SAN FRANCISCO (July 26, 2007) - Building Materials Holding Corporation (NYSE: BLG), a leading provider of construction services and building materials to professional residential builders and contractors, today reported second quarter 2007 sales of $697 million, a decrease of 24% from $922 million in the same quarter a year ago. For the six months ended June 30, 2007, sales were $1.3 billion, a decrease of 30% from $1.8 billion in 2006.
Net income for the second quarter of 2007 was $19.4 million or $0.66 per share compared to $34.2 million or $1.16 per share in the same quarter a year ago. The current quarter results included a gain of $5.7 million or $0.19 per share from the sale of certain real estate associated with the relocation of a building materials operation in Texas. For the six months ended June 30, 2007, net income was $14.5 million or $0.49 per share compared to $62.2 million or $2.10 per share in the same period of 2006.
Robert E. Mellor, Chairman, President and Chief Executive Officer, stated, “Market conditions remained very challenging during the second quarter, with year-over-year comparisons continuing to reflect the sharp correction occurring in the homebuilding sector. We were pleased that our focus on cost controls resulted in improved operating margins during the quarter and enabled us to return to profitability while generating positive cash flow.
“We continue to adjust our operating costs to current levels of regional homebuilding activity while maintaining a strong commitment to preserving our service levels to customers. We remain extremely focused on cost management and cash flow, as the timing of a recovery of the homebuilding market remains highly uncertain.”
BMC West Segment Operating Results
(thousands)
| | | | | | | | |
| | Three Months Ended June 30 | $ | % | | Six Months Ended June 30 | $ | % |
| | | 2006 | Change | Change | | | 2006 | Change | Change |
Sales | $ 340,276 | $ 420,061 | $ (79,785) | (19)% | | $ 626,909 | $ 806,320 | $(179,411) | (22)% |
| | | | | | | | | | |
Income from operations | $ 33,207 | $ 39,178 | $ (5,971) | (15)% | | $ 44,638 | $ 69,724 | $ (25,086) | (36)% |
For the second quarter, BMC West sales were $340 million, a decrease of 19% from $420 million in the same quarter a year ago. For the six months, sales were $627 million, a decrease of 22% from $806 million in the same period of 2006. Building permits were lower in all our markets with particular sales weakness in the Colorado Front Range and Southwest regions.
For the second quarter, income from operations was $33.2 million, a decrease of 15% from $39.2 million in the same quarter of 2006. For the six months, income from operations was $44.6 million, a decrease of 36% from $69.7 million in the same period of 2006. Income from operations declined due to lower sales. Income from operations included a pre-tax gain of $8.2 million for the sale of certain real estate associated with the relocation of a building materials operation in Texas.
SelectBuild Segment Operating Results
(thousands)
| | | | | | | | |
| | Three Months Ended June 30 | $ | % | | Six Months Ended June 30 | $ | % |
| | | 2006 | Change | Change | | 2007 | 2006 | Change | Change |
Sales | $ 356,751 | $ 501,931 | $(145,180) | (29)% | | $ 639,222 | $1,000,229 | $(361,007) | (36)% |
| | | | | | | | | | |
Income from operations | $ 15,702 | $ 47,098 | $(31,396) | (67)% | | $ 18,288 | $ 93,173 | $(74,885) | (80)% |
For the second quarter, SelectBuild sales were $357 million, a decrease of 29% from $502 million in the same period of 2006. Sales from comparable operations decreased 36% or $183 million due to lower contract starts. Sales from acquisitions not present in the same quarter of 2006 were 11% of sales or $38 million.
For the six months, sales were $639 million, a decrease of 36% from $1.0 billion in the same period of 2006. Sales from comparable operations were 43% or $426 million lower for the period. Sales from acquisitions not present in the same period of 2006 were 10% of sales or $65 million.
For the second quarter, income from operations was $15.7 million, a decrease of 67% from $47.1 million in the same quarter of 2006. Operating income from comparable operations decreased 79% or $37.3 million. Operating income included $5.9 million from acquisitions not present in the same quarter of 2006.
For the six months, income from operations was $18.3 million, a decrease of 80% from $93.2 million in the same period of 2006. Operating income from comparable operations decreased 90% or $83.7 million. Operating income included $8.8 million from acquisitions not present in the same period of 2006. Operating income declined for both the quarter and six months due to lower sales and competitive pressure on margins.
