract or retain highly qualified employees in the future, it could adversely impact our operating results.
We may be unable to maintain profitability or positive cash flows from operations.
We may be unable to maintain profitability or positive cash flows from operations.
Product shortages, loss of key suppliers or failure to develop relationships with qualified suppliers, and our dependence on third-party suppliers and
Product shortages, loss of key suppliers or failure to develop relationships with qualified suppliers, and our dependence on third-party suppliers and
We have set goals to progressively improve our profitability over time by growing our sales, increasing our gross margin and reducing our expenses as a
We have set goals to progressively improve our profitability over time by growing our sales, increasing our gross margin and reducing our expenses as a
percentage of sales. For the years ended December 31, 2017 and 2016, we had net income of $57.4 million and $30.9 million , respectively, and for the year ended
percentage of sales. For the years ended December 31, 2017 and 2016, we had net income of $57.4 million and $30.9 million , respectively, and for the year ended
December 31, 2015, we had a net loss of $4.8 million . For the years ended December 31, 2017 , 2016 and 2015, we had cash provided by operations of $93.9
December 31, 2015, we had a net loss of $4.8 million . For the years ended December 31, 2017 , 2016 and 2015, we had cash provided by operations of $93.9
million , $106.9 million , and $0.7 million , respectively. There can be no assurance that we will achieve our profitability goals or continue to generate positive
million , $106.9 million , and $0.7 million , respectively. There can be no assurance that we will achieve our profitability goals or continue to generate positive
cash flow from operations. Factors that could significantly adversely affect our efforts to achieve these goals include, but are not limited to, the failure to:
cash flow from operations. Factors that could significantly adversely affect our efforts to achieve these goals include, but are not limited to, the failure to:
•
•
•
•
•
•
grow our revenue through organic growth or through acquisitions;
grow our revenue through organic growth or through acquisitions;
improve our revenue mix by investing (including through acquisitions) in businesses that provide higher gross margins than we have been able to generate
improve our revenue mix by investing (including through acquisitions) in businesses that provide higher gross margins than we have been able to generate
historically;
historically;
achieve improvements in purchasing or maintain or increase our rebates from suppliers through our supplier consolidation and/or low-cost country
achieve improvements in purchasing or maintain or increase our rebates from suppliers through our supplier consolidation and/or low-cost country
initiatives;
initiatives;
improve our gross margins through the utilization of improved pricing practices and technology and sourcing savings;
improve our gross margins through the utilization of improved pricing practices and technology and sourcing savings;
effectively evaluate future inventory reserves;
effectively evaluate future inventory reserves;
collect monies owed from customers;
collect monies owed from customers;
•
•
• maintain or reduce our overhead and support expenses as we grow;
• maintain or reduce our overhead and support expenses as we grow;
•
•
•
•
• maintain relationships with our significant customers;
• maintain relationships with our significant customers;
•
•
•
•
integrate any businesses acquired; and
integrate any businesses acquired; and
continue to successfully integrate BMHC and SBS.
continue to successfully integrate BMHC and SBS.
Any of these failures or delays may adversely affect our ability to maintain or increase our profitability.
Any of these failures or delays may adversely affect our ability to maintain or increase our profitability.
Our continued success will depend on our ability to retain our key employees and to attract and retain new qualified employees, while controlling our
Our continued success will depend on our ability to retain our key employees and to attract and retain new qualified employees, while controlling our
labor costs.
labor costs.
Our success depends in part on our ability to attract, hire, train and retain qualified managerial, operational, sales and other personnel, while at the same time
Our success depends in part on our ability to attract, hire, train and retain qualified managerial, operational, sales and other personnel, while at the same time
controlling our labor costs. We face significant competition for these types of employees in our industry and from other industries. Labor shortages may impact our
controlling our labor costs. We face significant competition for these types of employees in our industry and from other industries. Labor shortages may impact our
ability to hire skilled or unskilled workers with experience in carpentry, construction or fabrication. We may be unsuccessful in attracting and retaining the
ability to hire skilled or unskilled workers with experience in carpentry, construction or fabrication. We may be unsuccessful in attracting and retaining the
personnel we require to conduct and expand our operations successfully. In addition, key personnel, including sales force employees with key customer
personnel we require to conduct and expand our operations successfully. In addition, key personnel, including sales force employees with key customer
relationships, may leave us and compete against us.
relationships, may leave us and compete against us.
Our success also depends to a significant extent on the continued service of our senior management team. Our officers and divisional vice presidents have
Our success also depends to a significant extent on the continued service of our senior management team. Our officers and divisional vice presidents have
experience in manufacturing, distribution, retail and homebuilding, and have been integral to our successful acquisition and integration of businesses to gain scale
experience in manufacturing, distribution, retail and homebuilding, and have been integral to our successful acquisition and integration of businesses to gain scale
in our current markets. The loss of any member of our senior management
in our current markets. The loss of any member of our senior management
10
10
manufacturers could affect our financial health.
manufacturers could affect our financial health.
Our ability to offer a wide variety of products to our customers is dependent upon our ability to obtain adequate product supply from manufacturers and other
Our ability to offer a wide variety of products to our customers is dependent upon our ability to obtain adequate product supply from manufacturers and other
suppliers. Generally, our products are obtainable from various sources and in sufficient quantities. Our ability to continue to identify and develop relationships with
suppliers. Generally, our products are obtainable from various sources and in sufficient quantities. Our ability to continue to identify and develop relationships with
qualified suppliers who can satisfy our high standards for quality and our need to access products in a timely and efficient manner is a significant challenge. Our
qualified suppliers who can satisfy our high standards for quality and our need to access products in a timely and efficient manner is a significant challenge. Our
ability to access products also can be adversely affected by the financial instability of suppliers (particularly in light of continuing economic difficulties in various
ability to access products also can be adversely affected by the financial instability of suppliers (particularly in light of continuing economic difficulties in various
regions of the United States and the world), suppliers’ noncompliance with applicable laws, tariffs and import duties, supply disruptions, shipping interruptions or
regions of the United States and the world), suppliers’ noncompliance with applicable laws, tariffs and import duties, supply disruptions, shipping interruptions or
costs, and other factors beyond our control. The loss of, or a substantial decrease in the availability of, products from our suppliers or the loss of key supplier
costs, and other factors beyond our control. The loss of, or a substantial decrease in the availability of, products from our suppliers or the loss of key supplier
arrangements could adversely impact our business, financial condition, operating results and cash flows.
arrangements could adversely impact our business, financial condition, operating results and cash flows.
Although in many instances we have agreements with our suppliers, these agreements are generally terminable by either party on limited notice. Many of our
Although in many instances we have agreements with our suppliers, these agreements are generally terminable by either party on limited notice. Many of our
suppliers also offer us favorable terms based on the volume of our purchases. If market conditions change, suppliers may stop offering us favorable terms. Failure
suppliers also offer us favorable terms based on the volume of our purchases. If market conditions change, suppliers may stop offering us favorable terms. Failure
by our suppliers to continue to supply us with products on favorable terms, commercially reasonable terms, or at all, could put pressure on our operating margins or
by our suppliers to continue to supply us with products on favorable terms, commercially reasonable terms, or at all, could put pressure on our operating margins or
have a material adverse effect on our business, financial condition, operating results and cash flows.
have a material adverse effect on our business, financial condition, operating results and cash flows.
A portion of the workforces of many of our suppliers, particularly our foreign suppliers, are represented by labor unions. Workforce disputes at these suppliers may
A portion of the workforces of many of our suppliers, particularly our foreign suppliers, are represented by labor unions. Workforce disputes at these suppliers may
result in work stoppages or slowdowns. Such disruptions could have a material adverse effect on these suppliers ability to continue meeting our needs.
result in work stoppages or slowdowns. Such disruptions could have a material adverse effect on these suppliers ability to continue meeting our needs.
The implementation of our supply chain and technology initiatives could disrupt our operations, and these initiatives might not provide the anticipated
The implementation of our supply chain and technology initiatives could disrupt our operations, and these initiatives might not provide the anticipated
benefits or might fail.
benefits or might fail.
We have made, and we plan to continue to make, significant investments in our supply chain and technology. These initiatives are designed to streamline our
We have made, and we plan to continue to make, significant investments in our supply chain and technology. These initiatives are designed to streamline our
operations to allow our employees to continue to provide high quality service to our customers, while simplifying customer interaction and providing our
operations to allow our employees to continue to provide high quality service to our customers, while simplifying customer interaction and providing our
customers with a more interconnected purchasing experience. The cost and potential problems and interruptions associated with the implementation of these
customers with a more interconnected purchasing experience. The cost and potential problems and interruptions associated with the implementation of these
initiatives, including those associated with managing third-party service providers and employing new web-based tools and services, could disrupt or reduce the
initiatives, including those associated with managing third-party service providers and employing new web-based tools and services, could disrupt or reduce the
efficiency of our operations. In the event that we grow very rapidly, there can be no assurance that we will be able to keep up, expand or adapt our IT infrastructure
efficiency of our operations. In the event that we grow very rapidly, there can be no assurance that we will be able to keep up, expand or adapt our IT infrastructure
to meet evolving demand on a timely basis and at a commercially reasonable cost, or at all. In addition, our improved supply chain and new or upgraded
to meet evolving demand on a timely basis and at a commercially reasonable cost, or at all. In addition, our improved supply chain and new or upgraded
technology might not provide the anticipated benefits, it might take longer than expected to realize the anticipated benefits or the initiatives might fail altogether.
technology might not provide the anticipated benefits, it might take longer than expected to realize the anticipated benefits or the initiatives might fail altogether.
11
11
We are exposed to product liability, warranty, casualty, construction defect, contract, tort, employment and other claims and legal proceedings related to
We are exposed to product liability, warranty, casualty, construction defect, contract, tort, employment and other claims and legal proceedings related to
our business, products and services as well as services provided for us through third parties.
our business, products and services as well as services provided for us through third parties.
We are from time to time involved in product liability, warranty, casualty, construction defect, contract, tort, employment and other claims relating to our business,
We are from time to time involved in product liability, warranty, casualty, construction defect, contract, tort, employment and other claims relating to our business,
the products we manufacture, distribute or install, and services we provide, either directly or through third parties, that, if adversely determined, could adversely
the products we manufacture, distribute or install, and services we provide, either directly or through third parties, that, if adversely determined, could adversely
affect our business, financial condition, operating results and cash flows if we were unable to receive indemnification for such claims or were not adequately
affect our business, financial condition, operating results and cash flows if we were unable to receive indemnification for such claims or were not adequately
insured for such claims. We rely on manufacturers and other suppliers to provide us with many of the products we sell, distribute or install. Because we do not
insured for such claims. We rely on manufacturers and other suppliers to provide us with many of the products we sell, distribute or install. Because we do not
have direct control over the quality of such products manufactured or supplied by such third-party suppliers, we are exposed to risks relating to the quality of such
have direct control over the quality of such products manufactured or supplied by such third-party suppliers, we are exposed to risks relating to the quality of such
products. In addition, we are exposed to potential claims arising from the conduct of our employees, homebuilders and their subcontractors, and third-party
products. In addition, we are exposed to potential claims arising from the conduct of our employees, homebuilders and their subcontractors, and third-party
installers for which we may be liable. We and they are subject to regulatory requirements and risks applicable to general contractors, which include management of
installers for which we may be liable. We and they are subject to regulatory requirements and risks applicable to general contractors, which include management of
licensing, permitting and quality of our third-party installers. If we fail to manage these processes effectively or provide proper oversight of these services, we
licensing, permitting and quality of our third-party installers. If we fail to manage these processes effectively or provide proper oversight of these services, we
could suffer lost sales, fines and lawsuits, as well as damage to our reputation, which could adversely affect our business.
could suffer lost sales, fines and lawsuits, as well as damage to our reputation, which could adversely affect our business.
Product liability, warranty, casualty, construction defect, contract, tort, employment and other claims can be expensive to defend and can divert the attention of
Product liability, warranty, casualty, construction defect, contract, tort, employment and other claims can be expensive to defend and can divert the attention of
management and other personnel for significant periods, regardless of the ultimate outcome. Claims of this nature could also have a negative impact on customer
management and other personnel for significant periods, regardless of the ultimate outcome. Claims of this nature could also have a negative impact on customer
confidence in our products and our Company. We cannot assure you that any current or future claims will not adversely affect our business, financial condition,
confidence in our products and our Company. We cannot assure you that any current or future claims will not adversely affect our business, financial condition,
operating results and cash flows.
operating results and cash flows.
team or other experienced, senior employees or sales force employees could impair our ability to execute our business plan, cause us to lose customers and reduce
team or other experienced, senior employees or sales force employees could impair our ability to execute our business plan, cause us to lose customers and reduce
our net sales, or lead to employee morale problems and/or the loss of other key employees. In any such event, our business, financial condition, operating results
our net sales, or lead to employee morale problems and/or the loss of other key employees. In any such event, our business, financial condition, operating results
and cash flows could be adversely affected.
and cash flows could be adversely affected.
On January 10, 2018, we announced that Peter C. Alexander was leaving the Company under mutual agreement, effective immediately, and would be replaced by
On January 10, 2018, we announced that Peter C. Alexander was leaving the Company under mutual agreement, effective immediately, and would be replaced by
David Keltner, a member of the Board of Directors, as interim President and Chief Executive Officer while the Board conducts a search for a permanent
David Keltner, a member of the Board of Directors, as interim President and Chief Executive Officer while the Board conducts a search for a permanent
replacement. Any change in senior management involves significant inherent risk, and any failure to identify a suitable replacement or maintain a smooth transition
replacement. Any change in senior management involves significant inherent risk, and any failure to identify a suitable replacement or maintain a smooth transition
process could hinder our strategic planning, execution and future performance. While we endeavor to minimize any negative impact associated with changes such
process could hinder our strategic planning, execution and future performance. While we endeavor to minimize any negative impact associated with changes such
as these, there may be uncertainty among investors, employees and others regarding our future direction and performance. Any disruption in our operations,
as these, there may be uncertainty among investors, employees and others regarding our future direction and performance. Any disruption in our operations,
uncertainty regarding our future or negative public perception regarding the change could have a material adverse effect on our business, financial condition,
uncertainty regarding our future or negative public perception regarding the change could have a material adverse effect on our business, financial condition,
operating results and cash flows.
operating results and cash flows.
Our ability to control labor costs is subject to numerous external factors, including prevailing wage rates, the impact of legislation or regulations governing wages,
Our ability to control labor costs is subject to numerous external factors, including prevailing wage rates, the impact of legislation or regulations governing wages,
regulations governing payment of workers on a "piece-work" or "piece-rate" basis, labor relations, healthcare benefits, and health and other insurance costs. In
regulations governing payment of workers on a "piece-work" or "piece-rate" basis, labor relations, healthcare benefits, and health and other insurance costs. In
addition, we compete with other companies for many of our employees in hourly and piece-rate positions, and we invest significant resources in training and
addition, we compete with other companies for many of our employees in hourly and piece-rate positions, and we invest significant resources in training and
motivating them to maintain a high level of job satisfaction. These positions have historically had high turnover rates, which can lead to increased training and
motivating them to maintain a high level of job satisfaction. These positions have historically had high turnover rates, which can lead to increased training and
retention costs. If we are unable to attract or retain highly qualified employees in the future, it could adversely impact our operating results.
retention costs. If we are unable to attract or retain highly qualified employees in the future, it could adversely impact our operating results.
We may be unable to maintain profitability or positive cash flows from operations.
We may be unable to maintain profitability or positive cash flows from operations.
We have set goals to progressively improve our profitability over time by growing our sales, increasing our gross margin and reducing our expenses as a
We have set goals to progressively improve our profitability over time by growing our sales, increasing our gross margin and reducing our expenses as a
percentage of sales. For the years ended December 31, 2017 and 2016, we had net income of $57.4 million and $30.9 million , respectively, and for the year ended
percentage of sales. For the years ended December 31, 2017 and 2016, we had net income of $57.4 million and $30.9 million , respectively, and for the year ended
December 31, 2015, we had a net loss of $4.8 million . For the years ended December 31, 2017 , 2016 and 2015, we had cash provided by operations of $93.9
December 31, 2015, we had a net loss of $4.8 million . For the years ended December 31, 2017 , 2016 and 2015, we had cash provided by operations of $93.9
million , $106.9 million , and $0.7 million , respectively. There can be no assurance that we will achieve our profitability goals or continue to generate positive
million , $106.9 million , and $0.7 million , respectively. There can be no assurance that we will achieve our profitability goals or continue to generate positive
cash flow from operations. Factors that could significantly adversely affect our efforts to achieve these goals include, but are not limited to, the failure to:
cash flow from operations. Factors that could significantly adversely affect our efforts to achieve these goals include, but are not limited to, the failure to:
grow our revenue through organic growth or through acquisitions;
grow our revenue through organic growth or through acquisitions;
improve our revenue mix by investing (including through acquisitions) in businesses that provide higher gross margins than we have been able to generate
improve our revenue mix by investing (including through acquisitions) in businesses that provide higher gross margins than we have been able to generate
achieve improvements in purchasing or maintain or increase our rebates from suppliers through our supplier consolidation and/or low-cost country
achieve improvements in purchasing or maintain or increase our rebates from suppliers through our supplier consolidation and/or low-cost country
improve our gross margins through the utilization of improved pricing practices and technology and sourcing savings;
improve our gross margins through the utilization of improved pricing practices and technology and sourcing savings;
• maintain or reduce our overhead and support expenses as we grow;
• maintain or reduce our overhead and support expenses as we grow;
historically;
historically;
initiatives;
initiatives;
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
labor costs.
labor costs.
effectively evaluate future inventory reserves;
effectively evaluate future inventory reserves;
collect monies owed from customers;
collect monies owed from customers;
• maintain relationships with our significant customers;
• maintain relationships with our significant customers;
integrate any businesses acquired; and
integrate any businesses acquired; and
continue to successfully integrate BMHC and SBS.
continue to successfully integrate BMHC and SBS.
Any of these failures or delays may adversely affect our ability to maintain or increase our profitability.
Any of these failures or delays may adversely affect our ability to maintain or increase our profitability.
Our continued success will depend on our ability to retain our key employees and to attract and retain new qualified employees, while controlling our
Our continued success will depend on our ability to retain our key employees and to attract and retain new qualified employees, while controlling our
Our success depends in part on our ability to attract, hire, train and retain qualified managerial, operational, sales and other personnel, while at the same time
Our success depends in part on our ability to attract, hire, train and retain qualified managerial, operational, sales and other personnel, while at the same time
controlling our labor costs. We face significant competition for these types of employees in our industry and from other industries. Labor shortages may impact our
controlling our labor costs. We face significant competition for these types of employees in our industry and from other industries. Labor shortages may impact our
ability to hire skilled or unskilled workers with experience in carpentry, construction or fabrication. We may be unsuccessful in attracting and retaining the
ability to hire skilled or unskilled workers with experience in carpentry, construction or fabrication. We may be unsuccessful in attracting and retaining the
personnel we require to conduct and expand our operations successfully. In addition, key personnel, including sales force employees with key customer
personnel we require to conduct and expand our operations successfully. In addition, key personnel, including sales force employees with key customer
relationships, may leave us and compete against us.
relationships, may leave us and compete against us.
Our success also depends to a significant extent on the continued service of our senior management team. Our officers and divisional vice presidents have
Our success also depends to a significant extent on the continued service of our senior management team. Our officers and divisional vice presidents have
experience in manufacturing, distribution, retail and homebuilding, and have been integral to our successful acquisition and integration of businesses to gain scale
experience in manufacturing, distribution, retail and homebuilding, and have been integral to our successful acquisition and integration of businesses to gain scale
in our current markets. The loss of any member of our senior management
in our current markets. The loss of any member of our senior management
10
10
Product shortages, loss of key suppliers or failure to develop relationships with qualified suppliers, and our dependence on third-party suppliers and
Product shortages, loss of key suppliers or failure to develop relationships with qualified suppliers, and our dependence on third-party suppliers and
manufacturers could affect our financial health.
manufacturers could affect our financial health.
Our ability to offer a wide variety of products to our customers is dependent upon our ability to obtain adequate product supply from manufacturers and other
Our ability to offer a wide variety of products to our customers is dependent upon our ability to obtain adequate product supply from manufacturers and other
suppliers. Generally, our products are obtainable from various sources and in sufficient quantities. Our ability to continue to identify and develop relationships with
suppliers. Generally, our products are obtainable from various sources and in sufficient quantities. Our ability to continue to identify and develop relationships with
qualified suppliers who can satisfy our high standards for quality and our need to access products in a timely and efficient manner is a significant challenge. Our
qualified suppliers who can satisfy our high standards for quality and our need to access products in a timely and efficient manner is a significant challenge. Our
ability to access products also can be adversely affected by the financial instability of suppliers (particularly in light of continuing economic difficulties in various
ability to access products also can be adversely affected by the financial instability of suppliers (particularly in light of continuing economic difficulties in various
regions of the United States and the world), suppliers’ noncompliance with applicable laws, tariffs and import duties, supply disruptions, shipping interruptions or
regions of the United States and the world), suppliers’ noncompliance with applicable laws, tariffs and import duties, supply disruptions, shipping interruptions or
costs, and other factors beyond our control. The loss of, or a substantial decrease in the availability of, products from our suppliers or the loss of key supplier
costs, and other factors beyond our control. The loss of, or a substantial decrease in the availability of, products from our suppliers or the loss of key supplier
arrangements could adversely impact our business, financial condition, operating results and cash flows.
arrangements could adversely impact our business, financial condition, operating results and cash flows.
Although in many instances we have agreements with our suppliers, these agreements are generally terminable by either party on limited notice. Many of our
Although in many instances we have agreements with our suppliers, these agreements are generally terminable by either party on limited notice. Many of our
suppliers also offer us favorable terms based on the volume of our purchases. If market conditions change, suppliers may stop offering us favorable terms. Failure
suppliers also offer us favorable terms based on the volume of our purchases. If market conditions change, suppliers may stop offering us favorable terms. Failure
by our suppliers to continue to supply us with products on favorable terms, commercially reasonable terms, or at all, could put pressure on our operating margins or
by our suppliers to continue to supply us with products on favorable terms, commercially reasonable terms, or at all, could put pressure on our operating margins or
have a material adverse effect on our business, financial condition, operating results and cash flows.
have a material adverse effect on our business, financial condition, operating results and cash flows.
A portion of the workforces of many of our suppliers, particularly our foreign suppliers, are represented by labor unions. Workforce disputes at these suppliers may
A portion of the workforces of many of our suppliers, particularly our foreign suppliers, are represented by labor unions. Workforce disputes at these suppliers may
result in work stoppages or slowdowns. Such disruptions could have a material adverse effect on these suppliers ability to continue meeting our needs.
result in work stoppages or slowdowns. Such disruptions could have a material adverse effect on these suppliers ability to continue meeting our needs.
The implementation of our supply chain and technology initiatives could disrupt our operations, and these initiatives might not provide the anticipated
The implementation of our supply chain and technology initiatives could disrupt our operations, and these initiatives might not provide the anticipated
benefits or might fail.
benefits or might fail.
We have made, and we plan to continue to make, significant investments in our supply chain and technology. These initiatives are designed to streamline our
We have made, and we plan to continue to make, significant investments in our supply chain and technology. These initiatives are designed to streamline our
operations to allow our employees to continue to provide high quality service to our customers, while simplifying customer interaction and providing our
operations to allow our employees to continue to provide high quality service to our customers, while simplifying customer interaction and providing our
customers with a more interconnected purchasing experience. The cost and potential problems and interruptions associated with the implementation of these
customers with a more interconnected purchasing experience. The cost and potential problems and interruptions associated with the implementation of these
initiatives, including those associated with managing third-party service providers and employing new web-based tools and services, could disrupt or reduce the
initiatives, including those associated with managing third-party service providers and employing new web-based tools and services, could disrupt or reduce the
efficiency of our operations. In the event that we grow very rapidly, there can be no assurance that we will be able to keep up, expand or adapt our IT infrastructure
efficiency of our operations. In the event that we grow very rapidly, there can be no assurance that we will be able to keep up, expand or adapt our IT infrastructure
to meet evolving demand on a timely basis and at a commercially reasonable cost, or at all. In addition, our improved supply chain and new or upgraded
to meet evolving demand on a timely basis and at a commercially reasonable cost, or at all. In addition, our improved supply chain and new or upgraded
technology might not provide the anticipated benefits, it might take longer than expected to realize the anticipated benefits or the initiatives might fail altogether.
technology might not provide the anticipated benefits, it might take longer than expected to realize the anticipated benefits or the initiatives might fail altogether.
11
11
We occupy many of our facilities under long-term non-cancellable leases. If we close a facility, we are still obligated under the applicable lease. We may
We occupy many of our facilities under long-term non-cancellable leases. If we close a facility, we are still obligated under the applicable lease. We may
be unable to renew leases at the end of their terms.
be unable to renew leases at the end of their terms.
could result in additional pricing pressure which could adversely affect our business, financial condition, operating results and cash flows.
could result in additional pricing pressure which could adversely affect our business, financial condition, operating results and cash flows.
Many of our facilities are located in leased premises. Many of our current leases are non-cancellable and typically have initial terms ranging from five to ten years,
Many of our facilities are located in leased premises. Many of our current leases are non-cancellable and typically have initial terms ranging from five to ten years,
and most provide options to renew for specified periods of time. We believe that leases we enter into in the future will likely be long-term and non-cancellable and
and most provide options to renew for specified periods of time. We believe that leases we enter into in the future will likely be long-term and non-cancellable and
have similar renewal options. If we close or idle a facility, most likely we remain committed to perform our obligations under the applicable lease, which would
have similar renewal options. If we close or idle a facility, most likely we remain committed to perform our obligations under the applicable lease, which would
include, among other things, payment of the base rent, insurance, taxes and other expenses on the leased property for the balance of the lease term. The inability to
include, among other things, payment of the base rent, insurance, taxes and other expenses on the leased property for the balance of the lease term. The inability to
terminate leases when idling a facility or exiting a geographic market can have a significant adverse impact on our business, financial condition, operating results
terminate leases when idling a facility or exiting a geographic market can have a significant adverse impact on our business, financial condition, operating results
and cash flows.
and cash flows.
In addition, at the end of the lease term and any renewal period for a facility, we may be unable to renew the lease without substantial additional cost, if at all. If we
In addition, at the end of the lease term and any renewal period for a facility, we may be unable to renew the lease without substantial additional cost, if at all. If we
are unable to renew our facility leases, we may close or relocate a facility, which could subject us to construction and other costs and risks, which in turn could
are unable to renew our facility leases, we may close or relocate a facility, which could subject us to construction and other costs and risks, which in turn could
have a material adverse effect on our business, financial condition, operating results and cash flows. In addition, we may not be able to secure a replacement
have a material adverse effect on our business, financial condition, operating results and cash flows. In addition, we may not be able to secure a replacement
facility in a location that is as commercially viable, including access to rail service, as the lease we are unable to renew. For example, closing a facility, even during
facility in a location that is as commercially viable, including access to rail service, as the lease we are unable to renew. For example, closing a facility, even during
the time of relocation, will reduce the sales that the facility would have contributed to our revenues. Additionally, the revenue and profit, if any, generated at a
the time of relocation, will reduce the sales that the facility would have contributed to our revenues. Additionally, the revenue and profit, if any, generated at a
relocated facility may not equal the revenue and profit generated at the existing one.
relocated facility may not equal the revenue and profit generated at the existing one.
market share.
market share.
We may be unable to effectively manage our inventory and working capital as our sales volume increases, which could have a material adverse effect on
We may be unable to effectively manage our inventory and working capital as our sales volume increases, which could have a material adverse effect on
us.
us.
We purchase certain materials, including lumber products, which are then sold to customers as well as used as direct production inputs for our manufactured and
We purchase certain materials, including lumber products, which are then sold to customers as well as used as direct production inputs for our manufactured and
prefabricated products. We must maintain, and have adequate working capital to purchase, sufficient inventory to meet customer demand. Due to the lead times
prefabricated products. We must maintain, and have adequate working capital to purchase, sufficient inventory to meet customer demand. Due to the lead times
required by our suppliers, we order products in advance of expected sales. This requires us to forecast our sales and purchases accordingly. In periods of growth, it
required by our suppliers, we order products in advance of expected sales. This requires us to forecast our sales and purchases accordingly. In periods of growth, it
can be especially difficult to forecast sales accurately. We must also manage our working capital to fund our inventory purchases. In the future, if we are unable to
can be especially difficult to forecast sales accurately. We must also manage our working capital to fund our inventory purchases. In the future, if we are unable to
manage effectively our inventory and working capital as we attempt to grow our business, our cash flows may be negatively affected, which could have a material
manage effectively our inventory and working capital as we attempt to grow our business, our cash flows may be negatively affected, which could have a material
adverse effect on our business, financial condition, operating results and cash flows.
adverse effect on our business, financial condition, operating results and cash flows.
The majority of our net sales are credit sales that are made primarily to customers whose ability to pay is dependent, in part, upon the economic strength
The majority of our net sales are credit sales that are made primarily to customers whose ability to pay is dependent, in part, upon the economic strength
of the industry and geographic areas in which they operate, and the failure to collect or timely collect monies owed from customers could adversely affect
of the industry and geographic areas in which they operate, and the failure to collect or timely collect monies owed from customers could adversely affect
us.
us.
The majority of our net sales volume in fiscal 2017 was facilitated through the extension of credit to our customers whose ability to pay is dependent, in part, upon
The majority of our net sales volume in fiscal 2017 was facilitated through the extension of credit to our customers whose ability to pay is dependent, in part, upon
the economic strength of the industry in the areas where they operate. We offer credit to customers, either through unsecured credit that is based solely upon the
the economic strength of the industry in the areas where they operate. We offer credit to customers, either through unsecured credit that is based solely upon the
creditworthiness of the customer, or secured credit for materials sold for a specific job where the security lies in lien rights associated with the material going into
creditworthiness of the customer, or secured credit for materials sold for a specific job where the security lies in lien rights associated with the material going into
the job. The type of credit offered depends both on the financial strength of the customer and the nature of the business in which the customer is involved. End
the job. The type of credit offered depends both on the financial strength of the customer and the nature of the business in which the customer is involved. End
users, resellers and other non-contractor customers generally purchase more on unsecured credit than secured credit. During the housing downturn, several of our
users, resellers and other non-contractor customers generally purchase more on unsecured credit than secured credit. During the housing downturn, several of our
homebuilder customers defaulted on amounts owed to us or extended their payable days as a result of their financial condition. The inability of our customers to
homebuilder customers defaulted on amounts owed to us or extended their payable days as a result of their financial condition. The inability of our customers to
pay off their credit lines in a timely manner, or at all, would adversely affect our business, financial condition, operating results and cash flows. Furthermore, our
pay off their credit lines in a timely manner, or at all, would adversely affect our business, financial condition, operating results and cash flows. Furthermore, our
collections efforts with respect to non-paying or slow-paying customers could negatively impact our customer relations going forward.
collections efforts with respect to non-paying or slow-paying customers could negatively impact our customer relations going forward.
Because we depend on the creditworthiness of certain of our customers, if the financial condition of our customers declines, our credit risk could increase.
Because we depend on the creditworthiness of certain of our customers, if the financial condition of our customers declines, our credit risk could increase.
Significant contraction in our markets, coupled with tightened credit availability and financial institution underwriting standards, could adversely affect certain of
Significant contraction in our markets, coupled with tightened credit availability and financial institution underwriting standards, could adversely affect certain of
our customers. Should one or more of our larger customers declare bankruptcy as has occurred in the past, it could adversely affect the collectability of our
our customers. Should one or more of our larger customers declare bankruptcy as has occurred in the past, it could adversely affect the collectability of our
accounts receivable, bad debt reserves and net income.
accounts receivable, bad debt reserves and net income.
affected.
affected.
We are subject to competitive pricing pressure from our customers.
We are subject to competitive pricing pressure from our customers.
Production homebuilders historically have exerted significant pressure on their outside suppliers to keep prices low because of their market share and ability to
Production homebuilders historically have exerted significant pressure on their outside suppliers to keep prices low because of their market share and ability to
leverage such market share in the highly fragmented building products supply and services industry. The housing industry downturn resulted in significantly
leverage such market share in the highly fragmented building products supply and services industry. The housing industry downturn resulted in significantly
increased pricing pressures from production homebuilders and other customers. Continued consolidation among homebuilders, and changes in homebuilders’
increased pricing pressures from production homebuilders and other customers. Continued consolidation among homebuilders, and changes in homebuilders’
purchasing policies or payment practices,
purchasing policies or payment practices,
12
12
We may not timely identify or effectively respond to consumer needs, expectations, market conditions or trends, which could adversely affect our
We may not timely identify or effectively respond to consumer needs, expectations, market conditions or trends, which could adversely affect our
relationship with customers, the demand for our products and services and our market share.
relationship with customers, the demand for our products and services and our market share.
It is difficult to predict successfully the products and services our customers will demand. The success of our business depends in part on our ability to identify and
It is difficult to predict successfully the products and services our customers will demand. The success of our business depends in part on our ability to identify and
respond promptly to changes in demographics, consumer preferences, expectations, needs and weather conditions, while also managing inventory levels. For
respond promptly to changes in demographics, consumer preferences, expectations, needs and weather conditions, while also managing inventory levels. For
example, an increased consumer focus on making homes energy efficient could require us to offer more energy efficient building materials and there can be no
example, an increased consumer focus on making homes energy efficient could require us to offer more energy efficient building materials and there can be no
assurance that we would be able to identify appropriate suppliers on acceptable terms. Failure to identify timely or effectively respond to changing consumer
assurance that we would be able to identify appropriate suppliers on acceptable terms. Failure to identify timely or effectively respond to changing consumer
preferences, expectations and building product needs could adversely affect our relationship with customers, the demand for our products and services and our
preferences, expectations and building product needs could adversely affect our relationship with customers, the demand for our products and services and our
Because we cannot immediately adapt our production capacity and related cost structures to rapidly changing market conditions, when demand is below our
Because we cannot immediately adapt our production capacity and related cost structures to rapidly changing market conditions, when demand is below our
expectations, our manufacturing capacity will likely exceed our production requirements. If, during a general market upturn or an upturn in one of our geographic
expectations, our manufacturing capacity will likely exceed our production requirements. If, during a general market upturn or an upturn in one of our geographic
markets, we cannot increase our manufacturing capacity to meet product demand, we will not be able to fulfill orders in a timely manner, which could lead to order
markets, we cannot increase our manufacturing capacity to meet product demand, we will not be able to fulfill orders in a timely manner, which could lead to order
cancellations, contract breaches or indemnification obligations. This inability could materially and adversely limit our ability to improve our results. By contrast, if
cancellations, contract breaches or indemnification obligations. This inability could materially and adversely limit our ability to improve our results. By contrast, if
during an economic downturn we had excess manufacturing capacity, then our fixed costs associated with excess manufacturing capacity could have a significant
during an economic downturn we had excess manufacturing capacity, then our fixed costs associated with excess manufacturing capacity could have a significant
adverse effect on our business, financial condition, operating results and cash flows.
adverse effect on our business, financial condition, operating results and cash flows.
We may be unable to successfully implement our growth strategy, which includes pursuing strategic acquisitions and opening new facilities.
We may be unable to successfully implement our growth strategy, which includes pursuing strategic acquisitions and opening new facilities.
Our long-term business plan provides for continued growth through strategic acquisitions and organic growth through the construction of new facilities or the
Our long-term business plan provides for continued growth through strategic acquisitions and organic growth through the construction of new facilities or the
expansion of existing facilities. Failure to identify and acquire suitable acquisition candidates on acceptable terms could have a material adverse effect on our
expansion of existing facilities. Failure to identify and acquire suitable acquisition candidates on acceptable terms could have a material adverse effect on our
growth strategy. Moreover, our reduced operating results during the housing downturn, our liquidity position or the requirements of the Credit Agreement could
growth strategy. Moreover, our reduced operating results during the housing downturn, our liquidity position or the requirements of the Credit Agreement could
prevent us from obtaining the capital required to effect new acquisitions or expansions of existing facilities. Our failure to make successful acquisitions or to build
prevent us from obtaining the capital required to effect new acquisitions or expansions of existing facilities. Our failure to make successful acquisitions or to build
or expand facilities, including manufacturing facilities, produce saleable product or meet customer demand in a timely manner could result in damage to or loss of
or expand facilities, including manufacturing facilities, produce saleable product or meet customer demand in a timely manner could result in damage to or loss of
customer relationships, which could adversely affect our business, financial condition, operating results and cash flows.
customer relationships, which could adversely affect our business, financial condition, operating results and cash flows.
Federal, state, local and other regulations could impose substantial costs and/or restrictions on our operations that would reduce our net income.
Federal, state, local and other regulations could impose substantial costs and/or restrictions on our operations that would reduce our net income.
We are subject to various federal, state, local and other regulations, including, among other things, regulations promulgated by the DOT, work safety regulations
We are subject to various federal, state, local and other regulations, including, among other things, regulations promulgated by the DOT, work safety regulations
promulgated by OSHA, employment regulations promulgated by the United States Equal Employment Opportunity Commission, regulations of the United States
promulgated by OSHA, employment regulations promulgated by the United States Equal Employment Opportunity Commission, regulations of the United States
Department of Labor, federal and state environmental regulations, and state and local zoning restrictions, building codes and contractors’ licensing regulations.
Department of Labor, federal and state environmental regulations, and state and local zoning restrictions, building codes and contractors’ licensing regulations.
More burdensome regulatory requirements in these or other areas may increase our general and administrative costs and adversely affect our business, financial
More burdensome regulatory requirements in these or other areas may increase our general and administrative costs and adversely affect our business, financial
condition, operating results and cash flows. Moreover, failure to comply with the regulatory requirements applicable to our business could expose us to litigation
condition, operating results and cash flows. Moreover, failure to comply with the regulatory requirements applicable to our business could expose us to litigation
and/or substantial penalties that could adversely affect our business, financial condition, operating results and cash flows.
and/or substantial penalties that could adversely affect our business, financial condition, operating results and cash flows.
Our transportation operations are subject to the regulatory jurisdiction of the DOT. The DOT has broad administrative powers with respect to our transportation
Our transportation operations are subject to the regulatory jurisdiction of the DOT. The DOT has broad administrative powers with respect to our transportation
operations. More restrictive limitations on vehicle weight and size, trailer length and configuration, or driver hours of service would increase our costs, which, if
operations. More restrictive limitations on vehicle weight and size, trailer length and configuration, or driver hours of service would increase our costs, which, if
we are unable to pass these cost increases on to our customers, may increase our selling, general and administrative expenses and adversely affect our business,
we are unable to pass these cost increases on to our customers, may increase our selling, general and administrative expenses and adversely affect our business,
financial condition, operating results and cash flows. If we fail to comply adequately with DOT regulations or regulations become more stringent, we could
financial condition, operating results and cash flows. If we fail to comply adequately with DOT regulations or regulations become more stringent, we could
experience increased inspections, regulatory authorities could take remedial action including imposing fines or shutting down our operations or we could be subject
experience increased inspections, regulatory authorities could take remedial action including imposing fines or shutting down our operations or we could be subject
to increased audit and compliance costs. If any of these events were to occur, our business, financial condition, operating results and cash flows could be adversely
to increased audit and compliance costs. If any of these events were to occur, our business, financial condition, operating results and cash flows could be adversely
In addition, the homebuilding industry is subject to various local, state and federal statutes, ordinances, codes, rules and regulations concerning zoning, building
In addition, the homebuilding industry is subject to various local, state and federal statutes, ordinances, codes, rules and regulations concerning zoning, building
design and safety, construction, energy conservation, environmental protection and similar matters, including regulations that impose restrictive zoning and density
design and safety, construction, energy conservation, environmental protection and similar matters, including regulations that impose restrictive zoning and density
requirements on our business or that limit the number of homes
requirements on our business or that limit the number of homes
13
13
We occupy many of our facilities under long-term non-cancellable leases. If we close a facility, we are still obligated under the applicable lease. We may
We occupy many of our facilities under long-term non-cancellable leases. If we close a facility, we are still obligated under the applicable lease. We may
could result in additional pricing pressure which could adversely affect our business, financial condition, operating results and cash flows.
could result in additional pricing pressure which could adversely affect our business, financial condition, operating results and cash flows.
be unable to renew leases at the end of their terms.
be unable to renew leases at the end of their terms.
Many of our facilities are located in leased premises. Many of our current leases are non-cancellable and typically have initial terms ranging from five to ten years,
Many of our facilities are located in leased premises. Many of our current leases are non-cancellable and typically have initial terms ranging from five to ten years,
and most provide options to renew for specified periods of time. We believe that leases we enter into in the future will likely be long-term and non-cancellable and
and most provide options to renew for specified periods of time. We believe that leases we enter into in the future will likely be long-term and non-cancellable and
have similar renewal options. If we close or idle a facility, most likely we remain committed to perform our obligations under the applicable lease, which would
have similar renewal options. If we close or idle a facility, most likely we remain committed to perform our obligations under the applicable lease, which would
include, among other things, payment of the base rent, insurance, taxes and other expenses on the leased property for the balance of the lease term. The inability to
include, among other things, payment of the base rent, insurance, taxes and other expenses on the leased property for the balance of the lease term. The inability to
terminate leases when idling a facility or exiting a geographic market can have a significant adverse impact on our business, financial condition, operating results
terminate leases when idling a facility or exiting a geographic market can have a significant adverse impact on our business, financial condition, operating results
and cash flows.
and cash flows.
In addition, at the end of the lease term and any renewal period for a facility, we may be unable to renew the lease without substantial additional cost, if at all. If we
In addition, at the end of the lease term and any renewal period for a facility, we may be unable to renew the lease without substantial additional cost, if at all. If we
are unable to renew our facility leases, we may close or relocate a facility, which could subject us to construction and other costs and risks, which in turn could
are unable to renew our facility leases, we may close or relocate a facility, which could subject us to construction and other costs and risks, which in turn could
have a material adverse effect on our business, financial condition, operating results and cash flows. In addition, we may not be able to secure a replacement
have a material adverse effect on our business, financial condition, operating results and cash flows. In addition, we may not be able to secure a replacement
facility in a location that is as commercially viable, including access to rail service, as the lease we are unable to renew. For example, closing a facility, even during
facility in a location that is as commercially viable, including access to rail service, as the lease we are unable to renew. For example, closing a facility, even during
the time of relocation, will reduce the sales that the facility would have contributed to our revenues. Additionally, the revenue and profit, if any, generated at a
the time of relocation, will reduce the sales that the facility would have contributed to our revenues. Additionally, the revenue and profit, if any, generated at a
relocated facility may not equal the revenue and profit generated at the existing one.
relocated facility may not equal the revenue and profit generated at the existing one.
We may be unable to effectively manage our inventory and working capital as our sales volume increases, which could have a material adverse effect on
We may be unable to effectively manage our inventory and working capital as our sales volume increases, which could have a material adverse effect on
We purchase certain materials, including lumber products, which are then sold to customers as well as used as direct production inputs for our manufactured and
We purchase certain materials, including lumber products, which are then sold to customers as well as used as direct production inputs for our manufactured and
prefabricated products. We must maintain, and have adequate working capital to purchase, sufficient inventory to meet customer demand. Due to the lead times
prefabricated products. We must maintain, and have adequate working capital to purchase, sufficient inventory to meet customer demand. Due to the lead times
required by our suppliers, we order products in advance of expected sales. This requires us to forecast our sales and purchases accordingly. In periods of growth, it
required by our suppliers, we order products in advance of expected sales. This requires us to forecast our sales and purchases accordingly. In periods of growth, it
can be especially difficult to forecast sales accurately. We must also manage our working capital to fund our inventory purchases. In the future, if we are unable to
can be especially difficult to forecast sales accurately. We must also manage our working capital to fund our inventory purchases. In the future, if we are unable to
manage effectively our inventory and working capital as we attempt to grow our business, our cash flows may be negatively affected, which could have a material
manage effectively our inventory and working capital as we attempt to grow our business, our cash flows may be negatively affected, which could have a material
adverse effect on our business, financial condition, operating results and cash flows.
adverse effect on our business, financial condition, operating results and cash flows.
We may not timely identify or effectively respond to consumer needs, expectations, market conditions or trends, which could adversely affect our
We may not timely identify or effectively respond to consumer needs, expectations, market conditions or trends, which could adversely affect our
relationship with customers, the demand for our products and services and our market share.
relationship with customers, the demand for our products and services and our market share.
It is difficult to predict successfully the products and services our customers will demand. The success of our business depends in part on our ability to identify and
It is difficult to predict successfully the products and services our customers will demand. The success of our business depends in part on our ability to identify and
respond promptly to changes in demographics, consumer preferences, expectations, needs and weather conditions, while also managing inventory levels. For
respond promptly to changes in demographics, consumer preferences, expectations, needs and weather conditions, while also managing inventory levels. For
example, an increased consumer focus on making homes energy efficient could require us to offer more energy efficient building materials and there can be no
example, an increased consumer focus on making homes energy efficient could require us to offer more energy efficient building materials and there can be no
assurance that we would be able to identify appropriate suppliers on acceptable terms. Failure to identify timely or effectively respond to changing consumer
assurance that we would be able to identify appropriate suppliers on acceptable terms. Failure to identify timely or effectively respond to changing consumer
preferences, expectations and building product needs could adversely affect our relationship with customers, the demand for our products and services and our
preferences, expectations and building product needs could adversely affect our relationship with customers, the demand for our products and services and our
market share.
market share.
Because we cannot immediately adapt our production capacity and related cost structures to rapidly changing market conditions, when demand is below our
Because we cannot immediately adapt our production capacity and related cost structures to rapidly changing market conditions, when demand is below our
expectations, our manufacturing capacity will likely exceed our production requirements. If, during a general market upturn or an upturn in one of our geographic
expectations, our manufacturing capacity will likely exceed our production requirements. If, during a general market upturn or an upturn in one of our geographic
markets, we cannot increase our manufacturing capacity to meet product demand, we will not be able to fulfill orders in a timely manner, which could lead to order
markets, we cannot increase our manufacturing capacity to meet product demand, we will not be able to fulfill orders in a timely manner, which could lead to order
cancellations, contract breaches or indemnification obligations. This inability could materially and adversely limit our ability to improve our results. By contrast, if
cancellations, contract breaches or indemnification obligations. This inability could materially and adversely limit our ability to improve our results. By contrast, if
during an economic downturn we had excess manufacturing capacity, then our fixed costs associated with excess manufacturing capacity could have a significant
during an economic downturn we had excess manufacturing capacity, then our fixed costs associated with excess manufacturing capacity could have a significant
adverse effect on our business, financial condition, operating results and cash flows.
adverse effect on our business, financial condition, operating results and cash flows.
We may be unable to successfully implement our growth strategy, which includes pursuing strategic acquisitions and opening new facilities.
We may be unable to successfully implement our growth strategy, which includes pursuing strategic acquisitions and opening new facilities.
Our long-term business plan provides for continued growth through strategic acquisitions and organic growth through the construction of new facilities or the
Our long-term business plan provides for continued growth through strategic acquisitions and organic growth through the construction of new facilities or the
expansion of existing facilities. Failure to identify and acquire suitable acquisition candidates on acceptable terms could have a material adverse effect on our
expansion of existing facilities. Failure to identify and acquire suitable acquisition candidates on acceptable terms could have a material adverse effect on our
growth strategy. Moreover, our reduced operating results during the housing downturn, our liquidity position or the requirements of the Credit Agreement could
growth strategy. Moreover, our reduced operating results during the housing downturn, our liquidity position or the requirements of the Credit Agreement could
prevent us from obtaining the capital required to effect new acquisitions or expansions of existing facilities. Our failure to make successful acquisitions or to build
prevent us from obtaining the capital required to effect new acquisitions or expansions of existing facilities. Our failure to make successful acquisitions or to build
or expand facilities, including manufacturing facilities, produce saleable product or meet customer demand in a timely manner could result in damage to or loss of
or expand facilities, including manufacturing facilities, produce saleable product or meet customer demand in a timely manner could result in damage to or loss of
customer relationships, which could adversely affect our business, financial condition, operating results and cash flows.
customer relationships, which could adversely affect our business, financial condition, operating results and cash flows.
The majority of our net sales are credit sales that are made primarily to customers whose ability to pay is dependent, in part, upon the economic strength
The majority of our net sales are credit sales that are made primarily to customers whose ability to pay is dependent, in part, upon the economic strength
of the industry and geographic areas in which they operate, and the failure to collect or timely collect monies owed from customers could adversely affect
of the industry and geographic areas in which they operate, and the failure to collect or timely collect monies owed from customers could adversely affect
Federal, state, local and other regulations could impose substantial costs and/or restrictions on our operations that would reduce our net income.
Federal, state, local and other regulations could impose substantial costs and/or restrictions on our operations that would reduce our net income.
us.
us.
us.
us.
The majority of our net sales volume in fiscal 2017 was facilitated through the extension of credit to our customers whose ability to pay is dependent, in part, upon
The majority of our net sales volume in fiscal 2017 was facilitated through the extension of credit to our customers whose ability to pay is dependent, in part, upon
the economic strength of the industry in the areas where they operate. We offer credit to customers, either through unsecured credit that is based solely upon the
the economic strength of the industry in the areas where they operate. We offer credit to customers, either through unsecured credit that is based solely upon the
creditworthiness of the customer, or secured credit for materials sold for a specific job where the security lies in lien rights associated with the material going into
creditworthiness of the customer, or secured credit for materials sold for a specific job where the security lies in lien rights associated with the material going into
the job. The type of credit offered depends both on the financial strength of the customer and the nature of the business in which the customer is involved. End
the job. The type of credit offered depends both on the financial strength of the customer and the nature of the business in which the customer is involved. End
users, resellers and other non-contractor customers generally purchase more on unsecured credit than secured credit. During the housing downturn, several of our
users, resellers and other non-contractor customers generally purchase more on unsecured credit than secured credit. During the housing downturn, several of our
homebuilder customers defaulted on amounts owed to us or extended their payable days as a result of their financial condition. The inability of our customers to
homebuilder customers defaulted on amounts owed to us or extended their payable days as a result of their financial condition. The inability of our customers to
pay off their credit lines in a timely manner, or at all, would adversely affect our business, financial condition, operating results and cash flows. Furthermore, our
pay off their credit lines in a timely manner, or at all, would adversely affect our business, financial condition, operating results and cash flows. Furthermore, our
collections efforts with respect to non-paying or slow-paying customers could negatively impact our customer relations going forward.
collections efforts with respect to non-paying or slow-paying customers could negatively impact our customer relations going forward.
Because we depend on the creditworthiness of certain of our customers, if the financial condition of our customers declines, our credit risk could increase.
Because we depend on the creditworthiness of certain of our customers, if the financial condition of our customers declines, our credit risk could increase.
Significant contraction in our markets, coupled with tightened credit availability and financial institution underwriting standards, could adversely affect certain of
Significant contraction in our markets, coupled with tightened credit availability and financial institution underwriting standards, could adversely affect certain of
our customers. Should one or more of our larger customers declare bankruptcy as has occurred in the past, it could adversely affect the collectability of our
our customers. Should one or more of our larger customers declare bankruptcy as has occurred in the past, it could adversely affect the collectability of our
accounts receivable, bad debt reserves and net income.
accounts receivable, bad debt reserves and net income.
We are subject to competitive pricing pressure from our customers.
We are subject to competitive pricing pressure from our customers.
Production homebuilders historically have exerted significant pressure on their outside suppliers to keep prices low because of their market share and ability to
Production homebuilders historically have exerted significant pressure on their outside suppliers to keep prices low because of their market share and ability to
leverage such market share in the highly fragmented building products supply and services industry. The housing industry downturn resulted in significantly
leverage such market share in the highly fragmented building products supply and services industry. The housing industry downturn resulted in significantly
increased pricing pressures from production homebuilders and other customers. Continued consolidation among homebuilders, and changes in homebuilders’
increased pricing pressures from production homebuilders and other customers. Continued consolidation among homebuilders, and changes in homebuilders’
purchasing policies or payment practices,
purchasing policies or payment practices,
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We are subject to various federal, state, local and other regulations, including, among other things, regulations promulgated by the DOT, work safety regulations
We are subject to various federal, state, local and other regulations, including, among other things, regulations promulgated by the DOT, work safety regulations
promulgated by OSHA, employment regulations promulgated by the United States Equal Employment Opportunity Commission, regulations of the United States
promulgated by OSHA, employment regulations promulgated by the United States Equal Employment Opportunity Commission, regulations of the United States
Department of Labor, federal and state environmental regulations, and state and local zoning restrictions, building codes and contractors’ licensing regulations.
Department of Labor, federal and state environmental regulations, and state and local zoning restrictions, building codes and contractors’ licensing regulations.
More burdensome regulatory requirements in these or other areas may increase our general and administrative costs and adversely affect our business, financial
More burdensome regulatory requirements in these or other areas may increase our general and administrative costs and adversely affect our business, financial
condition, operating results and cash flows. Moreover, failure to comply with the regulatory requirements applicable to our business could expose us to litigation
condition, operating results and cash flows. Moreover, failure to comply with the regulatory requirements applicable to our business could expose us to litigation
and/or substantial penalties that could adversely affect our business, financial condition, operating results and cash flows.
and/or substantial penalties that could adversely affect our business, financial condition, operating results and cash flows.
Our transportation operations are subject to the regulatory jurisdiction of the DOT. The DOT has broad administrative powers with respect to our transportation
Our transportation operations are subject to the regulatory jurisdiction of the DOT. The DOT has broad administrative powers with respect to our transportation
operations. More restrictive limitations on vehicle weight and size, trailer length and configuration, or driver hours of service would increase our costs, which, if
operations. More restrictive limitations on vehicle weight and size, trailer length and configuration, or driver hours of service would increase our costs, which, if
we are unable to pass these cost increases on to our customers, may increase our selling, general and administrative expenses and adversely affect our business,
we are unable to pass these cost increases on to our customers, may increase our selling, general and administrative expenses and adversely affect our business,
financial condition, operating results and cash flows. If we fail to comply adequately with DOT regulations or regulations become more stringent, we could
financial condition, operating results and cash flows. If we fail to comply adequately with DOT regulations or regulations become more stringent, we could
experience increased inspections, regulatory authorities could take remedial action including imposing fines or shutting down our operations or we could be subject
experience increased inspections, regulatory authorities could take remedial action including imposing fines or shutting down our operations or we could be subject
to increased audit and compliance costs. If any of these events were to occur, our business, financial condition, operating results and cash flows could be adversely
to increased audit and compliance costs. If any of these events were to occur, our business, financial condition, operating results and cash flows could be adversely
affected.
affected.
In addition, the homebuilding industry is subject to various local, state and federal statutes, ordinances, codes, rules and regulations concerning zoning, building
In addition, the homebuilding industry is subject to various local, state and federal statutes, ordinances, codes, rules and regulations concerning zoning, building
design and safety, construction, energy conservation, environmental protection and similar matters, including regulations that impose restrictive zoning and density
design and safety, construction, energy conservation, environmental protection and similar matters, including regulations that impose restrictive zoning and density
requirements on our business or that limit the number of homes
requirements on our business or that limit the number of homes
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that can be built within the boundaries of a particular area. Regulatory restrictions may increase our operating expenses and limit the availability of suitable
that can be built within the boundaries of a particular area. Regulatory restrictions may increase our operating expenses and limit the availability of suitable
building lots for our customers, which could negatively affect our sales and earnings.
building lots for our customers, which could negatively affect our sales and earnings.
We may not be able to utilize certain of our net operating loss carryforwards, which could harm our profitability.
We may not be able to utilize certain of our net operating loss carryforwards, which could harm our profitability.
Changes in legislation and government policy may have a material adverse effect on us.
Changes in legislation and government policy may have a material adverse effect on us.
The 2016 presidential and congressional elections in the United States have resulted in uncertainty with respect to, and could result in significant changes in,
The 2016 presidential and congressional elections in the United States have resulted in uncertainty with respect to, and could result in significant changes in,
legislation and government policy. The 2018 midterm elections could add to this uncertainty. Specific legislative and regulatory proposals discussed during and
legislation and government policy. The 2018 midterm elections could add to this uncertainty. Specific legislative and regulatory proposals discussed during and
after the election that could have a material impact on us include, but are not limited to, modifications to international trade policy and increased regulation related
after the election that could have a material impact on us include, but are not limited to, modifications to international trade policy and increased regulation related
to the employment of foreign workers.
to the employment of foreign workers.
Immigration reform and enforcement continues to attract significant attention in the public arena, the United States Congress and at the state and local levels. We
Immigration reform and enforcement continues to attract significant attention in the public arena, the United States Congress and at the state and local levels. We
rely in part on a seasonal workforce which requires specific types of visas to enter the United States. If new or more restrictive immigration legislation is enacted at
rely in part on a seasonal workforce which requires specific types of visas to enter the United States. If new or more restrictive immigration legislation is enacted at
the federal level or in states in which we do business, or if existing regulations are interpreted or enforced differently, these changes could make it more difficult or
the federal level or in states in which we do business, or if existing regulations are interpreted or enforced differently, these changes could make it more difficult or
costly for us to hire United States citizens and/or legal immigrant workers. In such case, we may incur additional costs to run our business, including to find and
costly for us to hire United States citizens and/or legal immigrant workers. In such case, we may incur additional costs to run our business, including to find and
hire replacement workers, or may have to change the way we conduct our operations, either of which could have a material adverse effect on our business,
hire replacement workers, or may have to change the way we conduct our operations, either of which could have a material adverse effect on our business,
financial condition, operating results and cash flows.
financial condition, operating results and cash flows.
The Tax Cuts and Jobs Act of 2017 ("2017 Tax Act") was enacted during December 2017, which, among other provisions, limits mortgage interest and state and
The Tax Cuts and Jobs Act of 2017 ("2017 Tax Act") was enacted during December 2017, which, among other provisions, limits mortgage interest and state and
local tax deductions, including property taxes and state income taxes, which may affect demand for new homes. The limitation on state and local tax deductions
local tax deductions, including property taxes and state income taxes, which may affect demand for new homes. The limitation on state and local tax deductions
may have a greater impact in high tax states such as California, which accounted for approximately 13% of our 2017 net sales. Future changes in federal income
may have a greater impact in high tax states such as California, which accounted for approximately 13% of our 2017 net sales. Future changes in federal income
tax laws may also affect demand for new homes. From time to time, various proposals are discussed, which, if enacted, may have an adverse effect on the
tax laws may also affect demand for new homes. From time to time, various proposals are discussed, which, if enacted, may have an adverse effect on the
homebuilding industry in general. No meaningful prediction can be made as to whether any such proposals will be enacted and, if enacted, the particular form such
homebuilding industry in general. No meaningful prediction can be made as to whether any such proposals will be enacted and, if enacted, the particular form such
laws would take. Because we have substantial fixed costs, relatively modest declines in our customers’ production levels could have a significant adverse effect on
laws would take. Because we have substantial fixed costs, relatively modest declines in our customers’ production levels could have a significant adverse effect on
our business, financial condition, operating results and cash flows.
our business, financial condition, operating results and cash flows.
Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our financial
Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our financial
performance.
performance.
We are subject to income and other taxes in the United States. We are subject to ongoing tax audits in various jurisdictions. We regularly assess the likely outcome
We are subject to income and other taxes in the United States. We are subject to ongoing tax audits in various jurisdictions. We regularly assess the likely outcome
of these audits in order to determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the outcome of
of these audits in order to determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the outcome of
these audits, and the amounts ultimately paid upon resolution of audits could be materially different from the amounts previously included in our income tax
these audits, and the amounts ultimately paid upon resolution of audits could be materially different from the amounts previously included in our income tax
expense and therefore could have a material impact on our tax provision, net income and cash flows. In addition, our effective tax rate in the future could be
expense and therefore could have a material impact on our tax provision, net income and cash flows. In addition, our effective tax rate in the future could be
adversely affected by changes to our operating structure, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, and the discovery of
adversely affected by changes to our operating structure, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, and the discovery of
new information in the course of our tax return preparation.
new information in the course of our tax return preparation.
As of December 31, 2017, we had a net deferred tax liability of $1.8 million . The carrying value of our deferred tax assets is dependent on our ability to generate
As of December 31, 2017, we had a net deferred tax liability of $1.8 million . The carrying value of our deferred tax assets is dependent on our ability to generate
future taxable income in the United States. Future changes in tax legislation could have a significant adverse effect on our tax rate or the carrying value of our
future taxable income in the United States. Future changes in tax legislation could have a significant adverse effect on our tax rate or the carrying value of our
deferred tax assets and liabilities. Any of these changes could affect our financial performance.
deferred tax assets and liabilities. Any of these changes could affect our financial performance.
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We have net operating loss ("NOL") carryforwards to reduce future taxable income. Utilization of our NOL carryforwards may be subject to a substantial
We have net operating loss ("NOL") carryforwards to reduce future taxable income. Utilization of our NOL carryforwards may be subject to a substantial
limitation under Section 382 of the Internal Revenue Code of 1986, as amended ("Section 382"), and comparable provisions of state tax laws, due to changes in
limitation under Section 382 of the Internal Revenue Code of 1986, as amended ("Section 382"), and comparable provisions of state tax laws, due to changes in
ownership of our company that may occur in the future. Under Section 382 and comparable provisions of state tax laws, if a corporation undergoes an “ownership
ownership of our company that may occur in the future. Under Section 382 and comparable provisions of state tax laws, if a corporation undergoes an “ownership
change,” generally defined as a greater than 50% change by value in its equity ownership over a three-year period, the corporation's ability to carry forward its pre-
change,” generally defined as a greater than 50% change by value in its equity ownership over a three-year period, the corporation's ability to carry forward its pre-
change net operating losses to reduce its post-change income may be limited. We may experience ownership changes in the future as a result of future changes in
change net operating losses to reduce its post-change income may be limited. We may experience ownership changes in the future as a result of future changes in
our stock ownership. As a result, our ability to use our pre-change NOL carryforwards to reduce U.S. federal and state taxable income we produce in the future
our stock ownership. As a result, our ability to use our pre-change NOL carryforwards to reduce U.S. federal and state taxable income we produce in the future
years may be subject to limitations, which could result in increased future tax liability to us.
years may be subject to limitations, which could result in increased future tax liability to us.
We may be adversely affected by any natural or man-made disruptions to our distribution and manufacturing facilities.
We may be adversely affected by any natural or man-made disruptions to our distribution and manufacturing facilities.
We currently maintain a broad network of distribution and manufacturing facilities throughout the eastern, southern and western United States. Any widespread
We currently maintain a broad network of distribution and manufacturing facilities throughout the eastern, southern and western United States. Any widespread
disruption to our facilities resulting from fire, earthquake, hurricanes and other weather-related events, an act of terrorism, labor disputes, supply chain disruptions
disruption to our facilities resulting from fire, earthquake, hurricanes and other weather-related events, an act of terrorism, labor disputes, supply chain disruptions
or any other cause could damage a significant portion of our inventory and could materially impair our ability to manufacture and distribute our products to
or any other cause could damage a significant portion of our inventory and could materially impair our ability to manufacture and distribute our products to
customers. We could incur significantly higher costs and longer lead times associated with distributing our products to our customers during the time that it takes
customers. We could incur significantly higher costs and longer lead times associated with distributing our products to our customers during the time that it takes
for us to reopen or replace a damaged facility. In addition, any shortages of fuel or significant fuel cost increases could disrupt our ability to distribute products to
for us to reopen or replace a damaged facility. In addition, any shortages of fuel or significant fuel cost increases could disrupt our ability to distribute products to
our customers. Disruptions to the national or local transportation infrastructure systems may also affect our ability to keep our operations and services functioning
our customers. Disruptions to the national or local transportation infrastructure systems may also affect our ability to keep our operations and services functioning
properly. If any of these events were to occur, our business, financial condition, operating results and cash flows could be materially adversely affected.
properly. If any of these events were to occur, our business, financial condition, operating results and cash flows could be materially adversely affected.
We are subject to exposure to environmental liabilities and are subject to environmental regulation.
We are subject to exposure to environmental liabilities and are subject to environmental regulation.
We are subject to various federal, state and local environmental laws, ordinances, rules and regulations, including those promulgated by the United States
We are subject to various federal, state and local environmental laws, ordinances, rules and regulations, including those promulgated by the United States
Environmental Protection Agency and analogous state agencies. As current and former owners, lessees and operators of real property, we can be held liable for the
Environmental Protection Agency and analogous state agencies. As current and former owners, lessees and operators of real property, we can be held liable for the
investigation or remediation of contamination at or from such properties, in some circumstances irrespective of whether we knew of or caused such contamination.
investigation or remediation of contamination at or from such properties, in some circumstances irrespective of whether we knew of or caused such contamination.
No assurance can be provided that investigation and remediation will not be required in the future as a result of spills or releases of petroleum products or
No assurance can be provided that investigation and remediation will not be required in the future as a result of spills or releases of petroleum products or
hazardous substances, the discovery of currently unknown environmental conditions, more stringent standards regarding existing contamination, or changes in
hazardous substances, the discovery of currently unknown environmental conditions, more stringent standards regarding existing contamination, or changes in
legislation, laws, ordinances, rules or regulations or their interpretation or enforcement. More burdensome environmental regulatory requirements may increase our
legislation, laws, ordinances, rules or regulations or their interpretation or enforcement. More burdensome environmental regulatory requirements may increase our
costs and adversely affect our business, financial condition, operating results and cash flows.
costs and adversely affect our business, financial condition, operating results and cash flows.
We are subject to health and safety laws and regulations and any failure to comply with any current or future laws or regulations could have a material
We are subject to health and safety laws and regulations and any failure to comply with any current or future laws or regulations could have a material
adverse effect on us.
adverse effect on us.
Manufacturing and building sites are inherently dangerous workplaces. Our work sites often put our employees and others in close proximity with large pieces of
Manufacturing and building sites are inherently dangerous workplaces. Our work sites often put our employees and others in close proximity with large pieces of
mechanized equipment, moving vehicles, manufacturing processes, and heavy products. As a result, we are subject to a variety of health and safety laws and
mechanized equipment, moving vehicles, manufacturing processes, and heavy products. As a result, we are subject to a variety of health and safety laws and
regulations dealing with occupational health and safety. Unsafe work sites have the potential to increase employee turnover and raise our operating costs. Our
regulations dealing with occupational health and safety. Unsafe work sites have the potential to increase employee turnover and raise our operating costs. Our
safety record can also impact our reputation. We maintain functional groups whose primary purpose is to ensure we implement effective work procedures
safety record can also impact our reputation. We maintain functional groups whose primary purpose is to ensure we implement effective work procedures
throughout our organization and take other steps to ensure the health and safety of our work force, but there can be no assurances these measures will be successful
throughout our organization and take other steps to ensure the health and safety of our work force, but there can be no assurances these measures will be successful
in preventing injuries or violations of health and safety laws and regulations. Any failure to maintain safe work sites or violations of applicable law could expose us
in preventing injuries or violations of health and safety laws and regulations. Any failure to maintain safe work sites or violations of applicable law could expose us
to significant financial losses and reputational harm, as well as civil and criminal liabilities, any of which could have a material adverse effect on our business,
to significant financial losses and reputational harm, as well as civil and criminal liabilities, any of which could have a material adverse effect on our business,
financial condition, operating results and cash flows.
financial condition, operating results and cash flows.
We may be adversely affected by any disruption in our information technology systems.
We may be adversely affected by any disruption in our information technology systems.
Our operations are dependent upon our IT systems, which encompass all of our major business functions. A substantial disruption in our IT systems for any
Our operations are dependent upon our IT systems, which encompass all of our major business functions. A substantial disruption in our IT systems for any
prolonged time period (arising from, for example, system capacity limits from unexpected increases in our volume of business, outages, computer viruses,
prolonged time period (arising from, for example, system capacity limits from unexpected increases in our volume of business, outages, computer viruses,
unauthorized access or delays in our service) could result in delays in receiving inventory and supplies or filling customer orders and adversely affect our customer
unauthorized access or delays in our service) could result in delays in receiving inventory and supplies or filling customer orders and adversely affect our customer
service and relationships. Our systems might be damaged or interrupted by natural or man-made events or by computer viruses, physical or electronic break-ins, or
service and relationships. Our systems might be damaged or interrupted by natural or man-made events or by computer viruses, physical or electronic break-ins, or
similar disruptions affecting the global Internet. Such delays, problems or costs may have a material adverse effect on our business, financial condition, operating
similar disruptions affecting the global Internet. Such delays, problems or costs may have a material adverse effect on our business, financial condition, operating
results and cash flows.
results and cash flows.
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building lots for our customers, which could negatively affect our sales and earnings.
building lots for our customers, which could negatively affect our sales and earnings.
Changes in legislation and government policy may have a material adverse effect on us.
Changes in legislation and government policy may have a material adverse effect on us.
The 2016 presidential and congressional elections in the United States have resulted in uncertainty with respect to, and could result in significant changes in,
The 2016 presidential and congressional elections in the United States have resulted in uncertainty with respect to, and could result in significant changes in,
legislation and government policy. The 2018 midterm elections could add to this uncertainty. Specific legislative and regulatory proposals discussed during and
legislation and government policy. The 2018 midterm elections could add to this uncertainty. Specific legislative and regulatory proposals discussed during and
after the election that could have a material impact on us include, but are not limited to, modifications to international trade policy and increased regulation related
after the election that could have a material impact on us include, but are not limited to, modifications to international trade policy and increased regulation related
to the employment of foreign workers.
to the employment of foreign workers.
rely in part on a seasonal workforce which requires specific types of visas to enter the United States. If new or more restrictive immigration legislation is enacted at
rely in part on a seasonal workforce which requires specific types of visas to enter the United States. If new or more restrictive immigration legislation is enacted at
the federal level or in states in which we do business, or if existing regulations are interpreted or enforced differently, these changes could make it more difficult or
the federal level or in states in which we do business, or if existing regulations are interpreted or enforced differently, these changes could make it more difficult or
costly for us to hire United States citizens and/or legal immigrant workers. In such case, we may incur additional costs to run our business, including to find and
costly for us to hire United States citizens and/or legal immigrant workers. In such case, we may incur additional costs to run our business, including to find and
hire replacement workers, or may have to change the way we conduct our operations, either of which could have a material adverse effect on our business,
hire replacement workers, or may have to change the way we conduct our operations, either of which could have a material adverse effect on our business,
financial condition, operating results and cash flows.
financial condition, operating results and cash flows.
The Tax Cuts and Jobs Act of 2017 ("2017 Tax Act") was enacted during December 2017, which, among other provisions, limits mortgage interest and state and
The Tax Cuts and Jobs Act of 2017 ("2017 Tax Act") was enacted during December 2017, which, among other provisions, limits mortgage interest and state and
local tax deductions, including property taxes and state income taxes, which may affect demand for new homes. The limitation on state and local tax deductions
local tax deductions, including property taxes and state income taxes, which may affect demand for new homes. The limitation on state and local tax deductions
may have a greater impact in high tax states such as California, which accounted for approximately 13% of our 2017 net sales. Future changes in federal income
may have a greater impact in high tax states such as California, which accounted for approximately 13% of our 2017 net sales. Future changes in federal income
homebuilding industry in general. No meaningful prediction can be made as to whether any such proposals will be enacted and, if enacted, the particular form such
homebuilding industry in general. No meaningful prediction can be made as to whether any such proposals will be enacted and, if enacted, the particular form such
laws would take. Because we have substantial fixed costs, relatively modest declines in our customers’ production levels could have a significant adverse effect on
laws would take. Because we have substantial fixed costs, relatively modest declines in our customers’ production levels could have a significant adverse effect on
our business, financial condition, operating results and cash flows.
our business, financial condition, operating results and cash flows.
Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our financial
Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our financial
performance.
performance.
We are subject to income and other taxes in the United States. We are subject to ongoing tax audits in various jurisdictions. We regularly assess the likely outcome
We are subject to income and other taxes in the United States. We are subject to ongoing tax audits in various jurisdictions. We regularly assess the likely outcome
of these audits in order to determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the outcome of
of these audits in order to determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the outcome of
these audits, and the amounts ultimately paid upon resolution of audits could be materially different from the amounts previously included in our income tax
these audits, and the amounts ultimately paid upon resolution of audits could be materially different from the amounts previously included in our income tax
expense and therefore could have a material impact on our tax provision, net income and cash flows. In addition, our effective tax rate in the future could be
expense and therefore could have a material impact on our tax provision, net income and cash flows. In addition, our effective tax rate in the future could be
adversely affected by changes to our operating structure, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, and the discovery of
adversely affected by changes to our operating structure, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, and the discovery of
new information in the course of our tax return preparation.
new information in the course of our tax return preparation.
As of December 31, 2017, we had a net deferred tax liability of $1.8 million . The carrying value of our deferred tax assets is dependent on our ability to generate
As of December 31, 2017, we had a net deferred tax liability of $1.8 million . The carrying value of our deferred tax assets is dependent on our ability to generate
future taxable income in the United States. Future changes in tax legislation could have a significant adverse effect on our tax rate or the carrying value of our
future taxable income in the United States. Future changes in tax legislation could have a significant adverse effect on our tax rate or the carrying value of our
deferred tax assets and liabilities. Any of these changes could affect our financial performance.
deferred tax assets and liabilities. Any of these changes could affect our financial performance.
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that can be built within the boundaries of a particular area. Regulatory restrictions may increase our operating expenses and limit the availability of suitable
that can be built within the boundaries of a particular area. Regulatory restrictions may increase our operating expenses and limit the availability of suitable
We may not be able to utilize certain of our net operating loss carryforwards, which could harm our profitability.
We may not be able to utilize certain of our net operating loss carryforwards, which could harm our profitability.
Immigration reform and enforcement continues to attract significant attention in the public arena, the United States Congress and at the state and local levels. We
Immigration reform and enforcement continues to attract significant attention in the public arena, the United States Congress and at the state and local levels. We
We may be adversely affected by any natural or man-made disruptions to our distribution and manufacturing facilities.
We may be adversely affected by any natural or man-made disruptions to our distribution and manufacturing facilities.
We currently maintain a broad network of distribution and manufacturing facilities throughout the eastern, southern and western United States. Any widespread
We currently maintain a broad network of distribution and manufacturing facilities throughout the eastern, southern and western United States. Any widespread
disruption to our facilities resulting from fire, earthquake, hurricanes and other weather-related events, an act of terrorism, labor disputes, supply chain disruptions
disruption to our facilities resulting from fire, earthquake, hurricanes and other weather-related events, an act of terrorism, labor disputes, supply chain disruptions
or any other cause could damage a significant portion of our inventory and could materially impair our ability to manufacture and distribute our products to
or any other cause could damage a significant portion of our inventory and could materially impair our ability to manufacture and distribute our products to
customers. We could incur significantly higher costs and longer lead times associated with distributing our products to our customers during the time that it takes
customers. We could incur significantly higher costs and longer lead times associated with distributing our products to our customers during the time that it takes
for us to reopen or replace a damaged facility. In addition, any shortages of fuel or significant fuel cost increases could disrupt our ability to distribute products to
for us to reopen or replace a damaged facility. In addition, any shortages of fuel or significant fuel cost increases could disrupt our ability to distribute products to
our customers. Disruptions to the national or local transportation infrastructure systems may also affect our ability to keep our operations and services functioning
our customers. Disruptions to the national or local transportation infrastructure systems may also affect our ability to keep our operations and services functioning
properly. If any of these events were to occur, our business, financial condition, operating results and cash flows could be materially adversely affected.
properly. If any of these events were to occur, our business, financial condition, operating results and cash flows could be materially adversely affected.
tax laws may also affect demand for new homes. From time to time, various proposals are discussed, which, if enacted, may have an adverse effect on the
tax laws may also affect demand for new homes. From time to time, various proposals are discussed, which, if enacted, may have an adverse effect on the
We are subject to exposure to environmental liabilities and are subject to environmental regulation.
We are subject to exposure to environmental liabilities and are subject to environmental regulation.
We have net operating loss ("NOL") carryforwards to reduce future taxable income. Utilization of our NOL carryforwards may be subject to a substantial
We have net operating loss ("NOL") carryforwards to reduce future taxable income. Utilization of our NOL carryforwards may be subject to a substantial
limitation under Section 382 of the Internal Revenue Code of 1986, as amended ("Section 382"), and comparable provisions of state tax laws, due to changes in
limitation under Section 382 of the Internal Revenue Code of 1986, as amended ("Section 382"), and comparable provisions of state tax laws, due to changes in
ownership of our company that may occur in the future. Under Section 382 and comparable provisions of state tax laws, if a corporation undergoes an “ownership
ownership of our company that may occur in the future. Under Section 382 and comparable provisions of state tax laws, if a corporation undergoes an “ownership
change,” generally defined as a greater than 50% change by value in its equity ownership over a three-year period, the corporation's ability to carry forward its pre-
change,” generally defined as a greater than 50% change by value in its equity ownership over a three-year period, the corporation's ability to carry forward its pre-
change net operating losses to reduce its post-change income may be limited. We may experience ownership changes in the future as a result of future changes in
change net operating losses to reduce its post-change income may be limited. We may experience ownership changes in the future as a result of future changes in
our stock ownership. As a result, our ability to use our pre-change NOL carryforwards to reduce U.S. federal and state taxable income we produce in the future
our stock ownership. As a result, our ability to use our pre-change NOL carryforwards to reduce U.S. federal and state taxable income we produce in the future
years may be subject to limitations, which could result in increased future tax liability to us.
years may be subject to limitations, which could result in increased future tax liability to us.
We are subject to various federal, state and local environmental laws, ordinances, rules and regulations, including those promulgated by the United States
We are subject to various federal, state and local environmental laws, ordinances, rules and regulations, including those promulgated by the United States
Environmental Protection Agency and analogous state agencies. As current and former owners, lessees and operators of real property, we can be held liable for the
Environmental Protection Agency and analogous state agencies. As current and former owners, lessees and operators of real property, we can be held liable for the
investigation or remediation of contamination at or from such properties, in some circumstances irrespective of whether we knew of or caused such contamination.
investigation or remediation of contamination at or from such properties, in some circumstances irrespective of whether we knew of or caused such contamination.
No assurance can be provided that investigation and remediation will not be required in the future as a result of spills or releases of petroleum products or
No assurance can be provided that investigation and remediation will not be required in the future as a result of spills or releases of petroleum products or
hazardous substances, the discovery of currently unknown environmental conditions, more stringent standards regarding existing contamination, or changes in
hazardous substances, the discovery of currently unknown environmental conditions, more stringent standards regarding existing contamination, or changes in
legislation, laws, ordinances, rules or regulations or their interpretation or enforcement. More burdensome environmental regulatory requirements may increase our
legislation, laws, ordinances, rules or regulations or their interpretation or enforcement. More burdensome environmental regulatory requirements may increase our
costs and adversely affect our business, financial condition, operating results and cash flows.
costs and adversely affect our business, financial condition, operating results and cash flows.
We are subject to health and safety laws and regulations and any failure to comply with any current or future laws or regulations could have a material
We are subject to health and safety laws and regulations and any failure to comply with any current or future laws or regulations could have a material
adverse effect on us.
adverse effect on us.
Manufacturing and building sites are inherently dangerous workplaces. Our work sites often put our employees and others in close proximity with large pieces of
Manufacturing and building sites are inherently dangerous workplaces. Our work sites often put our employees and others in close proximity with large pieces of
mechanized equipment, moving vehicles, manufacturing processes, and heavy products. As a result, we are subject to a variety of health and safety laws and
mechanized equipment, moving vehicles, manufacturing processes, and heavy products. As a result, we are subject to a variety of health and safety laws and
regulations dealing with occupational health and safety. Unsafe work sites have the potential to increase employee turnover and raise our operating costs. Our
regulations dealing with occupational health and safety. Unsafe work sites have the potential to increase employee turnover and raise our operating costs. Our
safety record can also impact our reputation. We maintain functional groups whose primary purpose is to ensure we implement effective work procedures
safety record can also impact our reputation. We maintain functional groups whose primary purpose is to ensure we implement effective work procedures
throughout our organization and take other steps to ensure the health and safety of our work force, but there can be no assurances these measures will be successful
throughout our organization and take other steps to ensure the health and safety of our work force, but there can be no assurances these measures will be successful
in preventing injuries or violations of health and safety laws and regulations. Any failure to maintain safe work sites or violations of applicable law could expose us
in preventing injuries or violations of health and safety laws and regulations. Any failure to maintain safe work sites or violations of applicable law could expose us
to significant financial losses and reputational harm, as well as civil and criminal liabilities, any of which could have a material adverse effect on our business,
to significant financial losses and reputational harm, as well as civil and criminal liabilities, any of which could have a material adverse effect on our business,
financial condition, operating results and cash flows.
financial condition, operating results and cash flows.
We may be adversely affected by any disruption in our information technology systems.
We may be adversely affected by any disruption in our information technology systems.
Our operations are dependent upon our IT systems, which encompass all of our major business functions. A substantial disruption in our IT systems for any
Our operations are dependent upon our IT systems, which encompass all of our major business functions. A substantial disruption in our IT systems for any
prolonged time period (arising from, for example, system capacity limits from unexpected increases in our volume of business, outages, computer viruses,
prolonged time period (arising from, for example, system capacity limits from unexpected increases in our volume of business, outages, computer viruses,
unauthorized access or delays in our service) could result in delays in receiving inventory and supplies or filling customer orders and adversely affect our customer
unauthorized access or delays in our service) could result in delays in receiving inventory and supplies or filling customer orders and adversely affect our customer
service and relationships. Our systems might be damaged or interrupted by natural or man-made events or by computer viruses, physical or electronic break-ins, or
service and relationships. Our systems might be damaged or interrupted by natural or man-made events or by computer viruses, physical or electronic break-ins, or
similar disruptions affecting the global Internet. Such delays, problems or costs may have a material adverse effect on our business, financial condition, operating
similar disruptions affecting the global Internet. Such delays, problems or costs may have a material adverse effect on our business, financial condition, operating
results and cash flows.
results and cash flows.
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We are subject to cybersecurity risks that could adversely affect us, and we may incur increasing costs in an effort to minimize those risks.
We are subject to cybersecurity risks that could adversely affect us, and we may incur increasing costs in an effort to minimize those risks.
associated with this project and a delay in our ability to improve existing operations, to support future growth and to take advantage of new applications and
associated with this project and a delay in our ability to improve existing operations, to support future growth and to take advantage of new applications and
Our business relies on systems, including those of third parties with whom we do business, and a website that involve the storage and transmission of customers’
Our business relies on systems, including those of third parties with whom we do business, and a website that involve the storage and transmission of customers’
and employees' personal and proprietary information. Our systems and those of third parties with whom we do business have been, and will likely continue to be,
and employees' personal and proprietary information. Our systems and those of third parties with whom we do business have been, and will likely continue to be,
subjected to computer viruses or other malicious codes, unauthorized access attempts and cyber-attacks that include phishing-attacks, denial-of-service attacks,
subjected to computer viruses or other malicious codes, unauthorized access attempts and cyber-attacks that include phishing-attacks, denial-of-service attacks,
ransomware, malware and hacking. Breach of our systems or those of third parties with whom we do business could compromise our confidential information and
ransomware, malware and hacking. Breach of our systems or those of third parties with whom we do business could compromise our confidential information and
that of our customers or employees, impede or interrupt our business operations, and may result in other negative consequences, including remediation costs, loss
that of our customers or employees, impede or interrupt our business operations, and may result in other negative consequences, including remediation costs, loss
of revenue, litigation, significant legal and financial exposure, loss of intellectual property and reputational damage.
of revenue, litigation, significant legal and financial exposure, loss of intellectual property and reputational damage.
To date, we have not experienced a material breach of cybersecurity. As cyber-attacks become more sophisticated generally, and as we implement changes giving
To date, we have not experienced a material breach of cybersecurity. As cyber-attacks become more sophisticated generally, and as we implement changes giving
customers greater electronic access to our systems, we may be required to incur significant costs to strengthen our systems from outside intrusions and/or maintain
customers greater electronic access to our systems, we may be required to incur significant costs to strengthen our systems from outside intrusions and/or maintain
insurance coverage related to the threat of such attacks. Further, the regulatory environment related to information security and privacy is increasingly rigorous,
insurance coverage related to the threat of such attacks. Further, the regulatory environment related to information security and privacy is increasingly rigorous,
with new and constantly changing requirements applicable to our business and those of third parties with whom we do business, and compliance with those
with new and constantly changing requirements applicable to our business and those of third parties with whom we do business, and compliance with those
requirements could result in additional costs. Despite our efforts, we may not have the resources or technical sophistication to anticipate or prevent rapidly
requirements could result in additional costs. Despite our efforts, we may not have the resources or technical sophistication to anticipate or prevent rapidly
evolving types of cyber-attacks on our systems or those of the third parties with whom we do business. While we have implemented administrative and technical
evolving types of cyber-attacks on our systems or those of the third parties with whom we do business. While we have implemented administrative and technical
controls such as web filtering, endpoint and storage area network antivirus scanning and isolation, next-generation firewalls, a secure email gateway and mobile
controls such as web filtering, endpoint and storage area network antivirus scanning and isolation, next-generation firewalls, a secure email gateway and mobile
device administration, purchased cyber insurance coverage and taken other preventive actions to reduce the risk of cyber incidents and protect our IT, these
device administration, purchased cyber insurance coverage and taken other preventive actions to reduce the risk of cyber incidents and protect our IT, these
measures, and other measures we may take in the future, can be expensive, and may be insufficient, circumvented or may become ineffective. Any of the foregoing
measures, and other measures we may take in the future, can be expensive, and may be insufficient, circumvented or may become ineffective. Any of the foregoing
risks and increased costs could have a material adverse effect on our business, financial condition, operating results and cash flows.
risks and increased costs could have a material adverse effect on our business, financial condition, operating results and cash flows.
Insufficient insurance coverage could have a material adverse effect on us.
Insufficient insurance coverage could have a material adverse effect on us.
We carry insurance for general liability, auto liability and workers' compensation exposures subject to deductibles and/or self-insured retentions that we believe to
We carry insurance for general liability, auto liability and workers' compensation exposures subject to deductibles and/or self-insured retentions that we believe to
be reasonable under the circumstances, and we self-insure for employee and eligible dependent health care claims, with insurance purchased from independent
be reasonable under the circumstances, and we self-insure for employee and eligible dependent health care claims, with insurance purchased from independent
carriers to cover individual claims in excess of the self-insured limits. However, our insurance program does not cover, or may not adequately cover, every
carriers to cover individual claims in excess of the self-insured limits. However, our insurance program does not cover, or may not adequately cover, every
potential risk associated with our business and the consequences thereof. In addition, market conditions or any significant claim or a number of claims made by or
potential risk associated with our business and the consequences thereof. In addition, market conditions or any significant claim or a number of claims made by or
against us could cause our premiums and deductibles to increase substantially and, in some instances, our coverage may be reduced or become entirely unavailable.
against us could cause our premiums and deductibles to increase substantially and, in some instances, our coverage may be reduced or become entirely unavailable.
In the future, we may not be able to obtain meaningful coverage at reasonable rates for a variety of risks, including certain types of environmental hazards and
In the future, we may not be able to obtain meaningful coverage at reasonable rates for a variety of risks, including certain types of environmental hazards and
ongoing regulatory compliance. If our insurance coverage is insufficient, if we are not able to obtain sufficient coverage in the future, or if we are exposed to
ongoing regulatory compliance. If our insurance coverage is insufficient, if we are not able to obtain sufficient coverage in the future, or if we are exposed to
significant losses as a result of the risks for which we self-insure, any resulting costs or liabilities could have a material adverse effect on our business, financial
significant losses as a result of the risks for which we self-insure, any resulting costs or liabilities could have a material adverse effect on our business, financial
condition, operating results and cash flows.
condition, operating results and cash flows.
Operation on multiple ERP information systems, and the conversion from multiple systems to a single system, may negatively impact our operations.
Operation on multiple ERP information systems, and the conversion from multiple systems to a single system, may negatively impact our operations.
reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts, and other general corporate purposes;
reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts, and other general corporate purposes;
The Company currently operates on multiple ERP systems, which we use for operations representing virtually all of our sales. Certain of our ERP systems are
The Company currently operates on multiple ERP systems, which we use for operations representing virtually all of our sales. Certain of our ERP systems are
proprietary systems that have been highly customized by our computer programmers. We rely upon our ERP systems to manage and replenish inventory, to fill and
proprietary systems that have been highly customized by our computer programmers. We rely upon our ERP systems to manage and replenish inventory, to fill and
ship customer orders on a timely basis, to coordinate our sales and distribution activities across all of our products and services and to provide information for
ship customer orders on a timely basis, to coordinate our sales and distribution activities across all of our products and services and to provide information for
financial reporting purposes.
financial reporting purposes.
Processing, consolidating and reconciling information from multiple ERP systems increases the chance of error, and we may incur significant additional costs
Processing, consolidating and reconciling information from multiple ERP systems increases the chance of error, and we may incur significant additional costs
related thereto. Inconsistencies in the information from multiple ERP systems could adversely impact our ability to manage our business efficiently and may result
related thereto. Inconsistencies in the information from multiple ERP systems could adversely impact our ability to manage our business efficiently and may result
in heightened risk to our ability to maintain accurate books and records and comply with regulatory requirements.
in heightened risk to our ability to maintain accurate books and records and comply with regulatory requirements.
During 2016 and 2017, the Company implemented the ERP system utilized by Legacy SBS ("the Legacy SBS ERP system") at certain Legacy BMHC and newly
During 2016 and 2017, the Company implemented the ERP system utilized by Legacy SBS ("the Legacy SBS ERP system") at certain Legacy BMHC and newly
acquired locations. If the remaining implementation of the Legacy SBS ERP system across Legacy BMHC and newly acquired operations is not executed
acquired locations. If the remaining implementation of the Legacy SBS ERP system across Legacy BMHC and newly acquired operations is not executed
successfully, this could result in business interruptions and loss of customers. If we do not complete the remaining implementation timely and successfully, we
successfully, this could result in business interruptions and loss of customers. If we do not complete the remaining implementation timely and successfully, we
may also incur additional costs
may also incur additional costs
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technologies.
technologies.
Such projects are inherently complex, resource intensive, and lengthy. As a result, we could experience unplanned or unforeseen issues that could adversely affect
Such projects are inherently complex, resource intensive, and lengthy. As a result, we could experience unplanned or unforeseen issues that could adversely affect
the project, our business or our results of operations, including:
the project, our business or our results of operations, including:
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costs of implementation that materially exceed our expectations;
costs of implementation that materially exceed our expectations;
diversion of management’s attention away from normal daily business operations;
diversion of management’s attention away from normal daily business operations;
or the early termination of information system supplier agreements;
or the early termination of information system supplier agreements;
increased demand on our operations support personnel;
increased demand on our operations support personnel;
risk of incurring asset impairment charges, accelerated depreciation expense or other charges related to the early retirement of information system assets
risk of incurring asset impairment charges, accelerated depreciation expense or other charges related to the early retirement of information system assets
delays in the go-live of one or more of the stages of the project, resulting in additional costs or time for completion;
delays in the go-live of one or more of the stages of the project, resulting in additional costs or time for completion;
errors in implementation resulting in errors in the commencement or reporting of business transactions;
errors in implementation resulting in errors in the commencement or reporting of business transactions;
failure in the deliverables of our key partners, suppliers and implementation advisors, resulting in an inferior product, reduced business efficacy and the
failure in the deliverables of our key partners, suppliers and implementation advisors, resulting in an inferior product, reduced business efficacy and the
project not providing expected benefits;
project not providing expected benefits;
input deliveries and production impairment;
input deliveries and production impairment;
loss of sales or customers as a result of errors in business transactions or delays in providing products or services;
loss of sales or customers as a result of errors in business transactions or delays in providing products or services;
deficiencies in the training of employees in the use of the new solution, resulting in errors in the recording of data or transactions, leading to delays in
deficiencies in the training of employees in the use of the new solution, resulting in errors in the recording of data or transactions, leading to delays in
a control failure during or post implementation, which may result in a material weakness in our internal controls over financial reporting; and
a control failure during or post implementation, which may result in a material weakness in our internal controls over financial reporting; and
other implementation issues leading to delays and impacts on our business.
other implementation issues leading to delays and impacts on our business.
Any of the foregoing could materially and negatively impact our business, financial condition, operating results and cash flows.
Any of the foregoing could materially and negatively impact our business, financial condition, operating results and cash flows.
Risks Related to Our Indebtedness
Risks Related to Our Indebtedness
Our indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy
Our indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy
or the industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations under our indebtedness.
or the industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations under our indebtedness.
As of December 31, 2017 , our total debt was $377.3 million , which includes obligations under the senior secured notes due 2024 (the "Senior Notes") and our
As of December 31, 2017 , our total debt was $377.3 million , which includes obligations under the senior secured notes due 2024 (the "Senior Notes") and our
revolving credit facility (excluding unamortized debt issuance costs), as well as obligations under capital leases and certain other notes. This leverage could have
revolving credit facility (excluding unamortized debt issuance costs), as well as obligations under capital leases and certain other notes. This leverage could have
important consequences, including: making it more difficult for us to satisfy our obligations with respect to our indebtedness; increasing our vulnerability to
important consequences, including: making it more difficult for us to satisfy our obligations with respect to our indebtedness; increasing our vulnerability to
general adverse economic and industry conditions; requiring us to dedicate a portion of our cash flow from operations to payments on our indebtedness, thereby
general adverse economic and industry conditions; requiring us to dedicate a portion of our cash flow from operations to payments on our indebtedness, thereby
increasing our vulnerability to and limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; exposing us
increasing our vulnerability to and limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; exposing us
to the risk of increased interest rates as borrowings under certain of our indebtedness are subject to variable rates of interest; placing us at a competitive
to the risk of increased interest rates as borrowings under certain of our indebtedness are subject to variable rates of interest; placing us at a competitive
disadvantage compared to our competitors that have less debt; and limiting our ability to borrow additional funds.
disadvantage compared to our competitors that have less debt; and limiting our ability to borrow additional funds.
We are substantially reliant on liquidity provided by our Second Amended and Restated Senior Secured Credit Agreement (the "Credit Agreement") and cash on
We are substantially reliant on liquidity provided by our Second Amended and Restated Senior Secured Credit Agreement (the "Credit Agreement") and cash on
hand to provide working capital and fund our operations. Our working capital and capital expenditure requirements are likely to grow as the housing market
hand to provide working capital and fund our operations. Our working capital and capital expenditure requirements are likely to grow as the housing market
improves and we execute our strategic growth plan. Economic and credit market conditions, the performance of the homebuilding industry, and our financial
improves and we execute our strategic growth plan. Economic and credit market conditions, the performance of the homebuilding industry, and our financial
performance, as well as other factors, may constrain our financing abilities. Our ability to secure additional financing, if available, and to satisfy our financial
performance, as well as other factors, may constrain our financing abilities. Our ability to secure additional financing, if available, and to satisfy our financial
obligations under indebtedness outstanding from time to time will depend upon our future operating performance, the availability of credit, economic conditions
obligations under indebtedness outstanding from time to time will depend upon our future operating performance, the availability of credit, economic conditions
and financial, business and other factors, many of which are beyond our control.
and financial, business and other factors, many of which are beyond our control.
We may be unable to secure additional financing or financing on favorable terms or our operating cash flow may be insufficient to satisfy our financial obligations
We may be unable to secure additional financing or financing on favorable terms or our operating cash flow may be insufficient to satisfy our financial obligations
under our outstanding indebtedness. If additional funds are raised through the issuance of additional equity or convertible debt securities, our stockholders may
under our outstanding indebtedness. If additional funds are raised through the issuance of additional equity or convertible debt securities, our stockholders may
experience significant dilution. We may also incur additional indebtedness in the future, including collateralized debt, subject to the restrictions contained in the
experience significant dilution. We may also incur additional indebtedness in the future, including collateralized debt, subject to the restrictions contained in the
Credit Agreement and Indenture. If new debt is added to our current debt levels, the related risks that we now face could intensify.
Credit Agreement and Indenture. If new debt is added to our current debt levels, the related risks that we now face could intensify.
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We are subject to cybersecurity risks that could adversely affect us, and we may incur increasing costs in an effort to minimize those risks.
We are subject to cybersecurity risks that could adversely affect us, and we may incur increasing costs in an effort to minimize those risks.
Our business relies on systems, including those of third parties with whom we do business, and a website that involve the storage and transmission of customers’
Our business relies on systems, including those of third parties with whom we do business, and a website that involve the storage and transmission of customers’
and employees' personal and proprietary information. Our systems and those of third parties with whom we do business have been, and will likely continue to be,
and employees' personal and proprietary information. Our systems and those of third parties with whom we do business have been, and will likely continue to be,
subjected to computer viruses or other malicious codes, unauthorized access attempts and cyber-attacks that include phishing-attacks, denial-of-service attacks,
subjected to computer viruses or other malicious codes, unauthorized access attempts and cyber-attacks that include phishing-attacks, denial-of-service attacks,
ransomware, malware and hacking. Breach of our systems or those of third parties with whom we do business could compromise our confidential information and
ransomware, malware and hacking. Breach of our systems or those of third parties with whom we do business could compromise our confidential information and
that of our customers or employees, impede or interrupt our business operations, and may result in other negative consequences, including remediation costs, loss
that of our customers or employees, impede or interrupt our business operations, and may result in other negative consequences, including remediation costs, loss
of revenue, litigation, significant legal and financial exposure, loss of intellectual property and reputational damage.
of revenue, litigation, significant legal and financial exposure, loss of intellectual property and reputational damage.
To date, we have not experienced a material breach of cybersecurity. As cyber-attacks become more sophisticated generally, and as we implement changes giving
To date, we have not experienced a material breach of cybersecurity. As cyber-attacks become more sophisticated generally, and as we implement changes giving
customers greater electronic access to our systems, we may be required to incur significant costs to strengthen our systems from outside intrusions and/or maintain
customers greater electronic access to our systems, we may be required to incur significant costs to strengthen our systems from outside intrusions and/or maintain
insurance coverage related to the threat of such attacks. Further, the regulatory environment related to information security and privacy is increasingly rigorous,
insurance coverage related to the threat of such attacks. Further, the regulatory environment related to information security and privacy is increasingly rigorous,
with new and constantly changing requirements applicable to our business and those of third parties with whom we do business, and compliance with those
with new and constantly changing requirements applicable to our business and those of third parties with whom we do business, and compliance with those
requirements could result in additional costs. Despite our efforts, we may not have the resources or technical sophistication to anticipate or prevent rapidly
requirements could result in additional costs. Despite our efforts, we may not have the resources or technical sophistication to anticipate or prevent rapidly
evolving types of cyber-attacks on our systems or those of the third parties with whom we do business. While we have implemented administrative and technical
evolving types of cyber-attacks on our systems or those of the third parties with whom we do business. While we have implemented administrative and technical
controls such as web filtering, endpoint and storage area network antivirus scanning and isolation, next-generation firewalls, a secure email gateway and mobile
controls such as web filtering, endpoint and storage area network antivirus scanning and isolation, next-generation firewalls, a secure email gateway and mobile
device administration, purchased cyber insurance coverage and taken other preventive actions to reduce the risk of cyber incidents and protect our IT, these
device administration, purchased cyber insurance coverage and taken other preventive actions to reduce the risk of cyber incidents and protect our IT, these
measures, and other measures we may take in the future, can be expensive, and may be insufficient, circumvented or may become ineffective. Any of the foregoing
measures, and other measures we may take in the future, can be expensive, and may be insufficient, circumvented or may become ineffective. Any of the foregoing
risks and increased costs could have a material adverse effect on our business, financial condition, operating results and cash flows.
risks and increased costs could have a material adverse effect on our business, financial condition, operating results and cash flows.
Insufficient insurance coverage could have a material adverse effect on us.
Insufficient insurance coverage could have a material adverse effect on us.
associated with this project and a delay in our ability to improve existing operations, to support future growth and to take advantage of new applications and
associated with this project and a delay in our ability to improve existing operations, to support future growth and to take advantage of new applications and
technologies.
technologies.
Such projects are inherently complex, resource intensive, and lengthy. As a result, we could experience unplanned or unforeseen issues that could adversely affect
Such projects are inherently complex, resource intensive, and lengthy. As a result, we could experience unplanned or unforeseen issues that could adversely affect
the project, our business or our results of operations, including:
the project, our business or our results of operations, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
costs of implementation that materially exceed our expectations;
costs of implementation that materially exceed our expectations;
diversion of management’s attention away from normal daily business operations;
diversion of management’s attention away from normal daily business operations;
risk of incurring asset impairment charges, accelerated depreciation expense or other charges related to the early retirement of information system assets
risk of incurring asset impairment charges, accelerated depreciation expense or other charges related to the early retirement of information system assets
or the early termination of information system supplier agreements;
or the early termination of information system supplier agreements;
increased demand on our operations support personnel;
increased demand on our operations support personnel;
delays in the go-live of one or more of the stages of the project, resulting in additional costs or time for completion;
delays in the go-live of one or more of the stages of the project, resulting in additional costs or time for completion;
errors in implementation resulting in errors in the commencement or reporting of business transactions;
errors in implementation resulting in errors in the commencement or reporting of business transactions;
failure in the deliverables of our key partners, suppliers and implementation advisors, resulting in an inferior product, reduced business efficacy and the
failure in the deliverables of our key partners, suppliers and implementation advisors, resulting in an inferior product, reduced business efficacy and the
project not providing expected benefits;
project not providing expected benefits;
loss of sales or customers as a result of errors in business transactions or delays in providing products or services;
loss of sales or customers as a result of errors in business transactions or delays in providing products or services;
deficiencies in the training of employees in the use of the new solution, resulting in errors in the recording of data or transactions, leading to delays in
deficiencies in the training of employees in the use of the new solution, resulting in errors in the recording of data or transactions, leading to delays in
input deliveries and production impairment;
input deliveries and production impairment;
a control failure during or post implementation, which may result in a material weakness in our internal controls over financial reporting; and
a control failure during or post implementation, which may result in a material weakness in our internal controls over financial reporting; and
other implementation issues leading to delays and impacts on our business.
other implementation issues leading to delays and impacts on our business.
Any of the foregoing could materially and negatively impact our business, financial condition, operating results and cash flows.
Any of the foregoing could materially and negatively impact our business, financial condition, operating results and cash flows.
We carry insurance for general liability, auto liability and workers' compensation exposures subject to deductibles and/or self-insured retentions that we believe to
We carry insurance for general liability, auto liability and workers' compensation exposures subject to deductibles and/or self-insured retentions that we believe to
be reasonable under the circumstances, and we self-insure for employee and eligible dependent health care claims, with insurance purchased from independent
be reasonable under the circumstances, and we self-insure for employee and eligible dependent health care claims, with insurance purchased from independent
Risks Related to Our Indebtedness
Risks Related to Our Indebtedness
carriers to cover individual claims in excess of the self-insured limits. However, our insurance program does not cover, or may not adequately cover, every
carriers to cover individual claims in excess of the self-insured limits. However, our insurance program does not cover, or may not adequately cover, every
potential risk associated with our business and the consequences thereof. In addition, market conditions or any significant claim or a number of claims made by or
potential risk associated with our business and the consequences thereof. In addition, market conditions or any significant claim or a number of claims made by or
against us could cause our premiums and deductibles to increase substantially and, in some instances, our coverage may be reduced or become entirely unavailable.
against us could cause our premiums and deductibles to increase substantially and, in some instances, our coverage may be reduced or become entirely unavailable.
In the future, we may not be able to obtain meaningful coverage at reasonable rates for a variety of risks, including certain types of environmental hazards and
In the future, we may not be able to obtain meaningful coverage at reasonable rates for a variety of risks, including certain types of environmental hazards and
ongoing regulatory compliance. If our insurance coverage is insufficient, if we are not able to obtain sufficient coverage in the future, or if we are exposed to
ongoing regulatory compliance. If our insurance coverage is insufficient, if we are not able to obtain sufficient coverage in the future, or if we are exposed to
significant losses as a result of the risks for which we self-insure, any resulting costs or liabilities could have a material adverse effect on our business, financial
significant losses as a result of the risks for which we self-insure, any resulting costs or liabilities could have a material adverse effect on our business, financial
condition, operating results and cash flows.
condition, operating results and cash flows.
Operation on multiple ERP information systems, and the conversion from multiple systems to a single system, may negatively impact our operations.
Operation on multiple ERP information systems, and the conversion from multiple systems to a single system, may negatively impact our operations.
The Company currently operates on multiple ERP systems, which we use for operations representing virtually all of our sales. Certain of our ERP systems are
The Company currently operates on multiple ERP systems, which we use for operations representing virtually all of our sales. Certain of our ERP systems are
proprietary systems that have been highly customized by our computer programmers. We rely upon our ERP systems to manage and replenish inventory, to fill and
proprietary systems that have been highly customized by our computer programmers. We rely upon our ERP systems to manage and replenish inventory, to fill and
ship customer orders on a timely basis, to coordinate our sales and distribution activities across all of our products and services and to provide information for
ship customer orders on a timely basis, to coordinate our sales and distribution activities across all of our products and services and to provide information for
financial reporting purposes.
financial reporting purposes.
Processing, consolidating and reconciling information from multiple ERP systems increases the chance of error, and we may incur significant additional costs
Processing, consolidating and reconciling information from multiple ERP systems increases the chance of error, and we may incur significant additional costs
related thereto. Inconsistencies in the information from multiple ERP systems could adversely impact our ability to manage our business efficiently and may result
related thereto. Inconsistencies in the information from multiple ERP systems could adversely impact our ability to manage our business efficiently and may result
in heightened risk to our ability to maintain accurate books and records and comply with regulatory requirements.
in heightened risk to our ability to maintain accurate books and records and comply with regulatory requirements.
During 2016 and 2017, the Company implemented the ERP system utilized by Legacy SBS ("the Legacy SBS ERP system") at certain Legacy BMHC and newly
During 2016 and 2017, the Company implemented the ERP system utilized by Legacy SBS ("the Legacy SBS ERP system") at certain Legacy BMHC and newly
acquired locations. If the remaining implementation of the Legacy SBS ERP system across Legacy BMHC and newly acquired operations is not executed
acquired locations. If the remaining implementation of the Legacy SBS ERP system across Legacy BMHC and newly acquired operations is not executed
successfully, this could result in business interruptions and loss of customers. If we do not complete the remaining implementation timely and successfully, we
successfully, this could result in business interruptions and loss of customers. If we do not complete the remaining implementation timely and successfully, we
may also incur additional costs
may also incur additional costs
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Our indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy
Our indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy
or the industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations under our indebtedness.
or the industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations under our indebtedness.
As of December 31, 2017 , our total debt was $377.3 million , which includes obligations under the senior secured notes due 2024 (the "Senior Notes") and our
As of December 31, 2017 , our total debt was $377.3 million , which includes obligations under the senior secured notes due 2024 (the "Senior Notes") and our
revolving credit facility (excluding unamortized debt issuance costs), as well as obligations under capital leases and certain other notes. This leverage could have
revolving credit facility (excluding unamortized debt issuance costs), as well as obligations under capital leases and certain other notes. This leverage could have
important consequences, including: making it more difficult for us to satisfy our obligations with respect to our indebtedness; increasing our vulnerability to
important consequences, including: making it more difficult for us to satisfy our obligations with respect to our indebtedness; increasing our vulnerability to
general adverse economic and industry conditions; requiring us to dedicate a portion of our cash flow from operations to payments on our indebtedness, thereby
general adverse economic and industry conditions; requiring us to dedicate a portion of our cash flow from operations to payments on our indebtedness, thereby
reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts, and other general corporate purposes;
reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts, and other general corporate purposes;
increasing our vulnerability to and limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; exposing us
increasing our vulnerability to and limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; exposing us
to the risk of increased interest rates as borrowings under certain of our indebtedness are subject to variable rates of interest; placing us at a competitive
to the risk of increased interest rates as borrowings under certain of our indebtedness are subject to variable rates of interest; placing us at a competitive
disadvantage compared to our competitors that have less debt; and limiting our ability to borrow additional funds.
disadvantage compared to our competitors that have less debt; and limiting our ability to borrow additional funds.
