The net loss at Builders FirstSource (BFS) deepened to $13.6 million in the third quarter from an $11.6 million loss in the year-earlier period even though sales rose 34.3% to $291.8 million, the No. 8 company on the ProSales 100announced today.
The Dallas-based company prefers to view its results through the prism of Adjusted EBITDA, which strips out interest and income tax expenses, depreciation and amortization expenses, facility closure costs, losses from discontinued operations, and stock compensation expenses from EBITDA's usual measure of earnings before interest, taxes, depreciation, and amortization. By that measure, BFS swung to a positive $3 million from a negative $741,000 in last year's July-through-September period. It's the second straight quarter of positive adjusted EBITDA, CEO Floyd Sherman noted.
BFS estimates that roughly 27 points of its 34.3% gain in sales were from increased sales volume, while 7 points of the gain were due to increased prices on the goods BFS sells in its markets across a swath of Dixie from Maryland to Texas.
Those higher prices hurt BFS by cutting its gross margin percentage to 19.8% this year from 20.5% in 3Q11, the company said. BFS counts a large number of production and commercial builders among its clients, so it has to guarantee prices for a longer period than many dealers.
"While we were very pleased by the improved building activity and our increased sales during the quarter, our gross margins were again negatively impacted by inflation on commodity lumber within the quarter and our limited ability to adjust intra-quarter customer pricing," chief financial officer Chad Crow said. "While we were able to pass on some price increases as part of our third-quarter pricing, we once again experienced a rising commodity market formost of the quarter. Commodity prices increased, on average, 14% from the end of the second quarter through mid-September before falling back somewhat by quarter-end. These factors, combined with what is still an extremely competitive pricing environment, constrained our gross margin during the quarter."
Selling, general, and administrative expenses rose 16.8% to $58.7 million, or roughly $1 million more than the company recorded in gross margin. One reason why was the 23.6% increase in salaries and benefits to $35.6 million, which the company attributed to higher sales commissions and extra staffing to meet the increased sales volume.
At $97.3 million, lumber and sheet goods accounted for 33.4% of all sales, up from 28.5% in last year's third quarter. Sales of prefabricated components was the next biggest contributor at $56.1 million, or 19.2% of all sales (vs. 18.9% in 2011); while sales of windows and doors totaled $61.8 million, or 21.2% of sales (down from 23.6% a year earlier). Millwork sales totaled $28 million (9.6% vs. 10.2%) and sales of other building products and services contributed the other $48.5 million (16.6% vs. 18.8%).