Corporate
(thousands)
| | Three Months Ended June 30 | | $ | % | | Six Months Ended June 30 | | $ | % |
| | 2007 | 2006 | | Change | Change | | | 2006 | | Change | Change |
Corporate general and administrative | $ 10,726 | $ 21,959 | | $(11,233) | (51)% | | $ 23,783 | $ 44,194 | | $(20,411) | (46)% |
Corporate represents shared services expenses to support the operations of our two business segments and public company costs. For the second quarter, these expenses decreased 51% to $10.7 million from $22 million in the same quarter of 2006. For the six months, these expenses decreased 46% to $23.8 million from $44.2 million in the same period of 2006. The decrease was due to lower compensation and professional fees.
Conference Call and Webcast
Management will host a conference call and audio webcast today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). The conference call may be accessed by dialing 866-383-7989 (Domestic), or 617-597-5328 (International), pass code 16909671. A replay will be available through Friday, August 10, 2007 by dialing 888-286-8010 (Domestic) or 617-801-6888 (International). The required pass code for the replay is 22142691. The live conference call and replay can also be accessed via audio webcast at BMHC’s website at www.bmhc.com. An archive of the webcast will be available for 90 days following the conclusion of the teleconference.
About BMHC
BMHC, a Fortune 1000 company, is one of the largest providers of residential construction services and building materials in the United States. We serve the homebuilding industry through two subsidiaries: SelectBuild provides construction services to high-volume production homebuilders in key growth markets across the country; BMC West distributes building materials and manufactures building components for professional builders and contractors in the western and southern states. Recently, BMHC was named to Fortune Magazine’s 100 Fastest Growing Companies and for a second consecutive year named to the Forbes 400 Best Big Companies. To learn more about BMHC, visit our website at www.bmhc.com.
BUSINESS RISKS AND FORWARD-LOOKING STATEMENTS
There are a number of business risks and uncertainties that affect our operations and therefore could cause future results to differ from past performance or expected results. Additional information regarding business risks and uncertainties is contained in Item 1A of our most recent Form 10-K. These risks and uncertainties may include, but are not limited to:
| · | demand for and supply of single-family homes which is influenced by changes in the overall condition of the U.S. economy, including interest rates, job formation, consumer confidence and other important factors; |
| · | the integration of acquired businesses may not result in anticipated cost savings and revenue synergies being fully realized or may take longer to realize than expected; |
| · | our ability to identify suitable acquisition candidates; |
| · | availability of and our ability to attract, train and retain qualified individuals; |
| · | our ability to implement and maintain cost structures that align with revenue growth; |
| · | changes in the business models of our customers may limit our ability to provide construction services and building products required by our customers; |
| · | fluctuations in our costs and availability of sourcing channels for commodity wood products, concrete, steel and other building materials; |
| · | weather conditions, including natural catastrophic events; |
| · | exposure to construction defect and product liability claims as well as other legal proceedings; |
| · | disruptions in our information systems; |
| · | actual and perceived vulnerabilities as a result of terrorist activities and armed conflict; |
| · | costs and/or restrictions associated with federal, state and other regulations; and |
| · | numerous other matters of a local and regional scale, including those of a political, economic, business, competitive or regulatory nature. |
Risks related to our shares may include, however are not limited to:
| · | price for our shares may fluctuate significantly; and |
| · | anti-takeover defenses and certain provisions could prevent an acquisition of our company or limit share price. |
Certain statements made in this news release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about our expectations, anticipated financial results and future business prospects are forward-looking statements. While these statements represent our current judgment on what the future may hold and we believe these judgments are reasonable, these statements involve risks and uncertainties that could cause our actual
results to differ materially from those in forward-looking statements. These factors include, but are not limited to the risks and uncertainties cited in the above paragraphs. Undue reliance should not be placed on such forward-looking statements, as such statements speak only as of the date of this news release. We undertake no obligation to update forward-looking statements.
