DALLAS, Oct. 21, 2010 (GLOBE 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 its results for the third quarter ended September 30, 2010.
    Third Quarter Financial Highlights (unaudited)      
         
  Third  Quarter  2010 Diluted Per Share Third  Quarter 2009 Diluted Per Share
         
Sales $ 180.4 million   $188.9 million  
Loss from continuing operations (19.7) million $(0.21) (15.9) million $(0.41)
         
Included in the calculation of loss from continuing operations:        
 Tax valuation allowance  7.2 million 0.08 6.2 million 0.16
         
Adjusted loss from continuing operations $(12.4) million $(0.13) $(9.7) million $(0.25)
         
         
Adjusted EBITDA* $(8.3) million   $(4.8) million  
         
*See reconciliation attached.        

"The third quarter of 2010 saw a decline in housing starts as the September seasonally adjusted annual rate for U.S. single-family housing starts decreased to 452,000, down 10.8 percent from September last year. Actual U.S. single-family housing starts for the current quarter were 119,600, down 13.5 percent from the third quarter of 2009. We saw a similar level of decline in actual U.S. single-family units under construction, as they decreased 12.8 percent from the same quarter last year," said Floyd Sherman, Builders FirstSource Chief Executive Officer. "Despite the decline in building activity, our sales of $180.4 million were down just 4.5 percent from sales of $188.9 million in the third quarter of 2009."

Continuing, Mr. Sherman added, "The South Region, as defined by the U.S. Census Bureau and which encompasses our entire geographic footprint, experienced similar trends as actual single-family housing starts for the third quarter of 2010 decreased to 59,400, down 13.7 percent from the third quarter of 2009, and single-family units under construction were down 5.9 percent over the same period."

"While pricing in the commodity markets has stabilized, we continue to experience the same competitive pricing conditions we have been faced with in recent years. As a result, our current quarter gross margins declined 1.2 percentage points compared to the third quarter of 2009, though our margins improved 1.4 percentage points from the second quarter of 2010. From an operating expense perspective, we continue to focus on our cost containment initiatives. During the current quarter, we temporarily idled four manufacturing facilities, two in Maryland and two in Florida, and two distribution centers in South Carolina, in order to reduce operating expenses and excess capacity. Most of the customer demand from these idled facilities will be serviced by other existing locations within the market."

Commenting on the current quarter results, Chad Crow, Builders FirstSource Senior Vice President and Chief Financial Officer, added, "We ended the quarter with approximately $126 million in liquidity, which included $121.4 million in available cash. Our cash balance at quarter-end was on forecast and our available liquidity slightly higher than forecast. We received $1.2 million in September from a litigation settlement. Cash used for the current quarter, inclusive of this litigation settlement, was $3.2 million. Reductions in working capital contributed $12.1 million of cash during the quarter, which was offset by $1.6 million of cash used for capital expenditures and $13.7 million of cash used to fund operating losses and cash interest expense. Our focus on working capital management continued, as our accounts receivable days decreased to 35.7 days, compared to 36.4 days in the same quarter last year. Offsetting this improvement was a decrease in inventory turns, which dropped to 9.5x, compared to 10.5x in the same quarter last year. Accounts payable days held steady quarter-over-quarter at 28.9 days."

Third Quarter 2010 Results Compared to Third Quarter 2009

(See accompanying financial schedules for full financial details and reconciliations of Non-GAAP financial measures to their GAAP equivalents.)
  • Sales were $180.4 million compared to $188.9 million last year, a decrease of $8.5 million, or 4.5 percent. We estimate that sales increased 5.6 percent due to commodity inflation, but decreased approximately 10 percent due to volume and competitive pricing pressure.
  • Gross margin percentage was 19.7 percent, down from 20.9 percent, a 1.2 percentage point decline, which was primarily due to competitive pricing pressure on non-commodity products.  
  • Selling, general and administrative ("SG&A") expenses decreased $1.7 million, or 3.4 percent. We recorded the $1.2 million litigation settlement as a reduction to SG&A expenses. As a percentage of sales, SG&A expense, excluding stock-based compensation expense and the litigation settlement, increased from 25.8 percent in 2009 to 26.4 percent in 2010.  
  • We recorded asset impairment charges in the current quarter of $0.8 million related to fixed assets. There were no asset impairment charges in the third quarter of 2009.  
  • Interest expense was $6.9 million for the third quarter of 2010, an increase of $1.0 million from the third quarter of 2009, primarily due to higher interest rates in the current quarter and partially offset by lower average debt balances.  
  • We recorded an income tax benefit of $0.5 million during the quarter compared to expense of $0.1 million in the third quarter of 2009. We recorded an after-tax, non-cash valuation allowance of $7.2 million and $6.2 million in 2010 and 2009, respectively, related to our net deferred tax assets. Absent this valuation allowance, our tax benefit rate would have been 38.4 percent and 38.5 percent in 2010 and 2009, respectively.  
  • Loss from continuing operations for the third quarter of 2010 was $19.7 million, or $0.21 per diluted share, compared to $15.9 million, or $0.41 per diluted share, for the third quarter of 2009. Excluding the valuation allowance, our loss from continuing operations per diluted share was $0.13 and $0.25 for 2010 and 2009, respectively.  
  • Loss from discontinued operations was $0.8 million, or $0.01 per diluted share, compared to income of $0.7 million, or $0.02 per diluted share, for the third quarter of 2009.
  • Net loss was $20.5 million, or $0.22 per diluted share, compared to net loss of $15.2 million, or $0.39 per diluted share.   
  • Diluted weighted average shares outstanding were 94.9 million compared to 39.2 million. Approximately 58.6 million additional shares were issued in the first quarter of 2010 as part of our rights offering and debt exchange.  
  • Adjusted EBITDA was a loss of $8.3 million compared to a loss of $4.8 million last year. See reconciliation attached.

