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US LBM Reveals 3.1% Sales Gain, 56% Profit Rise in 2019's First 9 Months

US LBM has just shed light for the first time on its 2019 performance, reporting a 55.9% jump in net profit to $27.5 million during the first three quarters of this year vs. the year-earlier period on a 3.1% rise in sales to $2.58 billion.

The numbers come from a Nov. 26 filing to the Securities and Exchange Commission updating information required as a preliminary step to becoming a publicly traded company. US LBM, which has been majority-owned by Kelso & Co. since July 2015, first filed an S-1 registration in May 2017.

Gross margin during the January-to-September period climbed to 29.2% from a year earlier 27.0% and appeared to generate most of the increase in net profit. Adjusted EBITDA--earnings before interest, taxes, depreciation, amortization, and one-time adjustments, grew to $191 million, or 7.4% of sales, from $178.7 million, or 7.2%.

Most of the voluminous SEC filing copied the same language as the previous one, which was submitted in March and covered results in 2018. A side-by-side comparison of the two revealed a few adjustments:

* Specialty products as a percentage of all sales revenue rose to 76% in the first three quarters of 2019 from 72% in all of 2018.

* The number of locations has grown to 258 in 32 states from 251 in 30.

* US LBM took a goodwill impairment charge of $12.6 million on an unidentified 8-branch unit after concluding realized and forecast cash flows didn't meet expectations. The $12.6 million was roughly 23% of the unit's previous goodwill valuation.

* Capital expenditures (excluding money gained from equipment sales) totaled $38.6 million in January through September.

* Equity ownership by management and key employees now is equal to 10.0%, down from 10.3%.

As with Builders FirstSource (BFS) and BMC, US LBM's sales appear to have been affected by the drop in lumber prices this year. In fact, sales at US LBM yards open during both 2018 and 2019 shrank by 1.9%.

Notably, despite the variations in revenue and in net income as a percent of revenue, adjusted EBITDA margin for all three companies was the same at 7.4%.

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