For More Information Investor Contacts:
| · | Bill Smartt, Senior Vice President and Chief Financial Officer, BMHC |
| · | Mark Kailer, Vice President, Treasurer and Investor Relations Officer, BMHC |
+1.415.627.9100
| · | Lisa Laukkanen, The Blueshirt Group for BMHC |
+1.415.217.4967
lisa@blueshirtgroup.com
(Tables Follow)
Building Materials Holding Corporation
Consolidated Statements of Operations
(thousands, except per share data)
(unaudited)
| | Three Months Ended June 30 | | Six Months Ended June 30 |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 |
Sales | | | | | | | | | | | |
| Construction services | $ | 405,989 | | $ | 560,731 | | $ | 724,997 | | $ | 1,109,789 |
| Building products | | 291,038 | | | 361,261 | | | 541,134 | | | 696,760 |
Total sales | | 697,027 | | | 921,992 | | | 1,266,131 | | | 1,806,549 |
| | | | | | | | | | | | |
Costs and operating expenses | | | | | | | | | | | |
| Cost of goods sold | | | | | | | | | | | |
| Construction services | | 344,865 | | | 459,526 | | | 620,267 | | | 913,657 |
| Building products | | 211,740 | | | 264,518 | | | 392,818 | | | 511,744 |
| Impairment of assets | | — | | | 2,237 | | | — | | | 2,237 |
Selling, general and administrative expenses | | 112,470 | | | 131,893 | | | 226,292 | | | 262,494 |
| Other income, net | | (10,231) | | | (499) | | | (12,389) | | | (2,286) |
| Total costs and operating expenses | | 658,844 | | | 857,675 | | | 1,226,988 | | | 1,687,846 |
| | | | | | | | | | | | |
Income from operations | | 38,183 | | | 64,317 | | | 39,143 | | | 118,703 |
| | | | | | | | | | | | |
| Interest expense | | 9,501 | | | 6,465 | | | 17,719 | | | 12,055 |
| | | | | | | | | | | | |
Income before income taxes and minority interests | | 28,682 | | | 57,852 | | | 21,424 | | | 106,648 |
| | | | | | | | | | | | |
| Income taxes | | 9,265 | | | 20,520 | | | 6,597 | | | 38,330 |
| | | | | | | | | | | | |
Minority interests income, net of income taxes | | — | | | (3,157) | | | (376) | | | (6,074) |
| | | | | | | | | | | | |
Net income | $ | 19,417 | | $ | 34,175 | | $ | 14,451 | | $ | 62,244 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Net income per share: | | | | | | | | | | | |
| Basic | | $0.67 | | | $1.20 | | | $0.50 | | | $2.18 |
| Diluted | | $0.66 | | | $1.16 | | | $0.49 | | | $2.10 |
Building Materials Holding Corporation
Consolidated Balance Sheets
(thousands, except per share data)
(unaudited)
| | | June 30 | December 31 | | | | June 30 | December 31 |
| | | 2007 | 2006 | | | | 2007 | 2006 |
Assets | | | | | | | Liabilities, Minority Interests and Shareholders’ Equity | | | | | |
| Cash and cash equivalents | $ | 35,401 | | $ | 74,272 | | | | | | | |
| Marketable securities | | 8,022 | | | 4,337 | | Accounts payable | $ | 134,544 | | $ | 110,961 |
| Receivables, net of allowances | | | | | | | Accrued compensation | | 40,725 | | | 48,552 |
| of $5,158 and $4,487 | | 328,957 | | | 279,829 | | Insurance deductible reserves | | 27,716 | | | 24,931 |
| Inventory | | 156,707 | | | 144,366 | | Other accrued liabilities | | 39,620 | | | 103,402 |
| Unbilled receivables | | 72,191 | | | 43,527 | | Billings in excess of costs and estimated | | | | | |
| Deferred income taxes | | 9,015 | | | 8,914 | | earnings | | 35,833 | | | 27,622 |
| Prepaid expenses and other | | 10,652 | | | 11,166 | | Current portion of long-term debt | | 5,038 | | | 8,143 |
Current assets | | 620,945 | | | 566,411 | | Current liabilities | | 283,476 | | | 323,611 |
| | | | | | | | | | | | | |
| Property and equipment | | | | | | | Deferred income taxes | | 12,139 | | | 9,138 |
| Land | | 63,887 | | | 62,367 | | Insurance deductible reserves | | 25,868 | | | 25,841 |
| Buildings and improvements | | 139,700 | | | 139,602 | | Long-term debt | | 433,408 | | | 349,161 |
| Equipment | | 193,199 | | | 188,285 | | Other long-term liabilities | | 36,077 | | | 41,390 |
| Construction in progress | | 5,412 | | | 8,579 | | | | | | | |
