Builders FirstSource Inc (BLDR) 2014 Q4 法說會逐字稿

Good morning and welcome to the Builders FirstSource fourth-quarter and fiscal-year 2014 earnings conference call. Your host for today's call is Mr. Floyd Sherman, Chief Executive Officer. (Operator Instructions).

Any reproduction of this call in whole or in part is not permitted without prior written authorization of Builders FirstSource. And as a reminder, this conference call is being recorded today, February 20, 2015.

The Company issued a press release after the market close yesterday. If you don't have a copy, you can find it on our website at BLDR.com.

Before we begin, I would like to remind you that. during the course of this conference call. management may make statements concerning the Company's future prospects, financial results, business strategies and industry trends. Such statements are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties which could cause actual results to differ materially from expectations. Please refer to our most recent Form 10-K filed with the Securities and Exchange Commission and other reports filed with the SEC for more information on those risks. The Company undertakes obligation to publicly update or revise any forward-looking statements.

We have provided reconciliations of non-GAAP financial measures to their GAAP equivalents in our earnings press release and detailed explanations of non-GAAP financial measures in our Form 8-K filed yesterday, both of which are available on our website.

At this time, I would like to turn the call over to Floyd Sherman.

Thank you and good morning. Welcome to our fourth-quarter and fiscal-year 2014 earnings call. Joining me from our management team is Chad Crow, President, Chief Operating Officer and Chief Financial Officer, as well as Marcie Hyder, Vice President and Controller. After I give a brief recap of our fourth quarter and fiscal year, I'll turn the call over to Chad, who will discuss our financial results in more detail. After my closing comments regarding our outlook, we'll take your questions.

Though the level of new construction activity was not what we had expected in 2014, we were still able to deliver profitable top-line growth while also expanding our product offerings and customer base via multiple acquisitions within very attractive housing markets. We reported sales of approximately $397 million for the fourth quarter of 2014, up 7.5% from a year ago. Excluding the impact of recent acquisitions, our fourth-quarter sales increased 3%. Quarter-over-quarter commodity price fluctuations had minimal impact on our sales.

For fiscal 2014, we reported sales of approximately $1.6 billion, up 7.7% over 2013. Excluding the impact of acquisitions, our sales for fiscal 2014 increased 5.8% compared to last year as sales volume grew 7.9% before a 2.1% negative impact of commodity price deflation on our sales.

From a single family housing start perspective, the Census Bureau reported 2014 actual starts in the South region, which encompasses all of our markets, increased 6% compared to 2013.

I'd also like to point out fiscal 2014 marked the first year of positive net income for us since 2006. The continued execution of our core strategies has helped us weather the worst housing downturn since the Great Depression and significantly improved our results. I feel honored to be working with what I believe is the best group of people in this industry and I'm very proud of what we've accomplished over the past few years.

I'll now turn the call over to Chad, who will review our financial results in more detail.

Thank you, Floyd. Good morning, everyone.

For the current quarter, we reported sales of $396.7 million compared to $369.1 million for the fourth quarter of 2013, an increase of $27.6 million, or 7.5%. Excluding the impact of recent acquisitions, sales increased 3% largely due to higher sales volume as commodity price fluctuations had a minimal impact on our sales.

Breaking down our sales by product category, prefabricated components were $79.1 million, up 9.8% from $72 million in the fourth quarter of 2013. Windows and doors were $92 million, up 11.2%. Lumber and lumber sheet goods were $121.6 million, down $1.5 million. Our millwork category was $44 million, up $25.1 million, and other building products and services were $60 million, or 7% -- up 7% from last year.

From a product mix standpoint, our value-added product categories continue to make up a higher percentage of our overall sales while lumber and lumber sheet goods declined as a percentage of sales. Our other building products and services category was relatively flat compared to last year.

Gross margin was 22.8% in the current quarter, up from 22.4% last year. Our gross margin percent increased largely due to improved customer pricing versus the fourth quarter of 2013. Increasing our gross margins as we continued to grow our top line was a focal point for us this past year and I'm very pleased to say we improved our gross margin percentage sequentially each quarter of 2014, resulting in an 80 basis point increase year-over-year.

