(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
Emerging growth company |
PART I - FINANCIAL INFORMATION | ||
Item 1 | ||
Item 2 | ||
Item 3 | ||
Item 4 | ||
PART II - OTHER INFORMATION | ||
Item 1 | ||
Item 1A | ||
Item 2 | ||
Item 3 | ||
Item 4 | ||
Item 5 | ||
Item 6 | ||
(in thousands, except share and per share amounts) | September 30, 2019 | December 31, 2018 | |||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | $ | |||||
Accounts receivable, net of allowances | |||||||
Inventories, net | |||||||
Contract assets | |||||||
Prepaid expenses and other current assets | |||||||
Total current assets | |||||||
Property and equipment, net of accumulated depreciation | |||||||
Operating lease right-of-use assets | |||||||
Customer relationship intangible assets, net of accumulated amortization | |||||||
Other intangible assets, net of accumulated amortization | |||||||
Goodwill | |||||||
Other long-term assets | |||||||
Total assets | $ | $ | |||||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | $ | |||||
Accrued expenses and other liabilities | |||||||
Contract liabilities | |||||||
Income taxes payable | |||||||
Interest payable | |||||||
Current portion: | |||||||
Long-term debt and finance lease obligations | |||||||
Operating lease liabilities | |||||||
Insurance reserves | |||||||
Total current liabilities | |||||||
Insurance reserves | |||||||
Long-term debt | |||||||
Long-term portion of finance lease obligations | |||||||
Long-term portion of operating lease liabilities | |||||||
Deferred income taxes | |||||||
Other long-term liabilities | |||||||
Total liabilities | |||||||
Commitments and contingencies (Note 9) | |||||||
Stockholders’ equity | |||||||
Preferred stock, $0.01 par value, 50.0 million shares authorized, no shares issued and outstanding at September 30, 2019 and December 31, 2018 | |||||||
Common stock, $0.01 par value, 300.0 million shares authorized, 68.3 million and 67.7 million shares issued, and 66.8 million and 67.2 million outstanding at September 30, 2019 and December 31, 2018, respectively | |||||||
Additional paid-in capital | |||||||
Retained earnings | |||||||
Treasury stock, at cost, 1.5 million and 0.5 million shares at September 30, 2019 and December 31, 2018, respectively | ( | ) | ( | ) | |||
Total stockholders’ equity | |||||||
Total liabilities and stockholders’ equity | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands, except per share amounts) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net sales | |||||||||||||||
Building products | $ | $ | $ | $ | |||||||||||
Construction services | |||||||||||||||
Cost of sales | |||||||||||||||
Building products | |||||||||||||||
Construction services | |||||||||||||||
Gross profit | |||||||||||||||
Selling, general and administrative expenses | |||||||||||||||
Depreciation expense | |||||||||||||||
Amortization expense | |||||||||||||||
Merger and integration costs | |||||||||||||||
Impairment of assets | |||||||||||||||
Income from operations | |||||||||||||||
Other income (expense) | |||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Other income, net | |||||||||||||||
Income before income taxes | |||||||||||||||
Income tax expense | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Weighted average common shares outstanding | |||||||||||||||
Basic | |||||||||||||||
Diluted | |||||||||||||||
Net income per common share | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ |
Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Total | |||||||||||||||||||||
(in thousands) | Shares | Amount | Shares | Amount | |||||||||||||||||||||
Stockholders’ equity as of December 31, 2017 | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||
Exercise of stock options | — | — | — | ||||||||||||||||||||||
Shares vested for long-term incentive plan | — | — | ( | ) | — | ||||||||||||||||||||
Repurchases of common stock related to equity award activity | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Share withholdings made in satisfaction of exercise price | — | — | ( | ) | — | ||||||||||||||||||||
Stock compensation expense | — | — | — | — | — | ||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||
Stockholders’ equity as of March 31, 2018 | ( | ) | |||||||||||||||||||||||
Exercise of stock options | — | — | — | ||||||||||||||||||||||
Shares vested for long-term incentive plan | — | — | ( | ) | — | ||||||||||||||||||||
Repurchases of common stock related to equity award activity | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Stock compensation expense | — | — | — | — | — | ||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||
Stockholders’ equity as of June 30, 2018 | ( | ) | |||||||||||||||||||||||
Exercise of stock options | — | — | — | ||||||||||||||||||||||
Shares vested for long-term incentive plan | — | — | — | — | |||||||||||||||||||||
Repurchases of common stock related to equity award activity | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Stock compensation expense | — | — | — | — | — | ||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||
Stockholders’ equity as of September 30, 2018 | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||
Stockholders’ equity as of December 31, 2018 | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||
Exercise of stock options | — | — | — | ||||||||||||||||||||||
Shares vested for long-term incentive plan | — | — | ( | ) | — | ||||||||||||||||||||
Repurchases of common stock under share repurchase program | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Repurchases of common stock related to equity award activity | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Stock compensation expense | — | — | — | — | — | ||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||
