DALLAS, July 31, 2008 (PRIME NEWSWIRE) -- Builders FirstSource, Inc. (Nasdaq:BLDR), today reported a net loss of $45.9 million, or ($1.29) per diluted share, on sales of $307.3 million for the second quarter ended June 30, 2008. These results compare to net income of $8.4 million, or $0.23 per diluted share on sales of $465.1 million for the second quarter ended June 30, 2007.
Other Second Quarter Financial Highlights
(in millions, except Second Quarter Second Quarter
gross margin and per share data) 2008 2007
---------------- ---------------
Sales $ 307.3 $ 465.1
Gross margin, as a percentage
of sales 21.6% 25.1%
Net (loss) income $ (45.9) $ 8.4
Net (loss) income per
diluted share $ (1.29) $ 0.23
Asset impairments, pre-tax $ 14.2 $ --
(per share amounts net
of tax) ($0.24 per share) ($-- per share)
Valuation allowance on net
deferred tax assets $ 24.1 $ --
(per share amounts) ($0.68 per share) ($-- per share)
Diluted weighted average
shares outstanding 35.7 36.4
Operating cash flow $ (2.9) $ 31.8
"Housing starts nationally and in our markets continued to decline during the quarter. Specifically in our markets, housing starts fell an estimated 43.1 percent in the second quarter of 2008 when compared to the second quarter of 2007," said Floyd Sherman, Builders FirstSource Chief Executive Officer. "Our sales for the quarter declined by 33.9 percent, as we were able to partially offset the decline in housing starts by growing market share by an estimated 8.2 percent while sales from new operations contributed 1.6 percent. The change in market prices for lumber & lumber sheet goods had a nominal impact on sales for the quarter."
Mr. Sherman continued, "With the continued decline in housing starts and general macroeconomic conditions that affect our industry, we have not wavered from our commitment to reduce operating costs, improve operating efficiencies and grow market share. We continue to evaluate our costs and make necessary reductions. We were able to reduce our selling general and administrative costs by 18.8 percent from the second quarter of 2007. We also successfully gained market share during the quarter through developing customer relationships and diversifying our customer base."
Second Quarter 2008 Results Compared to Second Quarter 2007
(See accompanying financial schedules for full financial details and reconciliations of Non-GAAP financial measures to their GAAP equivalents.)
* Sales were $307.3 million compared to $465.1 million. This 33.9 percent
sales decline was primarily driven by the decrease in housing activity
within the company's markets which had an estimated 43.1 percent
negative effect on sales. Also, lower market prices for commodity
lumber and lumber sheet goods had a 0.6 percent negative effect on
sales. These non-controllable sales drivers were partially offset by
sales growth attributable to market share gains of an estimated 8.2
percent and sales growth from new operations of 1.6 percent. Overall
sales volumes declined an estimated 32.5 percent. Gross margin
percentage was 21.6 percent, down from 25.1 percent, due to competitive
market conditions, and the de-leveraging of fixed costs within our
manufacturing facilities.
* Selling, general and administrative ("SG&A") expenses decreased $18.7
million, or 18.8 percent from the second quarter of 2007. As a
percentage of sales, however, SG&A increased from 21.4 percent in 2007
to 26.3 percent in 2008 which is reflective of fixed cost items
becoming a larger percentage of our SG&A. Average full-time equivalent
employees for the second quarter 2008 were 22.0 percent lower than the
second quarter 2007, while our salaries and benefits expense fell $13.9
million from 2007, or 22.6 percent, compared to a 32.5 percent volume
decline. Our decline in salaries and benefits was approximately 70
percent variable to our sale volumes as we continue to increase
employee efficiency. Offsetting our declines in selling, general and
administrative expenses, we had an increase in our bad debt expense
and other customer write-offs of $1.3 million, a result of the
continued decline in economic conditions and their effect on our
smaller customers, and a $0.6 million increase in our fuel expense
related to rising fuel prices.
* We recorded asset impairment charges of $14.2 million, or $0.24 per
share net of tax. The impairment charges are the result of the
continued decline in housing starts in specific markets and the effect
of this decline on these business units' current operating performance
as well as long-term expectations. The asset impairment charges
consisted of $7.5 million of goodwill, $4.4 million of other intangible
assets, and $2.3 million of fixed assets.
* An after-tax, non-cash valuation allowance of $24.1 million, or $0.68
per share was recorded during the second quarter of 2008 related to the
deferred tax assets in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes." The
valuation allowance is reflected as a charge to second quarter income
tax expense and a reduction of the Company's deferred tax assets as of
June 30, 2008.
* Net loss was $45.9 million, or ($1.29) per diluted share, compared to
net income of $8.4 million, or $0.23 per diluted share. Excluding the
asset impairment charges and the tax valuation allowance, our diluted
loss per share was ($0.37) per share.
* Diluted weighted average shares outstanding were 35.7 million compared
to 36.4 million.
* Adjusted EBITDA was $(7.0) million, or (2.3) percent of sales, compared
to $25.3 million, or 5.4 percent of sales.
