DALLAS, Feb. 22, 2007 (PRIME NEWSWIRE) -- Builders FirstSource, Inc. (Nasdaq:BLDR), a leading supplier and manufacturer of structural and related building products for residential new construction in the United States, today reported financial results for its fourth quarter and fiscal year ended December 31, 2006.
2006 Financial Highlights * Sales - Q4 $438.6 million, FY $2,239.5 million * Gross margin - Q4 26.0 percent of sales, FY 26.2 percent of sales * Net income - Q4 $3.9 million, FY $68.9 million * Net income per diluted share - Q4 $0.11, FY $1.91 * Diluted weighted average shares outstanding - Q4 36.1 million, FY 36.0 million
"Even though we are facing the reality of a housing downturn, I want to highlight some of our achievements in 2006," said Floyd Sherman, Builders FirstSource Chief Executive Officer. "First, we continued to grow market share. Our fiscal 2006 sales decreased only 4.2 percent while housing activity in our markets decreased 14.2 percent, and commodity deflation reduced our sales by 3.4 percent. Second, we effectively managed pricing and controlled costs as our gross margin percentage improved 90 basis points. And finally, we adjusted our operating cost structure as housing demand fell rapidly during the second half of the year. As a result of these actions and strong housing activity in the first half of the year, our EBITDA as a percentage of sales was an impressive 7.5 percent for fiscal 2006."
Sherman continued, "Our business is based on relationships. Our people in the field are critical in building and maintaining customer relationships in order to increase our market share. I want to thank all of our employees for their hard work and sacrifice given the current operating conditions."
Fourth Quarter 2006 Financial Results Compared
to Fourth Quarter 2005
----------------------------------------------
(See accompanying financial schedules for full financial
details and reconciliations of Non-GAAP financial measures
to their GAAP equivalents.)
* Sales were $438.6 million compared to $565.9 million. This 22.5
percent sales decline was primarily driven by an estimated 32.2
percent decrease in housing activity within the company's
markets. Also, commodity lumber and lumber sheet goods prices had
a 6.2 percent negative effect on sales. These non-controllable
sales drivers were partially offset by sales growth attributable
to market share gains of approximately 13.6 percent and sales
growth from new operations of 2.3 percent.
* Net income was $3.9 million compared to $19.5 million. Net
income for the fourth quarter 2006 included stock-based
compensation expense of $0.6 million (net of tax) as the company
adopted Statement of Financial Accounting Standards No. 123
(Revised 2004), Share-Based Payment, ("SFAS No. 123R") on January
1, 2006. The company's effective tax rate was 50.4 percent as the
company established approximately $0.9 million of additional
reserves in connection with various tax audits which are
underway.
* Net income per diluted share was $0.11 in 2006, including $0.02
related to the aforementioned stock-based compensation expense,
compared to $0.56 in 2005.
* Diluted weighted average shares outstanding were 36.1 million
compared to 35.1 million.
* Gross margin percentage was up slightly at 26.0 percent,
compared to 25.8 percent. The margin expansion was primarily
driven by declining procurement prices and effective pricing
management, resulting in higher margins for the prefabricated
components and lumber & lumber sheet goods categories.
* Selling, general and administrative ("SG&A") expenses decreased
$9.2 million. As a percentage of sales, however, SG&A increased
from 19.2 percent in 2005 to 22.7 percent in 2006. Lower market
prices for lumber products increased the 2006 percentage by 170
basis points as many variable costs do not adjust with changes in
price. Stock compensation expense, which was not present in 2005,
added 27 basis points.
* In order to align its workforce with customer demand, the
company reduced the number of full-time equivalent employees by
18.2 percent during the fourth quarter 2006. However, fourth
quarter expenses did not reflect the full benefit of these
actions as most of the headcount reductions occurred late in the
quarter.
* EBITDA was $20.8 million, or 4.7 percent of sales, compared to
$42.4 million, or 7.5 percent of sales.
The company is now experiencing the full impact of the housing slowdown across all markets. Even its stronger markets, such as in Georgia, Texas and the Carolinas, experienced sharp year-over-year declines in housing starts during the fourth quarter.