Stockholders’ equity as of March 31, 2019 | ( | ) | |||||||||||||||||||||||
Exercise of stock options | — | — | — | ||||||||||||||||||||||
Shares vested for long-term incentive plan | — | — | ( | ) | — | ||||||||||||||||||||
Repurchases of common stock under share repurchase program | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Repurchases of common stock related to equity award activity | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Stock compensation expense | — | — | — | — | — | ||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||
Stockholders’ equity as of June 30, 2019 | ( | ) | |||||||||||||||||||||||
Exercise of stock options | — | — | — | ||||||||||||||||||||||
Shares vested for long-term incentive plan | — | — | — | — | |||||||||||||||||||||
Repurchases of common stock related to equity award activity | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Stock compensation expense | — | — | — | — | — | ||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||
Stockholders’ equity as of September 30, 2019 | $ | $ | ( | ) | $ | $ | $ |
Nine Months Ended September 30, | |||||||
(in thousands) | 2019 | 2018 | |||||
Cash flows from operating activities | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation expense | |||||||
Amortization of intangible assets | |||||||
Amortization of debt issuance costs | |||||||
Deferred income taxes | |||||||
Non-cash stock compensation expense | |||||||
Gain on sale of property, equipment and real estate | ( | ) | ( | ) | |||
Other non-cash adjustments | |||||||
Change in assets and liabilities, net of effects of acquisitions | |||||||
Accounts receivable, net of allowances | ( | ) | ( | ) | |||
Inventories, net | ( | ) | ( | ) | |||
Accounts payable | |||||||
Other assets and liabilities | ( | ) | |||||
Net cash provided by operating activities | |||||||
Cash flows from investing activities | |||||||
Purchases of businesses, net of cash acquired | ( | ) | ( | ) | |||
Purchases of property, equipment and real estate | ( | ) | ( | ) | |||
Proceeds from sale of property, equipment and real estate | |||||||
Insurance proceeds | |||||||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash flows from financing activities | |||||||
Proceeds from revolving line of credit | |||||||
Repayments of proceeds from revolving line of credit | ( | ) | ( | ) | |||
Repurchases of common stock under share repurchase program | ( | ) | |||||
Payments on finance lease obligations | ( | ) | ( | ) | |||
Principal payments on other notes | ( | ) | |||||
Other financing activities, net | ( | ) | ( | ) | |||
Net cash used in financing activities | ( | ) | ( | ) | |||
Net increase in cash and cash equivalents | |||||||
Cash and cash equivalents | |||||||
Beginning of period | |||||||
End of period | $ | $ | |||||
Supplemental disclosure of non-cash investing and financing transactions | |||||||
Acquisition-related holdback payments due at future date | $ | $ | |||||
Acquisition-related post-closing adjustment receivable | |||||||
Assets acquired under finance lease obligations |
• | On |
• | On |
• | On |
• | On |
• | On |
(in thousands) | September 30, 2019 | December 31, 2018 | |||||
Trade receivables | $ | $ | |||||
Allowance for doubtful accounts | ( | ) | ( | ) | |||
Other allowances | ( | ) | ( | ) | |||
$ | $ |
(in thousands) | Classification | Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | |||||||
Operating lease cost (a) | Selling, general and administrative expenses | $ | $ | |||||||
Finance lease cost | ||||||||||
Amortization of ROU assets | Depreciation expense | $ | $ | |||||||
Interest on lease liabilities | Interest expense | |||||||||
Total finance lease cost | $ | $ |
(in thousands) | Classification | September 30, 2019 | ||||
Assets | ||||||
Operating lease right-of-use assets | Operating lease right-of-use assets | $ | ||||
Finance lease right-of-use assets (a) | Property and equipment, net of accumulated depreciation | |||||
Total leased right-of-use assets | $ | |||||
Liabilities | ||||||
Current portion | ||||||
Operating lease liabilities | Current portion of operating lease liabilities | $ | ||||
Finance lease liabilities | Current portion of long-term debt and finance lease obligations | |||||
Noncurrent portion | ||||||
Operating lease liabilities | Long-term portion of operating lease liabilities | |||||
Finance lease liabilities | Long-term portion of finance lease obligations | |||||
Total lease liabilities | $ |
September 30, 2019 | ||
Weighted average remaining lease term (years) | ||
Operating leases | ||
Finance leases | ||
Weighted average discount rate | ||
Operating leases | % | |
Finance leases | % |
(in thousands) | Operating Leases | Finance Leases | Total | ||||||||
2019 (a) | $ | $ | $ | ||||||||
2020 | |||||||||||
2021 | |||||||||||
2022 | |||||||||||
2023 | |||||||||||
Thereafter | |||||||||||
Total lease payments | |||||||||||
Less: Interest | ( | ) | ( | ) | ( | ) | |||||
Present value of lease liabilities | $ | $ | $ |
(in thousands) | Nine Months Ended September 30, 2019 | ||
Cash paid for amounts included in the measurement of lease liabilities | |||
Operating cash flows from operating leases | $ | ||
Operating cash flows from finance leases | |||
Financing cash flows from finance leases | |||
Right-of-use assets obtained in exchange for lease obligations | |||
Operating leases | $ | ||
Finance leases |
(in thousands) | Capital Leases | Operating Leases | ||||||
2019 | $ | $ | ||||||
2020 | ||||||||
2021 | ||||||||
2022 | ||||||||
2023 | ||||||||
Thereafter | ||||||||
$ | (a) | |||||||
Less: Amounts representing interest | ( | ) | ||||||
Total obligation under capital leases | ||||||||
Less: Current portion of capital lease obligation | ( | ) | ||||||
Long-term capital lease obligation | $ |
