Exhibit 99.1
For Immediate Release
BUILDING MATERIALS HOLDING CORPORATION ANNOUNCES
FOURTH QUARTER AND FULL YEAR 2003 FINANCIAL RESULTS
SAN FRANCISCO (February 24, 2004) – Building Materials Holding Corporation (Nasdaq: BMHC), a leading provider of building products and construction services to professional builders and contractors, today reported consolidated sales for the fourth quarter of 2003 of $420.1 million, up 41.5% from $296.9 million in the fourth quarter of 2002. Sales for the year ended December 31, 2003 increased 21.8% to $1.4 billion compared to $1.2 billion in 2002. The increase in sales for the fourth quarter was primarily due to inflation in commodity wood product prices as well as WBC Construction ($52.8 million), which was acquired in the first quarter of 2003 and not consolidated until August 2003. The increase in sales for the year was primarily attributable to WBC Construction ($83.8 million), KBI Norcal ($70.3 million), which was acquired in July of 2002, and inflation in commodity wood product prices.
Net income for the fourth quarter of 2003 was $5.8 million or $0.43 per diluted share, compared with net income of $1.0 million or $0.08 per diluted share for the fourth quarter of 2002. Excluding charges for impairment of goodwill and intangible assets in the comparable periods, net income for the fourth quarter was $6.3 million or $0.47 per diluted share, compared to net income of $5.2 million or $0.39 per diluted share for the fourth quarter of 2002. The improvement in net income was due to increased sales and operating efficiencies. Net income was impacted by lower gross margins resulting from rapid increases in commodity wood product prices, which limited BMHC’s ability to pass along increased prices due to existing customer sales commitments and the competitive environment. Net income also reflects an operating loss at WBC Construction resulting from rapid growth at lower gross margins.
For the full year, net income was $19.9 million or $1.48 per diluted share, compared to $7.0 million or $0.53 per diluted share for 2002. Excluding the charge in 2002 of $11.6 million, or $0.88 cents per diluted share, for the change in accounting principle for goodwill and intangible assets as well as related fourth quarter impairment charges in both years, 2003 net income was $20.4 million, or $1.52 per diluted share, compared to 2002 net income of $22.8 million or $1.72 per diluted share. The decrease was primarily due to lower gross margins resulting from BMHC’s limited ability to pass on higher commodity wood product prices because of existing sales commitments, competitive pressures, and new acquisitions with lower margins relative to comparable business operations. This was partially offset by improved selling, general and administrative expenses as a percentage of sales.
Mr. Robert E. Mellor, Chairman, President and Chief Executive Officer, stated, “Throughout 2003, we remained committed to our strategy of increasing construction services, expanding into attractive markets and broadening our services at existing locations. In the past year we successfully entered markets in Florida, Virginia, Maryland and Delaware, and completed the integration of lumber and truss operations at KBI Norcal. As demonstrated by our improved fourth quarter sales, we are expanding construction services and enhancing relationships with production homebuilders.
“With construction services becoming an increasing portion of our overall operations in the last year, we analyzed the needs of the Company and its two core operations – BMC West and BMC Construction – and completed new management appointments for each. In line with these changes, we are reporting financial results by segment. Under the direction of this management structure, we
expect to improve our operations and enhance relationships with both production and custom homebuilders. We are in a solid position to capitalize on continued strength in the housing industry.”
The BMC West business segment sells both building products and construction services while BMC Construction provides only construction services. For financial reporting purposes, construction services on the consolidated statement of earnings includes construction services from both BMC West and BMC Construction segments. A reconciliation of sales and operating income by segment is provided in a supplemental table at the end of this release.
BMC West
The following information provides sales and operating income for the BMC West business segment:
| | (in millions) | |
| | Fourth Quarter | | Full Year | |
| | 2003 | | 2002 | | 2003 | | 2002 | |
Sales: | | | | | | | | | |
Building products | | $ | 246.0 | | $ | 208.0 | | $ | 917.5 | | $ | 868.4 | |
Construction services | | 25.8 | | 18.3 | | 89.9 | | 73.4 | |
| | 271.8 | | 226.3 | | 1,007.4 | | 941.8 | |
| | | | | | | | | |
Operating income | | $ | 13.8 | | $ | 5.4 | | $ | 52.1 | | $ | 47.5 | |
Fourth quarter 2003 sales increased 20.1% to $271.8 million compared to $226.3 million in the same period a year ago. For the year, sales increased 7.0% to $1.0 billion compared to $941.8 million in the prior year. Higher sales for the quarter and year were a result of inflation in commodity wood product prices during the second half of the year.