For the current quarter, our SG&A increased $9.4 million, or 13.5%. Of the $9.4 million increase in SG&A, $1.3 million related to stock comp expense and $1 million related to depreciation and amortization, both of which are noncash items. The remaining $7.1 million increase was largely due to investments made in employees, equipment and facilities to support current and future sales growth. This includes incremental salaries and wages, equipment lease expense, and facility rent along with expenses associated with acquisitions.

As a percentage of sales, SG&A expense increased to 19.9% compared to 18.8% for the fourth quarter of 2013. Of this 110 basis point increase, 50 basis points related to stock comp expense and depreciation and amortization, again both noncash items, with the remaining 60 basis points being associated with the aforementioned investments in growth infrastructure.

Interest expense was $8.6 million for the fourth quarters of 2014 and 2013.

We recorded $500,000 of income tax expense compared to $200,000 in the fourth quarter of 2013. We recorded a reduction of the after-tax noncash valuation allowance on our deferred tax assets of $900,000 and $2.6 million in the fourth quarters of 2014 and 2013 respectively. As of December 31, 2014, our gross federal income tax net operating loss available for carryforward was approximately $245 million.

Income from continuing operations for the fourth quarter of 2014 was $2.5 million, or $0.02 per diluted share, compared to $4.6 million, or $0.05 per diluted share, last year. Our adjusted EBITDA was $17.7 million, or 4.5% of sales, compared to $16.2 million, or 4.4% of sales, last year.

Operating cash flow was negative $3 million for the fourth quarter of 2014 compared to $8.6 million in the fourth quarter of 2013. The primary difference relates to a $12.3 million increase in our working capital in the current quarter while working capital was flat in the fourth quarter of 2013.

During the fourth quarter of 2014, we used approximately $36.2 million of cash on hand to acquire Trim Tech of Austin and Empire Trust Limited, marking the fourth and fifth acquisitions by the Company since mid-2014.

Capital expenditures were $11.2 million for the fourth quarter of 2014, an increase of $5.5 million over the same quarter of 2013 and primarily relate to the relocation of an existing facility in San Antonio and the opening of a new facility in north Houston.

Total liquidity at December 31, 2014 was $147.2 million, including $17.8 million of cash and $129.4 million in borrowing availability under our revolver. We had no new borrowings under our revolver during the quarter and had $30 million in outstanding borrowings at December 31, 2014.

I'll now turn the call back over to Floyd for his closing comments.

Thank you, Chad. Our outlook is for a steady recovery in the housing market due to factors such as continued job growth, favorable mortgage rates, and lending guidelines that appear to be easing. As the economy expands and the housing market moves back towards a stronger level of activity, our focus will remain on profitably growing our revenues while continuing to look for ways to gain share, either organically or through acquisitions, and to ultimately to improve our operating margins.

I'll now turn the call over to the operator for Q&A.

(Operator Instructions). Trey Grooms, Stephens Inc.

Good morning, gentlemen. A couple of questions. First off, I mean you guys are doing a great job on the margins. Congrats on that. But it looks like that is starting to cut into your share a little bit, your organic growth up 3%. Single-family starts were up I think 9% in the quarter in the South. First off, do you think that's the case? Do you feel like you've lost some share in the quarter, or is there something else going on?

And then secondly, how do you think about balancing out margins and marketshare as we look through the next several quarters just going forward?

Definitely, Trey, you know, I know the amount of business that we're walking from is definitely an indication that, as we continue to try to move our margins up, that we are maybe flattening out I think on an overall basis. And then still for the year, we gained a little bit of marketshare or just about flat. So we continue to really evaluate that position.

We really don't feel that we can start cutting prices and be able to hold the margin gains that we've made and that we currently are enjoying. We think it's very important to get our margins up because, as the housing continues to recover, as conditions get better, it's a heck of a lot harder to pull your margins up from 20% and get it back to a normalized rate of 24% to 25% than it is to pull it up from 23%. That's what we really feel is the reason and the important reason why we want to continue holding our position on margins. If we feel that it really starts taking away from our marketshare, we may then decide to relook at it.