Commenting on the fourth quarter results, Charles Horn, Builders FirstSource Senior Vice President and Chief Financial Officer, said, "The operating environment worsened during the fourth quarter. However, we continued to execute our strategy of being a value-added provider of building products and services. As a result, we grew our market share in all but one of our states. As the homebuilders seek to control their costs in this operating environment, we believe that they will seek to partner with their more value-added suppliers in order to increase efficiency and improve quality in the homebuilding process. We believe this has helped us gain market share throughout this down cycle."
Horn added, "We continued to carefully manage our cost structure in light of the lower sales volume. While we took additional cost saving measures during the fourth quarter, we did not realize the full benefit as these actions occurred late in the quarter. We will continue to focus on adjusting staffing levels commensurate with changes in sales volume."
Fiscal Year 2006 Financial Results Compared to Fiscal Year 2005
---------------------------------------------------------------
(See accompanying financial schedules for full financial details
and reconciliations of Non-GAAP financial measures to their
GAAP equivalents.)
* Sales were $2,239.5 million compared to $2,337.8 million. Sales
decreased only 4.2 percent despite an estimated 14.2 percent
decrease in housing activity in the company's markets and a 3.4
percent negative impact of decreased commodity lumber and lumber
sheet goods prices. These non-controllable sales drivers were
partially offset by sales growth attributable to market share
gains of approximately 12.2 percent and sales growth from new
operations of 1.2 percent.
* Net income was $68.9 million compared to $48.6 million. Net
income for 2006 included stock-based compensation expense of $2.6
million (net of tax) as the company adopted SFAS No. 123R on
January 1, 2006. Adjusted for items related to the company's
initial public offering ("IPO") and refinancing transactions,
2005 net income was $82.2 million.
* Net income per diluted share was $1.91, including $0.07 related
to the aforementioned stock-based compensation expense, compared
to $1.55 in 2005. Adjusted for items related to the company's IPO
and refinancing transactions, 2005 net income per diluted share
was $2.35.
* Diluted weighted average shares outstanding were 36.0 million
compared to 31.4 million. Adjusted for incremental shares related
to the company's IPO, 2005 diluted weighted average shares
outstanding were 35.0 million.
* Gross margin percentage increased from 25.3 percent to 26.2
percent. The margin expansion was primarily driven by declining
procurement prices and effective pricing management, resulting in
higher margins for the prefabricated components and lumber &
lumber sheet goods categories.
* SG&A expenses decreased $27.4 million. SG&A for 2005 included a
$36.4 million payment to stock option holders in connection with
the company's IPO and refinancing transactions. This amount was
partially offset by incremental expenses related to
Sarbanes-Oxley 404 compliance efforts and stock-based
compensation expense, which was not present in 2005.
* EBITDA was $169.0 million compared to $144.3 million. Adjusted
for items relating to the company's initial public offering, 2005
EBITDA was $180.7 million, or 7.7 percent of sales, compared to
7.5 percent of sales in 2006.
* As of December 31, 2006, the company's cash on hand was $93.3
million, and funded debt was $314.9 million.
* Capital expenditures, excluding acquisitions, were $27.2 million
in 2006 compared to $29.7 million in 2005. The company spent
approximately $10.0 million less than it had planned in order to
conserve capital as housing starts began to decline dramatically
in the second half of the year.
Outlook
The company expects that the difficult market conditions affecting its business will continue to have a negative effect on its operating results and year-over-year comparisons through at least mid 2007 and potentially longer. Additionally, if market conditions continue to deteriorate and create increased competitive pressure, the company may not be able to maintain the margins it reported in 2006.
"At this point it is unclear if the housing market has hit bottom. Until housing demand becomes more predictable, we will manage our business day-to-day in order to meet customer needs," said Mr. Sherman. "Despite the challenging operating conditions, we still believe we can continue to gain market share allowing us to outperform our underlying markets. We also expect sales from new operations to contribute slightly more in 2007 than in 2006. We will continue to work diligently to achieve the appropriate balance of short-term costs reductions while maintaining the expertise to grow the business when market conditions improve. As we said last quarter we want to avoid taking steps that will limit our ability to compete and create shareholder value in the long term."
