Stock Building Supply Announces 2014 Second Quarter Results

RALEIGH, N.C., July 29, 2014 (GLOBE NEWSWIRE) -- Stock Building Supply Holdings, Inc. (Nasdaq:STCK), a large, diversified lumber and building materials distributor and solutions provider that sells primarily to new construction and remodeling contractors, today reported its financial results for the second quarter ended June 30, 2014.

Second Quarter 2014 Financial Highlights

• Net sales of $344.6 million, up 9.5%, compared to $314.7 million in the prior year period
• Operating income of $8.9 million, up 130.1%, compared to $3.9 million in the prior year period
• Net income of $5.6 million, compared to $2.0 million in the prior year period
• Adjusted income from continuing operations of $5.8 million, compared to $3.2 million in the prior year period
• Adjusted EBITDA of $12.9 million, compared to $9.0 million in the prior year period

Commenting on the Company's results, Jeff Rea, President and Chief Executive Officer of Stock Building Supply, stated, "During the second quarter, we continued to grow at above-market rates with overall sales volume increasing approximately 13% and gross profit dollars increasing 15%. While U.S. single-family housing starts increased only 1.2% in the first half of 2014 compared to the prior year period, our sales and service professionals delivered double-digit growth during this time period in key product categories such as structural components, millwork and interior products and windows and exterior products. Furthermore, our sales to remodeling contractors increased nearly 13% in the second quarter as compared to the prior year, and we continued to invest in strategic growth initiatives aimed at improving our service capabilities for this customer segment. Additionally, in the second quarter we expanded our structural component capacity in North Carolina and Utah and opened a new distribution and customer support facility in north Charlotte."

Jim Major, Executive Vice President and Chief Financial Officer, stated, "Our focused sales and productivity initiatives continue to drive gross margin improvements and increases in adjusted EBITDA. Second quarter gross margin improved approximately 120 basis points to 23.9% as compared to the prior year period, reflecting the benefits of our growth with key customer groups and value-added product categories. Adjusted EBITDA increased $3.9 million, which represented a pull-through of 13.1% of incremental net sales. We continue to maintain a balanced approach to funding growth investments to bolster our market position while driving improvements in our operating margins."

Second Quarter 2014 Financial Results Compared to Prior Year Period

Net sales for the second quarter of 2014 totaled $344.6 million, up $29.9 million, or 9.5%, compared to $314.7 million in the second quarter of 2013. The Company estimates net sales increased approximately 13.3% related to sales volume, which was partially offset by reduced selling prices on commodity products.

Gross profit in the second quarter of 2014 was $82.2 million, up $10.7 million, or 15.0%, compared to $71.5 million in the second quarter of 2013, primarily as a result of increased sales volume. The gross margin percentage for the second quarter of 2014 increased approximately 120 basis points to 23.9% from 22.7% in the second quarter of 2013, primarily as a result of improved gross margins on sales of structural components and lumber and lumber sheet goods, as well as a higher percentage of total net sales being derived from non-commodity product offerings.

Selling, general and administrative expenses during the second quarter of 2014 were $71.1 million, up $6.4 million, or 9.8%, from $64.7 million in the second quarter of 2013. Variable costs associated with higher sales volume, such as sales commissions, shipping and handling costs and other variable compensation, increased by $3.3 million. Other salary, wage, benefit and taxation costs increased $2.8 million, primarily as a result of headcount additions to serve higher sales volume and generate future growth opportunities.

Operating income in the second quarter of 2014 was $8.9 million, compared to operating income of $3.9 million in the second quarter of 2013. Net income during the quarter totaled $5.6 million, or $0.21 per diluted share, compared to net income of $2.0 million, or $0.07 per diluted share, in the second quarter of 2013.

Adjusted EBITDA in the second quarter of 2014 totaled $12.9 million, up $3.9 million, compared to Adjusted EBITDA of $9.0 million in the second quarter of 2013. Adjusted income from continuing operations for the second quarter of 2014 increased $2.6 million to $5.8 million, compared to adjusted income from continuing operations of $3.2 million in the second quarter of 2013. A reconciliation of non-GAAP (adjusted) financial measures to comparable GAAP financial measures is provided as an appendix to this release.

Liquidity and Capital Resources

Total liquidity as of June 30, 2014 was approximately $99.3 million, which includes cash and cash equivalents of $9.1 million and $90.2 million of borrowing availability under our revolving line of credit.

Cash used in operating activities in the second quarter was $20.2 million, as compared to cash used in operating activities of $21.0 million in the prior year period, primarily as a result of seasonal increases in working capital. Capital expenditures during the second quarter of 2014 totaled $4.4 million, primarily to fund purchases of vehicles and equipment.

Outlook

"While the pace of recovery in U.S. single-family housing starts has been slower than expected, we remain confident that the recovery in the residential construction market is progressing, and anticipate continued growth in our core business segments in the second half of 2014," stated Mr. Rea. "As demonstrated in the first half of the year, we are realizing benefits from our local and company-wide operating initiatives and remain focused on executing our strategy to further improve our customer service, growth capabilities and operating results."