If you look at where the losses come from, it's primarily you'll see it in our commodity products. The commodity products for the quarter were down actually 1%, almost 1.2%, over where it was a year ago.

Our gains we continue to make in prefab components, they were up almost 10%. Windows and doors were up 11%, millwork up 25%, and then our other products were down, about flat with market growth.

So the big area that we are trading off is in the area of the lumber and panels or the commodity products and we're trying to push our efforts into the higher-margin products, which we feel ultimately will be a lot better for us. We know we can get the lumber and panel business back if we want to go after it, but it can also then work against you in some of the other higher-margin product areas that we've been concentrating in. So that in a long way around is -- hopefully answers your question.

Absolutely it does. Thanks, Floyd, for that. That makes a lot of sense.

Shifting now, Chad, you talked I guess in prior quarters kind of your thoughts on how things are progressing in the current quarter. Would you mind giving us your view on what you're seeing right now and how you're thinking about the March quarter and spring selling season and generally any color that you can give us on that?

Yes. You know, it's really too soon to say exactly how the quarter might shake out. I will say, in January, things were relatively flat with how we ended the year. We started to see some momentum a week or two ago in our daily sales and then we got slammed by the weather this past week in a lot of our markets and still have some locations that are even closed today. So it's a little too soon to try to guess what top line might be.

I think one thing you need to keep in mind, Trey, is, on a sequential quarter basis, we do get hit with some extra SG&A, some extra payroll taxes with the reset of Social Security. On a sequential quarter basis, we start out in a hole about 50 basis points on gross margin just because of payroll taxes alone. And then on the SG&A side of things, we would expect to pick up an incremental $3.5 million on SG&A between payroll taxes and the fact that we have to start accruing for vacation at the beginning of the year. So just something to keep in mind on a sequential quarter basis. I still think Q1 of this year will be better than last year, but it's really hard to say exactly where it all may fall out.

Okay, that makes sense. But just a point of clarity on that, when you said relatively flat with 4Q, do you mean on an absolute -- like an absolute sales basis or do you mean similar growth, year-over year-growth, as what we saw in the fourth quarter?

Well, our sales per day at the end of the year, where we were running was pretty consistent with how we entered the first of the year and how January played out. Then we did start to see a pickup, as I said, until we got hit by some of the snow and ice.

Got you, okay. All right. Thanks for that. My last question and then I will turn it over is going to be -- just I mean I know you guys are all of the Texas market, feet on the ground and really understand that market I think as well as anybody. You've been doing some acquisitions there, some greenfields with the new distribution facility in North Houston.

Can you give us just some color on what your Texas exposure is as a percent of revs? And then if you could help break that down, as much as you can anyway, into the specific markets within Texas that you're in, that would be helpful.

Then as the follow-on to that, what are you guys seeing out of that market? Are you seeing any slowdown in any of these markets? What are your expectations there as we look into the next several quarters, given the announcements we've seen from the energy companies and with the commodity and so forth?

Right now, our sales in Texas are probably 20%, 25% of our total revenue. I'm not going to try to break that down by market.

Okay.

I will say we have seen a slowdown in Houston on the more expensive homes, say, $450,000 and up. Those orders seem to have slowed a bit. Really haven't seen much of a pullback on the lower-cost homes in Houston or in other markets in Texas at this point. So, we're all still waiting to see if the other shoe is going to drop, and a lot of that is going to depend on for how long a period of time the oil prices may stay depressed.

Got you. Okay. Thanks guys and good luck and I'll hop back in queue.

Philip Volpicelli, Deutsche Bank.

Good morning. My first question is with regard to the acquisitions. You made the two acquisitions in the quarter (technical difficulty). Can you give us any indication of what the revenue or the EBITDA is for those acquisitions so that we can figure out what the leverage is on a pro forma basis or the multiple you paid for them?

Let's see. TimberTech was $15 million-ish I believe on an annual basis, and Trim Tech was a little bit higher than that on an annual basis.

And that's revenue, Chad? Or that's EBITDA?

That's correct. That's revenue.

Okay. And should we think that the margin profile is similar to your margin profile, or how should we think about that?

