Stock Building Supply Announces 2014Third Quarter Results

Net Income of $5.0 million; Adjusted EBITDA Increases 26.5% to $13.2 million

Raleigh, NC - October 28, 2014 - Stock Building Supply Holdings, Inc. (NASDAQ: STCK) (the “Company”), 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 third quarter ended September 30, 2014.

Third Quarter2014 Financial Highlights

• Net sales of $354.1 million, up7.8%, compared to $328.5 million in the prior year period

• Operating income of $8.4 million, compared to operating loss of $2.9 million in the prior year period

• Net income of $5.0 million, compared to net loss of $5.5 million in the prior year period

• Adjusted income from continuing operations of $5.8 million, up 36.4%, compared to $4.2 million in the prior year period

• Adjusted EBITDA of $13.2 million, up 26.5%, compared to $10.4 million in the prior year period

• Cash provided by operating activities of $16.7 million, up 302.0%, compared to $4.2 million in the prior year period

Commenting on the Company’s results, Jeff Rea, President and Chief Executive Officer, stated, “In the third quarter, we reported year-over-year financial improvement, reflecting the continued execution of our core strategies designed to grow our business profitably. Our year-over-year sales volume growth of approximately 8% and gross profit growth of 12% in the third quarter continue to compare favorably to U.S. single-family housing starts, which increased less than 4% for the nine months ended September 30, 2014. We remain committed to our growth strategies and believe we are well positioned to accelerate profitability as the housing market continues to move toward more historical levels of activity.”

Jim Major, Executive Vice President and Chief Financial Officer, stated, “Our local sales and service professionals continued to drive operational improvements leading to enhanced financial performance. Gross margins increased by approximately 90 basis points in the third quarter compared to the prior year period, marking six consecutive quarters of year-over-year improvement. Third quarter Adjusted EBITDA improved approximately 27%, compared to the prior year period, resulting in pull-through of incremental sales dollars of nearly 11%. Cash provided by operating activities increased $12.5 million in the third quarter and $39.3 million for the nine months ended September 30, 2014, compared to the prior year periods, allowing us to accelerate capital investment in our growth strategy. We remain intensely focused on operating margin expansion, while capitalizing on opportunities to profitably gain share in our construction end-markets.”

Third Quarter2014 Financial Results Compared to Prior Year Period

Net sales for the third quarter of 2014 totaled $354.1 million, up$25.6 million, or 7.8%, compared to $328.5 million in the third quarter of 2013. The Company estimates net sales increased approximately 8.0% related to sales volume, which was partially offset by reduced selling prices on commodity products.

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Gross profit in the third quarter of 2014 was $84.4 million, up$9.0 million, or 12.0%, compared to $75.4 million in the third quarter of 2013, primarily as a result of increased sales volume. The gross margin percentage for the third quarter of 2014 increased approximately 90 basis points to 23.8% from 22.9% in the third quarter of 2013, primarily as a result of improved gross margins on sales of structural components and lumber and lumber sheet goods and increases in supplier consideration due to higher purchase volumes.

Selling, general and administrative expenses during the third quarter of 2014 were $73.7 million, up$6.8 million, or 10.1%, from $66.9 million in the third quarter of 2013. Variable costs associated with higher sales volume, such as sales commissions, shipping and handling costs and other variable compensation, increased by $1.7 million. Other salary, wage, benefit and taxation costs increased $4.2 million, primarily as a result of increases in self-insured health costs, stock compensation expense and selected headcount additions to serve higher sales volume and generate future growth opportunities.

Operating income in the third quarter of 2014 was $8.4 million, compared to operating loss of $2.9 million in the third quarter of 2013. Net income during the quarter totaled $5.0 million, or $0.19 per diluted share, compared to net loss of $5.5 million, or $(0.30) per diluted share, in the third quarter of 2013.

Adjusted EBITDA in the third quarter of 2014 totaled $13.2 million, up$2.8 million, compared to $10.4 million in the third quarter of 2013. Adjusted income from continuing operations for the third quarter of 2014increased $1.6 million to $5.8 million, compared to adjusted income from continuing operations of $4.2 million in the third quarter of 2013. A reconciliation of non-GAAP financial measures to comparable GAAP financial measures is provided as an appendix to this release.