(in thousands) | September 30, 2019 | December 31, 2018 | |||||
Senior secured notes, due 2024 | $ | $ | |||||
Revolving credit agreement | |||||||
Unamortized debt issuance costs related to senior secured notes | ( | ) | ( | ) | |||
Less: Current portion of long-term debt | |||||||
$ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Structural components | $ | $ | $ | $ | |||||||||||
Lumber & lumber sheet goods | |||||||||||||||
Millwork, doors & windows | |||||||||||||||
Other building products & services | |||||||||||||||
Total net sales | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Single-family homebuilders | $ | $ | $ | $ | |||||||||||
Remodeling contractors | |||||||||||||||
Multi-family, commercial & other contractors | |||||||||||||||
Total net sales | $ | $ | $ | $ |
(in thousands) | September 30, 2019 | December 31, 2018 | Change | ||||||||
Receivables, including unbilled receivables presented in prepaid expenses and other current assets | $ | $ | $ | ||||||||
Contract assets | |||||||||||
Contract liabilities | $ | $ | $ | ( | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Restricted stock units (a) | $ | $ | $ | $ | |||||||||||
Restricted stock | |||||||||||||||
Stock options | |||||||||||||||
Stock based compensation | $ | $ | $ | $ |
Three Months Ended September 30, 2019 | |||||||||||||||
(in thousands) | Net Sales | Gross Profit | Depreciation & Amortization | Adjusted EBITDA | |||||||||||
Geographic divisions | $ | $ | $ | $ | |||||||||||
Other reconciling items | ( | ) | |||||||||||||
$ | $ | $ |
Three Months Ended September 30, 2018 | |||||||||||||||
(in thousands) | Net Sales | Gross Profit | Depreciation & Amortization | Adjusted EBITDA | |||||||||||
Geographic divisions | $ | $ | $ | $ | |||||||||||
Other reconciling items | ( | ) | |||||||||||||
$ | $ | $ |
Nine Months Ended September 30, 2019 | |||||||||||||||
(in thousands) | Net Sales | Gross Profit | Depreciation & Amortization | Adjusted EBITDA | |||||||||||
Geographic divisions | $ | $ | $ | $ | |||||||||||
Other reconciling items | ( | ) | |||||||||||||
$ | $ | $ |
Nine Months Ended September 30, 2018 | |||||||||||||||
(in thousands) | Net Sales | Gross Profit | Depreciation & Amortization | Adjusted EBITDA | |||||||||||
Geographic divisions | $ | $ | $ | $ | |||||||||||
Other reconciling items | ( | ) | |||||||||||||
$ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Income before income taxes | $ | $ | $ | $ | |||||||||||
Interest expense | |||||||||||||||
Interest income | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Depreciation and amortization | |||||||||||||||
Merger and integration costs | |||||||||||||||
Non-cash stock compensation expense | |||||||||||||||
Impairment of assets | |||||||||||||||
Acquisition costs | |||||||||||||||
Sale of Coleman Floor (a) | ( | ) | ( | ) | |||||||||||
Other items (b) | ( | ) | |||||||||||||
Adjusted EBITDA of other reconciling items | |||||||||||||||
Adjusted EBITDA of geographic divisions reportable segment | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands, except per share amounts) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Income attributable to common stockholders | $ | $ | $ | $ | |||||||||||
Weighted average common shares outstanding, basic | |||||||||||||||
Effect of dilutive securities: | |||||||||||||||
Restricted stock units (a) | |||||||||||||||
Stock options | |||||||||||||||
Restricted stock | |||||||||||||||
Weighted average common shares outstanding, diluted | |||||||||||||||
Basic income per common share | $ | $ | $ | $ | |||||||||||
Diluted income per common share | $ | $ | $ | $ |
• | the state of the homebuilding industry and repair and remodeling activity, the economy and the credit markets; |
• | fluctuation of commodity prices and prices of our products as a result of national and international economic and other conditions; |
• | the impact of potential changes in our customer or product sales mix; |
• | 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; |
• | seasonality and cyclicality of the building products supply and services industry; |
• | competitive industry pressures and competitive pricing pressure from our customers and competitors; |
• | our exposure to product liability, warranty, casualty, construction defect, contract, tort, employment and other claims and legal proceedings; |
• | our ability to maintain profitability and positive cash flows; |
• | our ability to retain our key employees and to attract and retain new qualified employees, while controlling our labor costs; |
• | product shortages, loss of key suppliers or failure to develop relationships with qualified suppliers, and our dependence on third-party suppliers and manufacturers; |
• | the implementation of our supply chain and technology initiatives; |
• | the impact of long-term noncancellable leases at our facilities; |
• | our ability to effectively manage inventory and working capital; |
• | the credit risk from our customers; |
• | our ability to identify or respond effectively to consumer needs, expectations, market conditions or trends; |
• | our ability to successfully implement our growth strategy; |
• | the impact of federal, state, local and other laws and regulations; |
• | the impact of changes in legislation and government policy; |
• | the impact of unexpected changes in our tax provisions and adoption of new tax legislation; |
• | our ability to utilize our net operating loss carryforwards; |
• | natural or man-made disruptions to our distribution and manufacturing facilities; |
• | our exposure to environmental liabilities and subjection to environmental laws and regulation; |
• | the impact of health and safety laws and regulations; |
• | the impact of disruptions to our information technology systems; |