We are substantially reliant on liquidity provided by our Second Amended and Restated Senior Secured Credit Agreement (the "Credit Agreement") and cash on
We are substantially reliant on liquidity provided by our Second Amended and Restated Senior Secured Credit Agreement (the "Credit Agreement") and cash on
hand to provide working capital and fund our operations. Our working capital and capital expenditure requirements are likely to grow as the housing market
hand to provide working capital and fund our operations. Our working capital and capital expenditure requirements are likely to grow as the housing market
improves and we execute our strategic growth plan. Economic and credit market conditions, the performance of the homebuilding industry, and our financial
improves and we execute our strategic growth plan. Economic and credit market conditions, the performance of the homebuilding industry, and our financial
performance, as well as other factors, may constrain our financing abilities. Our ability to secure additional financing, if available, and to satisfy our financial
performance, as well as other factors, may constrain our financing abilities. Our ability to secure additional financing, if available, and to satisfy our financial
obligations under indebtedness outstanding from time to time will depend upon our future operating performance, the availability of credit, economic conditions
obligations under indebtedness outstanding from time to time will depend upon our future operating performance, the availability of credit, economic conditions
and financial, business and other factors, many of which are beyond our control.
and financial, business and other factors, many of which are beyond our control.
We may be unable to secure additional financing or financing on favorable terms or our operating cash flow may be insufficient to satisfy our financial obligations
We may be unable to secure additional financing or financing on favorable terms or our operating cash flow may be insufficient to satisfy our financial obligations
under our outstanding indebtedness. If additional funds are raised through the issuance of additional equity or convertible debt securities, our stockholders may
under our outstanding indebtedness. If additional funds are raised through the issuance of additional equity or convertible debt securities, our stockholders may
experience significant dilution. We may also incur additional indebtedness in the future, including collateralized debt, subject to the restrictions contained in the
experience significant dilution. We may also incur additional indebtedness in the future, including collateralized debt, subject to the restrictions contained in the
Credit Agreement and Indenture. If new debt is added to our current debt levels, the related risks that we now face could intensify.
Credit Agreement and Indenture. If new debt is added to our current debt levels, the related risks that we now face could intensify.
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The Credit Agreement and Indenture contain various covenants that could limit our ability to operate our business.
The Credit Agreement and Indenture contain various covenants that could limit our ability to operate our business.
Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
The Credit Agreement and Indenture governing our senior notes (the "Indenture") place limitations on our ability and the ability of our subsidiaries to, among other
The Credit Agreement and Indenture governing our senior notes (the "Indenture") place limitations on our ability and the ability of our subsidiaries to, among other
things, incur debt, create other liens on its assets, make investments, sell assets, pay dividends, undertake transactions with affiliates, enter into merger transactions
things, incur debt, create other liens on its assets, make investments, sell assets, pay dividends, undertake transactions with affiliates, enter into merger transactions
and enter into unrelated businesses. The Credit Agreement also contains a financial covenant requiring us and our subsidiaries to maintain a Fixed Charge
and enter into unrelated businesses. The Credit Agreement also contains a financial covenant requiring us and our subsidiaries to maintain a Fixed Charge
Coverage Ratio, as defined therein, of at least 1.00:1.00 at the end of any fiscal quarter during the period from the date that Excess Availability, as defined therein,
Coverage Ratio, as defined therein, of at least 1.00:1.00 at the end of any fiscal quarter during the period from the date that Excess Availability, as defined therein,
under the Credit Agreement is less than or equal to the greater of (1) $33.3 million and (2) 10.0% of the Line Cap under the Credit Agreement until the date that
under the Credit Agreement is less than or equal to the greater of (1) $33.3 million and (2) 10.0% of the Line Cap under the Credit Agreement until the date that
Excess Availability has been greater than the greater of (i) $33.3 million and (ii) 10.0% of the Line Cap for a period of at least 30 consecutive days. The Credit
Excess Availability has been greater than the greater of (i) $33.3 million and (ii) 10.0% of the Line Cap for a period of at least 30 consecutive days. The Credit
Agreement and Indenture also contain various customary representations and warranties, financial and collateral reporting requirements and other affirmative and
Agreement and Indenture also contain various customary representations and warranties, financial and collateral reporting requirements and other affirmative and
negative covenants. Amounts owed under the Credit Agreement and Indenture may be accelerated and the lenders may exercise other remedies available to them
negative covenants. Amounts owed under the Credit Agreement and Indenture may be accelerated and the lenders may exercise other remedies available to them
upon the occurrence of various events of default set forth in the Credit Agreement and Indenture, including the failure to make principal or interest payments when
upon the occurrence of various events of default set forth in the Credit Agreement and Indenture, including the failure to make principal or interest payments when
due, breaches of covenants, representations and warranties set forth in the Credit Agreement and Indenture and defaults under other debt obligations. Acceleration
due, breaches of covenants, representations and warranties set forth in the Credit Agreement and Indenture and defaults under other debt obligations. Acceleration
of amounts owed under the Credit Agreement or the Indenture, or the exercise of other remedies available to holders of our debt, could materially and negatively
of amounts owed under the Credit Agreement or the Indenture, or the exercise of other remedies available to holders of our debt, could materially and negatively
impact our business, financial condition, operating results and cash flows.
impact our business, financial condition, operating results and cash flows.
Risks Related to Ownership of Our Common Stock
Risks Related to Ownership of Our Common Stock
The price of our common stock may fluctuate significantly.
The price of our common stock may fluctuate significantly.
Volatility in the market price of our common stock may prevent you from being able to sell your shares of our common stock at or above the price you paid for
Volatility in the market price of our common stock may prevent you from being able to sell your shares of our common stock at or above the price you paid for
them. The market price for our common stock could fluctuate significantly for various reasons, including but not limited to:
them. The market price for our common stock could fluctuate significantly for various reasons, including but not limited to:
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our operating and financial performance and prospects;
our operating and financial performance and prospects;
our quarterly or annual earnings or those of other companies in our industry;
our quarterly or annual earnings or those of other companies in our industry;
the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
changes in, or failure to meet, earnings estimates or recommendations by research analysts who track our common stock or the stock of other companies
changes in, or failure to meet, earnings estimates or recommendations by research analysts who track our common stock or the stock of other companies
in our industry;
in our industry;
changes in the frequency of coverage or the failure of research analysts to cover, or downgrades in analyst recommendations regarding, our common
changes in the frequency of coverage or the failure of research analysts to cover, or downgrades in analyst recommendations regarding, our common
stock;
stock;
general economic, industry and market conditions;
general economic, industry and market conditions;
strategic actions by us, our customers or our competitors, such as acquisitions or restructurings;
strategic actions by us, our customers or our competitors, such as acquisitions or restructurings;
sales of common stock by us or members of our management team;
sales of common stock by us or members of our management team;
the granting or exercise of employee stock options or other equity compensation;
the granting or exercise of employee stock options or other equity compensation;
volume of trading in our common stock; and
volume of trading in our common stock; and
the impact of the factors described elsewhere in “Risk Factors.”
the impact of the factors described elsewhere in “Risk Factors.”
In addition, in recent years, the stock market has regularly experienced significant price and volume fluctuations. This volatility has had a significant impact on the
In addition, in recent years, the stock market has regularly experienced significant price and volume fluctuations. This volatility has had a significant impact on the
market price of securities issued by many companies, including companies in our industry. The changes have at times occurred without regard to the operating
market price of securities issued by many companies, including companies in our industry. The changes have at times occurred without regard to the operating
performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us and these
performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us and these
fluctuations could materially impact our share price.
fluctuations could materially impact our share price.
We do not currently intend to pay dividends on our common stock.
We do not currently intend to pay dividends on our common stock.
We do not anticipate paying any cash dividends on our common stock for the foreseeable future. Instead, we intend to retain future earnings to fund our growth. In
We do not anticipate paying any cash dividends on our common stock for the foreseeable future. Instead, we intend to retain future earnings to fund our growth. In
addition, our existing indebtedness restricts, and we anticipate our future indebtedness may restrict, our ability to pay dividends. Any determination to pay
addition, our existing indebtedness restricts, and we anticipate our future indebtedness may restrict, our ability to pay dividends. Any determination to pay
dividends in the future will be at the discretion of our Board and will depend upon many factors, including our financial condition, operating results, projections,
dividends in the future will be at the discretion of our Board and will depend upon many factors, including our financial condition, operating results, projections,
cash flows, earnings, legal requirements, restrictions in our indebtedness and agreements governing any other indebtedness we may enter into and other factors that
cash flows, earnings, legal requirements, restrictions in our indebtedness and agreements governing any other indebtedness we may enter into and other factors that
our Board deems relevant. Accordingly, holders of our common stock may need to sell their shares to realize a return on their investment, and may not be able to
our Board deems relevant. Accordingly, holders of our common stock may need to sell their shares to realize a return on their investment, and may not be able to
sell their shares at or above the price paid for them.
sell their shares at or above the price paid for them.
Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could adversely affect the price of our
Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could adversely affect the price of our
common stock and could impair our ability to raise capital through the sale of additional shares.
common stock and could impair our ability to raise capital through the sale of additional shares.
There are 5.6 million shares authorized for issuance under the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan ("SBS 2013 Incentive
There are 5.6 million shares authorized for issuance under the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan ("SBS 2013 Incentive
Plan"), all of which are registered. As of January 31, 2018 , approximately 3.4 million of these shares were available for issuance, not including shares underlying
Plan"), all of which are registered. As of January 31, 2018 , approximately 3.4 million of these shares were available for issuance, not including shares underlying
outstanding unvested restricted stock awards and restricted stock units ("RSUs") and outstanding vested and unvested stock options. In addition, as of January 31,
outstanding unvested restricted stock awards and restricted stock units ("RSUs") and outstanding vested and unvested stock options. In addition, as of January 31,
2018 , there were issued and outstanding approximately (i) 0.1 million shares of nonvested stock, (ii) 0.7 million RSUs that convert into common stock upon
2018 , there were issued and outstanding approximately (i) 0.1 million shares of nonvested stock, (ii) 0.7 million RSUs that convert into common stock upon
vesting, and (iii) 0.7 million options for the purchase of common stock under the SBS 2013 Incentive Plan. Upon vesting, conversion or exercise as applicable,
vesting, and (iii) 0.7 million options for the purchase of common stock under the SBS 2013 Incentive Plan. Upon vesting, conversion or exercise as applicable,
such registered shares can be freely sold in the public market. If a large number of these shares are sold in the public market, the sales could reduce the trading
such registered shares can be freely sold in the public market. If a large number of these shares are sold in the public market, the sales could reduce the trading
price of our common stock.
price of our common stock.
Our future operating results may fluctuate significantly and our current operating results may not be a good indication of our future performance.
Our future operating results may fluctuate significantly and our current operating results may not be a good indication of our future performance.
Fluctuations in our financial results could affect our stock price in the future.
Fluctuations in our financial results could affect our stock price in the future.
Our revenues and operating results have historically varied from period-to-period and we expect that they will continue to do so as a result of a number of factors,
Our revenues and operating results have historically varied from period-to-period and we expect that they will continue to do so as a result of a number of factors,
many of which are outside of our control. Any volatility in our financial results may make it more difficult for us to raise capital in the future or pursue acquisitions
many of which are outside of our control. Any volatility in our financial results may make it more difficult for us to raise capital in the future or pursue acquisitions
that involve issuances of our stock. Our operating results for prior periods may not be effective predictors of future performance.
that involve issuances of our stock. Our operating results for prior periods may not be effective predictors of future performance.
Factors associated with our industry, the operation of our business and the markets for our products and services may cause our quarterly financial results to
Factors associated with our industry, the operation of our business and the markets for our products and services may cause our quarterly financial results to
fluctuate, including:
fluctuate, including:
the seasonal and cyclical nature of the homebuilding industry;
the seasonal and cyclical nature of the homebuilding industry;
the highly competitive nature of our industry;
the highly competitive nature of our industry;
the volatility of prices, availability and affordability of raw materials, including lumber, wood products and other building products;
the volatility of prices, availability and affordability of raw materials, including lumber, wood products and other building products;
shortages of skilled and technical labor, increased labor costs and labor disruptions;
shortages of skilled and technical labor, increased labor costs and labor disruptions;
the production schedules of our customers;
the production schedules of our customers;
general economic conditions, including but not limited to housing starts, repair and remodeling activity and light commercial construction, inventory
general economic conditions, including but not limited to housing starts, repair and remodeling activity and light commercial construction, inventory
levels of new and existing homes for sale, foreclosure rates, interest rates, unemployment rates, relative currency values, mortgage availability and
levels of new and existing homes for sale, foreclosure rates, interest rates, unemployment rates, relative currency values, mortgage availability and
pricing, as well as other consumer financing mechanisms, that ultimately affect demand for our products;
pricing, as well as other consumer financing mechanisms, that ultimately affect demand for our products;
actions of suppliers, customers and competitors, including merger and acquisition activities, plant closures and financial failures;
actions of suppliers, customers and competitors, including merger and acquisition activities, plant closures and financial failures;
litigation, claims and investigations involving us;
litigation, claims and investigations involving us;
the financial condition and creditworthiness of our customers;
the financial condition and creditworthiness of our customers;
cost of compliance with government laws and regulations;
cost of compliance with government laws and regulations;
weather patterns; and
weather patterns; and
severe weather phenomena such as drought, hurricanes, tornadoes and fire.
severe weather phenomena such as drought, hurricanes, tornadoes and fire.
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Any one of the factors above or the cumulative effect of some of the factors referred to above may result in significant fluctuations in our financial and other
Any one of the factors above or the cumulative effect of some of the factors referred to above may result in significant fluctuations in our financial and other
operating results, including fluctuations in our key metrics. The variability and unpredictability could result in our failing to meet our internal operating plan or the
operating results, including fluctuations in our key metrics. The variability and unpredictability could result in our failing to meet our internal operating plan or the
expectations of securities analysts or investors for any period. This volatility could cause the market price of our shares to fall substantially and we could face
expectations of securities analysts or investors for any period. This volatility could cause the market price of our shares to fall substantially and we could face
costly lawsuits, including securities class action suits.
costly lawsuits, including securities class action suits.
Certain provisions of our organizational documents and other contractual provisions may make it difficult for stockholders to change the composition of
Certain provisions of our organizational documents and other contractual provisions may make it difficult for stockholders to change the composition of
our Board of Directors and may discourage hostile takeover attempts.
our Board of Directors and may discourage hostile takeover attempts.
Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing
Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing
changes in control if our Board determines that such changes in control are not in the best interests of us and our stockholders. The provisions in our amended and
changes in control if our Board determines that such changes in control are not in the best interests of us and our stockholders. The provisions in our amended and
restated certificate of incorporation and amended and restated bylaws include, among other things, the following:
restated certificate of incorporation and amended and restated bylaws include, among other things, the following:
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a classified Board with three-year staggered terms;
a classified Board with three-year staggered terms;
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The Credit Agreement and Indenture contain various covenants that could limit our ability to operate our business.
The Credit Agreement and Indenture contain various covenants that could limit our ability to operate our business.
Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
The Credit Agreement and Indenture governing our senior notes (the "Indenture") place limitations on our ability and the ability of our subsidiaries to, among other
The Credit Agreement and Indenture governing our senior notes (the "Indenture") place limitations on our ability and the ability of our subsidiaries to, among other
things, incur debt, create other liens on its assets, make investments, sell assets, pay dividends, undertake transactions with affiliates, enter into merger transactions
things, incur debt, create other liens on its assets, make investments, sell assets, pay dividends, undertake transactions with affiliates, enter into merger transactions
and enter into unrelated businesses. The Credit Agreement also contains a financial covenant requiring us and our subsidiaries to maintain a Fixed Charge
and enter into unrelated businesses. The Credit Agreement also contains a financial covenant requiring us and our subsidiaries to maintain a Fixed Charge
Coverage Ratio, as defined therein, of at least 1.00:1.00 at the end of any fiscal quarter during the period from the date that Excess Availability, as defined therein,
Coverage Ratio, as defined therein, of at least 1.00:1.00 at the end of any fiscal quarter during the period from the date that Excess Availability, as defined therein,
under the Credit Agreement is less than or equal to the greater of (1) $33.3 million and (2) 10.0% of the Line Cap under the Credit Agreement until the date that
under the Credit Agreement is less than or equal to the greater of (1) $33.3 million and (2) 10.0% of the Line Cap under the Credit Agreement until the date that
Excess Availability has been greater than the greater of (i) $33.3 million and (ii) 10.0% of the Line Cap for a period of at least 30 consecutive days. The Credit
Excess Availability has been greater than the greater of (i) $33.3 million and (ii) 10.0% of the Line Cap for a period of at least 30 consecutive days. The Credit
Agreement and Indenture also contain various customary representations and warranties, financial and collateral reporting requirements and other affirmative and
Agreement and Indenture also contain various customary representations and warranties, financial and collateral reporting requirements and other affirmative and
negative covenants. Amounts owed under the Credit Agreement and Indenture may be accelerated and the lenders may exercise other remedies available to them
negative covenants. Amounts owed under the Credit Agreement and Indenture may be accelerated and the lenders may exercise other remedies available to them
upon the occurrence of various events of default set forth in the Credit Agreement and Indenture, including the failure to make principal or interest payments when
upon the occurrence of various events of default set forth in the Credit Agreement and Indenture, including the failure to make principal or interest payments when
due, breaches of covenants, representations and warranties set forth in the Credit Agreement and Indenture and defaults under other debt obligations. Acceleration
due, breaches of covenants, representations and warranties set forth in the Credit Agreement and Indenture and defaults under other debt obligations. Acceleration
of amounts owed under the Credit Agreement or the Indenture, or the exercise of other remedies available to holders of our debt, could materially and negatively
of amounts owed under the Credit Agreement or the Indenture, or the exercise of other remedies available to holders of our debt, could materially and negatively
impact our business, financial condition, operating results and cash flows.
impact our business, financial condition, operating results and cash flows.
Risks Related to Ownership of Our Common Stock
Risks Related to Ownership of Our Common Stock
The price of our common stock may fluctuate significantly.
The price of our common stock may fluctuate significantly.
Volatility in the market price of our common stock may prevent you from being able to sell your shares of our common stock at or above the price you paid for
Volatility in the market price of our common stock may prevent you from being able to sell your shares of our common stock at or above the price you paid for
them. The market price for our common stock could fluctuate significantly for various reasons, including but not limited to:
them. The market price for our common stock could fluctuate significantly for various reasons, including but not limited to:
our operating and financial performance and prospects;
our operating and financial performance and prospects;
our quarterly or annual earnings or those of other companies in our industry;
our quarterly or annual earnings or those of other companies in our industry;
the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
changes in, or failure to meet, earnings estimates or recommendations by research analysts who track our common stock or the stock of other companies
changes in, or failure to meet, earnings estimates or recommendations by research analysts who track our common stock or the stock of other companies
changes in the frequency of coverage or the failure of research analysts to cover, or downgrades in analyst recommendations regarding, our common
changes in the frequency of coverage or the failure of research analysts to cover, or downgrades in analyst recommendations regarding, our common
in our industry;
in our industry;
stock;
stock;
general economic, industry and market conditions;
general economic, industry and market conditions;
strategic actions by us, our customers or our competitors, such as acquisitions or restructurings;
strategic actions by us, our customers or our competitors, such as acquisitions or restructurings;
sales of common stock by us or members of our management team;
sales of common stock by us or members of our management team;
the granting or exercise of employee stock options or other equity compensation;
the granting or exercise of employee stock options or other equity compensation;
volume of trading in our common stock; and
volume of trading in our common stock; and
the impact of the factors described elsewhere in “Risk Factors.”
the impact of the factors described elsewhere in “Risk Factors.”
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In addition, in recent years, the stock market has regularly experienced significant price and volume fluctuations. This volatility has had a significant impact on the
In addition, in recent years, the stock market has regularly experienced significant price and volume fluctuations. This volatility has had a significant impact on the
market price of securities issued by many companies, including companies in our industry. The changes have at times occurred without regard to the operating
market price of securities issued by many companies, including companies in our industry. The changes have at times occurred without regard to the operating
performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us and these
performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us and these
fluctuations could materially impact our share price.
fluctuations could materially impact our share price.
We do not currently intend to pay dividends on our common stock.
We do not currently intend to pay dividends on our common stock.
We do not anticipate paying any cash dividends on our common stock for the foreseeable future. Instead, we intend to retain future earnings to fund our growth. In
We do not anticipate paying any cash dividends on our common stock for the foreseeable future. Instead, we intend to retain future earnings to fund our growth. In
addition, our existing indebtedness restricts, and we anticipate our future indebtedness may restrict, our ability to pay dividends. Any determination to pay
addition, our existing indebtedness restricts, and we anticipate our future indebtedness may restrict, our ability to pay dividends. Any determination to pay
dividends in the future will be at the discretion of our Board and will depend upon many factors, including our financial condition, operating results, projections,
dividends in the future will be at the discretion of our Board and will depend upon many factors, including our financial condition, operating results, projections,
cash flows, earnings, legal requirements, restrictions in our indebtedness and agreements governing any other indebtedness we may enter into and other factors that
cash flows, earnings, legal requirements, restrictions in our indebtedness and agreements governing any other indebtedness we may enter into and other factors that
our Board deems relevant. Accordingly, holders of our common stock may need to sell their shares to realize a return on their investment, and may not be able to
our Board deems relevant. Accordingly, holders of our common stock may need to sell their shares to realize a return on their investment, and may not be able to
sell their shares at or above the price paid for them.
sell their shares at or above the price paid for them.
Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could adversely affect the price of our
Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could adversely affect the price of our
common stock and could impair our ability to raise capital through the sale of additional shares.
common stock and could impair our ability to raise capital through the sale of additional shares.
There are 5.6 million shares authorized for issuance under the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan ("SBS 2013 Incentive
There are 5.6 million shares authorized for issuance under the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan ("SBS 2013 Incentive
Plan"), all of which are registered. As of January 31, 2018 , approximately 3.4 million of these shares were available for issuance, not including shares underlying
Plan"), all of which are registered. As of January 31, 2018 , approximately 3.4 million of these shares were available for issuance, not including shares underlying
outstanding unvested restricted stock awards and restricted stock units ("RSUs") and outstanding vested and unvested stock options. In addition, as of January 31,
outstanding unvested restricted stock awards and restricted stock units ("RSUs") and outstanding vested and unvested stock options. In addition, as of January 31,
2018 , there were issued and outstanding approximately (i) 0.1 million shares of nonvested stock, (ii) 0.7 million RSUs that convert into common stock upon
2018 , there were issued and outstanding approximately (i) 0.1 million shares of nonvested stock, (ii) 0.7 million RSUs that convert into common stock upon
vesting, and (iii) 0.7 million options for the purchase of common stock under the SBS 2013 Incentive Plan. Upon vesting, conversion or exercise as applicable,
vesting, and (iii) 0.7 million options for the purchase of common stock under the SBS 2013 Incentive Plan. Upon vesting, conversion or exercise as applicable,
such registered shares can be freely sold in the public market. If a large number of these shares are sold in the public market, the sales could reduce the trading
such registered shares can be freely sold in the public market. If a large number of these shares are sold in the public market, the sales could reduce the trading
price of our common stock.
price of our common stock.
Our future operating results may fluctuate significantly and our current operating results may not be a good indication of our future performance.
Our future operating results may fluctuate significantly and our current operating results may not be a good indication of our future performance.
Fluctuations in our financial results could affect our stock price in the future.
Fluctuations in our financial results could affect our stock price in the future.
Our revenues and operating results have historically varied from period-to-period and we expect that they will continue to do so as a result of a number of factors,
Our revenues and operating results have historically varied from period-to-period and we expect that they will continue to do so as a result of a number of factors,
many of which are outside of our control. Any volatility in our financial results may make it more difficult for us to raise capital in the future or pursue acquisitions
many of which are outside of our control. Any volatility in our financial results may make it more difficult for us to raise capital in the future or pursue acquisitions
that involve issuances of our stock. Our operating results for prior periods may not be effective predictors of future performance.
that involve issuances of our stock. Our operating results for prior periods may not be effective predictors of future performance.
Factors associated with our industry, the operation of our business and the markets for our products and services may cause our quarterly financial results to
Factors associated with our industry, the operation of our business and the markets for our products and services may cause our quarterly financial results to
fluctuate, including:
fluctuate, including:
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the seasonal and cyclical nature of the homebuilding industry;
the seasonal and cyclical nature of the homebuilding industry;
the highly competitive nature of our industry;
the highly competitive nature of our industry;
the volatility of prices, availability and affordability of raw materials, including lumber, wood products and other building products;
the volatility of prices, availability and affordability of raw materials, including lumber, wood products and other building products;
shortages of skilled and technical labor, increased labor costs and labor disruptions;
shortages of skilled and technical labor, increased labor costs and labor disruptions;
the production schedules of our customers;
the production schedules of our customers;
general economic conditions, including but not limited to housing starts, repair and remodeling activity and light commercial construction, inventory
general economic conditions, including but not limited to housing starts, repair and remodeling activity and light commercial construction, inventory
levels of new and existing homes for sale, foreclosure rates, interest rates, unemployment rates, relative currency values, mortgage availability and
levels of new and existing homes for sale, foreclosure rates, interest rates, unemployment rates, relative currency values, mortgage availability and
pricing, as well as other consumer financing mechanisms, that ultimately affect demand for our products;
pricing, as well as other consumer financing mechanisms, that ultimately affect demand for our products;
actions of suppliers, customers and competitors, including merger and acquisition activities, plant closures and financial failures;
actions of suppliers, customers and competitors, including merger and acquisition activities, plant closures and financial failures;
litigation, claims and investigations involving us;
litigation, claims and investigations involving us;
the financial condition and creditworthiness of our customers;
the financial condition and creditworthiness of our customers;
cost of compliance with government laws and regulations;
cost of compliance with government laws and regulations;
weather patterns; and
weather patterns; and
severe weather phenomena such as drought, hurricanes, tornadoes and fire.
severe weather phenomena such as drought, hurricanes, tornadoes and fire.
Any one of the factors above or the cumulative effect of some of the factors referred to above may result in significant fluctuations in our financial and other
Any one of the factors above or the cumulative effect of some of the factors referred to above may result in significant fluctuations in our financial and other
operating results, including fluctuations in our key metrics. The variability and unpredictability could result in our failing to meet our internal operating plan or the
operating results, including fluctuations in our key metrics. The variability and unpredictability could result in our failing to meet our internal operating plan or the
expectations of securities analysts or investors for any period. This volatility could cause the market price of our shares to fall substantially and we could face
expectations of securities analysts or investors for any period. This volatility could cause the market price of our shares to fall substantially and we could face
costly lawsuits, including securities class action suits.
costly lawsuits, including securities class action suits.
Certain provisions of our organizational documents and other contractual provisions may make it difficult for stockholders to change the composition of
Certain provisions of our organizational documents and other contractual provisions may make it difficult for stockholders to change the composition of
our Board of Directors and may discourage hostile takeover attempts.
our Board of Directors and may discourage hostile takeover attempts.
Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing
Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing
changes in control if our Board determines that such changes in control are not in the best interests of us and our stockholders. The provisions in our amended and
changes in control if our Board determines that such changes in control are not in the best interests of us and our stockholders. The provisions in our amended and
restated certificate of incorporation and amended and restated bylaws include, among other things, the following:
restated certificate of incorporation and amended and restated bylaws include, among other things, the following:
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a classified Board with three-year staggered terms;
a classified Board with three-year staggered terms;
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the ability of our Board, without stockholder approval, to issue shares of preferred stock and to determine the price and other terms, including preferences
the ability of our Board, without stockholder approval, to issue shares of preferred stock and to determine the price and other terms, including preferences
and voting rights, of those shares without stockholder approval;
and voting rights, of those shares without stockholder approval;
stockholder action can only be taken at a special or regular meeting and not by written consent;
stockholder action can only be taken at a special or regular meeting and not by written consent;
advance notice procedures for nominating candidates to our Board or presenting matters at stockholder meetings;
advance notice procedures for nominating candidates to our Board or presenting matters at stockholder meetings;
removal of directors only for cause;
removal of directors only for cause;
allowing only our Board to fill vacancies on our Board; and
allowing only our Board to fill vacancies on our Board; and
super-majority voting requirements to amend our amended and restated bylaws and certain provisions of our amended and restated certificate of
super-majority voting requirements to amend our amended and restated bylaws and certain provisions of our amended and restated certificate of
incorporation (the "Charter").
incorporation (the "Charter").
Our Charter opts us out of being subject to Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), an anti-takeover law. In general,
Our Charter opts us out of being subject to Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), an anti-takeover law. In general,
Section 203 of the DGCL prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group
Section 203 of the DGCL prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group
owning 15% or more of the corporation’s voting stock for a period of three years following the date the person became an interested stockholder, unless (with
owning 15% or more of the corporation’s voting stock for a period of three years following the date the person became an interested stockholder, unless (with
certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. However,
certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. However,
our Charter contains anti-takeover provisions that are substantially similar in effect to Section 203 of the DGCL. The anti-takeover provisions in the Charter
our Charter contains anti-takeover provisions that are substantially similar in effect to Section 203 of the DGCL. The anti-takeover provisions in the Charter
prohibit us from engaging in a business combination, such as a merger, with a person or group owning 15% or more of our voting stock for a period of three years
prohibit us from engaging in a business combination, such as a merger, with a person or group owning 15% or more of our voting stock for a period of three years
following the date the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person
following the date the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person
became an interested stockholder is approved in a prescribed manner. The Charter includes specified exceptions from anti-takeover provisions, which provide that
became an interested stockholder is approved in a prescribed manner. The Charter includes specified exceptions from anti-takeover provisions, which provide that
(i) in certain circumstances (as described below), Davidson Kempner Capital Management LP, The Gores Group, LLC and their respective affiliates or associates
(i) in certain circumstances (as described below), Davidson Kempner Capital Management LP, The Gores Group, LLC and their respective affiliates or associates
(the “Grandfathered Stockholders”), and (ii) any person who would otherwise be an interested stockholder because of a transfer, assignment, conveyance,
(the “Grandfathered Stockholders”), and (ii) any person who would otherwise be an interested stockholder because of a transfer, assignment, conveyance,
hypothecation, encumbrance or other disposition of 5% or more of our outstanding voting stock by any Grandfathered Stockholder to such person will be excluded
hypothecation, encumbrance or other disposition of 5% or more of our outstanding voting stock by any Grandfathered Stockholder to such person will be excluded
from the “interested stockholder” definition in the Charter. At any time during the period beginning on the closing date of the Merger and ending on the third
from the “interested stockholder” definition in the Charter. At any time during the period beginning on the closing date of the Merger and ending on the third
anniversary thereof, each Grandfathered Stockholder is permitted to own any amount less than 20% of our outstanding voting stock and will not be deemed an
anniversary thereof, each Grandfathered Stockholder is permitted to own any amount less than 20% of our outstanding voting stock and will not be deemed an
interested stockholder unless such Grandfathered Stockholder’s ownership level meets or exceeds 20% of our outstanding voting stock during such three-year
interested stockholder unless such Grandfathered Stockholder’s ownership level meets or exceeds 20% of our outstanding voting stock during such three-year
period. From and after the third anniversary of the closing date of the Merger, each Grandfathered Stockholder is permitted to continue owning its respective
period. From and after the third anniversary of the closing date of the Merger, each Grandfathered Stockholder is permitted to continue owning its respective
ownership amount that it owns, together with its affiliates and associates, on such anniversary and will not be deemed an interested stockholder unless such
ownership amount that it owns, together with its affiliates and associates, on such anniversary and will not be deemed an interested stockholder unless such
Grandfathered Stockholder’s ownership level later exceeds such ownership amount of our outstanding voting stock. Moreover, each Grandfathered Stockholder,
Grandfathered Stockholder’s ownership level later exceeds such ownership amount of our outstanding voting stock. Moreover, each Grandfathered Stockholder,
together with its affiliates and associates, may reduce its ownership amount at any time from and after the third anniversary of the effective time of the Merger;
together with its affiliates and associates, may reduce its ownership amount at any time from and after the third anniversary of the effective time of the Merger;
provided that, if such Grandfathered Stockholder reduces its ownership amount below the ownership amount of such Grandfathered Stockholder that exists on the
provided that, if such Grandfathered Stockholder reduces its ownership amount below the ownership amount of such Grandfathered Stockholder that exists on the
third anniversary of the effective time of the Merger, such Grandfathered Stockholder may not increase its ownership amount above such reduced amount;
third anniversary of the effective time of the Merger, such Grandfathered Stockholder may not increase its ownership amount above such reduced amount;
provided, further, that if such Grandfathered Stockholder reduces its ownership amount below 15% of our outstanding voting stock after the third anniversary of
provided, further, that if such Grandfathered Stockholder reduces its ownership amount below 15% of our outstanding voting stock after the third anniversary of
the effective time of the Merger, such Grandfathered Stockholder may own any amount of voting stock below 15% of our outstanding voting stock, in the case of
the effective time of the Merger, such Grandfathered Stockholder may own any amount of voting stock below 15% of our outstanding voting stock, in the case of
each of the foregoing provisos, without being deemed an interested stockholder.
each of the foregoing provisos, without being deemed an interested stockholder.
While these provisions have the effect of encouraging persons seeking to acquire control of us to negotiate with our Board, they could enable the Board to hinder
While these provisions have the effect of encouraging persons seeking to acquire control of us to negotiate with our Board, they could enable the Board to hinder
or frustrate a transaction that some, or a majority, of the stockholders might believe to be in their best interests and, in that case, may prevent or discourage
or frustrate a transaction that some, or a majority, of the stockholders might believe to be in their best interests and, in that case, may prevent or discourage
attempts to remove and replace incumbent directors.
attempts to remove and replace incumbent directors.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for
stockholders to replace members of our Board, which is responsible for appointing the members of our management.
stockholders to replace members of our Board, which is responsible for appointing the members of our management.
Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on us and
Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on us and
our stock price.
our stock price.
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met.
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not
occur or that all control issues and instances of fraud will be detected. Therefore, our internal control over financial reporting will not prevent or detect all errors
occur or that all control issues and instances of fraud will be detected. Therefore, our internal control over financial reporting will not prevent or detect all errors
and all fraud.
and all fraud.
Ensuring that the Company has adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely
Ensuring that the Company has adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely
basis is a costly and time-consuming effort that needs to be reevaluated frequently. Implementing appropriate changes to the internal controls of the Company may
basis is a costly and time-consuming effort that needs to be reevaluated frequently. Implementing appropriate changes to the internal controls of the Company may
take a significant period of time to complete, may distract directors, officers and employees, and may entail substantial costs in order to modify existing accounting
take a significant period of time to complete, may distract directors, officers and employees, and may entail substantial costs in order to modify existing accounting
systems.
systems.
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Additionally, the Company may experience material weaknesses or significant deficiencies in its internal control over financial reporting in the future. Any failure
Additionally, the Company may experience material weaknesses or significant deficiencies in its internal control over financial reporting in the future. Any failure
to maintain internal control over financial reporting could severely inhibit the Company’s ability to accurately report its cash flows, results of operations or
to maintain internal control over financial reporting could severely inhibit the Company’s ability to accurately report its cash flows, results of operations or
financial condition. If the Company is unable to conclude that its internal control over financial reporting is effective, or if its independent registered public
financial condition. If the Company is unable to conclude that its internal control over financial reporting is effective, or if its independent registered public
accounting firm determines the Company has a material weakness or significant deficiency in its internal control over financial reporting, the Company could lose
accounting firm determines the Company has a material weakness or significant deficiency in its internal control over financial reporting, the Company could lose
investor confidence in the accuracy and completeness of its financial reports, the market price of its common stock could decline and the Company could be
investor confidence in the accuracy and completeness of its financial reports, the market price of its common stock could decline and the Company could be
subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in the Company’s internal
subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in the Company’s internal
control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict its future access to the
control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict its future access to the
capital markets and negatively impact the price and trading market for our common stock.
capital markets and negatively impact the price and trading market for our common stock.
Our Charter includes an exclusive forum clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our Charter includes an exclusive forum clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our Charter provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and
Our Charter provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and
exclusive forum for (i) any derivative action brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owned by any
exclusive forum for (i) any derivative action brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owned by any
director, officer or other employee of the Company to the Company or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the
director, officer or other employee of the Company to the Company or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the
DGCL, our Charter or our bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise
DGCL, our Charter or our bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise
acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the foregoing provisions. The exclusive forum clause may limit
acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the foregoing provisions. The exclusive forum clause may limit
our stockholders’ ability to obtain a favorable judicial forum for disputes with us. It is also possible that, notwithstanding such exclusive forum clause, a court
our stockholders’ ability to obtain a favorable judicial forum for disputes with us. It is also possible that, notwithstanding such exclusive forum clause, a court
could rule that such a provision is inapplicable or unenforceable.
could rule that such a provision is inapplicable or unenforceable.
We are a holding company and depend on the cash flow of our subsidiaries.
We are a holding company and depend on the cash flow of our subsidiaries.
We are a holding company with no material assets other than the equity interests of our subsidiaries. Our subsidiaries conduct substantially all of our operations
We are a holding company with no material assets other than the equity interests of our subsidiaries. Our subsidiaries conduct substantially all of our operations
and own substantially all of our assets. Consequently, our cash flow and our ability to meet our obligations and pay any future dividends to our stockholders
and own substantially all of our assets. Consequently, our cash flow and our ability to meet our obligations and pay any future dividends to our stockholders
depends upon the cash flow of our subsidiaries and their ability to make payments, directly or indirectly, to us in the form of dividends, distributions and other
depends upon the cash flow of our subsidiaries and their ability to make payments, directly or indirectly, to us in the form of dividends, distributions and other
payments. Any inability on the part of our subsidiaries to make payments to us could have a material adverse effect on our business, financial condition and results
payments. Any inability on the part of our subsidiaries to make payments to us could have a material adverse effect on our business, financial condition and results
of operations.
of operations.
None.
None.
Item 1B. Unresolved Staff Comments
Item 1B. Unresolved Staff Comments
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Additionally, the Company may experience material weaknesses or significant deficiencies in its internal control over financial reporting in the future. Any failure
Additionally, the Company may experience material weaknesses or significant deficiencies in its internal control over financial reporting in the future. Any failure
to maintain internal control over financial reporting could severely inhibit the Company’s ability to accurately report its cash flows, results of operations or
to maintain internal control over financial reporting could severely inhibit the Company’s ability to accurately report its cash flows, results of operations or
financial condition. If the Company is unable to conclude that its internal control over financial reporting is effective, or if its independent registered public
financial condition. If the Company is unable to conclude that its internal control over financial reporting is effective, or if its independent registered public
accounting firm determines the Company has a material weakness or significant deficiency in its internal control over financial reporting, the Company could lose
accounting firm determines the Company has a material weakness or significant deficiency in its internal control over financial reporting, the Company could lose
investor confidence in the accuracy and completeness of its financial reports, the market price of its common stock could decline and the Company could be
investor confidence in the accuracy and completeness of its financial reports, the market price of its common stock could decline and the Company could be
subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in the Company’s internal
subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in the Company’s internal
control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict its future access to the
control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict its future access to the
capital markets and negatively impact the price and trading market for our common stock.
capital markets and negatively impact the price and trading market for our common stock.
Section 203 of the DGCL prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group
Section 203 of the DGCL prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group
Our Charter includes an exclusive forum clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our Charter includes an exclusive forum clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our Charter provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and
Our Charter provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and
exclusive forum for (i) any derivative action brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owned by any
exclusive forum for (i) any derivative action brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owned by any
director, officer or other employee of the Company to the Company or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the
director, officer or other employee of the Company to the Company or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the
DGCL, our Charter or our bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise
DGCL, our Charter or our bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise
acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the foregoing provisions. The exclusive forum clause may limit
acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the foregoing provisions. The exclusive forum clause may limit
our stockholders’ ability to obtain a favorable judicial forum for disputes with us. It is also possible that, notwithstanding such exclusive forum clause, a court
our stockholders’ ability to obtain a favorable judicial forum for disputes with us. It is also possible that, notwithstanding such exclusive forum clause, a court
could rule that such a provision is inapplicable or unenforceable.
could rule that such a provision is inapplicable or unenforceable.
from the “interested stockholder” definition in the Charter. At any time during the period beginning on the closing date of the Merger and ending on the third
from the “interested stockholder” definition in the Charter. At any time during the period beginning on the closing date of the Merger and ending on the third
We are a holding company and depend on the cash flow of our subsidiaries.
We are a holding company and depend on the cash flow of our subsidiaries.
We are a holding company with no material assets other than the equity interests of our subsidiaries. Our subsidiaries conduct substantially all of our operations
We are a holding company with no material assets other than the equity interests of our subsidiaries. Our subsidiaries conduct substantially all of our operations
and own substantially all of our assets. Consequently, our cash flow and our ability to meet our obligations and pay any future dividends to our stockholders
and own substantially all of our assets. Consequently, our cash flow and our ability to meet our obligations and pay any future dividends to our stockholders
depends upon the cash flow of our subsidiaries and their ability to make payments, directly or indirectly, to us in the form of dividends, distributions and other
depends upon the cash flow of our subsidiaries and their ability to make payments, directly or indirectly, to us in the form of dividends, distributions and other
payments. Any inability on the part of our subsidiaries to make payments to us could have a material adverse effect on our business, financial condition and results
payments. Any inability on the part of our subsidiaries to make payments to us could have a material adverse effect on our business, financial condition and results
of operations.
of operations.
third anniversary of the effective time of the Merger, such Grandfathered Stockholder may not increase its ownership amount above such reduced amount;
third anniversary of the effective time of the Merger, such Grandfathered Stockholder may not increase its ownership amount above such reduced amount;
Item 1B. Unresolved Staff Comments
Item 1B. Unresolved Staff Comments
provided, further, that if such Grandfathered Stockholder reduces its ownership amount below 15% of our outstanding voting stock after the third anniversary of
provided, further, that if such Grandfathered Stockholder reduces its ownership amount below 15% of our outstanding voting stock after the third anniversary of
the effective time of the Merger, such Grandfathered Stockholder may own any amount of voting stock below 15% of our outstanding voting stock, in the case of
the effective time of the Merger, such Grandfathered Stockholder may own any amount of voting stock below 15% of our outstanding voting stock, in the case of
None.
None.
each of the foregoing provisos, without being deemed an interested stockholder.
each of the foregoing provisos, without being deemed an interested stockholder.
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the ability of our Board, without stockholder approval, to issue shares of preferred stock and to determine the price and other terms, including preferences
the ability of our Board, without stockholder approval, to issue shares of preferred stock and to determine the price and other terms, including preferences
and voting rights, of those shares without stockholder approval;
and voting rights, of those shares without stockholder approval;
stockholder action can only be taken at a special or regular meeting and not by written consent;
stockholder action can only be taken at a special or regular meeting and not by written consent;
advance notice procedures for nominating candidates to our Board or presenting matters at stockholder meetings;
advance notice procedures for nominating candidates to our Board or presenting matters at stockholder meetings;
removal of directors only for cause;
removal of directors only for cause;
allowing only our Board to fill vacancies on our Board; and
allowing only our Board to fill vacancies on our Board; and
incorporation (the "Charter").
incorporation (the "Charter").
super-majority voting requirements to amend our amended and restated bylaws and certain provisions of our amended and restated certificate of
super-majority voting requirements to amend our amended and restated bylaws and certain provisions of our amended and restated certificate of
Our Charter opts us out of being subject to Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), an anti-takeover law. In general,
Our Charter opts us out of being subject to Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), an anti-takeover law. In general,
owning 15% or more of the corporation’s voting stock for a period of three years following the date the person became an interested stockholder, unless (with
owning 15% or more of the corporation’s voting stock for a period of three years following the date the person became an interested stockholder, unless (with
certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. However,
certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. However,
our Charter contains anti-takeover provisions that are substantially similar in effect to Section 203 of the DGCL. The anti-takeover provisions in the Charter
our Charter contains anti-takeover provisions that are substantially similar in effect to Section 203 of the DGCL. The anti-takeover provisions in the Charter
prohibit us from engaging in a business combination, such as a merger, with a person or group owning 15% or more of our voting stock for a period of three years
prohibit us from engaging in a business combination, such as a merger, with a person or group owning 15% or more of our voting stock for a period of three years
following the date the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person
following the date the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person
became an interested stockholder is approved in a prescribed manner. The Charter includes specified exceptions from anti-takeover provisions, which provide that
became an interested stockholder is approved in a prescribed manner. The Charter includes specified exceptions from anti-takeover provisions, which provide that
(i) in certain circumstances (as described below), Davidson Kempner Capital Management LP, The Gores Group, LLC and their respective affiliates or associates
(i) in certain circumstances (as described below), Davidson Kempner Capital Management LP, The Gores Group, LLC and their respective affiliates or associates
(the “Grandfathered Stockholders”), and (ii) any person who would otherwise be an interested stockholder because of a transfer, assignment, conveyance,
(the “Grandfathered Stockholders”), and (ii) any person who would otherwise be an interested stockholder because of a transfer, assignment, conveyance,
hypothecation, encumbrance or other disposition of 5% or more of our outstanding voting stock by any Grandfathered Stockholder to such person will be excluded
hypothecation, encumbrance or other disposition of 5% or more of our outstanding voting stock by any Grandfathered Stockholder to such person will be excluded
anniversary thereof, each Grandfathered Stockholder is permitted to own any amount less than 20% of our outstanding voting stock and will not be deemed an
anniversary thereof, each Grandfathered Stockholder is permitted to own any amount less than 20% of our outstanding voting stock and will not be deemed an
interested stockholder unless such Grandfathered Stockholder’s ownership level meets or exceeds 20% of our outstanding voting stock during such three-year
interested stockholder unless such Grandfathered Stockholder’s ownership level meets or exceeds 20% of our outstanding voting stock during such three-year
period. From and after the third anniversary of the closing date of the Merger, each Grandfathered Stockholder is permitted to continue owning its respective
period. From and after the third anniversary of the closing date of the Merger, each Grandfathered Stockholder is permitted to continue owning its respective
ownership amount that it owns, together with its affiliates and associates, on such anniversary and will not be deemed an interested stockholder unless such
ownership amount that it owns, together with its affiliates and associates, on such anniversary and will not be deemed an interested stockholder unless such
Grandfathered Stockholder’s ownership level later exceeds such ownership amount of our outstanding voting stock. Moreover, each Grandfathered Stockholder,
Grandfathered Stockholder’s ownership level later exceeds such ownership amount of our outstanding voting stock. Moreover, each Grandfathered Stockholder,
together with its affiliates and associates, may reduce its ownership amount at any time from and after the third anniversary of the effective time of the Merger;
together with its affiliates and associates, may reduce its ownership amount at any time from and after the third anniversary of the effective time of the Merger;
provided that, if such Grandfathered Stockholder reduces its ownership amount below the ownership amount of such Grandfathered Stockholder that exists on the
provided that, if such Grandfathered Stockholder reduces its ownership amount below the ownership amount of such Grandfathered Stockholder that exists on the
While these provisions have the effect of encouraging persons seeking to acquire control of us to negotiate with our Board, they could enable the Board to hinder
While these provisions have the effect of encouraging persons seeking to acquire control of us to negotiate with our Board, they could enable the Board to hinder
or frustrate a transaction that some, or a majority, of the stockholders might believe to be in their best interests and, in that case, may prevent or discourage
or frustrate a transaction that some, or a majority, of the stockholders might believe to be in their best interests and, in that case, may prevent or discourage
attempts to remove and replace incumbent directors.
attempts to remove and replace incumbent directors.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for
stockholders to replace members of our Board, which is responsible for appointing the members of our management.
stockholders to replace members of our Board, which is responsible for appointing the members of our management.
Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on us and
Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on us and
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met.
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not
occur or that all control issues and instances of fraud will be detected. Therefore, our internal control over financial reporting will not prevent or detect all errors
occur or that all control issues and instances of fraud will be detected. Therefore, our internal control over financial reporting will not prevent or detect all errors
Ensuring that the Company has adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely
Ensuring that the Company has adequate internal financial and accounting controls and procedures in place to produce accurate financial statements on a timely
basis is a costly and time-consuming effort that needs to be reevaluated frequently. Implementing appropriate changes to the internal controls of the Company may
basis is a costly and time-consuming effort that needs to be reevaluated frequently. Implementing appropriate changes to the internal controls of the Company may
take a significant period of time to complete, may distract directors, officers and employees, and may entail substantial costs in order to modify existing accounting
take a significant period of time to complete, may distract directors, officers and employees, and may entail substantial costs in order to modify existing accounting
our stock price.
our stock price.
and all fraud.
and all fraud.
systems.
systems.
20
20
Item 2. Properties
Item 2. Properties
PART II
PART II
We have a broad network of distribution and manufacturing operations across 149 facilities in 18 states throughout the eastern, southern and western United
We have a broad network of distribution and manufacturing operations across 149 facilities in 18 states throughout the eastern, southern and western United
States. These branches are supported from our headquarters in Atlanta, Georgia and our main operating center in Raleigh, North Carolina. Many of our operations
States. These branches are supported from our headquarters in Atlanta, Georgia and our main operating center in Raleigh, North Carolina. Many of our operations
are co-located within a single facility: we have 101 distribution operations, 48 millwork fabrication operations, 51 structural component fabrication operations, and
are co-located within a single facility: we have 101 distribution operations, 48 millwork fabrication operations, 51 structural component fabrication operations, and
8 flooring distribution operations.
8 flooring distribution operations.
Distribution facilities generally include five to 25 acres of outside storage, a 30,000 to 60,000 square foot warehouse, office and product display space, and 15,000
Distribution facilities generally include five to 25 acres of outside storage, a 30,000 to 60,000 square foot warehouse, office and product display space, and 15,000
to 30,000 square feet of covered storage. The outside area provides space for lumber storage and a staging area for delivery while the warehouse stores millwork,
to 30,000 square feet of covered storage. The outside area provides space for lumber storage and a staging area for delivery while the warehouse stores millwork,
doors and windows. The distribution facilities are usually located in industrial areas with low cost real estate and easy access to freeways to maximize distribution
doors and windows. The distribution facilities are usually located in industrial areas with low cost real estate and easy access to freeways to maximize distribution
efficiency and convenience. In most markets, at least one of the distribution facilities is situated on a rail line to facilitate the procurement of dimensional lumber in
efficiency and convenience. In most markets, at least one of the distribution facilities is situated on a rail line to facilitate the procurement of dimensional lumber in
rail car quantities and minimize our cost of goods.
rail car quantities and minimize our cost of goods.
Our fabrication operations produce roof and floor trusses, wall panels, pre-cut engineered wood, stairs, windows, pre-hung interior and exterior doors and custom
Our fabrication operations produce roof and floor trusses, wall panels, pre-cut engineered wood, stairs, windows, pre-hung interior and exterior doors and custom
millwork. In most cases, they are located on the same premises as our distribution facilities, which facilitates the efficient distribution of product to customers.
millwork. In most cases, they are located on the same premises as our distribution facilities, which facilitates the efficient distribution of product to customers.
Millwork fabrication operations typically vary in size from 5,000 to 50,000 square feet of warehouse space to accommodate fabrication lines and the storage of
Millwork fabrication operations typically vary in size from 5,000 to 50,000 square feet of warehouse space to accommodate fabrication lines and the storage of
base components and finished goods. Structural component fabrication operations vary in size from 20,000 to 50,000 square feet with five to 25 acres of outside
base components and finished goods. Structural component fabrication operations vary in size from 20,000 to 50,000 square feet with five to 25 acres of outside
storage for lumber and for finished goods.
storage for lumber and for finished goods.
As of January 31, 2018 , we lease 95 facilities, including our corporate and branch support offices, and own 54 facilities. Many of our leases are non-cancellable
As of January 31, 2018 , we lease 95 facilities, including our corporate and branch support offices, and own 54 facilities. Many of our leases are non-cancellable
and typically have an initial operating lease term of five to ten years and most provide options to renew for specified periods of time. A majority of our leases
and typically have an initial operating lease term of five to ten years and most provide options to renew for specified periods of time. A majority of our leases
provide for fixed annual rentals. Certain of our leases include provisions for escalating rent, as an example, based on changes in the consumer price index. Most of
provide for fixed annual rentals. Certain of our leases include provisions for escalating rent, as an example, based on changes in the consumer price index. Most of
the leases require us to pay taxes, insurance and maintenance expenses associated with the properties.
the leases require us to pay taxes, insurance and maintenance expenses associated with the properties.
Item 3. Legal Proceedings
Item 3. Legal Proceedings
We are currently involved in various claims, legal proceedings and lawsuits incidental to the conduct of our business in the ordinary course. We are a defendant in
We are currently involved in various claims, legal proceedings and lawsuits incidental to the conduct of our business in the ordinary course. We are a defendant in
various pending lawsuits, legal proceedings and claims arising from assertions of alleged product liability, warranty, casualty, construction defect, contract, tort,
various pending lawsuits, legal proceedings and claims arising from assertions of alleged product liability, warranty, casualty, construction defect, contract, tort,
employment and other claims. We carry insurance in such amounts in excess of our self-insurance retentions and/or deductibles as we believe to be reasonable
employment and other claims. We carry insurance in such amounts in excess of our self-insurance retentions and/or deductibles as we believe to be reasonable
under the circumstances although insurance may or may not cover any or all of our liabilities in respect of claims and lawsuits. We do not believe that the ultimate
under the circumstances although insurance may or may not cover any or all of our liabilities in respect of claims and lawsuits. We do not believe that the ultimate
resolution of these matters will have a material adverse effect on our consolidated financial position, cash flows or operating results.
resolution of these matters will have a material adverse effect on our consolidated financial position, cash flows or operating results.
On August 30, 2017, Region 10 of the U.S. Environmental Protection Agency (the “EPA”) sent a notice of intent to us, alleging certain violations of the Clean
On August 30, 2017, Region 10 of the U.S. Environmental Protection Agency (the “EPA”) sent a notice of intent to us, alleging certain violations of the Clean
Water Act with respect to industrial stormwater permitting regarding monitoring, inspections, benchmarks and record keeping at our Everett, Washington facility.
Water Act with respect to industrial stormwater permitting regarding monitoring, inspections, benchmarks and record keeping at our Everett, Washington facility.
The EPA asserted that the alleged violations may subject us to administrative or civil penalties. On January 9, 2018, the Company and the EPA reached a
The EPA asserted that the alleged violations may subject us to administrative or civil penalties. On January 9, 2018, the Company and the EPA reached a
settlement in an amount of less than $0.1 million. A consent agreement is being prepared and, once finalized, the EPA will publish notice of the Consent
settlement in an amount of less than $0.1 million. A consent agreement is being prepared and, once finalized, the EPA will publish notice of the Consent
Agreement for a 30-day comment period.
Agreement for a 30-day comment period.
Item 4. Mine Safety Disclosures
Item 4. Mine Safety Disclosures
Not applicable.
Not applicable.
2017
2017
First quarter
First quarter
Second quarter
Second quarter
Third quarter
Third quarter
Fourth quarter
Fourth quarter
2016
2016
First quarter
First quarter
Second quarter
Second quarter
Third quarter
Third quarter
Fourth quarter
Fourth quarter
Holders of Record
Holders of Record
Dividend Policy
Dividend Policy
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information for Common Stock
Market Information for Common Stock
stock for the periods indicated:
stock for the periods indicated:
Our common stock is traded on the Nasdaq Stock Market under the symbol “BMCH”. The table below sets forth the high and low sales prices of our common
Our common stock is traded on the Nasdaq Stock Market under the symbol “BMCH”. The table below sets forth the high and low sales prices of our common
High
High
$23.10
$23.10
$23.90
$23.90
$22.55
$22.55
$25.70
$25.70
$17.06
$17.06
$19.99
$19.99
$21.50
$21.50
$20.15
$20.15
Low
Low
$17.45
$17.45
$19.27
$19.27
$18.20
$18.20
$20.10
$20.10
$12.14
$12.14
$16.01
$16.01
$17.34
$17.34
$15.45
$15.45
As of January 31, 2018 , there were approximately 80 stockholders of record of our common stock. Because many of our shares of common stock are held by
As of January 31, 2018 , there were approximately 80 stockholders of record of our common stock. Because many of our shares of common stock are held by
brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners represented by these record holders.
brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners represented by these record holders.
We do not plan to pay a regular dividend on our common stock. The declaration and payment of all future dividends, if any, will be at the discretion of our Board
We do not plan to pay a regular dividend on our common stock. The declaration and payment of all future dividends, if any, will be at the discretion of our Board
and will depend upon our financial condition, earnings, contractual conditions, restrictions imposed by the Credit Agreement and Indenture or the agreements
and will depend upon our financial condition, earnings, contractual conditions, restrictions imposed by the Credit Agreement and Indenture or the agreements
governing any indebtedness we may incur in the future, applicable laws and other factors that our Board may deem relevant.
governing any indebtedness we may incur in the future, applicable laws and other factors that our Board may deem relevant.
Securities Authorized for Issuance Under Equity Compensation Plans
Securities Authorized for Issuance Under Equity Compensation Plans
For information on securities authorized for issuance under our equity compensation plans, see "Item 12. Security Ownership of Certain Beneficial Owners and
For information on securities authorized for issuance under our equity compensation plans, see "Item 12. Security Ownership of Certain Beneficial Owners and
Management."
Management."
22
22
23
23
We have a broad network of distribution and manufacturing operations across 149 facilities in 18 states throughout the eastern, southern and western United
We have a broad network of distribution and manufacturing operations across 149 facilities in 18 states throughout the eastern, southern and western United
States. These branches are supported from our headquarters in Atlanta, Georgia and our main operating center in Raleigh, North Carolina. Many of our operations
States. These branches are supported from our headquarters in Atlanta, Georgia and our main operating center in Raleigh, North Carolina. Many of our operations
are co-located within a single facility: we have 101 distribution operations, 48 millwork fabrication operations, 51 structural component fabrication operations, and
are co-located within a single facility: we have 101 distribution operations, 48 millwork fabrication operations, 51 structural component fabrication operations, and
8 flooring distribution operations.
8 flooring distribution operations.
Distribution facilities generally include five to 25 acres of outside storage, a 30,000 to 60,000 square foot warehouse, office and product display space, and 15,000
Distribution facilities generally include five to 25 acres of outside storage, a 30,000 to 60,000 square foot warehouse, office and product display space, and 15,000
to 30,000 square feet of covered storage. The outside area provides space for lumber storage and a staging area for delivery while the warehouse stores millwork,
to 30,000 square feet of covered storage. The outside area provides space for lumber storage and a staging area for delivery while the warehouse stores millwork,
doors and windows. The distribution facilities are usually located in industrial areas with low cost real estate and easy access to freeways to maximize distribution
doors and windows. The distribution facilities are usually located in industrial areas with low cost real estate and easy access to freeways to maximize distribution
efficiency and convenience. In most markets, at least one of the distribution facilities is situated on a rail line to facilitate the procurement of dimensional lumber in
efficiency and convenience. In most markets, at least one of the distribution facilities is situated on a rail line to facilitate the procurement of dimensional lumber in
rail car quantities and minimize our cost of goods.
rail car quantities and minimize our cost of goods.
Our fabrication operations produce roof and floor trusses, wall panels, pre-cut engineered wood, stairs, windows, pre-hung interior and exterior doors and custom
Our fabrication operations produce roof and floor trusses, wall panels, pre-cut engineered wood, stairs, windows, pre-hung interior and exterior doors and custom
millwork. In most cases, they are located on the same premises as our distribution facilities, which facilitates the efficient distribution of product to customers.
millwork. In most cases, they are located on the same premises as our distribution facilities, which facilitates the efficient distribution of product to customers.
Millwork fabrication operations typically vary in size from 5,000 to 50,000 square feet of warehouse space to accommodate fabrication lines and the storage of
Millwork fabrication operations typically vary in size from 5,000 to 50,000 square feet of warehouse space to accommodate fabrication lines and the storage of
base components and finished goods. Structural component fabrication operations vary in size from 20,000 to 50,000 square feet with five to 25 acres of outside
base components and finished goods. Structural component fabrication operations vary in size from 20,000 to 50,000 square feet with five to 25 acres of outside
storage for lumber and for finished goods.
storage for lumber and for finished goods.
As of January 31, 2018 , we lease 95 facilities, including our corporate and branch support offices, and own 54 facilities. Many of our leases are non-cancellable
As of January 31, 2018 , we lease 95 facilities, including our corporate and branch support offices, and own 54 facilities. Many of our leases are non-cancellable
and typically have an initial operating lease term of five to ten years and most provide options to renew for specified periods of time. A majority of our leases
and typically have an initial operating lease term of five to ten years and most provide options to renew for specified periods of time. A majority of our leases
provide for fixed annual rentals. Certain of our leases include provisions for escalating rent, as an example, based on changes in the consumer price index. Most of
provide for fixed annual rentals. Certain of our leases include provisions for escalating rent, as an example, based on changes in the consumer price index. Most of
the leases require us to pay taxes, insurance and maintenance expenses associated with the properties.
the leases require us to pay taxes, insurance and maintenance expenses associated with the properties.
Item 3. Legal Proceedings
Item 3. Legal Proceedings
We are currently involved in various claims, legal proceedings and lawsuits incidental to the conduct of our business in the ordinary course. We are a defendant in
We are currently involved in various claims, legal proceedings and lawsuits incidental to the conduct of our business in the ordinary course. We are a defendant in
various pending lawsuits, legal proceedings and claims arising from assertions of alleged product liability, warranty, casualty, construction defect, contract, tort,
various pending lawsuits, legal proceedings and claims arising from assertions of alleged product liability, warranty, casualty, construction defect, contract, tort,
employment and other claims. We carry insurance in such amounts in excess of our self-insurance retentions and/or deductibles as we believe to be reasonable
employment and other claims. We carry insurance in such amounts in excess of our self-insurance retentions and/or deductibles as we believe to be reasonable
under the circumstances although insurance may or may not cover any or all of our liabilities in respect of claims and lawsuits. We do not believe that the ultimate
under the circumstances although insurance may or may not cover any or all of our liabilities in respect of claims and lawsuits. We do not believe that the ultimate
resolution of these matters will have a material adverse effect on our consolidated financial position, cash flows or operating results.
resolution of these matters will have a material adverse effect on our consolidated financial position, cash flows or operating results.
On August 30, 2017, Region 10 of the U.S. Environmental Protection Agency (the “EPA”) sent a notice of intent to us, alleging certain violations of the Clean
On August 30, 2017, Region 10 of the U.S. Environmental Protection Agency (the “EPA”) sent a notice of intent to us, alleging certain violations of the Clean
Water Act with respect to industrial stormwater permitting regarding monitoring, inspections, benchmarks and record keeping at our Everett, Washington facility.
Water Act with respect to industrial stormwater permitting regarding monitoring, inspections, benchmarks and record keeping at our Everett, Washington facility.
The EPA asserted that the alleged violations may subject us to administrative or civil penalties. On January 9, 2018, the Company and the EPA reached a
The EPA asserted that the alleged violations may subject us to administrative or civil penalties. On January 9, 2018, the Company and the EPA reached a
settlement in an amount of less than $0.1 million. A consent agreement is being prepared and, once finalized, the EPA will publish notice of the Consent
settlement in an amount of less than $0.1 million. A consent agreement is being prepared and, once finalized, the EPA will publish notice of the Consent
Agreement for a 30-day comment period.
Agreement for a 30-day comment period.
Item 4. Mine Safety Disclosures
Item 4. Mine Safety Disclosures
Not applicable.
Not applicable.
Item 2. Properties
Item 2. Properties
PART II
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information for Common Stock
Market Information for Common Stock
Our common stock is traded on the Nasdaq Stock Market under the symbol “BMCH”. The table below sets forth the high and low sales prices of our common
Our common stock is traded on the Nasdaq Stock Market under the symbol “BMCH”. The table below sets forth the high and low sales prices of our common
stock for the periods indicated:
stock for the periods indicated:
2017
2017
First quarter
First quarter
Second quarter
Second quarter
Third quarter
Third quarter
Fourth quarter
Fourth quarter
2016
2016
First quarter
First quarter
Second quarter
Second quarter
Third quarter
Third quarter
Fourth quarter
Fourth quarter
Holders of Record
Holders of Record
High
High
$23.10
$23.10
$23.90
$23.90
$22.55
$22.55
$25.70
$25.70
$17.06
$17.06
$19.99
$19.99
$21.50
$21.50
$20.15
$20.15
Low
Low
$17.45
$17.45
$19.27
$19.27
$18.20
$18.20
$20.10
$20.10
$12.14
$12.14
$16.01
$16.01
$17.34
$17.34
$15.45
$15.45
As of January 31, 2018 , there were approximately 80 stockholders of record of our common stock. Because many of our shares of common stock are held by
As of January 31, 2018 , there were approximately 80 stockholders of record of our common stock. Because many of our shares of common stock are held by
brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners represented by these record holders.
brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners represented by these record holders.
Dividend Policy
Dividend Policy
We do not plan to pay a regular dividend on our common stock. The declaration and payment of all future dividends, if any, will be at the discretion of our Board
We do not plan to pay a regular dividend on our common stock. The declaration and payment of all future dividends, if any, will be at the discretion of our Board
and will depend upon our financial condition, earnings, contractual conditions, restrictions imposed by the Credit Agreement and Indenture or the agreements
and will depend upon our financial condition, earnings, contractual conditions, restrictions imposed by the Credit Agreement and Indenture or the agreements
governing any indebtedness we may incur in the future, applicable laws and other factors that our Board may deem relevant.
governing any indebtedness we may incur in the future, applicable laws and other factors that our Board may deem relevant.
Securities Authorized for Issuance Under Equity Compensation Plans
Securities Authorized for Issuance Under Equity Compensation Plans
For information on securities authorized for issuance under our equity compensation plans, see "Item 12. Security Ownership of Certain Beneficial Owners and
For information on securities authorized for issuance under our equity compensation plans, see "Item 12. Security Ownership of Certain Beneficial Owners and
Management."
Management."
22
22
23
23
Stock Performance Graph
Stock Performance Graph
Item 6. Selected Financial Data
Item 6. Selected Financial Data
The following graph shows a comparison from August 9, 2013 (the date trading commenced on our common stock on the Nasdaq) through December 31, 2017 of
The following graph shows a comparison from August 9, 2013 (the date trading commenced on our common stock on the Nasdaq) through December 31, 2017 of
the cumulative return for our common stock, the Russell 2000 Index and the S&P 600 Building Products Index (ticker symbol "^SP600-201020"). The graph tracks
the cumulative return for our common stock, the Russell 2000 Index and the S&P 600 Building Products Index (ticker symbol "^SP600-201020"). The graph tracks
the performance of a $100 investment in our common stock and in each of the indices (with the reinvestment of dividends).
the performance of a $100 investment in our common stock and in each of the indices (with the reinvestment of dividends).
24
24
On December 1, 2015, BMHC and SBS completed the Merger. As the Merger constituted a reverse acquisition for accounting purposes under generally accepted
On December 1, 2015, BMHC and SBS completed the Merger. As the Merger constituted a reverse acquisition for accounting purposes under generally accepted
accounting principles in the United States, the historical financial statements of the Company reflect only the operations and financial condition of BMHC. The
accounting principles in the United States, the historical financial statements of the Company reflect only the operations and financial condition of BMHC. The
operating results of SBS are reported as part of the Company beginning on the closing date of the Merger. The selected consolidated financial data as of December
operating results of SBS are reported as part of the Company beginning on the closing date of the Merger. The selected consolidated financial data as of December
31, 2017 and 2016 and for the years ended December 31, 2017 , 2016 and 2015 have been derived from our audited consolidated financial statements included as
31, 2017 and 2016 and for the years ended December 31, 2017 , 2016 and 2015 have been derived from our audited consolidated financial statements included as
Item 8 of this Annual Report on Form 10-K. Selected consolidated financial data as of December 31, 2015 , 2014 and 2013 and for the years ended December 31,
Item 8 of this Annual Report on Form 10-K. Selected consolidated financial data as of December 31, 2015 , 2014 and 2013 and for the years ended December 31,
2014 and 2013 were derived from BMHC's consolidated financial statements, which are not included herein.
2014 and 2013 were derived from BMHC's consolidated financial statements, which are not included herein.
The following data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in
The following data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in
Item 7 of this Annual Report on Form 10-K and with our consolidated financial statements and related notes included as Item 8 of this Annual Report on Form 10-
Item 7 of this Annual Report on Form 10-K and with our consolidated financial statements and related notes included as Item 8 of this Annual Report on Form 10-
K:
K:
(in thousands, except per share data)
(in thousands, except per share data)
Statement of operations data:
Statement of operations data:
Net sales
Net sales
Gross profit
Gross profit
Selling, general and administrative expenses
Selling, general and administrative expenses
Net income (loss)
Net income (loss)
Net income (loss) per share - basic
Net income (loss) per share - basic
Net income (loss) per share - diluted
Net income (loss) per share - diluted
Statement of cash flows data:
Statement of cash flows data:
Net cash provided by (used in):
Net cash provided by (used in):
Operating activities
Operating activities
Investing activities
Investing activities
Financing activities
Financing activities
Other financial data:
Other financial data:
Depreciation and amortization
Depreciation and amortization
Capital expenditures
Capital expenditures
Balance sheet data (at period end):
Balance sheet data (at period end):
Total current assets
Total current assets
$
$
$
$
$
$
$
$
2017
2017
2016
2016
2015
2015
2014
2014
2013
2013
Year Ended December 31,
Year Ended December 31,
$
$
3,365,968 $
3,365,968 $
3,093,743 $
3,093,743 $
1,576,746 $
1,576,746 $
1,311,498 $
1,311,498 $
1,210,156
1,210,156
795,515
795,515
619,546
619,546
57,425
57,425
741,965
741,965
571,799
571,799
30,880
30,880
361,410
361,410
306,843
306,843
(4,831)
(4,831)
295,074
295,074
229,316
229,316
94,032
94,032
0.86
0.86
0.85 $
0.85 $
0.47
0.47
0.46 $
0.46 $
(0.12)
(0.12)
(0.12) $
(0.12) $
2.42
2.42
2.39 $
2.39 $
256,547
256,547
200,588
200,588
21,655
21,655
0.57
0.57
0.56
0.56
93,934 $
93,934 $
106,888 $
106,888 $
743 $
743 $
30,732 $
30,732 $
(88,271)
(88,271)
(2,830)
(2,830)
(33,729)
(33,729)
(65,331)
(65,331)
(135,076)
(135,076)
72,160
72,160
(16,262)
(16,262)
(424)
(424)
15,357
15,357
(63,999)
(63,999)
96,098
96,098
69,217 $
69,217 $
63,278
63,278
68,680 $
68,680 $
38,067
38,067
24,589 $
24,589 $
31,319
31,319
15,457 $
15,457 $
28,275
28,275
13,767
13,767
15,057
15,057
Property and equipment, net of accumulated depreciation
Property and equipment, net of accumulated depreciation
295,820
295,820
286,741
286,741
295,978
295,978
Total debt and capital lease obligations (including current
Total debt and capital lease obligations (including current
Total assets
Total assets
portion)
portion)
Total stockholders' equity
Total stockholders' equity
1,473,350
1,473,350
1,395,014
1,395,014
1,371,139
1,371,139
371,636
371,636
746,899
746,899
376,563
376,563
680,601
680,601
426,840
426,840
628,932
628,932
140,435
140,435
581,853
581,853
263,449
263,449
179,078
179,078
323,262
323,262
122,930
122,930
459,805
459,805
257,276
257,276
82,229
82,229
734,137 $
734,137 $
666,942 $
666,942 $
613,960 $
613,960 $
358,095 $
358,095 $
25
25
Stock Performance Graph
Stock Performance Graph
Item 6. Selected Financial Data
Item 6. Selected Financial Data
The following graph shows a comparison from August 9, 2013 (the date trading commenced on our common stock on the Nasdaq) through December 31, 2017 of
The following graph shows a comparison from August 9, 2013 (the date trading commenced on our common stock on the Nasdaq) through December 31, 2017 of
the cumulative return for our common stock, the Russell 2000 Index and the S&P 600 Building Products Index (ticker symbol "^SP600-201020"). The graph tracks
the cumulative return for our common stock, the Russell 2000 Index and the S&P 600 Building Products Index (ticker symbol "^SP600-201020"). The graph tracks
the performance of a $100 investment in our common stock and in each of the indices (with the reinvestment of dividends).
the performance of a $100 investment in our common stock and in each of the indices (with the reinvestment of dividends).
On December 1, 2015, BMHC and SBS completed the Merger. As the Merger constituted a reverse acquisition for accounting purposes under generally accepted
On December 1, 2015, BMHC and SBS completed the Merger. As the Merger constituted a reverse acquisition for accounting purposes under generally accepted
accounting principles in the United States, the historical financial statements of the Company reflect only the operations and financial condition of BMHC. The
accounting principles in the United States, the historical financial statements of the Company reflect only the operations and financial condition of BMHC. The
operating results of SBS are reported as part of the Company beginning on the closing date of the Merger. The selected consolidated financial data as of December
operating results of SBS are reported as part of the Company beginning on the closing date of the Merger. The selected consolidated financial data as of December
31, 2017 and 2016 and for the years ended December 31, 2017 , 2016 and 2015 have been derived from our audited consolidated financial statements included as
31, 2017 and 2016 and for the years ended December 31, 2017 , 2016 and 2015 have been derived from our audited consolidated financial statements included as
Item 8 of this Annual Report on Form 10-K. Selected consolidated financial data as of December 31, 2015 , 2014 and 2013 and for the years ended December 31,
Item 8 of this Annual Report on Form 10-K. Selected consolidated financial data as of December 31, 2015 , 2014 and 2013 and for the years ended December 31,
2014 and 2013 were derived from BMHC's consolidated financial statements, which are not included herein.
2014 and 2013 were derived from BMHC's consolidated financial statements, which are not included herein.
The following data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in
The following data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in
Item 7 of this Annual Report on Form 10-K and with our consolidated financial statements and related notes included as Item 8 of this Annual Report on Form 10-
Item 7 of this Annual Report on Form 10-K and with our consolidated financial statements and related notes included as Item 8 of this Annual Report on Form 10-
K:
K:
24
24
(in thousands, except per share data)
(in thousands, except per share data)
Statement of operations data:
Statement of operations data:
Net sales
Net sales
Gross profit
Gross profit
Selling, general and administrative expenses
Selling, general and administrative expenses
Net income (loss)
Net income (loss)
Net income (loss) per share - basic
Net income (loss) per share - basic
Net income (loss) per share - diluted
Net income (loss) per share - diluted
Statement of cash flows data:
Statement of cash flows data:
Net cash provided by (used in):
Net cash provided by (used in):
Operating activities
Operating activities
Investing activities
Investing activities
Financing activities
Financing activities
Other financial data:
Other financial data:
Depreciation and amortization
Depreciation and amortization
Capital expenditures
Capital expenditures
Balance sheet data (at period end):
Balance sheet data (at period end):
Total current assets
Total current assets
2017
2017
2016
2016
2015
2015
2014
2014
2013
2013
Year Ended December 31,
Year Ended December 31,
$
$
3,365,968 $
3,365,968 $
3,093,743 $
3,093,743 $
1,576,746 $
1,576,746 $
1,311,498 $
1,311,498 $
1,210,156
1,210,156
795,515
795,515
619,546
619,546
57,425
57,425
741,965
741,965
571,799
571,799
30,880
30,880
361,410
361,410
306,843
306,843
(4,831)
(4,831)
295,074
295,074
229,316
229,316
94,032
94,032
0.86
0.86
0.85 $
0.85 $
0.47
0.47
0.46 $
0.46 $
(0.12)
(0.12)
(0.12) $
(0.12) $
2.42
2.42
2.39 $
2.39 $
256,547
256,547
200,588
200,588
21,655
21,655
0.57
0.57
0.56
0.56
93,934 $
93,934 $
106,888 $
106,888 $
743 $
743 $
30,732 $
30,732 $
(88,271)
(88,271)
(2,830)
(2,830)
(33,729)
(33,729)
(65,331)
(65,331)
(135,076)
(135,076)
72,160
72,160
(16,262)
(16,262)
(424)
(424)
15,357
15,357
(63,999)
(63,999)
96,098
96,098
69,217 $
69,217 $
63,278
63,278
68,680 $
68,680 $
38,067
38,067
24,589 $
24,589 $
31,319
31,319
15,457 $
15,457 $
28,275
28,275
13,767
13,767
15,057
15,057
$
$
$
$
$
$
$
$
734,137 $
734,137 $
666,942 $
666,942 $
613,960 $
613,960 $
358,095 $
358,095 $
Property and equipment, net of accumulated depreciation
Property and equipment, net of accumulated depreciation
295,820
295,820
286,741
286,741
295,978
295,978
Total assets
Total assets
1,473,350
1,473,350
1,395,014
1,395,014
1,371,139
1,371,139
Total debt and capital lease obligations (including current
Total debt and capital lease obligations (including current
portion)
portion)
Total stockholders' equity
Total stockholders' equity
371,636
371,636
746,899
746,899
376,563
376,563
680,601
680,601
426,840
426,840
628,932
628,932
140,435
140,435
581,853
581,853
263,449
263,449
179,078
179,078
25
25
323,262
323,262
122,930
122,930
459,805
459,805
257,276
257,276
82,229
82,229
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The
following
discussion
and
analysis
should
be
read
in
conjunction
with
Item
6.
“Selected
Financial
Data”
and
our
consolidated
financial
statements
and
the
The
following
discussion
and
analysis
should
be
read
in
conjunction
with
Item
6.
“Selected
Financial
Data”
and
our
consolidated
financial
statements
and
the
related
notes
to
those
statements
included
in
Item
8.
“Financial
Statements
and
Supplementary
Data.”
The
following
discussion
contains,
in
addition
to
historical
related
notes
to
those
statements
included
in
Item
8.
“Financial
Statements
and
Supplementary
Data.”
The
following
discussion
contains,
in
addition
to
historical
information,
forward-looking
statements
that
involve
risks,
uncertainties
and
assumptions.
Our
actual
results
may
differ
materially
from
those
anticipated
in
these
information,
forward-looking
statements
that
involve
risks,
uncertainties
and
assumptions.
Our
actual
results
may
differ
materially
from
those
anticipated
in
these
forward-looking
statements
as
a
result
of
many
factors,
including
those
set
forth
under
the
heading
Item
1A.
“Risk
Factors”
and
elsewhere
in
this
report.
forward-looking
statements
as
a
result
of
many
factors,
including
those
set
forth
under
the
heading
Item
1A.
“Risk
Factors”
and
elsewhere
in
this
report.
Overview
Overview
On December 1, 2015, SBS completed the Merger with privately-held BMHC in accordance with the terms of the Merger Agreement, pursuant to which BMHC
On December 1, 2015, SBS completed the Merger with privately-held BMHC in accordance with the terms of the Merger Agreement, pursuant to which BMHC
merged with and into SBS. SBS survived the Merger and in connection therewith changed its name to “BMC Stock Holdings, Inc.” The financial statements
merged with and into SBS. SBS survived the Merger and in connection therewith changed its name to “BMC Stock Holdings, Inc.” The financial statements
represent the financial statements of BMC Stock Holdings, Inc. and its subsidiaries.
represent the financial statements of BMC Stock Holdings, Inc. and its subsidiaries.
Under generally accepted accounting principles in the United States, the Merger was treated as a “reverse merger” under the acquisition method of accounting. For
Under generally accepted accounting principles in the United States, the Merger was treated as a “reverse merger” under the acquisition method of accounting. For
accounting purposes, BMHC is considered to have acquired SBS. Consequently, the historical financial statements of the Company reflect only the operations and
accounting purposes, BMHC is considered to have acquired SBS. Consequently, the historical financial statements of the Company reflect only the operations and
financial condition of BMHC prior to the Merger. The operating results of SBS are included as part of the Company's reported results beginning on the closing date
financial condition of BMHC prior to the Merger. The operating results of SBS are included as part of the Company's reported results beginning on the closing date
of the Merger.
of the Merger.
We are one of the leading providers of diversified building products and services in the U.S. residential construction market. Our objective is to provide best-in-
We are one of the leading providers of diversified building products and services in the U.S. residential construction market. Our objective is to provide best-in-
class customer service and value-added products to our customers, which are primarily single- and multi-family home builders and professional remodelers. Our
class customer service and value-added products to our customers, which are primarily single- and multi-family home builders and professional remodelers. Our
product offerings include lumber and lumber sheet goods and an array of value-added products including millwork, doors, windows and structural components
product offerings include lumber and lumber sheet goods and an array of value-added products including millwork, doors, windows and structural components
such as EWP, floor and roof trusses and wall panels. Our whole-house framing solution, Ready-Frame
®,
which is one of our fastest growing product offerings,
such as EWP, floor and roof trusses and wall panels. Our whole-house framing solution, Ready-Frame
®,
which is one of our fastest growing product offerings,
saves builders both time and money and improves job site safety. We also offer our customers important services such as design, product specification, installation
saves builders both time and money and improves job site safety. We also offer our customers important services such as design, product specification, installation
and installation management.
and installation management.
respectively.
respectively.
As part of our initiatives to execute our strategic plan, including growing our value-added product and service offerings and expanding our presence in the
As part of our initiatives to execute our strategic plan, including growing our value-added product and service offerings and expanding our presence in the
professional remodeling space, we plan to expand our business through organic and acquisitive means. The 18 states in which we operate accounted for
professional remodeling space, we plan to expand our business through organic and acquisitive means. The 18 states in which we operate accounted for
approximately 65% of 2017 U.S. single-family housing permits according to the U.S. Census Bureau. In these 18 states, we operate in 43 metropolitan areas,
approximately 65% of 2017 U.S. single-family housing permits according to the U.S. Census Bureau. In these 18 states, we operate in 43 metropolitan areas,
which accounted for approximately half of the permits issued in those states, according to the U.S. Census Bureau, providing significant opportunity for growth.
which accounted for approximately half of the permits issued in those states, according to the U.S. Census Bureau, providing significant opportunity for growth.
Our net sales for the year ended December 31, 2017 increased 8.8% compared to the year ended December 31, 2016 . We estimate net sales increased 2.8% due to
Our net sales for the year ended December 31, 2017 increased 8.8% compared to the year ended December 31, 2016 . We estimate net sales increased 2.8% due to
organic sales volume, 1.8% due to the acquisitions of Code Plus Components, LLC ("Code Plus") and Texas Plywood & Lumber Company, Inc. ("TexPly") and
organic sales volume, 1.8% due to the acquisitions of Code Plus Components, LLC ("Code Plus") and Texas Plywood & Lumber Company, Inc. ("TexPly") and
4.2% due to commodity price inflation. Our gross margin was 23.6% for the year ended December 31, 2017 compared to 24.0% for the prior year period. We
4.2% due to commodity price inflation. Our gross margin was 23.6% for the year ended December 31, 2017 compared to 24.0% for the prior year period. We
recorded income from operations of $101.2 million during the year ended December 31, 2017 , compared with $83.7 million during the year ended December 31,
recorded income from operations of $101.2 million during the year ended December 31, 2017 , compared with $83.7 million during the year ended December 31,
2016 . See further discussion in “-Operating Results” below.
2016 . See further discussion in “-Operating Results” below.
On September 1, 2015, BMHC purchased certain assets and assumed certain liabilities of Marietta, Georgia-based Robert Bowden Inc. ("RBI") for a purchase
On September 1, 2015, BMHC purchased certain assets and assumed certain liabilities of Marietta, Georgia-based Robert Bowden Inc. ("RBI") for a purchase
price of $102.4 million. RBI has three locations in the Atlanta, Georgia area and sells millwork and window products to homebuilders and residential contractors.
price of $102.4 million. RBI has three locations in the Atlanta, Georgia area and sells millwork and window products to homebuilders and residential contractors.
On May 1, 2015, BMHC completed the acquisition of Vidalia, Georgia-based VNS Corporation ("VNS") for a purchase price of $47.1 million. VNS has nine
On May 1, 2015, BMHC completed the acquisition of Vidalia, Georgia-based VNS Corporation ("VNS") for a purchase price of $47.1 million. VNS has nine
locations in southern Georgia and sells building materials and provides construction services in the southeastern United States.
locations in southern Georgia and sells building materials and provides construction services in the southeastern United States.
Net sales increased by approximately $54.3 million for the year ended December 31, 2017 as a result of the acquisitions of TexPly and Code Plus. For the year
Net sales increased by approximately $54.3 million for the year ended December 31, 2017 as a result of the acquisitions of TexPly and Code Plus. For the year
ended December 31, 2016, net sales increased by approximately $1.4 billion as a result of the Merger and acquisitions of RBI and VNS.
ended December 31, 2016, net sales increased by approximately $1.4 billion as a result of the Merger and acquisitions of RBI and VNS.
See Note 3 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion of our acquisitions.
See Note 3 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion of our acquisitions.
Conditions in the housing and construction market
Conditions in the housing and construction market
The building products supply and services industry is highly dependent on new single-family home and multi-family construction and repair and remodeling
The building products supply and services industry is highly dependent on new single-family home and multi-family construction and repair and remodeling
activity, which in turn are dependent upon a number of factors, including, among other things, interest rates, consumer confidence, employment rates, wage rates,
activity, which in turn are dependent upon a number of factors, including, among other things, interest rates, consumer confidence, employment rates, wage rates,
foreclosure rates, housing inventory levels, housing demand, the availability of land, local zoning and permitting processes, the availability of construction
foreclosure rates, housing inventory levels, housing demand, the availability of land, local zoning and permitting processes, the availability of construction
financing, the availability of qualified trade laborers, the health of the economy and mortgage markets and the availability of personal income tax deductions
financing, the availability of qualified trade laborers, the health of the economy and mortgage markets and the availability of personal income tax deductions
related to home ownership, some of which were limited by the 2017 Tax Act. According to the U.S. Census Bureau, single-family housing starts in the South and
related to home ownership, some of which were limited by the 2017 Tax Act. According to the U.S. Census Bureau, single-family housing starts in the South and
West regions of the United States, which are our primary operating regions, were 0.55 million, 0.60 million and 0.66 million in 2015 , 2016 and 2017 ,
West regions of the United States, which are our primary operating regions, were 0.55 million, 0.60 million and 0.66 million in 2015 , 2016 and 2017 ,
As of November 2017, Dodge Data & Analytics (formerly McGraw-Hill) forecasted that U.S. single-family housing starts will increase approximately 7% in 2018.
As of November 2017, Dodge Data & Analytics (formerly McGraw-Hill) forecasted that U.S. single-family housing starts will increase approximately 7% in 2018.
Additionally, the S&P Corelogic Case-Shiller Home Price Index, a leading measure of pricing for the U.S. residential housing market, has increased on a year-
Additionally, the S&P Corelogic Case-Shiller Home Price Index, a leading measure of pricing for the U.S. residential housing market, has increased on a year-
over-year basis for 67 straight months as of November 2017 and in November 2017, the index reached its highest levels ever.
over-year basis for 67 straight months as of November 2017 and in November 2017, the index reached its highest levels ever.
According to the U.S. Census Bureau, multi-family housing starts in the United States reached a low of 0.11 million in 2009, but reached levels of 0.40 million,
According to the U.S. Census Bureau, multi-family housing starts in the United States reached a low of 0.11 million in 2009, but reached levels of 0.40 million,
0.39 million and 0.35 million in 2015 , 2016 and 2017 , respectively. While this end market has receded since 2015, the multi-family space represents a significant
0.39 million and 0.35 million in 2015 , 2016 and 2017 , respectively. While this end market has receded since 2015, the multi-family space represents a significant
opportunity for us to capture additional market share and provide value-added solutions.
opportunity for us to capture additional market share and provide value-added solutions.
The professional remodeling space, when compared to new home construction, tends to be less price sensitive and more resilient to broader economic conditions.
The professional remodeling space, when compared to new home construction, tends to be less price sensitive and more resilient to broader economic conditions.
As of September 2017, the Home Improvement Research Institute estimated 2017 and 2018 U.S. sales of home maintenance, repair and improvement products to
As of September 2017, the Home Improvement Research Institute estimated 2017 and 2018 U.S. sales of home maintenance, repair and improvement products to
the professional market would reach approximately $103 billion and $106 billion, respectively, compared to sales of approximately $94 billion and $100 billion in
the professional market would reach approximately $103 billion and $106 billion, respectively, compared to sales of approximately $94 billion and $100 billion in
2015 and 2016, respectively. Several factors, including the overall age of the U.S. housing stock, rising home prices, availability of consumer capital at historically
2015 and 2016, respectively. Several factors, including the overall age of the U.S. housing stock, rising home prices, availability of consumer capital at historically
low interest rates and focus on energy efficiency may drive long-term growth in repair and remodeling expenditures.
low interest rates and focus on energy efficiency may drive long-term growth in repair and remodeling expenditures.
Factors Affecting Our Operating Results
Factors Affecting Our Operating Results
Overall economic conditions in the markets where we operate
Overall economic conditions in the markets where we operate
Our operating results and financial performance are influenced by a variety of factors, including, among others, acquisitions, conditions in the housing market and
Our operating results and financial performance are influenced by a variety of factors, including, among others, acquisitions, conditions in the housing market and
economic conditions generally, changes in the cost of the products we sell (particularly commodity products), pricing policies of our competitors, production
economic conditions generally, changes in the cost of the products we sell (particularly commodity products), pricing policies of our competitors, production
schedules of our customers and seasonality. Some of the more important factors are briefly discussed below.
schedules of our customers and seasonality. Some of the more important factors are briefly discussed below.
Merger and acquisitions
Merger and acquisitions
On April 3, 2017, the Company completed the acquisition of TexPly, a supplier of production millwork and doors in the Dallas-Fort Worth area, for a purchase
On April 3, 2017, the Company completed the acquisition of TexPly, a supplier of production millwork and doors in the Dallas-Fort Worth area, for a purchase
price of $31.7 million , including the purchase of real estate.
price of $31.7 million , including the purchase of real estate.
Commodity nature of our products
Commodity nature of our products
Economic changes both nationally and locally in our markets impact our financial performance. Unfavorable changes in demographics, credit markets, consumer
Economic changes both nationally and locally in our markets impact our financial performance. Unfavorable changes in demographics, credit markets, consumer
confidence, health care costs, housing affordability, housing inventory levels, a weakening of the national economy or of any regional or local economy in which
confidence, health care costs, housing affordability, housing inventory levels, a weakening of the national economy or of any regional or local economy in which
we operate and other factors beyond our control could adversely affect consumer spending, result in decreased demand for homes and adversely affect our
we operate and other factors beyond our control could adversely affect consumer spending, result in decreased demand for homes and adversely affect our
business. We believe continued strong employment levels, access to financing and strong consumer confidence will be necessary to increase household formation
business. We believe continued strong employment levels, access to financing and strong consumer confidence will be necessary to increase household formation
rates. We believe improved household formation rates in turn will increase demand for housing and stimulate new construction.
rates. We believe improved household formation rates in turn will increase demand for housing and stimulate new construction.
On March 27, 2017, the Company completed the acquisition of Code Plus, a truss manufacturer located in Martinsburg, West Virginia serving the Washington DC
On March 27, 2017, the Company completed the acquisition of Code Plus, a truss manufacturer located in Martinsburg, West Virginia serving the Washington DC
market, for a purchase price of $7.1 million .
market, for a purchase price of $7.1 million .
As discussed above, on December 1, 2015, SBS completed the Merger with privately-held BMHC in accordance with the terms of the Merger Agreement, pursuant
As discussed above, on December 1, 2015, SBS completed the Merger with privately-held BMHC in accordance with the terms of the Merger Agreement, pursuant
to which BMHC merged with and into SBS.
to which BMHC merged with and into SBS.
26
26
Many of the building products we distribute, including lumber, OSB, plywood and particleboard, are commodities that are widely available from other
Many of the building products we distribute, including lumber, OSB, plywood and particleboard, are commodities that are widely available from other
manufacturers or distributors with prices and volumes determined frequently based on participants’ perceptions of short-term supply and demand factors.
manufacturers or distributors with prices and volumes determined frequently based on participants’ perceptions of short-term supply and demand factors.
27
27
On September 1, 2015, BMHC purchased certain assets and assumed certain liabilities of Marietta, Georgia-based Robert Bowden Inc. ("RBI") for a purchase
On September 1, 2015, BMHC purchased certain assets and assumed certain liabilities of Marietta, Georgia-based Robert Bowden Inc. ("RBI") for a purchase
price of $102.4 million. RBI has three locations in the Atlanta, Georgia area and sells millwork and window products to homebuilders and residential contractors.
price of $102.4 million. RBI has three locations in the Atlanta, Georgia area and sells millwork and window products to homebuilders and residential contractors.
On May 1, 2015, BMHC completed the acquisition of Vidalia, Georgia-based VNS Corporation ("VNS") for a purchase price of $47.1 million. VNS has nine
On May 1, 2015, BMHC completed the acquisition of Vidalia, Georgia-based VNS Corporation ("VNS") for a purchase price of $47.1 million. VNS has nine
locations in southern Georgia and sells building materials and provides construction services in the southeastern United States.
locations in southern Georgia and sells building materials and provides construction services in the southeastern United States.
Net sales increased by approximately $54.3 million for the year ended December 31, 2017 as a result of the acquisitions of TexPly and Code Plus. For the year
Net sales increased by approximately $54.3 million for the year ended December 31, 2017 as a result of the acquisitions of TexPly and Code Plus. For the year
ended December 31, 2016, net sales increased by approximately $1.4 billion as a result of the Merger and acquisitions of RBI and VNS.
ended December 31, 2016, net sales increased by approximately $1.4 billion as a result of the Merger and acquisitions of RBI and VNS.
See Note 3 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion of our acquisitions.
See Note 3 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion of our acquisitions.
Conditions in the housing and construction market
Conditions in the housing and construction market
The building products supply and services industry is highly dependent on new single-family home and multi-family construction and repair and remodeling
The building products supply and services industry is highly dependent on new single-family home and multi-family construction and repair and remodeling
activity, which in turn are dependent upon a number of factors, including, among other things, interest rates, consumer confidence, employment rates, wage rates,
activity, which in turn are dependent upon a number of factors, including, among other things, interest rates, consumer confidence, employment rates, wage rates,
foreclosure rates, housing inventory levels, housing demand, the availability of land, local zoning and permitting processes, the availability of construction
foreclosure rates, housing inventory levels, housing demand, the availability of land, local zoning and permitting processes, the availability of construction
financing, the availability of qualified trade laborers, the health of the economy and mortgage markets and the availability of personal income tax deductions
financing, the availability of qualified trade laborers, the health of the economy and mortgage markets and the availability of personal income tax deductions
related to home ownership, some of which were limited by the 2017 Tax Act. According to the U.S. Census Bureau, single-family housing starts in the South and
related to home ownership, some of which were limited by the 2017 Tax Act. According to the U.S. Census Bureau, single-family housing starts in the South and
West regions of the United States, which are our primary operating regions, were 0.55 million, 0.60 million and 0.66 million in 2015 , 2016 and 2017 ,
West regions of the United States, which are our primary operating regions, were 0.55 million, 0.60 million and 0.66 million in 2015 , 2016 and 2017 ,
respectively.
respectively.
As of November 2017, Dodge Data & Analytics (formerly McGraw-Hill) forecasted that U.S. single-family housing starts will increase approximately 7% in 2018.
As of November 2017, Dodge Data & Analytics (formerly McGraw-Hill) forecasted that U.S. single-family housing starts will increase approximately 7% in 2018.
Additionally, the S&P Corelogic Case-Shiller Home Price Index, a leading measure of pricing for the U.S. residential housing market, has increased on a year-
Additionally, the S&P Corelogic Case-Shiller Home Price Index, a leading measure of pricing for the U.S. residential housing market, has increased on a year-
over-year basis for 67 straight months as of November 2017 and in November 2017, the index reached its highest levels ever.
over-year basis for 67 straight months as of November 2017 and in November 2017, the index reached its highest levels ever.
According to the U.S. Census Bureau, multi-family housing starts in the United States reached a low of 0.11 million in 2009, but reached levels of 0.40 million,
According to the U.S. Census Bureau, multi-family housing starts in the United States reached a low of 0.11 million in 2009, but reached levels of 0.40 million,
0.39 million and 0.35 million in 2015 , 2016 and 2017 , respectively. While this end market has receded since 2015, the multi-family space represents a significant
0.39 million and 0.35 million in 2015 , 2016 and 2017 , respectively. While this end market has receded since 2015, the multi-family space represents a significant
opportunity for us to capture additional market share and provide value-added solutions.
opportunity for us to capture additional market share and provide value-added solutions.
The professional remodeling space, when compared to new home construction, tends to be less price sensitive and more resilient to broader economic conditions.
The professional remodeling space, when compared to new home construction, tends to be less price sensitive and more resilient to broader economic conditions.
As of September 2017, the Home Improvement Research Institute estimated 2017 and 2018 U.S. sales of home maintenance, repair and improvement products to
As of September 2017, the Home Improvement Research Institute estimated 2017 and 2018 U.S. sales of home maintenance, repair and improvement products to
the professional market would reach approximately $103 billion and $106 billion, respectively, compared to sales of approximately $94 billion and $100 billion in
the professional market would reach approximately $103 billion and $106 billion, respectively, compared to sales of approximately $94 billion and $100 billion in
2015 and 2016, respectively. Several factors, including the overall age of the U.S. housing stock, rising home prices, availability of consumer capital at historically
2015 and 2016, respectively. Several factors, including the overall age of the U.S. housing stock, rising home prices, availability of consumer capital at historically
low interest rates and focus on energy efficiency may drive long-term growth in repair and remodeling expenditures.
low interest rates and focus on energy efficiency may drive long-term growth in repair and remodeling expenditures.
Overall economic conditions in the markets where we operate
Overall economic conditions in the markets where we operate
Economic changes both nationally and locally in our markets impact our financial performance. Unfavorable changes in demographics, credit markets, consumer
Economic changes both nationally and locally in our markets impact our financial performance. Unfavorable changes in demographics, credit markets, consumer
confidence, health care costs, housing affordability, housing inventory levels, a weakening of the national economy or of any regional or local economy in which
confidence, health care costs, housing affordability, housing inventory levels, a weakening of the national economy or of any regional or local economy in which
we operate and other factors beyond our control could adversely affect consumer spending, result in decreased demand for homes and adversely affect our
we operate and other factors beyond our control could adversely affect consumer spending, result in decreased demand for homes and adversely affect our
business. We believe continued strong employment levels, access to financing and strong consumer confidence will be necessary to increase household formation
business. We believe continued strong employment levels, access to financing and strong consumer confidence will be necessary to increase household formation
rates. We believe improved household formation rates in turn will increase demand for housing and stimulate new construction.
rates. We believe improved household formation rates in turn will increase demand for housing and stimulate new construction.
Commodity nature of our products
Commodity nature of our products
Many of the building products we distribute, including lumber, OSB, plywood and particleboard, are commodities that are widely available from other
Many of the building products we distribute, including lumber, OSB, plywood and particleboard, are commodities that are widely available from other
manufacturers or distributors with prices and volumes determined frequently based on participants’ perceptions of short-term supply and demand factors.
manufacturers or distributors with prices and volumes determined frequently based on participants’ perceptions of short-term supply and demand factors.
As discussed above, on December 1, 2015, SBS completed the Merger with privately-held BMHC in accordance with the terms of the Merger Agreement, pursuant
As discussed above, on December 1, 2015, SBS completed the Merger with privately-held BMHC in accordance with the terms of the Merger Agreement, pursuant
27
27
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The
following
discussion
and
analysis
should
be
read
in
conjunction
with
Item
6.
“Selected
Financial
Data”
and
our
consolidated
financial
statements
and
the
The
following
discussion
and
analysis
should
be
read
in
conjunction
with
Item
6.
“Selected
Financial
Data”
and
our
consolidated
financial
statements
and
the
related
notes
to
those
statements
included
in
Item
8.
“Financial
Statements
and
Supplementary
Data.”
The
following
discussion
contains,
in
addition
to
historical
related
notes
to
those
statements
included
in
Item
8.
“Financial
Statements
and
Supplementary
Data.”
The
following
discussion
contains,
in
addition
to
historical
information,
forward-looking
statements
that
involve
risks,
uncertainties
and
assumptions.
Our
actual
results
may
differ
materially
from
those
anticipated
in
these
information,
forward-looking
statements
that
involve
risks,
uncertainties
and
assumptions.
Our
actual
results
may
differ
materially
from
those
anticipated
in
these
forward-looking
statements
as
a
result
of
many
factors,
including
those
set
forth
under
the
heading
Item
1A.
“Risk
Factors”
and
elsewhere
in
this
report.
forward-looking
statements
as
a
result
of
many
factors,
including
those
set
forth
under
the
heading
Item
1A.
“Risk
Factors”
and
elsewhere
in
this
report.
Overview
Overview
of the Merger.
of the Merger.
On December 1, 2015, SBS completed the Merger with privately-held BMHC in accordance with the terms of the Merger Agreement, pursuant to which BMHC
On December 1, 2015, SBS completed the Merger with privately-held BMHC in accordance with the terms of the Merger Agreement, pursuant to which BMHC
merged with and into SBS. SBS survived the Merger and in connection therewith changed its name to “BMC Stock Holdings, Inc.” The financial statements
merged with and into SBS. SBS survived the Merger and in connection therewith changed its name to “BMC Stock Holdings, Inc.” The financial statements
represent the financial statements of BMC Stock Holdings, Inc. and its subsidiaries.
represent the financial statements of BMC Stock Holdings, Inc. and its subsidiaries.
Under generally accepted accounting principles in the United States, the Merger was treated as a “reverse merger” under the acquisition method of accounting. For
Under generally accepted accounting principles in the United States, the Merger was treated as a “reverse merger” under the acquisition method of accounting. For
accounting purposes, BMHC is considered to have acquired SBS. Consequently, the historical financial statements of the Company reflect only the operations and
accounting purposes, BMHC is considered to have acquired SBS. Consequently, the historical financial statements of the Company reflect only the operations and
financial condition of BMHC prior to the Merger. The operating results of SBS are included as part of the Company's reported results beginning on the closing date
financial condition of BMHC prior to the Merger. The operating results of SBS are included as part of the Company's reported results beginning on the closing date
We are one of the leading providers of diversified building products and services in the U.S. residential construction market. Our objective is to provide best-in-
We are one of the leading providers of diversified building products and services in the U.S. residential construction market. Our objective is to provide best-in-
class customer service and value-added products to our customers, which are primarily single- and multi-family home builders and professional remodelers. Our
class customer service and value-added products to our customers, which are primarily single- and multi-family home builders and professional remodelers. Our
product offerings include lumber and lumber sheet goods and an array of value-added products including millwork, doors, windows and structural components
product offerings include lumber and lumber sheet goods and an array of value-added products including millwork, doors, windows and structural components
such as EWP, floor and roof trusses and wall panels. Our whole-house framing solution, Ready-Frame
®,
which is one of our fastest growing product offerings,
such as EWP, floor and roof trusses and wall panels. Our whole-house framing solution, Ready-Frame
®,
which is one of our fastest growing product offerings,
saves builders both time and money and improves job site safety. We also offer our customers important services such as design, product specification, installation
saves builders both time and money and improves job site safety. We also offer our customers important services such as design, product specification, installation
and installation management.
and installation management.
As part of our initiatives to execute our strategic plan, including growing our value-added product and service offerings and expanding our presence in the
As part of our initiatives to execute our strategic plan, including growing our value-added product and service offerings and expanding our presence in the
professional remodeling space, we plan to expand our business through organic and acquisitive means. The 18 states in which we operate accounted for
professional remodeling space, we plan to expand our business through organic and acquisitive means. The 18 states in which we operate accounted for
approximately 65% of 2017 U.S. single-family housing permits according to the U.S. Census Bureau. In these 18 states, we operate in 43 metropolitan areas,
approximately 65% of 2017 U.S. single-family housing permits according to the U.S. Census Bureau. In these 18 states, we operate in 43 metropolitan areas,
which accounted for approximately half of the permits issued in those states, according to the U.S. Census Bureau, providing significant opportunity for growth.
which accounted for approximately half of the permits issued in those states, according to the U.S. Census Bureau, providing significant opportunity for growth.
Our net sales for the year ended December 31, 2017 increased 8.8% compared to the year ended December 31, 2016 . We estimate net sales increased 2.8% due to
Our net sales for the year ended December 31, 2017 increased 8.8% compared to the year ended December 31, 2016 . We estimate net sales increased 2.8% due to
organic sales volume, 1.8% due to the acquisitions of Code Plus Components, LLC ("Code Plus") and Texas Plywood & Lumber Company, Inc. ("TexPly") and
organic sales volume, 1.8% due to the acquisitions of Code Plus Components, LLC ("Code Plus") and Texas Plywood & Lumber Company, Inc. ("TexPly") and
4.2% due to commodity price inflation. Our gross margin was 23.6% for the year ended December 31, 2017 compared to 24.0% for the prior year period. We
4.2% due to commodity price inflation. Our gross margin was 23.6% for the year ended December 31, 2017 compared to 24.0% for the prior year period. We
recorded income from operations of $101.2 million during the year ended December 31, 2017 , compared with $83.7 million during the year ended December 31,
recorded income from operations of $101.2 million during the year ended December 31, 2017 , compared with $83.7 million during the year ended December 31,
2016 . See further discussion in “-Operating Results” below.
2016 . See further discussion in “-Operating Results” below.
Factors Affecting Our Operating Results
Factors Affecting Our Operating Results
Our operating results and financial performance are influenced by a variety of factors, including, among others, acquisitions, conditions in the housing market and
Our operating results and financial performance are influenced by a variety of factors, including, among others, acquisitions, conditions in the housing market and
economic conditions generally, changes in the cost of the products we sell (particularly commodity products), pricing policies of our competitors, production
economic conditions generally, changes in the cost of the products we sell (particularly commodity products), pricing policies of our competitors, production
schedules of our customers and seasonality. Some of the more important factors are briefly discussed below.
schedules of our customers and seasonality. Some of the more important factors are briefly discussed below.
On April 3, 2017, the Company completed the acquisition of TexPly, a supplier of production millwork and doors in the Dallas-Fort Worth area, for a purchase
On April 3, 2017, the Company completed the acquisition of TexPly, a supplier of production millwork and doors in the Dallas-Fort Worth area, for a purchase
price of $31.7 million , including the purchase of real estate.
price of $31.7 million , including the purchase of real estate.
On March 27, 2017, the Company completed the acquisition of Code Plus, a truss manufacturer located in Martinsburg, West Virginia serving the Washington DC
On March 27, 2017, the Company completed the acquisition of Code Plus, a truss manufacturer located in Martinsburg, West Virginia serving the Washington DC
Merger and acquisitions
Merger and acquisitions
market, for a purchase price of $7.1 million .
market, for a purchase price of $7.1 million .
to which BMHC merged with and into SBS.
to which BMHC merged with and into SBS.
