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8-K/A - FORM 8-K AMENDMENT - Builders FirstSource, Inc.d934759d8ka.htm
EX-99.3 - EX-99.3 - Builders FirstSource, Inc.d934759dex993.htm

Exhibit 99.2

ProBuild Holdings, Inc.

Index

 

     Page(s)  
Condensed Combined Financial Statements   

Balance Sheets

     F-1   

Statements of Operations

     F-2   

Statements of Comprehensive Income

     F-3   

Statements of Cash Flows

     F-4   

Notes to Financial Statements

     F-5   


ProBuild Holdings, Inc.

Condensed Combined Balance Sheets

March 31, 2015 and December 31, 2014

 

     2015     2014  
    

(unaudited)

(in thousands of dollars)

 

Assets

    

Current assets

    

Cash and cash equivalents

   $ 15,665      $ 9,385   

Accounts receivable, less allowances of $12,726 and $12,504 at March 31, 2015 and December 31, 2014, respectively

     414,558        443,829   

Inventories, net

     337,066        317,476   

Other current assets

     21,444        20,494   
  

 

 

   

 

 

 

Total current assets

  788,733      791,184   

Property and equipment, net

  571,844      583,719   

Goodwill

  1,026,159      1,026,159   

Other Assets

  6,915      8,384   
  

 

 

   

 

 

 

Total assets

$ 2,393,651    $ 2,409,446   
  

 

 

   

 

 

 

Liabilities and Equity

Current liabilities

Accounts payable

$ 292,583    $ 288,707   

Accrued expenses and other current liabilities

  209,437      252,436   

Current maturities of notes payable and lease obligations

  6,269      6,109   
  

 

 

   

 

 

 

Total current liabilities

  508,289      547,252   

Long-term liabilities

Notes payable and lease obligations, net of current maturities

  1,327,888      1,281,305   

Other long-term liabilities

  19,838      21,085   
  

 

 

   

 

 

 

Total liabilities

  1,856,015      1,849,642   
  

 

 

   

 

 

 

Commitments and contingencies (Note 8)

Stockholder’s equity

Common stock

  5      5   

Additional paid-in capital

  869,218      869,218   

Accumulated deficit

  (815,485   (810,583
  

 

 

   

 

 

 

Total ProBuild Holdings, Inc. stockholder’s equity

  53,738      58,640   

Noncontrolling interests

  483,898      501,164   
  

 

 

   

 

 

 

Total equity

  537,636      559,804   
  

 

 

   

 

 

 

Total liabilities and equity

$ 2,393,651    $ 2,409,446   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these combined financial statements.

 

F-1


ProBuild Holdings, Inc.

Condensed Combined Statements of Operations

Three Months Ended March 31, 2015 and 2014

 

     2015     2014  
     (unaudited)
(in thousands of dollars)
 

Net sales

   $ 913,140      $ 908,444   

Cost of goods sold

     676,286        677,799   
  

 

 

   

 

 

 

Gross margin

  236,854      230,645   
  

 

 

   

 

 

 

Operating expenses, excluding depreciation and amortization

  233,915      248,747   

Depreciation expense

  12,300      11,760   

Amortization expense

  988      3,415   
  

 

 

   

 

 

 

Total operating expenses

  247,203      263,922   
  

 

 

   

 

 

 

Loss from operations

  (10,349   (33,277

Interest expense

  (12,878   (13,655

Other income

  3,046      3,092   
  

 

 

   

 

 

 

Loss before income tax expense

  (20,181   (43,840

Income tax expense

  866      776   
  

 

 

   

 

 

 

Net loss from operations

  (21,047   (44,616

Less: Loss attributable to the noncontrolling interests

  (16,145   (41,885
  

 

 

   

 

 

 

Net loss attributable to ProBuild Holdings, Inc.

$ (4,902 $ (2,731
  

 

 

   

 

 

 

The accompanying notes are an integral part of these combined financial statements.

 

F-2


ProBuild Holdings, Inc.

