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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good day, ladies and gentlemen, and welcome to the first quarter 2008 Building Materials Holding Corporation conference call. My name is Karen, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Ms. Lisa Laukkanen. Please proceed.
LISA LAUKKANEN, IR, BUILDING MATERIALS HOLDING CORPORATION: Good morning, and thanks for joining us on BMHC's conference call to discuss first quarter 2008 financial results. The Company issued a press release this morning detailing its results. If you do not have a copy, the release can be found on BMHC's website at bmhc.com or feel free to call The Blueshirt Group at 415-217-4961 and a copy can be sent to you.
Before we begin, I would like to make a brief statement regarding forward-looking remarks that you may hear on today's conference call. Certain statements made in this conference call may 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, risks and uncertainties cited in our press release.
Additional information, regarding these risks is contained in our latest annual report on Form 10-K and in our periodic filings with the SEC. Undue reliance should not be placed on such forward-looking statements as such statements speak only as of the date of the conference call. We undertake no obligation to update forward-looking statements. At this time, I'd like to turn the call over to Mr. Robert E. Mellor, Chairman and Chief Executive Officer of BMHC. Rob?
ROB MELLOR, CEO, BUILDING MATERIALS HOLDING CORPORATION: Thank you, Lisa. Good morning and thanks to everyone for joining us. With me on the call today are Bill Smartt, our Senior Vice President and Chief Financial Officer, Stan Wilson, President and Chief Operating Officer, and Mark Kailer, our Vice President, Treasurer and head of Investor Relations. First, I'll offer a few remarks on our views of the homebuilding industry, which will be followed by a review of our business and trends for the first quarter. Bill will then provide details of our financial results. And after those commentary, I'll offer a few additional remarks on our outlook. We'll then open the call for questions.
During the first quarter of 2008, the homebuilding industry's challenges persisted, as macroeconomic factors affecting the industry further deteriorating. New and existing unsold home inventories remained at elevated levels, mortgage capital was compressed, and new home starts continued to decline. Reflecting the decline in the homebuilding market, single-family building permits in the month of March plunged 46% from a year earlier to an annual pace of 606,000. Additionally, single-family starts declined approximately 44% from March of 2007 to an annualized rate of 680,000. BMHC's regional markets quarterly building permit activity for single-family homes was down 48% year-over-year, while the U.S. overall was down 41%.
The challenging homebuilding industry conditions continue to impact our results in the first quarter. Our revenue declined significantly and we recorded a net loss for the period. In spite of the current business environment, the distribution side of our business, BMHC West, has continued to increase its market share and maintains its gross margins. Sales continued to outpace permit activity in its markets, declining less than the comparable decreases in permits.
Sales at SelectBuild unfortunately have continued to be under intense downward pressure. as home production levels dramatically declined and private contractors priced jobs below our costs. While SelectBuild sales declined less than the comparable decreases in permits across its markets, the business trends for the construction side of our business have necessitated aggressive steps be taken to streamline the operations. In light of the continued challenging market conditions, and in keeping with the initiatives we outlined when reporting our year-end results, we are developing a plan to unify BMC West and SelectBuild to streamline the operations.
We believe that the implementation of this plan will right size the organization to reflect current market conditions and improve management's ability to manage the business in the downturn, while positioning the Company for future growth and value creation. We estimate that the plan will reduce SG&A expenses by 20 to $25 million in aggregate on an annual basis. The primary components of the plan are as follows. We are flattening and simplifying our organizational structure by reorganizing the 22 markets that BMC West and SelectBuild currently serve into just seven geographic regions rather than the previous 13 regions. As part of our extensive analysis of operations, we've also identified a number of business units to be shut down by the end of 2008. These units were performing below expectations and in aggregate have incurred losses for the full year 2007 and the first quarter 2008.
Another group of business units have been identified for consolidation into other operations, and we're continuing to conduct detailed performance and market analysis on all remaining units. We expect to realize significant savings in overhead expenses as well, as positive cash flow, after exit costs as a result of the shutdowns. We are also consolidating administrative functions. SelectBuild's accounting, purchasing, payroll and IT will be absorbed into the existing corporate support operations which should result in a substantial reduction in overhead expenses.
We also anticipate significant operational improvements as a result of this plan. Further headcount reductions will occur as we continue to right-size the business, realign our organizational structure, and consolidate administrative functions. Cost savings should be realized as we leverage the purchasing power of the unified company's supply chain. We will develop a sharper focus on SelectBuild's inventory management, to create a more fluid system with higher turnover, modeled on the proven inventory management systems and procedures used at BMC West. Our SelectBuild field operations will be able to focus more fully on operations and customer service as we centralize administrative support functions.
As we proceed with implementation of the plan, we will maintain the unique brands of BMC West for distribution and manufacturing activities, and SelectBuild for construction services. The unified approach to management and support operations, however, should create new opportunities...
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