Ten days after announcing plans to acquire a company three times its size, Builders FirstSource (BFS) reported today its net loss deepened to $7.1 million in the first quarter from a $3.3 million loss in the year-earlier period, even though sales rose 7.2% to $371 million.
A $13.5 million increase in selling, general, and administrative expenses to $82.8 million accounted for much of the deepening loss. Gross margin rose to 22.6% from 21.7% in 2014's fourth quarter.
Floyd Sherman, the Dallas-based company's CEO, ignored the net loss to to declare himself "extremely pleased with our start to fiscal 2015." He noted that sales rose even though average market prices for framing lumber have fallen 13.6% since last year's first-quarter.
"However, our value-added sales of prefabricated components, windows and doors, and and millwork increased 12.8% versus first quarter 2014 sales in the same product categories," Sherman added. He credited those gains largely to the company's recent acquisitions of several component manufacturing firms. That includes Timber Tech Texas, a maker of roof and floor trusses, which posted sales worth $4.4 million last year.
Nothing in the quarterly financial statement dealt with BFS' April 10 announcement that it will acquire ProBuild, the nation's biggest full-service lumberyard company, in an all-cash deal worth $1.63 billion. But Sherman did refer to ProBuild in the statement's outlook section when he declared: "Our recently announced transaction with ProBuild, which we expect to close in the second half of 2015, will be a high priority for us in the coming months, and we look forward to being able to bring the best talent in the industry together as one team.
"We believe this transaction significantly enhances our opportunity for growth," Sherman continued, "and we have never been more excited about the future prospects for our company."
Concerns have been raised regarding the amount of debt that BFS is taking on to acquire ProBuild. BFS will issue approximately $1.5 billion in debt to finance the deal. That will further burden a company that, as of March 31, has on its books $409 million worth of long-term debt, $55 million of which will mature soon.
The company's balance sheet also claims as assets $141.1 million worth of goodwill. That's 22% of its total assets.