Building Materials Holding (BLGM) 8-K BMHC Announces Third Quarter 2007 Financial Results

Exhibit 99.1

 

BMHC ANNOUNCES THIRD QUARTER 2007 FINANCIAL RESULTS

SAN FRANCISCO (October 25, 2007) - Building Materials Holding Corporation (NYSE: BLG), a leading provider of construction services and building materials to professional residential builders and contractors, today reported sales for the third quarter of 2007 decreased 24% to $618 million from $818 million in the same quarter a year ago. For the nine months, sales decreased 28% to $1.9 billion from $2.6 billion in the same period of 2006.

Net income for the third quarter of 2007 decreased to $4.2 million or $0.14 per share from $35.3 million or $1.20 per share in the same quarter a year ago. For the nine months ended September 30, 2007, net income decreased to $18.6 million or $0.63 per share from $97.6 million or $3.30 per share in the same period of 2006.

Income from discontinued operations included a gain from the September 2007 sale of three BMC West distribution operations and their related operating results. Net income from these discontinued operations was $3.1 million or $0.10 per share for the quarter, $0.9 million or $0.03 per share in the same quarter a year ago, $4.3 million or $0.15 per share for the nine months and $2.0 million or $0.07 per share for the same period a year ago.

Commenting on third quarter results, Robert E. Mellor, Chairman, President and Chief Executive Officer, stated, “Our third quarter results reflect the continued deterioration of the homebuilding market. Throughout the quarter, negative macroeconomic factors such as declining housing permits, ongoing mortgage market difficulties and the substantial inventory of unsold homes have continued to impact participants in the homebuilding industry. In this challenging business environment, we have remained focused on managing costs, maintaining a solid balance sheet and generating operating cash flow.”

 

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Segment Financial Performance

BMC West Segment Operating Results

(thousands)

	Three Months Ended September 30				$			%			Nine Months Ended September 30				$			%
	2007		2006		Change			Change			2007		2006		Change			Change
Sales	$	319,728	$	379,780	$	(60,052	)		(16	)%	$	928,039	$	1,168,256	$	(240,217	)		(21	)%
Income from continuing    operations	$	20,623	$	31,403	$	(10,780	)		(34	)%	$	63,219	$	99,471	$	(36,252	)		(36	)%

For the quarter, BMC West sales decreased 16% to $320 million from $380 million in the same quarter of 2006. For the nine months, sales decreased 21% to $928 million from $1.2 billion in the same period of 2006. Sales declined in all of our regions consistent with lower building permits relative to the prior year.

For the quarter, income from continuing operations decreased 34% to $20.6 million from $31.4 million in the same quarter of 2006. For the nine months, income from continuing operations decreased 36% to $63.2 million from $99.5 million in the same period of 2006. The decline in income from continuing operations was due to lower sales, partially offset by lower selling, general and administrative expenses as well as a gain recognized in the previous quarter for the sale of real estate related to a relocation of an operation in Texas.

Income from discontinued operations reflects a $3.7 million non-operating gain for a portion of the real estate associated with the September 2007 sale of three building materials distribution operations in Western Colorado as well as their results of operations prior to the sale. These business units were previously reported as a component of BMC West and were approximately 3% of sales and 5% of operating results for this segment.

SelectBuild Segment Operating Results

(thousands)

	Three Months Ended September 30				$			%			Nine Months Ended September 30				$			%
	2007		2006		Change			Change			2007		2006		Change			Change
Sales	$	298,552	$	438,014	$	(139,462	)		(32	)%	$	937,774	$	1,438,243	$	(500,469	)		(35	)%
Income from operations	$	3,408	$	36,918	$	(33,510	)		(91	)%	$	21,696	$	130,091	$	(108,395	)		(83	)%

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For the quarter, SelectBuild sales decreased 32% to $299 million from $438 million in the same quarter of 2006. Sales were lower due to the sharp decline in home construction by high-volume homebuilders. Sales were particularly weak in our Pacific and Southeast regions.

For the nine months, sales decreased 35% to $938 million from $1.4 billion in the same period of 2006. Sales from comparable operations decreased 40% or $571 million for the period. Sales from acquisitions not present in the same period of 2006 were 7% or $70 million of sales.

For the quarter, income from operations decreased 91% to $3.4 million from $36.9 million in the same quarter of 2006.

For the nine months, income from operations decreased 83% to $21.7 million from $130.1 million in the same period a year ago. Income from operations for comparable operations decreased 90% or $116.8 million. Acquisitions not present in the same period of 2006 were 39% or $8.4 million of income from operations. Income from operations declined due to lower sales and competitive pressure on margins.

Corporate

(thousands)

	Three Months Ended September 30		$	%	Nine Months Ended September 30		$	%
	2007	2006	Change	Change	2007	2006	Change	Change
Corporate general and     administrative	$   13,896	$   5,587	$  8,309	(149)%	$   37,679	$   49,781	$(12,102)	(24)%

Corporate represents expenses to support the operations of our business segments, SelectBuild and BMC West. These expenses were $8.3 million more than the same quarter a year ago. The third quarter of 2006 included a reduction of $9.9 million in the actuarial estimate of insurance expense as a result of improved claims experience. Excluding this reduction in the actuarial estimate, corporate expenses decreased due to lower compensation, including incentives.