• | cybersecurity risks; |
• | 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; |
• | the impact of our indebtedness; and |
• | the impact of the various financial covenants in our secured credit agreement and senior secured notes indenture. |
• | On January 14, 2019, the Company acquired substantially all of the assets and assumed certain liabilities of Barefoot, a supplier of windows, exterior doors, hardware, specialty products and installation services in the Charlotte, North Carolina metropolitan area. |
• | On February 8, 2019, the Company acquired substantially all of the assets and assumed certain liabilities of Locust Lumber, a supplier of lumber products and building materials primarily to custom homebuilders and professional remodeling contractors in the Charlotte, North Carolina metropolitan area. |
• | On August 1, 2019, the Company acquired substantially all of the assets and assumed certain liabilities of Kingston Lumber, a supplier of lumber products, trusses and other building materials primarily to custom homebuilders and professional remodeling contractors in the Seattle, Washington metropolitan area. |
• | On September 3, 2019, the Company acquired substantially all of the assets and assumed certain liabilities of Heritage One, a supplier of pre-hung doors, millwork, hardware and finish carpentry services in the Sacramento, California metropolitan area. |
• | On September 16, 2019, the Company acquired substantially all of the assets and assumed certain liabilities of Colorado Fasteners, a supplier of fasteners, tools and other related products in the Denver, Colorado metropolitan area. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2019 versus 2018 | 2019 average price | 2019 versus 2018 | 2019 average price | ||||||||||
Framing lumber prices | (23.6 | )% | $ | 357 | (29.0 | )% | $ | 353 | |||||
Structural panel prices | (30.2 | )% | $ | 337 | (31.1 | )% | $ | 353 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||
Net sales | $ | 964,249 | 100.0 | % | $ | 990,264 | 100.0 | % | $ | 2,736,029 | 100.0 | % | $ | 2,822,927 | 100.0 | % | |||||||||||
Cost of sales | 709,482 | 73.6 | % | 748,961 | 75.6 | % | 2,019,363 | 73.8 | % | 2,142,941 | 75.9 | % | |||||||||||||||
Gross profit | 254,767 | 26.4 | % | 241,303 | 24.4 | % | 716,666 | 26.2 | % | 679,986 | 24.1 | % | |||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||
Selling, general and administrative expenses | 189,284 | 19.6 | % | 176,204 | 17.8 | % | 540,649 | 19.8 | % | 506,236 | 17.9 | % | |||||||||||||||
Depreciation expense | 10,501 | 1.1 | % | 10,059 | 1.0 | % | 30,117 | 1.1 | % | 29,323 | 1.0 | % | |||||||||||||||
Amortization expense | 4,552 | 0.5 | % | 3,790 | 0.4 | % | 13,237 | 0.5 | % | 11,263 | 0.4 | % | |||||||||||||||
Merger and integration costs | 1,295 | 0.1 | % | 1,459 | 0.1 | % | 5,467 | 0.2 | % | 3,627 | 0.1 | % | |||||||||||||||
Impairment of assets | 115 | 0.0 | % | — | 0.0 | % | 644 | 0.0 | % | — | 0.0 | % | |||||||||||||||
Income from operations | 49,020 | 5.1 | % | 49,791 | 5.0 | % | 126,552 | 4.6 | % | 129,537 | 4.6 | % | |||||||||||||||
Other income (expense) | |||||||||||||||||||||||||||
Interest expense | (5,773 | ) | (0.6 | )% | (5,926 | ) | (0.6 | )% | (17,385 | ) | (0.6 | )% | (17,916 | ) | (0.6 | )% | |||||||||||
Other income, net | 3,540 | 0.4 | % | 2,953 | 0.3 | % | 10,159 | 0.4 | % | 7,830 | 0.3 | % | |||||||||||||||
Income before income taxes | 46,787 | 4.9 | % | 46,818 | 4.7 | % | 119,326 | 4.4 | % | 119,451 | 4.2 | % | |||||||||||||||
Income tax expense | 13,190 | 1.4 | % | 10,960 | 1.1 | % | 29,680 | 1.1 | % | 27,829 | 1.0 | % | |||||||||||||||
Net income | $ | 33,597 | 3.5 | % | $ | 35,858 | 3.6 | % | $ | 89,646 | 3.3 | % | $ | 91,622 | 3.2 | % |
Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | |||||||||||||||
(in thousands) | Net Sales | % of Sales | Net Sales | % of Sales | % Change | |||||||||||
Structural components | $ | 175,344 | 18.2 | % | $ | 166,919 | 16.9 | % | 5.0 | % | ||||||
Lumber & lumber sheet goods | 274,908 | 28.5 | % | 357,286 | 36.1 | % | (23.1 | )% | ||||||||
Millwork, doors & windows | 285,750 | 29.6 | % | 251,606 | 25.4 | % | 13.6 | % | ||||||||
Other building products & services | 228,247 | 23.7 | % | 214,453 | 21.6 | % | 6.4 | % | ||||||||
Total net sales | $ | 964,249 | 100.0 | % | $ | 990,264 | 100.0 | % | (2.6 | )% |
• | selling, general and administrative expenses were $189.3 million, up $13.1 million, or 7.4%, from $176.2 million for the three months ended September 30, 2018. Approximately $6.7 million of this increase related to selling, general and administrative expenses of the 2019 Acquisitions, $5.2 million of this increase related to employee wages and benefits and $2.0 million of this increase related to gains on sale of property, equipment and real estate during the prior year period, partially offset by a decrease of $0.8 million in other selling, general and administrative categories. |
• | depreciation expense was $10.5 million compared to $10.1 million for the three months ended September 30, 2018. |
• | amortization expense was $4.6 million compared to $3.8 million for the three months ended September 30, 2018. This increase resulted from the amortization of intangible assets acquired in the 2019 Acquisitions. |
• | the Company incurred $1.3 million of Merger and integration costs related to the ongoing integration of Building Materials Holding Corporation (“BMHC”) and Stock Building Supply Holdings, Inc. (“SBS”), consisting primarily of system integration costs, compared to $1.5 million for the three months ended September 30, 2018. |
• | the Company recognized asset impairment charges of $0.1 million related to the relocation of the operations of one of the Company’s facilities. |
Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | |||||||||||||||
(in thousands) | Net Sales | % of Sales | Net Sales | % of Sales | % Change | |||||||||||
Structural components | $ | 483,575 | 17.7 | % | $ | 470,365 | 16.7 | % | 2.8 | % | ||||||
Lumber & lumber sheet goods | 798,722 | 29.2 | % | 1,013,495 | 35.9 | % | (21.2 | )% | ||||||||
Millwork, doors & windows | 796,807 | 29.1 | % | 730,318 | 25.9 | % | 9.1 | % | ||||||||
Other building products & services | 656,925 | 24.0 | % | 608,749 | 21.5 | % | 7.9 | % | ||||||||
Total net sales | $ | 2,736,029 | 100.0 | % | $ | 2,822,927 | 100.0 | % | (3.1 | )% |
• | selling, general and administrative expenses were $540.6 million, up $34.4 million, or 6.8%, from $506.2 million for the nine months ended September 30, 2018. Excluding the $4.3 million impact of the out of period correction of the Prior Period Misstatement (see Note 2), selling, general and administrative expenses increased $30.1 million. Approximately $16.5 million of this increase related to selling, general and administrative expenses of the 2019 Acquisitions and Shone Lumber acquisition and $4.6 million of this increase related to increased health care costs. The remaining increase was primarily related to employee wage inflation. |
• | depreciation expense was $30.1 million compared to $29.3 million for the nine months ended September 30, 2018. |
• | amortization expense was $13.2 million compared to $11.3 million for the nine months ended September 30, 2018. This increase resulted from the amortization of intangible assets acquired in the 2019 Acquisitions and Shone Lumber acquisition. |
• | the Company incurred $5.5 million of Merger and integration costs related to the ongoing integration of BMHC and SBS, consisting primarily of system integration costs and non-cash charges related to the write-down of certain long-lived assets, compared to $3.6 million for the nine months ended September 30, 2018. Merger and integration costs for the nine months ended September 30, 2018 also included a gain from disposition of property due to the integration. |
• | the Company recognized asset impairment charges of $0.6 million related to the relocation of the operations of certain of the Company’s facilities. |
(in thousands) | September 30, 2019 | December 31, 2018 | |||||
Cash and cash equivalents | $ | 173,259 | $ | 150,723 | |||
Accounts receivable, net of allowances | 344,645 | 298,440 | |||||
Inventories, net | 324,458 | 309,279 | |||||
Other current assets | 103,166 | 88,597 | |||||
Accounts payable, accrued expenses and other current liabilities | (377,022 | ) | (289,518 | ) | |||
Current portion of long-term debt and finance lease obligations | (6,369 | ) | (6,661 | ) | |||
Current portion of operating lease liabilities (a) | (24,343 | ) | — | ||||
Total net current assets | $ | 537,794 | $ | 550,860 |
Nine Months Ended September 30, | |||||||
(in thousands) | 2019 | 2018 | |||||
Net income | $ | 89,646 | $ | 91,622 | |||
Non-cash expenses | 63,735 | 55,300 | |||||
Change in deferred income taxes | 4,857 | 1,314 | |||||
Change in working capital and other assets and liabilities | 40,179 | (37,598 | ) | ||||
Net cash provided by operating activities | $ | 198,417 | $ | 110,638 |
Nine Months Ended September 30, | |||||||
(in thousands) | 2019 | 2018 | |||||
Purchases of businesses, net of cash acquired | $ | (85,780 | ) | $ | (20,970 | ) | |
Purchases of property, equipment and real estate | (67,582 | ) | (42,704 | ) | |||
Proceeds from sale of property, equipment and real estate | 4,444 | 10,968 | |||||
Insurance proceeds | 107 | 1,991 | |||||
Net cash used in investing activities | $ | (148,811 | ) | $ | (50,715 | ) |
Nine Months Ended September 30, | |||||||
(in thousands) | 2019 | 2018 | |||||
Repurchases of common stock under share repurchase program | $ | (16,446 | ) | $ | — | ||
Payments on finance lease obligations and other notes | (5,094 | ) | (6,012 | ) | |||
Net repayments of proceeds from Revolver | — | (4,462 | ) | ||||
Other financing activities, net | (5,530 | ) | (3,508 | ) | |||
Net cash used in financing activities | $ | (27,070 | ) | $ | (13,982 | ) |
• | We have restricted debit memo functionality within our primary ERP system by role and dollar limit authority, and have implemented additional monitoring and analytical controls performed by individuals who do not have conflicting access. |
• | We have removed cash application access from our credit directors, and in markets where it is feasible, we have removed cash application access from our credit managers. |
• | In markets where it is not feasible to remove cash application access from our credit managers due to resource limitations, we have implemented additional monitoring and analytical controls performed by individuals who do not have conflicting access. |
Exhibit No. | Description | |
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File - The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 is formatted in Inline XBRL (included as Exhibit 101). |
BMC STOCK HOLDINGS, INC. | ||
Date: November 5, 2019 | By: | /s/ James F. Major, Jr. |
Executive Vice President, Chief Financial Officer and Treasurer | ||
(Principal financial and accounting officer and duly authorized officer) |
1. | I have reviewed this quarterly report on Form 10-Q of BMC Stock Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
1. | I have reviewed this quarterly report on Form 10-Q of BMC Stock Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Leases (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of lease cost | The components of lease cost for the three and nine months ended September 30, 2019 were as follows:
(a) Includes short-term leases and variable lease costs, which are not material.