You know, those are very heavy value-adds, so their margin profile is going to be a little heavier than our overall Builders FirstSource margin profile, but I would put it consistent with similar operations within our Company.

Okay. So can you give us like an aggregate multiple? What I'm trying to do is -- obviously you spent the $30 million of cash in the quarter, so your net debt looks like it's gone up but in fact all you've really done is added the EBITDA. So I'm trying to figure out what the impact is on your net leverage.

We're not going to give EBITDA on those acquisitions.

All right. That's fine.

And then I think Trey was trying to get to this point. The revenue per start in the region is down about 4% in the fourth quarter and that accelerated from the negative 2.9% in the third quarter. Is that because you're building lower-priced homes? Is that a mix issue? What's driving that decline in revenue per start?

You know, I think part of it, as Floyd mentioned, is the fact that we are locking lower margin business, so any time you do that, you are going to lose some share.

Commodity deflation, the impact on the quarter was minimal. It was slightly negative. We just didn't feel like it was worth disclosing.

You talk to our guys in the field and they will tell you they don't feel like they're losing any share that they didn't want to lose because of price. So, I don't know if there is a little noise in the starts numbers. I don't know if it is our mix of customers that maybe aren't pulling as many permits as others in the region. It's really hard to tell on a one-quarter basis and even sometimes two quarters for that standpoint. So I think the spring and early summer selling season will really be the proof in the pudding to see how we're doing on a share basis.

But I would even say, Chad, on a year basis, our loss in revenue per start is all coming out of our lower lumber sheet goods. For the year, our prefab components sales growth was up almost 13%, windows and doors up almost 16%, millwork 17%.

If you look at the lumber, lumber sheet goods down 0.8%, and that's a third of your business. If you look at the other building products, which is primarily install, and we definitely have pulled back on our install because of the difficulties of acquiring labor, keeping labor, being able to price labor and so forth, that was only up 4.3%.

So, while we maybe have lost a little bit of revenue per share we weren't totally able to make it up in those other products. We have been able to move up our margins substantially. 80 basis points in a highly competitive market I think is an indication that our strategy is good. We still produced more bottom-line EBITDA. We still produced a gain in sales. If I saw us losing it across the board in all those categories, I'd be a lot more worried than I am now. Any time we want to go and get lumber sales and panel sales, you can do it if you want to drop your drawers.

Okay, great. And then on the windows and doors space, the manufacturers there have been announcing price increases. One, have those price increases been sticking? And two, have you had any problem passing them along to your customers on specifically windows and doors?

The prices seem to be sticking and it's always a battle to raise prices, but we've been pretty successful at passing those along.

Okay. And the last one for me, with the potential headwinds in Texas from what's happened with oil and gas, would that make you more conservative on the acquisition front or how are you thinking about acquisitions in 2015?

Well, we would certainly -- we're still certainly interested in acquisitions. The pipeline still seems pretty full. We would probably give a little harder thought to more acquisitions in Texas right now until we see how the oil situation is going to pan out. But we're going to be prudently aggressive no matter what the situation is or what the economy is like. So, I don't know that it's really going to change our strategy all that much other than maybe, like I said, given the opportunities in Texas, a little bit more thought from an oil price standpoint.

And I think you also have to say, Chad, we are looking harder for acquisitions that can maybe move the needle more than some of the acquisitions that we've done. It takes a tremendous amount of effort and time on a lot of people's part. On some of the smaller acquisitions, you're going to put in that same effort and time on a larger acquisition. So, we're looking hard for those type acquisitions that we feel can give us a lot more scale than what we have been doing.

Yes, and we've tapped the brakes the last couple of months and we're just trying now to digest and integrate the six that we've done recently.

Okay. Thank you very much.

Jay McCanless, Sterne, Agee.

Thanks for taking my questions. First question on the comments that were in the release about lumber deflation not having an impact this quarter. I was surprised to see that and just wanted to find out, even with OSB still down year over year and framing lumber up a little bit, is that finally getting to the point now where OSB is not going to be a drag on the numbers going forward? And how are lumber prices right now, cash prices, looking?