For the nine months, interest expense was 28% or $5.8 million more than the same period a year ago. The increase was due to rising interest rates as well as a larger average balance of debt outstanding.

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Our combined federal and state tax rate for continuing operations decreased for the quarter and nine months due to tax credits and lower operating results.

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 800-798-2796 (Domestic), or 617-614-6204 (International), pass code 67449919. A replay will be available through Thursday, November 1, 2007 by dialing 888-286-8010 (Domestic) or 617-801-6888 (International). The required pass code for the replay is 88206814. 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. 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;

·   our business model;

·   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;

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·   intense competition;

·   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)

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Building Materials Holding Corporation

Consolidated Statements of Operations

(thousands, except per share data)

(unaudited)

	Three Months Ended September 30				Nine Months Ended September 30
		2007		2006		2007		2006
Sales
Construction services	$	351,738	$	485,790	$	1,076,735	$	1,595,579
Building products		266,542		332,004		789,078		1,010,920
Total sales		618,280		817,794		1,865,813		2,606,499
Costs and operating expenses
Cost of goods sold
Construction services		307,192		400,371		927,459		1,314,028
Building products		193,073		238,676		572,578		737,168
Impairment of assets		—		—		—		2,237
Selling, general and administrative       expenses		109,718		117,790		332,729		377,311
Other income, net		(1,838)		(1,777)		(14,189)		(4,026)
Total costs and operating expenses		608,145		755,060		1,818,577		2,426,718
Income from operations		10,135		62,734		47,236		179,781
Interest expense		8,751		8,566		26,470		20,621
Income from continuing operations     before income taxes and minority    interests		1,384		54,168		20,766		159,160
Income taxes (benefit)		(148)		17,370		5,674		55,068
Minority interests income, net of income       taxes		(414)		(2,398)		(790)		(8,472)
Income from continuing operations		1,118		34,400		14,302		95,620
Income from discontinued operations       prior to sale		1,178		1,537		3,220		3,193
Gain on sale of discontinued operations		3,722		—		3,722		—
Income taxes		1,850		589		2,625		1,221
Income from discontinued operations		3,050		948		4,317		1,972
Net income	$	4,168	$	35,348	$	18,619	$	97,592
Net income per share:
Continuing operations		$0.04		$1.20		$0.50		$3.35
Discontinued operations		0.10		0.04		0.15		0.07
Basic		$0.14		$1.24		$0.65		$3.42
Continuing operations		$0.04		$1.17		$0.48		$3.23
Discontinued operations		0.10		0.03		0.15		0.07
Diluted		$0.14		$1.20		$0.63		$3.30

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Building Materials Holding Corporation 

Consolidated Balance Sheets

(thousands, except per share data)

(unaudited)

	September 30		December 31			September 30		December 31
	2007		2006			2007		2006
Assets					Liabilities, Minority Interests and Shareholders’ Equity
Cash and cash equivalents	$	33,604	$	74,272
Marketable securities		6,623		4,337	Accounts payable	$	115,432	$	109,129
Receivables, net of allowances					Accrued compensation		42,079		48,180
of $4,968 and $4,487		292,048		276,497	Insurance deductible reserves		28,824		24,931
Inventory		135,954		141,457	Other accrued liabilities		36,419		103,145
Unbilled receivables		54,585		43,527	Billings in excess of costs and
Deferred income taxes		11,456		8,914	estimated earnings		30,412		27,622
Prepaid expenses and other		15,075		11,153	Current portion of long-term debt		4,971		8,143
Assets of discontinued operations		1,560		6,254	Liabilities of discontinued operations		2,348		2,461
Current assets		550,905		566,411	Current liabilities		260,485		323,611
Property and equipment					Deferred income taxes		13,951		9,138
Land		62,736		61,217	Insurance deductible reserves		26,542		25,841
Buildings and improvements		138,095		136,659	Long-term debt		373,885		349,161
Equipment		193,658		186,956	Other long-term liabilities		39,211		41,390
Construction in progress		7,305		8,579
Accumulated depreciation		(154,119)		(136,020)	Minority interests		3,028		7,141
Marketable securities		52,192		53,513
Deferred loan costs		4,639		5,481	Commitments and contingent liabilities		—		—
Other long-term assets		31,112		26,975
Other intangibles, net		98,966		108,792	Shareholders’ equity
Goodwill		320,841		308,000	Common shares, $0.001 par value:
Assets of discontinued operations		—		2,348	authorized 50 million; issued
	$	1,306,330	$	1,328,911	and outstanding 29.4 and 29.2
					million shares		29		29
					Additional paid-in capital		161,876		154,405
					Retained earnings		428,752		418,927
					Accumulated other comprehensive
					income (loss), net		(1,429)		(732)
					Shareholders’ equity		589,228		572,629
						$	1,306,330	$	1,328,911

