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.

Commenting on the second quarter results, Charles Horn, Builders FirstSource Senior Vice President and Chief Financial Officer, said, "We continue to react to the poor market conditions and adjust our operating expenses as necessary. Our selling, general and administrative expenses fell 15.5 percent compared to our 21.9 percent sales volume decline. We will continue to carefully manage our cost structure as we work through this difficult housing environment."

Horn continued, "Our liquidity is strong with cash of $144.5 million and available borrowing capacity of $107.8 million. We effectively managed our working capital during the quarter and improved our inventory turns, accounts receivable days and accounts payable days compared to the first quarter, returning our working capital percentage of sales to below 10 percent. This strong financial footing provides us the ability to opportunistically grow during this downturn through internal means or via acquisition.

Outlook

The company expects the difficult market conditions to continue into 2008, negatively affecting our operating results. Additionally, increased competitive pressure arising from the current operating conditions could continue to have a negative impact on margins.

Mr. Sherman concluded, "We will continue to look for ways to counteract the non-controllable macroeconomic factors and will persistently strive to grow our market share and flex our cost structure while still providing quality customer service as we manage through this down cycle. We will also seek to grow our company as attractive opportunities arise."

Conference Call

Builders FirstSource will host a conference call Friday at 10:00 a.m. Central Time (CT) and will simultaneously broadcast it live over the Internet. To participate in the teleconference, please dial into the call a few minutes before the start time: 877-704-5381 (U.S. and Canada) and 913-312-1295 (international). A replay of the call will be available from 1:00 p.m. CT July 27 through August 2, 2007. To access the replay, please dial 888-203-1112 (U.S. and Canada) and 719-457-0820 (international). Please refer to pass code 8285284. To access the webcast, go to http://www.bldr.com/ and click on "Investors." The online archive of the webcast will be available for approximately 90 days.

About Builders FirstSource

Headquartered in Dallas, Texas, Builders FirstSource is a leading supplier and manufacturer of structural and related building products for residential new construction. The company operates in 13 states, principally in the southern and eastern United States, and has 68 distribution centers and 60 manufacturing facilities, many of which are located on the same premises as our distribution facilities. Manufacturing facilities include plants that manufacture roof and floor trusses, wall panels, stairs, aluminum and vinyl windows, custom millwork and pre-hung doors. Builders FirstSource also distributes windows, interior and exterior doors, dimensional lumber and lumber sheet goods, millwork and other building products. For more information about Builders FirstSource, visit the company's Web site at http://www.bldr.com/ .

Cautionary Notice

Statements in this news release and the schedules hereto which are not purely historical facts or which necessarily depend upon future events, including statements about the impact of expected market share gains, plans to reduce costs, 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. All forward-looking statements are based upon information available to Builders FirstSource, Inc. on the date this release was submitted. Builders FirstSource, Inc. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including risks or uncertainties related to the Company's growth strategies, including gaining market share, or the Company's revenues and operating results being highly dependent on, among other things, the homebuilding industry, lumber prices and the economy. Builders FirstSource, Inc. may not succeed in addressing these and other risks. Further information regarding factors that could affect our financial and other results can be found in the risk factors section of Builders FirstSource, Inc.'s most recent annual report on Form 10-K filed with the Securities and Exchange Commission. Consequently, all forward-looking statements in this release are qualified by the factors, risks and uncertainties contained therein.

