BUILDERS FIRSTSOURCE, INC. The following discussion of our financial condition and results of operations should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto for the year endedDecember 31, 2021 included in our most recent Form 10-K. The following discussion and analysis should also be read in conjunction with the unaudited condensed consolidated financial statements appearing elsewhere in this report.
Cautionary Statement
Statements in this report and the schedules hereto that are not purely historical facts or that necessarily depend upon future events, including statements about expected market share gains, forecasted financial performance or other statements about anticipations, beliefs, expectations, hopes, intentions or strategies for the future, may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on forward-looking statements. In addition, oral statements made by our directors, officers and employees to the investor and analyst communities, media representatives and others, depending upon their nature, may also constitute forward-looking statements. All forward-looking statements are based upon currently available information and the Company's current assumptions, expectations and projections about future events. Forward-looking statements are by nature inherently uncertain, and actual results or events may differ materially from the results or events described in the forward-looking statements as a result of many factors. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements involve risks and uncertainties, many of which are beyond the Company's control or may be currently unknown to the Company, that could cause actual events or results to differ materially from the events or results described in the forward-looking statements; such risks or uncertainties include those related to the Company's growth strategies, including acquisitions, organic growth and digital strategies, or the dependence of the Company's revenues and operating results on, among other things, the homebuilding industry and, to a lesser extent, repair and remodel activity, which in each case is dependent on economic conditions, including inflation, interest rates, labor and supply shortages, and also lumber and other commodity prices. The Company may not succeed in addressing these and other risks. Further information regarding the risk factors that could affect our financial and other results can be found in the risk factors section of the Company's most recent Form 10-K filed with theSecurities and Exchange Commission . Consequently, all forward-looking statements in this report are qualified by the factors, risks and uncertainties contained therein.
COMPANY OVERVIEW
We are a leading supplier and manufacturer of building materials, manufactured components and construction services to professional contractors, sub-contractors and consumers. The Company operates approximately 575 locations in 42 states acrossthe United States , which are internally organized into geographic operating divisions. Due to the similar economic characteristics, categories of products, distribution methods and customers, our operating divisions are aggregated into one reportable segment. We offer an integrated solution to our customers, providing manufacturing, supply and installation of a full range of structural and related building products. Our manufactured products include our factory-built roof and floor trusses, wall panels and stairs, vinyl windows, custom millwork and trim, as well as engineered wood that we design, cut, and assemble for each home. We also assemble interior and exterior doors into pre-hung units. Additionally, we supply our customers with a broad offering of professional-grade building products not manufactured by us, such as dimensional lumber and lumber sheet goods and various window, door and millwork lines. Our full range of construction-related services includes professional installation, turn-key framing and shell construction, and spans all our product categories.
We group our building products into four product categories:
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Lumber &
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Manufactured Products. Manufactured products are factory-built substitutes for job-site framing and include wood floor and roof trusses, steel roof trusses, wall panels, and engineered wood that we design, cut and assemble for each home. Manufactured products also include our proprietary whole-house framing solution, Ready-Frame®, which designs, pre-cuts, labels, and bundles lumber and lumber sheet goods into customized framing packages, saving builders both time and money and improving job site safety.
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Windows, Doors & Millwork. Windows & doors are comprised of the manufacturing,
assembly, and distribution of windows, and the assembly and distribution of
interior and exterior door units. Millwork includes interior trim and custom
features, including those that we manufacture under the Synboard ® brand name.
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SpecialtyBuilding Products & Services . Specialty building products & services consist of various products, including vinyl, composite and wood siding, metal studs, cement, roofing, insulation, wallboard, ceilings, cabinets, and hardware. This category also includes services such as turn-key framing, shell construction, design assistance and professional installation of products spanning all of our product categories. We also offer software products through our Paradigm subsidiary, including drafting, estimating, quoting, and virtual home design services, which provide software solutions to retailers, distributors, manufacturers and homebuilders that boost sales, reduce costs, and help them become more competitive.
