Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Builders FirstSource, Inc. | d910401d8k.htm |
| EX-99.1 - EX-99.1 - Builders FirstSource, Inc. | d910401dex991.htm |
 Acquisition of ProBuild
Creating a Diversified National Pro Dealer
April 13, 2015
Exhibit 99.2 |
 Disclaimer
2
Before we begin, I would like to remind you that during the course of this conference call, management
may make statements that are not purely historical facts or that necessarily depend upon future
events, including statements about expected market share gains, forecasted financial performance or other statements
about anticipations, beliefs, expectations, hopes, intentions or strategies for the future, such
statements are considered forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. You are cautioned not to place undue reliance on forward-looking statements. All
forward-looking statements are based upon information available to Builders FirstSource on the
date hereof. Builders FirstSource undertakes no obligation to publicly update or revise any
such forward-looking statements, whether as a result of new information, future events or otherwise. Such forward-looking
statements involve risks and uncertainties that could cause actual events or results to differ
materially from the events or results described in the forward-looking statements,
including risks or uncertainties related to the Company’s growth strategies, including gaining market share, or the Company’s revenues and
operating results being highly dependent on, among other things, the homebuilding industry, lumber
prices and the economy. The Company may not succeed in addressing these and other risks.
Further information regarding factors that could affect the Company’s financial and other results can be found in the risk
factors section of Builders FirstSource's most recent annual report on Form 10-K filed with the
Securities and Exchange Commission. Consequently, all forward- looking statements made on
this call are qualified by the factors, risks and uncertainties contained therein.
In addition, there are significant risks and uncertainties relating to Builders FirstSource's proposed
acquisition and ownership of ProBuild, including: (a) the failure to receive, on a timely basis
or otherwise, the required approvals from government and regulatory authorities in connection with the transaction, and the
terms of those approvals; (b) the representations, warranties and indemnifications by the sellers of
ProBuild are limited in the securities purchase agreement, and the Builders FirstSource’s
diligence into the business has been limited and, as a result, the assumptions on which its estimates of future results of the
business have been based may prove to be incorrect in a number of material ways, which could result in
an inability to realize the expected benefits of the acquisition or exposure to material
liabilities; (c) using debt to finance, in part, the acquisition will substantially increase Builders FirstSource’s indebtedness; (d)
Builders FirstSource’s obligation to close the acquisition is not conditioned on the completion
of its debt or equity financing, and, under certain circumstances, if Builders FirstSource
fails to satisfy its obligation to consummate the acquisition or fails to obtain certain regulatory approvals, Builders FirstSource may be
required to pay a termination fee that could have an adverse effect on Builders FirstSource's ability
to fund its operations and meet its obligations under its outstanding debt instruments; (e) the
inability of Builders FirstSource to successfully integrate ProBuild’s operations and realize anticipated benefits of the
acquisition; and (f) the ability to attract and retain key personnel and to maintain relationships
with customers, suppliers or other business partners, including those of ProBuild. These
factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of
the forward-looking statements contained herein. Other unknown or unpredictable factors could also
have material adverse effects on Builders FirstSource’s future results.
Finally, in no way does this call constitute an offer to sell or the solicitation of an offer to buy
any securities of Builders FirstSource or any other issuer, nor shall there be any sale of any
securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.