Liquidity and Capital Resources

Total liquidity as of September 30, 2014 was approximately $108.6 million, which includes cash and cash equivalents of $8.2 million and $100.4 million of borrowing availability under our revolving line of credit.

Capital expenditures during the third quarter of 2014 totaled approximately $8.0 million, primarily to fund purchases of delivery fleet, material handling equipment and technology investments.

Outlook

“While the U.S. housing market has been slower than anticipated so far in 2014, our service professionals have once again delivered solid operating result improvements,” stated Mr. Rea. “We anticipate a continued, gradual recovery in the housing market from today’s levels and remain focused on both near-term and longer-term value creation activities. Additionally, we are maintaining the pace of investment in our strategic service and growth initiatives which we expect will enhance the strength of our business moving forward.”

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Conference Call

The Company will host a conference call on Tuesday, October 28, 2014 at 10:00 a.m. (Eastern Time) and will simultaneously broadcast it live over the Internet. The conference call can be accessed by dialing 877-407-0784 (domestic) or 201-689-8560 (international). A telephonic replay will be available approximately three hours after the call and can be accessed by dialing 877-870-5176, or for international callers, 1-858-384-5517. The participant passcode for the live call and the replay is 13593043. The telephonic replay will be available until 11:59 pm (Eastern Time) on November 4, 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.

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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 68 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 EBITDA, Adjusted EBITDA and Adjusted income 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 EBITDA, Adjusted EBITDA and Adjusted income 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.

Investor Relations Contact

Stock Building Supply Holdings, Inc.

Mark Necaise

(919) 431-1021

or

Solebury Communications Group LLC

Richard Zubek

(919) 431-1133

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STOCK BUILDING SUPPLY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except share and per share amounts)	2014			2013			2014			2013
Net sales	$	354,060		$	328,468		$	978,629		$	891,847
Cost of goods sold	269,668			253,087			746,781			691,166
Gross profit	84,392			75,381			231,848			200,681
Selling, general and administrative expenses	73,665			66,931			211,878			188,458
Depreciation expense	1,681			1,456			4,790			4,716
Amortization expense	563			563			1,690			1,672
Impairment of assets held for sale	—			—			48			—
Public offering transaction-related costs	60			9,322			508			10,008
Restructuring expense	2			31			11			130
	75,971			78,303			218,925			204,984
Income (loss) from operations	8,421			(2,922		)	12,923			(4,303		)
Other income (expense)
Interest expense	(712		)	(892		)	(2,011		)	(3,150		)
Other income, net	197			200			610			596
Income (loss) from continuing operations before income taxes	7,906			(3,614		)	11,522			(6,857		)
Income tax expense	(2,972		)	(1,989		)	(4,417		)	(1,076		)
Income (loss) from continuing operations	4,934			(5,603		)	7,105			(7,933		)
Income from discontinued operations, net of income tax expense of $25, $54, $133 and $237, respectively	40			90			208			341
Net income (loss)	4,974			(5,513		)	7,313			(7,592		)
Redeemable Class B Senior Preferred stock deemed dividend	—			(363		)	—			(1,836		)
Income (loss) attributable to common stockholders	$	4,974		$	(5,876	)	$	7,313		$	(9,428	)
Weighted average common shares outstanding
Basic	25,733,833			19,813,209			25,713,688			15,718,667
Diluted	26,229,323			19,813,209			26,218,405			15,718,667
Basic income (loss) per share
Income (loss) from continuing operations	$	0.19		$	(0.30	)	$	0.27		$	(0.62	)
Income from discontinued operations	—			—			0.01			0.02
Net income (loss) per share	$	0.19		$	(0.30	)	$	0.28		$	(0.60	)
Diluted income (loss) per share
Income (loss) from continuing operations	$	0.19		$	(0.30	)	$	0.27		$	(0.62	)
Income from discontinued operations	—			—			0.01			0.02
Net income (loss) per share	$	0.19		$	(0.30	)	$	0.28		$	(0.60	)