Our operating results are dependent on the following trends, events and uncertainties, some of which are beyond our control:
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Homebuilding Industry and Market Competition . Our business is driven primarily by the residential new construction market and the residential repair and remodel market, which are in turn dependent upon a number of factors, including demographic trends, interest rates, consumer confidence, employment rates, housing affordability, household formation, land development costs, the availability of skilled construction labor, inflation, mortgage markets and the health of the economy. According to theU.S. Census Bureau , the seasonally adjusted annual rate ofU.S. total and single-family housing starts were 1.4 million and 0.9 million, respectively, as ofSeptember 30, 2022 . Many factors have impacted and may continue to impact our sales and gross margins, including continued consolidation within the building products supply industry, increased competition for homebuilder business, supply chain constraints and cyclical fluctuations in commodity prices. Moreover, our industry remains highly fragmented and competitive, and we will continue to face significant competition from local and regional suppliers. As a result of various current market dynamics, including inflation, mortgage rate increases and shifts in housing affordability, industry forecasters, including theNational Association of Home Builders ("NAHB"), expect to see housing demand soften near-term. Despite expected near-term tempered market conditions, we believe the housing industry remains underbuilt and that there are several meaningful trends that indicateU.S. housing demand will continue to be strong over the long-term, including the aging of housing stock, and normal population growth due to immigration and birthrate exceeding death rate.
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Targeting Large Production Homebuilders. The homebuilding industry continues to undergo consolidation, and the larger homebuilders continue to increase their market share. We expect that trend to continue as larger homebuilders have better liquidity and land positions relative to the smaller, less capitalized homebuilders. Our focus is on maintaining relationships and market share with these customers while balancing the competitive pressures we are facing in servicing large homebuilders with certain profitability expectations. Additionally, we have been successful in expanding our custom homebuilder base while maintaining acceptable credit standards.
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Repair and remodel end market. Although the repair and remodel end market is influenced by housing starts to a lesser degree than the homebuilding market, the repair and remodel end market is still dependent upon some of the same factors as the homebuilding market, including demographic trends, interest rates, consumer confidence, employment rates, the health of the economy and home financing markets. The repair and remodel end market has been impacted by the COVID-19 pandemic and while the extent of the impact and related uncertainties are not yet known, we may experience reduced sales demand, challenges in the supply chain, increased margin pressures and/or increased operating costs in this area of our business as a result. We expect that our ability to remain competitive in this space will depend on our continued ability to provide a high level of customer service coupled with a broad product offering.
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Use of Prefabricated Components. Homebuilders are increasingly using prefabricated components in order to realize increased efficiency, overcome skilled construction labor shortages and improve quality. Shortening cycle time from start to completion is a key imperative of the homebuilders during periods of strong consumer demand. As the availability of skilled construction labor remains limited, we continue to see the demand for prefabricated components increasing within the residential new construction market.
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Economic Conditions. Economic changes both nationally and locally in our markets
impact our financial performance. The building products supply industry is
highly dependent upon new home construction and, to a lesser extent, repair and
remodel activities and is subject to cyclical market changes. Our operations are
subject to fluctuations arising from changes in supply and demand, national and
local economic conditions, labor costs and availability, competition, government
regulation, trade policies, rising inflation and other factors that affect the
homebuilding industry, such as demographic trends, increasing interest rates,
housing starts, the high cost of land development, employment levels, consumer
confidence, and the availability of credit to homebuilders, contractors, and
homeowners. Disruptions and uncertainties as a result of a pandemic, like the
COVID-19 pandemic, may have a significant impact on our future operating
results.
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Housing Affordability. The affordability of housing can be a key driver in demand for our products. Home affordability is influenced by a number of economic factors, such as the level of employment, consumer confidence, consumer income, supply of houses, the availability of financing and interest rates. Changes in the inventory of available homes and other economic factors relative to home prices could result in changes to the affordability of homes. As a result, homebuyer demand may shift toward smaller or larger homes creating fluctuations in demand for our products.
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Cost and/or Availability of Materials. Prices of wood products, which are subject to cyclical market fluctuations, may adversely impact operating income when prices rapidly rise or fall within a relatively short period of time. We purchase certain materials, including lumber products, which are then sold to customers as well as used as direct production inputs for our manufactured and prefabricated products. Short-term changes in the cost and/or availability of these materials, some of which are subject to significant fluctuations, are often passed on to our customers, but our pricing quotation periods and market competition may limit our ability to pass on such price changes. We may also be limited in our ability to pass on increases on in-bound freight costs on our products. We may also experience challenges sourcing suitable products for our customers and may be forced to provide alternative materials as substitution for contracted orders. Our inability to pass on material price increases to our customers could adversely impact our operating results.
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Controlling Expenses. Another important aspect of our strategy is controlling costs and striving to be a low-cost building materials supplier in the markets we serve. We closely manage our working capital and operating expenses. Further, we pay careful attention to our logistics function and its effect on our shipping and handling costs.
