Builders FirstSource (BFS) recorded a 20.5% jump in sales during the second quarter from a year earlier to reach $211.5 million, but turbulent commodities prices and hot competition reduced margins to the point where the Dallas-based dealer's loss from continuing operations worsened by $300,000 from 2009's second quarter to $18.9 million, the company announced late today.
"While we enjoyed improved building activity and increased sales during the quarter, extremely volatile commodity prices coupled with intensely competitive pricing conditions had a negative impact on gross margins," BFS chief executive officer Floyd Sherman said in a statement. "Commodity prices rose over 22% from the end of March through the end of April and then fell sharply, decreasing 35% from the end of April through the end of June. This volatility in the commodity markets, combined with excess capacity in the supply chain chasing a limited number of units under construction, contributed to our gross margins declining four percentage points compared to the second quarter of 2009." The second quarter's gross margin percentage was 18.3% vs. 22.3% in the April-June 2009 period.
Accounts receivable days dropped to 34.5 days in the second quarter from a year-earlier 39.1, while inventory turns climbed to 9.8 from 9.2. Selling, general, and administrative expenses rose 2.2%.
Looking ahead, Sherman warned that building activity in the second half of this year may not be as strong as previously expected. That in turn, "could result in our use of cash for fiscal 2010 being somewhat higher than the $60 million to $70 million we originally forecasted," he added. As of June 30, the company had $125 million in cash on hand, liquidity was above $141 million, and BFS was set up to borrow another $16.6 million if needed.
Once one figures in the $7.1 million valuation allowance for this year's second quarter and the $6.6 million allowance for the year-earlier quarter, BFS' adjusted loss from continuing operations improved a bit to $11.8 million from $12 million.
BFS ranked 10th on this year's ProSales 100, with 2009 sales of $678 million, 98% of it to pros. Since then, as a result of consolidations higher up in the rankings, it has moved to ninth on the updated ProSales 100 list of top 20 LBM operations.