Operating income increased to $13.8 million for the fourth quarter of 2003 from $5.4 million in the same quarter of 2002. Excluding the 2002 fourth quarter charge for impairment of goodwill and intangible assets of $6.7 million, 2003 operating income increased 13.9% to $13.8 million compared to $12.1 million in 2002. The increase reflects improved management of operating expenses, partially offset by lower gross margins as a percentage of sales resulting from the Company’s limited ability to pass along commodity wood product price increases.
For the year, operating income increased to $52.1 million compared to $47.5 million in the same period of 2002. Excluding the 2002 fourth quarter charge for impairment of goodwill and intangible assets of $6.7 million, 2003 operating income decreased 3.9% to $52.1 million from $54.2 million in 2002. The decrease was the result of lower gross margins relative to sales, partially offset by improved management of operating expenses.
BMC Construction
The following information provides sales and operating income for the BMC Construction business segment:
| | (in millions) | |
| | Fourth Quarter | | Full Year | |
| | 2003 | | 2002 | | 2003 | | 2002 | |
| | | | | | | | | |
Sales of construction services | | $ | 148.7 | | $ | 71.0 | | $ | 408.9 | | $ | 220.5 | |
| | | | | | | | | |
Operating income | | $ | 4.4 | | $ | 4.3 | | $ | 18.6 | | $ | 20.6 | |
Fourth quarter 2003 sales increased 109.5% to $148.7 million compared to $71.0 million in the same period a year ago. For the year, sales increased 85.5% to $408.9 million compared to $220.5 million in the prior year. The sales increase for the quarter was primarily due to WBC Construction ($52.8 million), which was acquired in the first quarter of 2003 and not consolidated until August 2003. For the year, higher sales were mainly a result of WBC Construction ($83.8 million) and KBI Norcal ($70.3 million), which was acquired in July of 2002.
Operating income for the fourth quarter increased 3.1% to $4.4 million from $4.3 million in the same quarter of 2002. The increase was mainly due to improvements in operating efficiencies at KBI Norcal, offset by a $0.8 million impairment of goodwill and intangible asset charge at KBI and an operating loss at WBC Construction primarily attributable to the rapid growth of new construction projects at lower gross margins, as well as higher commodity prices the Company was not able to pass along to customers.
For the year, operating income decreased 9.5% to $18.6 million compared to $20.6 million in the same period for 2002. Operating income in 2003 reflects a decline attributable to competitive pressure on gross margins relative to sales mitigated in part by improvements in operating expenses as a percentage of sales and the charge for impairment of goodwill and intangible assets at KBI.
Non-GAAP Financial Measures
The Company has used non-GAAP financial measures, which exclude the onetime charge in 2002 for the change in accounting principle for goodwill and intangible assets as well as fourth quarter charges for impairment of goodwill and intangible assets in both years, in analyzing financial results because they provide meaningful information regarding the Company’s operational performance and facilitate management’s internal comparisons to the Company’s historical operating results. The Company believes that these non-GAAP financial measures are useful to investors because they allow for greater transparency. Wherever non-GAAP financial measures have been included in this press release, the Company has reconciled them in the tables below to their GAAP counterparts. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The following tables reconcile the non-GAAP financial measures used with GAAP:
Adjustments to Net Income
(amounts in thousands, except per share data)
| | 4th Quarter | | Full Year | |
| | 2003 | | 2002 | | 2003 | | 2002 | |
Net income | | $ | 5,778 | | $ | 1,046 | | $ | 19,929 | | $ | 7,015 | |
Impairment of goodwill and intangible assets, net of tax | | 505 | | 4,119 | | 505 | | 4,119 | |
Charge for change in accounting principle, net of tax | | | | | | | | 11,650 | |
Adjusted net income | | $ | 6,283 | | $ | 5,165 | | $ | 20,434 | | $ | 22,784 | |
| | | | | | | | | | | | | |
Adjusted net income per diluted share | | $ | 0.47 | | $ | 0.39 | | $ | 1.52 | | $ | 1.72 | |
Teleconference and Webcast
BMHC will host a conference call and audio webcast today at 8:30 a.m. Pacific Time to discuss its financial results for the fourth quarter and year ended December 31, 2003. The conference call can be accessed by dialing 877-223-0437 (Domestic), or 706-643-0552 (International). A replay will be available through March 2, 2004 by dialing 800-642-1687 (Domestic) or 706-645-9291 (International). The required passcode for the replay is 1484280. The live conference call and replay can also be accessed via audio web cast at BMHC’s website at www.bmhc.com or www.videonewswire.com/BMHC. The archive of the webcast will be available for 90 days following the conclusion of the call.
