Net sales for the quarter were $1.8 billion, a decline of $52.4 million, a decrease of 2.9%

Sales volume grew by an estimated 7.7% with improvement across all three customer segments, led by an 8.7% volume increase in our value-added product categories

Commodity deflation decreased net sales by an estimated 10.6%

Adjusted EBITDA of $109.3 million or 6.2% of net sales

Net income of $41.4 million, or $0.35 per diluted share, and adjusted net income of $47.2 million, or $0.40 per diluted share

Net debt to Adjusted EBITDA ratio of 2.5x, at the low end of our targeted range

Acquired Raney Components, a vertically-integrated distributor and installer of value-added products in Florida with annual revenue of approximately $140 million.

Net sales were $1.8 billion, a 2.9% decrease compared to the same period a year ago driven by the impact of deflation in commodity prices of approximately 10.6%. Lumber and lumber sheet goods sales declined by 16.1%, attributable to the deflation in commodity prices as compared to the same period a year ago. Our remaining product categories, excluding gypsum, roofing and insulation, achieved increased sales on higher volumes.

Sales volume, excluding commodity deflation, grew by an overall 7.7%. Our single-family end market grew by an estimated 7.5%, repair and remodel / other by 6.8% and multi-family by 13.3%. Sales volume in our value-added product categories grew by 8.7%, including 10.7% in Manufactured Products and 6.9% in our Windows, Doors and Millwork categories.

Gross margin was $476.6 million compared to $492.8 million, a decrease of 3.3% over the prior year driven by the commodity deflation impact on net sales, mostly offset by an improved product mix and our continued focus on pricing discipline. Gross margin percentage remained relatively steady at 27.0 % versus 27.1% in the prior year period.

SG&A was consistent with the fourth quarter of 2018, as operational efficiencies fully offset increased variable expenses related to higher sales volume.

SG&A as a percentage of net sales was 22.8%, an increase of 60 basis points, primarily the result of the impact of commodity price deflation on our net sales.

Interest expense was $27.5 million in the fourth quarter of 2019, an increase of $4.1 million from the fourth quarter of 2018. This increase was primarily attributable to one-time charges of $3.5 million related to the partial repayment of the term loan in that period.

In addition, interest expense for the fourth quarter 2018 included a $3.2 million gain on debt extinguishment. However, these increases were partially offset by reduced interest expense attributable to lower outstanding debt balances in the fourth quarter of 2019 compared to the fourth quarter of 2018.

Income tax expense was $6.3 million, or an effective tax rate of 13.2%, compared to $15.0 million, or an effective tax rate of 22.4% in the prior year. The year over year decrease was mainly driven by one-time items impacting the rate in the quarter.

Net income was $41.4 million, or $0.35 per diluted share, compared to $52.0 million, or $0.45 per diluted share, in the same period a year ago.

Adjusted net income was $47.2 million, or $0.40 per diluted share, compared to $53.1 million, or $0.46 per diluted share, in the prior year quarter. The decrease was primarily driven by the deflationary impact of commodity prices on net sales.

Adjusted EBITDA declined $15.7 million to $109.3 million, a decrease of 12.6%. The decrease was primarily driven by lower gross margin dollars due to the impact of commodity price deflation on net sales. As a result, Adjusted EBITDA declined to 6.2% of sales in the fourth quarter from 6.9% in the same period a year ago.

Net sales were $7.3 billion, a 5.8% decrease compared to the prior year, driven by the impact of commodity price deflation. Sales volume increased by an estimated 6.5%, driven by increased volumes across all of our product categories, led by growth in value-added product categories.

Gross profit increased $53.9 million to $2.0 billion. Our gross margin percentage increased to 27.2% from 24.9% in the prior year period, a 230 basis point improvement. The increase was primarily attributable to an improved product mix, the decline in the cost of commodities relative to our customer pricing commitments, and continued pricing discipline. In addition, sales growth from our higher margin, value-added product categories contributed to increased gross profit dollars and percentage compared to the prior year period.

Interest expense was $109.6 million in 2019, an increase of $1.3 million from 2018. The increase was due to lower outstanding debt balances offset by $10.2 million in one-time charges related to the debt transactions executed during the year. In addition, interest expense for the full year 2018 included a $3.2 million gain on debt extinguishment.

Net income was $221.8 million, or $1.90 per diluted share, compared to $205.2 million, or $1.76 per diluted share, in the prior year period, representing an increase of $0.14 per diluted share, or 8.0%.

Adjusted net income was $245.1 million, or $2.09 per diluted share, compared to $221.2 million, or $1.90 per diluted share in the year ago period, representing an increase of $0.19 per diluted share. The year over year increase in adjusted net income of $23.9 million, or 10.8%, was primarily driven by the higher gross margin.

Adjusted EBITDA grew $14.5 million to $516.1 million, or 7.1% of net sales, compared to $501.6 million, or 6.5% of sales, attributable to higher gross margin dollars partially offset by increases in variable compensation related to the growth in estimated sales volume and profitability. The 2.9% increase in Adjusted EBITDA, and the 60 basis points improvement in EBITDA margin, were primarily due to the factors described above.

Net debt was $1,285.9 million as of December 31, 2019. The net debt to Adjusted EBITDA leverage ratio remained steady at 2.5x compared to September 30, 2019, at the low end of the Company’s previously stated leverage target ratio of between 2.5x and 3.5x.

Cash provided by operating activities was $504.0 million in 2019 which was positively impacted by commodity deflation on the value of working capital compared to the prior year period.

