DALLAS, Oct. 23, 2008 (GLOBE NEWSWIRE) -- Builders FirstSource, Inc. (Nasdaq:BLDR), today reported a net loss of $18.9 million, or $0.53 loss per diluted share, on sales of $288.3 million for the third quarter ended September 30, 2008. These results compare to a net loss of $12.0 million, or $0.34 loss per diluted share, on sales of $413.9 million for the third quarter ended September 30, 2007.
Third Quarter Financial Highlights
(in millions, except gross Third Quarter Third Quarter
margin and per share data) 2008 2007
----------------- -----------------
Sales $288.3 $413.9
Gross margin, as a
percentage of sales 21.0% 24.1%
Net loss $(18.9) $(12.0)
Net loss per diluted share $(0.53) $(0.34)
Facility closure costs pre-tax $4.1 $-
(per share amounts net of tax) ($0.07 per share) ($0.00 per share)
Asset impairments, pre-tax $ - $ 18.9
(per share amounts net of tax) ($0.00 per share) ($0.33 per share)
Valuation allowance on net
deferred tax assets $3.2 $-
(per share amounts) ($0.09 per share) ($0.00 per share)
Diluted weighted average
shares outstanding 35.7 35.0
Operating cash flow $ (4.4) $ 6.2
"Our industry is facing unprecedented times. Annualized housing starts in September 2008 fell to 817 thousand units, the lowest level since 1958 based on currently available data from the U.S. Census Bureau. Additionally, the credit markets supporting mortgages and commercial lending were virtually frozen at the end of the quarter as a result of the financial crisis affecting our country. This contraction in lending could further damage already weak housing conditions," said Floyd Sherman, Builders FirstSource Chief Executive Officer. "Early in the housing downturn, we redirected our focus to conserving cash which is essential in this business environment. We are more than two years into the downturn and our cash remains strong at $131.2 million. Accordingly, we believe we are well-positioned to withstand the challenging conditions facing our industry."
Mr. Sherman continued, "Over a year ago, we began the process of reducing excess physical capacity by closing or temporarily idling certain facilities. During the third quarter, we closed two additional facilities. Subsequent to quarter end, we made the difficult decision to exit the New Jersey market, coupled with the closure of two additional facilities, bringing total closures to nine facilities. Idling and closing facilities are tough decisions to make, but we must evaluate not only the short-term, but also the long-term prospects of our locations to protect our liquidity and ensure the long-term success of Builders FirstSource. We believe these actions will add $5 to $7 million of liquidity in 2009."
Third Quarter 2008 Results Compared to Third Quarter 2007
(See accompanying financial schedules for full financial details and reconciliations of Non-GAAP financial measures to their GAAP equivalents.)
* Sales were $288.3 million compared to $413.9 million. This 30.3
percent sales decline was primarily driven by the decrease in
housing activity within the company's markets which had an
estimated 39.4 percent negative effect on sales. Also, lower
market prices for commodity lumber and lumber sheet goods had a
1.4 percent negative effect on sales. These non-controllable
sales drivers were partially offset by sales growth attributable
to market share gains of an estimated 10.1 percent and sales
growth from new operations of 0.4 percent. Overall sales volumes
declined an estimated 29.6 percent. Gross margin percentage was
21.0 percent, down from 24.1 percent, due to competitive market
conditions and the impact of fixed costs within our manufacturing
facilities against lower sales volumes.
* Selling, general and administrative ("SG&A") expenses decreased
$17.6 million, or 18.9 percent, from the third quarter of 2007.
As a percentage of sales, however, SG&A increased from 22.5
percent in 2007 to 26.2 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 third quarter 2008
were 22.0 percent lower than the third quarter 2007, while our
salaries and benefits expense fell $12.4 million from 2007, or
21.7 percent, compared to a 29.6 percent volume decline.
Offsetting our declines in selling, general and administrative
expenses, we had a $0.6 million increase in our fuel expense
related to higher fuel prices.
* We recorded facility closure costs of $4.1 million, or $0.07 per
share net of tax. Due to the protracted decline in the economic
conditions that affect our industry, we evaluated the current
operating performance as well as the long-term expectations of
our locations. Based on this evaluation, we decided to close a
location in South Carolina and a location in Ohio. The majority
of the facility closure costs relate to future lease obligations
on our closed facilities.
* An after-tax, non-cash valuation allowance of $3.2 million, or
$0.09 per share, was recorded during the third quarter of 2008
related to net deferred tax assets in accordance with Statement
of Financial Accounting Standards No. 109 "Accounting for Income
Taxes." The valuation allowance is reflected as a reduction to
third quarter income tax benefit and to the Company's net
deferred tax assets as of September 30, 2008.
* Net loss was $18.9 million, or $0.53 loss per diluted share,
compared to net loss of $12.0 million, or $0.34 loss per diluted
share. Excluding the facility closure costs and the tax valuation
allowance, our diluted loss per share was $0.37 in the third
quarter of 2008, which compares to a diluted loss of $0.01 per
share exclusive of the asset impairment charges in the third
quarter of 2007.
* Diluted weighted average shares outstanding were 35.7 million
compared to 35.0 million.