I would like to have been able to say that. We saw a strengthening of the commodity pricing in the fourth quarter. Lumber started moving up. Panels started moving up. And then towards the end of December, the market started falling again.

If you look at currently where we are in the midpoint in February, we're now looking at the framing lumber composite is down versus where it was a year ago by almost 8%. Panels are down close to 11%.

I don't know how much the extreme weather that we're experiencing through the Midwest and Northeast is affecting the pricing on lumber panels right now. I suspect it is having a significant effect.

Our feeling is still that we're going to continue to see a commodity pricing during 2015 that's going to be very similar to what we had seen in 2014. We probably saw the tightest band of trading within the year that I can ever recall. It stayed within about a $40 band on lumber and even a little bit tighter band on panels. We didn't have the extreme volatility that we have seen in the past, and I think that's going to be more of what we're going to see through 2015. There still is adequate capacity, in fact still too much capacity chasing too little demand. So, I think what we're seeing right now is more weather-driven than it is what we're going to see in market pricing. I really suspect that we're going to see some increasing lumber and panel prices as we run out through March.

Okay, that's good to hear. Thank you, Floyd.

The second question I had was on the fourth-quarter SG&A number. And I apologize if you've already talked about this. But were there any one-time items in there that we can take out for next year?

I don't know that there's anything in there you can take out. On a percentage of sales basis, about half of our increase quarter-over-quarter was stock comp and depreciation and amortization, so obviously noncash items, but those numbers will carry on into 2015.

The others, as I said, were more investments in our current growth or our future growth, investments in employees, delivery equipment, facilities. And so those will carry through 2015 as well, but obviously the hope there is we're able to deleverage those against increasing sales as the year goes on.

For the quarter, our salary and wages, if we look at that, we flexed about 66% variable to sales growth. The areas that really caught us also, Chad, that I would hope that we can see an improvement next year is with our health insurance. We really got clobbered again in the fourth quarter with an increase in group health, almost $1.2 million over fourth quarter a year ago. The last couple of quarters have been really, really tough. I don't know whether we're seeing some of what we may be seeing on a long-term basis that's being created through the Health Reform Act. I suspect that's part of it, but it also just maybe it was our time to really experience some very, very high cost claims. But our professional services -- and that will probably continue as long as we continue doing the acquisitions and we're active in that area. That added over $0.5 million of unusual cost to us. So just those couple of items, you're looking at right at $2 million or so of what I would say is unanticipated or unexpected cost.

Got you. Thank you for that.

Then the last question I had, Floyd, was going back to making an acquisition that would actually increase your scale and give you guys a bigger footprint, what has to -- assuming that the market continues to trend up a little bit in the Southeast, I mean are you just going to have to pay more if you want to get that scale, or do you think it's more of a situation where the market needs to roll over a little bit and slow down where those people are ready to sell? Can you give us some more color around what you're thinking on that?

I really think it's probably going to be a combination of both of those things. I know there appears to be some situations developing where people are trying to get what they think will be a better trailing 12 EBITDA. I think we'll see some things maybe loosen up in the spring.

Will we have to pay more? Typically, you're willing to pay a little bit more if the value is there and we have to really see that the value is there. We've got to see that there's good expansion capabilities in the business. And if we can expand the profitability in the business that we don't have to put in a lot of capital expenditures, those things will probably say that we're going to have to pay more. But so far on the businesses we bought, I think we bought at very good value propositions. I suspect the larger ones we're going to probably have to raise the bar somewhat.

Chad, do you have any different views on that?

No, I think that's right. I think the fact that the market is not growing at the rate that maybe a year ago folks thought it would is certainly one of the reasons we've seen the pipeline fill up even more from an opportunity standpoint.

Okay. Great. Thanks guys. Have a good day.

(Operator Instructions). Sam McGovern, Credit Suisse.

Good afternoon, guys. Thanks for taking my questions.

Just on following up on the M&A theme, to the extent that you do see increased opportunities with the pullback in Houston, would that be someplace you would go further into? And then also would you guys be looking to expand geographies or would it just be sort of infill in your current footprint?

