BMHC Building Materials

SAN FRANCISCO, Oct. 24 /PRNewswire-FirstCall/ -- Building Materials Holding Corporation (NASDAQ:BMHC), a leading provider of construction services and building materials to professional residential builders and contractors, today reported sales for the third quarter of 2006 increased 1% to $831 million from $820 million in the same quarter a year ago. For the nine months ended September 30, 2006, sales increased 26% to $2.6 billion from $2.1 billion in the same period of 2005. Net income for the third quarter of 2006 was $35.3 million or $1.20 per share compared to $41.6 million or $1.40 per share in the same quarter a year ago. For the nine months ended September 30, 2006, net income was $97.6 million or $3.30 per share compared to $96.0 million or $3.28 per share in the same period of 2005. Net income for the quarter included a favorable adjustment of $6.4 million net of tax, or $0.22 per share for an actuarial- based adjustment of insurance expense. Robert E. Mellor, Chairman, President and Chief Executive Officer, stated, "We clearly experienced the effects of a significant slow down in the housing market and falling commodity wood prices. However, continued strength in certain key markets, including the Intermountain region and Texas and an improvement in our sales mix helped us maintain gross margins. During the quarter, we continued our emphasis on gaining market share and completed two acquisitions which have further diversified our operations. Overall, we are pleased with the results we have achieved year-to-date and we will continue to focus on the integration of the fourteen acquisitions we completed during 2006 and 2005." Segment Financial Performance (thousands) SelectBuild Three Months Ended September 30 $ % 2006 2005 Change Change Sales $438,014 $402,400 $35,614 9% Income from operations $36,918 $47,118 $(10,200) (22)% Nine Months Ended September 30 $ % 2006 2005 Change Change Sales $1,438,243 $948,277 $489,966 52% Income from operations $130,091 $112,406 $17,685 16% For the third quarter, SelectBuild sales increased 9% to $438 million from $402 million in the same period of 2005. Acquisitions not present in the same quarter of 2005 represented sales of $148 million. Sales from comparable operations were down 28%, principally in our Southwest and Pacific markets. Income from operations for the quarter decreased 22% to $36.9 million from $47.1 million in the same quarter of 2005. Income from comparable operations was down 46% or $21.6 million. As a percent of sales, improvement in gross margins were more than offset by selling, general and administrative expenses which were higher due to increased expenses associated with acquisitions. For the nine months, sales increased 52% to $1.4 billion from $948 million in the same period of 2005. Acquisitions not present in the same period of 2005 represented sales of $587 million for the nine month period. Sales from comparable operations were down 10%, principally in our Southwest, Southeast and Pacific markets. Income from operations for the nine months increased 16% to $130.1 million from $112.4 million in the same period of 2005. This increase was due to acquisitions not present in the same period of the prior year. Income from comparable operations was down 26% or $29.3 million. As a percent of sales, gross margins were approximately the same as the period a year ago, while selling, general and administrative expenses were higher due to increased expenses associated with acquisitions as well as compensation expenses. BMC West Three Months Ended September 30 $ % 2006 2005 Change Change Sales $392,585 $417,428 $(24,843) (6)% Income from operations $32,940 $43,644 $(10,704) (25)% Nine Months Ended September 30 $ % 2006 2005 Change Change Sales $1,198,905 $1,146,000 $52,905 5% Income from operations $102,664 $113,549 $(10,885) (10)% For the third quarter, BMC West sales decreased 6% to $393 million from $417 million in the same quarter of 2005. Acquisitions not present in the same quarter of 2005 represented sales of $19 million for the quarter. Sales from comparable operations were down 10%. Sales were lower in most markets and were slightly offset by strength in our Intermountain region and Texas. Income from operations for the quarter decreased 25% to $32.9 million from $43.6 million in the same quarter