* Adjusted EBITDA was $(7.6) million, or (2.6) percent of sales,
compared to $14.6 million, or 3.5 percent of sales.
* In response to the uncertainty surrounding the credit markets in
August and September of 2008, we borrowed a total of $60 million
under our $350 million revolving credit facility to increase our
cash position. As the borrowing was made late in the quarter, the
impact to interest expense, net was nominal.
* As of September 30, 2008, the company's cash on hand was $131.2
million, available borrowing capacity was $23.3 million, net of
the $35 million minimum liquidity covenant within the credit
agreement, and funded debt was $335.0 million. As of December 31,
2007, our cash on hand was $97.6 million, available borrowing
capacity was $83.9 million, net of the $35 million minimum
liquidity covenant, and funded debt was $275.0 million.
* Operating cash flow was a use of $4.4 million compared to a
provision of $6.2 million for the quarters ended September 30,
2008 and 2007, respectively. The decline in our operating cash
flows was primarily due to higher net loss this year which was
not fully offset by changes in working capital.
* Capital expenditures were $1.1 million compared to $1.5 million
for the quarters ended September 30, 2008 and 2007, respectively.
Commenting on the third quarter results, Charles Horn, Builders FirstSource Senior Vice President and Chief Financial Officer, said, "We have been very diligent in paring our operating expenses in response to declining market conditions. For the quarter, our operating expenses declined 63.9 percent variable with sales volumes. In addition, the actions taken during and immediately subsequent to the quarter to reduce physical capacity should further lower our fixed operating costs going forward."
Mr. Horn continued, "With the turmoil in the credit markets, liquidity is even more important as we continue to face declining economic conditions. We used only $4.0 million of cash during the quarter and our liquidity remains strong at $154.5 million. The borrowings on our credit facility were purely in response to the uncertainty in the credit markets."
Outlook
The company expects the difficult market conditions to negatively affect its operating results through mid-2010. Additionally, increased competitive pressure arising from the current operating conditions could continue to have a negative impact on margins.
Mr. Sherman concluded, "The decline in the housing markets coupled with the turmoil in the credit markets have created unprecedented conditions in our industry. We believe our strategy has helped us to weather the downturn to date, and we believe it will allow us to endure the conditions ahead. We will continue to focus on our liquidity, identify cost efficiencies and grow our market share. Our strategy has been successful because of the efforts of our employees. We appreciate and count on our employees' continued commitment to Builders FirstSource to help us withstand this prolonged industry downturn."
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: 866-409-1564 (U.S. and Canada) and 913-905-3226 (international). A replay of the call will be available from 1:00 p.m. CT October 24, 2008 through December 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 8374658. To access the webcast, go to 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 11 states, principally in the southern and eastern United States, and has 61 distribution centers and 59 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, future conditions in the housing or credit markets, 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, the credit markets 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.
Financial Schedules to Follow
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------- ---------------------
2008 2007 2008 2007
---------------------------------------------------------------------
(in thousands, except per share amounts)
Sales $288,324 $413,917 $866,096 $1,290,200
Cost of sales 227,793 314,294 678,894 969,393
------------------- ---------------------
Gross margin 60,531 99,623 187,202 320,807
Selling, general and
administrative expenses
(includes stock-based
compensation expense
compensation expense of
$2,227 and $2,199 for
the three months ended in
2008 and 2007,
respectively, and $6,363
and $6,033 for the nine
months ended in 2008 and
2007, respectively) 75,619 93,197 236,027 290,230
Facility closure costs 4,088 -- 4,088 --
Asset impairments -- 18,864 14,235 18,864
------------------- ---------------------
(Loss) income from
operations (19,176) (12,438) (67,148) 11,713
Interest expense, net 6,144 6,550 18,908 19,845
------------------- ---------------------
Loss before income taxes (25,320) (18,988) (86,056) (8,132)
Income tax benefit (6,464) (6,976) (5,441) (4,747)
------------------- ---------------------
Net loss $(18,856) $(12,012) $(80,615) $ (3,385)
=================== =====================
Net loss per share:
Basic and diluted $ (0.53) $ (0.34) $ (2.26) $ (0.10)
=================== =====================
Weighted average common
shares:
Basic and diluted 35,689 35,006 35,605 34,851
=================== =====================
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Sales by Product Category
(unaudited)
Three months ended September 30,
--------------------------------------
2008 2007
-------------------------------------------------------------------
(dollars in thousands)
Prefabricated components $ 59,969 20.8% $ 85,364 20.6%
Windows & doors 66,870 23.2% 94,033 22.7%
Lumber & lumber sheet goods 71,606 24.8% 109,892 26.6%
Millwork 28,288 9.8% 41,397 10.0%
Other building products
