From sales to starts to acquisitions and organic growth, 2003 was a record-breaking year in the home building and residential construction supply industries. As interest rates continued to hover at all-time lows, housing starts and remodeling expenditures hit all-time highs, and the collective selling might of the PROSALES 100 reached $28.9 billion, a 14.2 percent increase over 2002's $25.3 billion. While many large dealers continued to acquire both traditional distribution yards and construction service–type framing companies or dealers with manufacturing facilities, a large number of regional independents and middle-market dealers leveraged purchasing flexibility against lumber prices and emphasized installation and other value-added services to surge sales into double-digit growth.
From large semi-national dealers to regional independents to specialty distributors, firms in the PROSALES 100 categorically surpassed profit, earnings, and sales goals in 2003. The windfall has most companies making capital reinvestments back into the facilities and equipment that fanned last year's sales fires, including showrooms, truss plants, and door hanging facilities. With conservative optimism coloring the outlook for 2004, many companies also are indicating the desire to grow market share through expansion, increasingly diversifying product lines and services, and bolstering sales forces. Absent a huge increase in interest rates or traumatic events in the global arena, 2004 is shaping up to possibly surpass the record-breaking numbers of 2003. Read on for an in-depth look at the numbers, trends, and pro sales strategies shaping the industry this year and beyond.
By all accounts, 2003 was a banner sales year for the PROSALES 100. When asked about the major accomplishments their firms made in 2003, not surprisingly, the comments were overwhelmingly positive and focused on growth.
Many companies hit all-time highs, including Beloit, Wis.–based ABC Supply (No. 3), which posted the highest sales and profits in the company's history at $1.944 billion, reported president and COO David Luck, a 26.4 percent increase over 2002. And many are eyeing the business boom to continue, including Hammond Lumber Co.(No.91),in Belgrade, Maine, which grew 19.4 percent from 2002 to 2003 and acquired a yard in Bangor, Maine, in late 2002 that underwent significant growth in 2003. Looking forward, vice president Michael J. Hammond says the dealer is looking to build or acquire one to two more yards in 2004 and grow sales from $74 million to $110 million.
Honsador Lumber (No.57), in Kapolei, Hawaii, also is on a growth path, reporting a 21.6 percent leap from 2002 to 2003.The company's goal is to increase sales another 16.5 percent in 2004 by expanding its sales force, adding facilities, and expanding its product line, says Terry Inglett, president and COO, who notes that a strong housing market in the state has helped to catapult the company's business.
Sentiments such as these were echoed throughout the PROSALES Annual Survey of Leading Construction Suppliers, and this increased sales activity parallels the record-setting performance of the residential construction market in 2003.Overall, total new single-family home sales for the year reached 1.085 million, up 11.5 percent from 973,000 in 2002, according to the NAHB. Regionally, the big winners were the South with 512,000 sales, the West with 306,000 sales, and the Midwest with 189,000 sales.
For big builders in particular, 2003 was indeed a stellar year, according to the BUILDER 100, an annual May ranking of the nation's largest builders by BUILDER magazine, a sister publication of PROSALES. Accounting for 393,178 U.S. home closings last year—a 14 percent increase over 344,574 closings in 2002—the nation's top 100 home builders are continuing their growth march into 2004,with many of the leaders venturing into higher-end markets, infill development, and smaller regional metro areas, according to BUILDER's research.
Certainly, there was a lot of builder business to go around, and a full 90 percent of the PROSALES 100 companies listed in this year's report posted a positive gain, ranging from 0.6 percent at Schenectady, N.Y.–based Bellevue Builders Supply (No. 52) to this year's growth-chart toppers: Winter Haven, Fla.–based Adams Building Materials (No. 75), which experienced an impressive jump of 41.3 percent based primarily on organic growth, and McKinney, Texas–based Shelter Distribution (No. 22), the fastest-growing company through acquisition at 42.9 percent.
According to Shelter CFO Gary Swan, the specialty distributor is working on a platform to "support a buy-and-build strategy with the goal of ultimately creating a national distribution network." Focusing exclusively on wholesale distribution of roofing, vinyl siding, and related products and accessories, Shelter made three acquisitions in 2003 that collectively brought 26 new locations—more than doubling the company's 2002 unit count of 21. The most significant integration issues for Shelter have typically revolved around culture. "We want prior owners and key employees of the businesses we acquire to be involved in the business post-acquisition as they are best aware of their local competitive environment and customers," Swan says. Looking forward to 2004 and beyond, Shelter is keeping M&A in the crosshairs. "This business remains highly fragmented, with numerous regional and single-location businesses," Swan says. "We don't foresee any shortage of acquisition candidates."
Looking at year-over-year results, Adams and Shelter Distribution were each more than 10 percent ahead of the largest increase recorded last year, 31 percent by Beacon Roofing Supply (No. 9), based in Peabody, Mass.
In total, the top 20 fastest-growing companies this year ranged from 19.4 percent to Shelter Distribution's 42.9 percent. Last year that spread was from 14.5 percent to Beacon's 31 percent. That's more than a 5 percent overall increase marking the lower end of the scale for 2003. As a result, the number of companies reported on the list of fastest growth this year was bumped up to 25 to better reflect the overall outstanding performance of the PROSALES 100.