|
 Today’s Presenters
Floyd F. Sherman
Chief Executive Officer
Chad Crow
President, Chief Operating Officer & Chief Financial Officer
3 |
 Builders FirstSource’s Acquisition of ProBuild
Builders
FirstSource
today
announced
that
it
has
entered
into
an
agreement
to
acquire
ProBuild
in
an
all-cash transaction valued at approximately $1.63 billion. As part of the
transaction, Builders FirstSource will also assume certain
liabilities. Creates Diversified National Pro Dealer with Approximately $6
Billion in Sales Positions Combined Company to Capitalize on Continued
Recovery in Housing Market Significantly Enhances Product Offering, Services
and Capabilities Across Broader Operating Footprint Significantly and
Immediately Accretive to Earnings with Strong Long-Term Growth Potential 4
Combination Expected to Generate $100 Million - $120 Million in Annual Run-Rate Cost Savings
Within Two Years |
 Transaction Overview
Purchase Price
$1.63 billion
Form of
Consideration
All-Cash
Cost Savings
$100
million
to
$120
million
annual
run-rate,
pre-tax
savings
within
two
years
(1)
Financial Impact
Transaction is expected to be significantly and immediately accretive to EPS
Incremental
net
present
value
of
approximately
$105
million
from
tax
benefits
Combined company is expected to generate significant cash flow
Pro Forma Net Debt / Adj. EBITDA of 5.6x
(2)
Financing
Fully committed financing
$1.6 billion from new debt
$100 million from a marketed equity issuance
Assumption of $300 million of lease finance obligations
Timing and Closing
Conditions
Customary regulatory approvals and closing conditions
Expected to close in 2H 2015
5
(1) Excludes estimated one-time costs of $90 million to $100 million to implement cost
savings.
(2) Based on LTM Pro Forma adjusted EBITDA of $376 million as of 12/31/2014. Includes $110
million annual, run-rate cost savings, mid-point of the expected range. See
EBITDA reconciliations on pages 18 and 19.
|
 Overview of ProBuild
Holdings, Inc. Company Overview
ProBuild Holdings, Inc. (“ProBuild”) is one of the largest
distributors of building materials in the United States
Operates lumberyards, component facilities, millwork
shops, gypsum yards and retail stores across the U.S.
Leading national pro dealer
Strategic partner with its customers and suppliers
Owned by FMR LLC, the parent company of Fidelity
Investments
2014
Revenue:
$4.4
billion
(1)
2014 Adj. EBITDA:
$190 million
(2)
Creation of ProBuild (1855 to 2008)
1997: Acquired and taken
private by FMR
2006
2008
(2006)
2004
The Contractor Yard (1946)
Moore’s Lumber (1956)
HD Supply’s
LBM
Operations
Laird Norton (1855)
Lanoga
(1978)
UBC
(1962)
Hayes-Lucas Lumber
Botsford Lumber
Spenard (1952)
Strober (1912)
Lumbermens (1895)
Dixieline (1913)
Home Lumber (1952)
Wickes Lumber (1854)
Wolohan Lumber (1964)
Hope Lumber (1907)
Leeds Building Products
(1990)
2005
ProBuild Locations
(4)
# of Locations
(4)
Lumberyard
248
Millwork Shop
35
Component Plant
34
Gypsum Branch
28
Home Center
19
Diversified Operations
(#)
Presence in Top 100 MSAs.
(71)
(55)
(17)
(27)
(24)
(20)
Substantial Geographic Reach
National Locations
(3)
and
MSA Coverage
Source:
ProBuild presentations, company websites and filings.
(1) Excludes closed operations.
(2) See reconciliation on page 19.
(3) Based on most recent company reports. ProBuild is as of 12/31/2014. Figures do not account for
co-located branches located on a single site.
(4) As of 12/31/14, does not account for co-located branches located on a single site.
6
364
257
90
80
65
52 |
 Transaction Economics
Total
Transaction
Value:
$1.82
billion
(1)
2014A ProBuild
Adj. EBITDA
(2)
w/ Cost Savings
(3)
$ Millions
Purchase Multiple
$190
9.6x
$300
6.1x
Attractive Purchase Multiple Leading to Significant Returns
(1) Based on $1.63 billion purchase price plus assumption of $300 million of lease
finance obligations less $105 million net present value of tax
benefits. (2) See reconciliation on page 19.
(3) Based on $110 million annual, run-rate cost savings, mid-point of the
expected range. Excludes estimated one-time costs of $90 million to $100
million to implement cost savings. 7 |
 Transformative Impact
Acquisition of ProBuild Is a Transformative Transaction for Builders
FirstSource Source: Company filings.
Note: All figures are for the year ended 12/31/2014.