26
26
The following table reflects changes in the average composite framing lumber prices (per thousand board feet) and average composite structural panel prices (per
The following table reflects changes in the average composite framing lumber prices (per thousand board feet) and average composite structural panel prices (per
thousand square feet). These prices represent transactions between manufacturers and their customers as reported by Random Lengths and may differ in magnitude
thousand square feet). These prices represent transactions between manufacturers and their customers as reported by Random Lengths and may differ in magnitude
or timing from the actual selling prices or cost of goods reported in our operating results. The average composite structural panel prices are based on index prices
or timing from the actual selling prices or cost of goods reported in our operating results. The average composite structural panel prices are based on index prices
for OSB and plywood.
for OSB and plywood.
Changes in customer sales mix
Changes in customer sales mix
Framing lumber prices
Framing lumber prices
Structural panel prices
Structural panel prices
Year Ended December 31,
Year Ended December 31,
2017 Versus
2017 Versus
2016
2016
2017 Average
2017 Average
Price
Price
2016 Versus
2016 Versus
2015
2015
2016 Average
2016 Average
Price
Price
2015 Versus
2015 Versus
2014
2014
2015 Average
2015 Average
Price
Price
19% $
19% $
18% $
18% $
413
413
437
437
5% $
5% $
1% $
1% $
346
346
370
370
(14)% $
(14)% $
(5)% $
(5)% $
330
330
365
365
Periods of increasing prices provide the opportunity for higher sales and increased gross profit, while periods of declining prices may result in declines in sales and
Periods of increasing prices provide the opportunity for higher sales and increased gross profit, while periods of declining prices may result in declines in sales and
profitability. In particular, low market prices for wood products over a sustained period can adversely affect our financial condition, operating results and cash
profitability. In particular, low market prices for wood products over a sustained period can adversely affect our financial condition, operating results and cash
flows, as can excessive spikes in market prices. For further discussion of the impact of commodity prices on historical periods, see “-Operating Results.”
flows, as can excessive spikes in market prices. For further discussion of the impact of commodity prices on historical periods, see “-Operating Results.”
Consolidation of production homebuilders
Consolidation of production homebuilders
Over the past ten years, the homebuilding industry has undergone consolidation and many production homebuilders have increased their market share. We expect
Over the past ten years, the homebuilding industry has undergone consolidation and many production homebuilders have increased their market share. We expect
that trend to continue as larger homebuilders have better liquidity and land positions relative to the smaller, less capitalized homebuilders. Our focus is on
that trend to continue as larger homebuilders have better liquidity and land positions relative to the smaller, less capitalized homebuilders. Our focus is on
maintaining relationships and market share with these customers while balancing the competitive pressures we face in our markets with certain profitability
maintaining relationships and market share with these customers while balancing the competitive pressures we face in our markets with certain profitability
expectations. We expect that our ability to maintain strong relationships with the largest production homebuilders will be vital to our ability to expand into new
expectations. We expect that our ability to maintain strong relationships with the largest production homebuilders will be vital to our ability to expand into new
markets as well as grow our market share. While we generate significant sales from these homebuilders, our gross margins on sales to them tend to be lower than
markets as well as grow our market share. While we generate significant sales from these homebuilders, our gross margins on sales to them tend to be lower than
our gross margins on sales to other market segments. This could impact our gross margins if the market share held by the largest production homebuilders
our gross margins on sales to other market segments. This could impact our gross margins if the market share held by the largest production homebuilders
continues to increase.
continues to increase.
Freight costs and fuel charges
Freight costs and fuel charges
Our ability to control expenses
Our ability to control expenses
We pay close attention to managing our working capital and operating expenses. We employ a LEAN process operating philosophy, which encourages continuous
We pay close attention to managing our working capital and operating expenses. We employ a LEAN process operating philosophy, which encourages continuous
improvement in our core processes to minimize waste, improve customer service, increase expense productivity, improve working capital and maximize
improvement in our core processes to minimize waste, improve customer service, increase expense productivity, improve working capital and maximize
profitability and cash flow. We regularly analyze our workforce productivity to achieve the optimum, cost-efficient labor mix for our facilities. Further, we pay
profitability and cash flow. We regularly analyze our workforce productivity to achieve the optimum, cost-efficient labor mix for our facilities. Further, we pay
careful attention to our logistics function and have implemented GPS-enabled telematics technology across our delivery fleet to improve customer service, driver
careful attention to our logistics function and have implemented GPS-enabled telematics technology across our delivery fleet to improve customer service, driver
safety and the productivity of our shipping and handling costs.
safety and the productivity of our shipping and handling costs.
Mix of products sold
Mix of products sold
We typically realize greater gross margins on more highly engineered and customized products, or ancillary products that are often purchased based on
We typically realize greater gross margins on more highly engineered and customized products, or ancillary products that are often purchased based on
convenience and are therefore less price sensitive to our customers. For example, sales of lumber & lumber sheet goods tend to generate lower gross margins due
convenience and are therefore less price sensitive to our customers. For example, sales of lumber & lumber sheet goods tend to generate lower gross margins due
to their commodity nature and the relatively low switching costs of sourcing those products from different suppliers. Structural components and millwork, doors &
to their commodity nature and the relatively low switching costs of sourcing those products from different suppliers. Structural components and millwork, doors &
windows often generate higher gross margins relative to other products. Homebuilders often use structural components in order to realize increased efficiency and
windows often generate higher gross margins relative to other products. Homebuilders often use structural components in order to realize increased efficiency and
improved quality. We believe shortening cycle time from start to completion is a key goal of homebuilders during periods of strong consumer demand or limited
improved quality. We believe shortening cycle time from start to completion is a key goal of homebuilders during periods of strong consumer demand or limited
availability of framing labor. As the residential new construction market continues to strengthen, we expect the use of structural components by homebuilders to
availability of framing labor. As the residential new construction market continues to strengthen, we expect the use of structural components by homebuilders to
increase.
increase.
28
28
Our operating results may vary according to the amount and type of products we sell to each of our primary customer types: new single-family homebuilders,
Our operating results may vary according to the amount and type of products we sell to each of our primary customer types: new single-family homebuilders,
professional remodeling contractors, and multi-family builders and light commercial builders. The following table reflects our estimate of net sales by each
professional remodeling contractors, and multi-family builders and light commercial builders. The following table reflects our estimate of net sales by each
customer type. Certain prior year amounts have been reclassified to conform to the current year presentation.
customer type. Certain prior year amounts have been reclassified to conform to the current year presentation.
(in thousands)
(in thousands)
Single-family homebuilders
Single-family homebuilders
Professional remodeling contractors
Professional remodeling contractors
Other (including multi-family & light
Other (including multi-family & light
commercial builders)
commercial builders)
Total net sales
Total net sales
2017
2017
2016
2016
2015
2015
Net Sales
Net Sales
% of Sales
% of Sales
Net Sales
Net Sales
% of Sales
% of Sales
Net Sales
Net Sales
% of Sales
% of Sales
% Change
% Change
vs. 2016
vs. 2016
% Change
% Change
vs. 2015
vs. 2015
$
$
2,523,572
2,523,572
379,933
379,933
75.0%
75.0%
11.3%
11.3%
11.6% $
11.6% $
2,262,124
2,262,124
2.4%
2.4%
371,018
371,018
73.1%
73.1%
12.0%
12.0%
79.7% $
79.7% $
1,258,938
1,258,938
174.5%
174.5%
135,184
135,184
462,463
462,463
13.7%
13.7%
0.4%
0.4%
460,601
460,601
14.9%
14.9%
152.2%
152.2%
182,624
182,624
79.8%
79.8%
8.6%
8.6%
11.6%
11.6%
$
$
3,365,968
3,365,968
100.0%
100.0%
8.8% $
8.8% $
3,093,743
3,093,743
100.0%
100.0%
96.2% $
96.2% $
1,576,746
1,576,746
100.0%
100.0%
We tend to realize higher gross margins on sales to remodeling contractors due to the smaller product volumes purchased by those customers, as well as the more
We tend to realize higher gross margins on sales to remodeling contractors due to the smaller product volumes purchased by those customers, as well as the more
customized nature of the projects those customers generally undertake. Gross margins on sales to single-family, multi-family and light commercial customers can
customized nature of the projects those customers generally undertake. Gross margins on sales to single-family, multi-family and light commercial customers can
vary based on a variety of factors, including the purchase volumes of the individual customer, the mix of products sold to that customer, the size and selling price
vary based on a variety of factors, including the purchase volumes of the individual customer, the mix of products sold to that customer, the size and selling price
of the project being constructed and the number of upgrades added to the project before or during its construction.
of the project being constructed and the number of upgrades added to the project before or during its construction.
A portion of our shipping and handling costs is comprised of diesel and other fuels purchased for our delivery fleet and handling equipment. According to the U.S.
A portion of our shipping and handling costs is comprised of diesel and other fuels purchased for our delivery fleet and handling equipment. According to the U.S.
Energy Information Administration, the average retail price per gallon for No. 2 diesel fuel was $2.65, $2.31 and $2.71 for the years ended December 31, 2017 ,
Energy Information Administration, the average retail price per gallon for No. 2 diesel fuel was $2.65, $2.31 and $2.71 for the years ended December 31, 2017 ,
2016 and 2015 , respectively. For the year ended December 31, 2017 , we incurred costs of approximately $14.8 million within selling, general and administrative
2016 and 2015 , respectively. For the year ended December 31, 2017 , we incurred costs of approximately $14.8 million within selling, general and administrative
expenses for diesel and other fuels used for our delivery fleet and handling equipment. Future increases in the cost of fuel, or inbound freight costs for the products
expenses for diesel and other fuels used for our delivery fleet and handling equipment. Future increases in the cost of fuel, or inbound freight costs for the products
we purchase, could impact our operating results and cash flows if we are unable to pass along these cost increases to our customers through increased prices.
we purchase, could impact our operating results and cash flows if we are unable to pass along these cost increases to our customers through increased prices.
29
29
The following table reflects changes in the average composite framing lumber prices (per thousand board feet) and average composite structural panel prices (per
The following table reflects changes in the average composite framing lumber prices (per thousand board feet) and average composite structural panel prices (per
Changes in customer sales mix
Changes in customer sales mix
thousand square feet). These prices represent transactions between manufacturers and their customers as reported by Random Lengths and may differ in magnitude
thousand square feet). These prices represent transactions between manufacturers and their customers as reported by Random Lengths and may differ in magnitude
or timing from the actual selling prices or cost of goods reported in our operating results. The average composite structural panel prices are based on index prices
or timing from the actual selling prices or cost of goods reported in our operating results. The average composite structural panel prices are based on index prices
for OSB and plywood.
for OSB and plywood.
Framing lumber prices
Framing lumber prices
Structural panel prices
Structural panel prices
Year Ended December 31,
Year Ended December 31,
2017 Versus
2017 Versus
2017 Average
2017 Average
2016 Versus
2016 Versus
2016 Average
2016 Average
2015 Versus
2015 Versus
2015 Average
2015 Average
2016
2016
Price
Price
2015
2015
Price
Price
2014
2014
Price
Price
19% $
19% $
18% $
18% $
413
413
437
437
5% $
5% $
1% $
1% $
346
346
370
370
(14)% $
(14)% $
(5)% $
(5)% $
330
330
365
365
Periods of increasing prices provide the opportunity for higher sales and increased gross profit, while periods of declining prices may result in declines in sales and
Periods of increasing prices provide the opportunity for higher sales and increased gross profit, while periods of declining prices may result in declines in sales and
profitability. In particular, low market prices for wood products over a sustained period can adversely affect our financial condition, operating results and cash
profitability. In particular, low market prices for wood products over a sustained period can adversely affect our financial condition, operating results and cash
flows, as can excessive spikes in market prices. For further discussion of the impact of commodity prices on historical periods, see “-Operating Results.”
flows, as can excessive spikes in market prices. For further discussion of the impact of commodity prices on historical periods, see “-Operating Results.”
Consolidation of production homebuilders
Consolidation of production homebuilders
Over the past ten years, the homebuilding industry has undergone consolidation and many production homebuilders have increased their market share. We expect
Over the past ten years, the homebuilding industry has undergone consolidation and many production homebuilders have increased their market share. We expect
that trend to continue as larger homebuilders have better liquidity and land positions relative to the smaller, less capitalized homebuilders. Our focus is on
that trend to continue as larger homebuilders have better liquidity and land positions relative to the smaller, less capitalized homebuilders. Our focus is on
maintaining relationships and market share with these customers while balancing the competitive pressures we face in our markets with certain profitability
maintaining relationships and market share with these customers while balancing the competitive pressures we face in our markets with certain profitability
expectations. We expect that our ability to maintain strong relationships with the largest production homebuilders will be vital to our ability to expand into new
expectations. We expect that our ability to maintain strong relationships with the largest production homebuilders will be vital to our ability to expand into new
markets as well as grow our market share. While we generate significant sales from these homebuilders, our gross margins on sales to them tend to be lower than
markets as well as grow our market share. While we generate significant sales from these homebuilders, our gross margins on sales to them tend to be lower than
our gross margins on sales to other market segments. This could impact our gross margins if the market share held by the largest production homebuilders
our gross margins on sales to other market segments. This could impact our gross margins if the market share held by the largest production homebuilders
continues to increase.
continues to increase.
Our ability to control expenses
Our ability to control expenses
We pay close attention to managing our working capital and operating expenses. We employ a LEAN process operating philosophy, which encourages continuous
We pay close attention to managing our working capital and operating expenses. We employ a LEAN process operating philosophy, which encourages continuous
improvement in our core processes to minimize waste, improve customer service, increase expense productivity, improve working capital and maximize
improvement in our core processes to minimize waste, improve customer service, increase expense productivity, improve working capital and maximize
profitability and cash flow. We regularly analyze our workforce productivity to achieve the optimum, cost-efficient labor mix for our facilities. Further, we pay
profitability and cash flow. We regularly analyze our workforce productivity to achieve the optimum, cost-efficient labor mix for our facilities. Further, we pay
careful attention to our logistics function and have implemented GPS-enabled telematics technology across our delivery fleet to improve customer service, driver
careful attention to our logistics function and have implemented GPS-enabled telematics technology across our delivery fleet to improve customer service, driver
safety and the productivity of our shipping and handling costs.
safety and the productivity of our shipping and handling costs.
Mix of products sold
Mix of products sold
We typically realize greater gross margins on more highly engineered and customized products, or ancillary products that are often purchased based on
We typically realize greater gross margins on more highly engineered and customized products, or ancillary products that are often purchased based on
convenience and are therefore less price sensitive to our customers. For example, sales of lumber & lumber sheet goods tend to generate lower gross margins due
convenience and are therefore less price sensitive to our customers. For example, sales of lumber & lumber sheet goods tend to generate lower gross margins due
to their commodity nature and the relatively low switching costs of sourcing those products from different suppliers. Structural components and millwork, doors &
to their commodity nature and the relatively low switching costs of sourcing those products from different suppliers. Structural components and millwork, doors &
windows often generate higher gross margins relative to other products. Homebuilders often use structural components in order to realize increased efficiency and
windows often generate higher gross margins relative to other products. Homebuilders often use structural components in order to realize increased efficiency and
improved quality. We believe shortening cycle time from start to completion is a key goal of homebuilders during periods of strong consumer demand or limited
improved quality. We believe shortening cycle time from start to completion is a key goal of homebuilders during periods of strong consumer demand or limited
availability of framing labor. As the residential new construction market continues to strengthen, we expect the use of structural components by homebuilders to
availability of framing labor. As the residential new construction market continues to strengthen, we expect the use of structural components by homebuilders to
increase.
increase.
28
28
Our operating results may vary according to the amount and type of products we sell to each of our primary customer types: new single-family homebuilders,
Our operating results may vary according to the amount and type of products we sell to each of our primary customer types: new single-family homebuilders,
professional remodeling contractors, and multi-family builders and light commercial builders. The following table reflects our estimate of net sales by each
professional remodeling contractors, and multi-family builders and light commercial builders. The following table reflects our estimate of net sales by each
customer type. Certain prior year amounts have been reclassified to conform to the current year presentation.
customer type. Certain prior year amounts have been reclassified to conform to the current year presentation.
(in thousands)
(in thousands)
Single-family homebuilders
Single-family homebuilders
Professional remodeling contractors
Professional remodeling contractors
Other (including multi-family & light
Other (including multi-family & light
commercial builders)
commercial builders)
2017
2017
2016
2016
2015
2015
Net Sales
Net Sales
% of Sales
% of Sales
% Change
% Change
vs. 2016
vs. 2016
Net Sales
Net Sales
% of Sales
% of Sales
% Change
% Change
vs. 2015
vs. 2015
Net Sales
Net Sales
% of Sales
% of Sales
$
$
2,523,572
2,523,572
379,933
379,933
75.0%
75.0%
11.3%
11.3%
11.6% $
11.6% $
2,262,124
2,262,124
2.4%
2.4%
371,018
371,018
73.1%
73.1%
12.0%
12.0%
79.7% $
79.7% $
1,258,938
1,258,938
174.5%
174.5%
135,184
135,184
462,463
462,463
13.7%
13.7%
0.4%
0.4%
460,601
460,601
14.9%
14.9%
152.2%
152.2%
182,624
182,624
79.8%
79.8%
8.6%
8.6%
11.6%
11.6%
Total net sales
Total net sales
$
$
3,365,968
3,365,968
100.0%
100.0%
8.8% $
8.8% $
3,093,743
3,093,743
100.0%
100.0%
96.2% $
96.2% $
1,576,746
1,576,746
100.0%
100.0%
We tend to realize higher gross margins on sales to remodeling contractors due to the smaller product volumes purchased by those customers, as well as the more
We tend to realize higher gross margins on sales to remodeling contractors due to the smaller product volumes purchased by those customers, as well as the more
customized nature of the projects those customers generally undertake. Gross margins on sales to single-family, multi-family and light commercial customers can
customized nature of the projects those customers generally undertake. Gross margins on sales to single-family, multi-family and light commercial customers can
vary based on a variety of factors, including the purchase volumes of the individual customer, the mix of products sold to that customer, the size and selling price
vary based on a variety of factors, including the purchase volumes of the individual customer, the mix of products sold to that customer, the size and selling price
of the project being constructed and the number of upgrades added to the project before or during its construction.
of the project being constructed and the number of upgrades added to the project before or during its construction.
Freight costs and fuel charges
Freight costs and fuel charges
A portion of our shipping and handling costs is comprised of diesel and other fuels purchased for our delivery fleet and handling equipment. According to the U.S.
A portion of our shipping and handling costs is comprised of diesel and other fuels purchased for our delivery fleet and handling equipment. According to the U.S.
Energy Information Administration, the average retail price per gallon for No. 2 diesel fuel was $2.65, $2.31 and $2.71 for the years ended December 31, 2017 ,
Energy Information Administration, the average retail price per gallon for No. 2 diesel fuel was $2.65, $2.31 and $2.71 for the years ended December 31, 2017 ,
2016 and 2015 , respectively. For the year ended December 31, 2017 , we incurred costs of approximately $14.8 million within selling, general and administrative
2016 and 2015 , respectively. For the year ended December 31, 2017 , we incurred costs of approximately $14.8 million within selling, general and administrative
expenses for diesel and other fuels used for our delivery fleet and handling equipment. Future increases in the cost of fuel, or inbound freight costs for the products
expenses for diesel and other fuels used for our delivery fleet and handling equipment. Future increases in the cost of fuel, or inbound freight costs for the products
we purchase, could impact our operating results and cash flows if we are unable to pass along these cost increases to our customers through increased prices.
we purchase, could impact our operating results and cash flows if we are unable to pass along these cost increases to our customers through increased prices.
29
29
Operating Results
Operating Results
The impact of commodity price inflation during the year ended December 31, 2017 contributed to the increase in net sales in our lumber & lumber sheet goods and
The impact of commodity price inflation during the year ended December 31, 2017 contributed to the increase in net sales in our lumber & lumber sheet goods and
The following tables set forth our operating results in dollars and as a percentage of net sales for the periods indicated:
The following tables set forth our operating results in dollars and as a percentage of net sales for the periods indicated:
(in thousands)
(in thousands)
Net sales
Net sales
Cost of sales
Cost of sales
Gross profit
Gross profit
Operating expenses:
Operating expenses:
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
$
$
3,365,968
3,365,968
100.0 % $
100.0 % $
3,093,743
3,093,743
100.0 % $
100.0 % $
1,576,746
1,576,746
100.0 %
100.0 %
2,570,453
2,570,453
795,515
795,515
76.4 %
76.4 %
23.6 %
23.6 %
2,351,778
2,351,778
741,965
741,965
76.0 %
76.0 %
24.0 %
24.0 %
1,215,336
1,215,336
361,410
361,410
77.1 %
77.1 %
22.9 %
22.9 %
For the year ended December 31, 2017 , cost of sales increased $218.7 million , or 9.3% , to $2,570.5 million from $2,351.8 million during the year ended
For the year ended December 31, 2017 , cost of sales increased $218.7 million , or 9.3% , to $2,570.5 million from $2,351.8 million during the year ended
December 31, 2016 . Cost of sales for the year ended December 31, 2016 includes $2.9 million of expense incurred in relation to the sell-through of inventory
December 31, 2016 . Cost of sales for the year ended December 31, 2016 includes $2.9 million of expense incurred in relation to the sell-through of inventory
which was stepped up in value in connection with the Merger. We estimate our cost of sales increased approximately 5.0% as a result of commodity cost inflation,
which was stepped up in value in connection with the Merger. We estimate our cost of sales increased approximately 5.0% as a result of commodity cost inflation,
2.8% as a result of increased sales volumes related to existing operations and 1.6% related to the acquisitions of Code Plus and TexPly, partially offset by a 0.1%
2.8% as a result of increased sales volumes related to existing operations and 1.6% related to the acquisitions of Code Plus and TexPly, partially offset by a 0.1%
decrease as a result of the sell-through of inventory which was stepped up in value.
decrease as a result of the sell-through of inventory which was stepped up in value.
Selling, general and administrative expenses
Selling, general and administrative expenses
619,546
619,546
18.4 %
18.4 %
571,799
571,799
18.5 %
18.5 %
306,843
306,843
19.5 %
19.5 %
Depreciation expense
Depreciation expense
Amortization expense
Amortization expense
Merger and integration costs
Merger and integration costs
Impairment of assets
Impairment of assets
Income from operations
Income from operations
Other income (expenses)
Other income (expenses)
Interest expense
Interest expense
Loss on debt extinguishment
Loss on debt extinguishment
Other income, net
Other income, net
Income (loss) before income taxes
Income (loss) before income taxes
Income tax expense (benefit)
Income tax expense (benefit)
Net income (loss)
Net income (loss)
$
$
2017 compared to 2016
2017 compared to 2016
Net
sales
Net
sales
43,022
43,022
16,003
16,003
15,336
15,336
435
435
101,173
101,173
1.3 %
1.3 %
0.5 %
0.5 %
0.5 %
0.5 %
0.0 %
0.0 %
3.0 %
3.0 %
(25,036)
(25,036)
(0.7)%
(0.7)%
—
—
5,690
5,690
81,827
81,827
24,402
24,402
57,425
57,425
0.0 %
0.0 %
0.2 %
0.2 %
2.4 %
2.4 %
0.7 %
0.7 %
1.7 % $
1.7 % $
38,441
38,441
20,721
20,721
15,340
15,340
11,928
11,928
83,736
83,736
(30,131)
(30,131)
(12,529)
(12,529)
4,070
4,070
45,146
45,146
14,266
14,266
30,880
30,880
1.2 %
1.2 %
0.7 %
0.7 %
0.5 %
0.5 %
0.4 %
0.4 %
2.7 %
2.7 %
(1.0)%
(1.0)%
(0.4)%
(0.4)%
0.1 %
0.1 %
1.5 %
1.5 %
0.5 %
0.5 %
1.0 % $
1.0 % $
15,700
15,700
3,626
3,626
22,993
22,993
—
—
12,248
12,248
(27,552)
(27,552)
—
—
784
784
(14,520)
(14,520)
(9,689)
(9,689)
(4,831)
(4,831)
1.0 %
1.0 %
0.2 %
0.2 %
1.5 %
1.5 %
0.0 %
0.0 %
0.8 %
0.8 %
(1.7)%
(1.7)%
0.0 %
0.0 %
0.0 %
0.0 %
(0.9)%
(0.9)%
(0.6)%
(0.6)%
(0.3)%
(0.3)%
For the year ended December 31, 2017 , net sales increased $272.2 million , or 8.8% , to $3,366.0 million from $3,093.7 million during the year ended December
For the year ended December 31, 2017 , net sales increased $272.2 million , or 8.8% , to $3,366.0 million from $3,093.7 million during the year ended December
31, 2016 . The increase in net sales was primarily driven by the impact of commodity price inflation of approximately 4.2% and increased volume of
31, 2016 . The increase in net sales was primarily driven by the impact of commodity price inflation of approximately 4.2% and increased volume of
approximately 2.8% related to existing operations, while the acquisitions of Code Plus and TexPly increased net sales by approximately 1.8% .
approximately 2.8% related to existing operations, while the acquisitions of Code Plus and TexPly increased net sales by approximately 1.8% .
We estimate approximately 75% of our net sales for the year ended December 31, 2017 were to customers engaged in new single-family construction. According
We estimate approximately 75% of our net sales for the year ended December 31, 2017 were to customers engaged in new single-family construction. According
to the U.S. Census Bureau, single-family housing starts in the South and West regions of the United States, which are our primary operating regions, increased
to the U.S. Census Bureau, single-family housing starts in the South and West regions of the United States, which are our primary operating regions, increased
approximately 9.4% for the year ended December 31, 2017 as compared to the prior year, while single-family houses completed increased 8.7% during the same
approximately 9.4% for the year ended December 31, 2017 as compared to the prior year, while single-family houses completed increased 8.7% during the same
time period. Increases in net sales from Texas and California accounted for approximately 42% of the total increase in net sales for the year ended December 31,
time period. Increases in net sales from Texas and California accounted for approximately 42% of the total increase in net sales for the year ended December 31,
2017 , while the Company experienced a decrease in net sales in Georgia of less than 1% of overall net sales.
2017 , while the Company experienced a decrease in net sales in Georgia of less than 1% of overall net sales.
The following table shows net sales classified by major product category. Certain prior year amounts have been reclassified to conform to the current year
The following table shows net sales classified by major product category. Certain prior year amounts have been reclassified to conform to the current year
presentation.
presentation.
(in thousands)
(in thousands)
Structural components
Structural components
Lumber & lumber sheet goods
Lumber & lumber sheet goods
Millwork, doors & windows
Millwork, doors & windows
Other building products & services
Other building products & services
Total net sales
Total net sales
2017
2017
2016
2016
Net Sales
Net Sales
% of Sales
% of Sales
Net Sales
Net Sales
% of Sales
% of Sales
% Change
% Change
$
$
522,619
522,619
1,114,219
1,114,219
907,377
907,377
821,753
821,753
15.5% $
15.5% $
33.1%
33.1%
27.0%
27.0%
24.4%
24.4%
461,761
461,761
938,563
938,563
894,889
894,889
798,530
798,530
14.9%
14.9%
30.3%
30.3%
28.9%
28.9%
25.9%
25.9%
$
$
3,365,968
3,365,968
100.0% $
100.0% $
3,093,743
3,093,743
100.0%
100.0%
13.2%
13.2%
18.7%
18.7%
1.4%
1.4%
2.9%
2.9%
8.8%
8.8%
30
30
structural components product categories.
structural components product categories.
Cost
of
sales
Cost
of
sales
Gross
profit
Gross
profit
with the Merger.
with the Merger.
Operating
expenses
Operating
expenses
For the year ended December 31, 2017 :
For the year ended December 31, 2017 :
For the year ended December 31, 2017 , gross profit increased $53.6 million , or 7.2% , to $795.5 million from $742.0 million for the year ended December 31,
For the year ended December 31, 2017 , gross profit increased $53.6 million , or 7.2% , to $795.5 million from $742.0 million for the year ended December 31,
2016 , driven primarily by increased sales volumes and commodity price inflation. Our gross margin was 23.6% for the year ended December 31, 2017 and 24.0%
2016 , driven primarily by increased sales volumes and commodity price inflation. Our gross margin was 23.6% for the year ended December 31, 2017 and 24.0%
for the year ended December 31, 2016 . This decline resulted primarily from a decline in gross margin in lumber & lumber sheet goods and structural components
for the year ended December 31, 2016 . This decline resulted primarily from a decline in gross margin in lumber & lumber sheet goods and structural components
and a greater percentage of total net sales derived from lumber & lumber sheet goods, which generally generate lower margins. Gross profit for the year ended
and a greater percentage of total net sales derived from lumber & lumber sheet goods, which generally generate lower margins. Gross profit for the year ended
December 31, 2016 was impacted by $2.9 million, or 0.1% of net sales, in relation to the sell-through of inventory which was stepped up in value in connection
December 31, 2016 was impacted by $2.9 million, or 0.1% of net sales, in relation to the sell-through of inventory which was stepped up in value in connection
•
•
selling, general and administrative expenses increased $47.7 million , or 8.4% , to $619.5 million , or 18.4% of net sales, from $571.8 million , or 18.5%
selling, general and administrative expenses increased $47.7 million , or 8.4% , to $619.5 million , or 18.4% of net sales, from $571.8 million , or 18.5%
of net sales, for the year ended December 31, 2016 . Approximately $16.5 million of this increase related to increased shipping and handling costs to
of net sales, for the year ended December 31, 2016 . Approximately $16.5 million of this increase related to increased shipping and handling costs to
serve higher sales volumes related to existing operations, $12.5 million related to selling, general and administrative expenses of TexPly and Code Plus,
serve higher sales volumes related to existing operations, $12.5 million related to selling, general and administrative expenses of TexPly and Code Plus,
$5.6 million related to an increase in the provision for workers' compensation claims and $5.5 million related to increased health care costs. The
$5.6 million related to an increase in the provision for workers' compensation claims and $5.5 million related to increased health care costs. The
remaining increase was primarily due to costs associated with five newly-opened facilities of approximately $4.7 million.
remaining increase was primarily due to costs associated with five newly-opened facilities of approximately $4.7 million.
•
•
•
•
•
•
depreciation expense increased $4.6 million , or 11.9% , to $43.0 million from $38.4 million during the year ended December 31, 2016 . This increase
depreciation expense increased $4.6 million , or 11.9% , to $43.0 million from $38.4 million during the year ended December 31, 2016 . This increase
primarily relates to replacements and additions of delivery fleet, material handling equipment and operating equipment.
primarily relates to replacements and additions of delivery fleet, material handling equipment and operating equipment.
amortization expense was $16.0 million compared to $20.7 million in the prior year. This decrease resulted from certain intangible assets that became
amortization expense was $16.0 million compared to $20.7 million in the prior year. This decrease resulted from certain intangible assets that became
fully amortized in 2016, partially offset by the amortization of intangible assets acquired in the Code Plus and TexPly acquisitions.
fully amortized in 2016, partially offset by the amortization of intangible assets acquired in the Code Plus and TexPly acquisitions.
the Company incurred $15.3 million of Merger and integration costs related to the ongoing integration of BMHC and SBS, consisting primarily of
the Company incurred $15.3 million of Merger and integration costs related to the ongoing integration of BMHC and SBS, consisting primarily of
severance, system integration costs and professional fees compared to $15.3 million for the year ended December 31, 2016 . During the year ended
severance, system integration costs and professional fees compared to $15.3 million for the year ended December 31, 2016 . During the year ended
December 31, 2017, the Company recognized approximately $2.8 million of expense related to the discontinuance of the new third-party software BMHC
December 31, 2017, the Company recognized approximately $2.8 million of expense related to the discontinuance of the new third-party software BMHC
selected in 2013 for its planned Enterprise Resource Planning system ("New ERP") (see Note 6 to the consolidated financial statements included in Item 8
selected in 2013 for its planned Enterprise Resource Planning system ("New ERP") (see Note 6 to the consolidated financial statements included in Item 8
of this Annual Report on Form 10-K for further description of the New ERP).
of this Annual Report on Form 10-K for further description of the New ERP).
•
•
the Company recognized asset impairment charges of $0.4 million related to the write down of real estate held for sale to the lower of depreciated cost or
the Company recognized asset impairment charges of $0.4 million related to the write down of real estate held for sale to the lower of depreciated cost or
estimated fair value less expected disposition costs. During the year ended December 31, 2016, the Company decided to integrate all operations under the
estimated fair value less expected disposition costs. During the year ended December 31, 2016, the Company decided to integrate all operations under the
ERP system utilized by Legacy SBS, and to discontinue use of the New ERP (see Note 6 to the consolidated financial statements included in Item 8 of
ERP system utilized by Legacy SBS, and to discontinue use of the New ERP (see Note 6 to the consolidated financial statements included in Item 8 of
this Annual Report on Form 10-K for further description of the New ERP). In connection with this decision, the Company impaired capitalized software
this Annual Report on Form 10-K for further description of the New ERP). In connection with this decision, the Company impaired capitalized software
costs that had previously been recorded as construction-in-progress within property and equipment on the consolidated balance sheets.
costs that had previously been recorded as construction-in-progress within property and equipment on the consolidated balance sheets.
31
31
The following tables set forth our operating results in dollars and as a percentage of net sales for the periods indicated:
The following tables set forth our operating results in dollars and as a percentage of net sales for the periods indicated:
Year Ended December 31,
Year Ended December 31,
Cost
of
sales
Cost
of
sales
2017
2017
2016
2016
2015
2015
$
$
3,365,968
3,365,968
100.0 % $
100.0 % $
3,093,743
3,093,743
100.0 % $
100.0 % $
1,576,746
1,576,746
100.0 %
100.0 %
2,570,453
2,570,453
795,515
795,515
76.4 %
76.4 %
23.6 %
23.6 %
2,351,778
2,351,778
741,965
741,965
76.0 %
76.0 %
24.0 %
24.0 %
1,215,336
1,215,336
361,410
361,410
77.1 %
77.1 %
22.9 %
22.9 %
For the year ended December 31, 2017 , cost of sales increased $218.7 million , or 9.3% , to $2,570.5 million from $2,351.8 million during the year ended
For the year ended December 31, 2017 , cost of sales increased $218.7 million , or 9.3% , to $2,570.5 million from $2,351.8 million during the year ended
December 31, 2016 . Cost of sales for the year ended December 31, 2016 includes $2.9 million of expense incurred in relation to the sell-through of inventory
December 31, 2016 . Cost of sales for the year ended December 31, 2016 includes $2.9 million of expense incurred in relation to the sell-through of inventory
which was stepped up in value in connection with the Merger. We estimate our cost of sales increased approximately 5.0% as a result of commodity cost inflation,
which was stepped up in value in connection with the Merger. We estimate our cost of sales increased approximately 5.0% as a result of commodity cost inflation,
2.8% as a result of increased sales volumes related to existing operations and 1.6% related to the acquisitions of Code Plus and TexPly, partially offset by a 0.1%
2.8% as a result of increased sales volumes related to existing operations and 1.6% related to the acquisitions of Code Plus and TexPly, partially offset by a 0.1%
decrease as a result of the sell-through of inventory which was stepped up in value.
decrease as a result of the sell-through of inventory which was stepped up in value.
The impact of commodity price inflation during the year ended December 31, 2017 contributed to the increase in net sales in our lumber & lumber sheet goods and
The impact of commodity price inflation during the year ended December 31, 2017 contributed to the increase in net sales in our lumber & lumber sheet goods and
structural components product categories.
structural components product categories.
Selling, general and administrative expenses
Selling, general and administrative expenses
619,546
619,546
18.4 %
18.4 %
571,799
571,799
18.5 %
18.5 %
306,843
306,843
19.5 %
19.5 %
Gross
profit
Gross
profit
For the year ended December 31, 2017 , gross profit increased $53.6 million , or 7.2% , to $795.5 million from $742.0 million for the year ended December 31,
For the year ended December 31, 2017 , gross profit increased $53.6 million , or 7.2% , to $795.5 million from $742.0 million for the year ended December 31,
2016 , driven primarily by increased sales volumes and commodity price inflation. Our gross margin was 23.6% for the year ended December 31, 2017 and 24.0%
2016 , driven primarily by increased sales volumes and commodity price inflation. Our gross margin was 23.6% for the year ended December 31, 2017 and 24.0%
for the year ended December 31, 2016 . This decline resulted primarily from a decline in gross margin in lumber & lumber sheet goods and structural components
for the year ended December 31, 2016 . This decline resulted primarily from a decline in gross margin in lumber & lumber sheet goods and structural components
and a greater percentage of total net sales derived from lumber & lumber sheet goods, which generally generate lower margins. Gross profit for the year ended
and a greater percentage of total net sales derived from lumber & lumber sheet goods, which generally generate lower margins. Gross profit for the year ended
December 31, 2016 was impacted by $2.9 million, or 0.1% of net sales, in relation to the sell-through of inventory which was stepped up in value in connection
December 31, 2016 was impacted by $2.9 million, or 0.1% of net sales, in relation to the sell-through of inventory which was stepped up in value in connection
with the Merger.
with the Merger.
Operating
expenses
Operating
expenses
For the year ended December 31, 2017 :
For the year ended December 31, 2017 :
•
•
•
•
•
•
•
•
•
•
selling, general and administrative expenses increased $47.7 million , or 8.4% , to $619.5 million , or 18.4% of net sales, from $571.8 million , or 18.5%
selling, general and administrative expenses increased $47.7 million , or 8.4% , to $619.5 million , or 18.4% of net sales, from $571.8 million , or 18.5%
of net sales, for the year ended December 31, 2016 . Approximately $16.5 million of this increase related to increased shipping and handling costs to
of net sales, for the year ended December 31, 2016 . Approximately $16.5 million of this increase related to increased shipping and handling costs to
serve higher sales volumes related to existing operations, $12.5 million related to selling, general and administrative expenses of TexPly and Code Plus,
serve higher sales volumes related to existing operations, $12.5 million related to selling, general and administrative expenses of TexPly and Code Plus,
$5.6 million related to an increase in the provision for workers' compensation claims and $5.5 million related to increased health care costs. The
$5.6 million related to an increase in the provision for workers' compensation claims and $5.5 million related to increased health care costs. The
remaining increase was primarily due to costs associated with five newly-opened facilities of approximately $4.7 million.
remaining increase was primarily due to costs associated with five newly-opened facilities of approximately $4.7 million.
depreciation expense increased $4.6 million , or 11.9% , to $43.0 million from $38.4 million during the year ended December 31, 2016 . This increase
depreciation expense increased $4.6 million , or 11.9% , to $43.0 million from $38.4 million during the year ended December 31, 2016 . This increase
primarily relates to replacements and additions of delivery fleet, material handling equipment and operating equipment.
primarily relates to replacements and additions of delivery fleet, material handling equipment and operating equipment.
amortization expense was $16.0 million compared to $20.7 million in the prior year. This decrease resulted from certain intangible assets that became
amortization expense was $16.0 million compared to $20.7 million in the prior year. This decrease resulted from certain intangible assets that became
fully amortized in 2016, partially offset by the amortization of intangible assets acquired in the Code Plus and TexPly acquisitions.
fully amortized in 2016, partially offset by the amortization of intangible assets acquired in the Code Plus and TexPly acquisitions.
the Company incurred $15.3 million of Merger and integration costs related to the ongoing integration of BMHC and SBS, consisting primarily of
the Company incurred $15.3 million of Merger and integration costs related to the ongoing integration of BMHC and SBS, consisting primarily of
severance, system integration costs and professional fees compared to $15.3 million for the year ended December 31, 2016 . During the year ended
severance, system integration costs and professional fees compared to $15.3 million for the year ended December 31, 2016 . During the year ended
December 31, 2017, the Company recognized approximately $2.8 million of expense related to the discontinuance of the new third-party software BMHC
December 31, 2017, the Company recognized approximately $2.8 million of expense related to the discontinuance of the new third-party software BMHC
selected in 2013 for its planned Enterprise Resource Planning system ("New ERP") (see Note 6 to the consolidated financial statements included in Item 8
selected in 2013 for its planned Enterprise Resource Planning system ("New ERP") (see Note 6 to the consolidated financial statements included in Item 8
of this Annual Report on Form 10-K for further description of the New ERP).
of this Annual Report on Form 10-K for further description of the New ERP).
the Company recognized asset impairment charges of $0.4 million related to the write down of real estate held for sale to the lower of depreciated cost or
the Company recognized asset impairment charges of $0.4 million related to the write down of real estate held for sale to the lower of depreciated cost or
estimated fair value less expected disposition costs. During the year ended December 31, 2016, the Company decided to integrate all operations under the
estimated fair value less expected disposition costs. During the year ended December 31, 2016, the Company decided to integrate all operations under the
ERP system utilized by Legacy SBS, and to discontinue use of the New ERP (see Note 6 to the consolidated financial statements included in Item 8 of
ERP system utilized by Legacy SBS, and to discontinue use of the New ERP (see Note 6 to the consolidated financial statements included in Item 8 of
this Annual Report on Form 10-K for further description of the New ERP). In connection with this decision, the Company impaired capitalized software
this Annual Report on Form 10-K for further description of the New ERP). In connection with this decision, the Company impaired capitalized software
costs that had previously been recorded as construction-in-progress within property and equipment on the consolidated balance sheets.
costs that had previously been recorded as construction-in-progress within property and equipment on the consolidated balance sheets.
31
31
Operating Results
Operating Results
(in thousands)
(in thousands)
Net sales
Net sales
Cost of sales
Cost of sales
Gross profit
Gross profit
Operating expenses:
Operating expenses:
Depreciation expense
Depreciation expense
Amortization expense
Amortization expense
Merger and integration costs
Merger and integration costs
Impairment of assets
Impairment of assets
Income from operations
Income from operations
Other income (expenses)
Other income (expenses)
Interest expense
Interest expense
Loss on debt extinguishment
Loss on debt extinguishment
Other income, net
Other income, net
Income (loss) before income taxes
Income (loss) before income taxes
Income tax expense (benefit)
Income tax expense (benefit)
Net income (loss)
Net income (loss)
$
$
2017 compared to 2016
2017 compared to 2016
Net
sales
Net
sales
43,022
43,022
16,003
16,003
15,336
15,336
435
435
101,173
101,173
—
—
5,690
5,690
81,827
81,827
24,402
24,402
57,425
57,425
1.3 %
1.3 %
0.5 %
0.5 %
0.5 %
0.5 %
0.0 %
0.0 %
3.0 %
3.0 %
0.0 %
0.0 %
0.2 %
0.2 %
2.4 %
2.4 %
0.7 %
0.7 %
1.7 % $
1.7 % $
(25,036)
(25,036)
(0.7)%
(0.7)%
38,441
38,441
20,721
20,721
15,340
15,340
11,928
11,928
83,736
83,736
(30,131)
(30,131)
(12,529)
(12,529)
4,070
4,070
45,146
45,146
14,266
14,266
30,880
30,880
1.2 %
1.2 %
0.7 %
0.7 %
0.5 %
0.5 %
0.4 %
0.4 %
2.7 %
2.7 %
(1.0)%
(1.0)%
(0.4)%
(0.4)%
0.1 %
0.1 %
1.5 %
1.5 %
0.5 %
0.5 %
1.0 % $
1.0 % $
15,700
15,700
3,626
3,626
22,993
22,993
—
—
12,248
12,248
(27,552)
(27,552)
—
—
784
784
(14,520)
(14,520)
(9,689)
(9,689)
(4,831)
(4,831)
1.0 %
1.0 %
0.2 %
0.2 %
1.5 %
1.5 %
0.0 %
0.0 %
0.8 %
0.8 %
(1.7)%
(1.7)%
0.0 %
0.0 %
0.0 %
0.0 %
(0.9)%
(0.9)%
(0.6)%
(0.6)%
(0.3)%
(0.3)%
For the year ended December 31, 2017 , net sales increased $272.2 million , or 8.8% , to $3,366.0 million from $3,093.7 million during the year ended December
For the year ended December 31, 2017 , net sales increased $272.2 million , or 8.8% , to $3,366.0 million from $3,093.7 million during the year ended December
31, 2016 . The increase in net sales was primarily driven by the impact of commodity price inflation of approximately 4.2% and increased volume of
31, 2016 . The increase in net sales was primarily driven by the impact of commodity price inflation of approximately 4.2% and increased volume of
approximately 2.8% related to existing operations, while the acquisitions of Code Plus and TexPly increased net sales by approximately 1.8% .
approximately 2.8% related to existing operations, while the acquisitions of Code Plus and TexPly increased net sales by approximately 1.8% .
We estimate approximately 75% of our net sales for the year ended December 31, 2017 were to customers engaged in new single-family construction. According
We estimate approximately 75% of our net sales for the year ended December 31, 2017 were to customers engaged in new single-family construction. According
to the U.S. Census Bureau, single-family housing starts in the South and West regions of the United States, which are our primary operating regions, increased
to the U.S. Census Bureau, single-family housing starts in the South and West regions of the United States, which are our primary operating regions, increased
approximately 9.4% for the year ended December 31, 2017 as compared to the prior year, while single-family houses completed increased 8.7% during the same
approximately 9.4% for the year ended December 31, 2017 as compared to the prior year, while single-family houses completed increased 8.7% during the same
time period. Increases in net sales from Texas and California accounted for approximately 42% of the total increase in net sales for the year ended December 31,
time period. Increases in net sales from Texas and California accounted for approximately 42% of the total increase in net sales for the year ended December 31,
2017 , while the Company experienced a decrease in net sales in Georgia of less than 1% of overall net sales.
2017 , while the Company experienced a decrease in net sales in Georgia of less than 1% of overall net sales.
The following table shows net sales classified by major product category. Certain prior year amounts have been reclassified to conform to the current year
The following table shows net sales classified by major product category. Certain prior year amounts have been reclassified to conform to the current year
presentation.
presentation.
(in thousands)
(in thousands)
Structural components
Structural components
Lumber & lumber sheet goods
Lumber & lumber sheet goods
Millwork, doors & windows
Millwork, doors & windows
Other building products & services
Other building products & services
Total net sales
Total net sales
2017
2017
2016
2016
Net Sales
Net Sales
% of Sales
% of Sales
Net Sales
Net Sales
% of Sales
% of Sales
% Change
% Change
$
$
522,619
522,619
1,114,219
1,114,219
907,377
907,377
821,753
821,753
15.5% $
15.5% $
33.1%
33.1%
27.0%
27.0%
24.4%
24.4%
461,761
461,761
938,563
938,563
894,889
894,889
798,530
798,530
14.9%
14.9%
30.3%
30.3%
28.9%
28.9%
25.9%
25.9%
$
$
3,365,968
3,365,968
100.0% $
100.0% $
3,093,743
3,093,743
100.0%
100.0%
13.2%
13.2%
18.7%
18.7%
1.4%
1.4%
2.9%
2.9%
8.8%
8.8%
30
30
Interest
expense
Interest
expense
The following table shows net sales classified by major product category. Certain prior year amounts have been reclassified to conform to the current year
The following table shows net sales classified by major product category. Certain prior year amounts have been reclassified to conform to the current year
2016
2016
2015
2015
Net Sales
Net Sales
% of Sales
% of Sales
Net Sales
Net Sales
% of Sales
% of Sales
% Change
% Change
$
$
461,761
461,761
938,563
938,563
894,889
894,889
798,530
798,530
14.9% $
14.9% $
30.3%
30.3%
28.9%
28.9%
25.9%
25.9%
249,371
249,371
459,446
459,446
442,675
442,675
425,254
425,254
15.8%
15.8%
29.1%
29.1%
28.1%
28.1%
27.0%
27.0%
$
$
3,093,743
3,093,743
100.0% $
100.0% $
1,576,746
1,576,746
100.0%
100.0%
85.2%
85.2%
104.3%
104.3%
102.2%
102.2%
87.8%
87.8%
96.2%
96.2%
For the year ended December 31, 2017 , interest expense was $25.0 million compared to $30.1 million for the year ended December 31, 2016 . This decrease
For the year ended December 31, 2017 , interest expense was $25.0 million compared to $30.1 million for the year ended December 31, 2016 . This decrease
relates primarily to reduced average borrowings under the revolving line of credit under the Credit Agreement (the "Revolver") and a decrease in interest expense
relates primarily to reduced average borrowings under the revolving line of credit under the Credit Agreement (the "Revolver") and a decrease in interest expense
on the Senior Notes after the Company redeemed $250.0 million of 9.0% senior secured notes (the "Extinguished Senior Notes") with the proceeds from the
on the Senior Notes after the Company redeemed $250.0 million of 9.0% senior secured notes (the "Extinguished Senior Notes") with the proceeds from the
issuance of $350.0 million of 5.5% Senior Notes during September 2016. Non-cash amortization of debt issuance costs, which is included in interest expense, was
issuance of $350.0 million of 5.5% Senior Notes during September 2016. Non-cash amortization of debt issuance costs, which is included in interest expense, was
$1.7 million and $3.1 million for the years ended December 31, 2017 and 2016 , respectively.
$1.7 million and $3.1 million for the years ended December 31, 2017 and 2016 , respectively.
Loss
on
debt
extinguishment
Loss
on
debt
extinguishment
For the year ended December 31, 2016, the Company incurred a loss on debt extinguishment of $12.5 million related to the redemption of the Extinguished Senior
For the year ended December 31, 2016, the Company incurred a loss on debt extinguishment of $12.5 million related to the redemption of the Extinguished Senior
Notes. The loss is made up of a call premium of $8.4 million and the write off of unamortized debt issuance costs and original issue discount of $4.1 million. There
Notes. The loss is made up of a call premium of $8.4 million and the write off of unamortized debt issuance costs and original issue discount of $4.1 million. There
were no similar costs in 2017.
were no similar costs in 2017.
Other
income,
net
Other
income,
net
presentation.
presentation.
(in thousands)
(in thousands)
Structural components
Structural components
Lumber & lumber sheet goods
Lumber & lumber sheet goods
Millwork, doors & windows
Millwork, doors & windows
Other building products & services
Other building products & services
Total net sales
Total net sales
Cost
of
sales
Cost
of
sales
For the year ended December 31, 2017 , other income, net was $5.7 million , which consisted primarily of income related to the final settlement of insurance
For the year ended December 31, 2017 , other income, net was $5.7 million , which consisted primarily of income related to the final settlement of insurance
claims made by the Company for a fire at one of the Company's facilities during 2015, income from tax incentive programs and service charges assessed on past
claims made by the Company for a fire at one of the Company's facilities during 2015, income from tax incentive programs and service charges assessed on past
due accounts receivable. For the year ended December 31, 2016 , other income, net was $4.1 million , which consisted primarily of insurance proceeds received
due accounts receivable. For the year ended December 31, 2016 , other income, net was $4.1 million , which consisted primarily of insurance proceeds received
during the year ended December 31, 2016 related to a fire at one of the Company's facilities during 2015 and service charges assessed on past due accounts
during the year ended December 31, 2016 related to a fire at one of the Company's facilities during 2015 and service charges assessed on past due accounts
receivable.
receivable.
Gross
profit
Gross
profit
Income
tax
Income
tax
For the years ended December 31, 2017 and 2016, income tax expense was $24.4 million and $14.3 million , respectively. The effective tax rate for the year ended
For the years ended December 31, 2017 and 2016, income tax expense was $24.4 million and $14.3 million , respectively. The effective tax rate for the year ended
December 31, 2017 was 29.8% compared to 31.6% for the year ended December 31, 2016 . For the year ended December 31, 2017, the Company's effective tax
December 31, 2017 was 29.8% compared to 31.6% for the year ended December 31, 2016 . For the year ended December 31, 2017, the Company's effective tax
rate was lower than the Company's federal and state statutory rates primarily due to the enactment of the 2017 Tax Act, an Internal Revenue Code ("IRC") section
rate was lower than the Company's federal and state statutory rates primarily due to the enactment of the 2017 Tax Act, an Internal Revenue Code ("IRC") section
199 manufacturing deduction, and excess windfall tax benefits of stock compensation deductions. Excluding the impacts of the 2017 Tax Act, our effective income
199 manufacturing deduction, and excess windfall tax benefits of stock compensation deductions. Excluding the impacts of the 2017 Tax Act, our effective income
tax rate in 2017 would have been 34.2%. The 2017 Tax Act, among other things, reduces the federal corporate income tax rate to 21% from 35%, effective January
tax rate in 2017 would have been 34.2%. The 2017 Tax Act, among other things, reduces the federal corporate income tax rate to 21% from 35%, effective January
1, 2018, resulting in a net income tax benefit of $3.6 million in 2017 primarily related to a reduction of our net deferred tax liability. For the year ended December
1, 2018, resulting in a net income tax benefit of $3.6 million in 2017 primarily related to a reduction of our net deferred tax liability. For the year ended December
31, 2016, the Company's effective tax rate was lower than the Company's federal and state statutory rates primarily due to the adoption of a state tax position
31, 2016, the Company's effective tax rate was lower than the Company's federal and state statutory rates primarily due to the adoption of a state tax position
related to IRC section 382 limitations on a state net operating loss carryforward, excess windfall tax benefits of stock compensation deductions, and an IRC section
related to IRC section 382 limitations on a state net operating loss carryforward, excess windfall tax benefits of stock compensation deductions, and an IRC section
199 manufacturing deduction.
199 manufacturing deduction.
The Company expects our 2018 annual effective tax rate to be lower than our current year effective tax rate primarily due to a reduction in the federal corporate
The Company expects our 2018 annual effective tax rate to be lower than our current year effective tax rate primarily due to a reduction in the federal corporate
income tax rate to 21%. In addition to the lower corporate income tax rate, other tax law changes related to the 2017 Tax Act that may impact our Company's tax
income tax rate to 21%. In addition to the lower corporate income tax rate, other tax law changes related to the 2017 Tax Act that may impact our Company's tax
provision in subsequent years include, but are not limited to, the acceleration of tax depreciation for certain assets, repeal of the section 199 manufacturing
provision in subsequent years include, but are not limited to, the acceleration of tax depreciation for certain assets, repeal of the section 199 manufacturing
deduction, additional limitations on executive compensation and limitations on the deductibility of interest.
deduction, additional limitations on executive compensation and limitations on the deductibility of interest.
supplier agreements.
supplier agreements.
Operating
expenses
Operating
expenses
For the year ended December 31, 2016 :
For the year ended December 31, 2016 :
2016 compared to 2015
2016 compared to 2015
Net
sales
Net
sales
For the year ended December 31, 2016 , net sales increased $1,517.0 million , or 96.2% , to $3,093.7 million from $1,576.7 million during the year ended
For the year ended December 31, 2016 , net sales increased $1,517.0 million , or 96.2% , to $3,093.7 million from $1,576.7 million during the year ended
December 31, 2015 . The increase in net sales was driven primarily by increased volume of approximately 6.3% related to existing operations and 88.7% related to
December 31, 2015 . The increase in net sales was driven primarily by increased volume of approximately 6.3% related to existing operations and 88.7% related to
the Merger and acquisitions of VNS and RBI, while the impact of commodity price inflation increased net sales by approximately 1.2%.
the Merger and acquisitions of VNS and RBI, while the impact of commodity price inflation increased net sales by approximately 1.2%.
We estimate approximately 73% of our net sales for the year ended December 31, 2016 were to customers engaged in new single-family construction. According
We estimate approximately 73% of our net sales for the year ended December 31, 2016 were to customers engaged in new single-family construction. According
to the U.S. Census Bureau, single-family housing starts in the South and West regions of the United States, which are our primary operating regions, increased
to the U.S. Census Bureau, single-family housing starts in the South and West regions of the United States, which are our primary operating regions, increased
approximately 8.7% for the year ended December 31, 2016 as compared to the prior year, while single-family houses completed increased 13.6% during the same
approximately 8.7% for the year ended December 31, 2016 as compared to the prior year, while single-family houses completed increased 13.6% during the same
time period.
time period.
For the year ended December 31, 2016 , cost of sales increased $1,136.4 million , or 93.5% , to $2,351.8 million from $1,215.3 million during the year ended
For the year ended December 31, 2016 , cost of sales increased $1,136.4 million , or 93.5% , to $2,351.8 million from $1,215.3 million during the year ended
December 31, 2015 . We estimate our cost of sales increased approximately 92.1% as a result of the Merger and acquisitions of VNS and RBI, while organic
December 31, 2015 . We estimate our cost of sales increased approximately 92.1% as a result of the Merger and acquisitions of VNS and RBI, while organic
change accounted for an increase of 1.4%. Cost of sales for the years ended December 31, 2016 and 2015 includes $2.9 million and $10.3 million, respectively, of
change accounted for an increase of 1.4%. Cost of sales for the years ended December 31, 2016 and 2015 includes $2.9 million and $10.3 million, respectively, of
expense incurred in relation to the sell-through of Legacy SBS inventory which was stepped up in value in connection with the Merger.
expense incurred in relation to the sell-through of Legacy SBS inventory which was stepped up in value in connection with the Merger.
For the year ended December 31, 2016 , gross profit increased $380.6 million , or 105.3% , to $742.0 million from $361.4 million for the year ended December 31,
For the year ended December 31, 2016 , gross profit increased $380.6 million , or 105.3% , to $742.0 million from $361.4 million for the year ended December 31,
2015 , driven primarily by the Merger and the acquisitions of VNS and RBI, as well as increased sales volumes. Our gross margin was 24.0% for the year ended
2015 , driven primarily by the Merger and the acquisitions of VNS and RBI, as well as increased sales volumes. Our gross margin was 24.0% for the year ended
December 31, 2016 and 22.9% for the year ended December 31, 2015 . This increase was primarily driven by a higher percentage of total net sales being derived
December 31, 2016 and 22.9% for the year ended December 31, 2015 . This increase was primarily driven by a higher percentage of total net sales being derived
from millwork, doors & windows, which generally are sold at a higher gross margin than our other product categories, as well as increased consideration from
from millwork, doors & windows, which generally are sold at a higher gross margin than our other product categories, as well as increased consideration from
•
•
•
•
•
•
•
•
selling, general and administrative expenses increased $265.0 million , or 86.3% , to $571.8 million , or 18.5% of net sales, from $306.8 million , or
selling, general and administrative expenses increased $265.0 million , or 86.3% , to $571.8 million , or 18.5% of net sales, from $306.8 million , or
19.5% of net sales, for the year ended December 31, 2015 , primarily as a result of the Merger and acquisitions of VNS and RBI.
19.5% of net sales, for the year ended December 31, 2015 , primarily as a result of the Merger and acquisitions of VNS and RBI.
depreciation expense increased $22.7 million , or 144.8% , to $38.4 million from $15.7 million during the year ended December 31, 2015 , primarily as a
depreciation expense increased $22.7 million , or 144.8% , to $38.4 million from $15.7 million during the year ended December 31, 2015 , primarily as a
result of fixed assets acquired through the Merger and acquisitions of VNS and RBI, as well as replacements and additions of delivery fleet, material
result of fixed assets acquired through the Merger and acquisitions of VNS and RBI, as well as replacements and additions of delivery fleet, material
handling equipment and operating equipment.
handling equipment and operating equipment.
amortization expense was $20.7 million compared to $3.6 million in the prior year. The amortization expense recognized for the year ended December 31,
amortization expense was $20.7 million compared to $3.6 million in the prior year. The amortization expense recognized for the year ended December 31,
2016 relates to intangible assets acquired through the Merger and acquisitions of VNS and RBI.
2016 relates to intangible assets acquired through the Merger and acquisitions of VNS and RBI.
the Company recognized asset impairment charges of $11.9 million. During the first quarter of 2016, the Company decided to integrate all operations
the Company recognized asset impairment charges of $11.9 million. 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 New ERP (see Note 6 to the consolidated financial statements included in Item 8 of this
under the Legacy SBS ERP system, and to discontinue use of the New ERP (see Note 6 to the consolidated financial statements included in Item 8 of this
Annual Report on Form 10-K for further description of the New ERP). In connection with this decision, the Company impaired capitalized software costs
Annual Report on Form 10-K for further description of the New ERP). In connection with this decision, the Company impaired capitalized software costs
that had previously been recorded as construction-in-progress within property and equipment on the consolidated balance sheets.
that had previously been recorded as construction-in-progress within property and equipment on the consolidated balance sheets.
•
•
the Company incurred $15.3 million of Merger and integration costs related to the ongoing integration of BMHC and SBS, consisting primarily of
the Company incurred $15.3 million of Merger and integration costs related to the ongoing integration of BMHC and SBS, consisting primarily of
severance, system integration costs and professional fees compared to $23.0 million for the year ended December 31, 2015 .
severance, system integration costs and professional fees compared to $23.0 million for the year ended December 31, 2015 .
32
32
33
33
Interest
expense
Interest
expense
Loss
on
debt
extinguishment
Loss
on
debt
extinguishment
were no similar costs in 2017.
were no similar costs in 2017.
Other
income,
net
Other
income,
net
receivable.
receivable.
Income
tax
Income
tax
2016 compared to 2015
2016 compared to 2015
Net
sales
Net
sales
For the year ended December 31, 2017 , interest expense was $25.0 million compared to $30.1 million for the year ended December 31, 2016 . This decrease
For the year ended December 31, 2017 , interest expense was $25.0 million compared to $30.1 million for the year ended December 31, 2016 . This decrease
relates primarily to reduced average borrowings under the revolving line of credit under the Credit Agreement (the "Revolver") and a decrease in interest expense
relates primarily to reduced average borrowings under the revolving line of credit under the Credit Agreement (the "Revolver") and a decrease in interest expense
on the Senior Notes after the Company redeemed $250.0 million of 9.0% senior secured notes (the "Extinguished Senior Notes") with the proceeds from the
on the Senior Notes after the Company redeemed $250.0 million of 9.0% senior secured notes (the "Extinguished Senior Notes") with the proceeds from the
issuance of $350.0 million of 5.5% Senior Notes during September 2016. Non-cash amortization of debt issuance costs, which is included in interest expense, was
issuance of $350.0 million of 5.5% Senior Notes during September 2016. Non-cash amortization of debt issuance costs, which is included in interest expense, was
$1.7 million and $3.1 million for the years ended December 31, 2017 and 2016 , respectively.
$1.7 million and $3.1 million for the years ended December 31, 2017 and 2016 , respectively.
For the year ended December 31, 2016, the Company incurred a loss on debt extinguishment of $12.5 million related to the redemption of the Extinguished Senior
For the year ended December 31, 2016, the Company incurred a loss on debt extinguishment of $12.5 million related to the redemption of the Extinguished Senior
Notes. The loss is made up of a call premium of $8.4 million and the write off of unamortized debt issuance costs and original issue discount of $4.1 million. There
Notes. The loss is made up of a call premium of $8.4 million and the write off of unamortized debt issuance costs and original issue discount of $4.1 million. There
The following table shows net sales classified by major product category. Certain prior year amounts have been reclassified to conform to the current year
The following table shows net sales classified by major product category. Certain prior year amounts have been reclassified to conform to the current year
presentation.
presentation.
(in thousands)
(in thousands)
Structural components
Structural components
Lumber & lumber sheet goods
Lumber & lumber sheet goods
Millwork, doors & windows
Millwork, doors & windows
Other building products & services
Other building products & services
Total net sales
Total net sales
Cost
of
sales
Cost
of
sales
2016
2016
2015
2015
Net Sales
Net Sales
% of Sales
% of Sales
Net Sales
Net Sales
% of Sales
% of Sales
% Change
% Change
$
$
461,761
461,761
938,563
938,563
894,889
894,889
798,530
798,530
14.9% $
14.9% $
30.3%
30.3%
28.9%
28.9%
25.9%
25.9%
249,371
249,371
459,446
459,446
442,675
442,675
425,254
425,254
15.8%
15.8%
29.1%
29.1%
28.1%
28.1%
27.0%
27.0%
$
$
3,093,743
3,093,743
100.0% $
100.0% $
1,576,746
1,576,746
100.0%
100.0%
85.2%
85.2%
104.3%
104.3%
102.2%
102.2%
87.8%
87.8%
96.2%
96.2%
For the year ended December 31, 2017 , other income, net was $5.7 million , which consisted primarily of income related to the final settlement of insurance
For the year ended December 31, 2017 , other income, net was $5.7 million , which consisted primarily of income related to the final settlement of insurance
claims made by the Company for a fire at one of the Company's facilities during 2015, income from tax incentive programs and service charges assessed on past
claims made by the Company for a fire at one of the Company's facilities during 2015, income from tax incentive programs and service charges assessed on past
due accounts receivable. For the year ended December 31, 2016 , other income, net was $4.1 million , which consisted primarily of insurance proceeds received
due accounts receivable. For the year ended December 31, 2016 , other income, net was $4.1 million , which consisted primarily of insurance proceeds received
during the year ended December 31, 2016 related to a fire at one of the Company's facilities during 2015 and service charges assessed on past due accounts
during the year ended December 31, 2016 related to a fire at one of the Company's facilities during 2015 and service charges assessed on past due accounts
For the year ended December 31, 2016 , cost of sales increased $1,136.4 million , or 93.5% , to $2,351.8 million from $1,215.3 million during the year ended
For the year ended December 31, 2016 , cost of sales increased $1,136.4 million , or 93.5% , to $2,351.8 million from $1,215.3 million during the year ended
December 31, 2015 . We estimate our cost of sales increased approximately 92.1% as a result of the Merger and acquisitions of VNS and RBI, while organic
December 31, 2015 . We estimate our cost of sales increased approximately 92.1% as a result of the Merger and acquisitions of VNS and RBI, while organic
change accounted for an increase of 1.4%. Cost of sales for the years ended December 31, 2016 and 2015 includes $2.9 million and $10.3 million, respectively, of
change accounted for an increase of 1.4%. Cost of sales for the years ended December 31, 2016 and 2015 includes $2.9 million and $10.3 million, respectively, of
expense incurred in relation to the sell-through of Legacy SBS inventory which was stepped up in value in connection with the Merger.
expense incurred in relation to the sell-through of Legacy SBS inventory which was stepped up in value in connection with the Merger.
For the years ended December 31, 2017 and 2016, income tax expense was $24.4 million and $14.3 million , respectively. The effective tax rate for the year ended
For the years ended December 31, 2017 and 2016, income tax expense was $24.4 million and $14.3 million , respectively. The effective tax rate for the year ended
December 31, 2017 was 29.8% compared to 31.6% for the year ended December 31, 2016 . For the year ended December 31, 2017, the Company's effective tax
December 31, 2017 was 29.8% compared to 31.6% for the year ended December 31, 2016 . For the year ended December 31, 2017, the Company's effective tax
rate was lower than the Company's federal and state statutory rates primarily due to the enactment of the 2017 Tax Act, an Internal Revenue Code ("IRC") section
rate was lower than the Company's federal and state statutory rates primarily due to the enactment of the 2017 Tax Act, an Internal Revenue Code ("IRC") section
199 manufacturing deduction, and excess windfall tax benefits of stock compensation deductions. Excluding the impacts of the 2017 Tax Act, our effective income
199 manufacturing deduction, and excess windfall tax benefits of stock compensation deductions. Excluding the impacts of the 2017 Tax Act, our effective income
tax rate in 2017 would have been 34.2%. The 2017 Tax Act, among other things, reduces the federal corporate income tax rate to 21% from 35%, effective January
tax rate in 2017 would have been 34.2%. The 2017 Tax Act, among other things, reduces the federal corporate income tax rate to 21% from 35%, effective January
1, 2018, resulting in a net income tax benefit of $3.6 million in 2017 primarily related to a reduction of our net deferred tax liability. For the year ended December
1, 2018, resulting in a net income tax benefit of $3.6 million in 2017 primarily related to a reduction of our net deferred tax liability. For the year ended December
31, 2016, the Company's effective tax rate was lower than the Company's federal and state statutory rates primarily due to the adoption of a state tax position
31, 2016, the Company's effective tax rate was lower than the Company's federal and state statutory rates primarily due to the adoption of a state tax position
related to IRC section 382 limitations on a state net operating loss carryforward, excess windfall tax benefits of stock compensation deductions, and an IRC section
related to IRC section 382 limitations on a state net operating loss carryforward, excess windfall tax benefits of stock compensation deductions, and an IRC section
199 manufacturing deduction.
199 manufacturing deduction.
The Company expects our 2018 annual effective tax rate to be lower than our current year effective tax rate primarily due to a reduction in the federal corporate
The Company expects our 2018 annual effective tax rate to be lower than our current year effective tax rate primarily due to a reduction in the federal corporate
income tax rate to 21%. In addition to the lower corporate income tax rate, other tax law changes related to the 2017 Tax Act that may impact our Company's tax
income tax rate to 21%. In addition to the lower corporate income tax rate, other tax law changes related to the 2017 Tax Act that may impact our Company's tax
provision in subsequent years include, but are not limited to, the acceleration of tax depreciation for certain assets, repeal of the section 199 manufacturing
provision in subsequent years include, but are not limited to, the acceleration of tax depreciation for certain assets, repeal of the section 199 manufacturing
deduction, additional limitations on executive compensation and limitations on the deductibility of interest.
deduction, additional limitations on executive compensation and limitations on the deductibility of interest.
For the year ended December 31, 2016 , net sales increased $1,517.0 million , or 96.2% , to $3,093.7 million from $1,576.7 million during the year ended
For the year ended December 31, 2016 , net sales increased $1,517.0 million , or 96.2% , to $3,093.7 million from $1,576.7 million during the year ended
December 31, 2015 . The increase in net sales was driven primarily by increased volume of approximately 6.3% related to existing operations and 88.7% related to
December 31, 2015 . The increase in net sales was driven primarily by increased volume of approximately 6.3% related to existing operations and 88.7% related to
the Merger and acquisitions of VNS and RBI, while the impact of commodity price inflation increased net sales by approximately 1.2%.
the Merger and acquisitions of VNS and RBI, while the impact of commodity price inflation increased net sales by approximately 1.2%.
We estimate approximately 73% of our net sales for the year ended December 31, 2016 were to customers engaged in new single-family construction. According
We estimate approximately 73% of our net sales for the year ended December 31, 2016 were to customers engaged in new single-family construction. According
to the U.S. Census Bureau, single-family housing starts in the South and West regions of the United States, which are our primary operating regions, increased
to the U.S. Census Bureau, single-family housing starts in the South and West regions of the United States, which are our primary operating regions, increased
approximately 8.7% for the year ended December 31, 2016 as compared to the prior year, while single-family houses completed increased 13.6% during the same
approximately 8.7% for the year ended December 31, 2016 as compared to the prior year, while single-family houses completed increased 13.6% during the same
time period.
time period.
Gross
profit
Gross
profit
For the year ended December 31, 2016 , gross profit increased $380.6 million , or 105.3% , to $742.0 million from $361.4 million for the year ended December 31,
For the year ended December 31, 2016 , gross profit increased $380.6 million , or 105.3% , to $742.0 million from $361.4 million for the year ended December 31,
2015 , driven primarily by the Merger and the acquisitions of VNS and RBI, as well as increased sales volumes. Our gross margin was 24.0% for the year ended
2015 , driven primarily by the Merger and the acquisitions of VNS and RBI, as well as increased sales volumes. Our gross margin was 24.0% for the year ended
December 31, 2016 and 22.9% for the year ended December 31, 2015 . This increase was primarily driven by a higher percentage of total net sales being derived
December 31, 2016 and 22.9% for the year ended December 31, 2015 . This increase was primarily driven by a higher percentage of total net sales being derived
from millwork, doors & windows, which generally are sold at a higher gross margin than our other product categories, as well as increased consideration from
from millwork, doors & windows, which generally are sold at a higher gross margin than our other product categories, as well as increased consideration from
supplier agreements.
supplier agreements.
Operating
expenses
Operating
expenses
For the year ended December 31, 2016 :
For the year ended December 31, 2016 :
•
•
•
•
•
•
•
•
•
•
selling, general and administrative expenses increased $265.0 million , or 86.3% , to $571.8 million , or 18.5% of net sales, from $306.8 million , or
selling, general and administrative expenses increased $265.0 million , or 86.3% , to $571.8 million , or 18.5% of net sales, from $306.8 million , or
19.5% of net sales, for the year ended December 31, 2015 , primarily as a result of the Merger and acquisitions of VNS and RBI.
19.5% of net sales, for the year ended December 31, 2015 , primarily as a result of the Merger and acquisitions of VNS and RBI.
depreciation expense increased $22.7 million , or 144.8% , to $38.4 million from $15.7 million during the year ended December 31, 2015 , primarily as a
depreciation expense increased $22.7 million , or 144.8% , to $38.4 million from $15.7 million during the year ended December 31, 2015 , primarily as a
result of fixed assets acquired through the Merger and acquisitions of VNS and RBI, as well as replacements and additions of delivery fleet, material
result of fixed assets acquired through the Merger and acquisitions of VNS and RBI, as well as replacements and additions of delivery fleet, material
handling equipment and operating equipment.
handling equipment and operating equipment.
amortization expense was $20.7 million compared to $3.6 million in the prior year. The amortization expense recognized for the year ended December 31,
amortization expense was $20.7 million compared to $3.6 million in the prior year. The amortization expense recognized for the year ended December 31,
2016 relates to intangible assets acquired through the Merger and acquisitions of VNS and RBI.
2016 relates to intangible assets acquired through the Merger and acquisitions of VNS and RBI.
the Company recognized asset impairment charges of $11.9 million. During the first quarter of 2016, the Company decided to integrate all operations
the Company recognized asset impairment charges of $11.9 million. 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 New ERP (see Note 6 to the consolidated financial statements included in Item 8 of this
under the Legacy SBS ERP system, and to discontinue use of the New ERP (see Note 6 to the consolidated financial statements included in Item 8 of this
Annual Report on Form 10-K for further description of the New ERP). In connection with this decision, the Company impaired capitalized software costs
Annual Report on Form 10-K for further description of the New ERP). In connection with this decision, the Company impaired capitalized software costs
that had previously been recorded as construction-in-progress within property and equipment on the consolidated balance sheets.
that had previously been recorded as construction-in-progress within property and equipment on the consolidated balance sheets.
the Company incurred $15.3 million of Merger and integration costs related to the ongoing integration of BMHC and SBS, consisting primarily of
the Company incurred $15.3 million of Merger and integration costs related to the ongoing integration of BMHC and SBS, consisting primarily of
severance, system integration costs and professional fees compared to $23.0 million for the year ended December 31, 2015 .
severance, system integration costs and professional fees compared to $23.0 million for the year ended December 31, 2015 .
32
32
33
33
Interest
expense
Interest
expense
Historical Cash Flow Information
Historical Cash Flow Information
For the year ended December 31, 2016 , interest expense was $30.1 million compared to $27.6 million for the year ended December 31, 2015 . This increase
For the year ended December 31, 2016 , interest expense was $30.1 million compared to $27.6 million for the year ended December 31, 2015 . This increase
relates primarily to SBS borrowings that were assumed by the Company as of the date of the Merger and borrowings used to fund the acquisition of RBI. This
relates primarily to SBS borrowings that were assumed by the Company as of the date of the Merger and borrowings used to fund the acquisition of RBI. This
increase was partially offset by reduced borrowing levels on the Revolver after repaying approximately $74 million of Revolver borrowings from proceeds
increase was partially offset by reduced borrowing levels on the Revolver after repaying approximately $74 million of Revolver borrowings from proceeds
received from the Company's refinancing of its Senior Notes in September 2016. Non-cash amortization of debt issuance costs, which is included in interest
received from the Company's refinancing of its Senior Notes in September 2016. Non-cash amortization of debt issuance costs, which is included in interest
expense, was $3.1 million and $2.5 million for the years ended December 31, 2016 and 2015 , respectively.
expense, was $3.1 million and $2.5 million for the years ended December 31, 2016 and 2015 , respectively.
Net
current
assets
Net
current
assets
in the following table:
in the following table:
Loss
on
debt
extinguishment
Loss
on
debt
extinguishment
For the year ended December 31, 2016 , the Company incurred a loss on debt extinguishment of $12.5 million related to the redemption of the Extinguished Senior
For the year ended December 31, 2016 , the Company incurred a loss on debt extinguishment of $12.5 million related to the redemption of the Extinguished Senior
Notes. The loss is made up of a call premium of $8.4 million and the write off of unamortized debt issuance costs and original issue discount of $4.1 million.
Notes. The loss is made up of a call premium of $8.4 million and the write off of unamortized debt issuance costs and original issue discount of $4.1 million.
Other
income,
net
Other
income,
net
(in thousands)
(in thousands)
Cash and cash equivalents
Cash and cash equivalents
Accounts receivable, net of allowances
Accounts receivable, net of allowances
Inventories, net
Inventories, net
Other current assets
Other current assets
For the year ended December 31, 2016 , other income, net increased $3.3 million compared to the year ended December 31, 2015 . Approximately $1.9 million of
For the year ended December 31, 2016 , other income, net increased $3.3 million compared to the year ended December 31, 2015 . Approximately $1.9 million of
this increase was due to insurance proceeds received during the year ended December 31, 2016 related to a fire at one of the Company's facilities during 2015. The
this increase was due to insurance proceeds received during the year ended December 31, 2016 related to a fire at one of the Company's facilities during 2015. The
remaining increase relates primarily to service charges assessed on past due accounts receivable for Legacy SBS operations.
remaining increase relates primarily to service charges assessed on past due accounts receivable for Legacy SBS operations.
Accounts payable, accrued expenses and other current liabilities
Accounts payable, accrued expenses and other current liabilities
Current portion of long-term debt and capital lease obligations
Current portion of long-term debt and capital lease obligations
Total net current assets
Total net current assets
December 31,
December 31,
December 31,
December 31,
2017
2017
2016
2016
$
$
11,750 $
11,750 $
322,892
322,892
309,060
309,060
90,435
90,435
(307,538)
(307,538)
(7,739)
(7,739)
$
$
418,860 $
418,860 $
8,917
8,917
313,304
313,304
272,276
272,276
72,445
72,445
(291,657)
(291,657)
(11,155)
(11,155)
364,130
364,130
Net current assets (current assets less current liabilities) were $418.9 million and $364.1 million as of December 31, 2017 and 2016 , respectively, as summarized
Net current assets (current assets less current liabilities) were $418.9 million and $364.1 million as of December 31, 2017 and 2016 , respectively, as summarized
Income
tax
Income
tax
For the year ended December 31, 2016 , income tax expense was $14.3 million compared to income tax benefit of $9.7 million for the year ended December 31,
For the year ended December 31, 2016 , income tax expense was $14.3 million compared to income tax benefit of $9.7 million for the year ended December 31,
2015 . The effective tax rate for the year ended December 31, 2016 was 31.6% compared to 66.7% for the year ended December 31, 2015 . For the year ended
2015 . The effective tax rate for the year ended December 31, 2016 was 31.6% compared to 66.7% for the year ended December 31, 2015 . For the year ended
December 31, 2016, the Company's effective tax rate was lower than the Company's federal and state statutory rates primarily due to the adoption of a state tax
December 31, 2016, the Company's effective tax rate was lower than the Company's federal and state statutory rates primarily due to the adoption of a state tax
position related to IRC section 382 limitations on a state net operating loss carryforward, excess windfall tax benefits of stock compensation deductions, and an
position related to IRC section 382 limitations on a state net operating loss carryforward, excess windfall tax benefits of stock compensation deductions, and an
IRC section 199 manufacturing deduction. For the year ended December 31, 2015, the Company's effective tax rate was higher than the Company's federal and
IRC section 199 manufacturing deduction. For the year ended December 31, 2015, the Company's effective tax rate was higher than the Company's federal and
state statutory rates primarily due to adopting a tax position related to IRC section 382 limitations on its federal and state net operating loss carryforwards and other
state statutory rates primarily due to adopting a tax position related to IRC section 382 limitations on its federal and state net operating loss carryforwards and other
built-in losses.
built-in losses.
2017 .
2017 .
Accounts receivable, net, increased $9.6 million from December 31, 2016 to December 31, 2017 primarily due to increases in sales, partially offset by a decrease
Accounts receivable, net, increased $9.6 million from December 31, 2016 to December 31, 2017 primarily due to increases in sales, partially offset by a decrease
in days sales outstanding (measured against net sales in the fourth quarter of each period), which were 38 days at December 31, 2016 and 35 days at December 31,
in days sales outstanding (measured against net sales in the fourth quarter of each period), which were 38 days at December 31, 2016 and 35 days at December 31,
Inventories, net, increased $36.8 million from December 31, 2016 to December 31, 2017 primarily due to commodity price inflation and increases in sales.
Inventories, net, increased $36.8 million from December 31, 2016 to December 31, 2017 primarily due to commodity price inflation and increases in sales.
Inventory days on hand (measured against cost of sales in the fourth quarter of each period) were 43 days at December 31, 2017 and 2016 .
Inventory days on hand (measured against cost of sales in the fourth quarter of each period) were 43 days at December 31, 2017 and 2016 .
Accounts payable, accrued expenses and other current liabilities increased $15.9 million from December 31, 2016 to December 31, 2017 primarily due to an
Accounts payable, accrued expenses and other current liabilities increased $15.9 million from December 31, 2016 to December 31, 2017 primarily due to an
increase in accounts payable related to increased inventory purchases in connection with higher sales volume.
increase in accounts payable related to increased inventory purchases in connection with higher sales volume.
Liquidity and Capital Resources
Liquidity and Capital Resources
Cash
flows
from
operating
activities
Cash
flows
from
operating
activities
Our primary capital requirements are to fund working capital needs and operating expenses, meet required interest and principal payments and fund capital
Our primary capital requirements are to fund working capital needs and operating expenses, meet required interest and principal payments and fund capital
expenditures. During 2017 and 2016 , our capital resources have primarily consisted of cash and cash equivalents generated through operating cash flows, proceeds
expenditures. During 2017 and 2016 , our capital resources have primarily consisted of cash and cash equivalents generated through operating cash flows, proceeds
from the September 2016 issuance of the Senior Notes and borrowings under our Revolver.
from the September 2016 issuance of the Senior Notes and borrowings under our Revolver.
Net cash provided by operating activities was $93.9 million , $106.9 million and $0.7 million for the years ended December 31, 2017 , 2016 and 2015 ,
Net cash provided by operating activities was $93.9 million , $106.9 million and $0.7 million for the years ended December 31, 2017 , 2016 and 2015 ,
respectively, as summarized in the following table:
respectively, as summarized in the following table:
Our liquidity at December 31, 2017 was $320.0 million , which includes $11.8 million in cash and cash equivalents and $308.2 million of unused borrowing
Our liquidity at December 31, 2017 was $320.0 million , which includes $11.8 million in cash and cash equivalents and $308.2 million of unused borrowing
capacity under our Revolver.
capacity under our Revolver.
We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to fund debt service
We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to fund debt service
requirements and provide cash, as required, to support our ongoing operations, capital expenditures, lease obligations and working capital for at least the next
requirements and provide cash, as required, to support our ongoing operations, capital expenditures, lease obligations and working capital for at least the next
12 months.
12 months.
34
34
(in thousands)
(in thousands)
Net income (loss)
Net income (loss)
Non-cash expenses
Non-cash expenses
Change in deferred income taxes
Change in deferred income taxes
Impairment of assets
Impairment of assets
Loss on debt extinguishment
Loss on debt extinguishment
Change in working capital and other assets and liabilities
Change in working capital and other assets and liabilities
Net cash provided by operating activities
Net cash provided by operating activities
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
$
$
57,425 $
57,425 $
30,880 $
30,880 $
74,548
74,548
2,318
2,318
435
435
—
—
(40,792)
(40,792)
79,629
79,629
(3,571)
(3,571)
11,928
11,928
12,529
12,529
(24,507)
(24,507)
$
$
93,934 $
93,934 $
106,888 $
106,888 $
(4,831)
(4,831)
39,895
39,895
(5,892)
(5,892)
—
—
—
—
(28,429)
(28,429)
743
743
Net cash provided by operating activities decreased by $13.0 million for the year ended December 31, 2017 as compared to the year ended December 31, 2016.
Net cash provided by operating activities decreased by $13.0 million for the year ended December 31, 2017 as compared to the year ended December 31, 2016.
This decrease was primarily related to an increase in cash paid for income taxes, net of refunds, of $14.6 million , which resulted from an increase in taxable
This decrease was primarily related to an increase in cash paid for income taxes, net of refunds, of $14.6 million , which resulted from an increase in taxable
income and the utilization during the year ended December 31, 2016 of income tax overpayments made during the year ended December 31, 2015. Changes in
income and the utilization during the year ended December 31, 2016 of income tax overpayments made during the year ended December 31, 2015. Changes in
other assets and liabilities relate primarily to the timing of cash received from customers and cash paid to vendors.
other assets and liabilities relate primarily to the timing of cash received from customers and cash paid to vendors.
Net cash provided by operating activities increased by $106.1 million for the year ended December 31, 2016 as compared to the year ended December 31, 2015.
Net cash provided by operating activities increased by $106.1 million for the year ended December 31, 2016 as compared to the year ended December 31, 2015.
This increase was primarily related to improved profitability and the effects of the Merger, whereby the year ended December 31, 2016 contains a full year of
This increase was primarily related to improved profitability and the effects of the Merger, whereby the year ended December 31, 2016 contains a full year of
Legacy SBS cash flows, while the year ended December 31, 2015 only contains the cash flows of Legacy SBS beginning on the date that the Merger was
Legacy SBS cash flows, while the year ended December 31, 2015 only contains the cash flows of Legacy SBS beginning on the date that the Merger was
completed, December 1, 2015.
completed, December 1, 2015.
35
35
Loss
on
debt
extinguishment
Loss
on
debt
extinguishment
Other
income,
net
Other
income,
net
Income
tax
Income
tax
built-in losses.
built-in losses.
Liquidity and Capital Resources
Liquidity and Capital Resources
capacity under our Revolver.
capacity under our Revolver.
12 months.
12 months.
Interest
expense
Interest
expense
Historical Cash Flow Information
Historical Cash Flow Information
For the year ended December 31, 2016 , interest expense was $30.1 million compared to $27.6 million for the year ended December 31, 2015 . This increase
For the year ended December 31, 2016 , interest expense was $30.1 million compared to $27.6 million for the year ended December 31, 2015 . This increase
Net
current
assets
Net
current
assets
relates primarily to SBS borrowings that were assumed by the Company as of the date of the Merger and borrowings used to fund the acquisition of RBI. This
relates primarily to SBS borrowings that were assumed by the Company as of the date of the Merger and borrowings used to fund the acquisition of RBI. This
increase was partially offset by reduced borrowing levels on the Revolver after repaying approximately $74 million of Revolver borrowings from proceeds
increase was partially offset by reduced borrowing levels on the Revolver after repaying approximately $74 million of Revolver borrowings from proceeds
received from the Company's refinancing of its Senior Notes in September 2016. Non-cash amortization of debt issuance costs, which is included in interest
received from the Company's refinancing of its Senior Notes in September 2016. Non-cash amortization of debt issuance costs, which is included in interest
expense, was $3.1 million and $2.5 million for the years ended December 31, 2016 and 2015 , respectively.
expense, was $3.1 million and $2.5 million for the years ended December 31, 2016 and 2015 , respectively.
Net current assets (current assets less current liabilities) were $418.9 million and $364.1 million as of December 31, 2017 and 2016 , respectively, as summarized
Net current assets (current assets less current liabilities) were $418.9 million and $364.1 million as of December 31, 2017 and 2016 , respectively, as summarized
in the following table:
in the following table:
For the year ended December 31, 2016 , the Company incurred a loss on debt extinguishment of $12.5 million related to the redemption of the Extinguished Senior
For the year ended December 31, 2016 , the Company incurred a loss on debt extinguishment of $12.5 million related to the redemption of the Extinguished Senior
Notes. The loss is made up of a call premium of $8.4 million and the write off of unamortized debt issuance costs and original issue discount of $4.1 million.
Notes. The loss is made up of a call premium of $8.4 million and the write off of unamortized debt issuance costs and original issue discount of $4.1 million.
(in thousands)
(in thousands)
Cash and cash equivalents
Cash and cash equivalents
Accounts receivable, net of allowances
Accounts receivable, net of allowances
Inventories, net
Inventories, net
Other current assets
Other current assets
For the year ended December 31, 2016 , other income, net increased $3.3 million compared to the year ended December 31, 2015 . Approximately $1.9 million of
For the year ended December 31, 2016 , other income, net increased $3.3 million compared to the year ended December 31, 2015 . Approximately $1.9 million of
this increase was due to insurance proceeds received during the year ended December 31, 2016 related to a fire at one of the Company's facilities during 2015. The
this increase was due to insurance proceeds received during the year ended December 31, 2016 related to a fire at one of the Company's facilities during 2015. The
remaining increase relates primarily to service charges assessed on past due accounts receivable for Legacy SBS operations.
remaining increase relates primarily to service charges assessed on past due accounts receivable for Legacy SBS operations.
Accounts payable, accrued expenses and other current liabilities
Accounts payable, accrued expenses and other current liabilities
Current portion of long-term debt and capital lease obligations
Current portion of long-term debt and capital lease obligations
Total net current assets
Total net current assets
December 31,
December 31,
2017
2017
December 31,
December 31,
2016
2016
$
$
11,750 $
11,750 $
322,892
322,892
309,060
309,060
90,435
90,435
(307,538)
(307,538)
(7,739)
(7,739)
$
$
418,860 $
418,860 $
8,917
8,917
313,304
313,304
272,276
272,276
72,445
72,445
(291,657)
(291,657)
(11,155)
(11,155)
364,130
364,130
For the year ended December 31, 2016 , income tax expense was $14.3 million compared to income tax benefit of $9.7 million for the year ended December 31,
For the year ended December 31, 2016 , income tax expense was $14.3 million compared to income tax benefit of $9.7 million for the year ended December 31,
2015 . The effective tax rate for the year ended December 31, 2016 was 31.6% compared to 66.7% for the year ended December 31, 2015 . For the year ended
2015 . The effective tax rate for the year ended December 31, 2016 was 31.6% compared to 66.7% for the year ended December 31, 2015 . For the year ended
December 31, 2016, the Company's effective tax rate was lower than the Company's federal and state statutory rates primarily due to the adoption of a state tax
December 31, 2016, the Company's effective tax rate was lower than the Company's federal and state statutory rates primarily due to the adoption of a state tax
position related to IRC section 382 limitations on a state net operating loss carryforward, excess windfall tax benefits of stock compensation deductions, and an
position related to IRC section 382 limitations on a state net operating loss carryforward, excess windfall tax benefits of stock compensation deductions, and an
IRC section 199 manufacturing deduction. For the year ended December 31, 2015, the Company's effective tax rate was higher than the Company's federal and
IRC section 199 manufacturing deduction. For the year ended December 31, 2015, the Company's effective tax rate was higher than the Company's federal and
state statutory rates primarily due to adopting a tax position related to IRC section 382 limitations on its federal and state net operating loss carryforwards and other
state statutory rates primarily due to adopting a tax position related to IRC section 382 limitations on its federal and state net operating loss carryforwards and other
Accounts receivable, net, increased $9.6 million from December 31, 2016 to December 31, 2017 primarily due to increases in sales, partially offset by a decrease
Accounts receivable, net, increased $9.6 million from December 31, 2016 to December 31, 2017 primarily due to increases in sales, partially offset by a decrease
in days sales outstanding (measured against net sales in the fourth quarter of each period), which were 38 days at December 31, 2016 and 35 days at December 31,
in days sales outstanding (measured against net sales in the fourth quarter of each period), which were 38 days at December 31, 2016 and 35 days at December 31,
2017 .
2017 .
Inventories, net, increased $36.8 million from December 31, 2016 to December 31, 2017 primarily due to commodity price inflation and increases in sales.
Inventories, net, increased $36.8 million from December 31, 2016 to December 31, 2017 primarily due to commodity price inflation and increases in sales.
Inventory days on hand (measured against cost of sales in the fourth quarter of each period) were 43 days at December 31, 2017 and 2016 .
Inventory days on hand (measured against cost of sales in the fourth quarter of each period) were 43 days at December 31, 2017 and 2016 .
Accounts payable, accrued expenses and other current liabilities increased $15.9 million from December 31, 2016 to December 31, 2017 primarily due to an
Accounts payable, accrued expenses and other current liabilities increased $15.9 million from December 31, 2016 to December 31, 2017 primarily due to an
increase in accounts payable related to increased inventory purchases in connection with higher sales volume.
increase in accounts payable related to increased inventory purchases in connection with higher sales volume.
Cash
flows
from
operating
activities
Cash
flows
from
operating
activities
Our primary capital requirements are to fund working capital needs and operating expenses, meet required interest and principal payments and fund capital
Our primary capital requirements are to fund working capital needs and operating expenses, meet required interest and principal payments and fund capital
expenditures. During 2017 and 2016 , our capital resources have primarily consisted of cash and cash equivalents generated through operating cash flows, proceeds
expenditures. During 2017 and 2016 , our capital resources have primarily consisted of cash and cash equivalents generated through operating cash flows, proceeds
from the September 2016 issuance of the Senior Notes and borrowings under our Revolver.
from the September 2016 issuance of the Senior Notes and borrowings under our Revolver.
Net cash provided by operating activities was $93.9 million , $106.9 million and $0.7 million for the years ended December 31, 2017 , 2016 and 2015 ,
Net cash provided by operating activities was $93.9 million , $106.9 million and $0.7 million for the years ended December 31, 2017 , 2016 and 2015 ,
respectively, as summarized in the following table:
respectively, as summarized in the following table:
Our liquidity at December 31, 2017 was $320.0 million , which includes $11.8 million in cash and cash equivalents and $308.2 million of unused borrowing
Our liquidity at December 31, 2017 was $320.0 million , which includes $11.8 million in cash and cash equivalents and $308.2 million of unused borrowing
We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to fund debt service
We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to fund debt service
requirements and provide cash, as required, to support our ongoing operations, capital expenditures, lease obligations and working capital for at least the next
requirements and provide cash, as required, to support our ongoing operations, capital expenditures, lease obligations and working capital for at least the next
34
34
(in thousands)
(in thousands)
Net income (loss)
Net income (loss)
Non-cash expenses
Non-cash expenses
Change in deferred income taxes
Change in deferred income taxes
Impairment of assets
Impairment of assets
Loss on debt extinguishment
Loss on debt extinguishment
Change in working capital and other assets and liabilities
Change in working capital and other assets and liabilities
Net cash provided by operating activities
Net cash provided by operating activities
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
$
$
57,425 $
57,425 $
30,880 $
30,880 $
74,548
74,548
2,318
2,318
435
435
—
—
(40,792)
(40,792)
79,629
79,629
(3,571)
(3,571)
11,928
11,928
12,529
12,529
(24,507)
(24,507)
$
$
93,934 $
93,934 $
106,888 $
106,888 $
(4,831)
(4,831)
39,895
39,895
(5,892)
(5,892)
—
—
—
—
(28,429)
(28,429)
743
743
Net cash provided by operating activities decreased by $13.0 million for the year ended December 31, 2017 as compared to the year ended December 31, 2016.
Net cash provided by operating activities decreased by $13.0 million for the year ended December 31, 2017 as compared to the year ended December 31, 2016.
This decrease was primarily related to an increase in cash paid for income taxes, net of refunds, of $14.6 million , which resulted from an increase in taxable
This decrease was primarily related to an increase in cash paid for income taxes, net of refunds, of $14.6 million , which resulted from an increase in taxable
income and the utilization during the year ended December 31, 2016 of income tax overpayments made during the year ended December 31, 2015. Changes in
income and the utilization during the year ended December 31, 2016 of income tax overpayments made during the year ended December 31, 2015. Changes in
other assets and liabilities relate primarily to the timing of cash received from customers and cash paid to vendors.
other assets and liabilities relate primarily to the timing of cash received from customers and cash paid to vendors.
Net cash provided by operating activities increased by $106.1 million for the year ended December 31, 2016 as compared to the year ended December 31, 2015.
Net cash provided by operating activities increased by $106.1 million for the year ended December 31, 2016 as compared to the year ended December 31, 2015.
This increase was primarily related to improved profitability and the effects of the Merger, whereby the year ended December 31, 2016 contains a full year of
This increase was primarily related to improved profitability and the effects of the Merger, whereby the year ended December 31, 2016 contains a full year of
Legacy SBS cash flows, while the year ended December 31, 2015 only contains the cash flows of Legacy SBS beginning on the date that the Merger was
Legacy SBS cash flows, while the year ended December 31, 2015 only contains the cash flows of Legacy SBS beginning on the date that the Merger was
completed, December 1, 2015.
completed, December 1, 2015.
35
35
For the year ended December 31, 2017, the Company had proceeds from the Revolver, net of repayments, of $4.5 million . The Company made net repayments of
For the year ended December 31, 2017, the Company had proceeds from the Revolver, net of repayments, of $4.5 million . The Company made net repayments of
$152.3 million on the Revolver during the year ended December 31, 2016. Approximately $74 million of this repayment was funded through net proceeds from the
$152.3 million on the Revolver during the year ended December 31, 2016. Approximately $74 million of this repayment was funded through net proceeds from the
September 2016 Senior Notes issuance, after payment of accrued interest, debt issuance costs and the call premium. Proceeds from the Revolver, net of
September 2016 Senior Notes issuance, after payment of accrued interest, debt issuance costs and the call premium. Proceeds from the Revolver, net of
repayments, of $84.5 million for the year ended December 31, 2015 relates primarily to amounts borrowed to purchase RBI in September 2015, as well as
repayments, of $84.5 million for the year ended December 31, 2015 relates primarily to amounts borrowed to purchase RBI in September 2015, as well as
purchases of property and equipment.
purchases of property and equipment.
Payments on capital leases and other notes increased during the years ended December 31, 2017 and 2016 compared to the year ended December 31, 2015 due
Payments on capital leases and other notes increased during the years ended December 31, 2017 and 2016 compared to the year ended December 31, 2015 due
primarily to new financing of handling equipment to support higher sales volumes as well as one-time payments made during the year ended December 31, 2017
primarily to new financing of handling equipment to support higher sales volumes as well as one-time payments made during the year ended December 31, 2017
related to the payoff of certain other notes.
related to the payoff of certain other notes.
During September 2016, the Company completed an issuance of $350.0 million of Senior Notes and utilized a portion of the cash proceeds from the issuance to
During September 2016, the Company completed an issuance of $350.0 million of Senior Notes and utilized a portion of the cash proceeds from the issuance to
redeem in full the $250.0 million Extinguished Senior Notes. The Company incurred $6.7 million of debt issuance costs related to the Senior Notes, and paid a call
redeem in full the $250.0 million Extinguished Senior Notes. The Company incurred $6.7 million of debt issuance costs related to the Senior Notes, and paid a call
premium of $8.4 million related to the Extinguished Senior Notes. The debt issuance costs incurred during 2015 relate primarily to third-party and lender costs
premium of $8.4 million related to the Extinguished Senior Notes. The debt issuance costs incurred during 2015 relate primarily to third-party and lender costs
incurred in relation to the Credit Agreement.
incurred in relation to the Credit Agreement.
During May 2016, the Company commenced a public offering of 5,700,000 shares of its common stock by certain stockholders. In connection with the offering,
During May 2016, the Company commenced a public offering of 5,700,000 shares of its common stock by certain stockholders. In connection with the offering,
the Company granted the underwriters an option to purchase up to an additional 855,000 shares of common stock. The underwriters exercised this option, which
the Company granted the underwriters an option to purchase up to an additional 855,000 shares of common stock. The underwriters exercised this option, which
generated gross proceeds of $14.5 million and net proceeds of $13.8 million, after subtracting $0.7 million of underwriting commissions and other fees.
generated gross proceeds of $14.5 million and net proceeds of $13.8 million, after subtracting $0.7 million of underwriting commissions and other fees.
Borrowings under other notes for the year ended December 31, 2015 relate to notes secured by certain operating equipment. No such borrowings were made during
Borrowings under other notes for the year ended December 31, 2015 relate to notes secured by certain operating equipment. No such borrowings were made during
Cash
flows
from
investing
activities
Cash
flows
from
investing
activities
Net cash used in investing activities was $88.3 million , $33.7 million and $135.1 million for the years ended December 31, 2017 , 2016 and 2015 , respectively, as
Net cash used in investing activities was $88.3 million , $33.7 million and $135.1 million for the years ended December 31, 2017 , 2016 and 2015 , respectively, as
summarized in the following table:
summarized in the following table:
(in thousands)
(in thousands)
Purchases of property, equipment and real estate
Purchases of property, equipment and real estate
Purchases of businesses, net of cash acquired
Purchases of businesses, net of cash acquired
Proceeds from sale of property, equipment and real estate
Proceeds from sale of property, equipment and real estate
Insurance proceeds
Insurance proceeds
Change in restricted assets
Change in restricted assets
Cash acquired in the Merger
Cash acquired in the Merger
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
$
$
(63,278) $
(63,278) $
(38,067) $
(38,067) $
(38,438)
(38,438)
13,445
13,445
—
—
—
—
—
—
—
—
3,187
3,187
1,151
1,151
—
—
—
—
(31,319)
(31,319)
(149,485)
(149,485)
3,280
3,280
—
—
36,106
36,106
6,342
6,342
Net cash used in investing activities
Net cash used in investing activities
$
$
(88,271) $
(88,271) $
(33,729) $
(33,729) $
(135,076)
(135,076)
Cash used for the purchase of property, equipment and real estate for the years ended December 31, 2017 , 2016 and 2015 resulted primarily from the purchase of
Cash used for the purchase of property, equipment and real estate for the years ended December 31, 2017 , 2016 and 2015 resulted primarily from the purchase of
vehicles and equipment to support increased sales volume and replace aged assets, and facility and technology investments to support our operations. Proceeds
vehicles and equipment to support increased sales volume and replace aged assets, and facility and technology investments to support our operations. Proceeds
from the sale of property, equipment and real estate during the year ended December 31, 2017 relates primarily to the sale of real estate of $12.7 million .
from the sale of property, equipment and real estate during the year ended December 31, 2017 relates primarily to the sale of real estate of $12.7 million .
the years ended December 31, 2017 and 2016.
the years ended December 31, 2017 and 2016.
Purchases of businesses, net of cash acquired, for the year ended December 31, 2017 relate to the acquisitions of Code Plus and TexPly and for the year ended
Purchases of businesses, net of cash acquired, for the year ended December 31, 2017 relate to the acquisitions of Code Plus and TexPly and for the year ended
December 31, 2015, relate to the acquisitions of VNS and RBI, as discussed in "Factors Affecting our Operating Results" above.
December 31, 2015, relate to the acquisitions of VNS and RBI, as discussed in "Factors Affecting our Operating Results" above.
Proceeds from the exercise of stock options, which are included in other financing activities, net, were $3.4 million , $1.3 million and $0 for the years ended
Proceeds from the exercise of stock options, which are included in other financing activities, net, were $3.4 million , $1.3 million and $0 for the years ended
December 31, 2017 , 2016 and 2015 , respectively. Other financing activities, net also includes net activity related to secured borrowings and purchases of treasury
December 31, 2017 , 2016 and 2015 , respectively. Other financing activities, net also includes net activity related to secured borrowings and purchases of treasury
stock in connection with shares withheld on vesting and exercises of equity awards.
stock in connection with shares withheld on vesting and exercises of equity awards.
During the year ended December 31, 2016, the Company received insurance proceeds related to a fire at one of the Company's facilities during 2015, of which $1.2
During the year ended December 31, 2016, the Company received insurance proceeds related to a fire at one of the Company's facilities during 2015, of which $1.2
million related to property, plant and equipment damaged in the fire.
million related to property, plant and equipment damaged in the fire.
Capital expenditures
Capital expenditures
During 2013, BMHC deposited $46.4 million in a separate bank account to collateralize letters of credit related to insurance claims for periods prior to January
During 2013, BMHC deposited $46.4 million in a separate bank account to collateralize letters of credit related to insurance claims for periods prior to January
2010. During 2015, BMHC was able to release the majority of these amounts into unrestricted cash as a result of reductions in claims and the transfer of the risk of
2010. During 2015, BMHC was able to release the majority of these amounts into unrestricted cash as a result of reductions in claims and the transfer of the risk of
loss of certain claims to a reinsurer in January 2015. In connection with the Credit Agreement entered into on December 1, 2015, the Company was able to release
loss of certain claims to a reinsurer in January 2015. In connection with the Credit Agreement entered into on December 1, 2015, the Company was able to release
the remaining cash collateral into unrestricted cash.
the remaining cash collateral into unrestricted cash.
Capital expenditures vary depending on prevailing business factors, including current and anticipated market conditions. We expect our 2018 capital expenditures,
Capital expenditures vary depending on prevailing business factors, including current and anticipated market conditions. We expect our 2018 capital expenditures,
including the incurrence of capital lease obligations and net of proceeds from the sale of property, equipment and real estate to be approximately $55.0 million to
including the incurrence of capital lease obligations and net of proceeds from the sale of property, equipment and real estate to be approximately $55.0 million to
$65.0 million primarily related to vehicles and equipment, including lease buyouts, and facility and technology investments to support our operations. We are still
$65.0 million primarily related to vehicles and equipment, including lease buyouts, and facility and technology investments to support our operations. We are still
evaluating the impact of the 2017 Tax Act on our level of capital expenditures, which may incentivize us to increase our level of capital spending during 2018.
evaluating the impact of the 2017 Tax Act on our level of capital expenditures, which may incentivize us to increase our level of capital spending during 2018.
Cash acquired in the Merger of $6.3 million represents cash and cash equivalents of SBS on the closing date of the Merger.
Cash acquired in the Merger of $6.3 million represents cash and cash equivalents of SBS on the closing date of the Merger.
Senior secured notes
Senior secured notes
Cash
flows
from
financing
activities
Cash
flows
from
financing
activities
Net cash (used in) provided by financing activities was $(2.8) million , $(65.3) million and $72.2 million for the years ended December 31, 2017 , 2016 and 2015 ,
Net cash (used in) provided by financing activities was $(2.8) million , $(65.3) million and $72.2 million for the years ended December 31, 2017 , 2016 and 2015 ,
respectively, as summarized in the following table:
respectively, as summarized in the following table:
(in thousands)
(in thousands)
Net proceeds from (repayments of) Revolver
Net proceeds from (repayments of) Revolver
Payments on capital leases and other notes
Payments on capital leases and other notes
Payments of debt issuance costs
Payments of debt issuance costs
Proceeds from issuance of Senior Notes
Proceeds from issuance of Senior Notes
Redemption of Extinguished Senior Notes
Redemption of Extinguished Senior Notes
Proceeds from issuance of common stock, net of offering costs
Proceeds from issuance of common stock, net of offering costs
Payments of debt extinguishment costs
Payments of debt extinguishment costs
Borrowings under other notes
Borrowings under other notes
Other financing activities, net
Other financing activities, net
Net cash (used in) provided by financing activities
Net cash (used in) provided by financing activities
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
$
$
4,462 $
4,462 $
(152,260) $
(152,260) $
(12,553)
(12,553)
(38)
(38)
—
—
—
—
—
—
—
—
—
—
$
$
5,299
5,299
(2,830) $
(2,830) $
(12,103)
(12,103)
(7,011)
(7,011)
350,000
350,000
(250,000)
(250,000)
13,776
13,776
(8,438)
(8,438)
—
—
705
705
(65,331) $
(65,331) $
84,546
84,546
(10,623)
(10,623)
(3,567)
(3,567)
—
—
—
—
—
—
—
—
2,491
2,491
(687)
(687)
72,160
72,160
36
36
On September 15, 2016, the Company issued $350.0 million of Senior Notes. The Senior Notes mature on October 1, 2024 and are secured by a first priority lien
On September 15, 2016, the Company issued $350.0 million of Senior Notes. The Senior Notes mature on October 1, 2024 and are secured by a first priority lien
on certain assets of the Company and a second priority lien on the collateral that secures the Credit Agreement, which collectively approximates substantially all
on certain assets of the Company and a second priority lien on the collateral that secures the Credit Agreement, which collectively approximates substantially all
assets of the Company. The interest rate is fixed at 5.5% and is payable semiannually on April 1 and October 1. The Indenture contains customary nonfinancial
assets of the Company. The interest rate is fixed at 5.5% and is payable semiannually on April 1 and October 1. The Indenture contains customary nonfinancial
covenants, including restrictions on new indebtedness, issuance of liens and guarantees, investments, distributions to equityholders, asset sales and affiliate
covenants, including restrictions on new indebtedness, issuance of liens and guarantees, investments, distributions to equityholders, asset sales and affiliate
transactions. The Senior Notes were issued by BMC East, LLC, a 100% owned subsidiary of the Company, and are guaranteed by the Company and the other
transactions. The Senior Notes were issued by BMC East, LLC, a 100% owned subsidiary of the Company, and are guaranteed by the Company and the other
subsidiaries that guarantee the Credit Agreement. Each of the subsidiary guarantors is 100% owned, directly or indirectly, by the Company, and all guarantees are
subsidiaries that guarantee the Credit Agreement. Each of the subsidiary guarantors is 100% owned, directly or indirectly, by the Company, and all guarantees are
full and unconditional and joint and several. We were in compliance with all covenants under the Indenture as of December 31, 2017.
full and unconditional and joint and several. We were in compliance with all covenants under the Indenture as of December 31, 2017.