                 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES               Condensed Consolidated Statements of Operations                                 (unaudited)                                   Three months ended    Six months ended                                        June 30,             June 30,                                     2007      2006      2007       2006                                   (in thousands, except per share amounts)   Sales                           $465,140  $642,353  $876,283  $1,230,980   Cost of sales                    348,507   472,092   655,099     910,354     Gross margin                   116,633   170,261   221,184     320,626   Selling, general and    administrative expenses    (includes stock-based    compensation expense of    $2,236 and $1,134 for the    three months ended in 2007    and 2006, respectively, and    $3,834 and $1,782 for the    six months ended in 2007 and    2006, respectively)              99,563   117,789   197,033     229,991   Income from operations            17,070    52,472    24,151      90,635   Interest expense, net              6,583     7,325    13,295      14,501     Income before income taxes      10,487    45,147    10,856      76,134   Income tax expense                 2,092    16,765     2,229      28,434     Net income                      $8,395   $28,382    $8,627     $47,700   Net income per share:     Basic                            $0.24     $0.84     $0.25       $1.43     Diluted                          $0.23     $0.79     $0.24       $1.33   Weighted average common shares:     Basic                           34,911    33,787    34,773      33,448     Diluted                         36,352    36,082    36,279      35,992                 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES                          Sales by Product Category                                 (unaudited)                                           Three months ended June 30,                                             2007               2006                                              (dollars in thousands)   Prefabricated components            $101,345   21.8%    $137,328   21.4%   Windows & doors                      105,300   22.6%     131,031   20.4%   Lumber & lumber sheet goods          125,949   27.1%     214,976   33.5%   Millwork                              42,986    9.2%      56,894    8.8%   Other building products & services    89,560   19.3%     102,124   15.9%      Total sales                      $465,140  100.0%    $642,353  100.0%                                            Six months ended June 30,                                             2007               2006                                              (dollars in thousands)   Prefabricated components            $185,500   21.2%    $259,370   21.1%   Windows & doors                      197,911   22.6%     246,605   20.0%   Lumber & lumber sheet goods          240,631   27.5%     420,699   34.2%   Millwork                              82,228    9.4%     108,744    8.8%   Other building products & services   170,013   19.3%     195,562   15.9%      Total sales                      $876,283  100.0%  $1,230,980  100.0%                 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES                    Condensed Consolidated Balance Sheets                                           June 30,          December 31,                                             2007               2006                                          (unaudited)                                    (in thousands, except per share amounts)   ASSETS   Current assets:     Cash and cash equivalents              $144,505            $93,258     Accounts receivable, less      allowances of $7,188 and $6,292,      respectively                           199,909            196,658     Inventories                             125,105            122,015     Other current assets                     32,220             28,380       Total current assets                  501,739            440,311   Property, plant and equipment, net        104,067            109,777   Goodwill                                  173,755            173,806   Other assets, net                          21,586             24,621       Total assets                         $801,147           $748,515   LIABILITIES AND STOCKHOLDERS'    EQUITY   Current liabilities:     Accounts payable                       $129,220            $84,944     Accrued liabilities                      55,923             59,329     Current maturities of long-term      debt                                       444                442       Total current liabilities             185,587            144,715   Long-term debt, net of current    maturities                               318,536            318,758   Other long-term liabilities                26,125             28,178                                             530,248            491,651   Commitments and contingencies   Stockholders' equity:     Preferred stock, $0.01 par value,      10,000 shares authorized; zero      shares issued and outstanding              --                 --     Common stock, $0.01 par value,      200,000 shares authorized;      35,587 and 34,832 shares issued and      outstanding at June 30, 2007      and December 31, 2006, respectively        350                345     Additional paid-in capital              134,340            127,630     Retained earnings                       134,754            126,974     Accumulated other comprehensive      income                                   1,455              1,915       Total stockholders' equity            270,899            256,864       Total liabilities and        stockholders' equity                $801,147           $748,515                 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES               Condensed Consolidated Statements of Cash Flows                                 (unaudited)                                             Six months ended June 30,                                               2007             2006                                                  (in thousands)  Cash flows from operating activities:      Net income                                $8,627          $47,700      Adjustments to reconcile net       income to net cash       provided by operating       activities:         Depreciation and amortization           12,111           10,512         Amortization of deferred loan          costs                                   1,317            1,306         Deferred income taxes                   (1,620)          (1,364)         Bad debt expense                           810              543         Non-cash stock based          compensation                            3,834            1,782         Net (gain) loss on sales of          assets                                   (369)             190      Changes in assets and liabilities:         Accounts receivable                     (4,908)         (27,407)         Inventories                             (3,090)         (11,098)         Other current assets                    (2,367)          (5,845)         Other assets and liabilities            (1,734)            (219)         Accounts payable                        44,276           17,961         Accrued liabilities                     (3,335)          (4,727)               Net cash provided by                operating activities             53,552           29,334  Cash flows from investing activities:      Purchases of property, plant and       equipment                                 (5,936)         (15,770)      Proceeds from sale of property,       plant and equipment                          841              536      Cash used for acquisitions, net               --           (26,305)               Net cash used in                investing activities             (5,095)         (41,539)  Cash flows from financing activities:      Payments of long-term debt                   (220)             (14)      Deferred loan costs                           --              (100)      Exercise of stock options                   3,493            7,330      Repurchase of common stock                   (483)             --        Net cash provided by         financing activities                     2,790            7,216  Net change in cash and cash   equivalents                                   51,247           (4,989)  Cash and cash equivalents at beginning   of period                                     93,258           30,736  Cash and cash equivalents at end of   period                                      $144,505          $25,747                 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES   Reconciliation of Non-GAAP Financial Measures to their GAAP Equivalents                      (unaudited - dollars in thousands)   Note: The company provided detailed explanations of these non-GAAP         financial measures in its Form 8-K filed with the Securities and         Exchange Commission on July 26, 2007.                                      Three months ended  Six months ended                                           June 30,           June 30,                                        2007     2006      2007      2006   Reconciliation to EBITDA:   Net income                          $8,395  $28,382    $8,627   $47,700   Reconciling items:      Depreciation and amortization       expense                          6,043    5,377    12,111    10,512      Interest expense                  6,583    7,325    13,295    14,501      Income tax expense                2,092   16,765     2,229    28,434         EBITDA                       $23,113  $57,849   $36,262  $101,147         EBITDA as percentage of sales   5.0%     9.0%      4.1%      8.2%                                                         Last twelve months                                                               ended                                                              June 30,                                                           2007      2006   Reconciliation to Return on Net    Assets:   Net income                                             $29,820   $95,027   Reconciling items:      Interest expense                                     27,511    30,221      Income tax expense                                   16,032    56,919         Earnings before interest and          taxes                                           $73,363  $182,167         Average net assets                              $508,529  $523,520         Return on net assets                               14.4%     34.8%

CONTACT: Charles L. Horn, Senior Vice President and Chief Financial Officer of Builders FirstSource, Inc., +1-214-880-3500

Web site: http://www.bldr.com/

SOURCE Builders FirstSource, Inc.


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