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Multi-Family and Light Commercial Business. Our primary focus has been on single-family residential new construction and the repair and remodel end market. However, through recent acquisitions we have expanded our operational footprint in the multi-family and light commercial markets, growing our value-add components and millwork product offerings in this end market. We will continue to identify opportunities for profitable growth in these areas.
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Capital Structure. We strive to optimize our capital structure to ensure that our financial needs are met in light of economic conditions, business activities, organic investments, opportunities for growth through acquisition and the overall risk characteristics of our underlying assets. In addition to these factors, we also evaluate our capital structure on the basis of our leverage ratio, our liquidity position, our debt maturity profile, our market capitalization, and market interest rates. As such, we may enter into various debt or equity transactions to appropriately manage and optimize our capital structure and liquidity needs.
RECENT DEVELOPMENTS
Business Combinations
Through the date of this filing, we have completed six acquisitions for a combined$639.0 million purchase price, net of cash acquired. These acquisitions of the Texas Panel Truss Businesses, the East Panel Truss Businesses, Valley Truss, HomCo, Trussway, Fulcrum, and Pima further expand our market footprint and provide additional operations in our value-add product categories and our multi-family customer segment. These transactions are described in further detail in Notes 2 and 13 to the condensed consolidated financial statements included in Item 1 of this quarterly report on Form 10-Q.
Company Shares Repurchases
OnFebruary 18, 2022 , the Company announced that its board of directors authorized the repurchase of$1.0 billion of its shares of common stock. Subsequently, onMay 9, 2022 , the board of directors authorized a new share repurchase program of$2.0 billion , which replaced the previous authorization. This authorization is in addition to the two previous$1.0 billion authorizations in 2021, which were completed onJanuary 12, 2022 . Share repurchases under the program may be made through a variety of methods, which may include open market purchases, block trades, accelerated share repurchase transactions, trading plans in accordance with Rule 10b-5 or Rule 10b-18 under the Exchange Act, or any combination of such methods. The program does not obligate the Company to acquire any particular amount of its common stock, and the share repurchase program may be suspended or discontinued at any time at the Company's discretion. During the nine months endedSeptember 30, 2022 , the Company repurchased 31.7 million shares at a weighted average price of$61.03 per share, for a total cost of approximately$1.9 billion , inclusive of fees.
Debt Transactions
OnJanuary 21, 2022 , the Company completed a private offering of an additional$300.0 million in aggregate principal amount of 4.25% 2032 notes at an issue price equal to 100.50% of par value. OnFebruary 4, 2022 , the Company amended the 2026 facility to increase the total commitments by an aggregate amount of$400.0 million , resulting in a new$1.8 billion amended credit facility. 19 -------------------------------------------------------------------------------- OnJune 15, 2022 , the Company completed a private offering of$700.0 million in aggregate principal amount of 6.375% 2032 notes at an issue price equal to 100% of par value. Subsequently, onJune 16, 2022 , the Company redeemed the remaining$612.5 million in outstanding aggregate principal amount of 2027 notes. These transactions are described in Notes 2, 8 and 13 to the condensed consolidated financial statements included in Item 1 of this quarterly report on Form 10-Q. From time to time, based on market conditions and other factors and subject to compliance with applicable laws and regulations, the Company may repurchase or call its notes, repay debt, repurchase shares of its common stock or otherwise enter into transactions regarding its capital structure.