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ROU assets and lease liabilities | The following table presents the Company’s right-of-use assets and lease liabilities as of September 30, 2019:
(a) Finance lease right-of-use assets are presented net of accumulated amortization of $42.9 million as of September 30, 2019. |
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Weighted average remaining term and discount rate | The following table presents the weighted average remaining lease term and weighted average discount rate for the Company’s leases as of September 30, 2019:
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Future minimum lease payments under non-cancellable leases | Future maturities of lease liabilities as of September 30, 2019 were as follows:
(a) Excludes the nine months ended September 30, 2019. |
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Cash paid for amounts included in the measurement of lease liabilities and ROU assets | Cash paid for amounts included in the measurement of lease liabilities and right-of-use assets obtained in exchange for lease obligations during the nine months ended September 30, 2019 were as follows:
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Future minimum lease payments prior to adoption of Topic 842 | Future minimum lease payments under noncancellable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of December 31, 2018 are as follows:
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Income Taxes (Policies) |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Income Taxes The Company evaluates its deferred tax assets quarterly to determine if valuation allowances are required. In assessing the realizability of deferred tax assets, the Company considers both positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. |
Revenue (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2019 |
Sep. 30, 2019 |
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New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Contract assets change | $ 4,411 | |
Contract liabilities change | (387) | |
Revenue recognized previously included in contract liabilities | $ 900 | $ 32,000 |
Earnings Per Share (Schedule of anti-dilutive securities) (Details) - shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Restricted stock units [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share (in shares) | 0 | 0 | 0 | 0 |
Stock options [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share (in shares) | 0 | 0 | 0 | 0 |
Restricted stock [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share (in shares) | 0 | 0 | 0 | 0 |
Segments (Schedule of net sales, adjusted EBITDA and certain other measures by reportable segment) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Segment Reporting Information [Line Items] | ||||
Net sales | $ 964,249 | $ 990,264 | $ 2,736,029 | $ 2,822,927 |
Gross profit | 254,767 | 241,303 | 716,666 | 679,986 |
Depreciation & amortization | 18,535 | 16,626 | 52,959 | 48,560 |
Operating segments [Member] | Geographic divisions [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 964,249 | 990,264 | 2,736,029 | 2,822,927 |
Gross profit | 254,767 | 241,303 | 716,666 | 679,986 |
Depreciation & amortization | 17,974 | 16,106 | 51,121 | 47,079 |
Adjusted EBITDA | 96,752 | 92,698 | 260,537 | 252,873 |
Other reconciling items [Member] | Other reconciling items [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 0 | 0 | 0 | 0 |
Gross profit | 0 | 0 | 0 | 0 |
Depreciation & amortization | 561 | 520 | 1,838 | 1,481 |
Adjusted EBITDA | $ (22,094) | $ (18,330) | $ (58,150) | $ (52,496) |
Income Taxes |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company evaluates its deferred tax assets quarterly 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 will not be realized. The Company had a valuation allowance of $0.1 million against its deferred tax assets related to certain state tax jurisdictions as of September 30, 2019 and December 31, 2018. To the extent the Company generates future tax net operating losses, the Company may be required to increase the valuation allowance on deferred tax assets, which may unfavorably impact the effective tax rate. The Company has no material uncertain tax positions as of September 30, 2019 and December 31, 2018. During the three and nine months ended September 30, 2019, the Company recorded an out of period expense of $1.6 million and $1.5 million, respectively, in Income tax expense and a corresponding increase to Income taxes payable to correct for a misstatement related to its calculation of excess windfall tax benefits on stock option exercises in certain prior periods (the “Income Tax Adjustment”). The Company has concluded that the financial impact of the Income Tax Adjustment is not material to any of its previously issued financial statements and that the correction of such Income Tax Adjustment is not material to either the three or nine months ended September 30, 2019 or to the expected financial results for the year ending December 31, 2019. For the three and nine months ended September 30, 2019, the Company’s effective tax rate was 28.2% and 24.9%, respectively, which varied from the federal statutory rate of 21% primarily due to state income taxes and the Income Tax Adjustment. Excluding the Income Tax Adjustment, the Company’s effective tax rate was 24.7% and 23.6% for the three and nine months ended September 30, 2019, respectively. For the three and nine months ended September 30, 2018, the Company’s effective tax rate was 23.4% and 23.3%, respectively, which varied from the federal statutory rate of 21% primarily due to state income taxes.
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Accounts Receivable |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | Accounts Receivable Accounts receivable consist of the following at September 30, 2019 and December 31, 2018:
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Earnings Per Share |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share Basic net income per share (“EPS”) is calculated by dividing net income 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, 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. Performance-based restricted stock units are not included in the calculation of diluted EPS until they are contingently issuable. The basic and diluted EPS calculations for the three and nine months ended September 30, 2019 and 2018 are presented below:
(a) Includes service-based and contingently issuable performance-based restricted stock units. For the three and nine months ended September 30, 2019 and 2018, there were no anti-dilutive restricted stock units, stock options or restricted stock. As of September 30, 2019, the number of currently outstanding performance-based restricted stock units that are issued upon vesting could range from zero to a maximum of 0.9 million.