(1) Pro Forma adjustments to include the full-year impact of completed BLDR
acquisitions and related cost synergies. (2) Adjusted for closed
operations. (3) Impact of lease finance obligations included in interest
expense. See reconciliation on page 19. (4) Mid-point of the expected
range. Excludes estimated one-time costs of $90 million to $100 million to
implement cost savings.
($ in millions)
Builders
FirstSource
ProBuild
Cost Savings
Pro Forma Total
Sales
$1,660
$4,430
$6,090
Adj. EBITDA
$76
$190
$110
$376
% Margin
4.5%
4.3%
6.2%
(2)(3)
(2)
(1)
(1)
8
(4) |
 Builders FirstSource and ProBuild: Value Creating Combination
Greater Diversification
& Scale
1
Improved Geographic
Footprint
2
Expanded Sales of Higher
Margin Products
3
Significant Cost Savings
4
National footprint
Presence in 74 of the top 100 and 24 of the top 25 MSAs
Limited overlapping regional coverage
Expected
continued
growth
in
the
housing
market
driving
top
line
growth
Steadily improving margins from product mix, enhanced by cost savings
Transaction is expected to be significantly and immediately accretive to EPS
Combined company will generate ~$6 billion in sales
More balanced end customer exposure
More diversified sales by region
Anticipated $100 million to $120 million annual run-rate cost savings within
two years
Implemented through network optimization, procurement savings and general
and administrative cost savings
Favorable Timing, Growth
Potential & Financial Impact
5
Further diversification to higher margin products
Drive value-added sales
Deleverages materially over the next three years
Bolstered by strong liquidity and free cash flow
Free cash flow growth enhanced by recovering housing sector
Significant Cash Flow
Generation Supports
Deleveraging
6
9 |
 Greater Diversification and Scale
(1) BLDR 2014 sales includes Pro Forma adjustment for 2014 acquisitions.
(2) Excludes closed ProBuild operations.
(3) ProBuild actual sales figure taken from filings.
Sales by End Use
(1)
Sales by Geography
(1)
BLDR
2014 Sales
Pro Forma
2014 Sales
(2)
Pro Forma
2014 Sales
(2)
BLDR
2014 Sales
Pro Dealers 2013A Total Net Sales
Denotes LBM Dealer
Pro Forma
1
10
Source: ProSales Magazine
sales ranking for 2013
(3)
New Residential
73%
Remodeling
22%
Commercial & Other
5%
New Residential
85%
Remodeling
5%
Commercial & Other
10%
Southeast
63%
South Central
22%
Northeast
15%
Southeast
31%
South
Central
21%
Northeast
20%
Midwest
11%
Northwest
8%
Alaska
5%
California
4%
$5,713
$4,991
$4,223
$2,279
$2,200
$2,143
$1,490
$1,245
$1,200
$1,197 |
 Improved Geographic Footprint
2
Source: Builders FirstSource Management, U.S. Census.
(1) Based on most recent company reports. ProBuild is as of 12/31/2014. Figures do
not account for co-located branches located on a single site.
(2) Top Metropolitan Statistical Areas (MSAs) based on 2014 Single Family Home
Building Permits per U.S. Census data.
BLDR
(
80
Locations)
(1)
ProBuild
(364
Locations)
(1)
Presence in Top 100 MSAs
(2)
Pro Forma U.S. Coverage with Limited Overlapping Regional Coverage
11
27
71
74
BLDR
ProBuild
Pro Forma |
 Expanded Sales of Higher Margin Products
Source: Company presentations and filings.
(1) Does not sum directly due to rounding of displayed product category
values. (2) Other contains siding, metal & concrete products, roofing
& insulation, install sales, hardware tools & fasteners and home
center products for ProBuild. Other contains various products including hardware, composite materials, roofing
and insulation for BLDR.
(3) BLDR 2014 sales and EBITDA include Pro Forma adjustment for 2014 acquisitions.