CURRENT OPERATING CONDITIONS AND OUTLOOK
According to theU.S. Census Bureau , actualU.S. total housing starts were 0.4 million for the third quarter of 2022, a decrease of 7.4% compared to the third quarter of 2021. ActualU.S. single-family starts for the third quarter of 2022 were 0.2 million, a decrease of 18.2% compared to the third quarter of 2021. A composite of third-party sources, including theNAHB , are forecasting 1.6 millionU.S. total housing starts for 2022, a decrease of 2.4% from 2021. The composite is also forecasting 1.0 millionU.S single family housing starts for 2022, a decrease of 9.7% from 2021. In addition, theHome Improvement Research Institute is forecasting sales in the professional repair and remodel end market to increase approximately 10.2% in 2022 compared to 2021. Our net sales for the third quarter of 2022 increased 4.6% from the same period last year. The increase was driven by core organic sales growth of 6.9%, primarily in our repair and remodel customer segment, with acquisitions accounting for another 5.2%, offset by commodity price deflation of 7.5%. Our gross margin percentage in the third quarter of 2022 increased by 3.9% compared to the third quarter of 2021, primarily due to core organic growth in value-added product categories, as well as disciplined pricing in a volatile, supply-constrained marketplace. Our selling, general and administrative expenses, as a percentage of net sales, were 17.4% in the third quarter of 2022, a 1.5% increase from 15.9% in the third quarter of 2021, largely due to additional operating expenses from locations acquired within the last twelve months, and higher wages and variable compensation costs as a result of increased net sales and profitability. We believe the long-term outlook for the housing industry is positive and that the housing industry remains underbuilt due to growth in the underlying demographics compared to historical new construction levels. However, rising interest rates and inflation may dampen near term housing industry demand as homes become less affordable for consumers, investors and builders. We believe we are well-positioned to take advantage of the construction activity in our markets and to increase our market share, which may include strategic acquisitions. We will continue to focus on working capital by closely monitoring the credit exposure of our customers, remaining focused on maintaining the right level of inventory and by working with our vendors to improve payment terms and pricing on our products. We strive to achieve the appropriate balance of short-term expense control while maintaining the expertise and capacity to grow the business as market conditions expand.
SEASONALITY AND OTHER FACTORS
Our first and fourth quarters have historically been, and are generally expected to continue to be, adversely affected by weather causing reduced construction activity during these quarters. In addition, quarterly results historically have reflected, and are expected to continue to reflect, fluctuations from period to period arising from the following:
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The volatility of lumber prices;
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The cyclical nature of the homebuilding industry;
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General economic conditions in the markets in which we compete;
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The pricing policies of our competitors;
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Disruptions in our supply chain;
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The production schedules of our customers; and
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The effects of weather.
The composition and level of working capital typically change during periods of
increasing sales as we carry more inventory and receivables. Working capital
levels typically increase in the first and second quarters of the year due to
higher sales during the peak residential construction season. These increases
may result in negative operating cash flows during this peak season, which
historically have been financed through available cash and borrowing
availability under credit facilities. Generally, collection of receivables and
reduction in inventory levels following the peak building and construction
season positively impact cash flow.
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--------------------------------------------------------------------------------RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to net sales of certain costs, expenses and income items:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 65.0 % 68.9 % 65.9 % 71.4 %
Gross margin 35.0 % 31.1 % 34.1 % 28.6 %
Selling, general and administrative 17.4 % 15.9 % 16.4 % 17.0 %
expenses
Income from operations 17.6 % 15.2 % 17.7 % 11.6 %
Interest expense, net 0.8 % 0.7 % 0.9 % 0.6 %
Income tax expense 4.0 % 3.4 % 3.9 % 2.5 %
Net income 12.8 % 11.1 % 12.9 % 8.5 %
Three Months Ended
Net Sales . Net sales for the three months endedSeptember 30, 2022 were$5.8 billion , a 4.6% increase over net sales of$5.5 billion for the three months endedSeptember 30, 2021 . Core organic growth, primarily in the repair and remodel segment, and net sales from acquisitions increased net sales by 6.9% and 5.2%, respectively. These increases were partially offset by commodity price deflation of 7.5% .
The following table shows net sales classified by product category:
Three Months Ended September 30,
2022 2021
(in millions)
% of Net % of Net
Net Sales Sales Net Sales Sales % Change
Lumber & lumber sheet goods $ 1,816.3 31.5 % $ 2,405.8 43.7 % -24.5 %
Manufactured products 1,478.2 25.7 % 1,259.3 22.9 % 17.4 %
Windows, doors & millwork 1,294.1 22.5 % 883.4 16.0 % 46.5 %
Specialty building products & services 1,172.9 20.3 % 960.1 17.4 % 22.2 %
Net sales $ 5,761.5 100.0 % $ 5,508.6 100.0 % 4.6 %
We achieved increased net sales in all of our product categories, except lumber
and lumber sheet goods, primarily due to core organic sales growth and
acquisitions. Lumber and lumber sheet goods net sales decreased primarily due to
the impact of commodity price deflation.
Gross Margin. Gross margin increased $0.3 billion to $2.0 billion and our gross
margin percentage increased to 35.0% in the third quarter of 2022 from 31.1% in
the third quarter of 2021, a 3.9% increase. This increase was primarily
attributable to increased sales in our value-added product categories through
core organic growth and acquisitions, as well as from disciplined pricing in a
volatile, supply-constrained marketplace.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $125.2 million , or 14.3%, and as a percentage
of net sales increased to 17.4%, up from 15.9% in the third quarter of 2021.