| Accumulated depreciation | | (149,961) | | | (139,342) | | Minority interests | | 3,943 | | | 7,141 |
| Marketable securities | | 50,032 | | | 53,513 | | | | | | | |
| Deferred loan costs | | 4,920 | | | 5,481 | | Commitments and contingent liabilities | | — | | | — |
| Other long-term assets | | 34,741 | | | 27,223 | | | | | | | |
| Other intangibles, net | | 102,704 | | | 108,792 | | Shareholders’ equity | | | | | |
| Goodwill | | 318,129 | | | 308,000 | | Common shares, $0.001 par value: | | | | | |
| | $ | 1,383,708 | | $ | 1,328,911 | | authorized 50 million; issued and | | | | | |
| | | | | | | | outstanding 29.4 and 29.2 million | | | | | |
| | | | | | | | shares | | 29 | | | 29 |
| | | | | | | | Additional paid-in capital | | 159,797 | | | 154,405 |
| | | | | | | | Retained earnings | | 427,522 | | | 418,927 |
| | | | | | | | Accumulated other comprehensive | | | | | |
| | | | | | | | income (loss), net | | 1,449 | | | (732) |
| | | | | | | | Shareholders’ equity | | 588,797 | | | 572,629 |
| | | | | | | | | $ | 1,383,708 | | $ | 1,328,911 |
Building Materials Holding Corporation
Consolidated Statements of Cash Flows
(thousands)
(unaudited)
| | Three Months Ended June 30 | | Six Months Ended June 30 |
Operating Activities | 2007 | | 2007 |
| Net income | $ | 19,417 | | $ | 14,451 |
| Items in net income not using (providing) cash: | | | | | |
| Minority interests, net | | — | | | 376 |
| Depreciation and amortization | | 11,364 | | | 24,111 |
| Impairment of assets | | — | | | — |
| Deferred loan cost amortization | | 280 | | | 561 |
| Share-based compensation | | 2,584 | | | 4,697 |
| Gain on sale of assets, net | | (8,337) | | | (8,700) |
| Realized gain on marketable securities | | 18 | | | 7 |
| Deferred income taxes | | 42 | | | 2,485 |
Changes in assets and liabilities, net of effects of acquisitions of business units: | | | | | |
| Receivables, net | | (40,379) | | | (49,128) |
| Inventory | | (12,346) | | | (12,341) |
| Unbilled receivables | | (14,860) | | | (28,664) |
| Prepaid expenses and other current assets | | 7,877 | | | 491 |
| Accounts payable | | 11,915 | | | 27,746 |
| Accrued compensation | | 5,711 | | | (7,783) |
| Insurance deductible reserves | | 985 | | | 2,785 |
| Other accrued liabilities | | 8,444 | | | (6,231) |
| Billings in excess of costs and estimated earnings | | 8,612 | | | 8,211 |
| Other long-term assets and liabilities | | 803 | | | (9,254) |
| Other, net | | (1,588) | | | (1,332) |
Cash flows provided (used) by operating activities | | 542 | | | (37,512) |
| | | | | | |
Investing Activities | | | | | |
| Purchases of property and equipment | | (7,341) | | | (15,992) |
| Acquisitions and investments in businesses, net of cash acquired | | (10,618) | | | (72,214) |
| Proceeds from dispositions of property and equipment | | 14,967 | | | 16,154 |
| Purchase of marketable securities | | (9,025) | | | (17,764) |
| Proceeds from sales of marketable securities | | 8,264 | | | 17,414 |
| Other, net | | (556) | | | (1,509) |
Cash flows used by investing activities | | (4,309) | | | (73,911) |
| | | | | | |
Financing Activities | | | | | |
| Net borrowings under revolver | | 7,800 | | | 87,000 |
| Principal payments on term notes | | (875) | | | (1,750) |
| Net payments on other notes | | (560) | | | (4,108) |
| Increase (Decrease) in book overdrafts | | 9,177 | | | (1,182) |
| Proceeds from share options exercised | | 128 | | | 163 |
| Tax benefit for share-based payments | | 225 | | | 253 |
| Dividends paid | | (2,917) | | | (5,832) |
| Deferred financing costs | | — | | | — |
| Distributions to minority interests | | (1,690) | | | (2,203) |
| Other, net | | (21) | | | 211 |
Cash flows provided by financing activities | | 11,267 | | | 72,552 |
| | | | | | |
(Decrease) Increase in Cash and Cash Equivalents | | 7,500 | | | (38,871) |
| | | | | | |
| Cash and cash equivalents, beginning of period | | 27,901 | | | 74,272 |
| Cash and cash equivalents, end of period | $ | 35,401 | | $ | 35,401 |
| | | | | | |