* As of June 30, 2008, the company's cash on hand was $75.2 million,
available borrowing capacity was $137.6 million, and funded debt was
$275.0 million. As of December 31, 2007, our cash on hand was $97.6
million, available borrowing capacity was $118.9 million and funded
debt was $275.0 million.
* Operating cash flow was $(2.9) million compared to $31.8 million. The
decline in our operating cash flows was primarily due to the net loss
in the first six months of 2008 which were not fully offset by changes
in working capital. The increase in accounts receivable was primarily
due to an increase in income taxes receivable.
* Capital expenditures were $5.2 million compared to $3.4 million.
Commenting on the second quarter results, Charles Horn, Builders FirstSource Senior Vice President and Chief Financial Officer, said, "Our gross margins continue to be impacted by the intense pricing pressures in our markets. In addition, market prices for lumber & lumber sheet goods increased on average approximately 12 percent from the first quarter of 2008 and we were largely unsuccessful in passing these price increases through to our customers, which negatively impacted gross margins. We continue to focus on our value-added products as well as increasing our manufacturing volume to try and mitigate some of the downward pressure that the competitive pricing environment is putting on our gross margins."
Mr. Horn continued, "We feel our liquidity is strong at over $210 million considering the protracted downturn in our industry. Our operating cash flow improved from the first quarter of 2008 as we improved our days sales outstanding and our inventory turns. Our inventory turns for the quarter improved to 9.7x compared to 8.8x in the first quarter of 2008, and our accounts receivable days improved to 38 days compared to 40 days in the first quarter of 2008. In addition, we received $6.8 million in income tax refunds in the second quarter of 2008 and are anticipating $7 to $10 million in additional tax refunds in the third or fourth quarter."
Outlook
The company expects the difficult market conditions to negatively affect its operating results throughout the remainder of 2008 and 2009. Additionally, increased competitive pressure arising from the current operating conditions could continue to have a negative impact on margins.
Mr. Sherman concluded, "Industry conditions continue to be difficult which is reflected in our results, but I am proud of the untiring effort of our employees to identify operating efficiencies, cut costs and most importantly seek additional market share through superior customer service and developing new business. We still see difficult times ahead of us, but we will continue our focus on liquidity and seeking opportunities to grow our business during this extended downturn in our industry."
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: 877-719-9801 (U.S. and Canada) and 719-325-4762 (international). A replay of the call will be available from 1:00 p.m. CT August 1, 2008 through August 15, 2008. To access the replay, please dial 888-203-1112 (U.S. and Canada) and 719-457-0820 (international). Please refer to pass code 4056339. 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 13 states, principally in the southern and eastern United States, and has 66 distribution centers and 62 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.
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended Six months ended
June 30, June 30,
------------------------------------------
2008 2007 2008 2007
---------------------------------------------------------------------
(in thousands, except per share amounts)
Sales $ 307,261 $ 465,140 $ 577,772 $ 876,283
Cost of sales 240,991 348,507 451,101 655,099
--------- --------- --------- ---------
Gross margin 66,270 116,633 126,671 221,184
Selling, general and
administrative expenses
(includes stock-based
compensation expense of
$2,029 and $2,236 for
the three months ended
in 2008 and 2007,
respectively and $4,136
and $3,834 for the six
months ended in 2008 and
2007, respectively ) 80,837 99,563 160,408 197,033
Asset impairments 14,235 -- 14,235 --
--------- --------- --------- ---------
(Loss) income from
operations (28,802) 17,070 (47,972) 24,151
Interest expense, net 6,294 6,583 12,764 13,295
--------- --------- --------- ---------
(Loss) income before
income taxes (35,096) 10,487 (60,736) 10,856
Income tax expense 10,817 2,092 1,023 2,229
--------- --------- --------- ---------
Net (loss) income $ (45,913) $ 8,395 $ (61,759) $ 8,627
========= ========= ========= =========
Net (loss) income
per share:
Basic $ (1.29) $ 0.24 $ (1.74) $ 0.25
========= ========= ========= =========
Diluted $ (1.29) $ 0.23 $ (1.74) $ 0.24
========= ========= ========= =========
Weighted average
common shares:
Basic 35,666 34,911 35,563 34,773
========= ========= ========= =========
Diluted 35,666 36,352 35,563 36,279
========= ========= ========= =========
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Sales by Product Category
(unaudited)
Three months ended June 30,
------------------------------------------
2008 2007
---------------------------------------------------------------------
(dollars in thousands)
Prefabricated components $ 59,913 19.5% $ 101,345 21.8%
Windows & doors 74,124 24.1% 105,300 22.6%
Lumber & lumber sheet
goods 76,157 24.8% 125,949 27.1%
Millwork 32,416 10.6% 42,986 9.2%
Other building products
