Builders FirstSource Reports Second Quarter 2007 Results

DALLAS, July 26 /PRNewswire-FirstCall/ -- Builders FirstSource, Inc. (NASDAQ:BLDR), a leading supplier and manufacturer of structural and related building products for residential new construction in the United States, today reported its results for the second quarter ended June 30, 2007.

  Second Quarter 2007 Financial Highlights  -- Sales -- $465.1 million  -- Gross margin -- 25.1 percent of sales  -- Net income -- $8.4 million  -- Net income per diluted share -- $0.23  -- Diluted weighted average shares outstanding -- 36.4 million  -- Operating cash flow -- $31.8 million

"Market conditions continued to create a very difficult operating environment during the second quarter," said Floyd Sherman, Builders FirstSource Chief Executive Officer. "Decreased housing starts and lower market prices for lumber products reduced our sales by an estimated 39 percent compared to last year. The negative impact of these macroeconomic factors was partially offset by profitably growing market share and continuing to focus on reducing operating costs."

Sherman continued, "Last fall we outlined our strategy for managing through the housing downturn. This strategy includes generating incremental sales through market share gains and new operations, maintaining strong margins, reducing costs and conserving capital. Our results for the second quarter show that our plan continues to benefit the company in the face of a very challenging housing market. Market share gains had an 8.7 percent positive effect on our sales while our gross margin remained strong at 25.1 percent. In addition, we reduced selling, general and administrative expenses by 15.5 percent and capital expenditures by 65.3 percent. Finally, we generated $31.8 million of operating cash flow, a 24.7 percent increase versus last year. We continue to manage our business day-to-day and react as quickly as possible to changing customer demand. I am proud of the ongoing effort company-wide to seek new business and operate as efficiently as possible while providing outstanding customer service."

Second Quarter 2007 Results Compared to Second Quarter 2006

(See accompanying financial schedules for full financial details and reconciliations of Non-GAAP financial measures to their GAAP equivalents.)

  -- Sales were $465.1 million compared to $642.4 million.  This 27.6     percent sales decline was primarily driven by the decrease in housing     activity within the company's markets which had an estimated 32.9     percent negative effect on sales. Also, commodity lumber and lumber     sheet goods prices had a 5.7 percent negative effect on sales.  These     non-controllable sales drivers were partially offset by sales growth     attributable to market share gains of approximately 8.7 percent and     sales growth from new operations of 2.3 percent.  Overall sales volumes     declined 21.9 percent.  -- Gross margin percentage was 25.1 percent, down from 26.5 percent, due     to pricing pressure from customers and the rising percentage of     installed sales, which traditionally carry lower gross margins.  The     overall decline in gross margin percentage was mitigated by a favorable     change in sales mix.  -- Selling, general and administrative ("SG&A") expenses decreased $18.2     million.  As a percentage of sales, however, SG&A increased from 18.3     percent in 2006 to 21.4 percent in 2007.  Lower market prices for     lumber products increased the 2007 percentage by 160 basis points as     many variable costs do not adjust with changes in price.  Incremental     stock compensation expense added $1.1 million and increased the 2007     percentage by 20 basis points.  Average full-time equivalent employees     for the second quarter 2007 were 17.9 percent lower than the second     quarter 2006, while our salaries and benefits expense fell $15.7     million from 2006, or 20.3 percent, nearly matching our sales volume     decline.  -- The company's effective tax rate was 19.9% compared to 37.1% due to     state tax law changes and reserve adjustments recognized during the     quarter.  -- Net income was $8.4 million, or $0.23 per diluted share, compared to     $28.4 million, or $0.79 per diluted share.  -- Diluted weighted average shares outstanding were 36.4 million compared     to 36.1 million.  -- EBITDA was $23.1 million, or 5.0 percent of sales, compared to $57.8     million, or 9.0 percent of sales.  -- As of June 30, 2007, the company's cash on hand grew to $144.5 million,     and funded debt was $314.7 million.  -- Operating cash flow was $31.8 million compared to $25.5 million.  -- Capital expenditures were $3.4 million compared to $9.7 million.