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Leases (Weighted Average Lease Term and Discount Rate) (Details) |
Sep. 30, 2019 |
---|---|
Leases [Abstract] | |
Weighted average remaining lease term: Operating leases | 6 years |
Weighted average remaining lease term: Finance leases | 4 years 9 months 18 days |
Weighted average discount rate: Operating leases | 6.40% |
Weighted average discount rate: Finance leases | 5.00% |
Earnings Per Share (Narrative) (Details) - Performance-based restricted stock units [Member] |
Sep. 30, 2019
shares
|
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Minimum [Member] | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Performance-based restricted stock units that could be issued upon vesting | 0 |
Maximum [Member] | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |
Performance-based restricted stock units that could be issued upon vesting | 900,000 |
Segments (Reconciliation of adjusted EBITDA to consolidated financial statements) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Segment Reporting, Revenue Reconciling Item [Line Items] | |||||||||
Income before income taxes | $ 46,787 | $ 46,818 | $ 119,326 | $ 119,451 | |||||
Interest expense | 5,773 | 5,926 | 17,385 | 17,916 | |||||
Interest income | (1,047) | (117) | (2,832) | (117) | |||||
Depreciation and amortization | 18,535 | 16,626 | 52,959 | 48,560 | |||||
Merger and integration costs | 1,295 | 1,459 | 5,467 | 3,627 | |||||
Non-cash stock compensation expense | 3,014 | 3,310 | 9,177 | 8,226 | |||||
Impairment of assets | 115 | 0 | 644 | 0 | |||||
Acquisition costs | 229 | 0 | 827 | 267 | |||||
Sale of Coleman Floor | [1] | (43) | 0 | (344) | 0 | ||||
Other items | [2] | 0 | 346 | (222) | 2,447 | ||||
Other reconciling items [Member] | Other reconciling items [Member] | |||||||||
Segment Reporting, Revenue Reconciling Item [Line Items] | |||||||||
Depreciation and amortization | 561 | 520 | 1,838 | 1,481 | |||||
Adjusted EBITDA | 22,094 | 18,330 | 58,150 | 52,496 | |||||
Operating segments [Member] | Geographic divisions [Member] | |||||||||
Segment Reporting, Revenue Reconciling Item [Line Items] | |||||||||
Depreciation and amortization | 17,974 | 16,106 | 51,121 | 47,079 | |||||
Adjusted EBITDA | $ (96,752) | $ (92,698) | $ (260,537) | $ (252,873) | |||||
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Basis of Presentation (Policies) |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of presentation | Basis of Presentation The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) that permit reduced disclosure for interim periods. The condensed consolidated balance sheet as of December 31, 2018 was derived from audited financial statements, but does not include all necessary disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed consolidated financial statements include all accounts of the Company and, in the opinion of management, include all recurring adjustments and normal accruals necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the dates and periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Annual Report on Form 10-K”). Results for interim periods are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period. All material intercompany accounts and transactions have been eliminated in consolidation.
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Comprehensive income | Comprehensive income Comprehensive income is equal to the net income for all periods presented.
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Cash and cash equivalents | Cash equivalents 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. As of September 30, 2019 and December 31, 2018, the Company had cash equivalents of $156.9 million and $146.1 million, respectively. Cash equivalents are valued at amortized cost, which approximates fair value due to the short-term maturity of these instruments, and were classified as Level 1 or Level 2 measurements in accordance with Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”).
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Statement of cash flows | Statement of cash flows Proceeds from revolving line of credit and repayments of proceeds from revolving line of credit as presented on the condensed consolidated statements of cash flows includes all cash activities and transactions between the Company and its associated lenders in relation to the revolving line of credit, excluding interest and fees, and is specifically inclusive of operating cash receipts that are automatically applied to the revolving line of credit pursuant to a cash sweep agreement. See Note 6 for further details on the Company’s revolving line of credit.
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Recently issued accounting pronouncements | Recently adopted accounting pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-02, Leases, and issued subsequent amendments to the initial guidance to provide additional clarification on specific topics (“ASU 2016-02” or “Topic 842”). ASU 2016-02 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 either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The Company adopted ASU 2016-02 on January 1, 2019 by recording ROU assets for its operating leases totaling approximately $110 million and corresponding lease liabilities totaling approximately $115 million. The impact of adopting ASU 2016-02 was not material to the Company’s results of operations or cash flows for the three and nine months ended September 30, 2019. See Note 5 for further details. Recently issued accounting pronouncements not yet adopted In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and issued subsequent amendments to the initial guidance to provide additional clarification on specific topics (“ASU 2016-13”). ASU 2016-13 amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU 2016-13 is effective for the Company’s annual and interim periods beginning on January 1, 2020, with early adoption permitted beginning January 1, 2019. Modified retrospective application is required, with certain exceptions. The Company expects to adopt the standard on January 1, 2020. The Company does not expect adoption of the standard to have a material impact on the Company’s allowance for financial instruments within the scope of the standard, including its trade receivables and contract assets. The Company continues to evaluate the disclosure requirements of the standard. 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 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 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 material impact on the Company’s consolidated financial statements. In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 modifies the disclosure requirements on fair value measurements by removing, modifying and adding certain disclosure requirements in ASC 820. ASU 2018-13 is effective for the Company’s annual and interim periods beginning on January 1, 2020, with early adoption permitted. Certain disclosures in ASU 2018-13 are required to be applied prospectively, while others require retrospective application. The adoption of the standard is not expected to have a material impact on the Company’s consolidated financial statements.
