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TheStreet Open House

Builders FirstSource Reports Fourth Quarter And Fiscal Year 2010 Results

Mr. Sherman continued, "For the current quarter, the competitive pricing pressures we had seen throughout the first nine months of 2010 were still present, but we have recently seen signs that suggest pricing discipline may be returning to the market. Fourth quarter gross margins were 19.1 percent, as compared to 19.7 percent in the fourth quarter of last year. For the year, we felt the negative impact of the commodity price volatility seen during the first half of 2010, as gross margins declined to 18.8 percent for the year, a 2.2 percentage point decrease from gross margins of 21.0 percent in 2009. We were able to partially mitigate this margin pressure by continuing our focus on expense control, management of headcount, and flexing capacity where appropriate. We have done this while maintaining a presence within all of our markets. We have also become a more efficient company, and feel we are well positioned to respond to any increase in building activity."

Commenting on the Company's results, Chad Crow, Builders FirstSource Senior Vice President and Chief Financial Officer, added, "Adjusted EBITDA in the current quarter was negative $12.5 million, down slightly from the negative $12.2 million in the fourth quarter of 2009, on $6.9 million less sales. Adjusted EBITDA for 2010 was negative $43.6 million as compared to negative $35.1 million for 2009. Although sales were up year-over-year, competitive pricing pressure, combined with extreme volatility in commodity prices during the first half of the year, negatively impacted margins. We were able to partially offset this negative impact through SG&A reductions."

Mr. Crow continued, "We ended the year with available liquidity of $125.8 million, which consisted of $103.2 million of available cash and approximately $22.6 million in availability under our revolving credit facility. For the current quarter, our cash usage was approximately $18 million. Reductions in working capital contributed $2 million, which was offset by approximately $1 million in capital expenditures and $19 million of cash used to fund operating losses and service debt. Cash used for 2010 was approximately $83 million, excluding the $33.8 million federal income tax refund received in 2010, as well as $67.9 million in net proceeds from the rights offering we completed during the year. Of the cash used in 2010, approximately $6 million related to an increase in working capital, $9 million related to capital expenditures primarily for buyouts of vehicle and equipment leases, with the remaining $68 million used to fund the operating losses of the company and cash interest payments. For the current year, our asset utilization improved as our working capital expressed as a percentage of sales was 9.3 percent, excluding cash and income tax receivables, down from 10.2 percent in 2009. Accounts receivable days decreased to 35.5 days for 2010, compared to 38.8 days last year as we continued reducing our overall delinquency rate and increased the rate of our overall receivable collections. Our inventory turns were essentially flat year-over-year, ending at 9.1x for 2010. Accounts payable days increased to 31.5 days, up from 28.9 days last year. Our focus on working capital management resulted in cash conversion days dropping to 44.2 days for 2010, a 5.1 day improvement over 2009."

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