of 2005. Income from comparable operations was down 25% to $32.5 million. As a percent of sales, improvement in gross margins were offset by selling, general and administrative expenses which were higher due to compensation costs and delivery expenses for higher volume. For the nine months, sales increased 5% to $1.2 billion from $1.1 billion in the same period of 2005. The increase was due to acquisitions not present in the same period of the prior year. Sales from comparable operations increased 1% over the same period a year ago, with particular strength in Texas and our Intermountain region. Income from operations for the nine months decreased 10% to $102.7 million from $113.5 million in the same period of 2005. As a percent of sales, gross margins were approximately the same as the period a year ago, while selling, general and administrative expenses were higher due to compensation and delivery expenses for higher volume. Corporate Three Months Ended September 30 $ % 2006 2005 Change Change Corporate general and administrative $5,587 $14,942 $(9,335) (63)% Nine Months Ended September 30 $ % 2006 2005 Change Change Corporate general and administrative $49,781 $48,935 $846 2% Corporate represents expenses to support the operations of our business segments, SelectBuild and BMC West. For the third quarter, general and administrative expenses decreased 63% to $5.6 million from $14.9 million in the same period of 2005. The decrease was due to an actuarial-based adjustment of insurance expense. Prior to the actuarial-based adjustment of insurance expense, these expenses were 2.3% of sales in both the nine month periods. Interest expense was $4.9 million more than the same quarter a year ago and $10.4 million more than the same nine month period a year ago. The increase was due to a larger average balance outstanding under our revolver as well as rising interest rates for the quarter and nine months. Conference Call and Webcast BMHC will host a conference call and audio webcast today at 9 a.m. Pacific Time (12:00 noon Eastern Time) to discuss financial results for the third quarter ended September 30, 2006. The conference call may be accessed by dialing 866-362-5158 (Domestic), or 617-597-5397 (International), pass code 47087193. A replay will be available through Tuesday, October 31, 2006 by dialing 888-286-8010 (Domestic), or 617-801-6888 (International). The required pass code for the replay is 29635622. The live conference call and replay can also be accessed via audio webcast at BMHC's website at http://www.bmhc.com/. The 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. BMHC is listed as one of Fortune Magazine's "100 Fastest Growing Companies" in 2006 and was recently named to the Forbes Platinum 400, also known as America's Best Big Companies. To learn more about BMHC, visit our website at http://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 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; -- 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 and acquire suitable acquisition candidates; -- availability of and our ability to attract, train and retain qualified individuals; -- implementation of cost structures that align with revenue growth; -- changes in the business models of our customers; -- fluctuations in our costs and availability of sourcing channels for commodity wood products, concrete, steel and other building materials; -- intense competition; -- weather conditions, including natural catastrophic events; -- 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; -- changes to various 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, but are not limited to: -- share price fluctuations and -- potential share price limitations due to anti-takeover defenses in our governing documents and certain provisions under Delaware law. 