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Building Materials Holding Corporation

Consolidated Statements of Cash Flows

(thousands)

(unaudited)

	Nine Months Ended September 30
Operating Activities	2007		2006
Net income	$	18,619	$	97,592
Items in net income not using (providing) cash:
Minority interests, net		790		8,472
Impairment of assets		—		2,237
Depreciation and amortization		36,509		33,277
Deferred loan cost amortization		842		685
Share-based compensation		6,698		6,851
Gain on sale of discontinued operations		(3,722)		—
Gain on sale of assets, net		(8,738)		(126)
��Realized loss on marketable securities		15		231
Deferred income taxes		3,649		2,509
Changes in assets and liabilities, net of effects of acquisitions         of business units:
Receivables, net		(14,498)		31,834
Inventory		5,482		11,751
Unbilled receivables		(11,058)		2,323
Prepaid expenses and other current assets		(3,946)		(2,745)
Accounts payable		9,543		(13,899)
Accrued compensation		(6,051)		(5,033)
Insurance deductible reserves		3,893		2,243
Other accrued liabilities		(10,392)		15,608
Billings in excess of costs and estimated earnings		2,790		(6,787)
Other long-term assets and liabilities		(10,595)		(8)
Other, net		461		(19)
Cash flows provided by operating activities		20,291		186,996
Investing Activities
Purchases of property and equipment		(21,771)		(47,805)
Acquisitions and investments in businesses, net of cash acquired		(76,440)		(200,725)
Proceeds from dispositions of property and equipment		16,325		1,823
Proceeds from sale of discontinued operations		9,592		—
Purchase of marketable securities		(26,447)		(38,492)
Proceeds from sales of marketable securities		26,161		20,540
Other, net		(290)		(3,188)
Cash flows used by investing activities		(72,870)		(267,847)
Financing Activities
Net borrowings under revolver		28,700		110,700
Principal payments on term notes		(2,625)		(2,813)
Net payments on other notes		(4,523)		(984)
(Decrease) Increase in book overdrafts		(275)		1,793
Proceeds from share options exercised		167		663
Tax benefit for share-based payments		249		707
Dividends paid		(8,771)		(7,951)
Deferred financing costs		—		(583)
Distributions to minority interests		(1,223)		(3,980)
Other, net		212		540
Cash flows provided by financing activities		11,911		98,092
(Decrease) Increase in Cash and Cash Equivalents		(40,668)		17,241
Cash and cash equivalents, beginning of period		74,272		30,078
Cash and cash equivalents, end of period	$	33,604	$	47,319
Supplemental Disclosure of Cash Flow Information
Accrued but unpaid dividends	$	2,938	$	2,903
Cash paid for interest	$	25,595	$	18,905
Cash paid for income taxes	$	7,569	$	60,505

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Building Materials Holding Corporation

Segment Information

(thousands)

(unaudited)

	Three Months Ended September 30				Nine Months Ended September 30
		2007		2006		2007		2006
Sales
SelectBuild	$	298,552	$	438,014	$	937,774	$	1,438,243
BMC West		319,728		379,780		928,039		1,168,256
	$	618,280	$	817,794	$	1,865,813	$	2,606,499
Income from operations
SelectBuild	$	3,408	$	36,918	$	21,696	$	130,091
BMC West		20,623		31,403		63,219		99,471
Corporate and other		(13,896)		(5,587)		(37,679)		(49,781)
	$	10,135	$	62,734	$	47,236	$	179,781

We evaluate our results of operations including and excluding acquisitions. We believe a presentation of sales and income from operations excluding recent acquisitions enhances an understanding of the acquisitions as well as comparable operations for the respective periods.

A reconciliation of sales and income from operations before recent acquisitions for the three and nine months ended September 30, 2007 and 2006 is provided in the following table:

	Three Months Ended September 30				Nine Months Ended September 30
		2007		2006		2007		2006
Sales
SelectBuild	$	298,552	$	438,014	$	937,774	$	1,438,243
Less: Acquisitions		(4,776)		—		(70,121)		—
		293,776		438,014		867,653		1,438,243
BMC West		319,728		379,780		928,039		1,168,256
Less: Acquisitions		—		—		(9,422)		—
		319,728		379,780		918,617		1,168,256
	$	613,504	$	817,794	$	1,786,270	$	2,606,499
Income from operations
SelectBuild	$	3,408	$	36,918	$	21,696	$	130,091
Less: Acquisitions		387		—		(8,400)		—
		3,795		36,918		13,296		130,091
BMC West		20,623		31,403		63,219		99,471
Less: Acquisitions		—		—		312		—
		20,623		31,403		63,531		99,471
Corporate and other		(13,896)		(5,587)		(37,679)		(49,781)
	$	10,522	$	62,734	$	39,148	$	179,781

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