& services 61,591 21.4% 83,231 20.1%
------------------ -------------------
Total sales $288,324 100.0% $ 413,917 100.0%
================== ===================
Nine months ended September 30,
---------------------------------------
2008 2007
--------------------------------------------------------------------
(dollars in thousands)
Prefabricated components $173,714 20.1% $ 270,864 21.0%
Windows & doors 209,231 24.1% 291,944 22.6%
Lumber & lumber sheet goods 212,280 24.5% 350,523 27.2%
Millwork 89,334 10.3% 123,625 9.6%
Other building products
& services 181,537 21.0% 253,244 19.6%
------------------ --------------------
Total sales $866,096 100.0% $ 1,290,200 100.0%
================== ====================
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
Sept. 30, Dec. 31,
2008 2007
-----------------------------------------------------------------
(in thousands, except
per share amounts)
ASSETS
Current assets:
Cash and cash equivalents $131,210 $ 97,574
Trade accounts receivable, less allowances
of $6,240 and $7,209, respectively 118,278 126,431
Other receivables 33,220 23,051
Inventories 91,294 95,038
Other current assets 9,408 26,672
-------- --------
Total current assets 383,410 368,766
Property, plant and equipment, net 85,360 96,358
Goodwill 147,822 155,588
Other assets, net 23,486 26,711
-------- --------
Total assets $640,078 $647,423
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 70,614 $ 65,811
Accrued liabilities 39,890 47,626
Current maturities of long-term debt 43 40
-------- --------
Total current liabilities 110,547 113,477
Long-term debt, net of current maturities 339,194 279,226
Other long-term liabilities 22,030 13,173
-------- --------
Total liabilities 471,771 405,876
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; 36,102 and 35,701
shares issued and outstanding at
September 30, 2008 and December 31, 2007,
respectively 357 351
Additional paid-in capital 145,076 138,476
Retained earnings 21,760 102,375
Accumulated other comprehensive income 1,114 345
-------- --------
Total stockholders' equity 168,307 241,547
-------- --------
Total liabilities and stockholders'
equity $640,078 $647,423
======== ========
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
Nine Months Ended
September 30,
--------------------
2008 2007
--------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net loss $(80,615) $ (3,385)
Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Depreciation and amortization 16,727 18,056
Asset impairments 14,235 18,864
Amortization of deferred loan costs 2,127 1,976
Deferred income taxes 20,872 (9,936)
Bad debt expense 3,107 1,782
Non-cash stock based compensation 6,363 6,033
Net gain on sales of assets (1,402) (583)
Changes in assets and liabilities:
Accounts receivable (6,659) 8,819
Inventories 3,744 11,892
Other current assets (135) (589)
Other assets and liabilities 1,581 (2,223)
Accounts payable 4,803 16,626
Accrued liabilities (8,043) (7,605)
-------- --------
Net cash (used in) provided by
operating activities (23,295) 59,727
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment (7,587) (7,451)
Proceeds from sale of property, plant and
equipment 2,665 1,552
Cash used for acquisitions, net 830 (17,626)
-------- --------
Net cash used in investing activities (4,092) (23,525)
-------- --------
Cash flows from financing activities:
Net borrowings under revolving credit
facility 60,000 --
Payments on long-term debt (29) (331)
Deferred loan costs (380) --
Exercise of stock options 1,831 3,765
Repurchase of common stock (399) (483)
-------- --------
Net cash provided by financing activities 61,023 2,951
-------- --------
Net change in cash and cash equivalents 33,636 39,153
Cash and cash equivalents at beginning of
period 97,574 93,258
-------- --------
Cash and cash equivalents at end of period $131,210 $132,411
======== ========
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Accounts Receivable Detail
(unaudited)
Sept. 30, Dec. 31,
2008 2007
---------------------------------------------------------------
(in thousands)
Trade receivables $ 124,518 $ 133,640
Less: allowance for doubtful accounts (6,240) (7,209)
--------- ---------
Trade accounts receivable, net $ 118,278 $ 126,431
========= =========
Income tax receivable 26,466 13,276
Other 6,754 9,775
--------- ---------
Other receivables 33,220 23,051
--------- ---------
Total accounts receivable, net $ 151,498 $ 149,482
========= =========
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
to their GAAP Equivalents
(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 October 23, 2008.
Three months ended Nine months ended
September 30, September 30,
------------------- ---------------------
2008 2007 2008 2007
--------------------------------------------- ---------------------
Reconciliation to EBITDA:
Net loss $(18,856) (12,012) $(80,615) $ (3,385)
Reconciling items:
Depreciation and
amortization expense 5,252 5,945 16,727 18,056
Facility closure costs 4,088 -- 4,088 --
Asset impairments -- 18,864 14,235 18,864
Interest expense, net 6,144 6,550 18,908 19,845
Income tax benefit (6,464) (6,976) (5,441) (4,747)
-------- -------- -------- --------
EBITDA $ (9,836) 12,371 $(32,098) 48,633
Stock compensation
expense 2,227 2,199 6,363 6,033
-------- -------- -------- --------
Adjusted EBITDA $ (7,609) $ 14,570 $(25,735) $ 54,666
Adjusted EBITDA as
percentage of sales -2.6% 3.5% -3.0% 4.2%
Last twelve months ended
September 30,
---------------------
2008 2007
----------------------------------------------------------------
Return on Net Assets:
(Loss) income from operations $ (91,736) $ 26,456
Average net assets $ 431,055 $493,444
Return on net assets -21.3% 5.4%