Cash used in investing activities was $199.2 million in 2019 including $92.9 million used for our acquisitions of Sun State and Raney in 2019 and capital expenditures of $112.9 million.

Liquidity as of December 31, 2019 was $695.3 million, consisting of $14.1 million cash on hand and $681.2 million net borrowing availability under our revolving credit facility.

In February of 2020, we issued $550.0 million in aggregate principal amount of senior unsecured notes due 2030 to redeem the remaining $503.9 million in aggregate principal amount of our senior secured notes due 2024, as well as, $47.5 million in aggregate principal amount of our senior secured notes due in 2027, and to pay related transaction premiums, fees and expenses.

Net sales

Cost of sales

Gross margin

Selling, general and administrative expenses

Income from operations

Interest expense, net

Income before income taxes

Income tax expense

Net income

Comprehensive income

Net income per share:

Basic

Diluted

Weighted average common shares:

Basic

Diluted

Net sales

Cost of sales

Gross margin

Selling, general and administrative expenses

Income from operations

Interest expense, net

Income before income taxes

Income tax expense

Net income

Comprehensive income

Net income per share:

Basic

Diluted

Weighted average common shares outstanding:

Basic

Diluted

Current assets:

Cash and cash equivalents

Accounts receivable, less allowances of $13,492 and $13,054 at December 31, 2019 and 2018, respectively

Other receivables

Inventories, net

Other current assets

Total current assets

Property, plant and equipment, net

Operating lease right-of-use assets, net

Goodwill

Intangible assets, net

Deferred income taxes

Other assets, net

Total assets

Current liabilities:

Accounts payable

Accrued liabilities

Current portion of operating lease liabilities

Current maturities of long-term debt

Total current liabilities

Noncurrent portion of operating lease liabilities

Long-term debt, net of current maturities, debt discount, premium and issuance costs

Deferred income taxes

Other long-term liabilities

Total liabilities

Commitments and contingencies

Stockholders’ equity:

Preferred stock, $0.01 par value, 10,000 shares authorized; zero shares issued and outstanding at December 31, 2019 and 2018

Common stock, $0.01 par value, 200,000 shares authorized; 116,052 and 115,078 shares issued and outstanding at December 31, 2019 and 2018, respectively

Additional paid-in capital

Retained earnings

Total stockholders’ equity

Total liabilities and stockholders’ equity

Cash flows from operating activities:

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Amortization of debt discount, premium and issuance costs

Loss (gain) on extinguishment of debt

Deferred income taxes

Stock compensation expense

Net (gain) loss on sales of assets and asset impairments

Changes in assets and liabilities, net of assets acquired and liabilities assumed:

Receivables

Inventories

Other current assets

Other assets and liabilities

Accounts payable

Accrued liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of property, plant and equipment

Proceeds from sale of property, plant and equipment

Cash used for acquisitions

Net cash used in investing activities

Cash flows from financing activities:

Borrowings under revolving credit facility

Repayments under revolving credit facility

Proceeds from long-term debt and other loans

Repayments of long-term debt and other loans

Payments of debt extinguishment costs

Payments of loan costs

Exercise of stock options

Repurchase of common stock

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Reconciliation to Adjusted EBITDA:

GAAP Net Income

Integration related expenses

Debt issuance and refinancing cost ⁽¹⁾

Adjusted Net Income

Weighted average diluted common shares (in millions)

Diluted adjusted net income per share:

Reconciling items:

Depreciation and amortization expense

Interest expense, net

Income tax (benefit) expense

Stock compensation expense

(Gain)/loss on sale and asset impairments

Other management-identified adjustments ⁽²⁾

Adjusted EBITDA

Adjusted EBITDA Margin

Costs associated with issuing and extinguishing long term debt in 2019 and 2018.

Primarily relates to severance and one time cost.

Net sales

Gross margin

Gross margin %

Adjusted SG&A/Other (excluding depreciation and amortization) as a % of sales ⁽¹⁾

Adjusted EBITDA

Adjusted EBITDA margin %

Depreciation and amortization

Interest expense, net of debt issuance cost and refinancing

Income tax expense

Other adjustments

Adjusted Net Income

Basic adjusted net income per share:

Diluted adjusted net income per share:

Weighted average common shares (in millions)

Basic

Diluted

Adjusted SG&A and other as a percentage of sales is defined as GAAP SG&A less depreciation and amortization, stock comp, acquisition, integration    and other expenses. GAAP SG&A in Q4-19 of $401.4M less $28.3M depreciation and amortization, less $2.3M of integration expenses, less $2.9M of stock comp, less $0.6 in gains on assets, impairments, and other. GAAP SG&A in FY19 of $1584.5M less $100.1M depreciation and amortization,    less $13.1M of integration expenses, less $12.3M of stock comp, plus $1.8 in gains on assets, impairments, and other.

Manufactured Products

Windows, Doors & Millwork

Value-Added Products

Gypsum, Roofing & Insulation

Siding, Metal & Concrete Products

Other

Specialized Products

Lumber & Lumber Sheet Goods

Total adjusted net sales

Three months ended

December 31,

2027 Secured Notes @ 6.75% Fixed

2024 Secured Notes @ 5.625% Fixed

2024 Term Loan @ 5.6% (Floating LIBOR)

Revolving Credit Facility @ 4.4% (Floating LIBOR)

Amortization of debt issuance costs, discount and premium

Finance leases and other finance obligations

Loss on debt extinguishment Cash

Total

Three months ended

December 31,

Twelve months ended

December 31,

Free Cash Flow

Operating activities

Less: Capital expenditures

Free Cash Flow