Liquidity and Capital Resources
  • Our total liquidity at quarter-end was approximately $126 million, which included $121.4 million in available cash and $4.2 million in borrowing availability under our revolver.    
  • Operating cash flow was ($1.8) million compared to ($16.1) million for the third quarter of 2009, the primary difference being the effect of changes in working capital.  
  • Capital expenditures were $1.6 million in the current quarter, relating primarily to buyouts of vehicle and equipment leases. Capital expenditures in the third quarter of 2009 were $0.0 million.

Outlook

Mr. Sherman concluded, "Though the volatility in the commodity markets has subsided, current market conditions remain difficult and we expect this to persist into 2011. We remain committed to our proven strategy of conserving liquidity while monitoring, and adjusting as necessary, physical capacity and staffing levels. As expected, seasonal reductions in working capital helped reduce our use of cash during the quarter. We still believe our liquidity at year-end will range from $100-$110 million. While we do not expect 2011 to be a robust year of new home construction, we are hopeful we will see some improvement over 2010, and that 2011 will signal the beginning of a sustained recovery."

Conference Call

Builders FirstSource will host a conference call Friday, October 22, 2010, 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: 800-289-0529 (U.S. and Canada) and 913-312-1438 (international).  A replay of the call will be available from 3:00 p.m. CT October 22, 2010 through October 27, 2010. To access the replay, please dial 888-203-1112 (U.S. and Canada) and 719-457-0820 (international).  Please refer to pass code 2607847. 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 9 states, principally in the southern and eastern United States, and has 54 distribution centers and 47 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, 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   Nine months ended 
  September 30, September 30,
   2010   2009   2010   2009 
   (in thousands, except per share amounts) 
         
 Sales   $ 180,394  $ 188,865  $ 553,250  $ 523,923
 Cost of sales   144,865  149,473  449,555  411,808
 Gross margin   35,529  39,392  103,695  112,115
         
Selling, general and administrative expenses (includes stock-based compensation expense of $1,097 and $540 for the three months ended in 2010 and 2009, respectively, and $3,217 and $2,521 for the nine months ended in 2010 and 2009, respectively)   47,569  49,260  148,460  151,658
Asset impairments   839  --  839  470
Facility closure costs   411  41  420  1,190
Loss from operations   (13,290)  (9,909)  (46,024)  (41,203)
Interest expense, net   6,910  5,930  24,766  19,558
Loss from continuing operations before income taxes   (20,200)  (15,839)  (70,790)  (60,761)
Income tax (benefit) expense   (525)  110  (995)  2,358
 Loss from continuing operations   (19,675)  (15,949)  (69,795)  (63,119)
Income (loss) from discontinued operations (net of income tax benefit of $0  for the three months and nine months ended in 2010 and 2009, respectively)   (795)  703  (1,100)  (5,309)
 Net loss   $ (20,470)  $ (15,246)  $ (70,895)  $ (68,428)
         
Basic and diluted net loss per share:         
Loss from continuing operations   $ (0.21)  $ (0.41)  $ (0.77)  $ (1.61)
Income (loss) from discontinued operations   (0.01)  0.02  (0.01)  (0.14)
Net loss   $ (0.22)  $ (0.39)  $ (0.78)  $ (1.75)
         
Weighted average common shares:         
Basic and diluted   94,895  39,179  90,589  39,114
         
 
 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES 
 Sales by Product Category 
 (unaudited) 
         
   Three months ended September 30, 
   2010   2009 
   (in thousands) 
         
 Prefabricated components   $ 36,283 20.1%  $ 36,479 19.3%
 Windows & doors   40,923 22.7%  44,728 23.7%
 Lumber & lumber sheet goods   50,053 27.7%  46,611 24.7%
 Millwork   19,605 10.9%  20,545 10.9%
 Other building products & services   33,530 18.6%  40,502 21.4%
 Total sales   $ 180,394 100.0%  $ 188,865 100.0%
         
   Nine months ended September 30, 
   2010   2009 
   (in thousands) 
         