Revolving credit agreement
Revolving credit agreement
On December 1, 2015, in connection with the Merger, the Company entered into the Credit Agreement with Wells Fargo Capital Finance, as administrative agent,
On December 1, 2015, in connection with the Merger, the Company entered into the Credit Agreement with Wells Fargo Capital Finance, as administrative agent,
and certain other lenders. The Credit Agreement, as amended, which includes the Revolver, has an aggregate commitment of $375.0 million and a letters of credit
and certain other lenders. The Credit Agreement, as amended, which includes the Revolver, has an aggregate commitment of $375.0 million and a letters of credit
sublimit of $100.0 million. The Revolver matures at the earlier of (i) December 1, 2020 and (ii) the date that is three months prior to the maturity of the Senior
sublimit of $100.0 million. The Revolver matures at the earlier of (i) December 1, 2020 and (ii) the date that is three months prior to the maturity of the Senior
Notes, or if the Senior Notes are refinanced or repaid, the date that is three months prior to the new maturity date of the replacement notes or other indebtedness
Notes, or if the Senior Notes are refinanced or repaid, the date that is three months prior to the new maturity date of the replacement notes or other indebtedness
37
37
Net cash used in investing activities was $88.3 million , $33.7 million and $135.1 million for the years ended December 31, 2017 , 2016 and 2015 , respectively, as
Net cash used in investing activities was $88.3 million , $33.7 million and $135.1 million for the years ended December 31, 2017 , 2016 and 2015 , respectively, as
Cash
flows
from
investing
activities
Cash
flows
from
investing
activities
summarized in the following table:
summarized in the following table:
(in thousands)
(in thousands)
Purchases of property, equipment and real estate
Purchases of property, equipment and real estate
Purchases of businesses, net of cash acquired
Purchases of businesses, net of cash acquired
Proceeds from sale of property, equipment and real estate
Proceeds from sale of property, equipment and real estate
Insurance proceeds
Insurance proceeds
Change in restricted assets
Change in restricted assets
Cash acquired in the Merger
Cash acquired in the Merger
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
$
$
(63,278) $
(63,278) $
(38,067) $
(38,067) $
(38,438)
(38,438)
13,445
13,445
—
—
—
—
—
—
—
—
3,187
3,187
1,151
1,151
—
—
—
—
(31,319)
(31,319)
(149,485)
(149,485)
3,280
3,280
—
—
36,106
36,106
6,342
6,342
Net cash used in investing activities
Net cash used in investing activities
$
$
(88,271) $
(88,271) $
(33,729) $
(33,729) $
(135,076)
(135,076)
Cash used for the purchase of property, equipment and real estate for the years ended December 31, 2017 , 2016 and 2015 resulted primarily from the purchase of
Cash used for the purchase of property, equipment and real estate for the years ended December 31, 2017 , 2016 and 2015 resulted primarily from the purchase of
vehicles and equipment to support increased sales volume and replace aged assets, and facility and technology investments to support our operations. Proceeds
vehicles and equipment to support increased sales volume and replace aged assets, and facility and technology investments to support our operations. Proceeds
from the sale of property, equipment and real estate during the year ended December 31, 2017 relates primarily to the sale of real estate of $12.7 million .
from the sale of property, equipment and real estate during the year ended December 31, 2017 relates primarily to the sale of real estate of $12.7 million .
Purchases of businesses, net of cash acquired, for the year ended December 31, 2017 relate to the acquisitions of Code Plus and TexPly and for the year ended
Purchases of businesses, net of cash acquired, for the year ended December 31, 2017 relate to the acquisitions of Code Plus and TexPly and for the year ended
December 31, 2015, relate to the acquisitions of VNS and RBI, as discussed in "Factors Affecting our Operating Results" above.
December 31, 2015, relate to the acquisitions of VNS and RBI, as discussed in "Factors Affecting our Operating Results" above.
For the year ended December 31, 2017, the Company had proceeds from the Revolver, net of repayments, of $4.5 million . The Company made net repayments of
For the year ended December 31, 2017, the Company had proceeds from the Revolver, net of repayments, of $4.5 million . The Company made net repayments of
$152.3 million on the Revolver during the year ended December 31, 2016. Approximately $74 million of this repayment was funded through net proceeds from the
$152.3 million on the Revolver during the year ended December 31, 2016. Approximately $74 million of this repayment was funded through net proceeds from the
September 2016 Senior Notes issuance, after payment of accrued interest, debt issuance costs and the call premium. Proceeds from the Revolver, net of
September 2016 Senior Notes issuance, after payment of accrued interest, debt issuance costs and the call premium. Proceeds from the Revolver, net of
repayments, of $84.5 million for the year ended December 31, 2015 relates primarily to amounts borrowed to purchase RBI in September 2015, as well as
repayments, of $84.5 million for the year ended December 31, 2015 relates primarily to amounts borrowed to purchase RBI in September 2015, as well as
purchases of property and equipment.
purchases of property and equipment.
Payments on capital leases and other notes increased during the years ended December 31, 2017 and 2016 compared to the year ended December 31, 2015 due
Payments on capital leases and other notes increased during the years ended December 31, 2017 and 2016 compared to the year ended December 31, 2015 due
primarily to new financing of handling equipment to support higher sales volumes as well as one-time payments made during the year ended December 31, 2017
primarily to new financing of handling equipment to support higher sales volumes as well as one-time payments made during the year ended December 31, 2017
related to the payoff of certain other notes.
related to the payoff of certain other notes.
During September 2016, the Company completed an issuance of $350.0 million of Senior Notes and utilized a portion of the cash proceeds from the issuance to
During September 2016, the Company completed an issuance of $350.0 million of Senior Notes and utilized a portion of the cash proceeds from the issuance to
redeem in full the $250.0 million Extinguished Senior Notes. The Company incurred $6.7 million of debt issuance costs related to the Senior Notes, and paid a call
redeem in full the $250.0 million Extinguished Senior Notes. The Company incurred $6.7 million of debt issuance costs related to the Senior Notes, and paid a call
premium of $8.4 million related to the Extinguished Senior Notes. The debt issuance costs incurred during 2015 relate primarily to third-party and lender costs
premium of $8.4 million related to the Extinguished Senior Notes. The debt issuance costs incurred during 2015 relate primarily to third-party and lender costs
incurred in relation to the Credit Agreement.
incurred in relation to the Credit Agreement.
During May 2016, the Company commenced a public offering of 5,700,000 shares of its common stock by certain stockholders. In connection with the offering,
During May 2016, the Company commenced a public offering of 5,700,000 shares of its common stock by certain stockholders. In connection with the offering,
the Company granted the underwriters an option to purchase up to an additional 855,000 shares of common stock. The underwriters exercised this option, which
the Company granted the underwriters an option to purchase up to an additional 855,000 shares of common stock. The underwriters exercised this option, which
generated gross proceeds of $14.5 million and net proceeds of $13.8 million, after subtracting $0.7 million of underwriting commissions and other fees.
generated gross proceeds of $14.5 million and net proceeds of $13.8 million, after subtracting $0.7 million of underwriting commissions and other fees.
Borrowings under other notes for the year ended December 31, 2015 relate to notes secured by certain operating equipment. No such borrowings were made during
Borrowings under other notes for the year ended December 31, 2015 relate to notes secured by certain operating equipment. No such borrowings were made during
the years ended December 31, 2017 and 2016.
the years ended December 31, 2017 and 2016.
Proceeds from the exercise of stock options, which are included in other financing activities, net, were $3.4 million , $1.3 million and $0 for the years ended
Proceeds from the exercise of stock options, which are included in other financing activities, net, were $3.4 million , $1.3 million and $0 for the years ended
December 31, 2017 , 2016 and 2015 , respectively. Other financing activities, net also includes net activity related to secured borrowings and purchases of treasury
December 31, 2017 , 2016 and 2015 , respectively. Other financing activities, net also includes net activity related to secured borrowings and purchases of treasury
stock in connection with shares withheld on vesting and exercises of equity awards.
stock in connection with shares withheld on vesting and exercises of equity awards.
During the year ended December 31, 2016, the Company received insurance proceeds related to a fire at one of the Company's facilities during 2015, of which $1.2
During the year ended December 31, 2016, the Company received insurance proceeds related to a fire at one of the Company's facilities during 2015, of which $1.2
million related to property, plant and equipment damaged in the fire.
million related to property, plant and equipment damaged in the fire.
Capital expenditures
Capital expenditures
During 2013, BMHC deposited $46.4 million in a separate bank account to collateralize letters of credit related to insurance claims for periods prior to January
During 2013, BMHC deposited $46.4 million in a separate bank account to collateralize letters of credit related to insurance claims for periods prior to January
2010. During 2015, BMHC was able to release the majority of these amounts into unrestricted cash as a result of reductions in claims and the transfer of the risk of
2010. During 2015, BMHC was able to release the majority of these amounts into unrestricted cash as a result of reductions in claims and the transfer of the risk of
loss of certain claims to a reinsurer in January 2015. In connection with the Credit Agreement entered into on December 1, 2015, the Company was able to release
loss of certain claims to a reinsurer in January 2015. In connection with the Credit Agreement entered into on December 1, 2015, the Company was able to release
the remaining cash collateral into unrestricted cash.
the remaining cash collateral into unrestricted cash.
Capital expenditures vary depending on prevailing business factors, including current and anticipated market conditions. We expect our 2018 capital expenditures,
Capital expenditures vary depending on prevailing business factors, including current and anticipated market conditions. We expect our 2018 capital expenditures,
including the incurrence of capital lease obligations and net of proceeds from the sale of property, equipment and real estate to be approximately $55.0 million to
including the incurrence of capital lease obligations and net of proceeds from the sale of property, equipment and real estate to be approximately $55.0 million to
$65.0 million primarily related to vehicles and equipment, including lease buyouts, and facility and technology investments to support our operations. We are still
$65.0 million primarily related to vehicles and equipment, including lease buyouts, and facility and technology investments to support our operations. We are still
evaluating the impact of the 2017 Tax Act on our level of capital expenditures, which may incentivize us to increase our level of capital spending during 2018.
evaluating the impact of the 2017 Tax Act on our level of capital expenditures, which may incentivize us to increase our level of capital spending during 2018.
Cash acquired in the Merger of $6.3 million represents cash and cash equivalents of SBS on the closing date of the Merger.
Cash acquired in the Merger of $6.3 million represents cash and cash equivalents of SBS on the closing date of the Merger.
Senior secured notes
Senior secured notes
Cash
flows
from
financing
activities
Cash
flows
from
financing
activities
Net cash (used in) provided by financing activities was $(2.8) million , $(65.3) million and $72.2 million for the years ended December 31, 2017 , 2016 and 2015 ,
Net cash (used in) provided by financing activities was $(2.8) million , $(65.3) million and $72.2 million for the years ended December 31, 2017 , 2016 and 2015 ,
respectively, as summarized in the following table:
respectively, as summarized in the following table:
On September 15, 2016, the Company issued $350.0 million of Senior Notes. The Senior Notes mature on October 1, 2024 and are secured by a first priority lien
On September 15, 2016, the Company issued $350.0 million of Senior Notes. The Senior Notes mature on October 1, 2024 and are secured by a first priority lien
on certain assets of the Company and a second priority lien on the collateral that secures the Credit Agreement, which collectively approximates substantially all
on certain assets of the Company and a second priority lien on the collateral that secures the Credit Agreement, which collectively approximates substantially all
assets of the Company. The interest rate is fixed at 5.5% and is payable semiannually on April 1 and October 1. The Indenture contains customary nonfinancial
assets of the Company. The interest rate is fixed at 5.5% and is payable semiannually on April 1 and October 1. The Indenture contains customary nonfinancial
covenants, including restrictions on new indebtedness, issuance of liens and guarantees, investments, distributions to equityholders, asset sales and affiliate
covenants, including restrictions on new indebtedness, issuance of liens and guarantees, investments, distributions to equityholders, asset sales and affiliate
transactions. The Senior Notes were issued by BMC East, LLC, a 100% owned subsidiary of the Company, and are guaranteed by the Company and the other
transactions. The Senior Notes were issued by BMC East, LLC, a 100% owned subsidiary of the Company, and are guaranteed by the Company and the other
subsidiaries that guarantee the Credit Agreement. Each of the subsidiary guarantors is 100% owned, directly or indirectly, by the Company, and all guarantees are
subsidiaries that guarantee the Credit Agreement. Each of the subsidiary guarantors is 100% owned, directly or indirectly, by the Company, and all guarantees are
full and unconditional and joint and several. We were in compliance with all covenants under the Indenture as of December 31, 2017.
full and unconditional and joint and several. We were in compliance with all covenants under the Indenture as of December 31, 2017.
$
$
4,462 $
4,462 $
(152,260) $
(152,260) $
Revolving credit agreement
Revolving credit agreement
On December 1, 2015, in connection with the Merger, the Company entered into the Credit Agreement with Wells Fargo Capital Finance, as administrative agent,
On December 1, 2015, in connection with the Merger, the Company entered into the Credit Agreement with Wells Fargo Capital Finance, as administrative agent,
and certain other lenders. The Credit Agreement, as amended, which includes the Revolver, has an aggregate commitment of $375.0 million and a letters of credit
and certain other lenders. The Credit Agreement, as amended, which includes the Revolver, has an aggregate commitment of $375.0 million and a letters of credit
sublimit of $100.0 million. The Revolver matures at the earlier of (i) December 1, 2020 and (ii) the date that is three months prior to the maturity of the Senior
sublimit of $100.0 million. The Revolver matures at the earlier of (i) December 1, 2020 and (ii) the date that is three months prior to the maturity of the Senior
Notes, or if the Senior Notes are refinanced or repaid, the date that is three months prior to the new maturity date of the replacement notes or other indebtedness
Notes, or if the Senior Notes are refinanced or repaid, the date that is three months prior to the new maturity date of the replacement notes or other indebtedness
37
37
(in thousands)
(in thousands)
Net proceeds from (repayments of) Revolver
Net proceeds from (repayments of) Revolver
Payments on capital leases and other notes
Payments on capital leases and other notes
Payments of debt issuance costs
Payments of debt issuance costs
Proceeds from issuance of Senior Notes
Proceeds from issuance of Senior Notes
Redemption of Extinguished Senior Notes
Redemption of Extinguished Senior Notes
Proceeds from issuance of common stock, net of offering costs
Proceeds from issuance of common stock, net of offering costs
Payments of debt extinguishment costs
Payments of debt extinguishment costs
Borrowings under other notes
Borrowings under other notes
Other financing activities, net
Other financing activities, net
Net cash (used in) provided by financing activities
Net cash (used in) provided by financing activities
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
(12,553)
(12,553)
(38)
(38)
—
—
—
—
—
—
—
—
—
—
$
$
5,299
5,299
(2,830) $
(2,830) $
(12,103)
(12,103)
(7,011)
(7,011)
350,000
350,000
(250,000)
(250,000)
13,776
13,776
(8,438)
(8,438)
—
—
705
705
(65,331) $
(65,331) $
84,546
84,546
(10,623)
(10,623)
(3,567)
(3,567)
—
—
—
—
—
—
—
—
2,491
2,491
(687)
(687)
72,160
72,160
36
36
that replaced or refinanced the Senior Notes. The Revolver is subject to an asset-based borrowing formula on eligible accounts receivable, credit card receivables
that replaced or refinanced the Senior Notes. The Revolver is subject to an asset-based borrowing formula on eligible accounts receivable, credit card receivables
and inventory, in each case reduced by certain reserves.
and inventory, in each case reduced by certain reserves.
Contractual Obligations and Commercial Commitments
Contractual Obligations and Commercial Commitments
Borrowings under the Revolver bear interest, at our option, at either the Base Rate (which means the higher of (i) the Federal Funds Rate plus 0.5%, (ii) the LIBOR
Borrowings under the Revolver bear interest, at our option, at either the Base Rate (which means the higher of (i) the Federal Funds Rate plus 0.5%, (ii) the LIBOR
rate plus 1.0% or (iii) the prime rate) plus a Base Rate Margin (which ranges from 0.25% to 0.75% based on Revolver availability) or LIBOR plus a LIBOR Rate
rate plus 1.0% or (iii) the prime rate) plus a Base Rate Margin (which ranges from 0.25% to 0.75% based on Revolver availability) or LIBOR plus a LIBOR Rate
Margin (which ranges from 1.25% to 1.75% based on Revolver availability).The fee on any outstanding letters of credit issued under the Revolver ranges from
Margin (which ranges from 1.25% to 1.75% based on Revolver availability).The fee on any outstanding letters of credit issued under the Revolver ranges from
0.75% to 1.25%, depending on whether the letters of credit are fully cash collateralized. The fee on the unused portion of the Revolver is 0.25%.
0.75% to 1.25%, depending on whether the letters of credit are fully cash collateralized. The fee on the unused portion of the Revolver is 0.25%.
The Credit Agreement contains customary nonfinancial covenants, including restrictions on new indebtedness, issuance of liens, investments, distributions to
The Credit Agreement contains customary nonfinancial covenants, including restrictions on new indebtedness, issuance of liens, investments, distributions to
equityholders, asset sales and affiliate transactions. The Credit Agreement includes a financial covenant that requires us to maintain a minimum Fixed Charge
equityholders, asset sales and affiliate transactions. The Credit Agreement includes a financial covenant that requires us to maintain a minimum Fixed Charge
Coverage Ratio of 1.00:1:00, as defined therein. However, the covenant is only applicable if excess availability under the Credit Agreement is less than or equal to
Coverage Ratio of 1.00:1:00, as defined therein. However, the covenant is only applicable if excess availability under the Credit Agreement is less than or equal to
the greater of (i) $33.3 million and (ii) 10% of the line cap, and remains in effect until excess availability has been greater than the greater of (i) $33.3 million and
the greater of (i) $33.3 million and (ii) 10% of the line cap, and remains in effect until excess availability has been greater than the greater of (i) $33.3 million and
(ii) 10% of the line cap for 30 consecutive days. While there can be no assurances, based upon our forecast, we do not expect the financial covenant to become
(ii) 10% of the line cap for 30 consecutive days. While there can be no assurances, based upon our forecast, we do not expect the financial covenant to become
applicable during the year ended December 31, 2018 . We were in compliance with all covenants under the Credit Agreement as of December 31, 2017 .
applicable during the year ended December 31, 2018 . We were in compliance with all covenants under the Credit Agreement as of December 31, 2017 .
Obligations under the Credit Agreement are guaranteed by our material subsidiaries. Obligations under the Credit Agreement, and the guarantees of those
Obligations under the Credit Agreement are guaranteed by our material subsidiaries. Obligations under the Credit Agreement, and the guarantees of those
obligations, are secured by substantially all of our assets and those of the guarantors, subject to certain exceptions and permitted liens, including a first-priority
obligations, are secured by substantially all of our assets and those of the guarantors, subject to certain exceptions and permitted liens, including a first-priority
security interest in certain accounts receivable, inventory and certain other assets of the Company and a second-priority security interest in substantially all other
security interest in certain accounts receivable, inventory and certain other assets of the Company and a second-priority security interest in substantially all other
assets of the Company that secure the Senior Notes on a first-priority basis.
assets of the Company that secure the Senior Notes on a first-priority basis.
We had outstanding borrowings of $4.5 million with net availability of $308.2 million as of December 31, 2017 . The interest rate on borrowings outstanding as of
We had outstanding borrowings of $4.5 million with net availability of $308.2 million as of December 31, 2017 . The interest rate on borrowings outstanding as of
December 31, 2017 , all of which were Base Rate borrowings, was 4.75% . We had $62.3 million in letters of credit outstanding under the Credit Agreement as of
December 31, 2017 , all of which were Base Rate borrowings, was 4.75% . We had $62.3 million in letters of credit outstanding under the Credit Agreement as of
December 31, 2017 .
December 31, 2017 .
38
38
In the table below, we set forth our enforceable and legally binding obligations as of December 31, 2017 . Some of the amounts included in the table are based on
In the table below, we set forth our enforceable and legally binding obligations as of December 31, 2017 . Some of the amounts included in the table are based on
management's estimates and assumptions about these obligations, including their duration, the possibility of renewal, anticipated actions by third parties and other
management's estimates and assumptions about these obligations, including their duration, the possibility of renewal, anticipated actions by third parties and other
factors. Because these estimates and assumptions are necessarily subjective, our actual payments may vary from those reflected in the table. We have not included
factors. Because these estimates and assumptions are necessarily subjective, our actual payments may vary from those reflected in the table. We have not included
liabilities related to self-insurance reserves in the table below, as these reserves represent an estimate of our future obligations and do not represent cash
liabilities related to self-insurance reserves in the table below, as these reserves represent an estimate of our future obligations and do not represent cash
requirements arising from contractual payment obligations. Purchase orders made in the ordinary course of business and commitments that are cancellable on 30
requirements arising from contractual payment obligations. Purchase orders made in the ordinary course of business and commitments that are cancellable on 30
days' notice are excluded from the table below. Any amounts for which we are liable under purchase orders are reflected on the consolidated balance sheets as
days' notice are excluded from the table below. Any amounts for which we are liable under purchase orders are reflected on the consolidated balance sheets as
accounts payable and accrued liabilities.
accounts payable and accrued liabilities.
(in millions)
(in millions)
Senior Notes obligations (1)
Senior Notes obligations (1)
Revolver obligations (2)
Revolver obligations (2)
Capital lease obligations (3)
Capital lease obligations (3)
Operating lease obligations (4)
Operating lease obligations (4)
Purchase commitments (5)
Purchase commitments (5)
Other long-term debt (6)
Other long-term debt (6)
Total
Total
Total
Total
2018
2018
2019-2020
2019-2020
2021-2022
2021-2022
Thereafter
Thereafter
$
$
484.8 $
484.8 $
19.3 $
19.3 $
Payments Due by Period
Payments Due by Period
5.1
5.1
24.4
24.4
138.6
138.6
7.1
7.1
0.4
0.4
0.2
0.2
8.5
8.5
27.6
27.6
7.1
7.1
0.1
0.1
38.5 $
38.5 $
4.9 $
4.9 $
12.4
12.4
44.4
44.4
—
—
0.3
0.3
38.5 $
38.5 $
— $
— $
2.8
2.8
29.3
29.3
—
—
—
—
$
$
660.4 $
660.4 $
62.8 $
62.8 $
100.5 $
100.5 $
70.6 $
70.6 $
388.5
388.5
—
—
0.7
0.7
37.3
37.3
—
—
—
—
426.5
426.5
(1) Represents principal of $350.0 million and semi-annual interest payments at a 5.5% interest rate. The Senior Notes mature in October 2024. For further information,
(1) Represents principal of $350.0 million and semi-annual interest payments at a 5.5% interest rate. The Senior Notes mature in October 2024. For further information,
refer to Note 9 to our audited financial statements included in Item 8 of this Annual Report on Form 10-K.
refer to Note 9 to our audited financial statements included in Item 8 of this Annual Report on Form 10-K.
(2) Represents principal of $4.5 million and interest payments of $0.6 million, based on outstanding borrowings and interest rates in effect under the Revolver as of
(2) Represents principal of $4.5 million and interest payments of $0.6 million, based on outstanding borrowings and interest rates in effect under the Revolver as of
December 31, 2017. To the extent that a decrease in eligible accounts receivable, credit card receivables and inventory reduces the maximum availability under the
December 31, 2017. To the extent that a decrease in eligible accounts receivable, credit card receivables and inventory reduces the maximum availability under the
Revolver below the amount then outstanding, amounts outstanding could become due sooner than reflected in the table. The Revolver matures at the earlier of December
Revolver below the amount then outstanding, amounts outstanding could become due sooner than reflected in the table. The Revolver matures at the earlier of December
1, 2020 or the date that is three months prior to the maturity date of the Senior Notes. For purposes of this table, as the Senior Notes mature on October 1, 2024, we have
1, 2020 or the date that is three months prior to the maturity date of the Senior Notes. For purposes of this table, as the Senior Notes mature on October 1, 2024, we have
assumed a maturity date of December 1, 2020. For further information, refer to Note 9 to our audited financial statements included in Item 8 of this Annual Report on
assumed a maturity date of December 1, 2020. For further information, refer to Note 9 to our audited financial statements included in Item 8 of this Annual Report on
(3) Represents payments under our capital leases for real estate, fleet vehicles and various equipment. For further information, refer to Note 12 to our audited financial
(3) Represents payments under our capital leases for real estate, fleet vehicles and various equipment. For further information, refer to Note 12 to our audited financial
(4) Represents payments under our operating leases, primarily for buildings, improvements and equipment. For further information, refer to Note 12 to our audited financial
(4) Represents payments under our operating leases, primarily for buildings, improvements and equipment. For further information, refer to Note 12 to our audited financial
Form 10-K.
Form 10-K.
statements included in Item 8 of this Annual Report on Form 10-K.
statements included in Item 8 of this Annual Report on Form 10-K.
statements included in Item 8 of this Annual Report on Form 10-K.
statements included in Item 8 of this Annual Report on Form 10-K.
that are short-term or cancellable.
that are short-term or cancellable.
(5) Consists primarily of obligations to purchase vehicles which are enforceable and legally binding on us. Excludes purchase orders made in the ordinary course of business
(5) Consists primarily of obligations to purchase vehicles which are enforceable and legally binding on us. Excludes purchase orders made in the ordinary course of business
(6) Represents payments on a term note secured by real property which matures in February 2021. The interest rate is 7.0%. For further information, refer to Note 9 to our
(6) Represents payments on a term note secured by real property which matures in February 2021. The interest rate is 7.0%. For further information, refer to Note 9 to our
audited financial statements included in Item 8 of this Annual Report on Form 10-K.
audited financial statements included in Item 8 of this Annual Report on Form 10-K.
39
39
that replaced or refinanced the Senior Notes. The Revolver is subject to an asset-based borrowing formula on eligible accounts receivable, credit card receivables
that replaced or refinanced the Senior Notes. The Revolver is subject to an asset-based borrowing formula on eligible accounts receivable, credit card receivables
Contractual Obligations and Commercial Commitments
Contractual Obligations and Commercial Commitments
and inventory, in each case reduced by certain reserves.
and inventory, in each case reduced by certain reserves.
Borrowings under the Revolver bear interest, at our option, at either the Base Rate (which means the higher of (i) the Federal Funds Rate plus 0.5%, (ii) the LIBOR
Borrowings under the Revolver bear interest, at our option, at either the Base Rate (which means the higher of (i) the Federal Funds Rate plus 0.5%, (ii) the LIBOR
rate plus 1.0% or (iii) the prime rate) plus a Base Rate Margin (which ranges from 0.25% to 0.75% based on Revolver availability) or LIBOR plus a LIBOR Rate
rate plus 1.0% or (iii) the prime rate) plus a Base Rate Margin (which ranges from 0.25% to 0.75% based on Revolver availability) or LIBOR plus a LIBOR Rate
Margin (which ranges from 1.25% to 1.75% based on Revolver availability).The fee on any outstanding letters of credit issued under the Revolver ranges from
Margin (which ranges from 1.25% to 1.75% based on Revolver availability).The fee on any outstanding letters of credit issued under the Revolver ranges from
0.75% to 1.25%, depending on whether the letters of credit are fully cash collateralized. The fee on the unused portion of the Revolver is 0.25%.
0.75% to 1.25%, depending on whether the letters of credit are fully cash collateralized. The fee on the unused portion of the Revolver is 0.25%.
The Credit Agreement contains customary nonfinancial covenants, including restrictions on new indebtedness, issuance of liens, investments, distributions to
The Credit Agreement contains customary nonfinancial covenants, including restrictions on new indebtedness, issuance of liens, investments, distributions to
equityholders, asset sales and affiliate transactions. The Credit Agreement includes a financial covenant that requires us to maintain a minimum Fixed Charge
equityholders, asset sales and affiliate transactions. The Credit Agreement includes a financial covenant that requires us to maintain a minimum Fixed Charge
Coverage Ratio of 1.00:1:00, as defined therein. However, the covenant is only applicable if excess availability under the Credit Agreement is less than or equal to
Coverage Ratio of 1.00:1:00, as defined therein. However, the covenant is only applicable if excess availability under the Credit Agreement is less than or equal to
the greater of (i) $33.3 million and (ii) 10% of the line cap, and remains in effect until excess availability has been greater than the greater of (i) $33.3 million and
the greater of (i) $33.3 million and (ii) 10% of the line cap, and remains in effect until excess availability has been greater than the greater of (i) $33.3 million and
(ii) 10% of the line cap for 30 consecutive days. While there can be no assurances, based upon our forecast, we do not expect the financial covenant to become
(ii) 10% of the line cap for 30 consecutive days. While there can be no assurances, based upon our forecast, we do not expect the financial covenant to become
applicable during the year ended December 31, 2018 . We were in compliance with all covenants under the Credit Agreement as of December 31, 2017 .
applicable during the year ended December 31, 2018 . We were in compliance with all covenants under the Credit Agreement as of December 31, 2017 .
Obligations under the Credit Agreement are guaranteed by our material subsidiaries. Obligations under the Credit Agreement, and the guarantees of those
Obligations under the Credit Agreement are guaranteed by our material subsidiaries. Obligations under the Credit Agreement, and the guarantees of those
obligations, are secured by substantially all of our assets and those of the guarantors, subject to certain exceptions and permitted liens, including a first-priority
obligations, are secured by substantially all of our assets and those of the guarantors, subject to certain exceptions and permitted liens, including a first-priority
security interest in certain accounts receivable, inventory and certain other assets of the Company and a second-priority security interest in substantially all other
security interest in certain accounts receivable, inventory and certain other assets of the Company and a second-priority security interest in substantially all other
assets of the Company that secure the Senior Notes on a first-priority basis.
assets of the Company that secure the Senior Notes on a first-priority basis.
We had outstanding borrowings of $4.5 million with net availability of $308.2 million as of December 31, 2017 . The interest rate on borrowings outstanding as of
We had outstanding borrowings of $4.5 million with net availability of $308.2 million as of December 31, 2017 . The interest rate on borrowings outstanding as of
December 31, 2017 , all of which were Base Rate borrowings, was 4.75% . We had $62.3 million in letters of credit outstanding under the Credit Agreement as of
December 31, 2017 , all of which were Base Rate borrowings, was 4.75% . We had $62.3 million in letters of credit outstanding under the Credit Agreement as of
December 31, 2017 .
December 31, 2017 .
38
38
In the table below, we set forth our enforceable and legally binding obligations as of December 31, 2017 . Some of the amounts included in the table are based on
In the table below, we set forth our enforceable and legally binding obligations as of December 31, 2017 . Some of the amounts included in the table are based on
management's estimates and assumptions about these obligations, including their duration, the possibility of renewal, anticipated actions by third parties and other
management's estimates and assumptions about these obligations, including their duration, the possibility of renewal, anticipated actions by third parties and other
factors. Because these estimates and assumptions are necessarily subjective, our actual payments may vary from those reflected in the table. We have not included
factors. Because these estimates and assumptions are necessarily subjective, our actual payments may vary from those reflected in the table. We have not included
liabilities related to self-insurance reserves in the table below, as these reserves represent an estimate of our future obligations and do not represent cash
liabilities related to self-insurance reserves in the table below, as these reserves represent an estimate of our future obligations and do not represent cash
requirements arising from contractual payment obligations. Purchase orders made in the ordinary course of business and commitments that are cancellable on 30
requirements arising from contractual payment obligations. Purchase orders made in the ordinary course of business and commitments that are cancellable on 30
days' notice are excluded from the table below. Any amounts for which we are liable under purchase orders are reflected on the consolidated balance sheets as
days' notice are excluded from the table below. Any amounts for which we are liable under purchase orders are reflected on the consolidated balance sheets as
accounts payable and accrued liabilities.
accounts payable and accrued liabilities.
(in millions)
(in millions)
Senior Notes obligations (1)
Senior Notes obligations (1)
Revolver obligations (2)
Revolver obligations (2)
Capital lease obligations (3)
Capital lease obligations (3)
Operating lease obligations (4)
Operating lease obligations (4)
Purchase commitments (5)
Purchase commitments (5)
Other long-term debt (6)
Other long-term debt (6)
Total
Total
Total
Total
2018
2018
2019-2020
2019-2020
2021-2022
2021-2022
Thereafter
Thereafter
Payments Due by Period
Payments Due by Period
$
$
484.8 $
484.8 $
19.3 $
19.3 $
5.1
5.1
24.4
24.4
138.6
138.6
7.1
7.1
0.4
0.4
0.2
0.2
8.5
8.5
27.6
27.6
7.1
7.1
0.1
0.1
38.5 $
38.5 $
4.9 $
4.9 $
12.4
12.4
44.4
44.4
—
—
0.3
0.3
38.5 $
38.5 $
— $
— $
2.8
2.8
29.3
29.3
—
—
—
—
$
$
660.4 $
660.4 $
62.8 $
62.8 $
100.5 $
100.5 $
70.6 $
70.6 $
388.5
388.5
—
—
0.7
0.7
37.3
37.3
—
—
—
—
426.5
426.5
(1) Represents principal of $350.0 million and semi-annual interest payments at a 5.5% interest rate. The Senior Notes mature in October 2024. For further information,
(1) Represents principal of $350.0 million and semi-annual interest payments at a 5.5% interest rate. The Senior Notes mature in October 2024. For further information,
refer to Note 9 to our audited financial statements included in Item 8 of this Annual Report on Form 10-K.
refer to Note 9 to our audited financial statements included in Item 8 of this Annual Report on Form 10-K.
(2) Represents principal of $4.5 million and interest payments of $0.6 million, based on outstanding borrowings and interest rates in effect under the Revolver as of
(2) Represents principal of $4.5 million and interest payments of $0.6 million, based on outstanding borrowings and interest rates in effect under the Revolver as of
December 31, 2017. To the extent that a decrease in eligible accounts receivable, credit card receivables and inventory reduces the maximum availability under the
December 31, 2017. To the extent that a decrease in eligible accounts receivable, credit card receivables and inventory reduces the maximum availability under the
Revolver below the amount then outstanding, amounts outstanding could become due sooner than reflected in the table. The Revolver matures at the earlier of December
Revolver below the amount then outstanding, amounts outstanding could become due sooner than reflected in the table. The Revolver matures at the earlier of December
1, 2020 or the date that is three months prior to the maturity date of the Senior Notes. For purposes of this table, as the Senior Notes mature on October 1, 2024, we have
1, 2020 or the date that is three months prior to the maturity date of the Senior Notes. For purposes of this table, as the Senior Notes mature on October 1, 2024, we have
assumed a maturity date of December 1, 2020. For further information, refer to Note 9 to our audited financial statements included in Item 8 of this Annual Report on
assumed a maturity date of December 1, 2020. For further information, refer to Note 9 to our audited financial statements included in Item 8 of this Annual Report on
Form 10-K.
Form 10-K.
(3) Represents payments under our capital leases for real estate, fleet vehicles and various equipment. For further information, refer to Note 12 to our audited financial
(3) Represents payments under our capital leases for real estate, fleet vehicles and various equipment. For further information, refer to Note 12 to our audited financial
statements included in Item 8 of this Annual Report on Form 10-K.
statements included in Item 8 of this Annual Report on Form 10-K.
(4) Represents payments under our operating leases, primarily for buildings, improvements and equipment. For further information, refer to Note 12 to our audited financial
(4) Represents payments under our operating leases, primarily for buildings, improvements and equipment. For further information, refer to Note 12 to our audited financial
statements included in Item 8 of this Annual Report on Form 10-K.
statements included in Item 8 of this Annual Report on Form 10-K.
(5) Consists primarily of obligations to purchase vehicles which are enforceable and legally binding on us. Excludes purchase orders made in the ordinary course of business
(5) Consists primarily of obligations to purchase vehicles which are enforceable and legally binding on us. Excludes purchase orders made in the ordinary course of business
that are short-term or cancellable.
that are short-term or cancellable.
(6) Represents payments on a term note secured by real property which matures in February 2021. The interest rate is 7.0%. For further information, refer to Note 9 to our
(6) Represents payments on a term note secured by real property which matures in February 2021. The interest rate is 7.0%. For further information, refer to Note 9 to our
audited financial statements included in Item 8 of this Annual Report on Form 10-K.
audited financial statements included in Item 8 of this Annual Report on Form 10-K.
39
39
Estimated losses on uncompleted contracts and changes in contract estimates reflect the Company's best estimate of probable losses of unbilled receivables, and are
Estimated losses on uncompleted contracts and changes in contract estimates reflect the Company's best estimate of probable losses of unbilled receivables, and are
recognized in the period such revisions are known and can be reasonably estimated. These estimates are recognized in cost of sales. Estimated losses on
recognized in the period such revisions are known and can be reasonably estimated. These estimates are recognized in cost of sales. Estimated losses on
uncompleted contracts and changes in contract estimates are established by assessing estimated costs to complete, change orders and claims for uncompleted
uncompleted contracts and changes in contract estimates are established by assessing estimated costs to complete, change orders and claims for uncompleted
contracts. Assumptions for estimated costs to complete include material prices, labor costs, labor productivity and contract claims. Such estimates are inherently
contracts. Assumptions for estimated costs to complete include material prices, labor costs, labor productivity and contract claims. Such estimates are inherently
uncertain and therefore it is possible that actual completion costs may vary from these estimates.
uncertain and therefore it is possible that actual completion costs may vary from these estimates.
Effective January 1, 2018, the Company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), including
Effective January 1, 2018, the Company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), including
subsequent amendments to the initial guidance, which provides a comprehensive revenue recognition model requiring companies to recognize revenue for the
subsequent amendments to the initial guidance, which provides a comprehensive revenue recognition model requiring companies to recognize revenue for the
transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. Refer to Note 2
transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. Refer to Note 2
to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information on the Company's adoption of ASU
to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information on the Company's adoption of ASU
2014-09.
2014-09.
Allowance for doubtful accounts
Allowance for doubtful accounts
Off-Balance Sheet Arrangements
Off-Balance Sheet Arrangements
completion, contract revenues and contract completion costs. Due to uncertainties inherent in the estimation process, it is possible that actual contract revenues and
completion, contract revenues and contract completion costs. Due to uncertainties inherent in the estimation process, it is possible that actual contract revenues and
At December 31, 2017 and 2016 , other than operating leases described above and letters of credit issued under the Credit Agreement, we had no material off-
At December 31, 2017 and 2016 , other than operating leases described above and letters of credit issued under the Credit Agreement, we had no material off-
balance sheet arrangements with unconsolidated entities.
balance sheet arrangements with unconsolidated entities.
completion costs may vary from estimates.
completion costs may vary from estimates.
Seasonality and Other Factors
Seasonality and Other Factors
Our first and fourth quarters have historically been, and are generally expected to continue to be, adversely affected by weather patterns in some of our markets,
Our first and fourth quarters have historically been, and are generally expected to continue to be, adversely affected by weather patterns in some of our markets,
causing reduced construction activity. In addition, quarterly results historically have reflected, and are expected to continue to reflect, fluctuations from period to
causing reduced construction activity. In addition, quarterly results historically have reflected, and are expected to continue to reflect, fluctuations from period to
period arising from the following:
period arising from the following:
•
•
•
•
•
•
•
•
•
•
•
•
the volatility of lumber prices;
the volatility of lumber prices;
the cyclical nature of the homebuilding industry;
the cyclical nature of the homebuilding industry;
general economic conditions in the markets in which we compete;
general economic conditions in the markets in which we compete;
the pricing policies of our competitors;
the pricing policies of our competitors;
the production schedules of our customers; and
the production schedules of our customers; and
the effects of weather.
the effects of weather.
The composition and level of working capital typically change during periods of increasing sales as we carry more inventory and receivables, although this is
The composition and level of working capital typically change during periods of increasing sales as we carry more inventory and receivables, although this is
generally offset in part by higher trade payables to our suppliers. Working capital levels typically increase in the second and third quarters of the year due to higher
generally offset in part by higher trade payables to our suppliers. Working capital levels typically increase in the second and third quarters of the year due to higher
sales during the peak residential construction season. These increases have in the past resulted in negative operating cash flows during this peak season, which
sales during the peak residential construction season. These increases have in the past resulted in negative operating cash flows during this peak season, which
historically have been financed through available cash or excess availability on our Revolver. Collection of receivables and reduction in inventory levels following
historically have been financed through available cash or excess availability on our Revolver. Collection of receivables and reduction in inventory levels following
the peak building and construction season have in the past positively impacted cash flow. In the past, we have also utilized our borrowing availability under credit
the peak building and construction season have in the past positively impacted cash flow. In the past, we have also utilized our borrowing availability under credit
facilities to cover working capital needs.
facilities to cover working capital needs.
Recently Issued Accounting Pronouncements
Recently Issued Accounting Pronouncements
We maintain an allowance for doubtful accounts for estimated losses due to the failure of our customers to make required payments. Management believes the
We maintain an allowance for doubtful accounts for estimated losses due to the failure of our customers to make required payments. Management believes the
accounting estimate related to the allowance for doubtful accounts is a “critical accounting estimate” as it involves judgments about our customers’ ability to pay.
accounting estimate related to the allowance for doubtful accounts is a “critical accounting estimate” as it involves judgments about our customers’ ability to pay.
The allowance for doubtful accounts is based on an assessment of individual past due accounts, historical write-off experience, accounts receivable aging, customer
The allowance for doubtful accounts is based on an assessment of individual past due accounts, historical write-off experience, accounts receivable aging, customer
disputes and the business environment. Account balances are charged off when the potential for recovery is considered remote.
disputes and the business environment. Account balances are charged off when the potential for recovery is considered remote.
Management believes the allowance amounts recorded, in each instance, represent its best estimate of future outcomes. If there is a deterioration of a major
Management believes the allowance amounts recorded, in each instance, represent its best estimate of future outcomes. If there is a deterioration of a major
customer’s financial condition, if the Company becomes aware of additional information related to the credit-worthiness of a major customer, or if future actual
customer’s financial condition, if the Company becomes aware of additional information related to the credit-worthiness of a major customer, or if future actual
default rates on trade receivables in general differ from those currently anticipated, the Company may have to adjust its allowance for doubtful accounts, which
default rates on trade receivables in general differ from those currently anticipated, the Company may have to adjust its allowance for doubtful accounts, which
would affect earnings in the period the adjustments were made.
would affect earnings in the period the adjustments were made.
Refer to Note 2 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for a summary of recently issued accounting
Refer to Note 2 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for a summary of recently issued accounting
pronouncements.
pronouncements.
Inventories
Inventories
Critical Accounting Policies
Critical Accounting Policies
Our discussion and analysis of operating results and financial condition are based upon our audited financial statements. The preparation of our financial
Our discussion and analysis of operating results and financial condition are based upon our audited financial statements. The preparation of our financial
statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and
statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and
related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the
related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the
circumstances, and we evaluate these estimates on an ongoing basis. Our critical accounting policies are those that materially affect our financial statements and
circumstances, and we evaluate these estimates on an ongoing basis. Our critical accounting policies are those that materially affect our financial statements and
involve difficult, subjective or complex judgments by management. Although these estimates are based on management’s best knowledge of current events and
involve difficult, subjective or complex judgments by management. Although these estimates are based on management’s best knowledge of current events and
actions that may impact us in the future, actual results may be materially different from the estimates.
actions that may impact us in the future, actual results may be materially different from the estimates.
We believe the following critical accounting policies are affected by significant judgments and estimates used in the preparation of our consolidated financial
We believe the following critical accounting policies are affected by significant judgments and estimates used in the preparation of our consolidated financial
statements and that the judgments and estimates are reasonable.
statements and that the judgments and estimates are reasonable.
Revenue recognition
Revenue recognition
Inventories consist primarily of materials purchased for resale, including lumber and sheet goods, millwork, doors and windows as well as certain manufactured
Inventories consist primarily of materials purchased for resale, including lumber and sheet goods, millwork, doors and windows as well as certain manufactured
products, and are carried at the lower of cost or net realizable value. The cost of substantially all of our inventories is determined by the weighted average cost
products, and are carried at the lower of cost or net realizable value. The cost of substantially all of our inventories is determined by the weighted average cost
method, which approximates the first-in, first-out approach. We evaluate our inventory value at the end of each quarter to ensure that it is carried at the lower of
method, which approximates the first-in, first-out approach. We evaluate our inventory value at the end of each quarter to ensure that it is carried at the lower of
cost or net realizable value. This evaluation includes an analysis of historical physical inventory results, a review of potential excess and obsolete inventories based
cost or net realizable value. This evaluation includes an analysis of historical physical inventory results, a review of potential excess and obsolete inventories based
on inventory aging and anticipated future demand. At least quarterly, each branch’s perpetual inventory records are adjusted to reflect any declines in net realizable
on inventory aging and anticipated future demand. At least quarterly, each branch’s perpetual inventory records are adjusted to reflect any declines in net realizable
value below inventory carrying cost. To the extent historical physical inventory results are not indicative of future results and if future events impact, either
value below inventory carrying cost. To the extent historical physical inventory results are not indicative of future results and if future events impact, either
favorably or unfavorably, the salability of our products or our relationships with certain key suppliers, our inventory reserves could differ significantly, resulting in
favorably or unfavorably, the salability of our products or our relationships with certain key suppliers, our inventory reserves could differ significantly, resulting in
either higher or lower future inventory provisions.
either higher or lower future inventory provisions.
Business combinations
Business combinations
For all acquisitions, we allocate the purchase price to the estimated fair values of the assets acquired and liabilities assumed as of the date of acquisition. The
For all acquisitions, we allocate the purchase price to the estimated fair values of the assets acquired and liabilities assumed as of the date of acquisition. The
excess of the fair value of the purchase consideration over the fair values of the identifiable assets and liabilities is recorded as goodwill. Management makes
excess of the fair value of the purchase consideration over the fair values of the identifiable assets and liabilities is recorded as goodwill. Management makes
significant estimates and assumptions when determining the fair value of assets acquired and liabilities assumed. These estimates include, but are not limited to,
significant estimates and assumptions when determining the fair value of assets acquired and liabilities assumed. These estimates include, but are not limited to,
discount rates, projected future net sales, projected future expected cash flows and useful lives. When necessary, we will engage third-party valuation firms to
discount rates, projected future net sales, projected future expected cash flows and useful lives. When necessary, we will engage third-party valuation firms to
We recognize revenue for sales of building products when products are delivered and the customer takes ownership and assumes risk of loss, collection of the
We recognize revenue for sales of building products when products are delivered and the customer takes ownership and assumes risk of loss, collection of the
relevant receivable is reasonably assured, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. All sales recognized are net of
relevant receivable is reasonably assured, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. All sales recognized are net of
allowances for discounts and estimated returns, based on historical experience. Taxes assessed by governmental authorities that are directly imposed on our
allowances for discounts and estimated returns, based on historical experience. Taxes assessed by governmental authorities that are directly imposed on our
revenue-producing transactions are excluded from sales.
revenue-producing transactions are excluded from sales.
assist us in determining fair values of acquired assets and assumed liabilities.
assist us in determining fair values of acquired assets and assumed liabilities.
Valuation of goodwill, long-lived assets and amortizable other intangible assets
Valuation of goodwill, long-lived assets and amortizable other intangible assets
The percentage-of-completion method is used to recognize revenue for construction services. Periodic estimates of progress towards completion are made based on
The percentage-of-completion method is used to recognize revenue for construction services. Periodic estimates of progress towards completion are made based on
either a comparison of labor costs incurred to date with total estimated contract labor costs or total costs incurred to date with total estimated contract costs. The
either a comparison of labor costs incurred to date with total estimated contract labor costs or total costs incurred to date with total estimated contract costs. The
percentage-of-completion method requires the use of various estimates, including among others, the extent of progress towards completion, contract revenues and
percentage-of-completion method requires the use of various estimates, including among others, the extent of progress towards completion, contract revenues and
contract completion costs. Contract revenues and contract costs to be recognized are dependent on the accuracy of estimates, including quantities of materials,
contract completion costs. Contract revenues and contract costs to be recognized are dependent on the accuracy of estimates, including quantities of materials,
labor productivity and other cost estimates. The Company has a history of making reasonable estimates of the extent of progress towards
labor productivity and other cost estimates. The Company has a history of making reasonable estimates of the extent of progress towards
fair market value.
fair market value.
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Our long-lived assets consist primarily of property, equipment, purchased intangible assets and goodwill. The valuation and the impairment testing of these long-
Our long-lived assets consist primarily of property, equipment, purchased intangible assets and goodwill. The valuation and the impairment testing of these long-
lived assets involve significant judgments and assumptions, particularly as they relate to the identification of reporting units, asset groups and the determination of
lived assets involve significant judgments and assumptions, particularly as they relate to the identification of reporting units, asset groups and the determination of
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completion, contract revenues and contract completion costs. Due to uncertainties inherent in the estimation process, it is possible that actual contract revenues and
completion, contract revenues and contract completion costs. Due to uncertainties inherent in the estimation process, it is possible that actual contract revenues and
completion costs may vary from estimates.
completion costs may vary from estimates.
Estimated losses on uncompleted contracts and changes in contract estimates reflect the Company's best estimate of probable losses of unbilled receivables, and are
Estimated losses on uncompleted contracts and changes in contract estimates reflect the Company's best estimate of probable losses of unbilled receivables, and are
recognized in the period such revisions are known and can be reasonably estimated. These estimates are recognized in cost of sales. Estimated losses on
recognized in the period such revisions are known and can be reasonably estimated. These estimates are recognized in cost of sales. Estimated losses on
uncompleted contracts and changes in contract estimates are established by assessing estimated costs to complete, change orders and claims for uncompleted
uncompleted contracts and changes in contract estimates are established by assessing estimated costs to complete, change orders and claims for uncompleted
contracts. Assumptions for estimated costs to complete include material prices, labor costs, labor productivity and contract claims. Such estimates are inherently
contracts. Assumptions for estimated costs to complete include material prices, labor costs, labor productivity and contract claims. Such estimates are inherently
uncertain and therefore it is possible that actual completion costs may vary from these estimates.
uncertain and therefore it is possible that actual completion costs may vary from these estimates.
Effective January 1, 2018, the Company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), including
Effective January 1, 2018, the Company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), including
subsequent amendments to the initial guidance, which provides a comprehensive revenue recognition model requiring companies to recognize revenue for the
subsequent amendments to the initial guidance, which provides a comprehensive revenue recognition model requiring companies to recognize revenue for the
transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. Refer to Note 2
transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. Refer to Note 2
to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information on the Company's adoption of ASU
to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information on the Company's adoption of ASU
2014-09.
2014-09.
Allowance for doubtful accounts
Allowance for doubtful accounts
We maintain an allowance for doubtful accounts for estimated losses due to the failure of our customers to make required payments. Management believes the
We maintain an allowance for doubtful accounts for estimated losses due to the failure of our customers to make required payments. Management believes the
accounting estimate related to the allowance for doubtful accounts is a “critical accounting estimate” as it involves judgments about our customers’ ability to pay.
accounting estimate related to the allowance for doubtful accounts is a “critical accounting estimate” as it involves judgments about our customers’ ability to pay.
The allowance for doubtful accounts is based on an assessment of individual past due accounts, historical write-off experience, accounts receivable aging, customer
The allowance for doubtful accounts is based on an assessment of individual past due accounts, historical write-off experience, accounts receivable aging, customer
disputes and the business environment. Account balances are charged off when the potential for recovery is considered remote.
disputes and the business environment. Account balances are charged off when the potential for recovery is considered remote.
Management believes the allowance amounts recorded, in each instance, represent its best estimate of future outcomes. If there is a deterioration of a major
Management believes the allowance amounts recorded, in each instance, represent its best estimate of future outcomes. If there is a deterioration of a major
customer’s financial condition, if the Company becomes aware of additional information related to the credit-worthiness of a major customer, or if future actual
customer’s financial condition, if the Company becomes aware of additional information related to the credit-worthiness of a major customer, or if future actual
default rates on trade receivables in general differ from those currently anticipated, the Company may have to adjust its allowance for doubtful accounts, which
default rates on trade receivables in general differ from those currently anticipated, the Company may have to adjust its allowance for doubtful accounts, which
would affect earnings in the period the adjustments were made.
would affect earnings in the period the adjustments were made.
Refer to Note 2 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for a summary of recently issued accounting
Refer to Note 2 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for a summary of recently issued accounting
Inventories
Inventories
Inventories consist primarily of materials purchased for resale, including lumber and sheet goods, millwork, doors and windows as well as certain manufactured
Inventories consist primarily of materials purchased for resale, including lumber and sheet goods, millwork, doors and windows as well as certain manufactured
products, and are carried at the lower of cost or net realizable value. The cost of substantially all of our inventories is determined by the weighted average cost
products, and are carried at the lower of cost or net realizable value. The cost of substantially all of our inventories is determined by the weighted average cost
method, which approximates the first-in, first-out approach. We evaluate our inventory value at the end of each quarter to ensure that it is carried at the lower of
method, which approximates the first-in, first-out approach. We evaluate our inventory value at the end of each quarter to ensure that it is carried at the lower of
cost or net realizable value. This evaluation includes an analysis of historical physical inventory results, a review of potential excess and obsolete inventories based
cost or net realizable value. This evaluation includes an analysis of historical physical inventory results, a review of potential excess and obsolete inventories based
on inventory aging and anticipated future demand. At least quarterly, each branch’s perpetual inventory records are adjusted to reflect any declines in net realizable
on inventory aging and anticipated future demand. At least quarterly, each branch’s perpetual inventory records are adjusted to reflect any declines in net realizable
value below inventory carrying cost. To the extent historical physical inventory results are not indicative of future results and if future events impact, either
value below inventory carrying cost. To the extent historical physical inventory results are not indicative of future results and if future events impact, either
favorably or unfavorably, the salability of our products or our relationships with certain key suppliers, our inventory reserves could differ significantly, resulting in
favorably or unfavorably, the salability of our products or our relationships with certain key suppliers, our inventory reserves could differ significantly, resulting in
either higher or lower future inventory provisions.
either higher or lower future inventory provisions.
Business combinations
Business combinations
For all acquisitions, we allocate the purchase price to the estimated fair values of the assets acquired and liabilities assumed as of the date of acquisition. The
For all acquisitions, we allocate the purchase price to the estimated fair values of the assets acquired and liabilities assumed as of the date of acquisition. The
excess of the fair value of the purchase consideration over the fair values of the identifiable assets and liabilities is recorded as goodwill. Management makes
excess of the fair value of the purchase consideration over the fair values of the identifiable assets and liabilities is recorded as goodwill. Management makes
significant estimates and assumptions when determining the fair value of assets acquired and liabilities assumed. These estimates include, but are not limited to,
significant estimates and assumptions when determining the fair value of assets acquired and liabilities assumed. These estimates include, but are not limited to,
discount rates, projected future net sales, projected future expected cash flows and useful lives. When necessary, we will engage third-party valuation firms to
discount rates, projected future net sales, projected future expected cash flows and useful lives. When necessary, we will engage third-party valuation firms to
assist us in determining fair values of acquired assets and assumed liabilities.
assist us in determining fair values of acquired assets and assumed liabilities.
Valuation of goodwill, long-lived assets and amortizable other intangible assets
Valuation of goodwill, long-lived assets and amortizable other intangible assets
Our long-lived assets consist primarily of property, equipment, purchased intangible assets and goodwill. The valuation and the impairment testing of these long-
Our long-lived assets consist primarily of property, equipment, purchased intangible assets and goodwill. The valuation and the impairment testing of these long-
lived assets involve significant judgments and assumptions, particularly as they relate to the identification of reporting units, asset groups and the determination of
lived assets involve significant judgments and assumptions, particularly as they relate to the identification of reporting units, asset groups and the determination of
fair market value.
fair market value.
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At December 31, 2017 and 2016 , other than operating leases described above and letters of credit issued under the Credit Agreement, we had no material off-
At December 31, 2017 and 2016 , other than operating leases described above and letters of credit issued under the Credit Agreement, we had no material off-
Off-Balance Sheet Arrangements
Off-Balance Sheet Arrangements
balance sheet arrangements with unconsolidated entities.
balance sheet arrangements with unconsolidated entities.
Seasonality and Other Factors
Seasonality and Other Factors
Our first and fourth quarters have historically been, and are generally expected to continue to be, adversely affected by weather patterns in some of our markets,
Our first and fourth quarters have historically been, and are generally expected to continue to be, adversely affected by weather patterns in some of our markets,
causing reduced construction activity. In addition, quarterly results historically have reflected, and are expected to continue to reflect, fluctuations from period to
causing reduced construction activity. In addition, quarterly results historically have reflected, and are expected to continue to reflect, fluctuations from period to
period arising from the following:
period arising from the following:
The composition and level of working capital typically change during periods of increasing sales as we carry more inventory and receivables, although this is
The composition and level of working capital typically change during periods of increasing sales as we carry more inventory and receivables, although this is
generally offset in part by higher trade payables to our suppliers. Working capital levels typically increase in the second and third quarters of the year due to higher
generally offset in part by higher trade payables to our suppliers. Working capital levels typically increase in the second and third quarters of the year due to higher
sales during the peak residential construction season. These increases have in the past resulted in negative operating cash flows during this peak season, which
sales during the peak residential construction season. These increases have in the past resulted in negative operating cash flows during this peak season, which
historically have been financed through available cash or excess availability on our Revolver. Collection of receivables and reduction in inventory levels following
historically have been financed through available cash or excess availability on our Revolver. Collection of receivables and reduction in inventory levels following
the peak building and construction season have in the past positively impacted cash flow. In the past, we have also utilized our borrowing availability under credit
the peak building and construction season have in the past positively impacted cash flow. In the past, we have also utilized our borrowing availability under credit
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the volatility of lumber prices;
the volatility of lumber prices;
the cyclical nature of the homebuilding industry;
the cyclical nature of the homebuilding industry;
general economic conditions in the markets in which we compete;
general economic conditions in the markets in which we compete;
the pricing policies of our competitors;
the pricing policies of our competitors;
the production schedules of our customers; and
the production schedules of our customers; and
the effects of weather.
the effects of weather.
facilities to cover working capital needs.
facilities to cover working capital needs.
Recently Issued Accounting Pronouncements
Recently Issued Accounting Pronouncements
pronouncements.
pronouncements.
Critical Accounting Policies
Critical Accounting Policies
Our discussion and analysis of operating results and financial condition are based upon our audited financial statements. The preparation of our financial
Our discussion and analysis of operating results and financial condition are based upon our audited financial statements. The preparation of our financial
statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and
statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and
related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the
related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the
circumstances, and we evaluate these estimates on an ongoing basis. Our critical accounting policies are those that materially affect our financial statements and
circumstances, and we evaluate these estimates on an ongoing basis. Our critical accounting policies are those that materially affect our financial statements and
involve difficult, subjective or complex judgments by management. Although these estimates are based on management’s best knowledge of current events and
involve difficult, subjective or complex judgments by management. Although these estimates are based on management’s best knowledge of current events and
actions that may impact us in the future, actual results may be materially different from the estimates.
actions that may impact us in the future, actual results may be materially different from the estimates.
We believe the following critical accounting policies are affected by significant judgments and estimates used in the preparation of our consolidated financial
We believe the following critical accounting policies are affected by significant judgments and estimates used in the preparation of our consolidated financial
statements and that the judgments and estimates are reasonable.
statements and that the judgments and estimates are reasonable.
Revenue recognition
Revenue recognition
We recognize revenue for sales of building products when products are delivered and the customer takes ownership and assumes risk of loss, collection of the
We recognize revenue for sales of building products when products are delivered and the customer takes ownership and assumes risk of loss, collection of the
relevant receivable is reasonably assured, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. All sales recognized are net of
relevant receivable is reasonably assured, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. All sales recognized are net of
allowances for discounts and estimated returns, based on historical experience. Taxes assessed by governmental authorities that are directly imposed on our
allowances for discounts and estimated returns, based on historical experience. Taxes assessed by governmental authorities that are directly imposed on our
revenue-producing transactions are excluded from sales.
revenue-producing transactions are excluded from sales.
The percentage-of-completion method is used to recognize revenue for construction services. Periodic estimates of progress towards completion are made based on
The percentage-of-completion method is used to recognize revenue for construction services. Periodic estimates of progress towards completion are made based on
either a comparison of labor costs incurred to date with total estimated contract labor costs or total costs incurred to date with total estimated contract costs. The
either a comparison of labor costs incurred to date with total estimated contract labor costs or total costs incurred to date with total estimated contract costs. The
percentage-of-completion method requires the use of various estimates, including among others, the extent of progress towards completion, contract revenues and
percentage-of-completion method requires the use of various estimates, including among others, the extent of progress towards completion, contract revenues and
contract completion costs. Contract revenues and contract costs to be recognized are dependent on the accuracy of estimates, including quantities of materials,
contract completion costs. Contract revenues and contract costs to be recognized are dependent on the accuracy of estimates, including quantities of materials,
labor productivity and other cost estimates. The Company has a history of making reasonable estimates of the extent of progress towards
labor productivity and other cost estimates. The Company has a history of making reasonable estimates of the extent of progress towards
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We test our tangible and intangible long-lived assets subject to amortization for impairment whenever facts and circumstances indicate that the carrying amount of
We test our tangible and intangible long-lived assets subject to amortization for impairment whenever facts and circumstances indicate that the carrying amount of
an asset may not be recoverable. We test goodwill for impairment annually, or more frequently if triggering events occur indicating that there may be impairment.
an asset may not be recoverable. We test goodwill for impairment annually, or more frequently if triggering events occur indicating that there may be impairment.
Casualty and health insurance
Casualty and health insurance
We have recorded goodwill and perform testing for potential goodwill impairment at a reporting unit level. A reporting unit is an operating segment, or a business
We have recorded goodwill and perform testing for potential goodwill impairment at a reporting unit level. A reporting unit is an operating segment, or a business
unit one level below an operating segment, for which discrete financial information is available, and for which management regularly reviews the operating results.
unit one level below an operating segment, for which discrete financial information is available, and for which management regularly reviews the operating results.
Additionally, components within an operating segment are aggregated as a single reporting unit if they have similar economic characteristics. Beginning January 1,
Additionally, components within an operating segment are aggregated as a single reporting unit if they have similar economic characteristics. Beginning January 1,
2017, following the realignment of certain markets which resulted in the consolidation of the Company's historical Mountain West division into the Intermountain
2017, following the realignment of certain markets which resulted in the consolidation of the Company's historical Mountain West division into the Intermountain
division, the Company's five operating segments, which have been determined to be the Company's reporting units, are the Mid-Atlantic, Southeast, Texas,
division, the Company's five operating segments, which have been determined to be the Company's reporting units, are the Mid-Atlantic, Southeast, Texas,
Intermountain and Western divisions. Following the realignment, the chief operating decision maker continues to review aggregate information to allocate
Intermountain and Western divisions. Following the realignment, the chief operating decision maker continues to review aggregate information to allocate
resources and assess performance. Based on this, as well as the similar economic characteristics, nature of products, distribution methods and customers of the
resources and assess performance. Based on this, as well as the similar economic characteristics, nature of products, distribution methods and customers of the
divisions both before and after the realignment, the Company has aggregated its operating segments into one reportable segment. We complete our annual
divisions both before and after the realignment, the Company has aggregated its operating segments into one reportable segment. We complete our annual
impairment assessment during the third quarter of each year. We did not recognize any impairment for the years ended December 31, 2017 , 2016 and 2015 .
impairment assessment during the third quarter of each year. We did not recognize any impairment for the years ended December 31, 2017 , 2016 and 2015 .
For impairment testing of long-lived assets, we identify asset groups at the lowest level for which identifiable cash flows are largely independent of the cash flows
For impairment testing of long-lived assets, we identify asset groups at the lowest level for which identifiable cash flows are largely independent of the cash flows
of other groups of assets and liabilities. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated
of other groups of assets and liabilities. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the assets. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment
undiscounted future cash flows expected to be generated by the assets. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment
charge is recognized by the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.
charge is recognized by the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.
As discussed above, changes in management intentions, market events or conditions, projected future net sales, operating results, cash flow of our reporting units
As discussed above, changes in management intentions, market events or conditions, projected future net sales, operating results, cash flow of our reporting units
and other similar circumstances could affect the assumptions used in the impairment tests. Although management currently believes that the estimates used in the
and other similar circumstances could affect the assumptions used in the impairment tests. Although management currently believes that the estimates used in the
evaluation of goodwill and other long-lived assets are reasonable, differences between actual and expected net sales, operating results and cash flow could cause
evaluation of goodwill and other long-lived assets are reasonable, differences between actual and expected net sales, operating results and cash flow could cause
these assets to be impaired. If any asset were determined to be impaired, this could have a material adverse effect on our results of operations and financial
these assets to be impaired. If any asset were determined to be impaired, this could have a material adverse effect on our results of operations and financial
position, but not our cash flow from operations.
position, but not our cash flow from operations.
Stock based compensation
Stock based compensation
During the year ended December 31, 2017, the Company granted restricted stock unit awards and performance restricted stock unit awards to certain employees
During the year ended December 31, 2017, the Company granted restricted stock unit awards and performance restricted stock unit awards to certain employees
and directors.
and directors.
We account for restricted stock unit awards by recording compensation expense over the requisite service period, using graded vesting, based on the award’s fair
We account for restricted stock unit awards by recording compensation expense over the requisite service period, using graded vesting, based on the award’s fair
value at the date of grant. The fair value of restricted stock unit awards is based on the price of our publicly traded common stock at the date of grant. For restricted
value at the date of grant. The fair value of restricted stock unit awards is based on the price of our publicly traded common stock at the date of grant. For restricted
stock unit awards with performance conditions, we record compensation expense based on the expected number of units that will vest, which is adjusted, as
stock unit awards with performance conditions, we record compensation expense based on the expected number of units that will vest, which is adjusted, as
appropriate, throughout the performance period.
appropriate, throughout the performance period.
We account for stock options granted to employees by recording compensation expense based on the award’s fair value, estimated on the date of grant using the
We account for stock options granted to employees by recording compensation expense based on the award’s fair value, estimated on the date of grant using the
Black-Scholes option-pricing model, which uses inputs including the fair value per share of our common stock, volatility, expected term of the awards, dividend
Black-Scholes option-pricing model, which uses inputs including the fair value per share of our common stock, volatility, expected term of the awards, dividend
yield and risk-free interest rate. The assumptions used in calculating the fair value of stock options represent our best estimates, based on management's judgment
yield and risk-free interest rate. The assumptions used in calculating the fair value of stock options represent our best estimates, based on management's judgment
and subjective future expectations. These estimates involve inherent uncertainties. If any of the assumptions used in the model change significantly, share-based
and subjective future expectations. These estimates involve inherent uncertainties. If any of the assumptions used in the model change significantly, share-based
compensation recorded for future awards may differ materially from that recorded for awards granted previously.
compensation recorded for future awards may differ materially from that recorded for awards granted previously.
The Company accounts for forfeitures as they occur.
The Company accounts for forfeitures as they occur.
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We carry insurance for general liability, auto liability and workers' compensation exposures subject to deductibles or self-insured retentions that we believe to be
We carry insurance for general liability, auto liability and workers' compensation exposures subject to deductibles or self-insured retentions that we believe to be
reasonable under the circumstances, and we self-insure for employee and eligible dependent health care claims, with insurance purchased from independent
reasonable under the circumstances, and we self-insure for employee and eligible dependent health care claims, with insurance purchased from independent
carriers to cover individual claims in excess of the self-insured limits. The expected liability for unpaid claims, including incurred but not reported losses, is
carriers to cover individual claims in excess of the self-insured limits. The expected liability for unpaid claims, including incurred but not reported losses, is
determined using the assistance of third-party actuaries and is reflected on the consolidated balance sheets as a liability with current and long-term components.
determined using the assistance of third-party actuaries and is reflected on the consolidated balance sheets as a liability with current and long-term components.
We have elected not to discount this liability. The amount recoverable from insurance providers is reflected on the consolidated balance sheets in prepaid expenses
We have elected not to discount this liability. The amount recoverable from insurance providers is reflected on the consolidated balance sheets in prepaid expenses
and other current assets. Our accounting policy includes an internal evaluation and adjustment of our reserve for all insured losses on a quarterly basis. At least on
and other current assets. Our accounting policy includes an internal evaluation and adjustment of our reserve for all insured losses on a quarterly basis. At least on
an annual basis, we engage external actuarial professionals to independently assess and estimate the total liability outstanding, which is compared to the actual
an annual basis, we engage external actuarial professionals to independently assess and estimate the total liability outstanding, which is compared to the actual
reserve balance at that time and adjusted accordingly.
reserve balance at that time and adjusted accordingly.
Income taxes
Income taxes
tax assets.
tax assets.
In accordance with ASC 740 “ Income
Taxes
,” we evaluate our deferred tax assets to determine if valuation allowances are required. In assessing the realizability
In accordance with ASC 740 “ Income
Taxes
,” we evaluate our deferred tax assets to determine if valuation allowances are required. In assessing the realizability
of deferred tax assets, we consider both positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred tax
of deferred tax assets, we consider both positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The primary negative evidence considered includes the cumulative operating losses generated in prior periods. The primary positive
assets will not be realized. The primary negative evidence considered includes the cumulative operating losses generated in prior periods. The primary positive
evidence considered includes recent prior periods with cumulative operating income and the reversal of deferred tax liabilities related to depreciation and
evidence considered includes recent prior periods with cumulative operating income and the reversal of deferred tax liabilities related to depreciation and
amortization that would occur within the same jurisdiction and during the carry-forward period necessary to absorb the state net operating losses and other deferred
amortization that would occur within the same jurisdiction and during the carry-forward period necessary to absorb the state net operating losses and other deferred
During 2017, the Company evaluated the positive and negative evidence in assessing the realizability of its deferred tax assets. As of December 31, 2017, we
During 2017, the Company evaluated the positive and negative evidence in assessing the realizability of its deferred tax assets. As of December 31, 2017, we
concluded that it is more likely than not that we will realize the benefit of our deferred tax assets, net of a state tax valuation allowance of $0.1 million.
concluded that it is more likely than not that we will realize the benefit of our deferred tax assets, net of a state tax valuation allowance of $0.1 million.
ASC 740 also prescribes a recognition threshold and certain measurement principles for the financial statements related to tax positions taken or expected to be
ASC 740 also prescribes a recognition threshold and certain measurement principles for the financial statements related to tax positions taken or expected to be
taken on a tax return. Under ASC 740, the impact of an uncertain tax position on an income tax return must be recognized at the largest amount that is more likely
taken on a tax return. Under ASC 740, the impact of an uncertain tax position on an income tax return must be recognized at the largest amount that is more likely
than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of
than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of
being sustained. Additionally, ASC 740 provides guidance on derecognition, classification, interest and penalties associated with income taxes, accounting in
being sustained. Additionally, ASC 740 provides guidance on derecognition, classification, interest and penalties associated with income taxes, accounting in
interim periods, disclosures and transition requirements. As of December 31, 2017 and 2016, the Company recognizes no material uncertain tax positions.
interim periods, disclosures and transition requirements. As of December 31, 2017 and 2016, the Company recognizes no material uncertain tax positions.
On December 22, 2017, the President of the United States signed into law the 2017 Tax Act. This legislation significantly changes U.S. tax law by, among other
On December 22, 2017, the President of the United States signed into law the 2017 Tax Act. This legislation significantly changes U.S. tax law by, among other
things, lowering corporate income tax rates from a maximum 35% to a flat 21% rate, effective January 1, 2018. The SEC staff issued Staff Accounting Bulletin
things, lowering corporate income tax rates from a maximum 35% to a flat 21% rate, effective January 1, 2018. The SEC staff issued Staff Accounting Bulletin
No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed
No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed
(including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. The Company has recognized the net
(including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. The Company has recognized the net
tax benefit of $3.6 million related to the impact of the 2017 Tax Act for the remeasurement of deferred tax assets and liabilities and included this amount in its
tax benefit of $3.6 million related to the impact of the 2017 Tax Act for the remeasurement of deferred tax assets and liabilities and included this amount in its
consolidated financial statements for the year ended December 31, 2017, on a provisional basis based on information currently available. The 2017 Tax Act may be
consolidated financial statements for the year ended December 31, 2017, on a provisional basis based on information currently available. The 2017 Tax Act may be
subject to technical amendments, as well as interpretations and implementing regulations by the Department of Treasury and Internal Revenue Service, any of
subject to technical amendments, as well as interpretations and implementing regulations by the Department of Treasury and Internal Revenue Service, any of
which could increase or decrease one or more impacts of the legislation. As such, we may record additional provisional amounts or adjustments to provisional
which could increase or decrease one or more impacts of the legislation. As such, we may record additional provisional amounts or adjustments to provisional
amounts during the measurement period ending no later than December 2018.
amounts during the measurement period ending no later than December 2018.
Consideration received from suppliers
Consideration received from suppliers
We enter into arrangements with many of our suppliers providing for inventory purchase rebates (“supplier rebates”) upon achievement of specified volume
We enter into arrangements with many of our suppliers providing for inventory purchase rebates (“supplier rebates”) upon achievement of specified volume
purchasing levels. We accrue estimated supplier rebates monthly as part of cost of goods sold based on progress toward earning the supplier rebates, taking into
purchasing levels. We accrue estimated supplier rebates monthly as part of cost of goods sold based on progress toward earning the supplier rebates, taking into
consideration cumulative purchases of inventory to date and projected purchases through the end of the year. We estimate the rebates applicable to inventory on-
consideration cumulative purchases of inventory to date and projected purchases through the end of the year. We estimate the rebates applicable to inventory on-
hand at each period end based on the inventory turns of the related items.
hand at each period end based on the inventory turns of the related items.
Under certain circumstances, including if market conditions were to change, suppliers may change the terms of some or all of these programs. Although these
Under certain circumstances, including if market conditions were to change, suppliers may change the terms of some or all of these programs. Although these
changes would not affect the amounts which we have recorded related to product already purchased, it may impact our gross margins in future periods.
changes would not affect the amounts which we have recorded related to product already purchased, it may impact our gross margins in future periods.
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We have recorded goodwill and perform testing for potential goodwill impairment at a reporting unit level. A reporting unit is an operating segment, or a business
We have recorded goodwill and perform testing for potential goodwill impairment at a reporting unit level. A reporting unit is an operating segment, or a business
unit one level below an operating segment, for which discrete financial information is available, and for which management regularly reviews the operating results.
unit one level below an operating segment, for which discrete financial information is available, and for which management regularly reviews the operating results.
Additionally, components within an operating segment are aggregated as a single reporting unit if they have similar economic characteristics. Beginning January 1,
Additionally, components within an operating segment are aggregated as a single reporting unit if they have similar economic characteristics. Beginning January 1,
2017, following the realignment of certain markets which resulted in the consolidation of the Company's historical Mountain West division into the Intermountain
2017, following the realignment of certain markets which resulted in the consolidation of the Company's historical Mountain West division into the Intermountain
division, the Company's five operating segments, which have been determined to be the Company's reporting units, are the Mid-Atlantic, Southeast, Texas,
division, the Company's five operating segments, which have been determined to be the Company's reporting units, are the Mid-Atlantic, Southeast, Texas,
Intermountain and Western divisions. Following the realignment, the chief operating decision maker continues to review aggregate information to allocate
Intermountain and Western divisions. Following the realignment, the chief operating decision maker continues to review aggregate information to allocate
resources and assess performance. Based on this, as well as the similar economic characteristics, nature of products, distribution methods and customers of the
resources and assess performance. Based on this, as well as the similar economic characteristics, nature of products, distribution methods and customers of the
divisions both before and after the realignment, the Company has aggregated its operating segments into one reportable segment. We complete our annual
divisions both before and after the realignment, the Company has aggregated its operating segments into one reportable segment. We complete our annual
For impairment testing of long-lived assets, we identify asset groups at the lowest level for which identifiable cash flows are largely independent of the cash flows
For impairment testing of long-lived assets, we identify asset groups at the lowest level for which identifiable cash flows are largely independent of the cash flows
of other groups of assets and liabilities. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated
of other groups of assets and liabilities. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the assets. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment
undiscounted future cash flows expected to be generated by the assets. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment
charge is recognized by the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.
charge is recognized by the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.
As discussed above, changes in management intentions, market events or conditions, projected future net sales, operating results, cash flow of our reporting units
As discussed above, changes in management intentions, market events or conditions, projected future net sales, operating results, cash flow of our reporting units
and other similar circumstances could affect the assumptions used in the impairment tests. Although management currently believes that the estimates used in the
and other similar circumstances could affect the assumptions used in the impairment tests. Although management currently believes that the estimates used in the
evaluation of goodwill and other long-lived assets are reasonable, differences between actual and expected net sales, operating results and cash flow could cause
evaluation of goodwill and other long-lived assets are reasonable, differences between actual and expected net sales, operating results and cash flow could cause
these assets to be impaired. If any asset were determined to be impaired, this could have a material adverse effect on our results of operations and financial
these assets to be impaired. If any asset were determined to be impaired, this could have a material adverse effect on our results of operations and financial
position, but not our cash flow from operations.
position, but not our cash flow from operations.
Stock based compensation
Stock based compensation
and directors.
and directors.
During the year ended December 31, 2017, the Company granted restricted stock unit awards and performance restricted stock unit awards to certain employees
During the year ended December 31, 2017, the Company granted restricted stock unit awards and performance restricted stock unit awards to certain employees
We account for restricted stock unit awards by recording compensation expense over the requisite service period, using graded vesting, based on the award’s fair
We account for restricted stock unit awards by recording compensation expense over the requisite service period, using graded vesting, based on the award’s fair
value at the date of grant. The fair value of restricted stock unit awards is based on the price of our publicly traded common stock at the date of grant. For restricted
value at the date of grant. The fair value of restricted stock unit awards is based on the price of our publicly traded common stock at the date of grant. For restricted
stock unit awards with performance conditions, we record compensation expense based on the expected number of units that will vest, which is adjusted, as
stock unit awards with performance conditions, we record compensation expense based on the expected number of units that will vest, which is adjusted, as
appropriate, throughout the performance period.
appropriate, throughout the performance period.
We account for stock options granted to employees by recording compensation expense based on the award’s fair value, estimated on the date of grant using the
We account for stock options granted to employees by recording compensation expense based on the award’s fair value, estimated on the date of grant using the
Black-Scholes option-pricing model, which uses inputs including the fair value per share of our common stock, volatility, expected term of the awards, dividend
Black-Scholes option-pricing model, which uses inputs including the fair value per share of our common stock, volatility, expected term of the awards, dividend
yield and risk-free interest rate. The assumptions used in calculating the fair value of stock options represent our best estimates, based on management's judgment
yield and risk-free interest rate. The assumptions used in calculating the fair value of stock options represent our best estimates, based on management's judgment
and subjective future expectations. These estimates involve inherent uncertainties. If any of the assumptions used in the model change significantly, share-based
and subjective future expectations. These estimates involve inherent uncertainties. If any of the assumptions used in the model change significantly, share-based
compensation recorded for future awards may differ materially from that recorded for awards granted previously.
compensation recorded for future awards may differ materially from that recorded for awards granted previously.
The Company accounts for forfeitures as they occur.
The Company accounts for forfeitures as they occur.
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We test our tangible and intangible long-lived assets subject to amortization for impairment whenever facts and circumstances indicate that the carrying amount of
We test our tangible and intangible long-lived assets subject to amortization for impairment whenever facts and circumstances indicate that the carrying amount of
Casualty and health insurance
Casualty and health insurance
an asset may not be recoverable. We test goodwill for impairment annually, or more frequently if triggering events occur indicating that there may be impairment.
an asset may not be recoverable. We test goodwill for impairment annually, or more frequently if triggering events occur indicating that there may be impairment.
We carry insurance for general liability, auto liability and workers' compensation exposures subject to deductibles or self-insured retentions that we believe to be
We carry insurance for general liability, auto liability and workers' compensation exposures subject to deductibles or self-insured retentions that we believe to be
reasonable under the circumstances, and we self-insure for employee and eligible dependent health care claims, with insurance purchased from independent
reasonable under the circumstances, and we self-insure for employee and eligible dependent health care claims, with insurance purchased from independent
carriers to cover individual claims in excess of the self-insured limits. The expected liability for unpaid claims, including incurred but not reported losses, is
carriers to cover individual claims in excess of the self-insured limits. The expected liability for unpaid claims, including incurred but not reported losses, is
determined using the assistance of third-party actuaries and is reflected on the consolidated balance sheets as a liability with current and long-term components.
determined using the assistance of third-party actuaries and is reflected on the consolidated balance sheets as a liability with current and long-term components.
We have elected not to discount this liability. The amount recoverable from insurance providers is reflected on the consolidated balance sheets in prepaid expenses
We have elected not to discount this liability. The amount recoverable from insurance providers is reflected on the consolidated balance sheets in prepaid expenses
and other current assets. Our accounting policy includes an internal evaluation and adjustment of our reserve for all insured losses on a quarterly basis. At least on
and other current assets. Our accounting policy includes an internal evaluation and adjustment of our reserve for all insured losses on a quarterly basis. At least on
an annual basis, we engage external actuarial professionals to independently assess and estimate the total liability outstanding, which is compared to the actual
an annual basis, we engage external actuarial professionals to independently assess and estimate the total liability outstanding, which is compared to the actual
reserve balance at that time and adjusted accordingly.
reserve balance at that time and adjusted accordingly.
impairment assessment during the third quarter of each year. We did not recognize any impairment for the years ended December 31, 2017 , 2016 and 2015 .
impairment assessment during the third quarter of each year. We did not recognize any impairment for the years ended December 31, 2017 , 2016 and 2015 .
Income taxes
Income taxes
In accordance with ASC 740 “ Income
Taxes
,” we evaluate our deferred tax assets to determine if valuation allowances are required. In assessing the realizability
In accordance with ASC 740 “ Income
Taxes
,” we evaluate our deferred tax assets to determine if valuation allowances are required. In assessing the realizability
of deferred tax assets, we consider both positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred tax
of deferred tax assets, we consider both positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The primary negative evidence considered includes the cumulative operating losses generated in prior periods. The primary positive
assets will not be realized. The primary negative evidence considered includes the cumulative operating losses generated in prior periods. The primary positive
evidence considered includes recent prior periods with cumulative operating income and the reversal of deferred tax liabilities related to depreciation and
evidence considered includes recent prior periods with cumulative operating income and the reversal of deferred tax liabilities related to depreciation and
amortization that would occur within the same jurisdiction and during the carry-forward period necessary to absorb the state net operating losses and other deferred
amortization that would occur within the same jurisdiction and during the carry-forward period necessary to absorb the state net operating losses and other deferred
tax assets.
tax assets.
During 2017, the Company evaluated the positive and negative evidence in assessing the realizability of its deferred tax assets. As of December 31, 2017, we
During 2017, the Company evaluated the positive and negative evidence in assessing the realizability of its deferred tax assets. As of December 31, 2017, we
concluded that it is more likely than not that we will realize the benefit of our deferred tax assets, net of a state tax valuation allowance of $0.1 million.
concluded that it is more likely than not that we will realize the benefit of our deferred tax assets, net of a state tax valuation allowance of $0.1 million.
ASC 740 also prescribes a recognition threshold and certain measurement principles for the financial statements related to tax positions taken or expected to be
ASC 740 also prescribes a recognition threshold and certain measurement principles for the financial statements related to tax positions taken or expected to be
taken on a tax return. Under ASC 740, the impact of an uncertain tax position on an income tax return must be recognized at the largest amount that is more likely
taken on a tax return. Under ASC 740, the impact of an uncertain tax position on an income tax return must be recognized at the largest amount that is more likely
than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of
than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of
being sustained. Additionally, ASC 740 provides guidance on derecognition, classification, interest and penalties associated with income taxes, accounting in
being sustained. Additionally, ASC 740 provides guidance on derecognition, classification, interest and penalties associated with income taxes, accounting in
interim periods, disclosures and transition requirements. As of December 31, 2017 and 2016, the Company recognizes no material uncertain tax positions.
interim periods, disclosures and transition requirements. As of December 31, 2017 and 2016, the Company recognizes no material uncertain tax positions.
On December 22, 2017, the President of the United States signed into law the 2017 Tax Act. This legislation significantly changes U.S. tax law by, among other
On December 22, 2017, the President of the United States signed into law the 2017 Tax Act. This legislation significantly changes U.S. tax law by, among other
things, lowering corporate income tax rates from a maximum 35% to a flat 21% rate, effective January 1, 2018. The SEC staff issued Staff Accounting Bulletin
things, lowering corporate income tax rates from a maximum 35% to a flat 21% rate, effective January 1, 2018. The SEC staff issued Staff Accounting Bulletin
No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed
No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed
(including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. The Company has recognized the net
(including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. The Company has recognized the net
tax benefit of $3.6 million related to the impact of the 2017 Tax Act for the remeasurement of deferred tax assets and liabilities and included this amount in its
tax benefit of $3.6 million related to the impact of the 2017 Tax Act for the remeasurement of deferred tax assets and liabilities and included this amount in its
consolidated financial statements for the year ended December 31, 2017, on a provisional basis based on information currently available. The 2017 Tax Act may be
consolidated financial statements for the year ended December 31, 2017, on a provisional basis based on information currently available. The 2017 Tax Act may be
subject to technical amendments, as well as interpretations and implementing regulations by the Department of Treasury and Internal Revenue Service, any of
subject to technical amendments, as well as interpretations and implementing regulations by the Department of Treasury and Internal Revenue Service, any of
which could increase or decrease one or more impacts of the legislation. As such, we may record additional provisional amounts or adjustments to provisional
which could increase or decrease one or more impacts of the legislation. As such, we may record additional provisional amounts or adjustments to provisional
amounts during the measurement period ending no later than December 2018.
amounts during the measurement period ending no later than December 2018.
Consideration received from suppliers
Consideration received from suppliers
We enter into arrangements with many of our suppliers providing for inventory purchase rebates (“supplier rebates”) upon achievement of specified volume
We enter into arrangements with many of our suppliers providing for inventory purchase rebates (“supplier rebates”) upon achievement of specified volume
purchasing levels. We accrue estimated supplier rebates monthly as part of cost of goods sold based on progress toward earning the supplier rebates, taking into
purchasing levels. We accrue estimated supplier rebates monthly as part of cost of goods sold based on progress toward earning the supplier rebates, taking into
consideration cumulative purchases of inventory to date and projected purchases through the end of the year. We estimate the rebates applicable to inventory on-
consideration cumulative purchases of inventory to date and projected purchases through the end of the year. We estimate the rebates applicable to inventory on-
hand at each period end based on the inventory turns of the related items.
hand at each period end based on the inventory turns of the related items.
Under certain circumstances, including if market conditions were to change, suppliers may change the terms of some or all of these programs. Although these
Under certain circumstances, including if market conditions were to change, suppliers may change the terms of some or all of these programs. Although these
changes would not affect the amounts which we have recorded related to product already purchased, it may impact our gross margins in future periods.
changes would not affect the amounts which we have recorded related to product already purchased, it may impact our gross margins in future periods.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8 Financial Statements and Supplementary Data
Item 8 Financial Statements and Supplementary Data
In the normal course of business, we are exposed to financial risks such as changes in interest rates and commodity price risk.
In the normal course of business, we are exposed to financial risks such as changes in interest rates and commodity price risk.
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Interest Rate Risk
Interest Rate Risk
When we have loan amounts under our Revolver, we are exposed to interest rate risk arising from fluctuations in interest rates. During 2017 , 2016 and 2015 , we
When we have loan amounts under our Revolver, we are exposed to interest rate risk arising from fluctuations in interest rates. During 2017 , 2016 and 2015 , we
did not use any interest rate swap contracts to manage this risk. An increase (decrease) in interest rates of 100 basis points on our variable-rate debt would increase
did not use any interest rate swap contracts to manage this risk. An increase (decrease) in interest rates of 100 basis points on our variable-rate debt would increase
(decrease) our annual interest expense by less than $0.1 million (based on our borrowings as of December 31, 2017 ).
(decrease) our annual interest expense by less than $0.1 million (based on our borrowings as of December 31, 2017 ).
Commodity Price Risk
Commodity Price Risk
Many of the products we purchase and resell are commodities whose price is determined by the market's supply and demand for such products. Price fluctuations
Many of the products we purchase and resell are commodities whose price is determined by the market's supply and demand for such products. Price fluctuations
in our selling prices and key costs have a significant effect on our financial performance. The markets for most of these commodities are cyclical and are affected
in our selling prices and key costs have a significant effect on our financial performance. The markets for most of these commodities are cyclical and are affected
by factors such as global economic conditions, including the strength of the U.S. housing market, changes in, or disruptions to, industry production capacity and
by factors such as global economic conditions, including the strength of the U.S. housing market, changes in, or disruptions to, industry production capacity and
changes in inventory levels and other factors beyond our control. During 2017 , 2016 and 2015 , we did not manage commodity price risk with derivative
changes in inventory levels and other factors beyond our control. During 2017 , 2016 and 2015 , we did not manage commodity price risk with derivative
instruments, except for immaterial lumber future contracts. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—
instruments, except for immaterial lumber future contracts. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Factors Affecting Our Operating Results—Commodity nature of our products" for further discussion. We estimate that a 1% increase (decrease) in the cost of
Factors Affecting Our Operating Results—Commodity nature of our products" for further discussion. We estimate that a 1% increase (decrease) in the cost of
lumber & lumber sheet goods, assuming no offsetting pricing changes, would decrease (increase) our annual operating income by approximately $9.4 million
lumber & lumber sheet goods, assuming no offsetting pricing changes, would decrease (increase) our annual operating income by approximately $9.4 million
(based on our operating results for the year ended December 31, 2017 ). However, we would likely adjust our pricing to offset any significant changes in our cost
(based on our operating results for the year ended December 31, 2017 ). However, we would likely adjust our pricing to offset any significant changes in our cost
of goods.
of goods.
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To the Board of Directors and Stockholders of
To the Board of Directors and Stockholders of
BMC Stock Holdings, Inc.
BMC Stock Holdings, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of BMC Stock Holdings, Inc. and its subsidiaries as of December 31, 2017 and December 31,
We have audited the accompanying consolidated balance sheets of BMC Stock Holdings, Inc. and its subsidiaries as of December 31, 2017 and December 31,
2016, and the related consolidated statements of operations, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31,
2016, and the related consolidated statements of operations, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31,
2017, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over
2017, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over
financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December
31, 2017 and December 31, 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in
31, 2017 and December 31, 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in
conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects,
conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued
effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued
by the COSO.
by the COSO.
Basis for Opinions
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for
its assessment of the effectiveness of internal control over financial reporting, included in Management's annual report on internal control over financial reporting
its assessment of the effectiveness of internal control over financial reporting, included in Management's annual report on internal control over financial reporting
appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over
appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over
financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
45
45
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8 Financial Statements and Supplementary Data
Item 8 Financial Statements and Supplementary Data
In the normal course of business, we are exposed to financial risks such as changes in interest rates and commodity price risk.
In the normal course of business, we are exposed to financial risks such as changes in interest rates and commodity price risk.
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Interest Rate Risk
Interest Rate Risk
Commodity Price Risk
Commodity Price Risk
When we have loan amounts under our Revolver, we are exposed to interest rate risk arising from fluctuations in interest rates. During 2017 , 2016 and 2015 , we
When we have loan amounts under our Revolver, we are exposed to interest rate risk arising from fluctuations in interest rates. During 2017 , 2016 and 2015 , we
did not use any interest rate swap contracts to manage this risk. An increase (decrease) in interest rates of 100 basis points on our variable-rate debt would increase
did not use any interest rate swap contracts to manage this risk. An increase (decrease) in interest rates of 100 basis points on our variable-rate debt would increase
(decrease) our annual interest expense by less than $0.1 million (based on our borrowings as of December 31, 2017 ).
(decrease) our annual interest expense by less than $0.1 million (based on our borrowings as of December 31, 2017 ).
Many of the products we purchase and resell are commodities whose price is determined by the market's supply and demand for such products. Price fluctuations
Many of the products we purchase and resell are commodities whose price is determined by the market's supply and demand for such products. Price fluctuations
in our selling prices and key costs have a significant effect on our financial performance. The markets for most of these commodities are cyclical and are affected
in our selling prices and key costs have a significant effect on our financial performance. The markets for most of these commodities are cyclical and are affected
by factors such as global economic conditions, including the strength of the U.S. housing market, changes in, or disruptions to, industry production capacity and
by factors such as global economic conditions, including the strength of the U.S. housing market, changes in, or disruptions to, industry production capacity and
changes in inventory levels and other factors beyond our control. During 2017 , 2016 and 2015 , we did not manage commodity price risk with derivative
changes in inventory levels and other factors beyond our control. During 2017 , 2016 and 2015 , we did not manage commodity price risk with derivative
instruments, except for immaterial lumber future contracts. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—
instruments, except for immaterial lumber future contracts. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Factors Affecting Our Operating Results—Commodity nature of our products" for further discussion. We estimate that a 1% increase (decrease) in the cost of
Factors Affecting Our Operating Results—Commodity nature of our products" for further discussion. We estimate that a 1% increase (decrease) in the cost of
lumber & lumber sheet goods, assuming no offsetting pricing changes, would decrease (increase) our annual operating income by approximately $9.4 million
lumber & lumber sheet goods, assuming no offsetting pricing changes, would decrease (increase) our annual operating income by approximately $9.4 million
(based on our operating results for the year ended December 31, 2017 ). However, we would likely adjust our pricing to offset any significant changes in our cost
(based on our operating results for the year ended December 31, 2017 ). However, we would likely adjust our pricing to offset any significant changes in our cost
of goods.
of goods.
44
44
To the Board of Directors and Stockholders of
To the Board of Directors and Stockholders of
BMC Stock Holdings, Inc.
BMC Stock Holdings, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of BMC Stock Holdings, Inc. and its subsidiaries as of December 31, 2017 and December 31,
We have audited the accompanying consolidated balance sheets of BMC Stock Holdings, Inc. and its subsidiaries as of December 31, 2017 and December 31,
2016, and the related consolidated statements of operations, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31,
2016, and the related consolidated statements of operations, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31,
2017, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over
2017, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over
financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December
31, 2017 and December 31, 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in
31, 2017 and December 31, 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in
conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects,
conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued
effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued
by the COSO.
by the COSO.
Basis for Opinions
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for
its assessment of the effectiveness of internal control over financial reporting, included in Management's annual report on internal control over financial reporting
its assessment of the effectiveness of internal control over financial reporting, included in Management's annual report on internal control over financial reporting
appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over
appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over
financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
45
45
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
the policies or procedures may deteriorate.
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
/s/ PricewaterhouseCoopers LLP
/s/ PricewaterhouseCoopers LLP
Atlanta, Georgia
Atlanta, Georgia
March 1, 2018
March 1, 2018
We have served as the Company’s auditor since 2015.
We have served as the Company’s auditor since 2015.
46
46
Customer relationship intangible assets, net of accumulated amortization
Customer relationship intangible assets, net of accumulated amortization
Other intangible assets, net of accumulated amortization
Other intangible assets, net of accumulated amortization
(in thousands, except share and per share amounts)
(in thousands, except share and per share amounts)
Assets
Assets
Current assets
Current assets
Cash and cash equivalents
Cash and cash equivalents
Accounts receivable, net of allowances
Accounts receivable, net of allowances
Inventories, net
Inventories, net
Costs in excess of billings on uncompleted contracts
Costs in excess of billings on uncompleted contracts
Income taxes receivable
Income taxes receivable
Prepaid expenses and other current assets
Prepaid expenses and other current assets
Total current assets
Total current assets
Property and equipment, net of accumulated depreciation
Property and equipment, net of accumulated depreciation
Deferred income taxes
Deferred income taxes
Goodwill
Goodwill
Other long-term assets
Other long-term assets
Total assets
Total assets
Current liabilities
Current liabilities
Accounts payable
Accounts payable
Liabilities and Stockholders' Equity
Liabilities and Stockholders' Equity
Accrued expenses and other liabilities
Accrued expenses and other liabilities
Billings in excess of costs on uncompleted contracts
Billings in excess of costs on uncompleted contracts
Long-term debt and capital lease obligations
Long-term debt and capital lease obligations
Interest payable
Interest payable
Current portion:
Current portion:
Insurance reserves
Insurance reserves
Total current liabilities
Total current liabilities
Insurance reserves
Insurance reserves
Long-term debt
Long-term debt
Deferred income taxes
Deferred income taxes
Other long-term liabilities
Other long-term liabilities
Total liabilities
Total liabilities
and December 31, 2016
and December 31, 2016
Additional paid-in capital
Additional paid-in capital
Retained earnings
Retained earnings
Long-term portion of capital lease obligations
Long-term portion of capital lease obligations
Commitments and contingencies (Note 12)
Commitments and contingencies (Note 12)
Stockholders' equity
Stockholders' equity
Total stockholders' equity
Total stockholders' equity
Total liabilities and stockholders' equity
Total liabilities and stockholders' equity
Preferred stock, $0.01 par value, 50.0 million shares authorized, no shares issued and outstanding at December 31, 2017
Preferred stock, $0.01 par value, 50.0 million shares authorized, no shares issued and outstanding at December 31, 2017
Common stock, $0.01 par value, 300.0 million shares authorized, 67.3 million and 66.8 million shares issued, and 67.1
Common stock, $0.01 par value, 300.0 million shares authorized, 67.3 million and 66.8 million shares issued, and 67.1
million and 66.7 million outstanding at December 31, 2017 and December 31, 2016, respectively
million and 66.7 million outstanding at December 31, 2017 and December 31, 2016, respectively
Treasury stock, at cost, 0.2 million and 0.1 million shares at December 31, 2017 and December 31, 2016, respectively
Treasury stock, at cost, 0.2 million and 0.1 million shares at December 31, 2017 and December 31, 2016, respectively
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
47
47
$
$
1,473,350 $
1,473,350 $
December 31,
December 31,
December 31,
December 31,
2017
2017
2016
2016
$
$
11,750 $
11,750 $
$
$
1,473,350 $
1,473,350 $
1,395,014
1,395,014
$
$
174,583 $
174,583 $
322,892
322,892
309,060
309,060
28,738
28,738
3,748
3,748
57,949
57,949
734,137
734,137
295,820
295,820
—
—
166,306
166,306
1,306
1,306
261,792
261,792
13,989
13,989
96,262
96,262
18,428
18,428
4,769
4,769
7,739
7,739
13,496
13,496
315,277
315,277
38,470
38,470
349,059
349,059
14,838
14,838
1,768
1,768
7,039
7,039
726,451
726,451
—
—
673
673
659,440
659,440
90,607
90,607
(3,821)
(3,821)
746,899
746,899
8,917
8,917
313,304
313,304
272,276
272,276
26,373
26,373
2,437
2,437
43,635
43,635
666,942
666,942
286,741
286,741
550
550
164,191
164,191
3,024
3,024
254,832
254,832
18,734
18,734
165,540
165,540
88,786
88,786
15,691
15,691
5,619
5,619
11,155
11,155
16,021
16,021
302,812
302,812
39,184
39,184
344,827
344,827
20,581
20,581
—
—
7,009
7,009
714,413
714,413
—
—
668
668
649,280
649,280
33,182
33,182
(2,529)
(2,529)
680,601
680,601
1,395,014
1,395,014
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
the policies or procedures may deteriorate.
the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
/s/ PricewaterhouseCoopers LLP
Atlanta, Georgia
Atlanta, Georgia
March 1, 2018
March 1, 2018
We have served as the Company’s auditor since 2015.
We have served as the Company’s auditor since 2015.