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. (Tables Follow) Building Materials Holding Corporation Consolidated Statements of Income (thousands, except per share data) (unaudited) Three Months Ended Nine Months Ended September 30 September 30 2006 2005 2006 2005 Sales Construction services $485,790 $459,626 $1,595,579 $1,096,560 Building products 344,809 360,202 1,041,569 997,717 Total sales 830,599 819,828 2,637,148 2,094,277 Costs and operating expenses Cost of goods sold Construction services 391,901 371,963 1,292,081 889,336 Building products 248,190 261,384 759,934 730,811 Impairment of assets -- -- 2,237 463 Selling, general and administrative expenses 128,041 112,084 404,012 299,426 Other income, net (1,804) (1,423) (4,090) (2,779) Total costs and operating expenses 766,328 744,008 2,454,174 1,917,257 Income from operations 64,271 75,820 182,974 177,020 Interest expense 8,566 3,629 20,621 10,177 Income before income taxes and minority interests 55,705 72,191 162,353 166,843 Income taxes 17,959 25,474 56,289 58,855 Minority interests income, net of income taxes (2,398) (5,153) (8,472) (11,962) Net income $35,348 $41,564 $97,592 $96,026 Net income per share: Basic $1.24 $1.47 $3.42 $3.43 Diluted $1.20 $1.40 $3.30 $3.28 Building Materials Holding Corporation Consolidated Balance Sheets (thousands, except share data) (unaudited) September 30 December 31 2006 2005 Assets Cash and cash equivalents $47,319 $30,078 Marketable securities 3,006 3,645 Receivables, net of allowances of $5,256 and $3,756 376,471 363,527 Inventory 176,493 168,282 Unbilled receivables 63,906 56,128 Deferred income taxes 4,158 5,768 Prepaid expenses and other 10,074 6,967 Total current assets 681,427 634,395 Property and equipment Land 62,541 47,328 Buildings and improvements 132,106 118,556 Equipment 187,629 166,633 Construction in progress 16,826 9,485 Accumulated depreciation (135,879) (121,525) Marketable securities 47,417 28,875 Deferred loan costs 3,514 3,616 Other long-term assets 28,119 20,465 Other intangibles, net 100,511 55,227 Goodwill 297,636 187,470 Total assets $1,421,847 $1,150,525 September 30 December 31 2006 2005 Liabilities, Minority Interests and Shareholders' Equity Accounts payable $144,676 $146,627 Accrued compensation 62,346 65,928 Insurance deductible reserves 24,115 21,872 Other accrued liabilities 92,095 51,579 Billings in excess of costs and estimated earnings 50,569 33,799 Current portion of long-term debt 13,758 10,131 Total current liabilities 387,559 329,936 Deferred income taxes 5,661 6,911 Insurance deductible reserves 24,885 20,753 Long-term debt 381,718 278,169 Other long-term liabilities 39,709 30,689 Total liabilities 839,532 666,458 Minority interests 13,385 14,006 Commitments and contingent liabilities -- -- Shareholders' equity Common shares, $0.001 par value: authorized 50 million shares; issued and outstanding 29,035,127 and 28,758,580 shares 29 29 Additional paid-in capital 150,588 143,780 Unearned compensation -- (2,698) Retained earnings 417,359 328,463 Accumulated other comprehensive income, net 954 487 Total shareholders' equity 568,930 470,061 Total liabilities, minority interests and shareholders' equity $1,421,847 $1,150,525 Building Materials Holding Corporation Segment Information (thousands) (unaudited) Three Months Ended Nine Months Ended September 30 September 30 2006 2005 2006 2005 Sales SelectBuild $438,014 $402,400 $1,438,243 $948,277 BMC West 392,585 417,428 1,198,905 1,146,000 $830,599 $819,828 $2,637,148 $2,094,277 Income from operations SelectBuild $36,918 $47,118 $130,091 $112,406 BMC West 32,940 43,644 102,664 113,549 Corporate and other (5,587) (14,942) (49,781) (48,935) $64,271 $75,820 $182,974 $177,020 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, 2006 and 2005 is provided in the following table: Three Months Ended Nine Months Ended September 30 September 30 2006 2005 2006 2005 Sales SelectBuild $438,014 $402,400 $1,438,243 $948,277 Less: Acquisitions (147,660) -- (586,824) -- 290,354 402,400 851,419 948,277 BMC West 392,585 417,428 1,198,905 1,146,000 Less: Acquisitions (18,541) -- (42,860) -- 374,044 417,428 1,156,045 1,146,000 $664,398 $819,828 $2,007,464 $2,094,277 Income from operations SelectBuild $36,918 $47,118 $130,091 $112,406 Less: Acquisitions (11,409) -- (47,032) -- 25,509 47,118 83,059 112,406 BMC West 32,940 43,644 102,664 113,549 Less: Acquisitions (404) -- (829) -- 32,536 43,644 101,835 113,549 Corporate and other (5,587) (14,942) (49,781) (48,935) $52,458 $75,820 $135,113 $177,020 DATASOURCE: Building Materials Holding Corporation CONTACT: Bill Smartt, Senior Vice President and Chief Financial Officer, or Mark Kailer, Vice President, Treasurer and Investor Relations Officer, both of Building Materials Holding Corporation, +1-415-627-9100 Web site: http://www.bmhc.com/

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