Condensed Combined Statements of Comprehensive Income

Three Months Ended March 31, 2015 and 2014

 

     2015     2014  
    

(unaudited)

(in thousands of dollars)

 

Net loss

   $ (21,047   $ (44,616
  

 

 

   

 

 

 

Other comprehensive loss

Pension adjustment

  (1,121   —     
  

 

 

   

 

 

 

Other comprehensive loss

  (1,121   —     
  

 

 

   

 

 

 

Total comprehensive loss

  (22,168   (44,616

Less: Comprehensive loss attributable to noncontrolling interests

  (17,266   (41,885
  

 

 

   

 

 

 

Comprehensive loss attributable to ProBuild Holdings, Inc.

$ (4,902 $ (2,731
  

 

 

   

 

 

 

The accompanying notes are an integral part of these combined financial statements.

 

F-3


ProBuild Holdings, Inc.

Condensed Combined Statements of Cash Flows

Three Months Ended March 31, 2015 and 2014

 

     2015     2014  
     (unaudited)
(in thousands of dollars)
 

Cash flows from operating activities

    

Net loss

   $ (21,047   $ (44,616

Adjustments to reconcile net loss to cash flows from operating activities

    

Depreciation

     13,664        13,076   

Amortization of intangible assets

     988        3,416   

Bad debts, net of recoveries

     463        540   

Loss on sales and impairment of property and equipment

     (927     (1,040

Deferred taxes

     (482     (99

Noncash interest

     540        540   

Unfunded pension obligation

     (879     (593

Other

     (1,452     (1,183

Changes in assets and liabilities

    

Accounts receivables, net

     28,808        15,999   

Inventories, net

     (19,590     (44,769

Prepaid expenses and other current assets

     (950     (1,565

Accounts payable

     16,130        23,329   

Accrued expenses and other current liabilities

     (42,561     (43,647
  

 

 

   

 

 

 

Net cash used by operating activities

  (27,295   (80,612
  

 

 

   

 

 

 

Cash flows from investing activities

Increase in notes receivable and investments

  (60   (222

Additions to property and equipment

  (5,840   (15,617

Proceeds from sale of property and equipment

  710      1,095   
  

 

 

   

 

 

 

Net cash used in investing activities

  (5,190   (14,744
  

 

 

   

 

 

 

Cash flows from financing activities

Decrease in checks outstanding

  (12,254   (7,079

Proceeds from long-term debt

  244,449      347,375   

Payments on long-term debt and capital lease obligations

  (193,430   (244,844
  

 

 

   

 

 

 

Net cash provided by financing activities

  38,765      95,452   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

  6,280      96   

Cash and cash equivalents

Beginning of quarter

  9,385      14,343   
  

 

 

   

 

 

 

End of quarter

$ 15,665    $ 14,439   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these combined financial statements.

 

F-4


ProBuild Holdings, Inc.

Notes to Condensed Combined Financial Statements

(unaudited)

 

1. Organization and Summary of Significant Accounting Policies

Organization and Description of Business

ProBuild Holdings, Inc. and subsidiaries and commonly controlled companies combined here within (“PBHI”) are owned by ProBuild Capital LLC, which is, in turn, owned by FMR LLC and a FMR LLC related party entity, ProBuild Investors LLC (collectively referred to herein as the “Investors”).

PBHI is a leading supplier of building materials, manufactured components, and construction services to professional contractors, subcontractors, and consumers. At March 31, 2015, PBHI operated locations in 40 states across the United States. PBHI sells a broad selection of building materials including lumber, plywood, OSB, gypsum wallboard and other drywall products, millwork, trusses, roofing, acoustical materials, siding products, insulation materials, metal specialties, hardware, and tools. PBHI’s manufactured products include trusses, wall panels, millwork, and pre-hung door and window fabrication. PBHI also provides construction services which include framing and installation of other products.