46
46
(in thousands, except share and per share amounts)
(in thousands, except share and per share amounts)
Assets
Assets
Current assets
Current assets
Cash and cash equivalents
Cash and cash equivalents
Accounts receivable, net of allowances
Accounts receivable, net of allowances
Inventories, net
Inventories, net
Costs in excess of billings on uncompleted contracts
Costs in excess of billings on uncompleted contracts
Income taxes receivable
Income taxes receivable
Prepaid expenses and other current assets
Prepaid expenses and other current assets
Total current assets
Total current assets
Property and equipment, net of accumulated depreciation
Property and equipment, net of accumulated depreciation
Deferred income taxes
Deferred income taxes
Customer relationship intangible assets, net of accumulated amortization
Customer relationship intangible assets, net of accumulated amortization
Other intangible assets, net of accumulated amortization
Other intangible assets, net of accumulated amortization
Goodwill
Goodwill
Other long-term assets
Other long-term assets
Total assets
Total assets
Liabilities and Stockholders' Equity
Liabilities and Stockholders' Equity
Current liabilities
Current liabilities
Accounts payable
Accounts payable
Accrued expenses and other liabilities
Accrued expenses and other liabilities
Billings in excess of costs on uncompleted contracts
Billings in excess of costs on uncompleted contracts
Interest payable
Interest payable
Current portion:
Current portion:
Long-term debt and capital lease obligations
Long-term debt and capital lease obligations
Insurance reserves
Insurance reserves
Total current liabilities
Total current liabilities
Insurance reserves
Insurance reserves
Long-term debt
Long-term debt
Long-term portion of capital lease obligations
Long-term portion of capital lease obligations
Deferred income taxes
Deferred income taxes
Other long-term liabilities
Other long-term liabilities
Total liabilities
Total liabilities
Commitments and contingencies (Note 12)
Commitments and contingencies (Note 12)
Stockholders' equity
Stockholders' equity
Preferred stock, $0.01 par value, 50.0 million shares authorized, no shares issued and outstanding at December 31, 2017
Preferred stock, $0.01 par value, 50.0 million shares authorized, no shares issued and outstanding at December 31, 2017
and December 31, 2016
and December 31, 2016
Common stock, $0.01 par value, 300.0 million shares authorized, 67.3 million and 66.8 million shares issued, and 67.1
Common stock, $0.01 par value, 300.0 million shares authorized, 67.3 million and 66.8 million shares issued, and 67.1
million and 66.7 million outstanding at December 31, 2017 and December 31, 2016, respectively
million and 66.7 million outstanding at December 31, 2017 and December 31, 2016, respectively
Additional paid-in capital
Additional paid-in capital
Retained earnings
Retained earnings
Treasury stock, at cost, 0.2 million and 0.1 million shares at December 31, 2017 and December 31, 2016, respectively
Treasury stock, at cost, 0.2 million and 0.1 million shares at December 31, 2017 and December 31, 2016, respectively
Total stockholders' equity
Total stockholders' equity
Total liabilities and stockholders' equity
Total liabilities and stockholders' equity
December 31,
December 31,
2017
2017
December 31,
December 31,
2016
2016
$
$
11,750 $
11,750 $
322,892
322,892
309,060
309,060
28,738
28,738
3,748
3,748
57,949
57,949
734,137
734,137
295,820
295,820
—
—
166,306
166,306
1,306
1,306
261,792
261,792
13,989
13,989
8,917
8,917
313,304
313,304
272,276
272,276
26,373
26,373
2,437
2,437
43,635
43,635
666,942
666,942
286,741
286,741
550
550
164,191
164,191
3,024
3,024
254,832
254,832
18,734
18,734
$
$
1,473,350 $
1,473,350 $
1,395,014
1,395,014
$
$
174,583 $
174,583 $
96,262
96,262
18,428
18,428
4,769
4,769
7,739
7,739
13,496
13,496
315,277
315,277
38,470
38,470
349,059
349,059
14,838
14,838
1,768
1,768
7,039
7,039
726,451
726,451
—
—
673
673
659,440
659,440
90,607
90,607
(3,821)
(3,821)
746,899
746,899
$
$
1,473,350 $
1,473,350 $
165,540
165,540
88,786
88,786
15,691
15,691
5,619
5,619
11,155
11,155
16,021
16,021
302,812
302,812
39,184
39,184
344,827
344,827
20,581
20,581
—
—
7,009
7,009
714,413
714,413
—
—
668
668
649,280
649,280
33,182
33,182
(2,529)
(2,529)
680,601
680,601
1,395,014
1,395,014
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
47
47
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except per share amounts)
(in thousands, except per share amounts)
2017
2017
2016
2016
2015
2015
(in thousands)
(in thousands)
Year Ended December 31,
Year Ended December 31,
Net sales
Net sales
Building products
Building products
Construction services
Construction services
Cost of sales
Cost of sales
Building products
Building products
Construction services
Construction services
Gross profit
Gross profit
Selling, general and administrative expenses
Selling, general and administrative expenses
Depreciation expense
Depreciation expense
Amortization expense
Amortization expense
Merger and integration costs
Merger and integration costs
Impairment of assets
Impairment of assets
Income from operations
Income from operations
Other income (expense)
Other income (expense)
Interest expense
Interest expense
Loss on debt extinguishment
Loss on debt extinguishment
Other income, net
Other income, net
Income (loss) before income taxes
Income (loss) before income taxes
Income tax expense (benefit)
Income tax expense (benefit)
Net income (loss)
Net income (loss)
Weighted average common shares outstanding
Weighted average common shares outstanding
Basic
Basic
Diluted
Diluted
Net income (loss) per common share
Net income (loss) per common share
Basic
Basic
Diluted
Diluted
$
$
2,561,454 $
2,561,454 $
2,336,041 $
2,336,041 $
804,514
804,514
3,365,968
3,365,968
1,906,583
1,906,583
663,870
663,870
2,570,453
2,570,453
795,515
795,515
619,546
619,546
43,022
43,022
16,003
16,003
15,336
15,336
435
435
694,342
694,342
101,173
101,173
(25,036)
(25,036)
—
—
5,690
5,690
81,827
81,827
24,402
24,402
757,702
757,702
3,093,743
3,093,743
1,725,843
1,725,843
625,935
625,935
2,351,778
2,351,778
741,965
741,965
571,799
571,799
38,441
38,441
20,721
20,721
15,340
15,340
11,928
11,928
658,229
658,229
83,736
83,736
(30,131)
(30,131)
(12,529)
(12,529)
4,070
4,070
45,146
45,146
14,266
14,266
$
$
57,425 $
57,425 $
30,880 $
30,880 $
66,900
66,900
67,404
67,404
66,055
66,055
66,609
66,609
$
$
$
$
0.86 $
0.86 $
0.85 $
0.85 $
0.47 $
0.47 $
0.46 $
0.46 $
1,146,190
1,146,190
430,556
430,556
1,576,746
1,576,746
864,485
864,485
350,851
350,851
1,215,336
1,215,336
361,410
361,410
306,843
306,843
15,700
15,700
3,626
3,626
22,993
22,993
—
—
349,162
349,162
12,248
12,248
(27,552)
(27,552)
—
—
784
784
(14,520)
(14,520)
(9,689)
(9,689)
(4,831)
(4,831)
41,260
41,260
41,260
41,260
(0.12)
(0.12)
(0.12)
(0.12)
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
48
48
Common Stock
Common Stock
Treasury Stock
Treasury Stock
Shares
Shares
Amount
Amount
Shares
Shares
Amount
Amount
Additional
Additional
Paid-in
Paid-in
Capital
Capital
Retained
Retained
Earnings
Earnings
482 $
$
482
(2,653) $
(2,653) $
174,203 $
174,203 $
7,133 $
7,133 $
—
—
453,128
453,128
—
—
(434)
(434)
(126)
(126)
103
103
—
—
—
—
25
25
—
—
—
—
—
—
119
119
4
4
—
—
—
—
—
—
148
148
—
—
—
—
59
59
—
—
—
—
3,487
3,487
194
194
(1,454)
(1,454)
—
—
—
—
(426)
(426)
(2,023)
(2,023)
—
—
—
—
—
—
(80)
(80)
—
—
—
—
—
—
(2,529)
(2,529)
(1,292)
(1,292)
—
—
—
—
—
—
—
—
(3,483)
(3,483)
(195)
(195)
—
—
2,749
2,749
—
—
626,402
626,402
13,768
13,768
1,299
1,299
(4)
(4)
—
—
80
80
7,252
7,252
483
483
—
—
649,280
649,280
3,393
3,393
(2)
(2)
—
—
6,769
6,769
—
—
Total
Total
179,078
179,078
453,390
453,390
—
—
—
—
(1,454)
(1,454)
2,749
2,749
(4,831)
(4,831)
628,932
628,932
13,776
13,776
1,301
1,301
(2,023)
(2,023)
—
—
—
—
7,252
7,252
483
483
30,880
30,880
680,601
680,601
3,396
3,396
—
—
(1,292)
(1,292)
6,769
6,769
57,425
57,425
(4,831)
(4,831)
2,302
2,302
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
30,880
30,880
33,182
33,182
57,425
57,425
Stockholders' equity as of December 31, 2014
Stockholders' equity as of December 31, 2014
Effect of reverse merger
Effect of reverse merger
Cancellation of BMHC treasury stock in connection with
Cancellation of BMHC treasury stock in connection with
the Merger
the Merger
Shares vested for long-term incentive plan
Shares vested for long-term incentive plan
Shares repurchased
Shares repurchased
Stock compensation expense
Stock compensation expense
Net loss
Net loss
Stockholders' equity as of December 31, 2015
Stockholders' equity as of December 31, 2015
Issuance of common stock, net of offering costs
Issuance of common stock, net of offering costs
Exercise of stock options
Exercise of stock options
Shares vested for long-term incentive plan
Shares vested for long-term incentive plan
Shares repurchased
Shares repurchased
Share withholdings made in satisfaction of exercise price
Share withholdings made in satisfaction of exercise price
Stock compensation expense
Stock compensation expense
Other
Other
Net income
Net income
Exercise of stock options
Exercise of stock options
Shares vested for long-term incentive plans
Shares vested for long-term incentive plans
Shares repurchased
Shares repurchased
Stock compensation expense
Stock compensation expense
Net income
Net income
39,455 $
39,455
$
26,186
26,186
(434)
(434)
153
153
—
—
—
—
—
—
65,360
65,360
855
855
175
175
424
424
—
—
—
—
—
—
—
—
—
—
260
260
212
212
—
—
—
—
—
—
Stockholders' equity as of December 31, 2016
Stockholders' equity as of December 31, 2016
66,814
66,814
395
395
262
262
(4)
(4)
1
1
—
—
—
—
—
—
654
654
8
8
2
2
4
4
—
—
—
—
—
—
—
—
—
—
668
668
3
3
2
2
—
—
—
—
—
—
49
49
Stockholders' equity as of December 31, 2017
Stockholders' equity as of December 31, 2017
67,286 $
67,286
$
673
673
207 $
207
$
(3,821) $
(3,821) $
659,440 $
659,440 $
90,607 $
90,607 $
746,899
746,899
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
Year Ended December 31,
$
$
2,561,454 $
2,561,454 $
2,336,041 $
2,336,041 $
(in thousands, except per share amounts)
(in thousands, except per share amounts)
2017
2017
2016
2016
2015
2015
(in thousands)
(in thousands)
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock
Common Stock
Treasury Stock
Treasury Stock
Shares
Shares
Amount
Amount
Shares
Shares
Amount
Amount
Additional
Additional
Paid-in
Paid-in
Capital
Capital
Retained
Retained
Earnings
Earnings
Net sales
Net sales
Building products
Building products
Construction services
Construction services
Cost of sales
Cost of sales
Building products
Building products
Construction services
Construction services
Gross profit
Gross profit
Selling, general and administrative expenses
Selling, general and administrative expenses
Depreciation expense
Depreciation expense
Amortization expense
Amortization expense
Merger and integration costs
Merger and integration costs
Impairment of assets
Impairment of assets
Income from operations
Income from operations
Other income (expense)
Other income (expense)
Interest expense
Interest expense
Loss on debt extinguishment
Loss on debt extinguishment
Other income, net
Other income, net
Income (loss) before income taxes
Income (loss) before income taxes
Income tax expense (benefit)
Income tax expense (benefit)
Net income (loss)
Net income (loss)
Weighted average common shares outstanding
Weighted average common shares outstanding
Basic
Basic
Diluted
Diluted
Basic
Basic
Diluted
Diluted
Net income (loss) per common share
Net income (loss) per common share
804,514
804,514
3,365,968
3,365,968
1,906,583
1,906,583
663,870
663,870
2,570,453
2,570,453
795,515
795,515
619,546
619,546
43,022
43,022
16,003
16,003
15,336
15,336
435
435
694,342
694,342
101,173
101,173
(25,036)
(25,036)
—
—
5,690
5,690
81,827
81,827
24,402
24,402
757,702
757,702
3,093,743
3,093,743
1,725,843
1,725,843
625,935
625,935
2,351,778
2,351,778
741,965
741,965
571,799
571,799
38,441
38,441
20,721
20,721
15,340
15,340
11,928
11,928
658,229
658,229
83,736
83,736
(30,131)
(30,131)
(12,529)
(12,529)
4,070
4,070
45,146
45,146
14,266
14,266
$
$
57,425 $
57,425 $
30,880 $
30,880 $
66,900
66,900
67,404
67,404
66,055
66,055
66,609
66,609
$
$
$
$
0.86 $
0.86 $
0.85 $
0.85 $
0.47 $
0.47 $
0.46 $
0.46 $
1,146,190
1,146,190
430,556
430,556
1,576,746
1,576,746
864,485
864,485
350,851
350,851
1,215,336
1,215,336
361,410
361,410
306,843
306,843
15,700
15,700
3,626
3,626
22,993
22,993
—
—
349,162
349,162
12,248
12,248
(27,552)
(27,552)
—
—
784
784
(14,520)
(14,520)
(9,689)
(9,689)
(4,831)
(4,831)
41,260
41,260
41,260
41,260
(0.12)
(0.12)
(0.12)
(0.12)
Stockholders' equity as of December 31, 2014
Stockholders' equity as of December 31, 2014
Effect of reverse merger
Effect of reverse merger
Cancellation of BMHC treasury stock in connection with
Cancellation of BMHC treasury stock in connection with
the Merger
the Merger
Shares vested for long-term incentive plan
Shares vested for long-term incentive plan
Shares repurchased
Shares repurchased
Stock compensation expense
Stock compensation expense
Net loss
Net loss
Stockholders' equity as of December 31, 2015
Stockholders' equity as of December 31, 2015
Issuance of common stock, net of offering costs
Issuance of common stock, net of offering costs
Exercise of stock options
Exercise of stock options
Shares vested for long-term incentive plan
Shares vested for long-term incentive plan
Shares repurchased
Shares repurchased
Share withholdings made in satisfaction of exercise price
Share withholdings made in satisfaction of exercise price
Stock compensation expense
Stock compensation expense
Other
Other
Net income
Net income
Stockholders' equity as of December 31, 2016
Stockholders' equity as of December 31, 2016
Exercise of stock options
Exercise of stock options
Shares vested for long-term incentive plans
Shares vested for long-term incentive plans
Shares repurchased
Shares repurchased
Stock compensation expense
Stock compensation expense
Net income
Net income
Stockholders' equity as of December 31, 2017
Stockholders' equity as of December 31, 2017
39,455 $
$
39,455
26,186
26,186
(434)
(434)
153
153
—
—
—
—
—
—
65,360
65,360
855
855
175
175
424
424
—
—
—
—
—
—
—
—
—
—
66,814
66,814
260
260
212
212
—
—
—
—
—
—
67,286 $
$
67,286
395
395
262
262
(4)
(4)
1
1
—
—
—
—
—
—
654
654
8
8
2
2
4
4
—
—
—
—
—
—
—
—
—
—
668
668
3
3
2
2
—
—
—
—
—
—
673
673
482 $
$
482
—
—
(434)
(434)
(126)
(126)
103
103
—
—
—
—
25
25
—
—
—
—
—
—
119
119
4
4
—
—
—
—
—
—
148
148
—
—
—
—
59
59
—
—
—
—
$
207 $
207
(2,653) $
(2,653) $
—
—
3,487
3,487
194
194
(1,454)
(1,454)
—
—
—
—
(426)
(426)
—
—
—
—
—
—
(2,023)
(2,023)
(80)
(80)
—
—
—
—
—
—
(2,529)
(2,529)
—
—
—
—
(1,292)
(1,292)
—
—
—
—
(3,821) $
(3,821) $
174,203 $
174,203 $
453,128
453,128
(3,483)
(3,483)
(195)
(195)
—
—
2,749
2,749
—
—
626,402
626,402
13,768
13,768
1,299
1,299
(4)
(4)
—
—
80
80
7,252
7,252
483
483
—
—
649,280
649,280
3,393
3,393
(2)
(2)
—
—
6,769
6,769
—
—
659,440 $
659,440 $
7,133 $
7,133 $
—
—
—
—
—
—
—
—
—
—
(4,831)
(4,831)
2,302
2,302
—
—
—
—
—
—
—
—
—
—
—
—
—
—
30,880
30,880
33,182
33,182
—
—
—
—
—
—
—
—
57,425
57,425
90,607 $
90,607 $
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
49
49
Total
Total
179,078
179,078
453,390
453,390
—
—
—
—
(1,454)
(1,454)
2,749
2,749
(4,831)
(4,831)
628,932
628,932
13,776
13,776
1,301
1,301
—
—
(2,023)
(2,023)
—
—
7,252
7,252
483
483
30,880
30,880
680,601
680,601
3,396
3,396
—
—
(1,292)
(1,292)
6,769
6,769
57,425
57,425
746,899
746,899
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
48
48
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(in thousands)
Cash flows from operating activities
Cash flows from operating activities
Net income (loss)
Net income (loss)
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
(in thousands)
(in thousands)
$
$
57,425 $
57,425 $
30,880 $
30,880 $
(4,831)
(4,831)
Proceeds from revolving line of credit
Proceeds from revolving line of credit
Cash flows from financing activities
Cash flows from financing activities
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Repayments of proceeds from revolving line of credit
Repayments of proceeds from revolving line of credit
Depreciation expense
Depreciation expense
Amortization of intangible assets
Amortization of intangible assets
Amortization of debt issuance costs
Amortization of debt issuance costs
Deferred income taxes
Deferred income taxes
Non-cash stock compensation expense
Non-cash stock compensation expense
Gain on sale of property, equipment and real estate
Gain on sale of property, equipment and real estate
Gain on insurance proceeds
Gain on insurance proceeds
Impairment of assets
Impairment of assets
Loss on debt extinguishment
Loss on debt extinguishment
Amortization of inventory step-up charges
Amortization of inventory step-up charges
Other non-cash adjustments
Other non-cash adjustments
Change in assets and liabilities, net of effects of acquisitions
Change in assets and liabilities, net of effects of acquisitions
Accounts receivable, net of allowances
Accounts receivable, net of allowances
Inventories, net
Inventories, net
Costs in excess of billings on uncompleted contracts
Costs in excess of billings on uncompleted contracts
Income taxes receivable
Income taxes receivable
Prepaid expenses and other current assets
Prepaid expenses and other current assets
Other long-term assets
Other long-term assets
Accounts payable
Accounts payable
Accrued expenses and other liabilities
Accrued expenses and other liabilities
Billings in excess of costs on uncompleted contracts
Billings in excess of costs on uncompleted contracts
Insurance reserves
Insurance reserves
Other long-term liabilities
Other long-term liabilities
Net cash provided by operating activities
Net cash provided by operating activities
Cash flows from investing activities
Cash flows from investing activities
Purchases of property, equipment and real estate
Purchases of property, equipment and real estate
Purchases of businesses, net of cash acquired
Purchases of businesses, net of cash acquired
Proceeds from sale of property, equipment and real estate
Proceeds from sale of property, equipment and real estate
Insurance proceeds
Insurance proceeds
Change in restricted assets
Change in restricted assets
Cash acquired in the Merger
Cash acquired in the Merger
Payments on capital lease obligations
Payments on capital lease obligations
Principal payments on other notes
Principal payments on other notes
Secured borrowings
Secured borrowings
Proceeds from exercise of stock options
Proceeds from exercise of stock options
Purchase of treasury stock
Purchase of treasury stock
Payments of debt issuance costs
Payments of debt issuance costs
Proceeds from issuance of Senior Notes
Proceeds from issuance of Senior Notes
Redemption of Extinguished Senior Notes
Redemption of Extinguished Senior Notes
Proceeds from issuance of common stock, net of offering costs
Proceeds from issuance of common stock, net of offering costs
Payments of debt extinguishment costs
Payments of debt extinguishment costs
Borrowings under other notes
Borrowings under other notes
Net cash (used in) provided by financing activities
Net cash (used in) provided by financing activities
Net increase (decrease) in cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Beginning of period
Beginning of period
End of period
End of period
Supplemental disclosure of cash flow information
Supplemental disclosure of cash flow information
Interest paid
Interest paid
Cash paid for income taxes, net
Cash paid for income taxes, net
Non-cash investing and financing transactions
Non-cash investing and financing transactions
Accrued purchases of property and equipment
Accrued purchases of property and equipment
Assets acquired under capital lease obligations
Assets acquired under capital lease obligations
Consideration transferred in connection with the Merger
Consideration transferred in connection with the Merger
53,214
53,214
16,003
16,003
1,684
1,684
2,318
2,318
6,769
6,769
(1,683)
(1,683)
(1,991)
(1,991)
435
435
—
—
—
—
552
552
(3,252)
(3,252)
(32,297)
(32,297)
(2,364)
(2,364)
(1,311)
(1,311)
(13,191)
(13,191)
3,458
3,458
3,477
3,477
5,417
5,417
2,737
2,737
(3,239)
(3,239)
(227)
(227)
93,934
93,934
(63,278)
(63,278)
(38,438)
(38,438)
13,445
13,445
—
—
—
—
—
—
47,959
47,959
20,721
20,721
3,114
3,114
(3,571)
(3,571)
7,252
7,252
(1,396)
(1,396)
(1,003)
(1,003)
11,928
11,928
12,529
12,529
2,884
2,884
98
98
(10,128)
(10,128)
(31,200)
(31,200)
(3,845)
(3,845)
9,627
9,627
(12,208)
(12,208)
(126)
(126)
28,592
28,592
(5,859)
(5,859)
(197)
(197)
(16)
(16)
853
853
106,888
106,888
(38,067)
(38,067)
—
—
3,187
3,187
1,151
1,151
—
—
—
—
20,963
20,963
3,626
3,626
2,525
2,525
(5,892)
(5,892)
2,749
2,749
(497)
(497)
—
—
—
—
—
—
10,285
10,285
244
244
(24,061)
(24,061)
(16,452)
(16,452)
(4,026)
(4,026)
(8,176)
(8,176)
(1,202)
(1,202)
1,240
1,240
873
873
4,377
4,377
8,360
8,360
7,973
7,973
2,665
2,665
743
743
(31,319)
(31,319)
(149,485)
(149,485)
3,280
3,280
—
—
36,106
36,106
6,342
6,342
Net cash used in investing activities
Net cash used in investing activities
(88,271)
(88,271)
(33,729)
(33,729)
(135,076)
(135,076)
51
51
50
50
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
995,306
995,306
(990,844)
(990,844)
(9,926)
(9,926)
(2,627)
(2,627)
2,880
2,880
3,396
3,396
(977)
(977)
(38)
(38)
—
—
—
—
—
—
—
—
—
—
(2,830)
(2,830)
2,833
2,833
8,917
8,917
11,750 $
11,750 $
1,544,064
1,544,064
(1,696,324)
(1,696,324)
(8,800)
(8,800)
(3,303)
(3,303)
1,427
1,427
1,301
1,301
(2,023)
(2,023)
(7,011)
(7,011)
350,000
350,000
(250,000)
(250,000)
13,776
13,776
(8,438)
(8,438)
—
—
(65,331)
(65,331)
7,828
7,828
1,089
1,089
8,917 $
8,917 $
24,210 $
24,210 $
22,858
22,858
28,081 $
28,081 $
8,210
8,210
811
811
2,481
2,481
—
—
505
505
15,089
15,089
—
—
293,183
293,183
(208,637)
(208,637)
(4,542)
(4,542)
(6,081)
(6,081)
767
767
—
—
(1,454)
(1,454)
(3,567)
(3,567)
—
—
—
—
—
—
—
—
2,491
2,491
72,160
72,160
(62,173)
(62,173)
63,262
63,262
1,089
1,089
23,970
23,970
4,310
4,310
1,968
1,968
2,342
2,342
453,390
453,390
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Repayments of proceeds from revolving line of credit
Repayments of proceeds from revolving line of credit
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
(in thousands)
(in thousands)
$
$
57,425 $
57,425 $
30,880 $
30,880 $
(4,831)
(4,831)
Proceeds from revolving line of credit
Proceeds from revolving line of credit
Cash flows from financing activities
Cash flows from financing activities
Payments on capital lease obligations
Payments on capital lease obligations
Principal payments on other notes
Principal payments on other notes
Secured borrowings
Secured borrowings
Proceeds from exercise of stock options
Proceeds from exercise of stock options
Purchase of treasury stock
Purchase of treasury stock
Payments of debt issuance costs
Payments of debt issuance costs
Proceeds from issuance of Senior Notes
Proceeds from issuance of Senior Notes
Redemption of Extinguished Senior Notes
Redemption of Extinguished Senior Notes
Proceeds from issuance of common stock, net of offering costs
Proceeds from issuance of common stock, net of offering costs
Payments of debt extinguishment costs
Payments of debt extinguishment costs
Borrowings under other notes
Borrowings under other notes
Net cash (used in) provided by financing activities
Net cash (used in) provided by financing activities
Net increase (decrease) in cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Beginning of period
Beginning of period
End of period
End of period
Supplemental disclosure of cash flow information
Supplemental disclosure of cash flow information
Interest paid
Interest paid
Cash paid for income taxes, net
Cash paid for income taxes, net
Non-cash investing and financing transactions
Non-cash investing and financing transactions
Accrued purchases of property and equipment
Accrued purchases of property and equipment
Assets acquired under capital lease obligations
Assets acquired under capital lease obligations
Consideration transferred in connection with the Merger
Consideration transferred in connection with the Merger
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
995,306
995,306
(990,844)
(990,844)
(9,926)
(9,926)
(2,627)
(2,627)
2,880
2,880
3,396
3,396
(977)
(977)
(38)
(38)
—
—
—
—
—
—
—
—
—
—
(2,830)
(2,830)
2,833
2,833
8,917
8,917
11,750 $
11,750 $
1,544,064
1,544,064
(1,696,324)
(1,696,324)
(8,800)
(8,800)
(3,303)
(3,303)
1,427
1,427
1,301
1,301
(2,023)
(2,023)
(7,011)
(7,011)
350,000
350,000
(250,000)
(250,000)
13,776
13,776
(8,438)
(8,438)
—
—
(65,331)
(65,331)
7,828
7,828
1,089
1,089
8,917 $
8,917 $
24,210 $
24,210 $
22,858
22,858
28,081 $
28,081 $
8,210
8,210
811
811
2,481
2,481
—
—
505
505
15,089
15,089
—
—
293,183
293,183
(208,637)
(208,637)
(4,542)
(4,542)
(6,081)
(6,081)
767
767
—
—
(1,454)
(1,454)
(3,567)
(3,567)
—
—
—
—
—
—
—
—
2,491
2,491
72,160
72,160
(62,173)
(62,173)
63,262
63,262
1,089
1,089
23,970
23,970
4,310
4,310
1,968
1,968
2,342
2,342
453,390
453,390
$
$
$
$
Net cash used in investing activities
Net cash used in investing activities
(88,271)
(88,271)
(33,729)
(33,729)
(135,076)
(135,076)
51
51
50
50
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
(in thousands)
(in thousands)
Cash flows from operating activities
Cash flows from operating activities
Net income (loss)
Net income (loss)
Depreciation expense
Depreciation expense
Amortization of intangible assets
Amortization of intangible assets
Amortization of debt issuance costs
Amortization of debt issuance costs
Deferred income taxes
Deferred income taxes
Non-cash stock compensation expense
Non-cash stock compensation expense
Gain on sale of property, equipment and real estate
Gain on sale of property, equipment and real estate
Gain on insurance proceeds
Gain on insurance proceeds
Impairment of assets
Impairment of assets
Loss on debt extinguishment
Loss on debt extinguishment
Amortization of inventory step-up charges
Amortization of inventory step-up charges
Other non-cash adjustments
Other non-cash adjustments
Change in assets and liabilities, net of effects of acquisitions
Change in assets and liabilities, net of effects of acquisitions
Accounts receivable, net of allowances
Accounts receivable, net of allowances
Inventories, net
Inventories, net
Costs in excess of billings on uncompleted contracts
Costs in excess of billings on uncompleted contracts
Income taxes receivable
Income taxes receivable
Prepaid expenses and other current assets
Prepaid expenses and other current assets
Other long-term assets
Other long-term assets
Accounts payable
Accounts payable
Accrued expenses and other liabilities
Accrued expenses and other liabilities
Billings in excess of costs on uncompleted contracts
Billings in excess of costs on uncompleted contracts
Insurance reserves
Insurance reserves
Other long-term liabilities
Other long-term liabilities
Net cash provided by operating activities
Net cash provided by operating activities
Cash flows from investing activities
Cash flows from investing activities
Purchases of property, equipment and real estate
Purchases of property, equipment and real estate
Purchases of businesses, net of cash acquired
Purchases of businesses, net of cash acquired
Proceeds from sale of property, equipment and real estate
Proceeds from sale of property, equipment and real estate
Insurance proceeds
Insurance proceeds
Change in restricted assets
Change in restricted assets
Cash acquired in the Merger
Cash acquired in the Merger
53,214
53,214
16,003
16,003
1,684
1,684
2,318
2,318
6,769
6,769
(1,683)
(1,683)
(1,991)
(1,991)
435
435
—
—
—
—
552
552
(3,252)
(3,252)
(32,297)
(32,297)
(2,364)
(2,364)
(1,311)
(1,311)
(13,191)
(13,191)
3,458
3,458
3,477
3,477
5,417
5,417
2,737
2,737
(3,239)
(3,239)
(227)
(227)
93,934
93,934
(63,278)
(63,278)
(38,438)
(38,438)
13,445
13,445
—
—
—
—
—
—
47,959
47,959
20,721
20,721
3,114
3,114
(3,571)
(3,571)
7,252
7,252
(1,396)
(1,396)
(1,003)
(1,003)
11,928
11,928
12,529
12,529
2,884
2,884
98
98
(10,128)
(10,128)
(31,200)
(31,200)
(3,845)
(3,845)
9,627
9,627
(12,208)
(12,208)
(126)
(126)
28,592
28,592
(5,859)
(5,859)
(197)
(197)
(16)
(16)
853
853
106,888
106,888
(38,067)
(38,067)
—
—
3,187
3,187
1,151
1,151
—
—
—
—
20,963
20,963
3,626
3,626
2,525
2,525
(5,892)
(5,892)
2,749
2,749
(497)
(497)
—
—
—
—
—
—
10,285
10,285
244
244
(24,061)
(24,061)
(16,452)
(16,452)
(4,026)
(4,026)
(8,176)
(8,176)
(1,202)
(1,202)
1,240
1,240
873
873
4,377
4,377
8,360
8,360
7,973
7,973
2,665
2,665
743
743
(31,319)
(31,319)
(149,485)
(149,485)
3,280
3,280
—
—
36,106
36,106
6,342
6,342
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s future results could be adversely affected by a number of factors including competitive pressure on sales and pricing, weather conditions,
The Company’s future results could be adversely affected by a number of factors including competitive pressure on sales and pricing, weather conditions,
consumer spending and debt levels, interest rates, existing residential home sales and new home construction, lumber prices and product mix.
consumer spending and debt levels, interest rates, existing residential home sales and new home construction, lumber prices and product mix.
(All amounts are presented in thousands except share and per share amounts.)
(All amounts are presented in thousands except share and per share amounts.)
Cash and cash equivalents
Cash and cash equivalents
1. Organization
1. Organization
On December 1, 2015, Stock Building Supply Holdings, Inc. (“SBS”) completed a business combination with privately-held Building Materials Holding
On December 1, 2015, Stock Building Supply Holdings, Inc. (“SBS”) completed a business combination with privately-held Building Materials Holding
Corporation (“BMHC”) in accordance with the terms of the Agreement and Plan of Merger, dated as of June 2, 2015, by and between SBS and BMHC (the
Corporation (“BMHC”) in accordance with the terms of the Agreement and Plan of Merger, dated as of June 2, 2015, by and between SBS and BMHC (the
“Merger Agreement”), pursuant to which BMHC merged with and into SBS (the “Merger”). As a result of the business combination, SBS survived the Merger and
“Merger Agreement”), pursuant to which BMHC merged with and into SBS (the “Merger”). As a result of the business combination, SBS survived the Merger and
in connection therewith changed its name to “BMC Stock Holdings, Inc.”.
in connection therewith changed its name to “BMC Stock Holdings, Inc.”.
These financial statements represent the financial statements of BMC Stock Holdings, Inc., and its subsidiaries. All references to “BMC,” “we,” “us,” “our” or the
These financial statements represent the financial statements of BMC Stock Holdings, Inc., and its subsidiaries. All references to “BMC,” “we,” “us,” “our” or the
“Company” in this Annual Report on Form 10-K mean BMC Stock Holdings, Inc.
“Company” in this Annual Report on Form 10-K mean BMC Stock Holdings, Inc.
Under U.S. generally accepted accounting principles ("U.S. GAAP"), the Merger was treated as a “reverse merger” under the acquisition method of accounting.
Under U.S. generally accepted accounting principles ("U.S. GAAP"), the Merger was treated as a “reverse merger” under the acquisition method of accounting.
For accounting purposes, BMHC is considered to have acquired SBS. Consequently, the historical financial statements of the Company reflect only the operations
For accounting purposes, BMHC is considered to have acquired SBS. Consequently, the historical financial statements of the Company reflect only the operations
and financial condition of BMHC prior to the date of the Merger. The operating results of SBS are reported as part of the Company beginning on the closing date
and financial condition of BMHC prior to the date of the Merger. The operating results of SBS are reported as part of the Company beginning on the closing date
of the Merger.
of the Merger.
purchase.
purchase.
Restricted assets
Restricted assets
Cash equivalents are highly liquid investments that are readily convertible to known amounts of cash and have a maturity of three months or less from the time of
Cash equivalents are highly liquid investments that are readily convertible to known amounts of cash and have a maturity of three months or less from the time of
Book overdrafts occur when purchases on corporate purchasing cards and checks written exceed available bank balances at a specific bank, despite there being
Book overdrafts occur when purchases on corporate purchasing cards and checks written exceed available bank balances at a specific bank, despite there being
cash at the Company's other financial institutions. For accounting purposes, the Company reclassifies these book overdrafts to accounts payable on the
cash at the Company's other financial institutions. For accounting purposes, the Company reclassifies these book overdrafts to accounts payable on the
consolidated balance sheets. Book overdrafts included in accounts payable were $0.1 million and $0.2 million at December 31, 2017 and 2016 , respectively.
consolidated balance sheets. Book overdrafts included in accounts payable were $0.1 million and $0.2 million at December 31, 2017 and 2016 , respectively.
Historically, the Company had restricted assets, which related to amounts deposited in a separate bank account to collateralize letters of credit related to insurance
Historically, the Company had restricted assets, which related to amounts deposited in a separate bank account to collateralize letters of credit related to insurance
claims for periods prior to January 2010. During the years ended December 31, 2015 and 2014, the Company was able to release the majority of these amounts into
claims for periods prior to January 2010. During the years ended December 31, 2015 and 2014, the Company was able to release the majority of these amounts into
unrestricted cash as a result of reductions in claims and the transfer of the risk of loss of certain claims to a reinsurer. In connection with the senior secured credit
unrestricted cash as a result of reductions in claims and the transfer of the risk of loss of certain claims to a reinsurer. In connection with the senior secured credit
agreement entered into on December 1, 2015 with Wells Fargo Capital Finance, described elsewhere in this document, the Company was able to release the
agreement entered into on December 1, 2015 with Wells Fargo Capital Finance, described elsewhere in this document, the Company was able to release the
remaining cash collateral into unrestricted cash.
remaining cash collateral into unrestricted cash.
Fair value of financial instruments
Fair value of financial instruments
The Company distributes lumber and building materials to new construction and repair and remodeling contractors. Additionally, the Company provides solution-
The Company distributes lumber and building materials to new construction and repair and remodeling contractors. Additionally, the Company provides solution-
based services to our customers, including component design, product specification and installation services.
based services to our customers, including component design, product specification and installation services.
ASC 820, Fair
Value
Measurements
and
Disclosures
(“ASC 820”), clarifies the definition of fair value, prescribes methods for measuring fair value, and
ASC 820, Fair
Value
Measurements
and
Disclosures
(“ASC 820”), clarifies the definition of fair value, prescribes methods for measuring fair value, and
establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
2. Summary of Significant Accounting Policies
2. Summary of Significant Accounting Policies
Basis of presentation
Basis of presentation
The accompanying consolidated financial statements have been prepared by management in conformity with U.S. GAAP.
The accompanying consolidated financial statements have been prepared by management in conformity with U.S. GAAP.
Principles of consolidation
Principles of consolidation
The consolidated financial statements include all accounts of BMC and its wholly-owned subsidiaries. All material intercompany accounts and transactions have
The consolidated financial statements include all accounts of BMC and its wholly-owned subsidiaries. All material intercompany accounts and transactions have
been eliminated in consolidation.
been eliminated in consolidation.
Use of estimates
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. The Company evaluates these estimates and judgments on an ongoing basis and bases its estimates on historical experience, current
during the reporting period. The Company evaluates these estimates and judgments on an ongoing basis and bases its estimates on historical experience, current
conditions and various other assumptions that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making
conditions and various other assumptions that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making
judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and
judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and
contingencies. The significant estimates which could change by a material amount in the near term include revenue recognition for construction services, accounts
contingencies. The significant estimates which could change by a material amount in the near term include revenue recognition for construction services, accounts
receivable reserves, estimated losses on uncompleted contracts and changes in contract estimates, inventory reserves, supplier rebates, goodwill impairment,
receivable reserves, estimated losses on uncompleted contracts and changes in contract estimates, inventory reserves, supplier rebates, goodwill impairment,
impairment of property and equipment, insurance reserves, warranties and share-based compensation. Actual results may differ materially from these estimates
impairment of property and equipment, insurance reserves, warranties and share-based compensation. Actual results may differ materially from these estimates
under different assumptions or conditions.
under different assumptions or conditions.
Business and credit concentrations
Business and credit concentrations
The Company maintains cash at financial institutions in excess of federally insured limits. Accounts receivable potentially expose the Company to concentrations
The Company maintains cash at financial institutions in excess of federally insured limits. Accounts receivable potentially expose the Company to concentrations
of credit risk. Mitigating this credit risk is collateral underlying certain accounts receivable (perfected liens or lien rights) as well as the Company’s analysis of a
of credit risk. Mitigating this credit risk is collateral underlying certain accounts receivable (perfected liens or lien rights) as well as the Company’s analysis of a
customer’s credit history prior to extending credit. Concentrations of credit risk with respect to accounts receivable are limited due to the Company’s large number
customer’s credit history prior to extending credit. Concentrations of credit risk with respect to accounts receivable are limited due to the Company’s large number
of customers and their dispersion across various regions of the United States. At December 31, 2017 and 2016 , no customer represented more than 10% of
of customers and their dispersion across various regions of the United States. At December 31, 2017 and 2016 , no customer represented more than 10% of
accounts receivable. For the years ended December 31, 2017 , 2016 and 2015 , no customer accounted for more than 10% of revenue.
accounts receivable. For the years ended December 31, 2017 , 2016 and 2015 , no customer accounted for more than 10% of revenue.
Level 1
Level 1
Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2
Level 2
Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in
Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in
markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market
markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market
data.
data.
Level 3
Level 3
Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in
Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in
pricing the asset or liability based on the best available information.
pricing the asset or liability based on the best available information.
If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument is categorized based upon the lowest level of input that is significant
If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument is categorized based upon the lowest level of input that is significant
to the fair value calculation.
to the fair value calculation.
Accounts receivable
Accounts receivable
Accounts receivable result from the extending of credit to trade customers for the purchase of goods and services. The terms generally provide for payment within
Accounts receivable result from the extending of credit to trade customers for the purchase of goods and services. The terms generally provide for payment within
30 days of being invoiced. On occasion, when necessary to compete in certain circumstances, the Company will sell product under extended payment terms.
30 days of being invoiced. On occasion, when necessary to compete in certain circumstances, the Company will sell product under extended payment terms.
Accounts receivable are stated at estimated net realizable value. The allowance for doubtful accounts is based on an assessment of individual past due accounts,
Accounts receivable are stated at estimated net realizable value. The allowance for doubtful accounts is based on an assessment of individual past due accounts,
historical write-off experience, accounts receivable aging, customer disputes and the business environment. Account balances are charged off when the potential
historical write-off experience, accounts receivable aging, customer disputes and the business environment. Account balances are charged off when the potential
for recovery is considered remote. The Company grants trade discounts on a percentage basis. The Company records an allowance against accounts receivable for
for recovery is considered remote. The Company grants trade discounts on a percentage basis. The Company records an allowance against accounts receivable for
the amount of discounts it estimates will be taken by customers. The discounts are recorded as a reduction to revenue when products are sold.
the amount of discounts it estimates will be taken by customers. The discounts are recorded as a reduction to revenue when products are sold.
Consideration received from suppliers
Consideration received from suppliers
The Company enters into agreements with many of its suppliers providing for inventory purchase rebates (“supplier rebates”) upon achievement of specified
The Company enters into agreements with many of its suppliers providing for inventory purchase rebates (“supplier rebates”) upon achievement of specified
volume purchasing levels. Supplier rebates are accrued as part of cost of goods sold based on progress towards earning the supplier rebates, taking into
volume purchasing levels. Supplier rebates are accrued as part of cost of goods sold based on progress towards earning the supplier rebates, taking into
consideration cumulative purchases of inventory to date and projected purchases through the end of the year. The Company estimates the rebates applicable to
consideration cumulative purchases of inventory to date and projected purchases through the end of the year. The Company estimates the rebates applicable to
inventory on-hand at each period end based on the estimated percentage of supplier rebates to be earned. The Company also receives consideration from suppliers
inventory on-hand at each period end based on the estimated percentage of supplier rebates to be earned. The Company also receives consideration from suppliers
to promote their products ("marketing and advertising allowances"), which are accrued as part of cost of goods sold or selling, general and administrative expenses,
to promote their products ("marketing and advertising allowances"), which are accrued as part of cost of goods sold or selling, general and administrative expenses,
depending on the nature of the allowance. Total rebates and marketing and advertising allowances
depending on the nature of the allowance. Total rebates and marketing and advertising allowances
52
52
53
53
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s future results could be adversely affected by a number of factors including competitive pressure on sales and pricing, weather conditions,
The Company’s future results could be adversely affected by a number of factors including competitive pressure on sales and pricing, weather conditions,
consumer spending and debt levels, interest rates, existing residential home sales and new home construction, lumber prices and product mix.
consumer spending and debt levels, interest rates, existing residential home sales and new home construction, lumber prices and product mix.
(All amounts are presented in thousands except share and per share amounts.)
(All amounts are presented in thousands except share and per share amounts.)
Cash and cash equivalents
Cash and cash equivalents
1. Organization
1. Organization
On December 1, 2015, Stock Building Supply Holdings, Inc. (“SBS”) completed a business combination with privately-held Building Materials Holding
On December 1, 2015, Stock Building Supply Holdings, Inc. (“SBS”) completed a business combination with privately-held Building Materials Holding
Corporation (“BMHC”) in accordance with the terms of the Agreement and Plan of Merger, dated as of June 2, 2015, by and between SBS and BMHC (the
Corporation (“BMHC”) in accordance with the terms of the Agreement and Plan of Merger, dated as of June 2, 2015, by and between SBS and BMHC (the
“Merger Agreement”), pursuant to which BMHC merged with and into SBS (the “Merger”). As a result of the business combination, SBS survived the Merger and
“Merger Agreement”), pursuant to which BMHC merged with and into SBS (the “Merger”). As a result of the business combination, SBS survived the Merger and
in connection therewith changed its name to “BMC Stock Holdings, Inc.”.
in connection therewith changed its name to “BMC Stock Holdings, Inc.”.
These financial statements represent the financial statements of BMC Stock Holdings, Inc., and its subsidiaries. All references to “BMC,” “we,” “us,” “our” or the
These financial statements represent the financial statements of BMC Stock Holdings, Inc., and its subsidiaries. All references to “BMC,” “we,” “us,” “our” or the
“Company” in this Annual Report on Form 10-K mean BMC Stock Holdings, Inc.
“Company” in this Annual Report on Form 10-K mean BMC Stock Holdings, Inc.
Under U.S. generally accepted accounting principles ("U.S. GAAP"), the Merger was treated as a “reverse merger” under the acquisition method of accounting.
Under U.S. generally accepted accounting principles ("U.S. GAAP"), the Merger was treated as a “reverse merger” under the acquisition method of accounting.
For accounting purposes, BMHC is considered to have acquired SBS. Consequently, the historical financial statements of the Company reflect only the operations
For accounting purposes, BMHC is considered to have acquired SBS. Consequently, the historical financial statements of the Company reflect only the operations
and financial condition of BMHC prior to the date of the Merger. The operating results of SBS are reported as part of the Company beginning on the closing date
and financial condition of BMHC prior to the date of the Merger. The operating results of SBS are reported as part of the Company beginning on the closing date
of the Merger.
of the Merger.
Cash equivalents are highly liquid investments that are readily convertible to known amounts of cash and have a maturity of three months or less from the time of
Cash equivalents are highly liquid investments that are readily convertible to known amounts of cash and have a maturity of three months or less from the time of
purchase.
purchase.
Book overdrafts occur when purchases on corporate purchasing cards and checks written exceed available bank balances at a specific bank, despite there being
Book overdrafts occur when purchases on corporate purchasing cards and checks written exceed available bank balances at a specific bank, despite there being
cash at the Company's other financial institutions. For accounting purposes, the Company reclassifies these book overdrafts to accounts payable on the
cash at the Company's other financial institutions. For accounting purposes, the Company reclassifies these book overdrafts to accounts payable on the
consolidated balance sheets. Book overdrafts included in accounts payable were $0.1 million and $0.2 million at December 31, 2017 and 2016 , respectively.
consolidated balance sheets. Book overdrafts included in accounts payable were $0.1 million and $0.2 million at December 31, 2017 and 2016 , respectively.
Restricted assets
Restricted assets
Historically, the Company had restricted assets, which related to amounts deposited in a separate bank account to collateralize letters of credit related to insurance
Historically, the Company had restricted assets, which related to amounts deposited in a separate bank account to collateralize letters of credit related to insurance
claims for periods prior to January 2010. During the years ended December 31, 2015 and 2014, the Company was able to release the majority of these amounts into
claims for periods prior to January 2010. During the years ended December 31, 2015 and 2014, the Company was able to release the majority of these amounts into
unrestricted cash as a result of reductions in claims and the transfer of the risk of loss of certain claims to a reinsurer. In connection with the senior secured credit
unrestricted cash as a result of reductions in claims and the transfer of the risk of loss of certain claims to a reinsurer. In connection with the senior secured credit
agreement entered into on December 1, 2015 with Wells Fargo Capital Finance, described elsewhere in this document, the Company was able to release the
agreement entered into on December 1, 2015 with Wells Fargo Capital Finance, described elsewhere in this document, the Company was able to release the
remaining cash collateral into unrestricted cash.
remaining cash collateral into unrestricted cash.
Fair value of financial instruments
Fair value of financial instruments
The Company distributes lumber and building materials to new construction and repair and remodeling contractors. Additionally, the Company provides solution-
The Company distributes lumber and building materials to new construction and repair and remodeling contractors. Additionally, the Company provides solution-
based services to our customers, including component design, product specification and installation services.
based services to our customers, including component design, product specification and installation services.
ASC 820, Fair
Value
Measurements
and
Disclosures
(“ASC 820”), clarifies the definition of fair value, prescribes methods for measuring fair value, and
ASC 820, Fair
Value
Measurements
and
Disclosures
(“ASC 820”), clarifies the definition of fair value, prescribes methods for measuring fair value, and
establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
2. Summary of Significant Accounting Policies
2. Summary of Significant Accounting Policies
Basis of presentation
Basis of presentation
Principles of consolidation
Principles of consolidation
been eliminated in consolidation.
been eliminated in consolidation.
Use of estimates
Use of estimates
The accompanying consolidated financial statements have been prepared by management in conformity with U.S. GAAP.
The accompanying consolidated financial statements have been prepared by management in conformity with U.S. GAAP.
The consolidated financial statements include all accounts of BMC and its wholly-owned subsidiaries. All material intercompany accounts and transactions have
The consolidated financial statements include all accounts of BMC and its wholly-owned subsidiaries. All material intercompany accounts and transactions have
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. The Company evaluates these estimates and judgments on an ongoing basis and bases its estimates on historical experience, current
during the reporting period. The Company evaluates these estimates and judgments on an ongoing basis and bases its estimates on historical experience, current
conditions and various other assumptions that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making
conditions and various other assumptions that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making
judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and
judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and
contingencies. The significant estimates which could change by a material amount in the near term include revenue recognition for construction services, accounts
contingencies. The significant estimates which could change by a material amount in the near term include revenue recognition for construction services, accounts
receivable reserves, estimated losses on uncompleted contracts and changes in contract estimates, inventory reserves, supplier rebates, goodwill impairment,
receivable reserves, estimated losses on uncompleted contracts and changes in contract estimates, inventory reserves, supplier rebates, goodwill impairment,
impairment of property and equipment, insurance reserves, warranties and share-based compensation. Actual results may differ materially from these estimates
impairment of property and equipment, insurance reserves, warranties and share-based compensation. Actual results may differ materially from these estimates
under different assumptions or conditions.
under different assumptions or conditions.
Business and credit concentrations
Business and credit concentrations
The Company maintains cash at financial institutions in excess of federally insured limits. Accounts receivable potentially expose the Company to concentrations
The Company maintains cash at financial institutions in excess of federally insured limits. Accounts receivable potentially expose the Company to concentrations
of credit risk. Mitigating this credit risk is collateral underlying certain accounts receivable (perfected liens or lien rights) as well as the Company’s analysis of a
of credit risk. Mitigating this credit risk is collateral underlying certain accounts receivable (perfected liens or lien rights) as well as the Company’s analysis of a
customer’s credit history prior to extending credit. Concentrations of credit risk with respect to accounts receivable are limited due to the Company’s large number
customer’s credit history prior to extending credit. Concentrations of credit risk with respect to accounts receivable are limited due to the Company’s large number
of customers and their dispersion across various regions of the United States. At December 31, 2017 and 2016 , no customer represented more than 10% of
of customers and their dispersion across various regions of the United States. At December 31, 2017 and 2016 , no customer represented more than 10% of
accounts receivable. For the years ended December 31, 2017 , 2016 and 2015 , no customer accounted for more than 10% of revenue.
accounts receivable. For the years ended December 31, 2017 , 2016 and 2015 , no customer accounted for more than 10% of revenue.
Level 1
Level 1
Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2
Level 2
Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in
Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in
markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market
markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market
data.
data.
Level 3
Level 3
Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in
Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in
pricing the asset or liability based on the best available information.
pricing the asset or liability based on the best available information.
If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument is categorized based upon the lowest level of input that is significant
If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument is categorized based upon the lowest level of input that is significant
to the fair value calculation.
to the fair value calculation.
Accounts receivable
Accounts receivable
Accounts receivable result from the extending of credit to trade customers for the purchase of goods and services. The terms generally provide for payment within
Accounts receivable result from the extending of credit to trade customers for the purchase of goods and services. The terms generally provide for payment within
30 days of being invoiced. On occasion, when necessary to compete in certain circumstances, the Company will sell product under extended payment terms.
30 days of being invoiced. On occasion, when necessary to compete in certain circumstances, the Company will sell product under extended payment terms.
Accounts receivable are stated at estimated net realizable value. The allowance for doubtful accounts is based on an assessment of individual past due accounts,
Accounts receivable are stated at estimated net realizable value. The allowance for doubtful accounts is based on an assessment of individual past due accounts,
historical write-off experience, accounts receivable aging, customer disputes and the business environment. Account balances are charged off when the potential
historical write-off experience, accounts receivable aging, customer disputes and the business environment. Account balances are charged off when the potential
for recovery is considered remote. The Company grants trade discounts on a percentage basis. The Company records an allowance against accounts receivable for
for recovery is considered remote. The Company grants trade discounts on a percentage basis. The Company records an allowance against accounts receivable for
the amount of discounts it estimates will be taken by customers. The discounts are recorded as a reduction to revenue when products are sold.
the amount of discounts it estimates will be taken by customers. The discounts are recorded as a reduction to revenue when products are sold.
Consideration received from suppliers
Consideration received from suppliers
The Company enters into agreements with many of its suppliers providing for inventory purchase rebates (“supplier rebates”) upon achievement of specified
The Company enters into agreements with many of its suppliers providing for inventory purchase rebates (“supplier rebates”) upon achievement of specified
volume purchasing levels. Supplier rebates are accrued as part of cost of goods sold based on progress towards earning the supplier rebates, taking into
volume purchasing levels. Supplier rebates are accrued as part of cost of goods sold based on progress towards earning the supplier rebates, taking into
consideration cumulative purchases of inventory to date and projected purchases through the end of the year. The Company estimates the rebates applicable to
consideration cumulative purchases of inventory to date and projected purchases through the end of the year. The Company estimates the rebates applicable to
inventory on-hand at each period end based on the estimated percentage of supplier rebates to be earned. The Company also receives consideration from suppliers
inventory on-hand at each period end based on the estimated percentage of supplier rebates to be earned. The Company also receives consideration from suppliers
to promote their products ("marketing and advertising allowances"), which are accrued as part of cost of goods sold or selling, general and administrative expenses,
to promote their products ("marketing and advertising allowances"), which are accrued as part of cost of goods sold or selling, general and administrative expenses,
depending on the nature of the allowance. Total rebates and marketing and advertising allowances
depending on the nature of the allowance. Total rebates and marketing and advertising allowances
52
52
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receivable at December 31, 2017 and 2016 are $23.3 million and $21.4 million , respectively, included in prepaid expenses and other current assets.
receivable at December 31, 2017 and 2016 are $23.3 million and $21.4 million , respectively, included in prepaid expenses and other current assets.
Goodwill and other intangible assets
Goodwill and other intangible assets
Revenue recognition
Revenue recognition
The Company recognizes revenue for sales of building products when products are delivered and the customer takes ownership and assumes risk of loss, collection
The Company recognizes revenue for sales of building products when products are delivered and the customer takes ownership and assumes risk of loss, collection
of the relevant receivable is reasonably assured, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. All sales recognized are
of the relevant receivable is reasonably assured, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. All sales recognized are
net of allowances for discounts and estimated returns, based on historical experience. Taxes assessed by governmental authorities that are directly imposed on the
net of allowances for discounts and estimated returns, based on historical experience. Taxes assessed by governmental authorities that are directly imposed on the
Company's revenue-producing transactions are excluded from sales.
Company's revenue-producing transactions are excluded from sales.
The percentage-of-completion method is used to recognize revenue for construction services. Periodic estimates of progress towards completion are made based on
The percentage-of-completion method is used to recognize revenue for construction services. Periodic estimates of progress towards completion are made based on
either a comparison of labor costs incurred to date with total estimated contract labor costs or total costs incurred to date with total estimated contract costs. The
either a comparison of labor costs incurred to date with total estimated contract labor costs or total costs incurred to date with total estimated contract costs. The
percentage-of-completion method requires the use of various estimates, including among others, the extent of progress towards completion, contract revenues and
percentage-of-completion method requires the use of various estimates, including among others, the extent of progress towards completion, contract revenues and
contract completion costs. Contract revenues and contract costs to be recognized are dependent on the accuracy of estimates, including quantities of materials,
contract completion costs. Contract revenues and contract costs to be recognized are dependent on the accuracy of estimates, including quantities of materials,
labor productivity and other cost estimates. The Company has a history of making reasonable estimates of the extent of progress towards completion, contract
labor productivity and other cost estimates. The Company has a history of making reasonable estimates of the extent of progress towards completion, contract
revenues and contract completion costs. Due to uncertainties inherent in the estimation process, it is possible that actual contract revenues and completion costs
revenues and contract completion costs. Due to uncertainties inherent in the estimation process, it is possible that actual contract revenues and completion costs
may vary from estimates. Revenue recognized using the percentage-of-completion method for the years ended December 31, 2017 , 2016 and 2015 represented
may vary from estimates. Revenue recognized using the percentage-of-completion method for the years ended December 31, 2017 , 2016 and 2015 represented
approximately 95% , 94% and 92% of the total revenue for construction services for the respective periods.
approximately 95% , 94% and 92% of the total revenue for construction services for the respective periods.
Estimated losses on uncompleted contracts and changes in contract estimates reflect the Company's best estimate of probable losses of unbilled receivables, and are
Estimated losses on uncompleted contracts and changes in contract estimates reflect the Company's best estimate of probable losses of unbilled receivables, and are
recognized in the period such revisions are known and can be reasonably estimated. These estimates are recognized in cost of sales. Estimated losses on
recognized in the period such revisions are known and can be reasonably estimated. These estimates are recognized in cost of sales. Estimated losses on
uncompleted contracts and changes in contract estimates are established by assessing estimated costs to complete, change orders and claims for uncompleted
uncompleted contracts and changes in contract estimates are established by assessing estimated costs to complete, change orders and claims for uncompleted
contracts. Assumptions for estimated costs to complete include material prices, labor costs, labor productivity and contract claims. Such estimates are inherently
contracts. Assumptions for estimated costs to complete include material prices, labor costs, labor productivity and contract claims. Such estimates are inherently
uncertain and therefore it is possible that actual completion costs may vary from these estimates.
uncertain and therefore it is possible that actual completion costs may vary from these estimates.
Shipping and handling costs
Shipping and handling costs
The Company includes shipping and handling costs in selling, general and administrative expenses on the consolidated statements of operations. Shipping and
The Company includes shipping and handling costs in selling, general and administrative expenses on the consolidated statements of operations. Shipping and
handling costs were $172.2 million , $152.7 million and $81.6 million for the years ended December 31, 2017 , 2016 and 2015 , respectively.
handling costs were $172.2 million , $152.7 million and $81.6 million for the years ended December 31, 2017 , 2016 and 2015 , respectively.
carrying value of the reporting unit's goodwill.
carrying value of the reporting unit's goodwill.
Property and equipment
Property and equipment
Property and equipment are stated at cost. Expenditures for renewals and betterments, which extend the useful lives of assets, are capitalized while maintenance
Property and equipment are stated at cost. Expenditures for renewals and betterments, which extend the useful lives of assets, are capitalized while maintenance
and repairs are charged to expense as incurred. Property and equipment obtained through acquisition are stated at estimated fair market value as of the acquisition
and repairs are charged to expense as incurred. Property and equipment obtained through acquisition are stated at estimated fair market value as of the acquisition
date, and are depreciated over their estimated remaining useful lives, which may differ from the Company's stated policies for certain assets. Gains and losses
date, and are depreciated over their estimated remaining useful lives, which may differ from the Company's stated policies for certain assets. Gains and losses
related to the sale of property and equipment are recorded as selling, general and administrative expenses.
related to the sale of property and equipment are recorded as selling, general and administrative expenses.
Impairment of long-lived assets
Impairment of long-lived assets
Property and equipment are depreciated using the straight-line method and are generally depreciated over the following estimated service lives:
Property and equipment are depreciated using the straight-line method and are generally depreciated over the following estimated service lives:
Buildings and improvements
Buildings and improvements
Leasehold improvements
Leasehold improvements
Furniture, fixtures and equipment
Furniture, fixtures and equipment
Vehicles
Vehicles
Lesser of life of the asset or remaining
Lesser of life of the asset or remaining
3–30 years
3–30 years
lease term, and not to exceed 15 years
lease term, and not to exceed 15 years
amount of the asset exceeds the estimated fair value of the asset.
amount of the asset exceeds the estimated fair value of the asset.
2–10 years
2–10 years
4–10 years
4–10 years
Merger and integration costs
Merger and integration costs
Property and equipment that is expected to be sold within the next twelve months, is actively marketed in its current condition for a price that is reasonable in
Property and equipment that is expected to be sold within the next twelve months, is actively marketed in its current condition for a price that is reasonable in
comparison to its estimated fair value and meets other relevant held-for-sale criteria are classified as assets held for sale. Assets held for sale are measured at the
comparison to its estimated fair value and meets other relevant held-for-sale criteria are classified as assets held for sale. Assets held for sale are measured at the
lower of carrying amount or fair value less costs to sell and are no longer depreciated. An impairment for assets held for sale is recognized if the carrying amount is
lower of carrying amount or fair value less costs to sell and are no longer depreciated. An impairment for assets held for sale is recognized if the carrying amount is
not recoverable. Assets held for sale were not presented separately and were classified as other long-term assets in the consolidated balance sheets and were $2.3
not recoverable. Assets held for sale were not presented separately and were classified as other long-term assets in the consolidated balance sheets and were $2.3
million and $2.0 million at December 31, 2017 and 2016 , respectively.
million and $2.0 million at December 31, 2017 and 2016 , respectively.
professional fees.
professional fees.
Income taxes
Income taxes
54
54
55
55
At least annually, or more frequently as changes in circumstances indicate, the Company tests goodwill for impairment. To the extent that the carrying value of the
At least annually, or more frequently as changes in circumstances indicate, the Company tests goodwill for impairment. To the extent that the carrying value of the
net assets of any of the reporting units having goodwill is greater than their estimated fair value, the Company may be required to record impairment charges.
net assets of any of the reporting units having goodwill is greater than their estimated fair value, the Company may be required to record impairment charges.
Beginning January 1, 2017, following the realignment of certain markets which resulted in the consolidation of the Company's historical Mountain West division
Beginning January 1, 2017, following the realignment of certain markets which resulted in the consolidation of the Company's historical Mountain West division
into the Intermountain division, the Company's five operating segments, which have been determined to be the Company's reporting units, are the Mid-Atlantic,
into the Intermountain division, the Company's five operating segments, which have been determined to be the Company's reporting units, are the Mid-Atlantic,
Southeast, Texas, Intermountain and Western divisions. Following the realignment, the chief operating decision maker continues to review aggregate information
Southeast, Texas, Intermountain and Western divisions. Following the realignment, the chief operating decision maker continues to review aggregate information
to allocate resources and assess performance. Based on this, as well as the similar economic characteristics, nature of products, distribution methods and customers
to allocate resources and assess performance. Based on this, as well as the similar economic characteristics, nature of products, distribution methods and customers
of the divisions both before and after the realignment, the Company has aggregated its operating segments into one reportable segment. The Company is required
of the divisions both before and after the realignment, the Company has aggregated its operating segments into one reportable segment. The Company is required
to make certain assumptions and estimates regarding the fair value of the reporting units containing goodwill when assessing for impairment. Changes in the fact
to make certain assumptions and estimates regarding the fair value of the reporting units containing goodwill when assessing for impairment. Changes in the fact
patterns underlying such assumptions and estimates could ultimately result in the recognition of additional impairment losses.
patterns underlying such assumptions and estimates could ultimately result in the recognition of additional impairment losses.
The Company completes its annual impairment assessment during the third quarter of each year. The Company did not recognize any impairment for the years
The Company completes its annual impairment assessment during the third quarter of each year. The Company did not recognize any impairment for the years
ended December 31, 2017 , 2016 and 2015 . The Company may consider qualitative factors as part of its annual impairment assessment to determine whether it is
ended December 31, 2017 , 2016 and 2015 . The Company may consider qualitative factors as part of its annual impairment assessment to determine whether it is
more likely than not that a reporting unit's carrying value exceeds its fair value. If the Company's qualitative assessment indicates that goodwill impairment is more
more likely than not that a reporting unit's carrying value exceeds its fair value. If the Company's qualitative assessment indicates that goodwill impairment is more
likely than not, the Company performs the two-step impairment test. Alternatively, the Company may bypass the qualitative test and initiate goodwill impairment
likely than not, the Company performs the two-step impairment test. Alternatively, the Company may bypass the qualitative test and initiate goodwill impairment
testing with the first step of the two-step goodwill impairment test. During the first step of the goodwill impairment test, the fair value of the reporting unit is
testing with the first step of the two-step goodwill impairment test. During the first step of the goodwill impairment test, the fair value of the reporting unit is
compared to its carrying value, including goodwill. The Company may derive a reporting unit's fair value through a combination of the market approach (a
compared to its carrying value, including goodwill. The Company may derive a reporting unit's fair value through a combination of the market approach (a
guideline transaction method) and the income approach. The income approach uses a reporting unit’s projection of estimated future cash flows that is discounted at
guideline transaction method) and the income approach. The income approach uses a reporting unit’s projection of estimated future cash flows that is discounted at
a market derived weighted average cost of capital. The projection uses management’s best estimates of economic and market conditions over the projected period
a market derived weighted average cost of capital. The projection uses management’s best estimates of economic and market conditions over the projected period
including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures.
including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures.
If the fair value of a reporting unit exceeds its carrying value, then the Company concludes no goodwill impairment has occurred. If the carrying value of the
If the fair value of a reporting unit exceeds its carrying value, then the Company concludes no goodwill impairment has occurred. If the carrying value of the
reporting unit exceeds its fair value, the Company performs the second step of the goodwill impairment test to measure possible goodwill impairment loss. During
reporting unit exceeds its fair value, the Company performs the second step of the goodwill impairment test to measure possible goodwill impairment loss. During
the second step, the implied fair value of the reporting unit's goodwill is compared to the carrying value of its goodwill. If the carrying value of the reporting unit's
the second step, the implied fair value of the reporting unit's goodwill is compared to the carrying value of its goodwill. If the carrying value of the reporting unit's
goodwill exceeds the implied fair value of the goodwill, the Company would recognize an impairment loss in an amount equal to the excess, not to exceed the
goodwill exceeds the implied fair value of the goodwill, the Company would recognize an impairment loss in an amount equal to the excess, not to exceed the
Acquired intangible assets other than goodwill are amortized over their weighted average amortization period unless they are determined to be indefinite. Acquired
Acquired intangible assets other than goodwill are amortized over their weighted average amortization period unless they are determined to be indefinite. Acquired
intangible assets are carried at cost, less accumulated amortization. For intangible assets purchased in a business combination, the estimated fair values of the
intangible assets are carried at cost, less accumulated amortization. For intangible assets purchased in a business combination, the estimated fair values of the
assets received are used to establish the carrying value. The fair value of acquired intangible assets is determined using common valuation techniques, and the
assets received are used to establish the carrying value. The fair value of acquired intangible assets is determined using common valuation techniques, and the
Company employs assumptions developed using the perspective of a market participant.
Company employs assumptions developed using the perspective of a market participant.
Long-lived assets, such as property, equipment and purchased intangible assets subject to amortization, are reviewed for impairment whenever facts and
Long-lived assets, such as property, equipment and purchased intangible assets subject to amortization, are reviewed for impairment whenever facts and
circumstances indicate that the carrying amount of an asset may not be recoverable. For impairment testing of long-lived assets, the Company identifies asset
circumstances indicate that the carrying amount of an asset may not be recoverable. For impairment testing of long-lived assets, the Company identifies asset
groups at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Recoverability of
groups at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by
assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by
the assets. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying
the assets. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying
Merger and integration costs related to the ongoing integration of BMHC and SBS consist primarily of severance, rebranding, system integration costs and
Merger and integration costs related to the ongoing integration of BMHC and SBS consist primarily of severance, rebranding, system integration costs and
The Company accounts for income taxes in accordance with ASC Topic 740, Income
Taxes
("ASC 740"), which requires an asset and liability approach for
The Company accounts for income taxes in accordance with ASC Topic 740, Income
Taxes
("ASC 740"), which requires an asset and liability approach for
measuring deferred taxes based on temporary differences between the financial statement and tax basis
measuring deferred taxes based on temporary differences between the financial statement and tax basis
Revenue recognition
Revenue recognition
The Company recognizes revenue for sales of building products when products are delivered and the customer takes ownership and assumes risk of loss, collection
The Company recognizes revenue for sales of building products when products are delivered and the customer takes ownership and assumes risk of loss, collection
of the relevant receivable is reasonably assured, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. All sales recognized are
of the relevant receivable is reasonably assured, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. All sales recognized are
net of allowances for discounts and estimated returns, based on historical experience. Taxes assessed by governmental authorities that are directly imposed on the
net of allowances for discounts and estimated returns, based on historical experience. Taxes assessed by governmental authorities that are directly imposed on the
Company's revenue-producing transactions are excluded from sales.
Company's revenue-producing transactions are excluded from sales.
The percentage-of-completion method is used to recognize revenue for construction services. Periodic estimates of progress towards completion are made based on
The percentage-of-completion method is used to recognize revenue for construction services. Periodic estimates of progress towards completion are made based on
either a comparison of labor costs incurred to date with total estimated contract labor costs or total costs incurred to date with total estimated contract costs. The
either a comparison of labor costs incurred to date with total estimated contract labor costs or total costs incurred to date with total estimated contract costs. The
percentage-of-completion method requires the use of various estimates, including among others, the extent of progress towards completion, contract revenues and
percentage-of-completion method requires the use of various estimates, including among others, the extent of progress towards completion, contract revenues and
contract completion costs. Contract revenues and contract costs to be recognized are dependent on the accuracy of estimates, including quantities of materials,
contract completion costs. Contract revenues and contract costs to be recognized are dependent on the accuracy of estimates, including quantities of materials,
labor productivity and other cost estimates. The Company has a history of making reasonable estimates of the extent of progress towards completion, contract
labor productivity and other cost estimates. The Company has a history of making reasonable estimates of the extent of progress towards completion, contract
revenues and contract completion costs. Due to uncertainties inherent in the estimation process, it is possible that actual contract revenues and completion costs
revenues and contract completion costs. Due to uncertainties inherent in the estimation process, it is possible that actual contract revenues and completion costs
may vary from estimates. Revenue recognized using the percentage-of-completion method for the years ended December 31, 2017 , 2016 and 2015 represented
may vary from estimates. Revenue recognized using the percentage-of-completion method for the years ended December 31, 2017 , 2016 and 2015 represented
approximately 95% , 94% and 92% of the total revenue for construction services for the respective periods.
approximately 95% , 94% and 92% of the total revenue for construction services for the respective periods.
Estimated losses on uncompleted contracts and changes in contract estimates reflect the Company's best estimate of probable losses of unbilled receivables, and are
Estimated losses on uncompleted contracts and changes in contract estimates reflect the Company's best estimate of probable losses of unbilled receivables, and are
recognized in the period such revisions are known and can be reasonably estimated. These estimates are recognized in cost of sales. Estimated losses on
recognized in the period such revisions are known and can be reasonably estimated. These estimates are recognized in cost of sales. Estimated losses on
uncompleted contracts and changes in contract estimates are established by assessing estimated costs to complete, change orders and claims for uncompleted
uncompleted contracts and changes in contract estimates are established by assessing estimated costs to complete, change orders and claims for uncompleted
contracts. Assumptions for estimated costs to complete include material prices, labor costs, labor productivity and contract claims. Such estimates are inherently
contracts. Assumptions for estimated costs to complete include material prices, labor costs, labor productivity and contract claims. Such estimates are inherently
uncertain and therefore it is possible that actual completion costs may vary from these estimates.
uncertain and therefore it is possible that actual completion costs may vary from these estimates.
The Company includes shipping and handling costs in selling, general and administrative expenses on the consolidated statements of operations. Shipping and
The Company includes shipping and handling costs in selling, general and administrative expenses on the consolidated statements of operations. Shipping and
handling costs were $172.2 million , $152.7 million and $81.6 million for the years ended December 31, 2017 , 2016 and 2015 , respectively.
handling costs were $172.2 million , $152.7 million and $81.6 million for the years ended December 31, 2017 , 2016 and 2015 , respectively.
Property and equipment are stated at cost. Expenditures for renewals and betterments, which extend the useful lives of assets, are capitalized while maintenance
Property and equipment are stated at cost. Expenditures for renewals and betterments, which extend the useful lives of assets, are capitalized while maintenance
and repairs are charged to expense as incurred. Property and equipment obtained through acquisition are stated at estimated fair market value as of the acquisition
and repairs are charged to expense as incurred. Property and equipment obtained through acquisition are stated at estimated fair market value as of the acquisition
date, and are depreciated over their estimated remaining useful lives, which may differ from the Company's stated policies for certain assets. Gains and losses
date, and are depreciated over their estimated remaining useful lives, which may differ from the Company's stated policies for certain assets. Gains and losses
Property and equipment are depreciated using the straight-line method and are generally depreciated over the following estimated service lives:
Property and equipment are depreciated using the straight-line method and are generally depreciated over the following estimated service lives:
Shipping and handling costs
Shipping and handling costs
Property and equipment
Property and equipment
Buildings and improvements
Buildings and improvements
Leasehold improvements
Leasehold improvements
Furniture, fixtures and equipment
Furniture, fixtures and equipment
Vehicles
Vehicles
Lesser of life of the asset or remaining
Lesser of life of the asset or remaining
lease term, and not to exceed 15 years
lease term, and not to exceed 15 years
3–30 years
3–30 years
2–10 years
2–10 years
4–10 years
4–10 years
Property and equipment that is expected to be sold within the next twelve months, is actively marketed in its current condition for a price that is reasonable in
Property and equipment that is expected to be sold within the next twelve months, is actively marketed in its current condition for a price that is reasonable in
comparison to its estimated fair value and meets other relevant held-for-sale criteria are classified as assets held for sale. Assets held for sale are measured at the
comparison to its estimated fair value and meets other relevant held-for-sale criteria are classified as assets held for sale. Assets held for sale are measured at the
lower of carrying amount or fair value less costs to sell and are no longer depreciated. An impairment for assets held for sale is recognized if the carrying amount is
lower of carrying amount or fair value less costs to sell and are no longer depreciated. An impairment for assets held for sale is recognized if the carrying amount is
not recoverable. Assets held for sale were not presented separately and were classified as other long-term assets in the consolidated balance sheets and were $2.3
not recoverable. Assets held for sale were not presented separately and were classified as other long-term assets in the consolidated balance sheets and were $2.3
million and $2.0 million at December 31, 2017 and 2016 , respectively.
million and $2.0 million at December 31, 2017 and 2016 , respectively.
receivable at December 31, 2017 and 2016 are $23.3 million and $21.4 million , respectively, included in prepaid expenses and other current assets.
receivable at December 31, 2017 and 2016 are $23.3 million and $21.4 million , respectively, included in prepaid expenses and other current assets.
Goodwill and other intangible assets
Goodwill and other intangible assets
At least annually, or more frequently as changes in circumstances indicate, the Company tests goodwill for impairment. To the extent that the carrying value of the
At least annually, or more frequently as changes in circumstances indicate, the Company tests goodwill for impairment. To the extent that the carrying value of the
net assets of any of the reporting units having goodwill is greater than their estimated fair value, the Company may be required to record impairment charges.
net assets of any of the reporting units having goodwill is greater than their estimated fair value, the Company may be required to record impairment charges.
Beginning January 1, 2017, following the realignment of certain markets which resulted in the consolidation of the Company's historical Mountain West division
Beginning January 1, 2017, following the realignment of certain markets which resulted in the consolidation of the Company's historical Mountain West division
into the Intermountain division, the Company's five operating segments, which have been determined to be the Company's reporting units, are the Mid-Atlantic,
into the Intermountain division, the Company's five operating segments, which have been determined to be the Company's reporting units, are the Mid-Atlantic,
Southeast, Texas, Intermountain and Western divisions. Following the realignment, the chief operating decision maker continues to review aggregate information
Southeast, Texas, Intermountain and Western divisions. Following the realignment, the chief operating decision maker continues to review aggregate information
to allocate resources and assess performance. Based on this, as well as the similar economic characteristics, nature of products, distribution methods and customers
to allocate resources and assess performance. Based on this, as well as the similar economic characteristics, nature of products, distribution methods and customers
of the divisions both before and after the realignment, the Company has aggregated its operating segments into one reportable segment. The Company is required
of the divisions both before and after the realignment, the Company has aggregated its operating segments into one reportable segment. The Company is required
to make certain assumptions and estimates regarding the fair value of the reporting units containing goodwill when assessing for impairment. Changes in the fact
to make certain assumptions and estimates regarding the fair value of the reporting units containing goodwill when assessing for impairment. Changes in the fact
patterns underlying such assumptions and estimates could ultimately result in the recognition of additional impairment losses.
patterns underlying such assumptions and estimates could ultimately result in the recognition of additional impairment losses.
The Company completes its annual impairment assessment during the third quarter of each year. The Company did not recognize any impairment for the years
The Company completes its annual impairment assessment during the third quarter of each year. The Company did not recognize any impairment for the years
ended December 31, 2017 , 2016 and 2015 . The Company may consider qualitative factors as part of its annual impairment assessment to determine whether it is
ended December 31, 2017 , 2016 and 2015 . The Company may consider qualitative factors as part of its annual impairment assessment to determine whether it is
more likely than not that a reporting unit's carrying value exceeds its fair value. If the Company's qualitative assessment indicates that goodwill impairment is more
more likely than not that a reporting unit's carrying value exceeds its fair value. If the Company's qualitative assessment indicates that goodwill impairment is more
likely than not, the Company performs the two-step impairment test. Alternatively, the Company may bypass the qualitative test and initiate goodwill impairment
likely than not, the Company performs the two-step impairment test. Alternatively, the Company may bypass the qualitative test and initiate goodwill impairment
testing with the first step of the two-step goodwill impairment test. During the first step of the goodwill impairment test, the fair value of the reporting unit is
testing with the first step of the two-step goodwill impairment test. During the first step of the goodwill impairment test, the fair value of the reporting unit is
compared to its carrying value, including goodwill. The Company may derive a reporting unit's fair value through a combination of the market approach (a
compared to its carrying value, including goodwill. The Company may derive a reporting unit's fair value through a combination of the market approach (a
guideline transaction method) and the income approach. The income approach uses a reporting unit’s projection of estimated future cash flows that is discounted at
guideline transaction method) and the income approach. The income approach uses a reporting unit’s projection of estimated future cash flows that is discounted at
a market derived weighted average cost of capital. The projection uses management’s best estimates of economic and market conditions over the projected period
a market derived weighted average cost of capital. The projection uses management’s best estimates of economic and market conditions over the projected period
including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures.
including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures.
If the fair value of a reporting unit exceeds its carrying value, then the Company concludes no goodwill impairment has occurred. If the carrying value of the
If the fair value of a reporting unit exceeds its carrying value, then the Company concludes no goodwill impairment has occurred. If the carrying value of the
reporting unit exceeds its fair value, the Company performs the second step of the goodwill impairment test to measure possible goodwill impairment loss. During
reporting unit exceeds its fair value, the Company performs the second step of the goodwill impairment test to measure possible goodwill impairment loss. During
the second step, the implied fair value of the reporting unit's goodwill is compared to the carrying value of its goodwill. If the carrying value of the reporting unit's
the second step, the implied fair value of the reporting unit's goodwill is compared to the carrying value of its goodwill. If the carrying value of the reporting unit's
goodwill exceeds the implied fair value of the goodwill, the Company would recognize an impairment loss in an amount equal to the excess, not to exceed the
goodwill exceeds the implied fair value of the goodwill, the Company would recognize an impairment loss in an amount equal to the excess, not to exceed the
carrying value of the reporting unit's goodwill.
carrying value of the reporting unit's goodwill.
Acquired intangible assets other than goodwill are amortized over their weighted average amortization period unless they are determined to be indefinite. Acquired
Acquired intangible assets other than goodwill are amortized over their weighted average amortization period unless they are determined to be indefinite. Acquired
intangible assets are carried at cost, less accumulated amortization. For intangible assets purchased in a business combination, the estimated fair values of the
intangible assets are carried at cost, less accumulated amortization. For intangible assets purchased in a business combination, the estimated fair values of the
assets received are used to establish the carrying value. The fair value of acquired intangible assets is determined using common valuation techniques, and the
assets received are used to establish the carrying value. The fair value of acquired intangible assets is determined using common valuation techniques, and the
Company employs assumptions developed using the perspective of a market participant.
Company employs assumptions developed using the perspective of a market participant.
related to the sale of property and equipment are recorded as selling, general and administrative expenses.
related to the sale of property and equipment are recorded as selling, general and administrative expenses.
Impairment of long-lived assets
Impairment of long-lived assets
Long-lived assets, such as property, equipment and purchased intangible assets subject to amortization, are reviewed for impairment whenever facts and
Long-lived assets, such as property, equipment and purchased intangible assets subject to amortization, are reviewed for impairment whenever facts and
circumstances indicate that the carrying amount of an asset may not be recoverable. For impairment testing of long-lived assets, the Company identifies asset
circumstances indicate that the carrying amount of an asset may not be recoverable. For impairment testing of long-lived assets, the Company identifies asset
groups at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Recoverability of
groups at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by
assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by
the assets. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying
the assets. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying
amount of the asset exceeds the estimated fair value of the asset.
amount of the asset exceeds the estimated fair value of the asset.
Merger and integration costs
Merger and integration costs
Merger and integration costs related to the ongoing integration of BMHC and SBS consist primarily of severance, rebranding, system integration costs and
Merger and integration costs related to the ongoing integration of BMHC and SBS consist primarily of severance, rebranding, system integration costs and
professional fees.
professional fees.
Income taxes
Income taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income
Taxes
("ASC 740"), which requires an asset and liability approach for
The Company accounts for income taxes in accordance with ASC Topic 740, Income
Taxes
("ASC 740"), which requires an asset and liability approach for
measuring deferred taxes based on temporary differences between the financial statement and tax basis
measuring deferred taxes based on temporary differences between the financial statement and tax basis
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of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered.
of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered.
Lease obligations
Lease obligations
The Company evaluates its deferred tax assets on a quarterly basis to determine whether a valuation allowance is required. In accordance with ASC 740, the
The Company evaluates its deferred tax assets on a quarterly basis to determine whether a valuation allowance is required. In accordance with ASC 740, the
Company assesses whether a valuation allowance should be established based on its determination of whether it is more likely than not that some portion or all of
Company assesses whether a valuation allowance should be established based on its determination of whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends primarily on: (i) the Company's ability to carry back net
the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends primarily on: (i) the Company's ability to carry back net
operating losses to tax years where it has previously paid income taxes based on applicable federal law; (ii) the timing of the reversal of deferred tax liabilities and
operating losses to tax years where it has previously paid income taxes based on applicable federal law; (ii) the timing of the reversal of deferred tax liabilities and
(iii) the Company's ability to generate future taxable income during the periods in which the related deferred tax assets are deductible. The assessment of a
(iii) the Company's ability to generate future taxable income during the periods in which the related deferred tax assets are deductible. The assessment of a
valuation allowance includes giving appropriate consideration to all positive and negative evidence related to the realization of the deferred tax asset. This
valuation allowance includes giving appropriate consideration to all positive and negative evidence related to the realization of the deferred tax asset. This
assessment considers, among other things, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of
assessment considers, among other things, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of
statutory carryforward periods, the Company's experience with operating loss and tax credit carryforwards not expiring unused and tax planning alternatives.
statutory carryforward periods, the Company's experience with operating loss and tax credit carryforwards not expiring unused and tax planning alternatives.
Significant judgment is required in determining the future tax consequences of events that have been recognized in the Company's consolidated financial
Significant judgment is required in determining the future tax consequences of events that have been recognized in the Company's consolidated financial
statements and/or tax returns. Actual outcomes of these future tax consequences could differ materially from the outcomes that the Company currently anticipates.
statements and/or tax returns. Actual outcomes of these future tax consequences could differ materially from the outcomes that the Company currently anticipates.
ASC 740 defines the methodology for recognizing the benefits of uncertain tax return positions as well as guidance regarding the measurement of the resulting tax
ASC 740 defines the methodology for recognizing the benefits of uncertain tax return positions as well as guidance regarding the measurement of the resulting tax
benefits. These provisions require an enterprise to recognize the financial statement effects of a tax position when it is more likely than not, which is defined as a
benefits. These provisions require an enterprise to recognize the financial statement effects of a tax position when it is more likely than not, which is defined as a
likelihood of more than 50%, based on technical merits, that the position will be sustained upon examination. The evaluation of whether a tax position meets the
likelihood of more than 50%, based on technical merits, that the position will be sustained upon examination. The evaluation of whether a tax position meets the
more likely than not recognition threshold requires a substantial degree of judgment by management based on the individual facts and circumstances. Actual results
more likely than not recognition threshold requires a substantial degree of judgment by management based on the individual facts and circumstances. Actual results
could differ from estimates. The Company had no material uncertain tax positions as of December 31, 2017.
could differ from estimates. The Company had no material uncertain tax positions as of December 31, 2017.
The Company’s policy is to recognize interest and penalties related to income tax liabilities and unrecognized tax benefits in income tax expense.
The Company’s policy is to recognize interest and penalties related to income tax liabilities and unrecognized tax benefits in income tax expense.
Casualty and health insurance
Casualty and health insurance
The Company carries insurance for general liability, auto liability and workers' compensation exposures subject to deductibles or self-insured retentions it believes
The Company carries insurance for general liability, auto liability and workers' compensation exposures subject to deductibles or self-insured retentions it believes
to be reasonable under the circumstances, and the Company self-insures for employee and eligible dependent health care claims, with insurance purchased from
to be reasonable under the circumstances, and the Company self-insures for employee and eligible dependent health care claims, with insurance purchased from
independent carriers to cover individual claims in excess of the self-insured limits. The expected liability for unpaid claims, including incurred but not reported
independent carriers to cover individual claims in excess of the self-insured limits. The expected liability for unpaid claims, including incurred but not reported
losses, is reflected on the consolidated balance sheets as a liability with current and long-term components. The amount recoverable from insurance providers is
losses, is reflected on the consolidated balance sheets as a liability with current and long-term components. The amount recoverable from insurance providers is
reflected on the consolidated balance sheets in prepaid expenses and other current assets. Provisions for losses are developed from actuarial valuations that rely
reflected on the consolidated balance sheets in prepaid expenses and other current assets. Provisions for losses are developed from actuarial valuations that rely
upon the Company’s past claims experience, which considers both the frequency and settlement of claims. The casualty and health insurance liabilities are
upon the Company’s past claims experience, which considers both the frequency and settlement of claims. The casualty and health insurance liabilities are
recorded at their undiscounted value.
recorded at their undiscounted value.
In January 2015, the Company entered into a retroactive reinsurance contract to transfer the risk of loss of certain insurance reserves for workers’ compensation
In January 2015, the Company entered into a retroactive reinsurance contract to transfer the risk of loss of certain insurance reserves for workers’ compensation
claims incurred from 2006 to 2011 to a reinsurer. As a part of the contract, the Company paid $11.1 million to the reinsurer to assume $8.3 million of insurance
claims incurred from 2006 to 2011 to a reinsurer. As a part of the contract, the Company paid $11.1 million to the reinsurer to assume $8.3 million of insurance
reserves. The $2.8 million difference between the amount paid to the reinsurer and the reserves transferred was recorded in selling, general and administrative
reserves. The $2.8 million difference between the amount paid to the reinsurer and the reserves transferred was recorded in selling, general and administrative
expenses on the consolidated statement of operations for the year ended December 31, 2015. Pursuant to the reinsurance contract, the reinsurer is obligated to pay
expenses on the consolidated statement of operations for the year ended December 31, 2015. Pursuant to the reinsurance contract, the reinsurer is obligated to pay
an aggregate maximum of $17.5 million for these claims with any excess borne by the Company.
an aggregate maximum of $17.5 million for these claims with any excess borne by the Company.
The Company recognizes lease obligations with fixed escalations of rental payments on a straight-line basis over the lease term, with the amount of rental expense
The Company recognizes lease obligations with fixed escalations of rental payments on a straight-line basis over the lease term, with the amount of rental expense
in excess of lease payments recorded as a deferred rent liability. As of December 31, 2017 and 2016 , the Company had a deferred rent liability of $4.2 million and
in excess of lease payments recorded as a deferred rent liability. As of December 31, 2017 and 2016 , the Company had a deferred rent liability of $4.2 million and
$3.6 million , respectively, included in accrued expenses and other liabilities and other long-term liabilities on the consolidated balance sheets.
$3.6 million , respectively, included in accrued expenses and other liabilities and other long-term liabilities on the consolidated balance sheets.
Advertising and promotion
Advertising and promotion
Costs associated with advertising and promoting products and services are expensed in the period incurred. Cooperative advertising allowances that are
Costs associated with advertising and promoting products and services are expensed in the period incurred. Cooperative advertising allowances that are
reimbursement of specific, incremental and identifiable costs incurred to promote vendors' products are recorded as an offset against advertising expenses in
reimbursement of specific, incremental and identifiable costs incurred to promote vendors' products are recorded as an offset against advertising expenses in
selling, general and administrative expenses. If those conditions are not met, the cooperative advertising allowances are recorded as a reduction in inventory and a
selling, general and administrative expenses. If those conditions are not met, the cooperative advertising allowances are recorded as a reduction in inventory and a
subsequent reduction in cost of goods sold when the related product is sold. For the years ended December 31, 2017 and 2016 , the Company recorded $5.8 million
subsequent reduction in cost of goods sold when the related product is sold. For the years ended December 31, 2017 and 2016 , the Company recorded $5.8 million
and $3.7 million , respectively, of advertising and promotion expenses, net of cooperative advertising allowances, in selling, general and administrative expenses.
and $3.7 million , respectively, of advertising and promotion expenses, net of cooperative advertising allowances, in selling, general and administrative expenses.
Advertising and promotion expenses, net of cooperative advertising allowances, were not material for the year ended December 31, 2015.
Advertising and promotion expenses, net of cooperative advertising allowances, were not material for the year ended December 31, 2015.
In accordance with the requirements of ASC 718, Compensation—Stock
Compensation
(“ASC 718”), the Company measures and recognizes compensation
In accordance with the requirements of ASC 718, Compensation—Stock
Compensation
(“ASC 718”), the Company measures and recognizes compensation
expense for all share-based payment awards made to employees using a fair value based pricing model. The compensation expense is recognized over the requisite
expense for all share-based payment awards made to employees using a fair value based pricing model. The compensation expense is recognized over the requisite
Stock-based compensation
Stock-based compensation
service period, using graded vesting.
service period, using graded vesting.
Exit or disposal costs
Exit or disposal costs
The Company accounts for costs associated with exit or disposal in accordance with ASC 420, Exit
or
Disposal
Cost
Obligations
(“ASC 420”), which requires
The Company accounts for costs associated with exit or disposal in accordance with ASC 420, Exit
or
Disposal
Cost
Obligations
(“ASC 420”), which requires
that: (i) liabilities associated with exit and disposal activities be measured at fair value; (ii) one-time termination benefits be expensed at the date the entity notifies
that: (i) liabilities associated with exit and disposal activities be measured at fair value; (ii) one-time termination benefits be expensed at the date the entity notifies
the employee, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period; (iii) liabilities related
the employee, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period; (iii) liabilities related
to an operating lease/contract be recognized and measured at its fair value when the contract does not have any future economic benefit to the entity (i.e., the entity
to an operating lease/contract be recognized and measured at its fair value when the contract does not have any future economic benefit to the entity (i.e., the entity
ceases to utilize the rights conveyed by the contract) and (iv) all other costs related to an exit or disposal activity be expensed as incurred.
ceases to utilize the rights conveyed by the contract) and (iv) all other costs related to an exit or disposal activity be expensed as incurred.
Costs incurred in connection with the Company’s revolving line of credit and senior secured notes are capitalized and amortized over the term of the agreement.
Costs incurred in connection with the Company’s revolving line of credit and senior secured notes are capitalized and amortized over the term of the agreement.
Total debt issuance costs, net of accumulated amortization, were $8.1 million and $9.8 million as of December 31, 2017 and 2016 , respectively. Debt issuance
Total debt issuance costs, net of accumulated amortization, were $8.1 million and $9.8 million as of December 31, 2017 and 2016 , respectively. Debt issuance
costs related to the Company's revolving line of credit and senior secured notes are included in other long-term assets and long-term debt, respectively, on the
costs related to the Company's revolving line of credit and senior secured notes are included in other long-term assets and long-term debt, respectively, on the
consolidated balance sheets. Amortization of debt issuance costs for the years ended December 31, 2017 , 2016 and 2015 was $1.7 million , $3.1 million and $2.5
consolidated balance sheets. Amortization of debt issuance costs for the years ended December 31, 2017 , 2016 and 2015 was $1.7 million , $3.1 million and $2.5
million , respectively, and is included in interest expense on the consolidated statements of operations.
million , respectively, and is included in interest expense on the consolidated statements of operations.
The Company maintains the insurance reserves related to these claims as a liability on its consolidated balance sheet with an offsetting reinsurance receivable,
The Company maintains the insurance reserves related to these claims as a liability on its consolidated balance sheet with an offsetting reinsurance receivable,
which includes current and long-term components. As of December 31, 2017 and 2016 , the carrying value of the insurance reserves related to these claims and the
which includes current and long-term components. As of December 31, 2017 and 2016 , the carrying value of the insurance reserves related to these claims and the
offsetting reinsurance receivable was $4.5 million and $5.6 million , respectively. Changes in these claims are recorded as an increase or decrease in the insurance
offsetting reinsurance receivable was $4.5 million and $5.6 million , respectively. Changes in these claims are recorded as an increase or decrease in the insurance
reserves and corresponding increase or decrease in the reinsurance receivable. Additionally, the Company monitors the financial condition of the reinsurer to
reserves and corresponding increase or decrease in the reinsurance receivable. Additionally, the Company monitors the financial condition of the reinsurer to
minimize its exposure to significant losses from reinsurer insolvency.
minimize its exposure to significant losses from reinsurer insolvency.
The Company will occasionally enter into derivative instruments to offset existing or expected risks associated with fluctuations in commodity prices. The
The Company will occasionally enter into derivative instruments to offset existing or expected risks associated with fluctuations in commodity prices. The
Company does not enter into derivative instruments for speculative or trading purposes. The Company recognizes all derivative instruments as assets or liabilities
Company does not enter into derivative instruments for speculative or trading purposes. The Company recognizes all derivative instruments as assets or liabilities
in the Company’s balance sheets at fair value. Changes in the fair value of derivative instruments that are not designated as hedges or that do not meet the hedge
in the Company’s balance sheets at fair value. Changes in the fair value of derivative instruments that are not designated as hedges or that do not meet the hedge
accounting criteria are reported in earnings. The Company elected not to designate any new derivative instruments as hedges for the years 2017 , 2016 or 2015 ,
accounting criteria are reported in earnings. The Company elected not to designate any new derivative instruments as hedges for the years 2017 , 2016 or 2015 ,
and therefore, all changes in the fair market value of the derivative instruments have been reported in cost of goods sold on the consolidated statements of
and therefore, all changes in the fair market value of the derivative instruments have been reported in cost of goods sold on the consolidated statements of
Retirement savings program
Retirement savings program
The Company sponsors a defined contribution retirement savings plan. The Company has recorded expense of $5.2 million , $4.6 million and $2.4 million related
The Company sponsors a defined contribution retirement savings plan. The Company has recorded expense of $5.2 million , $4.6 million and $2.4 million related
to employer contributions for the years ended December 31, 2017 , 2016 and 2015 , respectively. These expenses are recorded to either selling, general and
to employer contributions for the years ended December 31, 2017 , 2016 and 2015 , respectively. These expenses are recorded to either selling, general and
administrative expenses or cost of sales on the consolidated statements of operations, depending on the classification of the employee.
administrative expenses or cost of sales on the consolidated statements of operations, depending on the classification of the employee.
The Company has warranty obligations with respect to most manufactured products. As of December 31, 2017 and 2016 , the Company had warranty liabilities of
The Company has warranty obligations with respect to most manufactured products. As of December 31, 2017 and 2016 , the Company had warranty liabilities of
$2.5 million and $1.8 million , respectively, included in accrued expenses and other liabilities on the consolidated balance sheets.
$2.5 million and $1.8 million , respectively, included in accrued expenses and other liabilities on the consolidated balance sheets.
Debt issuance costs
Debt issuance costs
Derivatives
Derivatives
operations.
operations.
Warranty expense
Warranty expense
Reclassifications
Reclassifications
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Certain prior year amounts have been reclassified to conform to the current year presentation.
Certain prior year amounts have been reclassified to conform to the current year presentation.
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of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered.
of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered.
Lease obligations
Lease obligations
The Company evaluates its deferred tax assets on a quarterly basis to determine whether a valuation allowance is required. In accordance with ASC 740, the
The Company evaluates its deferred tax assets on a quarterly basis to determine whether a valuation allowance is required. In accordance with ASC 740, the
Company assesses whether a valuation allowance should be established based on its determination of whether it is more likely than not that some portion or all of
Company assesses whether a valuation allowance should be established based on its determination of whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends primarily on: (i) the Company's ability to carry back net
the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends primarily on: (i) the Company's ability to carry back net
operating losses to tax years where it has previously paid income taxes based on applicable federal law; (ii) the timing of the reversal of deferred tax liabilities and
operating losses to tax years where it has previously paid income taxes based on applicable federal law; (ii) the timing of the reversal of deferred tax liabilities and
(iii) the Company's ability to generate future taxable income during the periods in which the related deferred tax assets are deductible. The assessment of a
(iii) the Company's ability to generate future taxable income during the periods in which the related deferred tax assets are deductible. The assessment of a
valuation allowance includes giving appropriate consideration to all positive and negative evidence related to the realization of the deferred tax asset. This
valuation allowance includes giving appropriate consideration to all positive and negative evidence related to the realization of the deferred tax asset. This
assessment considers, among other things, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of
assessment considers, among other things, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of
statutory carryforward periods, the Company's experience with operating loss and tax credit carryforwards not expiring unused and tax planning alternatives.
statutory carryforward periods, the Company's experience with operating loss and tax credit carryforwards not expiring unused and tax planning alternatives.
Significant judgment is required in determining the future tax consequences of events that have been recognized in the Company's consolidated financial
Significant judgment is required in determining the future tax consequences of events that have been recognized in the Company's consolidated financial
statements and/or tax returns. Actual outcomes of these future tax consequences could differ materially from the outcomes that the Company currently anticipates.
statements and/or tax returns. Actual outcomes of these future tax consequences could differ materially from the outcomes that the Company currently anticipates.
ASC 740 defines the methodology for recognizing the benefits of uncertain tax return positions as well as guidance regarding the measurement of the resulting tax
ASC 740 defines the methodology for recognizing the benefits of uncertain tax return positions as well as guidance regarding the measurement of the resulting tax
benefits. These provisions require an enterprise to recognize the financial statement effects of a tax position when it is more likely than not, which is defined as a
benefits. These provisions require an enterprise to recognize the financial statement effects of a tax position when it is more likely than not, which is defined as a
likelihood of more than 50%, based on technical merits, that the position will be sustained upon examination. The evaluation of whether a tax position meets the
likelihood of more than 50%, based on technical merits, that the position will be sustained upon examination. The evaluation of whether a tax position meets the
more likely than not recognition threshold requires a substantial degree of judgment by management based on the individual facts and circumstances. Actual results
more likely than not recognition threshold requires a substantial degree of judgment by management based on the individual facts and circumstances. Actual results
could differ from estimates. The Company had no material uncertain tax positions as of December 31, 2017.
could differ from estimates. The Company had no material uncertain tax positions as of December 31, 2017.
The Company recognizes lease obligations with fixed escalations of rental payments on a straight-line basis over the lease term, with the amount of rental expense
The Company recognizes lease obligations with fixed escalations of rental payments on a straight-line basis over the lease term, with the amount of rental expense
in excess of lease payments recorded as a deferred rent liability. As of December 31, 2017 and 2016 , the Company had a deferred rent liability of $4.2 million and
in excess of lease payments recorded as a deferred rent liability. As of December 31, 2017 and 2016 , the Company had a deferred rent liability of $4.2 million and
$3.6 million , respectively, included in accrued expenses and other liabilities and other long-term liabilities on the consolidated balance sheets.
$3.6 million , respectively, included in accrued expenses and other liabilities and other long-term liabilities on the consolidated balance sheets.
Advertising and promotion
Advertising and promotion
Costs associated with advertising and promoting products and services are expensed in the period incurred. Cooperative advertising allowances that are
Costs associated with advertising and promoting products and services are expensed in the period incurred. Cooperative advertising allowances that are
reimbursement of specific, incremental and identifiable costs incurred to promote vendors' products are recorded as an offset against advertising expenses in
reimbursement of specific, incremental and identifiable costs incurred to promote vendors' products are recorded as an offset against advertising expenses in
selling, general and administrative expenses. If those conditions are not met, the cooperative advertising allowances are recorded as a reduction in inventory and a
selling, general and administrative expenses. If those conditions are not met, the cooperative advertising allowances are recorded as a reduction in inventory and a
subsequent reduction in cost of goods sold when the related product is sold. For the years ended December 31, 2017 and 2016 , the Company recorded $5.8 million
subsequent reduction in cost of goods sold when the related product is sold. For the years ended December 31, 2017 and 2016 , the Company recorded $5.8 million
and $3.7 million , respectively, of advertising and promotion expenses, net of cooperative advertising allowances, in selling, general and administrative expenses.
and $3.7 million , respectively, of advertising and promotion expenses, net of cooperative advertising allowances, in selling, general and administrative expenses.
Advertising and promotion expenses, net of cooperative advertising allowances, were not material for the year ended December 31, 2015.
Advertising and promotion expenses, net of cooperative advertising allowances, were not material for the year ended December 31, 2015.
Stock-based compensation
Stock-based compensation
In accordance with the requirements of ASC 718, Compensation—Stock
Compensation
(“ASC 718”), the Company measures and recognizes compensation
In accordance with the requirements of ASC 718, Compensation—Stock
Compensation
(“ASC 718”), the Company measures and recognizes compensation
expense for all share-based payment awards made to employees using a fair value based pricing model. The compensation expense is recognized over the requisite
expense for all share-based payment awards made to employees using a fair value based pricing model. The compensation expense is recognized over the requisite
service period, using graded vesting.
service period, using graded vesting.
The Company’s policy is to recognize interest and penalties related to income tax liabilities and unrecognized tax benefits in income tax expense.
The Company’s policy is to recognize interest and penalties related to income tax liabilities and unrecognized tax benefits in income tax expense.
Exit or disposal costs
Exit or disposal costs
Casualty and health insurance
Casualty and health insurance
The Company carries insurance for general liability, auto liability and workers' compensation exposures subject to deductibles or self-insured retentions it believes
The Company carries insurance for general liability, auto liability and workers' compensation exposures subject to deductibles or self-insured retentions it believes
to be reasonable under the circumstances, and the Company self-insures for employee and eligible dependent health care claims, with insurance purchased from
to be reasonable under the circumstances, and the Company self-insures for employee and eligible dependent health care claims, with insurance purchased from
independent carriers to cover individual claims in excess of the self-insured limits. The expected liability for unpaid claims, including incurred but not reported
independent carriers to cover individual claims in excess of the self-insured limits. The expected liability for unpaid claims, including incurred but not reported
losses, is reflected on the consolidated balance sheets as a liability with current and long-term components. The amount recoverable from insurance providers is
losses, is reflected on the consolidated balance sheets as a liability with current and long-term components. The amount recoverable from insurance providers is
reflected on the consolidated balance sheets in prepaid expenses and other current assets. Provisions for losses are developed from actuarial valuations that rely
reflected on the consolidated balance sheets in prepaid expenses and other current assets. Provisions for losses are developed from actuarial valuations that rely
upon the Company’s past claims experience, which considers both the frequency and settlement of claims. The casualty and health insurance liabilities are
upon the Company’s past claims experience, which considers both the frequency and settlement of claims. The casualty and health insurance liabilities are
recorded at their undiscounted value.
recorded at their undiscounted value.
In January 2015, the Company entered into a retroactive reinsurance contract to transfer the risk of loss of certain insurance reserves for workers’ compensation
In January 2015, the Company entered into a retroactive reinsurance contract to transfer the risk of loss of certain insurance reserves for workers’ compensation
claims incurred from 2006 to 2011 to a reinsurer. As a part of the contract, the Company paid $11.1 million to the reinsurer to assume $8.3 million of insurance
claims incurred from 2006 to 2011 to a reinsurer. As a part of the contract, the Company paid $11.1 million to the reinsurer to assume $8.3 million of insurance
reserves. The $2.8 million difference between the amount paid to the reinsurer and the reserves transferred was recorded in selling, general and administrative
reserves. The $2.8 million difference between the amount paid to the reinsurer and the reserves transferred was recorded in selling, general and administrative
expenses on the consolidated statement of operations for the year ended December 31, 2015. Pursuant to the reinsurance contract, the reinsurer is obligated to pay
expenses on the consolidated statement of operations for the year ended December 31, 2015. Pursuant to the reinsurance contract, the reinsurer is obligated to pay
an aggregate maximum of $17.5 million for these claims with any excess borne by the Company.
an aggregate maximum of $17.5 million for these claims with any excess borne by the Company.
The Company maintains the insurance reserves related to these claims as a liability on its consolidated balance sheet with an offsetting reinsurance receivable,
The Company maintains the insurance reserves related to these claims as a liability on its consolidated balance sheet with an offsetting reinsurance receivable,
which includes current and long-term components. As of December 31, 2017 and 2016 , the carrying value of the insurance reserves related to these claims and the
which includes current and long-term components. As of December 31, 2017 and 2016 , the carrying value of the insurance reserves related to these claims and the
offsetting reinsurance receivable was $4.5 million and $5.6 million , respectively. Changes in these claims are recorded as an increase or decrease in the insurance
offsetting reinsurance receivable was $4.5 million and $5.6 million , respectively. Changes in these claims are recorded as an increase or decrease in the insurance
reserves and corresponding increase or decrease in the reinsurance receivable. Additionally, the Company monitors the financial condition of the reinsurer to
reserves and corresponding increase or decrease in the reinsurance receivable. Additionally, the Company monitors the financial condition of the reinsurer to
minimize its exposure to significant losses from reinsurer insolvency.
minimize its exposure to significant losses from reinsurer insolvency.
The Company accounts for costs associated with exit or disposal in accordance with ASC 420, Exit
or
Disposal
Cost
Obligations
(“ASC 420”), which requires
The Company accounts for costs associated with exit or disposal in accordance with ASC 420, Exit
or
Disposal
Cost
Obligations
(“ASC 420”), which requires
that: (i) liabilities associated with exit and disposal activities be measured at fair value; (ii) one-time termination benefits be expensed at the date the entity notifies
that: (i) liabilities associated with exit and disposal activities be measured at fair value; (ii) one-time termination benefits be expensed at the date the entity notifies
the employee, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period; (iii) liabilities related
the employee, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period; (iii) liabilities related
to an operating lease/contract be recognized and measured at its fair value when the contract does not have any future economic benefit to the entity (i.e., the entity
to an operating lease/contract be recognized and measured at its fair value when the contract does not have any future economic benefit to the entity (i.e., the entity
ceases to utilize the rights conveyed by the contract) and (iv) all other costs related to an exit or disposal activity be expensed as incurred.
ceases to utilize the rights conveyed by the contract) and (iv) all other costs related to an exit or disposal activity be expensed as incurred.
Debt issuance costs
Debt issuance costs
Costs incurred in connection with the Company’s revolving line of credit and senior secured notes are capitalized and amortized over the term of the agreement.
Costs incurred in connection with the Company’s revolving line of credit and senior secured notes are capitalized and amortized over the term of the agreement.
Total debt issuance costs, net of accumulated amortization, were $8.1 million and $9.8 million as of December 31, 2017 and 2016 , respectively. Debt issuance
Total debt issuance costs, net of accumulated amortization, were $8.1 million and $9.8 million as of December 31, 2017 and 2016 , respectively. Debt issuance
costs related to the Company's revolving line of credit and senior secured notes are included in other long-term assets and long-term debt, respectively, on the
costs related to the Company's revolving line of credit and senior secured notes are included in other long-term assets and long-term debt, respectively, on the
consolidated balance sheets. Amortization of debt issuance costs for the years ended December 31, 2017 , 2016 and 2015 was $1.7 million , $3.1 million and $2.5
consolidated balance sheets. Amortization of debt issuance costs for the years ended December 31, 2017 , 2016 and 2015 was $1.7 million , $3.1 million and $2.5
million , respectively, and is included in interest expense on the consolidated statements of operations.
million , respectively, and is included in interest expense on the consolidated statements of operations.
Derivatives
Derivatives
The Company will occasionally enter into derivative instruments to offset existing or expected risks associated with fluctuations in commodity prices. The
The Company will occasionally enter into derivative instruments to offset existing or expected risks associated with fluctuations in commodity prices. The
Company does not enter into derivative instruments for speculative or trading purposes. The Company recognizes all derivative instruments as assets or liabilities
Company does not enter into derivative instruments for speculative or trading purposes. The Company recognizes all derivative instruments as assets or liabilities
in the Company’s balance sheets at fair value. Changes in the fair value of derivative instruments that are not designated as hedges or that do not meet the hedge
in the Company’s balance sheets at fair value. Changes in the fair value of derivative instruments that are not designated as hedges or that do not meet the hedge
accounting criteria are reported in earnings. The Company elected not to designate any new derivative instruments as hedges for the years 2017 , 2016 or 2015 ,
accounting criteria are reported in earnings. The Company elected not to designate any new derivative instruments as hedges for the years 2017 , 2016 or 2015 ,
and therefore, all changes in the fair market value of the derivative instruments have been reported in cost of goods sold on the consolidated statements of
and therefore, all changes in the fair market value of the derivative instruments have been reported in cost of goods sold on the consolidated statements of
operations.
operations.
Retirement savings program
Retirement savings program
Warranty expense
Warranty expense
The Company sponsors a defined contribution retirement savings plan. The Company has recorded expense of $5.2 million , $4.6 million and $2.4 million related
The Company sponsors a defined contribution retirement savings plan. The Company has recorded expense of $5.2 million , $4.6 million and $2.4 million related
to employer contributions for the years ended December 31, 2017 , 2016 and 2015 , respectively. These expenses are recorded to either selling, general and
to employer contributions for the years ended December 31, 2017 , 2016 and 2015 , respectively. These expenses are recorded to either selling, general and
administrative expenses or cost of sales on the consolidated statements of operations, depending on the classification of the employee.
administrative expenses or cost of sales on the consolidated statements of operations, depending on the classification of the employee.
The Company has warranty obligations with respect to most manufactured products. As of December 31, 2017 and 2016 , the Company had warranty liabilities of
The Company has warranty obligations with respect to most manufactured products. As of December 31, 2017 and 2016 , the Company had warranty liabilities of
$2.5 million and $1.8 million , respectively, included in accrued expenses and other liabilities on the consolidated balance sheets.
$2.5 million and $1.8 million , respectively, included in accrued expenses and other liabilities on the consolidated balance sheets.
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Certain prior year amounts have been reclassified to conform to the current year presentation.
Certain prior year amounts have been reclassified to conform to the current year presentation.
Reclassifications
Reclassifications
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Comprehensive income (loss)
Comprehensive income (loss)
Comprehensive income (loss) is equal to the net income (loss) for all periods presented.
Comprehensive income (loss) is equal to the net income (loss) for all periods presented.
Recently adopted accounting pronouncements
Recently adopted accounting pronouncements
In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-11, Simplifying the Measurement of Inventory
In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-11, Simplifying the Measurement of Inventory
(“ASU 2015-11”). ASU 2015-11 requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Prior to the
(“ASU 2015-11”). ASU 2015-11 requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Prior to the
issuance of the standard, inventory was measured at the lower of cost or market, where market was defined as replacement cost, with a ceiling of net realizable
issuance of the standard, inventory was measured at the lower of cost or market, where market was defined as replacement cost, with a ceiling of net realizable
value and floor of net realizable value less a normal profit margin. Inventory measured using last-in, first-out (LIFO) and the retail inventory method are not
value and floor of net realizable value less a normal profit margin. Inventory measured using last-in, first-out (LIFO) and the retail inventory method are not
impacted by the new guidance. Prospective application is required and early adoption is permitted. ASU 2015-11 became effective for the Company’s annual and
impacted by the new guidance. Prospective application is required and early adoption is permitted. ASU 2015-11 became effective for the Company’s annual and
interim periods beginning on January 1, 2017. The adoption of the guidance did not have a material impact on the Company's financial statements.
interim periods beginning on January 1, 2017. The adoption of the guidance did not have a material impact on the Company's financial statements.
Recently issued accounting pronouncements not yet adopted
Recently issued accounting pronouncements not yet adopted
In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), and issued subsequent
In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), and issued subsequent
amendments to the initial guidance within Accounting Standards Update 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations
amendments to the initial guidance within Accounting Standards Update 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations
(“ASU 2016-08”) issued in March 2016, Accounting Standards Update 2016-10, Revenue from Contracts with Customers, Identifying Performance Obligations
(“ASU 2016-08”) issued in March 2016, Accounting Standards Update 2016-10, Revenue from Contracts with Customers, Identifying Performance Obligations
and Licensing (“ASU 2016-10”) issued in April 2016, Accounting Standards Update 2016-12, Revenue from Contracts with Customers, Narrow-Scope
and Licensing (“ASU 2016-10”) issued in April 2016, Accounting Standards Update 2016-12, Revenue from Contracts with Customers, Narrow-Scope
Improvements and Practical Expedients (“ASU 2016-12”) issued in May 2016 and Accounting Standards Update 2016-20, Technical Corrections and
Improvements and Practical Expedients (“ASU 2016-12”) issued in May 2016 and Accounting Standards Update 2016-20, Technical Corrections and
Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20”) issued in December 2016 (ASU 2014-09, ASU 2016-08, ASU 2016-10,
Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20”) issued in December 2016 (ASU 2014-09, ASU 2016-08, ASU 2016-10,
ASU 2016-12 and ASU 2016-20 collectively “Topic 606”). Topic 606 provides a comprehensive revenue recognition model requiring companies to recognize
ASU 2016-12 and ASU 2016-20 collectively “Topic 606”). Topic 606 provides a comprehensive revenue recognition model requiring companies to recognize
revenue for the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.
revenue for the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.
