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BMHC Announces Third Quarter 2006 Financial Results

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 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 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


SOURCE  Building Materials Holding Corporation 
10/24/2006
/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
(BMHC)

CO: Building Materials Holding Corporation
ST: California
IN: CST
SU: ERN CCA SLS

7105 10/24/2006 07:30 EDT http://www.prnewswire.com

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