These financial statements also include the accounts of a consolidated affiliate, ProBuild Real Estate Holdings, LLC (“PBRE”), which is a wholly owned subsidiary of ProBuild Capital LLC and owns properties that are leased to PBHI. PBRE is considered a variable interest entity (“VIE”) for which PBHI directs activities and absorbs losses related to property sales and disposals and, as such, PBHI consolidates the results of PBRE. Related party earnings from operations have been eliminated in the preparation of these combined financial statements and all remaining PBRE income is reflected on the accompanying combined statements of operations as noncontrolling interests.

In the opinion of management, the accompanying unaudited condensed combined financial statements include all recurring adjustments and normal accruals necessary for a fair presentation of PBHI’s financial position, results of operations and cash flows for the dates and periods presented. 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 significant intercompany accounts and transactions have been eliminated in combination.

The condensed combined balance sheet as of December 31, 2014 is derived from the audited combined financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. This condensed combined balance sheet as of December 31, 2014 and the unaudited condensed combined financial statements included herein should be read in conjunction with the more detailed audited combined financial statements for the year ended December 31, 2014. Accounting policies used in the preparation of these unaudited condensed combined financial statements are consistent with the accounting policies described in the Notes to Combined Financial Statements included in our audited financial statements as of and for the year ended December 31, 2014.

Certain prior period amounts have been reclassified to conform with the current period condensed presentation. Nontrade receivables have been reflected in accounts receivable, insurance recoveries have been reflected in other current assets and checks outstanding have been reflected in accounts payable in the condensed combined balance sheet at March 31, 2015 and December 31, 2014. These reclassifications did not have an impact on current or total assets and liabilities for the periods presented.

 

2. Inventory

Inventory consists principally of building materials finished goods and is carried at the lower of cost or market. Cost is determined using the last-in, first-out method. Had the first-in, first-out method been used to value inventory at March 31, 2015 and December 31, 2014, inventory would have been approximately $52.2 million higher at March 31, 2015 and December 31, 2014, with no impact on pre-tax loss for the three months ended March 31, 2015 and 2014. Inventory is reported net of allowances for shrink, obsolescence, and net realizable value. As of March 31, 2015 and December 31, 2014, inventory allowances were $8.8 million and $7.9 million, respectively.

 

F-5


3. Property and Equipment

Property and equipment as of March 31, 2015 and December 31, 2014 is as follows:

 

     2015      2014  
     (in thousands of dollars)  

Land

   $ 195,357       $ 196,260   

Buildings and improvements

     332,403         330,857   

Equipment and fixtures

     558,399         555,048   

Assets held-for-sale

     10,016         9,683   

Construction in progress

     10,645         17,818   
  

 

 

    

 

 

 
  1,106,820      1,109,666   

Less: Accumulated depreciation

  (534,976   (525,947
  

 

 

    

 

 

 

Property and equipment, net

$ 571,844    $ 583,719   
  

 

 

    

 

 

 

Included in property and equipment are certain assets held under capital leases and lease finance obligations. These assets are recorded at the present value of minimum lease payments and include land, buildings and equipment. The following balances held under capital lease and lease finance obligations, net of accumulated amortization of $50.1 million and $49.7 million as of March 31, 2015 and December 31, 2014, respectively, are included on the accompanying combined balance sheets:

 

     2015      2014  
     (in thousands of dollars)  

Land

   $ 140,672       $ 142,087   

Buildings and improvements

     115,881         119,124   

Equipment and fixtures

     10,463         10,959   
  

 

 

    

 

 

 
$ 267,016    $ 272,170   

Depreciation expense for the three months ended March 31, 2015 and 2014 was $13.7 million and $13.1 million, respectively, of which $1.4 million and $1.3 million, respectively, related to manufacturing and distribution centers and was included in cost of goods sold.

No impairments were recognized on the held-for-use assets at March 31, 2015 and December 31, 2014. For the three months ended March 31, 2015 and 2014, PBHI recognized impairment gains related to increases in the fair value, less cost to sell, of assets held-for-sale in the amounts of $0.4 million and $0.6 million, respectively.