This increase was primarily due to additional operating expenses from locations
acquired within the last twelve months, and higher wages and variable
compensation costs as a result of increased net sales and profitability.
Interest Expense, Net. Interest expense was $44.1 million in the third quarter
of 2022, an increase of $8.2 million from the third quarter of 2021. The
increase was primarily due to higher outstanding debt balances and increased
interest rates during the third quarter of 2022 compared to the third quarter of
2021.
Income Tax Expense. We recorded income tax expense of $232.4 million and $188.3
million in the third quarters of 2022 and 2021, respectively. Our effective tax
rate was 23.9% in the third quarter of 2022 and 23.5% in the third quarter of
2021. The increase in the tax expense was primarily driven by an increase in
income before income taxes in the current period.
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Nine Months ended
Net Sales . Net sales for the nine months endedSeptember 30, 2022 were$18.4 billion , a 20.4% increase over net sales of$15.3 billion for the nine months endedSeptember 30, 2021 . Core organic growth, primarily in the single family customer segment, net sales from acquisitions, and commodity price inflation increased net sales by 10.9%, 7.1%, and 2.4%, respectively.
The following table shows net sales classified by product category:
Nine Months Ended September 30,
2022 2021
(in millions)
% of Net % of Net
Net Sales Sales Net Sales Sales % Change
Lumber & lumber sheet goods $ 6,987.0 38.0 % $ 6,771.2 44.4 % 3.2 %
Manufactured products 4,541.4 24.7 % 3,208.9 21.0 % 41.5 %
Windows, doors & millwork 3,539.1 19.3 % 2,473.5 16.2 % 43.1 %
Specialty 3,301.4 18.0 % 2,805.4 18.4 % 17.7 %
Net sales $ 18,368.9 100.0 % $ 15,259.0 100.0 % 20.4 %
We achieved increased net sales in all of our product categories, due to core organic sales growth, acquisitions, and commodity price inflation.
Gross Margin. Gross margin increased$1.9 billion to$6.3 billion and our gross margin percentage increased to 34.1% in the nine months endedSeptember 30, 2022 from 28.6% in the nine months endedSeptember 30, 2021 , a 5.5% increase. This increase was primarily attributable to core organic growth, particularly in value-added product categories, acquisitions, and from disciplined pricing in a volatile, supply-constrained marketplace. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased$415.5 million , or 16.0%. This increase was primarily due to the higher variable compensation costs as a result of higher sales and profitability, as well as additional operating expenses from locations acquired within the last twelve months.
As a percentage of net sales, selling, general and administrative expenses
decreased to 16.4% in the nine months ended
Interest Expense, Net. Interest expense was$156.1 million in the nine months endedSeptember 30, 2022 , an increase of$60.5 million from the nine months endedSeptember 30, 2021 . Interest expense increased primarily due to higher debt balances and increased interest rates in the first nine months of 2022 compared to the first nine months of 2021, as well as the loss on extinguishment of$27.4 million recognized during the first nine months of 2022, partially offset by$4.6 million expensed in the first nine months of 2021 related to the partial 2027 notes redemption and the 2026 facility amendment. Income Tax Expense. We recorded income tax expense of$723.2 million and$387.1 million for the nine months endedSeptember 30, 2022 and 2021, respectively. Our effective tax rate was 23.4% in the first nine months endedSeptember 30, 2022 an increase from 23.2% in the first nine months endedSeptember 30, 2021 . The increase in the tax expense was primarily driven by an increase in income before income taxes in the current period.
