Builders FirstSource Reports Second Quarter 2010 Results

DALLAS, July 22, 2010 (GLOBE NEWSWIRE) -- 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, 2010.

"Our sales for the second quarter of 2010 were $211.5 million, up 20.5 percent over sales of $175.5 million one year ago," said Floyd Sherman, Builders FirstSource Chief Executive Officer. "Fueled by the federal tax credit for first-time homebuyers, the seasonally adjusted annual rate for U.S. single-family starts increased to 563,000 as of April, but fell to 454,000 as of June, down 4.6 percent from one year ago, as the tax credit expired.  For the current quarter, actual U.S. single-family housing starts were 142,000, up 14.8 percent from the same quarter last year, but the number of single-family units under construction fell 6.6 percent." Mr. Sherman continued, "The South Region, as defined by the U.S. Census Bureau and which encompasses our entire geographic footprint, fared slightly better as actual single-family housing starts were 72,000, up 18.0 percent from the second quarter of 2009, and single-family units under construction were up 1.1 percent over the same period." 

"While we enjoyed improved building activity and increased sales during the quarter, extremely volatile commodity prices coupled with intensely competitive pricing conditions had a negative impact on gross margins. Commodity prices rose over 22 percent from the end of March through the end of April, and then fell sharply, decreasing 35 percent from the end of April through the end of June. This volatility in the commodity markets, combined with excess capacity in the supply chain chasing a limited number of units under construction, contributed to our gross margins declining 4.0 percentage points compared to the second quarter of 2009.   From an operating expense perspective, we continued our focus on controlling costs as selling, general and administrative expenses increased only 2.2 percent compared to a 11.2 percent increase in sales volume."

Chad Crow, Builders FirstSource Senior Vice President and Chief Financial Officer, added, "We ended the quarter with approximately $125 million in cash and over $141 million of available liquidity, as we had $16.6 million of net borrowing availability under our revolver. Our cash balance at quarter-end was on forecast and our available liquidity was slightly higher than forecast. Cash used for the quarter, excluding the $33.8 million federal income tax refund we received in April, was $34.0 million. Of the $34.0 million of cash used, $15.1 million was due to an increase in working capital, $4.8 million related to capital expenditures, and the remaining $14.1 million of cash was used to fund operating losses. Our working capital management continues to be effective as accounts receivable days decreased to 34.5 days, compared to 39.1 days in the same quarter last year. Inventory turns improved to 9.8x, up from 9.2x for the second quarter of 2009, and our accounts payable days remained flat quarter-over-quarter. Our continued focus on our working capital management resulted in cash conversion days dropping to 41.1 days for the quarter, a 6.9 day improvement over the second quarter of 2009, and a slight decrease on a sequential quarter basis. Working capital expressed as a percentage of sales for the quarter was 8.8 percent compared to 9.6 percent a year ago."

Second Quarter 2010 Results Compared to Second Quarter 2009

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

• Sales were $211.5 million compared to $175.5 million last year, an increase of $36.0 million or 20.5 percent. We estimate that sales increased 9.3 percent due to commodity inflation and 11.2 percent due to volume. 
• Gross margin percentage was 18.3 percent, down from 22.3 percent, a 4.0 percentage point decline. Specifically, our gross margin percentage declined 4.8 percentage points due to price, which was partially offset by a 0.8 percentage point improvement in margin due to sales volume (fixed costs in costs of goods sold).
• Selling, general and administrative ("SG&A") expenses increased $1.1 million, or 2.2 percent. However, as a percentage of sales, SG&A expense decreased from 28.7 percent in 2009 to 24.3 percent in 2010 primarily due to reduced customer write-offs and better leveraging of costs against increased sales.
• Interest expense was $6.5 million in the current quarter, an increase of $0.4 million from the second quarter of 2009, primarily due to higher interest rates during the current quarter and partially offset by lower average debt balances.
• We recorded an income tax benefit of $0.3 million during the quarter compared to expense of $0.1 million in the second quarter of 2009. We recorded an after-tax, non-cash valuation allowance of $7.1 million and $6.6 million in 2010 and 2009, respectively, related to our net deferred tax assets. Absent this valuation allowance, our tax benefit rate would have been 38.5 percent and 35.2 percent in 2010 and 2009, respectively.
• Loss from continuing operations for the second quarter of 2010 was $18.9 million, or $0.20 loss per diluted share, compared to $18.6 million, or $0.47 loss per diluted share for the second quarter of 2009. Excluding the valuation allowance, our loss from continuing operations per diluted share was $0.12 for 2010 and $0.30 for 2009.
• Loss from discontinued operations was $0.1 million, or $0.00 per diluted share, compared to $4.0 million, or $0.11 loss per diluted share for the second quarter of 2009.
• Net loss was $19.0 million, or $0.20 loss per diluted share, compared to net loss of $22.6 million, or $0.58 loss per diluted share. 
• Diluted weighted average shares outstanding were 94.9 million compared to 39.1 million. Approximately 58.6 million additional shares were issued in the first quarter of 2010 as part of our rights offering and debt exchange.
• Adjusted EBITDA was a loss of $7.6 million compared to a loss of $5.6 million last year. See reconciliation attached.

Liquidity and Capital Resources

• Our available cash at June 30, 2010 was approximately $125 million. Our total liquidity at quarter-end was over $141 million, as we had $16.6 million in borrowing availability under our revolver.  
• Operating cash flow was $4.5 million compared to $29.1 million for the second quarter of 2009, the primary difference being the effect of changes in working capital. Operating cash flow includes federal income tax refunds of $33.8 million and $31.8 million in the second quarters of 2010 and 2009, respectively.
• Capital expenditures were $4.8 million in the current quarter and are expected to be $2.0-$3.0 million over the remainder of the year, relating primarily to buyouts of vehicle and equipment leases. Capital expenditures in the second quarter of 2009 were $0.3 million.

Outlook

Mr. Sherman concluded, "An extremely volatile commodity market during the quarter added to what was already one of the toughest housing markets in our nation's history. Through these challenging conditions, we remain focused on prudently managing cash and positioning the company to take advantage of a housing recovery. Our use of cash through June is consistent with forecast, and we believe seasonal reductions in working capital will help reduce our use of cash over the remainder of the year. However, it now appears building activity in the back half of 2010 may not be as strong as had been anticipated which could result in our use of cash for fiscal 2010 being somewhat higher than the $60-$70 million we originally forecasted. There still appears to be a significant amount of uncertainty in the macro-economic factors that drive our business. We will continue managing our business in the same conservative manner as we have over the past several years and will do so until greater clarity returns to the homebuilding sector."

"My sincere appreciation goes out to all Builders FirstSource employees. These are extremely difficult times in our industry and our employees' dedication and positive attitude make me very grateful to be part of the Builders FirstSource team."

Conference Call

Builders FirstSource will host a conference call Friday, July 23, 2010, 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: 888-737-3699 (U.S. and Canada) and 913-981-5585 (international).  A replay of the call will be available from 3:00 p.m. CT July 23, 2010 through July 28, 2010. To access the replay, please dial 888-203-1112 (U.S. and Canada) and 719-457-0820 (international).  Please refer to pass code 2861649. To access the webcast, go to 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 9 states, principally in the southern and eastern United States, and has 56 distribution centers and 51 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 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.