Conference Call

Stock Building Supply will host a conference call on Tuesday, July 29, 2014 at 8:30 a.m. (Eastern Time) and will simultaneously broadcast it live over the Internet. The conference call can be accessed by dialing 877-407-0784 (domestic) or 201-689-8560 (international). A telephonic replay will be available approximately three hours after the call and can be accessed by dialing 877-870-5176, or for international callers, 1-858-384-5517. The participant passcode for the live call and the replay is 13586411. The telephonic replay will be available until 11:59 pm (Eastern Time) on August 5, 2014. The live webcast and archived replay can also be accessed on the Company's investor relations website at ir.stocksupply.com. The online archive of the webcast will be available for approximately 90 days.

About Stock Building Supply

Stock Building Supply operates in 21 metropolitan areas in 14 states primarily in the South and West regions of the United States (as defined by the U.S. Census Bureau). Today, we serve our customers from 69 strategically located facilities. We offer a broad range of products, including lumber and lumber sheet goods, millwork, doors, flooring, windows, structural components, engineered wood products, trusses, wall panels and other exterior products. Our customer base includes production homebuilders, custom homebuilders and remodeling contractors.

Non-GAAP Financial Measures

This press release presents Adjusted EBITDA and Adjusted income (loss) from continuing operations, which are non-GAAP financial measures within the meaning of applicable Securities and Exchange Commission ("SEC") rules and regulations. For a reconciliation of Adjusted EBITDA and Adjusted income (loss) from continuing operations to the most comparable GAAP measure and a discussion of the reasons why the Company believes that these non-GAAP financial measures provide information that is useful to investors, see the tables below under "Reconciliation of GAAP to Non-GAAP Measures."

Forward-Looking Statements

This press release contains forward-looking statements, which are subject to substantial risks, uncertainties and assumptions. You should not place reliance on these statements. These statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "seek," "will," "may" or similar expressions. These risks include, but are not limited to, the following: (i) the state of the homebuilding industry and repair and remodeling activity; (ii) seasonality and cyclicality of the building products supply and services industry; (iii) competitive industry pressures and competitive pricing pressure from our customers; (iv) inflation or deflation of commodity prices; (v) litigation or claims relating to our products and services; (vi) our ability to maintain profitability; (vii) our ability to attract and retain key employees and (viii) product shortages and relationships with key suppliers. Further information regarding factors that could impact our financial and other results can be found in the Risk Factors section of our Annual Report on Form 10-K, filed with the SEC on March 4, 2014, and subsequent filings with the SEC. These statements are based on certain assumptions that we have made in light of our experience in the industry as well as our perceptions of expected future developments and other factors we believe are appropriate in these circumstances. As you read and consider this press release, you should understand that these statements are not guarantees of performance or results. Many factors could affect our actual performance and results and could cause actual results to differ materially from those expressed in the forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

STOCK BUILDING SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Measures
(unaudited)

EBITDA is defined as net income (loss) before interest expense, income tax expense (benefit) and depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus impairment of assets held for sale, public offering transaction-related costs, restructuring expense, discontinued operations, net of taxes, management fees, non-cash compensation expense, acquisition costs, and severance and other items related to store closures. Adjusted income (loss) from continuing operations is defined as net income as adjusted for the same items deducted from EBITDA in calculating Adjusted EBITDA, and after tax effecting those items. EBITDA, Adjusted EBITDA and Adjusted income (loss) from continuing operations are intended as supplemental measures of our performance that are not required by, or presented in accordance with, generally accepted accounting principles in the United States ("GAAP"). We believe that EBITDA, Adjusted EBITDA and Adjusted income (loss) from continuing operations provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results. Our management uses EBITDA and Adjusted EBITDA to compare our performance to that of prior periods for trend analyses, for purposes of determining management incentive compensation and for budgeting and planning purposes. EBITDA and Adjusted EBITDA are used in monthly financial reports prepared for management and our board of directors. We believe that the use of EBITDA, Adjusted EBITDA and Adjusted income (loss) from continuing operations provide additional tools for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with other distribution and retail companies, which may present similar non-GAAP financial measures to investors. However, our calculation of EBITDA, Adjusted EBITDA and Adjusted income (loss) from continuing operations are not necessarily comparable to similarly titled measures reported by other companies. Our management does not consider EBITDA, Adjusted EBITDA or Adjusted income (loss) from continuing operations in isolation or as alternatives to financial measures determined in accordance with GAAP. The principal limitation of EBITDA, Adjusted EBITDA and Adjusted income (loss) from operations is that they exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements. Some of these limitations are: (i) EBITDA, Adjusted EBITDA and Adjusted income (loss) from continuing operations do not reflect changes in, or cash requirements for, our working capital needs; (ii) EBITDA and Adjusted EBITDA do not reflect our interest expense, or the requirements necessary to service interest or principal payments on our debt; (iii) EBITDA and Adjusted EBITDA do not reflect our income tax expenses or the cash requirements to pay our taxes; (iv) EBITDA, Adjusted EBITDA and Adjusted income (loss) from continuing operations do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments and (v) although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and EBITDA, Adjusted EBITDA and Adjusted income (loss) from continuing operations do not reflect any cash requirements for such replacements. In order to compensate for these limitations, management presents EBITDA, Adjusted EBITDA and Adjusted income (loss) from continuing operations in conjunction with GAAP results. You should review the reconciliations of net income (loss) to EBITDA, Adjusted EBITDA and Adjusted income (loss) from continuing operations below, and should not rely on any single financial measure to evaluate our business.