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STOCK BUILDING SUPPLY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share amounts)	September 30,   2014			December 31,   2013
Assets
Current assets
Cash and cash equivalents	$	8,244		$	1,138
Restricted assets	956			460
Accounts receivable, net	130,624			111,285
Inventories, net	114,748			91,303
Costs in excess of billings on uncompleted contracts	10,163			7,921
Assets held for sale	—			2,363
Prepaid expenses and other current assets	11,818			9,332
Deferred income taxes	5,561			3,332
Total current assets	282,114			227,134
Property and equipment, net of accumulated depreciation	71,085			56,039
Intangible assets, net of accumulated amortization	23,099			24,789
Goodwill	7,186			7,186
Restricted assets	861			1,359
Other assets	1,878			2,033
Total assets	$	386,223		$	318,540
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	89,167		$	64,984
Accrued expenses and other liabilities	40,693			30,528
Income taxes payable	5,704			2,989
Current portion of restructuring reserve	998			1,594
Current portion of capital lease obligation	1,676			1,240
Billings in excess of costs on uncompleted contracts	1,798			1,599
Total current liabilities	140,036			102,934
Revolving line of credit	81,816			59,072
Long-term portion of capital lease obligation	6,176			6,011
Deferred income taxes	13,695			15,496
Other long-term liabilities	7,548			7,346
Total liabilities	249,271			190,859
Commitments and contingencies
Stockholders' equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding at September 30, 2014 and December 31, 2013	—			—
Common stock, $0.01 par value, 300,000,000 shares authorized, 26,176,056 and 26,112,007 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively	262			261
Additional paid-in capital	146,527			144,570
Retained deficit	(9,837		)	(17,150		)
Total stockholders' equity	136,952			127,681
Total liabilities and stockholders' equity	$	386,223		$	318,540

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STOCK BUILDING SUPPLY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Nine Months Ended September 30,
(in thousands)	2014			2013
Cash flows from operating activities
Net income (loss)	$	7,313		$	(7,592	)
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation expense	8,054			7,389
Amortization of intangible assets	1,690			1,672
Amortization of debt issuance costs	353			465
Deferred income taxes	(4,030		)	(3,723		)
Non-cash stock compensation expense	1,848			573
Impairment of assets held for sale	96			—
Gain on sale of property, equipment and real estate	(1,076		)	(270		)
Bad debt expense	417			1,316
Change in assets and liabilities
Accounts receivable	(19,756		)	(35,401		)
Inventories, net	(23,445		)	(20,598		)
Accounts payable	26,951			14,735
Other assets and liabilities	6,396			6,904
Net cash provided by (used in) operating activities	4,811			(34,530		)
Cash flows from investing activities
Purchases of property and equipment	(20,795		)	(2,574		)
Proceeds from sale of property, equipment and real estate	3,493			3,070
Change in restricted assets	2			3,223
Purchase of business	—			(2,373		)
Net cash (used in) provided by investing activities	(17,300		)	1,346
Cash flows from financing activities
Proceeds from revolving line of credit	1,046,220			961,160
Repayments of proceeds from revolving line of credit	(1,023,476		)	(973,305		)
Proceeds from issuance of common stock, net of offering costs	—			55,821
Other financing activities	(3,149		)	(2,657		)
Net cash provided by financing activities	19,595			41,019
Net increase in cash and cash equivalents	7,106			7,835
Cash and cash equivalents
Beginning of period	1,138			2,691
End of period	$	8,244		$	10,526

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STOCK BUILDING SUPPLY HOLDINGS, INC. AND SUBSIDIARIES

Sales by Product Category

(unaudited)