See reconciliation on page 18. (4) Impact of lease finance obligations
included in interest expense. See reconciliation on page 19. (5) Pro Forma
adjustments to include the full-year impact of completed BLDR acquisitions and cost
savings of $110 million, mid-point of the expected range. Excludes estimated
one-time costs of $90 million to $100 million to implement cost
savings. 2014 Sales by Product Category
Value-added Products
Lumber
Components
Millwork
Other
(2)
BLDR
(3)
ProBuild
53%
(1)
32%
(1)
Conclusion:
BLDR brings significant
expertise selling value-added
products to combined business
2014 Adjusted EBITDA Margin
12
Pro Forma
(5)
(3)
33%
32%
20%
15%
39%
17%
15%
29%
3 |
 Significant Cost
Savings Potential Estimated Run Rate Cost Savings of $100mm to $120mm
Focus on Integration and Cost Savings Realization
($ in Millions)
Network
Consolidation
~20%
Procurement
~35%
General &
Administrative
~45%
BLDR has successfully acquired and integrated 35
businesses since its inception
Clear path to identifiable and achievable savings
Run-rate cost savings represent ~2% of Pro Forma
combined costs
Integration strategy in process with defined objectives
$79
$102
$110
Year 1
Year 2
Year 3
(1)
Actions taken
to realize 72%
of run-rate
savings by the
end of Year 1
Source: Builders FirstSource management.
(1) Mid-point of the expected range. Excludes estimated one-time costs of $90 million to $100
million over two years to implement cost savings.
13
Actions taken
to realize 72%
of run-rate
savings by the
end of Year 1 |
 1,231
1,273
1,359
1,499
1,611
1,716
1,465
1,046
622
445
471
431
535
618
647
747
1,037
338
329
346
349
345
353
336
309
284
109
116
178
245
307
356
362
363
1,569
1,603
1,705
1,848
1,956
2,068
1,801
1,355
906
554
587
609
781
925
1,003
1,109
1,400
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015E
2016E
Total Housing Starts
2014 Starts
1,003
2014 % growth to Peak
106.2%
Peak ('05)
2,068
2014 % growth to Median
46.9%
Long-Term Median
1,473
CAGR ('14 to '16)
18.1%
6
61
76
53
125
190
110
$60
$187
$376
2012A
2013A
PF 12/31/14
Favorable Timing and Growth Potential
Source: Builders FirstSource management, U.S. Census Bureau, National Association
of Homebuilders. (1) Mid-point of the expected range. Excludes estimated
one-time costs of $90 million to $100 million to implement cost
savings. (2) Pro Forma adjustments to include the full-year impact of
completed BLDR acquisitions and related cost synergies. (3) See
reconciliation on page 19. (4) Median housing starts from 1954 through
2014. Adj. EBITDA
($ in Millions)
Median U.S. Housing Starts Forecast
(Units in Thousands)
Median: 1,473
(4)
Multi-Family Homes
Single Family Homes
Margins
BLDR:
ProBuild:
Pro Forma:
0.6
1.5
1.3%
4.1
3.0
3.3%
4.5
(2)
4.3
(3)
6.2%
Consistent growth to adjusted EBITDA
and margins
Strong momentum lifting sales
Adjusted EBITDA reflects substantial
internal improvements
Significant cost savings meaningfully
enhance EBITDA and margins
Resulting in significant earnings accretion
and long-term earnings growth
(1)
14
(4)
5
Cost Savings |
 Significant Cash Flow Generation Supports Deleveraging
6
6
Net Debt / Pro Forma Adjusted EBITDA
(1)
Source: Builders FirstSource management.
(1) Pro Forma adjustments to include the full-year impact of completed BLDR
acquisitions and cost savings of $110 million, mid-point of the expected
range. Excludes estimated one-time costs of $90 million to $100 million to implement cost savings.
(2) Net funded debt of $1.8 billion excludes assumed and existing lease finance
obligations of $304 million. Lease Adjusted EBITDA includes $21.3 million in
expenses related to lease finance obligations. (3) Net debt of $2.1 billion
includes assumed lease finance obligations of $300 million. (4) Includes
$30.1 million revolver draw and $17.8 million cash at 12/31/2014. Based on BLDR Pro Forma
EBITDA of $75.5 million. See reconciliation on page 18.