About BMHC
Building Materials Holding Corporation is one of the largest residential construction services companies in the United States. The Company specializes in providing construction and installation services, component manufacturing and high-quality building materials to residential builders and contractors across the nation. Keys to BMHC’s growth strategy are increasing construction services to residential production homebuilders and entry into selective geographic markets.
Business Risks and Forward-Looking Statements
Certain statements made in this news release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of BMHC, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks or uncertainties may include, but are not limited to, changes in costs of materials sold; changes in selling prices; competition within the construction services and building materials industry; changes in economic conditions and interest rates; integration of acquired businesses; increases in costs of raw materials and labor; retention of key management personnel; consumer confidence; household and job formation; government regulation; and general economic, business and competitive factors, all or each of which may cause actual results to differ from the statements made in this press release. These risks and uncertainties are discussed in detail in Building Materials Holding Corporation’s Form 10-K. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. BMHC disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements contained in the Annual Report on Form 10-K or this news release.
CONTACT: | | Ellis Goebel |
| | |
| | Senior Vice President, Finance |
| | (415) 627-9100 |
(Tables Follow)
BUILDING MATERIALS HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(amounts in thousands, except per share data)
(Unaudited)
| | Three months ended
December 31, | | Twelve months ended
December 31, | |
| | 2003 | | 2002 | | 2003 | | 2002 | |
Sales | | | | | | | | | |
Building products | | $ | 245,518 | | $ | 207,568 | | $ | 916,256 | | $ | 867,623 | |
Construction services | | 174,570 | | 89,333 | | 498,815 | | 293,871 | |
Total net sales | | 420,088 | | 296,901 | | 1,415,071 | | 1,161,494 | |
Costs and operating expenses | | | | | | | | | |
Cost of goods sold | | | | | | | | | |
Building products | | 186,076 | | 154,461 | | 687,769 | | 639,713 | |
Construction services | | 157,630 | | 74,361 | | 437,493 | | 243,364 | |
Impairment of goodwill and intangible assets | | 829 | | 6,698 | | 829 | | 6,698 | |
Selling, general and administrative expense | | 64,561 | | 58,840 | | 250,319 | | 233,328 | |
Total costs and operating expenses | | 409,096 | | 294,360 | | 1,376,410 | | 1,123,103 | |
| | | | | | | | | |
Income from operations | | 10,992 | | 2,541 | | 38,661 | | 38,391 | |
| | | | | | | | | |
Other income (expense), net | | 1,394 | | 172 | | 1,768 | | 730 | |
Interest expense | | 2,452 | | 2,222 | | 9,279 | | 9,812 | |
Income before income taxes, minority interest, equity earnings in an unconsolidated company and change in accounting principle | | 9,934 | | 491 | | 31,150 | | 29,309 | |
Income taxes (benefit) | | 3,299 | | (159 | ) | 11,402 | | 10,871 | |
Minority interest (loss) | | 857 | | (396 | ) | 1,250 | | (227 | ) |
Equity in earnings of an unconsolidated Company, net of tax | | | | | | 1,431 | | | |
Income before change in accounting principle | | 5,778 | | 1,046 | | 19,929 | | 18,665 | |
Change in accounting principle, net of tax Benefit of $6,286 | | | | | | | | (11,650 | ) |
Net income | | $ | 5,778 | | $ | 1,046 | | $ | 19,929 | | $ | 7,015 | |
| | | | | | | | | |