You know, we're certainly not going to rule Houston out. If something interesting came along, we would definitely take a look at it.

As far as expanding geography, the most likely scenario will be to strengthen our share in our existing markets or maybe expand into adjacent markets. We're not opposed to going outside of our current footprint. I think that would require an acquisition of a little more size. It wouldn't make a whole lot of sense for us to acquire one or two locations that were a significant distance from our current footprint, but something of more size, we would certainly look at other geographies as well.

Got it. And just on the windows side, can you update us in terms of what you guys are seeing in terms of demand there and any update in terms of vinyl pricing?

Demand on windows is still very strong, yes.

The big thing that we're seeing in the window arena, most of the manufacturers have announced price increases typically ranging from 4% to 5% to as high as 9%. We certainly have seen these increases. We're in the process of passing them on because, especially where we purchase for resale, we don't have any choice. We've got to pass those increases on or we'll suffer a real margin hit.

Where we manufacture windows here in Texas, we also increased our prices. We started putting those price increases or at least informing the customers late last fall, and so they are going in during the first quarter. We should have probably 80% of our customers on the new pricing and then the rest of them will fall into the second quarter. But it's tough to get the price increases through. And you have to be prepared to walk from some business if you can't get what you believe is a responsible price and something that you need to go forward with. The builders are not taking price increases at all favorably. But if your service is good, your quality is good, the representation of your -- with your people on the job site, if you're doing it better than other people, then you can hold the business. So far, for the most part, we're holding the business.

Great. Thank you guys. I will pass it along.

Rob Hansen, Deutsche Bank.

Thanks. I just wanted to ask about acquisitions a different way more in terms of how long does it take to integrate one of these companies? You guys have done six deals, and to get linked in on your IT systems so everybody's all on the same page.

Typically, we could get that done in a couple of months. We've gotten three of the six done that we've acquired since June 30, and we've been working on the other three. We had to pause a little bit just because of our fiscal year-end and other activities that are involved with that. But usually a couple of months for each of them.

Got it, okay. And then in terms of acquisitions, just how do you look at what is the criteria for generating value in an acquisition and how does that change in a larger style acquisition?

Well, criteria, certainly customer mix, product mix, the strength of the market they're in play into all decisions. As far as comparing a small deal versus a large with a large, with a large deal, you're probably going to have more home-office type synergies that you can achieve as opposed to a small deal. Hopefully on the purchasing side, you'll get a little more leverage there. Those are probably the two main differences between a large and small deal.

Yes, and in the smaller deal, you probably have far less potential for customer overlap because you're looking at a specific niche to maybe strengthen yourself in a market or an area that you're not serving. In a larger one, you're definitely going to have some overlap. But this is such a highly fragmented business and there are so many competitors that a customer has to choose from, that really isn't a significant problem, I don't think, that we'll see going forward.

Got it. And one last one is just on the six acquisitions that you've done, what percentage of the revenue would you say is on the commodity type lumber products versus the higher margin more value-add products?

Well, four of the six do very little in the way of lumber and commodity type products. So, I would say, of the six acquisitions, their commodity lumber mix may only be 10% to 15%.

Yes.

So we've only got some in Houston and some in Orlando.

Florida.

All right. Great. Thanks guys.

Justin Bergner, Gabelli & Co.

Good morning. Most of my questions have been answered. I think, on the last call, you indicated that you were planning the business around 10% housing start growth in 2015. Does that remain the case and do you think competitors are planning their businesses around similar levels?

That's still the case for us. We're budgeting for about a 10% increase in starts. I don't know. I really can't speak to what our competitors are doing, but folks I've had the chance to talk to within the industry, I would say 10% is more the norm. Some are a little higher than that, but I would say 10% to 12% is probably what I've heard from most folks.

Okay, great. That's helpful.

And then secondly, what would need to happen for you to stop walking away from some of the business that you're walking away from? What has to happen in the marketplace for that business to become attractive again?

