A flurry of M&A deals, particularly with the former Stock Building Supply, helped BMC Stock Holdings announce today sharp increases in net profit and sales during the second quarter compared with the year-earlier period.
The year-over-year comparisons vary depending on whether one takes into account how Stock was doing before it merged with BMC last last Dec. 1. Under GAAP principles, which excludes Stock's 2Q2015 performance but includes it in the most recent second quarter, BMC reported its net income shot up nearly nine-fold to $18 million in this year's second quarter vs. $2.1 million a year before. But if one includes Stock's 2Q2015 numbers, the net income gain becomes 77%--i.e., $21.6 million in the latest quarter against $12.2 million a year before.
Likewise, the change in net sales excluding Stock's 2015 showing comes out to a 123.2% gain to $797.5 million. BMC credited that growth in sales, as well as to its profits, from the benefits it received from having acquired two other companies earlier in 2015: VNS Corp. of Valdosta, Ga., and Robert Bowden Inc. of Marietta, Ga.
When one also takes Stock's 2015 showing into account, net sales increased 12.8% to $797.5 million. BMC estimates its VNS and Bowden acquisitions contributed 5.4 points of its 12.8% sales gain, while 6.8 points were from other volume growth, and 0.6 point of the rise was due to higher prices for lumber and sheet goods.
Sales of structural components increased 15.3% while sales of millwork, doors, and windows climbed 17%, President and CEO Peter Alexander said in a statement. He noted that the company's Ready-Frame system--a legacy of BMC not connected with any merger--saw sales jump nearly 32%. Nearly one-quarter of BMC's sales in April through June--$195.9 million--came through construction services rather than the sale of building products.
Jim Major, executive vice president and chief financial officer, said gross margins hit 24.0% while selling, general and administrative expenses declined to 17.5% of net sales. "The combination of improving cash flow from operations and $13.6 million in net proceeds from our May 2016 equity offering allowed us to reduce long-term debt to $376.6 million as of June 30, 2016, and positions us to seek additional investments that further the execution of our strategic objectives and improve operating results," he said in the statement.
BMC likes to measure its performance in terms of adjusted EBITDA, which it defines as net income plus interest expense, income tax expense, depreciation and amortization, impairment of assets, merger and integration costs, inventory step-up charges and non-cash stock compensation expense. By that measure, its adjusted EBITDA grew to $57.5 million from $35.1 million. One reason why is that it could exclude combined depreciation and amortization expenses that topped $17.1 million million in the latest quarter vs. $8.7 million a year before.
The company's balance sheet as of June 30 showed $1.4 billion worth of assets, including $255 million worth of goodwille, but only $756.1 million worthy of liabilities, of which the long-term debt totaled $376.6 million.