(5) Figures as of 12/31/2014.
Pro Forma net funded debt of $1.79 billion
at close
(2)
–
5.0x PF 2014 Lease Adjusted EBITDA of
$355 million
(1)(2)
–
Pro Forma net debt including assumed
lease finance obligations of 5.6x PF 2014
Adjusted
EBITDA
of
$376
million
(1)(3)
Strong liquidity position with ~$400 million of
liquidity at closing
Expect deleveraging driven by:
–
Cost savings realization
–
Earnings expansion
–
Strong free cash flow generation
enhanced by recovering housing sector
–
Low ongoing capital expenditure
–
Utilization of tax assets
15
Net Funded Debt / Pro Forma Lease Adjusted EBITDA
Net Debt / Pro Forma Adjusted EBITDA
(2)
(3)
Deleverages
materially in
first 3 years
(2)
(3)
(4)
(5)
5.0x
4.8x
5.6x
BLDR Status Quo
12/31/2014
Pro Forma at
Close
Within 3 Years |
 An
Exciting Opportunity to Drive Growth and Create Significant Shareholder
Value
Consistent with Growth Strategy
Enhanced Free Cash Flow Generation / Expected Deleveraging
Significant Cost Savings
Attractive Multiple / Returns Above Cost of Capital
Enhances Geographic Presence and Diversity
Optimal Timing in Housing Recovery
Creates Significant Shareholder Value
16 |
 Appendix |
 Reconciliation of GAAP to Adjusted Measures
Builders FirstSource Adjusted EBITDA Reconciliation
Source:
Builders FirstSource management.
(1) Pro Forma adjustments to include the full-year impact of completed BLDR
acquisitions. 18
Fiscal Year
($ in millions)
2012A
2013A
2014A
Net Income (Loss)
($56.9)
($42.7)
$18.2
Reconciling Items:
Depreciation & Amortization
$11.1
$9.3
$9.5
Interest Expense
45.1
89.6
30.3
Income Tax Expense
0.6
0.8
1.1
Loss from Discontinued Operations, Net of Tax
2.4
0.3
0.4
Stock Compensation Expense
3.6
4.2
6.2
Litigation Settlement
(0.6)
--
--
Transaction Costs
--
--
0.6
Facility Closure Costs
1.0
(0.0)
0.5
Other
0.0
(0.3)
0.0
Adjusted EBITDA
$6.4
$61.3
$66.8
Plus: Pro Forma Adjustments for Previous Acquisitions
(1)
--
--
8.7
Pro Forma Adjusted EBITDA
$6.4
$61.3
$75.5 |
 Reconciliation of GAAP to Adjusted Measures (Cont’d)
ProBuild Adjusted EBITDA Reconciliation
Source: ProBuild management.
(1) 2012, 2013 and 2014 figures include $21.0 million, $21.0 million and $21.3
million, respectively, in expenses related to lease finance
obligations. Fiscal Year
($ in millions)
2012A
2013A
2014A
Net Loss Attributable to PBH Inc.
($13.1)
($19.1)
($11.2)
Minority Interest
($148.4)
($21.6)
$36.4
Net Income (Loss)
($161.5)
($40.7)
$25.2
Reconciling Items:
Depreciation and Amortization
$91.4
$69.0
$62.8
Interest Expense
61.9
58.7
54.7
Income Tax Expense
1.5
1.5
0.6
Long-Term Bonus
2.8
2.1
3.7
LIFO Expense
13.9
12.4
6.5
(Gain) Loss on Sale
0.4
0.0
(0.4)
(Income) Loss from Closed Operations
19.2
(1.2)
21.6
Held for Sale Impairment
3.5
4.5
2.0
Non-Recurring Charges
7.1
12.1
6.0
Impairments and Other Extraordinary Adjustments
13.1
6.9
(0.2)
Pro Forma Adjustments
--
--
7.7
Pro Forma Adjusted EBITDA
$53.3
$125.3
$190.4
19
(1) |
 Pro
Forma Builders FirstSource Capitalization Debt
Equity
Rollover $350 million of existing
BLDR Senior Secured Notes
New debt:
–
$800 million ABL (estimated cost
L+150bps, drawn $295 million at
close excluding seasonal working
capital demand)
–
$550 million Term Loan B
(estimated cost L + 450bps with
1.0% LIBOR floor)
–
$750 million Senior Unsecured
Notes (estimated cost 8.5%)
$304 million in existing lease finance
obligations
(1)
$100 million in new equity via a
marketed follow-on offering
(1) Includes $4 million of existing Builders FirstSource lease finance
obligations. (2) Excludes assumed ProBuild lease finance obligations of $300
million and $4 million of existing Builders FirstSource lease finance
obligations. (3) Includes $110 million annual, run-rate cost savings,
mid-point of the expected range. (4) Lease Adjusted EBITDA includes $21.3
million in expenses related to lease finance obligations. Includes $110
million annual, run-rate cost savings, mid-point of the expected range.