Better pricing. The business that we're walking away from is strictly an issue of price and the margin contribution that we can get out of it. And it's primarily in the commodity area and in the install area. Install, we've got to see some stabilizing in the area of labor and labor cost, labor availability and labor cost. And in commodities, it's a matter of pricing. When time and time again we're seeing commodities being priced on a delivered basis to a job site for low single digit margins, hell, we can't even get our truck out of the yard for what we see in some of the pricing.

So I think the level of housing activity, as it begins to eat up and put supply in a tighter constraint, I think you'll see the commodity pricing come up into where people start getting -- will be more realistic in what they're looking for in the way of pricing for lumber, lumber sheet goods.

Okay, thank you.

Paul Betz, BB&T Capital Markets.

Hi. Good morning everybody. Sorry if I missed this. The investments that we're seeing in SG&A, I think it's been incremental the past two quarters. Do you see that continuing in maybe the first half of next year or have you invested enough to accommodate that 10% growth that you're looking for next year?

I would expect the adds two certainly slow. I think we're in pretty good shape and we should be able to leverage our cost structure very well against the anticipated volume next year. So, it is an investment for this next year, for 2015, but I do think it was necessary. We made the decision not to cut certain folks loose, not to get rid of extra equipment, to go ahead and put some investments into some new facilities, and I do think we'll start to see that pay off this year.

Do you think you'll get -- I think you've had a long-term goal of maybe 18% SG&A. Do you think you'll get back down to that in 2015?

Probably not all the way down to 18%, but certainly a good chance of getting back around mid-to upper 18%s. A lot of that is going to depend on commodity lumber pricing as well because certainly higher lumber prices makes it much easier to leverage our SG&A.

Okay. And one last SG&A question. You said something about $3.5 million sequential increase in SG&A. What was that from?

Payroll taxes that reset in the first quarter and vacation expense. We have a use it or lose it policy so we have to accrue for vacation the first couple of quarters of the year and then we're able to reverse that accrual. And that alone will be probably a $1.7 million increase in Q1 SG&A versus Q4. Combined payroll taxes and vacation will be about $3.5 million.

Okay. That's it for me. Thank you.

(Operator Instructions). Trey Grooms, Stephens.

Hey guys. Just a couple more real quick ones. Chad, would you expect to see any benefits from the lower diesel prices or increased driver availability there in Texas? I know that had been a challenge for a lot of folks. But any thoughts on that, any benefits you could see?

We could see some free up of some drivers, which could help. From a fuel standpoint, our fuel typically runs 1% to 1.1% of sales. So there's the potential there to pick up 15 or 20 basis points I would think on the fuel side of things if these prices stay down.

And over the last few years, has the driver availability really been a headwind as far as wages?

Oh, yes. Constantly having to make a decision. Our drivers are being poached from competitors, other industries, and we're constantly having to evaluate whether to bump their pay to keep them or let them go. But that is still the case. It's still very tight.

Okay. One last one. You mentioned, Floyd, I think you talked about some price movements you've seen in some of your material, windows specifically. Could you comment on any other price movements you're seeing, specifically maybe in doors? Because I know there was quite a bit of movement last year, but just anything that you're expecting for this year?

Yes, we're definitely seeing it in doors. That's announced; that's out in the marketplace. Your trim moldings, interior finish-out items, siding, all of those things seem to be following right along with one another. The insulation, even though we really don't do a great business in insulation or sheetrock, those items have also had significant increases. So, some of those items have gone a year or two without -- and really had not gotten the increases that they've needed. It almost seems like most of the manufacturers have taken the position we either get it now or we've got to begin looking for another approach to the business. And so there's a lot of desperation attempts at getting better pricing.

Got you. And then my last one is just housekeeping. I may have missed it in the comments already. But, Chad, D&A and CapEx for this year given the acquisitions that are in place?

I think our D&A will be $15 million to $16 million for the year. CapEx, we're probably looking at around $25 million. About half of that will be fleet delivery related. And then the rest is investments in equipment and some facility expansions.

All right. Thanks a lot, guys.

We have no further questions in the queue at this time.

Okay. We appreciate everyone joining the call today. If you have any follow-up questions, don't hesitate to give Chad or Marcie a call here in Dallas. Thanks and have a great day.

This concludes today's conference. Thank you for your participation.