Mr. Sherman concluded, "We believe our 2006 operating results prove that our strategy is valid even in a challenging operating environment. Finally, we continue to believe that the long-term outlook for the housing market is very positive and that our strategy can create shareholder value over the long-term."
Conference Call
Builders FirstSource will host a conference call tomorrow 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: 800-289-0726 (U.S. and Canada) and 913-981-5545 (international). A replay of the call will be available from 1:00 p.m. CT February 23 through March 1, 2007. To access the replay, please dial 888-203-1112 (U.S. and Canada) and 719-457-0820 (international). Please refer to pass code 8476550. 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 68 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. Effective July 3, 2006, the company was assigned to NASDAQ's recently created NASDAQ Global Select Market, a new tier of the NASDAQ Global Market with higher initial listing and corporate governance standards. 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 Year ended
December 31, December 31,
----------------------- -----------------------
2006 2005 2006 2005
---------------------------------------------------------------------
(in thousands, except per share amounts)
Sales $ 438,579 $ 565,851 $2,239,454 $2,337,757
Cost of sales 324,445 419,707 1,652,899 1,745,230
---------- ---------- ---------- ----------
Gross margin 114,134 146,144 586,555 592,527
Impairment of
goodwill -- -- 6,763 --
Selling, general and
administrative
expenses 99,391 108,583 439,944 467,355
---------- ---------- ---------- ----------
Income from
operations 14,743 37,561 139,848 125,172
Interest expense,
net 6,925 7,583 28,718 47,227
---------- ---------- ---------- ----------
Income before
income taxes 7,818 29,978 111,130 77,945
Income tax expense 3,941 10,479 42,237 29,317
---------- ---------- ---------- ----------
Net income $ 3,877 $ 19,499 $ 68,893 $ 48,628
========== ========== ========== ==========
Net income per
share:
Basic $ 0.11 $ 0.59 $ 2.04 $ 1.67
Diluted $ 0.11 $ 0.56 $ 1.91 $ 1.55
Weighted average
common shares
outstanding:
Basic 34,224 32,786 33,796 29,152
========== ========== ========== ==========
Diluted 36,069 35,066 36,039 31,428
========== ========== ========== ==========
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Sales by Product Category
(unaudited)
Three Months Ended December 31,
----------------------------------------
2006 2005
---------------------------------------------------------------------
(dollars in thousands)
Prefabricated components $ 86,095 19.6% $ 115,063 20.3%
Windows & doors 103,337 23.6% 116,805 20.7%
Lumber & lumber sheet goods 122,753 28.0% 194,012 34.3%
Millwork 42,719 9.7% 51,594 9.1%
Other building products
& services 83,675 19.1% 88,377 15.6%
----------------- ------------------
Total sales $ 438,579 100.0% $ 565,851 100.0%
================= ==================
Year Ended December 31,
----------------------------------------
2006 2005
---------------------------------------------------------------------
(dollars in thousands)
Prefabricated components $463,738 20.7% $ 491,850 21.0%
Windows & doors 470,437 21.0% 447,472 19.1%
Lumber & lumber sheet goods 716,443 32.0% 849,928 36.4%
Millwork 204,424 9.1% 203,113 8.7%
Other building products
& services 384,412 17.2% 345,394 14.8%
----------------- ------------------
Total sales $2,239,454 100.0% $ 2,337,757 100.0%
================= ==================
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
December 31,
2006 2005
(unaudited)
---------------------------------------------------------------------
(in thousands, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents $ 93,258 $ 30,736
Accounts receivable, less allowances of
$6,292 and $6,135, respectively 196,658 237,695
Inventories 122,015 149,397
Other current assets 28,380 24,753
--------- ---------
Total current assets 440,311 442,581
Property, plant and equipment, net 109,777 99,862
Goodwill 173,806 163,030