The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In
The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In
July 2015, the FASB voted to defer the effective date of ASU 2014-09 by one year, and therefore, the standard is effective for the Company’s annual and interim
July 2015, the FASB voted to defer the effective date of ASU 2014-09 by one year, and therefore, the standard is effective for the Company’s annual and interim
periods beginning on January 1, 2018. The guidance permits the use of either a full retrospective or modified retrospective transition method. The Company will
periods beginning on January 1, 2018. The guidance permits the use of either a full retrospective or modified retrospective transition method. The Company will
utilize the modified retrospective transition method, which recognizes the cumulative effect of initially applying the standard in retained earnings on the date of
utilize the modified retrospective transition method, which recognizes the cumulative effect of initially applying the standard in retained earnings on the date of
adoption, utilizing certain practical expedients as defined in Topic 606. The Company has evaluated the new standard against its existing accounting policies and
adoption, utilizing certain practical expedients as defined in Topic 606. The Company has evaluated the new standard against its existing accounting policies and
practices, including reviewing purchase orders, invoices, shipping terms, conducting questionnaires with finance and operations personnel and reviewing contracts
practices, including reviewing purchase orders, invoices, shipping terms, conducting questionnaires with finance and operations personnel and reviewing contracts
with customers. The adoption of the standard is not expected to have a material impact on the timing of revenue recognition or amount of revenue recognized from
with customers. The adoption of the standard is not expected to have a material impact on the timing of revenue recognition or amount of revenue recognized from
the Company's building products contracts. Revenue for building products contracts will continue to be recognized at a point in time, when control of the promised
the Company's building products contracts. Revenue for building products contracts will continue to be recognized at a point in time, when control of the promised
goods is transferred to the customer, with the exception of certain product offerings which are customized to customer specifications and meet the criteria to be
goods is transferred to the customer, with the exception of certain product offerings which are customized to customer specifications and meet the criteria to be
recognized over time, which is consistent with the Company’s current accounting. The Company has not identified any information to date that would indicate that
recognized over time, which is consistent with the Company’s current accounting. The Company has not identified any information to date that would indicate that
the adoption of Topic 606 will have a material impact on the accounting for the Company’s construction services contracts. Revenue for construction services
the adoption of Topic 606 will have a material impact on the accounting for the Company’s construction services contracts. Revenue for construction services
contracts will generally continue to be recognized over time as the Company satisfies the performance obligations in the contracts. The Company is also prepared
contracts will generally continue to be recognized over time as the Company satisfies the performance obligations in the contracts. The Company is also prepared
to meet the disclosure requirements of the standard, which are significant and incremental to the current disclosures.
to meet the disclosure requirements of the standard, which are significant and incremental to the current disclosures.
In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model
In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model
that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as
that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as
either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for the Company’s
either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for the Company’s
annual and interim periods beginning on January 1, 2019. A modified retrospective transition approach is required for lessees for capital and operating leases
annual and interim periods beginning on January 1, 2019. A modified retrospective transition approach is required for lessees for capital and operating leases
existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.
existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.
The Company is in the process of evaluating the impact of the standard on the Company's financial statements. As a lessee, certain of the Company's various leases
The Company is in the process of evaluating the impact of the standard on the Company's financial statements. As a lessee, certain of the Company's various leases
under existing guidance are classified as operating leases that are not recorded on the balance sheet but are recorded in the statement of operations as expense is
under existing guidance are classified as operating leases that are not recorded on the balance sheet but are recorded in the statement of operations as expense is
incurred. Upon adoption of the standard, the Company will be required to record substantially all leases on the balance sheet as a ROU asset and a lease liability.
incurred. Upon adoption of the standard, the Company will be required to record substantially all leases on the balance sheet as a ROU asset and a lease liability.
The timing of expense recognition and classification in the statement of operations could change based on the classification of leases as either operating or
The timing of expense recognition and classification in the statement of operations could change based on the classification of leases as either operating or
financing.
financing.
In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash
In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash
Payments (“ASU 2016-15”). ASU 2016-15 was issued to decrease the diversity in practice of how certain cash receipts and cash payments are presented and
Payments (“ASU 2016-15”). ASU 2016-15 was issued to decrease the diversity in practice of how certain cash receipts and cash payments are presented and
classified in the statement of cash flows by providing guidance on
classified in the statement of cash flows by providing guidance on
eight specific cash flow issues. ASU 2016-15 is effective for the Company’s annual and interim periods beginning on January 1, 2018, with retrospective
eight specific cash flow issues. ASU 2016-15 is effective for the Company’s annual and interim periods beginning on January 1, 2018, with retrospective
application required. The adoption of the standard is not expected to have a material impact on the Company's financial statements.
application required. The adoption of the standard is not expected to have a material impact on the Company's financial statements.
In November 2016, the FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-
In November 2016, the FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-
18 requires that the statement of cash flows include restricted cash in the beginning and end-of-period total amounts shown and that the statement of cash flows
18 requires that the statement of cash flows include restricted cash in the beginning and end-of-period total amounts shown and that the statement of cash flows
explain the changes in restricted cash during the period. ASU 2016-18 is effective for the Company's annual and interim periods beginning on January 1, 2018.
explain the changes in restricted cash during the period. ASU 2016-18 is effective for the Company's annual and interim periods beginning on January 1, 2018.
Retrospective application is required. The adoption of the standard is not expected to have a material impact on the Company's financial statements.
Retrospective application is required. The adoption of the standard is not expected to have a material impact on the Company's financial statements.
In January 2017, the FASB issued Accounting Standards Update 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU
In January 2017, the FASB issued Accounting Standards Update 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU
2017-01”). ASU 2017-01 provides guidance in determining when a set of assets and activities meets the definition of a business. ASU 2017-01 is effective for the
2017-01”). ASU 2017-01 provides guidance in determining when a set of assets and activities meets the definition of a business. ASU 2017-01 is effective for the
Company's annual and interim periods beginning on January 1, 2018. Prospective application is required. The adoption of the standard is not expected to have a
Company's annual and interim periods beginning on January 1, 2018. Prospective application is required. The adoption of the standard is not expected to have a
material impact on the Company's financial statements.
material impact on the Company's financial statements.
In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which
Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which
requires computation of the implied fair value of a reporting unit's goodwill. The amount of a goodwill impairment will now be the amount by which a reporting
requires computation of the implied fair value of a reporting unit's goodwill. The amount of a goodwill impairment will now be the amount by which a reporting
unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for the Company's annual goodwill
unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for the Company's annual goodwill
impairment test and any interim tests during the Company's annual and interim periods beginning on January 1, 2020. Early adoption is permitted for goodwill
impairment test and any interim tests during the Company's annual and interim periods beginning on January 1, 2020. Early adoption is permitted for goodwill
impairment tests performed on testing dates after January 1, 2017. Prospective application is required. The adoption of the standard is not expected to have a
impairment tests performed on testing dates after January 1, 2017. Prospective application is required. The adoption of the standard is not expected to have a
material impact on the Company's financial statements.
material impact on the Company's financial statements.
In February 2017, the FASB issued Accounting Standards Update 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets
In February 2017, the FASB issued Accounting Standards Update 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets
(Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). ASU 2017-
(Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). ASU 2017-
05 clarifies the scope of Subtopic 610-20, which provides guidance for recognizing gains and losses from the sale or transfer of nonfinancial assets in contracts
05 clarifies the scope of Subtopic 610-20, which provides guidance for recognizing gains and losses from the sale or transfer of nonfinancial assets in contracts
with noncustomers. ASU 2017-05 also provides guidance for partial sales of nonfinancial assets. ASU 2017-05 is effective for the Company’s annual and interim
with noncustomers. ASU 2017-05 also provides guidance for partial sales of nonfinancial assets. ASU 2017-05 is effective for the Company’s annual and interim
periods beginning on January 1, 2018. The guidance permits the use of either a retrospective or cumulative effect transition method. The adoption of the standard is
periods beginning on January 1, 2018. The guidance permits the use of either a retrospective or cumulative effect transition method. The adoption of the standard is
not expected to have a material impact on the Company's financial statements.
not expected to have a material impact on the Company's financial statements.
In May 2017, the FASB issued Accounting Standards Update 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting
In May 2017, the FASB issued Accounting Standards Update 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting
(“ASU 2017-09”). ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply
(“ASU 2017-09”). ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply
modification accounting under ASC 718. ASU 2017-09 is effective for the Company’s annual and interim periods beginning on January 1, 2018. ASU 2017-09 is
modification accounting under ASC 718. ASU 2017-09 is effective for the Company’s annual and interim periods beginning on January 1, 2018. ASU 2017-09 is
to be applied prospectively to an award modified on or after the adoption date. The adoption of the standard is not expected to have a material impact on the
to be applied prospectively to an award modified on or after the adoption date. The adoption of the standard is not expected to have a material impact on the
Company's financial statements.
Company's financial statements.
3. Acquisitions
3. Acquisitions
For all acquisitions, the Company allocates the purchase price to assets acquired and liabilities assumed as of the date of acquisition based on the estimated fair
For all acquisitions, the Company allocates the purchase price to assets acquired and liabilities assumed as of the date of acquisition based on the estimated fair
values at the date of acquisition. The excess of the fair value of the purchase consideration over the fair values of the identifiable assets and liabilities is recorded as
values at the date of acquisition. The excess of the fair value of the purchase consideration over the fair values of the identifiable assets and liabilities is recorded as
goodwill. Management makes significant estimates and assumptions when determining the fair value of assets acquired and liabilities assumed. These estimates
goodwill. Management makes significant estimates and assumptions when determining the fair value of assets acquired and liabilities assumed. These estimates
include, but are not limited to, discount rates, projected future net sales, projected future expected cash flows and useful lives.
include, but are not limited to, discount rates, projected future net sales, projected future expected cash flows and useful lives.
Acquisition of Texas Plywood & Lumber Company, Inc.
Acquisition of Texas Plywood & Lumber Company, Inc.
On April 3, 2017 , the Company acquired substantially all of the assets and assumed certain liabilities of Texas Plywood & Lumber Company, Inc. (“TexPly”), a
On April 3, 2017 , the Company acquired substantially all of the assets and assumed certain liabilities of Texas Plywood & Lumber Company, Inc. (“TexPly”), a
supplier of production millwork and doors in the Dallas-Fort Worth area, for a purchase price of $31.7 million , of which $2.5 million was deposited in an escrow
supplier of production millwork and doors in the Dallas-Fort Worth area, for a purchase price of $31.7 million , of which $2.5 million was deposited in an escrow
account to fund post-closing adjustments and other indemnification obligations for a period of one year from the closing date of the acquisition. This acquisition
account to fund post-closing adjustments and other indemnification obligations for a period of one year from the closing date of the acquisition. This acquisition
enhances the Company’s value-added offerings and footprint in the Dallas-Fort Worth market.
enhances the Company’s value-added offerings and footprint in the Dallas-Fort Worth market.
The acquisition was accounted for using the acquisition method of accounting under ASC 805, Business Combinations ("ASC 805"), whereby the results of
The acquisition was accounted for using the acquisition method of accounting under ASC 805, Business Combinations ("ASC 805"), whereby the results of
operations of TexPly are included in the Company’s consolidated financial statements beginning on the acquisition date. The purchase price allocation resulted in
operations of TexPly are included in the Company’s consolidated financial statements beginning on the acquisition date. The purchase price allocation resulted in
the recognition of goodwill of $3.6 million , a customer relationship
the recognition of goodwill of $3.6 million , a customer relationship
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Comprehensive income (loss)
Comprehensive income (loss)
Comprehensive income (loss) is equal to the net income (loss) for all periods presented.
Comprehensive income (loss) is equal to the net income (loss) for all periods presented.
Recently adopted accounting pronouncements
Recently adopted accounting pronouncements
In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-11, Simplifying the Measurement of Inventory
In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-11, Simplifying the Measurement of Inventory
(“ASU 2015-11”). ASU 2015-11 requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Prior to the
(“ASU 2015-11”). ASU 2015-11 requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Prior to the
issuance of the standard, inventory was measured at the lower of cost or market, where market was defined as replacement cost, with a ceiling of net realizable
issuance of the standard, inventory was measured at the lower of cost or market, where market was defined as replacement cost, with a ceiling of net realizable
value and floor of net realizable value less a normal profit margin. Inventory measured using last-in, first-out (LIFO) and the retail inventory method are not
value and floor of net realizable value less a normal profit margin. Inventory measured using last-in, first-out (LIFO) and the retail inventory method are not
impacted by the new guidance. Prospective application is required and early adoption is permitted. ASU 2015-11 became effective for the Company’s annual and
impacted by the new guidance. Prospective application is required and early adoption is permitted. ASU 2015-11 became effective for the Company’s annual and
interim periods beginning on January 1, 2017. The adoption of the guidance did not have a material impact on the Company's financial statements.
interim periods beginning on January 1, 2017. The adoption of the guidance did not have a material impact on the Company's financial statements.
Recently issued accounting pronouncements not yet adopted
Recently issued accounting pronouncements not yet adopted
In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), and issued subsequent
In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), and issued subsequent
amendments to the initial guidance within Accounting Standards Update 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations
amendments to the initial guidance within Accounting Standards Update 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations
(“ASU 2016-08”) issued in March 2016, Accounting Standards Update 2016-10, Revenue from Contracts with Customers, Identifying Performance Obligations
(“ASU 2016-08”) issued in March 2016, Accounting Standards Update 2016-10, Revenue from Contracts with Customers, Identifying Performance Obligations
and Licensing (“ASU 2016-10”) issued in April 2016, Accounting Standards Update 2016-12, Revenue from Contracts with Customers, Narrow-Scope
and Licensing (“ASU 2016-10”) issued in April 2016, Accounting Standards Update 2016-12, Revenue from Contracts with Customers, Narrow-Scope
Improvements and Practical Expedients (“ASU 2016-12”) issued in May 2016 and Accounting Standards Update 2016-20, Technical Corrections and
Improvements and Practical Expedients (“ASU 2016-12”) issued in May 2016 and Accounting Standards Update 2016-20, Technical Corrections and
Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20”) issued in December 2016 (ASU 2014-09, ASU 2016-08, ASU 2016-10,
Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20”) issued in December 2016 (ASU 2014-09, ASU 2016-08, ASU 2016-10,
ASU 2016-12 and ASU 2016-20 collectively “Topic 606”). Topic 606 provides a comprehensive revenue recognition model requiring companies to recognize
ASU 2016-12 and ASU 2016-20 collectively “Topic 606”). Topic 606 provides a comprehensive revenue recognition model requiring companies to recognize
revenue for the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.
revenue for the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.
The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In
The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In
July 2015, the FASB voted to defer the effective date of ASU 2014-09 by one year, and therefore, the standard is effective for the Company’s annual and interim
July 2015, the FASB voted to defer the effective date of ASU 2014-09 by one year, and therefore, the standard is effective for the Company’s annual and interim
periods beginning on January 1, 2018. The guidance permits the use of either a full retrospective or modified retrospective transition method. The Company will
periods beginning on January 1, 2018. The guidance permits the use of either a full retrospective or modified retrospective transition method. The Company will
utilize the modified retrospective transition method, which recognizes the cumulative effect of initially applying the standard in retained earnings on the date of
utilize the modified retrospective transition method, which recognizes the cumulative effect of initially applying the standard in retained earnings on the date of
adoption, utilizing certain practical expedients as defined in Topic 606. The Company has evaluated the new standard against its existing accounting policies and
adoption, utilizing certain practical expedients as defined in Topic 606. The Company has evaluated the new standard against its existing accounting policies and
practices, including reviewing purchase orders, invoices, shipping terms, conducting questionnaires with finance and operations personnel and reviewing contracts
practices, including reviewing purchase orders, invoices, shipping terms, conducting questionnaires with finance and operations personnel and reviewing contracts
with customers. The adoption of the standard is not expected to have a material impact on the timing of revenue recognition or amount of revenue recognized from
with customers. The adoption of the standard is not expected to have a material impact on the timing of revenue recognition or amount of revenue recognized from
the Company's building products contracts. Revenue for building products contracts will continue to be recognized at a point in time, when control of the promised
the Company's building products contracts. Revenue for building products contracts will continue to be recognized at a point in time, when control of the promised
goods is transferred to the customer, with the exception of certain product offerings which are customized to customer specifications and meet the criteria to be
goods is transferred to the customer, with the exception of certain product offerings which are customized to customer specifications and meet the criteria to be
recognized over time, which is consistent with the Company’s current accounting. The Company has not identified any information to date that would indicate that
recognized over time, which is consistent with the Company’s current accounting. The Company has not identified any information to date that would indicate that
the adoption of Topic 606 will have a material impact on the accounting for the Company’s construction services contracts. Revenue for construction services
the adoption of Topic 606 will have a material impact on the accounting for the Company’s construction services contracts. Revenue for construction services
contracts will generally continue to be recognized over time as the Company satisfies the performance obligations in the contracts. The Company is also prepared
contracts will generally continue to be recognized over time as the Company satisfies the performance obligations in the contracts. The Company is also prepared
to meet the disclosure requirements of the standard, which are significant and incremental to the current disclosures.
to meet the disclosure requirements of the standard, which are significant and incremental to the current disclosures.
In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model
In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model
that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as
that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as
either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for the Company’s
either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for the Company’s
annual and interim periods beginning on January 1, 2019. A modified retrospective transition approach is required for lessees for capital and operating leases
annual and interim periods beginning on January 1, 2019. A modified retrospective transition approach is required for lessees for capital and operating leases
existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.
existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.
The Company is in the process of evaluating the impact of the standard on the Company's financial statements. As a lessee, certain of the Company's various leases
The Company is in the process of evaluating the impact of the standard on the Company's financial statements. As a lessee, certain of the Company's various leases
under existing guidance are classified as operating leases that are not recorded on the balance sheet but are recorded in the statement of operations as expense is
under existing guidance are classified as operating leases that are not recorded on the balance sheet but are recorded in the statement of operations as expense is
incurred. Upon adoption of the standard, the Company will be required to record substantially all leases on the balance sheet as a ROU asset and a lease liability.
incurred. Upon adoption of the standard, the Company will be required to record substantially all leases on the balance sheet as a ROU asset and a lease liability.
The timing of expense recognition and classification in the statement of operations could change based on the classification of leases as either operating or
The timing of expense recognition and classification in the statement of operations could change based on the classification of leases as either operating or
financing.
financing.
In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash
In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash
Payments (“ASU 2016-15”). ASU 2016-15 was issued to decrease the diversity in practice of how certain cash receipts and cash payments are presented and
Payments (“ASU 2016-15”). ASU 2016-15 was issued to decrease the diversity in practice of how certain cash receipts and cash payments are presented and
classified in the statement of cash flows by providing guidance on
classified in the statement of cash flows by providing guidance on
eight specific cash flow issues. ASU 2016-15 is effective for the Company’s annual and interim periods beginning on January 1, 2018, with retrospective
eight specific cash flow issues. ASU 2016-15 is effective for the Company’s annual and interim periods beginning on January 1, 2018, with retrospective
application required. The adoption of the standard is not expected to have a material impact on the Company's financial statements.
application required. The adoption of the standard is not expected to have a material impact on the Company's financial statements.
In November 2016, the FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-
In November 2016, the FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-
18 requires that the statement of cash flows include restricted cash in the beginning and end-of-period total amounts shown and that the statement of cash flows
18 requires that the statement of cash flows include restricted cash in the beginning and end-of-period total amounts shown and that the statement of cash flows
explain the changes in restricted cash during the period. ASU 2016-18 is effective for the Company's annual and interim periods beginning on January 1, 2018.
explain the changes in restricted cash during the period. ASU 2016-18 is effective for the Company's annual and interim periods beginning on January 1, 2018.
Retrospective application is required. The adoption of the standard is not expected to have a material impact on the Company's financial statements.
Retrospective application is required. The adoption of the standard is not expected to have a material impact on the Company's financial statements.
In January 2017, the FASB issued Accounting Standards Update 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU
In January 2017, the FASB issued Accounting Standards Update 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU
2017-01”). ASU 2017-01 provides guidance in determining when a set of assets and activities meets the definition of a business. ASU 2017-01 is effective for the
2017-01”). ASU 2017-01 provides guidance in determining when a set of assets and activities meets the definition of a business. ASU 2017-01 is effective for the
Company's annual and interim periods beginning on January 1, 2018. Prospective application is required. The adoption of the standard is not expected to have a
Company's annual and interim periods beginning on January 1, 2018. Prospective application is required. The adoption of the standard is not expected to have a
material impact on the Company's financial statements.
material impact on the Company's financial statements.
In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which
Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which
requires computation of the implied fair value of a reporting unit's goodwill. The amount of a goodwill impairment will now be the amount by which a reporting
requires computation of the implied fair value of a reporting unit's goodwill. The amount of a goodwill impairment will now be the amount by which a reporting
unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for the Company's annual goodwill
unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for the Company's annual goodwill
impairment test and any interim tests during the Company's annual and interim periods beginning on January 1, 2020. Early adoption is permitted for goodwill
impairment test and any interim tests during the Company's annual and interim periods beginning on January 1, 2020. Early adoption is permitted for goodwill
impairment tests performed on testing dates after January 1, 2017. Prospective application is required. The adoption of the standard is not expected to have a
impairment tests performed on testing dates after January 1, 2017. Prospective application is required. The adoption of the standard is not expected to have a
material impact on the Company's financial statements.
material impact on the Company's financial statements.
In February 2017, the FASB issued Accounting Standards Update 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets
In February 2017, the FASB issued Accounting Standards Update 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets
(Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). ASU 2017-
(Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). ASU 2017-
05 clarifies the scope of Subtopic 610-20, which provides guidance for recognizing gains and losses from the sale or transfer of nonfinancial assets in contracts
05 clarifies the scope of Subtopic 610-20, which provides guidance for recognizing gains and losses from the sale or transfer of nonfinancial assets in contracts
with noncustomers. ASU 2017-05 also provides guidance for partial sales of nonfinancial assets. ASU 2017-05 is effective for the Company’s annual and interim
with noncustomers. ASU 2017-05 also provides guidance for partial sales of nonfinancial assets. ASU 2017-05 is effective for the Company’s annual and interim
periods beginning on January 1, 2018. The guidance permits the use of either a retrospective or cumulative effect transition method. The adoption of the standard is
periods beginning on January 1, 2018. The guidance permits the use of either a retrospective or cumulative effect transition method. The adoption of the standard is
not expected to have a material impact on the Company's financial statements.
not expected to have a material impact on the Company's financial statements.
In May 2017, the FASB issued Accounting Standards Update 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting
In May 2017, the FASB issued Accounting Standards Update 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting
(“ASU 2017-09”). ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply
(“ASU 2017-09”). ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply
modification accounting under ASC 718. ASU 2017-09 is effective for the Company’s annual and interim periods beginning on January 1, 2018. ASU 2017-09 is
modification accounting under ASC 718. ASU 2017-09 is effective for the Company’s annual and interim periods beginning on January 1, 2018. ASU 2017-09 is
to be applied prospectively to an award modified on or after the adoption date. The adoption of the standard is not expected to have a material impact on the
to be applied prospectively to an award modified on or after the adoption date. The adoption of the standard is not expected to have a material impact on the
Company's financial statements.
Company's financial statements.
3. Acquisitions
3. Acquisitions
For all acquisitions, the Company allocates the purchase price to assets acquired and liabilities assumed as of the date of acquisition based on the estimated fair
For all acquisitions, the Company allocates the purchase price to assets acquired and liabilities assumed as of the date of acquisition based on the estimated fair
values at the date of acquisition. The excess of the fair value of the purchase consideration over the fair values of the identifiable assets and liabilities is recorded as
values at the date of acquisition. The excess of the fair value of the purchase consideration over the fair values of the identifiable assets and liabilities is recorded as
goodwill. Management makes significant estimates and assumptions when determining the fair value of assets acquired and liabilities assumed. These estimates
goodwill. Management makes significant estimates and assumptions when determining the fair value of assets acquired and liabilities assumed. These estimates
include, but are not limited to, discount rates, projected future net sales, projected future expected cash flows and useful lives.
include, but are not limited to, discount rates, projected future net sales, projected future expected cash flows and useful lives.
Acquisition of Texas Plywood & Lumber Company, Inc.
Acquisition of Texas Plywood & Lumber Company, Inc.
On April 3, 2017 , the Company acquired substantially all of the assets and assumed certain liabilities of Texas Plywood & Lumber Company, Inc. (“TexPly”), a
On April 3, 2017 , the Company acquired substantially all of the assets and assumed certain liabilities of Texas Plywood & Lumber Company, Inc. (“TexPly”), a
supplier of production millwork and doors in the Dallas-Fort Worth area, for a purchase price of $31.7 million , of which $2.5 million was deposited in an escrow
supplier of production millwork and doors in the Dallas-Fort Worth area, for a purchase price of $31.7 million , of which $2.5 million was deposited in an escrow
account to fund post-closing adjustments and other indemnification obligations for a period of one year from the closing date of the acquisition. This acquisition
account to fund post-closing adjustments and other indemnification obligations for a period of one year from the closing date of the acquisition. This acquisition
enhances the Company’s value-added offerings and footprint in the Dallas-Fort Worth market.
enhances the Company’s value-added offerings and footprint in the Dallas-Fort Worth market.
The acquisition was accounted for using the acquisition method of accounting under ASC 805, Business Combinations ("ASC 805"), whereby the results of
The acquisition was accounted for using the acquisition method of accounting under ASC 805, Business Combinations ("ASC 805"), whereby the results of
operations of TexPly are included in the Company’s consolidated financial statements beginning on the acquisition date. The purchase price allocation resulted in
operations of TexPly are included in the Company’s consolidated financial statements beginning on the acquisition date. The purchase price allocation resulted in
the recognition of goodwill of $3.6 million , a customer relationship
the recognition of goodwill of $3.6 million , a customer relationship
58
58
59
59
The final allocated fair values of acquired assets and assumed liabilities is summarized as follows:
The final allocated fair values of acquired assets and assumed liabilities is summarized as follows:
intangible asset of $13.6 million , accounts receivable of $5.2 million , inventory of $3.9 million and real property of $5.4 million , as well as other operating assets
intangible asset of $13.6 million , accounts receivable of $5.2 million , inventory of $3.9 million and real property of $5.4 million , as well as other operating assets
and liabilities. The customer relationship intangible asset has a useful life of 13 years . Goodwill represents the future economic benefits expected to arise from
and liabilities. The customer relationship intangible asset has a useful life of 13 years . Goodwill represents the future economic benefits expected to arise from
other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships, as well as expected
other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships, as well as expected
future synergies. All of the goodwill recognized is expected to be deductible for tax purposes.
future synergies. All of the goodwill recognized is expected to be deductible for tax purposes.
For the year ended December 31, 2016, TexPly generated net sales of approximately $55.2 million . The Company incurred transaction costs of $0.3 million for the
For the year ended December 31, 2016, TexPly generated net sales of approximately $55.2 million . The Company incurred transaction costs of $0.3 million for the
year ended December 31, 2017 , which are included in selling, general and administrative expenses in the consolidated statements of operations.
year ended December 31, 2017 , which are included in selling, general and administrative expenses in the consolidated statements of operations.
Deemed (for accounting purposes only) issuance of BMC stock to SBS shareholders
Deemed (for accounting purposes only) issuance of BMC stock to SBS shareholders
The final calculation of consideration transferred is as follows:
The final calculation of consideration transferred is as follows:
(in thousands, except share and per share data)
(in thousands, except share and per share data)
Number of SBS shares outstanding on the closing date of the Merger
Number of SBS shares outstanding on the closing date of the Merger
SBS common stock price per share on the closing date of the Merger
SBS common stock price per share on the closing date of the Merger
Acquisition of Code Plus Components, LLC
Acquisition of Code Plus Components, LLC
On March 27, 2017 , the Company acquired substantially all of the assets and assumed certain liabilities of Code Plus Components, LLC (“Code Plus”), a
On March 27, 2017 , the Company acquired substantially all of the assets and assumed certain liabilities of Code Plus Components, LLC (“Code Plus”), a
manufacturer of structural components located in Martinsburg, West Virginia, for a purchase price of $7.1 million . This acquisition allowed the Company to add
manufacturer of structural components located in Martinsburg, West Virginia, for a purchase price of $7.1 million . This acquisition allowed the Company to add
truss manufacturing capability to its value-added offerings in the Washington, DC metro area. The purchase price includes an initial holdback of $0.4 million due
truss manufacturing capability to its value-added offerings in the Washington, DC metro area. The purchase price includes an initial holdback of $0.4 million due
to the sellers one year from the closing date. The holdback amount may be reduced under certain circumstances. Additionally, the acquisition includes an earnout
to the sellers one year from the closing date. The holdback amount may be reduced under certain circumstances. Additionally, the acquisition includes an earnout
provision that would require the Company to pay the sellers up to an additional $0.8 million upon the acquired operations achieving certain performance targets
provision that would require the Company to pay the sellers up to an additional $0.8 million upon the acquired operations achieving certain performance targets
from the acquisition date through December 31, 2018. The Company funded the transaction through borrowings on the Company’s revolving line of credit.
from the acquisition date through December 31, 2018. The Company funded the transaction through borrowings on the Company’s revolving line of credit.
The acquisition was accounted for using the acquisition method of accounting under ASC 805, whereby the results of operations of Code Plus are included in the
The acquisition was accounted for using the acquisition method of accounting under ASC 805, whereby the results of operations of Code Plus are included in the
Company’s consolidated financial statements beginning on the acquisition date. The purchase price allocation resulted in the recognition of goodwill of $3.4
Company’s consolidated financial statements beginning on the acquisition date. The purchase price allocation resulted in the recognition of goodwill of $3.4
million , a customer relationship intangible asset of $2.3 million and a non-compete agreement intangible asset of $0.5 million , as well as other operating assets
million , a customer relationship intangible asset of $2.3 million and a non-compete agreement intangible asset of $0.5 million , as well as other operating assets
and liabilities. The purchase price allocation reflects a measurement period adjustment which increased goodwill and reduced the customer relationship intangible
and liabilities. The purchase price allocation reflects a measurement period adjustment which increased goodwill and reduced the customer relationship intangible
asset by $1.1 million . The customer relationship intangible asset and non-compete agreement intangible asset have useful lives of 12 years and 5 years ,
asset by $1.1 million . The customer relationship intangible asset and non-compete agreement intangible asset have useful lives of 12 years and 5 years ,
respectively. Goodwill represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition,
respectively. Goodwill represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition,
including assembled workforce and non-contractual relationships, as well as expected future synergies. All of the goodwill recognized is expected to be deductible
including assembled workforce and non-contractual relationships, as well as expected future synergies. All of the goodwill recognized is expected to be deductible
for tax purposes.
for tax purposes.
For the year ended December 31, 2016, Code Plus generated net sales of approximately $14.2 million . The Company incurred transaction costs of $0.1 million for
For the year ended December 31, 2016, Code Plus generated net sales of approximately $14.2 million . The Company incurred transaction costs of $0.1 million for
the year ended December 31, 2017 , which are included in selling, general and administrative expenses in the consolidated statements of operations.
the year ended December 31, 2017 , which are included in selling, general and administrative expenses in the consolidated statements of operations.
Net sales for Code Plus and TexPly, in aggregate, included in the consolidated statements of operations were $54.3 million for the year ended December 31, 2017 .
Net sales for Code Plus and TexPly, in aggregate, included in the consolidated statements of operations were $54.3 million for the year ended December 31, 2017 .
Estimated pre-tax earnings of Code Plus and TexPly, in aggregate, included in the consolidated statements of operations were $3.2 million for the year ended
Estimated pre-tax earnings of Code Plus and TexPly, in aggregate, included in the consolidated statements of operations were $3.2 million for the year ended
December 31, 2017 . The impact of the Code Plus and TexPly acquisitions was not considered significant for the reporting of pro forma financial information.
December 31, 2017 . The impact of the Code Plus and TexPly acquisitions was not considered significant for the reporting of pro forma financial information.
Merger with Stock Building Supply Holdings, Inc.
Merger with Stock Building Supply Holdings, Inc.
As described in Note 1, BMHC and SBS were merged in an all-stock transaction on December 1, 2015 . The Merger was accounted for as a reverse acquisition
As described in Note 1, BMHC and SBS were merged in an all-stock transaction on December 1, 2015 . The Merger was accounted for as a reverse acquisition
with BMHC deemed to be the acquirer solely for accounting purposes. Accordingly, the consideration transferred has been allocated to the acquired assets and
with BMHC deemed to be the acquirer solely for accounting purposes. Accordingly, the consideration transferred has been allocated to the acquired assets and
liabilities of SBS based upon their estimated fair values. The consideration transferred was calculated as the number of SBS common shares outstanding
liabilities of SBS based upon their estimated fair values. The consideration transferred was calculated as the number of SBS common shares outstanding
immediately prior to the Merger multiplied by the closing stock price of SBS on the closing date of the Merger. In addition, consideration transferred includes the
immediately prior to the Merger multiplied by the closing stock price of SBS on the closing date of the Merger. In addition, consideration transferred includes the
fair value of outstanding SBS restricted stock units and stock options that vested upon consummation of the Merger, as well as the fair value of unvested SBS stock
fair value of outstanding SBS restricted stock units and stock options that vested upon consummation of the Merger, as well as the fair value of unvested SBS stock
options multiplied by the portion of the requisite service period that elapsed prior to the closing date of the Merger.
options multiplied by the portion of the requisite service period that elapsed prior to the closing date of the Merger.
60
60
Fair value of SBS equity awards
Fair value of SBS equity awards
Total consideration transferred
Total consideration transferred
(in thousands)
(in thousands)
Cash and cash equivalents
Cash and cash equivalents
Accounts receivable
Accounts receivable
Inventories
Inventories
Other current assets
Other current assets
Property and equipment
Property and equipment
Customer relationships
Customer relationships
Trademarks
Trademarks
Non-compete agreements
Non-compete agreements
Favorable lease agreements
Favorable lease agreements
Other long-term assets
Other long-term assets
Accounts payable
Accounts payable
Accrued expenses and other liabilities
Accrued expenses and other liabilities
Unfavorable lease agreements
Unfavorable lease agreements
Current portion of capital lease obligations
Current portion of capital lease obligations
Long-term portion of capital lease obligations
Long-term portion of capital lease obligations
Other current liabilities
Other current liabilities
Long-term debt
Long-term debt
Deferred income taxes
Deferred income taxes
Other long-term liabilities
Other long-term liabilities
Identifiable net assets acquired
Identifiable net assets acquired
Goodwill
Goodwill
Total net assets acquired
Total net assets acquired
$
$
$
$
$
$
$
$
26,186,111
26,186,111
16.99
16.99
444,902
444,902
8,488
8,488
453,390
453,390
6,342
6,342
124,526
124,526
115,888
115,888
26,504
26,504
125,717
125,717
129,800
129,800
4,500
4,500
6,112
6,112
5,050
5,050
1,302
1,302
(77,062)
(77,062)
(40,652)
(40,652)
(4,550)
(4,550)
(3,275)
(3,275)
(6,664)
(6,664)
(67,713)
(67,713)
(75,006)
(75,006)
(11,612)
(11,612)
(5,666)
(5,666)
253,541
253,541
199,849
199,849
453,390
453,390
The gross contractual value and fair value of accounts receivable acquired were $129.2 million and $124.5 million , respectively.
The gross contractual value and fair value of accounts receivable acquired were $129.2 million and $124.5 million , respectively.
Inventory was valued at its estimated net realizable value, which is defined as expected sales price less cost to sell, plus a reasonable margin for the selling effort.
Inventory was valued at its estimated net realizable value, which is defined as expected sales price less cost to sell, plus a reasonable margin for the selling effort.
The step-up in the basis of SBS's inventory totaled $13.2 million , of which $2.9 million was recognized in cost of goods sold in the Company's consolidated
The step-up in the basis of SBS's inventory totaled $13.2 million , of which $2.9 million was recognized in cost of goods sold in the Company's consolidated
statements of operations during the year ended December 31, 2016 and $10.3 million was recognized during the year ended December 31, 2015.
statements of operations during the year ended December 31, 2016 and $10.3 million was recognized during the year ended December 31, 2015.
Personal property assets were valued using the cost approach and/or market approach, real property assets were valued using the sales comparison and/or cost
Personal property assets were valued using the cost approach and/or market approach, real property assets were valued using the sales comparison and/or cost
approach, customer relationships were valued using the excess earnings method, trademarks were valued using the relief from royalty method and non-compete
approach, customer relationships were valued using the excess earnings method, trademarks were valued using the relief from royalty method and non-compete
agreements were valued using the lost profit method. In estimating the fair value of favorable and unfavorable lease agreements, market rents were estimated for
agreements were valued using the lost profit method. In estimating the fair value of favorable and unfavorable lease agreements, market rents were estimated for
each of SBS’s leased locations. If the contractual rents were considered to be below/above the market rent, a favorable/unfavorable lease agreement was valued by
each of SBS’s leased locations. If the contractual rents were considered to be below/above the market rent, a favorable/unfavorable lease agreement was valued by
discounting the difference between the contractual rent and estimated market rates over the remaining lease term.
discounting the difference between the contractual rent and estimated market rates over the remaining lease term.
61
61
intangible asset of $13.6 million , accounts receivable of $5.2 million , inventory of $3.9 million and real property of $5.4 million , as well as other operating assets
intangible asset of $13.6 million , accounts receivable of $5.2 million , inventory of $3.9 million and real property of $5.4 million , as well as other operating assets
The final calculation of consideration transferred is as follows:
The final calculation of consideration transferred is as follows:
and liabilities. The customer relationship intangible asset has a useful life of 13 years . Goodwill represents the future economic benefits expected to arise from
and liabilities. The customer relationship intangible asset has a useful life of 13 years . Goodwill represents the future economic benefits expected to arise from
other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships, as well as expected
other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships, as well as expected
future synergies. All of the goodwill recognized is expected to be deductible for tax purposes.
future synergies. All of the goodwill recognized is expected to be deductible for tax purposes.
For the year ended December 31, 2016, TexPly generated net sales of approximately $55.2 million . The Company incurred transaction costs of $0.3 million for the
For the year ended December 31, 2016, TexPly generated net sales of approximately $55.2 million . The Company incurred transaction costs of $0.3 million for the
year ended December 31, 2017 , which are included in selling, general and administrative expenses in the consolidated statements of operations.
year ended December 31, 2017 , which are included in selling, general and administrative expenses in the consolidated statements of operations.
Acquisition of Code Plus Components, LLC
Acquisition of Code Plus Components, LLC
On March 27, 2017 , the Company acquired substantially all of the assets and assumed certain liabilities of Code Plus Components, LLC (“Code Plus”), a
On March 27, 2017 , the Company acquired substantially all of the assets and assumed certain liabilities of Code Plus Components, LLC (“Code Plus”), a
manufacturer of structural components located in Martinsburg, West Virginia, for a purchase price of $7.1 million . This acquisition allowed the Company to add
manufacturer of structural components located in Martinsburg, West Virginia, for a purchase price of $7.1 million . This acquisition allowed the Company to add
truss manufacturing capability to its value-added offerings in the Washington, DC metro area. The purchase price includes an initial holdback of $0.4 million due
truss manufacturing capability to its value-added offerings in the Washington, DC metro area. The purchase price includes an initial holdback of $0.4 million due
to the sellers one year from the closing date. The holdback amount may be reduced under certain circumstances. Additionally, the acquisition includes an earnout
to the sellers one year from the closing date. The holdback amount may be reduced under certain circumstances. Additionally, the acquisition includes an earnout
provision that would require the Company to pay the sellers up to an additional $0.8 million upon the acquired operations achieving certain performance targets
provision that would require the Company to pay the sellers up to an additional $0.8 million upon the acquired operations achieving certain performance targets
from the acquisition date through December 31, 2018. The Company funded the transaction through borrowings on the Company’s revolving line of credit.
from the acquisition date through December 31, 2018. The Company funded the transaction through borrowings on the Company’s revolving line of credit.
The acquisition was accounted for using the acquisition method of accounting under ASC 805, whereby the results of operations of Code Plus are included in the
The acquisition was accounted for using the acquisition method of accounting under ASC 805, whereby the results of operations of Code Plus are included in the
Company’s consolidated financial statements beginning on the acquisition date. The purchase price allocation resulted in the recognition of goodwill of $3.4
Company’s consolidated financial statements beginning on the acquisition date. The purchase price allocation resulted in the recognition of goodwill of $3.4
million , a customer relationship intangible asset of $2.3 million and a non-compete agreement intangible asset of $0.5 million , as well as other operating assets
million , a customer relationship intangible asset of $2.3 million and a non-compete agreement intangible asset of $0.5 million , as well as other operating assets
and liabilities. The purchase price allocation reflects a measurement period adjustment which increased goodwill and reduced the customer relationship intangible
and liabilities. The purchase price allocation reflects a measurement period adjustment which increased goodwill and reduced the customer relationship intangible
asset by $1.1 million . The customer relationship intangible asset and non-compete agreement intangible asset have useful lives of 12 years and 5 years ,
asset by $1.1 million . The customer relationship intangible asset and non-compete agreement intangible asset have useful lives of 12 years and 5 years ,
respectively. Goodwill represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition,
respectively. Goodwill represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition,
including assembled workforce and non-contractual relationships, as well as expected future synergies. All of the goodwill recognized is expected to be deductible
including assembled workforce and non-contractual relationships, as well as expected future synergies. All of the goodwill recognized is expected to be deductible
for tax purposes.
for tax purposes.
For the year ended December 31, 2016, Code Plus generated net sales of approximately $14.2 million . The Company incurred transaction costs of $0.1 million for
For the year ended December 31, 2016, Code Plus generated net sales of approximately $14.2 million . The Company incurred transaction costs of $0.1 million for
the year ended December 31, 2017 , which are included in selling, general and administrative expenses in the consolidated statements of operations.
the year ended December 31, 2017 , which are included in selling, general and administrative expenses in the consolidated statements of operations.
Net sales for Code Plus and TexPly, in aggregate, included in the consolidated statements of operations were $54.3 million for the year ended December 31, 2017 .
Net sales for Code Plus and TexPly, in aggregate, included in the consolidated statements of operations were $54.3 million for the year ended December 31, 2017 .
Estimated pre-tax earnings of Code Plus and TexPly, in aggregate, included in the consolidated statements of operations were $3.2 million for the year ended
Estimated pre-tax earnings of Code Plus and TexPly, in aggregate, included in the consolidated statements of operations were $3.2 million for the year ended
December 31, 2017 . The impact of the Code Plus and TexPly acquisitions was not considered significant for the reporting of pro forma financial information.
December 31, 2017 . The impact of the Code Plus and TexPly acquisitions was not considered significant for the reporting of pro forma financial information.
Merger with Stock Building Supply Holdings, Inc.
Merger with Stock Building Supply Holdings, Inc.
As described in Note 1, BMHC and SBS were merged in an all-stock transaction on December 1, 2015 . The Merger was accounted for as a reverse acquisition
As described in Note 1, BMHC and SBS were merged in an all-stock transaction on December 1, 2015 . The Merger was accounted for as a reverse acquisition
with BMHC deemed to be the acquirer solely for accounting purposes. Accordingly, the consideration transferred has been allocated to the acquired assets and
with BMHC deemed to be the acquirer solely for accounting purposes. Accordingly, the consideration transferred has been allocated to the acquired assets and
liabilities of SBS based upon their estimated fair values. The consideration transferred was calculated as the number of SBS common shares outstanding
liabilities of SBS based upon their estimated fair values. The consideration transferred was calculated as the number of SBS common shares outstanding
immediately prior to the Merger multiplied by the closing stock price of SBS on the closing date of the Merger. In addition, consideration transferred includes the
immediately prior to the Merger multiplied by the closing stock price of SBS on the closing date of the Merger. In addition, consideration transferred includes the
fair value of outstanding SBS restricted stock units and stock options that vested upon consummation of the Merger, as well as the fair value of unvested SBS stock
fair value of outstanding SBS restricted stock units and stock options that vested upon consummation of the Merger, as well as the fair value of unvested SBS stock
options multiplied by the portion of the requisite service period that elapsed prior to the closing date of the Merger.
options multiplied by the portion of the requisite service period that elapsed prior to the closing date of the Merger.
60
60
(in thousands, except share and per share data)
(in thousands, except share and per share data)
Number of SBS shares outstanding on the closing date of the Merger
Number of SBS shares outstanding on the closing date of the Merger
SBS common stock price per share on the closing date of the Merger
SBS common stock price per share on the closing date of the Merger
Deemed (for accounting purposes only) issuance of BMC stock to SBS shareholders
Deemed (for accounting purposes only) issuance of BMC stock to SBS shareholders
Fair value of SBS equity awards
Fair value of SBS equity awards
Total consideration transferred
Total consideration transferred
The final allocated fair values of acquired assets and assumed liabilities is summarized as follows:
The final allocated fair values of acquired assets and assumed liabilities is summarized as follows:
(in thousands)
(in thousands)
Cash and cash equivalents
Cash and cash equivalents
Accounts receivable
Accounts receivable
Inventories
Inventories
Other current assets
Other current assets
Property and equipment
Property and equipment
Customer relationships
Customer relationships
Trademarks
Trademarks
Non-compete agreements
Non-compete agreements
Favorable lease agreements
Favorable lease agreements
Other long-term assets
Other long-term assets
Accounts payable
Accounts payable
Accrued expenses and other liabilities
Accrued expenses and other liabilities
Unfavorable lease agreements
Unfavorable lease agreements
Current portion of capital lease obligations
Current portion of capital lease obligations
Other current liabilities
Other current liabilities
Long-term debt
Long-term debt
Deferred income taxes
Deferred income taxes
Long-term portion of capital lease obligations
Long-term portion of capital lease obligations
Other long-term liabilities
Other long-term liabilities
Identifiable net assets acquired
Identifiable net assets acquired
Goodwill
Goodwill
Total net assets acquired
Total net assets acquired
$
$
$
$
$
$
$
$
26,186,111
26,186,111
16.99
16.99
444,902
444,902
8,488
8,488
453,390
453,390
6,342
6,342
124,526
124,526
115,888
115,888
26,504
26,504
125,717
125,717
129,800
129,800
4,500
4,500
6,112
6,112
5,050
5,050
1,302
1,302
(77,062)
(77,062)
(40,652)
(40,652)
(4,550)
(4,550)
(3,275)
(3,275)
(6,664)
(6,664)
(67,713)
(67,713)
(75,006)
(75,006)
(11,612)
(11,612)
(5,666)
(5,666)
253,541
253,541
199,849
199,849
453,390
453,390
The gross contractual value and fair value of accounts receivable acquired were $129.2 million and $124.5 million , respectively.
The gross contractual value and fair value of accounts receivable acquired were $129.2 million and $124.5 million , respectively.
Inventory was valued at its estimated net realizable value, which is defined as expected sales price less cost to sell, plus a reasonable margin for the selling effort.
Inventory was valued at its estimated net realizable value, which is defined as expected sales price less cost to sell, plus a reasonable margin for the selling effort.
The step-up in the basis of SBS's inventory totaled $13.2 million , of which $2.9 million was recognized in cost of goods sold in the Company's consolidated
The step-up in the basis of SBS's inventory totaled $13.2 million , of which $2.9 million was recognized in cost of goods sold in the Company's consolidated
statements of operations during the year ended December 31, 2016 and $10.3 million was recognized during the year ended December 31, 2015.
statements of operations during the year ended December 31, 2016 and $10.3 million was recognized during the year ended December 31, 2015.
Personal property assets were valued using the cost approach and/or market approach, real property assets were valued using the sales comparison and/or cost
Personal property assets were valued using the cost approach and/or market approach, real property assets were valued using the sales comparison and/or cost
approach, customer relationships were valued using the excess earnings method, trademarks were valued using the relief from royalty method and non-compete
approach, customer relationships were valued using the excess earnings method, trademarks were valued using the relief from royalty method and non-compete
agreements were valued using the lost profit method. In estimating the fair value of favorable and unfavorable lease agreements, market rents were estimated for
agreements were valued using the lost profit method. In estimating the fair value of favorable and unfavorable lease agreements, market rents were estimated for
each of SBS’s leased locations. If the contractual rents were considered to be below/above the market rent, a favorable/unfavorable lease agreement was valued by
each of SBS’s leased locations. If the contractual rents were considered to be below/above the market rent, a favorable/unfavorable lease agreement was valued by
discounting the difference between the contractual rent and estimated market rates over the remaining lease term.
discounting the difference between the contractual rent and estimated market rates over the remaining lease term.
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61
The customer relationships, trademarks and non-compete agreements are being amortized over weighted average periods of 16.5 years , 3.8 years and 1.0 year ,
The customer relationships, trademarks and non-compete agreements are being amortized over weighted average periods of 16.5 years , 3.8 years and 1.0 year ,
respectively. Acquired property and equipment is being depreciated on a straight-line basis over the respective estimated remaining useful lives.
respectively. Acquired property and equipment is being depreciated on a straight-line basis over the respective estimated remaining useful lives.
Pro Forma Financial Information (Unaudited)
Pro Forma Financial Information (Unaudited)
Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed, and represents
Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed, and represents
the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and
the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and
non-contractual relationships, as well as expected future synergies. None of the goodwill recognized is expected to be tax deductible.
non-contractual relationships, as well as expected future synergies. None of the goodwill recognized is expected to be tax deductible.
Net sales and estimated pre-tax loss of Legacy SBS included in the consolidated statements of operations for the year ended December 31, 2015 were $103.6
Net sales and estimated pre-tax loss of Legacy SBS included in the consolidated statements of operations for the year ended December 31, 2015 were $103.6
million and $18.6 million , respectively.
million and $18.6 million , respectively.
The following unaudited pro forma combined results of operations give effect to the Merger and acquisitions of RBI and VNS by the Company as if SBS, RBI and
The following unaudited pro forma combined results of operations give effect to the Merger and acquisitions of RBI and VNS by the Company as if SBS, RBI and
VNS had been acquired on January 1, 2014, the beginning of the comparable prior annual period, applying certain assumptions and pro forma adjustments. These
VNS had been acquired on January 1, 2014, the beginning of the comparable prior annual period, applying certain assumptions and pro forma adjustments. These
pro forma adjustments primarily relate to depreciation expense on stepped up fixed assets, amortization of acquired intangibles, cost of goods sold expense related
pro forma adjustments primarily relate to depreciation expense on stepped up fixed assets, amortization of acquired intangibles, cost of goods sold expense related
to the sale of stepped up inventory, interest expense related to additional debt that would be needed to fund the acquisitions and the estimated impact of these
to the sale of stepped up inventory, interest expense related to additional debt that would be needed to fund the acquisitions and the estimated impact of these
adjustments on the Company's income tax provision. The unaudited pro forma consolidated results of operations are provided for illustrative purposes only and are
adjustments on the Company's income tax provision. The unaudited pro forma consolidated results of operations are provided for illustrative purposes only and are
not indicative of the Company's actual consolidated results of operations or consolidated financial position. The unaudited pro forma results of operations do not
not indicative of the Company's actual consolidated results of operations or consolidated financial position. The unaudited pro forma results of operations do not
reflect any operating efficiencies or cost savings which resulted from the Merger and acquisitions of RBI and VNS or may be realized in the future.
reflect any operating efficiencies or cost savings which resulted from the Merger and acquisitions of RBI and VNS or may be realized in the future.
Acquisition of Robert Bowden, Inc.
Acquisition of Robert Bowden, Inc.
Unaudited pro forma financial information is as follows:
Unaudited pro forma financial information is as follows:
On September 1, 2015 , BMHC purchased certain assets (excluding cash) and assumed certain liabilities of Marietta, Georgia-based Robert Bowden Inc. ("RBI")
On September 1, 2015 , BMHC purchased certain assets (excluding cash) and assumed certain liabilities of Marietta, Georgia-based Robert Bowden Inc. ("RBI")
for a purchase price of $102.4 million in cash (subject to certain adjustments). RBI has three locations in the Atlanta, Georgia area, including its manufacturing
for a purchase price of $102.4 million in cash (subject to certain adjustments). RBI has three locations in the Atlanta, Georgia area, including its manufacturing
facility in Marietta. RBI sells millwork and window products to homebuilders and residential contractors primarily in the Atlanta metro market. BMHC funded the
facility in Marietta. RBI sells millwork and window products to homebuilders and residential contractors primarily in the Atlanta metro market. BMHC funded the
transaction through borrowings under BMHC's revolving line of credit (the "BMHC Revolver").
transaction through borrowings under BMHC's revolving line of credit (the "BMHC Revolver").
The acquisition was accounted for using the acquisition method of accounting under ASC 805. The purchase price allocation resulted in the recognition of
The acquisition was accounted for using the acquisition method of accounting under ASC 805. The purchase price allocation resulted in the recognition of
goodwill of $44.4 million , a customer relationship intangible asset of $39.9 million , a non-compete agreement intangible asset of $0.4 million , accounts
goodwill of $44.4 million , a customer relationship intangible asset of $39.9 million , a non-compete agreement intangible asset of $0.4 million , accounts
receivable of $8.3 million , inventory of $6.7 million and property and equipment of $5.5 million , as well as other operating assets and liabilities. The customer
receivable of $8.3 million , inventory of $6.7 million and property and equipment of $5.5 million , as well as other operating assets and liabilities. The customer
relationships and non-compete agreements are being amortized over periods of 10 years and 3 years , respectively. Goodwill represents the future economic
relationships and non-compete agreements are being amortized over periods of 10 years and 3 years , respectively. Goodwill represents the future economic
benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual
benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual
relationships, as well as expected future synergies. All of the goodwill recognized is expected to be tax deductible.
relationships, as well as expected future synergies. All of the goodwill recognized is expected to be tax deductible.
Net sales and estimated pre-tax income of RBI included in the consolidated statements of operations for the year ended December 31, 2015 were $27.0 million and
Net sales and estimated pre-tax income of RBI included in the consolidated statements of operations for the year ended December 31, 2015 were $27.0 million and
$1.2 million , respectively.
$1.2 million , respectively.
Accounts receivable consist of the following at December 31, 2017 and 2016 :
Accounts receivable consist of the following at December 31, 2017 and 2016 :
Acquisition of VNS Corporation
Acquisition of VNS Corporation
On May 1, 2015 , BMHC completed the acquisition of Vidalia, Georgia-based VNS Corporation (“VNS”), enabling BMHC to expand its product offerings into the
On May 1, 2015 , BMHC completed the acquisition of Vidalia, Georgia-based VNS Corporation (“VNS”), enabling BMHC to expand its product offerings into the
southeastern United States. BMHC funded the transaction through the use of available cash and borrowings on the BMHC Revolver. The purchase price was $47.1
southeastern United States. BMHC funded the transaction through the use of available cash and borrowings on the BMHC Revolver. The purchase price was $47.1
million , net of $2.3 million of acquired cash.
million , net of $2.3 million of acquired cash.
The acquisition was accounted for using the acquisition method of accounting under ASC 805. The purchase price allocation resulted in the recognition of
The acquisition was accounted for using the acquisition method of accounting under ASC 805. The purchase price allocation resulted in the recognition of
goodwill of $9.4 million , a customer relationship intangible asset of $10.0 million , a trademark intangible asset of $0.9 million , accounts receivable of $19.5
goodwill of $9.4 million , a customer relationship intangible asset of $10.0 million , a trademark intangible asset of $0.9 million , accounts receivable of $19.5
million , property and equipment of $11.6 million , inventory of $10.7 million , and accounts payable of $7.5 million , as well as other operating assets and
million , property and equipment of $11.6 million , inventory of $10.7 million , and accounts payable of $7.5 million , as well as other operating assets and
liabilities. The customer relationships and trademarks are being amortized over periods of 10 years and 2 years , respectively. Goodwill represents the future
liabilities. The customer relationships and trademarks are being amortized over periods of 10 years and 2 years , respectively. Goodwill represents the future
economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-
economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-
contractual relationships, as well as expected future synergies. None of the goodwill recognized is expected to be deductible for tax purposes.
contractual relationships, as well as expected future synergies. None of the goodwill recognized is expected to be deductible for tax purposes.
Net sales and estimated pre-tax income of VNS included in the consolidated statements of operations for the year ended December 31, 2015 were $103.1 million
Net sales and estimated pre-tax income of VNS included in the consolidated statements of operations for the year ended December 31, 2015 were $103.1 million
and $4.7 million , respectively.
and $4.7 million , respectively.
62
62
The following table shows the changes in the allowance for doubtful accounts:
The following table shows the changes in the allowance for doubtful accounts:
(in thousands)
(in thousands)
Net sales
Net sales
Net income
Net income
Basic net income per share
Basic net income per share
Diluted net income per share
Diluted net income per share
4. Accounts Receivable
4. Accounts Receivable
(in thousands)
(in thousands)
Trade receivables
Trade receivables
Allowance for doubtful accounts
Allowance for doubtful accounts
Other allowances
Other allowances
(in thousands)
(in thousands)
Balance at January 1
Balance at January 1
Write-offs
Write-offs
Recoveries
Recoveries
Increase in allowance
Increase in allowance
Balance at December 31
Balance at December 31
5. Inventories
5. Inventories
respectively.
respectively.
Pro Forma Year
Pro Forma Year
Ended December
Ended December
31,
31,
2015
2015
$
$
2,890,163
2,890,163
15,098
15,098
0.23
0.23
0.23
0.23
323,725
323,725
(4,162)
(4,162)
(6,259)
(6,259)
313,304
313,304
1,560
1,560
(558)
(558)
236
236
1,119
1,119
2,357
2,357
2017
2017
2016
2016
$
$
$
$
333,954 $
333,954 $
(4,771)
(4,771)
(6,291)
(6,291)
322,892 $
322,892 $
2017
2017
2016
2016
2015
2015
$
$
4,162 $
4,162 $
2,357 $
2,357 $
(3,665)
(3,665)
960
960
3,314
3,314
(2,186)
(2,186)
2,587
2,587
1,404
1,404
$
$
4,771 $
4,771 $
4,162 $
4,162 $
Inventories consist principally of materials purchased for resale, including lumber, sheet goods, millwork, doors and windows, as well as certain manufactured
Inventories consist principally of materials purchased for resale, including lumber, sheet goods, millwork, doors and windows, as well as certain manufactured
products and are valued at the lower of cost or net realizable value, with cost being measured using a weighted average cost approach, which approximates the
products and are valued at the lower of cost or net realizable value, with cost being measured using a weighted average cost approach, which approximates the
first-in, first-out approach. A provision for excess and obsolete inventory of $1.5 million and $1.7 million is recorded as of December 31, 2017 and 2016 ,
first-in, first-out approach. A provision for excess and obsolete inventory of $1.5 million and $1.7 million is recorded as of December 31, 2017 and 2016 ,
63
63
The customer relationships, trademarks and non-compete agreements are being amortized over weighted average periods of 16.5 years , 3.8 years and 1.0 year ,
The customer relationships, trademarks and non-compete agreements are being amortized over weighted average periods of 16.5 years , 3.8 years and 1.0 year ,
Pro Forma Financial Information (Unaudited)
Pro Forma Financial Information (Unaudited)
respectively. Acquired property and equipment is being depreciated on a straight-line basis over the respective estimated remaining useful lives.
respectively. Acquired property and equipment is being depreciated on a straight-line basis over the respective estimated remaining useful lives.
Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed, and represents
Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed, and represents
the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and
the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and
non-contractual relationships, as well as expected future synergies. None of the goodwill recognized is expected to be tax deductible.
non-contractual relationships, as well as expected future synergies. None of the goodwill recognized is expected to be tax deductible.
Net sales and estimated pre-tax loss of Legacy SBS included in the consolidated statements of operations for the year ended December 31, 2015 were $103.6
Net sales and estimated pre-tax loss of Legacy SBS included in the consolidated statements of operations for the year ended December 31, 2015 were $103.6
million and $18.6 million , respectively.
million and $18.6 million , respectively.
Acquisition of Robert Bowden, Inc.
Acquisition of Robert Bowden, Inc.
The following unaudited pro forma combined results of operations give effect to the Merger and acquisitions of RBI and VNS by the Company as if SBS, RBI and
The following unaudited pro forma combined results of operations give effect to the Merger and acquisitions of RBI and VNS by the Company as if SBS, RBI and
VNS had been acquired on January 1, 2014, the beginning of the comparable prior annual period, applying certain assumptions and pro forma adjustments. These
VNS had been acquired on January 1, 2014, the beginning of the comparable prior annual period, applying certain assumptions and pro forma adjustments. These
pro forma adjustments primarily relate to depreciation expense on stepped up fixed assets, amortization of acquired intangibles, cost of goods sold expense related
pro forma adjustments primarily relate to depreciation expense on stepped up fixed assets, amortization of acquired intangibles, cost of goods sold expense related
to the sale of stepped up inventory, interest expense related to additional debt that would be needed to fund the acquisitions and the estimated impact of these
to the sale of stepped up inventory, interest expense related to additional debt that would be needed to fund the acquisitions and the estimated impact of these
adjustments on the Company's income tax provision. The unaudited pro forma consolidated results of operations are provided for illustrative purposes only and are
adjustments on the Company's income tax provision. The unaudited pro forma consolidated results of operations are provided for illustrative purposes only and are
not indicative of the Company's actual consolidated results of operations or consolidated financial position. The unaudited pro forma results of operations do not
not indicative of the Company's actual consolidated results of operations or consolidated financial position. The unaudited pro forma results of operations do not
reflect any operating efficiencies or cost savings which resulted from the Merger and acquisitions of RBI and VNS or may be realized in the future.
reflect any operating efficiencies or cost savings which resulted from the Merger and acquisitions of RBI and VNS or may be realized in the future.
Unaudited pro forma financial information is as follows:
Unaudited pro forma financial information is as follows:
On September 1, 2015 , BMHC purchased certain assets (excluding cash) and assumed certain liabilities of Marietta, Georgia-based Robert Bowden Inc. ("RBI")
On September 1, 2015 , BMHC purchased certain assets (excluding cash) and assumed certain liabilities of Marietta, Georgia-based Robert Bowden Inc. ("RBI")
for a purchase price of $102.4 million in cash (subject to certain adjustments). RBI has three locations in the Atlanta, Georgia area, including its manufacturing
for a purchase price of $102.4 million in cash (subject to certain adjustments). RBI has three locations in the Atlanta, Georgia area, including its manufacturing
facility in Marietta. RBI sells millwork and window products to homebuilders and residential contractors primarily in the Atlanta metro market. BMHC funded the
facility in Marietta. RBI sells millwork and window products to homebuilders and residential contractors primarily in the Atlanta metro market. BMHC funded the
transaction through borrowings under BMHC's revolving line of credit (the "BMHC Revolver").
transaction through borrowings under BMHC's revolving line of credit (the "BMHC Revolver").
The acquisition was accounted for using the acquisition method of accounting under ASC 805. The purchase price allocation resulted in the recognition of
The acquisition was accounted for using the acquisition method of accounting under ASC 805. The purchase price allocation resulted in the recognition of
goodwill of $44.4 million , a customer relationship intangible asset of $39.9 million , a non-compete agreement intangible asset of $0.4 million , accounts
goodwill of $44.4 million , a customer relationship intangible asset of $39.9 million , a non-compete agreement intangible asset of $0.4 million , accounts
receivable of $8.3 million , inventory of $6.7 million and property and equipment of $5.5 million , as well as other operating assets and liabilities. The customer
receivable of $8.3 million , inventory of $6.7 million and property and equipment of $5.5 million , as well as other operating assets and liabilities. The customer
relationships and non-compete agreements are being amortized over periods of 10 years and 3 years , respectively. Goodwill represents the future economic
relationships and non-compete agreements are being amortized over periods of 10 years and 3 years , respectively. Goodwill represents the future economic
benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual
benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual
relationships, as well as expected future synergies. All of the goodwill recognized is expected to be tax deductible.
relationships, as well as expected future synergies. All of the goodwill recognized is expected to be tax deductible.
Net sales and estimated pre-tax income of RBI included in the consolidated statements of operations for the year ended December 31, 2015 were $27.0 million and
Net sales and estimated pre-tax income of RBI included in the consolidated statements of operations for the year ended December 31, 2015 were $27.0 million and
(in thousands)
(in thousands)
Net sales
Net sales
Net income
Net income
Basic net income per share
Basic net income per share
Diluted net income per share
Diluted net income per share
4. Accounts Receivable
4. Accounts Receivable
Pro Forma Year
Pro Forma Year
Ended December
Ended December
31,
31,
2015
2015
$
$
2,890,163
2,890,163
15,098
15,098
0.23
0.23
0.23
0.23
$1.2 million , respectively.
$1.2 million , respectively.
Acquisition of VNS Corporation
Acquisition of VNS Corporation
On May 1, 2015 , BMHC completed the acquisition of Vidalia, Georgia-based VNS Corporation (“VNS”), enabling BMHC to expand its product offerings into the
On May 1, 2015 , BMHC completed the acquisition of Vidalia, Georgia-based VNS Corporation (“VNS”), enabling BMHC to expand its product offerings into the
southeastern United States. BMHC funded the transaction through the use of available cash and borrowings on the BMHC Revolver. The purchase price was $47.1
southeastern United States. BMHC funded the transaction through the use of available cash and borrowings on the BMHC Revolver. The purchase price was $47.1
million , net of $2.3 million of acquired cash.
million , net of $2.3 million of acquired cash.
The acquisition was accounted for using the acquisition method of accounting under ASC 805. The purchase price allocation resulted in the recognition of
The acquisition was accounted for using the acquisition method of accounting under ASC 805. The purchase price allocation resulted in the recognition of
goodwill of $9.4 million , a customer relationship intangible asset of $10.0 million , a trademark intangible asset of $0.9 million , accounts receivable of $19.5
goodwill of $9.4 million , a customer relationship intangible asset of $10.0 million , a trademark intangible asset of $0.9 million , accounts receivable of $19.5
million , property and equipment of $11.6 million , inventory of $10.7 million , and accounts payable of $7.5 million , as well as other operating assets and
million , property and equipment of $11.6 million , inventory of $10.7 million , and accounts payable of $7.5 million , as well as other operating assets and
liabilities. The customer relationships and trademarks are being amortized over periods of 10 years and 2 years , respectively. Goodwill represents the future
liabilities. The customer relationships and trademarks are being amortized over periods of 10 years and 2 years , respectively. Goodwill represents the future
economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-
economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-
contractual relationships, as well as expected future synergies. None of the goodwill recognized is expected to be deductible for tax purposes.
contractual relationships, as well as expected future synergies. None of the goodwill recognized is expected to be deductible for tax purposes.
Net sales and estimated pre-tax income of VNS included in the consolidated statements of operations for the year ended December 31, 2015 were $103.1 million
Net sales and estimated pre-tax income of VNS included in the consolidated statements of operations for the year ended December 31, 2015 were $103.1 million
and $4.7 million , respectively.
and $4.7 million , respectively.
62
62
Accounts receivable consist of the following at December 31, 2017 and 2016 :
Accounts receivable consist of the following at December 31, 2017 and 2016 :
(in thousands)
(in thousands)
Trade receivables
Trade receivables
Allowance for doubtful accounts
Allowance for doubtful accounts
Other allowances
Other allowances
The following table shows the changes in the allowance for doubtful accounts:
The following table shows the changes in the allowance for doubtful accounts:
(in thousands)
(in thousands)
Balance at January 1
Balance at January 1
Write-offs
Write-offs
Recoveries
Recoveries
Increase in allowance
Increase in allowance
Balance at December 31
Balance at December 31
5. Inventories
5. Inventories
2017
2017
2016
2016
$
$
$
$
333,954 $
333,954 $
(4,771)
(4,771)
(6,291)
(6,291)
322,892 $
322,892 $
323,725
323,725
(4,162)
(4,162)
(6,259)
(6,259)
313,304
313,304
2017
2017
2016
2016
2015
2015
$
$
4,162 $
4,162 $
2,357 $
2,357 $
(3,665)
(3,665)
960
960
3,314
3,314
(2,186)
(2,186)
2,587
2,587
1,404
1,404
$
$
4,771 $
4,771 $
4,162 $
4,162 $
1,560
1,560
(558)
(558)
236
236
1,119
1,119
2,357
2,357
Inventories consist principally of materials purchased for resale, including lumber, sheet goods, millwork, doors and windows, as well as certain manufactured
Inventories consist principally of materials purchased for resale, including lumber, sheet goods, millwork, doors and windows, as well as certain manufactured
products and are valued at the lower of cost or net realizable value, with cost being measured using a weighted average cost approach, which approximates the
products and are valued at the lower of cost or net realizable value, with cost being measured using a weighted average cost approach, which approximates the
first-in, first-out approach. A provision for excess and obsolete inventory of $1.5 million and $1.7 million is recorded as of December 31, 2017 and 2016 ,
first-in, first-out approach. A provision for excess and obsolete inventory of $1.5 million and $1.7 million is recorded as of December 31, 2017 and 2016 ,
respectively.
respectively.
63
63
6. Property and Equipment
6. Property and Equipment
7. Goodwill and Intangible Assets, Net
7. Goodwill and Intangible Assets, Net
Property and equipment consists of the following at December 31, 2017 and 2016 :
Property and equipment consists of the following at December 31, 2017 and 2016 :
(in thousands)
(in thousands)
Land
Land
Buildings and improvements
Buildings and improvements
Leasehold improvements
Leasehold improvements
Furniture, fixtures and equipment
Furniture, fixtures and equipment
Vehicles
Vehicles
Construction-in-progress
Construction-in-progress
Less: Accumulated depreciation
Less: Accumulated depreciation
2017
2017
2016
2016
The following table details the goodwill activity for the years ended December 31, 2017 , 2016 and 2015 :
The following table details the goodwill activity for the years ended December 31, 2017 , 2016 and 2015 :
$
$
51,009 $
51,009 $
104,752
104,752
19,750
19,750
161,014
161,014
120,855
120,855
14,519
14,519
471,899
471,899
(176,079)
(176,079)
295,820 $
295,820 $
$
$
57,693
57,693
93,252
93,252
17,610
17,610
136,513
136,513
97,119
97,119
12,574
12,574
414,761
414,761
(128,020)
(128,020)
286,741
286,741
Total depreciation expense for the years ended December 31, 2017 , 2016 and 2015 was $53.2 million , $48.0 million and $21.0 million , respectively, including
Total depreciation expense for the years ended December 31, 2017 , 2016 and 2015 was $53.2 million , $48.0 million and $21.0 million , respectively, including
amortization expense related to capital leases. These amounts include depreciation expense of $10.2 million , $9.5 million and $5.3 million included in cost of
amortization expense related to capital leases. These amounts include depreciation expense of $10.2 million , $9.5 million and $5.3 million included in cost of
goods sold in 2017 , 2016 and 2015 , respectively.
goods sold in 2017 , 2016 and 2015 , respectively.
Impairment of BMHC ERP System
Impairment of BMHC ERP System
During 2013, BMHC selected a new third-party software vendor for its planned Enterprise Resource Planning ("New ERP") system and began incurring costs
During 2013, BMHC selected a new third-party software vendor for its planned Enterprise Resource Planning ("New ERP") system and began incurring costs
related to design, development and implementation of the New ERP. BMHC also began paying an annual licensing fee. During March 2016, the Company decided
related to design, development and implementation of the New ERP. BMHC also began paying an annual licensing fee. During March 2016, the Company decided
to integrate all operations under the Enterprise Resource Planning system utilized by Legacy SBS (the "Legacy SBS ERP system") and to discontinue the use of the
to integrate all operations under the Enterprise Resource Planning system utilized by Legacy SBS (the "Legacy SBS ERP system") and to discontinue the use of the
New ERP. In connection with this decision, the Company recorded asset impairment charges of approximately $11.9 million in its consolidated statement of
New ERP. In connection with this decision, the Company recorded asset impairment charges of approximately $11.9 million in its consolidated statement of
operations for the year ended December 31, 2016 related to capitalized software development costs for New ERP functionality that the Company had intended to
operations for the year ended December 31, 2016 related to capitalized software development costs for New ERP functionality that the Company had intended to
implement in future periods. These costs had previously been recorded as construction-in-progress within property and equipment on the consolidated balance
implement in future periods. These costs had previously been recorded as construction-in-progress within property and equipment on the consolidated balance
sheets.
sheets.
During the year ended December 31, 2017, the Company determined that it had ceased receiving economic benefit from certain non-cancellable license and service
During the year ended December 31, 2017, the Company determined that it had ceased receiving economic benefit from certain non-cancellable license and service
contracts related to the New ERP. In accordance with ASC 420, Exit or Disposal Cost Obligations, as of the cease use date, the Company recognized
contracts related to the New ERP. In accordance with ASC 420, Exit or Disposal Cost Obligations, as of the cease use date, the Company recognized
approximately $2.8 million of expense within Merger and integration costs in its consolidated statements of operations for the year ended December 31, 2017,
approximately $2.8 million of expense within Merger and integration costs in its consolidated statements of operations for the year ended December 31, 2017,
consisting of $2.1 million for contractual payments due subsequent to the cease use date, all of which have been paid as of December 31, 2017, and the
consisting of $2.1 million for contractual payments due subsequent to the cease use date, all of which have been paid as of December 31, 2017, and the
acceleration of expense recognition of unamortized prepaid costs of $0.7 million .
acceleration of expense recognition of unamortized prepaid costs of $0.7 million .
64
64
Goodwill
Goodwill
(in thousands)
(in thousands)
December 31, 2014
December 31, 2014
Acquisition of VNS
Acquisition of VNS
Acquisition of RBI
Acquisition of RBI
Merger with SBS
Merger with SBS
December 31, 2015
December 31, 2015
VNS measurement period adjustment
VNS measurement period adjustment
RBI measurement period adjustment
RBI measurement period adjustment
SBS measurement period adjustment
SBS measurement period adjustment
December 31, 2016
December 31, 2016
Acquisition of Code Plus
Acquisition of Code Plus
Acquisition of TexPly
Acquisition of TexPly
December 31, 2017
December 31, 2017
Intangible assets
Intangible assets
$
$
$
$
1,137
1,137
9,287
9,287
44,541
44,541
199,699
199,699
254,664
254,664
142
142
(124)
(124)
150
150
254,832
254,832
3,402
3,402
3,558
3,558
261,792
261,792
Intangible assets represent the value assigned to trademarks, customer relationships and non-compete agreements in connection with acquired companies. The
Intangible assets represent the value assigned to trademarks, customer relationships and non-compete agreements in connection with acquired companies. The
following table provides the gross carrying amount and related accumulated amortization of definite-lived intangible assets.
following table provides the gross carrying amount and related accumulated amortization of definite-lived intangible assets.
Trademarks
Trademarks
Customer Relationships
Customer Relationships
Non-Compete Agreements
Non-Compete Agreements
Gross
Gross
Carrying
Carrying
Amount
Amount
Accumulated
Accumulated
Amortization
Amortization
Gross
Gross
Carrying
Carrying
Amount
Amount
Accumulated
Accumulated
Amortization
Amortization
Gross
Gross
Carrying
Carrying
Amount
Amount
Accumulated
Accumulated
Amortization
Amortization
December 31, 2014
December 31, 2014
$
$
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
(in thousands)
(in thousands)
Acquisition of VNS
Acquisition of VNS
Acquisition of RBI
Acquisition of RBI
Merger with SBS
Merger with SBS
Amortization
Amortization
December 31, 2015
December 31, 2015
Amortization
Amortization
December 31, 2016
December 31, 2016
Acquisition of Code Plus
Acquisition of Code Plus
Acquisition of TexPly
Acquisition of TexPly
Amortization
Amortization
850
850
—
—
4,500
4,500
—
—
5,350
5,350
—
—
5,350
5,350
—
—
—
—
—
—
—
—
—
—
—
—
(408)
(408)
(408)
(408)
(2,140)
(2,140)
(2,548)
(2,548)
—
—
—
—
—
—
—
—
—
—
(2,664)
(2,664)
(2,664)
(2,664)
(12,845)
(12,845)
(15,509)
(15,509)
—
—
—
—
—
—
400
400
6,112
6,112
—
—
6,512
6,512
—
—
6,512
6,512
500
500
—
—
—
—
— $
— $
—
—
—
—
—
—
(554)
(554)
(554)
(554)
(5,736)
(5,736)
(6,290)
(6,290)
—
—
—
—
(208)
(208)
Total
Total
—
—
10,850
10,850
40,300
40,300
140,412
140,412
(3,626)
(3,626)
187,936
187,936
(20,721)
(20,721)
167,215
167,215
2,800
2,800
13,600
13,600
(16,003)
(16,003)
December 31, 2107
December 31, 2107
$
$
5,350 $
5,350 $
(4,558)
(4,558)
$
$
195,600 $
195,600 $
(29,294) $
(29,294) $
7,012 $
7,012 $
(6,498)
(6,498)
$
$
167,612
167,612
(2,010)
(2,010)
—
—
(13,785)
(13,785)
10,000
10,000
39,900
39,900
129,800
129,800
179,700
179,700
—
—
—
—
179,700
179,700
2,300
2,300
13,600
13,600
65
65
Property and equipment consists of the following at December 31, 2017 and 2016 :
Property and equipment consists of the following at December 31, 2017 and 2016 :
6. Property and Equipment
6. Property and Equipment
(in thousands)
(in thousands)
Land
Land
Buildings and improvements
Buildings and improvements
Leasehold improvements
Leasehold improvements
Furniture, fixtures and equipment
Furniture, fixtures and equipment
Vehicles
Vehicles
Construction-in-progress
Construction-in-progress
Less: Accumulated depreciation
Less: Accumulated depreciation
2017
2017
2016
2016
$
$
51,009 $
51,009 $
104,752
104,752
19,750
19,750
161,014
161,014
120,855
120,855
14,519
14,519
471,899
471,899
(176,079)
(176,079)
295,820 $
295,820 $
$
$
57,693
57,693
93,252
93,252
17,610
17,610
136,513
136,513
97,119
97,119
12,574
12,574
414,761
414,761
(128,020)
(128,020)
286,741
286,741
Total depreciation expense for the years ended December 31, 2017 , 2016 and 2015 was $53.2 million , $48.0 million and $21.0 million , respectively, including
Total depreciation expense for the years ended December 31, 2017 , 2016 and 2015 was $53.2 million , $48.0 million and $21.0 million , respectively, including
7. Goodwill and Intangible Assets, Net
7. Goodwill and Intangible Assets, Net
Goodwill
Goodwill
The following table details the goodwill activity for the years ended December 31, 2017 , 2016 and 2015 :
The following table details the goodwill activity for the years ended December 31, 2017 , 2016 and 2015 :
(in thousands)
(in thousands)
December 31, 2014
December 31, 2014
Acquisition of VNS
Acquisition of VNS
Acquisition of RBI
Acquisition of RBI
Merger with SBS
Merger with SBS
December 31, 2015
December 31, 2015
VNS measurement period adjustment
VNS measurement period adjustment
RBI measurement period adjustment
RBI measurement period adjustment
SBS measurement period adjustment
SBS measurement period adjustment
December 31, 2016
December 31, 2016
amortization expense related to capital leases. These amounts include depreciation expense of $10.2 million , $9.5 million and $5.3 million included in cost of
amortization expense related to capital leases. These amounts include depreciation expense of $10.2 million , $9.5 million and $5.3 million included in cost of
Acquisition of Code Plus
Acquisition of Code Plus
goods sold in 2017 , 2016 and 2015 , respectively.
goods sold in 2017 , 2016 and 2015 , respectively.
Impairment of BMHC ERP System
Impairment of BMHC ERP System
Acquisition of TexPly
Acquisition of TexPly
December 31, 2017
December 31, 2017
During 2013, BMHC selected a new third-party software vendor for its planned Enterprise Resource Planning ("New ERP") system and began incurring costs
During 2013, BMHC selected a new third-party software vendor for its planned Enterprise Resource Planning ("New ERP") system and began incurring costs
Intangible assets
Intangible assets
$
$
$
$
1,137
1,137
9,287
9,287
44,541
44,541
199,699
199,699
254,664
254,664
142
142
(124)
(124)
150
150
254,832
254,832
3,402
3,402
3,558
3,558
261,792
261,792
related to design, development and implementation of the New ERP. BMHC also began paying an annual licensing fee. During March 2016, the Company decided
related to design, development and implementation of the New ERP. BMHC also began paying an annual licensing fee. During March 2016, the Company decided
to integrate all operations under the Enterprise Resource Planning system utilized by Legacy SBS (the "Legacy SBS ERP system") and to discontinue the use of the
to integrate all operations under the Enterprise Resource Planning system utilized by Legacy SBS (the "Legacy SBS ERP system") and to discontinue the use of the
New ERP. In connection with this decision, the Company recorded asset impairment charges of approximately $11.9 million in its consolidated statement of
New ERP. In connection with this decision, the Company recorded asset impairment charges of approximately $11.9 million in its consolidated statement of
operations for the year ended December 31, 2016 related to capitalized software development costs for New ERP functionality that the Company had intended to
operations for the year ended December 31, 2016 related to capitalized software development costs for New ERP functionality that the Company had intended to
implement in future periods. These costs had previously been recorded as construction-in-progress within property and equipment on the consolidated balance
implement in future periods. These costs had previously been recorded as construction-in-progress within property and equipment on the consolidated balance
sheets.
sheets.
During the year ended December 31, 2017, the Company determined that it had ceased receiving economic benefit from certain non-cancellable license and service
During the year ended December 31, 2017, the Company determined that it had ceased receiving economic benefit from certain non-cancellable license and service
contracts related to the New ERP. In accordance with ASC 420, Exit or Disposal Cost Obligations, as of the cease use date, the Company recognized
contracts related to the New ERP. In accordance with ASC 420, Exit or Disposal Cost Obligations, as of the cease use date, the Company recognized
approximately $2.8 million of expense within Merger and integration costs in its consolidated statements of operations for the year ended December 31, 2017,
approximately $2.8 million of expense within Merger and integration costs in its consolidated statements of operations for the year ended December 31, 2017,
consisting of $2.1 million for contractual payments due subsequent to the cease use date, all of which have been paid as of December 31, 2017, and the
consisting of $2.1 million for contractual payments due subsequent to the cease use date, all of which have been paid as of December 31, 2017, and the
acceleration of expense recognition of unamortized prepaid costs of $0.7 million .
acceleration of expense recognition of unamortized prepaid costs of $0.7 million .
64
64
Intangible assets represent the value assigned to trademarks, customer relationships and non-compete agreements in connection with acquired companies. The
Intangible assets represent the value assigned to trademarks, customer relationships and non-compete agreements in connection with acquired companies. The
following table provides the gross carrying amount and related accumulated amortization of definite-lived intangible assets.
following table provides the gross carrying amount and related accumulated amortization of definite-lived intangible assets.
Trademarks
Trademarks
Customer Relationships
Customer Relationships
Non-Compete Agreements
Non-Compete Agreements
Gross
Gross
Carrying
Carrying
Amount
Amount
Accumulated
Accumulated
Amortization
Amortization
Gross
Gross
Carrying
Carrying
Amount
Amount
Accumulated
Accumulated
Amortization
Amortization
Gross
Gross
Carrying
Carrying
Amount
Amount
Accumulated
Accumulated
Amortization
Amortization
(in thousands)
(in thousands)
December 31, 2014
December 31, 2014
$
$
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
Acquisition of VNS
Acquisition of VNS
Acquisition of RBI
Acquisition of RBI
Merger with SBS
Merger with SBS
Amortization
Amortization
December 31, 2015
December 31, 2015
Amortization
Amortization
December 31, 2016
December 31, 2016
Acquisition of Code Plus
Acquisition of Code Plus
Acquisition of TexPly
Acquisition of TexPly
Amortization
Amortization
850
850
—
—
4,500
4,500
—
—
5,350
5,350
—
—
5,350
5,350
—
—
—
—
—
—
—
—
—
—
—
—
(408)
(408)
(408)
(408)
(2,140)
(2,140)
(2,548)
(2,548)
—
—
—
—
10,000
10,000
39,900
39,900
129,800
129,800
—
—
179,700
179,700
—
—
179,700
179,700
2,300
2,300
13,600
13,600
—
—
—
—
—
—
(2,664)
(2,664)
(2,664)
(2,664)
(12,845)
(12,845)
(15,509)
(15,509)
—
—
—
—
(2,010)
(2,010)
—
—
(13,785)
(13,785)
—
—
400
400
6,112
6,112
—
—
6,512
6,512
—
—
6,512
6,512
500
500
—
—
—
—
— $
— $
—
—
—
—
—
—
(554)
(554)
(554)
(554)
(5,736)
(5,736)
(6,290)
(6,290)
—
—
—
—
(208)
(208)
Total
Total
—
—
10,850
10,850
40,300
40,300
140,412
140,412
(3,626)
(3,626)
187,936
187,936
(20,721)
(20,721)
167,215
167,215
2,800
2,800
13,600
13,600
(16,003)
(16,003)
December 31, 2107
December 31, 2107
$
$
5,350 $
5,350 $
(4,558)
(4,558)
$
$
195,600 $
195,600 $
(29,294) $
(29,294) $
7,012 $
7,012 $
(6,498)
(6,498)
$
$
167,612
167,612
65
65
Aggregate amortization expense was $16.0 million , $20.7 million and $3.6 million for the years ended December 31, 2017 , 2016 and 2015 , respectively. Based
Aggregate amortization expense was $16.0 million , $20.7 million and $3.6 million for the years ended December 31, 2017 , 2016 and 2015 , respectively. Based
upon current assumptions, the Company expects that its definite-lived intangible assets will be amortized according to the following schedule:
upon current assumptions, the Company expects that its definite-lived intangible assets will be amortized according to the following schedule:
that guarantee the Credit Agreement (as defined below). Each of the subsidiary guarantors is 100% owned, directly or indirectly, by the Company, and all
that guarantee the Credit Agreement (as defined below). Each of the subsidiary guarantors is 100% owned, directly or indirectly, by the Company, and all
guarantees are full and unconditional and joint and several. The Senior Notes mature on October 1, 2024 and are secured by a first priority lien on certain assets of
guarantees are full and unconditional and joint and several. The Senior Notes mature on October 1, 2024 and are secured by a first priority lien on certain assets of
(in thousands)
(in thousands)
2018
2018
2019
2019
2020
2020
2021
2021
2022
2022
Thereafter
Thereafter
$
$
14,383
14,383
14,294
14,294
14,294
14,294
14,294
14,294
14,219
14,219
96,128
96,128
$
$
167,612
167,612
8. Accrued Expenses and Other Liabilities
8. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consists of the following at December 31, 2017 and 2016 :
Accrued expenses and other liabilities consists of the following at December 31, 2017 and 2016 :
(in thousands)
(in thousands)
2017
2017
2016
2016
Accrued payroll and other employee related expenses
Accrued payroll and other employee related expenses
$
$
the Company and a second priority lien on the collateral that secures the Credit Agreement on a first-priority basis, which collectively accounts for substantially all
the Company and a second priority lien on the collateral that secures the Credit Agreement on a first-priority basis, which collectively accounts for substantially all
assets of the Company. The interest rate is fixed at 5.5% and is payable semiannually on April 1 and October 1 .
assets of the Company. The interest rate is fixed at 5.5% and is payable semiannually on April 1 and October 1 .
The Indenture contains customary nonfinancial covenants, including restrictions on new indebtedness, issuance of liens and guarantees, investments, distributions
The Indenture contains customary nonfinancial covenants, including restrictions on new indebtedness, issuance of liens and guarantees, investments, distributions
to equityholders, asset sales and affiliate transactions. At any time prior to October 1, 2019, the Company may redeem the Senior Notes in whole or in part at a
to equityholders, asset sales and affiliate transactions. At any time prior to October 1, 2019, the Company may redeem the Senior Notes in whole or in part at a
price equal to 100% of the principal, plus accrued and unpaid interest, plus the greater of (a) 1% of the principal amount of such Senior Note and (b) on any
price equal to 100% of the principal, plus accrued and unpaid interest, plus the greater of (a) 1% of the principal amount of such Senior Note and (b) on any
redemption date, the excess (to the extent positive) of the present value of the redemption price of such Senior Note at October 1, 2019 (equal to 104.125% ) plus
redemption date, the excess (to the extent positive) of the present value of the redemption price of such Senior Note at October 1, 2019 (equal to 104.125% ) plus
all required interest payments due on such Senior Note to and including October 1, 2019 (excluding accrued but unpaid interest), computed upon the redemption
all required interest payments due on such Senior Note to and including October 1, 2019 (excluding accrued but unpaid interest), computed upon the redemption
date using a discount rate equal to the applicable treasury rate, as defined in the Indenture, at such redemption date plus 50 basis points, over the outstanding
date using a discount rate equal to the applicable treasury rate, as defined in the Indenture, at such redemption date plus 50 basis points, over the outstanding
principal amount of such Senior Note. Further, during any twelve month period prior to October 1, 2019, the Company may redeem up to 10% of the Senior Notes
principal amount of such Senior Note. Further, during any twelve month period prior to October 1, 2019, the Company may redeem up to 10% of the Senior Notes
at a redemption price equal to 103% plus accrued and unpaid interest. At any time on or after October 1, 2019, the Company may redeem the Senior Notes in
at a redemption price equal to 103% plus accrued and unpaid interest. At any time on or after October 1, 2019, the Company may redeem the Senior Notes in
whole or in part at the redemption prices set forth in the Indenture plus accrued and unpaid interest. In addition, at any time prior to October 1, 2019, the Company
whole or in part at the redemption prices set forth in the Indenture plus accrued and unpaid interest. In addition, at any time prior to October 1, 2019, the Company
may redeem up to 40% of the aggregate principal amount of the Senior Notes with the net cash proceeds of one or more equity offerings, as described in the
may redeem up to 40% of the aggregate principal amount of the Senior Notes with the net cash proceeds of one or more equity offerings, as described in the
Indenture, at a price equal to 105.5% plus accrued and unpaid interest. If the Company experiences certain change of control events, holders of the Senior Notes
Indenture, at a price equal to 105.5% plus accrued and unpaid interest. If the Company experiences certain change of control events, holders of the Senior Notes
may require the Company to repurchase all or part of their Senior Notes at a price equal to 101% plus accrued and unpaid interest. The Company was in
may require the Company to repurchase all or part of their Senior Notes at a price equal to 101% plus accrued and unpaid interest. The Company was in
compliance with all debt covenants under the Indenture for the year ended December 31, 2017 .
compliance with all debt covenants under the Indenture for the year ended December 31, 2017 .
The net cash proceeds from the Senior Notes were used to redeem in full $250.0 million of 9.0% senior secured notes that were issued by BMHC in September
The net cash proceeds from the Senior Notes were used to redeem in full $250.0 million of 9.0% senior secured notes that were issued by BMHC in September
2013 and which were scheduled to mature in September 2018 (the “Extinguished Senior Notes”), and to pay accrued interest on the Extinguished Senior Notes of
2013 and which were scheduled to mature in September 2018 (the “Extinguished Senior Notes”), and to pay accrued interest on the Extinguished Senior Notes of
$11.3 million . In connection with the redemption of the Extinguished Senior Notes, the Company incurred a loss on debt extinguishment of $12.5 million ,
$11.3 million . In connection with the redemption of the Extinguished Senior Notes, the Company incurred a loss on debt extinguishment of $12.5 million ,
consisting of a call premium of $8.4 million , and the write off of unamortized debt issuance costs and original issue discount of $4.1 million . The remaining
consisting of a call premium of $8.4 million , and the write off of unamortized debt issuance costs and original issue discount of $4.1 million . The remaining
proceeds were used to repay outstanding borrowings on the Revolver (as defined below) and to pay debt issuance costs of $6.7 million , which will be amortized
proceeds were used to repay outstanding borrowings on the Revolver (as defined below) and to pay debt issuance costs of $6.7 million , which will be amortized
over the term of the Senior Notes.
over the term of the Senior Notes.
As of December 31, 2017 , the estimated market value of the Senior Notes was $14.0 million higher than the carrying amount. The fair value is based on
As of December 31, 2017 , the estimated market value of the Senior Notes was $14.0 million higher than the carrying amount. The fair value is based on
institutional trading activity and was classified as a Level 2 measurement in accordance with ASC 820.
institutional trading activity and was classified as a Level 2 measurement in accordance with ASC 820.
Revolving Credit Agreement
Revolving Credit Agreement
On December 1, 2015 , in connection with the Merger, the Company entered into a senior secured credit agreement with Wells Fargo Capital Finance, as
On December 1, 2015 , in connection with the Merger, the Company entered into a senior secured credit agreement with Wells Fargo Capital Finance, as
administrative agent, and certain other lenders (the “Original Credit Agreement”) which includes a revolving line of credit (the “Revolver”). On September 15,
administrative agent, and certain other lenders (the “Original Credit Agreement”) which includes a revolving line of credit (the “Revolver”). On September 15,
2016 , the Company entered into the second amendment to the Credit Agreement (the “Second Amendment” and, the Original Credit Agreement as amended by
2016 , the Company entered into the second amendment to the Credit Agreement (the “Second Amendment” and, the Original Credit Agreement as amended by
the Second Amendment, the "Credit Agreement"), which reduced the aggregate commitment from $450.0 million to $375.0 million and increased the letters of
the Second Amendment, the "Credit Agreement"), which reduced the aggregate commitment from $450.0 million to $375.0 million and increased the letters of
credit commitment from $75.0 million to $100.0 million . The Revolver is subject to an asset-based borrowing formula on eligible accounts receivable, credit card
credit commitment from $75.0 million to $100.0 million . The Revolver is subject to an asset-based borrowing formula on eligible accounts receivable, credit card
receivables and inventory, in each case reduced by certain reserves.
receivables and inventory, in each case reduced by certain reserves.
Borrowings under the Revolver bear interest, at the Company's option, at either the Base Rate (which means the higher of (i) the Federal Funds Rate plus 0.5% ,
Borrowings under the Revolver bear interest, at the Company's option, at either the Base Rate (which means the higher of (i) the Federal Funds Rate plus 0.5% ,
(ii) the LIBOR rate plus 1.0% or (iii) the prime rate) plus a Base Rate Margin (which ranges from 0.25% to 0.75% based on Revolver availability) or LIBOR plus a
(ii) the LIBOR rate plus 1.0% or (iii) the prime rate) plus a Base Rate Margin (which ranges from 0.25% to 0.75% based on Revolver availability) or LIBOR plus a
LIBOR Rate Margin (which ranges from 1.25% to 1.75% based on Revolver availability).
LIBOR Rate Margin (which ranges from 1.25% to 1.75% based on Revolver availability).
The fee on any outstanding letters of credit issued under the Revolver ranges from 0.75% to 1.25% , depending on whether the letters of credit are fully cash
The fee on any outstanding letters of credit issued under the Revolver ranges from 0.75% to 1.25% , depending on whether the letters of credit are fully cash
collateralized. The fee on the unused portion of the Revolver is 0.25% . The Credit Agreement contains customary nonfinancial covenants, including restrictions on
collateralized. The fee on the unused portion of the Revolver is 0.25% . The Credit Agreement contains customary nonfinancial covenants, including restrictions on
new indebtedness, issuance of liens, investments, distributions to equityholders, asset sales and affiliate transactions. The Credit Agreement includes a financial
new indebtedness, issuance of liens, investments, distributions to equityholders, asset sales and affiliate transactions. The Credit Agreement includes a financial
covenant that requires us to maintain a Fixed Charge Coverage Ratio, as defined therein, of at least 1.00 :1:00, at the end of any fiscal quarter during the period
covenant that requires us to maintain a Fixed Charge Coverage Ratio, as defined therein, of at least 1.00 :1:00, at the end of any fiscal quarter during the period
from the date that Excess Availability, as defined therein, under the Credit Agreement is less than or equal to the greater of (1) $33.3 million and (2) 10% of the
from the date that Excess Availability, as defined therein, under the Credit Agreement is less than or equal to the greater of (1) $33.3 million and (2) 10% of the
line cap, and remains in effect until excess availability has been greater than the greater of (1) $33.3 million and (2) 10% of the line cap for a period of at least 30
line cap, and remains in effect until excess availability has been greater than the greater of (1) $33.3 million and (2) 10% of the line cap for a period of at least 30
consecutive days.
consecutive days.
67
67
41,798 $
41,798 $
20,741
20,741
11,664
11,664
4,653
4,653
2,950
2,950
2,467
2,467
1,127
1,127
818
818
715
715
520
520
$
$
8,809
8,809
96,262 $
96,262 $
41,728
41,728
19,083
19,083
10,062
10,062
2,564
2,564
—
—
1,813
1,813
873
873
460
460
727
727
789
789
10,687
10,687
88,786
88,786
December 31, 2017 December 31, 2016
December 31, 2017 December 31, 2016
$
$
350,000 $
350,000 $
4,462
4,462
336
336
354,798
354,798
(5,639)
(5,639)
349,159
349,159
100
100
$
$
349,059 $
349,059 $
350,000
350,000
—
—
2,963
2,963
352,963
352,963
(6,474)
(6,474)
346,489
346,489
1,662
1,662
344,827
344,827
Accrued taxes
Accrued taxes
Advances from customers
Advances from customers
Accrued rebates payable
Accrued rebates payable
Pending litigation accrual
Pending litigation accrual
Accrued warranty reserve
Accrued warranty reserve
Accrued credit card fees
Accrued credit card fees
Current portion of deferred rent
Current portion of deferred rent
Accrued professional fees
Accrued professional fees
Unfavorable leases
Unfavorable leases
Other
Other
9. Debt
9. Debt
Long-term debt at December 31, 2017 and 2016 consists of the following:
Long-term debt at December 31, 2017 and 2016 consists of the following:
(in thousands)
(in thousands)
Senior secured notes, due 2024
Senior secured notes, due 2024
Revolving credit agreement
Revolving credit agreement
Other
Other
Unamortized debt issuance costs related to senior secured notes
Unamortized debt issuance costs related to senior secured notes
Less: Current portion of long-term debt
Less: Current portion of long-term debt
Senior Secured Notes
Senior Secured Notes
On September 15, 2016 , the Company issued $350.0 million of senior secured notes due 2024 (the “Senior Notes”) under an unregistered private placement not
On September 15, 2016 , the Company issued $350.0 million of senior secured notes due 2024 (the “Senior Notes”) under an unregistered private placement not
subject to the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The Senior Notes are governed by an indenture dated
subject to the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The Senior Notes are governed by an indenture dated
September 15, 2016 (the “Indenture”). The Senior Notes were issued by BMC East, LLC, a 100% owned subsidiary of the Company, and are guaranteed by the
September 15, 2016 (the “Indenture”). The Senior Notes were issued by BMC East, LLC, a 100% owned subsidiary of the Company, and are guaranteed by the
Company and the other subsidiaries
Company and the other subsidiaries
66
66
Aggregate amortization expense was $16.0 million , $20.7 million and $3.6 million for the years ended December 31, 2017 , 2016 and 2015 , respectively. Based
Aggregate amortization expense was $16.0 million , $20.7 million and $3.6 million for the years ended December 31, 2017 , 2016 and 2015 , respectively. Based
upon current assumptions, the Company expects that its definite-lived intangible assets will be amortized according to the following schedule:
upon current assumptions, the Company expects that its definite-lived intangible assets will be amortized according to the following schedule:
8. Accrued Expenses and Other Liabilities
8. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consists of the following at December 31, 2017 and 2016 :
Accrued expenses and other liabilities consists of the following at December 31, 2017 and 2016 :
Accrued payroll and other employee related expenses
Accrued payroll and other employee related expenses
$
$
2017
2017
2016
2016
(in thousands)
(in thousands)
2018
2018
2019
2019
2020
2020
2021
2021
2022
2022
Thereafter
Thereafter
(in thousands)
(in thousands)
Accrued taxes
Accrued taxes
Advances from customers
Advances from customers
Accrued rebates payable
Accrued rebates payable
Pending litigation accrual
Pending litigation accrual
Accrued warranty reserve
Accrued warranty reserve
Accrued credit card fees
Accrued credit card fees
Current portion of deferred rent
Current portion of deferred rent
Accrued professional fees
Accrued professional fees
Unfavorable leases
Unfavorable leases
Other
Other
9. Debt
9. Debt
(in thousands)
(in thousands)
Senior secured notes, due 2024
Senior secured notes, due 2024
Revolving credit agreement
Revolving credit agreement
Other
Other
Long-term debt at December 31, 2017 and 2016 consists of the following:
Long-term debt at December 31, 2017 and 2016 consists of the following:
Unamortized debt issuance costs related to senior secured notes
Unamortized debt issuance costs related to senior secured notes
Less: Current portion of long-term debt
Less: Current portion of long-term debt
Senior Secured Notes
Senior Secured Notes
$
$
$
$
167,612
167,612
14,383
14,383
14,294
14,294
14,294
14,294
14,294
14,294
14,219
14,219
96,128
96,128
41,728
41,728
19,083
19,083
10,062
10,062
2,564
2,564
—
—
1,813
1,813
873
873
460
460
727
727
789
789
10,687
10,687
88,786
88,786
350,000
350,000
—
—
2,963
2,963
352,963
352,963
(6,474)
(6,474)
346,489
346,489
1,662
1,662
344,827
344,827
41,798 $
41,798 $
20,741
20,741
11,664
11,664
4,653
4,653
2,950
2,950
2,467
2,467
1,127
1,127
818
818
715
715
520
520
$
$
8,809
8,809
96,262 $
96,262 $
December 31, 2017 December 31, 2016
December 31, 2017 December 31, 2016
$
$
350,000 $
350,000 $
4,462
4,462
336
336
354,798
354,798
(5,639)
(5,639)
349,159
349,159
100
100
$
$
349,059 $
349,059 $
that guarantee the Credit Agreement (as defined below). Each of the subsidiary guarantors is 100% owned, directly or indirectly, by the Company, and all
that guarantee the Credit Agreement (as defined below). Each of the subsidiary guarantors is 100% owned, directly or indirectly, by the Company, and all
guarantees are full and unconditional and joint and several. The Senior Notes mature on October 1, 2024 and are secured by a first priority lien on certain assets of
guarantees are full and unconditional and joint and several. The Senior Notes mature on October 1, 2024 and are secured by a first priority lien on certain assets of
the Company and a second priority lien on the collateral that secures the Credit Agreement on a first-priority basis, which collectively accounts for substantially all
the Company and a second priority lien on the collateral that secures the Credit Agreement on a first-priority basis, which collectively accounts for substantially all
assets of the Company. The interest rate is fixed at 5.5% and is payable semiannually on April 1 and October 1 .
assets of the Company. The interest rate is fixed at 5.5% and is payable semiannually on April 1 and October 1 .
The Indenture contains customary nonfinancial covenants, including restrictions on new indebtedness, issuance of liens and guarantees, investments, distributions
The Indenture contains customary nonfinancial covenants, including restrictions on new indebtedness, issuance of liens and guarantees, investments, distributions
to equityholders, asset sales and affiliate transactions. At any time prior to October 1, 2019, the Company may redeem the Senior Notes in whole or in part at a
to equityholders, asset sales and affiliate transactions. At any time prior to October 1, 2019, the Company may redeem the Senior Notes in whole or in part at a
price equal to 100% of the principal, plus accrued and unpaid interest, plus the greater of (a) 1% of the principal amount of such Senior Note and (b) on any
price equal to 100% of the principal, plus accrued and unpaid interest, plus the greater of (a) 1% of the principal amount of such Senior Note and (b) on any
redemption date, the excess (to the extent positive) of the present value of the redemption price of such Senior Note at October 1, 2019 (equal to 104.125% ) plus
redemption date, the excess (to the extent positive) of the present value of the redemption price of such Senior Note at October 1, 2019 (equal to 104.125% ) plus
all required interest payments due on such Senior Note to and including October 1, 2019 (excluding accrued but unpaid interest), computed upon the redemption
all required interest payments due on such Senior Note to and including October 1, 2019 (excluding accrued but unpaid interest), computed upon the redemption
date using a discount rate equal to the applicable treasury rate, as defined in the Indenture, at such redemption date plus 50 basis points, over the outstanding
date using a discount rate equal to the applicable treasury rate, as defined in the Indenture, at such redemption date plus 50 basis points, over the outstanding
principal amount of such Senior Note. Further, during any twelve month period prior to October 1, 2019, the Company may redeem up to 10% of the Senior Notes
principal amount of such Senior Note. Further, during any twelve month period prior to October 1, 2019, the Company may redeem up to 10% of the Senior Notes
at a redemption price equal to 103% plus accrued and unpaid interest. At any time on or after October 1, 2019, the Company may redeem the Senior Notes in
at a redemption price equal to 103% plus accrued and unpaid interest. At any time on or after October 1, 2019, the Company may redeem the Senior Notes in
whole or in part at the redemption prices set forth in the Indenture plus accrued and unpaid interest. In addition, at any time prior to October 1, 2019, the Company
whole or in part at the redemption prices set forth in the Indenture plus accrued and unpaid interest. In addition, at any time prior to October 1, 2019, the Company
may redeem up to 40% of the aggregate principal amount of the Senior Notes with the net cash proceeds of one or more equity offerings, as described in the
may redeem up to 40% of the aggregate principal amount of the Senior Notes with the net cash proceeds of one or more equity offerings, as described in the
Indenture, at a price equal to 105.5% plus accrued and unpaid interest. If the Company experiences certain change of control events, holders of the Senior Notes
Indenture, at a price equal to 105.5% plus accrued and unpaid interest. If the Company experiences certain change of control events, holders of the Senior Notes
may require the Company to repurchase all or part of their Senior Notes at a price equal to 101% plus accrued and unpaid interest. The Company was in
may require the Company to repurchase all or part of their Senior Notes at a price equal to 101% plus accrued and unpaid interest. The Company was in
compliance with all debt covenants under the Indenture for the year ended December 31, 2017 .
compliance with all debt covenants under the Indenture for the year ended December 31, 2017 .
The net cash proceeds from the Senior Notes were used to redeem in full $250.0 million of 9.0% senior secured notes that were issued by BMHC in September
The net cash proceeds from the Senior Notes were used to redeem in full $250.0 million of 9.0% senior secured notes that were issued by BMHC in September
2013 and which were scheduled to mature in September 2018 (the “Extinguished Senior Notes”), and to pay accrued interest on the Extinguished Senior Notes of
2013 and which were scheduled to mature in September 2018 (the “Extinguished Senior Notes”), and to pay accrued interest on the Extinguished Senior Notes of
$11.3 million . In connection with the redemption of the Extinguished Senior Notes, the Company incurred a loss on debt extinguishment of $12.5 million ,
$11.3 million . In connection with the redemption of the Extinguished Senior Notes, the Company incurred a loss on debt extinguishment of $12.5 million ,
consisting of a call premium of $8.4 million , and the write off of unamortized debt issuance costs and original issue discount of $4.1 million . The remaining
consisting of a call premium of $8.4 million , and the write off of unamortized debt issuance costs and original issue discount of $4.1 million . The remaining
proceeds were used to repay outstanding borrowings on the Revolver (as defined below) and to pay debt issuance costs of $6.7 million , which will be amortized
proceeds were used to repay outstanding borrowings on the Revolver (as defined below) and to pay debt issuance costs of $6.7 million , which will be amortized
over the term of the Senior Notes.
over the term of the Senior Notes.