	Three Months Ended   September 30, 2014				Three Months Ended   September 30, 2013
(in thousands)	Net Sales		% of Sales		Net Sales		% of Sales		% Change
Structural components	$	49,163	13.9	%	$	46,335	14.1	%	6.1	%
Millwork & other interior products	64,821		18.3	%	58,215		17.7	%	11.3	%
Lumber & lumber sheet goods	123,116		34.8	%	114,147		34.8	%	7.9	%
Windows & other exterior products	73,626		20.8	%	71,463		21.8	%	3.0	%
Other building products & services	43,334		12.2	%	38,308		11.6	%	13.1	%
Total net sales	$	354,060	100.0	%	$	328,468	100.0	%	7.8	%

	Nine Months Ended   September 30, 2014				Nine Months Ended   September 30, 2013
(in thousands)	Net Sales		% of Sales		Net Sales		% of Sales		% Change
Structural components	$	132,846	13.6	%	$	117,367	13.2	%	13.2	%
Millwork & other interior products	178,528		18.2	%	161,213		18.1	%	10.7	%
Lumber & lumber sheet goods	343,279		35.1	%	329,744		37.0	%	4.1	%
Windows & other exterior products	201,921		20.6	%	182,062		20.4	%	10.9	%
Other building products & services	122,055		12.5	%	101,461		11.3	%	20.3	%
Total net sales	$	978,629	100.0	%	$	891,847	100.0	%	9.7	%

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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.

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STOCK BUILDING SUPPLY HOLDINGS, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Measures (continued)

(unaudited)

The following is a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA.

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2014			2013			2014			2013
Net income (loss)	$	4,974		$	(5,513	)	$	7,313		$	(7,592	)
Interest expense	712			892			2,011			3,150
Income tax expense (benefit)	2,972			1,989			4,417			1,076
Depreciation and amortization	3,298			3,032			9,744			9,058
EBITDA	$	11,956		$	400		$	23,485		$	5,692
Impairment of assets held for sale	—			—			48			—
Public offering transaction-related costs	60			9,322			508			10,008
Restructuring expense	2			31			11			130
Discontinued operations, net of taxes	(40		)	(90		)	(208		)	(341		)
Management fees (a)	37			239			126			1,205
Non-cash compensation expense	868			309			1,848			573
Acquisition costs (b)	—			—			—			257
Severance and other items related to store closures (c)	325			229			440			721
Adjusted EBITDA	$	13,208		$	10,440		$	26,258		$	18,245

The following is a reconciliation of net income (loss) to Adjusted income from continuing operations.

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2014			2013			2014			2013
Net income (loss)	$	4,974		$	(5,513	)	$	7,313		$	(7,592	)
Impairment of assets held for sale	—			—			48			—
Public offering transaction-related costs	60			9,322			508			10,008
Restructuring expense	2			31			11			130
Discontinued operations, net of taxes	(40		)	(90		)	(208		)	(341		)
Management fees (a)	37			239			126			1,205
Non-cash compensation expense	868			309			1,848			573
Acquisition costs (b)	—			—			—			257
Severance and other items related to store closures (c)	325			229			440			721
Tax effect of adjustments to continuing operations (d)	(457		)	(297		)	(895		)	(1,218		)
Adjusted income from continuing operations	$	5,769		$	4,230		$	9,191		$	3,743

(a)	Represents the expense for management services provided by The Gores Group, LLC (“Gores”) through August 2013 and professional services provided by an affiliate of Gores.
(b)	Represents transaction expenses related to the acquisition of Chesapeake Structural Systems, Inc., Creative Wood Products, LLC , Chestruc, LLC and Total Building Services Group, LLC.
(c)	Represents severance expense and other items related to closed locations, consisting primarily of pre-tax losses incurred during closure and post-closure activities.
(d)	The tax effect of adjustments to continuing operations was based on the respective transactions’ income tax rate, which was 37.5%, 33.2%, 36.0% and 33.3% for the three months ended September 30, 2014 and 2013 and the nine months ended September 30, 2014 and 2013, respectively. The tax effect of adjustments to continuing operations excludes approximately $0.1 million, $9.0 million, $0.5 million and $9.2 million of non-deductible public offering transaction-related costs for the three months ended September 30, 2014 and 2013 and the nine months ended September 30, 2014 and 2013, respectively.

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