 

4. Notes Payable and Lease Finance Obligations

Notes payable and lease finance obligations as of March 31, 2015 and December 31, 2014 consist of the following:

 

     2015      2014  
     (in thousands of dollars)  

Related party notes payable

   $ 685,000       $ 685,000   

Revolving credit facilities

     355,282         302,932   

Lease finance obligations

     286,414         290,902   
  

 

 

    

 

 

 

Total notes payable

  1,326,696      1,278,834   

Less:

Current portion - 3rd party notes payable

  (888   (886
  

 

 

    

 

 

 

Total long term notes payable

$ 1,325,808    $ 1,277,948   
  

 

 

    

 

 

 

 

F-6


5. Income Taxes

The effective tax rates for the three months ended March 31, 2015 and 2014 were (4.3%) and (1.8%), respectively, which differs from the statutory rate of 35% principally due to state and local taxes, a valuation allowance and losses allocated to noncontrolling interests.

Based on the weight of positive and negative evidence, a valuation allowance on substantially all of the net deferred tax assets was recorded as of March 31, 2015 and December 31, 2014 in the amount of $267.9 million and $267.6 million, respectively. Realizability of the deferred tax assets could change if estimates of future taxable income change. To the extent taxable income is generated in future periods, these tax benefits will be realized and will reduce the future effective tax rate.

 

6. Related Party Transactions

For the three months ended March 31, 2015 and 2014, PBHI incurred interest expense of $3.4 million and $3.8 million, respectively, on related party debt. As of March 31, 2015 and December 31, 2014, PBHI had $9.1 million and $5.0 million, respectively, of cash invested in an overnight money market instrument with a related party.

 

7. Employee Retirement and Benefit Plans

Retirement Plan

PBHI terminated The ProBuild Retirement Plan as of January 30, 2015 and concurrently completed plan measurements resulting in an adjustment to its unfunded postretirement liabilities to reflect the unfunded status of the plans. This adjustment, along with the postretirement benefit expense, resulted in another comprehensive loss of $1.1 million for the three months ended March 31, 2015. Further, PBHI contributed $2.0 million to the Retirement Plan during 2015, and upon IRS approval of the plan termination expects to fund any required additional final contributions to fully fund all plan benefits. Also, upon IRS approval of the termination and liquidation of the Retirement Plan, any remaining unamortized comprehensive loss will be recognized in PBHI’s combined statements of operations. Expected benefit payments in 2015 are $8.1 million with distribution of all remaining plan benefits to be made upon IRS approval.

 

8. Commitments and Contingencies

PBHI is a party to certain disputes arising in the ordinary course of business. Such disputes may include product liability, warranty claims, general contractual liabilities, employment matters, intellectual property disputes, environmental and other matters. Management does not believe the ultimate outcome of these matters will materially affect PBHI’s financial position, cash flows or results of operations.

 

F-7


9. Noncontrolling Interest

Noncontrolling interests represent third-party ownership in consolidated VIEs in which PBHI is determined to be the primary beneficiary. Below is an equity roll forward of the noncontrolling interests which identifies the balances between PBH LLC and other VIEs:

 

     Noncontrolling Interests
(in thousands of dollars)
 
     PBH LLC      PBRE      Total  

Balances at December 31, 2014

   $ 396,106       $ 105,058       $ 501,164   
  

 

 

    

 

 

    

 

 

 

Net (loss) income

  (17,240   1,095      (16,145

Other comprehensive (loss)

Pension adjustment

  (1,121   —        (1,121
  

 

 

    

 

 

    

 

 

 

Total comprehensive (loss) income

  (18,361   1,095      (17,266

Balances at March 31, 2015

$ 377,745    $ 106,153    $ 483,898   
  

 

 

    

 

 

    

 

 

 

 

10. Subsequent Events

PBHI evaluated subsequent events through May 28, 2015.

On April 13, 2015, PBHI signed a Securities Purchase Agreement with Builders FirstSource, Inc. as the acquirer in an all-cash transaction with a purchase price of $1.625 billion. The transaction is expected to close in the second half of 2015.

 

F-8