Other assets, net 24,621 18,934
--------- ---------
Total assets $ 748,515 $ 724,407
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 84,944 $ 127,998
Accrued liabilities 59,329 83,572
Current maturities of long-term debt 442 102
--------- ---------
Total current liabilities 144,715 211,672
Long-term debt, net of current maturities 318,758 314,898
Other long-term liabilities 28,178 26,702
--------- ---------
491,651 553,272
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; 34,832 and
32,998 shares issued and outstanding
at December 31, 2006 and
2005, respectively 345 330
Additional paid-in capital 127,630 111,979
Unearned stock compensation -- (1,087)
Retained earnings 126,974 58,081
Accumulated other comprehensive income 1,915 1,832
--------- ---------
Total stockholders' equity 256,864 171,135
--------- ---------
Total liabilities and
stockholders' equity $ 748,515 $ 724,407
========= =========
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
to their GAAP Equivalents
(unaudited - dollars in thousands, except per share amounts)
Three months ended Year ended
December 31, December 31,
---------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------
Reconciliation to Adjusted
Net Income and Adjusted
Net Income per Share (a):
Net income $ 3,877 $19,499 $ 68,893 $ 48,628
Reconciling items:
Cash payment to stock
option holders (b) -- -- -- 36,364
Write-off of unamortized
debt issuance costs (c) -- -- -- 10,293
Financing costs incurred
and expensed in conjunction
with the February 2005
refinancing (c) -- -- -- 2,425
Termination penalty resulting
from prepayment of term
loan under prior credit
facilities (c) -- -- -- 1,700
Reduction in interest expense
assuming IPO net proceeds
were used to repay debt at
the beginning of the
period (c) -- -- -- 3,319
Tax effect of reconciling
items at 38.0% -- -- -- (20,558)
------- ------- -------- --------
Adjusted net income $ 3,877 $19,499 $ 68,893 $ 82,171
======= ======= ======== ========
Weighted average shares
outstanding:
Diluted shares 36,069 35,066 36,039 31,428
Incremental shares
for IPO (d) -- -- -- 3,534
------- ------- -------- --------
Adjusted diluted shares 36,069 35,066 36,039 34,962
======= ======= ======== ========
Adjusted net income per
share - diluted $ 0.11 $ 0.56 $ 1.91 $ 2.35
======= ======= ======== ========
Reconciliation to EBITDA and
Adjusted EBITDA (a):
Net income $ 3,877 $19,499 $ 68,893 $ 48,628
Reconciling items:
Depreciation and amortization
expense 6,036 4,883 22,346 19,131
Impairment of goodwill -- -- 6,763 --
Interest expense 6,925 7,583 28,718 47,227
Income tax expense 3,941 10,479 42,237 29,317
------- ------- -------- --------
EBITDA 20,779 42,444 168,957 144,303
Add: cash payment to stock
option holders (b) -- -- -- 36,364
------- ------- -------- --------
Adjusted EBITDA $20,779 $42,444 $168,957 $180,667
======= ======= ======== ========
Adjusted EBITDA as
percentage of sales 4.7% 7.5% 7.5% 7.7%
Reconciliation to Return on Net
Assets and Adjusted Return on
Net Assets (a):
Net income $ 68,893 $ 48,628
Reconciling items:
Interest expense 28,718 47,227
Income tax expense 42,237 29,317
-------- --------
Earnings before interest
and taxes 139,848 125,172
Add: cash payment to stock
option holders (b) -- 36,364
-------- --------
Adjusted earnings before
interest and taxes $139,848 $161,536
======== ========
Average net assets 496,271 486,717
Return on net assets 28.2% 25.7%
Adjusted return on net assets 28.2% 33.2%
(a) The company has provided detailed explanations of its non-GAAP
financial measures in its Form 8-K filed February 22, 2007.
(b) Represents cash payment made to stock option holders
(including applicable payroll taxes) in lieu of adjusting
exercise prices in conjunction with our refinancing transactions.
This amount is included in selling, general and administrative
expenses.
(c) This amount is included in interest expense.
(d) Represents incremental shares related to the company's IPO
assuming the 7,500 shares sold by the company were issued at the
beginning of the period.