& services 64,651 21.0% 89,560 19.3%
--------- --------- --------- ---------
Total sales $ 307,261 100.0% $ 465,140 100.0%
========= ========= ========= =========
Six months ended June 30,
------------------------------------------
2008 2007
---------------------------------------------------------------------
(dollars in thousands)
Prefabricated components $ 113,745 19.7% $ 185,500 21.2%
Windows & doors 142,361 24.6% 197,911 22.6%
Lumber & lumber sheet
goods 140,674 24.3% 240,631 27.5%
Millwork 61,046 10.6% 82,228 9.4%
Other building products
& services 119,946 20.8% 170,013 19.3%
--------- --------- --------- ---------
Total sales $ 577,772 100.0% $ 876,283 100.0%
========= ========= ========= =========
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
June 30, December 31,
2008 2007
---------------------------------------------------------------------
(in thousands, except
per share amounts)
ASSETS
Current assets:
Cash and cash equivalents $ 75,192 $ 97,574
Accounts receivable, less allowances of
$6,219 and $7,209, respectively 165,191 149,482
Inventories 100,351 95,038
Other current assets 5,233 26,672
--------- ---------
Total current assets 345,967 368,766
Property, plant and equipment, net 89,521 96,358
Goodwill 148,058 155,588
Other assets, net 25,568 26,711
--------- ---------
Total assets $ 609,114 $ 647,423
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 81,447 $ 65,811
Accrued liabilities 43,192 47,626
Current maturities of long-term debt 42 40
--------- ---------
Total current liabilities 124,681 113,477
Long-term debt, net of current maturities 279,205 279,226
Other long-term liabilities 19,374 13,173
--------- ---------
Total liabilities 423,260 405,876
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; 36,075 and 35,701
shares issued and outstanding at June
30, 2008 and December 31, 2007,
respectively 357 351
Additional paid-in capital 142,864 138,476
Retained earnings 40,616 102,375
Accumulated other comprehensive income 2,017 345
--------- ---------
Total stockholders' equity 185,854 241,547
--------- ---------
Total liabilities and stockholders'
equity $ 609,114 $ 647,423
========= =========
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
Six Months Ended June 30,
----------------------
2008 2007
---------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net (loss) income $ (61,759) $ 8,627
Adjustments to reconcile net (loss)
income to net cash (used in) provided
by operating activities:
Depreciation and amortization 11,475 12,111
Asset impairments 14,235
Amortization of deferred loan costs 1,416 1,317
Deferred income taxes 19,946 (1,620)
Bad debt expense 2,067 810
Non-cash stock based compensation 4,136 3,834
Net gain on sales of assets (1,065) (369)
Changes in assets and liabilities:
Accounts receivable (18,356) (4,908)
Inventories (5,313) (3,090)
Other current assets 4,040 (2,367)
Other assets and liabilities (805) (1,734)
Accounts payable 15,636 44,276
Accrued liabilities (4,593) (3,335)
--------- ---------
Net cash (used in) provided by
operating activities (18,940) 53,552
--------- ---------
Cash flows from investing activities:
Purchases of property, plant and
equipment (6,458) (5,936)
Proceeds from sale of property,
plant and equipment 1,979 841
--------- ---------
Net cash used in investing activities (4,479) (5,095)
--------- ---------
Cash flows from financing activities:
Payments of long-term debt (19) (220)
Deferred loan costs (354) --
Exercise of stock options 1,809 3,493
Repurchase of common stock (399) (483)
--------- ---------
Net cash provided by financing
activities 1,037 2,790
--------- ---------
Net change in cash and cash equivalents (22,382) 51,247
Cash and cash equivalents at beginning
of period 97,574 93,258
--------- ---------
Cash and cash equivalents at end of period $ 75,192 $ 144,505
========= =========
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Accounts Receivable Detail
(unaudited)
June 30, December 31,
2008 2007
---------------------------------------------------------------------
(in thousands)
Trade receivables $ 137,851 $ 133,639
Income tax receivable 27,229 13,276
Other 6,330 9,776
--------- ---------
Accounts receivable 171,410 156,691
Less: allowance for doubtful accounts (6,219) (7,209)
--------- ---------
Accounts receivable, net $ 165,191 $ 149,482
========= =========
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures to their GAAP Equivalent
(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 31, 2008.
Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
2008 2007 2008 2007
----------------------------------------------- --------------------
Reconciliation to EBITDA:
Net (loss) income $ (45,913) 8,395 $ (61,759) $ 8,627
Reconciling items:
Depreciation and
amortization expense 5,545 6,043 11,475 12,111
Asset impairments 14,235 -- 14,235 --
Interest expense, net 6,294 6,583 12,764 13,295
Income tax expense 10,817 2,092 1,023 2,229
--------- --------- --------- ---------
EBITDA $ (9,022) 23,113 $ (22,262) 36,262
Stock compensation
expense 2,029 2,236 4,136 3,834
--------- --------- --------- ---------
Adjusted EBITDA $ (6,993) $ 25,349 $ (18,126) $ 40,096
Adjusted EBITDA as
percentage of sales -2.3% 5.4% -3.1% 4.6%
Last twelve months
ended June 30,
--------------------
2008 2007
---------------------------------------------------------------------
Return on Net Assets:
(Loss) income from operations $ (84,998) $ 73,363
Average net assets $ 440,148 $ 508,529
Return on net assets -19.3% 14.4%