As of December 31, 2017 , the estimated market value of the Senior Notes was $14.0 million higher than the carrying amount. The fair value is based on
As of December 31, 2017 , the estimated market value of the Senior Notes was $14.0 million higher than the carrying amount. The fair value is based on
institutional trading activity and was classified as a Level 2 measurement in accordance with ASC 820.
institutional trading activity and was classified as a Level 2 measurement in accordance with ASC 820.
Revolving Credit Agreement
Revolving Credit Agreement
On December 1, 2015 , in connection with the Merger, the Company entered into a senior secured credit agreement with Wells Fargo Capital Finance, as
On December 1, 2015 , in connection with the Merger, the Company entered into a senior secured credit agreement with Wells Fargo Capital Finance, as
administrative agent, and certain other lenders (the “Original Credit Agreement”) which includes a revolving line of credit (the “Revolver”). On September 15,
administrative agent, and certain other lenders (the “Original Credit Agreement”) which includes a revolving line of credit (the “Revolver”). On September 15,
2016 , the Company entered into the second amendment to the Credit Agreement (the “Second Amendment” and, the Original Credit Agreement as amended by
2016 , the Company entered into the second amendment to the Credit Agreement (the “Second Amendment” and, the Original Credit Agreement as amended by
the Second Amendment, the "Credit Agreement"), which reduced the aggregate commitment from $450.0 million to $375.0 million and increased the letters of
the Second Amendment, the "Credit Agreement"), which reduced the aggregate commitment from $450.0 million to $375.0 million and increased the letters of
credit commitment from $75.0 million to $100.0 million . The Revolver is subject to an asset-based borrowing formula on eligible accounts receivable, credit card
credit commitment from $75.0 million to $100.0 million . The Revolver is subject to an asset-based borrowing formula on eligible accounts receivable, credit card
receivables and inventory, in each case reduced by certain reserves.
receivables and inventory, in each case reduced by certain reserves.
Borrowings under the Revolver bear interest, at the Company's option, at either the Base Rate (which means the higher of (i) the Federal Funds Rate plus 0.5% ,
Borrowings under the Revolver bear interest, at the Company's option, at either the Base Rate (which means the higher of (i) the Federal Funds Rate plus 0.5% ,
(ii) the LIBOR rate plus 1.0% or (iii) the prime rate) plus a Base Rate Margin (which ranges from 0.25% to 0.75% based on Revolver availability) or LIBOR plus a
(ii) the LIBOR rate plus 1.0% or (iii) the prime rate) plus a Base Rate Margin (which ranges from 0.25% to 0.75% based on Revolver availability) or LIBOR plus a
LIBOR Rate Margin (which ranges from 1.25% to 1.75% based on Revolver availability).
LIBOR Rate Margin (which ranges from 1.25% to 1.75% based on Revolver availability).
The fee on any outstanding letters of credit issued under the Revolver ranges from 0.75% to 1.25% , depending on whether the letters of credit are fully cash
The fee on any outstanding letters of credit issued under the Revolver ranges from 0.75% to 1.25% , depending on whether the letters of credit are fully cash
collateralized. The fee on the unused portion of the Revolver is 0.25% . The Credit Agreement contains customary nonfinancial covenants, including restrictions on
collateralized. The fee on the unused portion of the Revolver is 0.25% . The Credit Agreement contains customary nonfinancial covenants, including restrictions on
new indebtedness, issuance of liens, investments, distributions to equityholders, asset sales and affiliate transactions. The Credit Agreement includes a financial
new indebtedness, issuance of liens, investments, distributions to equityholders, asset sales and affiliate transactions. The Credit Agreement includes a financial
covenant that requires us to maintain a Fixed Charge Coverage Ratio, as defined therein, of at least 1.00 :1:00, at the end of any fiscal quarter during the period
covenant that requires us to maintain a Fixed Charge Coverage Ratio, as defined therein, of at least 1.00 :1:00, at the end of any fiscal quarter during the period
from the date that Excess Availability, as defined therein, under the Credit Agreement is less than or equal to the greater of (1) $33.3 million and (2) 10% of the
from the date that Excess Availability, as defined therein, under the Credit Agreement is less than or equal to the greater of (1) $33.3 million and (2) 10% of the
line cap, and remains in effect until excess availability has been greater than the greater of (1) $33.3 million and (2) 10% of the line cap for a period of at least 30
line cap, and remains in effect until excess availability has been greater than the greater of (1) $33.3 million and (2) 10% of the line cap for a period of at least 30
consecutive days.
consecutive days.
67
67
On September 15, 2016 , the Company issued $350.0 million of senior secured notes due 2024 (the “Senior Notes”) under an unregistered private placement not
On September 15, 2016 , the Company issued $350.0 million of senior secured notes due 2024 (the “Senior Notes”) under an unregistered private placement not
subject to the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The Senior Notes are governed by an indenture dated
subject to the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The Senior Notes are governed by an indenture dated
September 15, 2016 (the “Indenture”). The Senior Notes were issued by BMC East, LLC, a 100% owned subsidiary of the Company, and are guaranteed by the
September 15, 2016 (the “Indenture”). The Senior Notes were issued by BMC East, LLC, a 100% owned subsidiary of the Company, and are guaranteed by the
Company and the other subsidiaries
Company and the other subsidiaries
66
66
The components of income tax expense (benefit) for the years ended December, 31 2017 , 2016 and 2015 are as follows:
The components of income tax expense (benefit) for the years ended December, 31 2017 , 2016 and 2015 are as follows:
The Revolver matures at the earlier of (i) December 1, 2020 and (ii) the date that is three months prior to the maturity of the Senior Notes, or if the Senior Notes
The Revolver matures at the earlier of (i) December 1, 2020 and (ii) the date that is three months prior to the maturity of the Senior Notes, or if the Senior Notes
are refinanced or repaid, the date that is three months prior to the new maturity date of the replacement notes or other indebtedness that replaced or refinanced the
are refinanced or repaid, the date that is three months prior to the new maturity date of the replacement notes or other indebtedness that replaced or refinanced the
Senior Notes. Due to the redemption of the Extinguished Senior Notes during September 2016, the issuance of the Senior Notes which mature on October 1, 2024
Senior Notes. Due to the redemption of the Extinguished Senior Notes during September 2016, the issuance of the Senior Notes which mature on October 1, 2024
and the Company entering into the Second Amendment, the effective maturity date of the Revolver was extended from June 15, 2018, the date three months prior
and the Company entering into the Second Amendment, the effective maturity date of the Revolver was extended from June 15, 2018, the date three months prior
to the maturity date of the Extinguished Senior Notes, to December 1, 2020. After considering the increase to the remaining term and the reduction of the aggregate
to the maturity date of the Extinguished Senior Notes, to December 1, 2020. After considering the increase to the remaining term and the reduction of the aggregate
commitment resulting from the Second Amendment, the overall borrowing capacity of the Revolver increased. Accordingly, all existing unamortized debt issuance
commitment resulting from the Second Amendment, the overall borrowing capacity of the Revolver increased. Accordingly, all existing unamortized debt issuance
costs and new debt issuance costs related to the Second Amendment are being amortized through December 1, 2020. The Company was in compliance with all
costs and new debt issuance costs related to the Second Amendment are being amortized through December 1, 2020. The Company was in compliance with all
debt covenants under the Credit Agreement for the year ended December 31, 2017 .
debt covenants under the Credit Agreement for the year ended December 31, 2017 .
The Company had outstanding borrowings under the Revolver of $4.5 million with net availability of $308.2 million as of December 31, 2017 . The interest rate on
The Company had outstanding borrowings under the Revolver of $4.5 million with net availability of $308.2 million as of December 31, 2017 . The interest rate on
borrowings outstanding as of December 31, 2017 , all of which were Base Rate borrowings, was 4.75% . The Company had $62.3 million in letters of credit
borrowings outstanding as of December 31, 2017 , all of which were Base Rate borrowings, was 4.75% . The Company had $62.3 million in letters of credit
outstanding under the Credit Agreement as of December 31, 2017 . Obligations under the Credit Agreement are guaranteed by the Company's material subsidiaries.
outstanding under the Credit Agreement as of December 31, 2017 . Obligations under the Credit Agreement are guaranteed by the Company's material subsidiaries.
Obligations under the Credit Agreement and the guarantees of those obligations, are secured by substantially all of the Company's assets and those of the
Obligations under the Credit Agreement and the guarantees of those obligations, are secured by substantially all of the Company's assets and those of the
guarantors, subject to certain exceptions and permitted liens, including a first-priority security interest in certain accounts receivable, inventory and certain other
guarantors, subject to certain exceptions and permitted liens, including a first-priority security interest in certain accounts receivable, inventory and certain other
assets of the Company and a second-priority security interest in substantially all other assets of the Company that secure the Senior Notes on a first-priority basis.
assets of the Company and a second-priority security interest in substantially all other assets of the Company that secure the Senior Notes on a first-priority basis.
11. Income Taxes
11. Income Taxes
(in thousands)
(in thousands)
Current
Current
Federal
Federal
State
State
Deferred
Deferred
Federal
Federal
State
State
The carrying value of the Revolver at December 31, 2017 approximates fair value as the rates are comparable to those at which the Company could currently
The carrying value of the Revolver at December 31, 2017 approximates fair value as the rates are comparable to those at which the Company could currently
borrow under similar terms, are variable and incorporate a measure of the Company's credit risk. As such, the fair value of the Revolver was classified as a Level 2
borrow under similar terms, are variable and incorporate a measure of the Company's credit risk. As such, the fair value of the Revolver was classified as a Level 2
measurement in accordance with ASC 820.
measurement in accordance with ASC 820.
Other
Other
Other long-term debt consists of a $0.3 million term note secured by real property with a maturity of February 2021 . The interest rate is 7.0% and is paid monthly.
Other long-term debt consists of a $0.3 million term note secured by real property with a maturity of February 2021 . The interest rate is 7.0% and is paid monthly.
The estimated market value of other long-term debt approximates the carrying amount.
The estimated market value of other long-term debt approximates the carrying amount.
Scheduled maturities of long-term debt were as follows:
Scheduled maturities of long-term debt were as follows:
(in thousands)
(in thousands)
2018
2018
2019
2019
2020
2020
2021
2021
2022
2022
Thereafter
Thereafter
10. Other Long-term Liabilities
10. Other Long-term Liabilities
Other long-term liabilities consists of the following at December 31, 2017 and 2016 :
Other long-term liabilities consists of the following at December 31, 2017 and 2016 :
(in thousands)
(in thousands)
Long-term deferred rent
Long-term deferred rent
Unfavorable leases
Unfavorable leases
Other
Other
68
68
$
$
$
$
100
100
107
107
4,577
4,577
14
14
—
—
350,000
350,000
354,798
354,798
2017
2017
2016
2016
$
$
$
$
3,428 $
3,428 $
2,298
2,298
1,313
1,313
7,039 $
7,039 $
3,170
3,170
2,907
2,907
932
932
7,009
7,009
Federal statutory rate
Federal statutory rate
State taxes, net of federal tax
State taxes, net of federal tax
Nondeductible capitalized transaction costs
Nondeductible capitalized transaction costs
Nondeductible compensation expense
Nondeductible compensation expense
Nondeductible (permanent) items
Nondeductible (permanent) items
IRC Section 199 manufacturing deduction
IRC Section 199 manufacturing deduction
Changes in tax rates, including 2017 Tax Act
Changes in tax rates, including 2017 Tax Act
Changes related to IRC section 382 limitations
Changes related to IRC section 382 limitations
Excess windfall benefit of stock compensation
Excess windfall benefit of stock compensation
Other items
Other items
Effective tax rate
Effective tax rate
2017
2017
2016
2016
2015
2015
$
$
20,215 $
20,215 $
1,869
1,869
22,084
22,084
1,797
1,797
521
521
2,318
2,318
16,713 $
16,713 $
1,124
1,124
17,837
17,837
(3,049)
(3,049)
(522)
(522)
(3,571)
(3,571)
$
$
24,402 $
24,402 $
14,266 $
14,266 $
2017
2017
2016
2016
2015
2015
35.0 %
35.0 %
35.0 %
35.0 %
2.9
2.9
0.2
0.2
0.2
0.2
0.9
0.9
(2.5)
(2.5)
(4.4)
(4.4)
(2.3)
(2.3)
(0.2)
(0.2)
—
—
2.7
2.7
1.4
1.4
0.5
0.5
1.0
1.0
(3.5)
(3.5)
1.6
1.6
(3.9)
(3.9)
(3.7)
(3.7)
0.5
0.5
(4,202)
(4,202)
405
405
(3,797)
(3,797)
(4,176)
(4,176)
(1,716)
(1,716)
(5,892)
(5,892)
(9,689)
(9,689)
35.0 %
35.0 %
1.7
1.7
(16.2)
(16.2)
—
—
(3.0)
(3.0)
—
—
(6.2)
(6.2)
55.5
55.5
—
—
(0.1)
(0.1)
A reconciliation of differences between the statutory U.S. federal income tax rate of 35% and the Company’s effective tax rate from continuing operations for the
A reconciliation of differences between the statutory U.S. federal income tax rate of 35% and the Company’s effective tax rate from continuing operations for the
years ended December 31, 2017 , 2016 and 2015 follows:
years ended December 31, 2017 , 2016 and 2015 follows:
29.8 %
29.8 %
31.6 %
31.6 %
66.7 %
66.7 %
For the year ended December 31, 2017, the Company recognized $24.4 million of income tax expense, which included an income tax benefit of $3.6 million
For the year ended December 31, 2017, the Company recognized $24.4 million of income tax expense, which included an income tax benefit of $3.6 million
related to a reduction of the Company's net deferred tax liability due to the lowering of the U.S. corporate income tax rate to 21% from 35% within the Tax Cuts
related to a reduction of the Company's net deferred tax liability due to the lowering of the U.S. corporate income tax rate to 21% from 35% within the Tax Cuts
and Jobs Act of 2017 ("2017 Tax Act"), which was enacted on December 22, 2017. This legislation significantly changes U.S. tax law effective January 1, 2018
and Jobs Act of 2017 ("2017 Tax Act"), which was enacted on December 22, 2017. This legislation significantly changes U.S. tax law effective January 1, 2018
by, among other things, lowering corporate income tax rates, eliminating Internal Revenue Code ("IRC") Section 199 manufacturing deduction, accelerating tax
by, among other things, lowering corporate income tax rates, eliminating Internal Revenue Code ("IRC") Section 199 manufacturing deduction, accelerating tax
depreciation on certain acquired assets, further limiting executive compensation, and creating certain interest deduction limitations. The Securities and Exchange
depreciation on certain acquired assets, further limiting executive compensation, and creating certain interest deduction limitations. The Securities and Exchange
Commission staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary
Commission staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary
information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017
information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017
Tax Act. The Company has recognized the net tax benefit of $3.6 million related to the impact of the 2017 Tax Act for the remeasurement of deferred tax assets
Tax Act. The Company has recognized the net tax benefit of $3.6 million related to the impact of the 2017 Tax Act for the remeasurement of deferred tax assets
and liabilities and included this amount in its consolidated financial statements for the year ended December 31, 2017, on a provisional basis based on information
and liabilities and included this amount in its consolidated financial statements for the year ended December 31, 2017, on a provisional basis based on information
currently available. The 2017 Tax Act may be subject to technical amendments, as well as interpretations and implementing regulations by the Department of
currently available. The 2017 Tax Act may be subject to technical amendments, as well as interpretations and implementing regulations by the Department of
Treasury and Internal Revenue Service, any of which could increase or decrease one or more impacts of the legislation. As such, we may record additional
Treasury and Internal Revenue Service, any of which could increase or decrease one or more impacts of the legislation. As such, we may record additional
provisional amounts or adjustments to provisional amounts during the measurement period ending no later than December 2018.
provisional amounts or adjustments to provisional amounts during the measurement period ending no later than December 2018.
For the year ended December 31, 2017, the Company's effective tax rate was lower than the Company's federal and state statutory rates primarily due to the
For the year ended December 31, 2017, the Company's effective tax rate was lower than the Company's federal and state statutory rates primarily due to the
enactment of the 2017 Tax Act, an IRC section 199 manufacturing deduction, and excess windfall tax benefits of stock compensation deductions. The effective tax
enactment of the 2017 Tax Act, an IRC section 199 manufacturing deduction, and excess windfall tax benefits of stock compensation deductions. The effective tax
rate for 2017 was 29.8% and excluding the impacts of the 2017 Tax Act, the Company's effective income tax rate in 2017 would have been 34.2% .
rate for 2017 was 29.8% and excluding the impacts of the 2017 Tax Act, the Company's effective income tax rate in 2017 would have been 34.2% .
69
69
are refinanced or repaid, the date that is three months prior to the new maturity date of the replacement notes or other indebtedness that replaced or refinanced the
are refinanced or repaid, the date that is three months prior to the new maturity date of the replacement notes or other indebtedness that replaced or refinanced the
Senior Notes. Due to the redemption of the Extinguished Senior Notes during September 2016, the issuance of the Senior Notes which mature on October 1, 2024
Senior Notes. Due to the redemption of the Extinguished Senior Notes during September 2016, the issuance of the Senior Notes which mature on October 1, 2024
and the Company entering into the Second Amendment, the effective maturity date of the Revolver was extended from June 15, 2018, the date three months prior
and the Company entering into the Second Amendment, the effective maturity date of the Revolver was extended from June 15, 2018, the date three months prior
to the maturity date of the Extinguished Senior Notes, to December 1, 2020. After considering the increase to the remaining term and the reduction of the aggregate
to the maturity date of the Extinguished Senior Notes, to December 1, 2020. After considering the increase to the remaining term and the reduction of the aggregate
commitment resulting from the Second Amendment, the overall borrowing capacity of the Revolver increased. Accordingly, all existing unamortized debt issuance
commitment resulting from the Second Amendment, the overall borrowing capacity of the Revolver increased. Accordingly, all existing unamortized debt issuance
costs and new debt issuance costs related to the Second Amendment are being amortized through December 1, 2020. The Company was in compliance with all
costs and new debt issuance costs related to the Second Amendment are being amortized through December 1, 2020. The Company was in compliance with all
debt covenants under the Credit Agreement for the year ended December 31, 2017 .
debt covenants under the Credit Agreement for the year ended December 31, 2017 .
The Company had outstanding borrowings under the Revolver of $4.5 million with net availability of $308.2 million as of December 31, 2017 . The interest rate on
The Company had outstanding borrowings under the Revolver of $4.5 million with net availability of $308.2 million as of December 31, 2017 . The interest rate on
borrowings outstanding as of December 31, 2017 , all of which were Base Rate borrowings, was 4.75% . The Company had $62.3 million in letters of credit
borrowings outstanding as of December 31, 2017 , all of which were Base Rate borrowings, was 4.75% . The Company had $62.3 million in letters of credit
outstanding under the Credit Agreement as of December 31, 2017 . Obligations under the Credit Agreement are guaranteed by the Company's material subsidiaries.
outstanding under the Credit Agreement as of December 31, 2017 . Obligations under the Credit Agreement are guaranteed by the Company's material subsidiaries.
Obligations under the Credit Agreement and the guarantees of those obligations, are secured by substantially all of the Company's assets and those of the
Obligations under the Credit Agreement and the guarantees of those obligations, are secured by substantially all of the Company's assets and those of the
guarantors, subject to certain exceptions and permitted liens, including a first-priority security interest in certain accounts receivable, inventory and certain other
guarantors, subject to certain exceptions and permitted liens, including a first-priority security interest in certain accounts receivable, inventory and certain other
assets of the Company and a second-priority security interest in substantially all other assets of the Company that secure the Senior Notes on a first-priority basis.
assets of the Company and a second-priority security interest in substantially all other assets of the Company that secure the Senior Notes on a first-priority basis.
The carrying value of the Revolver at December 31, 2017 approximates fair value as the rates are comparable to those at which the Company could currently
The carrying value of the Revolver at December 31, 2017 approximates fair value as the rates are comparable to those at which the Company could currently
borrow under similar terms, are variable and incorporate a measure of the Company's credit risk. As such, the fair value of the Revolver was classified as a Level 2
borrow under similar terms, are variable and incorporate a measure of the Company's credit risk. As such, the fair value of the Revolver was classified as a Level 2
measurement in accordance with ASC 820.
measurement in accordance with ASC 820.
Other
Other
Scheduled maturities of long-term debt were as follows:
Scheduled maturities of long-term debt were as follows:
Other long-term debt consists of a $0.3 million term note secured by real property with a maturity of February 2021 . The interest rate is 7.0% and is paid monthly.
Other long-term debt consists of a $0.3 million term note secured by real property with a maturity of February 2021 . The interest rate is 7.0% and is paid monthly.
The estimated market value of other long-term debt approximates the carrying amount.
The estimated market value of other long-term debt approximates the carrying amount.
(in thousands)
(in thousands)
2018
2018
2019
2019
2020
2020
2021
2021
2022
2022
Thereafter
Thereafter
(in thousands)
(in thousands)
Long-term deferred rent
Long-term deferred rent
Unfavorable leases
Unfavorable leases
Other
Other
10. Other Long-term Liabilities
10. Other Long-term Liabilities
Other long-term liabilities consists of the following at December 31, 2017 and 2016 :
Other long-term liabilities consists of the following at December 31, 2017 and 2016 :
68
68
$
$
$
$
100
100
107
107
4,577
4,577
14
14
—
—
350,000
350,000
354,798
354,798
3,170
3,170
2,907
2,907
932
932
7,009
7,009
2017
2017
2016
2016
$
$
$
$
3,428 $
3,428 $
2,298
2,298
1,313
1,313
7,039 $
7,039 $
The Revolver matures at the earlier of (i) December 1, 2020 and (ii) the date that is three months prior to the maturity of the Senior Notes, or if the Senior Notes
The Revolver matures at the earlier of (i) December 1, 2020 and (ii) the date that is three months prior to the maturity of the Senior Notes, or if the Senior Notes
11. Income Taxes
11. Income Taxes
The components of income tax expense (benefit) for the years ended December, 31 2017 , 2016 and 2015 are as follows:
The components of income tax expense (benefit) for the years ended December, 31 2017 , 2016 and 2015 are as follows:
(in thousands)
(in thousands)
Current
Current
Federal
Federal
State
State
Deferred
Deferred
Federal
Federal
State
State
2017
2017
2016
2016
2015
2015
$
$
20,215 $
20,215 $
1,869
1,869
22,084
22,084
1,797
1,797
521
521
2,318
2,318
16,713 $
16,713 $
1,124
1,124
17,837
17,837
(3,049)
(3,049)
(522)
(522)
(3,571)
(3,571)
$
$
24,402 $
24,402 $
14,266 $
14,266 $
(4,202)
(4,202)
405
405
(3,797)
(3,797)
(4,176)
(4,176)
(1,716)
(1,716)
(5,892)
(5,892)
(9,689)
(9,689)
A reconciliation of differences between the statutory U.S. federal income tax rate of 35% and the Company’s effective tax rate from continuing operations for the
A reconciliation of differences between the statutory U.S. federal income tax rate of 35% and the Company’s effective tax rate from continuing operations for the
years ended December 31, 2017 , 2016 and 2015 follows:
years ended December 31, 2017 , 2016 and 2015 follows:
Federal statutory rate
Federal statutory rate
State taxes, net of federal tax
State taxes, net of federal tax
Nondeductible capitalized transaction costs
Nondeductible capitalized transaction costs
Nondeductible compensation expense
Nondeductible compensation expense
Nondeductible (permanent) items
Nondeductible (permanent) items
IRC Section 199 manufacturing deduction
IRC Section 199 manufacturing deduction
Changes in tax rates, including 2017 Tax Act
Changes in tax rates, including 2017 Tax Act
Changes related to IRC section 382 limitations
Changes related to IRC section 382 limitations
Excess windfall benefit of stock compensation
Excess windfall benefit of stock compensation
Other items
Other items
Effective tax rate
Effective tax rate
2017
2017
2016
2016
2015
2015
35.0 %
35.0 %
35.0 %
35.0 %
2.9
2.9
0.2
0.2
0.2
0.2
0.9
0.9
(2.5)
(2.5)
(4.4)
(4.4)
—
—
(2.3)
(2.3)
(0.2)
(0.2)
29.8 %
29.8 %
2.7
2.7
1.4
1.4
0.5
0.5
1.0
1.0
(3.5)
(3.5)
1.6
1.6
(3.9)
(3.9)
(3.7)
(3.7)
0.5
0.5
31.6 %
31.6 %
66.7 %
66.7 %
35.0 %
35.0 %
1.7
1.7
(16.2)
(16.2)
—
—
(3.0)
(3.0)
—
—
(6.2)
(6.2)
55.5
55.5
—
—
(0.1)
(0.1)
For the year ended December 31, 2017, the Company recognized $24.4 million of income tax expense, which included an income tax benefit of $3.6 million
For the year ended December 31, 2017, the Company recognized $24.4 million of income tax expense, which included an income tax benefit of $3.6 million
related to a reduction of the Company's net deferred tax liability due to the lowering of the U.S. corporate income tax rate to 21% from 35% within the Tax Cuts
related to a reduction of the Company's net deferred tax liability due to the lowering of the U.S. corporate income tax rate to 21% from 35% within the Tax Cuts
and Jobs Act of 2017 ("2017 Tax Act"), which was enacted on December 22, 2017. This legislation significantly changes U.S. tax law effective January 1, 2018
and Jobs Act of 2017 ("2017 Tax Act"), which was enacted on December 22, 2017. This legislation significantly changes U.S. tax law effective January 1, 2018
by, among other things, lowering corporate income tax rates, eliminating Internal Revenue Code ("IRC") Section 199 manufacturing deduction, accelerating tax
by, among other things, lowering corporate income tax rates, eliminating Internal Revenue Code ("IRC") Section 199 manufacturing deduction, accelerating tax
depreciation on certain acquired assets, further limiting executive compensation, and creating certain interest deduction limitations. The Securities and Exchange
depreciation on certain acquired assets, further limiting executive compensation, and creating certain interest deduction limitations. The Securities and Exchange
Commission staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary
Commission staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary
information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017
information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017
Tax Act. The Company has recognized the net tax benefit of $3.6 million related to the impact of the 2017 Tax Act for the remeasurement of deferred tax assets
Tax Act. The Company has recognized the net tax benefit of $3.6 million related to the impact of the 2017 Tax Act for the remeasurement of deferred tax assets
and liabilities and included this amount in its consolidated financial statements for the year ended December 31, 2017, on a provisional basis based on information
and liabilities and included this amount in its consolidated financial statements for the year ended December 31, 2017, on a provisional basis based on information
currently available. The 2017 Tax Act may be subject to technical amendments, as well as interpretations and implementing regulations by the Department of
currently available. The 2017 Tax Act may be subject to technical amendments, as well as interpretations and implementing regulations by the Department of
Treasury and Internal Revenue Service, any of which could increase or decrease one or more impacts of the legislation. As such, we may record additional
Treasury and Internal Revenue Service, any of which could increase or decrease one or more impacts of the legislation. As such, we may record additional
provisional amounts or adjustments to provisional amounts during the measurement period ending no later than December 2018.
provisional amounts or adjustments to provisional amounts during the measurement period ending no later than December 2018.
For the year ended December 31, 2017, the Company's effective tax rate was lower than the Company's federal and state statutory rates primarily due to the
For the year ended December 31, 2017, the Company's effective tax rate was lower than the Company's federal and state statutory rates primarily due to the
enactment of the 2017 Tax Act, an IRC section 199 manufacturing deduction, and excess windfall tax benefits of stock compensation deductions. The effective tax
enactment of the 2017 Tax Act, an IRC section 199 manufacturing deduction, and excess windfall tax benefits of stock compensation deductions. The effective tax
rate for 2017 was 29.8% and excluding the impacts of the 2017 Tax Act, the Company's effective income tax rate in 2017 would have been 34.2% .
rate for 2017 was 29.8% and excluding the impacts of the 2017 Tax Act, the Company's effective income tax rate in 2017 would have been 34.2% .
69
69
Significant components of the Company’s deferred tax assets and liabilities are as follows at December 31, 2017 and 2016 :
Significant components of the Company’s deferred tax assets and liabilities are as follows at December 31, 2017 and 2016 :
For the year ended December 31, 2016, the Company recognized $14.3 million of income tax expense, which included an income tax benefit of $1.7 million as a
For the year ended December 31, 2016, the Company recognized $14.3 million of income tax expense, which included an income tax benefit of $1.7 million as a
result of the Company adopting a state tax position related to IRC section 382 limitations on a state net operating loss carry-forward. For the year ended December
result of the Company adopting a state tax position related to IRC section 382 limitations on a state net operating loss carry-forward. For the year ended December
31, 2016, the Company's effective tax rate, excluding the state tax position change, was lower than the Company’s federal and state statutory rates primarily due to
31, 2016, the Company's effective tax rate, excluding the state tax position change, was lower than the Company’s federal and state statutory rates primarily due to
excess windfall tax benefits of stock compensation deductions and an IRC section 199 manufacturing deduction.
excess windfall tax benefits of stock compensation deductions and an IRC section 199 manufacturing deduction.
For the year ended December 31, 2015, the Company recognized a $9.7 million income tax benefit, which included an income tax benefit of $8.1 million as a
For the year ended December 31, 2015, the Company recognized a $9.7 million income tax benefit, which included an income tax benefit of $8.1 million as a
result of the Company adopting a tax position related to IRC section 382 limitations on its federal and state net operating loss carryforwards and other built-in
result of the Company adopting a tax position related to IRC section 382 limitations on its federal and state net operating loss carryforwards and other built-in
losses. IRC section 382 imposes annual limitations on the utilization of net operating loss carry-forwards, other tax carry-forwards and certain built-in losses
losses. IRC section 382 imposes annual limitations on the utilization of net operating loss carry-forwards, other tax carry-forwards and certain built-in losses
(collectively, “Tax Attributes”) upon an ownership change as defined under that section. In general terms, an ownership change may result from transactions that
(collectively, “Tax Attributes”) upon an ownership change as defined under that section. In general terms, an ownership change may result from transactions that
increase the aggregate ownership of certain stockholders in the Company’s stock by more than 50 percentage points over a three year testing period. If the
increase the aggregate ownership of certain stockholders in the Company’s stock by more than 50 percentage points over a three year testing period. If the
Company were to experience an IRC section 382 ownership change, an annual limitation could be imposed on certain Tax Attributes. Upon the Merger, the
Company were to experience an IRC section 382 ownership change, an annual limitation could be imposed on certain Tax Attributes. Upon the Merger, the
Company reviewed whether any of its Tax Attributes would be subject to IRC section 382 limitation and from such review, identified a tax position, which
Company reviewed whether any of its Tax Attributes would be subject to IRC section 382 limitation and from such review, identified a tax position, which
involves using a specific identification method, instead of the Company's previous ratable allocation method, to determine the amount of tax-deductible built-in
involves using a specific identification method, instead of the Company's previous ratable allocation method, to determine the amount of tax-deductible built-in
losses subject to IRC section 382 limitations. As a result of adopting this tax position in the fourth quarter of 2015, the Company more likely than not expects to
losses subject to IRC section 382 limitations. As a result of adopting this tax position in the fourth quarter of 2015, the Company more likely than not expects to
realize additional federal and state net operating loss carry-forwards that were previously limited under the prior method of determining IRC section 382
realize additional federal and state net operating loss carry-forwards that were previously limited under the prior method of determining IRC section 382
limitations against its Tax Attributes. The Company did not recognize any material unfavorable adjustments to its Tax Attributes specifically related to the change
limitations against its Tax Attributes. The Company did not recognize any material unfavorable adjustments to its Tax Attributes specifically related to the change
of control from the Merger on December 1, 2015. For the year ended December 31, 2015, the Company's effective tax rate, excluding the IRC section 382 tax
of control from the Merger on December 1, 2015. For the year ended December 31, 2015, the Company's effective tax rate, excluding the IRC section 382 tax
position change, was lower than the Company's federal and state statutory rates primarily due to non-deductible merger-related transaction costs.
position change, was lower than the Company's federal and state statutory rates primarily due to non-deductible merger-related transaction costs.
On December 1, 2015, BMHC and SBS completed the Merger. The Merger qualified as a tax-free reorganization within the meaning of IRC section 368(a), and
On December 1, 2015, BMHC and SBS completed the Merger. The Merger qualified as a tax-free reorganization within the meaning of IRC section 368(a), and
therefore, the Company assumed the carryover tax basis of the acquired assets and liabilities of SBS. As a result, the Company recorded a net deferred tax liability
therefore, the Company assumed the carryover tax basis of the acquired assets and liabilities of SBS. As a result, the Company recorded a net deferred tax liability
of $75.0 million and a tax payable of $3.2 million impacting goodwill as part of purchase accounting. None of the goodwill recognized as part of this transaction is
of $75.0 million and a tax payable of $3.2 million impacting goodwill as part of purchase accounting. None of the goodwill recognized as part of this transaction is
deductible for income tax purposes.
deductible for income tax purposes.
On May 1, 2015, BMHC completed its stock acquisition of VNS. The Company assumed the carryover tax basis of the acquired assets and liabilities of VNS. As a
On May 1, 2015, BMHC completed its stock acquisition of VNS. The Company assumed the carryover tax basis of the acquired assets and liabilities of VNS. As a
result, the Company recorded a net deferred tax liability of $4.4 million and a tax receivable of $0.4 million impacting goodwill as part of purchase accounting.
result, the Company recorded a net deferred tax liability of $4.4 million and a tax receivable of $0.4 million impacting goodwill as part of purchase accounting.
None of the goodwill recognized as part of this transaction is deductible for income tax purposes.
None of the goodwill recognized as part of this transaction is deductible for income tax purposes.
70
70
(in thousands)
(in thousands)
Deferred tax assets related to:
Deferred tax assets related to:
Accounts receivable
Accounts receivable
Inventory
Inventory
Accrued compensation
Accrued compensation
Insurance reserves
Insurance reserves
Stock-based compensation
Stock-based compensation
Restructuring reserves
Restructuring reserves
Other accrued liabilities
Other accrued liabilities
Federal net operating loss carryforward
Federal net operating loss carryforward
State net operating loss carryforward
State net operating loss carryforward
Other
Other
Valuation allowance
Valuation allowance
Total deferred tax assets
Total deferred tax assets
Deferred tax liabilities related to:
Deferred tax liabilities related to:
Goodwill and intangibles
Goodwill and intangibles
Property and equipment
Property and equipment
Other assets
Other assets
Total deferred tax liabilities
Total deferred tax liabilities
Net deferred tax (liability) asset
Net deferred tax (liability) asset
operating losses if unused will expire as follows:
operating losses if unused will expire as follows:
•
•
•
•
•
•
$34.2 million in 2028;
$34.2 million in 2028;
$17.3 million in 2029; and
$17.3 million in 2029; and
$31.2 million in years 2030 through 2034.
$31.2 million in years 2030 through 2034.
through 2032.
through 2032.
2017
2017
2016
2016
$
$
2,061 $
2,061 $
1,931
1,931
2,981
2,981
10,778
10,778
2,388
2,388
365
365
1,149
1,149
17,372
17,372
5,559
5,559
1,633
1,633
46,217
46,217
(145)
(145)
46,072
46,072
(21,030)
(21,030)
(25,440)
(25,440)
(1,370)
(1,370)
(47,840)
(47,840)
2,951
2,951
2,857
2,857
6,044
6,044
17,126
17,126
3,210
3,210
1,868
1,868
665
665
30,664
30,664
5,593
5,593
2,398
2,398
73,376
73,376
(125)
(125)
73,251
73,251
(31,808)
(31,808)
(38,836)
(38,836)
(2,057)
(2,057)
(72,701)
(72,701)
550
550
At December 31, 2017 , due to IRC section 382 limitations, the Company estimates federal net operating loss carryforwards generated prior to November 2011 will
At December 31, 2017 , due to IRC section 382 limitations, the Company estimates federal net operating loss carryforwards generated prior to November 2011 will
be limited to approximately $4.8 million per year through 2034. These net operating losses may generally be carried forward 20 years. As a result, federal
be limited to approximately $4.8 million per year through 2034. These net operating losses may generally be carried forward 20 years. As a result, federal
$
$
(1,768) $
(1,768) $
In addition, at December 31, 2017, the Company had $108.5 million of state net operating loss carryforwards that expire at various dates commencing in 2017
In addition, at December 31, 2017, the Company had $108.5 million of state net operating loss carryforwards that expire at various dates commencing in 2017
During the first quarter of 2016, the Company elected to early adopt ASU 2016-09 and has prospectively recognized tax benefits of $1.9 million and $1.7 million
During the first quarter of 2016, the Company elected to early adopt ASU 2016-09 and has prospectively recognized tax benefits of $1.9 million and $1.7 million
during 2017 and 2016, respectively, from stock-based compensation deductions into its income tax expense. Deferred tax assets relating to tax benefits of stock-
during 2017 and 2016, respectively, from stock-based compensation deductions into its income tax expense. Deferred tax assets relating to tax benefits of stock-
based compensation were reduced to reflect exercises or vesting; however, some exercises or vesting resulted in tax deductions in excess of previously recorded
based compensation were reduced to reflect exercises or vesting; however, some exercises or vesting resulted in tax deductions in excess of previously recorded
deferred tax benefits based on the value at the time of grant ("windfalls"). Prior to the adoption of ASU 2016-09, the Company had excluded excess windfall tax
deferred tax benefits based on the value at the time of grant ("windfalls"). Prior to the adoption of ASU 2016-09, the Company had excluded excess windfall tax
benefits resulting from stock-based compensation vesting and exercises as components of the Company’s gross deferred tax assets, as Tax Attributes related to
benefits resulting from stock-based compensation vesting and exercises as components of the Company’s gross deferred tax assets, as Tax Attributes related to
such windfall tax benefits were not recognized until they resulted in a reduction of taxes payable. The tax effected amount of unrealized net operating loss
such windfall tax benefits were not recognized until they resulted in a reduction of taxes payable. The tax effected amount of unrealized net operating loss
carryforwards resulting from stock-based compensation awards vested and/or exercised was $0 , $0 and $0.4 million at December 31, 2017 , 2016 and 2015 ,
carryforwards resulting from stock-based compensation awards vested and/or exercised was $0 , $0 and $0.4 million at December 31, 2017 , 2016 and 2015 ,
respectively. When realized, these excess windfall tax benefits were credited to additional paid-in capital. Excess windfall tax benefits recognized as a component
respectively. When realized, these excess windfall tax benefits were credited to additional paid-in capital. Excess windfall tax benefits recognized as a component
of shareholders' equity were $0 , $0.4 million and $0 for December 31, 2017 , 2016 and 2015 , respectively. The Company had followed the "with-and-without"
of shareholders' equity were $0 , $0.4 million and $0 for December 31, 2017 , 2016 and 2015 , respectively. The Company had followed the "with-and-without"
allocation approach to determine when such net operating loss carryforwards have been realized.
allocation approach to determine when such net operating loss carryforwards have been realized.
The Company recognized a current income tax receivable of $3.7 million and $2.4 million at December 31, 2017 and 2016 , respectively. The Company paid
The Company recognized a current income tax receivable of $3.7 million and $2.4 million at December 31, 2017 and 2016 , respectively. The Company paid
federal and state income tax payments of $23.5 million and $8.8 million during 2017 and 2016 , respectively. The Company received tax refunds of $0.6 million
federal and state income tax payments of $23.5 million and $8.8 million during 2017 and 2016 , respectively. The Company received tax refunds of $0.6 million
and $0.6 million in 2017 and 2016 , respectively.
and $0.6 million in 2017 and 2016 , respectively.
71
71
For the year ended December 31, 2016, the Company recognized $14.3 million of income tax expense, which included an income tax benefit of $1.7 million as a
For the year ended December 31, 2016, the Company recognized $14.3 million of income tax expense, which included an income tax benefit of $1.7 million as a
Significant components of the Company’s deferred tax assets and liabilities are as follows at December 31, 2017 and 2016 :
Significant components of the Company’s deferred tax assets and liabilities are as follows at December 31, 2017 and 2016 :
result of the Company adopting a state tax position related to IRC section 382 limitations on a state net operating loss carry-forward. For the year ended December
result of the Company adopting a state tax position related to IRC section 382 limitations on a state net operating loss carry-forward. For the year ended December
31, 2016, the Company's effective tax rate, excluding the state tax position change, was lower than the Company’s federal and state statutory rates primarily due to
31, 2016, the Company's effective tax rate, excluding the state tax position change, was lower than the Company’s federal and state statutory rates primarily due to
excess windfall tax benefits of stock compensation deductions and an IRC section 199 manufacturing deduction.
excess windfall tax benefits of stock compensation deductions and an IRC section 199 manufacturing deduction.
For the year ended December 31, 2015, the Company recognized a $9.7 million income tax benefit, which included an income tax benefit of $8.1 million as a
For the year ended December 31, 2015, the Company recognized a $9.7 million income tax benefit, which included an income tax benefit of $8.1 million as a
result of the Company adopting a tax position related to IRC section 382 limitations on its federal and state net operating loss carryforwards and other built-in
result of the Company adopting a tax position related to IRC section 382 limitations on its federal and state net operating loss carryforwards and other built-in
losses. IRC section 382 imposes annual limitations on the utilization of net operating loss carry-forwards, other tax carry-forwards and certain built-in losses
losses. IRC section 382 imposes annual limitations on the utilization of net operating loss carry-forwards, other tax carry-forwards and certain built-in losses
(collectively, “Tax Attributes”) upon an ownership change as defined under that section. In general terms, an ownership change may result from transactions that
(collectively, “Tax Attributes”) upon an ownership change as defined under that section. In general terms, an ownership change may result from transactions that
increase the aggregate ownership of certain stockholders in the Company’s stock by more than 50 percentage points over a three year testing period. If the
increase the aggregate ownership of certain stockholders in the Company’s stock by more than 50 percentage points over a three year testing period. If the
Company were to experience an IRC section 382 ownership change, an annual limitation could be imposed on certain Tax Attributes. Upon the Merger, the
Company were to experience an IRC section 382 ownership change, an annual limitation could be imposed on certain Tax Attributes. Upon the Merger, the
Company reviewed whether any of its Tax Attributes would be subject to IRC section 382 limitation and from such review, identified a tax position, which
Company reviewed whether any of its Tax Attributes would be subject to IRC section 382 limitation and from such review, identified a tax position, which
involves using a specific identification method, instead of the Company's previous ratable allocation method, to determine the amount of tax-deductible built-in
involves using a specific identification method, instead of the Company's previous ratable allocation method, to determine the amount of tax-deductible built-in
losses subject to IRC section 382 limitations. As a result of adopting this tax position in the fourth quarter of 2015, the Company more likely than not expects to
losses subject to IRC section 382 limitations. As a result of adopting this tax position in the fourth quarter of 2015, the Company more likely than not expects to
realize additional federal and state net operating loss carry-forwards that were previously limited under the prior method of determining IRC section 382
realize additional federal and state net operating loss carry-forwards that were previously limited under the prior method of determining IRC section 382
limitations against its Tax Attributes. The Company did not recognize any material unfavorable adjustments to its Tax Attributes specifically related to the change
limitations against its Tax Attributes. The Company did not recognize any material unfavorable adjustments to its Tax Attributes specifically related to the change
of control from the Merger on December 1, 2015. For the year ended December 31, 2015, the Company's effective tax rate, excluding the IRC section 382 tax
of control from the Merger on December 1, 2015. For the year ended December 31, 2015, the Company's effective tax rate, excluding the IRC section 382 tax
position change, was lower than the Company's federal and state statutory rates primarily due to non-deductible merger-related transaction costs.
position change, was lower than the Company's federal and state statutory rates primarily due to non-deductible merger-related transaction costs.
(in thousands)
(in thousands)
Deferred tax assets related to:
Deferred tax assets related to:
Accounts receivable
Accounts receivable
Inventory
Inventory
Accrued compensation
Accrued compensation
Insurance reserves
Insurance reserves
Stock-based compensation
Stock-based compensation
Restructuring reserves
Restructuring reserves
Other accrued liabilities
Other accrued liabilities
Federal net operating loss carryforward
Federal net operating loss carryforward
State net operating loss carryforward
State net operating loss carryforward
Other
Other
On December 1, 2015, BMHC and SBS completed the Merger. The Merger qualified as a tax-free reorganization within the meaning of IRC section 368(a), and
On December 1, 2015, BMHC and SBS completed the Merger. The Merger qualified as a tax-free reorganization within the meaning of IRC section 368(a), and
therefore, the Company assumed the carryover tax basis of the acquired assets and liabilities of SBS. As a result, the Company recorded a net deferred tax liability
therefore, the Company assumed the carryover tax basis of the acquired assets and liabilities of SBS. As a result, the Company recorded a net deferred tax liability
of $75.0 million and a tax payable of $3.2 million impacting goodwill as part of purchase accounting. None of the goodwill recognized as part of this transaction is
of $75.0 million and a tax payable of $3.2 million impacting goodwill as part of purchase accounting. None of the goodwill recognized as part of this transaction is
Valuation allowance
Valuation allowance
Total deferred tax assets
Total deferred tax assets
deductible for income tax purposes.
deductible for income tax purposes.
On May 1, 2015, BMHC completed its stock acquisition of VNS. The Company assumed the carryover tax basis of the acquired assets and liabilities of VNS. As a
On May 1, 2015, BMHC completed its stock acquisition of VNS. The Company assumed the carryover tax basis of the acquired assets and liabilities of VNS. As a
result, the Company recorded a net deferred tax liability of $4.4 million and a tax receivable of $0.4 million impacting goodwill as part of purchase accounting.
result, the Company recorded a net deferred tax liability of $4.4 million and a tax receivable of $0.4 million impacting goodwill as part of purchase accounting.
None of the goodwill recognized as part of this transaction is deductible for income tax purposes.
None of the goodwill recognized as part of this transaction is deductible for income tax purposes.
70
70
Deferred tax liabilities related to:
Deferred tax liabilities related to:
Goodwill and intangibles
Goodwill and intangibles
Property and equipment
Property and equipment
Other assets
Other assets
Total deferred tax liabilities
Total deferred tax liabilities
Net deferred tax (liability) asset
Net deferred tax (liability) asset
2017
2017
2016
2016
$
$
2,061 $
2,061 $
1,931
1,931
2,981
2,981
10,778
10,778
2,388
2,388
365
365
1,149
1,149
17,372
17,372
5,559
5,559
1,633
1,633
46,217
46,217
(145)
(145)
46,072
46,072
(21,030)
(21,030)
(25,440)
(25,440)
(1,370)
(1,370)
(47,840)
(47,840)
$
$
(1,768) $
(1,768) $
2,951
2,951
2,857
2,857
6,044
6,044
17,126
17,126
3,210
3,210
1,868
1,868
665
665
30,664
30,664
5,593
5,593
2,398
2,398
73,376
73,376
(125)
(125)
73,251
73,251
(31,808)
(31,808)
(38,836)
(38,836)
(2,057)
(2,057)
(72,701)
(72,701)
550
550
At December 31, 2017 , due to IRC section 382 limitations, the Company estimates federal net operating loss carryforwards generated prior to November 2011 will
At December 31, 2017 , due to IRC section 382 limitations, the Company estimates federal net operating loss carryforwards generated prior to November 2011 will
be limited to approximately $4.8 million per year through 2034. These net operating losses may generally be carried forward 20 years. As a result, federal
be limited to approximately $4.8 million per year through 2034. These net operating losses may generally be carried forward 20 years. As a result, federal
operating losses if unused will expire as follows:
operating losses if unused will expire as follows:
•
•
•
•
•
•
$34.2 million in 2028;
$34.2 million in 2028;
$17.3 million in 2029; and
$17.3 million in 2029; and
$31.2 million in years 2030 through 2034.
$31.2 million in years 2030 through 2034.
In addition, at December 31, 2017, the Company had $108.5 million of state net operating loss carryforwards that expire at various dates commencing in 2017
In addition, at December 31, 2017, the Company had $108.5 million of state net operating loss carryforwards that expire at various dates commencing in 2017
through 2032.
through 2032.
During the first quarter of 2016, the Company elected to early adopt ASU 2016-09 and has prospectively recognized tax benefits of $1.9 million and $1.7 million
During the first quarter of 2016, the Company elected to early adopt ASU 2016-09 and has prospectively recognized tax benefits of $1.9 million and $1.7 million
during 2017 and 2016, respectively, from stock-based compensation deductions into its income tax expense. Deferred tax assets relating to tax benefits of stock-
during 2017 and 2016, respectively, from stock-based compensation deductions into its income tax expense. Deferred tax assets relating to tax benefits of stock-
based compensation were reduced to reflect exercises or vesting; however, some exercises or vesting resulted in tax deductions in excess of previously recorded
based compensation were reduced to reflect exercises or vesting; however, some exercises or vesting resulted in tax deductions in excess of previously recorded
deferred tax benefits based on the value at the time of grant ("windfalls"). Prior to the adoption of ASU 2016-09, the Company had excluded excess windfall tax
deferred tax benefits based on the value at the time of grant ("windfalls"). Prior to the adoption of ASU 2016-09, the Company had excluded excess windfall tax
benefits resulting from stock-based compensation vesting and exercises as components of the Company’s gross deferred tax assets, as Tax Attributes related to
benefits resulting from stock-based compensation vesting and exercises as components of the Company’s gross deferred tax assets, as Tax Attributes related to
such windfall tax benefits were not recognized until they resulted in a reduction of taxes payable. The tax effected amount of unrealized net operating loss
such windfall tax benefits were not recognized until they resulted in a reduction of taxes payable. The tax effected amount of unrealized net operating loss
carryforwards resulting from stock-based compensation awards vested and/or exercised was $0 , $0 and $0.4 million at December 31, 2017 , 2016 and 2015 ,
carryforwards resulting from stock-based compensation awards vested and/or exercised was $0 , $0 and $0.4 million at December 31, 2017 , 2016 and 2015 ,
respectively. When realized, these excess windfall tax benefits were credited to additional paid-in capital. Excess windfall tax benefits recognized as a component
respectively. When realized, these excess windfall tax benefits were credited to additional paid-in capital. Excess windfall tax benefits recognized as a component
of shareholders' equity were $0 , $0.4 million and $0 for December 31, 2017 , 2016 and 2015 , respectively. The Company had followed the "with-and-without"
of shareholders' equity were $0 , $0.4 million and $0 for December 31, 2017 , 2016 and 2015 , respectively. The Company had followed the "with-and-without"
allocation approach to determine when such net operating loss carryforwards have been realized.
allocation approach to determine when such net operating loss carryforwards have been realized.
The Company recognized a current income tax receivable of $3.7 million and $2.4 million at December 31, 2017 and 2016 , respectively. The Company paid
The Company recognized a current income tax receivable of $3.7 million and $2.4 million at December 31, 2017 and 2016 , respectively. The Company paid
federal and state income tax payments of $23.5 million and $8.8 million during 2017 and 2016 , respectively. The Company received tax refunds of $0.6 million
federal and state income tax payments of $23.5 million and $8.8 million during 2017 and 2016 , respectively. The Company received tax refunds of $0.6 million
and $0.6 million in 2017 and 2016 , respectively.
and $0.6 million in 2017 and 2016 , respectively.
71
71
In accordance with ASC 740, the Company evaluates its deferred tax assets to determine if valuation allowances are required. In assessing the realizability of
In accordance with ASC 740, the Company evaluates its deferred tax assets to determine if valuation allowances are required. In assessing the realizability of
deferred tax assets, the Company considers both positive and negative evidence in determining whether it is more likely than not that some portion or all of the
deferred tax assets, the Company considers both positive and negative evidence in determining whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
deferred tax assets will not be realized.
As of December 31, 2017 and 2016 , the primary positive evidence considered to support the realization of the Company's deferred tax assets includes: (i) the
As of December 31, 2017 and 2016 , the primary positive evidence considered to support the realization of the Company's deferred tax assets includes: (i) the
cumulative pre-tax income over the last 36 months, (ii) the reversal of deferred tax liabilities related to depreciation and amortization that would occur within the
cumulative pre-tax income over the last 36 months, (ii) the reversal of deferred tax liabilities related to depreciation and amortization that would occur within the
same jurisdiction and during the carry forward period necessary to absorb the federal and state net operating losses and other deferred tax assets, (iii) current and
same jurisdiction and during the carry forward period necessary to absorb the federal and state net operating losses and other deferred tax assets, (iii) current and
prior year utilization of federal and state net operating losses, and (iv) no history of material expiring Tax Attributes. The primary negative evidence considered
prior year utilization of federal and state net operating losses, and (iv) no history of material expiring Tax Attributes. The primary negative evidence considered
includes: (i) the Company's cumulative losses prior to 2013, (ii) unsettled circumstances associated with the general economy and housing market, as well as
includes: (i) the Company's cumulative losses prior to 2013, (ii) unsettled circumstances associated with the general economy and housing market, as well as
mortgage credit availability, and (iii) no federal and state net operating loss carryback opportunities. To the extent the Company generates future net operating
mortgage credit availability, and (iii) no federal and state net operating loss carryback opportunities. To the extent the Company generates future net operating
losses, the Company may be required to increase the valuation allowance on its deferred tax assets and income tax benefit would be adversely affected.
losses, the Company may be required to increase the valuation allowance on its deferred tax assets and income tax benefit would be adversely affected.
Based upon the positive and negative evidence considered, the Company believes it is more likely than not that it will realize the benefit of the deferred tax assets,
Based upon the positive and negative evidence considered, the Company believes it is more likely than not that it will realize the benefit of the deferred tax assets,
net of the existing state tax valuation allowances of $0.1 million and $0.1 million as of December 31, 2017 and 2016, respectively. To the extent the Company
net of the existing state tax valuation allowances of $0.1 million and $0.1 million as of December 31, 2017 and 2016, respectively. To the extent the Company
generates sufficient taxable income in the future to fully utilize the tax benefits of the net deferred tax assets on which a valuation allowance was recorded, the
generates sufficient taxable income in the future to fully utilize the tax benefits of the net deferred tax assets on which a valuation allowance was recorded, the
Company’s effective tax rate would be impacted as the valuation allowance is reversed. The Company continues to evaluate its deferred tax asset on a quarterly
Company’s effective tax rate would be impacted as the valuation allowance is reversed. The Company continues to evaluate its deferred tax asset on a quarterly
basis and notes that, if economic conditions were to change such that the Company earns less taxable income than the amounts required to fully utilize its deferred
basis and notes that, if economic conditions were to change such that the Company earns less taxable income than the amounts required to fully utilize its deferred
tax asset, a portion of the asset may expire unused.
tax asset, a portion of the asset may expire unused.
The following table shows the changes in the amount of the Company’s valuation allowance:
The following table shows the changes in the amount of the Company’s valuation allowance:
(in thousands)
(in thousands)
Balance at January 1,
Balance at January 1,
Additions charged to expense
Additions charged to expense
Additions charged to Goodwill/Purchase Accounting
Additions charged to Goodwill/Purchase Accounting
Deductions - other
Deductions - other
Balance at December 31,
Balance at December 31,
2017
2017
2016
2016
2015
2015
125 $
125 $
126 $
126 $
20
20
—
—
—
—
—
—
—
—
(1)
(1)
145 $
145 $
125 $
125 $
—
—
—
—
126
126
—
—
126
126
$
$
$
$
The Company has no material uncertain tax positions as of December 31, 2017 and December 31, 2016.
The Company has no material uncertain tax positions as of December 31, 2017 and December 31, 2016.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (exclusive of the effect of interest and penalties) is as follows:
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (exclusive of the effect of interest and penalties) is as follows:
of operations.
of operations.
(in thousands)
(in thousands)
2018
2018
2019
2019
2020
2020
2021
2021
2022
2022
Thereafter
Thereafter
(in thousands)
(in thousands)
Balance at January 1,
Balance at January 1,
Tax positions taken in prior periods:
Tax positions taken in prior periods:
Gross increases
Gross increases
Gross decreases
Gross decreases
Tax positions taken in current period:
Tax positions taken in current period:
Gross increases
Gross increases
Settlements with taxing authorities
Settlements with taxing authorities
Lapse of applicable statute of limitations
Lapse of applicable statute of limitations
Balance at December 31,
Balance at December 31,
2017
2017
2016
2016
$
$
— $
— $
3,224
3,224
—
—
—
—
—
—
—
—
—
—
$
$
— $
— $
—
—
(3,224)
(3,224)
—
—
—
—
—
—
—
—
The Company‘s state tax returns are open to examination for an average of three years. However, certain jurisdictions remain open to examination longer than
The Company‘s state tax returns are open to examination for an average of three years. However, certain jurisdictions remain open to examination longer than
three years due to the existence of net operating losses. The Company’s federal returns are open to examination for three years; however, due to statutory waivers,
three years due to the existence of net operating losses. The Company’s federal returns are open to examination for three years; however, due to statutory waivers,
SBS' tax years ended July 31, 2008 and May 5, 2009 remain open until July 31, 2019 with the federal tax authorities. SBS is currently under examination by the
SBS' tax years ended July 31, 2008 and May 5, 2009 remain open until July 31, 2019 with the federal tax authorities. SBS is currently under examination by the
IRS for its tax years ended July 31, 2008 and May 5, 2009 . At December 31, 2017 and 2016 , the amount recognized related to expected tax, penalties and interest
IRS for its tax years ended July 31, 2008 and May 5, 2009 . At December 31, 2017 and 2016 , the amount recognized related to expected tax, penalties and interest
payments as a result of the IRS audits in income taxes receivable on the consolidated balance sheets was immaterial.
payments as a result of the IRS audits in income taxes receivable on the consolidated balance sheets was immaterial.
The Company’s policy is to recognize interest and penalties related to income tax liabilities and unrecognized tax benefits in income tax expense. During the years
The Company’s policy is to recognize interest and penalties related to income tax liabilities and unrecognized tax benefits in income tax expense. During the years
ended December 31, 2017 , 2016 and 2015 , penalties and interest related to income tax liabilities and uncertain tax benefits were not material.
ended December 31, 2017 , 2016 and 2015 , penalties and interest related to income tax liabilities and uncertain tax benefits were not material.
12. Commitments and Contingencies
12. Commitments and Contingencies
The Company is obligated under capital leases covering fleet vehicles and certain equipment, as well as one facility. The fleet vehicles and equipment leases
The Company is obligated under capital leases covering fleet vehicles and certain equipment, as well as one facility. The fleet vehicles and equipment leases
generally have terms ranging from three to six years and the facility lease has a remaining term of six years. The carrying value of property and equipment under
generally have terms ranging from three to six years and the facility lease has a remaining term of six years. The carrying value of property and equipment under
capital leases was $25.2 million and $32.6 million at December 31, 2017 and 2016 , respectively, net of accumulated depreciation of $37.1 million and $28.8
capital leases was $25.2 million and $32.6 million at December 31, 2017 and 2016 , respectively, net of accumulated depreciation of $37.1 million and $28.8
million , respectively. Amortization of assets held under capital leases is included within depreciation expense or cost of goods sold on the consolidated statements
million , respectively. Amortization of assets held under capital leases is included within depreciation expense or cost of goods sold on the consolidated statements
The Company also has noncancellable operating leases, primarily for buildings, improvements and equipment. These leases generally contain renewal options for
The Company also has noncancellable operating leases, primarily for buildings, improvements and equipment. These leases generally contain renewal options for
periods ranging from one to five years and require the Company to pay all executory costs such as property taxes, maintenance and insurance.
periods ranging from one to five years and require the Company to pay all executory costs such as property taxes, maintenance and insurance.
Future minimum lease payments under noncancellable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital
Future minimum lease payments under noncancellable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital
lease payments as of December 31, 2017 are as follows:
lease payments as of December 31, 2017 are as follows:
Capital
Capital
Leases
Leases
Operating
Operating
Leases
Leases
$
$
8,450 $
8,450 $
7,073
7,073
5,412
5,412
1,934
1,934
873
873
660
660
24,402 $
24,402 $
(1,925)
(1,925)
22,477
22,477
(7,639)
(7,639)
14,838
14,838
$
$
27,640
27,640
25,323
25,323
19,022
19,022
16,500
16,500
12,809
12,809
37,269
37,269
138,563
138,563
(a)
(a)
Less: Amounts representing interest
Less: Amounts representing interest
Total obligation under capital leases
Total obligation under capital leases
Less: Current portion of capital lease obligation
Less: Current portion of capital lease obligation
Long-term capital lease obligation
Long-term capital lease obligation
the consumer price index.
the consumer price index.
enforceable and legally binding on us.
enforceable and legally binding on us.
(a) Minimum operating lease payments have not been reduced by minimum sublease rentals of $0.1 million due in the future under noncancelable subleases.
(a) Minimum operating lease payments have not been reduced by minimum sublease rentals of $0.1 million due in the future under noncancelable subleases.
Total rent expense under operating leases, excluding short-term rentals, for the years ended December 31, 2017 , 2016 and 2015 was $30.5 million , $29.3 million
Total rent expense under operating leases, excluding short-term rentals, for the years ended December 31, 2017 , 2016 and 2015 was $30.5 million , $29.3 million
and $8.1 million , respectively, which are included in either cost of sales or selling, general and administrative expenses on the consolidated statements of
and $8.1 million , respectively, which are included in either cost of sales or selling, general and administrative expenses on the consolidated statements of
operations, depending on the type of operations undertaken by the related facility or asset. Future payments for certain leases will be adjusted based on increases in
operations, depending on the type of operations undertaken by the related facility or asset. Future payments for certain leases will be adjusted based on increases in
As of December 31, 2017 , the Company had purchase commitments totaling $7.1 million related primarily to vehicles and certain IT equipment, which are
As of December 31, 2017 , the Company had purchase commitments totaling $7.1 million related primarily to vehicles and certain IT equipment, which are
From time to time, various claims, legal proceedings and litigation are asserted or commenced against the Company principally arising from alleged product
From time to time, various claims, legal proceedings and litigation are asserted or commenced against the Company principally arising from alleged product
liability, warranty, casualty, construction defect, contract, tort, employment and other disputes. In determining loss contingencies, management considers the
liability, warranty, casualty, construction defect, contract, tort, employment and other disputes. In determining loss contingencies, management considers the
likelihood of loss as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is recorded when it is considered probable that
likelihood of loss as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is recorded when it is considered probable that
such a liability has been incurred and when the amount of loss can be reasonably estimated. It is not certain that the Company will prevail in these matters.
such a liability has been incurred and when the amount of loss can be reasonably estimated. It is not certain that the Company will prevail in these matters.
However, the Company does not believe that the ultimate outcome of any pending matters will have a material adverse effect on its consolidated financial position,
However, the Company does not believe that the ultimate outcome of any pending matters will have a material adverse effect on its consolidated financial position,
results of operations or cash flows. The Company recorded $3.0 million of expense within selling, general and administrative expenses in its statements of
results of operations or cash flows. The Company recorded $3.0 million of expense within selling, general and administrative expenses in its statements of
operations for the year ended December 31, 2017 in relation to pending litigation. The amount accrued is based upon currently available information, however, the
operations for the year ended December 31, 2017 in relation to pending litigation. The amount accrued is based upon currently available information, however, the
ultimate obligation may be higher.
ultimate obligation may be higher.
72
72
73
73
In accordance with ASC 740, the Company evaluates its deferred tax assets to determine if valuation allowances are required. In assessing the realizability of
In accordance with ASC 740, the Company evaluates its deferred tax assets to determine if valuation allowances are required. In assessing the realizability of
deferred tax assets, the Company considers both positive and negative evidence in determining whether it is more likely than not that some portion or all of the
deferred tax assets, the Company considers both positive and negative evidence in determining whether it is more likely than not that some portion or all of the
The Company’s policy is to recognize interest and penalties related to income tax liabilities and unrecognized tax benefits in income tax expense. During the years
The Company’s policy is to recognize interest and penalties related to income tax liabilities and unrecognized tax benefits in income tax expense. During the years
ended December 31, 2017 , 2016 and 2015 , penalties and interest related to income tax liabilities and uncertain tax benefits were not material.
ended December 31, 2017 , 2016 and 2015 , penalties and interest related to income tax liabilities and uncertain tax benefits were not material.
deferred tax assets will not be realized.
deferred tax assets will not be realized.
As of December 31, 2017 and 2016 , the primary positive evidence considered to support the realization of the Company's deferred tax assets includes: (i) the
As of December 31, 2017 and 2016 , the primary positive evidence considered to support the realization of the Company's deferred tax assets includes: (i) the
cumulative pre-tax income over the last 36 months, (ii) the reversal of deferred tax liabilities related to depreciation and amortization that would occur within the
cumulative pre-tax income over the last 36 months, (ii) the reversal of deferred tax liabilities related to depreciation and amortization that would occur within the
same jurisdiction and during the carry forward period necessary to absorb the federal and state net operating losses and other deferred tax assets, (iii) current and
same jurisdiction and during the carry forward period necessary to absorb the federal and state net operating losses and other deferred tax assets, (iii) current and
prior year utilization of federal and state net operating losses, and (iv) no history of material expiring Tax Attributes. The primary negative evidence considered
prior year utilization of federal and state net operating losses, and (iv) no history of material expiring Tax Attributes. The primary negative evidence considered
includes: (i) the Company's cumulative losses prior to 2013, (ii) unsettled circumstances associated with the general economy and housing market, as well as
includes: (i) the Company's cumulative losses prior to 2013, (ii) unsettled circumstances associated with the general economy and housing market, as well as
mortgage credit availability, and (iii) no federal and state net operating loss carryback opportunities. To the extent the Company generates future net operating
mortgage credit availability, and (iii) no federal and state net operating loss carryback opportunities. To the extent the Company generates future net operating
losses, the Company may be required to increase the valuation allowance on its deferred tax assets and income tax benefit would be adversely affected.
losses, the Company may be required to increase the valuation allowance on its deferred tax assets and income tax benefit would be adversely affected.
Based upon the positive and negative evidence considered, the Company believes it is more likely than not that it will realize the benefit of the deferred tax assets,
Based upon the positive and negative evidence considered, the Company believes it is more likely than not that it will realize the benefit of the deferred tax assets,
net of the existing state tax valuation allowances of $0.1 million and $0.1 million as of December 31, 2017 and 2016, respectively. To the extent the Company
net of the existing state tax valuation allowances of $0.1 million and $0.1 million as of December 31, 2017 and 2016, respectively. To the extent the Company
generates sufficient taxable income in the future to fully utilize the tax benefits of the net deferred tax assets on which a valuation allowance was recorded, the
generates sufficient taxable income in the future to fully utilize the tax benefits of the net deferred tax assets on which a valuation allowance was recorded, the
Company’s effective tax rate would be impacted as the valuation allowance is reversed. The Company continues to evaluate its deferred tax asset on a quarterly
Company’s effective tax rate would be impacted as the valuation allowance is reversed. The Company continues to evaluate its deferred tax asset on a quarterly
basis and notes that, if economic conditions were to change such that the Company earns less taxable income than the amounts required to fully utilize its deferred
basis and notes that, if economic conditions were to change such that the Company earns less taxable income than the amounts required to fully utilize its deferred
tax asset, a portion of the asset may expire unused.
tax asset, a portion of the asset may expire unused.
The following table shows the changes in the amount of the Company’s valuation allowance:
The following table shows the changes in the amount of the Company’s valuation allowance:
(in thousands)
(in thousands)
Balance at January 1,
Balance at January 1,
Additions charged to expense
Additions charged to expense
Deductions - other
Deductions - other
Balance at December 31,
Balance at December 31,
Additions charged to Goodwill/Purchase Accounting
Additions charged to Goodwill/Purchase Accounting
2017
2017
2016
2016
2015
2015
125 $
125 $
126 $
126 $
20
20
—
—
—
—
145 $
145 $
125 $
125 $
$
$
$
$
The Company has no material uncertain tax positions as of December 31, 2017 and December 31, 2016.
The Company has no material uncertain tax positions as of December 31, 2017 and December 31, 2016.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (exclusive of the effect of interest and penalties) is as follows:
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (exclusive of the effect of interest and penalties) is as follows:
2017
2017
2016
2016
$
$
— $
— $
3,224
3,224
—
—
—
—
(1)
(1)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
126
126
—
—
126
126
—
—
(3,224)
(3,224)
—
—
—
—
—
—
—
—
(in thousands)
(in thousands)
Balance at January 1,
Balance at January 1,
Tax positions taken in prior periods:
Tax positions taken in prior periods:
Gross increases
Gross increases
Gross decreases
Gross decreases
Gross increases
Gross increases
Tax positions taken in current period:
Tax positions taken in current period:
Settlements with taxing authorities
Settlements with taxing authorities
Lapse of applicable statute of limitations
Lapse of applicable statute of limitations
Balance at December 31,
Balance at December 31,
The Company‘s state tax returns are open to examination for an average of three years. However, certain jurisdictions remain open to examination longer than
The Company‘s state tax returns are open to examination for an average of three years. However, certain jurisdictions remain open to examination longer than
three years due to the existence of net operating losses. The Company’s federal returns are open to examination for three years; however, due to statutory waivers,
three years due to the existence of net operating losses. The Company’s federal returns are open to examination for three years; however, due to statutory waivers,
SBS' tax years ended July 31, 2008 and May 5, 2009 remain open until July 31, 2019 with the federal tax authorities. SBS is currently under examination by the
SBS' tax years ended July 31, 2008 and May 5, 2009 remain open until July 31, 2019 with the federal tax authorities. SBS is currently under examination by the
IRS for its tax years ended July 31, 2008 and May 5, 2009 . At December 31, 2017 and 2016 , the amount recognized related to expected tax, penalties and interest
IRS for its tax years ended July 31, 2008 and May 5, 2009 . At December 31, 2017 and 2016 , the amount recognized related to expected tax, penalties and interest
payments as a result of the IRS audits in income taxes receivable on the consolidated balance sheets was immaterial.
payments as a result of the IRS audits in income taxes receivable on the consolidated balance sheets was immaterial.
$
$
— $
— $
12. Commitments and Contingencies
12. Commitments and Contingencies
The Company is obligated under capital leases covering fleet vehicles and certain equipment, as well as one facility. The fleet vehicles and equipment leases
The Company is obligated under capital leases covering fleet vehicles and certain equipment, as well as one facility. The fleet vehicles and equipment leases
generally have terms ranging from three to six years and the facility lease has a remaining term of six years. The carrying value of property and equipment under
generally have terms ranging from three to six years and the facility lease has a remaining term of six years. The carrying value of property and equipment under
capital leases was $25.2 million and $32.6 million at December 31, 2017 and 2016 , respectively, net of accumulated depreciation of $37.1 million and $28.8
capital leases was $25.2 million and $32.6 million at December 31, 2017 and 2016 , respectively, net of accumulated depreciation of $37.1 million and $28.8
million , respectively. Amortization of assets held under capital leases is included within depreciation expense or cost of goods sold on the consolidated statements
million , respectively. Amortization of assets held under capital leases is included within depreciation expense or cost of goods sold on the consolidated statements
of operations.
of operations.
The Company also has noncancellable operating leases, primarily for buildings, improvements and equipment. These leases generally contain renewal options for
The Company also has noncancellable operating leases, primarily for buildings, improvements and equipment. These leases generally contain renewal options for
periods ranging from one to five years and require the Company to pay all executory costs such as property taxes, maintenance and insurance.
periods ranging from one to five years and require the Company to pay all executory costs such as property taxes, maintenance and insurance.
Future minimum lease payments under noncancellable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital
Future minimum lease payments under noncancellable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital
lease payments as of December 31, 2017 are as follows:
lease payments as of December 31, 2017 are as follows:
(in thousands)
(in thousands)
2018
2018
2019
2019
2020
2020
2021
2021
2022
2022
Thereafter
Thereafter
Less: Amounts representing interest
Less: Amounts representing interest
Total obligation under capital leases
Total obligation under capital leases
Less: Current portion of capital lease obligation
Less: Current portion of capital lease obligation
Long-term capital lease obligation
Long-term capital lease obligation
Capital
Capital
Leases
Leases
Operating
Operating
Leases
Leases
27,640
27,640
25,323
25,323
19,022
19,022
16,500
16,500
12,809
12,809
37,269
37,269
138,563
138,563
(a)
(a)
$
$
8,450 $
8,450 $
7,073
7,073
5,412
5,412
1,934
1,934
873
873
660
660
24,402 $
24,402 $
(1,925)
(1,925)
22,477
22,477
(7,639)
(7,639)
14,838
14,838
$
$
(a) Minimum operating lease payments have not been reduced by minimum sublease rentals of $0.1 million due in the future under noncancelable subleases.
(a) Minimum operating lease payments have not been reduced by minimum sublease rentals of $0.1 million due in the future under noncancelable subleases.
Total rent expense under operating leases, excluding short-term rentals, for the years ended December 31, 2017 , 2016 and 2015 was $30.5 million , $29.3 million
Total rent expense under operating leases, excluding short-term rentals, for the years ended December 31, 2017 , 2016 and 2015 was $30.5 million , $29.3 million
and $8.1 million , respectively, which are included in either cost of sales or selling, general and administrative expenses on the consolidated statements of
and $8.1 million , respectively, which are included in either cost of sales or selling, general and administrative expenses on the consolidated statements of
operations, depending on the type of operations undertaken by the related facility or asset. Future payments for certain leases will be adjusted based on increases in
operations, depending on the type of operations undertaken by the related facility or asset. Future payments for certain leases will be adjusted based on increases in
the consumer price index.
the consumer price index.
As of December 31, 2017 , the Company had purchase commitments totaling $7.1 million related primarily to vehicles and certain IT equipment, which are
As of December 31, 2017 , the Company had purchase commitments totaling $7.1 million related primarily to vehicles and certain IT equipment, which are
enforceable and legally binding on us.
enforceable and legally binding on us.
From time to time, various claims, legal proceedings and litigation are asserted or commenced against the Company principally arising from alleged product
From time to time, various claims, legal proceedings and litigation are asserted or commenced against the Company principally arising from alleged product
liability, warranty, casualty, construction defect, contract, tort, employment and other disputes. In determining loss contingencies, management considers the
liability, warranty, casualty, construction defect, contract, tort, employment and other disputes. In determining loss contingencies, management considers the
likelihood of loss as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is recorded when it is considered probable that
likelihood of loss as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is recorded when it is considered probable that
such a liability has been incurred and when the amount of loss can be reasonably estimated. It is not certain that the Company will prevail in these matters.
such a liability has been incurred and when the amount of loss can be reasonably estimated. It is not certain that the Company will prevail in these matters.
However, the Company does not believe that the ultimate outcome of any pending matters will have a material adverse effect on its consolidated financial position,
However, the Company does not believe that the ultimate outcome of any pending matters will have a material adverse effect on its consolidated financial position,
results of operations or cash flows. The Company recorded $3.0 million of expense within selling, general and administrative expenses in its statements of
results of operations or cash flows. The Company recorded $3.0 million of expense within selling, general and administrative expenses in its statements of
operations for the year ended December 31, 2017 in relation to pending litigation. The amount accrued is based upon currently available information, however, the
operations for the year ended December 31, 2017 in relation to pending litigation. The amount accrued is based upon currently available information, however, the
ultimate obligation may be higher.
ultimate obligation may be higher.
72
72
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13. Stockholders' Equity
13. Stockholders' Equity
Merger
Merger
In connection with the Merger, each share of issued and outstanding BMHC common stock, par value $0.001 per share, excluding (i) any shares of BMHC
In connection with the Merger, each share of issued and outstanding BMHC common stock, par value $0.001 per share, excluding (i) any shares of BMHC
common stock held in treasury or by any wholly owned subsidiary of BMHC or (ii) any shares of BMHC common stock held by any BMHC stockholder who was
common stock held in treasury or by any wholly owned subsidiary of BMHC or (ii) any shares of BMHC common stock held by any BMHC stockholder who was
entitled to exercise, and properly exercised, appraisal rights with respect to such shares of BMHC common stock pursuant to the General Corporation Law of the
entitled to exercise, and properly exercised, appraisal rights with respect to such shares of BMHC common stock pursuant to the General Corporation Law of the
State of Delaware, was converted into the right to receive 0.5231 shares of Company common stock, par value $0.01 per share. As a result, approximately 39.2
State of Delaware, was converted into the right to receive 0.5231 shares of Company common stock, par value $0.01 per share. As a result, approximately 39.2
million shares of Company common stock were issued to BMHC stockholders. Each holder of BMHC common stock converted pursuant to the Merger who would
million shares of Company common stock were issued to BMHC stockholders. Each holder of BMHC common stock converted pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Company common stock received cash in lieu thereof in an amount each to such fractional amount
otherwise have been entitled to receive a fraction of a share of Company common stock received cash in lieu thereof in an amount each to such fractional amount
multiplied by $17.19 , the last reported sale price of SBS common stock on the last complete trading day prior to the Merger.
multiplied by $17.19 , the last reported sale price of SBS common stock on the last complete trading day prior to the Merger.
Shares and price per share of BMHC common stock for all prior periods have been restated to reflect the 0.5231 exchange ratio and BMC's par value of $0.01 per
Shares and price per share of BMHC common stock for all prior periods have been restated to reflect the 0.5231 exchange ratio and BMC's par value of $0.01 per
share.
share.
Treasury stock
Treasury stock
Employees have the option to surrender shares to the Company to satisfy their tax withholding obligations in connection with the vesting of restricted stock and
Employees have the option to surrender shares to the Company to satisfy their tax withholding obligations in connection with the vesting of restricted stock and
restricted stock unit awards. These surrendered shares are reflected as treasury stock, at cost, on the consolidated balance sheet as of December 31, 2017 and 2016 .
restricted stock unit awards. These surrendered shares are reflected as treasury stock, at cost, on the consolidated balance sheet as of December 31, 2017 and 2016 .
All BMHC treasury shares were canceled in connection with the Merger.
All BMHC treasury shares were canceled in connection with the Merger.
14. Stock Based Compensation
14. Stock Based Compensation
BMHC long-term incentive plans
BMHC long-term incentive plans
In March 2013, BMHC's Board of Directors approved the 2013 long-term incentive plan ("BMHC 2013 Incentive Plan") as subsequently approved by BMHC's
In March 2013, BMHC's Board of Directors approved the 2013 long-term incentive plan ("BMHC 2013 Incentive Plan") as subsequently approved by BMHC's
shareholders in May 2013. The BMHC 2013 Incentive Plan provided for grants of stock options, restricted stock and other stock-based awards. There were 1.6
shareholders in May 2013. The BMHC 2013 Incentive Plan provided for grants of stock options, restricted stock and other stock-based awards. There were 1.6
million common shares reserved for issuance under the plan. The awards granted under this plan vest immediately for directors and over a three year period for key
million common shares reserved for issuance under the plan. The awards granted under this plan vest immediately for directors and over a three year period for key
employees.
employees.
In March 2010, BMHC's Board of Directors approved the 2010 long-term incentive plan ("BMHC 2010 Incentive Plan") as approved by BMHC's reorganization
In March 2010, BMHC's Board of Directors approved the 2010 long-term incentive plan ("BMHC 2010 Incentive Plan") as approved by BMHC's reorganization
plan. The BMHC 2010 Incentive Plan provided for grants of restricted stock. There were 5.2 million common shares reserved for issuance under the plan. The
plan. The BMHC 2010 Incentive Plan provided for grants of restricted stock. There were 5.2 million common shares reserved for issuance under the plan. The
awards granted under this plan vest over a two year period for directors and a three year period for key employees.
awards granted under this plan vest over a two year period for directors and a three year period for key employees.
SBS long-term incentive plan
SBS long-term incentive plan
In connection with its initial public offering in August 2013, SBS adopted the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan ("SBS
In connection with its initial public offering in August 2013, SBS adopted the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan ("SBS
2013 Incentive Plan"). The SBS 2013 Incentive Plan provides for grants of stock options, stock appreciation rights, restricted stock, other stock-based awards,
2013 Incentive Plan"). The SBS 2013 Incentive Plan provides for grants of stock options, stock appreciation rights, restricted stock, other stock-based awards,
other cash-based compensation and performance awards. In general, if awards under the SBS 2013 Incentive Plan are for any reason canceled, or expire or
other cash-based compensation and performance awards. In general, if awards under the SBS 2013 Incentive Plan are for any reason canceled, or expire or
terminate unexercised, the shares covered by such awards may again be available for the grant of awards under the SBS 2013 Incentive Plan. Awards granted
terminate unexercised, the shares covered by such awards may again be available for the grant of awards under the SBS 2013 Incentive Plan. Awards granted
under the SBS 2013 Incentive Plan generally vest over a period of three or four years. Stock options granted under the SBS 2013 Incentive Plan have a maximum
under the SBS 2013 Incentive Plan generally vest over a period of three or four years. Stock options granted under the SBS 2013 Incentive Plan have a maximum
contractual term of 10 years from the date of grant. Shares awarded that revert to the Company as a result of forfeiture or termination, expiration or cancellation of
contractual term of 10 years from the date of grant. Shares awarded that revert to the Company as a result of forfeiture or termination, expiration or cancellation of
an award or that are used to exercise an award or for tax withholding, will be again available for issuance.
an award or that are used to exercise an award or for tax withholding, will be again available for issuance.
Effect of the Merger on stock based awards
Effect of the Merger on stock based awards
The SBS 2013 Incentive Plan remained in effect upon consummation of the Merger. In connection with the Merger, the Company amended the SBS 2013
The SBS 2013 Incentive Plan remained in effect upon consummation of the Merger. In connection with the Merger, the Company amended the SBS 2013
Incentive Plan in order to increase the number of shares of common stock authorized for issuance from 1.8 million to 5.6 million . As of December 31, 2017 ,
Incentive Plan in order to increase the number of shares of common stock authorized for issuance from 1.8 million to 5.6 million . As of December 31, 2017 ,
approximately 3.1 million common shares were available for issuance under the SBS 2013 Incentive Plan.
approximately 3.1 million common shares were available for issuance under the SBS 2013 Incentive Plan.
74
74
Upon consummation of the Merger, the Company assumed all obligations of BMHC under the BMHC 2010 Incentive Plan and BMHC 2013 Incentive Plan,
Upon consummation of the Merger, the Company assumed all obligations of BMHC under the BMHC 2010 Incentive Plan and BMHC 2013 Incentive Plan,
including BMHC's time-vesting restricted stock and performance-vesting restricted stock. At the effective time of the Merger, (i) each BMHC time-vesting
including BMHC's time-vesting restricted stock and performance-vesting restricted stock. At the effective time of the Merger, (i) each BMHC time-vesting
restricted share outstanding immediately prior to such time was converted, on the same terms and conditions as were applicable to such BMHC time-vesting
restricted share outstanding immediately prior to such time was converted, on the same terms and conditions as were applicable to such BMHC time-vesting
restricted share at such time, into a restricted share with respect to the number of shares of BMC common stock determined by multiplying each BMHC time-
restricted share at such time, into a restricted share with respect to the number of shares of BMC common stock determined by multiplying each BMHC time-
vesting restricted share by the exchange ratio, rounded up to the nearest whole share. The performance goals of each award of BMHC performance-vesting
vesting restricted share by the exchange ratio, rounded up to the nearest whole share. The performance goals of each award of BMHC performance-vesting
restricted stock outstanding immediately prior to the Merger was deemed satisfied at maximum and was converted, on the same terms and conditions (other than
restricted stock outstanding immediately prior to the Merger was deemed satisfied at maximum and was converted, on the same terms and conditions (other than
the terms and conditions relating to achievement of performance goals), into a restricted share with respect to that number of shares of BMC common stock
the terms and conditions relating to achievement of performance goals), into a restricted share with respect to that number of shares of BMC common stock
determined by multiplying each BMHC performance-vesting restricted share by the exchange ratio, rounded up to the nearest whole share, provided that the
determined by multiplying each BMHC performance-vesting restricted share by the exchange ratio, rounded up to the nearest whole share, provided that the
vesting criteria applicable to such conversion will provide for vesting based solely on the holder's continuation of service through the time of vesting.
vesting criteria applicable to such conversion will provide for vesting based solely on the holder's continuation of service through the time of vesting.
Under the SBS 2013 Incentive Plan, the merger constituted a "change in control" of SBS. In connection with a "change in control," as defined in the SBS 2013
Under the SBS 2013 Incentive Plan, the merger constituted a "change in control" of SBS. In connection with a "change in control," as defined in the SBS 2013
Incentive Plan, the vesting of outstanding awards under the SBS 2013 Incentive Plan was accelerated, with the exception of 0.2 million outstanding stock options
Incentive Plan, the vesting of outstanding awards under the SBS 2013 Incentive Plan was accelerated, with the exception of 0.2 million outstanding stock options
and 0.3 million outstanding restricted stock units awarded to certain Legacy SBS employees during November 2015. The fair value of the vested awards on the
and 0.3 million outstanding restricted stock units awarded to certain Legacy SBS employees during November 2015. The fair value of the vested awards on the
Merger date of $8.3 million and the fair value of the non-vested awards on the closing date of the Merger related to pre-Merger service rendered of $0.2 million
Merger date of $8.3 million and the fair value of the non-vested awards on the closing date of the Merger related to pre-Merger service rendered of $0.2 million
were included in the calculation of consideration transferred.
were included in the calculation of consideration transferred.
Performance-based restricted stock units
Performance-based restricted stock units
During the year ended December 31, 2017, in addition to grants of service-based restricted stock unit awards, the Company granted performance-based restricted
During the year ended December 31, 2017, in addition to grants of service-based restricted stock unit awards, the Company granted performance-based restricted
stock units that vest on March 15, 2020 . The number of performance-based restricted stock units that are issued on the vesting date could range from zero to a
stock units that vest on March 15, 2020 . The number of performance-based restricted stock units that are issued on the vesting date could range from zero to a
maximum of 0.2 million , based 50% upon the Company’s average return on invested capital over the three year period from January 1, 2017 through
maximum of 0.2 million , based 50% upon the Company’s average return on invested capital over the three year period from January 1, 2017 through
December 31, 2019 and 50% upon the Company’s cumulative adjusted earnings per share (“Adjusted EPS”) over the same three year period.
December 31, 2019 and 50% upon the Company’s cumulative adjusted earnings per share (“Adjusted EPS”) over the same three year period.
During the year ended December 31, 2016, in addition to grants of service-based restricted stock unit awards, the Company granted performance-based restricted
During the year ended December 31, 2016, in addition to grants of service-based restricted stock unit awards, the Company granted performance-based restricted
stock units that vest on March 15, 2019 . The number of performance-based restricted stock units that are issued on the vesting date could range from zero to a
stock units that vest on March 15, 2019 . The number of performance-based restricted stock units that are issued on the vesting date could range from zero to a
maximum of 0.2 million , based upon the Company's cumulative Adjusted EBITDA over the three year period from January 1, 2016 through December 31, 2018 .
maximum of 0.2 million , based upon the Company's cumulative Adjusted EBITDA over the three year period from January 1, 2016 through December 31, 2018 .
Compensation cost for the performance-based restricted stock units is recorded based on the expected number of units that will vest and is adjusted, as appropriate,
Compensation cost for the performance-based restricted stock units is recorded based on the expected number of units that will vest and is adjusted, as appropriate,
Stock based compensation is included in selling, general and administrative expenses on the consolidated statements of operations. The following table highlights
Stock based compensation is included in selling, general and administrative expenses on the consolidated statements of operations. The following table highlights
stock based compensation for the years ended December 31, 2017 , 2016 and 2015 :
stock based compensation for the years ended December 31, 2017 , 2016 and 2015 :
throughout the performance period.
throughout the performance period.
Stock based compensation expense
Stock based compensation expense
(in thousands)
(in thousands)
Restricted stock units (a)
Restricted stock units (a)
Restricted stock
Restricted stock
Stock options
Stock options
Stock based compensation
Stock based compensation
(a) Includes service-based and performance-based restricted stock units.
(a) Includes service-based and performance-based restricted stock units.
75
75
2017
2017
2016
2016
2015
2015
$
$
$
$
6,006 $
6,006 $
436
436
327
327
6,769 $
6,769 $
4,643 $
4,643 $
1,559
1,559
1,050
1,050
7,252 $
7,252 $
100
100
2,607
2,607
42
42
2,749
2,749
13. Stockholders' Equity
13. Stockholders' Equity
Merger
Merger
share.
share.
Treasury stock
Treasury stock
14. Stock Based Compensation
14. Stock Based Compensation
BMHC long-term incentive plans
BMHC long-term incentive plans
In connection with the Merger, each share of issued and outstanding BMHC common stock, par value $0.001 per share, excluding (i) any shares of BMHC
In connection with the Merger, each share of issued and outstanding BMHC common stock, par value $0.001 per share, excluding (i) any shares of BMHC
common stock held in treasury or by any wholly owned subsidiary of BMHC or (ii) any shares of BMHC common stock held by any BMHC stockholder who was
common stock held in treasury or by any wholly owned subsidiary of BMHC or (ii) any shares of BMHC common stock held by any BMHC stockholder who was
entitled to exercise, and properly exercised, appraisal rights with respect to such shares of BMHC common stock pursuant to the General Corporation Law of the
entitled to exercise, and properly exercised, appraisal rights with respect to such shares of BMHC common stock pursuant to the General Corporation Law of the
State of Delaware, was converted into the right to receive 0.5231 shares of Company common stock, par value $0.01 per share. As a result, approximately 39.2
State of Delaware, was converted into the right to receive 0.5231 shares of Company common stock, par value $0.01 per share. As a result, approximately 39.2
million shares of Company common stock were issued to BMHC stockholders. Each holder of BMHC common stock converted pursuant to the Merger who would
million shares of Company common stock were issued to BMHC stockholders. Each holder of BMHC common stock converted pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Company common stock received cash in lieu thereof in an amount each to such fractional amount
otherwise have been entitled to receive a fraction of a share of Company common stock received cash in lieu thereof in an amount each to such fractional amount
multiplied by $17.19 , the last reported sale price of SBS common stock on the last complete trading day prior to the Merger.
multiplied by $17.19 , the last reported sale price of SBS common stock on the last complete trading day prior to the Merger.
Shares and price per share of BMHC common stock for all prior periods have been restated to reflect the 0.5231 exchange ratio and BMC's par value of $0.01 per
Shares and price per share of BMHC common stock for all prior periods have been restated to reflect the 0.5231 exchange ratio and BMC's par value of $0.01 per
Employees have the option to surrender shares to the Company to satisfy their tax withholding obligations in connection with the vesting of restricted stock and
Employees have the option to surrender shares to the Company to satisfy their tax withholding obligations in connection with the vesting of restricted stock and
restricted stock unit awards. These surrendered shares are reflected as treasury stock, at cost, on the consolidated balance sheet as of December 31, 2017 and 2016 .
restricted stock unit awards. These surrendered shares are reflected as treasury stock, at cost, on the consolidated balance sheet as of December 31, 2017 and 2016 .
All BMHC treasury shares were canceled in connection with the Merger.
All BMHC treasury shares were canceled in connection with the Merger.
In March 2013, BMHC's Board of Directors approved the 2013 long-term incentive plan ("BMHC 2013 Incentive Plan") as subsequently approved by BMHC's
In March 2013, BMHC's Board of Directors approved the 2013 long-term incentive plan ("BMHC 2013 Incentive Plan") as subsequently approved by BMHC's
shareholders in May 2013. The BMHC 2013 Incentive Plan provided for grants of stock options, restricted stock and other stock-based awards. There were 1.6
shareholders in May 2013. The BMHC 2013 Incentive Plan provided for grants of stock options, restricted stock and other stock-based awards. There were 1.6
million common shares reserved for issuance under the plan. The awards granted under this plan vest immediately for directors and over a three year period for key
million common shares reserved for issuance under the plan. The awards granted under this plan vest immediately for directors and over a three year period for key
employees.
employees.
In March 2010, BMHC's Board of Directors approved the 2010 long-term incentive plan ("BMHC 2010 Incentive Plan") as approved by BMHC's reorganization
In March 2010, BMHC's Board of Directors approved the 2010 long-term incentive plan ("BMHC 2010 Incentive Plan") as approved by BMHC's reorganization
plan. The BMHC 2010 Incentive Plan provided for grants of restricted stock. There were 5.2 million common shares reserved for issuance under the plan. The
plan. The BMHC 2010 Incentive Plan provided for grants of restricted stock. There were 5.2 million common shares reserved for issuance under the plan. The
awards granted under this plan vest over a two year period for directors and a three year period for key employees.
awards granted under this plan vest over a two year period for directors and a three year period for key employees.
SBS long-term incentive plan
SBS long-term incentive plan
In connection with its initial public offering in August 2013, SBS adopted the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan ("SBS
In connection with its initial public offering in August 2013, SBS adopted the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan ("SBS
2013 Incentive Plan"). The SBS 2013 Incentive Plan provides for grants of stock options, stock appreciation rights, restricted stock, other stock-based awards,
2013 Incentive Plan"). The SBS 2013 Incentive Plan provides for grants of stock options, stock appreciation rights, restricted stock, other stock-based awards,
other cash-based compensation and performance awards. In general, if awards under the SBS 2013 Incentive Plan are for any reason canceled, or expire or
other cash-based compensation and performance awards. In general, if awards under the SBS 2013 Incentive Plan are for any reason canceled, or expire or
terminate unexercised, the shares covered by such awards may again be available for the grant of awards under the SBS 2013 Incentive Plan. Awards granted
terminate unexercised, the shares covered by such awards may again be available for the grant of awards under the SBS 2013 Incentive Plan. Awards granted
under the SBS 2013 Incentive Plan generally vest over a period of three or four years. Stock options granted under the SBS 2013 Incentive Plan have a maximum
under the SBS 2013 Incentive Plan generally vest over a period of three or four years. Stock options granted under the SBS 2013 Incentive Plan have a maximum
contractual term of 10 years from the date of grant. Shares awarded that revert to the Company as a result of forfeiture or termination, expiration or cancellation of
contractual term of 10 years from the date of grant. Shares awarded that revert to the Company as a result of forfeiture or termination, expiration or cancellation of
an award or that are used to exercise an award or for tax withholding, will be again available for issuance.
an award or that are used to exercise an award or for tax withholding, will be again available for issuance.
Effect of the Merger on stock based awards
Effect of the Merger on stock based awards
The SBS 2013 Incentive Plan remained in effect upon consummation of the Merger. In connection with the Merger, the Company amended the SBS 2013
The SBS 2013 Incentive Plan remained in effect upon consummation of the Merger. In connection with the Merger, the Company amended the SBS 2013
Incentive Plan in order to increase the number of shares of common stock authorized for issuance from 1.8 million to 5.6 million . As of December 31, 2017 ,
Incentive Plan in order to increase the number of shares of common stock authorized for issuance from 1.8 million to 5.6 million . As of December 31, 2017 ,
approximately 3.1 million common shares were available for issuance under the SBS 2013 Incentive Plan.
approximately 3.1 million common shares were available for issuance under the SBS 2013 Incentive Plan.
74
74
Upon consummation of the Merger, the Company assumed all obligations of BMHC under the BMHC 2010 Incentive Plan and BMHC 2013 Incentive Plan,
Upon consummation of the Merger, the Company assumed all obligations of BMHC under the BMHC 2010 Incentive Plan and BMHC 2013 Incentive Plan,
including BMHC's time-vesting restricted stock and performance-vesting restricted stock. At the effective time of the Merger, (i) each BMHC time-vesting
including BMHC's time-vesting restricted stock and performance-vesting restricted stock. At the effective time of the Merger, (i) each BMHC time-vesting
restricted share outstanding immediately prior to such time was converted, on the same terms and conditions as were applicable to such BMHC time-vesting
restricted share outstanding immediately prior to such time was converted, on the same terms and conditions as were applicable to such BMHC time-vesting
restricted share at such time, into a restricted share with respect to the number of shares of BMC common stock determined by multiplying each BMHC time-
restricted share at such time, into a restricted share with respect to the number of shares of BMC common stock determined by multiplying each BMHC time-
vesting restricted share by the exchange ratio, rounded up to the nearest whole share. The performance goals of each award of BMHC performance-vesting
vesting restricted share by the exchange ratio, rounded up to the nearest whole share. The performance goals of each award of BMHC performance-vesting
restricted stock outstanding immediately prior to the Merger was deemed satisfied at maximum and was converted, on the same terms and conditions (other than
restricted stock outstanding immediately prior to the Merger was deemed satisfied at maximum and was converted, on the same terms and conditions (other than
the terms and conditions relating to achievement of performance goals), into a restricted share with respect to that number of shares of BMC common stock
the terms and conditions relating to achievement of performance goals), into a restricted share with respect to that number of shares of BMC common stock
determined by multiplying each BMHC performance-vesting restricted share by the exchange ratio, rounded up to the nearest whole share, provided that the
determined by multiplying each BMHC performance-vesting restricted share by the exchange ratio, rounded up to the nearest whole share, provided that the
vesting criteria applicable to such conversion will provide for vesting based solely on the holder's continuation of service through the time of vesting.
vesting criteria applicable to such conversion will provide for vesting based solely on the holder's continuation of service through the time of vesting.
Under the SBS 2013 Incentive Plan, the merger constituted a "change in control" of SBS. In connection with a "change in control," as defined in the SBS 2013
Under the SBS 2013 Incentive Plan, the merger constituted a "change in control" of SBS. In connection with a "change in control," as defined in the SBS 2013
Incentive Plan, the vesting of outstanding awards under the SBS 2013 Incentive Plan was accelerated, with the exception of 0.2 million outstanding stock options
Incentive Plan, the vesting of outstanding awards under the SBS 2013 Incentive Plan was accelerated, with the exception of 0.2 million outstanding stock options
and 0.3 million outstanding restricted stock units awarded to certain Legacy SBS employees during November 2015. The fair value of the vested awards on the
and 0.3 million outstanding restricted stock units awarded to certain Legacy SBS employees during November 2015. The fair value of the vested awards on the
Merger date of $8.3 million and the fair value of the non-vested awards on the closing date of the Merger related to pre-Merger service rendered of $0.2 million
Merger date of $8.3 million and the fair value of the non-vested awards on the closing date of the Merger related to pre-Merger service rendered of $0.2 million
were included in the calculation of consideration transferred.
were included in the calculation of consideration transferred.
Performance-based restricted stock units
Performance-based restricted stock units
During the year ended December 31, 2017, in addition to grants of service-based restricted stock unit awards, the Company granted performance-based restricted
During the year ended December 31, 2017, in addition to grants of service-based restricted stock unit awards, the Company granted performance-based restricted
stock units that vest on March 15, 2020 . The number of performance-based restricted stock units that are issued on the vesting date could range from zero to a
stock units that vest on March 15, 2020 . The number of performance-based restricted stock units that are issued on the vesting date could range from zero to a
maximum of 0.2 million , based 50% upon the Company’s average return on invested capital over the three year period from January 1, 2017 through
maximum of 0.2 million , based 50% upon the Company’s average return on invested capital over the three year period from January 1, 2017 through
December 31, 2019 and 50% upon the Company’s cumulative adjusted earnings per share (“Adjusted EPS”) over the same three year period.
December 31, 2019 and 50% upon the Company’s cumulative adjusted earnings per share (“Adjusted EPS”) over the same three year period.
During the year ended December 31, 2016, in addition to grants of service-based restricted stock unit awards, the Company granted performance-based restricted
During the year ended December 31, 2016, in addition to grants of service-based restricted stock unit awards, the Company granted performance-based restricted
stock units that vest on March 15, 2019 . The number of performance-based restricted stock units that are issued on the vesting date could range from zero to a
stock units that vest on March 15, 2019 . The number of performance-based restricted stock units that are issued on the vesting date could range from zero to a
maximum of 0.2 million , based upon the Company's cumulative Adjusted EBITDA over the three year period from January 1, 2016 through December 31, 2018 .
maximum of 0.2 million , based upon the Company's cumulative Adjusted EBITDA over the three year period from January 1, 2016 through December 31, 2018 .
Compensation cost for the performance-based restricted stock units is recorded based on the expected number of units that will vest and is adjusted, as appropriate,
Compensation cost for the performance-based restricted stock units is recorded based on the expected number of units that will vest and is adjusted, as appropriate,
throughout the performance period.
throughout the performance period.
Stock based compensation expense
Stock based compensation expense
Stock based compensation is included in selling, general and administrative expenses on the consolidated statements of operations. The following table highlights
Stock based compensation is included in selling, general and administrative expenses on the consolidated statements of operations. The following table highlights
stock based compensation for the years ended December 31, 2017 , 2016 and 2015 :
stock based compensation for the years ended December 31, 2017 , 2016 and 2015 :
(in thousands)
(in thousands)
Restricted stock units (a)
Restricted stock units (a)
Restricted stock
Restricted stock
Stock options
Stock options
Stock based compensation
Stock based compensation
2017
2017
2016
2016
2015
2015
$
$
$
$
6,006 $
6,006 $
436
436
327
327
6,769 $
6,769 $
4,643 $
4,643 $
1,559
1,559
1,050
1,050
7,252 $
7,252 $
100
100
2,607
2,607
42
42
2,749
2,749
(a) Includes service-based and performance-based restricted stock units.
(a) Includes service-based and performance-based restricted stock units.
75
75
Stock based award activity
Stock based award activity
The following is a summary of stock option award activity. No stock options were granted by BMHC during any periods prior to the Merger.
The following is a summary of stock option award activity. No stock options were granted by BMHC during any periods prior to the Merger.
The following is a summary of restricted stock and restricted stock unit activity, excluding performance-based restricted stock units:
The following is a summary of restricted stock and restricted stock unit activity, excluding performance-based restricted stock units:
Restricted Stock
Restricted Stock
Restricted Stock Units
Restricted Stock Units
Number of Shares
Number of Shares
Outstanding
Outstanding
(in thousands)
(in thousands)
Weighted Average
Weighted Average
Grant Date Fair
Grant Date Fair
Value
Value
Number of
Number of
Units
Units
Outstanding (in
Outstanding (in
thousands)
thousands)
Weighted
Weighted
Average
Average
Grant Date
Grant Date
Fair Value
Fair Value
Outstanding at December 31, 2014
Outstanding at December 31, 2014
Legacy SBS stock options assumed
Legacy SBS stock options assumed
December 31, 2014
December 31, 2014
Legacy SBS restricted stock units assumed
Legacy SBS restricted stock units assumed
Granted
Granted
Vested
Vested
Forfeited
Forfeited
December 31, 2015
December 31, 2015
Granted
Granted
Vested
Vested
Forfeited
Forfeited
December 31, 2016
December 31, 2016
Granted
Granted
Vested
Vested
Forfeited
Forfeited
December 31, 2017
December 31, 2017
706
706
$
$
—
—
206
206
(279)
(279)
(178)
(178)
455
455
—
—
(301)
(301)
(37)
(37)
117
117
—
—
(49)
(49)
(8)
(8)
60
60
$
$
10.15
10.15
—
—
17.15
17.15
9.07
9.07
11.37
11.37
13.51
13.51
—
—
11.95
11.95
13.69
13.69
17.42
17.42
—
—
16.25
16.25
19.08
19.08
18.17
18.17
— $
— $
318
318
—
—
—
—
(36)
(36)
282
282
166
166
(123)
(123)
(27)
(27)
298
298
396
396
(163)
(163)
(21)
(21)
510
510
$
$
—
—
16.99
16.99
—
—
—
—
16.99
16.99
16.99
16.99
17.65
17.65
16.86
16.86
17.16
17.16
17.39
17.39
21.79
21.79
17.49
17.49
20.34
20.34
20.65
20.65
The following is a summary of the maximum number of performance-based restricted stock units which could be earned and related activity. There were no
The following is a summary of the maximum number of performance-based restricted stock units which could be earned and related activity. There were no
performance-based restricted stock units granted prior to December 31, 2015:
performance-based restricted stock units granted prior to December 31, 2015:
December 31, 2015
December 31, 2015
Granted (a)
Granted (a)
Vested
Vested
Forfeited
Forfeited
December 31, 2016
December 31, 2016
Granted (a)
Granted (a)
Vested
Vested
Forfeited
Forfeited
December 31, 2017
December 31, 2017
(a) Represents the maximum number of performance-based restricted stock units which could be earned.
(a) Represents the maximum number of performance-based restricted stock units which could be earned.
76
76
Performance-Based Restricted Stock Units
Performance-Based Restricted Stock Units
Number of
Number of
Units
Units
Outstanding (in
Outstanding (in
thousands)
thousands)
Weighted
Weighted
Average
Average
Grant Date
Grant Date
Fair Value
Fair Value
— $
— $
206
206
—
—
—
—
206
206
255
255
—
—
(8)
(8)
453
453
$
$
—
—
16.35
16.35
—
—
—
—
16.35
16.35
21.94
21.94
—
—
22.90
22.90
19.37
19.37
Number of Options
Number of Options
Weighted Average
Weighted Average
(in thousands)
(in thousands)
Exercise Price
Exercise Price
Contractual
Contractual
Term
Term
(in years)
(in years)
Intrinsic
Intrinsic
Value
Value
(in thousands)
(in thousands)
Granted
Granted
Exercised
Exercised
Forfeited
Forfeited
Expired
Expired
Granted
Granted
Exercised
Exercised
Forfeited
Forfeited
Expired
Expired
Granted
Granted
Exercised
Exercised
Forfeited
Forfeited
Expired
Expired
Outstanding at December 31, 2015
Outstanding at December 31, 2015
Outstanding at December 31, 2016
Outstanding at December 31, 2016
Outstanding at December 31, 2017
Outstanding at December 31, 2017
— $
— $
1,229
1,229
—
—
—
—
(1)
(1)
—
—
1,228
1,228
3
3
(175)
(175)
(10)
(10)
(22)
(22)
1,024
1,024
—
—
(260)
(260)
(14)
(14)
(45)
(45)
705
705
$
$
—
—
14.18
14.18
—
—
—
—
17.04
17.04
—
—
14.17
14.17
17.04
17.04
7.90
7.90
17.04
17.04
17.53
17.53
15.15
15.15
—
—
13.05
13.05
17.04
17.04
19.89
19.89
15.59
15.59
Exercisable at December 31, 2017
Exercisable at December 31, 2017
646
646
$
$
15.45
15.45
Vested and expected to vest at December 31, 2017
Vested and expected to vest at December 31, 2017
705
705
$
$
15.59
15.59
The grant date fair value of Legacy SBS unvested stock options assumed in the Merger was $7.48 . The weighted average grant date fair value of stock options
The grant date fair value of Legacy SBS unvested stock options assumed in the Merger was $7.48 . The weighted average grant date fair value of stock options
granted during the year ended December 31, 2016 was $9.70 .
granted during the year ended December 31, 2016 was $9.70 .
During the years ended December 31, 2017 and 2016 , the aggregate intrinsic value of the stock options exercised was $2.3 million and $1.9 million , respectively.
During the years ended December 31, 2017 and 2016 , the aggregate intrinsic value of the stock options exercised was $2.3 million and $1.9 million , respectively.
The following table summarizes the Company’s total unrecognized compensation cost related to equity based compensation as of December 31, 2017 :
The following table summarizes the Company’s total unrecognized compensation cost related to equity based compensation as of December 31, 2017 :
6.3 $
6.3 $
6.2 $
6.2 $
6.3 $
6.3 $
6,845
6,845
6,359
6,359
6,845
6,845
(in thousands, except period data)
(in thousands, except period data)
Stock options
Stock options
Restricted stock
Restricted stock
Restricted stock units
Restricted stock units
Performance-based restricted stock units
Performance-based restricted stock units
77
77
Weighted Average
Weighted Average
Remaining Period of
Remaining Period of
Expense
Expense
Recognition
Recognition
(in years)
(in years)
Unrecognized
Unrecognized
Compensation Cost
Compensation Cost
$
$
$
$
125
125
100
100
5,023
5,023
1,433
1,433
6,681
6,681
0.8
0.8
0.3
0.3
1.4
1.4
2.2
2.2
Stock based award activity
Stock based award activity
The following is a summary of stock option award activity. No stock options were granted by BMHC during any periods prior to the Merger.