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Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and ContingenciesFrom 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 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. However, the Company does not currently 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. As of December 31, 2018, the Company had accrued $3.0 million in relation to pending litigation that was recorded during the year ended December 31, 2017. During the nine months ended September 30, 2019, the Company paid $2.8 million to settle the matter. |
Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases Adoption of Topic 842 On January 1, 2019, the Company adopted Topic 842 by applying the guidance at adoption date. As a result, the comparative information as of December 31, 2018 and for the three and nine months ended September 30, 2018 has not been adjusted and continues to be reported under ASC 840, Leases (“ASC 840”). The Company elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed the Company to carry forward its identification of contracts that are or contain leases, its historical lease classification and its accounting for initial direct costs for existing leases. The impact of adopting Topic 842 was not material to the Company’s results of operations or cash flows for the three and nine months ended September 30, 2019. Beginning January 1, 2019, the Company recognized ROU assets and lease liabilities for the Company’s operating leases on its unaudited condensed consolidated balance sheets. ROU assets for the Company’s operating leases are presented within operating lease right-of-use assets on the Company’s condensed consolidated balance sheets, while the lease liabilities for the Company’s operating leases are presented within operating lease liabilities, with a current and long-term portion. Upon adoption of Topic 842, the balances at the adoption date of prepaid and accrued rent, lease incentives and unamortized assets and liabilities related to favorable and unfavorable leases were reclassified and are now presented within operating lease right-of-use assets on the Company’s condensed consolidated balance sheets. Refer to further discussion of the Company’s ROU assets and lease liabilities below. The Company’s accounting for its historical capital leases, which are now presented as finance leases under Topic 842, remained substantially unchanged. Lease Arrangements The Company has operating and finance leases primarily for its facilities, office space, land, fleet vehicles and equipment. Many of the Company’s leases are noncancellable and typically have an initial lease term of five to ten years, and most provide options at the Company’s election to renew for specified periods of time. The Company’s leases generally provide for fixed annual rentals. Certain of the Company’s leases include provisions for escalating rent, as an example, based on changes in the consumer price index. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at lease commencement. Most of the Company’s leases require it to pay taxes, insurance and maintenance expenses associated with the properties. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company determines if an arrangement contains a lease at inception. The Company has lease agreements with lease and non-lease components, which for all such leases are generally accounted for separately. The Company has elected the short-term lease exception under Topic 842 for all leases and as such, leases with an initial term of 12 months or less are not recorded on the unaudited condensed consolidated balance sheets. The Company recognizes lease expense for short-term leases on a straight-line basis over the lease term. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As the Company’s leases generally do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and any initial direct costs incurred. The Company’s lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases The components of lease cost for the three and nine months ended September 30, 2019 were as follows:
(a) Includes short-term leases and variable lease costs, which are not material. The Company subleases certain facilities to third parties. Income from sublease rentals for the three and nine months ended September 30, 2019 was not material. The following table presents the Company’s right-of-use assets and lease liabilities as of September 30, 2019:
(a) Finance lease right-of-use assets are presented net of accumulated amortization of $42.9 million as of September 30, 2019. The following table presents the weighted average remaining lease term and weighted average discount rate for the Company’s leases as of September 30, 2019:
Future maturities of lease liabilities as of September 30, 2019 were as follows:
(a) Excludes the nine months ended September 30, 2019. As of September 30, 2019, the Company had additional leases for a facility and two office spaces that have not yet commenced, as the facility and office spaces have not yet been made available to the Company. The facility and two office space leases are expected to commence in 2019 and 2020 and contain undiscounted lease payments of $15.8 million in aggregate over the terms of the leases, which range from 5 to 10 years. These payments are not included in the table above. Cash paid for amounts included in the measurement of lease liabilities and right-of-use assets obtained in exchange for lease obligations during the nine months ended September 30, 2019 were as follows:
Disclosures related to periods prior to adoption of Topic 842 As previously discussed, the Company adopted Topic 842 by applying the guidance at the adoption date, January 1, 2019. As required, the following disclosure is provided for periods prior to adoption, which continue to be presented in accordance with ASC 840. Future minimum lease payments under noncancellable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of December 31, 2018 are as follows:
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Organization |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization These unaudited financial statements represent the financial statements of BMC Stock Holdings, Inc. and its subsidiaries. All references to “BMC” or the “Company” mean BMC Stock Holdings, Inc. and its subsidiaries. The Company distributes lumber and building materials to new construction and repair and remodeling contractors. Additionally, the Company provides solution-based services to its customers, including component design, product specification and installation services.
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Leases (ROU Assets and Lease Liabilities) (Detail) - USD ($) $ in Thousands |
Sep. 30, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
||
---|---|---|---|---|---|
Operating lease right-of-use assets | $ 125,093 | $ 110,000 | $ 0 | ||
Total leased right-of-use assets | 143,157 | ||||
Current portion: Operating lease liabilities | 24,343 | 0 | |||
Noncurrent portion: Operating lease liabilities | 107,498 | $ 0 | |||
Noncurrent portion: Finance lease liabilities | 9,832 | ||||
Total lease liabilities | 148,042 | ||||
Property And Equipment [Member] | |||||
Finance lease right-of-use assets | [1] | 18,064 | |||
Finance lease ROU asset accumulated amortization | 42,900 | ||||
Current Portion Of Long-Term Debt And Finance Lease Obligations [Member] | |||||
Current portion: Finance lease liabilities | $ 6,369 | ||||
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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares shares in Millions |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Stockholders' Equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 50.0 | 50.0 |
Preferred stock, shares issued (in shares) | 0.0 | 0.0 |
Preferred stock, shares outstanding (in shares) | 0.0 | 0.0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 300.0 | 300.0 |
Common stock, shares issued (shares) | 68.3 | 67.7 |
Common stock, shares outstanding (in shares) | 66.8 | 67.2 |
Treasury stock (shares) | 1.5 | 0.5 |
Debt (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | Long-term debt as of September 30, 2019 and December 31, 2018 consists of the following:
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Commitments and Contingencies (Policies) |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | Commitments and ContingenciesFrom 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 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. |
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