Pro Forma Builders FirstSource Capitalization
20
Liquidity
~ $400 million of liquidity at closing
($ in millions)
As of
12/31/2014
Cash and Cash Equivalents
$158
Existing BLDR Debt
(1)
$354
New Debt
1,595
Lease Finance Obligations
300
Total Debt
$2,249
Net Debt
$2,091
Net
Funded
Debt
(2)
1,787
LTM
Adj.
EBITDA
(12/31/2014)
(3)
$376
LTM
Lease
Adj.
EBITDA
(12/31/2014)
(4)
355
Credit Statistics
Total
Debt
/
LTM
Adj.
EBITDA
(3)
6.0x
Net
Debt
/
LTM
Adj.
EBITDA
(3)
5.6x
5.0x
Net Funded Debt / LTM Lease Adj. EBITDA
(2)(4) |
 Additional Information and Where to Find It
21
This communication may be deemed to be solicitation material in respect of the possible acquisition
of shares of common stock of Builders FirstSource by JLL Partners Fund V. L.P and Warburg
Pincus Private Equity IX, L.P, pursuant to the terms of an Equity Commitment Letter entered
into among such persons and the Company. In connection with the foregoing issuance of Builders
FirstSource common stock, the Company expects to file a proxy statement on Schedule 14A with
the Securities and Exchange Commission (the “SEC”) as required by the rules of the
NASDAQ Stock Market. INVESTORS AND SECURITY HOLDERS OF BUILDERS FIRSTSOURCE ARE UREGED TO READ
THESE MATERIALS (INCLUDING ANY AMMENDMENTS OR SUPPLEMENTS THERETO) THAT BUILDERS FIRSTSOURCE
WILL FILE WITH THE SEC WHEN THEY BECOME AVAIALBLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT SUCH ISSUANCE. The preliminary proxy statement and the definitive proxy
statement, in each case as applicable (when they become available), and any other documents
filed by Builders FirstSource with the SEC, may be obtained free of charge at the SEC’s website at
www.sec.gov. In addition, investors and security holders may obtain free copies of the documents
filed with the SEC at Builders FirstSource’s website, investors.bldr.com, or by
contacting our Investor Relations department in writing at 2001 Bryan St., Suite 1600, Dallas,
Texas, 75201. Builders FirstSource and its directors and executive officers may be deemed to be participants in the
solicitation of proxies from Builders FirstSource’s stockholders with respect to the
possible issuance of Builders FirstSource common stock pursuant to the terms of the equity
commitment letter. Information about Builder FirstSource’s directors and executive
officers and their ownership of the Company’s common stock is set forth in Builders
FirstSource’s Annual Report of Form 10-K for the fiscal year ended December 31, 2014, which
was filed with the SEC on March 3, 2015 and its proxy statement for its 2014 Annual Meeting of
Stockholders, which was filed with the SEC on April 11, 2014. Information regarding the
identity of the potential participants, and their direct or indirect interests in the
solicitation, by security holdings or otherwise, will be set forth in the proxy statement to be filed with
the SEC in connection with the possible issuance of Builders FirstSource common stock pursuant to the
terms of the equity commitment letter.
|