LIQUIDITY AND CAPITAL RESOURCES
Our primary capital requirements are to fund working capital needs and operating expenses, meet required interest and principal payments, and to fund capital expenditures and potential future growth opportunities. Our capital resources atSeptember 30, 2022 consist of cash on hand and borrowing availability under our 2026 facility. Our 2026 facility will be primarily used for working capital, general corporate purposes and funding capital expenditures and growth opportunities. In addition, we may use borrowings under the 2026 facility to facilitate debt repayment and consolidation. Availability under the 2026 facility is determined by a borrowing base. Our borrowing base consists of trade accounts receivable, inventory, other receivables, and qualified cash that all meet specific criteria contained within the credit agreement, minus agent specified reserves. Net excess borrowing availability is equal to the maximum borrowing amount minus outstanding borrowings and letters of credit. 22 --------------------------------------------------------------------------------
The following table shows our borrowing base and excess availability as of:
September 30, December 31,
2022 2021
(in millions)
Accounts receivable availability $ 1,172.4 $ 1,032.9
Inventory availability 1,350.2 1,125.3
Other receivables availability 79.8 110.8 Gross availability 2,602.4 2,269.0 Less: Agent reserves (87.7 ) (66.6 ) Plus: Cash in qualified accounts 13.7 11.3 Borrowing base 2,528.4 2,213.7 Aggregate revolving commitments 1,800.0
1,400.0
Maximum borrowing amount (lesser of borrowing base and
aggregate revolving commitments) 1,800.0 1,400.0 Less: Outstanding borrowings (450.0 ) (588.0 ) Letters of credit (129.0 ) (126.4 ) Net excess borrowing availability on revolving facility$ 1,221.0
As ofSeptember 30, 2022 , we had$450.0 million in outstanding borrowings under our 2026 facility, and our net excess borrowing availability was$1.2 billion after being reduced by outstanding letters of credit totaling$129.0 million . Excess availability must equal or exceed a minimum specified amount, currently$180.0 million , or we are required to meet a fixed charge coverage ratio of 1.00 to 1.00. We were not in violation of any covenants or restrictions imposed by any of our debt agreements atSeptember 30, 2022 .
Liquidity
Our liquidity at
Our level of indebtedness results in significant interest expense and could have the effect of, among other things, reducing our flexibility to respond to changing business and economic conditions. From time to time, based on market conditions and other factors and subject to compliance with applicable laws and regulations, we may repurchase or call our notes, repay, refinance or modify our debt or otherwise enter into transactions regarding our capital structure. If industry conditions deteriorate or if we pursue additional acquisitions, we may be required to raise additional funds through the sale of capital stock or debt in the public capital markets or in privately negotiated transactions. There can be no assurance that any of these financing options would be available on favorable terms, if at all. Alternatives to help supplement our liquidity position could include, but are not limited to, idling or permanently closing additional facilities, adjusting our headcount in response to current business conditions, attempts to renegotiate leases, managing our working capital and/or divesting of non-core businesses. There are no assurances that these steps would prove successful or materially improve our liquidity position.
Consolidated Cash Flows
Cash provided by operating activities was$2.6 billion for the nine months endedSeptember 30, 2022 compared to cash provided by operating activities of$903.2 million for the nine months endedSeptember 30, 2021 . The increase in cash provided by operating activities was largely the result of an increase in net income offset by an increase in cash used to fund net working capital in the first nine months of 2022. For the nine months endedSeptember 30, 2022 , the Company used a net$817.3 million in cash investing in acquisitions and property, plant and equipment. Compared to the prior year, the Company used$153.1 million less cash in investing during the current period primarily due to$278.6 million less cash outflows for acquisitions, offset by$76.2 million in proceeds in the prior year period from the divestiture of the Company's gypsum operations. 23 -------------------------------------------------------------------------------- Cash used in financing activities was$1.8 billion for the nine months endedSeptember 30, 2022 , which consisted primarily of$2.0 billion in repurchases of common stock, the 2027 notes redemption for$612.5 million , and net paydowns on the 2026 facility of$138.0 million , offset by net proceeds from the issuance of$1.0 billion of 2032 notes. Cash used in financing activities was$131.9 million for the nine months endedSeptember 30, 2021 , which was primarily related to net proceeds from the issuance of$1.0 billion of 2032 notes, offset by$565.6 million in repurchases of common stock,$471.4 million for the extinguishment of debt acquired in the BMC Merger and the redemption of a portion of the Company's 2027 notes, and$75.0 million in net repayments on the 2026 facility.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Critical accounting policies are those that are both important to the accurate portrayal of a company's financial condition and results, and require subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. To prepare financial statements that conform to generally accepted accounting principles, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Certain estimates are particularly sensitive due to their significance to the financial statements and the possibility that future events may be significantly different from our expectations. Refer to Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K for a discussion of our critical accounting estimates and assumptions.
RECENT ACCOUNTING PRONOUNCEMENTS
Information regarding recent accounting pronouncements is discussed in Note 1 to the condensed consolidated financial statements included in Item 1 of this quarterly report on Form 10-Q.
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