Building Materials (NASDAQ:BMHC)
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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/