 Prefabricated components   $ 109,434 19.8%  $ 100,559 19.2%
 Windows & doors   124,308 22.5%  127,658 24.4%
 Lumber & lumber sheet goods   160,640 29.0%  125,018 23.9%
 Millwork   59,180 10.7%  55,883 10.6%
 Other building products & services   99,688 18.0%  114,805 21.9%
 Total sales   $ 553,250 100.0%  $ 523,923 100.0%
         
 
 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES 
 Condensed Consolidated Balance Sheets 
 (unaudited) 
     
     
   September 30,   December 31, 
   2010   2009 
   (in thousands, except per share amounts) 
     
 ASSETS     
Current assets:     
Cash and cash equivalents   $ 121,413  $ 84,098
Trade accounts receivable, less allowance of $3,391 and $4,883 at  September 30, 2010 and December 31, 2009, respectively   67,960  60,723
Other receivables   3,794  39,758
Inventories   58,164  48,022
Other current assets   9,479  7,741
Total current assets   260,810  240,342
Property, plant and equipment, net   60,077  64,025
Goodwill   111,193  111,193
Other assets, net   10,197  19,391
Total assets   $ 442,277  $ 434,951
     
LIABILITIES AND STOCKHOLDERS' EQUITY     
Current liabilities:     
Accounts payable   $ 45,627  $ 39,570
Accrued liabilities   31,796  28,923
Current maturities of long-term debt   51  48
Total current liabilities   77,474  68,541
Long-term debt, net of current maturities   169,063  299,135
Other long-term liabilities   13,200  20,328
Total liabilities   259,737  388,004
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; 96,872  and 36,347 shares issued and outstanding at September 30, 2010 and  December 31, 2009, respectively   949  363
Additional paid-in capital   354,103  150,240
Accumulated deficit   (169,868)  (98,973)
Accumulated other comprehensive loss   (2,644)  (4,683)
Total stockholders' equity   182,540  46,947
Total liabilities and stockholders' equity   $ 442,277  $ 434,951
     
 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES 
 Condensed Consolidated Statements of Cash Flows 
 (unaudited) 
     
     
   Nine months ended September 30, 
   2010   2009 
   (in thousands) 
Cash flows from operating activities:    
Net loss  $ (70,895)  $ (68,428)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:    
Depreciation and amortization  11,668  13,882
Asset impairments  839  470
Amortization of deferred loan costs  5,055  3,134
Deferred income taxes  (1,091)  302
Bad debt expense  650  1,656
Net non-cash (income) expense from discontinued operations  (3)  732
Stock compensation expense  3,217  2,521
Net gain on sales of assets  (162)  (525)
Changes in assets and liabilities:    
Receivables  28,081  42,035
Inventories  (10,142)  14,080
Other current assets  (1,738)  58
Other assets and liabilities  290  (2,669)
Accounts payable  6,057  11,133
Accrued expenses  4,048  (8,646)
Net cash (used in) provided by operating activities  (24,126)  9,735
     
Cash flows from investing activities:    
Purchases of property, plant and equipment  (8,183)  (1,976)
Proceeds from sale of property, plant and equipment  355  1,702
Net cash used in investing activities  (7,828)  (274)
     
Cash flows from financing activities:    
Payments under revolving credit facility  --   (20,000)
Payments of long-term debt and other loans  (105,176)  (32)
Proceeds from rights offering  180,107  -- 
Payments of recapitalization costs  (5,631)  -- 
Exercise of stock options  --   123
Repurchase of common stock  (31)  (126)
Net cash provided by (used in) financing activities  69,269  (20,035)
     
Net change in cash and cash equivalents  37,315  (10,574)
Cash and cash equivalents at beginning of period  84,098  106,891
Cash and cash equivalents at end of period  $ 121,413  $ 96,317
     
 
 BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES 
 Reconciliation of Non-GAAP Financial Measures to their GAAP Equivalents 
 (unaudited) 
     
Note:  The company provided a detailed explanation of this non-GAAP financial measure in its Form 8-k filed with the Securities and Exchange Commission on October 21, 2010.    
     
   Three months ended 
  September 30,
   2010   2009 
   (in thousands) 
Reconciliation to Adjusted EBITDA:     
Net loss   $ (20,470)  $ (15,246)
Reconciling items:     
Depreciation and amortization expense   3,852  4,359
Interest expense, net   6,910  5,930
Income tax (benefit) expense   (525)  110
(Income) loss from discontinued operations, net of tax   795  (703)
Asset impairments   839  --
Facility closure costs   411  41
Litigation settlement   (1,238)  --
Stock compensation expense   1,097  540
Other   33  123
Adjusted EBITDA   $ (8,296)  $ (4,846)
     
Adjusted EBITDA as a percent of sales  -4.6% -2.6%
     
CONTACT:  Builders FirstSource, Inc.          M. Chad Crow, Senior Vice President           and Chief Financial Officer          (214) 880-3585