Income before change in accounting principle per common share: | | | | | | | | | |
Basic | | $ | 0.43 | | $ | 0.08 | | $ | 1.50 | | $ | 1.43 | |
Diluted | | $ | 0.43 | | $ | 0.08 | | $ | 1.48 | | $ | 1.41 | |
Change in accounting principle per share: | | | | | | | | | |
Basic | | $ | 0.00 | | $ | 0.00 | | $ | 0.00 | | $ | (0.89 | ) |
Diluted | | $ | 0.00 | | $ | 0.00 | | $ | 0.00 | | $ | (0.88 | ) |
Net income per common share: | | | | | | | | | |
Basic | | $ | 0.43 | | $ | 0.08 | | $ | 1.50 | | $ | 0.54 | |
Diluted | | $ | 0.43 | | $ | 0.08 | | $ | 1.48 | | $ | 0.53 | |
Weighted average number of common shares: | | | | | | | | | |
Basic | | 13,327 | | 13,136 | | 13,279 | | 13,086 | |
Diluted | | 13,496 | | 13,275 | | 13,441 | | 13,263 | |
BUILDING MATERIALS HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
(Unaudited)
| | December 31,
2003 | | December 31,
2002 | |
ASSETS | | | | | |
Cash | | $ | 19,506 | | $ | 9,217 | |
Receivables, net | | 187,790 | | 132,757 | |
Inventory | | 111,146 | | 89,828 | |
Costs in excess of billings | | 8,625 | | 3,920 | |
Deferred income taxes | | 8,629 | | 5,302 | |
Prepaid expenses and other current assets | | 5,243 | | 7,456 | |
| | | | | |
Total current assets | | 340,939 | | 248,480 | |
| | | | | |
Property and equipment, net | | 165,400 | | 178,137 | |
Goodwill | | 72,745 | | 52,111 | |
Other intangibles, net | | 12,017 | | 12,950 | |
Deferred income taxes | | | | 529 | |
Deferred loan costs | | 2,406 | | 2,732 | |
Other long-term assets | | 10,692 | | 8,135 | |
| | | | | |
Total assets | | $ | 604,199 | | $ | 503,074 | |
| | | | | |
LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS’ EQUITY | | | | | |
Billings in excess of costs | | $ | 12,069 | | $ | 3,927 | |
Accounts payable and accrued expenses | | 109,067 | | 74,061 | |
| | | | | |
Total current liabilities | | 121,136 | | 77,988 | |
| | | | | |
Long-term debt | | 189,678 | | 157,375 | |
Deferred income taxes | | 5,354 | | | |
Other long-term liabilities | | 13,276 | | 11,428 | |
| | | | | |
Total liabilities | | 329,444 | | 246,791 | |
| | | | | |
Minority interest | | 3,745 | | 4,983 | |
| | | | | |
Shareholders’ equity: | | | | | |
| | | | | |
Common stock, $0.001 par value, 20,000,000 shares authorized; 13,333,711 and 13,135,562 shares issued and outstanding, respectively | | 13 | | 13 | |
Additional paid-in capital | | 115,282 | | 112,709 | |
Retained earnings | | 155,715 | | 138,578 | |
| | | | | |
Total shareholders’ equity | | 271,010 | | 251,300 | |
| | | | | |
Total liabilities, minority interest and shareholders’ equity | | $ | 604,199 | | $ | 503,074 | |
BUILDING MATERIALS HOLDING CORPORATION
SEGMENT INFORMATION
(amounts in thousands)
(Unaudited)
| | Three months ended
December 31, | | Twelve months ended
December 31, | |
| | 2003 | | 2002 | | 2003 | | 2002 | |
Sales | | | | | | | | | |
BMC West | | $ | 271,776 | | $ | 226,335 | | $ | 1,007,373 | | $ | 941,845 | |
| | | | | | | | | |
BMC Construction | | 148,736 | | 70,994 | | 408,929 | | 220,472 | |
| | | | | | | | | |
Intersegment eliminations | | (424 | ) | (428 | ) | (1,231 | ) | (823 | ) |
| | | | | | | | | |
| | $ | 420,088 | | $ | 296,901 | | $ | 1,415,071 | | $ | 1,161,494 | |
| | | | | | | | | |
Operating Income | | | | | | | | | |
BMC West | | $ | 13,831 | | $ | 5,444 | | $ | 52,147 | | $ | 47,541 | |
| | | | | | | | | |
BMC Construction | | 4,389 | | 4,257 | | 18,639 | | 20,593 | |
| | | | | | | | | |
Corporate and other | | (7,228 | ) | (7,160 | ) | (32,125 | ) | (29,743 | ) |
| | | | | | | | | |
| | $ | 10,992 | | $ | 2,541 | | $ | 38,661 | | $ | 38,391 | |