The following is a summary of stock option award activity. No stock options were granted by BMHC during any periods prior to the Merger.
Number of Options
Number of Options
(in thousands)
(in thousands)
Weighted Average
Weighted Average
Exercise Price
Exercise Price
Contractual
Contractual
Term
Term
(in years)
(in years)
Intrinsic
Intrinsic
Value
Value
(in thousands)
(in thousands)
Outstanding at December 31, 2014
Outstanding at December 31, 2014
Legacy SBS stock options assumed
Legacy SBS stock options assumed
Granted
Granted
Exercised
Exercised
Forfeited
Forfeited
Expired
Expired
Outstanding at December 31, 2015
Outstanding at December 31, 2015
Granted
Granted
Exercised
Exercised
Forfeited
Forfeited
Expired
Expired
Outstanding at December 31, 2016
Outstanding at December 31, 2016
Granted
Granted
Exercised
Exercised
Forfeited
Forfeited
Expired
Expired
510
510
$
$
Outstanding at December 31, 2017
Outstanding at December 31, 2017
— $
— $
1,229
1,229
—
—
—
—
(1)
(1)
—
—
1,228
1,228
3
3
(175)
(175)
(10)
(10)
(22)
(22)
1,024
1,024
—
—
(260)
(260)
(14)
(14)
(45)
(45)
705
705
$
$
—
—
14.18
14.18
—
—
—
—
17.04
17.04
—
—
14.17
14.17
17.04
17.04
7.90
7.90
17.04
17.04
17.53
17.53
15.15
15.15
—
—
13.05
13.05
17.04
17.04
19.89
19.89
15.59
15.59
The following is a summary of the maximum number of performance-based restricted stock units which could be earned and related activity. There were no
The following is a summary of the maximum number of performance-based restricted stock units which could be earned and related activity. There were no
Exercisable at December 31, 2017
Exercisable at December 31, 2017
646
646
$
$
15.45
15.45
performance-based restricted stock units granted prior to December 31, 2015:
performance-based restricted stock units granted prior to December 31, 2015:
Vested and expected to vest at December 31, 2017
Vested and expected to vest at December 31, 2017
705
705
$
$
15.59
15.59
6.3 $
6.3 $
6.2 $
6.2 $
6.3 $
6.3 $
6,845
6,845
6,359
6,359
6,845
6,845
The grant date fair value of Legacy SBS unvested stock options assumed in the Merger was $7.48 . The weighted average grant date fair value of stock options
The grant date fair value of Legacy SBS unvested stock options assumed in the Merger was $7.48 . The weighted average grant date fair value of stock options
granted during the year ended December 31, 2016 was $9.70 .
granted during the year ended December 31, 2016 was $9.70 .
During the years ended December 31, 2017 and 2016 , the aggregate intrinsic value of the stock options exercised was $2.3 million and $1.9 million , respectively.
During the years ended December 31, 2017 and 2016 , the aggregate intrinsic value of the stock options exercised was $2.3 million and $1.9 million , respectively.
The following table summarizes the Company’s total unrecognized compensation cost related to equity based compensation as of December 31, 2017 :
The following table summarizes the Company’s total unrecognized compensation cost related to equity based compensation as of December 31, 2017 :
(in thousands, except period data)
(in thousands, except period data)
Stock options
Stock options
Restricted stock
Restricted stock
Restricted stock units
Restricted stock units
Performance-based restricted stock units
Performance-based restricted stock units
77
77
Weighted Average
Weighted Average
Remaining Period of
Remaining Period of
Expense
Expense
Recognition
Recognition
(in years)
(in years)
Unrecognized
Unrecognized
Compensation Cost
Compensation Cost
$
$
$
$
125
125
100
100
5,023
5,023
1,433
1,433
6,681
6,681
0.8
0.8
0.3
0.3
1.4
1.4
2.2
2.2
The following is a summary of restricted stock and restricted stock unit activity, excluding performance-based restricted stock units:
The following is a summary of restricted stock and restricted stock unit activity, excluding performance-based restricted stock units:
Restricted Stock
Restricted Stock
Restricted Stock Units
Restricted Stock Units
Number of Shares
Number of Shares
Weighted Average
Weighted Average
Outstanding
Outstanding
(in thousands)
(in thousands)
Grant Date Fair
Grant Date Fair
Outstanding (in
Outstanding (in
Value
Value
thousands)
thousands)
Number of
Number of
Units
Units
Weighted
Weighted
Average
Average
Grant Date
Grant Date
Fair Value
Fair Value
December 31, 2014
December 31, 2014
Legacy SBS restricted stock units assumed
Legacy SBS restricted stock units assumed
Granted
Granted
Vested
Vested
Forfeited
Forfeited
Granted
Granted
Vested
Vested
Forfeited
Forfeited
Granted
Granted
Vested
Vested
Forfeited
Forfeited
December 31, 2015
December 31, 2015
December 31, 2016
December 31, 2016
December 31, 2017
December 31, 2017
December 31, 2015
December 31, 2015
Granted (a)
Granted (a)
Vested
Vested
Forfeited
Forfeited
Granted (a)
Granted (a)
Vested
Vested
Forfeited
Forfeited
December 31, 2016
December 31, 2016
December 31, 2017
December 31, 2017
706
706
$
$
—
—
206
206
(279)
(279)
(178)
(178)
455
455
(301)
(301)
(37)
(37)
117
117
(49)
(49)
(8)
(8)
60
60
—
—
—
—
$
$
10.15
10.15
—
—
17.15
17.15
9.07
9.07
11.37
11.37
13.51
13.51
—
—
11.95
11.95
13.69
13.69
17.42
17.42
—
—
16.25
16.25
19.08
19.08
18.17
18.17
— $
— $
318
318
—
—
—
—
(36)
(36)
282
282
166
166
(123)
(123)
(27)
(27)
298
298
396
396
(163)
(163)
(21)
(21)
— $
— $
206
206
—
—
—
—
206
206
255
255
—
—
(8)
(8)
453
453
$
$
16.99
16.99
—
—
—
—
—
—
16.99
16.99
16.99
16.99
17.65
17.65
16.86
16.86
17.16
17.16
17.39
17.39
21.79
21.79
17.49
17.49
20.34
20.34
20.65
20.65
16.35
16.35
—
—
—
—
—
—
16.35
16.35
21.94
21.94
—
—
22.90
22.90
19.37
19.37
Performance-Based Restricted Stock Units
Performance-Based Restricted Stock Units
Number of
Number of
Units
Units
Outstanding (in
Outstanding (in
thousands)
thousands)
Weighted
Weighted
Average
Average
Grant Date
Grant Date
Fair Value
Fair Value
(a) Represents the maximum number of performance-based restricted stock units which could be earned.
(a) Represents the maximum number of performance-based restricted stock units which could be earned.
76
76
(in thousands)
(in thousands)
Income (loss) before income taxes
Income (loss) before income taxes
Interest expense
Interest expense
Depreciation and amortization
Depreciation and amortization
Merger and integration costs
Merger and integration costs
Non-cash stock compensation expense
Non-cash stock compensation expense
Impairment of assets
Impairment of assets
Inventory step-up charges
Inventory step-up charges
Loss on debt extinguishment
Loss on debt extinguishment
Headquarters relocation (a)
Headquarters relocation (a)
Loss portfolio transfer
Loss portfolio transfer
Acquisition costs
Acquisition costs
Other items (b)
Other items (b)
15. Segments
15. Segments
Reconciliation to consolidated financial statements:
Reconciliation to consolidated financial statements:
ASC 280, Segment Reporting (“ASC 280”) defines operating segments as components of an enterprise about which separate financial information is available that
ASC 280, Segment Reporting (“ASC 280”) defines operating segments as components of an enterprise about which separate financial information is available that
is evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing performance.
is evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing performance.
Beginning January 1, 2017, following the realignment of certain markets which resulted in the consolidation of the Company's historical Mountain West division
Beginning January 1, 2017, following the realignment of certain markets which resulted in the consolidation of the Company's historical Mountain West division
into the Intermountain division, the Company's five operating segments are the Mid-Atlantic, Southeast, Texas, Intermountain and Western divisions. Following
into the Intermountain division, the Company's five operating segments are the Mid-Atlantic, Southeast, Texas, Intermountain and Western divisions. Following
the realignment, the CODM continues to review aggregate information to allocate resources and assess performance. Based on this, as well as the similar economic
the realignment, the CODM continues to review aggregate information to allocate resources and assess performance. Based on this, as well as the similar economic
characteristics, nature of products, distribution methods and customers of the divisions both before and after the realignment, the Company has aggregated its
characteristics, nature of products, distribution methods and customers of the divisions both before and after the realignment, the Company has aggregated its
operating segments into one reportable segment, "Geographic divisions."
operating segments into one reportable segment, "Geographic divisions."
In addition to the Company's reportable segment, the Company's consolidated results include "Other reconciling items." Other reconciling items is comprised of
In addition to the Company's reportable segment, the Company's consolidated results include "Other reconciling items." Other reconciling items is comprised of
the Company's corporate activities and other income and expenses not allocated to the operating segments.
the Company's corporate activities and other income and expenses not allocated to the operating segments.
The following tables present Net sales, Adjusted EBITDA and certain other measures for the reportable segment and total Company operations for the periods
The following tables present Net sales, Adjusted EBITDA and certain other measures for the reportable segment and total Company operations for the periods
indicated. Adjusted EBITDA is used as a performance metric by the CODM in determining how to allocate resources and assess performance.
indicated. Adjusted EBITDA is used as a performance metric by the CODM in determining how to allocate resources and assess performance.
(in thousands)
(in thousands)
Geographic divisions
Geographic divisions
Other reconciling items
Other reconciling items
(in thousands)
(in thousands)
Geographic divisions
Geographic divisions
Other reconciling items
Other reconciling items
(in thousands)
(in thousands)
Geographic divisions
Geographic divisions
Other reconciling items
Other reconciling items
$
$
$
$
$
$
$
$
$
$
$
$
Adjusted EBITDA of other reconciling items
Adjusted EBITDA of other reconciling items
50,058
50,058
50,726
50,726
Adjusted EBITDA of geographic divisions reportable segment
Adjusted EBITDA of geographic divisions reportable segment
$
$
250,061 $
250,061 $
244,616 $
244,616 $
(a) Represents expenses incurred to relocate BMHC's headquarters to Atlanta, Georgia, including employee retention, severance, recruiting, relocation and
(a) Represents expenses incurred to relocate BMHC's headquarters to Atlanta, Georgia, including employee retention, severance, recruiting, relocation and
professional fees.
professional fees.
(b) For the year ended December 31, 2017, represents expense incurred related to pending litigation of $3.0 million and income related to the final settlement of
(b) For the year ended December 31, 2017, represents expense incurred related to pending litigation of $3.0 million and income related to the final settlement of
insurance claims made by the Company for a fire at one of the Company's facilities during 2015 of $2.0 million . For the year ended December 31, 2015, represents
insurance claims made by the Company for a fire at one of the Company's facilities during 2015 of $2.0 million . For the year ended December 31, 2015, represents
adjustments to insurance reserves for workers compensation, general liability, automobile and construction claims incurred prior to BMHC's restructuring and a
adjustments to insurance reserves for workers compensation, general liability, automobile and construction claims incurred prior to BMHC's restructuring and a
Year Ended December 31, 2017
Year Ended December 31, 2017
December 31, 2017
December 31, 2017
Net Sales
Net Sales
Gross Profit
Gross Profit
3,365,968 $
3,365,968 $
795,515 $
795,515 $
—
—
—
—
3,365,968 $
3,365,968 $
795,515 $
795,515 $
Depreciation &
Depreciation &
Amortization
Amortization
Adjusted EBITDA
Adjusted EBITDA
Total Assets
Total Assets
66,809 $
66,809 $
2,408
2,408
69,217
69,217
250,061 $
250,061 $
(50,058)
(50,058)
$
$
1,435,970
1,435,970
37,380
37,380
1,473,350
1,473,350
Year Ended December 31, 2016
Year Ended December 31, 2016
December 31, 2016
December 31, 2016
Net Sales
Net Sales
Gross Profit
Gross Profit
3,093,743 $
3,093,743 $
741,965 $
741,965 $
—
—
—
—
3,093,743 $
3,093,743 $
741,965 $
741,965 $
Depreciation &
Depreciation &
Amortization
Amortization
Adjusted EBITDA
Adjusted EBITDA
Total Assets
Total Assets
casualty loss related to a fire at one of the Company’s facilities during 2015.
casualty loss related to a fire at one of the Company’s facilities during 2015.
66,592 $
66,592 $
2,088
2,088
68,680
68,680
244,616 $
244,616 $
(50,726)
(50,726)
$
$
1,345,475
1,345,475
49,539
49,539
1,395,014
1,395,014
The Company does not earn revenues or have long-lived assets located in foreign countries. In accordance with the enterprise-wide disclosure requirements of the
The Company does not earn revenues or have long-lived assets located in foreign countries. In accordance with the enterprise-wide disclosure requirements of the
accounting standard, the Company's net sales from external customers by main product lines are as follows for the years ended December 31, 2017 , 2016 and 2015
accounting standard, the Company's net sales from external customers by main product lines are as follows for the years ended December 31, 2017 , 2016 and 2015
. Certain prior year amounts have been reclassified to conform to the current year presentation.
. Certain prior year amounts have been reclassified to conform to the current year presentation.
Year Ended December 31, 2015
Year Ended December 31, 2015
December 31, 2015
December 31, 2015
Net Sales
Net Sales
Gross Profit
Gross Profit
1,576,746 $
1,576,746 $
361,410 $
361,410 $
—
—
—
—
1,576,746 $
1,576,746 $
361,410 $
361,410 $
Depreciation &
Depreciation &
Amortization
Amortization
Adjusted EBITDA
Adjusted EBITDA
Total Assets
Total Assets
23,726 $
23,726 $
863
863
24,589
24,589
122,914 $
122,914 $
(36,872)
(36,872)
$
$
1,305,545
1,305,545
65,594
65,594
1,371,139
1,371,139
78
78
(in thousands)
(in thousands)
Structural components
Structural components
Lumber & lumber sheet goods
Lumber & lumber sheet goods
Millwork, doors & windows
Millwork, doors & windows
Other building products & services
Other building products & services
Total net sales
Total net sales
16. Earnings Per Common Share
16. Earnings Per Common Share
Basic net income (loss) per share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average shares
Basic net income (loss) per share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average shares
outstanding during the period. Diluted EPS is calculated by adjusting weighted average shares outstanding for the dilutive effect of potential common shares,
outstanding during the period. Diluted EPS is calculated by adjusting weighted average shares outstanding for the dilutive effect of potential common shares,
determined using the treasury-stock method. For purposes of the diluted EPS calculation, stock options, restricted stock and restricted stock unit awards are
determined using the treasury-stock method. For purposes of the diluted EPS calculation, stock options, restricted stock and restricted stock unit awards are
considered to be potential common shares. During periods of net loss, no effect is given to potential common shares as they are anti-dilutive. Performance-based
considered to be potential common shares. During periods of net loss, no effect is given to potential common shares as they are anti-dilutive. Performance-based
restricted stock units are not included in the calculation of diluted EPS until they are contingently issuable.
restricted stock units are not included in the calculation of diluted EPS until they are contingently issuable.
79
79
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
$
$
81,827 $
81,827 $
45,146 $
45,146 $
(14,520)
(14,520)
25,036
25,036
69,217
69,217
15,336
15,336
6,769
6,769
435
435
—
—
—
—
—
—
—
—
424
424
959
959
30,131
30,131
68,680
68,680
15,340
15,340
7,252
7,252
11,928
11,928
2,884
2,884
12,529
12,529
—
—
—
—
—
—
—
—
27,552
27,552
24,589
24,589
22,993
22,993
2,749
2,749
10,285
10,285
—
—
—
—
3,865
3,865
2,826
2,826
2,604
2,604
3,099
3,099
36,872
36,872
122,914
122,914
2017
2017
2016
2016
2015
2015
$
$
522,619 $
522,619 $
461,761 $
461,761 $
1,114,219
1,114,219
907,377
907,377
821,753
821,753
938,563
938,563
894,889
894,889
798,530
798,530
249,371
249,371
459,446
459,446
442,675
442,675
425,254
425,254
$
$
3,365,968 $
3,365,968 $
3,093,743 $
3,093,743 $
1,576,746
1,576,746
15. Segments
15. Segments
Reconciliation to consolidated financial statements:
Reconciliation to consolidated financial statements:
(in thousands)
(in thousands)
Income (loss) before income taxes
Income (loss) before income taxes
Interest expense
Interest expense
Depreciation and amortization
Depreciation and amortization
Merger and integration costs
Merger and integration costs
Non-cash stock compensation expense
Non-cash stock compensation expense
Impairment of assets
Impairment of assets
Inventory step-up charges
Inventory step-up charges
Loss on debt extinguishment
Loss on debt extinguishment
Headquarters relocation (a)
Headquarters relocation (a)
Loss portfolio transfer
Loss portfolio transfer
Acquisition costs
Acquisition costs
Other items (b)
Other items (b)
ASC 280, Segment Reporting (“ASC 280”) defines operating segments as components of an enterprise about which separate financial information is available that
ASC 280, Segment Reporting (“ASC 280”) defines operating segments as components of an enterprise about which separate financial information is available that
is evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing performance.
is evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing performance.
Beginning January 1, 2017, following the realignment of certain markets which resulted in the consolidation of the Company's historical Mountain West division
Beginning January 1, 2017, following the realignment of certain markets which resulted in the consolidation of the Company's historical Mountain West division
into the Intermountain division, the Company's five operating segments are the Mid-Atlantic, Southeast, Texas, Intermountain and Western divisions. Following
into the Intermountain division, the Company's five operating segments are the Mid-Atlantic, Southeast, Texas, Intermountain and Western divisions. Following
the realignment, the CODM continues to review aggregate information to allocate resources and assess performance. Based on this, as well as the similar economic
the realignment, the CODM continues to review aggregate information to allocate resources and assess performance. Based on this, as well as the similar economic
characteristics, nature of products, distribution methods and customers of the divisions both before and after the realignment, the Company has aggregated its
characteristics, nature of products, distribution methods and customers of the divisions both before and after the realignment, the Company has aggregated its
operating segments into one reportable segment, "Geographic divisions."
operating segments into one reportable segment, "Geographic divisions."
In addition to the Company's reportable segment, the Company's consolidated results include "Other reconciling items." Other reconciling items is comprised of
In addition to the Company's reportable segment, the Company's consolidated results include "Other reconciling items." Other reconciling items is comprised of
the Company's corporate activities and other income and expenses not allocated to the operating segments.
the Company's corporate activities and other income and expenses not allocated to the operating segments.
The following tables present Net sales, Adjusted EBITDA and certain other measures for the reportable segment and total Company operations for the periods
The following tables present Net sales, Adjusted EBITDA and certain other measures for the reportable segment and total Company operations for the periods
indicated. Adjusted EBITDA is used as a performance metric by the CODM in determining how to allocate resources and assess performance.
indicated. Adjusted EBITDA is used as a performance metric by the CODM in determining how to allocate resources and assess performance.
(in thousands)
(in thousands)
Geographic divisions
Geographic divisions
Other reconciling items
Other reconciling items
(in thousands)
(in thousands)
Geographic divisions
Geographic divisions
Other reconciling items
Other reconciling items
(in thousands)
(in thousands)
Geographic divisions
Geographic divisions
Other reconciling items
Other reconciling items
Year Ended December 31, 2017
Year Ended December 31, 2017
December 31, 2017
December 31, 2017
Depreciation &
Depreciation &
Net Sales
Net Sales
Gross Profit
Gross Profit
Amortization
Amortization
Adjusted EBITDA
Adjusted EBITDA
Total Assets
Total Assets
3,365,968 $
3,365,968 $
795,515 $
795,515 $
—
—
—
—
3,365,968 $
3,365,968 $
795,515 $
795,515 $
66,809 $
66,809 $
2,408
2,408
69,217
69,217
250,061 $
250,061 $
(50,058)
(50,058)
$
$
1,435,970
1,435,970
37,380
37,380
1,473,350
1,473,350
Year Ended December 31, 2016
Year Ended December 31, 2016
December 31, 2016
December 31, 2016
Depreciation &
Depreciation &
Net Sales
Net Sales
Gross Profit
Gross Profit
Amortization
Amortization
Adjusted EBITDA
Adjusted EBITDA
Total Assets
Total Assets
3,093,743 $
3,093,743 $
741,965 $
741,965 $
—
—
—
—
3,093,743 $
3,093,743 $
741,965 $
741,965 $
66,592 $
66,592 $
2,088
2,088
68,680
68,680
244,616 $
244,616 $
(50,726)
(50,726)
$
$
1,345,475
1,345,475
49,539
49,539
1,395,014
1,395,014
Year Ended December 31, 2015
Year Ended December 31, 2015
December 31, 2015
December 31, 2015
Depreciation &
Depreciation &
Net Sales
Net Sales
Gross Profit
Gross Profit
Amortization
Amortization
Adjusted EBITDA
Adjusted EBITDA
Total Assets
Total Assets
1,576,746 $
1,576,746 $
361,410 $
361,410 $
—
—
—
—
1,576,746 $
1,576,746 $
361,410 $
361,410 $
23,726 $
23,726 $
863
863
24,589
24,589
122,914 $
122,914 $
(36,872)
(36,872)
$
$
1,305,545
1,305,545
65,594
65,594
1,371,139
1,371,139
$
$
$
$
$
$
$
$
$
$
$
$
78
78
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
$
$
81,827 $
81,827 $
45,146 $
45,146 $
(14,520)
(14,520)
25,036
25,036
69,217
69,217
15,336
15,336
6,769
6,769
435
435
—
—
—
—
—
—
—
—
424
424
959
959
30,131
30,131
68,680
68,680
15,340
15,340
7,252
7,252
11,928
11,928
2,884
2,884
12,529
12,529
—
—
—
—
—
—
—
—
27,552
27,552
24,589
24,589
22,993
22,993
2,749
2,749
—
—
10,285
10,285
—
—
3,865
3,865
2,826
2,826
2,604
2,604
3,099
3,099
36,872
36,872
122,914
122,914
Adjusted EBITDA of other reconciling items
Adjusted EBITDA of other reconciling items
50,058
50,058
50,726
50,726
Adjusted EBITDA of geographic divisions reportable segment
Adjusted EBITDA of geographic divisions reportable segment
$
$
250,061 $
250,061 $
244,616 $
244,616 $
(a) Represents expenses incurred to relocate BMHC's headquarters to Atlanta, Georgia, including employee retention, severance, recruiting, relocation and
(a) Represents expenses incurred to relocate BMHC's headquarters to Atlanta, Georgia, including employee retention, severance, recruiting, relocation and
professional fees.
professional fees.
(b) For the year ended December 31, 2017, represents expense incurred related to pending litigation of $3.0 million and income related to the final settlement of
(b) For the year ended December 31, 2017, represents expense incurred related to pending litigation of $3.0 million and income related to the final settlement of
insurance claims made by the Company for a fire at one of the Company's facilities during 2015 of $2.0 million . For the year ended December 31, 2015, represents
insurance claims made by the Company for a fire at one of the Company's facilities during 2015 of $2.0 million . For the year ended December 31, 2015, represents
adjustments to insurance reserves for workers compensation, general liability, automobile and construction claims incurred prior to BMHC's restructuring and a
adjustments to insurance reserves for workers compensation, general liability, automobile and construction claims incurred prior to BMHC's restructuring and a
casualty loss related to a fire at one of the Company’s facilities during 2015.
casualty loss related to a fire at one of the Company’s facilities during 2015.
The Company does not earn revenues or have long-lived assets located in foreign countries. In accordance with the enterprise-wide disclosure requirements of the
The Company does not earn revenues or have long-lived assets located in foreign countries. In accordance with the enterprise-wide disclosure requirements of the
accounting standard, the Company's net sales from external customers by main product lines are as follows for the years ended December 31, 2017 , 2016 and 2015
accounting standard, the Company's net sales from external customers by main product lines are as follows for the years ended December 31, 2017 , 2016 and 2015
. Certain prior year amounts have been reclassified to conform to the current year presentation.
. Certain prior year amounts have been reclassified to conform to the current year presentation.
(in thousands)
(in thousands)
Structural components
Structural components
Lumber & lumber sheet goods
Lumber & lumber sheet goods
Millwork, doors & windows
Millwork, doors & windows
Other building products & services
Other building products & services
Total net sales
Total net sales
16. Earnings Per Common Share
16. Earnings Per Common Share
2017
2017
2016
2016
2015
2015
$
$
522,619 $
522,619 $
461,761 $
461,761 $
1,114,219
1,114,219
907,377
907,377
821,753
821,753
938,563
938,563
894,889
894,889
798,530
798,530
249,371
249,371
459,446
459,446
442,675
442,675
425,254
425,254
$
$
3,365,968 $
3,365,968 $
3,093,743 $
3,093,743 $
1,576,746
1,576,746
Basic net income (loss) per share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average shares
Basic net income (loss) per share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the weighted average shares
outstanding during the period. Diluted EPS is calculated by adjusting weighted average shares outstanding for the dilutive effect of potential common shares,
outstanding during the period. Diluted EPS is calculated by adjusting weighted average shares outstanding for the dilutive effect of potential common shares,
determined using the treasury-stock method. For purposes of the diluted EPS calculation, stock options, restricted stock and restricted stock unit awards are
determined using the treasury-stock method. For purposes of the diluted EPS calculation, stock options, restricted stock and restricted stock unit awards are
considered to be potential common shares. During periods of net loss, no effect is given to potential common shares as they are anti-dilutive. Performance-based
considered to be potential common shares. During periods of net loss, no effect is given to potential common shares as they are anti-dilutive. Performance-based
restricted stock units are not included in the calculation of diluted EPS until they are contingently issuable.
restricted stock units are not included in the calculation of diluted EPS until they are contingently issuable.
79
79
The basic and diluted EPS calculations for the years ended December 31, 2017 , 2016 and 2015 are presented below:
The basic and diluted EPS calculations for the years ended December 31, 2017 , 2016 and 2015 are presented below:
18. Subsequent Events
18. Subsequent Events
(in thousands, except per share amounts)
(in thousands, except per share amounts)
2017
2017
2016
2016
2015
2015
transaction through available cash and borrowings on the Company’s Revolver. For the year ended December 31, 2017, Shone Lumber generated net sales of
transaction through available cash and borrowings on the Company’s Revolver. For the year ended December 31, 2017, Shone Lumber generated net sales of
Income (loss) attributable to common stockholders
Income (loss) attributable to common stockholders
$
$
57,425 $
57,425 $
30,880 $
30,880 $
(4,831)
(4,831)
approximately $70 million .
approximately $70 million .
Year Ended December 31,
Year Ended December 31,
On March 1, 2018 , the Company acquired substantially all of the assets and assumed certain liabilities of W.E. Shone Co. (“Shone Lumber”), a supplier of
On March 1, 2018 , the Company acquired substantially all of the assets and assumed certain liabilities of W.E. Shone Co. (“Shone Lumber”), a supplier of
building materials in the state of Delaware, for a purchase price of $23 million , subject to a holdback and working capital adjustments. The Company funded the
building materials in the state of Delaware, for a purchase price of $23 million , subject to a holdback and working capital adjustments. The Company funded the
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, basic
66,900
66,900
66,055
66,055
41,260
41,260
The results of operations of Shone Lumber will be included in the Company’s consolidated financial statements beginning on the acquisition date.
The results of operations of Shone Lumber will be included in the Company’s consolidated financial statements beginning on the acquisition date.
Effect of dilutive securities:
Effect of dilutive securities:
Restricted stock
Restricted stock
Restricted stock units
Restricted stock units
Stock options
Stock options
65
65
235
235
204
204
207
207
129
129
218
218
—
—
—
—
—
—
81
81
Weighted average common shares outstanding, diluted
Weighted average common shares outstanding, diluted
67,404
67,404
66,609
66,609
41,260
41,260
Basic income (loss) per common share
Basic income (loss) per common share
Diluted income (loss) per common share
Diluted income (loss) per common share
$
$
$
$
0.86 $
0.86 $
0.85 $
0.85 $
0.47 $
0.47 $
0.46 $
0.46 $
(0.12)
(0.12)
(0.12)
(0.12)
The following table provides the securities that could potentially dilute EPS in the future, but were not included in the computation of diluted EPS because to do so
The following table provides the securities that could potentially dilute EPS in the future, but were not included in the computation of diluted EPS because to do so
would have been anti-dilutive. The amounts included in this table exclude performance-based restricted stock units. The number of currently outstanding
would have been anti-dilutive. The amounts included in this table exclude performance-based restricted stock units. The number of currently outstanding
performance-based restricted stock units that are issued upon vesting could range from zero to a maximum of 0.5 million .
performance-based restricted stock units that are issued upon vesting could range from zero to a maximum of 0.5 million .
(in thousands)
(in thousands)
Restricted stock units
Restricted stock units
Stock options
Stock options
Restricted stock
Restricted stock
17. Unaudited Quarterly Financial Data
17. Unaudited Quarterly Financial Data
The following tables summarize the consolidated quarterly results of operations for 2017 and 2016 :
The following tables summarize the consolidated quarterly results of operations for 2017 and 2016 :
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
5
5
469
469
—
—
282
282
1,228
1,228
455
455
—
—
—
—
—
—
2017
2017
(in thousands, except per share amounts)
(in thousands, except per share amounts)
First
First
Quarter
Quarter
Second
Second
Quarter
Quarter
Third
Third
Quarter
Quarter
Fourth
Fourth
Quarter
Quarter
Net sales
Net sales
Gross profit
Gross profit
Net income
Net income
Basic income per share
Basic income per share
Diluted income per share
Diluted income per share
(in thousands, except per share amounts)
(in thousands, except per share amounts)
Net sales
Net sales
Gross profit
Gross profit
Net (loss) income
Net (loss) income
Basic (loss) income per share
Basic (loss) income per share
Diluted (loss) income per share
Diluted (loss) income per share
$
$
$
$
$
$
$
$
$
$
$
$
757,700 $
757,700 $
886,375 $
886,375 $
881,012 $
881,012 $
178,197
178,197
3,744
3,744
0.06 $
0.06 $
0.06 $
0.06 $
209,545
209,545
18,443
18,443
0.28 $
0.28 $
0.27 $
0.27 $
211,687
211,687
17,596
17,596
0.26 $
0.26 $
0.26 $
0.26 $
2016
2016
840,881
840,881
196,086
196,086
17,642
17,642
0.26
0.26
0.26
0.26
First
First
Quarter
Quarter
Second
Second
Quarter
Quarter
Third
Third
Quarter
Quarter
Fourth
Fourth
Quarter
Quarter
727,418 $
727,418 $
797,547 $
797,547 $
821,204 $
821,204 $
191,655
191,655
17,982
17,982
0.27 $
0.27 $
0.27 $
0.27 $
202,966
202,966
9,236
9,236
0.14 $
0.14 $
0.14 $
0.14 $
166,617
166,617
(6,756)
(6,756)
(0.10) $
(0.10) $
(0.10) $
(0.10) $
80
80
747,574
747,574
180,727
180,727
10,418
10,418
0.16
0.16
0.16
0.16
The basic and diluted EPS calculations for the years ended December 31, 2017 , 2016 and 2015 are presented below:
The basic and diluted EPS calculations for the years ended December 31, 2017 , 2016 and 2015 are presented below:
18. Subsequent Events
18. Subsequent Events
(in thousands, except per share amounts)
(in thousands, except per share amounts)
Income (loss) attributable to common stockholders
Income (loss) attributable to common stockholders
$
$
57,425 $
57,425 $
30,880 $
30,880 $
(4,831)
(4,831)
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
On March 1, 2018 , the Company acquired substantially all of the assets and assumed certain liabilities of W.E. Shone Co. (“Shone Lumber”), a supplier of
On March 1, 2018 , the Company acquired substantially all of the assets and assumed certain liabilities of W.E. Shone Co. (“Shone Lumber”), a supplier of
building materials in the state of Delaware, for a purchase price of $23 million , subject to a holdback and working capital adjustments. The Company funded the
building materials in the state of Delaware, for a purchase price of $23 million , subject to a holdback and working capital adjustments. The Company funded the
transaction through available cash and borrowings on the Company’s Revolver. For the year ended December 31, 2017, Shone Lumber generated net sales of
transaction through available cash and borrowings on the Company’s Revolver. For the year ended December 31, 2017, Shone Lumber generated net sales of
approximately $70 million .
approximately $70 million .
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, basic
66,900
66,900
66,055
66,055
41,260
41,260
The results of operations of Shone Lumber will be included in the Company’s consolidated financial statements beginning on the acquisition date.
The results of operations of Shone Lumber will be included in the Company’s consolidated financial statements beginning on the acquisition date.
65
65
235
235
204
204
207
207
129
129
218
218
—
—
—
—
—
—
81
81
Effect of dilutive securities:
Effect of dilutive securities:
Restricted stock
Restricted stock
Restricted stock units
Restricted stock units
Stock options
Stock options
(in thousands)
(in thousands)
Restricted stock units
Restricted stock units
Stock options
Stock options
Restricted stock
Restricted stock
(in thousands, except per share amounts)
(in thousands, except per share amounts)
Net sales
Net sales
Gross profit
Gross profit
Net income
Net income
Basic income per share
Basic income per share
Diluted income per share
Diluted income per share
(in thousands, except per share amounts)
(in thousands, except per share amounts)
Net sales
Net sales
Gross profit
Gross profit
Net (loss) income
Net (loss) income
Basic (loss) income per share
Basic (loss) income per share
Diluted (loss) income per share
Diluted (loss) income per share
Weighted average common shares outstanding, diluted
Weighted average common shares outstanding, diluted
67,404
67,404
66,609
66,609
41,260
41,260
Basic income (loss) per common share
Basic income (loss) per common share
Diluted income (loss) per common share
Diluted income (loss) per common share
$
$
$
$
0.86 $
0.86 $
0.85 $
0.85 $
0.47 $
0.47 $
0.46 $
0.46 $
(0.12)
(0.12)
(0.12)
(0.12)
The following table provides the securities that could potentially dilute EPS in the future, but were not included in the computation of diluted EPS because to do so
The following table provides the securities that could potentially dilute EPS in the future, but were not included in the computation of diluted EPS because to do so
would have been anti-dilutive. The amounts included in this table exclude performance-based restricted stock units. The number of currently outstanding
would have been anti-dilutive. The amounts included in this table exclude performance-based restricted stock units. The number of currently outstanding
performance-based restricted stock units that are issued upon vesting could range from zero to a maximum of 0.5 million .
performance-based restricted stock units that are issued upon vesting could range from zero to a maximum of 0.5 million .
17. Unaudited Quarterly Financial Data
17. Unaudited Quarterly Financial Data
The following tables summarize the consolidated quarterly results of operations for 2017 and 2016 :
The following tables summarize the consolidated quarterly results of operations for 2017 and 2016 :
Year Ended December 31,
Year Ended December 31,
2017
2017
2016
2016
2015
2015
5
5
469
469
—
—
282
282
1,228
1,228
455
455
—
—
—
—
—
—
2017
2017
211,687
211,687
17,596
17,596
0.26 $
0.26 $
0.26 $
0.26 $
2016
2016
191,655
191,655
17,982
17,982
0.27 $
0.27 $
0.27 $
0.27 $
First
First
Quarter
Quarter
Second
Second
Quarter
Quarter
Third
Third
Quarter
Quarter
Fourth
Fourth
Quarter
Quarter
757,700 $
757,700 $
886,375 $
886,375 $
881,012 $
881,012 $
First
First
Quarter
Quarter
Second
Second
Quarter
Quarter
Third
Third
Quarter
Quarter
Fourth
Fourth
Quarter
Quarter
727,418 $
727,418 $
797,547 $
797,547 $
821,204 $
821,204 $
209,545
209,545
18,443
18,443
0.28 $
0.28 $
0.27 $
0.27 $
202,966
202,966
9,236
9,236
0.14 $
0.14 $
0.14 $
0.14 $
840,881
840,881
196,086
196,086
17,642
17,642
0.26
0.26
0.26
0.26
747,574
747,574
180,727
180,727
10,418
10,418
0.16
0.16
0.16
0.16
$
$
$
$
$
$
$
$
$
$
$
$
178,197
178,197
3,744
3,744
0.06 $
0.06 $
0.06 $
0.06 $
166,617
166,617
(6,756)
(6,756)
(0.10) $
(0.10) $
(0.10) $
(0.10) $
80
80
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
PART III
PART III
None.
None.
Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Disclosure controls and procedures
Disclosure controls and procedures
Our management is responsible for establishing and maintaining disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the
Our management is responsible for establishing and maintaining disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). These disclosure controls and procedures are designed to ensure that information required to
Securities Exchange Act of 1934, as amended (the “Exchange Act”). These disclosure controls and procedures are designed to ensure that information required to
be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required
in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required
to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including
to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including
its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required
its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure.
disclosure.
We have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end
We have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end
of the period covered by this report, with the participation of our Chief Executive Officer and Chief Financial Officer, as well as other key members of our
of the period covered by this report, with the participation of our Chief Executive Officer and Chief Financial Officer, as well as other key members of our
management. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were
management. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were
effective as of December 31, 2017 .
effective as of December 31, 2017 .
The design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will
The design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated objectives under all future events, no matter how remote, or that the degree of compliance with the policies or procedures may not
succeed in achieving its stated objectives under all future events, no matter how remote, or that the degree of compliance with the policies or procedures may not
deteriorate. Because of their inherent limitations, disclosure controls and procedures may not prevent or detect all misstatements. Accordingly, even effective
deteriorate. Because of their inherent limitations, disclosure controls and procedures may not prevent or detect all misstatements. Accordingly, even effective
disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Management's annual report on internal control over financial reporting
Management's annual report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act). Management, with the participation of our principal executive officer and principal financial officer, conducted an assessment of the effectiveness
Exchange Act). Management, with the participation of our principal executive officer and principal financial officer, conducted an assessment of the effectiveness
of our internal control over financial reporting based on the criteria set forth in Internal
Control
-
Integrated
Framework
issued by the Committee of Sponsoring
of our internal control over financial reporting based on the criteria set forth in Internal
Control
-
Integrated
Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework). Based on the assessment, management has concluded that the internal control over financial
Organizations of the Treadway Commission (2013 framework). Based on the assessment, management has concluded that the internal control over financial
reporting of BMC Stock Holdings, Inc. was effective as of December 31, 2017 to provide reasonable assurance regarding the reliability of financial reporting and
reporting of BMC Stock Holdings, Inc. was effective as of December 31, 2017 to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements in accordance with GAAP.
the preparation of financial statements in accordance with GAAP.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
the policies or procedures may deteriorate.
Plan Category
Plan Category
Our independent registered public accounting firm, PricewaterhouseCoopers LLP, has issued an audit report with respect to the effectiveness of our internal control
Our independent registered public accounting firm, PricewaterhouseCoopers LLP, has issued an audit report with respect to the effectiveness of our internal control
over financial reporting as of December 31, 2017 , which appears in Part II, Item 8 of this Annual Report on Form 10-K.
over financial reporting as of December 31, 2017 , which appears in Part II, Item 8 of this Annual Report on Form 10-K.
Changes in internal control over financial reporting
Changes in internal control over financial reporting
There was no change in our internal control over financial reporting during the three months ended December 31, 2017 that has materially affected, or is
There was no change in our internal control over financial reporting during the three months ended December 31, 2017 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Item 9B. Other Information
None.
None.
82
82
Item 10. Directors, Executive Officers and Corporate Governance
Item 10. Directors, Executive Officers and Corporate Governance
Code
of
Business
Conduct
and
Ethics
for
Chief
Executive
Officer,
Chief
Financial
Officer
and
Chief
Accounting
Officer.
We have adopted a Code of Ethics which
Code
of
Business
Conduct
and
Ethics
for
Chief
Executive
Officer,
Chief
Financial
Officer
and
Chief
Accounting
Officer.
We have adopted a Code of Ethics which
applies to our chief executive officer, chief financial officer, chief accounting officer and all our other employees, and which can be found through our website,
applies to our chief executive officer, chief financial officer, chief accounting officer and all our other employees, and which can be found through our website,
www.buildwithbmc.com under the Investors section. We are not including this or any other information on our website as a part of, nor incorporating it by
www.buildwithbmc.com under the Investors section. We are not including this or any other information on our website as a part of, nor incorporating it by
reference into, this Annual Report on Form 10-K or any of our other SEC filings.
reference into, this Annual Report on Form 10-K or any of our other SEC filings.
In the event the Company makes any amendment to, or grants any waiver from, a provision of the Code of Business Conduct and Ethics that applies to the
In the event the Company makes any amendment to, or grants any waiver from, a provision of the Code of Business Conduct and Ethics that applies to the
principal executive officer, principal financial officer or principal accounting officer that requires disclosure under applicable SEC rules, the Company will
principal executive officer, principal financial officer or principal accounting officer that requires disclosure under applicable SEC rules, the Company will
disclose such amendment or waiver and reasons therefore within four business days of such event on its website at buildwithbmc.com.
disclose such amendment or waiver and reasons therefore within four business days of such event on its website at buildwithbmc.com.
Except as set forth above, the information required by this Item 10 is herein incorporated by reference to the Company's definitive proxy statement relating to the
Except as set forth above, the information required by this Item 10 is herein incorporated by reference to the Company's definitive proxy statement relating to the
2018 Annual Meeting of Stockholders (the “2018 Proxy Statement”), which will be filed with the SEC not later than 120 days after December 31, 2017.
2018 Annual Meeting of Stockholders (the “2018 Proxy Statement”), which will be filed with the SEC not later than 120 days after December 31, 2017.
Item 11. Executive Compensation
Item 11. Executive Compensation
Except as specifically set forth below, the information required by this Item 11 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed
Except as specifically set forth below, the information required by this Item 11 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed
with the SEC not later than 120 days after December 31, 2017.
with the SEC not later than 120 days after December 31, 2017.
The information required by Item 407(e)(5) of Regulation S-K will be included under the caption “Compensation Committee Report” in the 2018 Proxy Statement,
The information required by Item 407(e)(5) of Regulation S-K will be included under the caption “Compensation Committee Report” in the 2018 Proxy Statement,
which section is incorporated in this item by reference; however, such information is only “furnished” hereunder and not deemed “filed” for purposes of Section 18
which section is incorporated in this item by reference; however, such information is only “furnished” hereunder and not deemed “filed” for purposes of Section 18
of the Exchange Act.
of the Exchange Act.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Except as set forth below, the information required by this Item 12 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed with the
Except as set forth below, the information required by this Item 12 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed with the
SEC not later than 120 days after December 31, 2017.
SEC not later than 120 days after December 31, 2017.
The following table provides information as of December 31, 2017, with respect to the Company's existing equity compensation plans:
The following table provides information as of December 31, 2017, with respect to the Company's existing equity compensation plans:
Number of Securities
Number of Securities
To Be Issued Upon
To Be Issued Upon
Exercise of
Exercise of
Outstanding Options,
Outstanding Options,
Warrants and Rights
Warrants and Rights
Weighted-Average
Weighted-Average
Exercise Price of
Exercise Price of
Outstanding Options,
Outstanding Options,
Warrants and Rights
Warrants and Rights
Number of Securities
Number of Securities
Remaining Available
Remaining Available
for Future Issuance
for Future Issuance
under Equity
under Equity
Compensation
Compensation
Plans (Excluding
Plans (Excluding
Securities Reflected in
Securities Reflected in
Column (a))
Column (a))
Equity compensation plan approved by security holders
Equity compensation plan approved by security holders
(2013 Incentive Plan) (3)
(2013 Incentive Plan) (3)
Equity compensation plan not approved by security holders
Equity compensation plan not approved by security holders
(Pre-IPO incentive program) (4)
(Pre-IPO incentive program) (4)
Total
Total
1,662,798 (1)
1,662,798 (1)
$
$
17.06 (2)
17.06 (2)
3,103,798
3,103,798
64,671
64,671
1,727,469
1,727,469
$
$
0.97
0.97
15.59 (2)
15.59 (2)
—
—
3,103,798
3,103,798
(1) Includes 639,968 options, 60,165 restricted shares and 962,665 restricted stock units, including service-based and performance-based restricted stock units,
(1) Includes 639,968 options, 60,165 restricted shares and 962,665 restricted stock units, including service-based and performance-based restricted stock units,
outstanding under the 2013 Incentive Plan. Performance-based restricted stock units are presented assuming vesting of the maximum number of performance-based
outstanding under the 2013 Incentive Plan. Performance-based restricted stock units are presented assuming vesting of the maximum number of performance-based
(2) Represents the weighted average exercise price of the outstanding options only and does not reflect outstanding restricted stock and restricted stock units, which
(2) Represents the weighted average exercise price of the outstanding options only and does not reflect outstanding restricted stock and restricted stock units, which
restricted stock units which could be earned.
restricted stock units which could be earned.
have no exercise price.
have no exercise price.
(3) The material features of the plan are described in Note 14 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
(3) The material features of the plan are described in Note 14 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
83
83
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
PART III
PART III
None.
None.
Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Disclosure controls and procedures
Disclosure controls and procedures
Our management is responsible for establishing and maintaining disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the
Our management is responsible for establishing and maintaining disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). These disclosure controls and procedures are designed to ensure that information required to
Securities Exchange Act of 1934, as amended (the “Exchange Act”). These disclosure controls and procedures are designed to ensure that information required to
be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required
in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required
to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including
to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including
its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required
its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure.
disclosure.
We have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end
We have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end
of the period covered by this report, with the participation of our Chief Executive Officer and Chief Financial Officer, as well as other key members of our
of the period covered by this report, with the participation of our Chief Executive Officer and Chief Financial Officer, as well as other key members of our
management. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were
management. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were
effective as of December 31, 2017 .
effective as of December 31, 2017 .
The design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will
The design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated objectives under all future events, no matter how remote, or that the degree of compliance with the policies or procedures may not
succeed in achieving its stated objectives under all future events, no matter how remote, or that the degree of compliance with the policies or procedures may not
deteriorate. Because of their inherent limitations, disclosure controls and procedures may not prevent or detect all misstatements. Accordingly, even effective
deteriorate. Because of their inherent limitations, disclosure controls and procedures may not prevent or detect all misstatements. Accordingly, even effective
disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Management's annual report on internal control over financial reporting
Management's annual report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act). Management, with the participation of our principal executive officer and principal financial officer, conducted an assessment of the effectiveness
Exchange Act). Management, with the participation of our principal executive officer and principal financial officer, conducted an assessment of the effectiveness
of our internal control over financial reporting based on the criteria set forth in Internal
Control
-
Integrated
Framework
issued by the Committee of Sponsoring
of our internal control over financial reporting based on the criteria set forth in Internal
Control
-
Integrated
Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework). Based on the assessment, management has concluded that the internal control over financial
Organizations of the Treadway Commission (2013 framework). Based on the assessment, management has concluded that the internal control over financial
reporting of BMC Stock Holdings, Inc. was effective as of December 31, 2017 to provide reasonable assurance regarding the reliability of financial reporting and
reporting of BMC Stock Holdings, Inc. was effective as of December 31, 2017 to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements in accordance with GAAP.
the preparation of financial statements in accordance with GAAP.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
the policies or procedures may deteriorate.
Our independent registered public accounting firm, PricewaterhouseCoopers LLP, has issued an audit report with respect to the effectiveness of our internal control
Our independent registered public accounting firm, PricewaterhouseCoopers LLP, has issued an audit report with respect to the effectiveness of our internal control
over financial reporting as of December 31, 2017 , which appears in Part II, Item 8 of this Annual Report on Form 10-K.
over financial reporting as of December 31, 2017 , which appears in Part II, Item 8 of this Annual Report on Form 10-K.
Changes in internal control over financial reporting
Changes in internal control over financial reporting
There was no change in our internal control over financial reporting during the three months ended December 31, 2017 that has materially affected, or is
There was no change in our internal control over financial reporting during the three months ended December 31, 2017 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Item 9B. Other Information
None.
None.
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Item 10. Directors, Executive Officers and Corporate Governance
Item 10. Directors, Executive Officers and Corporate Governance
Code
of
Business
Conduct
and
Ethics
for
Chief
Executive
Officer,
Chief
Financial
Officer
and
Chief
Accounting
Officer.
We have adopted a Code of Ethics which
Code
of
Business
Conduct
and
Ethics
for
Chief
Executive
Officer,
Chief
Financial
Officer
and
Chief
Accounting
Officer.
We have adopted a Code of Ethics which
applies to our chief executive officer, chief financial officer, chief accounting officer and all our other employees, and which can be found through our website,
applies to our chief executive officer, chief financial officer, chief accounting officer and all our other employees, and which can be found through our website,
www.buildwithbmc.com under the Investors section. We are not including this or any other information on our website as a part of, nor incorporating it by
www.buildwithbmc.com under the Investors section. We are not including this or any other information on our website as a part of, nor incorporating it by
reference into, this Annual Report on Form 10-K or any of our other SEC filings.
reference into, this Annual Report on Form 10-K or any of our other SEC filings.
In the event the Company makes any amendment to, or grants any waiver from, a provision of the Code of Business Conduct and Ethics that applies to the
In the event the Company makes any amendment to, or grants any waiver from, a provision of the Code of Business Conduct and Ethics that applies to the
principal executive officer, principal financial officer or principal accounting officer that requires disclosure under applicable SEC rules, the Company will
principal executive officer, principal financial officer or principal accounting officer that requires disclosure under applicable SEC rules, the Company will
disclose such amendment or waiver and reasons therefore within four business days of such event on its website at buildwithbmc.com.
disclose such amendment or waiver and reasons therefore within four business days of such event on its website at buildwithbmc.com.
Except as set forth above, the information required by this Item 10 is herein incorporated by reference to the Company's definitive proxy statement relating to the
Except as set forth above, the information required by this Item 10 is herein incorporated by reference to the Company's definitive proxy statement relating to the
2018 Annual Meeting of Stockholders (the “2018 Proxy Statement”), which will be filed with the SEC not later than 120 days after December 31, 2017.
2018 Annual Meeting of Stockholders (the “2018 Proxy Statement”), which will be filed with the SEC not later than 120 days after December 31, 2017.
Item 11. Executive Compensation
Item 11. Executive Compensation
Except as specifically set forth below, the information required by this Item 11 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed
Except as specifically set forth below, the information required by this Item 11 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed
with the SEC not later than 120 days after December 31, 2017.
with the SEC not later than 120 days after December 31, 2017.
The information required by Item 407(e)(5) of Regulation S-K will be included under the caption “Compensation Committee Report” in the 2018 Proxy Statement,
The information required by Item 407(e)(5) of Regulation S-K will be included under the caption “Compensation Committee Report” in the 2018 Proxy Statement,
which section is incorporated in this item by reference; however, such information is only “furnished” hereunder and not deemed “filed” for purposes of Section 18
which section is incorporated in this item by reference; however, such information is only “furnished” hereunder and not deemed “filed” for purposes of Section 18
of the Exchange Act.
of the Exchange Act.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Except as set forth below, the information required by this Item 12 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed with the
Except as set forth below, the information required by this Item 12 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed with the
SEC not later than 120 days after December 31, 2017.
SEC not later than 120 days after December 31, 2017.
The following table provides information as of December 31, 2017, with respect to the Company's existing equity compensation plans:
The following table provides information as of December 31, 2017, with respect to the Company's existing equity compensation plans:
Plan Category
Plan Category
Equity compensation plan approved by security holders
Equity compensation plan approved by security holders
(2013 Incentive Plan) (3)
(2013 Incentive Plan) (3)
Equity compensation plan not approved by security holders
Equity compensation plan not approved by security holders
(Pre-IPO incentive program) (4)
(Pre-IPO incentive program) (4)
Total
Total
Number of Securities
Number of Securities
To Be Issued Upon
To Be Issued Upon
Exercise of
Exercise of
Outstanding Options,
Outstanding Options,
Warrants and Rights
Warrants and Rights
Weighted-Average
Weighted-Average
Exercise Price of
Exercise Price of
Outstanding Options,
Outstanding Options,
Warrants and Rights
Warrants and Rights
Number of Securities
Number of Securities
Remaining Available
Remaining Available
for Future Issuance
for Future Issuance
under Equity
under Equity
Compensation
Compensation
Plans (Excluding
Plans (Excluding
Securities Reflected in
Securities Reflected in
Column (a))
Column (a))
1,662,798 (1)
1,662,798 (1)
$
$
17.06 (2)
17.06 (2)
3,103,798
3,103,798
64,671
64,671
1,727,469
1,727,469
$
$
0.97
0.97
15.59 (2)
15.59 (2)
—
—
3,103,798
3,103,798
(1) Includes 639,968 options, 60,165 restricted shares and 962,665 restricted stock units, including service-based and performance-based restricted stock units,
(1) Includes 639,968 options, 60,165 restricted shares and 962,665 restricted stock units, including service-based and performance-based restricted stock units,
outstanding under the 2013 Incentive Plan. Performance-based restricted stock units are presented assuming vesting of the maximum number of performance-based
outstanding under the 2013 Incentive Plan. Performance-based restricted stock units are presented assuming vesting of the maximum number of performance-based
restricted stock units which could be earned.
restricted stock units which could be earned.
(2) Represents the weighted average exercise price of the outstanding options only and does not reflect outstanding restricted stock and restricted stock units, which
(2) Represents the weighted average exercise price of the outstanding options only and does not reflect outstanding restricted stock and restricted stock units, which
have no exercise price.
have no exercise price.
(3) The material features of the plan are described in Note 14 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
(3) The material features of the plan are described in Note 14 to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
83
83
(4) Pre-IPO incentive program of SBS that provided for grants of stock options and restricted stock to certain employees and directors. Awards granted under the
(4) Pre-IPO incentive program of SBS that provided for grants of stock options and restricted stock to certain employees and directors. Awards granted under the
program vested over such periods as were approved at the time of the grant of the award. Only options remain outstanding under the Pre-IPO incentive program.
program vested over such periods as were approved at the time of the grant of the award. Only options remain outstanding under the Pre-IPO incentive program.
PART IV
PART IV
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed with the SEC not later than 120 days
The information required by this Item 13 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed with the SEC not later than 120 days
after December 31, 2017.
after December 31, 2017.
Item 14. Principal Accountant Fees and Services
Item 14. Principal Accountant Fees and Services
The information required by this Item 14 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed with the SEC not later than 120 days
The information required by this Item 14 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed with the SEC not later than 120 days
after December 31, 2017.
after December 31, 2017.
Item 15. Exhibits and Financial Statement Schedules
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this report:
(a) The following documents are filed as part of this report:
1. The list of consolidated financial statements and related notes, together with the report of PricewaterhouseCoopers LLP, appear in Part II, Item 8
1. The list of consolidated financial statements and related notes, together with the report of PricewaterhouseCoopers LLP, appear in Part II, Item 8
"Financial Statements and Supplementary Data" of this Annual Report on Form 10-K and are hereby incorporated by reference.
"Financial Statements and Supplementary Data" of this Annual Report on Form 10-K and are hereby incorporated by reference.
2. Financial statement schedules have been omitted because they are not applicable, not material or the required information is otherwise included.
2. Financial statement schedules have been omitted because they are not applicable, not material or the required information is otherwise included.
3. The following documents are filed, furnished or incorporated by reference as exhibits to this report as required by Item 601 of Regulation S-K.
3. The following documents are filed, furnished or incorporated by reference as exhibits to this report as required by Item 601 of Regulation S-K.
84
84
Exhibit No.
Exhibit No.
Description
Description
2.1 +
2.1 +
Agreement and Plan of Merger, dated as of June 2, 2015, by and between Stock Building Supply Holdings, Inc. and Building Materials
Agreement and Plan of Merger, dated as of June 2, 2015, by and between Stock Building Supply Holdings, Inc. and Building Materials
Holding Corporation (incorporated by reference to Exhibit 2.1 to the Form 8-K filed with the SEC on June 5, 2015 in Commission File No.
Holding Corporation (incorporated by reference to Exhibit 2.1 to the Form 8-K filed with the SEC on June 5, 2015 in Commission File No.
001-36050)
001-36050)
Amended and Restated Certificate of Incorporation
Amended and Restated Certificate of Incorporation
3.1
3.1
3.2
3.2
4.1
4.1
4.2
4.2
10.1 #
10.1 #
10.2 #
10.2 #
10.3 #
10.3 #
10.4 #
10.4 #
10.5 #
10.5 #
10.6 #
10.6 #
10.7 #
10.7 #
10.8 #
10.8 #
10.9 #
10.9 #
Amended and Restated Bylaws of Stock Building Supply Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current
Amended and Restated Bylaws of Stock Building Supply Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current
Report on Form 8-K filed with the Commission on August 15, 2013 in Commission File No. 001-36050)
Report on Form 8-K filed with the Commission on August 15, 2013 in Commission File No. 001-36050)
Form of stock certificate (incorporated by reference to Exhibit 4.1 to the Stock Building Supply Holdings, Inc. Registration Statement on Form
Form of stock certificate (incorporated by reference to Exhibit 4.1 to the Stock Building Supply Holdings, Inc. Registration Statement on Form
S-1, as amended, filed with the Commission on June 14, 2013 in Commission File No. 333-189368)
S-1, as amended, filed with the Commission on June 14, 2013 in Commission File No. 333-189368)
Indenture, dated as of September 15, 2016, among BMC East, LLC, the Guarantors named therein and Wilmington Trust, National
Indenture, dated as of September 15, 2016, among BMC East, LLC, the Guarantors named therein and Wilmington Trust, National
Association, as Trustee and Notes Collateral Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K
Association, as Trustee and Notes Collateral Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K
filed with the Commission on September 16, 2016 in Commission File No. 001-36050).
filed with the Commission on September 16, 2016 in Commission File No. 001-36050).
Separation Agreement, dated as of January 9, 2018, by and between Peter C. Alexander and BMC Stock Holdings, Inc.
Separation Agreement, dated as of January 9, 2018, by and between Peter C. Alexander and BMC Stock Holdings, Inc.
Amended and Restated Employment Agreement, dated as of April 1, 2016, by and between Peter C. Alexander and BMC Stock Holdings, Inc.
Amended and Restated Employment Agreement, dated as of April 1, 2016, by and between Peter C. Alexander and BMC Stock Holdings, Inc.
(incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed with the Commission on April 7, 2016 in Commission File No.
(incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed with the Commission on April 7, 2016 in Commission File No.
001-36050)
001-36050)
001-36050)
001-36050)
Amended and Restated Employment Agreement, dated as of October 9, 2014, between Stock Building Supply Holdings, Inc. and James F.
Amended and Restated Employment Agreement, dated as of October 9, 2014, between Stock Building Supply Holdings, Inc. and James F.
Major, Jr. (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed with the Commission on October 10, 2014 in
Major, Jr. (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed with the Commission on October 10, 2014 in
Commission File No. 001-36050)
Commission File No. 001-36050)
Employment Agreement Amendment, dated as of June 2, 2015, by and between James F. Major, Jr. and Stock Building Supply Holdings, Inc.
Employment Agreement Amendment, dated as of June 2, 2015, by and between James F. Major, Jr. and Stock Building Supply Holdings, Inc.
(incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed with the Commission on June 5, 2015 in Commission File No.
(incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed with the Commission on June 5, 2015 in Commission File No.
Amended and Restated Employment Agreement, dated as of February 21, 2017, by and between Lisa M. Hamblet and BMC Stock Holdings,
Amended and Restated Employment Agreement, dated as of February 21, 2017, by and between Lisa M. Hamblet and BMC Stock Holdings,
Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on May 8, 2017
Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on May 8, 2017
Amended and Restated Employment Agreement, dated as of August 1, 2017, by and between Lisa M. Hamblet and BMC Stock Holdings, Inc.
Amended and Restated Employment Agreement, dated as of August 1, 2017, by and between Lisa M. Hamblet and BMC Stock Holdings, Inc.
(incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2017 in
(incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2017 in
Employment Agreement, dated as of October 9, 2014, between Stock Building Supply Holdings, Inc. and C. Lowell Ball (incorporated by
Employment Agreement, dated as of October 9, 2014, between Stock Building Supply Holdings, Inc. and C. Lowell Ball (incorporated by
reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on October 28, 2014 in Commission
reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on October 28, 2014 in Commission
Employment Agreement Amendment, dated as of June 2, 2015, by and between C. Lowell Ball and Stock Building Supply Holdings, Inc.
Employment Agreement Amendment, dated as of June 2, 2015, by and between C. Lowell Ball and Stock Building Supply Holdings, Inc.
(incorporated by reference to Exhibit 10.6 to the Registrant’s Form 8-K filed with the Commission on June 5, 2015 in Commission File No.
(incorporated by reference to Exhibit 10.6 to the Registrant’s Form 8-K filed with the Commission on June 5, 2015 in Commission File No.
Consulting Agreement, dated as of September 16, 2017, by and between Paul Street and BMC Corporate Services (incorporated by reference
Consulting Agreement, dated as of September 16, 2017, by and between Paul Street and BMC Corporate Services (incorporated by reference
to Exhibit 99.1 to the Registrant’s Form 8-K filed with the Commission on September 19, 2017 in Commission File No. 001-36050)
to Exhibit 99.1 to the Registrant’s Form 8-K filed with the Commission on September 19, 2017 in Commission File No. 001-36050)
in Commission File No. 001-36050)
in Commission File No. 001-36050)
Commission File No. 001-36050)
Commission File No. 001-36050)
File No. 001-36050)
File No. 001-36050)
001-36050)
001-36050)
85
85
(4) Pre-IPO incentive program of SBS that provided for grants of stock options and restricted stock to certain employees and directors. Awards granted under the
(4) Pre-IPO incentive program of SBS that provided for grants of stock options and restricted stock to certain employees and directors. Awards granted under the
program vested over such periods as were approved at the time of the grant of the award. Only options remain outstanding under the Pre-IPO incentive program.
program vested over such periods as were approved at the time of the grant of the award. Only options remain outstanding under the Pre-IPO incentive program.
PART IV
PART IV
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed with the SEC not later than 120 days
The information required by this Item 13 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed with the SEC not later than 120 days
(a) The following documents are filed as part of this report:
(a) The following documents are filed as part of this report:
Item 15. Exhibits and Financial Statement Schedules
Item 15. Exhibits and Financial Statement Schedules
after December 31, 2017.
after December 31, 2017.
Item 14. Principal Accountant Fees and Services
Item 14. Principal Accountant Fees and Services
after December 31, 2017.
after December 31, 2017.
The information required by this Item 14 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed with the SEC not later than 120 days
The information required by this Item 14 is herein incorporated by reference to the 2018 Proxy Statement, which will be filed with the SEC not later than 120 days
1. The list of consolidated financial statements and related notes, together with the report of PricewaterhouseCoopers LLP, appear in Part II, Item 8
1. The list of consolidated financial statements and related notes, together with the report of PricewaterhouseCoopers LLP, appear in Part II, Item 8
"Financial Statements and Supplementary Data" of this Annual Report on Form 10-K and are hereby incorporated by reference.
"Financial Statements and Supplementary Data" of this Annual Report on Form 10-K and are hereby incorporated by reference.
2. Financial statement schedules have been omitted because they are not applicable, not material or the required information is otherwise included.
2. Financial statement schedules have been omitted because they are not applicable, not material or the required information is otherwise included.
3. The following documents are filed, furnished or incorporated by reference as exhibits to this report as required by Item 601 of Regulation S-K.
3. The following documents are filed, furnished or incorporated by reference as exhibits to this report as required by Item 601 of Regulation S-K.
84
84
Exhibit No.
Exhibit No.
Description
Description
2.1 +
2.1 +
3.1
3.1
3.2
3.2
4.1
4.1
4.2
4.2
10.1 #
10.1 #
10.2 #
10.2 #
10.3 #
10.3 #
10.4 #
10.4 #
10.5 #
10.5 #
10.6 #
10.6 #
10.7 #
10.7 #
10.8 #
10.8 #
10.9 #
10.9 #
Agreement and Plan of Merger, dated as of June 2, 2015, by and between Stock Building Supply Holdings, Inc. and Building Materials
Agreement and Plan of Merger, dated as of June 2, 2015, by and between Stock Building Supply Holdings, Inc. and Building Materials
Holding Corporation (incorporated by reference to Exhibit 2.1 to the Form 8-K filed with the SEC on June 5, 2015 in Commission File No.
Holding Corporation (incorporated by reference to Exhibit 2.1 to the Form 8-K filed with the SEC on June 5, 2015 in Commission File No.
001-36050)
001-36050)
Amended and Restated Certificate of Incorporation
Amended and Restated Certificate of Incorporation
Amended and Restated Bylaws of Stock Building Supply Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current
Amended and Restated Bylaws of Stock Building Supply Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current
Report on Form 8-K filed with the Commission on August 15, 2013 in Commission File No. 001-36050)
Report on Form 8-K filed with the Commission on August 15, 2013 in Commission File No. 001-36050)
Form of stock certificate (incorporated by reference to Exhibit 4.1 to the Stock Building Supply Holdings, Inc. Registration Statement on Form
Form of stock certificate (incorporated by reference to Exhibit 4.1 to the Stock Building Supply Holdings, Inc. Registration Statement on Form
S-1, as amended, filed with the Commission on June 14, 2013 in Commission File No. 333-189368)
S-1, as amended, filed with the Commission on June 14, 2013 in Commission File No. 333-189368)
Indenture, dated as of September 15, 2016, among BMC East, LLC, the Guarantors named therein and Wilmington Trust, National
Indenture, dated as of September 15, 2016, among BMC East, LLC, the Guarantors named therein and Wilmington Trust, National
Association, as Trustee and Notes Collateral Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K
Association, as Trustee and Notes Collateral Agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K
filed with the Commission on September 16, 2016 in Commission File No. 001-36050).
filed with the Commission on September 16, 2016 in Commission File No. 001-36050).
Separation Agreement, dated as of January 9, 2018, by and between Peter C. Alexander and BMC Stock Holdings, Inc.
Separation Agreement, dated as of January 9, 2018, by and between Peter C. Alexander and BMC Stock Holdings, Inc.
Amended and Restated Employment Agreement, dated as of April 1, 2016, by and between Peter C. Alexander and BMC Stock Holdings, Inc.
Amended and Restated Employment Agreement, dated as of April 1, 2016, by and between Peter C. Alexander and BMC Stock Holdings, Inc.
(incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed with the Commission on April 7, 2016 in Commission File No.
(incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed with the Commission on April 7, 2016 in Commission File No.
001-36050)
001-36050)
Amended and Restated Employment Agreement, dated as of October 9, 2014, between Stock Building Supply Holdings, Inc. and James F.
Amended and Restated Employment Agreement, dated as of October 9, 2014, between Stock Building Supply Holdings, Inc. and James F.
Major, Jr. (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed with the Commission on October 10, 2014 in
Major, Jr. (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed with the Commission on October 10, 2014 in
Commission File No. 001-36050)
Commission File No. 001-36050)
Employment Agreement Amendment, dated as of June 2, 2015, by and between James F. Major, Jr. and Stock Building Supply Holdings, Inc.
Employment Agreement Amendment, dated as of June 2, 2015, by and between James F. Major, Jr. and Stock Building Supply Holdings, Inc.
(incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed with the Commission on June 5, 2015 in Commission File No.
(incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed with the Commission on June 5, 2015 in Commission File No.
001-36050)
001-36050)
Amended and Restated Employment Agreement, dated as of February 21, 2017, by and between Lisa M. Hamblet and BMC Stock Holdings,
Amended and Restated Employment Agreement, dated as of February 21, 2017, by and between Lisa M. Hamblet and BMC Stock Holdings,
Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on May 8, 2017
Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on May 8, 2017
in Commission File No. 001-36050)
in Commission File No. 001-36050)
Amended and Restated Employment Agreement, dated as of August 1, 2017, by and between Lisa M. Hamblet and BMC Stock Holdings, Inc.
Amended and Restated Employment Agreement, dated as of August 1, 2017, by and between Lisa M. Hamblet and BMC Stock Holdings, Inc.
(incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2017 in
(incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2017 in
Commission File No. 001-36050)
Commission File No. 001-36050)
Employment Agreement, dated as of October 9, 2014, between Stock Building Supply Holdings, Inc. and C. Lowell Ball (incorporated by
Employment Agreement, dated as of October 9, 2014, between Stock Building Supply Holdings, Inc. and C. Lowell Ball (incorporated by
reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on October 28, 2014 in Commission
reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on October 28, 2014 in Commission
File No. 001-36050)
File No. 001-36050)
Employment Agreement Amendment, dated as of June 2, 2015, by and between C. Lowell Ball and Stock Building Supply Holdings, Inc.
Employment Agreement Amendment, dated as of June 2, 2015, by and between C. Lowell Ball and Stock Building Supply Holdings, Inc.
(incorporated by reference to Exhibit 10.6 to the Registrant’s Form 8-K filed with the Commission on June 5, 2015 in Commission File No.
(incorporated by reference to Exhibit 10.6 to the Registrant’s Form 8-K filed with the Commission on June 5, 2015 in Commission File No.
001-36050)
001-36050)
Consulting Agreement, dated as of September 16, 2017, by and between Paul Street and BMC Corporate Services (incorporated by reference
Consulting Agreement, dated as of September 16, 2017, by and between Paul Street and BMC Corporate Services (incorporated by reference
to Exhibit 99.1 to the Registrant’s Form 8-K filed with the Commission on September 19, 2017 in Commission File No. 001-36050)
to Exhibit 99.1 to the Registrant’s Form 8-K filed with the Commission on September 19, 2017 in Commission File No. 001-36050)
85
85
Exhibit No.
Exhibit No.
Description
Description
Exhibit No.
Exhibit No.
Description
Description
10.10 #
10.10 #
10.11 #
10.11 #
10.12 #
10.12 #
10.13 #
10.13 #
10.14 #
10.14 #
10.15 #
10.15 #
10.16 #
10.16 #
10.17 #
10.17 #
10.18 #
10.18 #
10.19 #
10.19 #
10.20 #
10.20 #
10.21 #
10.21 #
10.22
10.22
10.23
10.23
10.24
10.24
Offer of Employment, dated as of October 16, 2015, by and between Thomas J. Barnes and Building Materials Holding Corporation
Offer of Employment, dated as of October 16, 2015, by and between Thomas J. Barnes and Building Materials Holding Corporation
(incorporated by reference to Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 1, 2017 in
(incorporated by reference to Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 1, 2017 in
Commission File No. 001-36050)
Commission File No. 001-36050)
10.25
10.25
Registration Rights Agreement, effective as of December 1, 2015, by and among Stock Building Supply Holdings, Inc. and certain
Registration Rights Agreement, effective as of December 1, 2015, by and among Stock Building Supply Holdings, Inc. and certain
stockholders affiliated with Davidson Kempner Capital Management LP, Robotti & Company Advisors, LLC and The Gores Group, LLC
stockholders affiliated with Davidson Kempner Capital Management LP, Robotti & Company Advisors, LLC and The Gores Group, LLC
(incorporated by reference to Annex G to the definitive Joint Proxy and Consent Solicitation Statement/Prospectus filed with the SEC on
(incorporated by reference to Annex G to the definitive Joint Proxy and Consent Solicitation Statement/Prospectus filed with the SEC on
Supplemental Retention Agreement, dated as of February 22, 2016, by and between Thomas J. Barnes and BMC Stock Holdings, Inc.
Supplemental Retention Agreement, dated as of February 22, 2016, by and between Thomas J. Barnes and BMC Stock Holdings, Inc.
(incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 1, 2017 in
(incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 1, 2017 in
Commission File No. 001-36050)
Commission File No. 001-36050)
Employment Agreement, dated as of January 7, 2017, by and between Michael McGaugh and BMC Stock Holdings, Inc. (incorporated by
Employment Agreement, dated as of January 7, 2017, by and between Michael McGaugh and BMC Stock Holdings, Inc. (incorporated by
reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on May 8, 2017 in Commission File
reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on May 8, 2017 in Commission File
No. 001-36050)
No. 001-36050)
Amended and Restated Employment Agreement, dated as of August 1, 2017, by and between Michael McGaugh and BMC Stock Holdings,
Amended and Restated Employment Agreement, dated as of August 1, 2017, by and between Michael McGaugh and BMC Stock Holdings,
Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 8,
Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 8,
2017 in Commission File No. 001-36050)
2017 in Commission File No. 001-36050)
Employment Agreement, dated as of June 1, 2017, by and between Lanesha Minnix and BMC Stock Holdings, Inc. (incorporated by reference
Employment Agreement, dated as of June 1, 2017, by and between Lanesha Minnix and BMC Stock Holdings, Inc. (incorporated by reference
to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2017 in Commission File No. 001-
to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2017 in Commission File No. 001-
36050)
36050)
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.20 to the Stock Building Supply Holdings, Inc. Registration
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.20 to the Stock Building Supply Holdings, Inc. Registration
Statement on Form S-1, as amended, filed with the Commission on June 14, 2013 in Commission File No. 333-189368)
Statement on Form S-1, as amended, filed with the Commission on June 14, 2013 in Commission File No. 333-189368)
Form of Indemnification Agreement Entered into with Certain Directors and Officers (incorporated by reference to Exhibit 10.1 to the
Form of Indemnification Agreement Entered into with Certain Directors and Officers (incorporated by reference to Exhibit 10.1 to the
Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 9, 2017 in Commission File No. 001-36050)
Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 9, 2017 in Commission File No. 001-36050)
Form of Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan (incorporated by reference to Exhibit 10.21 to the Stock
Form of Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan (incorporated by reference to Exhibit 10.21 to the Stock
Building Supply Holdings, Inc. Registration Statement on Form S-1, as amended, filed with the Commission on June 14, 2013 in Commission
Building Supply Holdings, Inc. Registration Statement on Form S-1, as amended, filed with the Commission on June 14, 2013 in Commission
File No. 333-189368)
File No. 333-189368)
Amendment to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan, (incorporated by reference to Annex B to the
Amendment to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan, (incorporated by reference to Annex B to the
definitive Joint Proxy and Consent Solicitation Statement/Prospectus filed with the SEC on November 2, 2015 in Commission File No. 333-
definitive Joint Proxy and Consent Solicitation Statement/Prospectus filed with the SEC on November 2, 2015 in Commission File No. 333-
206421)
206421)
Form of Nonqualified Stock Option Agreement Pursuant to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan
Form of Nonqualified Stock Option Agreement Pursuant to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan
(incorporated by reference to Exhibit 10.23 to Amendment 2 to the Stock Building Supply Holdings, Inc. Registration Statement on Form S-1,
(incorporated by reference to Exhibit 10.23 to Amendment 2 to the Stock Building Supply Holdings, Inc. Registration Statement on Form S-1,
as amended, filed with the Commission on July 29, 2013 in Commission File No. 333-189368)
as amended, filed with the Commission on July 29, 2013 in Commission File No. 333-189368)
Form of Restricted Stock Agreement Pursuant to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan (incorporated
Form of Restricted Stock Agreement Pursuant to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan (incorporated
by reference to Exhibit 10.24 to Amendment 2 to the Stock Building Supply Holdings, Inc. Registration Statement on Form S-1, as amended,
by reference to Exhibit 10.24 to Amendment 2 to the Stock Building Supply Holdings, Inc. Registration Statement on Form S-1, as amended,
filed with the Commission on July 29, 2013 in Commission File No. 333-189368)
filed with the Commission on July 29, 2013 in Commission File No. 333-189368)
Form of Restricted Stock Unit Agreement Pursuant to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan
Form of Restricted Stock Unit Agreement Pursuant to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan
(incorporated by reference to Exhibit 10.25 to Amendment 2 to the Stock Building Supply Holdings, Inc. Registration Statement on Form S-1,
(incorporated by reference to Exhibit 10.25 to Amendment 2 to the Stock Building Supply Holdings, Inc. Registration Statement on Form S-1,
as amended, filed with the Commission on July 29, 2013 in Commission File No. 333-189368)
as amended, filed with the Commission on July 29, 2013 in Commission File No. 333-189368)
Second Amended and Restated Senior Secured Credit Agreement, dated as of December 1, 2015, by and among Building Materials Holding
Second Amended and Restated Senior Secured Credit Agreement, dated as of December 1, 2015, by and among Building Materials Holding
Corporation, Stock Building Supply Holdings, Inc., certain subsidiaries of Building Materials Holding Corporation and Stock Building Supply
Corporation, Stock Building Supply Holdings, Inc., certain subsidiaries of Building Materials Holding Corporation and Stock Building Supply
Holdings, Inc. parties thereto, Wells Fargo Capital Finance, LLC as agent for the lenders, joint lead arranger, and joint book runner, Goldman
Holdings, Inc. parties thereto, Wells Fargo Capital Finance, LLC as agent for the lenders, joint lead arranger, and joint book runner, Goldman
Sachs Bank USA, as joint lead arranger and joint book runner, and the lenders parties thereto (incorporated by reference to Exhibit 4.3 to the
Sachs Bank USA, as joint lead arranger and joint book runner, and the lenders parties thereto (incorporated by reference to Exhibit 4.3 to the
Registrant’s Current Report on Form 8-K filed with the Commission on December 7, 2015 in Commission File No. 001-36050)
Registrant’s Current Report on Form 8-K filed with the Commission on December 7, 2015 in Commission File No. 001-36050)
Amendment Number One to Second Amended and Restated Senior Secured Credit Agreement and Consent, dated as of January 28, 2016, by
Amendment Number One to Second Amended and Restated Senior Secured Credit Agreement and Consent, dated as of January 28, 2016, by
and among BMC Stock Holdings, Inc., as parent, the subsidiaries of parent party thereto, as borrowers, the lenders party thereto, and Wells
and among BMC Stock Holdings, Inc., as parent, the subsidiaries of parent party thereto, as borrowers, the lenders party thereto, and Wells
Fargo Capital Finance, LLC, as agent for the lenders (incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on Form
Fargo Capital Finance, LLC, as agent for the lenders (incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on Form
10-K filed with the Commission on March 15, 2016 in Commission File No. 001-36050)
10-K filed with the Commission on March 15, 2016 in Commission File No. 001-36050)
Amendment Number Two to Second Amended and Restated Senior Secured Credit Agreement and Amendment Number One to Second
Amendment Number Two to Second Amended and Restated Senior Secured Credit Agreement and Amendment Number One to Second
Amended and Restated Security Agreement, dated as of September 15, 2016, by and among BMC Stock Holdings, Inc., the subsidiaries party
Amended and Restated Security Agreement, dated as of September 15, 2016, by and among BMC Stock Holdings, Inc., the subsidiaries party
thereto, the lenders identified on the signature page thereto and Wells Fargo Capital Finance, LLC, as agent for the lenders (incorporated by
thereto, the lenders identified on the signature page thereto and Wells Fargo Capital Finance, LLC, as agent for the lenders (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on September 16, 2016 in Commission
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on September 16, 2016 in Commission
File No. 001-36050)
File No. 001-36050)
86
86
November 2, 2015 in Commission File No. 333-206421)
November 2, 2015 in Commission File No. 333-206421)
10.26
10.26
First Supplement to the Registration Rights Agreement, dated as of May 18, 2016, by and among the Registrant and certain stockholders
First Supplement to the Registration Rights Agreement, dated as of May 18, 2016, by and among the Registrant and certain stockholders
affiliated with Davidson Kempner Capital Management LP, Robotti & Company Advisors, LLC and The Gores Group, LLC (incorporated by
affiliated with Davidson Kempner Capital Management LP, Robotti & Company Advisors, LLC and The Gores Group, LLC (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on May 24, 2016 in Commission File No.
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on May 24, 2016 in Commission File No.
001-36050).
001-36050).
List of subsidiaries of BMC Stock Holdings, Inc.
List of subsidiaries of BMC Stock Holdings, Inc.
Consent of PricewaterhouseCoopers LLP
Consent of PricewaterhouseCoopers LLP
Powers of Attorney (included on the signature page)
Powers of Attorney (included on the signature page)
21.1
21.1
23.1
23.1
24.1
24.1
31.1
31.1
31.2
31.2
32.1
32.1
32.2
32.2
Certification by David L. Keltner, Interim President and Chief Executive Officer, pursuant to Exchange Act Rule 13a-14/15d-14(a), as adopted
Certification by David L. Keltner, Interim President and Chief Executive Officer, pursuant to Exchange Act Rule 13a-14/15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by James F. Major, Jr., Executive Vice President, Chief Financial Officer and Treasurer, pursuant to Exchange Act Rule 13a-
Certification by James F. Major, Jr., Executive Vice President, Chief Financial Officer and Treasurer, pursuant to Exchange Act Rule 13a-
14/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
14/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*
101.INS*
XBRL Instance Document
XBRL Instance Document
101.SCH*
101.SCH*
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Schema Document
101.CAL*
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
_________________
_________________
upon request.
upon request.
# Denotes management compensatory plan or arrangement.
# Denotes management compensatory plan or arrangement.
Item 16. Form 10-K Summary
Item 16. Form 10-K Summary
None.
None.
87
87
+ Certain schedules to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedules will be furnished supplementally to the SEC
+ Certain schedules to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedules will be furnished supplementally to the SEC
* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities
* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities
Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
10.10 #
10.10 #
10.11 #
10.11 #
10.12 #
10.12 #
10.13 #
10.13 #
10.14 #
10.14 #
10.15 #
10.15 #
10.16 #
10.16 #
10.17 #
10.17 #
10.18 #
10.18 #
10.19 #
10.19 #
10.20 #
10.20 #
10.21 #
10.21 #
Commission File No. 001-36050)
Commission File No. 001-36050)
Commission File No. 001-36050)
Commission File No. 001-36050)
No. 001-36050)
No. 001-36050)
Employment Agreement, dated as of January 7, 2017, by and between Michael McGaugh and BMC Stock Holdings, Inc. (incorporated by
Employment Agreement, dated as of January 7, 2017, by and between Michael McGaugh and BMC Stock Holdings, Inc. (incorporated by
reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on May 8, 2017 in Commission File
reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on May 8, 2017 in Commission File
Amended and Restated Employment Agreement, dated as of August 1, 2017, by and between Michael McGaugh and BMC Stock Holdings,
Amended and Restated Employment Agreement, dated as of August 1, 2017, by and between Michael McGaugh and BMC Stock Holdings,
Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 8,
Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 8,
2017 in Commission File No. 001-36050)
2017 in Commission File No. 001-36050)
Employment Agreement, dated as of June 1, 2017, by and between Lanesha Minnix and BMC Stock Holdings, Inc. (incorporated by reference
Employment Agreement, dated as of June 1, 2017, by and between Lanesha Minnix and BMC Stock Holdings, Inc. (incorporated by reference
to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2017 in Commission File No. 001-
to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2017 in Commission File No. 001-
36050)
36050)
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.20 to the Stock Building Supply Holdings, Inc. Registration
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.20 to the Stock Building Supply Holdings, Inc. Registration
Statement on Form S-1, as amended, filed with the Commission on June 14, 2013 in Commission File No. 333-189368)
Statement on Form S-1, as amended, filed with the Commission on June 14, 2013 in Commission File No. 333-189368)
Form of Indemnification Agreement Entered into with Certain Directors and Officers (incorporated by reference to Exhibit 10.1 to the
Form of Indemnification Agreement Entered into with Certain Directors and Officers (incorporated by reference to Exhibit 10.1 to the
Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 9, 2017 in Commission File No. 001-36050)
Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 9, 2017 in Commission File No. 001-36050)
Form of Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan (incorporated by reference to Exhibit 10.21 to the Stock
Form of Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan (incorporated by reference to Exhibit 10.21 to the Stock
File No. 333-189368)
File No. 333-189368)
206421)
206421)
Amendment to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan, (incorporated by reference to Annex B to the
Amendment to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan, (incorporated by reference to Annex B to the
definitive Joint Proxy and Consent Solicitation Statement/Prospectus filed with the SEC on November 2, 2015 in Commission File No. 333-
definitive Joint Proxy and Consent Solicitation Statement/Prospectus filed with the SEC on November 2, 2015 in Commission File No. 333-
Form of Nonqualified Stock Option Agreement Pursuant to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan
Form of Nonqualified Stock Option Agreement Pursuant to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan
(incorporated by reference to Exhibit 10.23 to Amendment 2 to the Stock Building Supply Holdings, Inc. Registration Statement on Form S-1,
(incorporated by reference to Exhibit 10.23 to Amendment 2 to the Stock Building Supply Holdings, Inc. Registration Statement on Form S-1,
as amended, filed with the Commission on July 29, 2013 in Commission File No. 333-189368)
as amended, filed with the Commission on July 29, 2013 in Commission File No. 333-189368)
Form of Restricted Stock Agreement Pursuant to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan (incorporated
Form of Restricted Stock Agreement Pursuant to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan (incorporated
by reference to Exhibit 10.24 to Amendment 2 to the Stock Building Supply Holdings, Inc. Registration Statement on Form S-1, as amended,
by reference to Exhibit 10.24 to Amendment 2 to the Stock Building Supply Holdings, Inc. Registration Statement on Form S-1, as amended,
filed with the Commission on July 29, 2013 in Commission File No. 333-189368)
filed with the Commission on July 29, 2013 in Commission File No. 333-189368)
Exhibit No.
Exhibit No.
Description
Description
Exhibit No.
Exhibit No.
Description
Description
Offer of Employment, dated as of October 16, 2015, by and between Thomas J. Barnes and Building Materials Holding Corporation
Offer of Employment, dated as of October 16, 2015, by and between Thomas J. Barnes and Building Materials Holding Corporation
10.25
10.25
(incorporated by reference to Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 1, 2017 in
(incorporated by reference to Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 1, 2017 in
Supplemental Retention Agreement, dated as of February 22, 2016, by and between Thomas J. Barnes and BMC Stock Holdings, Inc.
Supplemental Retention Agreement, dated as of February 22, 2016, by and between Thomas J. Barnes and BMC Stock Holdings, Inc.
(incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 1, 2017 in
(incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 1, 2017 in
10.26
10.26
Registration Rights Agreement, effective as of December 1, 2015, by and among Stock Building Supply Holdings, Inc. and certain
Registration Rights Agreement, effective as of December 1, 2015, by and among Stock Building Supply Holdings, Inc. and certain
stockholders affiliated with Davidson Kempner Capital Management LP, Robotti & Company Advisors, LLC and The Gores Group, LLC
stockholders affiliated with Davidson Kempner Capital Management LP, Robotti & Company Advisors, LLC and The Gores Group, LLC
(incorporated by reference to Annex G to the definitive Joint Proxy and Consent Solicitation Statement/Prospectus filed with the SEC on
(incorporated by reference to Annex G to the definitive Joint Proxy and Consent Solicitation Statement/Prospectus filed with the SEC on
November 2, 2015 in Commission File No. 333-206421)
November 2, 2015 in Commission File No. 333-206421)
First Supplement to the Registration Rights Agreement, dated as of May 18, 2016, by and among the Registrant and certain stockholders
First Supplement to the Registration Rights Agreement, dated as of May 18, 2016, by and among the Registrant and certain stockholders
affiliated with Davidson Kempner Capital Management LP, Robotti & Company Advisors, LLC and The Gores Group, LLC (incorporated by
affiliated with Davidson Kempner Capital Management LP, Robotti & Company Advisors, LLC and The Gores Group, LLC (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on May 24, 2016 in Commission File No.
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on May 24, 2016 in Commission File No.
001-36050).
001-36050).
21.1
21.1
23.1
23.1
24.1
24.1
31.1
31.1
31.2
31.2
32.1
32.1
32.2
32.2
List of subsidiaries of BMC Stock Holdings, Inc.
List of subsidiaries of BMC Stock Holdings, Inc.
Consent of PricewaterhouseCoopers LLP
Consent of PricewaterhouseCoopers LLP
Powers of Attorney (included on the signature page)
Powers of Attorney (included on the signature page)
Certification by David L. Keltner, Interim President and Chief Executive Officer, pursuant to Exchange Act Rule 13a-14/15d-14(a), as adopted
Certification by David L. Keltner, Interim President and Chief Executive Officer, pursuant to Exchange Act Rule 13a-14/15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by James F. Major, Jr., Executive Vice President, Chief Financial Officer and Treasurer, pursuant to Exchange Act Rule 13a-
Certification by James F. Major, Jr., Executive Vice President, Chief Financial Officer and Treasurer, pursuant to Exchange Act Rule 13a-
14/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
14/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*
101.INS*
XBRL Instance Document
XBRL Instance Document
101.SCH*
101.SCH*
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Schema Document
Building Supply Holdings, Inc. Registration Statement on Form S-1, as amended, filed with the Commission on June 14, 2013 in Commission
Building Supply Holdings, Inc. Registration Statement on Form S-1, as amended, filed with the Commission on June 14, 2013 in Commission
101.CAL*
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
101.PRE*
_________________
_________________
XBRL Taxonomy Extension Presentation Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
# Denotes management compensatory plan or arrangement.
# Denotes management compensatory plan or arrangement.
+ Certain schedules to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedules will be furnished supplementally to the SEC
+ Certain schedules to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedules will be furnished supplementally to the SEC
upon request.
upon request.
* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities
* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities
Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
Form of Restricted Stock Unit Agreement Pursuant to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan
Form of Restricted Stock Unit Agreement Pursuant to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan
(incorporated by reference to Exhibit 10.25 to Amendment 2 to the Stock Building Supply Holdings, Inc. Registration Statement on Form S-1,
(incorporated by reference to Exhibit 10.25 to Amendment 2 to the Stock Building Supply Holdings, Inc. Registration Statement on Form S-1,
Item 16. Form 10-K Summary
Item 16. Form 10-K Summary
as amended, filed with the Commission on July 29, 2013 in Commission File No. 333-189368)
as amended, filed with the Commission on July 29, 2013 in Commission File No. 333-189368)
10.22
10.22
Second Amended and Restated Senior Secured Credit Agreement, dated as of December 1, 2015, by and among Building Materials Holding
Second Amended and Restated Senior Secured Credit Agreement, dated as of December 1, 2015, by and among Building Materials Holding
Corporation, Stock Building Supply Holdings, Inc., certain subsidiaries of Building Materials Holding Corporation and Stock Building Supply
Corporation, Stock Building Supply Holdings, Inc., certain subsidiaries of Building Materials Holding Corporation and Stock Building Supply
Holdings, Inc. parties thereto, Wells Fargo Capital Finance, LLC as agent for the lenders, joint lead arranger, and joint book runner, Goldman
Holdings, Inc. parties thereto, Wells Fargo Capital Finance, LLC as agent for the lenders, joint lead arranger, and joint book runner, Goldman
Sachs Bank USA, as joint lead arranger and joint book runner, and the lenders parties thereto (incorporated by reference to Exhibit 4.3 to the
Sachs Bank USA, as joint lead arranger and joint book runner, and the lenders parties thereto (incorporated by reference to Exhibit 4.3 to the
Registrant’s Current Report on Form 8-K filed with the Commission on December 7, 2015 in Commission File No. 001-36050)
Registrant’s Current Report on Form 8-K filed with the Commission on December 7, 2015 in Commission File No. 001-36050)
10.23
10.23
Amendment Number One to Second Amended and Restated Senior Secured Credit Agreement and Consent, dated as of January 28, 2016, by
Amendment Number One to Second Amended and Restated Senior Secured Credit Agreement and Consent, dated as of January 28, 2016, by
and among BMC Stock Holdings, Inc., as parent, the subsidiaries of parent party thereto, as borrowers, the lenders party thereto, and Wells
and among BMC Stock Holdings, Inc., as parent, the subsidiaries of parent party thereto, as borrowers, the lenders party thereto, and Wells
Fargo Capital Finance, LLC, as agent for the lenders (incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on Form
Fargo Capital Finance, LLC, as agent for the lenders (incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report on Form
10-K filed with the Commission on March 15, 2016 in Commission File No. 001-36050)
10-K filed with the Commission on March 15, 2016 in Commission File No. 001-36050)
10.24
10.24
Amendment Number Two to Second Amended and Restated Senior Secured Credit Agreement and Amendment Number One to Second
Amendment Number Two to Second Amended and Restated Senior Secured Credit Agreement and Amendment Number One to Second
Amended and Restated Security Agreement, dated as of September 15, 2016, by and among BMC Stock Holdings, Inc., the subsidiaries party
Amended and Restated Security Agreement, dated as of September 15, 2016, by and among BMC Stock Holdings, Inc., the subsidiaries party
thereto, the lenders identified on the signature page thereto and Wells Fargo Capital Finance, LLC, as agent for the lenders (incorporated by
thereto, the lenders identified on the signature page thereto and Wells Fargo Capital Finance, LLC, as agent for the lenders (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on September 16, 2016 in Commission
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on September 16, 2016 in Commission
File No. 001-36050)
File No. 001-36050)
None.
None.
86
86
87
87
SIGNATURES
SIGNATURES
Signature
Signature
Title
Title
Date
Date
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
the undersigned, thereunto duly authorized.
Date:
Date:
March 1, 2018
March 1, 2018
BMC STOCK HOLDINGS, INC.
BMC STOCK HOLDINGS, INC.
By:
By:
/s/ James F. Major, Jr.
/s/ James F. Major, Jr.
Executive Vice President, Chief Financial Officer and Treasurer
Executive Vice President, Chief Financial Officer and Treasurer
(Principal financial and accounting officer and duly authorized officer)
(Principal financial and accounting officer and duly authorized officer)
POWER OF ATTORNEY
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Lanesha Minnix, his true and lawful attorney-in-fact and agent, with full power of substitution
Each person whose signature appears below constitutes and appoints Lanesha Minnix, his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to
and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to
file the same, with all exhibits thereto and all other documents in connection therewith, with the SEC, granting unto each said attorney-in-fact and agents full
file the same, with all exhibits thereto and all other documents in connection therewith, with the SEC, granting unto each said attorney-in-fact and agents full
power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or
power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or
their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
of the registrant and in the capacities and on the dates indicated.
88
88
/s/ David L. Keltner
/s/ David L. Keltner
David L. Keltner
David L. Keltner
/s/ James F. Major, Jr.
/s/ James F. Major, Jr.
James F. Major, Jr.
James F. Major, Jr.
/s/ David Bullock
/s/ David Bullock
David Bullock
David Bullock
/s/ Mark Alexander
/s/ Mark Alexander
Mark Alexander
Mark Alexander
/s/ Henry Buckley
/s/ Henry Buckley
Henry Buckley
Henry Buckley
/s/ Barry J. Goldstein
/s/ Barry J. Goldstein
Barry J. Goldstein
Barry J. Goldstein
/s/ Michael Miller
/s/ Michael Miller
Michael Miller
Michael Miller
/s/ James O'Leary
/s/ James O'Leary
James O'Leary
James O'Leary
/s/ Jeffrey G. Rea
/s/ Jeffrey G. Rea
Jeffrey G. Rea
Jeffrey G. Rea
/s/ Carl R. Vertuca, Jr.
/s/ Carl R. Vertuca, Jr.
Carl R. Vertuca, Jr.
Carl R. Vertuca, Jr.
Interim President and Chief Executive Officer (principal
Interim President and Chief Executive Officer (principal
March 1, 2018
March 1, 2018
executive officer)
executive officer)
Executive Vice President, Chief Financial Officer and
Executive Vice President, Chief Financial Officer and
Treasurer (principal financial and accounting officer)
Treasurer (principal financial and accounting officer)
March 1, 2018
March 1, 2018
Director and Chairman of the Board
Director and Chairman of the Board
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
89
89
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by
SIGNATURES
SIGNATURES
Signature
Signature
Title
Title
the undersigned, thereunto duly authorized.
the undersigned, thereunto duly authorized.
Date:
Date:
March 1, 2018
March 1, 2018
BMC STOCK HOLDINGS, INC.
BMC STOCK HOLDINGS, INC.
By:
By:
/s/ James F. Major, Jr.
/s/ James F. Major, Jr.
Executive Vice President, Chief Financial Officer and Treasurer
Executive Vice President, Chief Financial Officer and Treasurer
(Principal financial and accounting officer and duly authorized officer)
(Principal financial and accounting officer and duly authorized officer)
POWER OF ATTORNEY
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Lanesha Minnix, his true and lawful attorney-in-fact and agent, with full power of substitution
Each person whose signature appears below constitutes and appoints Lanesha Minnix, his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to
and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to
file the same, with all exhibits thereto and all other documents in connection therewith, with the SEC, granting unto each said attorney-in-fact and agents full
file the same, with all exhibits thereto and all other documents in connection therewith, with the SEC, granting unto each said attorney-in-fact and agents full
power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or
power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or
their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
of the registrant and in the capacities and on the dates indicated.
88
88
/s/ David L. Keltner
/s/ David L. Keltner
David L. Keltner
David L. Keltner
/s/ James F. Major, Jr.
/s/ James F. Major, Jr.
James F. Major, Jr.
James F. Major, Jr.
/s/ David Bullock
/s/ David Bullock
David Bullock
David Bullock
/s/ Mark Alexander
/s/ Mark Alexander
Mark Alexander
Mark Alexander
/s/ Henry Buckley
/s/ Henry Buckley
Henry Buckley
Henry Buckley
/s/ Barry J. Goldstein
/s/ Barry J. Goldstein
Barry J. Goldstein
Barry J. Goldstein
/s/ Michael Miller
/s/ Michael Miller
Michael Miller
Michael Miller
/s/ James O'Leary
/s/ James O'Leary
James O'Leary
James O'Leary
/s/ Jeffrey G. Rea
/s/ Jeffrey G. Rea
Jeffrey G. Rea
Jeffrey G. Rea
/s/ Carl R. Vertuca, Jr.
/s/ Carl R. Vertuca, Jr.
Carl R. Vertuca, Jr.
Carl R. Vertuca, Jr.
Interim President and Chief Executive Officer (principal
Interim President and Chief Executive Officer (principal
executive officer)
executive officer)
Date
Date
March 1, 2018
March 1, 2018
Executive Vice President, Chief Financial Officer and
Executive Vice President, Chief Financial Officer and
Treasurer (principal financial and accounting officer)
Treasurer (principal financial and accounting officer)
March 1, 2018
March 1, 2018
Director and Chairman of the Board
Director and Chairman of the Board
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
89
89
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
March 1, 2018
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SHAREHOLDER AND CORPORATE INFORMATION
SHAREHOLDER AND CORPORATE INFORMATION
MANAGEMENT
MANAGEMENT
DAVID L. KELTNER
DAVID L. KELTNER
Director
Director
JIM MAJOR
JIM MAJOR
Treasurer
Treasurer
MIKE FARMER
MIKE FARMER
LISA M. HAMBLET
LISA M. HAMBLET
Remodeler Segment
Remodeler Segment
MIKE McGAUGH
MIKE McGAUGH
Interim President and Chief Executive Officer and
Interim President and Chief Executive Officer and
Executive Vice President, Chief Financial Officer and
Executive Vice President, Chief Financial Officer and
Senior Vice President, Human Resources
Senior Vice President, Human Resources
Executive Vice President, eBusiness and Pro
Executive Vice President, eBusiness and Pro
Executive Vice President and Chief Operating Officer
Executive Vice President and Chief Operating Officer
LANESHA MINNIX
LANESHA MINNIX
Corporate Secretary
Corporate Secretary
Senior Vice President, General Counsel and
Senior Vice President, General Counsel and
CORPORATE HEADQUARTERS
CORPORATE HEADQUARTERS
Two Lakeside Commons
Two Lakeside Commons
980 Hammond Drive NE, Suite 500
980 Hammond Drive NE, Suite 500
Atlanta, GA 30328
Atlanta, GA 30328
678.222.1219
678.222.1219
CORPORATE WEBSITE
CORPORATE WEBSITE
www.BuildWithBMC.com
www.BuildWithBMC.com
STOCK EXCHANGE LISTING
STOCK EXCHANGE LISTING
The Company’s common stock is listed on
The Company’s common stock is listed on
the Nasdaq Stock Exchange.
the Nasdaq Stock Exchange.
Ticker symbol: BMCH
Ticker symbol: BMCH
TRANSFER AGENT AND REGISTRAR
TRANSFER AGENT AND REGISTRAR
Computershare
Computershare
P.O. Box 30170
P.O. Box 30170
877.373.6374
877.373.6374
College Station, TX 77842-3170
College Station, TX 77842-3170
www.computershare.com/investor
www.computershare.com/investor
INDEPENDENT AUDITORS
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
INVESTOR RELATIONS
INVESTOR RELATIONS
Shareholders, Investors and Security Analysts are
Shareholders, Investors and Security Analysts are
invited to contact:
invited to contact:
Carey Phelps, Director, Investor Relations
Carey Phelps, Director, Investor Relations
678.222.1228
678.222.1228
Carey.Phelps@BuildWithBMC.com
Carey.Phelps@BuildWithBMC.com
FINANCIAL INFORMATION
FINANCIAL INFORMATION
For financial reports, filings with the Securities
For financial reports, filings with the Securities
and Exchange Commission (including Form 10-K),
and Exchange Commission (including Form 10-K),
news releases and other investor information,
news releases and other investor information,
please visit our investor website at:
please visit our investor website at:
ir.buildwithbmc.com
ir.buildwithbmc.com
BOARD OF DIRECTORS
BOARD OF DIRECTORS
DAVID W. BULLOCK
DAVID W. BULLOCK
(Chairman of Board)
(Chairman of Board)
MARK ALEXANDER
MARK ALEXANDER
CORY J. BOYDSTON
CORY J. BOYDSTON
HENRY BUCKLEY
HENRY BUCKLEY
BARRY J. GOLDSTEIN*
BARRY J. GOLDSTEIN*
DAVID L. KELTNER
DAVID L. KELTNER
(Interim President and CEO)
(Interim President and CEO)
MICHAEL T. MILLER
MICHAEL T. MILLER
JAMES O’LEARY
JAMES O’LEARY
JEFFREY G. REA
JEFFREY G. REA
CARL R. VERTUCA, JR.
CARL R. VERTUCA, JR.
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
N
Y
Y
Y
Y
N
N
Y
Y
*Mr. Goldstein is retiring from the Board as of the 2018 Annual Meeting of Stockholders
*Mr. Goldstein is retiring from the Board as of the 2018 Annual Meeting of Stockholders
DIRECTOR
DIRECTOR
INDEPENDENT (Y/N)
INDEPENDENT (Y/N)
AUDIT COMMITTEE
AUDIT COMMITTEE
COMPENSATION COMMITTEE
COMPENSATION COMMITTEE
AND NOMINATING COMMITTEE
AND NOMINATING COMMITTEE
ORGANIZATION AND
ORGANIZATION AND
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
X
X
X
X
X (Chair)
X (Chair)
X (Chair)
X (Chair)
X
X
X
X
X
X
X
X
X
X
X
X
X (Chair)
X (Chair)
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SHAREHOLDER AND CORPORATE INFORMATION
SHAREHOLDER AND CORPORATE INFORMATION
CORPORATE HEADQUARTERS
CORPORATE HEADQUARTERS
Two Lakeside Commons
Two Lakeside Commons
980 Hammond Drive NE, Suite 500
980 Hammond Drive NE, Suite 500
Atlanta, GA 30328
Atlanta, GA 30328
678.222.1219
678.222.1219
CORPORATE WEBSITE
CORPORATE WEBSITE
www.BuildWithBMC.com
www.BuildWithBMC.com
STOCK EXCHANGE LISTING
STOCK EXCHANGE LISTING
The Company’s common stock is listed on
The Company’s common stock is listed on
the Nasdaq Stock Exchange.
the Nasdaq Stock Exchange.
Ticker symbol: BMCH
Ticker symbol: BMCH
TRANSFER AGENT AND REGISTRAR
TRANSFER AGENT AND REGISTRAR
Computershare
Computershare
P.O. Box 30170
P.O. Box 30170
College Station, TX 77842-3170
College Station, TX 77842-3170
877.373.6374
877.373.6374
www.computershare.com/investor
www.computershare.com/investor
INDEPENDENT AUDITORS
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
INVESTOR RELATIONS
INVESTOR RELATIONS
Shareholders, Investors and Security Analysts are
Shareholders, Investors and Security Analysts are
invited to contact:
invited to contact:
Carey Phelps, Director, Investor Relations
Carey Phelps, Director, Investor Relations
678.222.1228
678.222.1228
Carey.Phelps@BuildWithBMC.com
Carey.Phelps@BuildWithBMC.com
FINANCIAL INFORMATION
FINANCIAL INFORMATION
For financial reports, filings with the Securities
For financial reports, filings with the Securities
and Exchange Commission (including Form 10-K),
and Exchange Commission (including Form 10-K),
news releases and other investor information,
news releases and other investor information,
please visit our investor website at:
please visit our investor website at:
ir.buildwithbmc.com
ir.buildwithbmc.com
BOARD OF DIRECTORS
BOARD OF DIRECTORS
DIRECTOR
DIRECTOR
INDEPENDENT (Y/N)
INDEPENDENT (Y/N)
AUDIT COMMITTEE
AUDIT COMMITTEE
DAVID W. BULLOCK
DAVID W. BULLOCK
(Chairman of Board)
(Chairman of Board)
MARK ALEXANDER
MARK ALEXANDER
CORY J. BOYDSTON
CORY J. BOYDSTON
HENRY BUCKLEY
HENRY BUCKLEY
BARRY J. GOLDSTEIN*
BARRY J. GOLDSTEIN*
DAVID L. KELTNER
DAVID L. KELTNER
(Interim President and CEO)
(Interim President and CEO)
MICHAEL T. MILLER
MICHAEL T. MILLER
JAMES O’LEARY
JAMES O’LEARY
JEFFREY G. REA
JEFFREY G. REA
CARL R. VERTUCA, JR.
CARL R. VERTUCA, JR.
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
N
Y
Y
Y
Y
N
N
Y
Y
X
X
X
X
X (Chair)
X (Chair)
X
X
X
X
*Mr. Goldstein is retiring from the Board as of the 2018 Annual Meeting of Stockholders
*Mr. Goldstein is retiring from the Board as of the 2018 Annual Meeting of Stockholders
MANAGEMENT
MANAGEMENT
DAVID L. KELTNER
DAVID L. KELTNER
Interim President and Chief Executive Officer and
Interim President and Chief Executive Officer and
Director
Director
JIM MAJOR
JIM MAJOR
Executive Vice President, Chief Financial Officer and
Executive Vice President, Chief Financial Officer and
Treasurer
Treasurer
MIKE FARMER
MIKE FARMER
Senior Vice President, Human Resources
Senior Vice President, Human Resources
LISA M. HAMBLET
LISA M. HAMBLET
Executive Vice President, eBusiness and Pro
Executive Vice President, eBusiness and Pro
Remodeler Segment
Remodeler Segment
MIKE McGAUGH
MIKE McGAUGH
Executive Vice President and Chief Operating Officer
Executive Vice President and Chief Operating Officer
LANESHA MINNIX
LANESHA MINNIX
Senior Vice President, General Counsel and
Senior Vice President, General Counsel and
Corporate Secretary
Corporate Secretary
ORGANIZATION AND
ORGANIZATION AND
COMPENSATION COMMITTEE
COMPENSATION COMMITTEE
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
AND NOMINATING COMMITTEE
AND NOMINATING COMMITTEE
X
X
X
X
X (Chair)
X (Chair)
X
X
X
X
X (Chair)
X (Chair)
Two Lakeside Commons
980 Hammond Drive NE, Suite 500 • Atlanta, GA 30328
678.222.1219 • BuildWithBMC.com